U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549




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, 2008





o       Transition Report Under Section 13 or
15(d) of the Securities Exchange Act of 1934


Commission
file number 000-23025







NOTIFY
TECHNOLOGY CORPORATION


(Name
of small business issuer in its charter)





California
            77-0382248(State
      or other jurisdiction
              of
      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:





common
stock, $0.001 par value










Check
whether the issuer is not required to file reports pursuant to
Section  13 or 15(d) of the Exchange Act. o





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
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)     Yes o No
x




State
issuer’s revenues for its most recent fiscal year. $4,640,723.





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 10, 2008, was approximately $500,534. 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.





At
December 12, 2008, the issuer had issued and outstanding 14,075,662 shares of
common stock, $0.001 par value.








Transitional
Small Business Disclosure Format (check
one):        YesoNo
x







PART
I




FORWARD
LOOKING STATEMENTS




You
should read the following discussion in conjunction with our audited financial
statements and the notes thereto that appear elsewhere in this Annual Report on
Form 10-KSB. The following discussion contains forward-looking statements,
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, which involve
risks and uncertainties.  Forward-looking statements generally include
words such as “may,” “will,” “plans,” “seeks,” ”expects,” “anticipates,”
“outlook,” “intends,” “believes” and words of similar import as well as the
negative of those terms. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking
statements.  All forward-looking statements included in this Annual
Report on Form 10-KSB, including, but not limited to, statements regarding the
future growth of our wireless product line; statements regarding future revenues
from our products; statements regarding future financings statements regarding
future costs; statements regarding future research and development efforts;
statements regarding competition in the market for wireless products; statements
regarding future patent applications; statements regarding future financial
results; and statements regarding future plans to extend our product line; are
based on current expectations and are subject to important factors that could
cause actual results to differ materially from those projected in the
forward-looking statements. Such important factors include, but are not limited
to, those discussed below under “Risk Factors” and elsewhere in this Annual
Report and in other documents we file with the U.S. Securities and Exchange
Commission.




ITEM
1. Description of Business




We were
incorporated in the State of California in August 1994.  We are an
independent software vendor (“ISV”) focused on providing secure, wireless
synchronization of email and personal information management (“PIM”) (calendar,
contacts, and tasks information) across a variety of wireless devices and email
collaborations suites. Our product provides solutions to organizations and
businesses supporting Novell GroupWiseä, Microsoft Exchangeä, Google EnterpriseTM and a
variety of alternative email collaboration suites such as the Sun Java
Communications Suite, the Oracle Collaboration Suite, the Mirapoint Messaging
Suite, CommunigatePro, Scalix Enterprise Server, Kerio Messaging Suite, the
MDaemon Messaging Suite, FirstClass, and Meeting Maker.  We support a
variety of wireless device platforms on each of these suites including the
BlackBerry®, Apple® iPhone®, iPod® touch, Palm, Windows Mobile®, and Symbian. In
July 2006, we became an official BlackBerry ISV Alliance Partner with Research
In Motion.  Using our products, our customers can achieve secure
wireless mobile access using a variety of handheld wireless devices to manage
their email, calendar appointments and address books on any of the email
collaboration suites we support.  Our products support wireless
devices from a wide range of manufacturers and network carriers around the
world.




We
historically derived significant revenues from sales of our Visual Got Mail
Solution, a wireline legacy product for voice mail notification as well as from
related services.  In February 2007, we discontinued this product but
our fiscal 2007 revenues reflects some service revenue from the installed base
of voice mail users during that period.




Since
2004, a majority of our revenues have come from our wireless software product
line . Wireless products contributed 100% of our total revenues in fiscal 2008
compared to approximately 94% of total revenues in fiscal 2007.  We
sell our products primarily through direct sales in the United States and Canada
and through resellers internationally.




Our
wireless enterprise synchronization product is the only integrated solution
providing organizations a single solution to simultaneously support any
BlackBerry, iPhone, Palm and Windows Mobile device.  Our solution is
network independent thereby offering unparalleled flexibility to change devices
or networks as technology develops or user needs evolve.  In addition,
we are the only official provider of wireless email and PIM synchronization
middleware supporting BlackBerry wireless devices other than Research In Motion
Limited (“RIM”). We have an ISV partnership agreement with RIM supporting our
ability to provide email and PIM synchronization to BlackBerry users on over 13
different email platforms. Our NotifyLink Enterprise product provides wireless
synchronization for email, calendar, contacts and task information and features
an “On-Premise” Edition and an “On-Demand” Edition. Both Editions can be
integrated into an organization’s existing network while offering broad wireless
device support.




The
On-Premise Edition product resides on the customer’s server behind its
firewall.  We have designed the NotifyLink On-Premise Edition for
information technology (IT) organizations that desire centralized management and
support for their mobile user needs. With the NotifyLink On-Premise Edition,
organizations can support their growing mobile workforce while providing a
migration path from wired to wireless device usage.


2




The
On-Demand Edition product Edition provides users with the same features as the
NotifyLink On-Premise Edition without the need to install a NotifyLink server on
the customer’s premises.  The NotifyLink On-Demand Edition is
particularly well suited for smaller user organizations seeking a comprehensive
wireless synchronization solution while minimizing infrastructure costs and IT
resources.




For
wireless device users, NotifyLink provides support for a variety of wireless
networks including cellular networks such as CDMA/1XRTT/EVDO, GSM/GPRS/EDGE, and
all fixed wireless networks using 802.11x technology.




Products




NotifyLink
Enterprise (“NotifyLink”)




NotifyLink
Enterprise is comprised of the NotifyLink Enterprise On-Premise Edition and the
NotifyLink Enterprise On-Demand Edition. NotifyLink has been designed to address
the needs of organizations of all sizes.




Using
either of the NotifyLink Enterprise Editions, mobile users can read, compose,
reply, forward, mark as read, and delete email messages from their mobile
devices. NotifyLink provides a user with “automatic” synchronization of emails
sent to the end user’s email mailbox and all emails originated, forwarded and
replied to from the mobile device will be synchronized with the user’s
desktop.  NotifyLink is device agnostic because email users are
provided with a platform specific smart client, which is loaded on the mobile
device. Once the platform specific smart client mobile device is installed on
the user’s wireless device and the NotifyLink enterprise server is installed,
the user is able to open his or her email, read it and then perform any number
of operations including replying, forwarding, and even deleting the
email.  NotifyLink supports attachment download and upload for Palm,
Windows Mobile, and BlackBerry mobile devices. NotifyLink also supports the
ability to forward attachments.  NotifyLink provides bi-directional
mobile synchronization of the user’s calendar, contacts, and tasks regardless of
whether the information was entered on the mobile device or at the user’s
desktop. The transmitted information keeps personal calendars continually up to
date at both the client server level and the mobile device level.




NotifyLink’s
wireless functionality supports all BlackBerry, iPhone, Palm and Windows Mobile
devices simultaneously over a variety of wireless networks: GSM/GPRS/EDGE,
CDMA/1XRTT/EVDO and all fixed wireless networks using 802.11x
technology.  NotifyLink wireless functionality also provides
“over-the-air” synchronization of email and personal information management,
thereby freeing users from the requirement to cradle their wireless devices in
order to maintain synchronization.  NotifyLink provides automatic
notification of new email and PIM, eliminating the need for users to initiate a
data session in order to retrieve their personal data.




All email
and PIM is stored behind an organization’s firewall while delivery of
information to and from the wireless devices is encrypted utilizing either
Triple Data Encryption Standard (TDES) or Advanced Encryption Standard (AES)
encryption algorithms.  AES is a Federal Information Processing
Standard, that specifies a cryptographic algorithm for use by U.S. Government
organizations to protect sensitive, unclassified
information.  Information security is increased because NotifyLink
supports both TDES and the latest AES.




NotifyLink Enterprise On-Premise
Edition




The
NotifyLink On-Premise Edition was our first Enterprise offering providing a
single enterprise solution supporting the wireless needs of its users through
the use of an on-premise server.  It is based on a client-server
architecture comprised of the NotifyLink device client module and the NotifyLink
Enterprise server product. The NotifyLink Enterprise server product involves
three components: a database component, a web component and a messaging
component. All three components are commonly installed to the same server. In a
more distributed environment, each component can be installed to a separate
server. The NotifyLink On-Premise Edition is ideal for companies with a volume
of mobile professionals who need real-time synchronization of their existing
email to any one of a variety of supported mobile devices.


3




NotifyLink Enterprise On-Demand
Edition




In
November 2004, we launched our NotifyLink On-Demand Edition for Novell
GroupWise.  In March 2005, we launched the NotifyLink On-Demand
Edition for Microsoft Exchange. Since then, we have continued to expand the
number of collaboration suites and devices we support.  We added the
Apple iPhone device and Google Enterprise collaboration suite in fiscal 2008.
The NotifyLink On-Demand Edition provides the same wireless synchronization of
email, calendar, contacts and task information as our NotifyLink On-Premise
Edition, except without the need of any on-premise hardware or
software.  The NotifyLink On-Demand Edition provides wireless
synchronization services and support from a hardened data center that provides
users a high level of reliability and availability.  It remotely
accesses email and PIM data from the customer email collaboration suite and
synchronizes to a user’s BlackBerry, iPhone, Palm or Windows Mobile wireless
device.  The NotifyLink On-Demand Edition provides organizations with
a simple solution to their immediate mobility needs.  It was designed
as a cost efficient alternative for customers whose universe of wireless users
does not justify an internal server or who do not have the internal IT resources
to maintain a NotifyLink Enterprise server.  The NotifyLink On-Demand
Edition is also targeted at organizations interested in outsourcing the wireless
synchronization of email and PIM.




Sales,
Marketing and Distribution




We are
expanding our customer base by gathering leads through several channels. We have
an inside sales force that handles leads generated from our corporate web site,
the web sites of our collaboration suite and device partners where we maintain a
presence, referrals from referral partners with whom we have agreements,
wireless carriers and device manufacturers such as RIM and Palm,
Inc.  Other partners such as Sun Microsystems, Inc., Oracle or Google
recommend NotifyLink as the primary full featured mobility solution to their
customers.   We will continue to receive referrals from these
channel partners only to the extent that they successfully refer our products
and services to interested customers. In addition, we attend a variety of trade
shows and conferences which also generate leads for our wireless
products.




Our
NotifyLink products consist of numerous contracts sold directly to individual
companies.  We typically sell licenses on an annual
basis.  This means that we observe revenue recognition rules that
spread the recognition of revenue from the sales of any one month ratably over
the term of each contract; commonly a twelve month period.  Because of
this practice, any significant increase or decrease in sales in any one period
resulting from sales or marketing programs is reflected as a gradual increase or
decrease in revenues.




Technical
and Marketing Support




We have
developed product collateral, improved web-site design and expanded marketing
programs for our NotifyLink products.  These program include product
awareness branding and product training through various media such as Notify
web-site marketing, strategic partner web-site marketing, regional, national and
international trade shows, strategic partner regional user meetings, carrier
training seminars, webinars, user market surveys and a monthly
newsletter.




We
provide customer technical support and remote product installation assistance
for our NotifyLink customers.  We maintain a hosting center for our
NotifyLink product line in Ohio. We also provide the support to maintain up-time
requirements for our NotifyLink On-Demand products.




Research
and Development




We
incurred $1,620,526 and $1,308,427 in research and development expenses in
fiscal 2008 and 2007, respectively.  The increase in
our  investment in fiscal 2008 reflected our focus on engineering to
maintain and develop new products. This focus resulted from our strategy to
provide and develop support for additional collaboration partners, thereby
creating the need to expand design and testing capabilities.  The
combination of expanding the number of collaboration suites NotifyLink supports
and the release into the market of numerous new devices by device manufacturers
taxed our ability to create new products and assure backward compatibility to
aging devices.  We doubled the size of our test department to respond
to the demand in a timely manner.  Our design personnel also created
ports for the Apple iPhone and Google Enterprise, neither of which had been on
the schedule as the year began.  We believe that our future success,
if any, depends significantly on our ability to continue to enhance our existing
wireless products and to develop new products. Therefore, we intend to continue
to incur research and development costs.  We expect that our main
focus of research and development efforts will remain in wireless
software.


4




Competition




We
believe the market for our wireless products is extremely competitive for
certain platforms and less competitive for others. Several companies offer
wireless solutions and alternatives for Novell GroupWise and Microsoft
Exchange.  The market for Zimbra, Kerio and CommuniGate offers users
with multiple alternatives including our NotifyLink solution.  We
believe our solution is more complete and includes advanced features not
available in alternative solutions and appeals to those customers who require or
desire the advanced features.  In the markets for Sun, Oracle,
Mirapoint and Meeting Maker, we have little to no competition at this time. Many
customers may not need the full functionality of our NotifyLink solution and may
be satisfied with more basic synchronization functionally offered at no charge
by our collaboration suite partners.




Proprietary
Rights




We regard
various features and design aspects of our products as proprietary and we rely
primarily on a combination of copyright, trademark and trade secret laws and
employee and third-party nondisclosure agreements to protect our proprietary
rights.  Our software products are generally not subject to patent
claims.  In fiscal 2006, we sold our rights to several patents for
legacy products no longer in production.  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, that any issued patents will be
enforceable or valid, 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.




In August
2006, we entered into an ISV Partnership with RIM, the maker of the BlackBerry
hand-held device, to provide email and PIM synchronization to any of the
alternative email collaboration suites we support.  Our agreement with
RIM is renewed annually.




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.




In
November 2003, we entered into a non-exclusive license agreement with NCR that
allows us to offer certain product features on our NotifyLink Enterprise
Editions that are covered by a patent held by NCR.   This
agreement requires a royalty payment on Enterprise revenue subject to the
patent.  The agreement contains a $500,000 cap on the aggregate
royalty to be paid and an exit clause if we were to no longer sell our
NotifyLink Enterprise Editions.  We paid $123,645 in royalties under
this agreement in the year ended September 30, 2008 compared to $103,225 in the
year ended September 30, 2007.  We have paid $416,901 against the
$500,000 cap as of September 30, 2008.  Once the $500,000 cap is
reached we will hold a fully paid up non-exclusive right for the use of the NCR
patent.




Employees




As of
September 30, 2008, we employed 59 persons of whom 27 were engaged in research
and development, 11 in sales and marketing, 15 in customer service, and 6 in
general administration and finance. All but 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.




RISK
FACTORS




Risks
Related to Our Business




We
have a history of losses, and there is no assurance of future
profitability.




We
commenced operations in August 1994 and through January 1996 were engaged
primarily in the sale of hardware products to the telephone market. We made the
decision in fiscal 2003 to refocus our strategy on developing and selling
software applications for the wireless market.  Accordingly, our
business has changed substantially in recent years, making it difficult to make
period-to-period comparisons of our operations and we face all of the risks and
uncertainties encountered by early-stage companies. For the fiscal years ended
September 30, 2008, 2007, 2006, and 2005, we incurred net losses of $287,681,
$426,004, $314,892 and $557,452, respectively. Although our cash flow from
operations was positive in the year ended September 30, 2008, we are not assured
that we can maintain a positive cash flow from operating activities in future
periods. We may also incur further operating losses in the future until such
time, if ever, as there is a substantial increase in orders for our products and
product sales generate sufficient revenue to fund our continuing
operations.  There can be no assurance that sales of our products will
continue to generate or maintain positive cash flow or that we will attain or
thereafter sustain profitability in any future period.




5




We
may be unable to generate the cash necessary to support a competitive level of
research and development activities.




At
September 30, 2008, we had an accumulated deficit of $24,662,263 and incurred a
net loss for the year ended September 30, 2008 of $287,680. We also had a
working capital deficit at that date of $1,423,331.  Our NotifyLink
products will need to sustain a favorable market acceptance in order for us to
be able to continue our research and development activities and to fund
operating expenses at a level required to stay competitive in our
market.  Regardless, as our NotifyLink wireless product line has not
generated sufficient contributions to our revenues to date to operate profitably
at the current level of research and development, an increase in the level of
research and development driven by market pressures could require us to obtain
further financing..  Obtaining additional financing will be subject to
a number of factors including market conditions, investor acceptance of our
business plan, and investor sentiment.  These factors may make the
timing, amount, terms and conditions of additional financing unattractive or
unavailable to us.  If, in a situation that required an increase in
research and development we are unable to maintain market acceptance of our
wireless products or raise additional financing, we will have to significantly
reduce our spending, delay or cancel planned activities or substantially change
our current corporate structure.  In such an event, we intend to
implement expense reduction plans in a timely manner.  However, these
actions would have material adverse effects on our business, results of
operations, and prospects, resulting in a possible failure of our
business.




If
we are unable to develop, market and sell new and improved wireless products on
a timely basis, we could lose existing and potential customers and our sales
could decrease.




We
continue to invest in our wireless products in order to grow our revenue and
improve our financial condition.  We need to develop, market and sell
new and improved wireless software products on a timely basis to keep pace with
technological developments, emerging industry standards, and the growing needs
of our sophisticated customers.  We may experience difficulties in
marketing and selling new products, and our inability to timely and
cost-effectively introduce new products and future enhancements, or the failure
of these new products or enhancements to achieve market acceptance, could
seriously harm our business.  Life cycles of wireless software
products are difficult to predict, because the market for such products is
relatively new and evolving and characterized by rapid technological change,
frequent enhancements to existing products and new product introductions,
changing customer needs and evolving industry standards.  The
introduction of competing products that employ new technologies and emerging
industry standards could render our products and services obsolete and
unmarketable or shorten the life cycles of our products and
services.  The emergence of new industry standards might require us to
redesign our products.  If our products are not in compliance with
industry standards that become widespread, our customers and potential customers
may not purchase our products.




Revenues
or expenses may vary, affecting our quarterly operating results.




We
anticipate that we will experience significant fluctuations in our operating
results in the future.  Fluctuations in operating results may cause
the price of our common stock to be volatile.  Operating results may
vary as a result of many factors, including the following:




·
            our
      level of research and development;




·
            our
      sales and marketing activities;




·
            announcements
      by us or our competitors;




·
            size
      and timing of orders from
customers;




·
            new
      product introductions by us or our
competitors;


6




·
            future
      market acceptance of our products;




·
            price
      erosion.




Each of
the above factors is difficult to control and forecast.  Thus, they
could have a material adverse effect on our business, financial condition and
results of operations.




Notwithstanding
the difficulty in forecasting future sales, we generally must undertake research
and development and sales and marketing activities and other commitments months
or years in advance.  Accordingly, any shortfall in product revenues
in a given quarter may materially adversely affect our financial condition and
results of operations because we are unable to adjust expenses during the
quarter to match the level of product revenues, if any, for the
quarter.  Due to these and other factors, we believe that quarter to
quarter comparisons of our results of operations are not necessarily meaningful
and should not be relied upon as indications of future performance.




We
need to continue to develop our marketing channels and build our sales
force.




We
continue to develop our formal referral partner channel and our international
reseller partners channel.  We participate in informal referral
arrangements with several wireless carriers, wireless device manufacturers and
several of our collaboration partners for the sale of our NotifyLink products
and services where our products assist in the sale of their
products.  We have a limited direct sales force to sell our NotifyLink
products and services to organizations and businesses and we rely upon both
formal and informal referral arrangements to provide leads for our NotifyLink
products.  To date, most of our referral arrangements are formal and
we will receive referrals only to the extent that our referral partners
successfully refer our products and services to potential
users.  There can be no assurance that we will continue to receive
referrals through our formal or informal arrangements.  Our NotifyLink
solution is sold into an emerging market and although we have operated on a cash
positive basis in the fiscal years ending September 30, 2008 and 2007, we have
not yet achieved sufficient growth in our sales to operate profitably on an
income statement basis.




We are
expanding our distribution channels for our wireless products by participating
in national and regional trade shows and promotions with strategic partners
across the United States and Europe.  We cannot predict whether these
activities will result in increased wireless revenue.  We also have
limited international sales due to limited resources to build a reseller
network.  Our management will need to expend time and effort to
develop these channels.  Our customer profile consists of a large
number of small to medium business customers thereby reducing our dependence on
any one customer.  We have expanded our internal sales force in
response. We are building experience selling into the wireless market but make
use of modest marketing and distribution programs to expand our distribution
channels and any marketing efforts undertaken by or on behalf of us may not be
successful.




One
of our directors holds a large percentage of our stock and is able to exert
substantial control over us.




David A.
Brewer, a member of our Board of Directors and the Chairman of our Audit
Committee since 2000, together with an entity affiliated with Mr. Brewer,
currently own approximately 56% of our outstanding common stock.  In
addition, Mr. Brewer owns options to purchase an additional fractional percent
of our common stock.   This represents a significant influence
over all matters requiring approval by shareholders, including the election of
directors, amendments to our Articles of Incorporation and significant corporate
transactions, such as a merger or other sale of our company or its
assets.  This concentration of ownership will limit other
shareholders’ ability to influence corporate matters and may have the effect of
delaying or preventing a third party from acquiring control over
us.




Our
products may suffer from defects.




Most of
our products consist of software and services related to our wireless NotifyLink
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.




7




We
depend on key executives.





Our
potential for success depends significantly on key management employees,
including our Chairman, President and Chief Executive Officer, Mr. Paul F.
DePond, our Vice President of Development, Rhonda Chicone and our Chief
Financial Officer, Gerald W. Rice.  We have entered into amended and
restated employment agreements with these three key management
employees.  We do not currently have “key man” life insurance on any
of these executives or any of our other key employees.  The loss of
the services of these executives or those of any of our other key employees
would materially and adversely affect us.  We also believe that our
future success will depend in large part on our ability to attract and retain
additional highly skilled technical, management, sales and marketing personnel.
If we were unable to retain or hire the necessary personnel, the development of
new products and enhancements to current products would likely be delayed or
prevented.  Competition for these highly-skilled employees is
intense.  Therefore, there can be no assurance that we will be
successful in retaining our key personnel or in attracting and retaining the
personnel we require for expansion.




Our
intellectual property may not be adequately protected and we may infringe the
rights of others.





We regard
various features and design aspects of our products as proprietary and rely
primarily on a combination of copyright, trademark and trade secret laws and
employee and third-party nondisclosure agreements to protect our proprietary
rights.   Our software products are generally not subject to
patent claims.  There can be no assurance, therefore, that any of our
competitors, some of whom have far greater resources than we do, will not
independently develop technologies that are substantially equivalent or superior
to our technology.




Our charter provisions may discourage
acquisition bids.




Our
Articles of Incorporation give our Board of Directors the authority to issue an
aggregate of 5,000,000 shares of preferred stock and to determine the price,
rights, preferences, privileges and restrictions, including voting rights for
these shares, without any further vote or action by our shareholders. The rights
of the holders of our common stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The issuance of preferred stock, while providing flexibility in
connection with possible acquisition and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of our outstanding voting stock.




Our
Articles of Incorporation limit the liability of officers and directors and we
have entered into indemnification agreements with them.





Our
Articles of Incorporation eliminate, in certain circumstances, the liability of
our directors for monetary damages for breach of their fiduciary duties as
directors.  We have also entered into indemnification agreements with
each of our directors and officers.  Each of these indemnification
agreements provides that we will indemnify the indemnitee against expenses,
including reasonable attorneys' fees, judgments, penalties, fines, and amounts
paid in settlement actually and reasonably incurred by such director in
connection with any civil or criminal action or administrative proceeding
arising out of his performance of duties as a director or officer, other than an
action instituted by the director or officer.  These indemnification
agreements also require that we indemnify the director or other party thereto in
all cases to the fullest extent permitted by applicable law.  Each
indemnification agreement permits the director or officer that is party thereto
to bring suit to seek recovery of amounts due under the indemnification
agreement and to recover the expenses of such a suit if they are
successful.  We currently have directors’ and officers’ liability
insurance, but there can be no assurance that any or all of our indemnification
obligations will be covered by this insurance or that the insurance limits will
not be exceeded.





Risks
Related to Our Industry




We
face significant competition.




We
believe the market for our wireless products is extremely competitive for
certain platforms, and less competitive for others.  Several companies
offer wireless email notification and management software for Microsoft Exchange
and Novell GroupWise.  Many of these companies have greater financial
and other resources than we do.  Microsoft and Novell offer similar
products at little to no charge that function in large parts of the enterprise
email market.  We sell our products in segments of the market where
the free products do not provide adequate functionality or sufficient product
features.  If these lower cost products were extended to our segment
of the market, we would face additional price pressure.  We may not be
able to compete successfully against better funded competitors as the market for
our products evolves and the level of competition increases.  A
failure to compete successfully against existing and new competitors would
materially and adversely affect our business, revenue, operating results, and
financial condition.


8




If
the market for wireless data communications devices does not grow, we may not
successfully increase or maintain the sale of our NotifyLink
products.




The
overall market for wireless data communications devices has experienced
significant growth in recent years.  The success of our NotifyLink
Enterprise On-Premise and On-Demand products depends upon this
growth.  There can be no assurance that the market for wireless
software products will continue to grow.  We cannot predict that
growth of our NotifyLink products will continue. If the various markets in which
our software products compete fail to grow, or grow more slowly than we
currently anticipate, or if we are unable to establish product markets for our
new software products, our business, results of operation and financial
condition would be materially and adversely affected.




Risks
Related to Our Common Stock




If we
fail to remain current on our reporting requirements, we could be removed from
the OTC Bulletin Board, which would limit the ability of broker-dealers to sell
our securities and the ability of shareholders to sell their securities in the
secondary market.




Companies
trading on the OTC Bulletin Board, such as Notify Technology, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934 (“Exchange
Act”), and must be current in their reports under Section 13 of the Exchange
Act, in order to maintain price quotation privileges on the OTC Bulletin Board.
 If we fail to remain current on our reporting requirements, we could be
removed from the OTC Bulletin Board.  As a result, the liquidity of our
securities could be adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of shareholders to sell their securities
in the secondary market




Our
common stock is subject to the “penny stock” rules of the Securities and
Exchange Commission, and the trading market in our common stock is limited,
which makes transactions in our stock cumbersome and may reduce the investment
value of our stock.




Our
common stock is “penny stock” because it is not registered on a national
securities exchange or listed on an automated quotation system sponsored by a
registered national securities association, pursuant to Rule 3a51-1(a) under the
Exchange Act.  For any transaction involving a penny stock, unless exempt,
the rules require:




·
            That
      a broker or dealer approve a person’s account for transactions in penny
      stocks; and




·
            That
      the broker or dealer receives from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.




The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market, which, in highlight form:




·
            Sets
      forth the basis on which the broker or dealer made the suitability
      determination; and




·
            That
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.




Generally,
brokers may be less willing to execute transactions in securities subject to the
penny stock rules.  This may make it more difficult for investors to
dispose of our common stock and cause a decline in the market value of our
stock.




Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions.  Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.


9




The
market for penny stocks has suffered in recent years from patterns of fraud and
abuse.




Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse.
 Such patterns include:




·
            Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer;




·
            Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;




·
            Boiler
      room practices involving high-pressure sales tactics and unrealistic price
      projections by inexperienced
salespersons;




·
            Excessive
      and undisclosed bid-ask differential and markups by selling
      broker-dealers; and




·
            The
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      resulting inevitable collapse of those prices and with consequential
      investor losses.




Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
 The occurrence of these patterns or practices could increase the
volatility of our share price.




Our
stock price may be volatile




The
market price for our common stock may be affected by a number of factors,
including the announcement of new products or product enhancements by us or our
competitors, the loss of services of one or more of our executive officers or
other key employees, quarterly variations in our or our competitors' results of
operations, changes in earnings estimates, developments in our industry, sales
of substantial numbers of shares of our common stock in the public market,
general market conditions and other factors, including factors unrelated to our
operating performance or the operating performance of our
competitors.  In addition, stock prices for many companies in the
technology sector have experienced wide fluctuations that have often been
unrelated to the operating performances of these companies.  These
factors and fluctuations, as well as general economic, political and market
conditions, such as recessions, may materially adversely affect the market price
of our common stock.




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 2,500 square feet of office space pursuant to a lease that
expires March 31, 2009.  We have a second location at 6570
Seville Drive, Canfield, Ohio 44406 that houses an engineering group and our
technical support organization. The Ohio facility consists of approximately
8,353 square feet of office space pursuant to a lease that expires in October
2012.




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 2008.


10




PART
II




ITEM
5. Market for Common Equity, Related Stockholder Matters, and Small Business
Issuer Purchases of Equity Securities




(a)           Market
for Common Equity.




Our
common stock was listed on the Nasdaq SmallCap Market under the symbol NTFY
until our common stock was delisted on September 4, 2002.  Since
September 4, 2002, 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 fiscal 2008 and
fiscal 2007 are as follows:




NTFY
Common Stock





High
                    
                    
                    LowFiscal
      Year Ended September 30, 2008Fourth
      Quarter
                    
                    $
                    0.330
                    
                    
                    $
                    0.200Third
      Quarter
                    
                    $
                    0.250
                    
                    
                    $
                    0.200Second
      Quarter
                    
                    $
                    0.212
                    
                    
                    $
                    0.180First
      Quarter
                    
                    $
                    0.530
                    
                    
                    $
                    0.170Fiscal
      Year Ended September 30, 2007Fourth
      Quarter
                    
                    $
                    0.400
                    
                    
                    $
                    0.230Third
      Quarter
                    
                    $
                    0.320
                    
                    
                    $
                    0.170Second
      Quarter
                    
                    $
                    0.300
                    
                    
                    $
                    0.160First
      Quarter
                    
                    $
                    0.250
                    
                    
                    $
                    0.160




These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions. The quarterly high and
low bid prices of our common stock during fiscal 2008 were provided by the
Nasdaq Stock Market; such prices during fiscal 2007 were provided by Bloomberg
L.P.




(b)           Holders.




As of
December 12, 2008, there were 63 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
information required by this item regarding equity compensation plans is
incorporated by reference to the information set forth in Item 11 of this Annual
Report on Form 10-KSB.




(e)          Recent
Sales of Unregistered Securities




During
the period covered by this Annual Report on Form 10-KSB, we did not issue or
sell any of our unregistered securities of Notify.


11




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
independent software vendor (“ISV”) focused on providing secure, wireless
synchronization of email and personal information management (“PIM”) (calendar,
contacts, and tasks information) across a variety of wireless devices and email
collaboration suites. Our products provide solutions to organizations and
businesses supporting Novell GroupWiseä, Microsoft Exchangeä, Google EnterpriseTM and a
variety of alternative email collaboration suites such as the Sun Java
Communications Suite, the Oracle Collaboration Suite, the Mirapoint Messaging
Suite, CommunigatePro, Scalix Enterprise Server, Kerio Messaging Suite, the
MDaemon Messaging Suite, FirstClass, and Meeting Maker.  We support a
variety of wireless device platforms on each of these suites including the
BlackBerry®, Apple® iPhone®, iPod® touch, Palm, Windows Mobile®, and Symbian. In
July 2006, we became an official BlackBerry ISV Alliance Partner with Research
In Motion.  Using our products, our customers can achieve secure
wireless mobile access using various handheld wireless devices to manage their
email, calendar appointments and address books on any of the email collaboration
suites we support.  Our products support wireless devices from a wide
range of manufacturers and network carriers around the world.




We
completed our initial public offering in September 1997, receiving net proceeds
of approximately $6.2 million. Prior to our initial public offering, our working
capital requirements were met through the sale of equity and debt securities in
private placements and, to a lesser extent, product revenue and a line of
credit. We have sustained significant operating losses in every fiscal period
since inception and expect to incur quarterly operating losses in the future.
Our limited operating history makes the prediction of future operating results
difficult if not impossible. Future operating results will depend on many
factors, including the demand for our products, the level of product and price
competition, and our ability to develop and market new products and control
costs. There can be no assurance that our revenues will grow or be sustained in
future periods or that we will ever achieve profitability.




Critical
Accounting Policies and Estimates




Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make significant estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses
and related disclosure of contingent assets and liabilities. We evaluate
estimates, including those related to bad debts, inventories and income taxes,
on an ongoing basis. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.




We
believe the following critical accounting policies, among others, involve the
more significant judgments and estimates used in the preparation of our
financial statements:




We
recognize revenue in accordance with the American institute of Certified Public
Accounts Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” and
SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB
104”).




Under SOP
97-2, we recognize software license agreements when persuasive evidence of an
agreement exists, delivery of the product has occurred, the license fee is fixed
or determinable and collection is probable.  Our license agreements
generally have a fixed term and the license revenue is recognized ratably over
the term of each license.




Under SAB
104, we recognize revenue when the title and risk of loss have passed to the
customer, there is persuasive evidence of an arrangement, delivery of the
product has occurred or services have been rendered, the sales price is fixed or
determinable and collection is probable. We recognize revenues at time of
shipment of our 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 ability to make payments, additional allowances might be
required.


12




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.




Results
of Operations




Fiscal
Years Ended September 30, 2008 and 2007




Revenue




Revenues
in fiscal 2008 consisted of net revenues from the sale of NotifyLink software
licenses, installation fees and the sale of third party software. In fiscal
2007, revenues consisted of a combination of revenues from NotifyLink licenses
and revenues from the sale of services related to our Visual Got Mail Solution.
License revenue is recognized on a straight-line basis over the term of each
contract. Installation revenue is recognized upon completion of trial activity
and finalizing the software agreement. Third party software revenue is
recognized upon delivery to the customer.  Revenue from the Visual Got
Mail Solution service was recognized in the month the service was supplied.
Revenues for the fiscal year ended September 30, 2008 increased to $4,640,723
from $3,709,404 in the fiscal year ended September 30, 2007. There was no
revenue from the Visual Got Mail Solution in fiscal 2008.  Revenues
from the sale of the Visual Got Mail Solution service for the fiscal year ended
September 30, 2007 equaled $237,991.




Cost
of Revenue




Cost of
revenues consists of the hosting center costs to support the service portion of
our NotifyLink products, the cost of re-sale software related to NotifyLink and
royalty expense to NCR for certain technology utilized in our NotifyLink
products. Cost of revenues increased to $153,755 in the fiscal year ended
September 30, 2008 from $120,824 in the fiscal year ended September 30,
2007.  The increase was due to the increased volume of sales; we pay a
fixed percentage royalty to NCR on sales of NotifyLink products.




The gross
margin was 97% in both fiscal 2008 and fiscal 2007.  The major cost
component of our gross margin is the royalty expense mentioned above that is
applied at a constant percentage of revenues regardless of
volume.  The other major costs of our business, consisting of product
design and sales/support, are categorized in operating expenses and thus do not
impact gross margin.




Research
and Development




Research
and development expenses consist primarily of personnel costs and
expenses.  We incurred $1,620,526 in research and development expenses
in fiscal 2008, an increase from the $1,308,428 in research and development
expenses incurred in fiscal 2007.  The increase in our investment in
fiscal 2008 reflected our focus on engineering to maintain and develop new
products.  This focus resulted from our strategy to provide and
develop additional support for numerous collaboration partners, thereby creating
the need to expand design and testing capabilities.  The combination
of expanding the number of collaboration suites NotifyLink supports and the
release into the market of numerous new devices by device manufacturers taxed
our ability to create new products and assure backward compatibility to aging
devices.  We doubled the size of our test department to respond to the
demand in a timely manner.  Our design personnel also created ports
for the Apple iPhone and Google Enterprise, neither of which had been on the
schedule as fiscal 2008 began.  We believe that our future success, if
any, depends significantly on our ability to continue to enhance our existing
wireless products and to develop new products. Therefore, we intend to continue
to incur research and development costs.




Sales
and Marketing




Sales and
marketing expense consists primarily of personnel, trade show and travel costs
and sales commissions related to our sales and marketing efforts. Sales and
marketing expenses increased to $1,881,552 for the fiscal year ended September
30, 2008 from $1,612,915 for the fiscal year ended September 30, 2007. This
increase was primarily attributable to an increase of approximately $148,000 in
personnel costs and an increase of approximately $100,000 in commissions and
referral fees.  We use an internal sales force and a customer support
staff to facilitate the NotifyLink sales process.  The sales process
also involves a customer trial period that, in turn, requires an initial
installation process involving assistance from technical support
personnel.  We have found that good technical support is an important
sales and retention tool for the customers in our market.  We
anticipate that sales and marketing expenses will increase in future quarters as
we hire additional sales and customer support personnel and attempt to expand
our existing and create new distribution channels.


13




General
and Administrative




General
and administrative expense consists of general management and finance personnel
costs, insurance expense, rent expense, professional fees and other general
corporate expenses. General and administrative expenses approximately level at
$1,281,302 for fiscal 2008 versus $1,287,246 for fiscal 2007. Increases in
compensation was largely offset by reductions in insurance expense.




Although
we have been able to avoid increased expenses in recent periods, we expect that
general and administrative expense may increase in future fiscal quarters as we
adhere to the requirements mandated by Sarbanes-Oxley Act.




Income
Taxes




There was
no provision for federal or state income taxes in fiscal 2007 or 2008 as we
incurred net operating losses. We expect to incur a net operating loss in future
periods. As of September 30, 2008, we had federal and state net operating loss
carryforwards of approximately $607,600 and $440,000,
respectively.  The net loss carryforwards and certain research and
development tax credit carryforwards will expire in tax years 2015 through 2027
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.




Liquidity
and Capital Resources




During
fiscal 2007 and 2008, we funded our operations through a combination of our
gross profit earned from revenue and existing cash balances.  Our
ability to fund our recurring losses from operations depends upon the continued
success of our NotifyLink wireless e-mail notification market
solutions.




A
significant characteristic of our business is the sale of our products
customarily in the form of annual contracts paid for upon signing with the
revenue amortized over the twelve-month service period.  The
unamortized contract revenue is reflected in the deferred revenue account on our
balance sheet.  As our installed base grows, this practice increases
the deferred revenue liability on the balance sheet provided we add new
contracts faster than old contracts expire.




The major
cost of operations is comprised of (1) the engineering design of our products
offered for sale and (2) the sales process of a contract that requires both
direct sales effort and technical support hours to facilitate a 30-day trial
period of our software prior to purchase.  The increase in the
NotifyLink deferred revenue to $2,418,235 as of September 30, 2008 from
$2,126,518 as of September 30, 2007, combined with the increase in revenues over
the same period,  indicates that total product revenue improved in
fiscal 2008.  Deferred revenue also represents the obligation to
service the contracts underlying the revenue.  However, the cash flow
required to provide the service of contracts is significantly less than the
amortized revenue recognized each month.




Our
continued operations depend on the cash flow from sales of
NotifyLink.  In the event sales of our product decline or our revenue
is otherwise interrupted, we would have to reduce our operations to minimally
service our existing contract obligations unless we secured additional
financing. If we were unable to increase our revenues or secure financing, we
would have to restructure our business to reduce costs.




We are
currently planning to expand our product offerings into our current or other
niche markets.  We believe that these niche markets are not adequately
addressed by market competitors at the present time.   We also
intend to capitalize on our ability to offer a single middleware solution for
those companies deploying a variety of manufacturers’ devices on a single email
system.  The success of our business operations will depend upon a
continued favorable market acceptance for our wireless software
products.


14




We also
continue to evaluate our opportunities to obtain financing to provide additional
funding for our operations.




In the
event we require additional capital, we cannot predict whether we will be able
to obtain financing on commercially reasonable terms, if at all.  Any
future financings may take the form of debt or equity securities or a
combination of debt and equity, including convertible notes or
warrants.  In the event we are required to obtain additional
financing, we cannot predict whether we could successfully conclude a financing
with any new investors.  Minimally, we expect that any additional
financing could result in a substantial dilution of the equity and voting
interests of our current shareholders.




In July
2008, warrants and options to purchase shares of our preferred stock that had
been outstanding since July 2001, expired without having been
exercised.  At September 30, 2008, we had outstanding a total of
14,075,662 shares of common stock and options to purchase 2,773,000 shares of
common stock.  There are no remaining obligations associated with the
expired warrants and options.  This simplification of our equity
structure could be advantageous in the event we require additional
capital.




At
September 30, 2008, we had cash and cash equivalents of $1,010,607 compared to
$839,775 at September 30, 2007.  Over the last several years, we have
financed our operations primarily through revenues from operations and existing
cash balances.  The net cash provided by operating activities equaled
$284,725 in the year ended September 30, 2008 versus net cash provided by
operating activities of $70,382 in the year ended September 30, 2007. The cash
provided by operations in the year ended September 30, 2008 resulted from a net
loss of $287,680, offset by a decrease in accounts receivable of $78,560, an
increase in deferred revenue of $291,717, an increase in accrued liabilities of
$116,995 and depreciation expense of $59,953.  Although we have been
cash positive in the last two fiscal years, we anticipate that we will have
negative cash flow from time to time in operating activities in future
periods.




Net cash
used in investing activities was an outflow of $134,195 and $41,794 for the
twelve-month periods ended September 30, 2008 and 2007,
respectively.  The net cash outflow in both periods was due to capital
purchases partially offset by the sale of fixed assets in fiscal
2007.




Net cash
used by financing activities was an inflow of $20,302 and outflow of $18,219 for
the respective years ended September 30, 2008 and 2007.  The net
inflow for financing activities for the year ended September 30, 2008 was a
combination of an inflow of $27,933 from the proceeds of the exercise of options
and $7,632 outflow from payments on capital leases.  The net cash
outflow for financing activities for the year ended September 30, 2007 was due
to payments on capital leases.




Off-Balance
Sheet Arrangements




We have
no off-balance sheet arrangements as defined by Item 303(c) of Regulation
S-B.




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.




ITEM
8A(T).  Controls and Procedures




(a)           Evaluation of Disclosure
Controls and Procedures.




Our Chief
Executive Officer and our chief Financial Officer, after evaluating our
disclosure controls and procedures (as defined in the rules and regulations of
the Securities and Exchange Commission under the Securities Exchange Act of 1934
(the "Exchange Act"), as of the end of the period covered by this Annual Report
on Form 10-KSB, have concluded that 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 accumulated and communicated to our
management, including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure, and that
such information is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and
forms.


15




(b)           Management’s
Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting.  Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.  Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.





Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an assessment of the
effectiveness of our internal control over financial reporting based on certain
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission.  Based on this evaluation, management concluded that our
internal control over financial reporting was effective in providing reasonable
assurance regarding the reliability of financial reporting and preparation of
the financial statements for external purposes in accordance with U.S. generally
accepted accounting principals as of September 30, 2008.




This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  This management report was not subject to attestation by
our registered public accounting firm pursuant to temporary rules of the SEC
that permit us to provide only management's report in this Annual Report on Form
10-KSB.




(c)           Changes in Internal Control
Over Financial Reporting.




We
installed a new accounting system that integrated the general ledger and
contract accounting in late fiscal 2008. No other significant changes were made
in our internal control over financial reporting in the period covered by this
Annual Report on Form 10-KSB or in other factors that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.




ITEM
8B.  Other Information




None.


16




PART
III




ITEM
9.  Directors, Executive Officers, Promoters, Control Persons and
Corporate Governance; Compliance With Section 16(a) of the Exchange
Act




Directors
and Executive Officers




Our
directors and executive officers and their ages as of September 30, 2008 are as
follows:


Name
                
                Age
                
                PositionPaul F.
      DePond
                
                55
                
                Chief
      Executive Officer, President and ChairmanGerald
      W. Rice
                
                60
                
                Chief
      Financial Officer and SecretaryRhonda
      Chicone
                
                44
                
                Vice
      President of Product DevelopmentDavid
      A. Brewer (1)(2)
                
                56
                
                DirectorMark
      Frappier (1)(2)(3)
                
                53
                
                Director


(1)
            Member
      of the Audit Committee


(2)
            Member
      of the Compensation Committee.




Biographical
information for directors and executive officers:




Paul F. DePond, our founder,
has served as our President, Chief Executive Officer and Chairman of the 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. Mr. DePond received aBachelor of
Science Degree in Electrical and Computer Engineering from the University of
Michigan, Ann Arbor in 1980 and Masters Degree in Computer Science from the
University of Michigan, Ann Arbor in 1980.




Gerald W. Rice has served as
our Chief Financial Officer and Secretary since August 1994.  From
November 1993 to June 1996, he owned Comprehensive Business Services, a
financial services company franchise.  From April 1992 to April 1993,
Mr. Rice served as Controller at Surface Sciences Instruments, a manufacturer of
capital equipment for surface chemical analysis.  From June 1990 to
April 1992, Mr. Rice was Vice President of Finance and Secretary of Applied
Dielectrics, a manufacturer of microwave circuit boards.  Mr. Rice
received an A.A. from Ohlone College in 1969 and a B.A. in Accounting from
California State College of Stanislaus in 1971.




Rhonda Chiconehas served as
our Vice President of Product Development since July 2001.  From
October 2000 to July 2001, Ms. Chicone 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. Chicone served as one
of our senior software engineers.  From September 1996 to January
1999, she was President of Tech-Xpress Enterprises, Inc.  Ms. Chicone
received a Science degree in Computer Science from Youngstown University in 1985
and a Master’s of Science in Technology from Kent University in
2002.




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.  Since September 2002, Mr. Brewer has also served as
President and Chief Executive Officer of PriaVision, Inc., a private company
developing advanced technologies for ophthalmic surgeons




Mark Frappier has served as
one of our directors since October 2007.  Since 1994, Mr. Frappier has
provided technical consulting to law firms and high tech corporations involved
in complex patent litigation.  From 1993 to 1994, he was the Director
of Technical Services at Rational Software and from 1989 to 1993 he was the
Director of Customer Service at CooperativeSolutions,
Inc.  Mr. Frappier began his career as an engineer designing computers
at Rational Machines, Inc., Wang, and Data General.  He graduated with
a Bachelor of Science degree in Engineering from Northeastern University in
1978


17




We
currently have two vacancies on our Board of Directors.  At the
present time, we are contemplating asking our shareholders to approve a proposal
at our next annual meeting of shareholders to reduce the number of authorized
directors to three.  We have not yet determined a date for such annual
meeting.  All directors are elected 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 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 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 our review of copies of such forms received by
us, or written representations from certain reporting persons, we believe that,
except as noted below, during the fiscal year ended September 30, 2008 all
filing requirements applicable to our officers, directors and ten percent
shareholders were fulfilled.




Mr.
Brewer was delinquent in the filing of his initial Form 3 and a Form 4 related
to the sale of stock.  These Forms are currently being prepared for
filing.




Mr.
Frappier was delinquent in the filing of a Form 3 related to his appointment to
the board of directors.  This Form has subsequently been
filed.




Code
of Ethics




We have
adopted the Notify Technology Corporation Code of Ethics for Principal and
Executive and Senior Financial Officers (“Code of Ethics”).  The Code
of Ethics applies to our principal executive officer, our principal financial
officer, our principal accounting officer or controller, and persons performing
similar functions and responsibilities who shall be identified by our audit
committee from time to time.




The Code
of Ethics is available at our website, located at http://www.notifycorp.com.




Audit
Committee




We have
an Audit Committee that was established in accordance with Section 3(a)(58)(A)
of the Exchange Act.  Messrs. Brewer and Frappier currently serve as
the members of the Audit Committee.  Mr. Frappier is “independent” as
defined under the National Association of Securities Dealers’ listing
standards.  The board of directors has determined that Mr. Brewer is
an “audit committee financial expert” as defined in Item 407(d) of
Regulation S-B promulgated by the Securities and Exchange
Commission.  Mr. Brewer is not “independent” by virtue of his
affiliation with 21X Investments, LLC, our largest shareholder.




ITEM
10.  Executive Compensation




Summary
Compensation Table




The
following table sets forth information for the two most recently completed
fiscal years concerning the compensation of (i) the Chief Executive Officer
and (ii)  the two other most highly compensated officers during the fiscal
year ended September 30, 2008 (together the “Named Executive
Officers”).


18


Annual
      CompensationName
      and
                        Principal
      Position
                    
                    Year
                    
                    Salary
                        ($)
                    
                    
                    Bonus
                        ($)
                    
                    
                    All
      Other
                        Compensation
                        ($)
      (1)
                    
                    
                    Total
                        ($)Paul F.
      DePond
                    
                    2008
                    
                    
                    276,576
                    
                    
                    
                    27,094
                    
                    
                    
                    23,625
                    
                    
                    
                    327,295Chief
      Executive Officer
                    
                    2007
                    
                    
                    242,308
                    
                    
                    
                    0
                    
                    
                    
                    30,159
                    
                    
                    
                    272,467Gerald W.
      Rice
                    
                    2008
                    
                    
                    193,538
                    
                    
                    
                    13,547
                    
                    
                    
                    14,205
                    
                    
                    
                    221,290Chief
      Financial Officer
                    
                    2007
                    
                    
                    183,077
                    
                    
                    
                    0
                    
                    
                    
                    31,627
                    
                    
                    
                    214,704Rhonda
      Chicone
                    
                    2008
                    
                    
                    136,808
                    
                    
                    
                    13,547
                    
                    
                    
                    6,741
                    
                    
                    
                    157,096Vice
      President of Product Development
                    
                    2007
                    
                    
                    120,769
                    
                    
                    
                    0
                    
                    
                    
                    7,924
                    
                    
                    
                    128,693
  
 (1)
              Represents
      payments of health insurance premiums and dental benefits on behalf of the
      Named Executive Officers.
  Outstanding
Equity Awards at Fiscal Year End
  The
following table sets forth certain information for the Named Executive Officers
with respect to securities underlying unexercised options at September 30,
2008.
  Option AwardsName
                                                                            
                                                                            Number of
                                                                              Securities
                                                                              Underlying
                                                                              Unexcercised
                                                                              Options(#)
                                                                              Exercisable
                                                                            
                                                                            
                                                                            Number of
                                                                              Securities
                                                                              Underlying
                                                                              Unexercised
                                                                              Options(#)
                                                                              Unexercisable
                                                                            
                                                                            
                                                                            Option
                                                                              Exercise
                                                                              Price($)
                                                                            
                                                                            Option
                                                                              Expiration
                                                                              DatePaul F.
      DePond
                                                                            
                                                                            
                                                                            50,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            8.813
                                                                            
                                                                            2/23/201050,000
                                                                            (2)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            2.750
                                                                            
                                                                            11/29/2010100,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            1.600
                                                                            
                                                                            6/28/2011500,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            1.600
                                                                            
                                                                            6/28/2011150,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.320
                                                                            
                                                                            10/10/2011400,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.250
                                                                            
                                                                            8/5/2013250,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.260
                                                                            
                                                                            11/8/2014Gerald
      W. Rice
                                                                            
                                                                            
                                                                            50,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            8.813
                                                                            
                                                                            2/23/201010,000
                                                                            (2)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            2.750
                                                                            
                                                                            11/29/201050,000
                                                                            (3)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            1.600
                                                                            
                                                                            6/28/2011100,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            1.600
                                                                            
                                                                            6/28/201150,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.320
                                                                            
                                                                            10/10/2011125,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.250
                                                                            
                                                                            8/5/201375,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.260
                                                                            
                                                                            11/8/2014Rhonda
      Chicone
                                                                            
                                                                            
                                                                            5,000
                                                                            (4)
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            3.781
                                                                            
                                                                            2/24/20095,000
                                                                            (4)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            6.375
                                                                            
                                                                            11/9/200920,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            8.813
                                                                            
                                                                            2/23/201010,000
                                                                            (4)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            3.875
                                                                            
                                                                            7/17/2010150,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            1.600
                                                                            
                                                                            6/28/201150,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.320
                                                                            
                                                                            10/10/2011150,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.250
                                                                            
                                                                            8/5/201375,000
                                                                            (1)
                                                                            
                                                                            
                                                                            —
                                                                            
                                                                            
                                                                            $
                                                                            0.260
                                                                            
                                                                            11/8/2014
  19
 (1)
              Options
      vested in equal monthly installments over a 36-month
  period
  (2)
              Options
      vested in equal monthly installments over a 25-month
  period
  (3)
              Options
      vested upon date of grant
  (4)
              Options
      vested in equal monthly installments over a 48 month
  period
  Director
Compensation
  Our
directors do not currently receive any cash compensation for service on the
board of directors or any committee thereof.  During fiscal 2008, no
option grants were made to our directors.
  Employment
Agreements and Change-in-Control Arrangements
  Paul F. DePond.  In
October 2007, we entered into an Amended and Restated Employment Agreement with
Mr. DePond.  The agreement provides for an annual base salary of
$255,000.  Under the Agreement, Mr. DePond is also eligible to
receive annual bonuses based upon targets approved by our Board of
Directors.
  The
Agreement further provides that in the event that Mr. DePond’s employment
with the Company is terminated without “Cause” (as defined in the Agreement)
within 24 months following a “Change of Control” (also as defined in the
Agreement) or at any time apart from a Change of Control, Mr. DePond is
entitled to receive the following:
  ·
              severance
      compensation equal to a continuation of his salary for a period of 18
      months;
  ·
              the
      maximum amount of his bonus for the fiscal year in which such involuntary
      termination occurs that could have been received had he satisfied all
      conditions necessary to earn such maximum amount of the bonus during the
      remainder of such fiscal year;
  ·
              100%
      Company-paid dental and life insurance coverage and reimbursement for all
      premium payments paid under COBRA for continuing health insurance coverage
      as provided to Mr. DePond and his dependents immediately prior to
      such termination until the earlier of (i) 18 months following such
      termination, or (ii) the date Mr. DePond becomes covered under
      another employer’s dental, life or health insurance plan.  In
      lieu of such reimbursements, Mr. DePond may, at his sole election,
      receive a one-time cash payment equal to the total amount of such premium
      payments Mr. DePond would be required to make for 18 months following
      such termination; and
  ·
              outplacement
      services for a period of up to 6 months following such termination with a
      maximum obligation to the Company of $9,000 for such
    services.
  Mr. DePond
is not entitled to severance compensation in the event of a termination for
Cause or upon his 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 the event of a
termination due to Mr. DePond’s death, his estate is entitled to receive a
one-time cash payment equal to his  annual base salary less the amount
he is entitled to receive under the Company-paid life insurance
policy.
  Gerald W.
Rice   In October 2007, we entered into an Amended and
Restated Employment Agreement with Mr. Rice that provides for an annual
base salary of $185,000.  Under the Agreement, Mr. Rice is also
eligible to receive annual bonuses based upon targets approved by our Board of
Directors.
  The
Agreement further provides that in the event that Mr. Rice’s employment
with the Company is terminated without “Cause” (as defined in the Agreement)
within 24 months following a “Change of Control” (also as defined in the
Agreement) or at any time apart from a Change of Control, Mr. Rice will be
entitled to receive the following:
  20
  ·
              severance
      compensation equal to a continuation of his salary for a period of 12
      months;
  ·
              the
      maximum amount of his bonus for the fiscal year in which such involuntary
      termination occurs that could have been received had he satisfied all
      conditions necessary to earn such maximum amount of the bonus during the
      remainder of such fiscal year;
  ·
              100%
      Company-paid dental and life insurance coverage and reimbursement for all
      premium payments paid under COBRA for continuing health insurance coverage
      as provided to Mr. Rice and his dependents immediately prior to such
      termination until the earlier of (i) 12 months following such
      termination, or (ii) the date Mr. Rice becomes covered under
      another employer’s dental, life or health insurance plan.  In
      lieu of such reimbursements, Mr. Rice may, at his sole election,
      receive a one-time cash payment equal to the total amount of such premium
      payments Mr. Rice would be required to make for 12 months following
      such termination; and
  ·
              outplacement
      services for a period of up to 6 months following such termination with a
      maximum obligation to the Company of $9,000 for such
    services.
  Mr. Rice
is not entitled to severance compensation in the event of a termination for
Cause or upon his voluntary resignation.  In the event of a
termination due to disability, Mr. Rice 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 the event of a
termination due to Mr. Rice’s death, his estate is entitled to receive a
one-time cash payment equal to his annual base salary less the amount he is
entitled to receive under the Company-paid life insurance policy.
  Rhonda Chicone.  In
October 2007 we entered into an Amended and Restated Employment Agreement with
Ms. Chicone that provides for an annual base salary of
$135,000.  Under the Agreement, Ms. Chicone is also eligible to
receive annual bonuses based on targets approved by our Board of
Directors.
  The
Agreement further provides that: In the event that Ms. Chicone’s employment
with the Company is terminated without Cause (as defined in the Agreement)
within 24 months following a “Change of Control” (also as defined in the
Agreement) or at any time apart from a Change of Control, Ms. Chicone will
be entitled to receive the following:
  ·
              severance
      compensation equal to a continuation of her salary for a period of 12
      months;
  ·
              the
      maximum amount of her bonus for the fiscal year in which such involuntary
      termination occurs that could have been received had she satisfied all
      conditions necessary to earn such maximum amount of the bonus during the
      remainder of such fiscal year;
  ·
              100%
      Company-paid dental and life insurance coverage and reimbursement for all
      premium payments paid under COBRA for continuing health insurance coverage
      as provided to Ms. Chicone and her dependents immediately prior to
      such termination until the earlier of (i)  12 months following such
      termination, or (ii) the date Ms. Chicone becomes covered under
      another employer’s dental, life or health insurance plan.  In
      lieu of such reimbursements, Ms. Chicone may, at her sole election,
      receive a one-time cash payment equal to the total amount of such premium
      payments Ms. Chicone would be required to make for 12 months
      following such termination; and
  ·
              outplacement
      services for a period of up to 6 months following such termination with a
      maximum obligation to the Company of $9,000 for such
    services.
  Ms. Chicone
is not entitled to severance compensation in the event of a termination for
Cause or upon her voluntary resignation.  In the event of a
termination due to death or disability, Ms. Chicone 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.
  21
  The
foregoing Agreements define a “Change of Control” as (i) the acquisition of
more than 30% of our total voting power 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) a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, (B) a sale of all or
substantially all of our assets, or (C) a liquidation; provided, however, that a
public offering of our common stock does not constitute a Change of
Control.  The Agreements define “Cause” as (i) an act of personal
dishonesty in connection with such person’s responsibilities as an employee and
which is intended to result in the substantial personal enrichment of such
person; (ii) a conviction of a felony that the Board of Directors reasonably
believes had or will have a material detrimental effect on our reputation or
business; and (iii) willful act by the person which constitutes
gross  misconduct and is injurious to us.  The Agreements
define “disability” as the person’s inability to perform duties under the
Agreement due to mental or physical illness and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician.
  ITEM
11.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
  The
following table sets forth certain information regarding beneficial ownership of
our common stock as of December 12, 2008, by (i) each person or entity who
is known by us to own beneficially more than 5% of the outstanding shares of our
common stock, (ii) each of our directors, (iii) each of the Named
Executive Officers, and (iv) all directors and executive officers as a
group.
  The table
is based on information provided to us or filed with the Securities and Exchange
Commission (“SEC”) by our directors, executive officers and principal
shareholders.  Beneficial ownership is determined in accordance with
the rules of the SEC, and includes voting and investment power with respect to
shares.  Shares of common stock as indicated in the table, issuable
upon exercise of options that are currently exercisable or are exercisable
within 60 days after December 12, 2008, are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the percentage of any
other shareholder.  Unless otherwise indicated, the address for each
shareholder listed in the following table is c/o Notify Technology Corporation,
1054 S. De Anza Blvd., Suite 105, San Jose, California
95129.
  22
 
 Shares of Common Stock
                        Beneficially OwnedName and Address of Beneficial
                        Owner
                    
                    Number
                    
                    
                    Percentage (1)21X
      Investments LLC (2)
                      c/o
      21X Investments LLC
                      1080
      Telegraph St B11
                      Reno
      NV 89502
                    
                    
                    6,650,000
                    
                    
                    
                    47.2Bruce
      Galloway (3)
                      c/o
      Galloway Capital Management, LLC
                      c/o
      720 Fifth Avenue, 10th
      Floor
                      New
      York, NY 10019
                    
                    
                    1,212,012
                    
                    
                    
                    8.6Galloway
      Capital Management, LLC (4)
                      720
      Fifth Avenue, 10th
      Floor
                      New
      York, NY  10019
                    
                    
                    882,071
                    
                    
                    
                    6.3Gary
      Herman (5)
                      c/o
      Galloway Capital Management, LLC
                      720
      Fifth Avenue, 10th
      Floor
                      New
      York, NY  10019
                    
                    
                    882,071
                    
                    
                    
                    6.3Strategic
      Turnaround Equity Partners LP (6)
                      c/o  Stuarts
      Corporate Services, Ltd.
                      P.O.
      Box 2510 GT, 4th
      Floor
                      One
      Cayman Financial Center
                      36A
      Dr. Roy’s Drive,
                      Georgetown,
      Grand Cayman
                      Cayman
      Islands
                    
                    
                    757,571
                    
                    
                    
                    5.4David A.
      Brewer (7)
                    
                    
                    7,811,600
                    
                    
                    
                    55.7Mark
      Frappier
                    
                    
                    —
                    
                    
                    
                    —Paul F.
      DePond (8)
                    
                    
                    1,647,615
                    
                    
                    
                    10.6Gerald W.
      Rice (9)
                    
                    
                    485,203
                    
                    
                    
                    3.3Rhonda
      Chicone (10)
                    
                    
                    476,000
                    
                    
                    
                    3.3All
      directors and executive officers as a group
    (5 persons)
                    
                    
                    10,500,418
                    
                    
                    
                    63.3
 
 
 (1)
              Applicable
      percentage of ownership is based on 14,075,662 shares of our common stock
      outstanding as of December 12, 2008, together with applicable options and
      warrants for such shareholder.
 (2)
              David
      Brewer, one of our directors, is the sole member and manager of 21X
      Investments LLC.  Information with respect to the number of
      shares beneficially owned is based solely on the Schedule 13G filed
      with the SEC by 21X Investments LLC on June 8, 2007.
 (3)
              Includes
      (i) 238,941 shares of common stock held by Mr. Galloway’s Individual
      Retirement Account; (ii) 21,000 shares of common stock held by Mr.
      Galloway’s son, for which Mr. Galloway has sole voting and investment
      authority; (iii) 70,000 shares of common stock held by Rexon Galloway
      Capital Growth, LLC, for which Mr. Galloway has sole voting and investment
      authority; (iv) 124,500 shares of common stock held by Finvest Yankee, LP
      (“Finvest”), for which Mr. Galloway shares voting and investment
      authority; and (v) 757,571 shares of common stock held by Strategic
      Turnaround Equity Partners, LP (“STEP”); .  Mr. Galloway is a
      managing member of Galloway Capital Management, LLC (“GCM”), the general
      partner of STEP.  As a result, he may be deemed to indirectly
      beneficially own the shares held by STEP.  Mr. Galloway
      disclaims beneficial ownership of the shares held by STEP, except to the
      extent of his indirect interests by virtue of being a managing member of
      GCM and  by virtue of his being a limited partner in
      STEP.  Information with respect to the number of shares
      beneficially owned in Notes 3 - 6 is based solely on the
      Schedule 13G/A filed with the SEC by Mr. Galloway, GCM, STEP and Mr.
      Herman on February 11, 2008.
 (4)
              Includes
      (i) 757,571 shares of common stock held by STEP and (ii) 124,500 shares of
      common stock held by Finvest, for which GCM shares voting and investment
      authority.
  23
  (5)
              Includes
      (i) 124,500 shares of common stock held by Finvest, for which Mr. Herman
      shares voting and investment authority; and (ii) 757,571 shares of common
      stock held by STEP.  Mr. Herman is a managing member of GCM, the
      general partner of STEP.  As a result, he may be deemed to
      indirectly beneficially own the shares held by STEP.  Mr. Herman
      disclaims beneficial ownership of the shares held by STEP, except to the
      extent of his indirect interests by virtue of being a managing member of
      GCM and by virtue of his being a limited partner in
  STEP.
 (6)
              STEP
      shares voting and investment authority over these shares with
      GCM.
 
 (7)
              Includes
      80,000 shares of common stock issuable to Mr. Brewer upon exercise of
      options exercisable within 60 days of December 12,
  2008.
 (8)
              Includes
      1,500,000 shares of common stock issuable to Mr. Paul DePond upon exercise
      of options exercisable within 60 days of December 12,
  2008.
 (9)
              Includes
      460,000 shares of common stock issuable to Mr. Rice upon exercise of
      options exercisable within 60 days of December 12,
  2008.
 (10)
              Includes
      465,000 shares of common stock issuable to Ms. Chicone upon exercise of
      options exercisable within 60 days of December 12,
  2008.
  Equity
Compensation Plan Information
  The
Notify Corporation 1997 Stock Plan (the “Stock Plan”) was established in January
1997.  The Stock Plan had a term of ten years and expired in January
2007.  Under the Stock Plan a total of 3,650,000 shares of our common
stock had been reserved for issuance.  At the expiration of the Stock
Plan options to purchase 175,338 shares of our common stock had been
exercised.  Options to purchase up to 2,773,000 shares of our common
stock were still outstanding on December 15, 2008.  The remaining
546,662 shares authorized under the Stock Plan expired with the termination of
the Stock Plan.  On October 15, 2007, 106,667, options were executed
and 3,333 expired, on December 2, 2007 40,000 options expired due to
non-exercise and 5,000 options expired on their 10 year anniversary on June 11,
2008.  The following table sets forth information with respect to our
Stock Plan as of September 30, 2008.
 
 (a)
                  
                  
                  (b)
                  
                  
                  (c)Number of Securities
                      to be Issued upon
                      Exercise of
                      Outstanding
                      Warrants, Warrants
                      and Rights
                  
                  
                  Weighted-Average
                      Exercise Price of
                      Outstanding Options,
                      Warrants and Rights
                  
                  
                  Number of Securities
                      Remaining Available
                      or Future Issuance
                      under Equity
                      Compensation Plans
                      (Excluding Securities
                      Reflected in
                      Column (a))Equity
      compensation plans approved by security holders
                  
                  
                  2,773,000
                  
                  
                  $
                  1.248
                  
                  
                  
                  N/AEquity
      compensation plans not approved by security holders
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  N/ATotal
                  
                  
                  2,773,000
                  
                  
                  $
                  1.248
                  
                  
                  
                  N/A
  ITEM
12.  Certain Relationships and Related Transactions, and Director
Independence
  Related
Party Transactions
  In
October 2007, we entered into Amended and Restated Employment Agreements with
each of Messrs. DePond and Rice and Ms. Chicone.  See the discussion
of these Agreements located above in the section titled “Executive Compensation
- Employment Agreements and Change-in-Control Arrangements”.
  Other
than those Agreements, during the last two years, we have not been a party to
any related party transactions described in Item 404 of Regulation S-B
promulgated by the Securities and Exchange Commission.
  Director
Independence
 
 Mr.
Frappier is the only current member of our Board of Directors that is
“independent” as defined under the National Association of Securities Dealers’
listing standards.
  24
  ITEM
13. Exhibits.
  (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 (3.1.2) to the Registrant's Quarterly
      Report on Form 10-QSB for the quarterly period ended June 30, 2001, filed
      on August 14, 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)3.2.1
                Certificate
      of Amendment to the Bylaws (incorporated herein by reference to Exhibit
      (3.2.1) to the Registrant’s Quarterly Report on Form 10-QSB, filed on May
      15, 2007)3.2.2
                Amended
      and Restated Bylaws of Registrant. (as amended on June 21, 2007)
      (incorporated herein by reference to Exhibit (3.2.2) to the Registrant’s
      Current Report on Form 8-K, filed on June 22, 2007)10.5(1)
                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)10.6(1)
                Registrant's
      1997 Stock Plan, as amended effective March 26, 2003, and form of stock
      option agreement. (incorporated by reference to Exhibit (4.1) to the
      Registrant’s Registration Statement on Form S-8 Reg. No 333-108868, filed
      on September 17, 2003)10.12.1
                Voice
      Mail Services Agreement, dated as of February 8, 2002, by and between the
      Registrant and AT&T Corp. (incorporated herein 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)10.12.2
                First
      Amendment to the Voice Mail  Services Agreement, dated as of
      February 8, 2003, by and between the Registrant and AT&T Corp.
      (incorporated herein by reference to Exhibit (10.1) to the Registrant’s
      Quarterly Report on Form 10-QSB for the quarterly period ended March 31,
      2003, filed on May 14, 2003)10.16(1)
                Amended
      and Restated Employment Agreement dated as of October 31, 2007 between
      Registrant and Paul DePond. (incorporated herein by reference to Exhibit
      (10.16) to the Registrant’s Currant Report 8-K, filed on December 21,
      2007)10.17(1)
                Amended
      and Restated Employment Agreement dated as of October 31, 2007 between
      Registrant and Gerald Rice. (incorporated herein by reference to Exhibit
      (10.17) to the Registrant’s Currant Report 8-K, filed on December 21,
      2007)10.18(1)
                Amended
      and Restated Employment Agreement dated as of October 31, 2007 between
      Registrant and Rhonda Chicone. (incorporated herein by reference to
      Exhibit (10.18) to the Registrant’s Currant Report 8-K, filed on December
      21, 2007)10.24
                Nonexclusive
      Technology License Agreement, dated as of November 24, 2003, by and
      between Registrant and NCR Corporation. (incorporated herein by reference
      to Exhibit (10.24) to the Registrant's Annual Report on Form 10-KSB for
      the fiscal year ended September 30, 2004, filed on December 22,
      2004)
  25
  10.25
                      Patent
      Purchase Agreement dated March 22, 2006, by and between Notify Technology
      Corporation and Sunshine Data Ventures LLC. (incorporated herein by
      reference to Exhibit (10.25) to the Registrant’s Currant Report 8-K, filed
      on March 24, 2006)10.30
                      Lease,
      dated as of February 27, 2006 by and among Registrant, and Ching C. Poon
      and Jenny M. Poon. (incorporated herein by reference to Exhibit (10.30) to
      the Registrant’s Annual Report on Form 10-KSB, filed on December 22,
      2006)10.32
                      Lease
      addendum dated February 22, 2007 between Notify Technology Corporation and
      Pecten Court Mountain View Associates, LLC. (incorporated herein by
      reference to Exhibit (10.32) to the Registrant’s Current Report on Form
      8-K, filed on February 22, 2007)10.33
                      Lease,
      dated as of October 16, 2008 by and between Registrant and Colbur Tech,
      LLC.14.1
                      Code
      of Ethics for Principal Executive and Senior Financial Officers
      (incorporated herein by reference to Exhibit (14.1) to the Registrant's
      Annual Report on Form 10-KSB for the fiscal year ended September 30, 2003,
      filed on December 29, 2003)24.1
                      Power
      of Attorney (see page 32).31.1
                      Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                      Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
                      Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002
  (1)           Management
compensation plan/contract
  26
  ITEM
14.    Principal Accountant Fees and Services
  Summary
of Fees
  The
following table summarizes the approximate aggregate fees billed to us or
expected to be billed to us by our independent auditors for our 2006 and 2005
fiscal years:
 
 Type of
                      Fees
                  
                  Fiscal Year 2008
                  
                  
                  Fiscal Year 2007Audit
      Fees
                  
                  $
                  45,675
                  (1)
                  
                  $
                  56,688
                  (1)Audit-Related
      Fees
                  
                  
                  —
                  
                  
                  
                  —Tax
      Fees
                  
                  
                  8,000
                  (2)
                  
                  
                  7,500
                  (2)All
      Other Fees
                  
                  
                  —
                  
                  
                  
                  —Total
      Fees
                  
                  $
                  53,675
                  
                  
                  $
                  64,188
 
 (1)
              Includes
      audit fees billed to us by L.L. Bradford & Company,
    LLC.
 (2)
              Includes
      fees for fiscal 2007 income tax preparation billed to us by L.L. Bradford
      & Company, LLC.
 
  Pre-Approval
of Independent Auditor Services and Fees
  Our Audit
Committee reviewed and pre-approved all audit and non-audit fees for services
provided by L.L. Bradford & Company, LLC and has determined that the
provision of such services to us during fiscal 2008 is compatible with and did
not impair L.L. Bradford & Company LLC’s independence.  L.L.
Bradford & Company, LLC was engaged to perform the 2007 fiscal year-end
audit and fiscal 2008 audit services.   It is the practice of the
audit committee to consider and approve in advance all auditing and non-auditing
services provided to us by our independent auditors in accordance with the
applicable requirements of the Securities and Exchange Commission.
  27
  SIGNATURES
  In
accordance with 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, thereunto duly authorized.
  NOTIFY
      TECHNOLOGY CORPORATIONDated:
      December 18, 2008
                          By:
                          /s/
      Paul F. DePondPaul
      F. DePondPresident
      and Chief Executive
Officer
  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 Annual 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 on the behalf of the registrant in
the capacities indicated below and on the dates stated.
  Signature
                                
                                Title
                                
                                Date/s/
      Paul F. DePond
                                
                                President,
      Chief Executive Officer and
                                
                                December
      18, 2008Paul
      F. DePond
                                
                                Chairman
      (Principal Executive Officer)/s/
      Gerald W. Rice
                                
                                Chief
      Financial Officer (Principal Financial
                                
                                December
      18, 2008Gerald
      W. Rice
                                
                                and
      Accounting Officer)/s/
      David A. Brewer
                                
                                Director
                                
                                December
      18, 2008David
      A. Brewer/s/
      MARK FRAPPIER
                                
                                Director
                                
                                December
      18, 2008Mark
      Frappier
  28
 
 Notify
Technology Corporation
  Financial
Statements
  Years
ended September 30, 2008 and 2007
  Contents
  Report
      of Independent Registered Public Accounting Firm
                      F-2Audited
      Financial Statements:Balance
      Sheet
                      F-3Statements
      of Operations
                      F-4Statements
      of Shareholders’ Equity (Deficit)
                      F-5Statements
      of Cash Flows
                      F-6Notes
      to Financial Statements
                      F-7
  F-1
  Report of
Independent Registered Public Accounting Firm
 The Board
of Directors and Shareholders
 Notify
Technology Corporation
  We have
audited the accompanying balance sheet of Notify Technology Corporation as of
September 30, 2008, and the related statements of operations, shareholders’
deficit, and cash flows for the years ended September 30, 2008 and 2007. 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 audit.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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, 2008, and the results of its operations and its cash flows for the
years ended September 30, 2008 and 2007, in conformity with accounting
principles generally accepted in the United States of America.
  /s/ L.L.
BRADFORD & COMPANY, LLC
  Las
Vegas, Nevada
 December
8, 2008
  F-2
 
 Notify
Technology Corporation
  Balance
Sheet
  September
30, 2008
  AssetsCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  1,010,607Accounts
      receivable, net of allowance for doubtful accounts of
    $30,300
                  
                  
                  509,735Other
      current assets
                  
                  
                  39,452Total
      current assets
                  
                  
                  1,559,794Property
      and equipment, net
                  
                  
                  173,224Total
      assets
                  
                  $
                  1,733,018Liabilities
      and Shareholders’ DeficitCurrent
      liabilities:Current
      portion of capital lease obligations
                  
                  $
                  4,445Accounts
      payable
                  
                  
                  40,045Accrued
      payroll and related liabilities
                  
                  
                  349,292Deferred
      revenue
                  
                  
                  2,418,235Other
      accrued liabilities
                  
                  
                  171,108Total
      current liabilities
                  
                  
                  2,983,125Long
      term portion of capital lease obligations
                  
                  
                  10,685Total
      liabilities
                  
                  
                  2,993,810Commitments
      and contingencies (Note 8)Shareholders’
      deficit:Preferred
      stock, $0.001 par value, 5,000,000 shares authorized
                  
                  
                  —Common
      stock, $0.001 par value, 30,000,000 shares authorized, 14,075,662 shares
      issued and outstanding at September 30, 2008
                  
                  
                  14,076Additional
      paid-in capital
                  
                  
                  23,387,395Accumulated
      deficit
                  
                  
                  (24,662,263
                  )Total
      shareholders’ deficit
                  
                  
                  (1,260,792
                  )Total
      liabilities and shareholders’ deficit
                  
                  $
                  1,733,018
 The
accompanying notes are an integral part of these financial
statements.
  F-3
  Notify
Technology Corporation
  Statements
of Operations
 
 Years Ended September 30,2008
                              
                              
                              2007Revenues:Product
      revenue
                              
                              $
                              4,640,723
                              
                              
                              $
                              3,709,404Service
      revenue
                              
                              
                              —
                              
                              
                              
                              237,991Total
      revenue
                              
                              
                              4,640,723
                              
                              
                              
                              3,947,395Cost
      of revenues:Product
      cost
                              
                              
                              14,160
                              
                              
                              
                              17,385Royalty
      cost
                              
                              
                              139,595
                              
                              
                              
                              103,439Total
      cost of revenues
                              
                              
                              153,755
                              
                              
                              
                              120,824Gross
      profit
                              
                              
                              4,486,968
                              
                              
                              
                              3,826,571,Operating
      costs and expenses:Research
      and development
                              
                              
                              1,620,526
                              
                              
                              
                              1,308,428Sales
      and marketing
                              
                              
                              1,881,552
                              
                              
                              
                              1,612,915General
      and administrative
                              
                              
                              1,281,302
                              
                              
                              
                              1,287,246Total
      operating costs and expenses
                              
                              
                              4,783,380
                              
                              
                              
                              4,208,589Loss
      from operations
                              
                              
                              (296,412
                              )
                              
                              
                              (382,018
                              )Other
      (income) expensesOther
      (income) expense, net
                              
                              
                              (13,542
                              )
                              
                              
                              130Option
      vesting expense
                              
                              
                              4,810
                              
                              
                              
                              43,856Total
      other (income) expense, net
                              
                              
                              (8,732
                              )
                              
                              
                              43,986Net
      loss
                              
                              $
                              (287,680
                              )
                              
                              $
                              (426,004
                              )Basic
      and diluted net loss per share
                              
                              $
                              (0.02
                              )
                              
                              $
                              (0.03
                              )Weighted-average
      shares used in computingnet
      loss per share
                              
                              
                              14,070,692
                              
                              
                              
                              13,968,995
 
 The
accompanying notes are an integral part of these financial
statements.
  F-4
  Notify
Technology Corporation
  Statements
of Shareholders’ Deficit
 
 Convertible Redeemable
                        
                        
                        
                        
                        
                        
                        
                        
                        Additional
                        
                        
                        
                        
                        
                        TotalPreferred Stock
                        
                        
                        Common Stock
                        
                        
                        Paid-In
                        
                        
                        Accumulated
                        
                        
                        Shareholders’Shares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        DeficitBalance
      at September 30, 2006
                        
                        
                        —
                        
                        
                        $
                        —
                        
                        
                        
                        13,968,995
                        
                        
                        $
                        13,969
                        
                        
                        $
                        23,310,903
                        
                        
                        $
                        (23,948,579
                        )
                        
                        $
                        (623,707
                        )Reclassification
      of warrant value
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        43,856
                        
                        
                        
                        
                        
                        
                        
                        43,856Net
      loss and comprehensive net loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (426,004
                        )
                        
                        
                        (426,004
                        )Balance
      at September 30, 2007
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        13,968,995
                        
                        
                        
                        13,969
                        
                        
                        
                        23,354,759
                        
                        
                        $
                        (24,374,583
                        )
                        
                        
                        (1,005,855
                        )Option
      vesting expense
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4,810
                        
                        
                        
                        
                        
                        
                        
                        4,810Proceeds
      from exercise of options
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        106,667
                        
                        
                        
                        107
                        
                        
                        
                        27,827
                        
                        
                        
                        
                        
                        
                        
                        27,934Net
      loss and comprehensive net loss
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (287,680
                        )
                        
                        
                        (287,680
                        )Balance
      at September 30, 2008
                        
                        
                        —
                        
                        
                        $
                        —
                        
                        
                        
                        14,075,662
                        
                        
                        $
                        14,076
                        
                        
                        $
                        23,387,396
                        
                        
                        $
                        (24,662,263
                        )
                        
                        $
                        (1,260,792
                        )
  The
accompanying notes are an integral part of these financial
statements.
  F-5
  Notify
Technology Corporation
  Statements
of Cash Flows
  Years Ended September 30,2008
                  
                  
                  2007Operating
      activitiesNet
      loss
                  
                  $
                  (287,680
                  )
                  
                  $
                  (426,004
                  )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                  
                  
                  59,953
                  
                  
                  
                  54,148(Gain)
      loss from sale of fixed assets
                  
                  
                  —
                  
                  
                  
                  1,848Option
      vesting expense
                  
                  
                  4,810
                  
                  
                  
                  43,856Changes
      in operating assets and liabilities:Accounts
      receivable, net
                  
                  
                  78,560
                  
                  
                  
                  (156,786
                  )Other
      current assets
                  
                  
                  12,240
                  
                  
                  
                  1,442Accounts
      payable
                  
                  
                  8,130
                  
                  
                  
                  (5,807
                  )Accrued
      liabilities
                  
                  
                  116,995
                  
                  
                  
                  49,773Deferred
      revenue
                  
                  
                  291,717
                  
                  
                  
                  502,912Net
      cash provided by (used in) operating activities
                  
                  
                  284,725
                  
                  
                  
                  70,382Investing
      activitiesExpenditures
      for property and equipment
                  
                  
                  (134,195
                  )
                  
                  
                  (44,794
                  )Proceeds
      from sale of fixed assets
                  
                  
                  —
                  
                  
                  
                  3,000Net
      cash used in investing activities
                  
                  
                  (134,195
                  )
                  
                  
                  (41,794
                  )Financing
      activitiesProceeds
      from exercise of options
                  
                  
                  27,934
                  
                  
                  
                  —Payments
      on capital leases
                  
                  
                  (7,632
                  )
                  
                  
                  (18,219
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  20,302
                  
                  
                  
                  (18,219
                  )Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  170,832
                  
                  
                  
                  10,369Cash
      and cash equivalents at beginning of year
                  
                  
                  839,775
                  
                  
                  
                  829,406Cash
      and cash equivalents at end of year
                  
                  $
                  1,010,607
                  
                  
                  $
                  839,775Supplemental
      disclosure of non-cash transactions:Equipment
      purchased under capital lease
                  
                  $
                  —
                  
                  
                  $
                  15,000Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                  
                  $
                  1,923
                  
                  
                  $
                  1,381Cash
      paid for income taxes
                  
                  $
                  300
                  
                  
                  $
                  1,080
  The
accompanying notes are an integral part of these financial
statements.
  F-6




Notify
Technology Corporation




Notes to
Financial Statements




September 30,
2008




1.
Business and Basis of Presentation




Notify
Technology Corporation (the Company or Notify), incorporated in California in
1994, is a software developer of enterprise mobility solutions for most wireless
handheld devices including the RIM BlackBerry, Apple iPhone, Palm based products
and Windows Mobile based products on a variety of email platforms including
various IMAP4 solutions as well as Novell GroupWise and Microsoft
Exchange.




The
Company has incurred net losses since inception and may incur net losses and
negative cash flow from operations for at least the next one or two
years.  The Company incurred losses of $287,680 and $426,004 for the
years ended September 30, 2008 and 2007, respectively.  The Company
has an accumulated deficit of $24.7 million as of September 30,
2008.  During fiscal 2008, the Company financed its operations through
the sale of its products and existing cash balances.




The
Company chose to replace its historical wireline products starting in fiscal
2001 and although it still received some revenue from its legacy wireline
business in fiscal 2007, it currently focuses all its efforts on its wireless
software products by researching and developing new products, enhancing its
existing NotifyLink product family and marketing and selling the NotifyLink
product line.  In fiscal 2008, the Company paid all of its operating
expenses based on sales of its NotifyLink product line. The success of the
Company’s business operations will depend upon the continued favorable market
acceptance of its wireless software products.




If
additional funds are raised through the issuance of equity or debt securities,
these securities could have rights that are senior to existing shareholders and
could contain covenants that would restrict operations.  Any
additional financing may not be available in amounts or on terms acceptable to
the Company, if at all.




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 of America 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.


F-7


Notify
Technology Corporation




Notes to
Financial Statements




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.  Cash and cash equivalents are deposited in demand and
money market accounts in financial institutions in the United
States.




Accounts
Receivable/ Allowance for Doubtful Accounts




Accounts
receivable are stated at net realizable value.  Uncollectible
receivables are recorded as bad debt expense when all efforts to collect them
have been exhausted and recoveries are recognized when they are
received.  Historically, the bad debts have been insignificant and the
allowance for bad debt approximates the average bad debt expense.




Inventories




The
Company’s current business does not require inventory and it no longer has any
remaining inventory of its legacy products.  If inventories were
present, they would be stated at the lower of cost or market on a first-in,
first-out basis.  At September 30, 2008, the value of inventory was
zero.




Property
and Equipment




Property
and equipment are stated at cost, net of accumulated depreciation and
amortization.  Depreciation is computed using 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 and assets under capital leases are
amortized by the straight-line method over the shorter of the lease term or the
estimated useful lives of such assets.  Upon retirement or sale, the
cost and related accumulated depreciation are removed from the accounts and any
related gain or loss is reflected in the statement of operations.Repairs and
maintenance are expensed as incurred.




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 its net
recoverable amount, which is determined based on either discounted future net
cash flows or appraised values, in the period when it is determined that the
carrying amount of the asset is not likely to be recoverable.


F-8


Notify
Technology Corporation




Notes to
Financial Statements




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
is provided.




Advertising
Costs




Advertising
costs are expensed as incurred.  The Company does not make use of
advertising in its Sales & Marketing programs and promotes the Company
products through trade show participation.  Advertising costs were
zero for the year ended September 30, 2008 and 2007.




Revenue
Recognition




The
Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position (“SOP”) 97-2, “Software
Revenue Recognition,” and SEC Staff Accounting Bulletin No. 104, “Revenue
Recognition” (“SAB 104”).




Under SOP
97-2, the Company recognizes software license agreements when persuasive
evidence of an agreement exists, delivery of the product has occurred, the
license fee is fixed or determinable and collection is probable.  The
Company’s license agreements generally have a fixed term and the license revenue
is recognized ratably over the term of each license.




Under SAB
104, the Company recognizes revenue when the title and risk of loss have passed
to the customer, there is persuasive evidence of an arrangement, delivery of the
product has occurred or services have been rendered, the sales price is fixed or
determinable and collection is probable. The Company recognizes revenues at time
of shipment of its products and sales are recorded net of discounts and
returns.




Service
income is recognized on a straight-line basis over the period of the service
agreement.


F-9


Notify
Technology Corporation




Notes to
Financial Statements




Deferred
revenue relates to products where a sales contract has been executed and payment
has been received but the obligation to provide services is being recognized
over the contractual term of the license.




Research
and Development




Based on
the Company’s software development process, the time period between the
development of new software features and the release of the product is short and
capitalization of internal development costs has not been material to
date.




Concentration
of Credit Risk




Financial
instruments that potentially expose the Company to concentrations of credit risk
consist principally of cash and cash equivalents and trade accounts receivable.
Cash and cash equivalents held with financial institutions that exceed the
amount of insurance provided on such deposits. The Company has not experienced
any losses on its deposits of cash and cash equivalents.




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, 2008, no customers represented more than 10% of accounts
receivable and most considerably less.  Revenue from one customer
accounted for 6% of total revenues for fiscal year ended September 30,
2007.




Fair
Value of Financial Instruments




Carrying
amounts of certain of the Company’s financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value due to their relatively short maturities. Based upon
borrowing rates currently available to the Company for capital leases with
similar terms, the carrying value of its capital lease obligations approximate
fair value.




Stock-Based
Compensation




Statement
of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for
Stock-Based Compensation—Transition and Disclosure, an Amendment of FASB
Statement No.123," amends the disclosure requirements of Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," to require more prominent disclosures in both annual and interim
financial statements regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results.


F-10


Notify
Technology Corporation




Notes to
Financial Statements




The
Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25
(APB 25), "Accounting for Stock Issued to Employees" and related
interpretations. Under APB 25, compensation expense is based on the difference,
if any, on the date of the grant, between the fair value of the Company's stock
and the exercise price.




The
Company recognized stock based employee compensation in fiscal 2008 and recorded
a non-cash expense of $4,810.  No options were issued in fiscal 2008.
The Company’s option plan expired in January 2007 and the Company did not
approve a replacement stock-based plan in fiscal 2008.




The
Company recognized no compensation expense in fiscal 2008 or in fiscal 2007
related to the grant of options to non-employees.




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.




Options
to purchase 2,773,000 were outstanding on September 30, 2008 and 2,928,000
shares of common stock and warrants to purchase 1,871,651 shares of common stock
were outstanding on September 30, 2007, but were not included in the
computation of diluted net loss per share as the effect would be
antidilutive.




Recent
Accounting Pronouncements




In June
2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in
Income Taxes,” which clarifies the accounting for uncertainty in income
taxes recognized in the financial statements in accordance with FASB Statement
No. 109, “ Accounting for
Income Taxes”.  FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return.  FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosures, and transition.  FIN 48 is effective for fiscal years
beginning after December 15, 2006.  The Company is currently
evaluating the impact of this standard on the consolidated financial
statements.





In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value
Measurements”.  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair
value.  SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007.  The Company is currently evaluating the impact of
this standard on the consolidated financial statements.




F-11


Notify
Technology Corporation




Notes to
Financial Statements




In
February 2007, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 159, “The Fair
Value Option for Financial Assets and Financial
Liabilities”,  SFAS No. 159 provides an option to report
selected financial assets and financial liabilities using fair
value.  The standard establishes required presentation and disclosures
to facilitate comparisons with companies that use different measurements for
similar assets and liabilities.  SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007, with early adoption allowed only if
SFAS No. 157 is also adopted.  The Company is currently evaluating the
impact of this standard on the consolidated financial statements.




In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"). SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired.
SFAS 141R also establishes disclosure requirements to enable the evaluation
of the nature and financial effects of the business combination. SFAS 141R
is effective for fiscal years beginning after December 15, 2008. For the
nine-month period ended June 30, 2008, FIN 48 has had no impact on the condensed
financial statements.




In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51" ("SFAS 160"). SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent's ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. For the
nine-month period ended June 30, 2008, FIN 48 has had no impact on the condensed
financial statements.




3.  Sale of Patents




On
February 13, 2006, an agreement was announced to assign certain patents related
to the Company’s legacy products that were no longer in production for a
one-time payment of $250,000.  The assignment was completed in June
2006 and the gain was reported as Other income in the fiscal quarter ended June
30, 2006.   This assignment was a one-time event and the patents
involved were not required for any current or proposed products.




4.
Property and Equipment




Property
and equipment consist of the following:


F-12


Notify
Technology Corporation




Notes to
Financial Statements




September 30,2008Furniture
      and office equipment
                          
                          $
                          452,671Software
                          
                          
                          103,626Leasehold
      improvements
                          
                          
                          2,246558,543Less
      accumulated depreciationand
      amortization
                          
                          
                          (385,319
                          )$
                          173,224




Property
and equipment includes $21,157 of office equipment under capital lease with
accumulated amortization of $6,028 at September 30, 2008.




Depreciation
and amortization expense was $59,953 and $54,148 for the years ended September
30, 2008 and 2007, respectively.




5.
Capital Lease Obligations




During
the year ended September 30, 2006, the Company entered into one capital lease
for office equipment totaling $6,157 with principal and interest (5.8%) due
monthly. During the year ended September 30, 2007, the Company entered into one
capital lease totaling $15,000 with principal and interest (5.0%) due
monthly.




Future
minimum lease payments under the lease are as follows:




For  the
      year ending September 30,2009
                  
                  $
                  5,2562010
                  
                  
                  4,6642011
                  
                  
                  3,4802012
                  
                  
                  3,480Total
      minimum lease payments
                  
                  
                  16,880Less:
      amount representing interest
                  
                  
                  (1,750
                  )Present
      value of net minimum lease payments
                  
                  
                  15,130Less:
      current portion
                  
                  
                  (4,445
                  )Long
      term portion
                  
                  $
                  10,685





6.
Guarantees




Indemnification
Agreements




The
Company enters into standard indemnification arrangements in the ordinary course
of business. Pursuant to these arrangements, the Company indemnifies, holds
harmless, and agrees to reimburse the indemnified parties for losses suffered or
incurred by the indemnified party, generally their business partners or
customers, in connection with any U.S. patent, or any copyright or other
intellectual property infringement claim by any third party with respect to the
Company’s products. The term of these indemnification agreements is generally
perpetual anytime after the execution of the agreement. The maximum potential
amount of future payments the Company could be required to make under these
agreements is unlimited. The Company has never incurred costs to defend lawsuits
or settle claims related to these indemnification agreements. As a result, the
Company believes the estimated fair value of these agreements is
minimal.




F-13


Notify
Technology Corporation




Notes to
Financial Statements




The
Company has entered into indemnification agreements with its directors and
officers that may require the Company: to indemnify its directors and officers
against liabilities that may arise by reason of their status or service as
directors or officers, other than liabilities arising from willful misconduct of
a culpable nature; to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified; and to obtain
directors' and officers' insurance if available on reasonable terms, which the
Company currently has in place.




Product
Warranty




The
Company warrants its products to current paid-up customers and makes available
for download service update releases that contain the most up-to-date version of
the Company’s products.  These software updates are continually
maintained and released when available.  As such, the Company does not
maintain a separate warranty reserve but expenses the cost to create and post
any maintenance release as a part of normal operations.




7.
Commitments and Contingencies




The
Company currently occupies two facilities under operating leases.  The
San Jose, California facility lease expires in March 2009 and the Canfield, Ohio
facility lease expires in October 2012.




Future
minimum lease payments are approximately as follows:




Year
      ending September 30, 2009
                  
                  $
                  143,983Year
      ending September 30, 2010
                  
                  
                  110,684Year
      ending September 30, 2011
                  
                  
                  110,684Year
      ending September 30, 2012
                  
                  
                  110,684Year
      ending September 30, 2013
                  
                  
                  4,612$
                  480,647




Facility
rent expense totaled approximately $145,000 and $145,000 for the years ended
September 30, 2008 and 2007, respectively.


F-14


Notify
Technology Corporation




Notes to
Financial Statements




In
November 2003, NCR Corporation and Notify Technology Corporation entered into a
non-exclusive license agreement that allows the Company to offer certain product
features on its Enterprise Mobility Solution that are covered by a patent held
by NCR.   This agreement requires that a royalty payment be made
to NCR based on the revenue from any NotifyLink product that is sold that uses
the technology covered by the patent. Payments under this agreement were
$123,645 and $103,342 during the fiscal years 2008 and 2007,
respectively.




8.
Shareholders’ Equity (Deficit)




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.


F-15


Notify
Technology Corporation




Notes to
Financial Statements




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.




Holders
of our outstanding Series A preferred stock had the right to require the
Company to redeem any unconverted shares of Series A preferred stock at any
time and from time to time during the period from July 20, 2003 to
July 25, 2004.  The per share redemption price was $10.00 plus
any accrued dividends.  The holders of Series A preferred stock
had the option to receive the redemption price in cash or in shares of our
common stock, but the Company was not obligated to pay the redemption in cash
unless the Company’s board of directors unanimously approved such payment in
cash.  If all holders of outstanding Series A preferred stock
elected to redeem in cash, the aggregate redemption price would have totaled
$4,610,000.  The holders of the Company’s Series A preferred stock
chose to exercise their right of redemption in the form of common
shares.  The outstanding Series A preferred shares were redeemed at an
effective rate of 20 shares of common stock for each share of Series A preferred
stock.  The redemption date was July 20, 2004 at which time 461,000
Series A preferred shares were presented for redemption and 9,220,000 shares of
common stock were subsequently issued on August 31, 2004.




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 consisted 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 expired on July 21, 2008 without any options being exercised . At
September 30, 2008, none of these options were outstanding.




Additionally,
the Company also issued a seven year warrant to purchase 118,151 shares of
common stock at an exercise price of $1.00 per share to an investment fund in
connection with the investment funds commitment to purchase Series A preferred
stock for the amount of the difference between $5 million and the aggregate
amount of money invested by all other investors in the
financing.  These warrants expired on May 16, 2008 without any
warrants being exercised.  At September 30, 2008, none of these
warrants were outstanding.




During
fiscal 2003, 5,000 shares of Series A preferred stock were converted to 50,000
shares of common stock.


F-16




Notify
Technology Corporation
  Notes to
Financial Statements




Common
Stock




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




September 30,20081997
      Stock Option Plan
                  
                  
                  2,773,000Warrant
      agreements
                  
                  
                  —2,773,000




Warrants
to Purchase Common Stock




At
September 30, 2008, the Company had no warrants outstanding:




·
            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
      warrants to purchase 1,753,500 shares of common stock expired in July 2008
      without any warrants being exercised and the warrant to purchase 118,151
      shares of common stock expired in May 2008 without
    exercise.




1997
Stock Option Plan




In
January 1997, the Company adopted the 1997 Stock Plan (the Plan), which
provided for the granting of stock options to employees, officers, consultants,
and directors of the Company.  The Plan expired in January
2007.  Stock options were granted at fair market value on the date of
grant with terms of up to ten years. Under the Plan, a total of 3,474,662 shares
of the Company’s common stock were 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.  Certain grants of options to employees
after the initial grant of options to employees vest over three
years.  Certain grants to members of the Company’s Board of Directors
in compensation for their services vest over their current term of office of one
year. The following table summarizes stock option activity:





Options OutstandingShares
                            Available
                            for
                            Grant
                          
                          
                          Number ofShares
                          
                          
                          Weighted-Average
                            PriceBalance
      at September 30, 2006
                          
                          
                          249,662
                          
                          
                          
                          3,225,000
                          
                          
                          $
                          1.154Granted
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          N/ACancelled
                          
                          
                          297,000
                          
                          
                          
                          (297,000
                          )
                          
                          $
                          0.336Expired
      with plan
                          
                          
                          (546,662
                          )
                          
                          
                          
                          
                          
                          
                          N/ABalance
      at September 30, 2007
                          
                          
                          —
                          
                          
                          
                          2,928,000
                          
                          
                          $
                          1.196Granted
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          N/ACancelled
                          
                          
                          —
                          
                          
                          
                          (48,333
                          )
                          
                          $
                          0.285Exercised
                          
                          
                          —
                          
                          
                          
                          (106,667
                          )
                          
                          $
                          0.262Balance
      at September 30, 2008
                          
                          
                          —
                          
                          
                          
                          2,773,000
                          
                          
                          $
                          1.248




F-17


Notify
Technology Corporation




Notes to
Financial Statements




The
following table summarizes outstanding and exercisable options at
September 30, 2008:




Options Outstanding
                              
                              
                              Options ExercisableExercise
                                Prices
                              
                              
                              Number of
                                Options
                                Outstanding
                              
                              
                              Weighted-
                                Average
                                Remaining
                                Life in Years
                              
                              
                              Weighted-Average
                                Exercise
                                Prices
                              
                              
                              Number of
                                Options
                                Exercisable
                              
                              
                              Weighted-
                                Average
                                Exercise
                                Prices$0.200
      – $0.260
                              
                              
                              
                              1,270,000
                              
                              
                              
                              5.31
                              
                              
                              $
                              0.252
                              
                              
                              
                              1,270,000
                              
                              
                              $
                              0.252$0.320
      – $0.490
                              
                              
                              
                              348,000
                              
                              
                              
                              3.06
                              
                              
                              $
                              0.331
                              
                              
                              
                              348,000
                              
                              
                              $
                              0.331$0.800
      – $0.906
                              
                              
                              
                              5,000
                              
                              
                              
                              0.00
                              
                              
                              $
                              0.906
                              
                              
                              
                              5,000
                              
                              
                              $
                              0.906$1.600
      – $2.375
                              
                              
                              
                              903,000
                              
                              
                              
                              2.74
                              
                              
                              $
                              1.603
                              
                              
                              
                              903,000
                              
                              
                              $
                              1.603$2.750
      – $3.875
                              
                              
                              
                              99,000
                              
                              
                              
                              1.88
                              
                              
                              $
                              3.127
                              
                              
                              
                              99,000
                              
                              
                              $
                              3.127$6.125
      – $7.656
                              
                              
                              
                              18,000
                              
                              
                              
                              1.05
                              
                              
                              $
                              6.603
                              
                              
                              
                              18,000
                              
                              
                              $
                              6.603$8.813
                              
                              
                              
                              130,000
                              
                              
                              
                              1.40
                              
                              
                              $
                              8.813
                              
                              
                              
                              130,000
                              
                              
                              $
                              8.8132,773,000
                              
                              
                              
                              3.85
                              
                              
                              $
                              1.248
                              
                              
                              
                              2,773,000
                              
                              
                              $
                              1.248




9.
Income Taxes




Due to
operating losses, there is no provision for income taxes for 2008 or 2007. The
expected statutory tax benefit of 34% is offset by the inability to recognize an
income tax benefit from the net operating losses.




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:


F-18


Notify
Technology Corporation




Notes to
Financial Statements




Year EndedSeptember 30,2008Deferred
      tax assets:Net
      operating loss carryforwards
                  
                  $
                  206,600Research
      credit carryforwards
                  
                  
                  247,500Other
      temporary differences
                  
                  
                  3,500Total
      deferred tax assets
                  
                  
                  457,600Valuation
      allowance
                  
                  
                  (457,600
                  )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.




As of
September 30, 2008, the Company had net operating loss carryforwards of
approximately $607,000 and $440,000 for Federal and California tax purposes,
which will expire in the years 2011 through 2027. As of September 30, 2008, the
Company also had research and development tax credit carryforwards for federal
and California tax purposes of approximately $247,500 and $215,000,
respectively. The credits will expire in the years 2016 through 2027, if not
utilized. Utilization of the net operating losses 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 losses and tax credit carryforwards before full
utilization.




10.
Industry Segment, Customer, and Geographic Information




The
Company has one operating segment by which management evaluates performance. The
Company sells its products primarily within the United States and Canada to
business customers with limited sales in other countries.




All of
the Company’s long-lived assets are located in the United States.




F-19




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 (3.1.2) to the Registrant's Quarterly
      Report on Form 10-QSB for the quarterly period ended June 30, 2001, filed
      on August 14, 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)3.2.1
                      Certificate
      of Amendment to the Bylaws (incorporated herein by reference to Exhibit
      (3.2.1) to the Registrant’s Quarterly Report on Form 10-QSB, filed on May
      15, 2007)3.2.2
                      Certificate
      of Amendment to the Bylaws  (incorporated herein by reference to
      Exhibit (3.2.2) to the Registrant’s Current Report on Form 8-K, filed on
      June 22, 2007)10.5(1)
                      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)10.6(1)
                      Registrant's
      1997 Stock Plan, as amendedeffective March
      26, 2003, and form of stock option agreement. (incorporated by
      reference to Exhibit (4.1) to the Registrant's Registration Statement on Form S-8 Reg. No.
      333-108868, filed on September 17, 2003)10.12.1
                      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)10.12.2
                      First Amendment to the Voice Mail Services
      Agreement, dated as of February 8, 2003, by and between the Registrant and
      AT&T Corp. (incorporated herein by reference to Exhibit (10.1) to the
      Registrant’s Quarterly Report on Form 10-QSB for the quarterly period
      ended March 31, 2003, filed on May 14, 2003)10.16(1)
                      Amended
      and Restated Employment Agreement dated as of October 31, 2007 between
      Registrant and Paul DePond. (incorporated herein by reference to Exhibit
      (10.16) to the Registrant’s Currant Report 8-K, filed on December 21,
      2007)10.17(1)
                      Amended
      and Restated Employment Agreement dated as of October 31, 2007 between
      Registrant and Gerald Rice. (incorporated herein by reference to Exhibit
      (10.17) to the Registrant’s Currant Report 8-K, filed on December 21,
      2007)10.18(1)
                      Amended
      and Restated Employment Agreement dated as of October 31, 2007 between
      Registrant and Rhonda Chicone. (incorporated herein by reference to
      Exhibit (10.18) to the Registrant’s Currant Report 8-K, filed on December
      21, 2007)10.24
                      Nonexclusive Technology License Agreement, dated
      as of November 24, 2003, by and between Registrant and NCR Corporation.
      (incorporated herein by reference to Exhibit (10.24) to the
      Registrant's Annual Report on Form 10-KSB for the fiscal year ended
      September 30, 2004, filed on December 22,
2004)









10.25
                          Patent
      Purchase Agreement dated March 22, 2006, by and between Notify Technology
      Corporation and Sunshine Data Ventures LLC. (incorporated herein by
      reference to Exhibit (10.25) to the Registrant’s Currant Report 8-K, filed
      on March 24, 2006)10.30
                          Lease, dated as of February 27, 2006 by and among
      Registrant, and Ching C. Poon and Jenny M. Poon. (incorporated
      herein by reference to Exhibit (10.30) to the Registrant’s Annual Report
      on Form 10-KSB, filed on December 22, 2006)10.32
                          Lease
      addendum dated February 22, 2007 between Notify Technology Corporation and
      Pecten Court Mountain View Associates, LLC. (incorporated herein by
      reference to Exhibit (10.32) to the Registrant’s Current Report on Form
      8-K, filed on February 22, 2007)10.33
                          Lease, dated as of October 16, 2008 by and between
      Registrant and Colbur Tech, LLC.14.1
                          Code of Ethics for Principal Executive and Senior
      Financial Officers(incorporated herein by reference to Exhibit
      (14.1) to the Registrant's Annual Report on Form 10-KSB for the fiscal
      year ended September 30, 2003, filed on December 29,
  2003)24.1
                          Power
      of Attorney (see page 32).31.1
                          Certification of Chief Executive Officer pursuant
      to Section 302 of the Sarbanes-Oxley Act of 200231.2
                          Certification of Chief Financial Officer pursuant
      to Section 302 of the Sarbanes-Oxley Act of 200232.1
                          Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002







(1)           Management
compensation plan/contract