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U.S. SECURITIES AND EXCHANGE
 COMMISSION


Washington, D.C. 20549




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FORM 10-KSB


(Mark one)

|                                                                                           | x      Annual
 Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the
 Fiscal Year Ended September 30, 2002
|------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------
|or                                                                                        
|o      Transition
 Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
|Commission
 File Number 000-23025                                                         



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NOTIFY TECHNOLOGY CORPORATION


(Name of small business issuer
 in its charter)




|California                                                     | 77-0382248                           
|-------------------------------------------------------------- | -------------------------------------
|(State
 or other jurisdictionof incorporation or organization) | (I.R.S.
 Employer Identification No.)
|                                                               |                                      
|1054
 S. De Anza Blvd. Suite 105 San Jose, California          | 95129                                
|(Address
 of principal executive offices)                      | (Zip
 Code)                          

Issuers telephone
 number: (408) 777-7920

Securities registered
 under Section 12(b) of the Exchange Act:

None

Securities registered
 under Section 12(g) of the Exchange Act:

UnitsCommon Stock
Class A Warrants



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Check whether
 the issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
 of the Exchange Act during the past 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 o

Check if no
 disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
 contained in this form, and no disclosure will be contained, to the best of registrants
 knowledge, in definitive proxy or information statements incorporated by
 reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
x

State issuers
 revenues for its most recent fiscal year. $3,481,920

The aggregate
 market value of the voting and non-voting common equity held by non-affiliates of
 the Registrant, based upon the closing sale price of the Common Stock on December
 17, 2002, was approximately $564,914. Shares of Common Stock held by officers and
 directors and their affiliated entities have been excluded in that such persons
 may be deemed to be affiliates. This determination of affiliate status is not necessarily
 conclusive for other purposes.

The number
 of shares outstanding of Registrants common stock, $0.001 par value at September
 30, 2002 was 5,783,678 shares.

Transitional
 Small Business Disclosure Format (check one):    Yes x No o



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TABLE OF CONTENTS



|                                                                     |                                                                                              |  |  |  |  |  |  | 
|-------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                              
|                                                                     | ITEM 1. Description of Business                                                             
|                                                                     | ITEM 2. Description of Property                                                             
|                                                                     | ITEM 3. Legal Proceedings                                                                   
|                                                                     | ITEM 4. Submission of Matters to a Vote of Security Holders                                 
|PART II                                                             
|                                                                     | ITEM 5. Market for Common Equity and Related Stockholder Matters                            
|                                                                     | ITEM 6. Managements Discussion and Analysis or Plan of Operation                           
|                                                                     | ITEM 7. Financial Statements                                                                
|                                                                     | ITEM 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
|PART III                                                            
|                                                                     | ITEM 9. Management                                                                          
|                                                                     | ITEM 10. Executive Compensation                                                             
|                                                                     | ITEM 11. Security Ownership of Certain Beneficial Owners and Management                     
|                                                                     | ITEM 12. Certain Relationships and Related Transactions                                     
|                                                                     | ITEM 13. Exhibits and Reports on Form 8-K                                                   
|                                                                     | ITEM 14. Controls and Procedures                                                            
|SIGNATURES                                                          
|Certification under Section 302(a) of the Sarbanes-Oxley Act of 2002
|EXHIBIT INDEX                                                       
|EXHIBIT 10.2                                                        
|EXHIBIT 10.16                                                       
|EXHIBIT 23.1                                                        
|EXHIBIT 99.1                                                        



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PART I

FORWARD LOOKING STATEMENTS

THIS ANNUAL
 REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
 SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
 EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS THAT INCLUDE THE WORDS BELIEVES,
 EXPECTS, ANTICIPATES OR SIMILAR EXPRESSIONS. FORWARD-LOOKING
 STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE ITEMS IDENTIFIED WITH THE ASTERISK
 (*) SYMBOL. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
 AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
 TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
 THE READER SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
 HEREIN, THE FACTORS SET FORTH UNDER THE CAPTION RISK FACTORS. WE CAUTION
 THE READER, HOWEVER, THAT THESE FACTORS MAY NOT BE EXHAUSTIVE.




ITEM 1. Description of Business

Notify Technology
 Corporation (also referred to as we, us and our
 unless the context otherwise requires) was incorporated in the State of California
 in August 1994. We are an innovative communications application service provider
 of wireline and wireless messaging services and a supplier of innovative call and
 message notification products and services. We currently sell our products through
 OEM relationships with major telephone companies, telephone equipment distributors,
 Internet service providers and 2way wireless carriers.

Our business
 is primarily focused in two different markets; the wireline CPE (Customer Premise
 Equipment, i.e. Caller ID devices) market and the 2way wireless market. Substantially
 all of our revenue in fiscal 2002 was derived from wireline based products that
 provides voicemail notification to a long distance telephone company. Our second
 focus is directed at the 2way wireless market providing products spanning from consumer
 to enterprise environments. Our vision is to provide mobile wireless email and personal
 information management (PIM) notification, access, and management across a variety
 of 2way devices and 2way networks. Our 2way wireless family of products is called
 NotifyLink. Our wireline or legacy products are the Visual Got Mail Solution for
 voice mail notification, and the Centrex Receptionist that is a small company auto
 attendant. Our Visual Got Mail Solution product incorporates caller-id, call waiting
 caller-id, and telephone company voice mail notification into one CPE device with
 an associated monthly service for voicemail notification. Our Centrex Receptionist
 product gives Centrex business customers a cost-effective means of ensuring that
 incoming calls are properly routed even when a human attendant is not available.

Products

Visual Got Mail Solution

Our Visual
 Got Mail Solution is designed to provide Voice Mail notification services to the
 customers of a long distance telephone company providing local services in nine
 states. The Visual Got Mail Solution, designed for telephone company deployment
 as a service offering, includes a scalable carrier class server infrastructure that
 we host and a Call Manager telephone adjunct that we manufacture and sell. The Visual
 Got Mail Solution integrates our caller-id technology with a unique method of voice
 mail notification into a single device that can fit in the palm of your hand. In
 fiscal 2002, we deployed the Visual Got Mail Solution with one telephone company.

NotifyLink

We launched
 the hosted version of our NotifyLink product line, the NotifyLink Internet Edition,
 in December 2000. The NotifyLink Internet Edition product provides the mobile
 dial-up e-mail user with access to and management of the users
 e-mail account. Although actively deployed for almost two years, the service has
 not attracted the volume of users originally hoped for. In July 2001, we launched
 two NotifyLink Desktop Edition products targeted for the always on user
 who has a continuous connection to the Internet. These desktop products are called
 NotifyLink Desktop Professional Edition and Desktop Standard Edition and have also
 had limited sales success. The product line has been expanded to

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operate on a number of 2way wireless devices
 and operating systems that include Motorolas ReFlex2 devices, Palm operating
 system based devices and Research in Motion (RIM) devices.

The NotifyLink
 Internet service now provides support for many 2way devices from manufacturers such
 as Research In Motion, Palm, Handspring, Kyocera, and others. The wireless e-mail
 service works with most e-mail providers including AOL, HotMail, MSN, Yahoo, and
 all POP3 mail systems. Users are able to use the NotifyLink Internet service with
 their existing e-mail accounts. Users register for the service via a web based interface
 typically linked to a specific carrier. To set up the NotifyLink Internet service,
 the user specifies each e-mail account it wants to monitor and sets any appropriate
 filters. The user can tailor the notification by defining a header which
 contains information about the e-mail, such as account, sender, subject, date and
 time, attachment names, attachment sizes, partial body text, and remaining character
 count. Once registered, the NotifyLink Internet service checks all specified e-mail
 accounts periodically. Users have the capability to perform on-demand checking
 of any of their specified accounts at any time. Once the service determines
 that a user has new e-mail, a notification is sent to the user in the format of
 a defined header. The user has the option to see more of
 the e-mail body or reply, forward, or delete
 the e-mail and its corresponding attachments from the T900.

The NotifyLink
 Desktop product provides support for many 2way devices from manufacturers such as
 Research In Motion, Palm, Handspring, Kyocera, and others. A user can easily install
 our NotifyLink Desktop software on a desktop computer that is connected to the Internet
 by a Cable, DSL, or LAN/WAN service. The software is easy to use and quickly configured.
 The user can configure the software by specifying the e-mail accounts that the user
 wants to access with the users wireless device, setting any filters to screen
 notification, and designating the type of wireless device and its associated address.
 In addition, the user can tailor the information contained in the wireless e-mail
 notification header that is sent to the users wireless device.
 The header information can include options such as account, sender,
 subject, date and time, attachment names, attachment sizes, partial body text, and
 remaining character count.

Once configured,
 the NotifyLink Standard or Plus Edition software will forward the filtered e-mail
 in the format of the header that was chosen by the user. Once theheader is
 received on a supported 2way wireless device, the user will
 have the option to see more of the e-mail body or reply,
 forward, or delete the e-mail and its corresponding attachments.
 Any action taken on the new e-mail message by the user will cause the InBox,
 Sent Items, or Deleted Items folders on the users
 desktop to be updated to reflect the action. Any e-mail message sent from
 the supported device by a user will display the originating users name and
 a memo notation that the message was forwarded from the users desktop e-mail
 address.

The NotifyLink
 Enterprise product provides support for many 2way devices from manufactures such
 as Research In Motion, Palm, Handspring, Kyocera, and others. A customer can easily
 install our NotifyLink Enterprise software on a server that is running either Microsoft
 Windows 2000 or NT. The enterprise software is easy to use and quickly configured.
 The NotifyLink Enterprise solution provides similar functionality to a user as the
 Desktop product. The NotifyLink Enterprise solution provides a centralized management
 solution for large organizations with many mobile users. Our wireless NotifyLink
 products have not sold as anticipated and did not account for significant revenue
 during the fiscal year ended September 30, 2002.

Call Manager

Our caller-id
 products incorporate our MessageAlert visual message waiting indication technology
 and provide support for combinations of telephone company services such as voice
 mail, caller-id, call waiting caller-id and deluxe call waiting. Caller-id products
 are categorized as either Type I (calling name and calling number only);
 Type II (Type I features plus call waiting caller-id) or Type
 II.5 (Type II plus deluxe call waiting). Type II and Type II.5 products support
 the more sophisticated services offered by telephone service providers than the
 Type I products more commonly on the market. Our Call Manager line of
 products include all three types and are designed to support bundling of services
 offered by the telephone service provider giving more functionality to the end user
 and more revenue opportunity for the telephone service provider.

We are no
 longer selling a generic caller-id product and are only selling solutions based
 on our Visual Got Mail technology that utilize our caller id technology as part
 of the overall solution.

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Centrex Receptionist

Small businesses
 that use Centrex services generally must maintain a human attendant to answer incoming
 calls, or the calls will go unanswered or be transferred into the business
 general voice mail mailbox. The Centrex Receptionist is a stand-alone unit that
 provides the Centrex customer with automatic call answer and transfer capability
 24 hours a day, 7 days a week. The Centrex Receptionist provides thirty minutes
 of recorded announcement time, special after hours or holiday announcements, and
 nine main menu items. Each main menu item supports nine selections that can be either
 a transfer to a telephone number or an announcement. The Centrex Receptionist also
 provides extension dialing, name directory services and call statistics. The unit
 has a battery back-up that will hold the stored settings in a power-out situation
 for up to three days. The Centrex Receptionist is remotely configured by our Customer
 Service but locally programmable by the user for voice greetings and voice announcements
 using a touch tone telephone. It has password protection for all administrative
 programming. The current Centex Receptionist model supports two or four incoming
 Centrex lines.

Sales, Marketing and Distribution

We are expanding
 our customer base through several channels. One channel is using 2way wireless carriers
 to market either by referral or actual resale of our NotifyLink product line of
 services and software. Currently, these carriers include WebLink Wireless, SkyTel,
 MetroCall, Arch Wireless and PageNet Canada. Another channel is based on referrals
 from 2way device manufactures such as Palm, Inc., Handspring, and Kyocera Wireless.
 A third channel solution is based on referrals from Novells Cool Solutions Web site.
 This solution is centered on our ability to support Novells wireless
 email system called GroupWise. We have a small direct sales force that sells to
 referrals that come directly to Notify from our various partners. To date, we have
 received only limited revenue from our NotifyLink referral and reseller channel
 partners, and we will receive revenue from these channel partners only to the extent
 that they successfully resell or refer our products and services to interested customers.

Our Visual
 Got Mail Solution provides revenue from both sales of adjunct equipment and providing
 ongoing Voice Mail notification services to the users of our long distance telephone
 customer. Service revenue is based on the monthly active installed base of Voice
 Mail users and varies as the installed base changes. In fiscal 2002, the installed
 base has grown from zero to 114,000 as of September 30, 2002. Our technology is
 proprietary and only our adjunct products will interface with our server center.
 We expect to continue to provide adjunct devices and Visual Got Mail Solution service
 based on a customer backlog of 174,000 devices as of September 30, 2002.* Our Visual
 Got Mail Solution sales were made to one long distance telephone customer in fiscal
 2002.

The traditional
 sales activities for our Call Manager products and Centrex Receptionist products
 have been focused on direct sales to large telephone companies. Our hardware products
 are privately labeled. We manufacture products based on purchase orders received
 from our long distance telephone customer. The Visual Got Mail Solution and Centrex
 Receptionist product lines accounted for 83% and 6% of total revenues in fiscal
 2002, respectively. The Visual Got Mail Solution was not sold in fiscal 2001 but
 the Centrex Receptionist accounted for 20% of revenues in fiscal 2001. Significant
 portions of our revenue have been concentrated in a small number of customers. For
 example, one customer accounted for 83% of sales for the year ended September 30,
 2002. Three other customers accounted for 36%, 26% and 12% of sales for the fiscal
 year ended September 30, 2001.

We are marketing
 the Centrex Receptionist to the same group of large telephone companies we targeted
 our traditional Call Manager products. We believe that we have established ourselves
 as a qualified supplier or joint marketing partner with respect to the Centrex Receptionist.

Technical and Marketing Support

We have developed
 product collateral and marketing programs for the NotifyLink products. This marketing
 program includes augmentation of collateral material, advertising and trade shows,
 supplemented with public relations campaigns.

We provide
 back-up technical support to large telephone companies and resellers of all of our
 products. Our support organization for the Centrex Receptionist provides both sales
 and technical support. The Centrex Receptionist requires ongoing remote modem support
 on a billable service arrangement by our customer service group whenever the user
 wants to add lines, make directory changes and perform system back ups.

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Research and Development

We incurred
 $1,074,817 and $1,075,482 in research and development expenses in fiscal 2002 and
 2001, respectively. Expenses remained flat despite changing of our development strategy
 from hardware development to software development and moving our research and development
 activities from California to Ohio. We believe that our future success, if any,
 depends significantly on our ability to continue to enhance our existing products
 and to develop new products and, therefore, we intend to continue to incur research
 and development costs. We expect that our research and development efforts will
 be focused in three areas: expanding our wireline offerings to our long distance
 telephone customer, continued development of our 2way wireless service and related
 software and the incorporation of our technology into complimentary products.

Manufacturing

We use offshore
 turnkey manufacturing to produce our Call Manager that is a component in our Visual
 Got Mail Solution. To the extent possible, we use standard parts and components
 for our products although some components are custom designed and/or are available
 only from a single source or limited sources.

Governmental Regulation and Industry
 Standards

Our products
 must comply with a variety of regulations and standards including regulations and
 standards set by the Federal Communications Commission, Underwriters Laboratories,
 National Registered Testing Laboratories, and Bell Communications Research. If we
 enter international markets, we will be required to comply with whatever governmental
 regulations and industry standards exist in those markets. In addition, the U.S.
 telecommunications market is evolving rapidly in part due to recently enacted laws
 revamping the telecommunications regulatory structure. Additional legislative or
 regulatory changes are possible. A failure by us to comply with existing regulations
 and standards or to adapt to new regulations and standards could have a material
 adverse effect on our business and operating results.

Competition

We believe
 that we do not currently have any direct competition for our NotifyLink Internet
 Edition . However, the NotifyLink Desktop and Enterprise products indirectly compete
 with products from Research In Motion and Infowave Software, Inc, Wireless Knowledge,
 Extended Systems, Synchrologic, Visto, and Good Technology.

We believe
 that we do not currently have any direct competition for our Visual Got Mail Solution.
 Indirect competition exists in alternate solutions to Voice Mail notification that
 does not involve an adjunct or CPE but does involve contracting with local telephone
 companies to provide voice mail notification. We believe our Visual Got Mail Solution
 competes favorably with respect to any of these other forms of Voice Mail notification
 when utilized by long distance telephone companies.

We believe
 that we have no direct competitors in the market for Centrex auto-attendant products.
 Indirect competition from Central Office based services, PBX hardware installed
 on the end users site and various PC based software systems. These alternate
 solutions do not always use Centrex lines and therefore do not stimulate Centrex
 service sales for the telephone company.

We expect
 that to the extent that the market for any of our products develops, competition
 will intensify and new competitors will enter the market. There can be no assurance
 that we will be able to compete successfully against existing and new 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 have
 a materially adverse effect upon our business and results of operations.

Proprietary Rights

We regard
 various features and design aspects of our products as proprietary and we rely primarily
 on a combination of patent and trademark laws and employee and third-party nondisclosure
 agreements to protect our proprietary rights. We have been issued a patent covering
 the design of our MessageAlert products, and a patent covering the MultiSense technology
 used in our MessageAlert product. We have also applied for patents on our Visual
 Got Mail technology. We intend to continue to apply for patents, as appropriate,
 for our future technologies and products. There are

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few barriers to entry into the market for
 our products, and there can be no assurance that any patents we apply for will be
 granted or that the scope of our patents or any patents granted in the future will
 be broad enough to protect us against the use of similar technologies by our competitors.
 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.

On May 17,
 2001, Research In Motion Limited, the maker of the Blackberry hand-held
 computer, announced that it had been issued a patent on its Blackberry single mailbox
 integration. Generally, the patent relates to Research In Motions proprietary
 system and method of redirecting information between a host computer system, and
 a mobile communications device while maintaining a common electronic address between
 the host system and the mobile device. Research In Motion also announced that it
 had filed a complaint against Glenayre Technologies, Inc. for, among other items,
 patent and trademark infringement. Our intellectual property counsel has reviewed
 the patent and issued an opinion to us opining that version 4.0 of our Desktop software
 does not infringe on Research In Motions patent. Nevertheless, no
 assurances can be given that Research In Motion will not bring an action against
 us for a patent infringement or similar claim, or if any such claim is brought,
 the eventual results thereof.

We may be
 involved from time to time in litigation to determine the enforceability, scope
 and validity of any of our proprietary rights or of third parties asserting infringement
 claims against us. These claims could result in substantial cost to us and could
 divert our management and technical personnel away from their normal responsibilities.

We have entered
 into a non-exclusive license agreement with Active Voice Corporation (Active
 Voice) pursuant to which we have paid an up-front fee on our sales of products
 that contain stutter dial tone detection.

We have also
 entered into a royalty agreement with Uniden America Corporation allowing Uniden
 to incorporate our VMWI technology into Unidens Products for a per unit fee.
 Royalty revenue from this agreement was $131,686 and $158,909 in fiscal 2002 and
 2001, respectively.

Employees

As of September
 30, 2002, we employed twenty-four persons of whom eleven were engaged in research
 and development, three in operations, six in sales, marketing, and customer support,
 and four in general administration and finance. Twenty-two of these employees are
 employed on a full-time basis. None of our employees are currently represented
 by a labor union. We consider our relations with our employees to be good.

Our success,
 if any, will be dependent on our ability to attract and retain highly skilled technical
 personnel as well as marketing and sales personnel. If we were unable to hire the
 necessary personnel, the development of new products and enhancements to current
 products would likely be delayed or prevented. Competition for highly skilled technical,
 managerial, sales, and marketing personnel is intense. There can be no assurance
 that we will be successful in retaining our key personnel and in attracting and
 retaining the personnel we require for expansion.

RISK FACTORS

Most of our Revenue is Derived from the
 Sale of a Single Solution to a Single Customer

For the fiscal
 year ending September 30, 83% of our revenue came from the sale of our Visual Got
 Mail solution to a single competitive provider of local phone services. All the
 sales to this customer occurred in the last six months of fiscal 2002. As we do
 not anticipate sales from our other products, including our Centrex Receptionist
 product and NotifyLink services, to increase significantly in the near term, we
 expect our revenue for at least the next two quarters and possibly longer will be
 largely dependent on our ability to continue selling to our long distance telephone
 customer. Though as of September 30, 2002, we had a backlog of approximately $2,400,000
 in orders from this customer, there can be no assurance that we will receive additional
 orders from this customer. In addition, a significant portion of the revenue and
 a disproportionate amount of the operating profit related to the Visual Got Mail
 Solution is derived from our provision of fulfillment services and subscription
 services. If, for whatever reason, this customer is not able to sell its services
 to its customers at the rate implied by its level of orders with us, our revenue,
 operating profit and financial condition would be materially adversely affected.
 In addition, this customer could at any time decide to decrease its sales efforts
 with respect to local phone service, cease to promote or provide voice mail services
 or use an alternative to our Visual Got Mail Solution.

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In such an event, we would have no alternative
 distribution channel for our Visual Got Mail Solution and our revenue, operating
 results and financial condition would be materially adversely affected.

Because of Our Financial Condition and
 Our Business Plans, Our Financial Statements Disclose That There is Substantial
 Doubt as to Our Ability to Continue as a Going Concern and Accordingly Our Business
 Has a High Risk of Failure

We are currently
 researching and developing new products and enhancements to existing products.
 Due to our present financial condition and our business plans, there is substantial
 doubt as to our ability to continue as a going concern. To date, our NotifyLink
 product line does not provide significant contributions to our revenues and our
 Visual Got Mail Solution sales are highly concentrated in one customer. The success
 of our business operations will depend upon our ability to obtain further financing
 until such time, if ever, as there is favorable market acceptance for our new wireless
 software products. It is not possible for us to predict with assurance the outcome
 of these matters. If we are unable to obtain further financing and profitable operations
 from our new software wireless products, then our business will fail.

We Have a Limited Operating History and
 a History of Losses, Moreover, There is No Assurance of Future Profitability

We commenced
 operations in August 1994 and through January 1996 were engaged primarily in research
 and development. We made a decision in January 2000 to develop and sell software
 applications for the 2way wireless data market. Accordingly, we have a limited
 operating history, and we face all of the risks and uncertainties encountered by
 early-stage companies. For the fiscal years ended September 30, 2001, 2000, 1999,
 and 1998, we incurred net losses of $3,337,612, $3,526,452, $3,123,284 and $2,617,561
 respectively. We incurred a net loss of $1,741,752 for fiscal 2002 and as of September
 30, 2002, we had an accumulated deficit of $21,319,852 and working capital of $1,333,821.
 We anticipate having a negative cash flow from operating activities in future quarters
 and years. We also expect to incur further operating losses in future quarters and
 years until such time, if ever, as there is a substantial increase in orders for
 our products and product sales generating sufficient revenue to fund our continuing
 operations. There can be no assurance that sales of our products will ever generate
 significant revenue, that we will ever generate positive cash flow from our operations
 or that we will attain or thereafter sustain profitability in any future period.

If We Are Unable To Market Our Wireless
 Software Products and Achieve Industry Acceptance Quickly, We Could Lose Existing
 and Potential Customers and Our Sales Would Decrease

Although most
 of our current revenue comes from our wireline Visual Got Mail Solution, our wireless
 products play a significant role in our plans for future growth. We need to market
 our new 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 intend to extend the offerings under our product family primarily
 through our NotifyLink product line. However, we may experience difficulties in
 marketing these new products, and our inability to timely and cost-effectively introduce
 them 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 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.

If the Market for Wireless Data Communications
 Devices Does Not Grow, We May Not Successfully Sell Our NotifyLink Products

The overall
 market for wireless data communications devices has experienced significant growth
 in recent years. The success of our NotifyLink Internet Edition and Standard Edition
 products depends upon this growth. There can be no assurance that the market for
 wireless software products will continue to grow, that firms within the industry
 will adopt our software products for integration with their wireless data communications
 solutions, or that we will be successful in independently establishing product markets
 for our wireless software products. In fact, our sales and marketing efforts over
 the last year have not resulted in significant sales of our NotifyLink products.
 In addition, if a number of ReFlex carriers should go out of business, we would
 have more difficulty selling our NotifyLink products to the fewer remaining ReFlex

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carriers. If the various markets in which
 our software products compete fail to grow, or grow more slowly than we currently
 anticipate, or if we were unable to establish product markets for our new software
 products, our business, results of operation and financial condition would be materially
 adversely affected.

We May Be Unable to Generate the Capital
 Necessary to Support Our Planned Level of Research and Development Activities or
 to Manufacture and Market Our Products

At September
 30, 2002, we had an accumulated deficit of $21,319,852 and incurred a net
 loss of $1,741,752 for the year ended September 30, 2002. Our recently
 developed products will need to attain favorable market acceptance in order for
 us to be able to continue our research and development activities and to fund operating
 expenses at current levels. On August 27, 2002, we announced a reduction in force
 of nine employees or about 28% of our work force, primarily in the research and
 development staff of our NotifyLink product line. Regardless, because our NotifyLink
 wireless product line has not provided significant contributions to our revenues
 to date, the success of our business operations will depend upon our ability to
 obtain further financing until such time, if ever, as there is favorable market
 acceptance for our new wireless software products. 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 we are unable to 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.

Our Quarterly Operating Results May Vary

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,
 Units and Class A warrants to be volatile. Operating results may vary as a result
 of many factors, including the following:



| | the continued
 commitment of our long distance customer to the voice mail business underlying our
 voice mail notification business
|- | -----------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                    
| | 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; 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.

Our Products May Not Be Accepted

We sold our
 first Centrex Receptionist in March 1998, the first Call Manager product in April
 1999, announced the first sales of our e-mail version of our Visual Got Mail products
 in November 1999. We also announced the launch of our new NotifyLink web based
 service and our NotifyLink Desktop products in November 2000 followed by the introduction
 of our voice mail version of our Visual Got Mail Solution in April 2001. To date,
 we have received only limited revenue from the sale of these products. While we
 have experienced some success with our Visual Got Mail Solution in 2001, we are

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limited by having one customer. We also
 believe that our wireless products are commercially viable, but developing products
 for the consumer and business marketplaces is inherently difficult and uncertain.
 We do not believe our sales to date are sufficient to determine whether or not
 there is meaningful consumer or business demand for our products.

We intend
 to devote resources to sales and marketing efforts of the NotifyLink product line
 and to promote general consumer and business interest in our products. There can
 be no assurance that such efforts will be successful or that significant market
 demand for our products will ever develop.

We Depend on Limited Number of Potential
 Customers and Need to Develop Marketing Channels

Currently,
 our Voice Mail notification CPE and service revenue is highly dependant on one customer.
 Also, we have entered into agreements with three wireless carriers and one 2way
 wireless device manufacturer for the sale of our NotifyLink products and services.
 We have a minimal direct sales force to sell our NotifyLink products and services
 to eventual users and we rely almost entirely upon our four customers to resell
 our NotifyLink products and services to users. To date, we have received only limited
 revenue from our four NotifyLink customers, and we will receive revenue from these
 customers only to the extent that they successfully resell our products and services
 to users. The success of our NotifyLink Internet Edition web based product will
 be dependent on our ability to sell it to, or in conjunction with, the seven largest
 2way wireless carriers. Our NotifyLink desktop software will be largely dependent
 on establishing a relationship with large 2way wireless device manufacturers. There
 can be no assurance that we will ever sell our NotifyLink products and services
 to additional 2way wireless carriers or 2way wireless device manufacturers or that
 we will ever receive any revenue from our existing customers. Our Enterprise solution
 product is just being introduced and no significant sales have yet been established.

Although we
 have sold significant quantities of our Call Manager as part of our Visual Got Mail
 Solution, we are highly dependant on one customer. We believe that we can sell
 only limited quantities of our traditional Call Manager and Centrex Receptionist
 products in the future. To date, we have sold our wireline products to one long
 distance telephone company, five Regional Bell Operating Companies, or RBOCs, and
 twelve Local Exchange Carriers, or LECs. We have experienced a significantly reduced
 market for our Call Manager products. Our Centrex Receptionist product is selling
 at a reduced level and we do not anticipate a significant increase in Centrex Receptionist
 sales in future quarters. If we fail to maintain a significant relationship with
 the our current customer, our business and operating results would be materially
 adversely affected.

We also intend
 to develop other distribution channels for our products by including certain wireless
 device manufacturers and national wireless carriers. Our management will need to
 expend time and effort to develop these channels. Because our marketing efforts
 have been largely focused on developing relationships with RBOCs and LECs, our management
 has had only limited experience in selling our products through these channels.
 We may not be able to implement this marketing and distribution program to expand
 our distribution channels and any marketing efforts undertaken by or on behalf of
 us may not be successful.

Our Products May Suffer from Defects

Some of our
 products will consist of software and service related to our wireless NotifyLink
 product line. Our NotifyLink 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.

Many of our
 products incorporate a combination of reasonably sophisticated computer chip design,
 electric circuit design, software programming and telephony technology. We have
 devoted substantial resources to researching and developing each of these elements.
 In order to reduce the manufacturing costs, expand the feature sets and otherwise
 enhance the operation of our products, we have from time to time redesigned our
 products. We expect that in the future we will engage in similar redesigns of our
 products. In addition, we are in the process of developing new, similarly complex
 products. Though we extensively test our products before marketing them, any new,
 redesigned or current product may contain design flaws that we would not detect
 through our testing procedures. In addition, we rely on subcontractors to manufacture
 our products. Though we have quality control procedures designed to detect manufacturing
 errors, there can be no assurance that we will identify all defective products.
 We believe that reliable operation will be an important purchase consideration for
 both our consumer and business customers. A failure by us to detect and prevent
 a design flaw or a

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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 Face Significant Competition

We believe
 the market for our products is highly competitive and that competition is likely
 to intensify. In the market for wireless e-mail notification and management software,
 we indirectly compete with Research In Motion Limited and Infowave Software, Inc,
 Wireless Knowledge, Extended Systems, Synchrologic, Visto and Good Technology.

Our Visual
 Got Mail Solution indirectly competes with a single alternate Voice Mail notification
 service offered only by Local Exchange Carriers.

Our Centrex
 Auto Attendant products compete with PC based auto attendant and voice mail systems.
 These companies include telephone equipment manufacturers such as Nortel , Inc.
 and Lucent Technologies, Inc.

Some of these
 companies have greater financial, technical and marketing resources than we do.
 In addition, there are several companies with substantially greater technical,
 financial and marketing resources than we have that could produce competing products.
 These companies include telephone equipment manufacturers such as Nortel , Inc.
 and Lucent Technologies, Inc. We expect that to the extent that the market for
 our products develops, competition will intensify and new competitors will enter
 the market. We may not be able to compete successfully against existing and new
 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 adversely affect our business and results of operations.

Delisting from the Nasdaq SmallCap Market
 May Affect the Liquidity of Our Trading Market and the Market Price of Our Common
 Stock

Our common
 stock is now quoted on the Over-the-Counter Bulletin Board. Our shareholders could
 find it difficult to dispose of, or to obtain accurate quotations of, or to obtain
 accurate quotations as to the market value of, our common stock. In addition, delisting
 may make our common stock ineligible for use as, or make our common stock substantially
 less attractive as, collateral for margin and purpose loans, for investment by financial
 institutions under their internal policies or state legal investment laws, as consideration
 in the financing of future acquisitions of businesses or assets by us, and for issuance
 by us in future capital raising transactions any of which could cause the market
 price of our common stock to decrease. Delisting subjects our common stock to the
 penny stock rules contained in Section 15(g) of the Securities Exchange
 Act of 1934.

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
 Operations, Gaylan Larson and our Chief Financial Officer, Gerald W. Rice. We have
 entered into employment agreements with these three key management employees. The loss of their services or those of any of our other key employees would materially
 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 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 and 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 patent and trademark laws and employee and third-party nondisclosure
 agreements to protect our proprietary rights. We have been issued a patent covering
 the design of our MessageAlert products, and a patent covering the MultiSense technology
 used in our MessageAlert product. We have also applied for patents on our Visual
 Got Mail technology. We intend to continue to apply for patents, as appropriate,
 for our future technologies and products. There are few barriers to entry into
 the market for our products, and there can be no assurance that any patents we apply
 for will be granted or that the scope of our patents or any patents granted in the
 future will be broad enough to protect us against the use of similar technologies
 by our competitors. There can be no assurance, therefore, that any of our competitors,
 some of whom have far

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greater resources than we do, will not independently
 develop technologies that are substantially equivalent or superior to our technology.

On May 17,
 2001, Research In Motion Limited, the maker of the Blackberry hand-held
 computer, announced that it had been issued a patent on its Blackberry single mailbox
 integration. Generally, the patent relates to Research In Motions proprietary
 system and method of redirecting information between a host computer system, and
 a mobile communications device while maintaining a common electronic address between
 the host system and the mobile device. Research In Motion also announced that it
 had filed a complaint against Glenayre Technologies, Inc. for, among other items,
 patent and trademark infringement. Our intellectual property counsel has reviewed
 the patent and issued an opinion to us opining that version 4.0 of our Desktop software
 does not infringe on Research In Motions patent. Nevertheless, no
 assurances can be given that Research In Motion will not bring an action against
 us for a patent infringement or similar claim, or if any such claim is brought,
 the eventual results thereof.

We may be
 involved from time to time in litigation to determine the enforceability, scope
 and validity of any of our proprietary rights or of third parties asserting infringement
 claims against us. These claims could result in substantial cost to us and could
 divert our management and technical personnel away from their normal responsibilities.

We May Not Be Able to Obtain Critical
 Components from Our Suppliers

Currently,
 we are able to obtain many key components used in our products only from single
 or limited sources. We do not have long term supply contracts with these or any
 other component vendors and purchase all of our components on a purchase order basis.
 Component shortages may occur and we may not be able to obtain the components we
 need in a timely manner and on a commercially reasonable basis. In particular, the
 microcontroller that forms the core of our Call Manager that is a key component
 in our Visual Got Mail Solution is manufactured only by Epson Electronics America,
 Inc. From time to time, the semiconductor industry has experienced extreme supply
 constraints. If we are unable to obtain sufficient quantities of microcontrollers
 from Epson Electronics America, Inc., our business and operating results would be
 materially adversely effected.

We utilize
 an offshore manufacturer to manufacture our products and this manufacturer may not
 be able to support our manufacturing requirements. If we are unable to obtain sufficient
 quantities of sole-source components or subassemblies, or to develop alternate sources,
 we could experience delays or reductions in product shipments or be forced to redesign
 our products. Each of these scenarios could materially adversely affect our business
 and operating results.

Our Products May Not Comply with Government
 Regulations and Industry Standards

Our products
 must comply with a variety of regulations and standards. These include regulations
 and standards set by the Federal Communications Commission, Underwriters Laboratories,
 National Registered Testing Laboratories, and Bell Communications Research. As
 our business expands into international markets, we will be required to comply with
 whatever governmental regulations and industry standards exist in those markets.
 In addition, the U.S. telecommunications market is evolving rapidly in part due
 to recently enacted laws revamping the telecommunications regulatory structure.
 Additional legislative or regulatory changes are possible. If we fail to comply
 with existing regulations and standards or to adapt to new regulations and standards,
 our business and operating results could be materially adversely effected.

Sales of Outstanding Shares May Hurt
 Our Stock Price

The market
 price for our common stock could fall substantially if our shareholders sell large
 amounts of our common stock. Potential future sales of our common stock include
 the following:



| | 1,233,870
 shares of our common stock that are outstanding which were placed in an escrow in
 connection with our initial public offering.                                                        
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                   
| | We have registered
 for resale 1,852,938 shares of outstanding common stock and 986,581 shares of common
 stock underlying outstanding warrants that were issued in March 1999 and November
 2000.
|  |                                                                                                                                                                                                   
| | We have registered
 for resale 8,132,820 shares of common stock that underlie our outstanding Series
 A preferred stock and warrants that were issued in July 2001.                               

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Sales or the Possibility of Sales of
 Our Common Stock in the Public Market May Adversely Affect the Market Price of Our
 Securities. Options and Warrants May Dilute Current Shareholders

The following
 options and warrants to purchase our common stock are outstanding:



| | 1,600,000
 Class A warrants to purchase 2,096,000 shares of our common stock for $4.96 per
 share, issued in connection with our initial public offering, subject to adjustment
 in some circumstances;                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                           
| | 425,000 Class
 A warrants to purchase 556,750 shares of our common stock for $4.96 per share, issued
 in connection with our 1997 bridge financing;                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                           
| | 2,152,055
 options outstanding as of September 30, 2002 under our 1997 Stock Plan, and subject
 to vesting requirements. 977,607 additional shares of our common stock are reserved
 for issuance under our 1997 Stock Plan;                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                           
| | warrants as
 of September 30, 2002 to purchase 721,244 shares of common stock at a price of $1.00
 per share held by David Brewer;                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                           
| | warrants to
 purchase 74,983 shares of common stock at a price of $1.00 held by various investors;                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                           
| | warrants
 to purchase 190,354 shares of common stock at a price of $0.01 per share issued
 to various prior investors as an anti-dilution adjustment to our issuance of securities
 in our July 2001 private placement;                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                           
| | warrants
 to purchase an aggregate of 1,871,651 shares of common stock at a price per share
 of $1.00 issued in connection with our July 2001 private placement; and                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                           
| | options to
 purchase an aggregate of 9.2685 units at a price per unit of $100,000, each unit
 consisting of shares of Series A Preferred Stock convertible into an aggregate of
 100,000 shares of common stock and a warrant to purchase 35,000 shares of common
 stock issued to the placement agent in our July 2001 private placement.

Holders of
 these options and warrants may exercise them at a time when we would otherwise be
 able to obtain additional equity capital on terms more favorable to us. Moreover,
 while these options and warrants are outstanding, our ability to obtain financing on favorable
 terms may be adversely affected.

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.

Our Net Income Will Be Decreased if the
 Escrow Securities Are Released

In connection
 with our initial public offering, many of our shareholders, including current officers,
 directors and employees, placed a substantial portion of our securities then held
 by them into an escrow account. These securities will be released from escrow if
 we reach pre-tax earnings targets. Upon the release from this escrow of any securities
 owned by our officers, directors, consultants or employees, we will be required
 to record compensation expense for financial reporting purposes. Accordingly, in
 any period in which securities are released from this escrow, we will record a substantial
 non-cash charge to earnings that will increase our loss or reduce or eliminate earnings,
 if any, at that time. The amount of this charge will be equal to the aggregate
 market price of the securities owned by directors, officers and employees which
 are released from the escrow. Although the amount of compensation expense recognized
 by us would not affect our total shareholders equity or cash flow, it may
 have a depressive effect on the market price of our securities.

Our Charter Provisions May Discourage Acquisition Bids

Our Articles of Incorporation
 gives 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

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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 them in
 connection with any civil or criminal action or administrative proceeding arising
 out of their 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.




ITEM 2. Description of Property

Our principal
 executive offices are located at 1054 South DeAnza Boulevard, Suite 105, San Jose,
 California 95129. These facilities consist of approximately 3,900 square feet of
 office space pursuant to a lease that expires March 31, 2003. We have a second
 location at 6570 Seville Drive, Canfield, Ohio 44406 that houses an engineering
 group and customer support for the Eastern United States. The Ohio facility consists
 of approximately 5,000 square feet of office space leased on a lease that expires
 in October 2006.




ITEM 3. Legal Proceedings

We are not
 a party to any litigation.




ITEM 4. Submission of Matters to a Vote
 of Security Holders

No matters
 were submitted to a vote by security holders during the fourth quarter of fiscal
 2002.

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PART II




ITEM 5. Market for Common Equity and
 Related Stockholder Matters

(a)        
 Market for Common Equity

Our common
 stock was listed on the Nasdaq SmallCap Market under the symbols NTFY until our
 common stock was delisted from the Nasdaq SmallCap Market September 4, 2002. From
 September 4, 2002 until present, our common stock, has been trading on the OTC Bulletin
 Board under the symbol NTFY.

The quarterly
 high and low bid prices of our common stock during the last two fiscal years are
 as follows:

NTFY Common Stock



|                                      | High |       |  | Low
|------------------------------------- | ---- | ----- |  | ---
|                                      |      |       | 
|Fiscal
 Year Ended September 30, 2002 |      |       |  |    
|Fourth Quarter                        | $    | 0.450 |  | $  
|Third Quarter                         | $    | 0.750 |  | $  
|Second Quarter                        | $    | 0.820 |  | $  
|First Quarter                         | $    | 0.900 |  | $  
|Fiscal
 Year Ended September 30, 2001 |      |       |  |    
|Fourth Quarter                        | $    | 1.740 |  | $  
|Third Quarter                         | $    | 2.438 |  | $  
|Second Quarter                        | $    | 4.250 |  | $  
|First Quarter                         | $    | 4.000 |  | $  

These quotations
 reflect inter-dealer prices, without retail mark-up, mark- down or commission, and
 may not represent actual transactions.

(b)        
 Holders.

As of December
 18, 2002, there were approximately 93 holders of record of our common stock.

(c)        
 Dividends.

We have never
 declared or paid any cash dividends on our common stock. We currently anticipate
 that we will retain all future earnings for the expansion and operation of our business
 and do not anticipate paying cash dividends in the foreseeable future.

(d)        
 Equity Compensation Plans

The following
 table sets forth information with respect to our 1997 Stock Plan as of September
 30, 2002.

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|                                                            | (a)                                                                                          |           | (b)                                                                          |  | (c)                                                                                                                                          
|----------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------- | ---------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|                                                            |                                                                                              |           |                                                                              |  |                                                                                                                                              
|Plan Category                                               | Number
 of securities to be issued upon exercise of outstanding options, warrants and rights |           | Weighted-average
 exercise price of outstanding options, warrants and rights |  | Number
 of securities remaining available for future issuance under equity compensation
 plans (excluding securities reflected in column (a))
|                                                            |                                                                                              |           |                                                                              |  |                                                                                                                                              
|Equity compensation
 plans approved by security holders     |                                                                                              | 2,152,055 |                                                                              |  | $                                                                                                                                            
|Equity compensation
 plans not approved by security holders |                                                                                              | N/A       |                                                                              |  |                                                                                                                                              
|Total                                                       |                                                                                              | 2,152,055 |                                                                              |  | $                                                                                                                                            




ITEM 6. Managements Discussion
 and Analysis or Plan of Operation

Overview

We were incorporated
 in the State of California in August 1994. We are an innovative communications
 application service provider of wireline and wireless messaging services. We are
 also a supplier of innovative solutions to maximize the convenience and utility
 of electronic communication by providing customers with flexible solutions that
 are neither network nor device dependant. We currently sell our products through
 OEM relationships with 2way wireless service providers, 2way wireless device manufacturers,
 major telephone companies and telephone equipment distributors.

We completed
 our initial public offering in September 1997, with 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 and, to a lesser extent,
 product revenue and a line of credit. We have sustained significant operating losses
 in every fiscal period since inception and expect to incur substantial 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, our ability to expand our existing distribution channels
 and to create new distribution channels, and our ability to develop and market new
 products and control costs. There can be no assurance that our revenue will grow
 or be sustained in future periods or that we will ever achieve profitability.

Results of Operations

Revenue

Our revenue
 has been derived primarily from the sale of our Visual Got Mail Solution and Centrex
 Receptionist products. Revenue consists primarily of gross revenue from the sale
 of telephony equipment and service income related to our Visual Got Mail Solution
 and the Centrex Receptionist Product. The revenue from these service contracts is
 recognized on a straight line basis over the term of the contract. Revenue for the
 fiscal year ended September 30, 2002 from the sale of products increased to $2,946,060
 from $982,374 for the fiscal year ended September 30, 2001. Revenue for the fiscal
 year ended September 30, 2002 from the sale of service increased to $404,174 from
 $168,811 for the fiscal year ended September 30, 2001. Revenue increased $2,887,987
 from the previous year due to our Visual Got Mail Solution and decreased $89,791
 due to a reduction in sales of the Centrex Receptionist. The development and sales
 of our Visual Got Mail Solution was to a single long distance telephone company
 for visual Voice Mail notification. The Centrex Receptionist revenue decreased
 because telephone companies emphasized the sale of KEY Systems as an
 alternative to selling our Centrex products. We are no longer selling Call Manager
 on a stand alone basis, but we utilize the hardware design in our Visual Got Mail
 Solution that requires the imbedded Caller-id technology as part of the overall
 solution. Revenue for fiscal year 2002 included royalty revenue of $131,686 compared
 to $158,909 in fiscal year 2001 from our multi-sense/stutter-dial patent There
 can be no assurance that a decline in revenue from our Visual Got Mail Solution
 and

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Centrex products will not occur in fiscal
 2003. We have not earned significant revenue from our NotifyLink products to date.

We sell products
 in the United States primarily to a long distance telephone company, 2way wireless
 carriers, regional bell operating companies and local exchange carriers. Our hardware
 products are private labeled. We manufacture based on purchase orders received from
 our long distance telephone customer. The Visual Got Mail Solution and Centrex Receptionist
 product lines accounted for 83%and 6% of total revenues in fiscal 2002, respectively.
 The Visual Got Mail Solution was not sold in fiscal 2001 but the Centrex Receptionist
 accounted for 20% of revenues in fiscal 2001. Significant portions of our revenue
 have been concentrated in a small number of customers. For example, one customer
 accounted for 83% of sales for the year ended September 30 2002. Three other customers
 accounted for 36%, 26% and 12% of sales for the fiscal year ended September 30,
 2001.

Cost of Sales

Cost of sales
 consists primarily of the cost to manufacture our products. Cost of sales increased
 to $1,867,549 in the fiscal year ended September 30, 2002 from $956,553 in the fiscal
 year ended September 30, 2001. This increase was the result of Visual Got Mail Solution
 shipments. The cost of the Visual Got Mail Solution shipments was significantly
 reduced by the use of $560,000 in inventory which had been written-down in prior
 periods. The Visual Got Mail Solution utilizes our traditional Call Manager caller
 id design with a few firmware changes. Call Manager sales declined in the last
 two prior fiscal years to the point that we recorded write-downs of inventory of
 $330,000 in fiscal 2000 and $400,000 in fiscal 2001. At that time, we had no expectation
 of using the inventory. The use of Call Managers in our Visual Got Mail Solution
 allowed us to consume $560,000 of the inventory that had been written-down, favorably
 impacting cost of sales.

The gross
 margin increased to 46% in fiscal 2002 from 27% in fiscal 2001. This improvement
 primarily occurred because of the favorable impact of using $560,000 of inventory
 that had been written-down in prior periods. The gross margin would have been 30%
 in fiscal 2002 without the favorable use of written-down inventory.

The inventory
 write-downs in fiscal 2001 were related to raw materials and work-in-process
 for our Call Manager product line. We experienced a lower demand for our
 caller-id units in customer promotional programs during the first fiscal quarter.
 Based on this continuing trend, we revised our fiscal 2001 sales forecast for the
 caller-id product line on December 31, 2000 and again on March 31, 2001, which led
 to determinations that there was excess inventory on each of those dates resulting
 in the $200,000 accrual for losses on firm purchase commitments on December 31,
 2000 and another accrual for losses of $200,000 on March 31, 2001.

Research and Development

Research and
 development expense consists principally of personnel costs, contract design services
 and supply expenses. Research and development expense decreased to $1,074,817 for
 the fiscal year ended September 30, 2002 from $1,075,482 for the fiscal year ended
 September 30, 2001. Although the decrease was minimal, we reduced our engineering
 staff in California that supported the development of hardware technology offset
 by increasing our development staff at our Ohio site to support the further development
 of our NotifyLink software product line. The change in technology emphasis eliminated
 development and testing costs associated with hardware design and allowed us to
 expand in a geographical area that is economically advantageous. We expect to continue
 our investment in research and development, albeit at a reduced level for fiscal
 2003, in order that we may complete the products under development and enhance our
 current products.*

Sales and Marketing

Sales and
 marketing expense consists primarily of personnel, consulting and travel costs and
 sales commissions related to our sales and marketing efforts. Sales and marketing
 expenses decreased to $644,514 for the fiscal year ended September 30, 2002 from
 $837,845 for the fiscal year ended September 30, 2001. This decrease was attributable
 primarily to the decrease in personnel, travel and a change in our commission structure.
 We also experienced a change in our customer profile requiring less travel and
 less product eligible for commissions. The sales support of our Visual Got Mail
 Solution requires little travel and the NotifyLink product line sales process does
 not require an on-site sales presence.

We believe
 that sales and marketing expenses may increase significantly in future quarters
 as we define the need for additional sales and customer support personnel and attempt
 to expand our existing and create new distribution channels.

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General and Administrative

General and
 administrative expense consists of general management and finance personnel, occupancy
 costs, professional fees and other general corporate expenses. General and administrative
 expenses decreased to $1,673,506 for fiscal 2002 from $1,912,394 for fiscal 2001.
 This decrease is primarily due to lower legal and accounting expense as fiscal 2001
 contained higher expenses related to the successful appeal against a Nasdaq ruling
 to delist us from the Nasdaq SmallCap Market and other regulatory matters.

Income Taxes

There was
 no provision for federal or state income taxes in fiscal 2001 or 2002 as we incurred
 net operating losses. We expect to incur a net operating loss in future quarters
 and years. As of September 30, 2002, we had federal and state net operating loss
 carryforwards of approximately $15,000,000 and $7,000,000, respectively. The net
 loss carryforwards and certain research and development tax credit carryforwards
 will expire in tax years 2005 through 2022, if not utilized. Utilization of the
 net operating losses and credits may be subject to a substantial annual limitation
 due to ownership change limitations provided by the Internal Revenue Code of 1986,
 as amended (the Code), and similar state provisions. The annual limitation
 may result in the expiration of net operating losses and credits carryforwards before
 full utilization. For financial reporting purposes, deferred tax assets primarily
 related to the net operating carryforwards recognized under Financial Accounting
 Standard No. 109, Accounting for Income Taxes, has been fully offset
 by a valuation allowance.

Release of Escrow Securities

In the event
 any Escrow Securities owned by security holders of the Registrant who are officers,
 directors, consultants or employees of the Registrant are released from escrow,
 compensation expense will be recorded for financial reporting purposes. Therefore,
 in the event we attain any of the earnings required for the release of the Escrow
 Securities, the release would be treated, for financial reporting purposes, as compensation
 expense to the Registrant. Accordingly, we will, in the event of the release of
 the Escrow Securities, recognize during the period that the earnings or stock price
 thresholds are met, a substantial non-cash charge to earnings that would increase
 our loss or reduce or eliminate earnings, if any, at such time. The amount of this
 charge will be equal to the aggregate market price of such Escrow Securities at
 the time of release from escrow. Although the amount of compensation expense recognized
 by us will not affect our total shareholders equity or cash flow, it may cause
 a reduction in the market price of our securities.

Liquidity and Capital Resources

During fiscal
 2002, we financed our operations through a combination of gross margin from sales
 of product and services and existing cash balances . Our ability to fund our recurring
 losses from operations depends upon the continuation of the current Visual Got Mail
 Solution program, our success in the wireless e-mail notification and wireless e-mail
 notification market solutions, and/or raising other sources of financing. We had
 a backlog of 174,000 Visual Got Mail Solution units as of September 30, 2002 for
 our Visual Got Mail Solution which we expect to fulfill in fiscal 2003. We do not
 believe that our existing cash balances are sufficient to fund our operations through
 September 30, 2003 and will have to secure additional financing or restructure our
 business in order to reduce costs. In October 2002, we entered into a credit facility
 arrangement of $750,000 that will allow us to continue to purchase our Visual Got
 Mail Solution inventory, but is not intended to fund operations through September,
 30 2003.

At September
 30, 2002, we had cash and cash equivalents and restricted cash of $1,377,956. Of
 this amount, $851,300 is recorded as restricted cash, which is securing outstanding
 letters of credit to our suppliers issued in connection with commitments to purchase
 additional inventory of $1,820,000.

Over the last
 three years, we have financed our operations primarily through sales of equity and
 debt securities and bank lines of credit. In the fiscal years ended September 30,
 2002 and 2001, the net cash used in operating activities equaled $2,101,860 and
 $2,932,427, respectively. The net cash used in operations in fiscal 2002, consisted
 primarily of the net loss of $1,741,752 and a decrease in net operating assets of
 $467,670 offset by depreciation of $107,562. The major causes of the decrease in
 net operating assets was an increase in accounts receivable of $470,196 due to higher
 sales in the fourth quarter of fiscal 2002 compared to the fourth quarter of fiscal
 2001, an increase of $287,515 in inventory due to the purchase of inventory for
 the Visual Got Mail Solution program, offset by an increase in accounts payable
 of $262,936 and an increase in deferred revenue of 104,708 in accordance with our
 revenue recognition policy. We anticipate that we will have a negative cash flow
 from operating activities in future quarters and years.

17



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##### Table of Contents



Net cash used
 in investing activities changed from an inflow of $472,587 in fiscal 2001 to an
 outflow of $677,778 in fiscal 2002 due to an increase in restricted cash and increased
 expenditures for property and equipment from $9,755 in fiscal 2001 to $109,334 in
 fiscal 2002 to purchase equipment to install and expand computer server systems
 to support the Visual Got Mail Solution.

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 SEC Staff Accounting Bulletin No. 101, Revenue
 Recognition in Financial Statements (SAB 101). Under SAB 101,
 revenue is recognized when the title and risk of loss have passed to the customer,
 there is persuasive evidence of an arrangement, delivery has occurred or services
 have been rendered, the sales price is determinable and collectibility is reasonably
 assured. The Company recognizes revenues at time of shipment of its products and
 sales are recorded net of discounts and returns.

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 inability
 to make payments, additional allowances might be required.

Inventories
 are recorded at the lower of cost or market on a first-in, first-out basis. Write-downs
 of inventories to market value are based upon obsolescence, as well as assumptions
 about future demand and market conditions. If assumptions about future demand/or
 actual market conditions are less favorable than those projected by management,
 additional write-downs of inventories could be required. The use of Call Managers
 in our Visual Got Mail Solution allowed us to consume $560,000 of the inventory
 that had been written-down in prior periods, favorably impacting cost of sales.

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.




ITEM 7. Financial Statements

Our audited
 financial statements appear beginning on page F-1 of this report.




ITEM 8. Changes In and Disagreements
 With Accountants on Accounting and Financial Disclosure

None.

18



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##### Table of Contents






PART III




ITEM 9. Management

Directors, Executive Officers and Key
 Employees

Our directors,
 executive officers and key employees and their ages as of September 30, 2002 are
 as follows:



|Name                               |  | Age |  | Position                                        
|---------------------------------- |  | --- |  | ------------------------------------------------
|                                   |  |     |  |                                                 
|Directors
 and Executive Officers: |  |     |  |                                                 
|                                   |  |     |  |                                                 
|Paul F. DePond                     |  | 49  |  | Chief Executive
 Officer, President and Chairman
|                                   |  |     |  |                                                 
|Gaylan I.
 Larson                  |  | 62  |  | Vice President,
 Operations                     
|                                   |  |     |  |                                                 
|Gerald W.
 Rice                    |  | 54  |  | Chief Financial
 Officer and Secretary          
|                                   |  |     |  |                                                 
|Rhonda Chicone
 Shick              |  | 38  |  | Vice President
 of Product Development          
|                                   |  |     |  |                                                 
|Michael K.
 Ballard(1)(2)          |  | 47  |  | Director                                        
|                                   |  |     |  |                                                 
|Harold S.
 Blue                    |  | 41  |  | Director                                        
|                                   |  |     |  |                                                 
|David A. Brewer(1)(2)              |  | 50  |  | Director                                        
|                                   |  |     |  |                                                 
|Andrew H.
 Plevin(1)(2)            |  | 39  |  | Director                                        
|                                   |  |     |  |                                                 
|Bertram Polan                      |  | 51  |  | Director                                        



---

|(1) | Member of
 the audit committee of the board of directors.       
|--- | ----------------------------------------------------------------
|   
|(2) | Member of
 the compensation committee of the board of directors.

Biographical information for directors
 and executive officers:

Paul F.
 DePond, our founder, has served as our President, Chief Executive Officer and
 Chairman of our board of directors since our inception in August 1994. From September
 1992 through May 1994, Mr. DePond served as Vice President of Corporate Marketing
 at Telebit Corporation, a supplier of high speed modems and dialup remote access
 products. From January 1991 through September 1992, Mr. DePond served as Vice President
 of Marketing at Alantec Corporation, a manufacturer of networking products.

Gaylan
 I. Larson has served as our Vice President of Operations since August 1994.

Gerald
 W. Rice has served as our Chief Financial Officer and Secretary since August
 1994.

Rhonda
 Chicone Shick has service as our Vice President of Product Development since
 July 2001. From October 2000 to July 2001, Ms. Shick served as our Director of
 Engineering and from October 1999 to October 2000, she served as our Engineering
 Manager. From January 1999 to October 1999, Ms. Schick served as one of our senior
 software engineers. From September 1996 to January 1999, she served as President
 of Tech-Xpress Enterprises, Inc.

Michael
 K. Ballard has served as one of our directors since January 1995. Since September
 1996, Mr. Ballard has been the President of Savannah Chanelle Vineyards, Inc. and
 since 1998, Mr. Ballard has been a partner of Aragon Ventures LLC, a private equity
 investment firm. From September 1999 to November 2000, he served as President and
 Chief Executive Officer of e-lingo Corporation, an Internet translation infrastructure
 company, and from June 1996 to October 1997, he served as a Division Director for
 Cisco Systems, Inc.

Harold
 S. Blue has served as a director of the Company since July 2001. Since January
 2002, Mr. Blue has served as partner and President of Commonwealth Group Holding,
 Inc., an investment and merchant bank. From February 1993 to December 2000, Mr.
 Blue served as Chairman and CEO of ProxyMed, Inc., a healthcare information systems
 company. From 1979-1984 he was the founder and CEO of Budget Drugs, a pharmacy chain
 in South Florida. From 1984 to 1988 Mr. Blue was the founder and President of Best
 Generics, a generic pharmaceutical distributor, which was sold to IVAX Corporation
 in 1988 at which time Mr. Blue joined IVAX as a director. From 1990 to 1993, Mr.
 Blue was founder and CEO

19



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##### Table of Contents



of Health Services, Inc., a physician practice
 management company, which was sold to InPhyNet Medical Management, Inc. In addition
 to being a director of the Company, Mr. Blue serves on the Board of Directors of
 EB2B Commerce, Inc., and Commonwealth Group Holding, Inc., which is the general
 partner of Commonwealth Associates, L.P. Mr. Blue was nominated for election to,
 and serves on the Board of Directors pursuant to provisions of that certain placement
 agency agreement between the Company and Commonwealth Associates, L.P. dated as
 of April 25, 2001 and amended as of July 11, 2001. The provision provides that Commonwealth
 Associates, L.P. shall have the right to designate two directors of the Companys
 Board of Directors until less than 100,000 shares of the Companys Series
 A Preferred Stock sold in the Companys July 2001 private placement are outstanding.

David A.
 Brewer has served as one of our directors since February 2000. Since January
 1999, Mr. Brewer has served as general manager for Aragon Ventures LLC, a private
 equity investment firm. Mr. Brewer has been Chairman of the End Poverty Foundation,
 a charity organization, since January 2001. From November 1999 to present, Mr. Brewer
 has served as Chief Executive Officer of Explore Holdings LLC, a private equity
 investment firm, and from July 1995 to present he has served as a managing member
 of Inktomi LLC, an internet research company. From September 1996 to December 1998,
 Mr. Brewer served as President, Chief Executive Officer and director of Explore
 Technologies, Inc., an educational toy manufacturer. From February 1996 to May
 1996, Mr. Brewer served as President, Chief Executive Officer, Chief Financial Officer
 and director of Inktomi Corporation, an internet software developer. Mr. Brewer
 was nominated for election to our board of directors pursuant to a requirement contained
 in that certain securities purchase agreement between us and Mr. Brewer dated March
 4, 1999.

Andrew
 H. Plevin has served as one of our directors since November 1998. Since September
 2000, he has served as managing partner of Carnegie Hill Venture Partners, a private
 equity investment firm. From November 1997 to August 2000, Mr. Plevin served as
 President, Chief Executive Officer and Chief Financial Officer of Core Software
 Technology, Inc. From August 1993 to November 1997, Mr. Plevin served as Vice President
 of D.H. Blair Investment Banking Corp. (D.H. Blair), a New York investment
 banking firm.

Bertram
 Polan has served as one our directors since December 2002.
Mr. Polan is President of Gemini Bio-Products of Woodland,
California, which he founded in 1985. Gemini is a provider of various
biological products to the medical research and biotech communities.

All directors
 are elected annually and serve until the next annual meeting of shareholders or
 until the election and qualification of their successors. All executive officers
 serve at the discretion of our board of directors. There are no family relationships
 between any of our directors or executive officers.

Section 16(a) Beneficial Ownership Reporting
 Compliance

Section 16(a)
 of the Securities Exchange Act of 1934, as amended (the Exchange Act)
 requires our executive officers and directors and persons who own more than ten
 percent of a registered class of our equity securities to file an initial report
 of ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities
 and Exchange Commission (the SEC) and the National Association of Securities
 Dealers, Inc. Executive officers, directors and greater than ten percent shareholders
 are also required by SEC rules to furnish us with copies of all Section 16(a) forms
 they file. Based solely on its review of copies of such forms received by it, or
 written representations from certain reporting persons, we believe that during the
 fiscal year ended September 30, 2002 all filing requirements applicable to its officers,
 directors and ten percent shareholders were fulfilled.




ITEM 10. Executive Compensation

The following
 table sets forth information for the three most recently completed fiscal years
 concerning the compensation of (i) the Chief Executive Officer and (ii) all other
 executive officers who earned over $100,000 in salary and bonus in the fiscal year
 ended September 30, 2002 (together the Named Executive Officers).

20



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##### Table of Contents



SUMMARY COMPENSATION TABLE



|                           |      |                      |     |        |        |         |       |  |              |        |          |  |         |  |            |  | Long-Term
 Compensation |  
|-------------------------- | ---- | -------------------- | --- | ------ | ------ | ------- | ----- |  | ------------ | ------ | -------- |  | ------- |  | ---------- |  | ----------------------- | -
|                           |      |                      |     |        |        |         |       |  |              |        |          |  |         |  |            |  |                         |  
|                           |      | Annual
 Compensation |     | Awards |        | Payouts |      
|                           |      |                      |     |        |        |         |       |  |             
|                           |      |                      |     |        |        |         |       |  |              |        |          |  | Other   |  | Restricted |  | Securities              |  
|                           |      |                      |     |        |        |         |       |  |              |        |          |  | Annual  |  | Stock      |  | Underlying              |  
|Name and Principal         |      |                      |     |        | Salary |         | Bonus |  | Compensation |        | Award(s) |  | Options |  | Payouts    |  | Compensation           
|Position                   | Year |                      | ($) |        | ($)    |         | ($)   |  | ($)          |        | (#)      |  | ($)     |  | ($)(1)    
|                           |      |                      |     |        |        |         |       |  |              |        |          |  |         |  |           
|Paul F. DePond             |      | 2002                 |     |        | $      | 208,284 |       |  | $            | 22,500 |          |  |         |  |            |  |                         | 
|Chief Executive Officer    |      | 2001                 |     |        |        | 184,424 |       |  |              |       |          |  |         |  |            |  |                         | 
|                           |      | 2000                 |     |        |        | 167,978 |       |  |              |       |          |  |         |  |            |  |                         | 
|Gaylan I. Larson(2)        |      | 2002                 |     |        |        | 90,837  |       |  |              | 10,000 |          |  |         |  |            |  |                         | 
|Vice President, Operations |      | 2001                 |     |        |        | 102,633 |       |  |              |       |          |  |         |  |            |  |                         | 
|                           |      | 2000                 |     |        |        | 136,154 |       |  |              |       |          |  |         |  |            |  |                         | 
|Gerald W. Rice             |      | 2002                 |     |        |        | 150,653 |       |  |              |       |          |  |         |  |            |  |                         | 
|Chief Financial Officer    |      | 2001                 |     |        |        | 134,573 |       |  |              |       |          |  |         |  |            |  |                         | 
|                           |      | 2000                 |     |        |        | 122,634 |       |  |              |       |          |  |         |  |            |  |                         | 



|(1) | Represents
 payments of health insurance premiums on behalf of the Named Executive Officers.
|--- | --------------------------------------------------------------------------------------------
|   
|(2) | Mr. Larson
 works on a part-time basis.                                                     

The following
 tables set forth certain information for the Named Executive Officers with respect
 to grants and exercises in fiscal 2002 of options to purchase our common stock:

Option Grants in Last
 Fiscal Year



|Individual Grants
|-----------------
|                 
|                 
|                 
|                 
|                 
|Name             
|                 
|Paul F. DePond   
|Gaylan I. Larson 
|Gerald W. Rice   

Aggregated Option Exercises
 in Last Fiscal Year and Fiscal Year End Option Values



|                 |             |   |          |  |              |   |                            |  | Number of                      |         | Value of             
|---------------- | ----------- | - | -------- |  | ------------ | - | -------------------------- |  | ------------------------------ | ------- | ---------------------
|                 |             |   |          |  |              |   |                            |  | Securities Underlying          |         | Unexercised          
|                 |             |   |          |  |              |   |                            |  | Unexercised
 Options at Fiscal |         | In-the-Money
 Options
|                 | Shares      |   | Value    |  | Year End (#) |   | at Fiscal Year
 End (1)($)
|                 | Acquired on |   | Realized |  |              |   |                           
|Name             | Exercise(#) |   | ($)      |  | Exercisable  |   | Unexercisable              |  | Exercisable                    |         | Unexercisable        
|                 |             |   |          |  |              |   |                            |  |                                |         |                      
|Paul F. DePond   |             |  |          |  |              |  |                            |  |                                | 393,389 |                      
|Gaylan I. Larson |             |  |          |  |              |  |                            |  |                                | 176,723 |                      
|Gerald W. Rice   |             |  |          |  |              |  |                            |  |                                | 143,123 |                      

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##### Table of Contents



Director Compensation

The Companys
 directors do not currently receive any cash compensation for service on the
 Companys Board of Directors or any committee thereof. Directors are eligible
 for option grants under the Companys 1997 Stock Plan. During the fiscal year
 ended September 30, 2002, no directors received option grants.

Employment Agreements and Change-in-Control
 Arrangements

In December
 1996, we entered into an employment agreement with Paul F. DePond. The agreement,
 as amended from time to time, provided for an initial base annual salary of $130,000,
 which subsequently increased to $150,000 thirteen months following our initial public
 offering, and increased to $175,000 in February 2000 and to $200,000 in October
 2001. Mr. DePond is eligible for a $50,000 bonus contingent upon our attainment
 of certain performance milestones.

In the event
 that the Company terminates Mr. DePond without cause within twelve (12) months following
 a change in control, Mr. DePond is entitled to receive severance compensation equal
 to a continuation of his salary for a period of twelve (12) months. In the event
 that the Company terminates Mr. DePond without cause apart from a change of control,
 Mr. DePond is entitled to receive severance compensation equal to a continuation
 of his salary for a period of three (3) months. Mr. DePond is not entitled to severance
 compensation in the event of a termination for cause or voluntary resignation. In
 the event of a termination due to disability, Mr. DePond is entitled to receive
 only those severance or disability benefits as are established under the Companys
 then existing severance and benefits plans and policies.

In December
 1996, we entered into an employment agreement with Mr. Rice that provided for an
 initial base annual salary of $105,000. Mr. Rices base salary increased
 to $130,000 in February 2000 and to $150,000 October 2001. Under the agreement,
 Mr. Rice is eligible to receive annual bonuses based on an earnings target approved
 by our board of directors. In November 2002, we entered into an employment agreement
 with Mr. Larson that provides that Mr. Larson will be paid an initial base annual
 salary of $96,000 and that Mr. Larson will work a minimum of 24 hours per week.

In the event
 that the Company terminates Messrs. Larson or Rice without cause within twelve (12)
 months following a change in control, Messrs. Larson and Rice will be entitled to
 receive severance compensation equal to a continuation of his salary for a period
 of six (6) months. In the event that the Company terminates Mr. Larson without
 cause apart from a change of control, Mr. Larson is entitled to receive severance
 compensation equal to a continuation of his salary for a period of three (3) months.
 In the event that the Company terminates Mr. Rice without cause apart from a change
 of control, Mr. Rice is entitled to receive severance compensation equal to a continuation
 of his salary for a period of six (6) months. Messrs. Larson and Rice are not
 entitled to severance compensation in the event of a termination for cause or voluntary
 resignation. In the event of a termination due to disability, the terminated officer
 is entitled to receive only those severance or disability benefits as are established
 under the Companys then existing severance and benefits plans and policies.

The foregoing
 agreements define a change in control as (i) the acquisition of more
 than 30% of our voting securities by any person or group; (ii) a change in a majority
 of our board of directors occurring within a two-year period; or (iii) the approval
 by our shareholders of a transaction which would result in a transfer of more than
 50% of our voting power provided, however, that a public offering of our common
 stock does not constitute a change of control. The agreements define cause
 as an act of dishonesty in connection with employment; a conviction of a felony
 which will detrimentally affect our reputation or business; willful and gross misconduct
 injurious to us; and continued and willful failure to perform duties. The agreements
 define disability as the inability to perform duties under the agreement
 due to mental or physical illness determined to be total and permanent by a physician.




ITEM 11. Security Ownership of Certain
 Beneficial Owners and Management

The following
 tables set forth certain information regarding beneficial ownership of our common
 stock and our Series A Preferred Stock as of November 30, 2002 by (i) each person
 or entity who is known by us to own beneficially more than 5% of the outstanding
 shares of that class of our stock, (ii) each of our directors, (iii) each of the
 executive officers, and (iv) all directors and executive officers as a group.

These tables
 are based on information provided to us or filed with the SEC by our directors,
 executive officers and principal shareholders. Unless otherwise indicated, the
 address for each shareholder listed in the following tables is c/o Notify Technology
 Corporation, 1054 S. De Anza Blvd., Suite 105, San Jose, California 95129.

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##### Table of Contents



COMMON STOCK



|                                                            | Common Shares
 Beneficially Owned
|----------------------------------------------------------- | ---------------------------------
|                                                            |                                  
|Name and Address of Beneficial Owner                        | Number(1)                        
|                                                            |                                  
|Michael S. Falk(2)                                          |                                  
|c/o Commonwealth Associates, L.P.                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|ComVest Management LLC(3)                                   |                                  
|c/o Commonwealth Associates, L.P.                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|ComVest Venture Partners, LP(4)                             |                                  
|c/o Commonwealth Associates, L.P.                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|David A. Brewer(5)                                          |                                  
|                                                            |                                  
|Robert Priddy(6)                                            |                                  
|c/o Commonwealth Associates, L.P.                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|RMC Capital, LLC(7)                                         |                                  
|c/o Commonwealth Associates, L.P.                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|Paul F. DePond(8)                                           |                                  
|                                                            |                                  
|Commonwealth Associates Management Company, Inc.(9)         |                                  
|c/o Commonwealth Associates, L.P.                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|Commonwealth Associates, L.P.(10)                           |                                  
|830 Third Avenue                                            |                                  
|New York, NY 10022                                          |                                  
|                                                            |                                  
|Gaylan I. Larson(11)                                        |                                  
|                                                            |                                  
|Andrew Plevin(12)                                           |                                  
|                                                            |                                  
|Gerald W. Rice(13)                                          |                                  
|                                                            |                                  
|Michael Ballard(14)                                         |                                  
|                                                            |                                  
|Harold S. Blue(15)                                          |                                  
|                                                            |                                  
|Bertram Polan                                               |                                  
|                                                            |                                  
|All directors and executive officers as a group (9 persons) |                                  
|                                                            |                                  
|                                                            |                                  



|*   | less than
 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(1) | Applicable
 percentage of ownership is based on 5,783,678 shares of our common stock outstanding
 as of November 30, 2002 together with applicable options, warrants or convertible
 Series A Preferred Stock for such shareholder. Beneficial ownership is determined
 in accordance with the rules of the Securities Exchange Commission, and includes
 voting and investment power with respect to shares. Shares of common stock (i) issuable
 upon exercise of options or warrants that are currently exercisable or are exercisable
 within 60 days after November 30, 2002 or (ii) issuable upon conversion of Series
 A Preferred Stock that is currently

23



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##### Table of Contents





|     | convertible
 or is convertible within 60 days after November 30, 2002 are deemed outstanding
 for purposes of computing the percentage ownership of the person holding such options,
 warrants or Series A Preferred Stock, but are not deemed outstanding for computing
 the percentage of any other shareholder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2)  | Consists of
 (i) 2,357,801 shares issuable to ComVest Venture Partners, LP, (ii) 483,421 shares
 issuable to Commonwealth Associates, L.P. and (iii) 149,214 shares issuable to Mr.
 Falk upon the conversion and exercise of the Series A Preferred Stock and warrants
 that are issuable upon the exercise of an option to purchase 1.105267 units, in
 which each unit consists of 10,000 shares of Series A Preferred Stock and a warrant
 to purchase 35,000 shares of common stock (a Preferred Unit). Mr. Falk
 is a manager of ComVest Management LLC, which is the general partner of ComVest
 Venture Partners, LP, and a director of Commonwealth Associates Management Company,
 Inc., which is the general partner of Commonwealth Associates, L.P. Mr. Falk shares
 voting and dispositive power over the shares held by ComVest Venture Partners, LP
 and Commonwealth Associates, L.P.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3)  | Consists of
 2,357,801 shares issuable to ComVest Venture Partners, LP. ComVest Management LLC
 is the general partner of ComVest Venture Partners, LP and shares voting and dispositive
 power over the shares held by ComVest Venture Partners, LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(4)  | Consists of
 (i) 608,151 shares issuable upon exercise of warrants, (ii) 1,400,000 shares issuable
 upon conversion of 140,000 shares of Series A Preferred Stock and (iii) 349,650
 shares issuable upon the conversion and exercise of the Series A Preferred Stock
 and warrants that are issuable upon exercise of an option to purchase 2.59 Preferred
 Units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(5)  | Includes (i)
 733,244 shares issuable upon exercise of warrants, (ii) 40,000 shares issuable upon
 exercise of options, (iii) 7,201 shares of common stock owned by New Madrone Fund,
 Inc., of which Mr. Brewer is a shareholder and (iv) 3,500 shares of common stock
 issuable upon exercise of warrants owned by JEB Associates, of which Mr. Brewer
 is a shareholder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(6)  | Includes 1,350,000
 shares issuable to RMC Capital, LLC. Mr. Priddy is a manager of RMC Capital, LLC
 and shares voting and dispositive power over these shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(7)  | Includes 1,000,000
 shares issuable upon conversion of 100,000 shares of Series A Preferred Stock and
 350,000 shares issuable upon exercise of warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(8)  | Includes 25,000
 shares issuable upon exercise of warrants and 462,500 shares issuable upon exercise
 of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(9)  | Consists of
 483,421 shares issuable to Commonwealth Associates, L.P. Commonwealth Associates
 Management Company, Inc. is the general partner of Commonwealth Associates, L.P.
 and shares voting and dispositive power over the shares held by Commonwealth Associates,
 L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(10) | Includes 483,421
 shares issuable upon the conversion and exercise of the Series A Preferred Stock
 and warrants that are issuable upon the exercise of an option to purchase 3.580907
 Preferred Units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(11) | Includes 201,389
 shares issuable upon exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(12) | Includes 4,250
 shares issuable upon exercise of warrants and 50,000 shares issuable upon exercise
 of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(13) | Includes 161,389
 shares issuable upon exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(14) | Includes 60,000
 shares issuable upon exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(15) | Includes 43,248
 shares issuable upon the conversion and exercise of the Series A Preferred Stock
 and warrants that are issuable upon the exercise of an option to purchase 0.320367
 Preferred Units. Also includes 6,667 shares issuable upon exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

SERIES A PREFERRED STOCK



|                                     | Shares of
 Series A Preferred Stock
|------------------------------------ | -----------------------------------
|                                     | Beneficially Owned                 
|Name and Address of Beneficial Owner | Number(1)                          
|                                     |                                    
|Michael S. Falk(2)                   |                                    
|c/o Commonwealth Associates, L.P.    |                                    
|830 Third Avenue                     |                                    
|New York, NY 10022                   |                                    
|                                     |                                    
|ComVest Management LLC(3)            |                                    
|c/o Commonwealth Associates, L.P.    |                                    
|830 Third Avenue                     |                                    
|New York, NY 10022                   |                                    
|                                     |                                    
|ComVest Venture Partners, LP(4)      |                                    
|c/o Commonwealth Associates, L.P.    |                                    
|830 Third Avenue                     |                                    
|New York, NY 10022                   |                                    
|                                     |                                    
|Robert Priddy(5)                     |                                    
|c/o Commonwealth Associates, L.P.    |                                    
|830 Third Avenue                     |                                    
|New York, NY 10022                   |                                    

24



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##### Table of Contents





|RMC Capital, LLC                                            |  | 100,000 |  |  |  | 21.5 | 
|----------------------------------------------------------- |  | ------- |  |  |  | ---- | 
|c/o Commonwealth Associates, L.P.                           |  |         |  |  |  |      | 
|830 Third Avenue                                            |  |         |  |  |  |      | 
|New York, NY 10022                                          |  |         |  |  |  |      | 
|                                                            |  |         |  |  |  |      | 
|Commonwealth Associates Management Company, Inc(6)          |  | 35,809  |  |  |  | 7.1  | 
|c/o Commonwealth Associates, L.P.                           |  |         |  |  |  |      | 
|830 Third Avenue                                            |  |         |  |  |  |      | 
|New York, NY 10022                                          |  |         |  |  |  |      | 
|                                                            |  |         |  |  |  |      | 
|Commonwealth Associates, L.P.(7)                            |  | 35,809  |  |  |  | 7.1  | 
|830 Third Avenue                                            |  |         |  |  |  |      | 
|New York, NY 10022                                          |  |         |  |  |  |      | 
|                                                            |  |         |  |  |  |      | 
|Harold S. Blue(8)                                           |  | 3,203   |  |  |  | *    | 
|                                                            |  |         |  |  |  |      | 
|David A. Brewer                                             |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|Paul F. DePond                                              |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|Gaylan I. Larson                                            |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|Andrew Plevin                                               |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|Gerald W. Rice                                              |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|Michael Ballard                                             |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|Bertram Polan                                               |  |        |  |  |  |     | 
|                                                            |  |         |  |  |  |      | 
|All directors and executive officers as a group (9 persons) |  | 3,203   |  |  |  | *    | 
|                                                            |  |         |  |  |  |      | 
|                                                            |  |         |  |  |  |      | 



|*   | less than
 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(1) | Applicable
 percentage of ownership is based on 466,000 shares of Series A Preferred Stock outstanding
 as of November 30, 2002 together with applicable warrants for such shareholder.
 Beneficial ownership is determined in accordance with the rules of the Securities
 Exchange Commission, and includes voting and investment power with respect to shares.
 Shares of Series A Preferred Stock issuable upon exercise of options that are currently
 exercisable or are exercisable within 60 days after November 30, 2002 are deemed
 outstanding for purposes of computing the percentage ownership of the person holding
 such options, but are not deemed outstanding for computing the percentage of any
 other shareholder.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | Consists of
 (i) 140,000 shares held by ComVest Venture Partners, LP, (ii) 25,900 shares issuable
 to ComVest Venture Partners, LP, (iii) 35,809 shares issuable to Commonwealth Associates,
 L.P. and (iv) 11,052 shares issuable to Mr. Falk upon exercise of an option. Mr.
 Falk is a manager of ComVest Management LLC, which is the general partner of ComVest
 Venture Partners, LP, and a director of Commonwealth Associates Management Company,
 Inc., which is the general partner of Commonwealth Associates, L.P. Mr. Falk shares
 voting and dispositive power over the shares held by ComVest Venture Partners, LP
 and Commonwealth Associates, L.P.                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | Consists of
 140,000 shares held by ComVest Venture Partners and 25,900 shares issuable to ComVest
 Venture Partners, LP. ComVest Management LLC is the general partner of ComVest
 Venture Partners, LP and shares voting and dispositive power over the shares held
 by ComVest Venture Partners, LP.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(4) | Includes 25,900
 shares issuable upon the exercise of an option.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(5) | Consists of
 1,000,000 shares held by RMC Capital, LLC. Mr. Priddy is a manager of RMC Capital,
 LLC and shares voting and dispositive power over these shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(6) | Consists of
 35,809 shares issuable to Commonwealth Associates, L.P. Commonwealth Associates
 Management Company, Inc. is the general partner of Commonwealth Associates, L.P.
 and shares voting and dispositive power over the shares held by Commonwealth Associates,
 L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(7) | Consists of
 35,809 shares issuable upon the exercise of an option.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(8) | Consists of
 3,203 shares issuable upon the exercise of an option.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

25



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##### Table of Contents






ITEM 12. Certain Relationships and Related
 Transactions

March 1999 Private Placement

In March 1999,
 we sold to David A. Brewer, a member of our board of directors, in a private placement
 850,000 shares of common stock and warrants to purchase 1,344,444 shares of common
 stock for an aggregate consideration of $3,060,000. The warrants consisted of four
 warrants to purchase 155,800 shares of common stock at $3.60 per share and one warrant
 to purchase 721,244 shares of common stock at $3.60 per share. The four warrants
 to purchase 155,800 shares of common stock terminated at the earlier of (i) our
 achievement of certain milestones or (ii) September 3, 2000. The termination date
 for the warrant to purchase 721,244 shares of common stock is March 3, 2003. In
 connection with the sale of the common stock and warrants to Mr. Brewer, we agreed
 to issue additional warrants to Mr. Brewer if we sold shares of our common stock
 in a capital raising transaction at a price below $3.60 per share prior to the earlier
 of (1) March 3, 2002 or (2) our calling our outstanding Class A warrants. In addition,
 we agreed to register for resale the common stock sold in the private placement
 and the common stock underlying the warrants.

Mr. Brewer
 exercised two of the four warrants on October 11, 1999 and received 311,600 shares
 of common stock underlying such warrants for an aggregate exercise price of $1,121,760.
 At the same time, we renegotiated the two remaining warrants to restate the milestone
 on one and extend both warrants until March 1, 2001 or 30 days after we meet certain
 product sales or revenue milestones. In February 2000, Mr. Brewer exercised one
 of these warrants and received 155,800 shares of common stock for an aggregate purchase
 price of $560,880. The other warrant to purchase 155,800 shares has expired.

In October
 2000 and in July 3001, Mr. Brewer agreed to waive his right to be issued additional
 warrants if we issued shares of our capital stock at a price below $3.60 per share
 with respect to the November 2000 and July 2001 private placements described below.

November 2000 Private Placement

In November
 2000, we sold in a private placement, 376,865 shares of common stock and warrants
 to purchase 188,424 shares of common stock for an aggregate purchase price of $1,225,000.
 Mr. Andrew H. Plevin, a member of our board of directors, purchased 76,916 shares
 of common stock and warrants to purchase 38,458 shares of common stock for an aggregate
 consideration of $250,000 in this private placement. The warrants consisted of two
 warrants to purchase 19,229 shares of common stock at $3.25 per share. We agreed
 to issue additional warrants and to decrease the exercise price of the warrants
 if we sold shares of our common stock in a capital raising transaction at a price
 below $3.25 per share prior to the earlier of (1) November 7, 2003 or (2) our calling
 our outstanding Class A warrants. In addition, we agreed to register for resale
 the common stock sold in the private placement and the common stock underlying the
 warrants.

In July 2001,
 Mr. Plevin agreed to waive his right to be issued additional warrants if we issued
 shares of our capital stock at a price below $3.25 per share with respect to the
 July 2001 private placement described below. In July 2001, the per share exercise
 price of Mr. Plevins two warrants decreased to $1.00 per share as a result
 of the July private placement and Mr. Plevin exercised his two warrants and received
 38,458 shares of common stock for an aggregate purchase price of $38,458.

July 2001 Private Placement

On July 20,
 2001, we completed a preferred stock and warrant financing. In the financing, we
 sold shares of our Series A Preferred Stock convertible into an aggregate of 5,010,000
 shares of our common stock and warrants to purchase an aggregate of 1,753,500 shares
 of common stock at an exercise price of $1.00 per share. The proceeds from the financing,
 net of the placement agents commission, were approximately $4,509,000.

We issued
 to ComVest Venture Partners, L.P. a warrant to purchase 118,151 shares of common
 stock on May 15, 2001 in connection with ComVest Venture Partners commitment
 to invest in the financing the difference between $5,000,000 and the aggregate amount
 of money invested by all other investors in the financing. In the financing, ComVest
 purchased approximately $1,400,000 of securities. In addition, we granted Commonwealth
 Associates, L.P., the placement agent for the financing, an option to purchase (i)
 shares of Series A Preferred Stock convertible into an aggregate of 926,850 shares
 of common stock and (ii) a warrant to purchase 324,397 shares of common stock.

26



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##### Table of Contents



We agreed
 to prepare and file with the Securities and Exchange Commission a registration statement
 covering the resale of the shares of common stock underlying all securities issued
 in connection with the financing. Also, we agreed to appoint two designees of Commonwealth
 Associates, L.P. to our board of directors and to cause the authorized number of
 directors on our board of directors to be no greater than six prior to our next
 annual meeting of shareholders. Mssrs. Harold S. Blue and Bertram Polan are Commonwealth
 Associates designees to our board of directors. We have covenanted to provide
 Commonwealth Associates, L.P. with (i) finders fees in connection with certain
 future financings, (ii) observation rights of members of our board of directors
 and (iii) membership rights to committees of the board of directors.

We believe
 that all of the transactions set forth above were made on terms no less favorable
 to us than could have been obtained from unaffiliated third parties.

27



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##### Table of Contents






ITEM 13. Exhibits and Reports on Form
 8-K.

(a)       Exhibits



|3.1.1  |  | Amended and
 Restated Articles of Incorporation of Registrant as filed with the Secretary of
 State of California on September 2, 1997. (incorporated herein by reference to Exhibit
 (3.2) to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on March 14, 1997)                                                                                                  
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.2  |  | Certificate
 of Amendment to the Registrants Articles of Incorporation as filed with the
 Secretary of State of California on March 3, 1998. (incorporated herein by reference
 to Exhibit (3.1.1) to the Registrants Quarterly Report on Form 10-QSB for
 the quarterly period ended June 30, 2001, filed on August 14, 2001)                                                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.3  |  | Certificate
 of Amendment to the Registrants Articles of Incorporation as filed with the
 Secretary of State of California on July 12, 2001. (incorporated herein by reference
 to Exhibit (3.1.1) to the Registrants Quarterly Report on Form 10-QSB for
 the quarterly period ended June 30, 2001, filed on August 14, 2001)                                                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.4  |  | Certificate
 of Determination, Preferences and Rights of Series A Preferred Stock as filed with
 the Secretary of State of California on July 13, 2001. (incorporated herein by reference
 to Exhibit (3.1) to the Registrants Current Report on Form 8-K, filed on July
 23, 2001)                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.2    |  | Amended and
 Restated Bylaws of Registrant. (incorporated herein by reference to Exhibit (3.2)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended June 30, 2001, filed on August 14, 2001)                                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.1.1  |  | Form of Warrant
 Agreement. (incorporated herein by reference to Exhibit (4.1) to Amendment No. 1
 to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on May 29, 1997)                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.1.2  |  | First Amendment
 to Warrant Agreement dated as of July 10, 2002 by and among the Registrant, American
 Stock Transfer & Trust Company and D.H. Blair Investment Banking Corp. (incorporated
 herein by reference to Exhibit (4.1) to the Registrants Current Report on
 Form 8-K, filed on July 17, 2002)                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.2    |  | Form of warrant
 issued to subscribers in connection with the Registrants July 2001 private
 placement. (incorporated herein by reference to Exhibit (4.1) to the Registrants
 Current Report on Form 8-K, filed on July 23, 2001)                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.3    |  | Form of option
 issued to the placement agent in connection with the Registrants July 2001
 private placement. (incorporated herein by reference to Exhibit (4.2) to the Registrants
 Current Report on Form 8-K, filed on July 23, 2001)                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.4    |  | Form of warrant
 underlying the option issued to the placement agent in connection with the Registrants
 July 2001 private placement. (incorporated herein by reference to Exhibit
 (4.3) to the Registrants Current Report on Form 8-K, filed on July 23, 2001)                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.1 |  | Employment
 Agreement dated as of August 1, 1997 between Registrant and Paul DePond. (incorporated
 herein by reference to Exhibit (10.1) to Amendment No. 2 to the Registrants
 Registration Statement on Form SB-2, Reg. No. 333-23369, filed on August 15, 1997)                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.2 |  | Amendment
 No. 1 dated February 23, 2000 to Employment Agreement dated as of August 1, 1997
 between Registrant and Paul DePond. (incorporated herein by reference to Exhibit
 (10.2) to Post-Effective Amendment No. 4 to the Registrants Registration Statement
 on Form SB-2, Reg. No. 333-23369, filed on April 18, 2000)                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.3 |  | Amendment
 No. 2 dated June 29, 2001 to Employment Agreement dated as of August 1, 1997 between
 Registrant and Paul DePond, as amended by Amendment No. 1 to Employment Agreement
 dated as of February 23, 2000. (incorporated herein by reference to Exhibit (10.2)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended June 30, 2001, filed on August 14, 2001)

28



---



##### Table of Contents





|10.1.4 |  | Amendment
 No. 3 dated October 11, 2001 to Employment Agreement dated as of August 1, 1997
 between Registrant and Paul DePond, as amended by Amendment No. 1 to Employment
 Agreement dated as of February 23, 2000 and Amendment No. 2 to Employment Agreement
 dated as of June 29, 2001. (incorporated herein by reference to Exhibit (10.4) to
 the Registrants Annual Report on Form 10-KSB for the annual period ended September
 30, 2001, filed on December 28, 2001) 
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.2   |  | Amended Employment
 Agreement dated as of November 4, 2002 between Registrant and Gaylan Larson.                                                                                                                                                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.1 |  | Employment
 Agreement dated as of August 1, 1997 between Registrant and Gerald Rice. (incorporated
 herein by reference to Exhibit (10.3) to Amendment No. 2 to the Registrants
 Registration Statement on Form SB-2, Reg. No. 333-23369, filed on August 15, 1997)                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.2 |  | Amendment
 No. 1 dated February 23, 2000 to Employment Agreement dated as of August 1, 1997
 between Registrant and Gerald Rice. (incorporated herein by reference to Exhibit
 (10.6) to Post-Effective Amendment No. 4 to the Registrants Registration Statement
 on Form SB-2, Reg. No. 333-23369, filed on April 18, 2000)                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.3 |  | Amendment
 No. 2 dated June 29, 2001 to Employment Agreement dated as of August 1, 1997 between
 Registrant and Gerald Rice, as amended by Amendment No. 1 to Employment Agreement
 dated as of February 23, 2000. (incorporated herein by reference to Exhibit (10.4)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended June 30, 2001, filed on August 14, 2001)                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.4 |  | Amendment
 No. 3 dated October 11, 2001 to Employment Agreement dated as of August 1, 1997
 between Registrant and Gerald Rice, as amended by Amendment No. 1 to Employment
 Agreement dated as of February 23, 2000 and Amendment No. 2 to Employment Agreement
 dated as of June 29, 2001. (incorporated herein by reference to Exhibit (10.11)
 to the Registrants Annual Report on Form 10-KSB for the annual period ended
 September 30, 2001, filed on December 28, 2001)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.4   |  | Form of Indemnification
 Agreement. (incorporated herein by reference to Exhibit (10.5) to the Registrants
 Registration Statement on Form SB-2, Reg. No. 333-23369, filed on March 14, 1997)                                                                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.5   |  | Escrow Agreement
 by and between Registrant, the American Stock Transfer & Trust Company and
 certain security holders of the Registrant, as amended. (incorporated herein by
 reference to Exhibit (10.6) to Amendment No. 2 to the Registrants Registration
 Statement on Form SB-2, Reg. No. 333-23369, filed on August 15, 1997)                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.6   |  | Registrants
 1997 Stock Plan, as amended. (incorporated by reference to Exhibit (10.2)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended March 31, 2002, filed on May 15, 2002)                                                                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.7   |  | Lease between
 Registrant, and Ching C. Poon and Jenny M. Poon. (incorporated herein by reference
 to Exhibit (10.59) to the Registrants Quarterly Report on Form 10-QSB for
 the quarterly period ended June 30, 2001, filed on August 14, 2001)                                                                                                                                                                                                                              
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.8+  |  | Nonexclusive
 Technology License Agreement between Registrant and Active Voice Corporation dated
 April 30, 1997. (incorporated herein by reference to Exhibit (10.10) to Amendment
 No. 2 to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on August 15, 1997)                                                                                                                                                                              
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.9   |  | Securities
 Purchase Agreement dated as of March 4, 1999 between Registrant andDavid A.
 Brewer. (incorporated herein by reference to Exhibit (10.11) to Post-Effective Amendment
 No. 3 to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on April 2, 1999)                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.10  |  | Amendment
 No. 1 dated October 7, 1999 to Securities Purchase Agreement dated as of March 4,
 1999 between Registrant and David Brewer. (incorporated herein by reference to Exhibit
 (10.12) to the Registrants Annual Report on Form 10-KSB for the fiscal year
 ended September 30, 1999, filed on December 28, 1999)                                                                                                                                                       

29



---



##### Table of Contents





|10.11  |  | Amendment
 No. 2 dated October 26, 2000 to Securities Purchase Agreement dated as of March
 4, 1999 and as amended on October 7, 1999 between Registrant and David Brewer. (incorporated
 herein by reference to Exhibit (10.14) to the Registrants Annual Report on
 Form 10-KSB for the fiscal year ended September 30, 2000, filed on December 29,
 2000)
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|10.12  |  | Securities
 Purchase Agreement dated November 8, 2000 by and among the Registrant and the purchasers
 listed on Exhibit A thereto. (incorporated herein by reference to Exhibit (10.17)
 to the Registrants Annual Report on Form 10-KSB for the fiscal year ended
 September 30, 2000, filed on December 29, 2000)                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|10.13  |  | Registration
 Rights Agreement, dated as of July 20, 2001 by and among the Registrant and the
 subscribers set forth therein. (incorporated herein by reference to Exhibit (10.1)
 to the Registrants Current Report on Form 8-K, filed on July 23, 2001)                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|10.14  |  | Form of Registration
 Rights Agreement, dated as of July 20, 2001 by and among the Registrant and Commonwealth
 Associates, L.P. (incorporated herein by reference to Exhibit (10.2) to the Registrants
 Current Report on Form 8-K, filed on July 23, 2001)                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|10.15+ |  | Voice Mail
 Services Agreement, dated as of February 8, 2002, by and between the Registrant
 and AT&T Corp. (incorporated by reference to Exhibit (10.1) to the Registrants
 Quarterly Report on Form 10-QSB for the quarterly period ended March 30,
 2002, filed on May 15, 2002)                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|10.16  |  | Master Purchase
 Order Assignment Agreement, dated as of September 13, 2002, by and between Transcap
 Trade Finance and the Registrant.                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|23.1.  |  | Consent of
 Ernst & Young LLP, Independent Auditors                                                                                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|24.1   |  | Power of Attorney
 (see page 31).                                                                                                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                              
|99.1   |  | Certification
 of Chief Executive Officer and Chief Financial Officer                                                                                                                                                                                                                                                                                        



---

|+ | Confidential
 treatment has been granted with respect to portions of these exhibits.
|- | ------------------------------------------------------------------------------------

(b)        
 Reports on Form 8-K

(1)     On
 July 17, 2002, we filed a report on Form 8-K under Item 5 reporting the amendment to
 the Warrant Agreement relating to our Class A Warrants to extend the expiration
 date of such warrants for a period of one year from August 28, 2002 to August 28,
 2003.

2)     On
 September 4, 2002, we filed a Report on Form 8-K under Item 5 reporting that our common stock,
 Units and Class A warrants had been delisted from the Nasdaq SmallCap Market, effective
 September 4, 2002.




ITEM 14. 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 Securities Exchange Act of 1934 (the Exchange
 Act) Rules 13a-14(c) and 15-d-14(c)) as of a date (the Evaluation Date) within
 90 days before the filing date of this Annual Report on Form 10-KSB, have concluded
 that as of the Evaluation Date, our disclosure controls and procedures are 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.

Subsequent
 to the Evaluation Date, there were no significant changes in our internal controls
 or in other factors that could significantly affect our disclosure controls and
 procedures, nor were there any significant deficiencies or material weaknesses in
 our internal controls. As a result, no corrective actions were required or undertaken.

30



---



##### Table of Contents






SIGNATURES

Pursuant to
 the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
 the registrant has duly caused this report to be signed on its behalf by the undersigned,
 duly authorized, in the City of San Jose, California, on the 24th day of December,
 2002.



|                         |  | NOTIFY TECHNOLOGY
 CORPORATION
|------------------------ |  | ------------------------------
|                         |  |                               
|Dated:
December 24, 2002 |  | By:                           
|                         |  |                               
|                         |  |                               
|                         |  |                               

POWER OF ATTORNEY

KNOW ALL MEN
 BY THESE PRESENTS that each person whose signature appears below constitutes and
 appoints Paul F. DePond and Gerald W. Rice and each of them, as his true and lawful
 attorneys-in-fact and agents, with full power of substitution and resubstitution,
 for him and in his name, place and stead, in any and all capacities, to sign any
 and all amendments to this Report on Form 10-KSB, and to file the same with all
 exhibits thereto, and other documents in connection therewith, with the Securities
 and Exchange Commission, granting unto said attorneys- in-fact and agents, and each
 of them, full power and authority to do and perform each and every act and thing
 requisite and necessary to be done in and about the premises, as fully to all intents
 and purposes as he might or could do in person, hereby ratifying and confirming
 all that said attorneys-in-fact and agents, or either of them, or their or his substitute
 or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance
 with the requirements of the Securities Exchange Act of 1934, this Report was signed
 by the following persons in the capacities indicated below and on the dates stated.



|Signature                          |                                                                                | Title             |  | Date
|---------------------------------- | ------------------------------------------------------------------------------ | ----------------- |  | ----
|                                   |                                                                                |                  
|/S/ PAUL DEPONDPaul DePond         | President,
 Chief Executive Officer and Chairman (Principal Executive Officer) | December 24, 2002
|                                   |                                                                                |                  
|/S/ GERALD RICE
Gerald Rice        | Chief Financial
 Officer (Principal Financial and Accounting Officer)          | December 24, 2002
|                                   |                                                                                |                  
|/S/ MICHAEL BALLARDMichael Ballard | Director                                                                       | December 19, 2002
|                                   |                                                                                |                  
|/S/ DAVID BREWERDavid Brewer       | Director                                                                       | December 27, 2002
|                                   |                                                                                |                  
|/S/ ANDREW PLEVINAndrew Plevin     | Director                                                                       | December 24, 2002
|                                   |                                                                                |                  
|/S/ HAROLD BLUEHarold Blue         | Director                                                                       | December 23, 2002
|                                   |                                                                                |                  
|/S/ BERTRAM POLANBertram Polan     | Director                                                                       | December 23, 2002
|                                   |                                                                                |                  

31



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##### Table of Contents






Certification under Section
 302(a) of the Sarbanes-Oxley Act of 2002



|   | I, Paul F.
 DePond, certify that:                                                                                                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                             
|1. | I have reviewed
 this annual report on Form 10-KSB of Notify Technology Corporation;                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                             
|2. | Based on my
 knowledge, this annual report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this annual report;
|   |                                                                                                                                                                                                                                                                                                                             
|3. | Based on my
 knowledge, the financial statements, and other financial information included in
 this annual report, fairly present in all material respects the financial condition,
 results of operations and cash flows of the registrant as of, and for, the periods
 presented in this annual report;                   
|   |                                                                                                                                                                                                                                                                                                                             
|4. | The registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                



| | a) | designed such
 disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this annual
 report is being prepared;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                 
| | b) | evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this annual report (the Evaluation
 Date); and                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                 
| | c) | presented
 in this annual report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          



|5. | The registrants
 other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent functions):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                   
| | b) | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and                                                                                                                                          



|6. | The registrants
 other certifying officers and I have indicated in this annual report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date: December 23, 2002 |                                       
|----------------------- | --------------------------------------
|                        | /s/ Paul F.
 DePond                   
|                        |                                       
|                        | Paul F. DePond                        
|                        | President
 and Chief Executive Officer

32



---



##### Table of Contents





|   | I, Gerald
 W. Rice, certify that:                                                                                                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                             
|1. | I have reviewed
 this annual report on Form 10-KSB of Notify Technology Corporation;                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                             
|2. | Based on my
 knowledge, this annual report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this annual report;
|   |                                                                                                                                                                                                                                                                                                                             
|3. | Based on my
 knowledge, the financial statements, and other financial information included in
 this annual report, fairly present in all material respects the financial condition,
 results of operations and cash flows of the registrant as of, and for, the periods
 presented in this annual report;                   
|   |                                                                                                                                                                                                                                                                                                                             
|4. | The registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                



| | a) | designed such
 disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this annual
 report is being prepared;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                 
| | b) | evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this annual report (the Evaluation
 Date); and                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                 
| | c) | presented
 in this annual report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          



|5. | The registrants
 other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent functions):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                   
| | b) | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and                                                                                                                                          



|6. | The registrants
 other certifying officers and I have indicated in this annual report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date: December 24, 2002 |                         
|----------------------- | ------------------------
|                        | /s/ Gerald
 W. Rice     
|                        |                         
|                        | Gerald W.
 Rice         
|                        | Chief Financial
 Officer

33



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##### Table of Contents



Notify Technology Corporation

Financial Statements

Years ended September
 30, 2002 and 2001

Contents



|Report of Independent Auditors     |  | F-2 | 
|---------------------------------- |  | --- | 
|Audited Financial Statements       |  |     | 
|Balance Sheet                      |  | F-3 | 
|Statements of Operations           |  | F-4 | 
|Statements of Shareholders Equity |  | F-5 | 
|Statements of Cash Flows           |  | F-6 | 
|Notes to Financial Statements      |  | F-7 | 

F-1



---



##### Table of Contents



Report of Independent Auditors

The Board of Directors and Shareholders
Notify Technology Corporation

We have audited the accompanying balance
 sheet of Notify Technology Corporation as of September 30, 2002, and the related
 statements of operations, shareholders equity, and cash flows for the years
 ended September 30, 2002 and 2001. These financial statements are the responsibility
 of the Companys management. Our responsibility is to express an opinion on
 these financial statements based on our audits.

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

In our opinion, the financial statements
 referred to above present fairly, in all material respects, the financial position
 of Notify Technology Corporation at September 30, 2002, and the results of its operations
 and its cash flows for the years ended September 30, 2002 and 2001, in conformity
 with accounting principles generally accepted in the United States.

As discussed in Note 1 to the financial
 statements, the Companys recurring losses from operations raise substantial
 doubt about its ability to continue as a going concern.
Managements plans as to these matters are also described in
Note 1. The 2002 financial statements
 do not include any adjustments that might result from the outcome of this uncertainty.



|                      | /s/ ERNST & YOUNG LLP
|--------------------- | ---------------------
|                      |                      
|San Jose,
 California |                      
|October 31,
 2002     |                      

F-2



---



##### Table of Contents



Notify Technology
 Corporation

Balance Sheet

September 30, 2002



|Assets                                                                                                                                                                                                                                            |  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Current assets:                                                                                                                                                                                                                                   |  |   |             |  
|Cash and cash equivalents                                                                                                                                                                                                                         |  | $ | 526,656     |  
|Restricted cash                                                                                                                                                                                                                                   |  |   | 851,300     |  
|Accounts receivable, net of allowance for doubtful accounts of $2,000                                                                                                                                                                             |  |   | 584,974     |  
|Inventories                                                                                                                                                                                                                                       |  |   | 399,596     |  
|Other current assets                                                                                                                                                                                                                              |  |   | 81,427      |  
|                                                                                                                                                                                                                                                  |  |   |             |  
|Total current assets                                                                                                                                                                                                                              |  |   | 2,443,953   |  
|Property and equipment, net                                                                                                                                                                                                                       |  |   | 159,877     |  
|                                                                                                                                                                                                                                                  |  |   |             |  
|Total assets                                                                                                                                                                                                                                      |  | $ | 2,603,830   |  
|                                                                                                                                                                                                                                                  |  |   |             |  
|Liabilities and shareholders equity                                                                                                                                                                                                              |  |   |             |  
|Current liabilities:                                                                                                                                                                                                                              |  |   |             |  
|Accounts payable                                                                                                                                                                                                                                  |  | $ | 426,824     |  
|Accrued payroll and related liabilities                                                                                                                                                                                                           |  |   | 110,426     |  
|Other accrued liabilities                                                                                                                                                                                                                         |  |   | 204,211     |  
|Deferred revenue                                                                                                                                                                                                                                  |  |   | 368,671     |  
|                                                                                                                                                                                                                                                  |  |   |             |  
|Total current liabilities                                                                                                                                                                                                                         |  |   | 1,110,132   |  
|Commitments and contingencies                                                                                                                                                                                                                     |  |   |             |  
|Shareholders equity:                                                                                                                                                                                                                             |  |   |             |  
|Preferred stock, $0.001 par value, 5,000,000
 shares authorized                                                                                                                                                                                   |  |   |            |  
|Series A convertible redeemable preferred stock,
 $0.001 par value, 900,000 shares designated and 466,000 shares issued and outstanding
 at September 30, 2002; redemption amount and liquidation preference of $5,592,000 at
 September 30, 2002 |  |   | 1,004,520   |  
|Common stock, $0.001 par value, 30,000,000 shares
 authorized, 5,783,678 shares issued and outstanding at September 30, 2002                                                                                                                      |  |   | 5,784       |  
|Additional paid-in capital                                                                                                                                                                                                                        |  |   | 21,805,746  |  
|Notes receivable from shareholders                                                                                                                                                                                                                |  |   | (2,500      | )
|Accumulated deficit                                                                                                                                                                                                                               |  |   | (21,319,852 | )
|                                                                                                                                                                                                                                                  |  |   |             |  
|Total shareholders equity                                                                                                                                                                                                                        |  |   | 1,493,698   |  
|                                                                                                                                                                                                                                                  |  |   |             |  
|Total liabilities and shareholders equity                                                                                                                                                                                                        |  | $ | 2,603,830   |  
|                                                                                                                                                                                                                                                  |  |   |             |  

The accompanying notes are an
 integral part of these financial statements.

F-3



---



##### Table of Contents



Notify Technology
 Corporation

Statements of Operations



|                                                                   |  | Years Ended September 30,
|------------------------------------------------------------------ |  | -------------------------
|                                                                   |  | 2002                     
|                                                                   |  |                          
|Revenues:                                                          |  |                          
|Product sales                                                      |  | $                        
|Service revenue                                                    |  |                          
|Royalty revenue                                                    |  |                          
|                                                                   |  |                          
|Total revenue                                                      |  |                          
|Cost of sales:                                                     |  |                          
|Product cost                                                       |  |                          
|Service cost                                                       |  |                          
|Inventory
 write downs                                             |  |                          
|                                                                   |  |                          
|Total cost
 of sales                                               |  |                          
|Gross profit                                                       |  |                          
|Operating
 costs and expenses:                                     |  |                          
|Research and
 development                                          |  |                          
|Sales and
 marketing                                               |  |                          
|General and
 administrative                                        |  |                          
|                                                                   |  |                          
|Total operating
 costs and expenses                                |  |                          
|                                                                   |  |                          
|Loss from
 operations                                              |  |                          
|Other income
 and expense, net                                     |  |                          
|Net loss                                                           |  |                          
|Deemed beneficial
 conversion dividend on Series A preferred stock |  |                          
|                                                                   |  |                          
|Loss attributable
 to common shareholders                          |  | $                        
|                                                                   |  |                          
|Basic and
 diluted net loss per share                              |  | $                        
|Weighted-average
 shares used in computing net loss per share      |  |                          

The accompanying notes are an
 integral part of these financial statements.

F-4



---



##### Table of Contents



Notify Technology Corporation

Statements of Shareholders Equity



|                                                                                                                                  | Convertible Redeemable |   |              |        |           |            |  |           |            |   |       | Notes       |   |            |               |       |        |         |  |  
|--------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | - | ------------ | ------ | --------- | ---------- |  | --------- | ---------- | - | ----- | ----------- | - | ---------- | ------------- | ----- | ------ | ------- |  | -
|                                                                                                                                  | Preferred Stock        |   | Common Stock |        |           | Additional |  |           | Receivable |   |       |             |   |            |               | Total
|                                                                                                                                  |                        |   |              |        |           | Paid-In    |  |           | from       |   |       | Accumulated |   |            | Shareholders'
|                                                                                                                                  | Shares                 |   |              | Amount |           | Shares     |  |           | Amount     |   |       | Capital     |   |            | Shareholders  |       |        | Deficit |  |  
|                                                                                                                                  |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  
|Balance at September 30, 2000                                                                                                     |                       |   |              |        |          |            |  | 4,887,058 |            |   | 4,887 |             |   | 13,845,024 |               |       | (2,500 | )       |  |  
|Issuance of common shares pursuant to private offering, net of issuance costs of $15,603                                          |                       |   |              |        |          |            |  | 349,995   |            |   | 350   |             |   | 1,209,397  |               |       |       |         |  |  
|Proceeds from exercise of options and warrants                                                                                    |                       |   |              |        |          |            |  | 49,540    |            |   | 50    |             |   | 46,204     |               |       |       |         |  |  
|Issuance of convertible preferred stock pursuant to
 private offering, net of issuance costs of $813,133                          | 501,000                |   |              |        | 1,079,967 |            |  |          |            |   |      |             |   |           |               |       |       |         |  |  
|Fair value of warrants to purchase convertible
 preferred stock issued in connection with the private offering                    |                       |   |              |        |          |            |  |          |            |   |      |             |   | 1,251,851  |               |       |       |         |  |  
|Fair value of warrants to purchase convertible
 preferred stock issued to placement agent in connection with the private offering |                       |   |              |        |          |            |  |          |            |   |      |             |   | 1,702,000  |               |       |       |         |  |  
|Fair value of warrants to purchase convertible preferred
 stock issued to investment fund in connection with the private offering |                       |   |              |        |          |            |  |          |            |   |      |             |   | 163,049    |               |       |       |         |  |  
|Deemed beneficial conversion dividend on Series A convertible preferred stock                                                     |                       |   |              |        |          |            |  |          |            |   |      |             |   | 3,507,000  |               |       |       |         |  |  
|Net loss and comprehensive net loss                                                                                               |                       |   |              |        |          |            |  |          |            |   |      |             |   |           |               |       |       |         |  |  
|                                                                                                                                  |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  
|Balance at September 30, 2001                                                                                                     | 501,000                |   |              | $      | 1,079,967 |            |  | 5,286,593 |            | $ | 5,287 |             | $ | 21,724,525 |               | $     | (2,500 | )       |  | $
|                                                                                                                                  |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  
|Proceeds from exercise of warrants                                                                                                |                        |   |              |        |           |            |  | 147,085   |            |   | 147   |             |   | 1,324      |               |       |        |         |  |  
|Conversion of preferred stock to common stock                                                                                     | (35,000                | ) |              |        | (75,447   | )          |  | 350,000   |            |   | 350   |             |   | 75,097     |               |       |        |         |  |  
|Deferred compensation relating to grant of stock options                                                                          |                        |   |              |        |           |            |  |           |            |   |       |             |   | 4,800      |               |       |        |         |  |  
|Net loss and comprehensive net loss                                                                                               |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  
|                                                                                                                                  |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  
|Balance at September 30, 2002                                                                                                     | 466,000                |   |              | $      | 1,004,520 |            |  | 5,783,678 |            | $ | 5,784 |             | $ | 21,805,746 |               | $     | (2,500 | )       |  | $
|                                                                                                                                  |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  
|                                                                                                                                  |                        |   |              |        |           |            |  |           |            |   |       |             |   |            |               |       |        |         |  |  

The accompanying notes are an
 integral part of these financial statements.

F-5



---



##### Table of Contents



Notify Technology Corporation

Statements of Cash Flows



|                                                                            | Years Ended September 30,
|--------------------------------------------------------------------------- | -------------------------
|                                                                            | 2002                     
|Operating activities                                                        |                          
|Net loss                                                                    | $                        
|Adjustments to reconcile net loss to net cash used in operating activities: |                          
|Depreciation                                                                |                          
|Disposal of fixed assets                                                    |                          
|Deferred compensation                                                       |                          
|Changes in operating assets and liabilities:                                |                          
|Accounts receivable, net                                                    |                          
|Inventories                                                                 |                          
|Other current assets                                                        |                          
|Accounts payable                                                            |                          
|Accrued payroll and related liabilities                                     |                          
|Other accrued liabilities                                                   |                          
|Deferred revenue                                                            |                          
|                                                                            |                          
|Net cash used in operating activities                                       |                          
|Investing activities                                                        |                          
|Expenditures for property and equipment                                     |                          
|Increase (decrease) in restricted cash                                      |                          
|                                                                            |                          
|Net cash provided by (used in) investing activities                         |                          
|Financing activities                                                        |                          
|Proceeds from exercise of options and warrants                              |                          
|Proceeds from issuance of common stock, net of issuance costs               |                          
|Proceeds from issuance of preferred stock, net of issuance costs            |                          
|                                                                            |                          
|Net cash provided by financing activities                                   |                          
|                                                                            |                          
|Net increase (decrease) in cash and cash equivalents                        |                          
|Cash and cash equivalents at beginning of year                              |                          
|                                                                            |                          
|Cash and cash equivalents at end of year                                    | $                        
|                                                                            |                          

The accompanying notes are an
 integral part of these financial statements.

F-6



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##### Table of Contents



Notify Technology
 Corporation

Notes to Financial Statements

September 30, 2002

1.  Business and Basis of Presentation

Notify Technology Corporation (the Company
 or Notify) is a communications service and software provider for wireline and wireless
 notification and messaging services. The Company is also a supplier of innovative
 call and message notification products and services.

The accompanying financial
statements have been prepared assuming that the Company will continue
as a Going Concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The
Company incurred losses of $1,741,752 and $3,337,612 for the years
ended September 30, 2002 and 2001, respectively. The Company has an
accumulated deficit of $21.3 million as of September 30,
2002. During fiscal 2002, the Company financed its operations through
a combination of results of the sale of its products and existing
cash balances. These conditions raise substantial doubt about the
Companys ability to continue as a Going Concern without
improvements in operating income or further capital financing.

The Companys ability to fund its recurring
 losses from operations depends upon the continuation of its current Visual Got Mail
 Solution program, its success in shifting its product focus into wireless e-mail
 notification and wireless e-mail notification market solutions, and/or raising other
 sources of financing. Management does not believe that its existing cash balances
 are sufficient to fund its operations through September 30, 2003.
Management plans to seek additional financing, restructure its
business in order to reduce costs and potentially seek the sale or
licensing of certain technologies, however, there can be no assurance
that Management will be successful in implementing such plans.
 In October 2002, the Company entered into a $750,000 credit facility arrangement
 that will allow the Company to continue to purchase inventory for its Visual Got
 Mail Solution product orders.

2.  Summary of Significant Accounting
 Policies

Use of Estimates

The preparation of financial statements
 in conformity with accounting principles generally accepted in the United States
 requires management to make estimates and assumptions that affect the amounts reported
 in the accompanying financial statements and notes thereto. Actual results could
 differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid,
 temporary investments with an original maturity of three months or less when purchased
 to be cash equivalents. The Company is exposed to credit risk in the event of default
 by the financial institutions to the extent of amounts recorded on the balance sheet.

Inventories

Inventories are stated at the lower of
 cost or market on a first-in, first-out basis. At September 30, 2002, inventories
 consisted entirely of finished goods.

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##### Table of Contents



Notify Technology
 Corporation

Notes
 to Financial Statements

2.  Summary of Significant Accounting
 Policies (continued)

Inventories (continued)

The Company significantly improved gross
 margin in fiscal year 2002 primarily due to the use of $560,000 in inventory that
 had been written-down in prior periods relating to the Visual Got Mail Solution
 products. These write-downs were recorded in fiscal 2001 and 2000 due to significant
 decreases in forecasted sales of the Call Manager product in the first half of fiscal
 2001 and in the second half of fiscal 2000, and were based on inventory levels and
 purchase commitments in excess of expected demand. The Visual Got Mail Solution,
 introduced in fiscal 2002, makes use of a variation of the Call Manager and the
 Company was able to use a significant portion of this inventory to produce the Visual
 Got Mail Solution.

Property and Equipment

Property and equipment are stated at cost.
 Depreciation is computed by the straight-line method over the following estimated
 useful lives of the assets: five years for furniture and office equipment and three
 years for software and computer equipment. Leasehold improvements are amortized
 by the straight-line method over the shorter of the lease term or the estimated useful
 lives of such assets.

Long-Lived Assets

The Company monitors the recoverability
 of long-lived assets based on estimated use factors such as future asset utilization,
 business climate and future undiscounted cash flows expected to result from the
 use of the related assets or realized upon sale. The Companys policy is to
 write down assets to their net recoverable amount in the period when it is determined
 that the carrying amount of the asset is not likely to be recoverable.

Income Taxes

The Company accounts for income taxes under
 the liability method. The estimated future tax effect of differences between the
 basis in assets and liabilities for tax and accounting purposes is accounted for
 as deferred taxes. A valuation allowance has been established to reduce deferred
 tax assets as it is more likely than not that all, or some portion, of such deferred
 tax assets would not be realized. A full allowance against deferred tax assets
 was provided.

Revenue Recognition

The Company recognizes revenue on sales
 of call and message notification products when the product is delivered, title has
 transferred, and no obligations remain. Service income is

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##### Table of Contents



Notify Technology
 Corporation

Notes
 to Financial Statements

2.  Summary of Significant Accounting
 Policies (continued)

Revenue Recognition (continued)

recognized on a straight-line basis over
 the period of the service agreement. Revenue from royalty agreements is recognized
 on receipt of payment.

Deferred revenue relates to (i) products
 where title has transferred and payment has been received but the product has not
 been delivered to the customer; (ii) service revenue that is being recognized over
 the period of the service agreement; and (iii) products that have been delivered
 and are pending installation and configuration, at which time title transfers to
 the customer.

Shipping and Handling Costs

The Company includes fees billed to customers
 relating to shipping and handling in net sales. Shipping and handling costs are
 classified as a component of cost of sales.

Research and Development

Expenses related to research and development
 of the Companys products were $1,075,000 each in the fiscal years ended September
 30, 2002 and 2001

Based on the Companys software development
 process, the time period between the establishment of technological feasibility
 and completion of the hardware component and the release of the product is short
 and capitalization of internal development costs has not been material to date.

Concentration of Credit Risk

The Company performs ongoing credit evaluations
 and generally requires no collateral. The Company maintains reserves for credit
 losses, and such losses have been within managements expectations. As of September
 30, 2002, one customer accounted for 96% of accounts receivable.

Stock Options

The Company accounts for stock option grants
 in accordance with the intrinsic value method because the Company believes the alternative
 fair value accounting requires the use of option valuation models that were not
 developed for use in valuing employee stock options. Under the intrinsic value method
 no compensation expense is recognized when the exercise price of the Companys
 employee stock options equals the market price of the underlying stock on the date
 of grant.

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##### Table of Contents



Notify Technology
 Corporation

Notes
 to Financial Statements

2.  Summary of Significant Accounting
 Policies (continued)

Net Loss Per Share

Net loss per common share is computed by
 dividing net loss available to common stockholders by the weighted average number
 of shares outstanding during the period.

The weighted-average number of common shares
 used in the net loss per share calculation was reduced by the common stock and potential
 common shares placed in escrow in connection with the Companys initial public
 offering. Options to purchase 2,152,055 and 1,613,722 shares of common stock were
 outstanding at September 30, 2002 and 2001, respectively, but were not included
 in the computation of diluted net loss per share as the effect would be antidilutive.

3.  Property and Equipment

Property and equipment consist of the following:



|                                               |  | September 30, 2002
|---------------------------------------------- |  | ------------------
|                                               |  |                   
|Furniture and office equipment                 |  | $                 
|Software                                       |  |                   
|Leasehold improvements                         |  |                   
|                                               |  |                   
|                                               |  |                   
|Less accumulated depreciation and amortization |  |                   
|                                               |  |                   
|                                               |  | $                 
|                                               |  |                   

4.  Commitments and Contingencies

The Company currently occupies two facilities
 under an operating lease. The lease on its San Jose, California facility expires
 in March 2003. Future minimum payments under this lease for the year ending September
 30, 2003 are $106,083. The lease on the Companys Canfield, Ohio facility expires
 in October 2006. Future minimum payments under this lease for each of the remaining
 four years ending September 30, are $71,387 per annum.

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##### Table of Contents



Notify Technology
 Corporation

Notes
 to Financial Statements

4.  Commitments and Contingencies (continued)

Facility rent expense totaled $282,000 and
 $242,000 for the years ended September 30, 2002 and 2001, respectively.

At September 30, 2002, the Company had $851,300
 of outstanding letters of credit to its suppliers related to a commitment to purchase
 additional inventory. The letters of credit are secured by a money market account
 of $851,300, which is recorded as restricted cash.

5.  Shareholders Equity

Preferred Stock

The Board of Directors has the authority,
 without any further vote or action by the shareholders, to provide for the issuance
 of 4,100,000 shares of preferred stock in one or more series with such designation,
 rights, preferences, and limitations as the Board of Directors may determine, including
 the consideration to be received, the number of shares comprising each series, dividend
 rates, redemption provisions, liquidation preferences, redemption and fund provisions,
 conversion rights, and voting rights, all without the approval of the holders of
 common stock.

Convertible Redeemable Preferred Stock

In July 2001, the Companys shareholders
 authorized and the Company completed an offering of Series A convertible redeemable
 preferred stock (Series A preferred stock) to a group of private investors. In connection
 with the offering, the Company issued 501,000 shares of Series A preferred stock
 at $10 per share and issued warrants to purchase 1,753,000 shares of common stock
 for consideration of $4.2 million, net of issuance costs. The Company has designated
 a total of 900,000 shares as Series A preferred stock.

At any time and from time to time on or
 after July 20, 2003 but before July 26, 2004, upon a written request of at least
 10% of the then outstanding shares of Series A Preferred Stock, the Company must
 redeem the requested number of shares of Series A Preferred Stock at a redemption
 price equal to $10.00 plus accrued dividends. The requesting holders must request
 that the Company redeem at least the lesser of 50,100 shares and all of the outstanding
 shares. The Company shall have the option to pay the redemption price in cash or
 in shares of Common Stock. If the Company chooses to pay the redemption price in
 shares of Common Stock, the value assigned to each share of Common Stock shall be
 the greater of (i) the average closing bid price on the OTC Bulletin Board for the
 twenty (20) trading days preceding the redemption request and (ii) $0.50 per share.

During fiscal 2002, 35,000 shares of convertible
 redeemable preferred stock was converted to 350,000 shares of common stock.

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##### Table of Contents



Notify Technology
 Corporation

Notes
 to Financial Statements

5.  Shareholders Equity (continued)

Convertible Redeemable Preferred Stock (continued)

The September 30, 2002 balance sheet also
 reflects the discount or beneficial conversion feature present in the Series A preferred
 stock. The discount represents the fair value of the conversion ratio at below fair
 market value of the underlying common stock on the date of closing and the fair
 value of warrants issued in connection with the issuance of the Series A preferred
 stock. The discount was recognized as a return to the preferred shareholders (similar
 to a dividend) over the minimum period of time in which the preferred shareholders
 can realize the return, which is immediately for the preferred shareholders. The
 discount has been accreted to additional paid-in capital on the September 30, 2002
 balance sheet.

Each share of Series A preferred stock is
 initially convertible into the Companys common stock at a conversion ratio
 of $1.00 per common share. The Series A preferred stock is convertible into common
 stock at any time upon the election of the holder. Furthermore, the Series A preferred
 stock shall automatically convert into common stock upon either the closing of a
 secondary public offering in excess of $25,000,000 at a price per share in excess
 of $2.00 or the closing bid price for the common stock is in excess of $2.00 for
 a period of 20 consecutive trading days. Each share of Series A preferred stock
 shall entitle the holder thereof to that number of votes on all matters submitted
 to a vote of the shareholders of the Company equal to the number of shares of common
 stock into which the Series A preferred stock can be converted.

Each Series A preferred stock is entitled
 to receive upon the liquidation of the Company in preference to holders of common
 stock, an amount equal to $12 per share, and shall thereafter share ratably, on
 an as-if-converted-basis, with all other holders of the Companys securities
 entitled to participate in the distribution of the Companys assets.

In connection with the offering of Series
 A preferred stock, the Company issued options to purchase 9.2685 units at a price
 per unit of $100,000 to the placement agent. Each unit consists of 10,000 shares
 of Series A preferred stock convertible into an aggregate of 100,000 shares of common
 stock with a warrant to purchase 35,000 shares of common stock. The option to purchase
 units expires in July 2008. The warrant will be exercisable at any time through
 July 2008 at a price of $1.00 per common stock. The Preferred stock was
 valued at $1.45 while the warrants were valued at $1.38.

The Company also issued in connection with
 the offering of Series A preferred stock a seven year warrant to purchase 118,151
 shares of common stock at an exercise price of $1.00 each to an investment fund
 in connection with the investment funds commitment to purchase Series A preferred
 stock for the amount of the differences between $5 million and the aggregate amount
 of money invested by all other investors in the financing.

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##### Table of Contents



Notify Technology
 Corporation

Notes
 to Financial Statements

5.  Shareholders Equity (continued)

Common Stock

The following table summarizes shares of
 common stock reserved for future issuance by the Company:



|                                       |  | September 30, 2002
|-------------------------------------- |  | ------------------
|                                       |  |                   
|Convertible redeemable preferred stock |  |                   
|1997 Stock Option Plan                 |  |                   
|Warrant agreements                     |  |                   
|                                       |  |                   
|                                       |  |                   
|                                       |  |                   

In November 2000, the Company issued 376,865
 shares of common stock and issued warrants to purchase 188,424 shares of common
 stock to a group of private investors, which included a director of the Company,
 for consideration of $1.2 million, net of issuance costs. Of these warrants, 38,458
 were exercised, 7,690 expired on August 8, 2001 and 67,293 expired on November 5,
 2001 leaving an outstanding balance of 74,983 warrants.

Warrants to Purchase Common Stock

At September 30, 2002, the Company had the
 following warrants outstanding:



     2,025,000
 Class A warrants to purchase 2,652,750
 shares of common stock issued in connection with the Offering and other financings
 were outstanding. Each Class A warrant initially entitled the holder to purchase
 one share of common stock at an exercise price of $6.50 per share. The terms of
 the Class A warrants were adjusted as a result of the July 2001 private placement
 to an exercise price of $4.96, and a conversion ratio of 1.31 shares of common stock.
 On July 10, 2002, the Class A warrant expiration date was extended to August 28,
 2003. Each Class A warrant remains subject to adjustment at any time through August
 28, 2003. Under certain circumstances, the warrants are subject to redemption by
 the Company at $0.05 per warrant on 30 days written notice.




     
A warrant to purchase 721,244 shares of
 common stock at an initial exercise price of $3.60 per share issued in connection
 with a March 1999 private placement was outstanding and which expires in March 2003.
 In connection with the March 1999 private placement, the Company also agreed to
 issue additional warrants if it sells shares of common stock in a capital raising
 transaction at a price below $3.60 per share prior to the earlier of (i) March 30,
 2002 or (ii) the


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##### Table of Contents



Notify Technology Corporation

Notes to Financial Statements

5. Shareholders Equity (continued)

Warrants to Purchase Common Stock (continued)



|  | date on which the Company calls the outstanding Class A warrants. In connection with the July 2001 financing, the warrant holder waived                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | the right
 to receive additional warrants and the exercise price of the 721,244 warrants was
 reduced from $3.60 to $1.00 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 74,983
 warrants to purchase shares of the Companys common stock, issued in connection
 with the November 2000 private placement were outstanding. 376,865 warrants were
 originally issued but one set of warrants to purchase 7,690 shares of common stock
 expired in August 2001, one set of warrants to purchase 67,293 shares of common
 stock expired in November 2001 and one set of warrants to purchase 74,983 shares
 of common stock expires in November 2003, all with an initial exercise price of
 $3.25 per share. In the event that the Company issues equity securities in a financing
 for an amount of $250,000 or more at a price per share less than the price per share
 of the November 2000 offering, the exercise price of the outstanding warrants will
 be reduced to the price per share at which such equity securities are sold and the
 Company will issue additional warrants to purchase common stock with an exercise
 price of $0.01 and a term of three years. The warrants will be exercisable into
 a number of shares of common stock determined by the price per share and the number
 of shares issued in the financing. As a result of the July 2001 financing, the exercise
 price of the 142,276 warrants was reduced from $3.25 to $1.00 and the Company issued
 an additional 337,439 warrants to purchase shares of the Companys common stock
 as an antidilution adjustment. Warrants to purchase 147,085 shares of common stock of
 these warrants were exercised in the fiscal year ending September 30, 2002. The
 remaining 190,354 warrants are exercisable at any time at a price of $0.01 per share
 and expire in July 2004. In July 2001, the Company received proceeds of $38,458
 from the exercise of 38,458 warrants issued in connection with the November 2000
 financing.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Warrants
 to purchase 1,753,500 and 118,151 shares of common stock at an exercise price of
 $1.00 were issued in connection with the July 2001 private placement to the placement
 agent and an investment fund, respectively. The warrant to purchase 1,753,500 shares
 of common stock expires in July 2008 and the warrant to purchase 118,151 shares
 of common stock expires in May 2008. In connection with the private placement, the
 Company also agreed that if it issues additional equity instruments at a price per
 share less than $1.00, then the price and number of warrants shall be adjusted on
 a weighted-average basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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##### Table of Contents



Notify Technology Corporation

Notes to Financial Statements

5. Shareholders Equity (continued)

1997 Stock Option Plan

In January 1997, the Company adopted the
 1997 Stock Plan (the Plan), which provides for the granting of
 stock options to employees, officers, consultants, and directors of the Company.
 Stock options are granted at fair market value on the date of grant with terms of
 up to ten years. Under the Plan, a total of 3,129,662 shares of the Companys
 common stock are reserved for issuance. Under the terms of these option grants,
 the options commence vesting upon the first anniversary of the date of employment
 and continue to vest ratably over the remainder of the four-year vesting period.

The following table summarizes stock option
 activity:



|                              |                            |            |                  |  | Options Outstanding    
|----------------------------- | -------------------------- | ---------- | ---------------- |  | -----------------------
|                              |                            |            |                  |  |                        
|                              | Shares
Available
For
Grant |            | Number of
Shares |  | Weighted-
Average
Price
|                              |                            |            |                  |  |                        
|Balance at September 30, 2000 |                            | 176,835    |                  |  |                        
|Authorized                    |                            | 1,700,000  |                  |  |                        
|Granted                       |                            | (1,223,000 | )                |  |                        
|Cancelled                     |                            | 112,105    |                  |  |                        
|Exercised                     |                            |           |                  |  |                        
|                              |                            |            |                  |  |                        
|Balance at September 30, 2001 |                            | 765,940    |                  |  |                        
|Authorized                    |                            | 750,000    |                  |  |                        
|Granted                       |                            | (670,834   | )                |  |                        
|Cancelled                     |                            | 132,501    |                  |  |                        
|                              |                            |            |                  |  |                        
|Balance at September 30, 2002 |                            | 977,607    |                  |  |                        
|                              |                            |            |                  |  |                        

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##### Table of Contents



Notify Technology Corporation

Notes to Financial Statements

5. Shareholders Equity (continued)

1997 Stock Option Plan (continued)

The following table summarizes outstanding
 and exercisable options at September 30, 2002:



|                |  |  | Options Outstanding           |  | Options Exercisable |                                          
|--------------- |  |  | ----------------------------- |  | ------------------- | -----------------------------------------
|                |  |  |                               | 
|Exercise
Prices |  |  | Number of
Options
Outstanding |  |                     | Weighted-
Average
Remaining
Life in Years
|                |  |  |                               |  |                     |                                          
|$0.320 - $0.690 |  |  | 604,855                       |  |                     |                                          
|$0.800 - $0.906 |  |  | 21,894                        |  |                     |                                          
|$1.600 - $2.375 |  |  | 1,053,000                     |  |                     |                                          
|$2.750 - $3.875 |  |  | 213,369                       |  |                     |                                          
|$5.594 - $7.656 |  |  | 43,937                        |  |                     |                                          
|$8.813          |  |  | 215,000                       |  |                     |                                          
|                |  |  |                               |  |                     |                                          
|                |  |  | 2,152,055                     |  |                     |                                          
|                |  |  |                               |  |                     |                                          

The weighted average fair value
 of options granted was $0.341 in 2002 and $1.763 in 2001.

Stock-Based Compensation

The Company has elected to follow the intrinsic
 value method of accounting for its employee stock options because, as discussed
 below, the alternative fair value method of accounting requires the use of option
 valuation models that were not developed for use in valuing employee stock options.
 Under the intrinsic value method, because the exercise price of the Companys
 employee stock options equals the market price of the underlying common stock on
 the date of grant, no compensation expense is recognized.

Pro forma information regarding net income
 and earnings per share is required as if the Company had accounted for its employee
 stock options granted subsequent to September 30, 1995 under the fair value method.
 The fair value of the options was estimated at the date of grant using a Black-Scholes
 option valuation model with the following assumptions: a weighted-average expected
 life of the option of 4 years; risk-free interest rate of 3.53%; dividend yield
 of 0.0%; and volatility factors of the expected market price of the Companys
 common stock of 112% and 131% for 2002 and 2001, respectively.

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##### Table of Contents



Notify Technology Corporation

Notes to Financial Statements

5. Shareholders Equity (continued)

Stock-Based Compensation (continued)

The Black-Scholes option valuation model
 was developed for use in estimating the fair value of traded options that have no
 vesting restrictions and are fully transferable. In addition, option valuation models
 require the input of highly subjective assumptions, including the expected stock
 price volatility. Because the Companys employee stock options have characteristics
 significantly different from those of traded options, and because changes in the
 subjective input assumptions can materially affect the fair value estimate, in managements
 opinion, the existing models do not necessarily provide a reliable single
 measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the
 estimated fair value of the options is amortized to expense over the options
 vesting period. The Companys pro forma information follows:



|                                      | 2002 |            | 2001
|------------------------------------- | ---- | ---------- | ----
|                                      |      |            |     
|Net loss:                             |      |            |     
|As reported                           | $    | (1,741,752 | )   
|Pro forma                             |      | (2,711,277 | )   
|Basic and diluted net loss per share: |      |            |     
|As reported                           |      | (0.41      | )   
|Pro forma                             |      | (0.64      | )   

The Company recognized $4,800 compensation
 expense in fiscal 2002 and no compensation expense in fiscal 2001 related to the
 grant of options to nonemployees.

F-17



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##### Table of Contents



Notify Technology Corporation

Notes to Financial Statements

5. Shareholders Equity (continued)

Escrow Securities

In connection with the Companys Initial
 Public Offering in August 1997, holders, who held Founders stock or who acquired
 the Companys common stock in prior private offerings, agreed to place 1,233,870
 of their shares into escrow. The securities will be released to the holders in the
 event specified levels of pretax income are achieved for the years ending through
 September 30, 2003, or if the Company is acquired by or merged into another entity
 in a transaction in which shareholders receive a specified consideration. Any securities
 remaining in escrow on September 30, 2003 will be forfeited, which securities will
 then be contributed to the Companys capital. The pretax income levels are
 subject to proportionate adjustment upon the issuance of certain securities subsequent
 to the Companys initial public offering.

In the event that the securities in escrow
 are released, the Securities and Exchange Commission has adopted the position that
 the release of the securities in escrow to officers, directors, employees, and consultants
 of the Company will be compensatory and, accordingly, will result in compensation
 expense for financial reporting purposes. The expense will equal the fair value
 of the securities in escrow on the date of release and will result in a material
 charge to operations. At September 30, 2002, the Company had not attained any of
 the specified earnings or market price levels. Therefore, all escrowed securities
 are still being held in trust by the Companys transfer agent.

6. Income Taxes

Due to operating losses, there is no provision
 for income taxes for 2002 or 2001. The expected statutory tax benefit of 34% is
 offset by the inability to recognize an income tax benefit from the net operating
 losses.

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Notify Technology Corporation

Notes to Financial Statements

6. Income Taxes (continued)

Deferred income taxes reflect the net tax
 effects of temporary differences between the carrying amounts of assets and liabilities
 for financial reporting purposes and the amounts used for income tax purposes. Significant
 components of the Companys deferred tax assets for federal and state income
 taxes are as follows:



|                                     |  | Year Ended         |            | Year Ended       
|------------------------------------ |  | ------------------ | ---------- | -----------------
|                                     |  | September 30, 2002 |            | September 30,2001
|Deferred tax assets:                 |  |                    |            |                  
|Net operating loss carryforwards     |  | $                  | 5,609,000  |                  
|Research credit carryforwards        |  |                    | 329,000    |                  
|Capitalized research and development |  |                    | 139,000    |                  
|Other temporary differences          |  |                    | 485,000    |                  
|                                     |  |                    |            |                  
|Total deferred tax assets            |  |                    | 6,562,000  |                  
|Valuation allowance                  |  |                    | (6,562,000 | )                
|                                     |  |                    |            |                  
|Net deferred tax assets              |  | $                  |           |                  
|                                     |  |                    |            |                  

Realization of deferred tax assets is dependent
 on future earnings, if any, the timing and amount of which are uncertain. Accordingly,
 a valuation allowance in an amount equal to the net deferred tax asset has been
 established to reflect these uncertainties. The change in the valuation allowance
 was a net increase of $302,000 and $1,325,000 for fiscal years 2002 and 2001,
 respectively.

As of September 30, 2002, the Company had
 net operating loss carryforwards of approximately $15,000,000 and $7,000,000 for
 Federal and California tax purposes, which will expire in the years 2003 through
 2022. As of September 30, 2002, the Company also had research and development tax
 credit carryforwards for federal and California tax purposes of
approximately $225,000
 and $158,000, respectively. The credits will expire in the years
2011 through 2022,
 if not utilized. Utilization of net operating loss and tax credit carryforwards
 may be subject to a substantial annual limitation due to the ownership change limitations
 provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.
 The annual limitation may result in the expiration of net operating loss and tax
 credit carryforwards before full utilization.

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Notify Technology Corporation

Notes to Financial Statements

7. Industry Segment, Customer, and Geographic
 Information

The Company has one operating segment by
 which management evaluates performance. The Company sells its products within the
 United States primarily to long distance carriers, regional bell operating companies
 and local exchange carriers. One product accounted for 83% of total revenues in
 fiscal 2002. The same product was not sold in fiscal 2001. One customer accounted
 for 83% of sales for the year ended September 30, 2002. Three other customers accounted
 for 36%, 26% and 12% of sales for the year ended September 30, 2001.

8. Subsequent Events

The Company has entered into an agreement
 to finance the purchase of inventory using the inventory as collateral. The agreement
 allows the Company to borrow a maximum of $750,000 based on purchase orders from
 its customers.

F-20



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EXHIBIT INDEX



|3.1.1  | Amended and
 Restated Articles of Incorporation of Registrant as filed with the Secretary of
 State of California on September 2, 1997. (incorporated herein by reference to Exhibit
 (3.2) to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on March 14, 1997)                                                                                                  
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.2  | Certificate
 of Amendment to the Registrants Articles of Incorporation as filed with the
 Secretary of State of California on March 3, 1998. (incorporated herein by reference
 to Exhibit (3.1.1) to the Registrants Quarterly Report on Form 10-QSB for
 the quarterly period ended June 30, 2001, filed on August 14, 2001)                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.3  | Certificate
 of Amendment to the Registrants Articles of Incorporation as filed with the
 Secretary of State of California on July 12, 2001. (incorporated herein by reference
 to Exhibit (3.1.1) to the Registrants Quarterly Report on Form 10-QSB for
 the quarterly period ended June 30, 2001, filed on August 14, 2001)                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.4  | Certificate
 of Determination, Preferences and Rights of Series A Preferred Stock as filed with
 the Secretary of State of California on July 13, 2001. (incorporated herein by reference
 to Exhibit (3.1) to the Registrants Current Report on Form 8-K, filed on July
 23, 2001)                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|3.2    | Amended and
 Restated Bylaws of Registrant. (incorporated herein by reference to Exhibit (3.2)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended June 30, 2001, filed on August 14, 2001)                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.1.1  | Form of Warrant
 Agreement. (incorporated herein by reference to Exhibit (4.1) to Amendment No. 1
 to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on May 29, 1997)                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.1.2  | First Amendment
 to Warrant Agreement dated as of July 10, 2002 by and among the Registrant, American
 Stock Transfer & Trust Company and D.H. Blair Investment Banking Corp. (incorporated
 herein by reference to Exhibit (4.1) to the Registrants Current Report on
 Form 8-K, filed on July 17, 2002)                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.2    | Form of warrant
 issued to subscribers in connection with the Registrants July 2001 private
 placement. (incorporated herein by reference to Exhibit (4.1) to the Registrants
 Current Report on Form 8-K, filed on July 23, 2001)                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.3    | Form of option
 issued to the placement agent in connection with the Registrants July 2001
 private placement. (incorporated herein by reference to Exhibit (4.2) to the Registrants
 Current Report on Form 8-K, filed on July 23, 2001)                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|4.4    | Form of warrant
 underlying the option issued to the placement agent in connection with the Registrants
 July 2001 private placement. (incorporated herein by reference to Exhibit
 (4.3) to the Registrants Current Report on Form 8-K, filed on July 23, 2001)                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.1 | Employment
 Agreement dated as of August 1, 1997 between Registrant and Paul DePond. (incorporated
 herein by reference to Exhibit (10.1) to Amendment No. 2 to the Registrants
 Registration Statement on Form SB-2, Reg. No. 333-23369, filed on August 15, 1997)                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.2 | Amendment
 No. 1 dated February 23, 2000 to Employment Agreement dated as of August 1, 1997
 between Registrant and Paul DePond. (incorporated herein by reference to Exhibit
 (10.2) to Post-Effective Amendment No. 4 to the Registrants Registration Statement
 on Form SB-2, Reg. No. 333-23369, filed on April 18, 2000)                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.3 | Amendment
 No. 2 dated June 29, 2001 to Employment Agreement dated as of August 1, 1997 between
 Registrant and Paul DePond, as amended by Amendment No. 1 to Employment Agreement
 dated as of February 23, 2000. (incorporated herein by reference to Exhibit (10.2)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended June 30, 2001, filed on August 14, 2001)



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|10.1.4 | Amendment
 No. 3 dated October 11, 2001 to Employment Agreement dated as of August 1, 1997
 between Registrant and Paul DePond, as amended by Amendment No. 1 to Employment
 Agreement dated as of February 23, 2000 and Amendment No. 2 to Employment Agreement
 dated as of June 29, 2001. (incorporated herein by reference to Exhibit (10.4) to
 the Registrants Annual Report on Form 10-KSB for the annual period ended September
 30, 2001, filed on December 28, 2001) 
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.2   | Amended Employment
 Agreement dated as of November 4, 2002 between Registrant and Gaylan Larson.                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.1 | Employment
 Agreement dated as of August 1, 1997 between Registrant and Gerald Rice. (incorporated
 herein by reference to Exhibit (10.3) to Amendment No. 2 to the Registrants
 Registration Statement on Form SB-2, Reg. No. 333-23369, filed on August 15, 1997)                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.2 | Amendment
 No. 1 dated February 23, 2000 to Employment Agreement dated as of August 1, 1997
 between Registrant and Gerald Rice. (incorporated herein by reference to Exhibit
 (10.6) to Post-Effective Amendment No. 4 to the Registrants Registration Statement
 on Form SB-2, Reg. No. 333-23369, filed on April 18, 2000)                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.3 | Amendment
 No. 2 dated June 29, 2001 to Employment Agreement dated as of August 1, 1997 between
 Registrant and Gerald Rice, as amended by Amendment No. 1 to Employment Agreement
 dated as of February 23, 2000. (incorporated herein by reference to Exhibit (10.4)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended June 30, 2001, filed on August 14, 2001)                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3.4 | Amendment
 No. 3 dated October 11, 2001 to Employment Agreement dated as of August 1, 1997
 between Registrant and Gerald Rice, as amended by Amendment No. 1 to Employment
 Agreement dated as of February 23, 2000 and Amendment No. 2 to Employment Agreement
 dated as of June 29, 2001. (incorporated herein by reference to Exhibit (10.11)
 to the Registrants Annual Report on Form 10-KSB for the annual period ended
 September 30, 2001, filed on December 28, 2001)
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.4   | Form of Indemnification
 Agreement. (incorporated herein by reference to Exhibit (10.5) to the Registrants
 Registration Statement on Form SB-2, Reg. No. 333-23369, filed on March 14, 1997)                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.5   | Escrow Agreement
 by and between Registrant, the American Stock Transfer & Trust Company and
 certain security holders of the Registrant, as amended. (incorporated herein by
 reference to Exhibit (10.6) to Amendment No. 2 to the Registrants Registration
 Statement on Form SB-2, Reg. No. 333-23369, filed on August 15, 1997)                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.6   | Registrants
 1997 Stock Plan, as amended. (incorporated by reference to Exhibit (10.2)
 to the Registrants Quarterly Report on Form 10-QSB for the quarterly period
 ended March 31, 2002, filed on May 15, 2002)                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.7   | Lease between
 Registrant, and Ching C. Poon and Jenny M. Poon. (incorporated herein by reference
 to Exhibit (10.59) to the Registrants Quarterly Report on Form 10-QSB for
 the quarterly period ended June 30, 2001, filed on August 14, 2001)                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.8+  | Nonexclusive
 Technology License Agreement between Registrant and Active Voice Corporation dated
 April 30, 1997. (incorporated herein by reference to Exhibit (10.10) to Amendment
 No. 2 to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on August 15, 1997)                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.9   | Securities
 Purchase Agreement dated as of March 4, 1999 between Registrant andDavid A.
 Brewer. (incorporated herein by reference to Exhibit (10.11) to Post-Effective Amendment
 No. 3 to the Registrants Registration Statement on Form SB-2, Reg. No. 333-23369,
 filed on April 2, 1999)                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.10  | Amendment
 No. 1 dated October 7, 1999 to Securities Purchase Agreement dated as of March 4,
 1999 between Registrant and David Brewer. (incorporated herein by reference to Exhibit
 (10.12) to the Registrants Annual Report on Form 10-KSB for the fiscal year
 ended September 30, 1999, filed on December 28, 1999)                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.11  | Amendment
 No. 2 dated October 26, 2000 to Securities Purchase Agreement dated as of March
 4, 1999 and as amended on October 7, 1999 between Registrant and David Brewer. (incorporated
 herein by reference to Exhibit (10.14) to the Registrants Annual Report on
 Form 10-KSB for the fiscal year ended September 30, 2000, filed on December 29,
 2000)                                                                                                                   



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|10.12  | Securities
 Purchase Agreement dated November 8, 2000 by and among the Registrant and the purchasers
 listed on Exhibit A thereto. (incorporated herein by reference to Exhibit (10.17)
 to the Registrants Annual Report on Form 10-KSB for the fiscal year ended
 September 30, 2000, filed on December 29, 2000)
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                     
|10.13  | Registration
 Rights Agreement, dated as of July 20, 2001 by and among the Registrant and the
 subscribers set forth therein. (incorporated herein by reference to Exhibit (10.1)
 to the Registrants Current Report on Form 8-K, filed on July 23, 2001)                                                          
|       |                                                                                                                                                                                                                                                                                                                     
|10.14  | Form of Registration
 Rights Agreement, dated as of July 20, 2001 by and among the Registrant and Commonwealth
 Associates, L.P. (incorporated herein by reference to Exhibit (10.2) to the Registrants
 Current Report on Form 8-K, filed on July 23, 2001)                                                       
|       |                                                                                                                                                                                                                                                                                                                     
|10.15+ | Voice Mail
 Services Agreement, dated as of February 8, 2002, by and between the Registrant
 and AT&T Corp. (incorporated by reference to Exhibit (10.1) to the Registrants
 Quarterly Report on Form 10-QSB for the quarterly period ended March 30,
 2002, filed on May 15, 2002)                                
|       |                                                                                                                                                                                                                                                                                                                     
|10.16  | Master Purchase
 Order Assignment Agreement, dated as of September 13, 2002, by and between Transcap
 Trade Finance and the Registrant.                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                     
|23.1.  | Consent of
 Ernst & Young LLP, Independent Auditors                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                     
|24.1   | Power of Attorney
 (see page 31).                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                     
|99.1   | Certification
 of Chief Executive Officer and Chief Financial Officer                                                                                                                                                                                                                                               



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+ Confidential treatment has been granted
 with respect to portions of these exhibits.