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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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, 2007

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

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

Issuer's telephone number (604) 482-0000

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

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

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

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

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

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 [ ]

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- 2 -

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[ ]

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

State issuer's revenues for its most recent fiscal year.
$245,206

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.)

49,780,684 common shares @ $0.42(1)= $20,907,887

(1) Closing price as quoted on the OTC Bulletin Board on March
1, 2008.

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

56,842,571 common shares issued and outstanding as of March
1, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

None

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

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VOICE MOBILITY INTERNATIONAL, INC.

TABLE OF CONTENTS

|         |         |                                                                                                                                                   | Page
      No.
|-------- | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | --------------
|Part I   |         |                                                                                                                                                  
|         |         |                                                                                                                                                   |               
|         | Item 1  | Description
      of Business                                                                                                                     | 2             
|         | Item 2  | Description of Property                                                                                                                           | 18            
|         | Item 3  | Legal
      Proceedings                                                                                                                           | 18            
|         | Item 4  | Submission of Matters to a
      Vote of Security Holders                                                                                         | 19            
|         |         |                                                                                                                                                   |               
|Part II  |         |                                                                                                                                                  
|         |         |                                                                                                                                                   |               
|         | Item 5  | Market for Common Equity and
      Related Stockholder Matters                                                                                    | 19            
|         | Item 6  | Management's
      Discussions and Analysis or Plan of Operation                                                                                  | 20            
|         | Item 7  | Financial Statements                                                                                                                              | 29            
|         | Item 8  | Changes in
      and Disagreements with Accountants on Accounting and Financial Disclosure                                                        | 68            
|         | Item 8A | Controls and Procedures                                                                                                                           | 68            
|         | Item 8B | Other
      Information                                                                                                                           | 69            
|         |         |                                                                                                                                                   |               
|Part III |         |                                                                                                                                                  
|         |         |                                                                                                                                                   |               
|         | Item 9  | Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act | 69            
|         | Item 10 | Executive Compensation                                                                                                                            | 73            
|         | Item 11 | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                                        | 78            
|         | Item 12 | Certain Relationships and
      Related Transactions, and Director Independence                                                                   | 79            
|         | Item 13 | Exhibits                                                                                                                                          | 81            
|         | Item 14 | Principal Accountant Fees
      and Services                                                                                                      | 82            
|         |         |                                                                                                                                                   |               
|         |         | Signatures                                                                                                                                        | 84            

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PART I

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

This annual report contains forward-looking statements which
are not purely historical and include any statements regarding beliefs, plans,
expectations, or intentions, including without limitation statements that 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.

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

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United States company and our common stock was quoted on the
OTC Bulletin Board under the symbol VMII. Between the period of June 1999 and
December 2007, we raised approximately $27 million, mostly from private
investors, to fund our development initiatives and operations.

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 and multimedia 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;

- 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; and

- is an ideal solution for
telecommunication companies or enterprise customers that have both a large
central location and many secondary locations of varied size but wish to put
them all under a single umbrella for voice and unified communications. Whether
the remote locations have their own telephone legacy systems or utilize voice
over internet protocol (VOIP) technology, the software solution can ensure that
company-wide deployment of voice and unified messaging is uniform, consistent
and integrated.

Legacy voicemail systems are systems that use technology that
is 15 to 20 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.
We are focused on the development of technology that takes advantage of the
market known as the voice over internet protocol (VOIP) market. Voice over
internet protocol (VOIP) is a general term for technologies that use internet
protocol for transmission of packets of data which include voice, video, text,
fax, and other forms of information that have traditionally been carried over
the dedicated circuit-switched connections of the public switched telephone
network (PSTN). General industry and analyst consensus shows that the voice over
internet protocol (VOIP) market is being adopted by the public and growing at a
considerable rate.

Our family of products are based upon open systems hardware and
software to create a solution that has low "per subscriber" fixed costs in the
industry. The solution is designed to be delivered as a messaging software
solution only, or as 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.

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;

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

- 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;

- 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;

- providing a fully synchronized
message storage area for enterprise so that a user would only have to go to one
location to retrieve all types of messages: email, fax and voice mail;

- providing several new revenue options
for operating telecommunication companies such as the ability to notify mobile
workers that their office or home voice mail has just received a voice mail
message from a specific person or number and the ability to forward a fax image
to a mobile device for viewing and forwarding; and

- providing highly innovative
methodologies to allow telecommunication companies the ability to create new
service offerings that takes internet content and forwards that content to a
voicemail box (of a mobile handset, like a cell phone) in voice form, thereby
allowing a person to access in real time internet content through a spoken
interface.

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;

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- 5 -

- 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;

- voice based text messaging (allows
users to record a voice message and deliver it as a text message);

- tools that allow internet developers
to deliver text based internet content to a voicemail box of a mobile handset
(like a cell phone) using a spoken interface (human voice), thereby allowing a
person to access in real time internet content through a spoken interface;

- storage of messages;

- webfeeds; and

- speech recognition integration.

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 (SMS) 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.

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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.

Voice short messaging service (SMS) and web feeds are new
features meant to connect the content of the message mailbox to real-time
internet based content. Voice short messaging service (SMS) allows a voice mail
to be created for the purpose of a one time single replay to the intended
recipient. The short messaging service (SMS) network is used to notify the
recipient and then direct him to the location of the message.

Web feeds is a feature that allows for the real-time "delivery"
to a mobile device, like a cell phone, of text and multimedia based internet
content that is forwarded to the mobile device when the user requests. The
content is delivered based upon user-defined criteria.

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.

For the year ended December 31, 2007, sales consisted of
technical training and support services provided to Avaya Inc. and product
license sales, hardware product sales and training services to three resellers.
For the year ended December 31, 2006, sales consisted of technical training and
support services provided to Avaya and T2MCI.

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 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

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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 are also aware of the rapid growth of telephone services
provided by companies who provide cable television services, the voice over
internet protocol (VOIP) provider and the internet telephony service provider
(ITSP).

Among the most unique attributes of our products is the ability
for a telecommunication company service provider to offer residential or
broadband users as well as mobile users the same software solution for all of
these different markets.

The software platform has been designed and engineered to meet
the demanding needs for the operating telecommunication company market. It is
capable of delivering large scale while running on equipment and technology that
is "commercial grade" and not proprietary or custom. The software can deliver
functionality that is consistent with the needs of a mobile user, a residential
user, a business user and a broadband user (persons who utilize the internet for
their telephone needs). This flexibility allows the product to be utilized in
all of these different customer markets, thereby increasing the scale of the
product and driving the price per subscriber down considerably.

A telecommunication company does not have to purchase separate
systems to serve each of the above customer markets. They can serve all of these
customer markets from a single software based product. This lessens the risk of
having to purchase additional hardware to run the software, the risk that the
software will become obsolete because of new product offerings in any of these
customer markets and the risk of being obligated to run the software on a
propriety or custom built hardware device or system.

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.

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. The global exclusivity terminated on June 1,
2005.

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

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- 8 -

many divisions 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 to its
potential customers.

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 distributors will be responsible for all selling,
distribution, support and maintenance of our enhanced messaging software. The
original equipment manufacturer distributors 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 to sell
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.

IBM: IBM makes a family of hardware
platforms that scale from the very small to the very large. We have had success
and acceptance with this hardware platform and intend to continue using this
hardware platform as one of our preferred vendors.

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.

In summary, our marketing efforts will be spread across
multiple addressable markets:

Avaya: We will continue to invest in
the relationship with Avaya as it leverages its market share dominance to
continue to provoke the move to the use of voice over internet protocol (VOIP)
and to expedite the migration to third generation messaging systems.

OEM: One primary characteristic of the
telecommunication marketplace is that traditional voice technologies are slowly
converting to voice over internet protocol (VOIP), that is telephone services
being delivered over the internet. This trend is impacting the systems purchased
by service providers (network operators) as well as enterprise customers. Our
software can reside on virtually any hardware platform and, as a result, can be
an easy addition for a manufacturer with a desire to include several
"applications" with the sale of a complete (hardware and software) system that
allows the customer to provide telephone services over the internet. Our
software can run on its own hardware or be embedded into and form part of a
larger software solution. We sell on the ability for the solution set to be
delivered entirely in software to enhance the overall product offering and to
increase margins.

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- 9 -

Channels: Our product can easily be
used in small and large applications because it is easily scalable. Our product
uses a series of predefined hardware profiles from the very small (up to 5000
subscribers) to the very large (over 1 million subscribers). Each hardware
profile can be incremented to meet the needs of a larger subscriber base. This
is attractive as it offers a low price point for entry and does not require the
"throw away" of any old hardware or the purchase of additional software as the
customer's user base grows. As a result of this flexibility, our product is an
excellent solution for large telecommunication companies. We will be continuing
to offer our product through value-added resellers.

International: Our product is rendered
in several languages today and, as such, is attractive to the more mature
markets as well as the emerging telephony markets. We will approach each market
with caution but we will invest in intelligent opportunities when they
arise.

International Markets

We believe international markets should offer us 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 2005, 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 audited consolidated financial statements
included elsewhere in this filing 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)

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- 10 -

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. In
December 2006, IP Unity acquired all of the assets of Glenayre Technology,
Inc.'s integrated messaging division. Glenayre has some excellent historical
relationship in the North American market and we will continue to watch their
growth and strategic decisions.

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 develop or, once developed,
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 develop and, once developed, 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;

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- 11 -

- our solutions have the unique ability
to be placed with the telecommunication companies environment or physically
installed in the customer's premises;

- we have developed a highly available,
scale-able, hosted solution that can be separated to provide functionality for
multiple end user segments such as residential, wireless, enterprise and
broadband; 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;

- message notification;

- voice short messaging service
(SMS);

- storage of messages; - web
feeds; and

- 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

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- 12 -

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 voice over internet protocol (VOIP) 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 voice over internet
protocol (VOIP ) 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.

Sales for the fiscal year ended December 31, 2007 were from
technical training and support services provided to Avaya and product license
sales, hardware product sales and training services to three resellers. Sales to
Avaya comprised 88% of revenue for the fiscal year ended December 31, 2007.
Sales for the fiscal year ended December 31, 2006 were from technical training
and support services provided to Avaya and T2MCI. Sales to these two customers
comprised 100% of revenue for the fiscal year ended December 31, 2006.

Research and Development

Our research and development team is primarily located in our
facility located in Victoria, British Columbia, 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, 2007 and 2006 were
$898,721 and $921,518 respectively.

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- 13 -

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. 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, 2008, we employed 16 people, six of who are
engaged in marketing and sales, seven in research, development and support, and
three 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.

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 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

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- 14 -

- 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 favourable 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 a significant portion of our operations
have been 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, 2007, we have incurred
aggregate net losses of approximately $50 million. Our loss from operations for
the fiscal year ended December 31, 2007 was $2.6 million. We also incurred an
operating loss since inception. 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.

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, 2007 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 $3,315,946 (Cdn$3,287,097)
of principal and accrued interest is outstanding at December 31, 2007. The
promissory note is repayable each quarter at the lesser of $228,667
(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, 2007, the current
portion due on the promissory note is $464,694 (Cdn$460,651) and 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

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- 15 -

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, 2007, the
non-current portion of the promissory note eligible for prepayment is $2,851,252
(Cdn$2,826,446) and if we elected to prepay this amount with the issuance of
common shares then this would result in the issuance of 9,746,365 common shares.
As at December 31, 2007, 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 10,041,655 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.

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

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- 16 -

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 a small number of channel
partners for the sale of our products and if we are unable to expand our channel
partner relationships or if our channel partners are 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
channel partners for sales of our products. If our channel partners are unable
to generate significant sales of our products or we are unable to expand the
number of channel partner relationships, 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.

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.

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- 17 -

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.

Any slow down 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.

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.

Financial Industry Regulatory Authority (FINRA) 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
FINRA has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the

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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 FINRA believes that there
is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA 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 $25,664 (Cdn$25,441) per year plus expenses. This lease expires on June
30, 2008. We are planning to renew this lease.

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 $60,602
(Cdn$60,075) per year plus expenses. This lease expires on December 31,
2008.

We believe that our existing facilities are adequate for our
needs through the end of the year ended December 31, 2008. 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.
|------- | ------------------

On April 28, 2006, Aliant Telecom Inc. / Telecommunciations
Aliant Inc. filed a Notice of Action with Statement of Claim with the Court of
Queen's Bench of New Brunswick, Trial Division, Judicial District of Saint John
claiming breach of several agreements between Innovatia /Aliant and our company.
The aggregate amount of the claim sought is approximately Cdn$3,786,611. We
believe that there is no substantive merit to the claim and management intends
to vigorously defend the action. We have additional disclosure regarding the
Innovatia / Aliant relationship in note 7 to the audited consolidated financial
statements. We have made no additional provision in the financial statements on
the belief that the probability of a loss is remote.

Other than as set out above, and to our knowledge, we are not a
party to any other litigation as at March 1, 2008. 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.

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- 19 -

|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, 2007.

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)Quarter Ended
    High
    Low
    Quarter Ended
    High (Cdn$)
    Low (Cdn$)December 31, 2007
    $0.45
    $0.20
    December 31, 2007
    $0.43
    $0.19September 30, 2007
    $0.29
    $0.18
    September 30, 2007
    $0.30
    $0.19June 30, 2007
    $0.39
    $0.21
    June 30, 2007
    $0.44
    $0.23March 31, 2007
    $0.41
    $0.30
    March 31, 2007
    $0.49
    $0.30December 31, 2006
    $0.55
    $0.36
    December 31, 2006
    $0.57
    $0.42September 30, 2006
    $0.65
    $0.36
    September 30, 2006
    $0.70
    $0.44June 30, 2006
    $0.73
    $0.50
    June 30, 2006
    $0.81
    $0.57March 31, 2006
    $0.76
    $0.59
    March 31, 2006
    $0.86
    $0.66


(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, 2008, the shareholders' list for our common stock
showed 131 registered stockholders and 56,842,571 shares issued and outstanding.
The closing sale price for our common stock on March 1, 2008, as reported on the
OTC Bulletin Board, was $0.42.

Dividend Policy

During the years ended December 31, 2007 and 2006, 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.

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- 20 -

Recent sales of unregistered securities

We did not sell or issue any securities during the year ended
December 31, 2007 without the registration of the securities under the
Securities Act of 1933 in reliance on exemptions from such registration
requirements that have not otherwise been disclosed in a quarterly report on
Form 10-QSB or in a quarterly report on Form 8-K.

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 the plan was
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, 2007.

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
    7,724,884
    $0.76
    1,560,152Equity compensation plans not approved
      by security holders
    N/A
    N/A
    N/ATotal
    7,724,884
    $0.76
    1,560,152


(1) The maximum number of options issuable under our stock
option plan is 12,000,000, less 2,214,964 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, 2007.

|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 the 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 year ended December 31, 2007, we continued the shift
of 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

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- 21 -

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. This allowed us to stretch the funds we received through
equity and debt financing to execute on our business plan.

Results of Operations for the fiscal years ended December
31, 2007 and December 31, 2006

Sales

Sales for the fiscal year ended December 31, 2007 were $245,206
compared to sales of $94,000 for the fiscal year ended December 31, 2006,
representing a 161% increase. Sales for the fiscal year ended December 31, 2007
were from technical training and support services provided to Avaya, product
license sales, hardware product sales and training services. Sales to Avaya
comprised 88% of revenue for the fiscal year ended December 31, 2007. Sales for
the fiscal year ended December 31, 2006 were from technical training and support
services provided to Avaya and T2MCI. Sales to these two customers comprised
100% of revenue for the fiscal year ended December 31, 2006. For the fiscal year
ended December 31, 2007, we derived 100% of our sales from our Canadian
operations (100% for the fiscal year ended December 31, 2006).

We have shifted our sales approach from direct sales to sales
through channel partners. During the fiscal year ended December 31, 2007, 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 and small and medium size business enterprises.

Cost of Sales

Cost of sales were $24,807 and $26,195 for the fiscal years
ended December 31, 2007 and 2006 respectively. Cost of sales for the fiscal year
ended December 31, 2007 were related to hardware and software costs as well as
costs incurred while providing support services and training. Cost of sales for
the fiscal year ended December 31, 2006 was related to costs incurred while
providing technical support and support services to Avaya and T2MCI.

Operating Expenses

Total operating costs for the year ended December 31, 2007 were
$2,785,095 compared to $2,593,748 for the previous year. The increase in total
costs of $191,347, or 7%, was primarily attributable to an increase in
development costs of approximately $104,000, consulting fees of approximately
$118,000, professional fees of approximately $100,000, travel costs of
approximately $92,000, gain on disposal of property and equipment of
approximately $60,000, meals and entertainment expenses of approximately
$31,000, regulatory fees of approximately $13,000 and tradeshow costs of
approximately $10,000. There were corresponding decreases in stock-based
compensation expenses of approximately $103,000, salaries of approximately
$95,000, investor relation expenses of approximately $15,000 and amortization
expenses of approximately $14,000.

Sales and Marketing

Our sales and marketing costs consist primarily of stock-based
compensation, personnel, advertising, promotions, public relations and business
development. Total costs were $715,564 and $364,590 for the fiscal years ended
December 31, 2007 and December 31, 2006, respectively, representing an increase
of $350,974 or 96%. The increase was primarily attributable to an increase in
consulting fees of approximately $130,000, travel costs of $89,000, salaries of
approximately $69,000, meals and entertainment costs of approximately $28,000,
tradeshow costs of approximately $10,000 and stock-based compensation expenses
of approximately $5,000.

Research and Development

Our research and development costs consist primarily of
development costs, stock-based compensation, personnel, data and voice
transmission, and related facility costs. Our research and development costs
were $898,721 and $921,518 for the fiscal years ended December 31, 2007 and
2006, respectively, representing a decrease of $22,797 of 2%. The decrease was
primarily due to a decrease in salaries of approximately $101,000, stock-based

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- 22 -

compensation expenses of approximately $37,000. There was a
corresponding increase in development costs of approximately $104,000 and
consulting fees of approximately $9,000.

General and Administrative

Our general and administrative costs consist primarily of
stock-based compensation, personnel costs, professional and legal costs,
consulting fees, travel, and the lease of office space. General and
administrative costs were $1,170,810 and $1,307,640 for the fiscal years ended
December 31, 2007 and 2006 respectively, representing a decrease of $136,830 or
10%. The decrease was primarily attributed to decreases in stock-based
compensation expenses of approximately $70,000, salaries of approximately
$63,000, consulting fees of approximately $21,000 and amortization expenses of
approximately $14,000. There were also increases in professional fees of
approximately $100,000 and gain on disposal of property and equipment of
approximately $60,000.

Interest Expense

Our interest expense was $877,703 and $820,899 for the fiscal
years ended December 31, 2007 and 2006 respectively. The interest expense for
the fiscal year ended December 31, 2007 includes the amortization of the debt
discount on the Series C and D notes of $11,823 (Cdn$12,645), the amortization
of the 15% repayment premium of the Series D note of $1,833 (Cdn$1,961) issued
in September 2003 and the amortization of the deferred charges relating to our
debt restructuring transaction in September 2005 of $196,568 (Cdn$210,235). The
interest expense for the fiscal year ended December 31, 2006 includes the
amortization of the debt discount on the Series C and D notes of $11,161
(Cdn$12,645), the amortization of the 15% repayment premium of the Series D note
of $1,731 (Cdn$1,961) issued in September 2003 and the amortization of the
deferred charges relating to our debt restructuring transaction in September
2005 of $185,561 (Cdn$210,235). The remaining interest expense for the fiscal
years ended December 31, 2007 and 2006 consist of the stated interest rate on
the principal amount of the then outstanding notes.

Income Taxes

At December 31, 2007, we had $5,592,000 United States tax net
operating losses that will expire in the years 2019 through to 2027. As at
December 31, 2007, we had Canadian tax non-capital losses of approximately
$22,704,000 that will expire in the years 2008 through 2027. Pursuant to Section
382 of the Internal Revenue Code, use of our net operating loss carry forwards
may be limited if we experience a cumulative change in ownership of greater than
50% in a moving three year period. Ownership changes could impact our ability to
utilize net operating losses and credit carry forwards 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.

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, 2007 and 2006 respectively, we recognized a valuation
allowance equal to deferred tax assets for which realization is uncertain.

Net Loss

Our net loss was $3,357,597 and $3,304,275 for the fiscal years
ended December 31, 2007 and 2006 respectively. The increase in net loss of
$53,322, or 2%, was primarily attributable to an increase in gross profits of
approximately $153,000, development costs of approximately $104,000, consulting
fees of approximately $118,000, professional fees of approximately $100,000,
travel costs of approximately $92,000, gain on disposal of property and
equipment of approximately $60,000, meals and entertainment expenses of
approximately $31,000, regulatory fees of approximately $13,000 and tradeshow
costs of approximately $10,000. There were corresponding decreases in
stock-based compensation expenses of approximately $103,000, salaries of
approximately $95,000, investor relation expenses of approximately $15,000 and
amortization expenses of approximately $14,000.

Since inception through December 31, 2007, we incurred
aggregate net losses of $50 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

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- 23 -

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, 2007, we had $1,606,448 in cash and cash
equivalents and working capital of $886,798 and as of December 31, 2006, we had
$3,160,476 in cash and cash equivalents and working capital of $2,459,898.

Operating Activities

Our operating activities resulted in net cash outflows of $2.1
million and $1.8 million for the fiscal years ended December 31, 2007 and 2006
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 $1,526
for the fiscal year ended December 31, 2007. During the fiscal year ended 2007,
we received proceeds of $21,000 from the sale of property and equipment and
spent $22,526 on property and equipment purchased during the period. Investing
activities resulted in net cash outflows of $7,545 for the fiscal year ended
December 31, 2006. During the fiscal year ended 2006, we received proceeds of
$342 from the sale of property and equipment and spent $7,887 on property and
equipment purchased during the period. The investing activities in fiscal 2007
and 2006 were limited due to our cash conservation plans. At December 31, 2007,
we did not have any material commitments for future capital expenditures.

Financing Activities

Financing activities resulted in net cash inflows of $104,507
for the fiscal year ended December 31, 2007 from the exercise of stock
options.

Financing activities resulted in net cash inflows of $2.8
million for the fiscal year ended December 31, 2006 from the issuance of common
shares and share purchase warrants in a private placement transaction and the
exercise of stock options.

Debt Obligations

As at December 31, 2007, we have $12,134,695 in debt
obligations and accrued interest with maturity dates as follows:

| |                                        |   | Amount outstanding |  |  | Maturity                 |    
| | -------------------------------------- | - | ------------------ |  |  | ------------------------ | ---
| |                                        |   | as at December 31, |  |  | Date                     |    
| |                                        |   | 2007               |  |  |                          |    
| | Series C notes payable                 | $ | 5,975,756          |  |  | December 31,
      2009  | (1)
| | Series D notes payable                 |   | 715,323            |  |  | December 31, 2009        | (1)
| | Series E notes payable                 |   | 865,730            |  |  | December 31,
      2009  | (1)
| | Series F convertible note payable      |   | 193,832            |  |  | December 31, 2009        | (1)
| | Series G notes payable                 |   | 516,627            |  |  | December 31,
      2009  | (1)
| | Series H notes payable                 |   | 551,481            |  |  | December 31, 2009        | (1)
| | Innovatia Inc. promissory note payable |   | 3,315,946          |  |  | as discussed
      below |    
| |                                        |   | 12,134,695         |  |  |                          |    

(1) On September
  19, 2005, we extended the maturity date of the Series C, D, E, F, G and H notes
  to December 31, 2009 and included a provision which provides for the scheduled
  repayment of these debts based upon a certain percentage of our earnings before
  interest, tax, depreciation and amortization. See note 6 to the consolidated
  financial statements included elsewhere in this filing.

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- 24 -

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 $3,315,946 (Cdn$3,287,097)
of principal and accrued interest is outstanding at December 31, 2007. The
promissory note bears interest at prime plus 1% (prime rate at December 31, 2007
was 6%) and is repayable in quarterly instalments until repaid in full. The
amount payable each quarter is the lesser of $228,667 (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, 2007, the current
portion due on the promissory note is $464,694 (Cdn$460,651) and 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 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, 2007, the non-current portion
of the promissory note eligible for prepayment is $2,851,252 (Cdn$2,826,446) and
if we elected to prepay this amount with the issuance of common shares then this
would result in the issuance of 9,746,365 common shares.

As at December 31, 2007, 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 10,041,655 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.

On April 28, 2006, Aliant Telecom Inc. / Telecommunciations
Aliant Inc. filed a Notice of Action with Statement of Claim with the Court of
Queen's Bench of New Brunswick, Trial Division, Judicial District of Saint John
claiming breach of several agreements between Innovatia /Aliant and the Company.
The aggregate amount of the claim sought is approximately Cdn$3,786,611.

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.

We continue to accrue for interest; however, there has been no
activity in terms of repayment of the promissory note since March 2002.

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 generation of our revenues
  could also be delayed.

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- 25 -

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, 2008.
Management projects that we may require an additional $1.25 million to fund our
ongoing operating expenses and working capital requirements for the next twelve
months. However, if conditions change outside of management's expectations, we
will need to raise additional capital. We would raise the capital required to
satisfy our needs primarily through the sale of our equity securities or
debt.

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 and small and medium
sized business enterprises. 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 telecommunications providers in 2008 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, 2007, 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.

Off-Balance Sheet Arrangements

As of December 31, 2007, we did not have any off-balance sheet
arrangements, including any outstanding derivative financial instruments,
off-balance sheet guarantees, interest rate swap transactions or foreign
currency contracts. Our Company does not engage in trading activities involving
non-exchange traded contracts.

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.

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- 26 -

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.

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 consulting and 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.

From time to time we enter into multiple contracts with a
single customer or group of related parties. We reference AICPA Technical
Practice Aid 5100.39, Software Revenue Recognition for Multiple-Element
Arrangements when making our assessment if multiple agreements or contracts with
a customer should be considered separate arrangements or one multiple-element
arrangement.

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

During the first quarter of 2006, we implemented the following
new critical accounting policy related to our stock-based compensation.
Beginning on January 1, 2006, we began accounting for stock options under the
provisions of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment" (FAS 123(R)), which requires the recognition of the fair
value of stock-based compensation. Under the fair value recognition provisions
for FAS 123(R), stock-based compensation cost is estimated at the grant date
based on the fair value of the awards

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- 27 -

expected to vest and recognized as expense ratably over the
requisite service period of the award. We have used the Black-Scholes valuation
model to estimate fair value of our stock-based awards which requires various
judgmental assumptions including estimating stock price volatility and expected
life. Our computation of expected volatility is based on a combination of
historical and market-based implied volatility. In addition, we consider many
factors when estimating expected life, including types of awards and historical
experience. If any of the assumptions used in the Black-Scholes valuation model
change significantly, stock-based compensation expense may differ materially in
the future from that recorded in the current period.

We adopted FAS 123(R) using the modified-prospective method
which requires the application of the accounting standard as of January 1, 2006.
Our consolidated financial statements as of and for the year ended 2007 reflect
the impact of FAS 123(R). In accordance with the modified-prospective method,
the consolidated financial statements for prior periods have not been restated
to reflect the impact of FAS 123(R).

Income Tax

During the first quarter of 2007, we adopted the following new
critical accounting policy related to income tax. Beginning on January 1, 2007,
we began accounting for income tax under the provisions of Financial Accounting
Standards Board Interpretation No. 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in an enterprises
financial statements in accordance with Financial Accounting Standards Board
Statement 109, Accounting for Income Taxes, and prescribes a recognition
threshold and measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. We and our
subsidiaries are subject to U.S. federal income tax, Canadian income tax, as
well as income tax of multiple state and local jurisdictions. Based on our
evaluation, we have concluded that there are no significant uncertain tax
positions requiring recognition in our financial statements. Our evaluation was
performed for the tax years ended December 31, 2000, 2001, 2002, 2003, 2004,
2005, 2006 and 2007, the tax years which remain subject to examination by major
tax jurisdictions as of December 31, 2007. We may from time to time be assessed
interest or penalties by major tax jurisdictions, although any such assessments
historically have been minimal and immaterial to our financial results. In the
event we receive an assessment for interest and/or penalties, it has been
classified in the financial statements as selling, general and administrative
expense.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard 157, Fair Value Measurements
("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures
about fair value measurements. This SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements, the Financial
Accounting Standards Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this SFAS 157 does not require any new fair value measurements.
However, the application of this SFAS 157 will change current practice,
effective for fiscal periods beginning after November 15, 2007. We do not
believe that the adoption of this standard will have a material impact on our
consolidated results of operations, cash flows or financial position upon
adoption.

In February 2007, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 159 The Fair Value Option
for Financial Assets and Financial Liabilities  including an amendment of FASB
Statement No. 115 (SFAS 159) which permits entities to choose to measure many
financial instruments and certain other items at fair value. This SFAS 159 is
effective for fiscal periods beginning after November 15, 2007. We do not
believe that the adoption of this standard will have a material impact on our
consolidated results of operations, cash flows or financial position upon
adoption.

In December 2007, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 160, Noncontrolling
Interests in Consolidated Financial Statement  an amendment of ARB No. 51
(SFAS160). SFAS 160 amends ARB No. 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as

---

- 28 -

equity in the consolidated financial statements. SFAS 160
requires consolidated net income to be reported at the amounts that include the
amounts attributable to both the parent and the noncontrolling interest. This
statement also establishes a method of accounting for changes in a parents
ownership interest in a subsidiary that does result in deconsolidation. SFAS 160
is effective for fiscal years, and interim periods within those fiscal years,
presentation and disclosure of SFAS 160 shall be applied retrospectively for all
periods presented. We do not believe the adoption of this standard will have a
material impact on our consolidated results of operations, cashflows or
financial position until adoption.

---

- 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, 2007 and
      2006.                                                                                                          
|                                                                                                                                                                          
|Consolidated Statements of Operations for the years ended
      December 31, 2007 and 2006.                                                                               
|                                                                                                                                                                          
|Consolidated Statements of Stockholders' Deficiency for
      the years ended December 31, 2007 and 2006.                                                                 
|                                                                                                                                                                          
|Consolidated Statements of Cash Flows for the years ended
      December 31, 2007 and 2006.                                                                               
|                                                                                                                                                                          
|Notes to the Consolidated Financial Statements.                                                                                                                           

---

- 30 -

Consolidated Financial Statements

Voice Mobility International,
Inc.December 31, 2007 and 2006

---

- 31 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Stockholders ofVoice
Mobility International, Inc.

We have audited the accompanying consolidated balance sheets of
Voice Mobility International, Inc. as of December 31, 2007 and 2006 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, 2007 and 2006, 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 stockholders' 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, | /s/ Ernst & Young LLP
|------------------ | ---------------------
|March 24, 2008     | Chartered Accountants

---

- 32 -

|Voice Mobility International, Inc.  
|------------------------------------
|CONSOLIDATED BALANCE SHEETS         
|[See Note 1 - Basis of Presentation]
|As at December 31                   

|                                                        |  | 2007        |   |  | 2006        |  
|------------------------------------------------------- |  | ----------- | - |  | ----------- | -
|                                                        |  | $           |   |  | $           |  
|ASSETS [note 6]                                         |  |             |   |  |             |  
|Current                                                 |  |             |   |  |             |  
|Cash and cash equivalents                               |  | 1,606,448   |   |  | 3,160,476   |  
|Accounts receivable [note 3]                            |  | 100,702     |   |  | 32,000      |  
|Other receivables                                       |  | 14,318      |   |  | 13,909      |  
|Prepaid expenses                                        |  | 65,451      |   |  | 42,718      |  
|Inventory                                               |  | 1,828       |   |  | -           |  
|Total current assets                                    |  | 1,788,747   |   |  | 3,249,103   |  
|                                                        |  |             |   |  |             |  
|Deferred contract costs [note 7]                        |  | 81,631      |   |  | 81,631      |  
|Deferred finance costs [note 6]                         |  | 428,117     |   |  | 546,239     |  
|Property and equipment, net [note 5]                    |  | 34,391      |   |  | 22,492      |  
|Total assets                                            |  | 2,332,886   |   |  | 3,899,465   |  
|                                                        |  |             |   |  |             |  
|LIABILITIES AND STOCKHOLDERS' DEFICIENCY                |  |             |   |  |             |  
|Current                                                 |  |             |   |  |             |  
|Accounts payable [note 7]                               |  | 203,134     |   |  | 184,976     |  
|Accrued liabilities [note 7]                            |  | 161,150     |   |  | 149,281     |  
|Employee related payables                               |  | 72,971      |   |  | 59,675      |  
|Current portion of promissory note payable [note 7]     |  | 464,694     |   |  | 395,273     |  
|Total current liabilities                               |  | 901,949     |   |  | 789,205     |  
|                                                        |  |             |   |  |             |  
|Deferred revenue [note 7]                               |  | 391,565     |   |  | 333,068     |  
|Notes payable [note 6]                                  |  | 8,818,749   |   |  | 7,027,949   |  
|Promissory note payable [note 7]                        |  | 2,851,252   |   |  | 2,277,228   |  
|Total liabilities                                       |  | 12,963,515  |   |  | 10,427,450  |  
|Commitments and contingencies [note 11]                 |  |             |   |  |             |  
|                                                        |  |             |   |  |             |  
|Stockholders' deficiency [note 9]                       |  |             |   |  |             |  
|Common stock, $0.001 par value, authorized 100,000,000  |  |             |   |  |             |  
|56,842,571 outstanding [2006 
      55,739,134]        |  | 56,843      |   |  | 55,739      |  
|Preferred stock, $0.001 par value, authorized 1,000,000 |  |             |   |  |             |  
|Series A Preferred
      stock, 1 outstanding           |  | 1           |   |  | 1           |  
|Additional paid-in capital                              |  | 42,151,402  |   |  | 41,502,645  |  
|Accumulated deficit                                     |  | (49,939,895 | ) |  | (46,582,298 | )
|Other accumulated comprehensive loss                    |  | (2,898,980  | ) |  | (1,504,072  | )
|Total stockholders' deficiency                          |  | (10,630,629 | ) |  | (6,527,985  | )
|Total liabilities
      and stockholders' deficiency    |  | 2,332,886   |   |  | 3,899,465   |  

See accompanying notes

---

- 33 -

|Voice Mobility International, Inc.    |                            
|------------------------------------- | ---------------------------
|                                      |                            
|CONSOLIDATED STATEMENTS OF OPERATIONS
|                                     
|Year ended December 31                | (expressed in U.S. dollars)

|                                          |  | 2007      |   |  | 2006      |  
|----------------------------------------- |  | --------- | - |  | --------- | -
|                                          |  | $         |   |  | $         |  
|                                          |  |           |   |  |           |  
|Sales [note 4]                            |  | 245,206   |   |  | 94,000    |  
|Cost of sales                             |  | 24,807    |   |  | 26,195    |  
|Gross profit                              |  | 220,399   |   |  | 67,805    |  
|                                          |  |           |   |  |           |  
|Operating expenses [note 9[c]]            |  |           |   |  |           |  
|Sales and marketing                       |  | 715,564   |   |  | 364,590   |  
|Research and development                  |  | 898,721   |   |  | 921,518   |  
|General and administrative                |  | 1,170,810 |   |  | 1,307,640 |  
|                                          |  | 2,785,095 |   |  | 2,593,748 |  
|Loss from operations                      |  | 2,564,696 |   |  | 2,525,943 |  
|Interest income                           |  | (84,802   | ) |  | (42,567   | )
|Interest expense                          |  | 877,703   |   |  | 820,899   |  
|Net loss                                  |  | 3,357,597 |   |  | 3,304,275 |  
|                                          |  |           |   |  |           |  
|Basic and diluted loss per share [note 8] |  | (0.06     | ) |  | (0.07     | )

See accompanying notes

---

- 34 -

|Voice Mobility International, Inc.                       
|---------------------------------------------------------
|                                                         
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
      DEFICIENCY
|                                                         
|Year ended December 31                                   

|                                                                |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  | Other         |   |  |             |  
|--------------------------------------------------------------- |  | ------------ |  |  | ------------------------ |  |  | ---------- |  |  | ------ |  |  | ----------- | - |  | ----------- | - |  | ------------- | - |  | ----------- | -
|                                                                |  | Common Stock |  |  | Series A Preferred Stock |  |  | Additional |  |  |        |  |  | Accumulated |   |  |             |  
|                                                                |  | Number       |  |  |                          |  |  | Number     |  |  |        |  |  | Paid-in     |   |  | Accumulated |   |  | Comprehensive |   |  |             |  
|                                                                |  | of Shares    |  |  | Amount                   |  |  | of Shares  |  |  | Amount |  |  | Capital     |   |  | Deficit     |   |  | Loss          |   |  | Total       |  
|                                                                |  | #            |  |  | $                        |  |  | #          |  |  | $      |  |  | $           |   |  | $           |   |  | $             |   |  | $           |  
|                                                                |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  |               |   |  |             |  
|Balance, December 31, 2005                                      |  | 48,368,134   |  |  | 48,368                   |  |  | 1          |  |  | 1      |  |  | 38,012,541  |   |  | (43,278,023 | ) |  | (1,572,637    | ) |  | (6,789,750  | )
|Common stock issued pursuant to private
      placement,        |  | 6,931,000    |  |  | 6,931                    |  |  | -          |  |  | -      |  |  | 2,832,287   |   |  | -           |   |  | -             |   |  | 2,839,218   |  
|net
      of share issue costs of $124.530                      |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  |               |   |  |             |  
|Common stock issued pursuant to exercise of
      stock options |  | 40,000       |  |  | 40                       |  |  | -          |  |  | -      |  |  | 9,867       |   |  | -           |   |  | -             |   |  | 9,907       |  
|Common stock issued on
      exchange of exchangeable shares    |  | 400,000      |  |  | 400                      |  |  | -          |  |  | -      |  |  | (400        | ) |  | -           |   |  | -             |   |  | -           |  
|Stock based compensation                                        |  | -            |  |  | -                        |  |  | -          |  |  | -      |  |  | 648,350     |   |  | -           |   |  | -             |   |  | 648,350     |  
|Components of comprehensive
      loss:                         |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  |               |   |  |             |  
|Net loss                                                        |  | -            |  |  | -                        |  |  | -          |  |  | -      |  |  | -           |   |  | (3,304,275  | ) |  | -             |   |  | (3,304,275  | )
|Foreign currency
      translation loss                         |  | -            |  |  | -                        |  |  | -          |  |  | -      |  |  | -           |   |  | -           |   |  | 68,565        |   |  | 68,565      |  
|Total comprehensive loss                                        |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  |               |   |  | (3,235,710  | )
|Balance, December 31, 2006                                      |  | 55,739,134   |  |  | 55,739                   |  |  | 1          |  |  | 1      |  |  | 41,502,645  |   |  | (46,582,298 | ) |  | (1,504,072    | ) |  | (6,527,985  | )
|Common stock issued on exchange of
      exchangeable shares    |  | 512,500      |  |  | 513                      |  |  | -          |  |  | -      |  |  | (513        | ) |  | -           |   |  | -             |   |  | -           |  
|Common stock issued pursuant
      to exercise of stock options |  | 590,937      |  |  | 591                      |  |  | -          |  |  | -      |  |  | 103,916     |   |  | -           |   |  | -             |   |  | 104,507     |  
|Stock based compensation                                        |  | -            |  |  | -                        |  |  | -          |  |  | -      |  |  | 545,354     |   |  | -           |   |  | -             |   |  | 545,354     |  
|Components of comprehensive
      loss:                         |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  |               |   |  |             |  
|Net loss                                                        |  | -            |  |  | -                        |  |  | -          |  |  | -      |  |  | -           |   |  | (3,357,597  | ) |  | -             |   |  | (3,357,597  | )
|Foreign currency
      translation loss                         |  | -            |  |  | -                        |  |  | -          |  |  | -      |  |  | -           |   |  | -           |   |  | (1,394,908    | ) |  | (1,394,908  | )
|Total comprehensive loss                                        |  |              |  |  |                          |  |  |            |  |  |        |  |  |             |   |  |             |   |  |               |   |  | (4,752,505  | )
|Balance, December 31, 2007                                      |  | 56,842,571   |  |  | 56,843                   |  |  | 1          |  |  | 1      |  |  | 42,151,402  |   |  | (49,939,895 | ) |  | (2,898,980    | ) |  | (10,630,629 | )

See accompanying notes

---

- 35 -

|Voice Mobility International, Inc.    |                            
|------------------------------------- | ---------------------------
|                                      |                            
|CONSOLIDATED STATEMENTS OF CASH FLOWS
|                                     
|Year ended December 31                | (expressed in U.S. dollars)

|                                                                      |  | 2007       |   |  | 2006       |  
|--------------------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                                      |  | $          |   |  | $          |  
|                                                                      |  |            |   |  |            |  
|OPERATING ACTIVITIES                                                  |  |            |   |  |            |  
|Net loss                                                              |  | (3,357,597 | ) |  | (3,304,275 | )
|Non-cash items included in net loss                                   |  |            |   |  |            |  
|Amortization of property and equipment                                |  | 20,088     |   |  | 33,441     |  
|Amortization of deferred
      finance costs                          |  | 198,402    |   |  | 187,292    |  
|Non-cash interest expense                                             |  | 11,823     |   |  | 11,161     |  
|Stock based compensation                                              |  | 545,354    |   |  | 648,350    |  
|Gain on disposal of property and equipment                            |  | (66,404    | ) |  | (342       | )
|Net change in operating assets and
      liabilities [note 12]        |  | 582,958    |   |  | 585,931    |  
|Cash used in operating activities                                     |  | (2,065,376 | ) |  | (1,838,442 | )
|                                                                      |  |            |   |  |            |  
|INVESTING ACTIVITIES                                                  |  |            |   |  |            |  
|Purchase of property and equipment                                    |  | (22,526    | ) |  | (7,887     | )
|Proceeds on sale of property and equipment                            |  | 21,000     |   |  | 342        |  
|Cash used in investing activities                                     |  | (1,526     | ) |  | (7,545     | )
|                                                                      |  |            |   |  |            |  
|FINANCING ACTIVITIES                                                  |  |            |   |  |            |  
|Proceeds from issuance of common stock, net of share issue
      cost |  | -          |   |  | 2,839,218  |  
|Proceeds on exercise of stock options                                 |  | 104,507    |   |  | 9,907      |  
|Cash provided by financing activities                                 |  | 104,507    |   |  | 2,849,125  |  
|                                                                      |  |            |   |  |            |  
|Effect of change in foreign exchange rate on cash                     |  |            |   |  |            |  
|and cash equivalents                                                  |  | 408,367    |   |  | 26,624     |  
|                                                                      |  |            |   |  |            |  
|Increase (decrease) in cash and cash
      equivalents                |  | (1,554,028 | ) |  | 1,029,762  |  
|Cash and cash equivalents, beginning of year                          |  | 3,160,476  |   |  | 2,130,714  |  
|Cash and cash equivalents, end of year                                |  | 1,606,448  |   |  | 3,160,476  |  

See accompanying notes

---

- 36 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (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 $3,357,597 for the year
ended December 31, 2007 [2006 - $3,304,275] and has a total shareholders'
deficiency of $10,630,629 [2006 - $6,527,985] 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 2007, the Company received net proceeds of $104,507 in connection with
the exercise of outstanding options. In fiscal 2006, the Company received net
proceeds of $2.8 million in connection with equity financing and the exercise of
outstanding options. 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 CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (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 U.S.
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, training services and language localization 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 CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

The Company recognizes revenue in accordance with Statement of
Position SOP 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 consulting and 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.

From time to time the Company enters into multiple contracts
with a single customer or group of related parties. The Company references AICPA
Technical Practice Aid 5100.39, Software Revenue Recognition for
Multiple-Element Arrangements when making their assessment if multiple
agreements or contracts with a customer should be considered separate
arrangements or one multiple-element arrangement.

Foreign currency

These consolidated financial statements have been presented in
United States dollars. The functional currency of the Company is the Canadian
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.

---

- 39 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

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.

Financial instruments

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

Inventory

Inventory is valued at the lower of cost, determined on a first
in first out basis, and net realizable value.

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 yearsComputer software
    2 yearsOffice equipment and furniture
    5 yearsLeasehold
      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 CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Stock-based compensation

During the first quarter of 2006, the Company implemented the
following critical accounting policy related to our stock-based compensation.
Beginning on January 1, 2006, the Company began accounting for stock options
under the provisions of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment (FAS 123(R)), which requires the recognition of the fair
value of stock-based compensation. Under the fair value recognition provisions
for FAS 123(R), stock-based compensation cost is estimated at the grant date
based on the fair value of the awards expected to vest and recognized as expense
ratably over the requisite service period of the award. The Company has used the
Black-Scholes valuation model to estimate fair value of its stock-based awards
which requires various judgmental assumptions including estimating stock price
volatility and expected life. The Companys computation of expected volatility
is based on a combination of historical and market-based implied volatility. In
addition, the Company considers many factors when estimating expected life,
including types of awards and historical experience. If any of the assumptions
used in the Black-Scholes valuation model change significantly, stock-based
compensation expense may differ materially in the future from that recorded in
the current period.

The Company adopted FAS 123(R) using the modified-prospective
method which requires the application of the accounting standard as of January
1, 2006. The Companys consolidated financial statements as of and for the year
ended 2006 and 2007 reflect the impact of FAS 123(R). In accordance with the
modified-prospective method, the consolidated financial statements for prior
periods have not been restated to reflect the impact of FAS 123(R).

Income taxes

During the first quarter of 2007, the Company adopted the
following new critical accounting policy related to income tax. Beginning on
January 1, 2007, the Company began accounting for income tax under the
provisions of Financial Accounting Standards Board (FASB) Interpretation No.
48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprises financial statements in accordance
with FASB Statement 109, Accounting for Income Taxes, and prescribes a
recognition threshold and measurement process for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition. The Company and its subsidiaries are subject to U.S. federal income
tax, Canadian income tax, as well as income tax of multiple state and local
jurisdictions. Based on the Companys evaluation, the Company has concluded that
there are no significant uncertain tax positions requiring recognition in the
Companys financial statements. The Companys evaluation was performed for the
tax years ended December 31, 2000, 2001, 2002, 2003, 2004, 2005 and 2006, the
tax years which remain subject to examination by major tax jurisdictions as of
December 31, 2007. The Company may from time to time be assessed interest or
penalties by major tax jurisdictions, although any such assessments historically
have been minimal and immaterial to the Companys financial results. In the
event the Company has received an assessment for interest and/or penalties, it
has been classified in the financial statements as selling, general and
administrative expense.

---

- 41 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

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.

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 September 2006, the FASB issued Statement of Financial
Accounting Standard 157, Fair Value Measurements (SFAS 157). SFAS 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. This SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, the FASB having previously concluded
in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, this SFAS 157 does not require any new fair value
measurements. However, the application of this SFAS 157 will change current
practice, effective for fiscal periods beginning after November 15, 2007. The
Company does not believe that the adoption of this standard will have a material
impact on its consolidated results of operations, cash flows or financial
position upon adoption.

In February 2007, the FASB issued Statement of Financial
Accounting Standard No. 159 The Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115 (SFAS
159) which permits entities to choose to measure many financial instruments and
certain other items at fair value. This SFAS 159 is effective for fiscal periods
beginning after November 15, 2007. The Company does not believe that the
adoption of this standard will have a material impact on its consolidated
results of operations, cash flows or financial position upon adoption.

---

- 42 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

In December 2007, the FASB issued Statement of Financial
Accounting Standard No. 160, Noncontrolling Interests in Consolidated Financial
Statement  an amendment of ARB No. 51 (SFAS160). SFAS 160 amends ARB No. 51
to establish accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies
that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS 160 requires consolidated net income to be reported
at the amounts that include the amounts attributable to both the parent and the
noncontrolling interest. This statement also establishes a method of accounting
for changes in a parents ownership interest in a subsidiary that does result in
deconsolidation. SFAS 160 is effective for fiscal years, and interim periods
within those fiscal years, presentation and disclosure of SFAS 160 shall be
applied retrospectively for all periods presented. The Company does not believe
the adoption of this standard will have a material impact on its consolidated
results of operations, cashflows or financial position until adoption.

3. CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and cash equivalents,
accounts receivables and the other receivables. The Company performs ongoing
credit evaluations of its customers and maintains allowances for potential
credit losses which, when realized, have been within the range of management's
expectations.

Amounts owing from four customers comprised 100% of the gross
accounts receivable balance at December 31, 2007. Amounts owing from one
customer comprised 100% of the gross accounts receivable balance at December 31,
2006.

---

- 43 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

4. SEGMENTED INFORMATION AND ECONOMIC DEPENDENCE

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   | 
|---- |  | ------ |  |  | ------- |  |  | ------ |  |  | ------- | 
|     |  |        |  |  |         |  |  |        |  |  |         | 
|2007 |  | -      |  |  | 245,206 |  |  |        |  |  | 245,206 | 
|2006 |  | -      |  |  | 62,000  |  |  | 32,000 |  |  | 94,000  | 

Sales from technical training and support services to one
customer comprised 88% of revenue and revenue from three customers comprise 12%
of revenue in 2007. Sales from technical training and support services to two
customers comprised 100% of revenue in 2006.

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

5. PROPERTY AND EQUIPMENT

|                               |  |           |  |  | Accumulated  |  |  | Net
      Book | 
|------------------------------ |  | --------- |  |  | ------------ |  |  | -------------- | 
|                               |  | Cost      |  |  | Amortization |  |  | Value          | 
|                               |  | $         |  |  | $            |  |  | $              | 
|                               |  |           |  |  |              |  |  |                | 
|2007                           |  |           |  |  |              |  |  |                | 
|Computer equipment             |  | 2,393,244 |  |  | 2,376,930    |  |  | 16,314         | 
|Computer software              |  | 677,114   |  |  | 670,330      |  |  | 6,784          | 
|Office equipment and furniture |  | 151,609   |  |  | 146,277      |  |  | 5,332          | 
|Leasehold improvements         |  | 37,204    |  |  | 31,243       |  |  | 5,961          | 
|                               |  | 3,259,171 |  |  | 3,224,780    |  |  | 34,391         | 
|                               |  |           |  |  |              |  |  |                | 
|2006                           |  |           |  |  |              |  |  |                | 
|Computer equipment             |  | 2,356,362 |  |  | 2,350,354    |  |  | 6,008          | 
|Computer software              |  | 565,313   |  |  | 564,781      |  |  | 532            | 
|Office equipment and furniture |  | 185,095   |  |  | 178,662      |  |  | 6,433          | 
|Leasehold improvements         |  | 31,153    |  |  | 21,634       |  |  | 9,519          | 
|                               |  | 3,137,923 |  |  | 3,115,431    |  |  | 22,492         | 

---

- 44 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE

|                                  |  | 2007      |  |  | 2006      | 
|--------------------------------- |  | --------- |  |  | --------- | 
|                                  |  | US$       |  |  | Cdn$      | 
|                                  |  |           |  |  |           | 
|Series C notes payable            |  | 5,975,756 |  |  | 5,923,767 | 
|Series D notes payable            |  | 715,323   |  |  | 709,100   | 
|Series E notes payable            |  | 865,730   |  |  | 858,198   | 
|Series F convertible note payable |  | 193,832   |  |  | 192,145   | 
|Series G notes payable            |  | 516,627   |  |  | 512,132   | 
|Series H notes payable            |  | 551,481   |  |  | 546,683   | 
|                                  |  | 8,818,749 |  |  | 8,742,025 | 

The outstanding Series C, D, E, F, G and H notes payable bear
interest at 8% per annum and are due on December 31, 2009. All scheduled
principal repayments and interest payments are based upon tiered percentages of
the Companys earnings before interest, tax, depreciation and amortization,
calculated and repayable quarterly. The immediate repayment of all amounts due
is required upon the occurrence of a qualified triggering event such as a change
of control, merger, amalgamation, acquisition or liquidation.

The Series F note is convertible at the option of the holder at
any time before December 31, 2009 into units at a price of $1.16 (Cdn$1.15) per
unit. Each unit will consist of one common share and one non-transferable common
share purchase warrant. 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
$1.16 (Cdn$1.15) per share at any time before December 31, 2009.

All of the outstanding notes payable are denominated in
Canadian dollars and include accrued and unpaid interest. Repayment of all
series of notes payable have been guaranteed by the Company and are
collateralized by the assets of the Company's subsidiary, Voice Mobility
Inc.

---

- 45 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE (contd)

SERIES C NOTES PAYABLE

|                          |  | 2007      |   |  | 2006      |  
|------------------------- |  | --------- | - |  | --------- | -
|                          |  | US$       |   |  | Cdn$      |  
|                          |  |           |   |  |           |  
|Principal                 |  | 4,678,227 |   |  | 4,637,526 |  
|Unamortized debt discount |  | (19,395   | ) |  | (19,226   | )
|                          |  | 4,658,832 |   |  | 4,618,300 |  
|Accrued interest          |  | 1,316,924 |   |  | 1,305,467 |  
|                          |  | 5,975,756 |   |  | 5,923,767 |  

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 Series C notes, common stock and
Class T share purchase warrants. The Class T share purchase warrants are
exercisable for a period of five years at an exercise price of $0.43 (Cdn$0.425)
per share. The gross proceeds have been allocated to the notes and the warrants
based on the relative fair value of each security at the time of issuance.
Accordingly, $3,300,127 (Cdn$4,454,841) was allocated to the notes and $272,379
(Cdn$367,685) 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 was subject to accretion over
the 27-month term to maturity of the notes and recorded as interest expense.

On September 19, 2005, the Company amended the maturity date
and repayment provision in exchange for the issuance of 980,137 Class Z share
purchase warrants. The Class Z share purchase warrants are exercisable for a
period of three years at an exercise price of $1.11 (Cdn$1.10) per share. The
warrants also include a call feature at the option of the Company that is
described in Note 9[d]. The relative fair value of warrants of $502,894
(Cdn$588,082) were estimated using the Black-Scholes option pricing model and
was recorded as a deferred finance charge and is subject to amortization over
the 51-month term to maturity of the notes and recorded as interest expense. The
remaining balance of the discount on the notes is subject to accretion over the
51-month term to the amended date of maturity of December 31, 2009.

The Series C notes bear interest at 8% per annum and are
payable based upon a tiered percentage of the Company's earnings before
interest, tax, depreciation and amortization. 68% of the aggregate amount
payable to service the notes are payable quarterly and mature on December 31,
2009.

---

- 46 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE (cont'd.)

SERIES D NOTES PAYABLE

|                          |  | 2007    |   |  | 2006    |  
|------------------------- |  | ------- | - |  | ------- | -
|                          |  | US$     |   |  | Cdn$    |  
|                          |  |         |   |  |         |  
|Principal                 |  | 504,388 |   |  | 500,000 |  
|Repayment premium         |  | 75,658  |   |  | 75,000  |  
|Unamortized debt discount |  | (6,119  | ) |  | (6,065  | )
|                          |  | 573,927 |   |  | 568,935 |  
|Accrued interest          |  | 141,396 |   |  | 140,165 |  
|                          |  | 715,323 |   |  | 709,100 |  

On September 9, 2003, the Company issued an aggregate of
$366,838 (Cdn$500,000) Series D notes and 574,999 Class R share purchase
warrants to four stockholders, one of whom was a director of the Company. The
warrants are exercisable for a period of five years at an exercise price of
$0.43 (Cdn$0.425) per share. The warrants also include a call feature at the
option of the Company that is described in Note 9[d].

The notes are subject to a repayment premium equal to 15% of
the outstanding principal balance. The repayment premium of $75,658 (Cdn$75,000)
was recorded as an increase to the notes balance and as a deferred financing
cost. The deferred financing cost was being amortized to interest expense over
the 27-month term to maturity. The gross proceeds have been allocated to the
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 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 was subject to
accretion over the 27-month term to maturity of the notes and recorded as
interest expense.

On September 19, 2005, the Company amended the maturity date
and repayment provision in exchange for the issuance of 120,221 Class Z share
purchase warrants. The Class Z share purchase warrants are exercisable for a
period of three years at an exercise price of $1.11 (Cdn$1.10) per share. The
warrants also include a call feature at the option of the Company that is
described in Note 9[d]. The relative fair value of warrants of $61,683
(Cdn$72,133) were estimated using the Black-Scholes option pricing model and was
recorded as a deferred finance charge and is subject to amortization over the
51-month term to maturity of the notes and recorded as interest expense. The
remaining balance of the deferred financing cost and discount on the notes is
subject to accretion over the 51-month term to the amended date of maturity of
December 31, 2009.

The Series D notes bear interest at 8% per annum and are
payable based upon a tiered percentage of the Companys earnings before
interest, tax, depreciation and amortization. 8% of the aggregate amount payable
to service the notes are payable quarterly and mature on December 31, 2009.

---

- 47 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE (cont'd.)

SERIES E NOTES PAYABLE

|                  |  | 2007    |  |  | 2006    | 
|----------------- |  | ------- |  |  | ------- | 
|                  |  | US$     |  |  | Cdn$    | 
|                  |  |         |  |  |         | 
|Principal         |  | 605,266 |  |  | 600,000 | 
|Repayment premium |  | 90,790  |  |  | 90,000  | 
|                  |  | 696,056 |  |  | 690,000 | 
|Accrued interest  |  | 169,674 |  |  | 168,198 | 
|                  |  | 865,730 |  |  | 858,198 | 

During the months of November and December 2003, the Company
issued an aggregate of $457,754 (Cdn$600,000) Series E notes to two
stockholders. 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 notes balance and expensed immediately as
interest since the notes were due on demand.

On September 19, 2005, the Company amended the maturity date
and repayment provision in exchange for the issuance of 144,266 Class Z share
purchase warrants. The Class Z share purchase warrants are exercisable for a
period of three years at an exercise price of $1.11 (Cdn$1.10) per share. The
warrants also include a call feature at the option of the Company that is
described in Note 9[d]. The relative fair value of warrants of $74,021
(Cdn$86,560) were estimated using the Black-Scholes option pricing model and was
recorded as a deferred finance charge and is subject to amortization over the
51-month term to maturity of the notes and recorded as interest expense.

The Series E notes bear interest at 8% per annum and are
payable based upon a tiered percentage of the Companys earnings before
interest, tax, depreciation and amortization. 10% of the aggregate amount
payable to service the notes are payable quarterly and mature on December 31,
2009.

---

- 48 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE (cont'd.)

SERIES F CONVERTIBLE NOTE PAYABLE

|                 |  | 2007    |  |  | 2006    | 
|---------------- |  | ------- |  |  | ------- | 
|                 |  | US$     |  |  | Cdn$    | 
|                 |  |         |  |  |         | 
|Principal        |  | 151,392 |  |  | 150,075 | 
|Accrued interest |  | 42,440  |  |  | 42,070  | 
|                 |  | 193,832 |  |  | 192,145 | 

On June 17, 2004, the Company issued a $112,517 (Cdn$150,075)
Series F convertible note to one shareholder. The convertible 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 note is convertible multiplied by the number of units. The
$32,000 was expensed immediately as interest since the note was due on
demand.

On September 19, 2005, the Company amended the maturity date,
conversion date and repayment provision in exchange for the issuance of 31,684
Class Z share purchase warrants. The Class Z share purchase warrants are
exercisable for a period of three years at an exercise price of $1.11 (Cdn$1.10)
per share. The warrants also include a call feature at the option of the Company
that is described in Note 9[d]. The relative fair value of warrants of $16,256
(Cdn$19,010) and extension of the conversion feature from June 17, 2006 to
December 31, 2009 of $20,096 (Cdn$23,500) were estimated using the Black-Scholes
option pricing model and was recorded as a deferred finance charge and is
subject to amortization over the 51-month term to maturity of the notes and
recorded as interest expense.

The note is convertible at the option of the holder at any time
before December 31, 2009 into units at a price of $1.16 (Cdn$1.15) per unit.
Each unit will consist of one common share and one non-transferable common share
purchase warrant. 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 $1.16
(Cdn$1.15) per share at any time before December 31, 2009.

The Series F convertible note bear interest at 8% per annum and
is payable based upon a tiered percentage of the Companys earnings before
interest, tax, depreciation and amortization. 2% of the aggregate amount payable
to service the notes are payable quarterly and mature on December 31, 2009.

---

- 49 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE (cont'd.)

SERIES G NOTES PAYABLE

|                 |  | 2007    |  |  | 2006    | 
|---------------- |  | ------- |  |  | ------- | 
|                 |  | US$     |  |  | Cdn$    | 
|                 |  |         |  |  |         | 
|Principal        |  | 403,511 |  |  | 400,000 | 
|Accrued interest |  | 113,116 |  |  | 112,132 | 
|                 |  | 516,627 |  |  | 512,132 | 

On July 1, 2004, the Company issued an aggregate of $303,882
(Cdn$400,000) Series G notes to two shareholders.

On September 19, 2005, the Company amended the maturity date
and repayment provision in exchange for the issuance of 84,448 Class Z share
purchase warrants. The Class Z share purchase warrants are exercisable for a
period of three years at an exercise price of $1.11 (Cdn$1.10) per share. The
warrants also include a call feature at the option of the Company that is
described in Note 9[d]. The relative fair value of warrants of $43,329
(Cdn$50,669) were estimated using the Black-Scholes option pricing model and was
recorded as a deferred finance charge and is subject to amortization over the
51-month term to maturity of the notes and recorded as interest expense.

The Series G notes bear interest at 8% per annum and are
payable based upon a tiered percentage of the Companys earnings before
interest, tax, depreciation and amortization. 6% of the aggregate amount payable
to service the notes are payable quarterly and mature on December 31, 2009.

SERIES H NOTES PAYABLE

|                 |  | 2007    |  |  | 2006    | 
|---------------- |  | ------- |  |  | ------- | 
|                 |  | US$     |  |  | Cdn$    | 
|                 |  |         |  |  |         | 
|Principal        |  | 453,949 |  |  | 450,000 | 
|Accrued interest |  | 97,532  |  |  | 96,683  | 
|                 |  | 551,481 |  |  | 546,683 | 

During the months of March and May 2005, the Company issued an
aggregate of $367,227 (Cdn$450,000) Series H notes to three stockholders.

---

- 50 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

6. NOTES PAYABLE (cont'd.)

On September 19, 2005, the Company amended the maturity date
and repayment provision in exchange for the issuance of 89,244 Class Z share
purchase warrants. The Class Z share purchase warrants are exercisable for a
period of three years at an exercise price of $1.11 (Cdn$1.10) per share. The
warrants also include a call feature at the option of the Company that is
described in Note 9[d]. The relative fair value of warrants of $45,789
(Cdn$53,546) were estimated using the Black-Scholes option pricing model and was
recorded as a deferred finance charge and is subject to amortization over the
51-month term to maturity of the notes and recorded as interest expense.

The Series H notes bear interest at 8% per annum and are
payable based upon a tiered percentage of the Companys earnings before
interest, tax, depreciation and amortization. 6% of the aggregate amount payable
to service the notes are payable quarterly and mature on December 31, 2009.

7. PROMISSORY NOTE PAYABLE

The Company believes Innovatia Inc. (Innovatia), a wholly
owned subsidiary of Aliant Inc. (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 (Note 11[b])

|                     |  | 2007      |  |  | 2006      | 
|-------------------- |  | --------- |  |  | --------- | 
|                     |  | US$       |  |  | Cdn$      | 
|                     |  |           |  |  |           | 
|Principal            |  | 2,450,163 |  |  | 2,428,847 | 
|Accrued interest     |  | 865,783   |  |  | 858,250   | 
|                     |  | 3,315,946 |  |  | 3,287,097 | 
|Less current portion |  | 464,694   |  |  | 460,651   | 
|                     |  | 2,851,252 |  |  | 2,826,446 | 

On December 28, 2001, the Company issued Innovatia 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,
2007 was 6%) and is repayable in quarterly installments until repaid in full.
The amount payable each quarter is the lesser of $228,667 (Cdn$226,678) and 40%
of the net aggregate amount of invoices issued by the Company to Aliant and its
subsidiaries in the quarter.

---

- 51 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

7. 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, 2007, the current
portion due on the promissory note is $464,694 (Cdn$460,651) and 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,
2007, the non-current portion of the promissory note eligible for prepayment is
$2,851,252 (Cdn$2,826,446) and if the Company elected to prepay this amount with
the issuance of common shares then this would result in the issuance of
9,746,365 common shares.

As at December 31, 2007, 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 10,041,655 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.

---

- 52 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

7. PROMISSORY NOTE PAYABLE (contd)

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. 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 U.S. dollar equivalent of
these assets and liabilities as reported in the Companys financial statements
is as follows:

|                                                           |  | 2007    |  |  | 2006    | 
|---------------------------------------------------------- |  | ------- |  |  | ------- | 
|                                                           |  | $       |  |  | $       | 
|Deferred contract costs                                    |  | 81,631  |  |  | 81,631  | 
|Royalty payable to Aliant, included in accrued liabilities |  | 70,309  |  |  | 59,805  | 
|Accounts payable to Innovatia for GST and
      PST on     |  |         |  |  |         | 
|development services                                       |  | 102,878 |  |  | 87,509  | 
|Deferred revenue                                           |  | 391,565 |  |  | 333,068 | 

---

- 53 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

8. LOSS PER SHARE

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

|                                                          |  | 2007       |   |  | 2006       |  
|--------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                          |  | $          |   |  | $          |  
|                                                          |  |            |   |  |            |  
|Numerator:                                                |  |            |   |  |            |  
|Net loss attributable to common stockholders              |  | (3,357,597 | ) |  | (3,304,275 | )
|                                                          |  |            |   |  |            |  
|Denominator:                                              |  |            |   |  |            |  
|Weighted average number of common stock
      outstanding |  | 56,501,964 |   |  | 48,836,909 |  
|Weighted average number of common stock issuable          |  |            |   |  |            |  
|on exercise of Exchangeable
      Shares                  |  | 9,829      |   |  | 698,801    |  
|Weighted average number of common stock                   |  |            |   |  |            |  
|equivalents outstanding                                   |  | 56,511,793 |   |  | 49,535,710 |  
|                                                          |  |            |   |  |            |  
|Basic and diluted loss per share                          |  | (0.06      | ) |  | (0.07      | )

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 stockholder, 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 2007, holders of the
Exchangeable Shares exchanged 512,500 Exchangeable Shares into 512,500 common
shares of the Company for no additional consideration. As at December 31, 2007,
nil Exchangeable Shares are outstanding [2006  512,500].

For the years ending December 31, 2007 and 2006, 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 anti-dilutive.

---

- 54 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. 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 and up to 1,000,000 shares of preferred
stock, par value $0.001 per share.

[b] Common stock

2007

Exchangeable Shares

During 2007, a holder of the Exchangeable Shares exchanged
512,500 Exchangeable Shares into 512,500 common shares of the Company for no
additional consideration.

Stock Options

On February 1, 2007, the Company issued 20,000 shares of common
stock from the exercise of stock options for gross proceeds of $4,764
(Cdn$5,600).

On February 15, 2007, the Company issued 34,062 shares of
common stock from the exercise of stock options for gross proceeds of $6,746
(Cdn$7,850).

On February 21, 2007, the Company issued 20,000 shares of
common stock from the exercise of stock options for gross proceeds of $4,823
(Cdn$5,600).

On February 23, 2007, the Company issued 80,000 shares of
common stock from the exercise of stock options for gross proceeds of $19,335
(Cdn$22,400).

On July 6, 2007, the Company issued 9,375 shares of common
stock from the exercise of stock options for gross proceeds of $1,431
(Cdn$1,500).

On September 19, 2007, the Company issued 427,500 shares of
common stock from the exercise of stock options for gross proceeds of $67,408
(Cdn$68,400).

2006

Private Placements

On December 19, 2006, the Company issued 6,851,000 units at
Cdn$0.50 per unit for net cash proceeds of $2,839,218 (Cdn$3,281,568). Each unit
consists of one share of common stock and one half of one Class A share purchase
warrant, entitling the holder to one common share, exercisable at Cdn$0.65 per
share at any time up to

---

- 55 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (contd)

December 19, 2009. The Company incurred $20,325 (Cdn$23,492) in
professional fees and $104,205 (Cdn$120,440) in financing fees for a total of
$124,530 (Cdn$143,932). The Company also issued 80,000 common shares and 40,000
Class A share purchase warrants to a third party as a financing fee. The
warrants also include a call feature at the option of the Company that is
described in Note 9[d].

Exchangeable Shares

During 2006, a holder of the Exchangeable Shares exchanged
400,000 Exchangeable Shares into 400,000 common shares of the Company for no
additional consideration.

Stock Options

On September 12, 2006, the Company issued 20,000 shares of
common stock from the exercise of stock options for gross proceeds of $5,003
(Cdn$5,600).

On November 23, 2006, the Company issued 20,000 shares of
common stock from the exercise of stock options for gross proceeds of $4,904
(Cdn$5,600).

---

- 56 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (cont'd.)

[c] 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
12,000,000 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.

Option awards are generally granted with an exercise price
equal to the market price of the Companys stock at the date of grant; those
option awards generally vest based on 3 years of continuous service and have
5-year contractual terms. 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.

Activity under the Plan is as follows:

|                           |  |                  |   |  | Options Outstanding |  
|-------------------------- |  | ---------------- | - |  | ------------------- | -
|                           |  |                  |   |  |                     |  
|                           |  | Shares Available |   |  | Number              |  
|                           |  | for Grant        |   |  | of Shares           |  
|                           |  |                  |   |  |                     |  
|Balance, December 31, 2005 |  | 777,197          |   |  | 7,138,776           |  
|Options granted            |  | (1,269,135       | ) |  | 1,269,135           |  
|Shares authorized          |  | 2,000,000        |   |  | -                   |  
|Options expired            |  | 803,866          |   |  | (803,866            | )
|Options exercised          |  | -                |   |  | (40,000             | )
|Balance, December 31, 2006 |  | 2,311,928        |   |  | 7,564,045           |  
|Options granted            |  | (2,420,500       | ) |  | 2,420,500           |  
|Options expired            |  | 396,250          |   |  | (396,250            | )
|Options forfeited          |  | 1,272,474        |   |  | (1,272,474          | )
|Options exercised          |  | -                |   |  | (590,937            | )
|Balance, December 31, 2007 |  | 1,560,152        |   |  | 7,724,884           |  

---

- 57 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. 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, 2007 are as follows:

|              |  | Options Outstanding |  |   | Options Exercisable | 
|------------- |  | ------------------- |  | - | ------------------- | 
|              |  |                     |  |   |                     | 
|              |  | Number              |  |   | Weighted            | 
|Range of      |  | Outstanding at      |  |   | Average             | 
|Exercise      |  | December 31,        |  |   | Exercise            | 
|Prices        |  | 2007                |  |   | Price               | 
|              |  |                     |  |   |                     | 
|$0.23 - $0.50 |  | 2,775,334           |  | $ | 0.36                | 
|$0.51 - $1.00 |  | 3,193,900           |  | $ | 0.80                | 
|$1.01 - $1.31 |  | 1,755,650           |  | $ | 1.10                | 
|              |  | 7,724,884           |  | $ | 0.71                | 

As at December 31, 2007, 7,724,884 [2006 - 7,564,045] options
outstanding have an exercise price denominated in Canadian dollars with a
weighted average exercise price of Cdn$0.70 [2006  Cdn$0.74] .

---

- 58 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (cont'd.)

Impact of Adoption of FAS 123(R)

At December 31, 2007, the Company has one stock-based employee
compensation plan. Prior to December 31, 2005, the Company accounted for the
plan under the recognition and measurement provisions of APB Opinion No.25,
Accounting for Stock Issued to Employees, and related Interpretations, as
permitted by FASB Statement No 123, Accounting for Stock-Based Compensation.
Effective January 1, 2006, the Company adopted the fair value recognition
provisions of FASB Statement No. 123(R), Share-Based Payment, using the
modified-prospective-transition method. Under that transition method,
compensation cost recognized in the year ended December 31, 2006 includes: (a)
compensation cost for all share-based payments granted prior to, but not yet
vested as of December 31, 2005, based on the grant date fair value estimated in
accordance with the original provisions of Statement 123, and (b) compensation
cost for all share-based payment granted subsequent to January 1, 2006, based on
the grant-date fair value estimated in accordance with the provisions of
Statement 123(R).

As FAS123(R) requires that stock-based compensation expense be
based on awards that are ultimately expected to vest, stock-based compensation
expense for the year ended December 31, 2007 has considerations for estimated
forfeitures. When estimating forfeitures, we consider voluntary termination
behavior as well as trends of actual option forfeitures.

Total stock-based compensation for the year ended December 31,
2007 includes stock-based compensation expense related to employees of $545,354
[2006 - $630,999] and stock-based-compensation expense related to a consultant
of $nil [2006 - $17,351] reported in the statement of operations as follows:

|                                     |      | 2007    |  |  | 2006    | 
|------------------------------------ | ---- | ------- |  |  | ------- | 
|                                     | **** | **$**   |  |  | $       | 
|Stock-based compensation             |      |         |  |  |         | 
|Sales and marketing                  |      | 95,384  |  |  | 90,504  | 
|Research and
      development       |      | 119,535 |  |  | 156,974 | 
|General and administrative           |      | 330,435 |  |  | 400,872 | 
|Total
      stock-based compensation |      | 545,354 |  |  | 648,350 | 

---

- 59 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (cont'd.)

Valuation Assumptions

The fair value of the Company's stock-based awards granted to
employees for the year ended December 31, 2007 and 2006 was estimated using the
Black-Scholes option pricing model.

The fair value of each option award is estimated on the date of
grant using the Black-Scholes option pricing model that uses the assumptions
noted in the following table. Because the Black-Scholes option pricing model
incorporates ranges of assumptions for inputs, those ranges are disclosed.
Expected volatilities are based on historical volatility of the Company's stock,
and other factors. The Company uses historical data to estimate option exercise
and employee termination within the valuation model. The expected term of
options granted is derived from the output of the option valuation model and
represents the period of time that options granted are expected to be
outstanding. The risk-free rate for periods within the expected life of the
options is based on the Bank of Canada T-Bill rate in effect at the time of
grant.

|                                                            |   | 2007          |  |   | 2006          | 
|----------------------------------------------------------- | - | ------------- |  | - | ------------- | 
|                                                            |   |               |  |   |               | 
|Expected life of employee stock options (in
      years)    |   | 3.0           |  |   | 3.0           | 
|Weighted average volatility                                 |   | 79%           |  |   | 97%           | 
|Expected volatility                                         |   | 78% - 80%     |  |   | 82% - 106%    | 
|Risk-free interest rate                                     |   | 4.03% - 4.66% |  |   | 3.84% - 4.18% | 
|Dividend yields                                             |   | 0%            |  |   | 0%            | 
|Weighted average fair value of stock options under          |   |               |  |   |               | 
|employee stock option plans granted during the
      period | $ | 0.16          |  | $ | 0.36          | 

---

- 60 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (cont'd.)

Stock-based Payment Award Activity

A summary of option activity under the Plan as of December 31,
2007, and changes during the year ended is presented below:

|                                 |  |            |   |  |                |  |  | Weighted    |  |  |           | 
|-------------------------------- |  | ---------- | - |  | -------------- |  |  | ----------- |  |  | --------- | 
|                                 |  |            |   |  | Weighted       |  |  | Average     |  |  | Aggregate | 
|                                 |  |            |   |  | Average        |  |  | Remaining   |  |  | Intrinsic | 
|                                 |  |            |   |  | Exercise Price |  |  | Contractual |  |  | Value     | 
|Options                          |  | Shares     |   |  | $              |  |  | Term        |  |  | $         | 
|                                 |  |            |   |  |                |  |  |             |  |  |           | 
|Outstanding at January 1, 2007   |  | 7,564,045  |   |  | 0.64           |  |  |             |  |  |           | 
|Granted                          |  | 2,420,500  |   |  | 0.37           |  |  |             |  |  |           | 
|Expired                          |  | (396,250   | ) |  | 0.19           |  |  |             |  |  |           | 
|Forfeited                        |  | (1,272,474 | ) |  | 0.73           |  |  |             |  |  |           | 
|Exercised                        |  | (590,937   | ) |  | 0.19           |  |  |             |  |  |           | 
|Outstanding at December 31, 2007 |  | 7,724,884  |   |  | 0.71           |  |  | 2.70        |  |  | 47,578    | 
|[Vested or expected to vest at   |  |            |   |  |                |  |  |             |  |  |           | 
|December 31, 2007]               |  | 7,495,447  |   |  | 0.71           |  |  | 2.70        |  |  | 47,578    | 
|Exercisable at December 31, 2007 |  | 5,511,730  |   |  | 0.76           |  |  | 1.59        |  |  | 9,268     | 

The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying awards and the quoted price of the
Companys common stock for the 1,443,000 options that were in-the-money at
December 31, 2007. The weighted-average grant date fair value of options granted
during the year ended December 31, 2007 and 2006 was $0.15 and $0.37,
respectively.

A summary of the status of the Companys nonvested shares as of
December 31, 2007 and changes during the year ended December 31, 2007, is
presented below:

|Nonvested
      Shares               |  | Shares     |   |  | Weighted Average      | 
|------------------------------------ |  | ---------- | - |  | --------------------- | 
|                                     |  |            |   |  | Grant-Date Fair Value | 
|                                     |  |            |   |  | $                     | 
|                                     |  |            |   |  |                       | 
|Nonvested at January 1, 2007         |  | 2,129,365  |   |  | 0.43                  | 
|Granted                              |  | 1,565,500  |   |  | 0.17                  | 
|Vested                               |  | (1,481,711 | ) |  | 0.45                  | 
|Nonvested at
      December 31, 2007 |  | 2,213,154  |   |  | 0.23                  | 

---

- 61 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (cont'd.)

As of December 31, 2007, there was $509,025 of total
unrecognized compensation cost related to nonvested share based compensation
arrangements granted under the Plan. That cost is expected to be recognized over
a weighted-average period of 4.09 years. The total fair value of shares vested
during the year ended December 31, 2007 was $545,354.

[d] 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     | 
|                 |  | #            |  |  | #         |  |  | #         |  |  | #            |  |  | #              |  |  | Cdn$     |  |  | Date       | 
|                 |  |              |  |  |           |  |  |           |  |  |              |  |  |                |  |  |          |  |  |            | 
|2007             |  |              |  |  |           |  |  |           |  |  |              |  |  |                |  |  |          |  |  |            | 
|Class R warrants |  | 574,999      |  |  | -         |  |  | -         |  |  | -            |  |  | 574,999        |  |  | 0.425    |  |  | Sep. 8/08  | 
|Class S warrants |  | 1,176,470    |  |  | -         |  |  | -         |  |  | -            |  |  | 1,176,470      |  |  | 0.425    |  |  | Sep. 8/08  | 
|Class T warrants |  | 3,198,350    |  |  | -         |  |  | -         |  |  | -            |  |  | 3,198,350      |  |  | 0.425    |  |  | Sep. 8/08  | 
|Class U warrants |  | 466,875      |  |  | -         |  |  | -         |  |  | 466,875      |  |  | -              |  |  | 1.36     |  |  | Mar. 4/07  | 
|Class V warrants |  | 4,000,000    |  |  | -         |  |  | -         |  |  | 4,000,000    |  |  | -              |  |  | 1.14     |  |  | May 31/07  | 
|Class W warrants |  | 76,923       |  |  | -         |  |  | -         |  |  | 76,923       |  |  | -              |  |  | 1.00     |  |  | Aug. 26/07 | 
|Class W warrants |  | 1,229,450    |  |  | -         |  |  | -         |  |  | 1,229,450    |  |  | -              |  |  | 1.00     |  |  | Sep. 21/07 | 
|Class X warrants |  | 2,063,560    |  |  |           |  |  | -         |  |  | -            |  |  | 2,063,560      |  |  | 1.10     |  |  | Jun. 26/08 | 
|Class Y warrants |  | 70,000       |  |  |           |  |  | -         |  |  | -            |  |  | 70,000         |  |  | 1.10     |  |  | Aug. 18/08 | 
|Class Z warrants |  | 1,450,000    |  |  |           |  |  | -         |  |  | -            |  |  | 1,450,000      |  |  | 1.10     |  |  | Sep. 18/08 | 
|Class A warrants |  | 3,465,500    |  |  | -         |  |  | -         |  |  | -            |  |  | 3,465,500      |  |  | 0.65     |  |  | Dec 19/09  | 
|                 |  | 17,772,127   |  |  | -         |  |  | -         |  |  | 5,773,248    |  |  | 11,998,879     |  |  |          |  |  |            | 
|                 |  |              |  |  |           |  |  |           |  |  |              |  |  |                |  |  |          |  |  |            | 
|2006             |  |              |  |  |           |  |  |           |  |  |              |  |  |                |  |  |          |  |  |            | 
|Class R warrants |  | 574,999      |  |  | -         |  |  | -         |  |  | -            |  |  | 574,999        |  |  | 0.425    |  |  | Sep. 8/08  | 
|Class S warrants |  | 1,176,470    |  |  | -         |  |  | -         |  |  | -            |  |  | 1,176,470      |  |  | 0.425    |  |  | Sep. 8/08  | 
|Class T warrants |  | 3,198,350    |  |  | -         |  |  | -         |  |  | -            |  |  | 3,198,350      |  |  | 0.425    |  |  | Sep. 8/08  | 
|Class U warrants |  | 466,875      |  |  | -         |  |  | -         |  |  | -            |  |  | 466,875        |  |  | 1.36     |  |  | Mar. 4/07  | 
|Class V warrants |  | 2,000,000    |  |  | -         |  |  | -         |  |  | 2,000,000    |  |  | -              |  |  | 1.14     |  |  | May 31/06  | 
|Class V warrants |  | 4,000,000    |  |  | -         |  |  | -         |  |  | -            |  |  | 4,000,000      |  |  | 1.14     |  |  | May 31/07  | 
|Class W warrants |  | 76,923       |  |  | -         |  |  | -         |  |  | -            |  |  | 76,923         |  |  | 1.00     |  |  | Aug. 26/07 | 
|Class W warrants |  | 1,229,450    |  |  | -         |  |  | -         |  |  | -            |  |  | 1,229,450      |  |  | 1.00     |  |  | Sep. 21/07 | 
|Class X warrants |  | 2,063,560    |  |  |           |  |  | -         |  |  | -            |  |  | 2,063,560      |  |  | 1.10     |  |  | Jun. 26/08 | 
|Class Y warrants |  | 70,000       |  |  |           |  |  | -         |  |  | -            |  |  | 70,000         |  |  | 1.10     |  |  | Aug. 18/08 | 
|Class Z warrants |  | 1,450,000    |  |  |           |  |  | -         |  |  | -            |  |  | 1,450,000      |  |  | 1.10     |  |  | Sep. 18/08 | 
|Class A warrants |  | -            |  |  | 3,465,500 |  |  | -         |  |  | -            |  |  | 3,465,500      |  |  | 0.65     |  |  | Dec 19/09  | 
|                 |  | 16,306,627   |  |  | 3,465,500 |  |  | -         |  |  | 2,000,000    |  |  | 17,772,127     |  |  |          |  |  |            | 

---

- 62 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

9. SHARE CAPITAL (cont'd.)

All of the share purchase warrants outstanding have exercise
prices denominated in Canadian dollars.

The following 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 a specified Canadian
dollar amount on the Toronto Stock Exchange for a period of 30 consecutive days
and 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.

|                          | Call
      Feature
|------------------------- | ------------------
|                          | $                 
|                          |                   
|Class R, S and T warrants | $1.29 (Cdn$1.275) 
|Class X, Y and Z warrants | $2.02 (Cdn$2.00)  
|Class A warrants          | $1.31 (Cdn$1.30)  

3,465,500 Class A 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$1.30 on the Toronto Stock
Exchange for a period of 30 consecutive days and the average daily trading
volume is greater than 100,000 shares for such 30 consecutive trading day
period. 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 September 19, 2005, the Company modified the existing call
feature on the Class T share purchase warrants to restrict the amount callable
to 20% in each successive 30 day period after the initial call.

---

- 63 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

10. INCOME TAXES

The Company adopted the provisions of FIN 48, on January 1,
2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an enterprises financial statements in accordance with FASB Statement 109,
Accounting for Income Taxes, and prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The Company and its subsidiaries are
subject to U.S. federal income tax, Canadian income tax, as well as income tax
of multiple state and local jurisdictions. Based on the Companys evaluation,
the Company has concluded that there are no significant uncertain tax positions
requiring recognition in the Companys financial statements. The Companys
evaluation was performed for the tax years ended December 31, 2000, 2001, 2002,
2003, 2004, 2005 and 2006, the tax years which remain subject to examination by
major tax jurisdictions as of December 31, 2007. The Company may from time to
time be assessed interest or penalties by major tax jurisdictions, although any
such assessments historically have been minimal and immaterial to the Companys
financial results. In the event the Company has received an assessment for
interest and/or penalties, it has been classified in the financial statements as
selling, general and administrative expense.

The Company is subject to United States federal and state
income taxes at an approximate rate of 35%. The Company is also subject to
Canadian federal and British Columbia provincial taxes in Canada. 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:

|                                        |  | 2007       |   |  | 2006       |  
|--------------------------------------- |  | ---------- | - |  | ---------- | -
|                                        |  | $          |   |  | $          |  
|                                        |  |            |   |  |            |  
|Tax recovery at U.S. statutory rates    |  | (1,182,000 | ) |  | (1,156,000 | )
|Higher effective income taxes of        |  |            |   |  |            |  
|Canadian subsidiary                     |  | 24,000     |   |  | (4,000     | )
|Change in valuation allowance           |  | 144,000    |   |  | (58,000    | )
|Change in tax rate applied in valuation |  |            |   |  |            |  
|allowance                               |  | 246,000    |   |  | 462,000    |  
|Imputed interest                        |  | 256,000    |   |  | 247,000    |  
|Non-deductible expenses                 |  | 512,000    |   |  | 509,000    |  
|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
realization is not more likely than not to occur.

---

- 64 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

10. INCOME TAXES (cont'd.)

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

|                                  |  | 2007       |   |  | 2006       |  
|--------------------------------- |  | ---------- | - |  | ---------- | -
|                                  |  | $          |   |  | $          |  
|                                  |  |            |   |  |            |  
|Net operating loss carry forwards |  | 8,218,000  |   |  | 9,010,000  |  
|Property and equipment            |  | 1,399,000  |   |  | 1,378,000  |  
|Unrealized foreign exchange       |  | (1,298,000 | ) |  | (727,000   | )
|Debt discount accretion           |  | 110,000    |   |  | 99,000     |  
|Financing fees                    |  | -          |   |  | 37,000     |  
|Deferred revenue                  |  | 106,000    |   |  | 103,000    |  
|Other                             |  | 6,000      |   |  | 5,000      |  
|Total deferred tax assets         |  | 8,541,000  |   |  | 9,905,000  |  
|Valuation allowance               |  | (8,541,000 | ) |  | (9,905,000 | )
|Net deferred tax
      assets     |  | -          |   |  | -          |  

---

- 65 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

10. INCOME TAXES (cont'd.)

The non-capital and net operating loss carry forwards expire as
follows:

$Canada2008
    
    9,230,0002009
    
    2,797,0002010
    
    2,277,0002014
    
    2,816,0002015
    
    1,893,0002026
    
    1,809,0002027
    
    1,882,000Total Canada
    
    22,704,000U.S.2019
    
    28,0002020
    
    2,673,0002021
    
    2,339,0002022
    
    259,0002023
    
    -2024
    
    293,0002025
    
    -2026
    
    -2027
    
    -Total US
    
    5,592,00028,296,000


Pursuant to Section 382 of the Internal Revenue Code, use of
the Company's net operating loss carry forwards 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 carry forwards 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.

---

- 66 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

11. COMMITMENTS AND CONTINGENCIES

[a] The Company leases two premises under operating leases,
both of which expire in 2008. The minimum lease payments are as follows:

$2008
    
    73,43473,434


The rental expense charged to the consolidated statements of
operations in 2007 amounted to $157,508 [2006 -$147,118].

---

- 67 -

|Voice Mobility International, Inc. |                            
|---------------------------------- | ---------------------------
|                                   |                            
|NOTES TO CONSOLIDATED             
|FINANCIAL STATEMENTS              
|                                  
|December 31, 2007                  | (expressed in U.S. dollars)

11. COMMITMENTS AND CONTINGENCIES (cont'd.)

[b] On April 28, 2006, Aliant Telecom Inc. / Telecommunciations
Aliant Inc. filed a Notice of Action with Statement of Claim with the Court of
Queens Bench of New Brunswick, Trial Division, Judicial District of Saint John
claiming breach of several agreements between Innovatia, Aliant and the Company.
The aggregate amount of the claim sought is Cdn$3,786,611. The Company believes
that there is no substantive merit to the claim and management intends to
vigorously defend the action. The Company has additional disclosure regarding
the relationship with Innovatia and Aliant in note 7 above. The Company has made
no additional provision in the financial statements on the belief that the
probability of a loss is remote. Any unaccrued amount the Company may be
obligated to pay, if any, in connection with this claim will be recorded in the
period the claim is resolved.

12. SUPPLEMENTAL CASH FLOW INFORMATION

Net changes in operating assets and liabilities are as
follows:

2007
    
    
    2006$
    
    
    $Accounts receivable
    
    (22,886
    )
    
    (27,000
    )Other receivables
    
    1,877
    
    
    (5,479
    )Prepaid expenses
    
    (23,187
    )
    
    (8,568
    )Inventory
    
    (1,846
    )
    
    -Accounts payable
    
    (11,013
    )
    
    35,401Accrued liabilities
    
    (13,243
    )
    
    (24,211
    )Employee related payables
    
    (12,543
    )
    
    (5,637
    )Accrued interest on promissory notes payable
    
    161,553
    
    
    145,641Accrued interest on notes payable
    
    504,246
    
    
    475,784582,958
    
    
    585,931


---

- 68 -

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

Not applicable.

|Item 8A(T). | 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, 2007, 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.

Management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13(a) -
15(f) under the Securities Exchange Act of 1934, as amended. Our internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of consolidated financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:

1. pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets and our consolidated
entities;

2. provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the consolidated financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
our company are being made only in accordance with authorizations of management
and our directors; and

3. provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect
on the consolidated financial statements. Because of its inherent limitations,
no system of internal control over financial reporting, including those
determined to be effective, may prevent or detect all misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.

Management, under the supervision and with the participation of
our Chief Executive Officer, conducted an evaluation of the effectiveness of our
internal control over financial reporting as of December 31, 2007. In conducting
this evaluation, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control - Integrated Framework.Based on this evaluation, management
concluded that, as of December 31, 2007, our Company's internal control over
financial reporting was effective.

Our Independent Registered Chartered Accountants have not
issued an attestation report on our internal control over financial reporting
pursuant to the temporary rules of the U.S. Securities and Exchange Commission
that permit us to provide only management's report for the year ended December
31, 2007.

---

- 69 -

No change in our internal control over financial reporting occurred
  as of the end of the period covered by this annual report that has materially
  affected, or is reasonably likely to materially affect, our internal control
  over financial reporting.

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

None.

PART III

|Item 9. | Directors, Executive Officers, Promoters, Control Persons and Corporate
      Governance; 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 AppointedRandy G.
      Buchamer
    Chief Executive Officer and Director
    51
    August 2001Morgan Sturdy(1)(2)(4)
    Director
    55
    April 2000Gary
      Donahee(2)(3)(5)
    Chairman of the Board of
      Directors, Director
    61
    Chairman of the Board
      of Directors - June 2006; October 2003David Raffa(1)(3)(4)
    Director
    49
    March 2006Gerry Butters(5)
    Director
    64
    July 2006Sherman Henderson(3)(5)
    Director
    65
    June 2007William H. Laird(1)
    Director
    60
    June 2007


|(1) | Members of our Audit Committee                           
|--- | ---------------------------------------------------------
|(2) | Members of our Corporate Governance Committee            
|(3) | Members of our Compensation Committee                    
|(4) | Members of our Strategic / Finance Planning
    Committee
|(5) | Members of our Sales 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 Rydan 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

---

- 70 -

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 is also a director of Bradner Ventures Ltd., a
public company with a class of securities registered under the Securities
Exchange Act of 1934.

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 Ignition Point and TIR Systems. He recently sat on
the Board of Creo Inc.'s which was acquired by Kodak Inc. in August 2005. 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 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 serves on the Premier's Technology Council. Mr.
Sturdy is a past director of National Wireless Canadian Research Foundation.

Gary Donahee - Chairman of the Board of Directors and
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, the American Heart Association,
Alaska Communication Systems and Vantrix Corporation.

David J. Raffa - Director

David Raffa is a co-founder of and Fund Manager with Lions Capital
  Corp., manager of BC Advantage Funds and Lions Liquidity Investment Fund LP,
  and a founder and principal of Valeo Corporate Finance. Lions manages two investment
  funds which invest in early stage life science and technology companies. Valeo
  provides corporate finance advice to technology companies on financing, mergers
  and acquisitions and building and operating boards of directors. Mr. Raffa began
  his career as a corporate finance lawyer. He sold his practice at Catalyst Corporate
  Finance Lawyers to Fasken Martineau at the end of 2005, and retired from the
  practice of law. Mr. Raffa has been a member of the Board of the BC Technology
  Industries Association, and an advisor to the B.C. Securities Commission and
  TSX Venture Exchange in respect of issues material to the technology industry.
  He also served as Chairman of Science World's Equity Committee. He currently
  serves as a director, officer or advisory board member of a number of public
  and private technology companies. Mr. Raffa is Chairman of ActiveState Corporation
  and a co-founder of Amorfix Life Sciences Ltd., a TSX listed company. Mr. Raffa
  has over 20 years experience in advising technology companies.

---

- 71 -

Gerry Butters - Director

Mr. Butters has been a director since July 2006. Mr. Butters is
a communications industry veteran with more than 40 years experience in this
sector. His career encompasses senior executive positions at Nortel Networks,
AT&T, and Lucent Technologies. These include Chairman of the Board of AGCS
(a joint venture of GTE and AT&T), President of NTI (a Nortel Networks US
subsidiary). He was President of Global Public Networks at AT&T Network
Systems from October 1997 to November 1999, President of the Optical Networks
Group at Lucent Technologies from December 1999 to August 2000 and Senior Vice
President Marketing and Technology at Lucent Technologies. Mr. Butters retired
from Lucent Technologies in August 2000. Since August 2000 through the present
time, Mr. Butters has been a board director of Lambda Optical Systems, a
privately held company since October 2003, and a technical advisor to several
privately held technology firms.

Mr. Butters is also a director of Amedia Networks Inc., a
public company with a class of securities registered under the Securities
Exchange Act of 1934.

Sherman Henderson - Director

Mr. Henderson currently serves as President and CEO of
Lightyear Network Solutions and has served for the past four years as Chairman
of the Board of COMPTEL, a US telecommunications industry association with over
400 members, including among others: Sprint, Qwest, BellSouth, ALLTEL, and Level
3. Mr. Henderson received a Bachelor of Arts degree in Business Administration
from Florida State University.

William H. Laird - Director

Mr. Laird is a venture capitalist and served for the past
fifteen years as director to several start-up companies. Mr. Laird is president
of W.H. Laird Holdings Ltd., and director and secretary of Tech-Crete Processors
Ltd., Piccadilly Place Mall Inc., and Exel Construction Ltd. These companies
encompass manufacturing, construction, and property development and leasing.

Family Relationships

There are no family relationships among our directors or
officers.

Involvement In Certain Legal Proceedings

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

(1) any bankruptcy petition filed by or
against any business of which such person was an executive officer either at the
time of the bankruptcy or within two years prior to that time;

(2) any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses);

(3) being subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; and

(4) being found by a court of competent
jurisdiction (in a civil action), the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed,
suspended, or vacated.

---

- 72 -

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, 2007, all filing requirements applicable to our 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 FormsWilliam H. Laird
    1(1)
    1(1)
    NilGerry Butters
    1(2)
    1(2)
    1(2)Sherman Henderson
    1(2)
    1(2)
    1(2)


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

(2) The named officer, director or greater than 10%
shareholder, as applicable, failure to file a Form 3  Initial Statement of
Beneficial Ownership of Securities.

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.

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- 73 -

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.

Nomination Procedures For Appointment of Directors

As of March 1, 2008, we did not effect any material changes to
the procedures by which our stockholders may recommend nominees to our board of
directors that were otherwise disclosed in our proxy statement on Schedule 14A
filed with the Securities and Exchange Commission on April 19, 2007.

Audit Committee

We have a standing Audit Committee which currently consists of
David Raffa, Morgan Sturdy and William Laird, all of whom are non-employee
directors of our Company. All of the members of the Audit Committee are
independent as defined by Nasdaq Marketplace Rule 4200(a)(15). The Audit
Committee was established in accordance with Section 3(a)(58)(A) of the
Securities and Exchange Act of 1934. The Audit Committee is directed to review
the scope, cost and results of the independent audit of our books and records,
the results of the annual audit with management and the adequacy of our
accounting, financial and operating controls; to recommend annually to the board
of directors the selection of the independent registered accountants; to
consider proposals made by the independent registered chartered accountants for
consulting work; and to report to the board of directors, when so requested, on
any accounting or financial matters. The board of directors adopted its charter
for the Audit Committee on April 26, 2002 and was formed in February, 2000.

Audit Committee Financial Expert

The Securities Exchange Act require the board to determine if
  a member of its Audit Committee is an "audit committee financial expert." According
  to these requirements, an Audit Committee member can be designated an Audit
  Committee financial expert only when the Audit Committee member satisfies specified
  qualification requirements, such as experience (or "experience actively supervising"
  others engaged in) preparing, auditing, analyzing, or evaluating financial statements
  presenting a level of accounting complexity comparable to what is encountered
  in connection with our Company's financial statements. Such qualifications may
  be acquired through specified means of experience or education. While the board
  has confidence in the ability and the effectiveness of its Audit Committee,
  the board has determined that no current Audit Committee member qualifies as
  an Audit Committee financial expert. However, the board believes that the current
  members of the Audit Committee are qualified and collectively have sufficiently
  extensive financial training and experience to carry out the duties and responsibilities
  of the Audit Committee. A vacancy remains on the board due to the resignation
  of Ken Miller in November 2007. The board desires to fill this vacancy with
  a person satisfying the requirements for an Audit Committee financial expert,
  assuming that such individual satisfies such other criteria that the board believes
  are important for an individual to make a meaningful contribution to the deliberations
  of the board as a whole.

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

Summary Compensation Table

The particulars of compensation paid to the following
persons:

|(a) | our principal executive officer;                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                        
|(b) | each of our two most highly compensated executive
      officers who were serving as executive officers at the end of the year
      ended December 31, 2007; and                                                                      
|    |                                                                                                                                                                                                                                        
|(c) | up to two additional individuals for whom disclosure
      would have been provided under (b) but for the fact that the individual
      was not serving as our executive officer at the end of the year ended
      December 31, 2007,

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who we will collectively refer to as our named executive
officers, of our company for the years ended December 31, 2007 and 2006, are set
out in the following summary compensation table, except that no disclosure is
provided for any named executive officer, other than our principal executive
officer, whose total compensation does not exceed $100,000 for the respective
fiscal year:

Name and Principal Position
    Year
    Salary ($)
    Bonus ($)
    Stock Awards ($)
    Option Awards ($)(1)
    Non- Equity Incentive Plan Compensa-
      tion ($)
    Change in Pension Value and Nonqualified
      Deferred Compensation Earnings ($)
    Other Annual Compen- sation
      ($)(2)
    Total ($)Randy Buchamer Chief Executive
      Officer (3)
    2007 2006
    201,755 176,320
    N/A N/A
    N/A N/A
    Nil 148,644
    Nil Nil
    Nil Nil
    6,053 5,290
    207,808 330,254Mike Seeley Director of
      Channel Sales (4)
    2007 2006
    110,095 N/A
    N/A N/A
    N/A N/A
    52,774 N/A
    Nil N/A
    Nil N/A
    4,035 N/A
    166,904 N/ARob Collins Director of
      Marketing (5)
    2007 2006
    108,191 90,098
    N/A N/A
    N/A N/A
    18,972 24,219
    Nil Nil
    Nil Nil
    6,053 5,290
    133,216 119,607James J. Hutton
      President(6)
    2007 2006
    52,961 138,852
    N/A N/A
    N/A N/A
    N/A 48,438
    Nil Nil
    Nil Nil
    2,018 5,290
    54,979 192,580


(1)Reflects the grant date
fair value calculated in accordance with FAS 123(R). See "Notes to Financial
Statement  Summary of Significant Accounting Policies  Stock Based
Compensation" for a discussion of the relevant assumptions used in calculating
the grant date fair value pursuant to FAS 123(R).

(2)Mr. Buchamer, Mr.
Seeley, Mr. Collins and Mr. Hutton "All Other Compensation" consists of car
allowance of $504 (Cdn$500) per month.

(3)Compensation was paid to
Mr. Buchamer by VMI, our operating subsidiary. Mr. 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 $201,755
(Cdn$200,000) per year plus a car allowance of $504 (Cdn$500) per month.

(4)Compensation was paid to
Mr. Seeley by VMI, our operating subsidiary. Mr. Seeley, Director of Channel
Sales entered into an indefinite term employment agreement on April 2, 2007. He
receives a salary of $105,922 (Cdn$105,000) per year plus and office allowance
of $404 (Cdn$400) per month and a car allowance of $504 (Cdn$500) per month.
During 2007, Mr. Seeley also received a draw on commission of $4,035 (Cdn$4,000)
per month.

(5)Compensation was paid to
Mr. Collins by VMI, our operating subsidiary. Mr. Collins, Director of Marketing
entered into an indefinite term employment agreement on January 19, 2000. He
receives a salary of $111,974 (Cdn$111,000) per year plus a car allowance of
$504 (Cdn$500) per month.

(6)Compensation was paid to
Mr. Hutton by VMI, our operating subsidiary. 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 to April 5, 2007. He received a
salary of $52,961 (Cdn$52,500) in 2007 plus a car allowance of $504 (Cdn$500)
per month. Mr. Hutton resigned as President on April 5, 2007.

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- 75 -

Stock Option Grants in 2007 to Named Executive
Officers

During 2007, we did not grant stock option awards to our Chief
Executive Officer and President pursuant to our Second Amended and Restated 1999
Stock Option Plan.

During 2007, the compensation committee voted to issue a total
of 2,420,500 options to other employees, consultants and directors. The exercise
price was the closing price on the date of grant and ranged from Cdn$0.23 to
Cdn$0.61 per share. 945,500 options will vest over a three-year period, 300,000
option will vest over a two-year period, 925,000 options will vest over a
one-year period and 250,000 options vested immediately from the grant date. The
options were granted to 15 employees. The grants ranged in size from 250,000 to
18,000 with the average being 54,635. 1,000,000 options were granted to
independent directors and nil options were granted to consultants.

Outstanding Equity Awards at Fiscal Year End

The following table summarizes equity awards granted to our
Chief Executive Officer that were outstanding as of December 31, 2007.

Option Awards
    Stock AwardsName
    Number of Securities Underlying Options
      (#) Exercisable
    Number of Securities Underlying Options
      (#) Unexercisable
    Equity Incentive Plan Awards: Number of
      Securities Underlying Unexercised Unearned Options
      (#)
    Option Exercise Price ($)
    Option Expiration Date
    Number of Shares of Units of Stock
      that have not Vested (#)
    Market Value of Shares or Units of Stock
      that have not Vested ($)
    Equity Incentive Plan Awards: Number of
      Unearned Shares, Units or Other Rights that have
      not Vested (#)
    Equity Incentive Plan Awards: Market or
      Payout Value of Unearned Shares, Units or Other
      Rights that have not Vested ($)Randy Buchamer (1)
    1,476,691
    374,609
    N/A
    0.78 (1)
    5 years from grant
    N/A
    N/A
    N/A
    N/AMike Seeley (2)
    80,365
    269,635
    N/A
    0.27 (2)
    5 years from grant
    N/A
    N/A
    N/A
    N/ARob Collins (3)
    295,000
    92,200
    N/A
    0.60 (3)
    5 years from grant
    N/A
    N/A
    N/A
    N/AJames J. Hutton
    N/A
    N/A
    N/A
    N/A
    N/A
    N/A
    N/A
    N/A
    N/A


(1)Includes a grant made on
February 13, 2003 for 83,000 options at an exercise price of $0.37 (Cdn$0.37)
per share; a grant made on March 18, 2004 for 658,800 options at an exercise
price of $0.86 (Cdn$0.85) per share; a grant made on February 16, 2005 for
108,800 options at an exercise price of $0.66 (Cdn$0.65) per share; a grant made
on August 24, 2005 for 491,900 options at an exercise price of $1.00 (Cdn$0.99)
per share; a grant made on March 30, 2006 for 108,800 options at an exercise
price of $0.80 (Cdn$0.79) per share and a grant made on August 22, 2006 for
400,000 options at an exercise price of $0.50 (Cdn$0.50) per share.

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- 76 -

(2)Includes a grant made on
July 24, 2007 for 350,000 options at an exercise price of $0.27 (Cdn$0.27) per
share.

(3)Includes a grant made on
February 13, 2003 for 44,000 options at an exercise price of $0.37 (Cdn$0.37)
per share; a grant made on March 18, 2004 for 54,400 options at an exercise
price of $0.86 (Cdn$0.85) per share; a grant made on February 16, 2005 for
54,400 options at an exercise price of $0.66 (Cdn$0.65) per share; a grant made
on April 6, 2005 for 75,000 options at an exercise price of $0.71 (Cdn$0.70) per
share; a grant made on March 30, 2006 for 54,400 options at an exercise price of
$0.80 (Cdn$0.79) per share; a grant made on February 20, 2007 for 55,000 options
at an exercise price of $0.46 (Cdn$0.46) per share and a grant made on July 24,
2007 for 50,000 options at an exercise price of $0.27 (Cdn$0.27) per share.

Aggregate Option Exercises in 2007 by Executive
Officers

The following table provides information as to options
exercised, if any, by each of the named executive officers in 2007 and the value
of options held by those officers at year-end measured in terms of the last
reported sale price for the shares of our common stock on December 31, 2007
($0.35) .

Name
    Shares Acquired on Exercise (#)
    Value Realized ($)
    Number of Securities Underlying
      Unexercised Options at December 31, 2007
    Value of Unexercised In-the -Money Options
      at December 31, 2007 (1)($)Exercisable
    Unexercisable
    Exercisable
    UnexercisableRandy Buchamer
    312,500
    7,881
    1,476,691
    374,609
    nil
    nilMike Seeley
    Nil
    Nil
    80,365
    269,635
    1,701 (2)
    2,180 (3)Rob Collins
    60,000
    4,842
    295,000
    92,200
    6,239 (4)
    20,932 (5)James J. Hutton(6)
    N/A
    N/A
    N/A
    N/A
    N/A
    N/A


(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,
2007 ($0.35 per share on OTC Bulletin Board) and the exercise price of the
individual's options.

(2) Of the exercisable
options, 80,365 options have an exercise price of $0.27.

(3) Of the unexercisable
options, 269,635 options have an exercise price of $0.27.

(4) Of the exercisable
options, 21,918 options have an exercise price of $0.27.

(5) Of the unexercisable
options, 28,082 options have an exercise price of $0.27.

(6)Mr. Hutton resigned as
President on April 5, 2007.

Compensation of the Company's 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.

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- 77 -

The following table summarizes compensation paid to all of our
non-employee directors:

Name
    Fees Earned or Paid in Cash ($)
    Stock Awards ($)
    Option Awards ($)
    Non- Qualified Deferred Compensation
      Earnings ($)
    Non-Equity Incentive Plan Compensation ($)
    All Other Compensation ($)
    Total ($)Gary Donahee
    Nil
    Nil
    7,539
    N/A
    N/A
    N/A
    7,539Morgan Sturdy
    Nil
    Nil
    7,539
    N/A
    N/A
    N/A
    7,539Robert Neal (1)
    Nil
    Nil
    7,539
    N/A
    N/A
    N/A
    7,539David Raffa
    Nil
    Nil
    7,539
    N/A
    N/A
    N/A
    7,539Kenneth R Miller (2)
    Nil
    Nil
    25,131
    N/A
    N/A
    N/A
    25,131Gerry Butters
    Nil
    Nil
    22,618
    N/A
    N/A
    N/A
    22,618Sherman
    Nil
    Nil
    37,696
    N/A
    N/A
    N/A
    37,696HendersonWilliam H. Laird
    Nil
    Nil
    7,539
    N/A
    N/A
    N/A
    7,539


(1)Mr. Neal resigned as
Director on November 16, 2007.

(2)Mr. Miller resigned as
Director on November 19, 2007.

Employment Agreement with Our Named Executive
Officers

Randy Buchamer, Chief Executive Officer of our Company and our
subsidiary, entered into an employment agreement on August 16, 2001. Except for
any accrued salary, Mr. Buchamer is not entitled to any payment following, or in
connection with, the resignation, retirement or other termination of Mr.
Buchamer's employment as Chief Executive Officer, or in connection with Mr.
Buchamer's responsibilities following a change in control. During the year ended
December 31, 2007, Mr. Buchamer received a salary of $201,755 (Cdn$200,000) plus
a car allowance of $504 (Cdn$500) per month.

Mike Seeley, Director of Channel Sales, entered into an
employment agreement on April 2, 2007. Except for any accrued salary, Mr. Seeley
is not entitled to any payment following, or in connection with, the
resignation, retirement or other termination of Mr. Seeley's employment as
Director of Channel Sales, or in connection with Mr. Seeley's responsibilities
following a change in control. During the year ended December 31, 2007, Mr.
Seeley received a salary of $74,586 (Cdn$73,938), a draw on commission of
$32,281 (Cdn$32,000), a car allowance of $4,035 (Cdn$4,000) and an office
allowance of $ 3,228 (Cdn$3,200).

Rob Collins, Director of Marketing, entered into an employment
agreement on January 19, 2000. Except for any accrued salary, Mr. Collins is not
entitled to any payment following, or in connection with, the resignation,
retirement or other termination of Mr. Collins's employment as Director of
Marketing, or in connection with Mr. Collinss responsibilities following a
change in control. During the year ended December 31, 2007, Mr. Collins received
a salary of $108,191 (Cdn$107,250) plus a car allowance of $504 (Cdn$500) per
month.

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- 78 -

|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, 2008 for (i) each
  stockholder 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, 2008, we had outstanding approximately
  56,842,571 shares of common stock issues and outstanding.

Name and Address of
      Beneficial Owner
    Amount and Nature of Beneficial
      Ownership
    Percentage of Class(1)William H. Laird c/o 100 - 4190
      Lougheed Highway Burnaby, BC V5C 6A8
    4,211,988(2)
    7.4%William E. Krebs
      c/o 100 - 4190 Lougheed Highway Burnaby, BC V5C
      6A8
    3,598,585(3)
    6.3%Randy Buchamer
      c/o 100 - 4190 Lougheed Highway Burnaby, BC V5C
      6A8
    1,942,702(4)
    3.3%Gary Donahee
      c/o 100 - 4190 Lougheed Highway Burnaby, BC V5C
      6A8
    613,607(5)
    1.1%Morgan Sturdy
      c/o 100 - 4190 Lougheed Highway Burnaby, BC V5C
      6A8
    544,376(6)
    **%David Raffa c/o
      100 - 4190 Lougheed Highway Burnaby, BC V5C 6A8
    363,607(7)
    **%Gerry Butters
      c/o 100 - 4190 Lougheed Highway Burnaby, BC V5C
      6A8
    221,518(8)
    **%Sherman Henderson
      c/o 100 - 4190 Lougheed Highway Burnaby, BC V5C
      6A8
    96,518(9)
    **%Directors and Executive Officers as a Group(7
      persons)
    7,994,317(10)
    13.3%


** Less than 1%

(1) Based on 56,842,571 shares of
common stock issued and outstanding as of March 1, 2008. Beneficial ownership is
determined in accordance with the rules of the SEC and generally includes voting
or

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- 79 -

investment power with respect to
securities, including those securities convertible or exercisable within 60
days. 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 and 22,141
share purchase warrants exercisable within the next 60 days owned by Mr. Laird's
wife. Includes 400,000 shares owned by Grey Friars Rentals Ltd. of which Mr.
Laird is a shareholder. Includes options to acquire an aggregate of 19,304
shares of our common stock and share purchase warrants to acquire an aggregate
of 407,133 shares of our common stock exercisable within the next 60 days

(3) Includes 2,593,131 shares and
431,836 share purchase warrants exercisable within the next 60 days 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 exercisable within
the next 60 days. Also includes share purchase warrants to acquire an aggregate
of 9,618 shares of our common stock exercisable within the next 60 days.

(4) Includes options to acquire an
aggregate of 1,592,702 shares of our common stock and share purchase warrants to
acquire an aggregate of 12,500 shares of our common stock exercisable within the
next 60 days.

(5) Includes options to acquire an
aggregate of 363,607 shares of our common stock exercisable within the next 60
days.

(6) Includes options to acquire an
aggregate of 313,607 shares of our common stock exercisable within the next 60
days.

(7) Includes options to acquire an
aggregate of 338,607 shares of common stock exercisable within the next 60
days.

(8) Includes options to acquire an
aggregate of 221,518 shares of common stock exercisable within the next 60
days.

(9) Includes options to acquire an
aggregate of 96,518 shares of common stock exercisable within the next 60
days.

(10) Includes share purchase warrants
to acquire an aggregate of 2,945,864 shares of common stock and options to
acquire 496,556 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, and Director Independence.
|-------- | --------------------------------------------------------------------------

Other than as described under the heading "Executive Compensation",
  no director, executive officer, principal stockholder holding at least 5% of
  our common shares, or any family member thereof, had any material interest,
  direct or indirect, in any transaction, or proposed transactions, during the
  year ended December 31, 2007, in which the amount involved in the transaction
  exceeded or exceeds the lesser of $120,000 or one percent of the average of
  our total assets at year-end for the last three completed fiscal years.

Corporate Governance

We currently act with seven directors, consisting of Randy
Buchamer, Morgan Sturdy, Gary Donahee, David Raffa, Gerry Butters, Sherman
Henderson and William Laird. We have determined that Morgan Sturdy, Gary
Donahee, David Raffa, Gerry Butters, Sherman Henderson and William Laird are
independent directors as defined by Nasdaq Marketplace Rule 4200(a)(15).

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- 80 -

We currently act with a standing audit and compensation
committee. We do not have a standing nominating committee but our entire board
of directors acts as our nominating committee. If any shareholders seeks to
nominate a director or bring any other business at any meeting of our
shareholders, the shareholder must comply with the procedures contained in our
bylaws and the shareholder must notify us in writing and such notice must be
delivered to or received by the Secretary in accordance with Rule 14a-8 of the
Exchange Act. A shareholder may write to the Secretary of our company at our
principal executive office, 100 - 4190 Lougheed Hwy, Burnaby, British Columbia,
Canada V5C 6A8, to deliver the notices discussed above and for a copy of the
relevant bylaw provisions regarding the requirements for making stockholder
proposals and nominating director candidates.

Audit Committee

Our Audit Committee consists of David Raffa, Morgan Sturdy and
William Laird, all of whom are non-employee directors of our Company. All of the
members of the Audit Committee are independent as defined by Nasdaq Marketplace
Rule 4200(a)(15). The Audit Committee was established in accordance with Section
3(a)(58)(A) of the Securities and Exchange Act of 1934. The Audit Committee is
directed to review the scope, cost and results of the independent audit of our
books and records, the results of the annual audit with management and the
adequacy of our accounting, financial and operating controls; to recommend
annually to the board of directors the selection of the independent registered
chartered accountants; to consider proposals made by the independent registered
chartered accountants for consulting work; and to report to the board of
directors, when so requested, on any accounting or financial matters. The Audit
Committee of the board of directors was formed in February 2000 and adopted its
charter on April 26, 2002.

Compensation Committee

The Compensation Committee currently consists of Gary Donahee,
David Raffa and Sherman Henderson, all of whom are non-employee directors of our
Company. All of the members of our Compensation Committee are independent as
defined by Nasdaq Marketplace Rule 4200(a)(15). The Compensation Committee
reviews and approves annual salaries, bonuses and other forms and items of
compensation for our senior officers and employees. Except for plans that are,
in accordance with their terms or as required by law, administered by the board
of directors or another particularly designated group, the Compensation
Committee also administers and implements all of our stock option and other
stock-based and equity-based benefit plans (including performance-based plans),
recommends changes or additions to those plans, and reports to the board of
directors on compensation matters. The Compensation Committee was formed in
February 2000 and adopted its charter on March 30, 2006. To the extent required
by law, a separate committee of disinterested parties administers the Second
Amended and Restated 1999 Stock Option Plan.

Transactions with Independent Directors

Other than as set out below or disclosed under the heading
"Certain Relationships and Related Transactions, and Director Independence",
none of our independent directors entered into any transaction, relationship or
arrangement during the year ended December 31, 2007 that was considered by our
board of directors in determining whether the director maintained his or her
independence in accordance with Nasdaq Marketplace Rule 4200(a)(15).

On July 24, 2007, we issued 50,000 stock options to each of
Gary Donahee, William Laird, Robert Neal, David Raffa and Morgan Sturdy and we
issued 250,000 stock options to each Gerry Butters, Sherman Henderson and Ken
Miller in consideration for their respective services as directors of our
Company. Options granted to Gary Donahee, William Laird, Robert Neal, David
Raffa, Morgan Sturdy and Sherman Henderson have an exercise price of Cdn$0.27
per share, options granted to Gerry Butters have an exercise price of Cdn$0.60
and options granted to Ken Miller have an exercise price of Cdn$0.59 and is
further disclosed in this annual report under the heading "Compensation of the
Company's Directors". Other than reimbursement for travel expenses incurred in
connection with attending our directors' meetings, our Company did not pay any
other fees to our directors during the year ended December 31, 2007.

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

Exhibits Required by Item 601 of Regulation S-B

Exhibit Number/Description

| | Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 3.1     | Articles of Incorporation,
        dated October 1, 1997 (1)                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 3.2     | Articles of Amendment of Articles
        of Incorporation, dated June 24, 1999 (1)                                                                                                                                                                                                                                                                                                                                                                                          
| | 3.6     | Amended and Restated
        Bylaws (2)                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 4.1     | Common Stock Certificate (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 4.2     | Form of Warrant
        (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.3     | Certificate of Designation of
        Series A Preferred Stock (1)                                                                                                                                                                                                                                                                                                                                                                                                           
| | 4.4     | Certificate of
        Designation of Series B Preferred Stock, dated December 27, 2000 (3)                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.5     | Certificate of Amendment to Certificate
        of Designation of Series B Preferred Stock (4)                                                                                                                                                                                                                                                                                                                                                                               
| | 10.1    | Amended and Restated
        1999 Stock Option Plan (4)                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 10.2    | Employment Agreement between
        Voice Mobility Inc. and Randy Buchamer, dated August 16, 2001 (4)                                                                                                                                                                                                                                                                                                                                                                       
| | 10.3    | Form of Amendment
        agreement in connection with the extension of the maturity date of the
        Series C, D, E, F, G and H promissory notes payable dated September 19,
        2005 between Voice Mobility International Inc., Voice Mobility Inc. and
        each of Bernice Kosiur, Manzanita Investments Ltd., MICAP Holding Inc.,
        Ketty Hughes, Margit Kristiansen, William Laird, William Krebs, L.A. Laird
        and Bearberry Investments Inc.(5)
| | 10.4    | Form of Amendment to Class T
        warrants dated September 19, 2005 between Voice Mobility International
        Inc., Voice Mobility Inc. and each of Bernice Kosiur, Manzanita Investments
        Ltd., MICAP Holding Inc., Ketty Hughes, Margit Kristiansen, William Laird,
        William Krebs, L.A. Laird and Bearberry Investments Inc. (5)                                                                                                                      
| | 10.5    | Form of Subscription
        Agreement dated December 19, 2006, between our company and 52 investors
        who participated in the Cdn$3,425,500 private placement.(6)                                                                                                                                                                                                                                                                                                     
| | 10.6    | Form of Subscription Agreement
        dated December 19, 2006, between our company and BC Advantage Funds (VCC)
        Ltd. (6)                                                                                                                                                                                                                                                                                                                                            
| | 10.7    | Finder's Subscription
        Agreement dated December 19, 2006, between our company and Raymond James
        Ltd. (6)                                                                                                                                                                                                                                                                                                                                                      
| | 14.1    | Code of Ethics. (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 31*     | Section
        302 Certification of Randy Buchamer, dated March 31, 2008                                                                                                                                                                                                                                                                                                                                                                                                    

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- 82 -

| | 32*   | Section
      906 Certification of Randy Buchamer, dated March 31, 2008
| | ----- | -----------------------------------------------------------------------
| |       |                                                                        
| | 21.1* | 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)                          
| |       |                                                                        
| | 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
Definitive Schedule 14A as filed on May 19, 2000.

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

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

(5) Previously submitted with our Form
SB-2, as filed on October 20, 2005.

(6) Previously submitted with our Form
  8-K, as filed on December 27, 2006.

|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,
2007 and 2006 as follows:

| |                    |   | 2007    |  |   | 2006   | 
| | ------------------ | - | ------- |  | - | ------ | 
| | Audit Fees         | $ | 95,000  |  | $ | 85,000 | 
| | Audit Related Fees |   | -       |  |   | -      | 
| | Tax Fees           |   | 11,000  |  |   | 9,000  | 
| | All Other Fees     |   | 1,000   |  |   | 1,000  | 
| | Total Fees         | $ | 107,000 |  | $ | 95,000 | 

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.

The Securities and Exchange Commission requires that, before
Ernst & Young LLP is engaged by our Company or its subsidiaries to render
any auditing or permitted non-audit related service, the engagement be:

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- 83 -

- approved by our 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.

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- 84 -

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|VOICE MOBILITY INTERNATIONAL, INC.  
|------------------------------------
|                                    
|By: /s/ Randy G. Buchamer           
|Randy G. Buchamer                   
|Chief Executive Officer and Director
|(Principal Executive Officer and    
|Principal Financial Officer)        
|                                    
|Date: March 31, 2008                

In accordance with the Exchange Act, 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          
|------------------------- | ------------------------------------ | --------------
|                          |                                      |               
|By: /s/ Randy G. Buchamer | Chief Executive Officer and Director | March 31, 2008
|Randy G. Buchamer         | (Principal Executive Officer and     |               
|                          | Principal Financial Officer)         |               
|                          |                                      |               
|By: /s/ Harry Chan        | Controller                           | March 31, 2008
|Harry Chan                | (Principal Accounting Officer)       |               
|                          |                                      |               
|By: /s/ Morgan P. Sturdy  | Director                             | March 31, 2008
|Morgan P. Sturdy          |                                      |               
|                          |                                      |               
|By: /s/ David Raffa       | Director                             | March 31, 2008
|David Raffa               |                                      |               
|                          |                                      |               
|By: /s/ Sherman Henderson | Director                             | March 31, 2008
|Sherman Henderson         |                                      |               
|                          |                                      |               
|By: /s/ William Laird     | Director                             | March 31, 2008
|William Laird             |                                      |               

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