# UNITED STATESSECURITIES
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 December 31, 2004
|--- | ------------------------------------------------------------------------------------------------------------------------------------

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

Commission file number
000-27387

VOICE MOBILITY
INTERNATIONAL, INC. (Name of small business issuer in its charter)

|                                                                                           |                                                
|------------------------------------------------------------------------------------------ | -----------------------------------------------
|NEVADA                     
(State or other jurisdiction of incorporation or
organization) | 33-0777819
(I.R.S. Employer Identification No.)

|                                                                                                      |                   
|----------------------------------------------------------------------------------------------------- | ------------------
|100 - 4190 Lougheed HighwayBurnaby, British Columbia, Canada
(Address of principal executive offices) | V5C 6A8
(Zip Code)

Issuers telephone
number  (604) 482-0000

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

|                        |                                              
|----------------------- | ---------------------------------------------
|Title of each class
Nil | Name of each exchange on which registered
Nil

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

Common Shares, par
value $0.001  (Title of class)

Check whether the issuer (1) 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 [ ]

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B is not contained in this form,
an 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.

[ ]

---

2

State issuer's revenues for its most
recent fiscal year.  $12,981

State the aggregate market value of
the voting and non-voting common equity held by non-affiliates computed by reference to
the price at which the common equity was sold, or the average bid and asked prices of such
common equity, as of a specified date within 60 days (See definition of affiliate in Rule
12B-2 of the Exchange Act.)

Note: If determining whether a person
is an affiliate will involve an unreasonable effort and expense, the issuer may calculate
the aggregate market value of the common equity held by non-affiliates on the basis of
reasonable assumptions, if the assumptions are stated.

39,799,582 common shares
@ $0.52(1) = $20,695,783 (1)              Average of bid
and ask closing prices on March 1, 2005.

State the number of shares
outstanding of each of the Issuers classes of common equity, as of the latest
practicable date.

41,928,491 common shares issued
and outstanding as of March 1, 2005. As of March 1, 2005, there were 2,700,000
exchangeable shares of Voice Mobility Canada Limited issued and outstanding which shares
are exchangeable into shares of our common stock at any time with no additional
consideration.

# DOCUMENTS INCORPORATED
BY REFERENCE

None

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

---



# VOICE MOBILITY
INTERNATIONAL, INC.

# TABLE OF CONTENTS

|         |                                                                                                                 | Page No.
|-------- | --------------------------------------------------------------------------------------------------------------- | --------
|Part I   |                                                                                                                 |         
|Item 1   | Description of Business                                                                                         | 2       
|Item 2   | Description of Property                                                                                         | 16      
|Item 3   | Legal Proceedings                                                                                               | 17      
|Item 4   | Submission of Matters to a Vote of Security Holders                                                             | 17      
|Part II 
|Item 5   | Market for Common Equity and Related Stockholder Matters                                                        | 17      
|Item 6   | Management's Discussions and Analysis or Plan of Operation                                                      | 19      
|Item 7   | Financial Statements                                                                                            | 29      
|Item 8   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                            | 63      
|Item 8A  | Controls and Procedures                                                                                         | 63      
|Item 8B  | Other Information                                                                                               | 63      
|Part III
|Item 9   | Directors, Executive Officers, Promoters and Control Persons: Compliance with Section 16(a) of the Exchange Act | 63      
|Item 10  | Executive Compensation                                                                                          | 67      
|Item 11  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                  | 72      
|Item 12  | Certain Relationships and Related Transactions                                                                  | 73      
|Item 13  | Exhibits                                                                                                        | 74      
|Item 14  | Principal Accountant Fees and Services                                                                          | 79      
|         | Signatures                                                                                                      | 81      

---

2

# PART I

|Item 1. | Description of Business.
|------- | ------------------------

This annual report contains
forward-looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by terminology
such as may, will, should, expects,
plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of
these terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the risks in
the section entitled Risk Factors, that may cause our or our industrys
actual results, levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these statements to
actual results.

Our financial statements are stated
in United States Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles.

In this annual report, unless
otherwise specified, all dollar amounts are expressed in United States dollars. All
references to CDN$ refer to Canadian dollars and all references to
common shares refer to the common shares in our capital stock.

Corporate Overview

We were incorporated on October 2,
1997 in the State of Nevada, under the name Equity Capital Group, Inc., and we
are the successor to the voice service and related messaging business founded by Voice
Mobility Inc. in 1993. On June 24, 1999, we changed our name to Voice Mobility
International, Inc. We have four wholly-owned subsidiaries: Voice Mobility Inc.,
which is a Canadian corporation incorporated on September 15, 1993; Voice Mobility (US)
Inc., which is a Nevada corporation incorporated on April 6, 2000; Voice Mobility Canada
Limited, which is a Canadian corporation incorporated on May 26, 1999; and VM Sub Limited,
which is a Canadian corporation incorporated on May 26, 1999.

Unless otherwise indicated, all
references to we, us, our and Voice
Mobility means Voice Mobility International, Inc., its predecessor company, Voice
Mobility Inc. and its other subsidiaries.

Our principal executive and head
offices are located at 100  4190 Lougheed Highway, Burnaby, British Columbia,
Canada. Sales and marketing operations are primarily based out of our head office.
Research, development and technical support are based out of our office located at 1001
Wharf Street, 3rd floor, Victoria, British Columbia, Canada. We have a
one-person research office in Nova Scotia, Canada.

History

Our subsidiary, Voice Mobility Inc.
was incorporated in 1993 under the name WGT Teleserve Inc., and was originally
focused on providing enhanced telecommunications services such as voice mail, fax handling
and Internet access to specific vertical markets. In the spring of 1997, we decided to
shift focus and began developing a comprehensive enhanced messaging product. Early
versions of our messaging products were subsequently released in 1998, 1999 and 2000.

In June 1999, the shareholders of
Voice Mobility Inc. completed a reverse acquisition whereby Voice Mobility Inc. became a
wholly owned subsidiary of our company. At that point we effectively commenced operations
as a US company and our common stock was quoted on the OTC Bulletin Board under the symbol
VMII. Between the period of June 1999 and December 2004, we raised approximately $20
million, mostly from private investors, to fund our development initiatives and
operations.

---

3

In April 2001, we completed a $8.4
million (CDN$13 million) equity financing and subsequently began trading on the Toronto
Stock Exchange in July under the symbol VMY.

Business Overview

We are engaged in the enhanced
messaging area of the telecommunications market. We market and deploy next generation
messaging solutions that provide enhanced messaging features and functionality while
ensuring integration with or replacement of existing first generation voicemail messaging
systems. Our enhanced messaging software suite:

| | 
allows telecommunications companies to replace their aging legacy voicemail systems and
incorporate incremental offerings such as real time call connect, voicemail to email, fax
to email and unified mailbox services; or
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
can serve as a first generation voice-mail and messaging system for telecommunications
companies that do not have an existing voice-mail system, with the added capability of
providing incremental offerings such as real time call connect, voicemail to email, fax to
email and unified mailbox services.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Legacy voicemail systems are systems
that use technology that is 10 to 15 years old. These legacy systems are incapable of
being upgraded, or economically upgraded, to offer enhanced messaging services, like real
time call connect, voicemail to email, fax to email services and unified mailbox services.

The enhanced messaging platform is a
combination of our enhanced messaging software suite installed on Intel-based
commercial-off-the-shelf computer hardware in the service providers preferred
configuration. We can provide our enhanced messaging software only, or we can provide a
complete turnkey solution including complete hosting, hardware, system configuration,
migration, operating support system integration and billing support system integration. In
addition, customers may license one or more of the incremental services or choose to
license our entire enhanced messaging software suite.

Our enhanced messaging software suite
is designed to function on industry standard commercial-off-the-shelf computer hardware
such as Intel processor-based computer servers. This allows our customers to utilize their
computer hardware manufacturer of choice, obtain the latest technology and add
complementary functionality quickly and cost effectively. Our enhanced messaging software
suite also uses communication and digital-signal-processing boards from NMS
Communications.

With the increased use of personal
communication devices, such as cell phones, personal digital assistants (PDAs) and
laptops, it has become a considerable challenge to manage the information retrieval
process from these various devices. Users of these multiple communication devices are
increasingly demanding a means of easily managing these devices in a time-saving manner.
In addition, users are increasingly demanding instant access to voicemails, faxes and
emails regardless of which communication device is available to them or their physical
location at any point in time.

Our enhanced messaging software suite
addresses all of these demands by:

| | 
allowing users to access their voicemail messages, email messages and faxes at anytime,
from any location, from a wide variety of devices;
| | --------------------------------------------------------------------------------------------------------------------------------------------

| | 
providing a speech interface which allows any speech recognition software to interface
with our software application;
| | -----------------------------------------------------------------------------------------------------------------------

---

4

| | 
allowing users to receive any type of communication regardless of its incoming format or
medium (i.e. voicemails and faxes) into one unified mailbox with the ability to control,
sort and prioritize all such messages;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | providing
instant notification of all messages;
| | ------------------------------------------------

| |  allowing
users to direct faxes to any fax machine; and
| | --------------------------------------------------------

| | 
providing users a single unified phone number which allows subscribers to merge all their
wired and wireless communication devices, including cellular telephone, pager, fax, home
and office numbers under that one number.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our product offering is an enhanced
messaging software solution through which telecommunications companies:

| | can
increase their revenues by increasing the services they can offer to their subscribers;
| | --------------------------------------------------------------------------------------------

| | 
can offer modern and technologically advanced messaging services to ensure that there is
no loss of customers to competitors offering these enhanced services;
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
can reduce their costs by replacing their old legacy voicemail systems and eliminating the
additional costs of maintaining their existing voice mail systems; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
can transition their customers from their old legacy voicemail systems to a new voicemail
system with no disruption in service.
| | ---------------------------------------------------------------------------------------------------------------------------------

Telecommunication companies/carriers
have been facing downward price pressure on services such as long distance, local
telephone service and data service. To combat this downward price pressure, these
telecommunication companies have usually introduced other revenue sources like call
answer, call waiting, call display, internet access and packages of local and long
distance calling. Our enhanced messaging software allows these telecommunication companies
to create further sets of product/service offerings to allow them to increase or maintain
their revenues.

Components of Our
Enhanced Messaging Product Offering

Our enhanced messaging software suite
includes the following core service features:

| | legacy
voicemail replacement;
| | ------------------------------

| |  one
number;
| | -------------

| | voicemail
to email;
| | --------------------

| |  fax
to email;
| | ---------------

| | a
single unified mailbox;
| | --------------------------

| | find-me
and follow-me / real time call connect;
| | ------------------------------------------------

| |  call
announce and call screening;
| | -----------------------------------

| | message
notification; and
| | --------------------------

| | speech
recognition integration.
| | --------------------------------

---

5

Our legacy voicemail replacement
feature allows a telecommunication company to replace existing voicemail systems currently
being used by telecommunications companies. The first stage involves installing our
enhanced messaging software and migrating any existing voicemail subscribers to our
messaging system. Our messaging software has been designed to allow telecommunication
companies to transition their subscribers between the telecommunication companys old
system and the new system. We also have the ability to interface with existing
legacy voice-mail systems, allowing for the transfer of messages between
systems. Finally, we emulate legacy voicemail telephone systems, both in terms of
interfaces and features. Once the legacy voicemail subscribers are transitioned to the new
messaging system, the telecommunications company has the option of adding and selling one
or more of the enhanced messaging features described below.

Our real time call connect feature
allows subscribers to merge all their wired and wireless communication devices, including
cellular telephone, pager, fax, home and office numbers, into a single unified phone
number where they can be reached. Subscribers only have to provide this one phone number
which lets them receive all their calls, faxes or voice messages, no matter how many
different telephone, cell phone or fax numbers they use.

Our voicemail to email feature allows
subscribers to receive voicemail messages through the subscribers one number and
have them delivered to one or more email mailboxes. This service gives the subscriber the
ability to choose the method of retrieving voicemail messages, through email, email
enabled wireless devices or more traditional retrieval methods (like over the telephone).
Our software is also capable of providing voicemail notifications via pagers, short
message service (SMS) devices or other wireless devices.

Our fax to email feature allows
subscribers to receive faxes through the subscribers one number and have them
delivered to one or more email mailboxes. The subscriber then has the power to determine
if and where the fax is printed. Our fax-to-email service converts faxes to email
attachments, and allows subscribers to view them on-screen, print, save, or forward them.
This functionality essentially eliminates the need for fax machines and/or dedicated fax
lines, and it also minimizes the privacy concerns with respect to communal fax machines.
Our software is also capable of providing fax mail notifications via pagers, short
messaging service devices or other wireless devices.

Our single unified mailbox feature
allows subscribers to retrieve, store and manage all of their messages. Our service is
email neutral (meaning that it does not matter which email software a subscriber actually
uses), so any email application on the market today can be configured as the
subscribers unified mailbox. In addition, subscribers are not forced to change their
e-mail addresses.

Our find-me and follow-me feature
allows a subscriber to program our service to locate them at up to five different
telephone numbers according to the subscribers personal preference. For example,
they may divide their working time between the office and home. To be sure they do not
miss any important calls, they could program the find-me and follow-me feature so that any
incoming calls are directed first to their office, then to home and finally to their cell
phone. The search numbers can be arranged in any desired order and can be changed as
circumstances change.

Our call-announce and call-screening
feature allows subscribers to identify the caller and then decide whether or not to answer
a particular call or direct it to their unified mailbox. Our message notification feature
notifies subscribers of new or urgent messages by voicemail, email, pager or any wireless
device. Our speech recognition integration interface allows service providers to select
their preferred speech recognition vendor as our enhanced messaging software can interface
with all vendors specifications.

The enhanced messaging platform is a
combination of our enhanced messaging software suite installed on Intel-based
commercial-off-the-shelf computer hardware in the service providers preferred
configuration. We can provide our enhanced messaging software only, or, we, with our
partner, can provide a complete turnkey solution including complete hosting, hardware,
system configuration, migration, operating support system integration and billing support
system integration. In addition, customers may license one or more of the incremental
services or choose to license our entire enhanced messaging software suite.

For the year ended December 31, 2004,
sales consisted of technical training and support services. For the year ended December
31, 2003, sales consisted of the recognition of deferred revenue from the prior year.

---

6

Pricing of Our Enhanced
Messaging Software

We have customized pricing structures
in place for strategic partners, system integrators and original equipment manufacturer
(OEM) distributors that resell our enhanced messaging software to the telecommunication
companies.

Target Market for Our
Enhanced Messaging Software

Currently we are focussing on one
primary adopter of our enhanced messaging software: telecommunication companies.

Telecommunication companies represent
our target customer opportunity. Tier I telecommunication companies, defined
to include providers of messaging services to 100,000  35,000,000 end users, in
particular tend to have large existing installed bases of voicemail users. The customer
base of many of these telecommunication companies using legacy voicemail systems continues
to grow at a rate of between 10% and 30% per year as a result of the growth in the use of
wireless telecommunication devices. Currently, the Tier I telecommunication companies are
looking for methods to limit spending in legacy voicemail systems and methods to cost
effectively implement enhanced messaging technology.

We believe that Tier I
telecommunication companies will no longer be willing to invest in legacy systems which
cannot be upgraded to offer enhanced messaging services and will therefore be required to
replace such legacy systems. We also believe that their decision will be driven by the
demand from current and potential subscribers that they offer and implement enhanced
messaging technology services. We anticipate that some of these telecommunication
companies will install our enhanced messaging software and migrate their current voicemail
customers over to our enhanced messaging software without interruption in service. We then
expect that these telecommunication companies would begin to incrementally market the
value-added service available as part of our enhanced messaging software, such as our real
time call connect, voicemail to email, fax to email and unified mailbox service offerings.
To support our customers, we have developed significant research that identifies end
users perceptions of enhanced messaging features, their pricing tolerances and
willingness to purchase such additional enhanced messaging features. With our research, we
can assist these telecommunication companies in effectively marketing our enhanced
messaging services to their current and potential customer base.

We currently believe that there may
be further opportunities for the deployment of our enhanced messaging services through the
consolidation presently occurring amongst telecommunications companies. As such
telecommunications companies merge and consolidate, their customer base and technology
will need to be consolidated and standardized and therefore we believe that there likely
will be further opportunities and demand for our enhanced messaging software.

Marketing and
Distribution Methods

The complexity of the current
voicemail systems used by telecommunication companies requires not only a sound
understanding of the systems capabilities but a thorough understanding of where and how
these systems can interconnect with other systems. There are very few companies that have
earned the trust of the largest telecommunication companies to deal directly with the
systems and technologies that are fundamental to the basic business of a telecommunication
company. These companies include large switch manufacturers and large system integrators
and consultants. We recognize this reality and understand that these relationships have
been forged over an extended period of time. As a result of these established
relationships, we anticipate that telecommunication companies will purchase their
technology directly from these trusted companies. We are therefore dedicated
to building strategic relationships with these companies or system integrators. We
anticipate that telecommunication companies will purchase our enhanced messaging software
directly from these companies or system integrators. The company or system integrator will
assist in installation, maintenance and support of our enhanced messaging software. We
will play a supporting role to these companies, system integrators and original equipment
manufacturer distributors. We intend to limit the number of relationships we enter into
with such companies and systems integrators, distribution partners and original equipment
manufacturer distributors. The key in this area of the business is the quality of the
partner, not the quantity.

---

7

In June of 2004, we signed a
comprehensive agreement with Avaya Inc. This agreement granted Avaya global exclusivity to
our core messaging technology. This agreement covers a three-year term and defines
specific performance based milestones. At the end of each year the exclusivity will either
be extended or terminated based upon the achievement of the milestones.

Overall the relationship is
progressing extremely well. Both companies have invested in ongoing development of the
product and the combined marketing and sales team are exposing the product to key
customers to create interest and awareness.

Avaya has unparalleled brand name in
the carrier and enterprise marketplace. We are working together with Avaya to leverage
that brand name to create interest and excitement about the offering in the service
provider market. With many division and several thousand sales people and distribution
partners, the greatest challenge lies in exposing our product offering to all potentially
interested parties both inside of Avaya and its potential customers. In addition, a very
unique utility-based business model has been introduced to the market that has received a
great deal of attention and interest.

While there is resolute focus on
helping Avaya get to market with the offering not only in the United States but also all
over the world, we recognize that a broader group of channel partners may be required in
order for maximum market penetration to be achieved.

We will also target original
equipment manufacturer distributors who wish to include our enhanced messaging software as
a component on a messaging system that they manufacture and distribute. The original
equipment manufacturer distributor will be responsible for all selling, distribution,
support and maintenance of our enhanced messaging software. The original equipment
manufacturer distributor may sell the product directly to the telecommunication companies
utilizing their own sales force and distribution network.

There are some target markets where
our company has no specific representation through strategic partners, system integrators
and original equipment manufacturer distributors. In these markets, we intend selling
directly to the customer.

Key Strategic Partners

| | Avaya:
Avaya is a global communication systems, applications services company that generated $5
billion in revenue last year. Avaya offers complete network management for enterprise
customers. Avaya provides services to 90% of the FORTUNE 500 companies and to the US
government. Avaya is a system integration partner and an original equipment manufacturer
distributor of our enhanced messaging product. Avayas service provider Managed
Services Divisionwill also provide a hosted turnkey solution to the market.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NMS
Communications: NMS provides to us communication boards, software interfaces for their
hardware solutions, and access to a broad range of resources for sales, marketing and
development.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | TARA:
Telecommunications Applications Research Alliance (TARA) gives us telecommunications
expertise and potential access to investment funding, as well as full access to
state-of-the-art lab telecommunications facilities through our on-site office and
membership. TARA is a unique facility that combines cutting edge telecommunications
research and development equipment with seed investment funding and business mentoring
resources. This membership enhances our ability to develop new telecommunications services
and products.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Service providers now have the
ability to operate our software on Intel processor based hardware made and distributed by
commercial-off-the-shelf computer hardware vendors such as IBM, DELL, HP and others. This
provides our strategic partners and system integrators (many have strategic relationships
with certain computer hardware vendors) and telecommunication companies with comfort that
they can choose their preferred computer hardware on which to operate our enhanced
messaging software.

---

8

International Markets

We believe international markets
should offer us strong opportunities in the long-term. Mature markets are seeking
replacement technologies to enhance and replace legacy voicemail systems that are reaching
the end of their useful lives. Emerging markets are being fuelled by the very basic need
for high performance and low cost telecommunications infrastructure.

We perceive a specific opportunity
with telecommunications companies that are either introducing messaging services to their
markets for the first time, or are seeking to supplant incumbent, aging, or manufacturer
discontinued platforms with next generation technology that creates new revenue
opportunities through the delivery of enhanced features and functionality.

We are targeting both incumbent and
emerging telecommunications companies. We intend on forming relationships with original
equipment manufacturers and systems integration partners in these international markets as
a means to further expand and facilitate market penetration and the acquisition of market
share. Key attributes of our enhanced messaging software that facilitate this expansion
are the user-friendly interfaces, our multi-language support, and our broad support for
many variants of telephony connectivity.

In 2004, we experienced interest from
our international markets. As we continue to offer telecommunication companies seeking to
cost-effectively replace legacy messaging systems with the opportunity to enhance and
expand existing systems with the deployment of our enhanced messaging system, and by
delivering an enhanced messaging system to companies initiating their first deployment of
messaging services, we believe our presence in, and revenues from, non-North American
markets will expand in the coming years.

See Note 4 to our consolidated
financial statements for financial information by geographic area.

Competition

Well-established suppliers such as
Lucent and Comverse currently dominate the Tier I telecommunication company messaging
market. These competitors have provided voice mail services to both wired and wireless
telecommunication companies since the early 1980s. In evaluating the competitive
landscape, we believe our closest competitors are companies offering voicemail and
enhanced messaging systems built to satisfy the high capacity and high resiliency needs of
the telecommunications company environment. Lucent and Comverse are also developing legacy
voicemail replacement products. In this segment, we have identified three primary
competitors: Lucent, Comverse and IP Unity.

| | 
Lucent is a well-entrenched supplier of voicemail systems to the Tier I telecommunications
company market. Existing products include the Lucent Sierra and the Lucent IMA-CA. These
products currently service 50% of the North American voicemail market. Its replacement
product is the Lucent Anypath, a product built for the evolution from voicemail to unified
messaging. Lucent is a large company headquartered in Murray Hills, New Jersey with 33,000
employees. The company has a portfolio stretching from switching, data networking, optical
equipment and software, next-generation third generation (3G) mobility solutions, a
network services organization  designing, engineering, installing, managing,
monitoring and repairing some of the most sophisticated networks in the world, and the
world-renowned Bell Labs.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
Comverse Technologies Inc. is a supplier of software and systems enabling enhanced
communications services for telecommunication companies. Comverse is based in the United
States with research and development facilities in Israel. Its customer base includes
wireless and wired telecommunications companies worldwide. The company employs over 5000
employees, including 2000 dedicated to research and development. In 2001, the company
announced unified messaging deals with several wireless service providers such as AT&T
Wireless (US), T-Mobile (Germany), and Vodaphone (Portugal).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
IP Unity is a relatively new player to the unified messaging market. They offer a solution
targeted at the internet providers / broadband providers in the market. Their strength
lies in their ability to integrate and interface with voice-over IP networks. IP Unity is
a private company and does not report its financials or company details.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

9

All of our primary competitors and
some of our other competitors have significantly greater financial, technical,
manufacturing, sales, marketing and other resources than us and have achieved greater name
recognition for their existing products and technologies than we have. We cannot guarantee
that we will be able to successfully increase our market penetration or our overall share
of the basic voicemail and enhanced messaging marketplace. Our results of operations could
be adversely impacted if we are unable to effectively increase our share of this market.

Our success depends in large part
upon the rate at which Tier I telecommunication companies incorporate our products into
their systems. If we are not successful in having our products used by the leading Tier I
telecommunication companies, there will be a material adverse effect on our business,
financial condition and results of operations.

No assurance can be given that our
competitors will not develop new technologies or enhancements to existing products or
introduce new products that will offer superior price or performance features. We expect
our competitors to offer new and existing products at prices necessary to gain or retain
market share. Certain of our competitors have substantial financial resources, which may
enable them to withstand sustained price competition or a market downturn better than us.
There can be no assurance that we will be able to compete successfully in the pricing of
our products, or otherwise, in the future.

Competitive Advantages

We compete on the basis of price and
product completeness/performance. We believe we have a number of competitive advantages
over our competitors as follows:

| | -
our  business  and  pricing  models are  designed to set a new  expectation  in the
market for price and          flexibility;
| | --------------------------------------------------------------------------------------------------------------------------------

| | 
our enhanced messaging software provides the same features and functionality as current
voicemail solutions but offers additional value-added messaging features;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
our system provides a lower cost of ownership to the telecommunication companies as they
no longer have to make a substantial investment in maintaining, upgrading or replacing
their legacy voicemail systems;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
we have developed a series of migration options designed to migrate large blocks of
mailboxes from legacy voicemail systems while ensuring that our software can also emulate
features and interfaces of the legacy voicemail systems; and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
our enhanced messaging software platform is designed to accommodate and support more users
while also satisfying the stringent availability requirements of the telecommunication
companies.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
enhanced messaging software provides all of the following features:
| | -----------------------------------------------------------------------

| | legacy
voicemail replacement;
| | ------------------------------

| |  one
number;
| | -------------

| | voicemail
to email;
| | --------------------

| |  fax
to email;
| | ---------------

| | a
single unified mailbox;
| | --------------------------

| | find-me
and follow-me / real-time call connect;
| | ------------------------------------------------

| |  call
announcement and call screening;
| | ---------------------------------------

---

10

| | message
notification;
| | ----------------------

| | speech
recognition integration.
| | --------------------------------

We are not aware of any competitor
that has developed a messaging solution that provides all of these features, that
incorporates the ability to emulate existing voicemail technology, provides advanced
unified communications features and capabilities and provides migration options from
legacy voicemail systems at a lower total cost of ownership.

Industry Description

The telecommunication industry is
slowly realizing that it is currently utilizing aging technology to provide
voice-messaging services. This technology dates back to older voicemail systems developed
in the 1980s and is in need of replacement. We believe that the telecommunications
companies realize that these older systems require replacement and are currently looking
for next generation messaging platforms and solutions that will allow them to bring to
market new product offerings that are being demanded by the marketplace. In particular,
Tier 1 telecommunications companies, incumbent telephone companies, are moving towards
decisions regarding replacement of legacy voice mail systems. Part of the reason for this
is the current and expected demands of businesses and individuals to better manage their
various communications devices. Market drivers include subscriber demand for new services,
telecommunications companies demand for lower priced technology and manufacturer
discontinuances of existing voice messaging technology.

Currently, the market is being
serviced by legacy voicemail systems, and with a small number of carriers offering
enhanced messaging features and functionality. These telecommunications companies who are
offering these features are having limited success in deployment and penetration. There
are very few telecommunications companies offering new features to date despite all such
companies expressing interest in offering such enhanced features. The largest barrier is
the migration of voicemail subscribers from the aging legacy voicemail technology to new
enhanced messaging technology. Being able to complete this migration in a cost effective
and non-disruptive manner to existing customers is of top priority for the entire
telecommunications industry.

Operating telecommunications
companies are extremely protective of current revenue streams. They are also reluctant to
move to newer technology until the value of doing so can be proven. While newer
technologies have proven to be less costly from an operations perspective the inertia of
these legacy voicemail systems will not fully be overcome until:

| | it
is abundantly clear that new features have considerable end user demand;
| | ----------------------------------------------------------------------------

| |  it
has been proven that the new features can command an attractive price point;
| | ---------------------------------------------------------------------------------

| | 
vendors can demonstrate that they can build platforms which allow access to new revenue
without disrupting current revenue; and
| | ---------------------------------------------------------------------------------------------------------------------------------

| | 
it is clear that IP based initiatives such as VoIP (voice over internet protocal) will
require equipment changes.
| | -------------------------------------------------------------------------------------------------------------------

All of these prerequisites are in
place now in many telecommunications companies to a lesser or greater degree. The overall
expenditures for voice messaging systems in the next several years are expected to
increase. This expected increase in spending is partly due to the lack of investment over
the last several years and partly due to the fact that many telecommunications companies
are evolving their networks to VoIP (voice over internet protocal) and other relevant next
generation technology infrastructure.

Significant Customers

In order to broaden and diversify our
potential customer base, we have been seeking out strategic partners to assist with the
sales and marketing of our products. We have been in contact with several potential
strategic partners and have entered into a system integration agreement, and an OEM
(original equipment manufacturer) sales agreement with Avaya Inc.

---

11

Research and Development

Our research and development team is
primarily located in our facility located in Victoria, British Columbia, Canada. The
research and development team also has a research analyst located in an office at the TARA
(Telecom Applications Research Alliance) facility in Halifax, Nova Scotia, Canada. Our
research and development team designs, develops, tests, documents, and localizes our
enhanced messaging product. The research and development teams feature and release
direction is governed by all strategic product stakeholders. Each feature is detailed in
written business requirements created by our business requirements team. A change control
board also directs the lower level problems and enhancements for all other development
work.  Releases are coordinated with our marketing, sales, and system
integration/partner support departments to ensure timely delivery of the grouped features
to our partners, clients, and ultimately our target market. Appropriate technology is
chosen for all work after performing a technical analysis of each requested feature and
also ensuring a match for that releases system requirements. All development work is
carried out with reviews and decision gates as part of an overall product development
process. The research and development team follows industry best practices for software
engineering and encourages continuous process improvement. Research and development
expenses for the years ended December 31, 2004 and 2003 were $760,810 and $725,456
respectively.

Intellectual Property

We rely on trade secrets to protect
our intellectual property. We do not have any registered patents, trademarks, or
copyrights. We execute confidentiality and non-disclosure agreements with our employees
and limit access to and distribution of our proprietary information. We do not have and do
not intend to apply for patents on our products. Management believes that the patent
application process in many countries in which we intend to sell products would be
time-consuming and expensive and any patent protection may be out of date by the time the
patent is granted.

The departure of any of our
management or significant technical personnel, the breach of their confidentiality and
non-disclosure obligations, or the failure to achieve our intellectual property objectives
may have a material adverse effect on our business, financial condition and results of
operations. We believe our success depends upon the knowledge and experience of our
management and technical personnel and our ability to market our existing products and to
develop new products. We do not have non-compete agreements with our employees who are
employed on an at-will basis. Therefore, employees may and have left us to go
to work for a competitor. While we believe that we have adequately protected our
proprietary technology, and we will take all appropriate and reasonable legal measures to
protect it, the use of our processes by a competitor could have a material adverse effect
on our business, financial condition and results of operations.

Employees

As of March 1, 2005, we employed 18
people, 3 of who are engaged in marketing and sales, 11 in research, development and
support, and 4 in management and administration. We are not subject to any collective
bargaining agreements and we consider relations with our employees to be excellent.

# RISK FACTORS

Much of the information included in
this annual report includes or is based upon estimates, projections or other
forward-looking statements. Such forward-looking statements include any
projections or estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon which they
are based, are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially, from any
estimates, predictions, projections, assumptions, or other future performance suggested
herein. We undertake no obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of such statements.

---

12

Such estimates, projections or other
forward-looking statements involve various risks and uncertainties as outlined
below. We caution readers of this annual report that important factors in some cases have
affected and, in the future, could materially affect actual results and cause actual
results to differ materially from the results expressed in any such estimates, projections
or other forward-looking statements. In evaluating us, our business and any
investment in our business, readers should carefully consider the following factors.

We have had negative cash flows
from operations and if we are not able to obtain further financing our business operations
may fail.

To date, we have had negative cash
flows from operations and have depended on sales of our equity securities and debt
financing to meet our cash requirements. We have estimated that we will require between
$8.2 and $8.8 million to carry out our business plan in the next twelve months, and we
will need to raise additional funds to:

| | support
our planned rapid growth and carry out our business plan,
| | ------------------------------------------------------------------

| |  develop
new or enhanced services and technologies,
| | ----------------------------------------------------

| | increase
our marketing efforts,
| | --------------------------------

| | acquire
complementary businesses or technologies,
| | --------------------------------------------------

| | respond
to regulatory requirements, and
| | ----------------------------------------

| | respond
to competitive pressures or unanticipated requirements.
| | ----------------------------------------------------------------

We may not be able to obtain
additional equity or debt financing on acceptable terms when we need it. Even if financing
is available it may not be available on terms that are favorable to us or in sufficient
amounts to satisfy our requirements. If we require, but are unable to obtain, additional
financing in the future, we may be unable to implement our business plan and our growth
strategies, respond to changing business or economic conditions, withstand adverse
operating results, consummate desired acquisitions and compete effectively. More
importantly, if we are unable to raise further financing when required, our continued
operations may have to be scaled down or even ceased and our ability to generate revenues
would be negatively affected.

A decline in the price of our
common stock could affect our ability to raise further working capital and adversely
impact our ability to continue our normal operations.

A prolonged decline in the price of
our common stock could result in a reduction in the liquidity of our common stock and a
reduction in our ability to raise capital. Because our operations have been primarily
financed through the sale of equity securities, a decline in the price of our common stock
could be especially detrimental to our liquidity and our operations. Such reductions would
force us to reallocate funds from other planned uses and would have a significant negative
effect on our business plans and operations, including our ability to develop new products
and continue our current operations. If our stock price declines, there can be no
assurance that we can raise additional capital or generate funds from operations
sufficient to meet our obligations. If we are unable to raise sufficient capital in the
future, we may not be able to have the resources to continue our normal operations.

We have a history of losses and
fluctuating operating results, which raise substantial doubt about our ability to continue
as a going concern.

Since inception through December 31,
2004, we have incurred aggregate net losses of approximately $40.2 million. Our loss from
operations for the fiscal year ended December 31, 2004 was $4.2 million. We also incurred
a loss from operations for each of the years ended December 31, 2003, 2002 and 2001. There
is no assurance that we will operate profitably or will generate positive cash flow in the
future. In addition, our operating results in the future may be subject to significant
fluctuations due to many factors not within our control, such as the unpredictability of
when customers will order products, the size of customers orders, the demand for our
products, and the level of competition and general economic conditions.

---

13

Although we anticipate that we will
earn revenues, we expect to continue to incur development costs and operating costs.
Consequently, we expect to incur operating losses and negative cash flow until our
products gain market acceptance sufficient to generate a commercially viable and
sustainable level of sales, and/or additional products are developed and commercially
released and sales of such products made so that we are operating in a profitable manner.
These circumstances raise substantial doubt about our ability to continue as a going
concern, as described in the explanatory paragraph in our independent registered public
accounting firms report on the December 31, 2004 consolidated financial statements.
Our audited consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.

If we elect to pay fees to
Innovatia in common stock then our shareholders will be subject to further, and maybe
significant, dilution.

On December 28, 2001, we issued to
Innovatia a promissory note in the amount of $1,707,989 (CDN$2,720,142) of which
$2,344,576 (CDN$2,818,180) of principal and accrued interest is outstanding at December
31, 2004. The promissory note is repayable each quarter at the lesser of $188,584
(CDN$226,678) and 40% of the net aggregate amount of invoices issued by us to Aliant in
the quarter. After December 31, 2004, any current or future amounts due in accordance with
the quarterly repayment schedule are only payable in common shares and the number of
common shares payable, if any, is determined by dividing the amount payable by Cdn$1.56.
As at December 31, 2004, the current portion due on the promissory note is $383,237
(CDN$460,651) and as of January 1, 2005, this amount is payable only by the issuance of
295,289 common shares. Notwithstanding, we have the option at any time and from time to
time to prepay in cash, common shares or a combination thereof, the whole or any portion
of the remaining non-current balance. If we elected to prepay by common shares, then
500,000 of the common shares will be valued at the lesser of the market price of the our
common shares on the Toronto Stock Exchange and Cdn$0.75 per share, and the value of the
balance of any other common shares issuable to repay the debt is determined by the
weighted average trading price of our common shares on the Toronto Stock Exchange over the
ten trading days immediately prior to the date on which the common shares are to be
issued. As at December 31, 2004, the non-current portion of the promissory note eligible
for prepayment is $1,961,339 (CDN$2,357,529) and if we elected to prepay this amount with
the issuance of common shares then as at January 1, 2005, this would result in the
issuance of 2,741,313 common shares. As at January 1, 2005, if we made the election to
settle the entire principal and interest outstanding with the issuance of common shares,
this would result in the issuance of 3,036,602 shares of common stock.

We could lose our competitive
advantages if we are not able to protect any proprietary technology and intellectual
property rights against infringement, and any related litigation could be time-consuming
and costly.

Our success and ability to compete
depends to a significant degree on our proprietary technology. If any of our competitors
copies or otherwise gains access to our proprietary technology or develops similar
software independently, we would not be able to compete as effectively. The measures we
take to protect our proprietary technology and other intellectual property rights are
currently based upon a combination of copyright, trade secret and trademark laws, but may
not be adequate to prevent their unauthorized use. Further, the laws of foreign countries
may provide inadequate protection of such intellectual property rights. We may need to
bring legal claims to enforce or protect such intellectual property rights. Any
litigation, whether successful or unsuccessful, could result in substantial costs and
diversions of resources. In addition, notwithstanding the rights we have secured in our
intellectual property, other persons may bring claims against us that we have infringed on
their intellectual property rights, including claims based upon the content we license
from third parties or claims that our intellectual property right interests are not valid.
Any claims against us, with or without merit, could be time consuming and costly to defend
or litigate, divert our attention and resources, result in the loss of goodwill associated
with our service marks or require us to make changes to our websites or other of our
technologies.

We hold no patents on our
proprietary technology and may not be able to protect our proprietary technology.

We do not have and do not intend to
apply for patents on our software products. We currently rely on copyright, trade secrets
and trademark laws to protect our proprietary intellectual property. Management believes
that the patent application process in many countries in which we intend to sell products
would be time-consuming and expensive and any patent protection might be out of date by
the time the patent were to be granted.

---

14

The departure of any of our
management or significant technical personnel, the breach of their confidentiality and
non-disclosure obligations, or the failure to achieve our intellectual property objectives
may have a material adverse effect on our business, financial condition and results of
operations. We believe our success depends upon the knowledge and experience of our
management and technical personnel and our ability to market our existing products and to
develop new products. Employees may and have left us to go to work for a competitor. While
we believe that we have adequately protected our proprietary technology, and we will take
all appropriate and reasonable legal measures to protect it, the use of our processes by a
competitor could have a material adverse effect on our business, financial condition and
results of operations. Our ability to compete successfully and achieve future revenue
growth will depend, in part, on our ability to protect our proprietary technology and
operate without infringing upon the rights of others. We may not be able to successfully
protect our proprietary technology, and our proprietary technology may otherwise become
known or be independently developed by competitors. Competitors products may add
features, increase performance or sell at lower prices. We cannot predict whether our
products will continue to compete successfully with such existing rival architectures or
whether new architectures will establish or gain market acceptance or provide increased
competition with our products.

Substantially all of our assets, a
majority of our directors and all of our officers are outside the United States, with the
result that it may be difficult for investors to enforce within the United States any
judgments obtained against us or any of our directors or officers.

Substantially all of our assets are
located outside the United States and we do not currently maintain a permanent place of
business within the United States. In addition, a majority of our directors and all of our
officers are nationals and/or residents of countries other than the United States, and all
or a substantial portion of such persons assets are located outside the United
States. As a result, it may be difficult for investors to enforce within the United States
any judgments obtained against us or our officers or directors, including judgments
predicated upon the civil liability provisions of the securities laws of the United States
or any state thereof. Consequently, you may be effectively prevented from pursuing
remedies under U.S. federal securities laws against them.

We are currently dependent on one
channel partner for the sale of our products and if we are unable to expand our channel
partner relationships or if our channel partner is unable to generate significant sales of
our products, then our revenues may not increase significantly.

We shifted our sales model from a
direct sales model to a channel partner model. A channel partner is a party who will
purchase our product for resale to telecommunication companies. This fundamentally shifted
the way our company was structured. Instead of selling and supporting the customer
directly, we will utilize the channel partner to conduct the sales and support activities
for our enhanced messaging software. Instead of being dependent on a small number of
customers for the sales of our products (as we were in our three previous fiscal years),
we are currently dependent on our sole channel partner, Avaya Inc., for sales of our
products. If Avaya is unable to generate significant sales of our products or we are
unable to expand the number of channel partner relationships, then we may not be able to
significantly increase our revenues and our business, financial condition and results of
operations would be materially and adversely affected.

We operate in a highly competitive
industry and our failure to compete effectively may adversely affect our ability to
generate revenue.

The market for unified messaging
software is highly competitive and subject to frequent product introductions with improved
price and/or performance characteristics. Even if we are able to introduce products which
meet evolving customer requirements in a timely manner, there can be no assurance that our
new products will gain market acceptance. Many companies, including Lucent, Comverse and
IP Unity and others have greater financial, technical, sales and marketing resources,
better name recognition and a larger customer base than ours. In addition, many of our
large competitors may offer customers a broader product line, which may provide a more
comprehensive solution than our current solutions. Increased competition in the unified
messaging industry could result in significant price competition, reduced profit margins
or loss of market share, any of which could have a material adverse effect on our ability
to generate revenues and successfully operate our business.

---

15

Rapid technological changes in our
industry could render our products non-competitive or obsolete and consequently affect our
ability to generate revenues.

The telecommunications industry is
characterized by rapidly changing technology and evolving industry standards. We believe
that our success will depend on our ability to continuously develop our products, to
enhance our current products and to introduce them promptly into the market. We can make
no assurance that our technology or systems will not become obsolete due to the
introduction of alternative technologies. If we are unable to continue to develop and
introduce new products to meet technology changes and changes in market demands, our
business and operating results, including our ability to generate revenues, could be
adversely affected.

If we fail to effectively manage
our growth our future business results could be harmed and our managerial and operational
resources may be strained.

As we proceed with the development of
our technology, we expect to experience significant and rapid growth in the scope and
complexity of our business. We will need to add staff to market our services, manage
operations, handle sales and marketing efforts and perform finance and accounting
functions. We will be required to hire a broad range of additional personnel in order to
successfully advance our operations. This growth is likely to place a strain on our
management and operational resources. The failure to develop and implement effective
systems, or to hire and retain sufficient personnel for the performance of all of the
functions necessary to effectively service and manage our potential business, or the
failure to manage growth effectively, could have a materially adverse effect on our
business and financial condition.

Our future growth and our ability
to generate revenues may be materially and adversely affected by continued reductions in
spending on telecommunications infrastructure by our potential customers.

A continued slowdown in capital
spending by telecommunication service providers may affect our future revenues more than
we currently expect. Moreover, the significant slowdown in capital spending by
telecommunication service providers has created uncertainty as to market demand for the
type of products we produce. As a result, revenues and operating results for a particular
period can be difficult to predict. In addition, there can be no certainty as to the
severity or duration of the current industry adjustment. As a result of the recent changes
in industry and market conditions, many of our potential customers have reduced their
capital spending on telecommunications infrastructure. Our revenues and operating results
are expected to continue to be affected by the continued reductions in capital spending on
telecommunications infrastructure by our potential customers.

Our Articles of Incorporation and
Bylaws and Nevada law contain provisions that could delay or prevent a change of control
and could limit the market price of our common stock.

Our authorized capital stock consists
of 100,000,000 shares of common stock and 1,000,000 shares of preferred stock. To date, 1
share of Series A preferred stock has been designated and is issued and outstanding and,
666,667 shares of Series B preferred stock have been designated, of which nil are issued
and outstanding. Our board of directors, without any action by stockholders, is authorized
to designate and issue shares of preferred stock in any class or series as it deems
appropriate and to establish the rights, preferences and privileges of these shares,
including dividends, liquidation and voting rights. The rights of holders of shares of
preferred stock that may be issued may be superior to the rights granted to the holders of
existing shares of our common stock. Further, the ability of our board of directors to
designate and issue such undesignated shares could impede or deter an unsolicited tender
offer or takeover proposal and the issuance of additional shares having preferential
rights could adversely affect the voting power and other rights of holders of our common
stock.

---

16

Trading of our stock may be
restricted by the SECs penny stock regulations, which may limit a stockholders
ability to buy and sell our stock.

The Securities and Exchange
Commission has adopted regulations which generally define penny stock to be
any equity security that has a market price (as defined) less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. Our securities
are covered by the penny stock rules, which impose additional sales practice requirements
on broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers
generally to institutions with assets in excess of $5,000,000 or individuals with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with
their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and monthly
account statements showing the market value of each penny stock held in the
customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing before or
with the customers confirmation. In addition, the penny stock rules require that
prior to a transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchasers written agreement to the
transaction. These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules discourage
investor interest in and limit the marketability of our common stock.

NASD sales practice requirements
may also limit a stockholders ability to buy and sell our stock.

In addition to the penny
stock rules described above, the National Association of Securities Dealers (NASD)
has adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is suitable
for that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to obtain
information about the customers financial status, tax status, investment objectives
and other information. Under interpretations of these rules, the NASD believes that there
is a high probability that speculative low priced securities will not be suitable for at
least some customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your ability to buy
and sell our stock and have an adverse effect on the market for our shares.

Our common stock is illiquid and
the price of our common stock may be negatively impacted by factors which are unrelated to
our operations.

Our common stock currently trades on
a limited basis on the OTC Bulletin Board and the Toronto Stock Exchange. The market price
of our common stock could fluctuate substantially due to a variety of factors, including
market perception of our ability to achieve our planned growth, quarterly operating
results of other telecommunication companies, trading volume in our common stock, changes
in general conditions in the economy and the financial markets or other developments
affecting our competitors or us. In addition, the stock market is subject to extreme price
and volume fluctuations. This volatility has had a significant effect on the market price
of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock.

|Item 2. | Description of Property.
|------- | ------------------------

Our principal executive offices are
located at 100  4190 Lougheed Highway, Burnaby, British Columbia, Canada,
V5C 6A8. We lease the office facility, which is approximately 2,000 square feet in
size, at a basic rate of $21,166 (CDN$25,441) per year plus expenses. This lease expires
on March 31, 2005 and we expect to continue to lease these premises on a month to month
basis thereafter.

We also lease an engineering facility
located at 3rd floor  1001 Wharf Street, Victoria, British Columbia,
Canada, V8W 1T6. The space is 4,050 square feet in size, and is leased at a basic rate of
$39,591 (CDN$47,588) per year plus expenses. This lease expires on December 31, 2008.

---

17

We believe that our existing
facilities are adequate for our needs through the end of the year ended December 31, 2005.
Should we require additional space at that time, or prior thereto, we believe that such
space can be secured on commercially reasonable terms.

|Item 3. | Legal
Proceedings.
|------- | ------------------

To our knowledge, we are not a party
to any other litigation as at March 1, 2005. We anticipate that, from time to time, we
periodically may become subject to other legal proceedings in the ordinary course of our
business. We are unable to ascertain the ultimate aggregate amount of monetary liability
or financial impact of the above matters which seek damages of material or indeterminate
amounts, and therefore cannot determine whether these actions, suits, claims or
proceedings will, individually or collectively, have a material adverse effect on our
business, results of operations, and financial condition. We intend to vigorously defend
these actions, suits, claims and proceedings.

|Item 4. | Submissions of Matters to a Vote of Security Holders.
|------- | -----------------------------------------------------

There were no matters submitted to a
vote of our security holders either through solicitation of proxies or otherwise in the
fourth quarter of the fiscal year ended December 31, 2004.

# PART II

|Item 5. | Market for Common Equity and Related Stockholder Matters.
|------- | ---------------------------------------------------------

Our common stock was listed and
commenced trading on the OTC Bulletin Board on June 30, 1999 under the symbol
VMII and on the Toronto Stock Exchange on July 16, 2001 under the symbol
VMY. Since June 30, 1999, trading in our common stock has been limited and
sporadic. The following table sets forth, for the periods indicated, the high and low
sales prices for our common stock on the OTC Bulletin Board and the Toronto Stock
Exchange:

|OTC Bulletin Board(1) | Toronto Stock Exchange (2)
|--------------------- | --------------------------
|
|December 31, 2004     | $0.76                     
|September 30, 2004    | $0.80                     
|June 30, 2004         | $0.95                     
|March 31, 2004        | $1.32                     
|December 31, 2003     | $0.90                     
|September 30, 2003    | $0.31                     
|June 30, 2003         | $0.27                     
|March 31, 2003        | $0.29                     

| | (1) | These prices were taken from Bloomberg L.P. Such over-the-counter market
                    quotations reflect inter-dealer prices, without retail mark-up, mark down or
                    commission and may not necessarily represent actual transactions.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | These prices were taken from Bloomberg L.P.
| | --- | -------------------------------------------

Our common shares are issued in
registered form. Computershare Trust Company of Canada, 401  510 Burrard Street,
Vancouver, British Columbia, Canada, V6C 3B9 (telephone: (604) 661-0271; facsimile (604)
685-3694) is the registrar and transfer agent for our common shares.

On March 1, 2005, the
shareholders list for our common stock showed 129 registered stockholders and
41,928,491 shares issued and outstanding. The closing sale price for our common stock on
March 1, 2005, as reported on the OTC Bulletin Board, was $0.52. On March 1, 2005, there
were 2,700,000 exchangeable shares of Voice Mobility Canada Limited issued and
outstanding. These exchangeable shares are exchangeable, at no additional consideration,
into shares of our common stock at any time.

---

18

Dividend Policy

During the years ended December 31,
2004 and 2003, we did not pay any cash dividends to any holders of our equity securities.

We have not paid any cash dividends on
our common stock and have no present intention of paying any dividends on the shares of
our common stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy will be
determined from time to time by our board of directors.

Recent sales of
unregistered securities

The following sets forth certain
information concerning securities which were sold or issued by us during the quarter ended
December 31, 2004 without the registration of the securities under the Securities Act of
1933 in reliance on exemptions from such registration requirements.

On October 20, 2004, in connection
with the exercise of options, we issued an aggregate of 72,000 shares of our common stock
for gross proceeds of $9,202 (CDN$11,520) to one non-U.S. person in an offshore
transaction relying on Section 3(a)(9), Regulation S and/or Section 4(2) of the Securities
Act of 1933.

On November 16, 2004, in connection
with the exercise of options, we issued an aggregate of 50,000 shares of our common stock
for gross proceeds of $6,678 (CDN$8,000) to one non-U.S. person in an offshore transaction
relying on Section 3(a)(9), Regulation S and/or Section 4(2) of the Securities Act of
1933.

On November 22, 2004, in connection
with the exercise of options, we issued an aggregate of 50,000 shares of our common stock
for gross proceeds of $6,626 (CDN$8,000) to one non-U.S. person in an offshore transaction
relying on Section 3(a)(9), Regulation S and/or Section 4(2) of the Securities Act of
1933.

On December 29, 2004, in connection
with the exercise of options, we issued an aggregate of 100,000 shares of our common stock
for gross proceeds of $12,890 (CDN$16,000) to one non-U.S. person in an offshore
transaction relying on Section 3(a)(9), Regulation S and/or Section 4(2) of the Securities
Act of 1933.

Equity Compensation Plan
Information

We adopted our current stock option
plan, entitled the Second Amended and Restated Stock Option Plan on April 25, 2001 and
approved by our shareholders on June 14, 2001. The following table provides a summary of
the number of options granted under our stock option plan, the weighted average exercise
price and the number of options remaining available for issuance all as at December 31,
2004.

---

19

|                                                               | Number of securities to
be issued upon exercise
of outstanding options | Weighted-Average   
exercise price of   
outstanding options, 
warrants and rights | Number of securities
remaining available for
future issuance under
equity compensation
plans(1)
|-------------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|Equity compensation   plans approved by
  security holders     | 5,671,354                                                              | $1.07                                                                              | 2,379,642                                                                                      
|Equity compensation   plans not approved
  by security holders | N/A                                                                    | N/A                                                                                | N/A                                                                                            
|Total                                                          | 5,671,354                                                              | $1.07                                                                              | 2,379,642                                                                                      

(1)    
          The maximum number of options issuable under our stock option plan is
          10,000,000, less 1,449,004 options that have been granted and exercised under
          the plan and less 500,000 options, which the Toronto Stock Exchange required
          that we remove from the plan in connection with a transaction with Aliant Inc.
          in December 2001.

Purchases of Equity
Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares
of common stock or other securities during the year ended December 31, 2004.

|Item 6. | Managements Discussions and Analysis or Plan of Operation.
|------- | -----------------------------------------------------------

OVERVIEW

You should read the following
discussion of our financial condition and results of operations together with the
consolidated audited financial statements and the notes to consolidated audited financial
statements included elsewhere in this filing. This discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements.

We are engaged in the development and
sales and marketing of unified voice messaging software through our wholly-owned operating
subsidiaries, Voice Mobility Inc. and Voice Mobility (US) Inc. Our enhanced messaging
software suite allows for legacy voice-mail replacement and incremental offerings such as
real time call connect, voice-mail to e-mail, and fax to e-mail services. These unified
communication services are facilitated by the creation of a single personal digital
mailbox that can receive any type of communication regardless of its incoming format or
medium.

During the years ended December 31,
2004 and 2003, we implemented a series of restructuring plans in an effort to reduce our
expenses and monthly burn rate. The restructuring plans consisted primarily of a reduction
in employees in all areas of our operations, a reduction in our office space from 5,000
s.f. to 2,000 s.f. (saving rent of $2,000 (CDN$3,000) per month) by relocating our offices
to our new premises in Burnaby, British Columbia, a reduction in the size of our office
space in Victoria, British Columbia and by a significant reduction in the utilization of
consultants.

During the year ended December 31,
2004, we shifted our sales model from a direct sales model to a channel partner model. A
channel partner is a party who will purchase our product for resale to telecommunication
companies. This fundamentally shifted the way our company was structured. Instead of
selling and supporting the customer directly, we will utilize the channel partner to
conduct the sales and support activities for our enhanced messaging software. This shift
in our structure allowed us to reduce expenses in the areas of support and training. We
reduced the number of employees by eight and we reduced expenses across the company after
a comprehensive review of our expenditures. This allowed us to stretch the funds we
received through equity and debt financing to execute on our business plan.

---

20

# Results of Operations
for the fiscal years ended December 31, 2004 and December 31, 2003

Sales

Sales for the fiscal year ended
December 31, 2004 were $12,981 compared to sales of $57,967 for the fiscal year ended
December 31, 2003, representing a 78% decrease. Sales for the fiscal year ended December
31, 2004 were from technical training and support services provided to Avaya. Sales for
the fiscal year ended December 31, 2003 were from recognition of deferred revenue in
relation to support services from prior periods. Sales to Avaya comprised 100% of the
revenue for the fiscal year ended December 31, 2004. Sales to two customers comprised 74%
of revenue for the fiscal year ended December 31, 2003. For the fiscal year ended December
31, 2004, we derived 100% of our sales from our Canadian operations (74% for the fiscal
year ended December 31, 2003) and nil% from sales from our U.S. operations (26% for the
fiscal year ended December 31, 2003).

During the fiscal year ended December
31, 2004, we generated sales through technical training and support services. We have
shifted our sales approach from direct sales to sales through channel partners. During the
fiscal year ended December 31, 2004, our focus was to establish and develop a relationship
with a channel partner that would provide us with opportunities for sales to Tier I
telecommunication companies. We have not generated any sales through channel partners to
date.

Cost of sales

Cost of sales were $5,683 and $nil
for the fiscal years ended December 31, 2004 and 2003 respectively. Cost of sales for the
fiscal year ended December 31, 2004 was related to travel and accommodation expenses
incurred while providing technical training and support services to Avaya. We did not
incur any cost of sales for the fiscal year ended December 31, 2003 as all revenue earned
in the year was recognized deferred revenue.

Operating Expenses

Total operating costs for the year
ended December 31, 2004 were $3,539,439 compared to $2,898,909 for the previous year. The
increase in total costs of $640,530, or 22%, was primarily attributable to the sales and
marketing expense relating to the issuance of Class V Warrants to Avaya. We issued the
warrants as part of an amended master license agreement executed in June 2004. As part of
the agreement, we granted 6,000,000 Class V Warrant to Avaya of which 2,000,000 vested
immediately. We recorded $1,169,591 in sales and marketing expenses for the fair value of
the 2,000,000 exercisable Class V Warrants issued. This increase in sales and marketing
expense was partially offset by the decrease in general and administrative expenses.

Sales & Marketing

Our sales and marketing costs
consists primarily of Avaya business development services, personnel, advertising,
promotions, public relations and business development. Total costs were $1,652,303 and
$665,801 for the fiscal years ended December 31, 2004 and December 31, 2003 respectively
representing an increase of 148% in sales and marketing costs.

The increase of $986,502 in sales and
marketing expense between the fiscal years ended December 31, 2004 and 2003 is a result of
a combination of an increase in sales and marketing related to the issuance of Class V
Warrants to Avaya of $1,169,591 and the decrease in overall investor relations of $24,000,
salaries of $122,000 and severance expense of $17,000.

Research and Development

Our research and development costs
consist primarily of personnel, data and voice transmission, and related facility costs.
Our research and development costs were $760,810 and $725,456 for the fiscal years ended
December 31, 2004 and 2003 respectively, representing an increase of $35,354 or 5%. The
increase of $35,354 is primarily a result of an increase in data and voice transmission
and related facility costs.

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21

General and Administrative

Our general and administrative costs
consist primarily of personnel costs, professional and legal costs, consulting fees,
travel, and the lease of office space. General and administrative costs were $1,126,326
and $1,507,562 for the fiscal years ended December 31, 2004 and 2003 respectively,
representing a decrease of $381,236 or 25% in our general and administrative costs. These
costs reflect employee stock option compensation cost of $14,061 and $60,062 for the
fiscal years ended December 31, 2004 and 2003 respectively.

The decrease of $335,235 (net of
stock based compensation) is a result of a combination of a decrease in the amortization
of property and equipment of approximately $551,062 due to the increase in fully amortized
assets during the year and an increase in legal and professional fees due to a settlement
agreement with a former employee whereby we paid $118,397 (CDN$150,000) in cash and issued
187,500 shares of our common stock valued at $112,500.

Interest Expense

Our interest expense was $706,176 and
$629,043 for the fiscal years ended December 31, 2004 and 2003 respectively. The interest
expense for the fiscal year ended December 31, 2004 includes the amortization of the debt
discount on the Series C and D promissory notes of $166,077 (Cdn.$214,971), the embedded
beneficial conversion feature of $32,000 related to the Series F convertible promissory
note and the amortization of the 15% repayment premium of the Series D promissory note of
$25,752 (Cdn.$33,333) issued in September 2003. The interest expense for the fiscal year
ended December 31, 2003 includes the amortization of the 15% repayment premium of $242,230
(Cdn.$318,750) on the Series A and B promissory notes, which were issued between June 2002
and May 2003. The remaining interest expense for the fiscal years ended December 31, 2004
and 2003 consist of the stated interest rate on the principal amount of the then
outstanding promissory notes.

Loss on Debt Restructuring

For the fiscal year ended December
31, 2003, we recorded a $241,636 loss on debt restructuring as described more fully in
Note 6 to the audited consolidated financial statements.

Income Taxes

At December 31, 2004, we have
$6,971,000 United States tax net operating losses that expire in the years 2019 through to
2023. As at December 31, 2004, we have Canadian tax net operating losses of approximately
$20,450,000 that will expire in the years 2005 through 2011. Non-capital losses of our
Canadian operating subsidiary Voice Mobility Inc., are restricted by Canadian Income Tax
law and may not be available entirely for use in future years pursuant to Section 111(4)
of the Canadian Income Tax Act.

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.
For fiscal years ended December 31, 2004 and 2003 respectively, we recognized a valuation
allowance equal to deferred tax assets for which realization is uncertain.

Net Loss

Our net loss was $4,235,958 and
$3,711,616 for the fiscal years ended December 31, 2004 and 2003 respectively. The primary
reason for the increase in net loss is due to the sales and marketing expense related to
the issuance of Class V Warrants to Avaya. We recorded $1,169,591 in sales and marketing
expenses for the fair value of the exercisable Class V Warrants issued to Avaya. The
increase in sales and marketing expense was partially offset by the decrease in general
and administrative expenses.

---

22

Since inception through December 31,
2004, we have incurred aggregate net losses of $40.2 million. The losses were primarily
incurred as a result of our focus on the development and testing of our product and the
marketing of our product. We have moved our focus from the development of our product and
we are now in a position to focus on the sales of our product and we believe that we will
continue to incur losses until we generate sufficient revenues to cover all of our
operating expenses. Because we are uncertain as to the rate at which telecommunications
companies will replace their legacy voicemail systems with technology like our enhanced
messaging product, we cannot accurately predict when we will be able to generate revenues
which will exceed our ongoing operating expenses.

# Results of Operations
for the fiscal years ended December 31, 2003 and December 31, 2002

Sales

Sales from the recognition of
deferred revenue for the fiscal year ended December 31, 2003 were $57,967 compared to
sales of $699,937 for the fiscal year ended December 31, 2002, representing a 92%
decrease. The decrease in sales is attributed to the decrease in the volume of goods sold
(and not to decreases in price) compared to the same period last year. Sales for the
fiscal year ended December 31, 2002 included software license sales, recognition of
deferred revenue from 2000, mailbox subscriptions, and support services.

Of the $641,970 decrease in sales,
$586,265 was attributable to sales of our software license to one customer, Aliant Inc.
and its subsidiaries, which comprised 84% of revenues for the fiscal year ended December
31, 2002. During the year ended December 31, 2003, we did not make any further sales to
Aliant. We shifted our sales approach from direct sales to sales through channel partners.
During the year, our focus was to establish and develop a relationship with a channel
partner that would provide us with opportunities for sales to Tier I telecommunication
companies. We hope that we have established such a relationship with Avaya Inc. We have
not generated any sales through channels to date.

Cost of sales

Cost of sales were $nil and $62,818
for the fiscal years ended December 31, 2003 and 2002 respectively, representing a 100%
decrease. We did not record any cost of sales for the fiscal year ended December 31, 2003
as all revenue earned in the year was recognized deferred revenue. Cost of sales for the
fiscal year ended December 31, 2002 was comprised of the royalty costs, any applicable
selling commissions, language translation costs and amortization of the telephony
hardware, software licenses, and installation costs of previous versions of our product at
existing customer locations (which used to be sold as a complete product including
hardware and software).

The decrease in cost of sales was
primarily attributable to a decrease of $44,585 in royalty costs related to sales of our
software license to one customer for the fiscal year ended December 31, 2002.

Operating Expenses

Total operating costs for the year
ended December 31, 2003 were $2,898,909 compared to $4,419,528 for the previous year. The
decrease in total costs of $1,520,619, or 34%, was primarily attributable to the continued
implementation of our restructuring plan to conserve cash and to reduce our monthly cash
burn rate. The plan resulted in a significant reduction in costs and the reduction in
personnel was the primary method used to reduce our operating costs. For the fiscal year
ended December 31, 2003, an aggregate of eight employees were laid off which resulted in a
net aggregate monthly savings of approximately $50,000. In addition to the layoffs, all
employees agreed to a rollback on salaries of between 2.5% to 5% during the year.
Approximately $350,000 was attributed to a reduction in the amortization on our property
and equipment and approximately $200,000 was attributed to a reduction on the use of
professionals. The total cost of the restructuring plan for the fiscal year ended December
31, 2003 was $52,366.

Sales & Marketing

Our sales and marketing costs
consists primarily of personnel, advertising, promotions, public relations, trade shows
and business development. Total costs were $665,801 and $1,103,112 for the fiscal years
ended December 31, 2003 and December 31, 2002 respectively representing a decrease of 40%
in sales and marketing costs.

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23

The decrease of $437,311 in sales and
marketing expense between the fiscal years ended December 31, 2003 and 2002 is a result of
a decrease in sales and marketing personnel, advertising and promotions, travel,
consulting fees, and general sales and marketing expenses. The decrease in sales and
marketing expenses is a result of our shift from a direct sales model to a channel partner
model. This shift will allow us to utilize the brand of our channel partner to access the
persons making the purchase decisions at the Tier I telecommunication companies. The shift
resulted in the reduction in staff which we employed for sales support and training. From
a sales perspective, we believe that this shift will allow for greater revenue potential
over time. The primary reason for the decrease in costs is a result of a significant cost
reduction plan. We decreased personnel in our sales and marketing department by 3 persons
between December 31, 2002 and December 31, 2003.

Research and Development

Our research and development costs
were $725,456 and $1,058,643 for the fiscal years ended December 31, 2003 and 2002
respectively, representing a decrease of $333,187 or 31%. Included in these costs are
employee stock option compensation cost of $nil and $21,766 for the fiscal years ended
December 31, 2003 and 2002 respectively.

The decrease of $311,421 (exclusive
of stock based compensation) between the fiscal years ended December 31, 2003 and 2002 is
primarily a result of a decrease in research and development personnel, data and voice
transmission and related facility costs. The primary reason for the decrease in costs is a
result of a significant cost reduction plan. We have decreased personnel in our research
and development department by 5 developers between December 31, 2002 and December 31,
2003.

General and Administrative

Our general and administrative costs
consist primarily of personnel costs, professional and legal costs, consulting fees,
travel, and the lease of office space. General and administrative costs were $1,507,562
and $2,257,773 for the fiscal years ended December 31, 2003 and 2002 respectively,
representing a decrease of $750,211 or 33% in our general and administrative costs.
Included in these costs are stock option compensation cost of $60,062 and $nil for the
fiscal years ended December 31, 2003 and 2002 respectively.

The decrease of $810,273 (exclusive
of stock based compensation) in general and administrative costs between the fiscal years
ended December 31, 2003 and 2002, is primarily a result of a decrease in personnel costs,
professional and legal costs.

Interest Income

Interest income was $5 and $7,134 for
the fiscal years ended December 31, 2003 and 2002 respectively. For the fiscal year ended
December 31, 2003, we earned interest income on cash through term deposits. The decrease
in interest income is a result of the decrease in cash and cash equivalents from December
31, 2002 to December 31, 2003.

Interest Expense

Our interest expense was $629,043 and
$133,434 for the fiscal years ended December 31, 2003 and 2002 respectively. The increase
in interest expense resulted from the increase in the issuance of debt securities for the
fiscal year ended December 31, 2003, including the Series A, B, C, D and E promissory
notes payable.

Loss on Debt Restructuring

For the fiscal year ended December
31, 2003, we recorded a $241,636 loss on debt restructuring as described more fully in
Note 7 to the audited consolidated financial statements.

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24

Income Taxes

At December 31, 2003, we have
$5,387,000 United States tax net operating losses that expire in the years 2019 through to
2022. As at December 31, 2003 we have Canadian tax net operating losses of approximately
$19,023,000 that will expire in the years 2004 through 2010. Non-capital losses of our
Canadian operating subsidiary Voice Mobility Inc., are restricted by Canadian Income Tax
law and may not be available entirely for use in future years pursuant to Section 111(4)
of the Canadian Income Tax Act.

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.
For fiscal years ended December 31, 2003 and 2002 respectively, we recognized a valuation
allowance equal to deferred tax assets for which realization is uncertain.

Net Loss

Our net loss was $3,711,616 and
$3,908,709 for the fiscal years ended December 31, 2003 and 2002 respectively. The primary
reason for the decrease in net loss is due to the implementation of our restructuring plan
that involved the reduction in personnel between December 2002 to December 2003 of 8
employees and their related costs. Along with the cost reduction plan, we recorded a loss
on debt restructuring of $241,636 that took place on September 9, 2003.

Since inception through December 31,
2003, we have incurred aggregate net losses of $36 million. The losses were primarily
incurred as a result of our focus on the development and testing of our product and the
marketing of our product. We have moved our focus from the development of our product and
we are now in a position to focus on the sales of our product and we believe that we will
continue to incur losses until we generate sufficient revenues to cover all of our
operating expenses. Because we are uncertain as to the rate at which telecommunications
companies will replace their legacy voicemail systems with technology like our enhanced
messaging product, we cannot accurately predict when we will be able to generate revenues
which will exceed our ongoing operating expenses.

# Liquidity and Capital
Resources

As of December 31, 2004, we had
$566,254 in cash and cash equivalents and a working capital deficiency of $5,631,974 and
as of December 31, 2003, we had $85,636 in cash and cash equivalents and a working capital
deficiency of $1,106,713.

Operating Activities

Our operating activities resulted in
net cash outflows of $2.3 million and $2.1 million for the fiscal years ended December 31,
2004 and 2003 respectively. The operating cash outflows for these periods resulted from
investments in research and development and sales and marketing, which led to operating
losses in all periods.

Investing Activities

Investing activities resulted in net
cash outflows of $109,079 for the fiscal year ended December 31, 2004. We received
proceeds of $8,963 from the sale of property and equipment and spent $118,042 on property
and equipment purchased during the period. Investing activities resulted in net cash
inflows of $8,292 for the year ended December 31, 2003. The investing activities in fiscal
2004 and 2003 were limited due to our cash conservation plans. At December 31, 2004, we
did not have any material commitments for future capital expenditures.

Financing Activities

Financing activities resulted in net
cash inflows of $2.9 million for the fiscal year ended December 31, 2004 from the issuance
of common shares and share purchase warrants in several private placement transactions,
the issuance of Series F and G promissory notes, and the exercise of certain outstanding
share purchase warrants and options. Financing activities resulted in net cash inflows of
$2.2 million for the fiscal year ended December 31, 2003 from the issuance of Series B, D
and E promissory notes and the issuance of common shares and share purchase warrants in a
private placement transaction in September 2003.

---

25

Debt Obligations

As at December 31, 2004, we have
$7,749,431 in debt obligations and accrued interest with maturity dates as follows:

|                                                                                                                                                                                                                                                                             | Amount outstanding
as at December 31,
2004                                  | Maturity
Date                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------
|Series C promissory notes payable            
Series D promissory notes payable            
Series E promissory notes payable            
Series F convertible promissory notes payable
Series G promissory notes payable            
Innovatia Inc. promissory note payable | $3,882,338  
452,254  
594,174  
129,890  
346,199  
2,344,576  
$7,749,431 | December 31, 2005
December 31, 2005
on demand
on demand
on demand
as discussed below

Innovatia Inc. Promissory
Note Payable

On December 28, 2001, we issued to
Innovatia a promissory note in the amount of $1,707,989 (CDN$2,720,142) of which
$2,344,576 (CDN$2,818,180) of principal and accrued interest is outstanding at December
31, 2004. The promissory note bears interest at prime plus 1% (prime rate at December 31,
2004 was 4.25%) and is repayable in quarterly installments until repaid in full. The
amount payable each quarter is the lesser of $188,584 (Cdn$226,678) and 40% of the net
aggregate amount of invoices issued by our company to Aliant and its subsidiaries in the
quarter.

After December 31, 2004, any current
or future amounts due in accordance with the quarterly repayment schedule are only payable
in common shares and the number of common shares payable, if any, is determined by
dividing the amount payable by Cdn$1.56. As at December 31, 2004, the current portion due
on the promissory note is $383,237 (CDN$460,651) and as of January 1, 2005, this amount is
payable only by the issuance of 295,289 common shares. Notwithstanding, we have the option
at any time and from time to time to prepay in cash, common shares or a combination
thereof, the whole or any portion of the remaining non-current balance. If we elected to
prepay by common shares, then 500,000 of the common shares will be valued at the lesser of
the market price of our common shares on the Toronto Stock Exchange and Cdn$0.75 per
share, and the value of the balance of any other common shares payable is determined by
the weighted average trading price of our common shares on the Toronto Stock Exchange over
the ten trading days immediately prior to the date on which the common shares are to be
issued. As at December 31, 2004, the non-current portion of the promissory note eligible
for prepayment is $1,961,339 (CDN$2,357,529) and if we elected to prepay this amount with
the issuance of common shares then as at January 1, 2005, this would result in the
issuance of 2,741,313 common shares.

As at January 1, 2005, if we made the
election to settle the entire principal and interest outstanding with the issuance of
common shares, this would result in the issuance of 3,036,602 shares of our common stock.
We are required to obtain shareholder and regulatory approval to issue common shares to
settle the promissory note. We have obtained shareholder and regulatory approval to issue
up to 2,000,000 shares of common stock to settle all or a portion of the promissory note.
If the 2,000,000 shares of common stock is not sufficient to settle the promissory note,
we will need to obtain further shareholder and regulatory approval to issue common shares
to settle the remaining balance of the promissory note. In the event such shareholder and
regulatory approval is not obtained, the promissory note will be payable only in cash.

---

26

We believe Innovatia has not complied
with the terms of its development and license agreements that gave rise to the promissory
note debt obligation and as a result we have corresponded with Innovatia to resolve the
matter.

Trends and Uncertainties

Our ability to generate revenues in
the future is dependent on when telecommunication companies will replace their legacy
voicemail systems and implement new technology, like our enhanced messaging software. We
cannot predict when telecommunication companies will adopt such technology and this causes
some uncertainty with respect to the growth of and our ability to generate ongoing
revenues.

The continued downturn in the
telecommunications industry is causing some telecommunications companies to delay making
any capital expenditures in connection with replacing their legacy voicemail systems. If
telecommunication companies delay their capital expenditures, then the growth of our
revenues could also be delayed.

Future Operations

Presently, our revenues are not
sufficient to meet operating and capital expenses and we have incurred operating losses
since inception, which are likely to continue for the foreseeable future. We anticipate
that we will have negative cash flows during the year ended December 31, 2005. Management
projects that we will require an additional $8.2 to $8.8 million to fund our ongoing
operating expenses, working capital requirements and extinguish our debt for the next
twelve months, broken down as follows:

Estimated Funding
Required During the Next Twelve Months

|                                                          |                        
|--------------------------------------------------------- | -----------------------
|Operating expenses                                        |                        
|Sales and Marketing                                       | $650,000 - $800,000    
|General and Administrative                                | $850,000 - $950,000    
|Research and Development                                  | $850,000 - $950,000    
|Capital Expenditures                                      | $50,000 - $100,000     
|Working capital                                           | $400,000- $500,000     
|Debt                                                     
|Payment of principal and interest on promissory  notes(1) | $5,400,000 - $5,500,000
|                                                          |                        
|Total                                                     | $8,200,000 - $8,800,000
|                                                          |                        

| | (1) | Included in this amount are the Series C, D, E, F and G promissory notes. We
               expect to renegotiate $4.3 million of Series C and D promissory notes to extend
               out the maturity date, however, at as the date of filing, no terms have been
               discussed. Included in the remaining amount are the Series E, F and G promissory
               notes which are due on demand, however, we believe that these amounts will
               remain outstanding into 2006.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We plan to raise the capital required
to satisfy these immediate short-term needs and additional capital required to meet the
balance of our estimated funding requirements for the next twelve months primarily through
the sale of our equity securities or debt.

Financing activities resulted in net
cash inflows of $2.9 million for the fiscal year ended December 31, 2004 from the issuance
of common shares and share purchase warrants in several private placement transactions,
the issuance of Series F and G promissory notes, and the exercise of certain outstanding
share purchase warrants and options.

---

27

We currently anticipate that we will
generate revenues in the long-term as we increase our sales and marketing activities and
gain acceptance of our software from Tier 1 telecommunications companies. We have
implemented significant cost reductions and expect to keep our operating costs to a
minimum until cash is available through financing or operating activities. Based on
current projections, we anticipate revenues from Tier I telecommunications providers in
2005 generated through the replacement of legacy voicemail systems or new deployments by
such providers.

Due to the uncertainty of our ability
to meet our current operating and capital expenses, in their report on the annual
consolidated financial statements for the year ended December 31, 2004, our independent
registered public accounting firm included an explanatory paragraph regarding concerns
about our ability to continue as a going concern in their audit report.

There is substantial doubt about our
ability to continue as a going concern as the continuation of our business is dependent
upon obtaining further financing, successful and sufficient market acceptance of our
current products and any new products that we may introduce, the continuing successful
development of our products and related technologies, and, finally, achieving a profitable
level of operations. The issuance of additional equity securities by us could result in a
significant dilution in the equity interests of our current stockholders. Obtaining
commercial loans, assuming those loans would be available, will increase our liabilities
and future cash commitments.

There are no assurances that we will
be able to obtain further funds required for our continued operations. We are pursuing
various financing alternatives to meet our immediate and long-term financial requirements.
There can be no assurance that additional financing will be available to us when needed
or, if available, that it can be obtained on commercially reasonable terms. If we are not
able to obtain the additional financing on a timely basis, we will be forced to scale down
or perhaps even cease the operation of our business.

APPLICATION OF CRITICAL
ACCOUNTING POLICIES

Our consolidated financial statements
and accompanying notes are prepared in accordance with United States generally accepted
accounting principles. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. These estimates and assumptions are affected by managements
application of accounting policies. We believe that understanding the basis and nature of
the estimates and assumptions involved with the following aspects of our consolidated
financial statements is critical to an understanding of our operating results and
financial position.

Revenue Recognition

Revenues are derived from sales of
software licenses, hardware and maintenance and training services. We sell software
licenses with maintenance and training services, hardware on a stand-alone basis and
bundled arrangements including software, hardware and maintenance and training services.
We generally license our software to customers for an indefinite period of time.

We recognize revenue in accordance
with Statement of Position SOP 97-2 Software Revenue Recognition and Staff
Accounting Bulletin 104 Revenue Recognition .

SOP 97-2 requires that the total
arrangement fee from software arrangements that include rights to multiple software
products, post contract customer support and/or other services be allocated to each
element of the arrangement based on their relative fair values. Under SOP 97-2, the
determination of fair value is based on vendor specific objective evidence.

Software revenue is recognized under
SOP 97-2 when persuasive evidence of an arrangement exists, when all elements essential to
the functionality of the software including installation and training are delivered in
accordance with the terms and conditions of the customer contracts, when the fee is fixed
or determinable, and when collection is reasonably assured. Fees are considered fixed or
determinable if the contracts are similar to others for which we have a standard business
practice and a history of successful collection under the original payment terms.

---

28

For software arrangements involving
multiple elements, we allocate revenue to each element based on vendor specific objective
evidence of relative fair values, which are derived by allocating a value to each element
that is based upon the prices charged when the element is sold separately. Our product and
services are generally sold as part of a contract involving software, hardware,
maintenance and training. Vendor specific objective evidence is used to determine the
relative fair values of these various elements in each of the contracts.

Revenue for hardware sold separately
is recognized under Staff Accounting Bulletin 104. Hardware revenue, net of trade
discounts is recognized upon shipment or when all elements essential to functionality are
complete and when all significant contractual obligations have been satisfied and
collection is reasonably assured. When contracts contain specific contingencies, we defer
revenue recognition until such time as the contingencies are resolved.

Revenues from maintenance are
recognized rateably over the term of the arrangement, generally one year, and revenues
from training are generally recognized as the services are performed.

Software Development Costs

Costs incurred internally to develop
computer software products and the costs to acquire externally developed software products
(which have no alternative future use) to be sold, leased or otherwise marketed are
charged to expense until the technological feasibility of the product has been
established. After technological feasibility is established and until the product is
available for general release, software development, product enhancements and acquisition
costs will be capitalized and amortized on a product-by-product basis.

Stock Based Compensation

We account for stock-based employee
compensation arrangements using the intrinsic value method in accordance with the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and comply with the disclosure provisions
of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (FAS 123) as amended by Statement of Financial Accounting
Standards No. 148 Accounting for Stock-Based Compensation Transition and Disclosure
 an amendment of FASB Statement No. 123". The pro forma disclosure of
stock-based compensation is included in Note 14(d) to our audited consolidated financial
statements for the year ended December 31, 2004. Under APB 25, compensation expense for
employees is based on the difference between the fair value of our stock and the exercise
price if any, on the date of the grant. We account for stock issued to non-employees at
fair value in accordance with FAS 123. We use the Black-Scholes option pricing model to
determine the fair value of stock options granted to non-employees.

RECENT ACCOUNTING
PRONOUNCEMENTS

In December 2004, the FASB issued
Statement of Financial Accounting Standards 123R Share-Based Payment, a
revision to FAS 123. FAS 123R replaces existing requirements under FAS 123 and APB 25, and
requires public companies to recognize the cost of employee services received in exchange
for equity instruments, based on the grant-date fair value of those instruments, with
limited exceptions. FAS 123R also affects the pattern in which compensation cost is
recognized, the accounting for employee share purchase plans, and the accounting for
income tax effects of share-based payment transactions. For small-business filers, FAS
123R will be effective for interim or annual periods beginning after December 15, 2005.
Early adoption is permitted in periods in which financial statements have not yet been
issued. We expect to adopt FAS 123R on January 1, 2006. As permitted by FAS 123, we
currently account for share-based payments to employees using APB 25s intrinsic
value method. Accordingly, the adoption of FAS 123Rs fair value method will have a
significant impact on our statement of operations, although it will have no impact on our
overall financial position. The impact of adoption of FAS 123R cannot be predicted at this
time because it will depend on levels of share-based payments granted in the future.
However, had we adopted FAS 123R in prior periods, the impact of that standard would have
approximated the impact of FAS 123 as described in the disclosure of pro forma net income
and earnings per share in Note 14[d] to these consolidated financial statements.

---

29

|Item 7. | Financial Statements.
|------- | ---------------------

Financial Statements
filed as part of this Annual Report on Form 10-KSB

Our financial statements are stated
in United States dollars (US$) and are prepared in accordance with United States generally
accepted accounting principles.

Report of Independent Registered
Public Accounting Firm.

Consolidated Balance Sheets at
December 31, 2004 and 2003.

Consolidated Statements of Operations
for the years ended December 31, 2004 and 2003.

Consolidated Statements of
Stockholders Equity (Deficiency) for the years ended December 31, 2004 and 2003.

Consolidated Statements of Cash Flows
for the years ended December 31, 2004 and 2003.

Notes to the Consolidated
Financial Statements.

---

30

Consolidated Financial
Statements

Voice Mobility
International, Inc.  December 31, 2004 and 2003

---

31

# REPORT OF INDEPENDENT
REGISTEREDPUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders of Voice Mobility
International, Inc.

We have audited the accompanying
consolidated balance sheets of Voice Mobility International, Inc. as of December
31, 2004 and 2003 and the related consolidated statements of operations,
stockholders deficiency and cash flows for the years then ended. These financial
statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance
with 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. We were not engaged to
perform an audit of the Companys internal control over financial reporting. Our
audit includes consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal
control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant
estimates made by management, and 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 consolidated
financial position of Voice Mobility International, Inc. at December 31, 2004 and 2003,
and the consolidated results of its operations and its cash flows for the years then ended
in conformity with U.S. generally accepted accounting principles.

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

|                                 |                                            
|-------------------------------- | -------------------------------------------
|Vancouver, Canada,
March 9, 2005 | /s/ Ernst & Young LLP
Chartered Accountants

---

32

# Voice Mobility
International, Inc.

CONSOLIDATED BALANCE
SHEETS  [See Note 1 
Basis of Presentation]

|                  |                            
|----------------- | ---------------------------
|As at December 31 | (expressed in U.S. dollars)

|                                                        | 2004         | 2003        
|------------------------------------------------------- | ------------ | ------------
|                                                        | $            | $           
|ASSETS [notes 7, 8, 9, 10, and 11]                      |              |             
|Current                                                 |              |             
|Cash and cash equivalents                               | 566,254      | 85,636      
|Other receivables                                       | 10,813       | 13,921      
|Note receivable [note 3]                                | --           | 190,406     
|Prepaid expenses                                        | 31,096       | 63,776      
|Total current assets                                    | 608,163      | 353,739     
|                                                        |              |             
|Deferred contract costs [note 12]                       | 81,631       | 81,631      
|Deferred finance costs [note 8]                         | 27,730       | 51,420      
|Property and equipment, net [note 5]                    | 105,078      | 115,684     
|Total assets                                            | 822,602      | 602,474     
|                                                        |              |             
|LIABILITIES AND STOCKHOLDERS' DEFICIENCY                |              |             
|Current                                                
|Accounts payable [note 3]                               | 159,968      | 269,071     
|Accrued liabilities [notes 12 and 16]                   | 216,582      | 207,194     
|Employee related payables                               | 63,369       | 67,227      
|Deferred revenue                                        | 12,126       | 7,351       
|Series C promissory notes payable [note 7]              | 3,882,338    | 17,936      
|Series D promissory notes payable [note 8]              | 452,254      | 1,860       
|Series E promissory notes payable [note 9]              | 594,174      | 534,510     
|Series F convertible promissory note payable [note 10]  | 129,890      | --          
|Series G promissory notes payable [note 11]             | 346,199      | --          
|Current portion of promissory note payable [note 12]    | 383,237      | 355,303     
|Total current liabilities                               | 6,240,137    | 1,460,452   
|                                                        |              |             
|Deferred revenue [note 12]                              | 322,927      | 299,389     
|Series C promissory notes payable [note 7]              | --           | 3,467,563   
|Series D promissory notes payable [note 8]              | --           | 363,972     
|Promissory note payable [note 12]                       | 1,961,339    | 1,722,552   
|Total liabilities                                       | 8,524,403    | 7,313,928   
|Commitments [note 17]                                  
|                                                        |              |             
|Stockholders' deficiency [note 14]                     
|Common stock, $0.001 par value, authorized 100,000,000  |              |             
|41,288,491 outstanding [2003 - 35,565,620]              | 41,288       | 35,566      
|Preferred stock, $0.001 par value, authorized 1,000,000 |              |             
|Series A Preferred stock, 1 outstanding                 | 1            | 1           
|Additional paid-in capital                              | 33,880,606   | 30,061,022  
|Accumulated deficit                                     | (40,247,098) | (36,011,140)
|Other accumulated comprehensive loss                    | (1,376,598)  | (796,903)   
|Total stockholders' deficiency                          | (7,701,801)  | (6,711,454) 
|Total liabilities and stockholders' deficiency          | 822,602      | 602,474     

See accompanying notes

---

33

# Voice Mobility
International, Inc.

CONSOLIDATED STATEMENTS
OF OPERATIONS

|                       |                            
|---------------------- | ---------------------------
|Year ended December 31 | (expressed in U.S. dollars)

|                                           | 2004      | 2003     
|------------------------------------------ | --------- | ---------
|                                           | $         | $        
|                                           |           |          
|Sales [note 4]                             | 12,981    | 57,967   
|Cost of sales                              | 5,683     | --       
|Gross profit                               | 7,298     | 57,697   
|                                           |           |          
|Operating expenses                         |           |          
|Sales and marketing [note 14[e]]           | 1,652,303 | 665,801  
|Research and development                   | 760,810   | 725,456  
|General and administrative [note 14[d]]    | 1,126,326 | 1,507,652
|                                           | 3,539,439 | 2,898,909
|Loss from operations                       | 3,532,141 | 2,840,942
|Interest income                            | (2,359)   | (5)      
|Interest expense                           | 706,176   | 629,043  
|Loss on debt restructuring [note 6]        | --        | 241,636  
|Net loss                                   | 4,235,958 | 3,711,616
|                                           |           |          
|Basic and diluted loss per share [note 13] | (0.10)    | (0.06)   

See accompanying notes

---

34

# Voice Mobility
International, Inc.

# CONSOLIDATED
STATEMENTS OF STOCKHOLDERS DEFICIENCY

|                       |                            
|---------------------- | ---------------------------
|Year ended December 31 | (expressed in U.S. dollars)

|                                                                                       |              |                          |                          |            |           |             |             |              | Other         |            
|-------------------------------------------------------------------------------------- | ------------ | ------------------------ | ------------------------ | ---------- | --------- | ----------- | ----------- | ------------ | ------------- | -----------
|                                                                                       | Common Stock | Series A Preferred Stock | Series B Preferred Stock | Additional |           | Accumulated |            
|                                                                                       | Number       |                          | Number                   |            | Number    |             | Paid-in     | Accumulated  | Comprehensive |            
|                                                                                       | of Shares    | Amount                   | of Shares                | Amount     | of Shares | Amount      | Capital     | Deficit      | Loss          | Total      
|                                                                                       | #            | $                        | $                        | $          | $         | $           | $           | $            | $             | $          
|                                                                                       |              |                          |                          |            |           |             |             |              |               |            
|Balance, December 31, 2002                                                             | 31,536,948   | 31,537                   | 1                        | 1          | 585,698   | 586         | 31,847,387  | (33,619,962) | (57,712)      | (1,798,163)
|Common stock and warrants issued onrestructuring of debtand preferred stock            | 864,702      | 865                      | --                       | --         | --        | --          | 805,939     | --           | --            | 806,804    
|Exchange of Series B convertible preferred stock                                       | --           | --                       | --                       | --         | (585,698) | (586)       | (3,097,955) | --           | --            | (3,098,541)
|Retained earning adjustment on the exchange of theSeries B convertible preferred stock | --           | --                       | --                       | --         | --        | --          | --          | 1,320,438    | --            | 1,320,438  
|Warrants issued pursuant to Series D promissory notes                                  | --           | --                       | --                       | --         | --        | --          | 85,932      | --           | --            | 85,932     
|Common stock issued pursuant to private placement,net of share issue costs of $3,110   | 1,176,470    | 1,176                    | --                       | --         | --        | --          | 361,645     | --           | --            | 362,821    
|Common stock issued on exchange of exchangeableshares                                  | 1,987,500    | 1,988                    | --                       | --         | --        | --          | (1,988)     | --           | --            | --         
|Stock based compensation                                                               | --           | --                       | --                       | --         | --        | --          | 60,062      | --           | --            | 60,062     
|Components of comprehensive loss:                                                     
|Net loss                                                                               | --           | --                       | --                       | --         | --        | --          | --          | (3,711,616)  | --            | (3,711,616)
|Foreign currency translation loss                                                      | --           | --                       | --                       | --         | --        | --          | --          | --           | (739,191)     | (739,191)  
|                                                                                       |              |                          |                          |            |           |             |             |              |               |            
|Total comprehensive loss                                                               | --           | --                       | --                       | --         | --        | --          | --          | --           | --            | (4,450,807)
|                                                                                       |              |                          |                          |            |           |             |             |              |               |            
|Balance, December 31, 2003                                                             | 35,565,620   | 35,566                   | 1                        | 1          | --        | --          | 30,061,022  | (36,011,140) | (796,903)     | (6,711,454)
|Common stock issued pursuant to private placements,net of share issue costs of $32,001 | 3,546,489    | 3,546                    | --                       | --         | --        | --          | 1,982,923   | --           | --            | 1,986,469  
|Common stock issued pursuant to exercise of stock options                              | 494,549      | 494                      | --                       | --         | --        | --          | 82,115      | --           | --            | 82,609     
|Common stock issued pursuant to exercise of commonstock warrants                       | 1,344,333    | 1,344                    | --                       | --         | --        | --          | 404,732     | --           | --            | 406,076    
|Common stock issued pursuant to settlement of accountspayable                          | 40,000       | 40                       | --                       | --         | --        | --          | 21,960      | --           | --            | 22,000     
|Common stock issued pursuant to legal settlement agreement                             | 187,500      | 188                      | --                       | --         | --        | --          | 112,312     | --           | --            | 112,500    
|Warrants issued pursuant to license and and servicesagreement with Avaya               | --           | --                       | --                       | --         | --        | --          | 1,169,591   | --           | --            | 1,169,591  
|Beneficial conversion feature pursuant to Series Fconvertible promissory note payable  | --           | --                       | --                       | --         | --        | --          | 32,000      | --           | --            | 32,000     
|Common stock issued on exchange of exchangeableshares                                  | 110,000      | 110                      | --                       | --         | --        | --          | (110)       | --           | --            | --         
|Stock based compensation                                                               | --           | --                       | --                       | --         | --        | --          | 14,061      | --           | --            | 14,061     
|Components of comprehensive loss:                                                     
|Net loss                                                                               | --           | --                       | --                       | --         | --        | --          | --          | (4,235,958)  | --            | (4,235,958)
|Foreign currency translation loss                                                      | --           | --                       | --                       | --         | --        | --          | --          | --           | (579,695)     | (579,695)  
|                                                                                       |              |                          |                          |            |           |             |             |              |               |            
|Total comprehensive loss                                                               | --           | --                       | --                       | --         | --        | --          | --          | --           | --            | (4,815,653)
|                                                                                       |              |                          |                          |            |           |             |             |              |               |            
|Balance, December 31, 2004                                                             | 41,288,491   | 41,288                   | 1                        | 1          | --        | --          | 33,880,606  | (40,247,098  | (1,376,598)   | (7,701,801)

See accompanying notes

---

35

# Voice Mobility
International, Inc.

# CONSOLIDATED
STATEMENTS OF CASH FLOWS

|                       |                            
|---------------------- | ---------------------------
|Year ended December 31 | (expressed in U.S. dollars)

|                                                                       | 2004        | 2003       
|---------------------------------------------------------------------- | ----------- | -----------
|                                                                       | $           | $          
|                                                                       |             |            
|OPERATING ACTIVITIES                                                   |             |            
|Net loss                                                               | (4,235,958) | (3,711,616)
|Non-cash items included in net loss                                    |             |            
|Amortization of property and equipment                                 | 120,546     | 671,608    
|Amortization of deferred finance costs                                 | 25,752      | 297916     
|Accretion of unamortized debt discount                                 | 166,077     | 44,422     
|Beneficial conversion feature on convertible note                      | 32,000      | --         
|Non-cash sales and marketing expense                                   | 1,169,591   | --         
|Stock based compensation                                               | 14,061      | 60,062     
|(Gain) loss on disposal of property and equipment                      | (5,977)     | 24,322     
|Loss on debt restructuring                                             | --          | 241,636    
|Common stock issued on legal settlement agreement                      | 112,500     | --         
|                                                                       | (2,601,408) | (2,371,650)
|Net change in operating assets and liabilities [note 19]               | 272,962     | 261,035    
|Cash used in operating activities                                      | (2,328,446) | (2,110,615)
|                                                                       |             |            
|INVESTING ACTIVITIES                                                   |             |            
|Purchase of property and equipment                                     | (118,042)   | (5,998)    
|Proceeds on sale of property and equipment                             | 8,963       | 14,290     
|Cash provided by (used in) investing activities                        | (109,079)   | 8,292      
|                                                                       |             |            
|FINANCING ACTIVITIES                                                  
|Proceeds from Series B promissory notes payable                        | --          | 1,032,229  
|Proceeds from Series D promissory notes payable                        | --          | 366,838    
|Proceeds from Series E promissory notes payable                        | --          | 457,754    
|Proceeds from Series F convertible promissory note payable             | 112,517     | --         
|Proceeds from Series G promissory notes payable                        | 303,882     | --         
|Proceeds from issuance of common stock                                 | 1,986,469   | 362,821    
|Proceeds on exercise of stock options                                  | 82,609      | --         
|Proceeds on exercise of common stock warrants                          | 406,076     | --         
|Cash provided by financing activities                                  | 2,891,553   | 2,219,642  
|                                                                       |             |            
|Effect of change in foreign exchange rate on cash and cash equivalents | 26,590      | (129,679)  
|                                                                       |             |            
|Increase (decrease) in cash and cash equivalents                       | 480,618     | (12,360)   
|Cash and cash equivalents, beginning of year                           | 85,636      | 97,996     
|Cash and cash equivalents, end of year                                 | 566,254     | 85,636     

See accompanying notes

---

36

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 1. NATURE OF BUSINESS
AND BASIS OF PRESENTATION

# Nature of business

Voice Mobility International, Inc.,
(the Company) is a Nevada corporation engaged in the development and sales and
marketing of enhanced messaging software through its wholly owned operating subsidiaries,
Voice Mobility Inc. and Voice Mobility (US) Inc. The Companys enhanced messaging
software suite will allow for legacy voice-mail replacement and incremental offerings such
as real time call connect, voice-mail to e-mail, and fax to e-mail services. These unified
communication services are facilitated by the creation of a single personal digital
mailbox that can receive any type of communication regardless of its incoming format or
medium. The Companys principal geographic markets include North America, Europe and
Asia.

# Basis of presentation

The financial statements have been
prepared by management in accordance with United States generally accepted accounting
principles on a going concern basis, which contemplates the realization of assets and the
discharge of liabilities in the normal course of business for the foreseeable future.

The Company incurred a net loss of
$4,235,958 for the year ended December 31, 2004 [2003  $3,711,616] and has a working
capital deficiency of $5,631,974 that raises substantial doubt about its ability to
continue as a going concern. Management has been able, thus far, to finance the operations
through a series of equity and debt financings. In fiscal 2004, the Company received net
proceeds of $2.9 million in connection with the issuance of debt and equity, and the
exercise of outstanding options and warrants. Management plans to continue to seek other
sources of financing on favorable terms; however, there are no assurances that any such
financing can be obtained on favorable terms, if at all. Management believes it has
implemented significant cost reductions and expects to keep its operating costs to a
minimum until cash is available through financing or operating activities. There are no
assurances that the Company will be successful in achieving these goals.

---

37

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 1.         NATURE
OF BUSINESS AND BASIS OF PRESENTATION (contd.)

In view of these conditions, the
ability of the Company to continue as a going concern is in substantial doubt and
dependent upon achieving a profitable level of operations and on the ability of the
Company to obtain necessary financing to fund ongoing operations. Management believes that
its current and future plans enable it to continue as a going concern. These financial
statements do not give effect to any adjustments which would be necessary should the
Company be unable to continue as a going concern and therefore be required to realize its
assets and discharge its liabilities in other than the normal course of business and at
amounts different from those reflected in the accompanying financial statements.

# 2. SIGNIFICANT
ACCOUNTING POLICIES

The following is a summary of
significant accounting policies used in the preparation of these consolidated financial
statements:

# Principles of
consolidation

The accompanying consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Voice Mobility Inc., Voice Mobility (US), Inc., Voice Mobility Canada
Limited, an inactive company and VM Sub Limited, also an inactive company. All
intercompany balances and transactions have been eliminated on consolidation.

# Use of estimates

The preparation of financial
statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

# Revenue recognition

Revenues are derived from sales of
software licenses, hardware, maintenance and training services. The Company has sold
software licenses with maintenance and training services, hardware on a stand-alone basis
and bundled arrangements including software, hardware and maintenance and training
services. The Company generally licenses software to customers for an indefinite period of
time.

---

38

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 2.        SIGNIFICANT
ACCOUNTING POLICIES (contd.)

The Company recognizes revenue in
accordance with Statement of Position 97-2, Software Revenue Recognition
(SOP 97-2) and Staff Accounting Bulletin No. 104, Revenue
Recognition (SAB 104).

SOP 97-2 requires that the total
arrangement fee from software arrangements that include rights to multiple software
products, post contract customer support and/or other services be allocated to each
element of the arrangement based on their relative fair values. Under SOP 97-2, the
determination of fair value is based on vendor specific objective evidence.

Software revenue is recognized under
SOP 97-2 when persuasive evidence of an arrangement exists, when all elements essential to
the functionality of the software including installation and training are delivered in
accordance with the terms and conditions of the customer contract, when the fee is fixed
or determinable, and when collection is reasonably assured. Fees are considered fixed or
determinable if the contracts are similar to others for which the Company has a standard
business practice and a history of successful collection under the original payment terms.

For software arrangements involving
multiple elements, the Company allocates revenue to each element based on vendor specific
objective evidence of relative fair values, which are derived by allocating a value to
each element that is based upon the prices charged when the element is sold separately.
The Companys product and services are generally sold as part of a contract involving
software, hardware, maintenance and training. Vendor specific objective evidence is used
to determine the relative fair values of these various elements in each of the contracts.

Revenue for hardware sold separately
is recognized under SAB 104. Hardware revenue, net of trade discounts is recognized upon
shipment or when all elements essential to functionality are complete and when all
significant contractual obligations have been satisfied and collection is reasonably
assured. When contracts contain specific contingencies, the Company defers revenue
recognition until such time as the contingencies are resolved.

Revenues from maintenance are
recognized ratably over the term of the arrangement, generally one year, and revenues from
training are generally recognized as the services are performed.

# Foreign currency

These consolidated financial
statements have been presented in United States dollars. The functional currency of the
Company is the U.S. dollar. The functional currency of the Companys Canadian
subsidiary is the Canadian dollar. Accordingly, all assets and liabilities of the Canadian
subsidiary which are denominated in Canadian dollars are translated at the year-end
exchange rate and revenues and expenses are translated using a weighted average exchange
rate for the applicable period. Any resulting exchange gains and losses are presented as
cumulative foreign currency translation gains (losses) within other accumulated
comprehensive loss.

Transactions denominated in foreign
currencies are translated at the exchange rate in effect on the respective transaction
dates and gains and losses are reflected in the consolidated statements of operations.

---

39

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 2.        SIGNIFICANT
ACCOUNTING POLICIES (contd.)

# Financial instruments

The Companys financial
instruments consists of cash and cash equivalents, other receivables, note receivable,
accounts payable, employee related payables, and promissory notes payable. Unless
otherwise stated the fair value of the financial instruments approximates their carrying
value. The Company has not entered into foreign exchange derivative contracts.

# Cash and cash equivalents

Cash and cash equivalents consist of
cash and short term deposits with original maturities of ninety days or less and are
recorded at amortized cost.

# Property and equipment

Property and equipment are carried at
cost. Amortization is provided using the straight-line method over the assets estimated
useful lives as follows:

|                               |                  
|------------------------------ | -----------------
|
|Computer equipment             | 3 years          
|Computer software              | 2 years          
|Office equipment and furniture | 5 years          
|Leasehold improvements         | Term of the lease

# Software development
costs

Costs incurred internally to develop
computer software products and the costs to acquire externally developed software products
(which have no alternative future use) to be sold, leased or otherwise marketed are
charged to expense until the technological feasibility of the product has been
established. After technological feasibility is established and until the product is
available for general release, software development, product enhancements and acquisition
costs are capitalized and amortized on a product-by-product basis.

---

40

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 2.          SIGNIFICANT
ACCOUNTING POLICIES (contd.)

# Stock based compensation

The Company accounts for stock-based
employee compensation arrangements using the intrinsic value method in accordance with the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and complies with the disclosure provisions
of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (FAS 123), as amended by Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure
 an amendment of FASB Statement No. 123 (FAS 148). The pro-forma
disclosure of stock based compensation is included in Note 14[d].

Under APB 25, compensation expense
for employees is based on the excess of the fair value of the Companys stock over
the exercise price if any, on the date of the grant. The Company accounts for stock issued
to non-employees at fair value in accordance with FAS 123. The Company uses the
Black-Scholes option pricing model to determine the fair value of stock options granted to
non-employees.

# Income taxes

The Company follows the liability
method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial reporting and tax
bases of assets and liabilities using enacted tax rates that will be in effect for the
year in which the differences are expected to reverse.

# Loss per share

Basic loss per share is computed by
dividing loss available to common stockholders by the weighted average number of common
stock and exchangeable shares outstanding for the period. Diluted loss per share reflects
the dilutive potential of outstanding securities using the treasury stock method.

---

41

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 2.         SIGNIFICANT
ACCOUNTING POLICIES (contd.)

# Comprehensive loss

Comprehensive loss includes all
changes in equity except those resulting from investments by owners and distributions to
owners. Other accumulated comprehensive loss consists only of accumulated foreign currency
translation adjustments for all years presented.

# Recent Accounting
Pronouncements

In December 2004, the FASB issued
Statement of Financial Accounting Standards 123R Share-Based Payment, a
revision to FAS 123. FAS 123R replaces existing requirements under FAS 123 and APB 25, and
requires public companies to recognize the cost of employee services received in exchange
for equity instruments, based on the grant-date fair value of those instruments, with
limited exceptions. FAS 123R also affects the pattern in which compensation cost is
recognized, the accounting for employee share purchase plans, and the accounting for
income tax effects of share-based payment transactions. For small-business filers, FAS
123R will be effective for interim or annual periods beginning after December 15, 2005.
Early adoption is permitted in periods in which financial statements have not yet been
issued. The Company expects to adopt FAS 123R on January 1, 2006. As permitted by FAS 123,
the Company currently accounts for share-based payments to employees using APB 25s
intrinsic value method. Accordingly, the adoption of FAS 123Rs fair value method
will have a significant impact on the Companys statement of earnings, although it
will have no impact on the Companys overall financial position. The impact of
adoption of FAS 123R cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future. However, had the Company adopted FAS 123R in
prior periods, the impact of that standard would have approximated the impact of FAS 123
as described in the disclosure of pro forma net loss and loss per share in Note 14[d] to
these consolidated financial statements.

---

42

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 3. NOTE RECEIVABLE

On November 11, 2004, in exchange for
the assignment of a note receivable from the former shareholder of the predecessor
corporation, Equity Capital Group, Inc and the securities pledged, a shareholder of the
Company reduced the principal amount of their Series C Promissory Note held by $153,206
(Cdn$185,000) and offset an accounts payable owing from the Company to the shareholder of
$37,200.

# 4. SEGMENTED INFORMATION

The Company operates in one major
line of business, the development, manufacture and marketing of enhanced messaging
software systems.

Revenue from external customers, by
location of customer, is as follows:

|     | Canada | US     | Other  | Total 
|---- | ------ | ------ | ------ | ------
|     |        |        |        |       
|2004 | --     | 12,981 | --     | 12,981
|2003 | 22,381 | 20,586 | 15,000 | 57,967

Sales from technical training and
support services to one customer comprised 100% of revenues in 2004. Sales from the
recognition of deferred revenue from three customers comprised 39%, 36% and 25% of
revenues in 2003 respectively.

The Company has substantially all its
assets in Canada and its current and planned future operations are, and will be, located
in Canada.

---

43

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 5. PROPERTY AND EQUIPMENT

|                               |           | Accumulated  | Net Book
|------------------------------ | --------- | ------------ | --------
|                               | Cost      | Amortization | Value   
|                               | $         | $            | $       
|                               |           |              |         
|2004                           |           |              |         
|Computer equipment             | 2,290,325 | 2,273,459    | 16,866  
|Computer software              | 547,130   | 493,066      | 54,064  
|Office equipment and furniture | 173,919   | 156,370      | 17,549  
|Leasehold improvements         | 28,612    | 12,013       | 16,599  
|                               | 3,039,986 | 2,934,908    | 105,078 
|                               |           |              |         
|2003                           |           |              |         
|Computer equipment             | 2,754,581 | 2,692,691    | 61,890  
|Computer software              | 696,218   | 694,908      | 1,310   
|Office equipment and furniture | 197,440   | 159,062      | 38,378  
|Leasehold improvements         | 142,854   | 128,748      | 14,106  
|                               | 3,791,093 | 3,675,409    | 115,684 

# 6. RESTRUCTURING OF DEBT
AND PREFERRED STOCK

On September 9, 2003, the Company
completed a restructuring arrangement whereby certain existing debt and convertible
preferred stock were settled in full in exchange for the issuance of new debt, common
stock and share purchase warrants. The exchange of old debt for new debt, common stock and
share purchase warrants was accounted for in accordance with Statement of Financial
Accounting Standards No. 15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings. The exchange of convertible preferred stock for new debt and share
purchase warrants was accounted for in accordance with Emerging Issues Task Force No.
98-5, Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios and Emerging Issues Task Force No. 00-27,
Application of Issue No. 98-5 to Certain Convertible Instruments.

Exchange of Series A and
B Promissory Notes

The existing principal amounts of the
Series A promissory notes (Cdn$650,000) and Series B promissory notes (Cdn$1,800,000) were
exchanged for the same $1,814,949 (Cdn$2,450,000) principal amount of Series C promissory
notes. The Series C promissory notes continue to bear interest at 8% per annum payable
quarterly, however, the maturity date was extended to December 31, 2005 (refer to Note 7).

---

44

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 6.  RESTRUCTURING
OF DEBT AND PREFERRED STOCK (contd.)

As part of the troubled debt
restructuring, the Company issued 864,702 common stock and 1,633,332 Class T share
purchase warrants in partial settlement of $272,242 (Cdn$367,500) representing the 15%
repayment premium accrued for the Series A promissory notes and Series B promissory notes.
The fair market value of the common stock, based on quoted market price, was $211,387
(Cdn$285,352) and the estimated fair value of the share purchase warrants, using the
Black-Scholes option pricing model, was $302,491 (Cdn$408,333). Accordingly, a loss of
$241,636 was recorded in the statement of operations for the year ended December 31, 2003.
No other gain or loss was recognized on the restructuring of the promissory notes.

The Class T share purchase warrants
are exercisable for a period of five years at an exercise price of $0.35 (Cdn$0.425) per
share. The warrants also include a call feature at the option of the Company that is
described in Note 14[e].

Exchange of Series B
Convertible Preferred Stock

The Company issued Series C
promissory notes with a principal amount of $1,757,093 (Cdn$2,372,526) and 1,581,684 Class
T share purchase warrants in exchange for the settlement of 585,698 Series B convertible
preferred stock with a stated amount of $1,757,093 (Cdn$2,372,526) and a previously
recorded beneficial conversion feature of $1,341,448.

The Series C promissory notes bear
interest at 8% per annum payable quarterly and mature on December 31, 2005 (refer to Note
7). The Class T share purchase warrants are exercisable for a period of five years at an
exercise price of $0.35 (Cdn$0.425) per share. The warrants also include a call feature at
the option of the Company that is described in Note 14[e].

The fair value of the Series C
promissory notes on the date of issuance was estimated at $1,485,177 (Cdn$2,004,841) based
on a 15% market interest rate which management has determined to reflect the
Companys cost of borrowing. The fair value of the Class T share purchase warrants
was estimated at $292,926 using the Black-Scholes option-pricing model. The $1,320,438 net
difference between the $3,098,541 combined carrying value of the convertible preferred
stock and previously recorded beneficial conversion feature and the $1,778,103 combined
fair value of the Series C promissory notes and Class T share purchase warrants issued was
recorded as a reduction to the accumulated deficit and a reduction to the net loss
attributable to common stockholders for purposes of the calculation of basic and diluted
loss per share.

---

45

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 7. SERIES C PROMISSORY
NOTES PAYABLE

|                          | 2004      | 2003      |           |          
|------------------------- | --------- | --------- | --------- | ---------
|                          | US$       | Cdn$      | US$       | Cdn$     
|                          |           |           |           |          
|Principal                 | 3,858,175 | 4,637,526 | 3,719,650 | 4,822,526
|Unamortized debt discount | (135,953) | (163,416) | (252,087) | (326,831)
|                          | 3,722,222 | 4,474,110 | 3,467,563 | 4,495,695
|Accrued interest          | 160,116   | 192,459   | 17,936    | 23,254   
|                          | 3,882,338 | 4,666,569 | 3,485,499 | 4,518,949

The Series C promissory notes were
issued on September 9, 2003 as part of the restructuring of debt and preferred shares
described in Note 6.

The Series C promissory notes bear
interest at the rate of 8% per annum payable quarterly and mature on December 31, 2005.
The Company has agreed to repay the Series C promissory notes at a rate equal to 10% of
gross sales as and when generated and as reported on the Companys quarterly and
annual financial statements.

The Series C promissory notes were
recorded at a discount of $305,894 (Cdn$367,685), to reflect the fair value based on a 15%
market interest rate. The discount is subject to accretion over the 27-month term to
maturity of the promissory notes and recorded as interest expense.

Repayment of the Series C promissory
notes have been guaranteed by the Company and are collateralized by the assets of the
Companys subsidiary, Voice Mobility Inc.

# 8. SERIES D PROMISSORY
NOTES PAYABLE

|                          | 2004     | 2003     |          |          
|------------------------- | -------- | -------- | -------- | ---------
|                          | US$      | Cdn$     | US$      | Cdn$     
|                          |          |          |          |          
|Principal                 | 415,973  | 500,000  | 385,654  | 500,000  
|Repayment premium         | 62,396   | 75,000   | 57,848   | 75,000   
|Unamortized debt discount | (42,891) | (51,555) | (79,530) | (103,111)
|                          | 435,478  | 523,445  | 363,972  | 471,889  
|Accrued interest          | 16,776   | 20,165   | 1,860    | 2,411    
|                          | 452,254  | 543,610  | 365,832  | 474,300  

---

46

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 8.         SERIES
D PROMISSORY NOTES PAYABLE (contd.)

On September 9, 2003, the Company
issued an aggregate of $366,838 (Cdn$500,000) Series D promissory notes and 574,999 Class
R share purchase warrants to four shareholders, one of whom is also a director of the
Company. The notes bear interest at a rate of 8% per annum payable quarterly and mature on
December 31, 2005. The warrants are exercisable for a period of five years at an exercise
price of $0.35 (Cdn$0.425) per share. The warrants also include a call feature at the
option of the Company that is described in Note 14[e].

The notes are subject to a repayment
premium equal to 15% of the outstanding principal balance. The repayment premium of
$62,396 (Cdn$75,000) was recorded as an increase to the promissory notes balance and as a
deferred financing cost. The deferred financing cost is being amortized to interest
expense over the 27-month term to maturity. The gross proceeds have been allocated to the
promissory notes and the warrants based on the relative fair value of each security at the
time of issuance. Accordingly, $284,466 (Cdn$384,000) was allocated to the promissory
notes and $85,932 (Cdn$116,000) was allocated to the warrants in aggregate. The fair value
of the warrants was estimated using the Black-Scholes option-pricing model. The discount
on the notes as a result of the warrants is subject to accretion over the 27-month term to
maturity of the promissory notes and recorded as interest expense.

Repayment of the Series D promissory
notes have been guaranteed by the Company and are collateralized by the assets of the
Companys subsidiary, Voice Mobility Inc.

# 9. SERIES E PROMISSORY
NOTES PAYABLE

|                  | 2004    | 2003    |         |        
|----------------- | ------- | ------- | ------- | -------
|                  | US$     | Cdn$    | US$     | Cdn$   
|                  |         |         |         |        
|Principal         | 499,168 | 600,000 | 462,784 | 600,000
|Repayment premium | 74,875  | 90,000  | 69,418  | 90,000 
|                  | 574,043 | 690,000 | 532,202 | 690,000
|Accrued interest  | 20,131  | 24,197  | 2,308   | 2,992  
|                  | 594,174 | 714,197 | 534,510 | 692,992

During the months of November and
December 2003, the Company issued an aggregate of $457,754 (Cdn$600,000) Series E
promissory notes to two shareholders. The notes bear interest at a rate of 8% per annum
payable quarterly and are due on demand.

The notes are subject to a repayment
premium equal to 15% of the outstanding principal balance. The repayment premium of
$69,418 (Cdn$90,000) was recorded as an increase to the promissory notes balance and
expensed immediately as interest since the notes are due on demand.

Repayment of the Series E promissory
notes have been guaranteed by the Company and are collateralized by the assets of the
Companys subsidiary, Voice Mobility Inc.

---

47

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 10. SERIES F CONVERTIBLE
PROMISSORY NOTE PAYABLE

|                 | 2004    | 2003    |     |     
|---------------- | ------- | ------- | --- | ----
|                 | US$     | Cdn$    | US$ | Cdn$
|                 |         |         |     |     
|Principal        | 124,855 | 150,075 | --  | --  
|Accrued interest | 5,035   | 6,052   | --  | --  
|                 | 129,890 | 156,127 | --  | --  

On June 17, 2004, the Company issued
a $112,517 (Cdn$150,075) Series F convertible promissory note to one shareholder. The note
bears interest at a rate of 8% per annum payable quarterly and is due on demand.

The note is convertible at the option
of the holder at any time before June 17, 2006 into units at a price of $0.96 (Cdn$1.15)
per unit. Each unit will consist of one common share and one non-transferable common share
purchase warrant. The convertible promissory note contains an embedded beneficial
conversion feature amounting to $32,000 that was calculated as the difference between the
conversion price and the fair value of the units into which the promissory note is
convertible multiplied by the number of units. The $32,000 was expensed immediately as
interest since the note is due on demand.

Each warrant entitles the holder,
upon giving 61 days notice to the Company, to purchase one common share of the Company at
a price of $0.96 (Cdn$1.15) per share at any time before June 17, 2006.

Repayment of the Series F convertible
promissory note has been guaranteed by the Company and is collateralized by the assets of
the Companys subsidiary, Voice Mobility Inc.

# 11. SERIES G PROMISSORY
NOTES PAYABLE

|                 | 2004    | 2003    |     |     
|---------------- | ------- | ------- | --- | ----
|                 | US$     | Cdn$    | US$ | Cdn$
|                 |         |         |     |     
|Principal        | 332,779 | 400,000 | --  | --  
|Accrued interest | 13,420  | 16,132  | --  | --  
|                 | 346,199 | 416,132 | --  | --  

On July 1, 2004, the Company issued
an aggregate of $303,882 (Cdn$400,000) Series G promissory notes to two shareholders. The
notes bear interest at a rate of 8% per annum payable quarterly and are due on demand.

Repayment of the Series G promissory
notes have been guaranteed by the Company and are collateralized by the assets of the
Companys subsidiary, Voice Mobility Inc.

---

48

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 12. PROMISSORY NOTE
PAYABLE

The Company believes Innovatia/Aliant
has not complied with the terms of the development agreement and the software license
agreement that gave rise to the promissory note payable and the other related assets and
liabilities as described below. As a result, the Company has corresponded with Aliant to
discuss a proposed settlement. Any settlement, which could differ materially from the
amounts currently reported, will be recorded in the period it occurs.

Promissory Note Payable

|                     | 2004      | 2003      |           |          
|-------------------- | --------- | --------- | --------- | ---------
|                     | US$       | Cdn$      | US$       | Cdn$     
|                     |           |           |           |          
|Principal            | 2,020,671 | 2,428,847 | 1,873,387 | 2,428,847
|Accrued interest     | 323,905   | 389,333   | 204,468   | 265,093  
|                     | 2,344,576 | 2,818,180 | 2,077,855 | 2,693,940
|Less current portion | 383,237   | 460,651   | 355,303   | 460,651  
|                     | 1,961,339 | 2,357,529 | 1,722,552 | 2,233,289

On December 28, 2001, the Company
issued Innovatia Inc. (Innovatia), a wholly owned subsidiary of Aliant Inc.
(Aliant), a promissory note in the amount of $1,707,989 (Cdn$2,720,142) in
settlement of development services contracted from Innovatia from February 1, 2001 to
December 31, 2001. The promissory note bears interest at prime plus 1% (prime rate at
December 31, 2004 was 4.25%) and is repayable in quarterly installments until repaid in
full. The amount payable each quarter is the lesser of $188,584 (Cdn$226,678) and 40% of
the net aggregate amount of invoices issued by the Company to Aliant and its subsidiaries
in the quarter.

Through to December 31, 2004, the
repayments can be made in cash or common shares at the sole option of the Company. If paid
by common shares, then 500,000 of the common shares will be valued at the lesser of the
market price of the shares on the Toronto Stock Exchange and Cdn$0.75 per share, and the
value of the balance of any other common shares issuable to repay the debt is determined
by the weighted average trading price of the Companys common shares on the Toronto
Stock Exchange over the ten trading days immediately prior to the date on which the common
shares are to be issued.

---

49

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 12.         PROMISSORY
NOTE PAYABLE (contd.)

After December 31, 2004, any current
or future amounts due in accordance with the quarterly repayment schedule are only payable
in common shares and the number of common shares payable, if any, is determined by
dividing the amount payable by Cdn$1.56. As at December 31, 2004, the current portion due
on the promissory note is $383,237 (CDN$460,651) and as of January 1, 2005, this amount is
payable only by the issuance of 295,289 common shares. Notwithstanding, the Company has
the option at any time and from time to time to prepay in cash, common shares or a
combination thereof, the whole or any portion of the remaining non-current balance. If the
Company elected to prepay by common shares, then 500,000 of the common shares will be
valued at the lesser of the market price of the common shares on the Toronto Stock
Exchange and Cdn$0.75 per share, and the value of the balance of any other common shares
issuable to repay the debt is determined by the weighted average trading price of the
common shares on the Toronto Stock Exchange over the ten trading days immediately prior to
the date on which the common shares are to be issued. As at December 31, 2004, the
non-current portion of the promissory note eligible for prepayment is $1,961,339
(CDN$2,357,529) and if the Company elected to prepay this amount with the issuance of
common shares then as at January 1, 2005, this would result in the issuance of 2,741,313
common shares.

As at January 1, 2005, if the Company
made the election to settle the entire principal and interest outstanding with the
issuance of common shares, this would result in the issuance of 3,036,602 shares of common
stock. The Company is required to obtain shareholder and regulatory approval to issue
common shares to settle the promissory note. The Company has obtained shareholder and
regulatory approval to issue up to 2,000,000 shares of common stock to settle all or a
portion of the promissory note. The Company will need to obtain further shareholder and
regulatory approval to issue common shares to settle the remaining balance of the
promissory note. In the event such shareholder and regulatory approval is not obtained,
the promissory note will be payable only in cash.

The Company continues to accrue for
interest, however, there has been no activity in terms of repayment of the promissory note
since March 2002.

Other Related Assets and
Liabilities

In addition to the promissory note
payable, the Companys financial statements include certain Canadian dollar
denominated assets and liabilities that have not changed since December 31, 2002. Each
balance originated in connection with either the initial development agreement with
Innovatia or the three year software license agreement with Aliant that was signed on June
19, 2002. The Company received an initial payment from Aliant immediately after signing
the software license agreement to deliver certain software products and services however,
the deployment of product did not occur as planned. The US dollar equivalent of these
assets and liabilities as reported in the Companys financial statements is as
follows:

|                                                                                              | 2004    | 2003   
|--------------------------------------------------------------------------------------------- | ------- | -------
|                                                                                              | $       | $      
|                                                                                              |         |        
|Deferred contract costs                                                                       | 81,631  | 81,631 
|Royalty payable to Aliant, included in accrued liabilities                                    | 57,984  | 53,758 
|Accounts payable to Innovatia for GST on developmentservices, included in accrued liabilities | 62,943  | 58,355 
|Deferred revenue                                                                              | 322,927 | 299,389

---

50

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 13. LOSS PER SHARE

The following table sets forth the
computation of loss per share:

|                                                                                                   | 2004        | 2003       
|-------------------------------------------------------------------------------------------------- | ----------- | -----------
|                                                                                                   | $           | $          
|                                                                                                   |             |            
|Numerator:                                                                                         |             |            
|Net loss                                                                                           | (4,235,958) | (3,711,616)
|Accumulated deficit adjustment on the exchange of the Series Bconvertible preferred stock (Note 6) | --          | 1,320,438  
|Net loss attributable to common stockholders                                                       | (4,235,958) | (2,391,178)
|                                                                                                   |             |            
|Denominator:                                                                                      
|Weighted average number of common stock outstanding                                                | 38,641,535  | 33,376,040 
|Weighted average number of common stock issuableon exercise of Exchangeable Shares                 | 3,344,837   | 4,235,925  
|Weighted average number of common stockequivalents outstanding                                     | 41,986,372  | 37,611,965 
|                                                                                                   |             |            
|Basic and diluted loss per share                                                                   | (0.10)      | (0.06)     

In connection with the 1999
recapitalization of the Company, Voice Mobility Canada Limited (VM Canada), a wholly-owned
subsidiary, issued 6,600,000 VM Canada Exchangeable Shares. Each VM Canada Exchangeable
Share is exchangeable for one common share of the Company at any time at the option of the
shareholder, and will be exchanged no later than July 1, 2009, and has essentially the
same voting, dividend and other rights as one common share. A share of Series A preferred
voting stock, which was issued to a trustee in trust for the holders of the VM Canada
Exchangeable Shares, provides the mechanism for holders of the VM Canada Exchangeable
Shares to have voting rights in the Company. The Company considers each Exchangeable Share
as equivalent to one share of its common stock and therefore the Exchangeable Shares are
included in the computation of basic loss per share. During 2004, holders of the
Exchangeable Shares exchanged 110,000 Exchangeable Shares into 110,000 common shares of
the Company for no additional consideration. As at December 31, 2004, 3,340,000
Exchangeable Shares are outstanding [2003  3,450,000].

For the years ending December 31,
2004 and 2003, the Companys common shares issuable upon the exercise of stock
options, warrants and other convertible securities were excluded from the determination of
diluted loss per share as their effect would be antidilutive.

---

51

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14. SHARE CAPITAL

# [a] Authorized

The Company is authorized to issue up
to 100,000,000 shares of common stock, par value $0.001 per share. The Company is also
authorized to issue up to 1,000,000 shares of preferred stock, par value $0.001 per share.

# [b] Common stock

# 2004

# Private Placements

On March 4, 2004, the Company issued
900,000 units at Cdn$1.15 per unit for net cash proceeds of $758,326 (Cdn$1,012,879). Each
unit comprises one share of common stock and one half of one Class U share purchase
warrant, entitling the holder to one common share, exercisable at Cdn$1.36 at any time up
to March 4, 2007. The Company paid $10,106 (Cdn$13,498) in cash and issued 33,750 common
shares and 16,875 Class U share purchase warrants to a third party as a finders fee. The
warrants also include a call feature at the option of the Company that is described in
Note 14[e].

On August 27, 2004, the Company
issued 153,846 units at Cdn$0.65 per unit for net cash proceeds of $76,103 (Cdn$100,000)
to a director of the Company. Each unit comprises one share of common stock and one half
of one Class W share purchase warrant, entitling the holder to one common share,
exercisable at Cdn$1.00 at any time up to August 26, 2007. The warrants also include a
call feature at the option of the Company that is described in Note 14[e].

On September 22, 2004, the Company
issued 2,153,846 units at Cdn$0.65 per unit for net cash proceeds of $1,075,870
(Cdn$1,381,308). Each unit comprises one share of common stock and one half of one Class W
share purchase warrant, entitling the holder to one common share, exercisable at Cdn$1.00
at any time up to September 21, 2007. The Company paid $4,010 (Cdn$5,148) in cash and
issued 145,631 common shares and 72,817 Class W share purchase warrants to a third party
as a finders fee. The warrants also include a call feature at the option of the Company
that is described in Note 14[e].

On September 22, 2004, the Company
issued 149,885 units at Cdn$0.66 per unit for net cash proceeds of $76,170 (Cdn$97,795).
Each unit comprises one share of common stock and one half of one Class W share purchase
warrant, entitling the holder to one common share, exercisable at Cdn$1.00 at any time up
to September 21, 2007. The Company paid $859 (Cdn$1,129) in cash and issued 9,531 common
shares and 4,766 Class W share purchase warrants to a third party as a finders fee. The
warrants also include a call feature at the option of the Company that is described in
Note 14[e].

---

52

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14.        SHARE
CAPITAL (contd.)

# [b] Common stock
(contd.)

# Exchangeable Shares

During 2004, holders of the
Exchangeable Shares exchanged 110,000 Exchangeable Shares into 110,000 common shares of
the Company for no additional consideration.

# Legal Settlement
Agreement

On June 23, 2004, in connection with
a legal settlement agreement with a former employee, the Company issued 187,500 shares of
common stock with a fair value at the time of issuance of $112,500 (see Note 18).

# Settlement of an
Accounts Payable Balance

On August 19, 2004, in connection
with the settlement of an outstanding accounts payable balance with a certain vendor, the
Company issued 40,000 shares of common stock with a fair value at the time of issuance of
$22,000.

# 2003

# Private Placements

On September 9, 2003, the Company
issued 1,176,470 units, at $0.31 (Cdn$0.425) per unit for net cash proceeds of $362,821
(Cdn$495,750). Each unit comprises one share of common stock and one Class S warrant,
entitling the holder to one common share, exercisable at $0.33 (Cdn$0.425) at any time up
to September 8, 2008. The warrants also include a call feature at the option of the
Company that is described in Note 14[e].

# Exchangeable Shares

During 2003, holders of the
Exchangeable Shares exchanged 1,987,500 Exchangeable Shares into 1,987,500 common shares
of the Company for no additional consideration.

# Restructuring of Debt

On September 9, 2003, in connection
with the exchange of the Series A and B promissory notes into the Series C promissory
notes described in Note 6, the Company issued an aggregate of 864,702 common shares to
settle the 15% repayment fee on the Series A and B promissory notes.

---

53

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14.         SHARE
CAPITAL (contd.)

# [c] Preferred stock

On September 9, 2003, the 585,698
outstanding shares of Series B preferred stock were settled in exchange for the issuance
of Series C promissory notes and Class T share purchase warrants as described in Note 6.

# [d] Stock options

# Second Amended and
Restated 1999 Stock Option Plan

On June 14, 2001, an amendment to the
Amended and Restated 1999 Stock Option Plan was approved to meet the requirements for
listing of the Companys securities on The Toronto Stock Exchange. The Second Amended
and Restated 1999 Stock Option Plan (Plan) authorizes an aggregate amount of
10,000,000 common shares to be issued pursuant to the exercise of stock options.

The Plan provides for the granting of
options, which either qualify for treatment as incentive stock options or non-statutory
stock options, and entitles directors, employees and consultants to purchase common shares
of the Company. Options granted are subject to approval of the Board of Directors or the
Compensation Committee.

The options generally vest over a
period of two to three years from the date of grant. Any options that do not vest as the
result of a grantee leaving the Company are forfeited and the common shares underlying
them are returned to the reserve. The options generally have a contractual term of five
years.

Activity under the Plan is as
follows:

|                           |                  |             | Options Outstanding |               
|-------------------------- | ---------------- | ----------- | ------------------- | --------------
|                           |                  |             |                     | Weighted      
|                           | Shares Available | Number      | Price               | Average       
|                           | for Grant        | of Shares   | per Share           | Exercise Price
|                           |                  |             |                     |               
|Balance, December 31, 2002 | 2,278,269        | 6,267,276   | 0.10 - 7.25         | $1.57         
|Options granted            | (1,137,372)      | 1,137,372   | 0.18 - 0.54         | $0.28         
|Options forfeited          | 2,746,399        | (2,746,399) | 0.20 - 6.88         | $1.80         
|Balance, December 31, 2003 | 3,887,296        | 4,658,249   | 0.12 - 7.25         | $1.13         
|Options granted            | (2,641,617)      | 2,641,617   | 0.58 - 1.08         | $0.82         
|Options forfeited          | 1,133,963        | (1,133,963) | 0.13 - 5.13         | $1.15         
|Options exercised          | --               | (494,549)   | 0.13 - 0.35         | $0.17         
|Balance, December 31, 2004 | 2,379,642        | 5,671,354   | 0.13 - 7.25         | $1.07         

---

54

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14.         SHARE
CAPITAL (contd.)

The weighted average remaining
contractual life and weighted average exercise price of options outstanding and of options
exercisable as at December 31, 2004 are as follows:

|             | Options Outstanding |          | Options Exercisable |                |         
|------------ | ------------------- | -------- | ------------------- | -------------- | --------
|             |                     |          | Weighted            |                |         
|             | Number              | Weighted | Average             | Number         | Weighted
|Range of     | Outstanding at      | Average  | Remaining           | Exercisable at | Average 
|Exercise     | December 31,        | Exercise | Contractual         | December 31,   | Exercise
|Prices       | 2004                | Price    | Life (years)        | 2004           | Price   
|             |                     |          |                     |                |         
|$0.13 - 0.50 | 1,795,771           | $0.21    | 2.88                | 1,755,429      | $0.21   
|$0.51 - 1.00 | 2,909,217           | $0.83    | 3.92                | 1,911,120      | $0.89   
|$1.01 - 2.00 | 310,700             | $1.44    | 1.61                | 285,700        | $1.47   
|$2.01 - 3.00 | 306,666             | $2.35    | 0.56                | 306,666        | $2.35   
|$3.01 - 7.25 | 349,000             | $5.97    | 0.44                | 349,000        | $5.97   
|             | 5,671,354           | $1.07    | 3.07                | 4,607,915      | $1.15   

As at December 31, 2004, 5,037,354
[2003  3,638,250] options outstanding have an exercise price denominated in Canadian
dollars with a weighted average exercise price of Cdn$0.84 [2003  Cdn$0.59].

The Company incurred non-cash stock
based compensation expense of $14,061 and $60,062 in general and administrative expenses
for the years ended December 31, 2004 and 2003 respectively.

---

55

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14.         SHARE
CAPITAL (contd.)

# Pro forma disclosure of
stock based compensation

Pro forma information regarding
results of operations and loss per share is required by FAS 123, as amended by FAS 148,
for stock-based awards to employees as if the Company had accounted for such awards using
the fair value method.

The fair value of the Companys
stock-based awards granted to employees in 2004 and 2003 was estimated using the
Black-Scholes option-pricing model.

The weighted average assumptions used
and the resulting estimates of weighted average fair value of stock options granted issued
during the following periods were as follows:

|                                                                                                         | 2004  | 2003 
|-------------------------------------------------------------------------------------------------------- | ----- | -----
|                                                                                                         |       |      
|                                                                                                         |       |      
|Expected life of employee stock options (in years)                                                       | 3.0   | 2.5  
|Volatility                                                                                               | 142%  | 171% 
|Risk-free interest rate                                                                                  | 3.34% | 3.57%
|Dividend yields                                                                                          | 0%    | 0%   
|Weighted average fair value of stock options under
employee stock option plans granted during the period | $0.59 | $0.23

For pro forma purposes, the estimated
value of the Companys stock-based awards to employees is amortized on a
straight-line basis over the vesting period of the underlying options. The effect on the
Companys net loss and loss per share of applying FAS 123 to the Companys
stock-based awards to employees would approximate the following:

|                                                           | 2004        | 2003       
|---------------------------------------------------------- | ----------- | -----------
|                                                           | $           | $          
|                                                           |             |            
|Net loss                                                   | (4,235,958) | (3,711,616)
|Compensation expense included in reported net loss         | 14,061      | 60,062     
|Compensation expense determined under thefair value method | (1,097,638) | (570,066)  
|Pro forma net loss                                         | (5,319,535) | (4,221,620)
|                                                           |             |            
|Basic and diluted loss per share                          
|As reported                                                | (0.10)      | (0.06)     
|Pro forma                                                  | (0.13)      | (0.08)     

---

56

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14.         SHARE
CAPITAL (contd.)

# [e] Warrants

The Company has the following common
stock warrants outstanding:

|                      | Outstanding  |           |           | Forfeited    | Outstanding    | Exercise  |           
|--------------------- | ------------ | --------- | --------- | ------------ | -------------- | --------- | ----------
|                      | at January 1 | Issued    | Exercised | or Cancelled | at December 31 | Price     | Expiry    
|                      | #            | #         | #         | #            | #              |           | Date      
|                      |              |           |           |              |                |           |           
|                      | 2004         |           |           |              |                |           |           
|Class K warrants      | 100,000      | --        | --        | 100,000      | --             | 1.50      | Forfeited 
|Class O warrants      | 500,000      | --        | 250,000   | --           | 250,000        | 0.25      | Jul. 26/05
|Class P warrants      | 700,000      | --        | 700,000   | --           | --             | 0.30      | Exercised 
|Class Q warrants      | 377,667      | --        | 377,667   | --           | --             | Cdn.0.45  | Exercised 
|Class R warrants      | 574,999      | --        | --        | --           | 574,999        | Cdn.0.425 | Sep. 8/08 
|Class S warrants      | 1,176,470    | --        | --        | --           | 1,176,470      | Cdn.0.425 | Sep. 8/08 
|Class T warrants      | 3,215,016    | --        | 16,666    | --           | 3,198,350      | Cdn.0.425 | Sep. 8/08 
|Class U warrants      | --           | 466,875   | --        | --           | 466,875        | Cdn.1.36  | Mar. 4/07 
|Class V warrants      | --           | 2,000,000 | --        | --           | 2,000,000      | Cdn.1.14  | May 31/06 
|Class V warrants      | --           | 4,000,000 | --        | --           | 4,000,000      | Cdn.1.14  | May 31/07 
|Class W warrants      | --           | 76,923    | --        | --           | 76,923         | Cdn.1.00  | Aug. 26/07
|Class W warrants      | --           | 1,229,450 | --        | --           | 1,229,450      | Cdn.1.00  | Sep. 21/07
|                      | 6,644,152    | 7,773,248 | 1,344,333 | 100,000      | 12,973,067     |           |           
|                      |              |           |           |              |                |           |           
|                      | 2003         |           |           |              |                |           |           
|Special warrants      | 3,250,000    | --        | --        | 3,250,000    | --             | Cdn.2.25  | Forfeited 
|Compensation options  | 650,000      | --        | --        | 650,000      | --             | Cdn.2.00  | Forfeited 
|Compensation warrants | 325,000      | --        | --        | 325,000      | --             | Cdn.2.25  | Forfeited 
|Class F warrants      | 1,250,000    | --        | --        | 1,250,000    | --             | 2.25      | Forfeited 
|Class K warrants      | 100,000      | --        | --        | --           | 100,000        | 1.50      | Apr. 25/04
|Class O warrants      | 500,000      | --        | --        | --           | 500,000        | 0.25      | Jul. 26/05
|Class P warrants      | 700,000      | --        | --        | --           | 700,000        | 0.30      | Jan. 31/04
|Class Q warrants      | 377,667      | --        | --        | --           | 377,667        | Cdn.0.45  | Jan. 31/04
|Class R warrants      | --           | 574,999   | --        | --           | 574,999        | Cdn.0.425 | Sep. 8/08 
|Class S warrants      | --           | 1,176,470 | --        | --           | 1,176,470      | Cdn.0.425 | Sep. 8/08 
|Class T warrants      | --           | 3,215,016 | --        | --           | 3,215,016      | Cdn.0.425 | Sep. 8/08 
|                      | 7,152,667    | 4,966,485 | --        | 5,475,000    | 6,644,152      |           |           

---

57

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 14.         SHARE
CAPITAL (contd.)

On July 28, 2003, the date of expiry
for the Class P warrants and Class Q warrants was extended from July 31, 2003 to January
31, 2004 for no additional consideration.

The Class R, S and T share purchase
warrants have a call feature by which the Company can demand exercise of the share
purchase warrants if the common stock trades at a price equal to or greater than
Cdn.$1.275 on the Toronto Stock Exchange for a period of 30 consecutive days. If the share
purchase warrants have not been exercised then such share purchase warrants will terminate
on the date that is 120 days from the date such demand is given to the holders.

The Class U share purchase warrants
have a call feature by which the Company can demand exercise of the share purchase
warrants if the common stock trades at a price equal to or greater than Cdn.$3.00 on the
Toronto Stock Exchange for a period of 30 consecutive days. If the share purchase warrants
have not been exercised then such share purchase warrants will terminate on the date that
is 120 days from the date such demand is given to the holders.

On June 1, 2004, the Company amended
its Master License Agreement with Avaya Inc. (Avaya) and in this regard
granted 6,000,000 Class V warrants, which allow Avaya, upon the achievement of certain
performance based milestones, to acquire up to 6,000,000 common shares of the Company at
Cdn.$1.14 per share. 2,000,000 warrants vested immediately and will expire on May 31,
2006. The fair value of the 2,000,000 warrants, which vested immediately, was measured
using the Black-Scholes option-pricing model and amounted to $1,169,591. This amount was
expensed to sales and marketing in the statements of operations. The remaining 4,000,000
Class V warrants will vest based on performance based milestones and will expire on May
31, 2007. As at December 31, 2004, no additional performance based milestones had been
met.

The Class W share purchase warrants
have a call feature by which the Company can demand exercise of the share purchase
warrants if the common stock trades at a price equal to or greater than Cdn.$2.25 on the
Toronto Stock Exchange for a period of 30 consecutive days. If the share purchase warrants
have not been exercised then such share purchase warrants will terminate on the date that
is 120 days from the date such demand is given to the holders.

---

58

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 15. INCOME TAXES

The Company is subject to United
States federal and state income taxes at an approximate rate of 35%. The reconciliation of
the provision (recovery) for income taxes at the United States federal statutory rate
compared to the Companys income tax expense is as follows:

|                                     | 2004        | 2003       
|------------------------------------ | ----------- | -----------
|                                     | $           | $          
|                                     |             |            
|Tax recovery at U.S. statutory rates | (1,483,000) | (1,299,000)
|Higher effective income taxes of    
|Canadian subsidiary                  | (14,000)    | (104,000)  
|Change in valuation allowance        | 1,329,000   | 1,067,000  
|Imputed interest                     | 164,000     | 299,000    
|Non-deductible expenses              | 11,000      | 37,000     
|Other                                | (7,000)     | --         
|Income tax expense (recovery)        | --          | --         

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.
The Company has recognized a valuation allowance for those deferred tax assets for which
it is more likely than not that realization will not occur.

Significant components of the
Companys deferred tax assets as of December 31 are as follows:

|                                 | 2004         | 2003       
|-------------------------------- | ------------ | -----------
|                                 | $            | $          
|                                 |              |            
|Net operating loss carryforwards | 9,720,000    | 8,308,000  
|Property and equipment           | 1,505,000    | 1,377,000  
|Unrealized foreign exchange      | (714,000)    | (420,000)  
|Debt discount accretion          | 119,000      | 42,000     
|Financing fees                   | 124,000      | 154,000    
|Other                            | 14,000       | 6,000      
|Total deferred tax assets        | 10,768,000   | 9,467,000  
|Valuation allowance              | (10,768,000) | (9,467,000)
|Net deferred tax assets          | --           | --         

---

59

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 15.          INCOME
TAXES (contd.)

The net operating loss carryforwards
expire as follows:

|       | $         
|------ | ----------
|       |           
|Canada |           
|2005   | 1,348,000 
|2006   | 1,401,000 
|2007   | 3,557,000 
|2008   | 7,612,000 
|2009   | 2,307,000 
|2010   | 1,878,000 
|2011   | 2,347,000 
|       | 20,450,000
|U.S.   |           
|2019   | 211,000   
|2020   | 2,701,000 
|2021   | 2,339,000 
|2022   | 358,000   
|2023   | 1,362,000 
|       | 6,971,000 
|       | 27,421,000

Pursuant to Section 382 of the
Internal Revenue Code, use of the Companys net operating loss carryforwards may be
limited if the Company experiences a cumulative change in ownership of greater than 50% in
a moving three year period. Ownership changes could impact the Companys ability to
utilize net operating losses and credit carryforwards remaining at the ownership change
date. The limitation will be determined by the fair market value of common stock
outstanding prior to the ownership change, multiplied by the applicable federal rate.

# 16. RELATED PARTY
TRANSACTIONS

The Company had the following related
party transactions in the normal course of operations which were recorded at amounts
established and agreed between the related parties:

[a]    
          During the year ended December 31, 2004, the Company was charged by Tsalix
          Investment Inc. (previously Pacific Western Mortgage Corporation), a company
          controlled by a shareholder and a director of the Company, for consulting
          services totalling $1,664 [2003  $3,085]. At December 31, 2004, $62,750 is
          included in accrued liabilities [2003  $59,680] that is owing to the same
          shareholder and director of the Company for monies paid on behalf of the
          Company.

---

60

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 16. RELATED
PARTY TRANSACTIONS (contd.)

[b]    
          During the year ended December 31, 2004, the Company was charged legal fees
          totalling $66,237 [2003  $74,668] by Catalyst Corporate Finance Lawyers,
          of which the Companys Corporate Secretary is a partner. At December 31,
          2004, $21,547 [2003  $41,323] is included in accounts payable and accrued
          liabilities.

[c]    
          As at December 31, 2004, included in the promissory notes payable are the
          following amounts due to a director or his immediate family member.

Principal Portion of
Promissory Notes

|                          | 2004      |           | 2003      |          
|------------------------- | --------- | --------- | --------- | ---------
|                          | US$       | Cdn$      | US$       | Cdn$     
|                          |           |           |           |          
|Series C promissory notes | 952,048   | 1,144,362 | 852,529   | 1,105,304
|Series D promissory notes | 188,816   | 226,957   | 152,734   | 198,020  
|Series E promissory notes | 297,087   | 357,099   | 267,141   | 346,348  
|Series G promissory notes | 173,100   | 208,066   | --        | --       
|                          | 1,611,051 | 1,936,484 | 1,272,404 | 1,649,672

[d]    
          As per Note 14[b], on August 27, 2004, the Company issued 153,846 units at
          Cdn$0.65 per unit for net cash proceeds of $76,103 (Cdn$100,000) to a director
          of the Company.

[e]    
          On April 28, 2004, the Company issued 10,000 stock options to ASTC Science World
          Society of which the Companys Corporate Secretary is a member of the
          equity committee and a director of the Company is a member of the Board of
          Governors.

# 17.COMMITMENTS

The Company leases two premises under
operating leases, one of which expires on March 31, 2005 and the other expires in 2008.
The minimum lease payments are as follows:

|     | $      
|---- | -------
|     |        
|2005 | 44,882 
|2006 | 42,960 
|2007 | 46,329 
|2008 | 49,979 
|     | 184,150

The rental expense charged to the
consolidated statements of operations in 2004 amounted to $149,750 [2003  $118,000].

---

61

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 18. LEGAL SETTLEMENT

On June 21, 2004, the Company entered
into a settlement agreement with a former employee whereby the Company paid $118,397
(Cdn$150,000) in cash and issued 187,500 shares of common stock which were valued at the
market price of the Companys shares on the date of issuance ($112,500) in exchange
for a dismissal of the lawsuit without costs.

# 19. SUPPLEMENTAL CASH
FLOW INFORMATION

Net changes in operating assets and
liabilities are as follows:

|                                             | 2004     | 2003   
|-------------------------------------------- | -------- | -------
|                                             | $        | $      
|                                             |          |        
|Other receivables                            | 3,108    | 5,508  
|Note receivable                              | --       | 58,393 
|Prepaid expenses                             | 32,680   | 4,691  
|Deferred contract costs                      | --       | (4,075)
|Accounts payable                             | (49,903) | 2,629  
|Accrued liabilities                          | 9,388    | 23,988 
|Employee related payables                    | (3,858)  | 19,719 
|Accrued interest on promissory notes payable | 277,454  | 145,753
|Deferred revenue                             | 4,093    | 4,429  
|                                             | 272,962  | 261,035

---

62

# Voice Mobility
International, Inc.

# NOTES TO CONSOLIDATEDFINANCIAL
STATEMENTS

|                  |                            
|----------------- | ---------------------------
|December 31, 2004 | (expressed in U.S. dollars)

# 19. SUPPLEMENTAL CASH
FLOW INFORMATION (contd)

Non-cash investing and financing
activities are as follows:

|                                                                                         | 2004    | 2003     
|---------------------------------------------------------------------------------------- | ------- | ---------
|                                                                                         | $       | $        
|Repayment of Series C promissory note payable onsettlement of notes receivable           | 153,206 | --       
|Series C promissory notes issued on settlement of   Series A and B promissory notes      | --      | 1,814,949
|Common stock and warrants issued on settlement of   Series A and B promissory notes      | --      | 272,242  
|Series C promissory notes issued on settlement of   Series B convertible preferred stock | --      | 1,757,093

Cash amounts paid for interest and
income taxes are as follows:

|                           | 2004    | 2003   
|-------------------------- | ------- | -------
|                           | $       | $      
|                           |         |        
|Cash paid for interest     | 201,962 | 164,586
|Cash paid for income taxes | --      | 563    

# 20. COMPARATIVE FIGURES

Certain comparative figures have been
reclassified to conform to the presentation adopted in the current period.

# 21. SUBSEQUENT EVENTS

As of March 9, 2005, holders of
exchangeable shares have exchanged 640,000 exchangeable shares into 640,000 common shares
of the Company for no additional consideration.

---

63

|Item 8. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

Not applicable.

|Item 8A | Controls and Procedures.
|------- | ------------------------

As required by Rule 13a-15 under the
Securities Exchange Act of 1934, as of the end of the period covered by the annual report,
being December 31, 2004, we have carried out an evaluation of the effectiveness of the
design and operation of our companys disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of our
companys management, including our companys president and our companys
chief executive officer. Based upon that evaluation, our companys president and our
companys chief executive officer concluded that our companys disclosure
controls and procedures are effective as at the end of the period covered by this report.
There have been no significant changes in our internal controls over financial reporting
that occurred during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect our internal controls over financial reporting.

Disclosure controls and procedures
and other procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time period specified in the Securities and
Exchange Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Securities Exchange Act of 1934 is
accumulated and communicated to management including our president and chief executive
officer as appropriate, to allow timely decisions regarding required disclosure.

|Item 8B. | Other Information.
|-------- | ------------------

None.

# PART III

|Item 9. | Directors, Executive Officers, Promoters and Control Persons: Compliance with Section
16(a) of the Exchange Act.
|------- | ----------------------------------------------------------------------------------------------------------------

The following table sets forth the
names, positions and ages of our executive officers and directors. All our directors serve
until the next annual meeting of shareholders or until their successors are elected and
qualify. The board of directors elects officers and their terms of office are, except to
the extent governed by employment contract, at the discretion of the board of directors.

|Name                         | Position Held with the
  Company     | Age | Date First Elected
  or Appointed                
|---------------------------- | ------------------------------------ | --- | -------------------------------------------------
|Randy G. Buchamer            | Chief Executive Officer and Director | 48  | August 2001                                      
|James J. Hutton              | President and Director               | 39  | President - August 2001
  Director - June 1999   
|David Raffa                  | Corporate Secretary                  | 46  | April 2000                                       
|William E. Krebs(1)(3)(4)    | Director                             | 58  | June 1999                                        
|Morgan Sturdy(2)(4)          | Director                             | 52  | April 2000                                       
|Donald A. Calder(1)(2)(3)(4) | Chairman of the Board of Directors,  | 60  | Chairman of the Board of  Directors - March 2003;
|Robert E. Neal(1)(2)(3)      | Director                             | 50  | September 2003                                   
|Gary Donahee(3)              | Director                             | 58  | October 2003                                     

---

64

(1) Members of
our Audit Committee(2) Members of our Corporate Governance Committee(3)
Members of our Compensation Committee(4)Members of our Finance
Committee

Randy G. Buchamer 
Chief Executive Officer and Director

Mr.       Buchamer has been our
Chief Executive Officer and a director of our company           since August, 2001.
Between August, 2001 and March, 1999, Mr. Buchamer provided           management
consulting services to various public companies for a consulting           company called
Ryden Management. From February, 1998 to March, 1999, Mr.           Buchamer served as
the Managing Director of Operations for the Jim Pattison           Group and was
responsible for supporting the $4.5 billion operations of 55           companies owned by
the Jim Pattison Group. Some of the Jim Pattison Group           businesses are involved
in grocery stores, specialty packaging, advertising,           magazine distribution,
broadcasting, automotive retailing as well as other           business. From 1996 to
1998, he served as Vice President and Chief Operating           Officer of Mohawk Oil
Retail Small Business Unit and from 1989 to 1996 as Vice           President Corporate
Services and Chief Information Officer for Mohawk Oil           Company. Mohawk is a
producer and seller of petroleum products. From 1987 to           1988, he was Retail
Market Specialist for Digital Equipment of Canada Limited.           Mr. Buchamer founded
and served, from 1981 to 1988, as President of Vartech           Systems Corporation and
RB Computer Products, an IBM value added reseller and           North American software
publisher and distributor of retail, distribution and           manufacturing software
solutions. He received his Executive MBA from Simon           Fraser Universitys
Executive Management Development Program in 1994 and           attended the Business
Administration program at the University of Illinois. He           also has completed
courses at the IBM Canada Business Management School.

Mr.           Buchamer also serves
as a director on the following companies (each of which has           a class of
securities registered under the Securities Exchange Act of 1934):           Heartland Oil
and Gas Ltd. and Bradner Ventures Ltd.

James J. Hutton President and
Director

Mr.          Hutton
previously served as our Chief Executive Officer from April 1998 to           August
2001. He has served as the President of our company since August, 2001.           Mr.
Hutton has served as a director of our subsidiary since 1998. From January           1998
to August 2000, Mr. Hutton served as a director of Acrex Ventures Ltd. From
          1990 to the present, he has also served as director and President of South
          Sycamore Group Holdings, a family company involved in diversified investments.
          From 1995 to 1998, Mr. Hutton served as Canadian Regional Manager for Ascend
          Communications, a company involved in broadband networking. From 1989 to 1995,
          Mr. Hutton served in various capacities for Gandalf Systems, Inc., starting as
a           sales executive and becoming Western Regional Manager. Gandalf Systems is a
          company which distributed networking equipment. From 1987 to 1989, Mr. Hutton
          was a Sales Trainee in the Automotive Electronics Group of Amp of Canada. Mr.
          Hutton attended the University of British Columbia.

David J. Raffa Corporate
Secretary

Mr.          Raffa is a founder, COO
and Investment Manager of BC Advantage Funds (VCC) Ltd., which is a fund that invests in early state life
science and technology companies.  He is partner of           Catalyst
Corporate Finance Lawyers, a corporate finance law firm, and is the principal of Harris Road Consulting Ltd.,
a company that specializes in guiding and advising boards of directors.
 Mr. Raffa has over 18 years experience in           working
with and advising technology companies. He also serves as a director or advisory board member
of a number of public and private technology companies. Mr. Raffa is
a member of the board of directors of the British Columbia
          Technology Industry Association.

---

65

William E. Krebs 
Director

Mr.        Krebs
previously served as the chairman of our board of directors from 1995 to
          September 2000. From 1995 to September 2000, Mr. Krebs was our Treasurer and
          Secretary. From January 1995 to August 2000, Mr. Krebs has also served as a
          director of Acrex Ventures Ltd. He also has served as President and a director
          of Pacific Western Mortgage Corp. since 1987 and served as President and a
          Director of Pacific Western Capital Corp. from 1994 to 1995. These companies
          provided consulting services and investment capital. From 1997 to 1999, he was
a           director and officer of WaveRider Communications, Inc., a company which dealt
          with wireless broadband technology. From 1990 to 1995, Mr. Krebs served as
          director and President of TelcoPlus Enterprises Ltd. and its wholly-owned
          subsidiary, Intertec Telecommunications Inc. Mr. Krebs served as a director and
          President of CT&T Telecommunications Inc. from 1990 to 1995. Mr. Krebs is a
          Chartered Accountant and practiced as such from 1973 to 1980. Mr. Krebs has
been           a member of the Canadian Institute of Chartered Accountants since 1973.

Morgan Sturdy 
Director

Since April, 2000, Morgan Sturdy
serves as a director on several Canadian and United States public companies as described
below. From September 1997 to April 2000, Mr. Sturdy was Executive Vice-President and
Chief Operating Officer of NICE Systems North America, a computer telephony interface
provider of call logging and quality performance products for call centers. For twelve
years prior, he served as President of Dees Communications Engineering Ltd., an innovator
in computer telephony solutions, which was then sold to NICE Systems. From 1997 to 1999,
he was Chairman of the Board of Directors of Hothaus Technologies, a leader in DSP
solutions for voice over IP, which was subsequently acquired by Broadcom. He is a current
director of several publicly traded companies, including Creo Inc., Ignition Point and TIR
Systems. Creo Inc.s common shares are registered under the Securities and Exchange
Act. Additionally, he sits on the board of three private technology companies including
Discovery Parks, Idellex Software and Responsetek Inc. Mr. Sturdy is the past Chairman of
the British Columbia Technology Association, a member of the Board of Governors of Science
World and Director of the Greater Vancouver YMCA. Mr. Sturdy is a past director of
National Wireless Canadian Research Foundation.

Donald A. Calder  Chairman
of the Board of Directors and Director

Mr.        Calder
was the Vice Chair of the Board and Executive Committee of the Vancouver           2010
Bid Corporation, which won for Vancouver, British Columbia the right to           host
the Olympic Winter Games and Paralympic Games in 2010. Mr. Calder has been
          retired since 1999. Mr. Calder was Chief Executive Officer of BC Telecom (a
          telephone company in British Columbia, Canada) from 1997 to 1999 and was
          previously the Executive Vice President of Network Operations at BC Telecom and
          Group Vice President of Marketing and Development with Stentor Resource Centre
          Inc. While at BC Telecom, Mr. Calder was responsible for negotiating and
          structuring the merger between BC Telecom and TELUS (a telephone company in
          British Columbia, Canada). Among his other community commitments, he was chair
          of the Vancouver General Hospital and University of British Columbia Hospital
          Foundation. Mr. Calder is the Chairman of the board of directors of the United
          Way of the British Columbia Lower Mainland and was Chairman of the 1999 United
          Way annual fundraising campaign prior to becoming Chief Executive Officer of
the           Vancouver 2010 Bid Committee.

Robert E. Neal 
Director

Robert E. Neal was reappointed to the
Board in September 2003. He is retired now. Until October 21, 2002 when he was appointed
Senior Vice President, Business Development, of Aliant, Inc., he was the President of
Innovatia, a company within Aliant Inc.s emerging business division that focuses on
the developing and selling of Internet-based technology. He was President of Innovatia
since 1997. Mr. Neal was a member of the Board as the nominee of Aliant, pursuant to an
understanding with Aliant. Aliant is one of our early investors and was our largest
customer in Canada. A native of Saint John, New Brunswick, Mr. Neal began his career in
the communications industry in 1979 at New Brunswick Telephone (NBTel). In 1992 he became
General Manager of NBTel Mobility. He was made president of Datacor (Atlantic) Inc. in
1996 and became president of NBTel interActive and General Manager of Export at NBTel in
the next year. In 1998, he was appointed Vice President of New Business Development.

---

66

Gary Donahee 
Director

From 1986 to 2003, Mr. Donahee served
in various capacities for Nortel Networks Corporation. Nortel Networks is a company that
supplies communications technology and infrastructure to enable value-added internet
protocol, or IP, data, voice and multimedia services that support the Internet and other
public and private networks using wireline and wireless technologies whose common shares
are registered pursuant to Section 12 of the Securities and Exchange Act of 1934. From
1986 to 1989, Mr. Donahee was Vice President, Human Resources, from 1989 to 1993, he was
Senior Vice President, Corporate Human Resources, from 1993 to 1995, he was Senior Vice
President and President Major Accounts, North America, from 1996 to 1998, he was Senior
Vice President and President CALA Caribbean and Latin America, from 1998 to 1999, he was
Senior Vice President and President Carrier Networks EMEA and from 1999 to 2003, Mr.
Donahee was Executive Vice President and President the Americas. Mr. Donahee is also a
director of Alaska Communications Systems Group Inc., a public company with a class of
securities registered under the Securities Exchange Act of 1934. Mr. Donahee received his
Bachelor of Arts, Education from the University of New Brunswick, completed his graduate
studies at the University of Western Ontario and attended the Marketing Management Program
at Stanford University. Mr. Donahee served as a director at various times on a number of
the boards including Bell Canada, Advanced Network Systems and the American Heart
Association.

Audit Committee Financial
Expert

Our board of directors has determined
that our company has one audit committee financial expert serving on the audit committee,
which person is William Krebs. William Krebs is a chartered accountant and practised for
seven years. Our board of directors has also determined that William Krebs is
independent, as that term is used in Item 7(b)(3)(iv) of Schedule 14A under
the Securities Exchange Act of 1934.

Family Relationships

There are no family relationships
among our directors or officers.

Compliance with Section
16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities
Exchange Act of 1934 requires our officers and directors, and persons who own more than
ten percent of a registered class of our equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers, directors
and greater than 10% shareholders are required by SEC regulation to furnish us with copies
of all Section 16(a) forms they file.

Based solely on our review of the
copies of such forms received by our company, or written representations from certain
reporting persons that no Form 5s were required for those persons, we believe that, during
the year ended December 31, 2004 all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with, with the
exception of the following:

|Name              | Number of
Late Reports | Number of Transactions Not
Reported on a Timely Basis | Failure to File
Requested Forms
|----------------- | ---------------------- | ----------------------------------------------------- | -------------------------------
|Randy G. Buchamer | 1(1)                   | 1(1)                                                  | Nil                            
|James J. Hutton   | 1(1)                   | 1(1)                                                  | Nil                            
|Marco Pacelli     | 1(2)                   | 1(2)                                                  | Nil                            
|David J. Raffa    | 1(3)                   | 1(3)                                                  | Nil                            

---

67

(1)    
          The named officer, director or greater than 10% shareholder, as applicable,
          filed a late Form 4  Statement of Change in Beneficial Ownership.

(2)    
          The named former officer, director or greater than 10% shareholder, as
          applicable, filed a late Form 4  Statement of Change in Beneficial
          Ownership.

(3)    
          The named officer, director or greater than 10% shareholder, as applicable,
          filed a late Form 3  Initial Statement of Beneficial Ownership.

Code of Ethics

Effective February 11, 2004, our
companys board of directors adopted a Code of Ethics and Business Conduct that
applies to, among other persons, our companys Chief Executive Officer (being our
principal executive officer and principal financial officer), our companys
Controller (being our principal accounting officer), as well as persons performing similar
functions. As adopted, our Code of Ethics and Business Conduct sets forth written
standards that are designed to deter wrongdoing and to promote:

| | (1) | honest
and ethical conduct, including the ethical handling of actual or
                    apparent conflicts of interest between personal and professional
relationships;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | full,
fair, accurate, timely, and understandable disclosure in reports and
                    documents that we file with, or submit to, the Securities and
Exchange                     Commission and in other public communications made by us;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | compliance
with applicable governmental laws, rules and regulations;
| | --- | --------------------------------------------------------------------

| | (4) | the
prompt internal reporting of violations of the Code of Ethics and Business
                    Conduct to an appropriate person or persons identified in the Code of
Ethics and                     Business Conduct; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | accountability
for adherence to the Code of Ethics and Business Conduct.
| | --- | ------------------------------------------------------------------------

Our Code of Ethics and Business
Conduct requires, among other things, that all of our companys personnel shall be
accorded full access to our Chief Executive Officer or Audit Committee with respect to any
matter which may arise relating to the Code of Ethics and Business Conduct. Further, all
of our companys personnel are to be accorded full access to our companys Audit
Committee if any such matter involves an alleged breach of the Code of Ethics and Business
Conduct by the Chief Executive Officer.

We will provide a copy of the Code of
Ethics and Business Conduct to any person without charge, upon request. Requests can be
sent to: Voice Mobility International, Inc., 100  4190 Lougheed Highway, Burnaby,
British Columbia, Canada, V5C 6A8 or via email to investors@voicemobility.com.

|Item 10. | Executive Compensation.
|-------- | -----------------------

During the year ended December 31,
2004, the following three (3) individuals served as executive officers of our company at
various times: Randy Buchamer, James Hutton and Marco Pacelli. Our chief executive
officer, Randy Buchamer, James Hutton and Marco Pacelli, being executive officers whose
total salary and bonus exceeded $100,000, are considered to be named executive officers
for the purposes of our executive compensation disclosure on this annual report on Form
10-KSB.

The following table shows, for the
three-year period ended December 31, 2004, the cash and other compensation we paid to our
Chief Executive Officer and to each of our executive officers who had annual compensation
in excess of $100,000.

---

68

|SUMMARY COMPENSATION TABLE                        
|--------------------------------------------------
|                                                  
|                                                  
|Name and Principal
Position                       
|Randy Buchamer         
Chief Executive Officer(3)
|James J. Hutton
President(4)                      
|Marco Pacelli(5)                                  
|Thomas G. O'Flaherty(6)                           
|William Gardiner(7)                               
|David Grinstead (8)                               

| | (1) | Compensation  was
paid to Mr. Buchamer, Mr. Hutton, Mr. OFlaherty,                     Mr. Gardiner
and Mr. Grinstead by VMI, our operating subsidiary. Compensation                     was
paid to Mr. Pacelli by Voice Mobility (US) Inc., our U.S. operating
                    subsidiary.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The  value
of perquisites and other personal benefits, securities and                     property
for the Named Executive Officers that do not exceed the lesser of
                    $50,000 or 10% of the total of the annual salary and bonus is not
reported                     herein.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Mr.  Buchamer
was appointed as our Chief Executive Officer on August 16,                     2001.
| | --- | --------------------------------------------------------------------------------------------------

| | (4) | Mr.  Hutton
served as our Chief Executive Officer from April 1, 1998 to                     August
15, 2001. Mr. Hutton was appointed as our President on June 29, 2001.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Mr.
Pacelli served as our Executive Vice President, Sales from October 1,
                    2002 to May 20, 2004.
| | --- | -------------------------------------------------------------------------------------------------------------------

| | (6) | Mr.
OFlaherty served as our President from January 1, 2000 to June
                    29, 2001.
| | --- | -------------------------------------------------------------------------------------------------

| | (7) | Mr. Gardiner served as our Vice President, Business Development from
                    August 1, 1998 to December 31, 2002 and as our Chief Executive Officer from
                    November 1997 to April 1, 1998.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

69

| | (8) | Mr. Grinstead served as our Executive Vice President, Business
                    Development from February 1, 2000 to October 25, 2002.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth for
each of the Named Executive Officers certain information concerning stock options granted
to them during the year ended December 31, 2004.

OPTION/SAR GRANTS IN
THE LAST FISCAL YEAR

|                     | Individual Grants                                               
|-------------------- | ----------------------------------------------------------------
|Name                 | Number of
Securities
Underlying
Options/
SARs
Granted
(#) (1)(2)
|Randy Buchamer       | 658,800                                                         
|James J. Hutton      | 108,800                                                         
|Marco Pacelli        | 54,400                                                          
|Thomas G. O'Flaherty | Nil                                                             
|William Gardiner     | Nil                                                             
|David Grinstead      | Nil                                                             

| | (1) | All of the above options are subject to the terms of our Second Amended
                    and Restated 1999 Stock Option Plan and are exercisable only as they vest. The
                    options have a term of 5 years from the date of grant.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | All options were granted at an exercise price equal to the fair market value of
                    our common stock on the date of grant.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth for
each Named Executive Officer certain information concerning the number of shares subject
to both exercisable and unexercisable stock options as of December 31, 2004. The values
for in-the-money options are calculated by determining the difference between
the fair market value of the securities underlying the options as of December 31, 2004
($0.735 per share) and the exercise price of the individuals options. During the
year ended December 31, 2004, Marco Pacelli exercised 272,000 options. No other named
Executive Officer exercised options during the year ended December 31, 2004.

---

70

AGGREGATED OPTION/SAR
EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

|Name                 | Shares
Acquired on
Exercise (#) | Aggregate
Value
Realized | Number of Securities Underlying
Unexercised Options/SARs at
FY-End (#)
Exercisable /
Unexercisable | Value of Unexercised In-the
-Money Options/SARs at FY-
end ($)
Exercisable / Unexercisable(1)
|-------------------- | ------------------------------- | ------------------------ | -------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------
|                     |                                 |                          | Exercisable                                                                                        | Unexercisable                                                                                
|Randy Buchamner      | Nil                             | Nil                      | 1,018,280                                                                                          | 593,520                                                                                      
|James J. Hutton      | Nil                             | Nil                      | 180,759                                                                                            | 56,541                                                                                       
|Marco Pacelli        | 272,000                         | $157,687                 | Nil                                                                                                | Nil                                                                                          
|Thomas G. O'Flaherty | Nil                             | Nil                      | Nil                                                                                                | Nil                                                                                          
|William Gardiner     | Nil                             | Nil                      | Nil                                                                                                | Nil                                                                                          
|David Grinstead      | Nil                             | Nil                      | Nil                                                                                                | Nil                                                                                          

| | (1) | The values for in-the-money options are calculated by determining
                    the difference between the fair market value of the securities underlying the
                    options as of December 31, 2004 ($0.735 per share on OTC Bulletin Board) and the
                    exercise price of the individuals options.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Of the exercisable options, 450,000 options have an exercise price of $0.13,
                    20,000 options have an exercise price of $0.23, 83,000 options have an exercise
                    price of $0.31, 65,280 options have an exercise price of $0.71, 350,000 options
                    have an exercise price of $1.14 and 50,000 options have an exercise price of
                    $1.71.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Of the unexercisable options, 593,520 options have an exercise price of $0.71.
| | --- | ------------------------------------------------------------------------------

| | (4) | Of the exercisable options, 46,000 options have an exercise price of $0.19,
                    49,479 options have an exercise price of $0.22, 20,000 options have an exercise
                    price of $0.23 and 65,280 options have an exercise price of $0.71.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Of the unexercisable options, 13,021 options have an exercise price of $0.22
                    and 43,520 options have an exercise price of $0.71.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Of the shares acquired on exercise of options, 272,000 options had an exercise
                    price of $0.13.
| | --- | ------------------------------------------------------------------------------------------------------------------

COMPENSATION OF DIRECTORS

Our non-employee directors are
granted incentive stock options. Employee directors are granted incentive stock options
based on their individual employment agreements. All stock option grants are made pursuant
to our Second Amended and Restated 1999 Stock Option Plan.

EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS

We have not entered into any
employment agreements with our officers and directors and have paid no compensation to
them. Our operating subsidiary, Voice Mobility Inc. and Voice Mobility (US) Inc., however,
have entered into employment agreements with our named executive officers.

---

71

Randy Buchamer, Chief Executive
Officer of our company and our subsidiary, entered into an indefinite term employment
agreement on August 16, 2001. He receives a salary of $166,389 (CDN$200,000) per year plus
a car allowance of $416 (CDN$500) per month. On August 16, 2001, he received a one-time
grant of 350,000 options exercisable at $1.14 (CDN$1.37) per share. In connection with Mr.
Buchamers service as a director, on June 1, 1999, he received a grant of 50,000
options exercisable at $1.00 (CDN$1.20) per share and on June 14, 2001, he received an
additional grant of 50,000 options exercisable at $1.70 (CDN$2.05). On February 26, 2002,
he received a grant of 20,000 options exercisable at $0.23 (CDN$0.28) per share, on
September 20, 2002, he received an additional grant of 450,000 options exercisable at
$0.13 (CDN$0.16) per share and on February 13, 2003, he received an additional grant of
83,000 options exercisable at $0.31 (CDN$0.37) per share. On March 18, 2004, he received
an additional grant of 658,800 options exercisable at $0.71 (CDN$0.85) per share.

Marco Pacelli, former Executive Vice
President, Sales of our company, entered into an employment agreement on October 1, 2002
for a term of two years expiring on September 30, 2004. He received a salary of $200,000
per year plus commissions. On September 20, 2002, he received a one-time grant of 500,000
options exercisable at $0.13 (CDN$0.16) per share. On February 13, 2003, he received an
additional grant of 127,000 options exercisable at $0.31 (CDN$0.37) per share and on March
18, 2004, he received an additional grant of 54,400 options exercisable at $0.71
(CDN$0.85) per share.

---

72

|Item 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
|-------- | -----------------------------------------------------------------------------------------------

We have set forth in the following
table certain information regarding our common stock beneficially owned on March 1, 2005
for (i) each shareholder we know to be the beneficial owner of 5% or more of our
outstanding common stock, (ii) each of our executive officers and directors, and (iii) all
executive officers and directors as a group. In general, a person is deemed to be a
beneficial owner of a security if that person has or shares the power to vote
or direct the voting of such security, or the power to dispose or to direct the
disposition of such security. A person is also deemed to be a beneficial owner of any
securities of which the person has the right to acquire beneficial ownership within 60
days. As of March 1, 2005, we had outstanding approximately 41,928,491 shares of common
stock issues and outstanding.

|Name and Address of Beneficial Owner                                                             | Amount and Nature ofBeneficial Ownership | Percentageof Class(1)
|------------------------------------------------------------------------------------------------ | ---------------------------------------- | ---------------------
|William H. Laird       
2930 13th Ave. S.W.
Salmon Arm, BC  V1E 4N7                              | 3,363,410 (2)                            | 8.0%                 
|William E. Krebs               
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8             | 3,157,131(3)                             | 7.3%                 
|James J. Hutton                
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8             | 1,589,345(4)                             | 3.7%                 
|Randy Buchamer                 
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8             | 1,223,630 (5)                            | 2.9%                 
|Morgan Sturdy                  
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8             | 528,846 (6)                              | 1.3%                 
|Donald A. Calder                
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8            | 325,000(7)                               | **%                  
|Robert Neal                    
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8             | 325,000 (8)                              | **%                  
|Gary Donahee                    
c/o 100 - 4190 Lougheed Highway
Burnaby, BC  V5C 6A8            | 325,000 (9)                              | **%                  
|David Raffa                         
c/o 1400 - 1055 West Hastings Street
Vancouver, BC  V6E 2E9 | 175,000(10)                              | **%                  
|Directors and Executive Officers as a Group                                                      | 7,648,952 (11)                           | 17.3%                

---

73

| | **
      Less than 1%
| | ---------------------

| | (1) | Based on 41,928,491 shares of common stock issued and outstanding as of March
                    1, 2005. As of March 1, 2005, there were 2,700,000 exchangeable shares of Voice
                    Mobility Canada Limited issued and outstanding which shares are exchangeable
                    into shares of our common stock at any time with no additional consideration.
                    Beneficial ownership is determined in accordance with the rules of the SEC and
                    generally includes voting or investment power with respect to securities. Except
                    as otherwise indicated, we believe that the beneficial owners of the common
                    stock listed above, based on information furnished by such owners, have sole
                    investment and voting power with respect to such shares, subject to community
                    property laws where applicable.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes 339,000 shares, which are owned by Mr. Lairds wife.
| | --- | -------------------------------------------------------------

| | (3) | Includes 1,250,000 shares owned by Tsalix Investment Inc. (previously Pacific
                    Western Mortgage Corporation) of which Mr. Krebs is the sole shareholder, which
                    shares consist of 1,250,000 exchangeable shares are associated with the single
                    share of Series A Preferred stock. Includes 1,482,131 shares owned by Margit
                    Kristiansen, Mr. Krebs wife. Includes 200,000 shares held in a self-directed
                    registered retirement savings plan. Also includes stock options to acquire an
                    aggregate of 225,000 shares of our common stock.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Includes 950,000 exchangeable shares associated with the single share of Series
                    A Preferred stock. Includes 36,778 shares, which are owned by Janis Gurney, Mr.
                    Huttons wife, over which Mr. Hutton disclaims beneficial ownership.
                    Includes options to acquire an aggregate of 192,567 shares of our common stock
                    exercisable within the next 60 days. Includes 110,000 shares held in a
                    self-directed registered retirement savings plan.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Includes options to acquire an aggregate of 1,223,630 shares of our common
                    stock exercisable within the next 60 days.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Includes options to acquire an aggregate of 375,000 shares of our common stock
                    and share purchase warrants to acquire an aggregate of 76,923 shares of our
                    common stock exercisable within the next 60 days.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Includes options to acquire an aggregate of 325,000 shares of our common stock
                    exercisable within the next 60 days.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Includes options to acquire an aggregate of 325,000 shares of common stock
                    exercisable within the next 60 days.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

| | (9) | Includes options to acquire an aggregate of 325,000 shares of common stock
                    exercisable within the next 60 days.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

| | (10) | Includes options to acquire an aggregate of 175,000 shares of common stock
                    exercisable within the next 60 days.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------

| | (11) | Includes 2,200,000 exchangeable shares exchangeable into 2,200,000 shares of
                    our common stock, share purchase warrants to acquire an aggregate of 76,923
                    shares of common stock and options to acquire 3,166,197 shares of our common
                    stock, all exercisable within 60 days.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity Plan Compensation
Information

This information can be found under
Item 5  Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Repurchases of Equity Securities.

|Item 12. | Certain Relationships and Related Transactions.
|-------- | -----------------------------------------------

Other than as described under the
heading Executive Compensation, or as set forth below, there are no material
transactions with any of our directors, officers or control persons that have occurred
during the last fiscal year.

---

74

During the year ended December 31,
2004, we purchased from Tsalix Investment Inc. (previously Pacific Western Mortgage
Corporation), a company controlled by William Krebs, a shareholder and director of our
company, consulting services totalling $1,644 [2003  $3,085]. We believe that the
fees we have paid for these consulting services are comparable to terms we could have
obtained from independent third parties.

During the year ended December 31,
2004, Morgan Sturdy, a director of our company, was paid $nil [2003  $2,314] for
directors fees.

On August 27, 2004, we issued 153,846
units at Cdn$0.65 per unit for net cash proceeds of $76,103 (Cdn$100,000) to Morgan
Sturdy, a director of our company. Each unit comprises one share of common stock and one
half of one Class W share purchase warrant, entitling the holder to one common share,
exercisable at Cdn$1.00 at any time up to August 26, 2007.

During the year ended December 31,
2004, Donald Calder, a director of our company, was paid $nil [2003  $2,314] for
directors fees.

During the year ended December 31,
2004, Robert Neal, a director of our company, was paid $nil [2003  $nil] for
directors fees.

As at December 31, 2004, the
following amounts due to William Krebs, a director of our company, or his immediate family
member.

|                          | 2004      | 2003     
|------------------------- | --------- | ---------
|                          | US$       | Cdn$     
|                          |           |          
|Series C promissory notes | 952,048   | 1,144,362
|Series D promissory notes | 188,816   | 226,957  
|Series E promissory notes | 297,087   | 357,099  
|Series G promissory notes | 173,100   | 208,066  
|                          | 1,611,051 | 1,936,484

On April 28, 2004, we issued 10,000
stock options to ASTC Science World Society of which our corporate secretary, David Raffa,
is a member of the equity committee and a director, Morgan Sturdy, is a member of the
Board of Governors.

During the year ended December 31,
2004, we paid $66,237 [2003  $74,668] to a lawfirm of which our corporate secretary,
David Raffa, is a partner.

|Item 13. | Exhibits.
|-------- | ---------

(a)    
          Exhibits Required by Item 601 of Regulation S-B

Exhibit Number/Description

---

75

|                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number   
3.1      
3.2      
3.6      
4.1      
4.2      
4.3      
4.4      
4.5      
5.1      
10.1     
10.2     
         
10.3     
         
10.4     
         
10.5     
         
10.6     
         
10.7     
10.8     
         
10.10    
10.11    
10.12    
         
10.13    
10.14    
10.15    
10.16    
10.17    
         
10.18    
         
10.19 | Description
Articles of Incorporation, dated October 1, 1997 (1)
Articles of Amendment of Articles of Incorporation, dated June 24, 1999 (1)
Amended and Restated Bylaws (4)
Common Stock Certificate (1)
Form of Warrant (1)
Certificate of Designation of Series A Preferred Stock (1)
Certificate of Designation of Series B Preferred Stock, dated December 27, 2000 (5)
Certificate of Amendment to Certificate of Designation of Series B Preferred Stock (9)
Opinion of Jones Vargas (6)
Amended and Restated 1999 Stock Option Plan (4)
Employment Agreement between Voice Mobility Inc. and of James Jay Hutton, dated April
1, 1998 (1)
Employment Agreement between Voice Mobility Inc. and of William Gardiner, dated August
1, 1998 (1)
Employment Agreement between Voice Mobility Inc. and of Jason Corless, dated October 1,
1998 (1)
Employment Agreement between Voice Mobility Inc. and of Budd Stewart, dated
June 20, 1999 (1)
Employment Agreement between Voice Mobility Inc. and of Geoff Heston, dated
August 7, 1999 (1)
Acquisition Agreement of Voice Mobility Inc., dated June 24, 1999 (1)
Agreement and Plan of Distribution of Equity Capital Group, Inc., dated April 1, 1999
(1)
Debt Settlement Agreement with Maritime Tel & Tel, dated September 15, 1997(1)
Voting, Support and Exchange Trust Agreement, dated September 30, 1999 (1)
Debt Settlement Agreement with Pacific Western Mortgage Corporation, dated
March 31, 1999 (1)
Debt Settlement Agreement with Ernest Weir Gardiner, dated March 31, 1999 (1)
Stock Purchase Agreement , dated April 1, 1999(1)
Form of Subscription Agreement, dated April 1, 1999 (1)
Exchange Agreement, dated July 5, 1999 (1)
Employment Agreement between Voice Mobility Inc. and Thomas G. O'Flaherty, dated
January 1, 2000 (5)
Employment Agreement between Voice Mobility Inc. and David Grinstead, dated February 1,
2000 (5)
Form of Series B Preferred Stock Subscription Agreement, dated December 27, 2000 (5)

---

76

|                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 
10.21 
10.22 
10.23 
10.24 
10.25 
10.26 
      
10.27 
      
10.28 
10.29 
      
10.30 
      
10.31 
10.32 
      
10.33 
      
10.34 
10.35 
      
10.36 
      
10.37 
10.38 
      
10.39 
      
10.40 | Form of Class I Stock Purchase Warrant, dated December 29, 2000 (5)
Escrow Agreement, as amended, dated December 29, 2000 (6)
Agency Agreement, dated April 3, 2001 (6)
Special Warrant Indenture, dated April 3, 2001 (6)
Share Warrant Indenture, dated April 3, 2001 (6)
Form of Subscription Agreements for Special Warrants (6)
LivingLAB Agreement Between Voice Mobility Inc. and Innovatia, dated
February 27, 2001 (6)
Non-Negotiable Promissory Note in favor of Ibex Investments Ltd., as amended, dated
April 25, 2001 (8)
Class K Stock Purchase Warrant, dated April 25, 2001 (6)
Non-Negotiable Promissory Note in favor of Alliance Equities Ltd., dated
May 11, 2001 (7)
Non-Negotiable Promissory Note in favor or Interior Holdings Ltd., dated
May 11, 2001 (7)
Form of Class L Stock Purchase Warrant , dated May 11, 2001 (7)
Non-Negotiable Promissory Note in favor of Alliance Equities Ltd., dated
June 14, 2001(8)
Non-Negotiable Promissory Note in favor of Interior Holdings Ltd., dated
June 14, 2001(8)
Form of Class M Stock Purchase Warrant, dated June 14, 2001 (8)
Non-Negotiable Promissory Note in favor of Alliance Equities Ltd., dated
June 25, 2001 (8)
Non-Negotiable Promissory Note in favor of Interior Holdings Ltd., dated
June 25, 2001 (8)
Form of Class N Stock Purchase Warrant, dated June 15, 2001 (8)
Escrow Agreement among the Company, Computershare Trust Company of Canada and certain
shareholders of the Company dated July 3, 2001 (8)
Settlement Agreement between Thomas O'Flaherty and the Company dated
June 29, 2001 (8)
Employment Agreement between Voice Mobility Inc. and Randy Buchamer, dated August 16,
2001 (9)

---

77

|                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.41 
      
10.42 
10.43 
      
10.44 
      
      
10.45 
10.46 
      
10.47 
10.48 
10.49 
10.50 
      
10.51 
      
      
10.52 
10.53 
      
      
10.54 
      
      
10.55 
      
      
10.56 
      
      
10.57 | Amended LivingLAB Agreement between Voice Mobility Inc. and Innovatia Inc., dated March
4, 2002(9)
Addendum to LivingLAB Agreement, dated December 28, 2001 (9)
Employment Agreement between Voice Mobility Inc. and James Hutton, dated
April 1, 2000 (9)
Software License Agreement, dated June 13, 2002, between Aliant Telecom Inc. and Voice
Mobility Inc. (Confidential treatment requested.  Confidential portions of this exhibit
have been redacted and filed separately with the Commission) (10)
Form of Subscription Agreement, dated July 26, 2002 and July 31, 2002 (11)
Employment Agreement between Voice Mobility Inc. and Marco Pacelli, dated
October 1, 2002 (11)
Subscription Agreement, dated December 30, 2002, with Wilt Laird (11)
Subscription Agreement, dated December 30, 2002, with Margit Kristiansen (11)
Ikano Communications Agreement dated April 6, 2000 (11)
Reseller Agreement, dated December 13, 2002, with Equiposy Control Division Commercial
S.A. de C.V. (11)
Form of Subscription Agreement and Promissory Note, dated June 28, 2002 between Voice
Mobility Inc. and each of William Laird, Bernice Kosier, Margit Kristiansen and Ketty
Hughes. (12)
Form of extension certificate of Class P and Class Q warrants (13)
Form of Exchange Agreements in connection with the conversion of the Series A and B
Promissory Note, dated September 9, 2003 between Voice Mobility Inc. and each of
William Laird, Bernice Kosier, Margit Kristiansen and Ketty Hughes. (14)
Form of Exchange Agreements in connection with the conversion of the Series B Preferred
Shares, dated September 9, 2003 between Voice Mobility Inc. and each of MICAP Holdings
Inc. and Manzanita Investments Ltd. (14)
Form of Subscription Agreements in connection with the issuance of Series D Promissory
Notes dated September 9, 2003 between Voice Mobility Inc, and each of Ketty Hughes,
William Laird, Margit Kristiansen and William Krebs. (14)
Form of Subscription Agreements in connection with the unit financing dated September
9, 2003 between Voice Mobility International Inc. and each of William Laird, Bob
Tassone and Kathy Fox. (14)
Master License and Service Agreement between Voice Mobility International Inc., and
Avaya Inc., dated September 12, 2003 (Portions of this document have been omitted and
filed separately with the Securities and Exchange Commission pursuant to a Request for
Confidential Treatment filed under 17 C.F.R. 200.80(b)(4) and 240.24b-2). (14)

---

78

|                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5
    
10.59
    
    
    
    
    
    
10.60
    
    
    
10.61
    
    
10.62
    
    
10.63
    
10.64
    
10.65
    
    
    
    
    
    
    
10.66
    
    
14.1
31* 
32* 
21.1 | Amendment No. 1 to Master License and Service Agreement between Voice Mobility
International, Inc. and Avaya Inc., dated December 2, 2003. (15)
Form of Subscription Agreements in connection with the unit financing dated March 4,
2004 between Voice Mobility International Inc. and each of Elizabeth Ann Laird, 656938
BC Ltd., Richard Roberts, Myrna Roberts, Heinz Hofliger, Kathy Fox and Bob Tassone,
Andrew Bury, Heather Bury, Constance and Stuart Ostlund, Columbia Marketing Ltd.,
Berkin Business SA, Paul Currie, Randall West, Mike Hope, Lila Jung, Don Sharpe, Steve
Clippingdale, Chartwell Investment Services, Shalimar Business, 514742 BC Ltd., and
391566 BC Ltd. (15)
Form of Subscription Agreements in connection with the issuance of the Series E
Promissory Notes dated November 15, 2003, November 24, 2003 and December 29, 2003
between Voice Mobility International Inc. and each of William Laird and Margit
Kristiansen. (15)
Form of subscription agreement in connection with the issuance of the Series F
Promissory Note dated June 17, 2004 between Voice Mobility International Inc. and
William Laird. (16)
Form of Subscription Agreement in connection with the issuance of the Series G
Promissory Note, dated July 1, 2004, between Voice Mobility Inc. and each of William
Laird and Margit Kristiansen. (17)
Debt Settlement and Subscription Agreement, dated August 19, 2004, between Voice
Mobility International, Inc. and 4P Management Partners S.A. (17)
Form of Subscription Agreement in connection with the unit financing, dated August 27,
2004, between Voice Mobility International, Inc. and Morgan Sturdy. (17)
Form of Subscription Agreement in connection with the unit financing, dated
September 22, 2004 between Voice Mobility International, Inc. and each of Jim Cox, Jeff
Reed, Alistair Boulton, Honor de Pencier, James Graham, William Greaves, Columbia
Marketing Ltd., Bekin Business S.A., Wolfram Boehm, Heinz Hoefliger, Sthakwy Fishing
Company Ltd., Lila Jung, 608314 BC Ltd., Kelly Selkirk, Mike Hope, Brent Peters, Paul
Currie, Barbara McKnight, Stanley Steed, Edward Morris, Jamie Robertson, Randall West,
John Ross, Chartwell Investment Services, Shalimar Business Services, Erich Hofer, Stu
Ostlund, Bill Whitehead, Monty Sutton, Doug Johnson and Bob Tassone. (17)
Form of Subscription Agreement in connection with the unit financing, dated September
22, 2004, between Voice Mobility International, Inc. and each of Barbara McKnight,
Chris Thomas, Renee Patterson and Don Donis. (17)
Code of Ethics. (15)
Section 302 Certification of Randy Buchamer, dated March 31, 2005
Section 906 Certification of Randy Buchamer, dated March 31, 2005
Subsidiaries of our company
Voice Mobility Inc. (Canadian Corporation)
Voice Mobility Canada Limited (Canadian Corporation)
VM Sub Limited (Canadian Corporation)
Voice Mobility (US) Inc. (Nevada corporation)

---

79

|      |                             
|----- | ----------------------------
|23.1* | Consent of Ernst & Young LLP

* Filed herewith.

|(1) | Previously submitted with our Registration Statement on Form 10-SB, as
                    originally filed on September 17, 1999, and all amendments thereto.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Previously submitted with our Form 8-K, as filed on March 16, 2000.
|--- | -------------------------------------------------------------------

|(3) | Previously submitted with our Form 10-KSB, as filed on March 30, 2000.
|--- | ----------------------------------------------------------------------

|(4) | Previously submitted with our Definitive Schedule 14A as filed on May 19, 2000.
|--- | -------------------------------------------------------------------------------

|(5) | Previously submitted with our Form 10-KSB, as filed on April 11, 2001.
|--- | ----------------------------------------------------------------------

|(6) | Previously submitted with our Registration Statement on Form S-1, as originally
                    filed on May 10, 2001.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(7) | Previously submitted with our Pre-effective Amendment No. 1 to the
                    Registration Statement on Form S-1, as filed on June 7, 2001.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Previously submitted with our Post-effective Amendment No. 1 to the
                    Registration Statement on Form S-1, as filed on July 16, 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Previously submitted with our Form 10-K, as filed on April 1, 2002.
|--- | -------------------------------------------------------------------

|(10) | Previously submitted with our Amendment No. 2 to Form 10-Q/A as filed on
                    January 10, 2003.
|---- | --------------------------------------------------------------------------------------------------------------

|(11) | Previously submitted with our Form 10-K, as filed on April 1, 2003.
|---- | -------------------------------------------------------------------

|(12) | Previously submitted with our Form 10-Q, as filed on May 15, 2003.
|---- | ------------------------------------------------------------------

|(13) | Previously submitted with our Form 10-Q, as filed on August 14, 2003.
|---- | ---------------------------------------------------------------------

|(14) | Previously submitted with our Form 10-Q, as filed on November 14, 2003.
|---- | -----------------------------------------------------------------------

|(15) | Previously submitted with our Form 10-K, as filed on March 26, 2004.
|---- | --------------------------------------------------------------------

|(16) | Previously submitted with our Form 10-QSB, as filed on August 13, 2004.
|---- | -----------------------------------------------------------------------

|(17) | Previously submitted with our Form 10-QSB, as filed on November 12, 2004.
|---- | -------------------------------------------------------------------------

|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

Audit Fees

Our independent registered public
accounting firm, Ernst & Young LLP, provided audit and other services during the years
ended December 31, 2004 and 2003 as follows:

|                   | 2004    | 2003   
|------------------ | ------- | -------
|Audit Fees         | $75,100 | $74,000
|Audit Related Fees | --      | --     
|Tax Fees           | 12,000  | 4,600  
|All Other Fees     | --      | --     
|                   |         |        
|Total Fees         | $87,100 | $78,600
|                   |         |        

---

80

| | Audit
Fees. This category includes the fees for the audit of our consolidated financial
statements and the quarterly reviews of interim financial statements. This category also
includes advice on audit and accounting matters that arose during or as a result of the
audit or the review of interim financial statements and services in connection with SEC
filings.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Audit
Related Fees.  There were no audited related fees paid to Ernst & Young LLP.
| | ----------------------------------------------------------------------------------

| | Tax
Fees. This category  includes the fees for  professional  services  rendered for tax
 compliance,  tax          advice and tax planning.
| | --------------------------------------------------------------------------------------------------------------------------------------------

| | All
Other Fees. There were no other fees paid to Ernst & Young LLP.
| | -------------------------------------------------------------------

Effective May 6, 2003, the Securities
and Exchange Commission adopted rules that require that before Ernst & Young LLP is
engaged by the company or its subsidiaries to render any auditing or permitted non-audit
related service, the engagement be:

| | approved
by the companys audit committee; or
| | ----------------------------------------------

| | 
entered into pursuant to pre-approval policies and procedures established by the audit
committee, provided the policies and procedures are detailed as to the particular service,
the audit committee is informed of each service, and such policies and procedures do not
include delegation of the audit committees responsibilities to management.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The audit committee requires advance
approval of all audit, audit-related, tax, and other services performed by the independent
auditor. Unless the specific service has been previously pre-approved with respect to that
year, the audit committee must approve the permitted service before the independent
auditor is engaged to perform it. The audit committee has delegated to the chair of the
audit committee authority to approve permitted services provided that the chair reports
any decisions to the committee at its next scheduled meeting.

The audit committee has considered
the nature and amount of the fees billed by Ernst & Young LLP, and believes that the
provision of the services for activities unrelated to the audit is compatible with
maintaining Ernst & Young LLPs independence.

---

81

# SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

# VOICE MOBILITY
INTERNATIONAL, INC.

By: /s/ Randy G. BuchamerRandy
G. Buchamer Chief Executive Officer
and Director(Principal Executive Officer andPrincipal Financial Officer)

Date: March 31, 2005

Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

|Signature                                                                                                                                                                                                                                                                 | Title                                                                                                                                                                                                                                                                                                                      | Date                                                                                     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------
|/s/  Randy G. Buchamer  
Randy G. Buchamer       
/s/  James J. Hutton    
James J. Hutton
/s/  Harry Chan         
Harry Chan              
/s/  William E. Krebs   
William E. Krebs
/s/  Morgan P. Sturdy   
Morgan P. Sturdy
/s/  Gary R. Donahee    
Gary R. Donahee | Chief Executive Officer and Director 
  (Principal Executive Officer and
    Principal Financial Officer)
       President and Director        
             Controller              
   (Principal Accounting Officer)
              Director               
              Director               
              Director | March 31, 2005
March 31, 2005
March 31, 2005
March 31, 2005
March 31, 2005
March 31, 2005