NOTIFY TECHNOLOGY CORP, POS AM, 1999-04-02

NOTIFY TECHNOLOGY CORP
POS AM, 1999-04-02
TELEPHONE & TELEGRAPH APPARATUS

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As filed with the Securities and Exchange Commission on April 2, 1999
Registration No. 333-23369
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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POST-EFFECTIVE AMENDMENT NO. 3 TO FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

NOTIFY TECHNOLOGY CORPORATION
(Name of small business issuer in its charter)

CALIFORNIA 3661 77-0382248
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code Number)
organization)

1054 S. De Anza Blvd. Suite 105
San Jose, California 95129
(408) 777-7920
(Address and telephone number,
of principal executive offices)

1054 S. De Anza Blvd. Suite 105
San Jose, California 95129
(408) 777-7920
(Address of principal place of business
or intended principal place of business)

Paul F. DePond
President and Chief Executive Officer
1054 S. De Anza Blvd. Suite 105
San Jose, California 95129
(408) 777-7920
(Name, Address and telephone number,
of agent for service)

Copies to:

HENRY P. MASSEY, JR., ESQ.
PETER S. HEINECKE, ESQ.
MICHAEL A. DE ANGELIS, ESQ.
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
(650) 493-9300

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]

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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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PROSPECTUS

NOTIFY TECHNOLOGY CORPORATION

1,600,000 Shares of Common Stock

We are offering 1,600,000 shares of our common stock to holders electing
to exercise our Class A warrants. We issued these warrants pursuant to the
Warrant Agreement, dated August 28, 1997 between us and D.H. Blair Investment
Banking Corp., the underwriter of our initial public offering, in connection
with our initial public offering. Notify Technology Corporation will receive
all the proceeds from this offering.

Our common stock, Class A warrants and Units are currently listed on the
Nasdaq SmallCap Market under the symbols "NTFY," "NTFYW" and "NTFYU,"
respectively. Each Unit consists of one share of our common stock and one
Class A warrant. Our Class A warrants entitle the holder to purchase one
share of Common Stock at an exercise price of $6.50, subject to adjustment,
until August 28, 2002.

___________________________

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS
___________________________

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
___________________________

PRICE: $6.50 PER SHARE
___________________________

<TABLE>
<CAPTION>
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Underwriting
Price to Discount and Proceeds to
Public Commission Company
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<S> <C> <C> <C>
Per Share . . . . . . . . . . . . $6.50 - $6.50
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Total . . . . . . . . . . . . . . $10,400,000 - $10,400,000
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</TABLE>

THE DATE OF THIS PROSPECTUS IS APRIL 2, 1999

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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Special Note Regarding
Forward-Looking Statements ..................... 2
Risk Factors ................................... 3
Use of Proceeds ................................ 12
Price Range of Common Stock,
Class A Warrants and Units ..................... 12
Dividend Policy ................................ 13
Management's Discussion and Analysis of
Financial Condition and
Results of Operations .......................... 14
Business ....................................... 19
Management ..................................... 24
Certain Relationships and Related
Transactions ................................. 29
Principal Shareholders ......................... 30
Description of Securities ...................... 34
Plan of Distribution ........................... 35
Legal Matters .................................. 36
Experts ........................................ 36
Additional Information ......................... 36
Index to Financial Statements .................. F-1
</TABLE>

___________________________

We are a California corporation. Our principal executive offices are
located at 1054 S. De Anza Blvd., Suite 105, San Jose, California 95129, and
our telephone number is (408) 777-7920. In this prospectus, "Notify
Technology," "we," "us," and "our" refer to Notify Technology Corporation,
unless the context otherwise requires.

You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or the prospectus supplement is accurate as of
any date other than the date on the front of the document.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operation," "Business,"
and elsewhere in this prospectus constitute forward-looking statements.
These statements involve known and unknown risks, uncertainties, and other
factors that may cause our or our industry's 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 such forward-looking statements. Such factors include, among
others, those listed under "Risk Factors" and elsewhere in this prospectus.

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 such terms or other comparable terminology.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future
results, events, levels of activity, performance, or achievements. We do not
assume responsibility for the accuracy and completeness of the
forward-looking statements. We do not intend to update any of the
forward-looking statements after the date of this prospectus to conform them
to actual results.

___________________________

Trade names and trademarks of other companies appearing in this
prospectus are the property of their respective holders.

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RISK FACTORS

Investing in our common stock will provide you with an equity ownership
interest in Notify Technology Corporation. As a Notify Technology
shareholder, you may be subject to risks inherent in our business. The
performance of your shares will reflect the performance of our business
relative to, among other things, our competition, general economic and market
conditions and industry conditions. The value of your investment may
increase or decline and could result in a loss. You should carefully
consider the following factors as well as other information contained in this
prospectus before deciding to invest in our common stock.

WE HAVE A LIMITED OPERATING HISTORY AND A HISTORY OF LOSSES, MOREOVER, THERE
IS NO ASSURANCE OF FUTURE PROFITABILITY

We commenced operations in August 1994 and through January 1996 we
primarily engaged in research and development. Accordingly, we have a
limited operating history, and we face all of the risks and uncertainties
encountered by early-stage companies. For the fiscal years ended September
30, 1997 and 1998, we incurred net losses of $1,382,910 and $2,617,561,
respectively. As of December 31, 1998, we had an accumulated deficit of
$6,689,583 and working capital of $2,002,594. We anticipate having a
negative cash flow from operating activities in future quarters. We incurred
a net loss of $605,831 for the three month period ended December 31, 1998 and
expect to incur further operating losses in future quarters and years. These
losses will continue until we sell substantially more of our products and our
revenue exceeds our operational expenses. We may never sell significantly
more of our products or achieve or sustain profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
and "Business--Sales, Marketing and Distribution."

OUR QUARTERLY OPERATING RESULTS MAY VARY

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

- - our level of research and development;

- - our sales and marketing activities;

- - announcements by us or our competitors;

- - size and timing of orders from customers;

- - new product introductions by us or our competitors; and

- - price erosion.

Each of the above factors is difficult to control and forecast. Thus,
they could have a material adverse effect on our business, financial
condition and results of operations. For example, during the third and
fourth quarters of fiscal 1997, we recorded revenue of approximately $2.8
million primarily as the result of one customer conducting a particularly
large marketing program using our MessageAlert product. Since that time, no
customer has conducted a similarly large marketing program.

Notwithstanding the difficulty in forecasting future sales, we generally
must undertake research and development and sales and marketing activities and
other commitments months or years in advance. Accordingly, any shortfall in
product revenues in a given quarter may materially adversely affect our
financial condition and

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results of operations because we are unable to adjust expenses during the
quarter to match the level of product revenues, if any, for the quarter. Due
to these and other factors, we believe that quarter to quarter comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of the future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

OUR PRODUCTS MAY NOT BE ACCEPTED

We sold our first MessageAlert in January 1996, our first Centrex Auto
Attendant in December 1996 and our first Centrex Receptionist in March 1998.
To date, we have received only limited revenue from the sale of these
products. We have not yet sold any of our recently developed Caller-ID
products. While we believe that our products are commercially viable,
developing products for the consumer and business marketplaces is inherently
difficult and uncertain. We do not believe our sales to date are sufficient
to determine whether or not there is meaningful consumer or business demand
for our products. We intend to devote significant resources to our sales and
marketing efforts and to promote consumer and business interest in our
products. There can be no assurance that we will be successful with such
efforts or that significant market demand for our products will ever develop.
See "Business--Products," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

WE DEPEND ON LIMITED NUMBER OF POTENTIAL CUSTOMERS AND NEED TO DEVELOP MARKETING
CHANNELS

We believe our success, if any, will be largely dependent on our ability
to either sell our products to or enter into joint marketing arrangements
with the seven Regional Bell Operating Companies (the "RBOCs") and
approximately 20 large Local Exchange Carriers ("LECs") in the United States.
In particular, we believe that we can successfully sell our MessageAlert
product and Caller-ID products only if we sell them to or in conjunction with
the RBOCs and LECs. We also expect to rely significantly on the RBOCs and
LECs for sales of our Centrex Receptionist product. Sales to RBOCs and LECs
constituted 71% and 86% of our revenue for the fiscal years ended September
30, 1998 and 1997, respectively. In addition, two customers accounted for 50%
and 17% of sales for the fiscal year ended September 30, 1998, and one
customer accounted for 70% of sales in the fiscal year ended September 30,
1997. To date, we have sold our products to five RBOCs and twelve LECs. It
took us substantially longer than we originally anticipated to qualify our
products and to develop the marketing relationships that are necessary to
make these sales. RBOCs and LECs tend to be hierarchical organizations,
which distribute decision-making authority and resist taking risks. Selling
a product to or entering into a marketing relationship with an RBOC or LEC is
generally a lengthy process requiring multiple meetings with numerous people
in the organization. If we fail to develop significantly enhanced
relationships with the RBOCs and LECs, our business and operating results
would be materially adversely effected.

We also intend to develop other distribution channels for our products,
including certain Competitive Local Exchange Carriers ("CLECs"). Our
management will need to expend time and effort to develop these channels.
Because our marketing efforts have been largely focused on the RBOCs and
LECs, our management has had only limited experience in selling our products
through these channels. We may not be able to implement such a marketing and
distribution program and any marketing efforts undertaken by or on behalf of
us may not be successful. See "Business--Sales, Marketing and Distribution."

OUR PRODUCTS MAY SUFFER FROM DEFECTS

Our products incorporate a combination of reasonably sophisticated computer
chip design, electric circuit design and telephony technology. We have devoted
substantial resources to researching and developing each of these elements. In
order to reduce the manufacturing costs, limit the power consumption and
otherwise enhance the operation of our products, we have redesigned our products
from time to time. We expect that in the future we will engage in similar
redesigns of our products. In addition, we are in the process of developing
new, similarly complex

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products. Though we extensively test our products before marketing them, any
new, redesigned or current product may contain design flaws that we won't
detect through our testing procedures. For example, in August 1996, we
recalled 6,500 of an earlier version of our MessageAlert product as a result
of a design flaw and, in November 1996, we recalled 14,000 of our
MessageAlert product, also as a result of a design flaw. The direct cost to
rework and repair the defective products in these instances was approximately
$29,000 and $13,000, respectively. No significant rework was required in
fiscal 1998 or in the three month period ended December 31, 1998. In
addition, we rely on subcontractors to manufacture and assemble our products.
Though we have quality control procedures designed to detect manufacturing
errors, there can be no assurance that we will identify all defective
products. We believe that reliable operation will be an important purchase
consideration for both our consumer and business customers. A failure to
detect and prevent a design flaw or a widespread product defect could
adversely affect the sales of both the affected product and our other
products, which could materially adversely affect our business, financial
condition and operating results. See "Business--Products" and
"--Manufacturing."

WE FACE SIGNIFICANT COMPETITION

We believe the market for our products is highly competitive and that
competition is likely to intensify. In the market for visual message waiting
indicators, we compete with Solopoint, Inc., Voicewaves, Inc., Consumerware,
Inc., SNI Innovation, Inc. and AASTRA TELECOM. In the market for
auto-attendant products, we compete directly with Solopoint, Inc. Finally, we
compete with CIDCO Incorporated, Solopoint, Inc., Consumerware, Inc., SNI
Innovation, Inc., TI Systems and AASTRA TELECOM in the Caller-ID market.
Certain of these companies have greater financial, technical and marketing
resources than we do. In addition, several other companies exist which have
substantially greater technical, financial and marketing resources than we do
and could produce competing products. These companies include telephone
equipment manufacturers such as Northern Telecom, Inc. and Lucent
Technologies, Inc. We expect that to the extent that the market for our
products develops, competition will intensify and new competitors will enter
the market. We may not be able to compete successfully against existing and
new competitors as the market for our products evolves and the level of
competition increases. A failure to compete successfully against existing
and new competitors would materially adversely effect our business and
results of operations.

WE DEPEND ON KEY EXECUTIVES

Our potential for success depends significantly on certain key
management employees, including our Chairman, President and Chief Executive
Officer, Mr. Paul F. DePond, our Chief Operations Officer, Gaylan Larson and
our Chief Financial Officer, Gerald W. Rice. We have obtained three-year
key-man term life insurance on Mr. DePond in the amount of $2,000,000 and
have entered into employment agreements with him along with Mr. Larson and
Mr. Rice. The loss of their services or those of any of our other key
employees would materially adversely effect us. We also believe that our
future success will depend in large part on our ability to attract and retain
additional highly skilled technical, management, sales and marketing
personnel. If we were unable to hire the necessary personnel, the development
of new products and enhancements to current products would likely be delayed
or prevented. Competition for these highly-skilled employees is intense.
Therefore, there can be no assurance that we will be successful in retaining
our key personnel and in attracting and retaining the personnel we require
for expansion. See "Business--Employees" and "Management."

OUR INTELLECTUAL PROPERTY MAY NOT BE ADEQUATELY PROTECTED AND WE MAY INFRINGE
THE RIGHTS OF OTHERS

Our success will depend in part on our ability to protect our
proprietary technology. We rely primarily on a combination of patent and
trademark laws and employee and third-party nondisclosure agreements to
protect our proprietary rights. We currently hold a patent covering the
design of our MessageAlert products and another patent covering the
MultiSense technology used in our MessageAlert product. We intend to
continue to seek patents for our future technologies and products when we
believe it to be appropriate. The process of seeking patent protection

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can be lengthy and expensive. There can be no assurance that any patents for
which we apply will be granted or that the scope of our patents or any
patents granted in the future will be broad enough to protect against the use
of similar technologies by our competitors. There can be no assurance,
therefore, that any of our competitors, some of whom have far greater
resources than we do, will not independently develop technologies that are
substantially equivalent or superior to our technology. Further, we intend
to distribute our products in a number of foreign countries. The laws of
those countries may not protect our proprietary rights to the same extent as
the laws of the United States.

We may be involved from time to time in litigation to determine the
enforceability, scope and validity of any of our proprietary rights, or of
third parties asserting infringement claims against us. Any such litigation
could result in substantial costs to us and could divert our management and
technical personnel away from their normal responsibilities. See
"Business--Proprietary Rights."

WE MAY NOT BE ABLE TO OBTAIN CRITICAL COMPONENTS FROM OUR SUPPLIERS

Currently, we are able to obtain certain key components used in our
products only from single or limited sources. We do not have long term
supply contracts with these or any other component vendors and we purchase
all of our components on a purchase order basis. Component shortages may
occur and we may not be able to obtain the components we need in a timely
manner or on a commercially reasonable basis. In particular, the
microcontroller, which forms the core of our Call Manager, is manufactured
only by Seico Epson. From time to time, the semiconductor industry has
experienced extreme supply constraints. If we were unable to obtain
sufficient quantities of microcontrollers from Seico Epson, our business and
operating results would be materially adversely effected. Our Centrex
Receptionist product line utilizes a hardware platform manufactured by
Connected Systems. If we were unable to obtain sufficient quantities of
hardware platforms from Connected Systems, our business would be materially
adversely effected.

We subcontract the manufacture of our board level assemblies to third
parties. There is no assurance that these subcontractors will be able to
support our manufacturing requirements in the future. If we are unable to
obtain sufficient quantities of sole-source components or subassemblies, or
to develop alternative sources, we could experience delays or reductions in
product shipments or be forced to redesign our products. Each such scenario
could materially adversely effect our business and operating results. See
"Business--Manufacturing."

OUR PRODUCTS MAY NOT COMPLY WITH GOVERNMENT REGULATIONS AND INDUSTRY STANDARDS

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

WE MAY NOT BE ABLE TO MANAGE OUR PLANNED GROWTH

We plan to expand our business operations during fiscal year 1999. This
expansion could strain our limited personnel, financial, management and other
resources. In order to manage our planned growth, we will need to maintain our
product development program and expand our sales and marketing capabilities and
personnel. In addition, we will need to adapt our financial planning,
accounting systems and management structure to

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accommodate such growth if it occurs. Our failure to properly anticipate or
manage our growth, if any, could adversely affect our business, operating
results and financial condition. See "Business."

SALES OF OUTSTANDING SHARES MAY HURT OUR STOCK PRICE

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

- - 425,000 Class A warrants and the underlying shares of common stock, which
we have agreed to register for resale pursuant to an agreement entered into
in connection with a 1997 bridge financing;

- - 2,156,518 outstanding shares of our common stock and options and warrants
to purchase our common stock are "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933, as amended (the "Securities
Act"). Pursuant to Rule 144, substantially all of these restricted shares
are eligible for resale subject to the restrictions on transferability
relating to 1,369,744 shares of our common stock or warrants to purchase
shares of our common stock placed in an escrow in connection with our
initial public offering. See "Principal Shareholders - Escrow Securities."

- - The holder of an option to purchase 160,000 Units consisting of one share
of common stock and one Class A warrant has certain demand and "piggy-back"
registration rights covering our securities. We could incur substantial
expenses if this option holder exercises this option.

- - David Brewer holds 850,000 shares of common stock and warrants to purchase
1,344,444 shares of common stock. We have agreed to register for resale
these shares of common stock, including the shares underlying the warrants,
at the request of Mr. Brewer which can be made at any time after June 3,
1999.

Sales of our common stock or the possibility of such sales, in the
public market may adversely affect the market price of our securities.

EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS MAY DILUTE CURRENT SHAREHOLDERS

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

- - 1,600,000 Class A warrants to purchase 1,600,000 shares of our common stock
for $6.50 per share, issued in connection with our initial public offering
(subject to adjustment in certain circumstances);

- - 425,000 Class A warrants to purchase 425,000 shares of our common stock for
$6.50 per share, issued in connection with our 1997 bridge financing;

- - an option to purchase 160,000 Units at a price per Unit of $7.00 issued to
the underwriter of our initial public offering;

- - additional warrants to purchase 207,192 shares of our common stock; and

- - 104,000 options outstanding as of March 1, 1999 under our 1997 Stock Plan,
and subject to vesting requirements (195,938 shares of our common stock are
reserved for issuance under our 1997 Stock Plan).

- - warrants to purchase 1,344,444 shares of common stock at a price of $3.60
held by David Brewer.

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

OUR STOCK PRICE MAY BE VOLATILE

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

OUR SECURITIES MAY BE DELISTED FROM THE NASDAQ STOCK MARKET

If we do not continue to meet the minimum listing requirements of the
Nasdaq SmallCap Market, our Units, common stock and Class A warrants may be
delisted from that market. To maintain our listing we must have:

1. either at least $2,000,000 in tangible assets, a $35,000,000 market
capitalization or net income of at least $500,000 in two of the three
prior years;
2. at least 500,000 shares in the public float valued at $1,000,000 or
more,
3. a minimum common stock bid price of $1.00;
4. at least two active market makers; AND
5. at least 300 holders of our common stock.

For a period in 1998, the bid price for our common stock fell below
$1.00. While the bid price has since risen above $1.00, there can be no
assurance that it will remain above $1.00.

If our securities were delisted from the Nasdaq SmallCap Market,
trading, if any, in our Units, common stock and Class A warrants would
thereafter be conducted in the over-the-counter market in the so-called "pink
sheets" or on the National Association of Security Dealer's "Electronic
Bulletin Board." As a result, the number of our securities which could be
bought or sold would likely be reduced, transactions in our securities might
be delayed and the prices for our securities might be lower than otherwise
would be attained.

OUR SECURITIES MAY BE CONSIDERED "PENNY" STOCKS

If our securities were to be delisted from Nasdaq, they could become
subject to Rule 15g-9 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") relating to low-price ("Penny") stocks. This rule
imposes additional sales practice requirements on broker-dealers which sell
such securities to persons other than established customers and "accredited
investors" (generally, individuals with a net worth in excess of $1,000,000
or annual incomes exceeding $200,000, or $300,000 together with their
spouses). For transactions covered by this rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently,
the rule may adversely affect the ability of broker-dealers to sell our
securities.

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Commission regulations define a "penny stock" to be any non-Nasdaq
equity security that has a market price (as therein defined) of less than
$5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a
penny stock, of a disclosure schedule prepared by the Commission relating to
the penny stock market. Disclosure is also required to be made about
commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally, monthly
statements are required to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in
penny stocks.

The foregoing penny stock restrictions will not apply to our securities
if such securities are listed on Nasdaq and have certain price and volume
information provided on a current and continuing basis or if we meet certain
minimum net tangible assets or average revenue criteria. There can be no
assurance that our securities will qualify for exemption from these
restrictions. In any event, even if our securities were exempt from such
restrictions, we would remain subject to Section 15(b)(6) of the Exchange
Act. This Section gives the Commission the authority to prohibit any person
that is engaged in unlawful conduct while participating in a distribution of
a penny stock from associating with a broker-dealer or participating in a
distribution of a penny stock, if the Commission finds that such a
restriction would be in the public interest. If our securities were subject
to the rules on penny stocks, the market liquidity for our securities could
be severely adversely affected.

WE DO NOT EXPECT TO PAY DIVIDENDS

We have not paid any dividends to our shareholders since our inception
and do not plan to pay dividends in the foreseeable future. We intend to
reinvest earnings, if any, in the development and expansion of our business.
See "Dividend Policy."

OUR OFFICERS AND DIRECTORS SUBSTANTIALLY CONTROL US

Based upon the number of shares of our common stock that are outstanding
as of March 15, 1999, our officers and directors as a group will beneficially
own approximately 17.7%, of our outstanding common stock after giving effect
to the exercise of all currently exercisable outstanding options and warrants
held by such individuals. In addition, David Brewer recently purchased
850,000 shares of our common stock and warrants to purchase 1,334,444 shares
of our common stock. As a result, Mr. Brewer now beneficially owns 39.0% of
our outstanding common stock, assuming the exercise of all warrants held by
Mr. Brewer. We have agreed to elect Mr. Brewer to our Board of Directors.
Consequently, the officers and directors as a group will be able to exert
substantial influence over the election of our directors and the direction of
our policies. See "Principal Shareholders."

WE HAVE CONTRACTUAL OBLIGATIONS TO THE UNDERWRITER OF OUR INITIAL PUBLIC
OFFERING

Until August 28, 2002, in the event D.H. Blair Investment Banking Corp.,
the underwriter of our initial public offering, originates financing or a
merger, acquisition, or transaction to which we are a party, we will be
obligated to pay it a finder's fee in consideration for origination of such
transaction. The fee is based on a percentage of the consideration paid in
the transaction, ranging from 7% of the first $1,000,000 to 2-1/2% of any
consideration in excess of $9,000,000. In addition, D.H. Blair Investment
Banking Corp. has exercised its right to designate one person to sit on our
Board of Directors until August 28, 2002. The designee, Mr. Andrew Plevin,
was an employee of the D.H. Blair Investment Banking Corp., but is now the
Acting President and Chief Executive Officer of Core Software Technology, Inc.

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OUR CHARTER PROVISIONS MAY DISCOURAGE ACQUISITION BIDS

Our Board of Directors has authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights of such shares, without any further
vote or action by our shareholders. The rights of the holders of our common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock, while providing flexibility in connection with
possible acquisition and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock. We have no current plans to issue shares of
Preferred Stock. See "Description of Securities--Preferred Stock."

OUR NET INCOME WILL BE DECREASED IF THE ESCROW SECURITIES ARE RELEASED

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

OUR ARTICLES OF INCORPORATION LIMIT THE LIABILITY OF OFFICERS AND DIRECTORS
AND WE HAVE ENTERED INTO INDEMNIFICATION AGREEMENTS WITH THEM

Our Articles of Incorporation eliminate in certain circumstances the
liability of our directors for monetary damages for breach of their fiduciary
duties as directors. We have also entered into indemnification agreements
("Indemnification Agreement(s)") with each of our directors and officers.
Each such Indemnification Agreement provides that we will indemnify the
indemnitee against expenses, including reasonable attorneys' fees, judgments,
penalties, fines, and amounts paid in settlement actually and reasonably
incurred by them in connection with any civil or criminal action or
administrative proceeding arising out of their performance of duties as a
director or officer, other than an action instituted by the director or
officer. The Indemnification Agreements also require that we indemnify the
director or other party thereto in all cases to the fullest extent permitted
by applicable law. Each Indemnification Agreement permits the director or
officer that is party thereto to bring suit to seek recovery of amounts due
under the Indemnification Agreement and to recover the expenses of such a
suit if they are successful. See "Management--Indemnification of Officers and
Directors and Related Matters."

WE FACE RISKS RELATED TO THE YEAR 2000

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have date sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. If not corrected, many computer and other
electronic applications and systems could fail or create erroneous results when
addressing dates on and after January 1, 2000. We believe that we rely on
systems, applications and third-party relationships which, if not year 2000
compliant prior to the end of 1999, could have material adverse impact on
business, financial condition and results of operations. For example, if our
vendors are unable to supply products to us because of the year 2000 problem,
our results of operations could be

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detrimentally affected, especially if the interruption of product supply
coincides with our obligations to deliver our products for customer
promotional programs.

We are undertaking efforts to ensure that our business systems and those
of our suppliers and customers are compliant with the requirements of the
year 2000. However, our year 2000 program may not be effective or we may not
be able to implement it in a timely and cost-effective manner. Our year 2000
efforts may not, therefore, ensure against disruptions caused by the approach
or advent of the year 2000. The year 2000 problem is potentially very
widespread, and it is not possible to determine all the potential risks that
we may face. Our inability to remedy our own year 2000 problems or the
failure of third parties to do so may cause business interruptions or
shutdowns, financial loss, regulatory actions, harm to our reputation and
exposure to liability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Impact of the Year 2000 Issue."

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<PAGE>

USE OF PROCEEDS

If all of the shares offered hereby are sold, the proceeds to us would
be approximately $9,830,000. We expect the net proceeds to be used for
working capital and for general corporate purposes.

Pending application, the net proceeds of the Offering will be invested
in short-term, high grade interest-bearing savings accounts, certificates of
deposit, United States government obligations, money market accounts or
short-term interest bearing obligations.

PRICE RANGE OF COMMON STOCK, CLASS A WARRANTS AND UNITS

Our common stock, Class A warrants and Units have been trading publicly
on the Nasdaq SmallCap Market under the symbols "NTFY" and "NTFYU,"
respectively, since August 28, 1997. The table below sets forth the range of
quarterly high and low closing sales prices for our common stock, Class A
warrants and Units on the Nasdaq SmallCap Market during the calendar quarters
indicated.

NTFY COMMON STOCK
<TABLE>
<CAPTION>

FISCAL YEAR ENDED
SEPTEMBER 30, 1999 HIGH LOW
------------------ ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . 2.500 0.813
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1998 HIGH LOW
------------------ ---- ----
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . 3.750 2.125
Second Quarter . . . . . . . . . . . . . . . . . . . 2.188 1.625
Third Quarter . . . . . . . . . . . . . . . . . . . . 4.000 2.000
Fourth Quarter . . . . . . . . . . . . . . . . . . . 2.750 0.938
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1997 HIGH LOW
------------------ ---- ---
<S> <C> <C>
Fourth Quarter . . . . . . . . . . . . . . . . . . . 4.500 3.875
</TABLE>

NTFYW CLASS A WARRANTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1999 HIGH LOW
------------------ ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . 0.438 0.156
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1998 HIGH LOW
------------------ ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . 1.500 0.375
Second Quarter . . . . . . . . . . . . . . . . . . . 0.750 0.375
Third Quarter . . . . . . . . . . . . . . . . . . . . 0.750 0.375
Fourth Quarter . . . . . . . . . . . . . . . . . . . 0.563 0.156
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1997 HIGH LOW
------------------ ---- ----
<S> <C> <C>
Fourth Quarter . . . . . . . . . . . . . . . . . . . 1.250 1.000
</TABLE>

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<PAGE>

NTFYU UNITS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1999 HIGH LOW
------------------ ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . 2.750 1.000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1998 HIGH LOW
------------------ ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . 5.000 2.500
Second Quarter . . . . . . . . . . . . . . . . . . 3.000 2.125
Third Quarter . . . . . . . . . . . . . . . . . . . 4.625 2.250
Fourth Quarter . . . . . . . . . . . . . . . . . . . 3.000 1.000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1997 HIGH LOW
------------------ ---- ---
<S> <C> <C>
Fourth Quarter . . . . . . . . . . . . . . . . . . . 5.313 5.000
</TABLE>

As of March 22, 1999, there were 74 holders of record of our common
stock and 4 holders of record of our Class A warrants.

DIVIDEND POLICY

We have never paid any cash dividends on our stock and anticipate that,
for the foreseeable future, we will continue to retain any earnings for use
in the operation of our business. Payment of cash dividends in the future
will depend upon our earnings, financial condition, any contractual
restrictions, restrictions imposed by applicable law, capital requirements
and other factors deemed relevant by our Board of Directors.

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<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Notify Technology Corporation was founded in August 1994 to develop,
manufacture, market and sell computer telephony products for the business,
SOHO and residential markets. From inception until January 1996, we were
engaged primarily in research and development. In January 1996, we shipped
the first version of our MessageAlert product, in December 1996 shipped our
first Centrex Auto Attendant product and in March 1998 shipped our first
Centrex Receptionist product. In January 1999, we released our line of Call
Manager products and, in February 1999, we announced our "Got Mail"
technology. Substantially all of our revenue has been derived from sales of
our MessageAlert and Centrex Receptionist products.

To date, our working capital requirements have been met through the sale
of equity and debt securities and, to a lesser extent, product revenue and
our line of credit. We have sustained significant operating losses in almost
every fiscal period since inception and expect to incur substantial quarterly
operating losses in the future. Our limited operating history makes the
prediction of future operating results difficult if not impossible. Future
operating results will depend on many factors, including the demand for our
products, the level of product and price competition, our ability to expand
our existing distribution channels and to create new distribution channels,
and our ability to develop and market new products and control costs. There
can be no assurance that our revenue will grow or be sustained in future
periods or that we will ever achieve profitability.

RESULTS OF OPERATIONS

REVENUE: To date, substantially all of our revenue has been derived
from the sale of our MessageAlert and Centrex Receptionist products. Revenue
consists of gross revenue less product returns. Revenue for the fiscal year
ended September 30, 1998 decreased to $1,638,268 from $3,735,773 for the
fiscal year ended September 30, 1997. Sales to RBOCs and LECs constituted
71% and 86% of revenue for the fiscal year ended September 30, 1998 and the
fiscal year ended September 30, 1997, respectively. In addition, two
customers accounted for 50% and 17% of sales in fiscal 1998, and one customer
accounted for 70% of sales in the fiscal year ended September 30, 1997.

In the three months ended December 31, 1998, 75% of our revenue was
derived from the sale of our Centrex Receptionist product and 25% was derived
from the sale of our MessageAlert product. Revenue for the three month period
ended December 31, 1998 decreased to $226,344 from $1,063,026 for the three
month period ended December 31, 1997. Revenue was down from the previous
year due to a decrease in telephone company voice mail promotions utilizing
the MessageAlert product. Sales to telephone companies consisted of 78% and
72% of revenue for the three month periods ended December 31, 1998 and 1997,
respectively. In addition, one customer accounted for 72% of sales in the
three month period ended December 31, 1998 and two customers accounted for
67% and 24% of sales in the three month period ended December 31, 1997.

A substantial portion of our revenue in the three month period ended
December 31, 1998 was derived from a continuing, non-promotional telephone
company program selling the Centrex Receptionist. In contrast, in the three
month period ended December 31, 1997, a substantial portion of our revenue was
derived from the sale of products in connection with telephone company
promotional programs utilizing the MessageAlert product. As the timing and

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<PAGE>

size of promotional programs using the MessageAlert product or our new Call
Manager products are uncertain, we anticipate we will continue to experience
substantial variances in quarterly revenue.

In addition, we believe that domestic telephone companies have in
aggregate decreased their purchases of telephone adjunct devices aimed solely
at Voice Mail customer acquisition. Based on requests for quotations issued
by telephone companies, we believe that purchases of telephone adjunct
devices to support Caller-ID programs continue to occur. A continuation of
this trend would have a material adverse effect on our Voice Mail-only
product business, which would have an adverse effect on our operating results
and financial condition.

COST OF SALES: Cost of sales consists primarily of the cost to
manufacture our products. Cost of sales decreased to $1,582,042 in the
fiscal year ended September 30, 1998 from $2,760,380 in the fiscal year ended
September 30, 1997. This decrease was the result of decreased sales of our
products for the use in telephone company promotional programs. As a result
of significant reserves for slow moving inventory taken in the fourth
quarter, our gross margin decreased to 3% in fiscal 1998 from 26% in fiscal
1997.

Cost of sales decreased to $112,300 in the three month period ended
December 31, 1998 from $766,037 for the three month period ended December 31,
1997. These decreases were the result of decreased sales of the MessageAlert
line of products. Our gross margin performance increased to 50.4% in the
three month period ended December 31, 1998 compared to 27.9% in the three
month period ended December 31, 1997. This improvement was the result of the
higher sales price received by us for lower volume orders of our MessageAlert
products and the higher gross margin associated with our Centrex Receptionist
product line.

RESEARCH AND DEVELOPMENT: Research and development expense consists
principally of personnel costs, contract design services, development tooling
and supply expenses. Research and development expense increased to $1,376,767
for the fiscal year ended September 30, 1998 from $745,063 for the fiscal
year ended September 30, 1997. This increase was primarily the result of an
aggressive program to develop and expand our product offerings that
significantly increased expenditures for engineers, outside consulting and
development materials.

Research and development expense remained level at $327,375 for the
three month period ended December 31, 1998 versus $327,621 for the three
month period ended December 31, 1997. As a result of this research and
development, we were able to release a new line of Caller-ID products at the
Consumer Electronics Show in January 1999.

We expect that research and development expenditures will continue at,
or near, the current level for fiscal 1999 in order that we may complete the
products under development and enhance our current products. See
"Business--Research and Development."

SALES AND MARKETING: Sales and marketing expense consists primarily of
personnel, consulting and travel costs and sales commissions related to our
sales and marketing efforts. Sales and marketing expenses decreased to
$589,295 for fiscal 1998 from $666,930 for fiscal 1997. These decreases were
attributable primarily to personnel changes and lower commissions earned.

Sales and marketing costs increased to $186,989 for the three month
period ended December 31, 1998 compared to $146,629 for the three month
period ended December 31, 1997 due to an increase in the size of the customer
service department to support the Centrex Receptionist product line. The
Centrex Receptionist product is remotely programmed by our customer service
staff and requires ongoing support.

We anticipate that sales and marketing expenses will increase
significantly in future quarters. See "Business--Sales, Marketing and
Distribution."

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<PAGE>

GENERAL AND ADMINISTRATIVE: General and administrative expense consists
of general management and finance personnel, occupancy costs and professional
fees and other general corporate expenses. General and administrative
expenses increased to $884,442 for the fiscal year ended September 30, 1998
from $633,584 for the fiscal year ended September 30, 1997. These increases
were primarily the result of additional legal, accounting and printing
expense and increases in executive salaries.

General and administrative expenses increased to $226,287 for the three
month period ended December 31, 1998 from $213,074 for the three month period
ended December 31, 1997. The increases were primarily the result of costs
related to the filing of a registration statement with the Securities and
Exchange Commission.

INCOME TAXES: There was no provision for federal or state income taxes
in fiscal 1997 or 1998 as we incurred net operating losses. As of September
30, 1998, we had federal and state net operating loss carryforwards of
approximately $5,061,000, which will expire in years 2002 through 2013. The
research and development tax credit carryforwards for federal and state
purposes of approximately $50,000 and $30,000, respectively, will expire in
the years 2010 through 2013, if not utilized. Utilization of the net
operating losses and credits may be subject to a substantial annual
limitation due to ownership change limitations provided by the Internal
Revenue Code of 1986, as amended, and similar state provisions. The annual
limitation may result in the expiration of net operating loss and credit
carryforwards before full utilization. For financial reporting purposes,
deferred tax assets primarily related to the net operating loss carryforwards
recognized under Financial Accounting Standard No. 109, "Accounting for
Income Taxes," have been fully offset by a valuation allowance, as the
realization of these assets is dependent on future earnings, the timing and
amount of which are uncertain.

LIQUIDITY AND CAPITAL RESOURCES

Our financial statements are prepared and presented on a basis assuming
we continue as a going concern. At September 30, 1998, we had an accumulated
deficit of $6.1 million and incurred a net loss of $2.6 million for fiscal
1998. We expect to incur continuing research and development and product
launch expenses. We anticipate that the existing cash and cash equivalents
will enable us to maintain our current operations through at least September
1999.

Our cash requirements may vary materially from those planned because of
the results of favorable new product acceptance or the development of
additional products or changes in the scale, timing or cost of our
manufacturing resources. We may need to raise additional funds in the form of
equity or debt financing to fund our future operations. We may also enter
into collaborative arrangements with corporate partners that could provide us
with additional funding in the form of equity, debt financing or license fees
in exchange for our rights with respect to certain markets or technology.
There can be no assurance that we will be able to raise any additional funds
or enter into any such collaborative arrangements on terms favorable to us,
or at all.

Prior to our initial public offering we financed our operations
primarily through sales of equity and debt securities and bank lines of
credit. In the fiscal years ended September 30, 1998 and 1997, our net cash
used in operating activities equaled $2,617,101 and $1,298,708, respectively.
Cash used in operating activities increased to $658,243 for the three month
period ending December 31, 1998 from $456,791 for the three month period
ending December 31, 1997. Cash used in operating activities for the three
month period ending December 31, 1997 was primarily related to operations,
with shipments largely offsetting inventory purchases. The cash used in
operating activities for the three month period ended December 31, 1997 was
offset by higher sales compared to the three month period ended December 31,
1998. We anticipate that we will have a negative cash flow from operating
activities in future quarters and years.

In March 1999, we sold to David Brewer 850,000 shares of common stock and
warrants to purchase 1,334,444 shares of common stock for aggregate
consideration of $3,060,000. The warrants consisted of four

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warrants to purchase 155,800 shares of common stock at $3.60 per share and
one warrant to purchase 721,244 shares of common stock at $3.60 per share.
Each of the four warrants expires upon the earlier of September 3, 2000 or 30
days after we meet certain product sales or revenue milestones. If we
achieve these milestones, we anticipate that Mr. Brewer will choose to
exercise the warrants and that we will receive as much as $2.2 million in
additional funding. However, there can be no assurance that will meet such
milestones or that Mr. Brewer will, in fact, exercise the warrants.

In connection with the sale of the common stock and warrants to Mr.
Brewer, we agreed to issue additional warrants to Mr. Brewer if we sell
shares of common stock in a capital raising transaction at price below $3.60
per share prior to the earlier of (i) March 3, 2002 or (ii) our calling our
outstanding Class A warrants.

In August 1997, we completed our initial public offering of securities
which consisted of the sale of 1.6 million Units, each consisting of one
share of our common stock and one Class A warrant to purchase one share of
our common stock at an exercise price of $6.50. The net proceeds of the
initial public offering, after deducting the underwriting discounts and
commissions and other expenses of the initial public offering, was
approximately $6.2 million.

In March 1997, we completed a bridge financing which consisted of the
sale of $850,000 principal amount of notes bearing interest at an annual rate
of 10% and warrants to purchase an aggregate of 425,000 shares of common
stock. The net proceeds of this financing of approximately $735,000 were
utilized by us to repay certain indebtedness and for working capital purposes
including general and administrative expense and expenses of the initial
public offering. We repaid the principal and accrued interest on these notes
with a portion of the proceeds of the initial public offering. We recognized
a non-recurring charge of approximately $130,000 representing the aggregate
amount of unamortized debt discount and debt issuance costs associated with
the financing at the time of repayment. See Note 3 of Notes to Financial
Statements.

IMPACT OF THE YEAR 2000 ISSUE

We have developed a three-phase program to limit or eliminate Y2K
exposures. Phase I is to identify those systems, applications and
third-party relationships that have exposure to Y2K disruptions in
operations. Phase II is the development and implementation of action plans
to achieve Y2K compliance in all areas prior to the end of 1999. Also
included in Phase II is the development of contingency plans which would be
implemented should Y2K compliance not be achieved in order to minimize
disruptions in operations. Phase III is the final testing or equivalent
certification of testing of each major area of exposure to ensure compliance.
We intend to complete all phases before the end of 1999.

We have identified three major areas determined to be critical for
successful Y2K compliance: Area 1, which included financial, research and
development and administrative informational systems applications reliant on
system software; Area 2, which includes research, development and quality
applications reliant on computer programs embedded in microprocessors; and
Area 3, which includes third-party relationships which may be affected by
Area 1 or Area 2 exposures, which exist in other companies.

With respect to Area 1, we are conducting an internal review and
contacting all software suppliers to determine major areas of Y2K exposure.
In research, development and quality applications (Area 2), we are working
with equipment manufacturers to identify exposures. With respect to Area 3,
we plan to evaluate our reliance on third parties in order to determine
whether their Y2K compliance will adequately assure uninterrupted operations.

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We have not yet completed Phase I of the Y2K program with respect to all
three of the major areas. We believe that we rely on systems, applications
and third-party relationships which, if not Y2K compliant prior to the end of
1999, could have material adverse impact on business, financial condition and
results of operations. Because we have not completed Phase II contingency
planning, we cannot describe what action we would take in any of the areas
should Y2K compliance not be achievable in time.

As of December 31, 1998, we had not identified any costs related to
replacement or remediation and testing of our Area 1 computer information
systems. Not having completed Phase I and Phase II evaluations, at this time
we have no basis for estimating the potential cost of our Y2K compliance
programs. The funds for these costs will be part of our cash flow from
operations and capital expenditures.

We do not expect that the year 2000 project will have a material effect
on our financial condition or results of operations unless the ability of
vendors to supply us products is interrupted. Any interruption of product
supply in conjunction with obligations to deliver product for customer
promotional programs could have a detrimental effect on the results of
operations. The cost of such disruption would be directly related to the
size and timing of any such interrupted program. We will be making special
efforts to avoid such an occurrence but there cannot be any assurance that we
will obtain the cooperation of vendors and customers to prevent such an event.

Based on the currently available information, management does not
believe that the Year 2000 will pose significant operational problems;
however, it is uncertain to what extent we may be affected by such matters.
In addition, there can be no assurance that the failure to ensure year 2000
capability by a supplier or another third party would not have a material
effect on us.

RELEASE OF ESCROW SECURITIES

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BUSINESS

We were incorporated in the State of California in August 1994. We are
engaged in the development, manufacture, marketing and sale of computer
telephony products for the business, Small Office Home Office ("SOHO") and
residential marketplaces. In recent years, the number of individuals and
businesses relying on their telephone company or other service provider to
provide them with services such as voice mail, and e-mail and CENTREX, a
business-oriented service that eliminates the need for on-premise telephone
switching equipment, has increased dramatically. Our products are designed
to enhance the convenience and utility of these services by providing
customers with features that are either not available or not included in
standard service packages.

PRODUCTS

MESSAGEALERT

The MessageAlert is a visual indicator for telephone company provided
voice mail (a "voice message waiting indicator", or "VMWI"). Telephone
companies typically use one of two signaling standards to alert voice mail
subscribers that they have a message waiting: stutter dial tone signaling and
"CLASS" signaling, which enables detection of a voice mail message without
taking the line off-hook.

The MessageAlert is the only battery powered stutter and CLASS
compatible MWI on the market. We have been granted a patent on the
MultiSense Technology incorporated in it that enables it to work with both
signaling standards. We market the MessageAlert under the name
"MessageAlert". The MessageAlert is also marketed by certain other telephone
companies under their own names. In addition, we market a version of the
MessageAlert, "MessageAlert PBX," which is specifically adapted for PBX
environments.

CENTREX RECEPTIONIST

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

CALLER - ID

We announced a family of Caller - ID products in January 1999. Our
Caller - ID products incorporate the MessageAlert visual message waiting
indication technology and support for a combination of telephone company
services such as voicemail, Caller - ID, call waiting Caller - ID and deluxe
call waiting. These products are categorized as "Type I" (calling name and
calling number only); "Type II" (Type I features plus Call Waiting - Caller -
ID) and "Type II.V" (Type II plus Call Waiting Deluxe). The Type II and Type
II.V products take advantage of more sophisticated services offered by
telephone service providers than the "Type I" technology more commonly on the
market. This line of products is designed to bundle multiple services from
the telephone service provider offering more functionality to the end user
and more revenue opportunity for the telephone service provider.

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We intend to distribute our products through or in conjunction with the
large domestic telephone companies and certain of their authorized resellers.
To date, we have sold our MessageAlert product to five of the seven Regional
Bell Operating companies and twelve of the 20 largest local exchange
carriers. Our strategy is to encourage these telephone companies to bundle
our products with their services to acquire new customers and to retain more
new service subscribers. In addition, we intend to encourage telephone
companies and their authorized resellers that focus on selling Centrex
services to market our Centrex Receptionist as an enhancement to the basic
Centrex service. We believe that the relationships with telephone companies
that we have formed as a result of our marketing of the MessageAlert product
will aid us in developing the telephone companies as a distribution channel
for the Centrex Receptionist and the Call Manager product line.

TECHNOLOGY: "GOT MAIL"

We recently announced the development of a visual "Got Mail" technology
that would allow home users to see that they have new e-mail without turning
on their computers. We are marketing this technology to large telephone
companies and Internet Service Providers that could offer the visual service
to their dial-up e-mail customers as a value-added service. We have not yet
announced a product utilizing our "Got Mail" technology.

SALES, MARKETING AND DISTRIBUTION

Our domestic and international marketing and sales activities for the
MessageAlert to date have been focused on direct sales to large telephone
companies. The MessageAlert is being either private labeled or joint
marketed by GTE Communication Systems Corporation, Pacific Bell, BellSouth
Corporation, Ameritech Corporation, Century Telephone Enterprises Inc.,
Commonwealth Telephone Company, Standard Telephone Company and Aliant
Communications, Inc. Except with respect to Pacific Bell, our relationship
with these companies has not been reduced to a formal agreement or contract
and none of these companies is obligated to purchase any product from us. We
manufacture product based on purchase orders and forecasts of purchases
received from Regional Bell Operating Companies ("RBOCs") and Local Exchange
Carriers ("LECs"). We believe large telephone companies typically do
business in this manner and do not intend to seek long-term contractual
commitments from our telephone company customers.

We are marketing the Centrex Receptionist to the same group of large
telephone companies we have targeted for the MessageAlert product. We have
entered into one contract with a major telephone company to sell the Centrex
Receptionist through its ongoing Customer Premise Equipment channel. We
believe that having established ourselves as a qualified supplier or joint
marketing partner with respect to the MessageAlert product will help shorten
the sales cycle with respect to the Centrex Receptionist. In particular, we
believe the Centrex Receptionist and the MessageAlert product can be marketed
together by the telephone companies to the business market.

We believe our success, if any, will be largely dependent on our ability
to either sell our products to or enter into joint marketing arrangements
with the seven RBOCs and approximately 20 large LECs in the United States.
In particular, we believe that our MessageAlert product can be sold
profitably only if it is sold to or in conjunction with the RBOCs and LECs.
We also expect to rely significantly on the RBOCs and LECs as a channel for
our Centrex Receptionist and Call Manager products. To date, we have sold
our products to five RBOCs and twelve LECs. Any failure to develop
significantly enhanced relationships with the RBOCs and LECs would have a
materially adverse effect on our business and operating results.

We are marketing our products outside North America by using sales
representatives in various countries. We have entered into a sales
representative agreement to market products in France and another agreement
to market products in the United Kingdom, Germany, Netherlands, Spain,
Sweden, and Switzerland. No significant revenue was generated from the
international market in fiscal 1998.

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<PAGE>

TECHNICAL AND MARKETING SUPPORT

We have developed product collateral and marketing programs for the
MessageAlert, Centrex Receptionist and Call Manager products. We intend to
expand our ongoing marketing programs. These marketing programs will include
augmentation of collateral material, advertising and trade shows,
supplemented with public relations campaigns.

We provide back-up technical support to large telephone companies and
resellers. Our support personnel perform all technical support. In the
future, our support organization will provide both sales and technical
support. Sales support consists of sales and marketing training at our home
office training facility for our own sales force and those of authorized
resellers. The Centrex Receptionist requires remote modem support by our
customer service group whenever the user wants to add lines, make directory
changes and perform system back-up on a billable service arrangement.

RESEARCH AND DEVELOPMENT

We incurred $1,376,767 and $745,063 in research and development expenses
in fiscal 1998 and 1997, respectively. We have had limited internal
engineering resources and have used contract engineering resources for a
significant portion of our research and development. We believe that our
future success, if any, depends significantly on our ability to continue to
enhance our existing products and to develop new products, and intend to
continue to incur continued research and development costs. We expect that
our research and development efforts will be focused in three areas: cost
reduction and feature enhancement of the MessageAlert product line; further
development of our Call Manager product line; and development of our "Got
Mail" technology.

MANUFACTURING

We have primarily used domestic contract manufacturing to minimize
resources devoted to manufacturing and to maximum flexibility and response
time. At times, we use offshore turnkey manufacturing when production volume
makes it a cost-effective alternative. To the extent possible, we use
standard parts and components for our products although certain components
are custom designed and/or are available only from a single source or limited
sources.

GOVERNMENTAL REGULATION AND INDUSTRY STANDARDS

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

COMPETITION

We currently have several direct competitors in the market for VMWI
products. Solopoint, Inc. produces the S025 Message Waiting Light, a stutter
dial tone and CLASS/FSK signal AC-powered VMWI. We believe that Bellsouth is
the only telephone company marketing the S025. Consumerware, Inc. produces
VoiceMail Lite, a battery powered, stutter tone only VMWI. We believe the
retail store unit of GTE is the only telephone company

-21-

<PAGE>

which markets the VoiceMail Lite. SNI Innovation, Inc. produces VisuAlert, a
dual standard VMWI that requires an AC adapter. We believe that no large
telephone company is reselling or marketing the VisuAlert product. AASTRA
TELECOM of Canada produces Call Answer Lite, a dual standard VMWI that
requires an AC Adapter. We believe competition in the VMWI market is based
on support of signaling standards, type of power source, other features,
price and quality. We believe we compete favorably with respect to all of
these factors.

We have one direct competitor in the market for auto-attendant products
specifically designed for the Centrex market. SoloPoint, Inc. produces an
auto-attendant product that has basic call answering and call routing
features but is missing one or more of the features of the Centrex
Receptionist. The Centrex Receptionist features include multiple levels of
menus, pre-recorded system prompts, interactive voice response for
configuration, name directory functionality, and call statistics for up to
four incoming ports. We believe competition in the auto-attendant market is
based on features (including ease of use, availability of a name directory,
amount of recording time and number of menu levels), price and quality. We
believe our Centrex Receptionist product competes favorably with respect to
all of these factors.

In the market of Call-ID products, there exist many companies, both
domestic and foreign who manufacture products offering a wide range of
functionality. The Caller - ID marketplace consists of two major segments;
retail and telephone company related sales. We compete in the telephone
company related segment that commonly requires large quantities of low
featured product for acquisition and entry level sales to Caller - ID
customers and smaller quantities of more fully featured product for multiple
service bundling and upgraded Caller - ID services such as Call Waiting -
Caller ID and Call Waiting - Disposition.

We compete with CIDCO Incorporated, Solopoint, Inc., Consumerware, Inc.,
SNI Innovation, Inc., TI Systems and AASTRA TELECOM in the Caller - ID
market. Foreign manufacturers of Caller - ID product compete primarily in the
retail marketplace or resell through one of the domestic companies named
above.

We are not aware of any direct competitors of the "Got Mail" technology
announced in February 1999. There exist PC based products that notify users
of e-mail but these require the PC to be turned on. Our technology, as
announced, would not require an active computer to provide notification.

We expect that to the extent that the market for any of our products
develops, competition will intensify and new competitors will enter the
market. Certain manufacturers of competing products have greater financial,
technical and marketing resources than we do. In addition, there are several
companies with substantially greater technical, financial and marketing
resources than us that could produce competing products. These companies
include telephone equipment manufacturers such as CIDCO Incorporated,
Northern Telecom Limited and Lucent Technologies Inc. There can be no
assurance that we will be able to compete successfully against existing and
new competitors as the market for our products evolves and the level of
competition increases. A failure to compete successfully against existing
and new competitors would have a materially adverse effect upon our business
and results of operations.

PROPRIETARY RIGHTS

We rely on a combination of patent and trade secret law, nondisclosure
agreements and technical measures to establish and protect our proprietary
rights in our products. We have a design patent issued on the MessageAlert
design. The MessageAlert design is unique in that it provides a visual
message waiting indicator light packaged in the form of a 3M Post- it(R) Note
holder. In addition, we were granted a patent in October 1998 relating to the
MultiSense technology used in the MessageAlert product. Our MultiSense
technology automatically detects and reacts to either stutter or CLASS
signaling. We intend to continue to apply for patents, as appropriate, for
our future technologies and products.

-22-

<PAGE>

There are few barriers to entry into the market for our products, and
there can be no assurance that any patents applied for by us will be granted
or that the scope of our patent or any patents granted in the future will be
broad enough to protect against the use of similar technologies by our
competitors. There can be no assurance, therefore, that any of our
competitors, some of whom have far greater resources than we do, will not
independently develop technologies that are substantially equivalent or
superior to our technology. Further, we intend to distribute our products in
a number of foreign countries. The laws of those countries may not protect
our proprietary rights to the same extent as the laws of the United States.

We may be involved from time to time in litigation to determine the
enforceability, scope and validity of any of our proprietary rights or of
third parties asserting infringement claims against us. Any such litigation
could result in substantial costs to us and diversion of efforts by our
management and technical personnel.

We have entered into a non-exclusive license agreement with Active Voice
Corporation ("Active Voice") pursuant to which we have paid an up-front fee
on sales of our MessageAlert product in exchange for certain rights with
respect to a patent issued to Active Voice covering stutter dial tone
detection.

EMPLOYEES

As of September 30, 1998, we employed sixteen persons of whom three were
engaged in research and development, two in manufacturing, eight in sales,
marketing, and customer support, and three in general administration and
finance. Fifteen of our employees work full time. We contemplate increasing
our staff at a pace consistent with our business and growth. None of our
employees are currently represented by a labor union. We consider our
relations with our employees to be good.

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

FACILITIES

The Company's principal executive offices are located at 1054 South
DeAnza Boulevard, Suite 105, San Jose, California 95129. The facilities
consist of approximately 3,900 square feet of office space pursuant to a
lease that expires March 31, 2001. The Company will either renew its lease
and acquire more space if available or enter into a lease for new premises in
the local area.

HOW TO GET INFORMATION ABOUT NOTIFY TECHNOLOGY CORPORATION

We are subject to the informational requirements of the Exchange Act and
therefore file reports, proxy and information statements and other
information with the SEC. You may read and copy any materials we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The SEC's Internet website is http://www.sec.gov.

-23-

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of Notify Technology Corporation,
and their ages as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Name Age Position
------------------------- ----- ----------------------------------------------------------------------------
<S> <C> <C>
Paul F. DePond(1) . . . . 45 President, Chief Executive Officer and Chairman of the Board of Directors
Gaylan I. Larson . . . . 58 Vice President of Operations and Director
Gerald W. Rice . . . . . 51 Chief Financial Officer and Secretary
Michael Ballard(1)(2) . . 43 Director
Michael Smith(2) . . . . 52 Director
Andrew Plevin(1) . . . . 35 Director
</TABLE>

- ------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee

PAUL F. DEPOND, founder of Notify Technology Corporation, has served as
its President, Chief Executive Officer and Chairman of the Board of Directors
since its inception in August 1994. Mr. DePond also sits on the Board of
Directors of LearnCom, a company located in San Jose, CA. From September
1992 through May 1994, Mr. DePond served as Vice President Corporate
Marketing of Telebit Corporation, a supplier of high speed modems and dialup
remote access products. From January 1991 through September 1992, Mr. DePond
served as Vice President, Marketing, of Alantec Corporation, a manufacturer
of networking products. Mr. DePond received a B.S. in Electrical Engineering
and Computer Engineering in 1979, and an M.A. in Computer Science in 1980,
each from the University of Michigan at Ann Arbor.

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

GAYLAN I. LARSON has served as Vice President of Operations and as a
Director of Notify Technology Corporation since August 1994. From January
1991 to August 1994, Mr. Larson was Chief Operating Officer of SportSense,
Inc., a manufacturer of golf training equipment. Prior to SportSense, Mr.
Larson served as General Manager of the Data Systems Division of
Hewlett-Packard Company, a company with which he had an 18 year relationship.
Mr. Larson received an A.A. from Sacramento Junior College in 1959, a B.S. in
Electrical Engineering from University of California, Berkeley in 1961, and a
M.S.E.E. in Engineering from Newark College of Engineering in 1965.

MICHAEL BALLARD has served as a director of Notify Technology
Corporation since January 1996. Mr. Ballard is the Chief Executive Officer
and Chairman of the Board of Savannah Chanel Vineyards, Inc. From October
1996 to November 1997, Mr. Ballard directed the dial-up technology division
of Cisco Systems, Inc. From May 1995 to October 1996, Mr. Ballard served as
Executive Vice President Marketing of Telebit Corporation. From June 1993 to
September 1994, Mr. Ballard served as Chief Operating Officer of UUNet, Inc.,
an internet service provider. From January 1986 to May 1993, Mr. Ballard held
several positions including Chief Executive Officer of Telebit Corporation.
Mr. Ballard received his B.F.A. in 1978 from the University of Utah.

-24-

<PAGE>

MICHAEL SMITH has served as a director of Notify Technology Corporation
since February 1996. Mr. Smith owned and operated COMAC, a literature and
product fulfillment company, from 1970 until 1999. Mr. Smith currently serves
as the President of COMAC, a subsidiary of Pierce Leahy Corporation. Mr.
Smith attended San Jose State University from 1964 through 1969.

ANDREW PLEVIN was elected as a director of Notify Technology Corporation
in February 1998. Since November 1997, Mr. Plevin has been acting Chief
Executive Officer and President of Core Software Technology, Inc. From
August 1993 to November 1997, Mr. Plevin served as Vice President of D.H.
Blair Investment Banking Corp. Mr. Plevin was nominated to the Board of
Directors pursuant to a requirement contained in the underwriting agreement
between Notify Technology and D.H. Blair Investment Banking Corp. for our
initial public offering. The provision provides that D.H. Blair Investment
Banking Corp. shall have the right to designate one director of our Board of
Directors for a period of five years from the closing date of our initial
public offering.

In connection with a private placement of our securities, we have agreed
to seek shareholder approval to expand our Board of Directors and to elect
David A. Brewer to our Board of Directors.

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

Our success, if any, will be dependent to a significant extent upon
certain key management employees, including Messrs. DePond and Larson. We
have 3-year key-man term life insurance on Mr. DePond in the amount of $2
million and have entered into employment agreements with him and with Messrs.
Larson, and Rice. See "Employment Contracts."

DIRECTOR COMPENSATION

Members of our Board of Directors do not receive compensation for their
services as directors.

-25-

<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
awarded to, earned by, or paid for services rendered to Notify Technology
Corporation in all capacities during the fiscal year ended September 30,
1998, by (i) our Chief Executive Officer and (ii) our most highly compensated
executive officers whose salary and bonus for such year exceeded $100,000
(the "Named Executive Officers").

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ----------------------------------------------------------------------- ------------------------------- -------
SECURITIES
OTHER ANNUAL RESTRICTED STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(1)
- -------------------------- ------ --------- ------- -------------- ----------------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul F. DePond . . . . 1998 132,739 -- -- -- -- -- 7,950
Chief Executive 1997 121,381 -- -- -- -- -- 8,673
Officer 1996 100,385, -- -- -- -- -- 7,146

Gaylan Larson . . . . . 1998 115,585 -- -- -- -- -- 6,138
Chief Operations 1997 112,446 -- -- -- -- -- 7,518
Officer 1996 95,365 -- -- -- -- -- --

Gerald Rice . . . . . . 1998 105,759 -- -- -- -- -- 6,562
Chief Financial 1997 95,519 -- -- -- 24,752 -- 6,886
Officer 1996 63,895 -- -- -- -- -- --
</TABLE>

- ---------------------------
(1) Represents payments of insurance premiums on behalf of the Named Executive
Officers.

The following tables set forth certain information for the Named Executive
Officers with respect to grants and exercises in fiscal 1998 of options to
purchase common stock:

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL EXERCISE
SECURITIES OPTIONS GRANTED OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
- ------------------------- ------------------- ------------------ ---------- ----------
<S> <C> <C> <C> <C>
Paul F. DePond . . . . . -- -- -- --
Gaylan Larson . . . . . . -- -- -- --
Gerald Rice . . . . . . . -- -- -- --
</TABLE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES VALUE YEAR END (#) FISCAL YEAR END (1)($)
ACQUIRED ON REALIZED ----------------------------- ----------------------------
NAME EXERCISES (#) ($). EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- --------------- ---------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul F. DePond . . . -- -- 110,792 -- -- --
Gaylan Larson . . . . -- -- -- -- -- --
Gerald Rice . . . . . -- -- 25,752 -- -- --
</TABLE>

- ----------------------------
(1) Market value of underlying securities at fiscal year-end minus exercise
price multiplied by the number of shares.

-26-

<PAGE>

STOCK OPTION PLAN

Our Stock Option Plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), and for the
granting to employees and consultants of nonstatutory stock options and stock
purchase rights ("SPRs"). The Stock Option Plan was approved by the Board of
Directors and the shareholders in January 1997. Unless terminated sooner, the
Stock Option Plan will terminate automatically in January 2007. A total of
195,938 shares of common stock are currently reserved for issuance pursuant
to the Stock Option Plan. As of January 31, 1999 we had granted options to
purchase an aggregate of 59,000 shares of Common Stock to nine employees and
four non-employees at $0.906 per share and 45,000 shares of Common Stock to
two employees and two non-employees at $3.781 per share on the date of this
registration.

The Stock Option Plan may be administered by the Board of Directors or a
committee of the Board (the "Committee"), which Committee shall, in the case
of options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The exercise
price of incentive stock options must be at least equal to the fair market
value of our common stock on the date of grant. The exercise price of
nonstatutory stock options and SPRs granted under the Stock Option Plan is
determined by the Committee, but with respect to nonstatutory stock options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the exercise price must at least be equal to the
fair market value of the Common Stock on the date of grant. With respect to
any participant who owns stock possessing more than 10% of the voting power
of all classes of our outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the term of such incentive stock option must not
exceed five years. The term of all other options granted under the Stock
Option Plan may not exceed ten years.

The Stock Option Plan provides that in the event of a merger of Notify
Technology Corporation with or into another corporation, a sale of
substantially all of our assets or a like transaction involving Notify
Technology Corporation, each option shall be assumed or an equivalent option
substituted by the successor corporation. If the outstanding options are not
assumed or substituted as described in the preceding sentence, the Committee
shall provide for the Optionee to have the right to exercise the option or
SPR as to all of the optioned stock, including shares as to which it would
not otherwise be exercisable. If the Administrator makes an option or SPR
exercisable in full in the event of a merger or sale of assets, the
Administrator shall notify the optionee that the option or SPR shall be fully
exercisable for a period of fifteen (15) days from the date of such notice,
and the option or SPR will terminate upon the expiration of such period.

EMPLOYMENT CONTRACTS

In December 1996, we entered into an employment agreement with Paul
DePond, our President and Chief Executive Officer. The agreement provides
for a base salary of $130,000, which increased to $150,000 thirteen months
following our initial public offering, and a $50,000 bonus contingent on our
attainment of certain performance milestones. In addition, if we are sold
while Mr. DePond is employed by us, Mr. DePond will receive a bonus equal to
2% of the price at which we are sold.

In the event that we terminate Mr. DePond without cause following a
change in control, Mr. DePond is entitled to receive severance compensation
equal to a continuation of his salary for a period of twenty-four (24)
months. In the event that we terminate Mr. DePond without cause apart from a
change of control, Mr. DePond is entitled to receive severance compensation
equal to a continuation of his salary for a period of eighteen (18) months.
Mr. DePond is not entitled to severance compensation in the event of a
termination for cause or voluntary resignation. In the event of a termination
due to disability, Mr. DePond is entitled to receive only those severance or
disability benefits as are established under our then existing severance and
benefits plans and policies.

-27-

<PAGE>

In December 1996, we entered into employment agreements with Mr. Larson,
our Vice President of Operations and Mr. Rice, our Chief Financial Officer.
The agreements provide for base salaries of $115,000 and $105,000 for Messrs.
Larson and Rice, respectively. Under the agreements, Messrs. Larson and Rice
are eligible to receive annual bonuses based on an earnings target approved
by our board of directors.

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

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

INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS

We have adopted provisions in our Articles of Incorporation that
eliminate the personal liability of our directors for monetary damages
arising from a breach of their fiduciary duties in certain circumstances to
the fullest extent permitted by law and authorizes us to indemnify our
directors and officers to the fullest extent permitted by law. Such
limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission.

Our bylaws provide that we shall indemnify our directors and officers to
the fullest extent permitted by California law. We have entered into
indemnification agreements with our officers and directors containing
provisions which are in some respects broader than the specific
indemnification provisions contained in the California Corporations Code. The
indemnification agreements may require us, among other things, to indemnify
such officers and directors against certain liabilities that may arise by
reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.

At present, there is no pending material litigation or proceeding
involving any of our directors or officers where indemnification may be
required or permitted. We are not aware of any threatened material
litigation or proceeding which may result in a claim for such indemnification.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Notify
Technology Corporation pursuant to the foregoing provisions, or otherwise, we
have been advised that it is the opinion of the Commission that such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In April 1997, Michael Ballard, one of our directors, loaned Notify
Technology $200,000 in exchange for a note in the principal amount of
$200,000 and warrants to purchase 2,970 shares of our Common Stock at a price
per share of $5.00. We repaid this note with a portion of the proceeds of
our initial public offering.

We have an ongoing business relationship with COMAC, a literature and
product fulfillment company previously owned by Michael Smith. Mr. Smith
currently serves as the president of COMAC, a subsidiary of Pierce Leahy
Corp. We use COMAC, along with other fulfillment companies, on a project by
project basis to facilitate the distribution of our products to telephone
company customers. We have no contractual obligation to use COMAC's
services. In fiscal year 1998, we paid to COMAC $61,100 in fees. During the
first quarter of fiscal 1999, we paid to COMAC $1,032 in fees.

In August 1997, we issued a five-year warrant to purchase 24,752 shares
of our common stock with an exercise price of $5.00 per share to Gerald W.
Rice, our Chief Financial Officer.

From August 1993 to November 1997, Mr. Andrew Plevin, a director on our
Board of Directors, served as Vice President of D.H. Blair Investment Banking
Corp. D.H. Blair Investment Banking Corp. served as placement agent for our
1997 bridge financing and as underwriter for our initial public offering. In
connection with the bridge financing and our initial public offering, D.H.
Blair Investment Banking Corp. received approximately $1,150,000 in
discounts, commission, and non-accountable expense allowances. In addition,
D.H. Blair Investment Banking Corp. received an option to purchase 160,000
Units, at $7.00 per Unit, exercisable at any time, in whole or in part,
during the two year period commencing August 28, 2000.

In March 1999, we sold to David A. Brewer in a private placement 850,000
shares of common stock and warrants to purchase 1,334,444 shares of common
stock for aggregate consideration of $3,060,000. The warrants consisted of
four warrants to purchase 155,800 share of common stock at $3.60 per share
and one warrant to purchase 721,244 shares of common stock at $3.60 per
share. Each of the four warrants expires upon the earlier of September 3,
2000 or 30 days after we meet certain product sales or revenue milestones.
The fifth warrant expires on March 3, 2003 and contains a net exercise
provision. In connection with the sale of the common stock and warrants to
Mr. Brewer, we agreed to issue additional warrants to Mr. Brewer if we sell
shares of common stock in a capital raising transaction at price below $3.60
per share prior to the earlier of (i) March 3, 2002 or (ii) our calling our
outstanding Class A warrants. In addition, we agreed to register for resale
the common stock sold in the private placement and the common stock
underlying the warrants at the request of Mr. Brewer which may be made at any
time after June 3, 1999. We also agreed to seek shareholder approval to
increase the size of our board of directors and to elect Mr. Brewer to our
board of directors.

We believe that all of the transactions set forth above were made on
terms no less favorable to us than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between us and our
officers, directors and principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors of the Board of Directors,
and will be on terms no less favorable to us than could be obtained from
unaffiliated third parties.

-29-

<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 15, 1999, (i) by each person (or
group of affiliated persons) who is known by us to own beneficially more than
five percent of our common stock, (ii) by each of the Named Executive
Officers, (iii) by each of our directors, and (iv) by all of our directors
and executive officers as a group. We believe that the persons and entities
named in the table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them, subject to
community property laws, where applicable.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) PERCENTAGE (1)
- -------------------------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
David A. Brewer(2)(3)(4)........................................................ 2,239,745 39.0%
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

Paul F. DePond(5)............................................................... 516,731 11.5
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

Alan Stahler(6)(7).............................................................. 315,500 6.9
c/o D.H. Blair Investment Banking Corp.
44 Wall Street
New York, NY 10005

J. Morton Davis(8)(9)........................................................... 288,704 6.4
c/o D.H. Blair Investment Banking Corp.
44 Wall Street
New York, NY 10005

Gaylan I. Larson................................................................ 198,019 4.5
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

Gerald W. Rice(10).............................................................. 94,058 2.1
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

Michael Ballard(11)............................................................. 71,970 1.6
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

Michael Smith(12)............................................................... 54,269 1.2
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

Andrew Plevin(13)............................................................... 6,700 *
c/o Notify Technology Corporation
1054 S. De Anza Blvd., Suite 105
San Jose, California 95129

All directors and executive officers as a group
(6 persons).................................................................. 941,747 17.7
</TABLE>
- ----------------------

-30-

<PAGE>

* Less than one percent.
(1) Applicable percentage of ownership is based on 4,399,326 shares of common
stock outstanding as of March 15, 1999 together with applicable options or
warrants for such shareholder. Beneficial ownership is determined in
accordance with the rules of the Securities Exchange Commission, and
includes voting and investment power with respect to shares. Shares of
common stock subject to warrants currently exercisable or exercisable
within 60 days after March 15, 1999 are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the percentage of
any other stockholder.
(2) Includes 1,357,444 shares issuable upon exercise of currently exercisable
warrants.
(3) Includes 19,801 shares of common stock owned by Hanabusa Investments, Inc.,
of which Mr. Brewer is a shareholder.
(4) Includes 12,500 shares of common stock and 13,000 shares issuable upon
exercise of currently exercisable warrants owned by JBB Associates, of
which Mr. Brewer is a shareholder.
(5) Includes 110,792 shares issuable upon exercise of currently exercisable
warrants.
(6) Includes 157,000 shares issuable upon exercise of currently exercisable
warrants.
(7) Beneficial Ownership based on December 31, 1998 filing of Schedule 13G
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(8) Includes 144,352 shares issuable upon exercise of currently exercisable
warrants.
(9) Beneficial ownership based on December 31, 1998 filing of Schedule 13G/A
under the Exchange Act.
(10) Includes 24,752 shares issuable upon exercise of currently exercisable
warrants.
(11) Includes 9,543 shares issuable upon exercise of currently exercisable
warrants.
(12) Includes 3,264 shares issuable upon exercise of currently exercisable
warrants.
(13) Includes 350 shares issuable upon exercise of currently exercisable
warrants.

ESCROW SECURITIES

In connection with our initial public offering, the holders of our
common stock and warrants to purchase common stock placed 1,242,985 shares of
our common stock (the "Escrow Shares") and warrants to purchase 126,759
shares of common stock (the "Escrow Warrants" and, together with the Escrow
Shares, the "Escrow Securities") into escrow pursuant to an escrow agreement
("Escrow Agreement") with our transfer agent, American Stock Transfer and
Trust, as escrow agent. The Escrow Securities are not assignable or
transferable; however, the Escrow Shares may be voted. Holders of any Escrow
Warrants in escrow may exercise their warrants prior to their release from
escrow; however, the shares issuable upon any such exercise will continue to
be held in escrow as Escrow Shares pursuant to the Escrow Agreement.

The Escrow Agreement provides that one-half of the Escrow Securities
(i.e. 684,872 shares of issued or issuable common stock) will be released
from escrow, on a pro rata basis, if, and only if, one or more of the
following conditions are met:

1. our net income before provision for income taxes and exclusive of
any extraordinary earnings as audited and determined by our independent
public accountants (the "Minimum Pretax Income") amounts to at least $1.7
million for the fiscal year ending September 30, 1998 or September 30,
1999;

2. the Minimum Pretax Income amounts to at least $2.8 million for
the fiscal year ending September 30, 2000;

3. the Minimum Pretax Income amounts to at least $4.1 million for
the fiscal year ending on September 30, 2001;

4. the Minimum Pretax Income amounts to at least $5.4 million for
the fiscal year ending on September 30, 2002;

5. the Minimum Pretax Income amounts to at least $8.2 million for
the fiscal year ending on September 30, 2003;

-31-

<PAGE>

6. commencing on August 28, 1997 and ending 18 months thereafter,
the bid price of our common stock averages in excess of $12.00 per share
(subject to adjustment in the event of any reverse stock splits or other
similar events) for 30 consecutive business days;

7. commencing 18 months after August 28, 1997 and ending 36 months
thereafter, the bid price averages in excess of $15.00 per share (subject
to adjustment in the event of any reverse stock splits or other similar
events) for 30 consecutive business days; or

8. we are acquired by or merged into another entity in a transaction
in which our shareholders receive per share consideration at least equal to
the level set forth in (6) above.

The Escrow Agreement further provides that the remaining Escrow
Securities (i.e. 684,872 shares of issued or issuable shares of common stock)
will be released from escrow, on a pro rata basis, if, and only if, one or
more of the following conditions is met:

1. the Minimum Pretax Income amounts to at least $2.8 million for
the fiscal year ending September 30, 1998 or September 30, 1999;

2. the Minimum Pretax Income amounts to at least $4.1 million for
the fiscal year ending on September 30, 2000;

3. the Minimum Pretax Income amounts to at least $5.4 million for
the fiscal year ending on September 30, 2001;

4. the Minimum Pretax Income amounts to at least $8.2 million for
the fiscal year ending on September 30, 2002;

5. the Minimum Pretax Income amounts to at least $9.5 million for
the fiscal year ending on September 30, 2003;

6. commencing on August 28, 1997 and ending 18 months thereafter,
the bid price of our common stock averages in excess of $13.30 per share
(subject to adjustment in the event of any reverse stock splits or other
similar events) for 30 consecutive business days;

7. commencing 18 months after August 28, 1997 and ending 36 months
thereafter, the bid price averages in excess of $16.75 per share (subject
to adjustment in the event of any reverse stock splits or other similar
events) for 30 consecutive business days; or

8. we are acquired by or merged into another entity in a transaction
in which our shareholders receive per share consideration at least equal to
the level set forth in (6) above.

The Minimum Pretax Income amounts set forth above (i) shall be
calculated exclusive of any extraordinary earnings, including, but not
limited to, any charge to income resulting from release of the Escrow
Securities and (ii) shall be increased proportionately, with certain
limitations, in the event additional shares of common stock or securities
convertible into, exchangeable for or exercisable into common stock are
issued after completion of our initial public offering. The foregoing Minimum
Pretax Income amounts have been adjusted to reflect the effect of the share
issuances to David A. Brewer. The bid price amounts set forth above are
subject to adjustment in the event of any stock splits, reverse stock splits,
reverse stock splits or other similar events.

-32-

<PAGE>

Any money, securities, rights or property distributed in respect of the
Escrow Securities, including any property distributed as dividends or
pursuant to any stock split, merger, recapitalization, dissolution, or total
or partial liquidation of us, shall be held in escrow until release of the
Escrow Securities. If none of the applicable Minimum Pretax Income or bid
price levels set forth above have been met by December 31, 2003, the Escrow
Securities, as well as any dividends or other distributions made with respect
thereto, will be canceled and contributed to our capital. We expect that the
release of the Escrow Securities to its officers, directors, employees and
consultants, if it occurs, will be deemed compensatory and, accordingly, will
result in a substantial charge to reportable earnings, which would equal the
fair market value of such shares on the date of release. Such charge could
substantially increase the loss or reduce or eliminate our net income for
financial reporting purposes for the period or periods during which such
shares are, or become probable of being, released from escrow. Although the
amount of compensation expense recognized by us will not affect our total
shareholders' equity, it may have a negative effect on the market price of
our securities.

The Minimum Pretax Income and bid price levels set forth above were
determined by negotiation between us and D. H. Blair & Co. and should not be
construed to imply or predict our future earnings or any increase in the
market price of our securities.

-33-

<PAGE>

DESCRIPTION OF SECURITIES

COMMON STOCK

We have authorized 15,000,000 shares of common stock, par value $0.001
per share. The holders of common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the shareholders.
Subject to preferences that may be applicable to any shares of preferred
stock issued in the future, holders of common stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of Notify Technology Corporation,
holders of the common stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding preferred stock. Holders of common stock have no preemptive
rights and no right to convert their common stock into any other securities.
There are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are, and all shares of common
stock to be outstanding upon completion of the offering contemplated hereby,
will be fully paid and nonassessable.

PREFERRED STOCK

We have authorized 5,000,000 shares of preferred stock. Shares of
preferred stock may be issued without shareholder approval. The Board of
Directors is authorized to issue such shares in one or more series and to fix
the rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including dividend rights and rates, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the
designation of such series, without any vote or action by the shareholders.
No shares of preferred stock are currently outstanding, and we have no
present intention to issue any shares of preferred stock. Any preferred stock
to be issued could rank prior to the common stock with respect to dividend
rights and rights on liquidation. Our board of directors, without shareholder
approval, may issue preferred stock with voting and conversion rights which
could adversely affect the voting power of holders of common stock and
discourage, delay or prevent a change in control of Notify Technology
Corporation.

TRANSFER AGENT AND WARRANT AGENT

American Stock Transfer & Trust Company, New York, New York, serves as
Transfer Agent for the shares of common stock and Units and Warrant Agent for
the Class A warrants.

-34-

<PAGE>

PLAN OF DISTRIBUTION

The price of the common stock offered hereby is based on the exercise
price of the Class A warrants as provided in the Warrant Agreement, dated
August 28, 1997 between us and D.H. Blair Investment Banking Corp., in
connection with our initial public offering (the "Warrant Agreement").
Certain of our executive officers will participate in the sale of these
shares to holders upon exercise of the Class A warrants. These participants,
who will not receive any compensation for these activities, will not be
deemed to be brokers pursuant to Rule 3(a)4-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and will merely ensure
compliance with our obligations under the Warrant Agreement in connection
with the issuance of the shares of common stock upon exercise of the Class A
warrants.

American Stock Transfer & Trust Company, our transfer agent, has been
designated as warrant agent (the "Warrant Agent") for the Class A warrants.
Pursuant to the Warrant Agreement, if at the time of the exercise of any
Class A warrant in respect of that warrant (i) the market price of our common
stock is greater than the purchase price of the warrant, (ii) the exercise of
the warrant was solicited by a member of the National Association of
Securities Dealers, Inc. ("NASD"), (iii) the warrant was not held in a
discretionary account, (iv) disclosure of compensation arrangements was made
both at the time of the original offering and at the time of exercise; and
(v) the solicitation of the exercise of the warrant was not in violation of
Regulation M promulgated under the Exchange Act, the Warrant Agent,
simultaneously with the distribution of the proceeds from the exercise of the
Class A warrant to us shall, on behalf of us, pay from the proceeds, a fee of
5% of the purchase price to D. H. Blair & Co. A portion of such fee may be
reallowed by D. H. Blair & Co. to the dealer who solicited the exercise. In
the event that the above conditions are not met, we will not pay any finder's
fee or commission in connection with the offering hereby of the shares in
connection with the exercise of the Class A warrants. We will pay all of the
expenses incident to this offering which are estimated to be less than
$570,000.

The Class A warrants may be exercised any time before August 28, 2002.
Delivery of shares of common stock upon exercise of a warrant will be made to
the holder immediately following receipt by the Warrant Agent of the original
Warrant Certificate, with the subscription form on the reverse thereof duly
executed, along with payment of the purchase price in cash or by official
bank or certified check payable to Notify Technology Corporation. A Class A
warrant shall be deemed to have been exercised immediately prior to the close
of business on the date of exercise and the person entitled to receive the
shares deliverable upon such exercise shall be treated for all purposes as
the holder of those shares as of the close of business on the date of
exercise. Any shares issued in connection with a timely exercise will be
shares of our common stock which have been registered for resale under the
Securities Act.

-35-

<PAGE>

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements at September 30, 1998 and for the years ended September 30, 1997
and 1998, as set forth in their report. We've included our financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.

ADDITIONAL INFORMATION

We have filed a Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, with the Securities and Exchange Commission (the
"Commission") with respect to the common stock offered pursuant to this
Prospectus. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information included in the
Registration Statement and amendments thereof and the exhibits thereto, which
are available for inspection without charge, and copies of which may be
obtained at prescribed rates, at the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission at 7 World Trade Center, 13th Floor, New York, New York 10048, and
at the Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission (http://www.sec.gov).

We will provide, without charge, to each person who received a
Prospectus, upon written or oral request of such person to us at the mailing
address or telephone number listed below, a copy of any of the information
incorporated by reference. The mailing address of our principal executive
offices is Notify Technology Corporation, 1054 S. De Anza Blvd., Suite 105,
San Jose, California 95129 and our telephone number is (408) 777-7920.

-36-

<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Report of Ernst & Young LLP, Independent Auditors............................................ F-2

Audited Financial Statements
Balance Sheets............................................................................... F-3
Statements of Operations..................................................................... F-4
Statement of Shareholders' Equity (Net Capital Deficiency)................................... F-5
Statements of Cash Flows..................................................................... F-6
Notes to Financial Statements................................................................ F-7

</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Notify Technology Corporation

We have audited the accompanying balance sheet of Notify Technology Corporation
as of September 30, 1998, and the related statements of operations,
shareholders' equity (net capital deficiency), and cash flows for the years
ended September 30, 1997 and 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Notify Technology Corporation
at September 30, 1998, and the results of its operations and its cash flows for
the years ended September 30, 1997 and 1998, in conformity with generally
accepted accounting principles.

/s/ Ernst & Young LLP

San Jose, California
October 20, 1998

F-2
<PAGE>

NOTIFY TECHNOLOGY CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
-------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,117,613 $1,457,334
Accounts receivable, net of allowance for doubtful accounts of
$16,555 at September 30, 1998 and December 31, 1998 88,868 76,443
Note receivable 50,000 -
Inventories 828,323 836,242
Other current assets 42,757 80,578
-------------------------------------
3,127,561 2,450,597

Property and equipment, net 125,358 110,774

Other assets 155,443 134,610
-------------------------------------
$3,408,362 $2,695,981
-------------------------------------
-------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 234,180 $ 171,039
Other accrued liabilities 171,661 154,264
Accrued payroll and related 56,448 30,436
Customer overpayment 92,263 92,263
-------------------------------------
Total current liabilities 554,552 448,002

Commitments

Shareholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
none issued and outstanding - -
Common stock, $0.001 par value, 15,000,000 shares authorized,
3,541,569 shares issued and outstanding at September 30, 1998
and December 31, 1998 3,542 3,542
Additional paid-in capital 8,945,417 8,945,417
Notes receivable from shareholders (11,397) (11,397)
Accumulated deficit (6,083,752) (6,689,583)
-------------------------------------
Total shareholders' equity 2,853,810 2,247,979
-------------------------------------
Total liabilities and shareholders' equity $3,408,362 $2,695,981
-------------------------------------
-------------------------------------
</TABLE>

F-3
<PAGE>

NOTIFY TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED THREE-MONTH PERIOD ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------------- -------------------------
1997 1998 1997 1998
-------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Product sales $ 3,735,773 $ 1,638,268 $1,063,026 $ 226,344
Cost of sales 2,760,380 1,582,042 766,037 112,300
-------------------------------------------------------------------------
Gross profit 975,393 56,226 296,989 114,044

Operating costs and expenses:
Research and development 745,063 1,376,767 327,621 327,375
Sales and marketing 666,930 589,295 146,629 186,989
General and administrative 633,584 884,442 213,074 226,287
-------------------------------------------------------------------------
Total operating costs and expenses 2,045,577 2,850,504 687,324 740,651

Loss from operations (1,070,184) (2,794,278) (390,335) (626,607)
Interest expense (199,133) (2,990) - -
Other income and expense, net 16,761 179,707 59,271 20,776
-------------------------------------------------------------------------
Net loss before extraordinary item (1,252,556) (2,617,561) (331,064) (605,831)
Extraordinary item loss from early
extinguishment of bridge notes (130,354) - - -
-------------------------------------------------------------------------
Net loss $(1,382,910) $(2,617,561) $ (331,064) $ (605,831)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic and diluted net loss per share
before extraordinary item $ (2.52) $ (1.13) $ (0.14) $ (0.26)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic and diluted loss per share $ (2.78) $ (1.13) $ (0.14) $ (0.26)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Weighted average shares used in
computing basic and diluted net loss
per share 497,157 2,296,449 2,297,606 2,298,584
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Pro forma net loss per share $ (1.82)
-------------------
-------------------

Weighted average shares used in
computing pro forma net loss per
share 760,693
-------------------
-------------------
</TABLE>

F-4
<PAGE>

NOTIFY TECHNOLOGY CORPORATION
STATEMENT OF SHAREHOLDERS` EQUITY (NET CAPITAL DEFICIENCY)

CONVERTIBLE
PREFERRED STOCK COMMON STOCK
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1996 4,500,000 $1,850,000 885,125 $ 58,619
Repayments of notes receivable from shareholders - - - -
Issuances of common stock to employees - - 33,057 12,200
Repurchases of common stock from shareholder - - (27,722) (7,000)
Issuances of common stock pursuant to conversion of
convertible promissory notes and accrued interest - - 165,694 761,476
Issuance of bridge warrants - - - 116,875
Conversion of no par common stock to $0.001 par common
stock - - - (941,114)
Issuance of common shares pursuant to initial public
offering (net of expenses) - - 1,600,000 1,600
Conversion of preferred A and preferred B shares to
common shares pursuant to initial public offering (4,500,000) (1,850,000) 891,060 891
Option purchased by underwriter - - - -
Net loss - - - -
---------------------------------------------------------
Balance at September 30, 1997 - - 3,547,214 3,547

<CAPTION>
TOTAL
NOTES SHAREHOLDERS'
ADDITIONAL RECEIVABLE EQUITY (NET
PAID-IN FROM ACCUMULATED CAPITAL
CAPITAL SHAREHOLDERS DEFICIT DEFICIENCY)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1996 $ - $ (17,650) $ (2,083,281) $ (192,312)
Repayments of notes receivable from shareholders - 4,075 - 4,075
Issuances of common stock to employees - (9,200) - 3,000
Repurchases of common stock from shareholder - 7,000 - -
Issuances of common stock pursuant to conversion of
convertible promissory notes and accrued interest - - - 761,476
Issuance of bridge warrants - - - 116,875
Conversion of no par common stock to $0.001 par common
stock 941,114 - - -
Issuance of common shares pursuant to initial public
offering (net of expenses) 6,152,533 - - 6,154,133
Conversion of preferred A and preferred B shares to
common shares pursuant to initial public offering 1,849,109 - - -
Option purchased by underwriter 160 - - 160
Net loss - - (1,382,910) (1,382,910)
----------------------------------------------------------------
Balance at September 30, 1997 8,942,916 (15,775) (3,466,191) 5,464,497

</TABLE>
F-5

<PAGE>

NOTIFY TECHNOLOGY CORPORATION
STATEMENT OF SHAREHOLDERS` EQUITY (NET CAPITAL DEFICIENCY) (CONTINUED)

CONVERTIBLE
PREFERRED STOCK COMMON STOCK
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
Repurchases of common stock from shareholder - $ - (7,544) $ (7)
Repayment of notes receivable from shareholders - - - -
Proceeds from exercise of options and warrants - - 1,899 2
Net loss - - - -
----------------------------------------------------------
Balance at September 30, 1998 - - 3,541,569 3,542
Net loss ( unaudited) - - - -
----------------------------------------------------------
Balance at December 31, 1998 (unaudited) - $ - 3,541,569 $ 3,542
----------------------------------------------------------
----------------------------------------------------------
<CAPTION>
TOTAL
NOTES SHAREHOLDERS'
ADDITIONAL RECEIVABLE EQUITY (NET
PAID-IN FROM ACCUMULATED CAPITAL
CAPITAL SHAREHOLDERS DEFICIT DEFICIENCY)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Repurchases of common stock from shareholder $ (550) $ - $ - $ (557)
Repayment of notes receivable from shareholders - 4,378 - 4,378
Proceeds from exercise of options and warrants 3,051 - - 3,053
Net loss - - (2,617,561) (2,617,561)
-------------------------------------------------------------
Balance at September 30, 1998 8,945,417 (11,397) (6,083,752) 2,853,810
Net loss ( unaudited) - - (605,831) (605,831)
-------------------------------------------------------------
Balance at December 31, 1998 (unaudited) $8,945,417 $ (11,397) $(6,689,583) $ 2,247,979
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
F-6
<PAGE>

NOTIFY TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE-MONTH PERIOD ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------------- ----------------------------
1997 1998 1997 1998
----------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss $(1,382,910) $(2,617,561) $ (331,064) $ (605,831)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 38,038 54,207 11,885 16,619
Deferred financing charges and accretion related to
bridge notes 232,375 - - -
Conversion of accrued interest on convertible notes
to common stock 29,351 - - -
Changes in operating assets and liabilities:
Accounts receivable (302,223) 348,037 127,959 12,425
Inventory (515,649) 267,255 372,069 (7,919)
Other assets (25,293) (214,142) (211,891) 33,012
Accounts payable 598,557 (481,174) (285,816) (63,141)
Other accrued liabilities 29,046 26,277 (139,933) (43,409)
-----------------------------------------------------------------------
Net cash used in operating activities (1,298,708) (2,617,101) (456,791) (658,244)

CASH FLOWS USED IN INVESTING ACTIVITIES
Expenditures for property and equipment (58,874) (65,825) (7,695) (2,035)
-----------------------------------------------------------------------

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of common stock 3,000 - - -
Proceeds from issuance of convertible notes payable 125,000 - - -
Net proceeds from bridge notes 734,500 - - -
Repayment of bridge note payable (850,000) - - -
Advances under line of credit 44,000 - (12,500) -
Repayments under line of credit (57,335) (36,665) - -
Payments on repurchase of unvested stock - (354) (354) -
Proceeds from notes payable to shareholders 265,000 - - -
Payments on notes payable to shareholders (295,000) (200,000) (200,000) -
Payments of notes receivable from shareholders 4,075 4,175 4,175 -
Proceeds from initial public offering, net 6,154,133 - - -
Proceeds from exercise of options and warrants 160 3,052 5 -
-----------------------------------------------------------------------
Net cash provided by (used in) financing activities 6,127,533 (229,792) (208,674) -

Net increase (decrease) in cash and cash equivalents 4,769,951 (2,912,718) (673,160) (660,279)
Cash and cash equivalents at beginning of period 260,380 5,030,331 5,030,331 2,117,613
-----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,030,331 $ 2,117,613 $ 4,357,171 $ 1,457,334
-----------------------------------------------------------------------
-----------------------------------------------------------------------

NONCASH FINANCING ACTIVITIES

Common stock issued for notes receivable from shareholders $ 9,200 $ - $ - $ -
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Conversion of convertible preferred stock to common stock $ 1,850,000 $ - $ - $ -
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Common stock retired for notes receivable from
shareholders $ 7,000 $ - $ - $ -
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Conversion of convertible stock payable and accrued
interest to common stock $ 761,476 $ - $ - $ -
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Value ascribed to warrants issued in conjunction with
private placement $ 116,875 $ - $ - $ -
-----------------------------------------------------------------------
-----------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest $ 71,140 $ 1,949 $ 11,708 $ -
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
F-7
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

On February 25, 1998, the Company changed its name from Notify Corporation
to Notify Technology Corporation. Notify Technology Corporation (the Company)
develops, manufactures and markets computer telephony products.

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial statements are prepared and presented on a basis
assuming it continues as a going concern. At September 30, 1998, the Company had
an accumulated deficit of $6.1 million and incurred a net loss of $2.6 million
for the year ended September 30, 1998. Management's planned expenditures for
fiscal 1999 approximate current cash and cash equivalents. The Company's
recently developed products will need to attain favorable market acceptance to
continue its research and development activities and fund operating expenses at
current levels. Management believes that sufficient funds will be available from
cash, cash equivalents, and operating activities to support planned operations
through September 30, 1999. There can be no assurance that the Company's new
products will attain favorable market acceptance. If the Company is unable to
attain certain revenue goals, significant reductions in spending and the delay
or cancellation of planned activities or more substantial restructuring of the
Company may be necessary. In such event, the Company intends to implement
expense reduction plans in a timely manner to enable the Company to meet its
cash requirements through at least September 30, 1999. These actions would have
material adverse effects on the Company's business, results of operations, and
prospects.

INTERIM RESULTS

The accompanying balance sheet as of December 31, 1998 and the statements
of operations, stockholders equity and cash flows for the three-month periods
ended December 31, 1997 and 1998 are unaudited. In the opinion of management,
the statements have been prepared on the same basis as the audited financial
statements and include all accruals considered necessary for a fair
presentation. Operating results for the three-month period ended December 31,
1998 are not necessarily indicative of the results that may be expected for the
year ending September 30, 1999.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of demand deposits and commercial paper
in highly liquid investments with a maturity of three months or less when
purchased and are stated at cost, which approximates market. The Company is
exposed to credit risk in the event of default by the financial institutions to
the extent of amounts recorded on the balance sheet.

F-8
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORIES

Inventories are stated at the lesser of cost, on a first-in, first-out
basis, or fair value and consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
---------------------- ---------------------
<S> <C> <C>
Raw materials $ 567,457 $ 570,000
Work-in-process 117,588 116,060
Finished goods 143,278 150,182
---------------------- ---------------------
$ 828,323 $ 836,242
---------------------- ---------------------
---------------------- ---------------------
</TABLE>

Increases in the Company's inventory reserve account in fiscal 1997 and
1998 were approximately $162,000 and $437,000, respectively and inventory
written off and deducted from the reserve account was $2,800 and $0,
respectively. Obsolete inventory of $19,000 was disposed of in the three-month
period ended December 31, 1998, and additional reserves of $7,000 were expensed
in the three-month period ended December 31, 1998 to allow for normal inventory
shrinkage.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and depreciated or amortized on a
straight-line basis of the lesser of the estimated useful lives of the asset or
the lease term. The estimated useful lives range from three to five years.

OTHER ASSETS

At September 30, 1998, other assets primarily consist of a prepaid royalty
for certain technology rights, which is being amortized on a straight-line basis
over a three-year period.

REVENUE RECOGNITION

Product sales are recognized upon product shipment. In fiscal 1997, one
customer accounted for 70% of sales. In fiscal 1998, two customers accounted for
50% and 17% of sales and one customer accounted for 72% of sales in the
three-month period ended December 31, 1998.

F-9
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). Under SFAS 109, the liability method
is used to account for income taxes. Under this method, deferred tax assets and
liabilities are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.

USE OF ESTIMATES

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

CONCENTRATION OF CREDIT RISK

The Company sells its products primarily to regional bell operating
companies and local exchange carriers in the United States. The Company performs
on-going credit evaluations and generally requires no collateral. The Company
maintains reserves for credit losses, and to date such losses have been within
management's expectations. Two customers accounted for 60% and 14% of accounts
receivable at September 30, 1998 and two customers accounted for 57% and 15% of
accounts receivable at December 31, 1998. One product accounted for 91% and 81%
of total revenues in fiscal 1997 and 1998, respectively.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS 123) encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based employee compensation using the intrinsic value method prescribed in
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees and Related Interpretations." Accordingly, compensation cost for
stock options granted to employees is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the amount
an employee must pay to acquire the stock.

F-10
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

BASIC AND DILUTED NET LOSS PER SHARE

Basic and diluted net loss per share is computed using the weighted-average
number of shares of common stock outstanding during the periods presented. Basic
net loss per share excludes any dilutive effects of stock options and warrants.
Diluted net loss per share includes the dilutive effect of the assumed exercise
of stock options and warrants using the treasury stock method. However, the
effect of outstanding stock options, warrants and convertible securities is
excluded from the calculation of diluted net loss per share as their inclusion
would be antidilutive. The weighted average number of common shares used in the
basic and diluted net loss per share calculation was reduced by the common stock
and potential common shares placed in escrow in connection with the Company's
initial public offering.

Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of preferred stock that converted to common stock
upon completion of the Company's initial public offering.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). The statement established standards for the reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. SFAS 130 requires that an enterprise display an amount
representing total comprehensive income for the period. The Company adopted SFAS
130 effective October 1, 1998 and its adoption did not impact the Company's
financial statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes new
requirements for the reporting of information regarding operating segments,
products, services, geographic areas, and major customers. SFAS 131 will be
effective for fiscal year 1999. The Company does not expect the adoption of SFAS
131 to have a significant impact on the Company's segment disclosure.

F-11
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

2. NOTE RECEIVABLE

In fiscal 1998, the Company issued an unsecured $50,000 note receivable to a
supplier, which is due in fiscal 1999. The note is repayable in services through
the due date, at which time any remaining balance is due in cash.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
---------------------- ---------------------
<S> <C> <C>
Furniture and office equipment $ 241,682 $ 243,719
Leasehold improvements 2,245 2,245
Less accumulated depreciation and amortization (118,569) (135,190)
---------------------- ---------------------
$ 125,358 $ 110,774
---------------------- ---------------------
---------------------- ---------------------
</TABLE>

4. FINANCING ARRANGEMENTS

During February 1997, the Company issued a $65,000 promissory note to a
shareholder, which accrued interest at the rate of 10% and was repaid from the
proceeds of the Company's initial public offering. The shareholder also received
a warrant to purchase 11,535 shares of common stock of the Company at $3.00 per
share. During fiscal 1998, the note was repaid from the proceeds of the offering
discussed in Note 6.

In April 1997, the Company issued a $200,000 promissory note to a
shareholder, which accrued interest at 10% per annum and was due and payable in
October 1997. In conjunction with this promissory note, the Company also issued
the shareholder a warrant to purchase 2,970 shares of the Company's common stock
at an exercise price of $5.00 per share. During fiscal 1998, the note was repaid
from the proceeds of the offering discussed in Note 6.

5. COMMITMENTS

The Company currently occupies a facility under an operating lease, which
expires in March 1999, and contains renewal options to extend the lease term for
one two-year period. Future minimum payments under this lease for the years
ending September 30, 1999 and 2000 are $109,000 and $149,000, respectively.

Rent expense totaled $73,000, $112,000 and $30,000 for the years ended
September 30, 1997, 1998 and the three-month period ended December 31, 1998,
respectively.

F-12
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

6. SHAREHOLDERS' EQUITY

INITIAL PUBLIC OFFERING OF UNITS AND RELATED MATTERS

In August 1997, the Company completed an offering to the public (the
Offering) of 1,600,000 units at $5.00 per unit. Each unit consisted of one share
of common stock, $0.001 par value and one Class A warrant. The proceeds of the
Offering were approximately $6,200,000, net of issuance costs. Each Class A
warrant entitles the holder to purchase one share of common stock at an exercise
price of $6.50, subject to adjustment, at any time through the fifth anniversary
of the Offering. Commencing one year from the date of the Offering, the warrants
are subject to redemption by the Company, at $0.05 per warrant, under certain
circumstances, on 30 days written notice. Additionally, the Company agreed to
grant to an underwriter an option to purchase, for nominal consideration, up to
160,000 units exercisable at $7.00 per unit during a two-year period that
commences three years from the date of the Offering.

COMMON STOCK

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

<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
-------------------------
<S> <C>
1997 stock option plan 198,125
Warrant agreements 2,557,786
-------------------------
2,755,911
-------------------------
-------------------------
</TABLE>

WARRANTS

In March 1997, the Company issued 425,000 warrants in connection with a
bridge loan. Each bridge warrant automatically converted, upon the closing of
the Offering, into one Class A warrant, which is identical in all respects to a
Class A warrant issued in the Offering. The fair value of the bridge warrants,
amounting to approximately $117,000, together with the cost of the issuance of
bridge loan of approximately $115,000, were treated as additional interest
expense over the term of the bridge loan. Upon repayment of the bridge loan in
fiscal 1997, the unamortized portion of the value ascribed to the warrants and
debt issuance costs of approximately $130,000 were recorded as an extraordinary
item.

During fiscal 1996 and 1997, the Company issued 7,920 and 48,272 warrants
in connection with certain financings with exercise prices of $5.05 and $0.25,
respectively. These warrants expire in fiscal 2001.

F-13
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

6. SHAREHOLDERS' EQUITY (CONTINUED)

In August 1997, the Company issued a warrant that entitles an officer of
the Company to purchase 24,752 shares of common stock at an exercise price of
$5.00 per share. This warrant is exercisable any time and expires in April 2002.

At September 30, 1998, warrants issued in connection with various
financings, including 2,025,000 Class A warrants, were outstanding to purchase
2,237,786 shares of the Company's common stock (including 123,554 and 29,702
warrants held by three directors and two employees, respectively) at prices
ranging from $0.25 to $6.50 per share. These warrants are exercisable at any
time and expire at dates ranging from April 2000 to April 2002.

1997 STOCK OPTION PLAN

In January 1997, the Company adopted the Notify Corporation 1997 Stock Plan
(the Plan), which provides for the granting of stock options to employees,
officers, consultants, and directors of the Company. Stock options are granted
at fair market value on the date of grant with terms of up to ten years. A total
of 200,000 shares of the Company's common stock were reserved for issuance under
the Plan. Under the terms of these option grants, 25% of the options vest upon
the first anniversary of the date of grant and an additional 1/36 of the
unvested shares vest ratably over the following 36 months.

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------
SHARES
AVAILABLE PRICE WEIGHTED
FOR NUMBER OF PER AVERAGE
GRANT SHARES SHARE PRICE
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 - - $ - $ -
Shares reserved 200,000 - $ - $ -
Grants (17,500) 17,500 $4.75 $4.750
-------------------------------
Balance at September 30, 1997 182,500 17,500 $4.75 $4.750
Grants (79,875) 79,875 $1.625 - $3.25 $2.145
Cancellations 41,500 (41,500) $1.625 - $3.625 $3.094
Exercises - (1,875) $1.625 $1.625
-------------------------------
Balance at September 30, 1998 144,125 54,000 $1.625 - $3.625 $2.742
-------------------------------
-------------------------------
</TABLE>

F-14
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

6. SHAREHOLDERS' EQUITY (CONTINUED)

The following table summarizes outstanding and exercisable options at
September 30, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------------
WEIGHTED NUMBER OF WEIGHTED
NUMBER OF AVERAGE OPTIONS AVERAGE
OPTIONS REMAINING EXERCISABLE EXERCISE
EXERCISE PRICES OUTSTANDING LIFE IN YEARS SHARES PRICE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1.625 28,000 9.40 1,875 $1.625
$1.875 10,000 9.95 - $1.875
$2.438 16,000 9.75 - $2.438
54,000 9.61 1,875 $1.912
</TABLE>

The weighted average fair value of options granted was $2.55 in 1997 and
$1.40 in 1998.

ESCROW SECURITIES

In connection with the Offering, holders of the Company's common and
preferred stock agreed to place 1,247,786 of their shares into escrow, and
holders of certain warrants agreed to place warrants to purchase 126,759 shares
of common stock into escrow. The securities will be released to the holders in
the event specified levels of pretax income of the Company for the years ending
September 30, 1998 to 2003 are achieved, or the market price of the Company's
common stock attains specified targets during a 36-month period commencing from
the effective date of the registration statement relating to the Company's
initial public offering. Any securities remaining in escrow on September 30,
2003 will be forfeited, which securities will then be contributed to the
Company's capital. The pretax income levels are subject to proportionate
adjustment upon the issuance of certain securities subsequent to the Company's
initial public offering.

In the event that the foregoing earnings or market price levels are
attained and the escrowed securities released, the Securities and Exchange
Commission has adopted the position that the release of escrowed securities to
officers, directors, employees, and consultants of the Company will be
compensatory and, accordingly, will result in compensation expense for financial
reporting purposes. The expense will equal the fair value of the escrowed
securities on the date of release and will result in a material charge to
operations.

F-15
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

7. RELATED PARTY TRANSACTIONS

The Company has an ongoing business relationship with a literature and
product fulfillment company owned by a director of the Company. The Company uses
this fulfillment company on a project by project basis to facilitate the
distribution of its products. The Company paid this fulfillment company $97,835,
$61,100 and $1,032 during fiscal 1997, 1998 and the three-month period ended
December 31, 1998, respectively.

8. INCOME TAXES

Due to operating losses, there is no provision for income taxes for 1997 or
1998. The expected statutory tax rate of 34% is offset by the inability to
recognize an income tax benefit from the net operating losses.

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

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1998
---------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,279,000 $ 2,023,000
Research credit carryforwards 35,000 75,000
Other temporary differences 75,000 226,000
---------------------------------------------
Total deferred tax assets 1,389,000 2,324,000
---------------------------------------------

Valuation allowance (1,389,000) (2,324,000)
---------------------------------------------
Net deferred tax assets $ - $ -
---------------------------------------------
---------------------------------------------
</TABLE>

Realization of deferred tax assets is dependent on future earnings, the
timing and amount of which are uncertain. Accordingly, a valuation allowance, in
an amount equal to the net deferred tax asset has been established to reflect
these uncertainties. The change in the valuation allowance was a net increase of
$534,000 and $935,000 for fiscal years 1997 and 1998, respectively.

F-16
<PAGE>

NOTIFY TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Information at December 31, 1998 and for the three-month
periods ended December 31, 1997 and 1998 is unaudited)

8. INCOME TAXES (CONTINUED)

As of September 30, 1998, the Company had net operating loss carryforwards
of approximately $5,061,000 for federal and California tax purposes, which will
expire in years 2002 through 2013. As of September 30, 1998, the Company also
had research and development tax credit carryforwards for federal and California
tax purposes of approximately $50,000 and $30,000, respectively. The credits
will expire in years 2010 through 2013, it not utilized. Utilization of net
operating loss and tax credit carryforwards may be subject to a substantial
annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986, as amended, and similar state provisions. The
annual limitation may result in the expiration of net operating loss and tax
credit carryforwards before full utilization.

9. SUBSEQUENT EVENTS (UNAUDITED)

In March 1999, the Company completed a private placement (the Placement) of
850,000 shares of unregistered common stock at $3.60 per share and warrants to
purchase common stock for total proceeds of approximately $3,060,000. The
Placement included a warrant to purchase 623,200 shares of common stock at $3.60
per share, immediately exercisable, which expires September 3, 2000 or upon the
Company achieving certain specified milestones. The Placement also included a
warrant to purchase 721,244 shares of common stock at $3.60 per share,
immediately exercisable, which expires on March 3, 2003.

F-17
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the
"Securities Act"). Our Bylaws provide that we shall indemnify our directors
and officers to the fullest extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law. We have entered into indemnification agreements with our
directors and officers containing provisions which are in some respects
broader than the specific indemnification provisions contained in the
California Corporations Code. The indemnification agreements may require us,
among other things, to indemnify our directors and officers against certain
liabilities that may arise by reason of their status or service as directors
or officers (other than liabilities arising from willful misconduct of
culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms. Article
IV of the Registrant's Articles of Incorporation (Exhibit 3.1 hereto)
provides for indemnification of its directors and officers to the maximum
extent permitted by the California Corporations Code and Article IV of the
Registrant's Bylaws (Exhibit 3.3 hereto) provides for indemnification of its
directors, officers, employees and other agents to the maximum extent
permitted by the California Corporation Code. Reference is also made to
Section 6(b) of the Underwriting Agreement contained in Exhibit 1.1 hereto,
indemnifying officers and directors of the Registrant against certain
liabilities.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale
of the Common Stock being registered hereby. All amounts are estimates,
except the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
Printing and engraving expenses $ 5,000
Legal fees and expenses 20,000
Auditors' accounting fees and expenses 20,000
Transfer Agent and Registrar fees 5,000
Solicitation Fee(1) 520,000
Miscellaneous expenses 5,000
--------
Total $570,000
========
</TABLE>

- ---------------------------
(1) This fee is payable to the underwriter of our initial public offering if the
exercise of the Class A warrants is solicited and certain other certain
conditions are met. See "Plan of Distribution."

II-1

<PAGE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The following is a summary of the transactions by Registrant during the
last three years involving sales of Registrant's securities that were not
registered under the Securities Act of 1933, as amended (the "Securities
Act"):

(1) From February 1995, to December 1996, we issued and sold to
fourteen of our employees or consultants 805,000 shares of our common stock
pursuant to restricted stock purchase agreements at prices varying from $.01
per share to $.10 per share. The sale and issuance of these securities was
exempt from the registration requirements of the Securities Act pursuant to
regulation 701 promulgated thereunder.

(2) In June 1996, we issued and sold to certain of our shareholders and
other investors an aggregate of $932,125 principal amount of convertible
promissory notes (the "Convertible Shareholder Notes") and warrants to
purchase that number of shares of our common stock equal to 20% of the
principal amount of the Convertible Shareholder Notes divided by the price
per share of our next equity financing at a price per share equal to the
price per share of our next equity financing (the "Shareholder Warrants").
The Convertible Shareholder Notes bore an interest rate of 8% per annum and
were convertible into equity of Notify Technology at a price equal to the
price per share of our next equity financing. The participants in this
financing consisted entirely of "accredited investors" as that term is
defined under Regulation D of the Securities Act. The sale and issuance of
these securities was exempt from the registration requirements of the
Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder.

(3) In January 1997, we completed a restructuring of the Convertible
Shareholder Notes and Shareholder Warrants. Holders of an aggregate of
$732,125 in principal amount of the Convertible Shareholder Notes converted
their Convertible Shareholder Notes into our common stock at a price per
share of $4.55 and exchanged their accompanying Shareholder Warrants for
warrants to purchase an aggregate of 48,272 shares of our common stock at a
price of $0.25 per share. Holders of the remaining $200,000 principal amount
of Convertible Shareholder Notes agreed to defer repayment of the notes until
the earlier of the closing of our initial public offering or until April 30,
1997 and exchanged their Shareholder Warrants for warrants to purchase an
aggregate of 7,920 shares of our common stock at an exercise price of $5.05
per share. The sale and issuance of these securities was exempt from the
registration requirements of the Securities Act pursuant to Section 3(a)(9)
thereof.

(4) In February 1997, we issued to our Chief Executive Officer a 10%
subordinated promissory note with principal amount of $65,000 and warrants to
purchase 11,535 shares of our common stock at a price per share of $3.00 for
an aggregate purchase price of $65,000. The sale and issuance of these
securities was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof.

(5) In March 1997, we issued and sold 17 bridge units ("Bridge Units") at
$50,000 per unit. Each Bridge Unit consisted of a one-year $50,000 promissory
note bearing 10% interest and warrants to purchase 25,000 shares of our common
stock at a purchase price of $3.00 per share. The warrants automatically convert
into warrants with identical terms as the Class A warrants, and the promissory
note becomes due upon the earlier of March 1998 or the closing of our initial
public offering. All of the purchasers of the Bridge Units were "accredited
investors" as that term is defined in Regulation D of the

II-2

<PAGE>

Securities Act. The sale and issuance of these securities was exempt from the
registration requirements of the Securities Act pursuant to Rule 506 of
Regulation D promulgated thereunder.

(6) In April 1997, we issued to one of our directors a 10% subordinated
promissory note with a principal amount of $200,000 and warrant to purchase
2,970 shares of our common stock at a price per share of $5.00 for an
aggregate purchase price of $200,000. The sale and issuance of these
securities was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof.

(7) In August 1997, we issued to Sutton Partners, L.P., a 10% promissory
note with a principal amount of $175,000. The issuance of the this note was
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof.

(8) In March 1999, we sold to David Brewer 850,000 shares of our common
stock and warrants to purchase 1,334,444 shares of our common stock for
aggregate consideration of $3,060,000. The sale of our common stock and
warrants was exempt registration under the Securities Act pursuant to Section
4(2) thereof.

The sale and exchange of the above securities were deemed to be exempt
from registration under the Securities Act as indicated. The recipients of
securities in each such transaction represented their intention to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were
attached to the share certificates issued in such transactions. All
recipients had adequate access to information about the Registrant.

ITEM 27. EXHIBITS.

(a) Exhibits

<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Articles of Incorporation of Registrant, as amended to date.
3.2* Restated Articles of Incorporation of Registrant to become effective upon the closing of
Registrant's initial public offering.
3.3* Bylaws of Registrant, as amended to date.
4.1* Form of Warrant Agreement.
4.2* Form of Underwriter's Unit Purchase Option.
4.3* Form of Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
10.1* Employment Agreement dated as of March 1, 1997 between Notify Technology and Paul
DePond (as amended).
10.2* Employment Agreement dated as of March 1, 1997 between Notify Technology and Gaylan
Larson (as amended).
10.3* Employment Agreement dated as of March 1, 1997 between Notify Technology and Gerald
Rice (as amended).
10.5* Form of Indemnification Agreement.
</TABLE>

II-3

<PAGE>
<TABLE>
<C> <S>
10.6* Escrow Agreement by and between Registrant, the American Stock Transfer & Trust Company
and certain security holders of the Registrant (as amended).
10.7* Registrant's 1997 Stock Plan.
10.8* Form of Lock-up Agreement (as amended).
10.9* Lease between Registrant and C.C. Poon.
10.10*+ Nonexclusive Technology License Agreement between Registrant and Active Voice
Corporation dated April 30, 1997.
10.11 Securities Purchase Agreement dated as of March 4, 1999 between Notify Technology and
David A. Brewer.
23.1 Consent of Independent Auditors (see page II-7).
23.2* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included as part of Exhibit 5.1).
24.1* Power of Attorney.
27* Financial Data Schedule.
</TABLE>
--------
(*) Previously filed.

+ Confidential treatment has been granted with respect to portions of this
exhibit.

(b) All schedules are omitted, since the required information is not
present in amounts sufficient to require submission of schedules or because
the information required is included in Registrant's financial statements and
notes thereto.

ITEM 28. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the provisions described in Item 24, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer of controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) It will file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;

II-4

<PAGE>

(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and

(iii) Include any additional or changed material information on the plan
of distribution.

(2) For determining liability under the Securities Act, Registrant will
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.

(3) It will file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.

(4) It will provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.

(5) For purposes of determining any liability under the Securities Act,
the Registrant will treat the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under Rule
424(b)(1), or (4), or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declares it effective.

II-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of the filing on Form SB-2 and authorized this
Post-Effective Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, California, on April 1, 1999.

NOTIFY TECHNOLOGY CORPORATION

By: /s/ Gerald W. Rice
---------------------------------
Gerald W. Rice
CHIEF FINANCIAL OFFICER

Pursuant to the requirements of the Securities Act, this Registration
Statement on Form SB-2 has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- -------------------------------- ---------------
<S> <C> <C>

* President, Chief Executive April 1, 1999
- -------------------------- Officer and Chairman (Principal
Paul F. DePond Executive Officer)

/s/ Gerald W. Rice Chief Financial Officer April 1, 1999
- -------------------------- (Principal Financial and
Gerald W. Rice Accounting Officer)

* Vice President, Operations and April 1, 1999
- -------------------------- Director
Gaylan Larson

* Director April 1, 1999
- --------------------------
Michael Ballard
Director
- --------------------------
Andrew Plevin

* Director April 1, 1999
- --------------------------
Michael Smith
* By: /s/ Gerald W. Rice
--------------------
Attorney-in-Fact
</TABLE>

II-6

<PAGE>

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated October 20, 1998 in Post-Effective Amendment No.
3 to the Registration Statement (Form SB-2) and the related Prospectus of
Notify Technology Corporation for the registration of the 1,600,000 shares of
its Common Stock underlying Class A warrants.

Ernst & Young LLP

San Jose, California
March 26, 1999

II-7

<PAGE>

EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Articles of Incorporation of Registrant, as amended to date.
3.2* Restated Articles of Incorporation of Registrant to become effective upon the closing of the
Registrant's initial public offering.
3.3* Bylaws of Registrant, as amended to date.
4.1* Form of Warrant Agreement.
4.2* Form of Underwriter's Unit Purchase Option.
4.3* Form of Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
10.1* Employment Agreement dated as of March 1, 1997 between Notify Technology and Paul
DePond (as amended).
10.2* Employment Agreement dated as of March 1, 1997 between Notify Technology and Gaylan
Larson (as amended).
10.3* Employment Agreement dated as of March 1, 1997 between Notify Technology and Gerald
Rice (as amended).
10.5* Form of Indemnification Agreement.
10.6* Escrow Agreement by and between Registrant, the American Stock Transfer & Trust
Company and certain security holders of the Registrant (as amended).
10.7* Registrant's 1997 Stock Plan.
10.8* Form of Lock-up Agreement (as amended).
10.9* Lease between Registrant and C.C. Poon.
10.10*+ Nonexclusive Technology License Agreement between Registrant and Active Voice
Corporation dated April 30, 1997.
10.11 Securities Purchase Agreement dated as of March 4, 1999 between the Registrant and David
A. Brewer.
23.1 Consent of Independent Auditors (see page II-7).
23.2* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included as part of Exhibit 5.1).
24.1* Power of Attorney.
27* Financial Data Schedule.
</TABLE>

--------
(*) Previously filed.
+ Confidential treatment has been granted with respect to portions of this
exhibit.

<PAGE>

EXHIBIT 10.11

NOTIFY TECHNOLOGY CORPORATION

SECURITIES PURCHASE AGREEMENT

MARCH 4, 1999

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1 Authorization of the Shares. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Representations and Warranties of the Company . . . . . . . . . . . . . . . 1

2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . 1
2.2 Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Valid Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . 2
2.5 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3. Representations and Warranties of the Purchasers. . . . . . . . . . . . . . 3

3.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Public Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Tax Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 Purchaser Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4. Conditions of Purchaser's Obligations at Closing. . . . . . . . . . . . . . 4

4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 5
4.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . 5
4.5 Investor Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . 5

5. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . . 5

5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 5
5.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Investor Rights Agreements . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>

-i-
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

6. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 6

6.1 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Issuance of Additional Warrants. . . . . . . . . . . . . . . . . . . . 6

7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 7
7.4 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . . . 7
7.5 Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.6 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.7 California Corporate Securities Law. . . . . . . . . . . . . . . . . . 8
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.9 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.10 Waiver of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.11 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Exhibit A-1 Form of Warrant
Exhibit A-2 Form of Section 10(b) of Warrant
Exhibit B Form of Warrant
Exhibit C Investor Rights Agreement
Exhibit D Form of Legal Opinion
</TABLE>

-ii-

<PAGE>

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT is made as of March 24, 1999, between
Notify Technology Corporation, a California corporation (the "COMPANY") and
David A. Brewer ("PURCHASER").

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. PURCHASE AND SALE OF STOCK.

1.1 AUTHORIZATION OF THE SHARES. The Company will on or before
the Closing (as defined below) authorize the sale and issuance pursuant to
this Agreement of 850,000 shares (the "SHARES") of common stock, $.001 par
value, of the Company ("COMMON STOCK") and warrants (the "WARRANTS") to
purchase an aggregate of 1,344,444 shares of Common Stock.

1.2 SALE OF THE SHARES. Subject to the terms and conditions
hereof and in reliance upon the representations, warranties and agreements
contained herein, the Company will issue and sell to Purchaser, and Purchaser
will purchase from the Company, at the Closing, the Shares for a purchase
price of $3.60 per share and the Warrants for a purchase price of $10 for an
aggregate purchase price of $3,060,010 (the "PURCHASE PRICE").

1.3 CLOSING DATE. The closing of the purchase and sale of the
Shares and Warrants hereunder (the "CLOSING") shall be held at the offices of
Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304 on March 4, 1999 (the "CLOSING DATE").

1.4 DELIVERY. At Closing, the Company shall deliver to Purchaser
five Warrants. Four of the Warrants shall be exercisable for 155,800 shares
of Common Stock each at a price per share of $3.60 and be in the form
attached hereto as EXHIBIT A-1 except that each of each of such Warrants will
have a different Section 10(b) as detailed in EXHIBIT A-2. The fifth Warrant
will be exercisable for 721,244 shares of Common Stock at a price per share
of $3.60 and will be in the form attached hereto as EXHIBIT B. In addition,
at the Closing, the Company will instruct the transfer agent for the Company
to (i) issue a certificate registered in Purchaser's name representing the
Shares and (ii) deliver said certificate to Purchaser. At the closing,
Purchaser shall deliver the Purchase Price to the Company in the form of a
check payable to the Company or a wire transfer to account of the Company or
the Company's counsel.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants as follows:

2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of California and has all requisite corporate power and
authority to carry on its business as currently conducted. The Company is
duly qualified to transact business and is in good standing in each

<PAGE>

jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.

2.2 CORPORATE POWER. The Company will have at the Closing all
requisite legal and corporate power and authority to (i) execute and deliver
this Agreement; (ii) sell and issue the Shares and Warrants hereunder; (iii)
to issue the Common Stock (the "WARRANT SHARES") issuable upon exercise of
the Warrants; and (iv) carry out and perform its obligations under the terms
of this Agreement.

2.3 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Investor Rights
Agreement in the form attached hereto as EXHIBIT C (the "INVESTOR RIGHTS
AGREEMENT"), the performance of all obligations of the Company hereunder and
the authorization, issuance (or reservation for issuance), sale and delivery
of the Shares, the Warrants and the Warrant Shares has been taken or will be
taken prior to the Closing. This Agreement, the Investor Rights Agreement
and the Warrants constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, subject to:
(i) judicial principles limiting the availability of specific performance,
injunctive relief, and other equitable remedies; (ii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors' rights; and (iii) limitations
on the enforceability of the indemnification provisions of the Investor
Rights Agreement.

2.4 VALID ISSUANCE OF COMMON STOCK. The Shares that are being
purchased by the Purchaser hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Investor Rights Agreement and under applicable
state and federal securities laws. The Warrant Shares, upon issuance in
accordance with the terms of the Warrants and upon payment of the
consideration described therein, will be duly and validly issued, fully paid,
and nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investor Rights
Agreement and under applicable state and federal securities laws.

2.5 SEC DOCUMENTS. Company has made available to Purchaser and
its counsel (by filing via EDGAR) correct and complete copies of each report,
schedule, registration statement and definitive proxy statement filed by
Company with the Securities and Exchange Commission (the "SEC") on or after
January 1, 1996 (the "COMPANY SEC DOCUMENTS"), which are all the documents
(other than preliminary material) that Company was required to file with the
SEC on or after January 1, 1996. As of their respective dates or, in the
case of registration statements, their effective dates, none of the Company
SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and there is no
requirement under the Securities Act of 1933, as amended, (the "SECURITIES
ACT") or the Securities Exchange Act of 1934, as amended, (the "EXCHANGE
ACT"), as the case may be, to have

-2-

<PAGE>

amended any such filing. The Company SEC Documents complied, when filed, in
all material respects with the then applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder. Company has filed all documents and
agreements which Company reasonably believed were required to be filed as
exhibits to the Company SEC Documents.

3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Purchaser hereby
represents and warrants that:

3.1 EXPERIENCE. Purchaser is experienced in evaluating companies
such as the Company, is able to evaluate and represent its own interests in
transactions such as the one contemplated by this Agreement, has such
knowledge and experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of Purchaser's prospective
investment in the Company, and has the ability to bear the economic risks of
the investment.

3.2 INVESTMENT. Purchaser is acquiring the Shares, the Warrants,
and the Warrant Shares, for investment for Purchaser's own account and not
with the view to, or for resale in connection with, any distribution thereof.
Purchaser understands that the Shares, the Warrants, and the Warrant Shares
have not been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein. Purchaser
further represents that it does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to
any third person with respect to any of the Shares, the Warrants, or the
Conversion Shares other than a transfer not involving a change of beneficial
ownership. Purchaser understands and acknowledges that the offering of the
Shares and Warrants pursuant to this Agreement will not be registered under
the Securities Act on the ground that the sale provided for in this Agreement
is exempt from the registration requirements of the Securities Act.

3.3 RULE 144. Purchaser acknowledges that the Shares, the
Warrants and the Conversion Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Purchaser covenants that, in the absence of an effective
registration statement covering the stock in question, Purchaser will sell,
transfer, or otherwise dispose of the Shares or the Warrant Shares only in a
manner consistent with such Purchaser's representations and covenants set
forth in this Section 3. In connection therewith, Purchaser acknowledges
that the Company will make a notation on its stock books regarding the
restrictions on transfers set forth in this Section 3 and will transfer
securities on the books of the Company only to the extent not inconsistent
therewith.

3.4 LEGENDS. Purchaser understands and acknowledges that the
certificate evidencing its Shares and the Warrant Shares will be imprinted
with a legend in the form set forth in Section 1.3 of the Investor Rights
Agreement.

-3-

<PAGE>

3.5 ACCESS TO DATA. Purchaser has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management and
to review the Company's facilities. Purchaser understands that such
discussions, as well as any written information issued by the Company, were
intended to describe the aspects of the Company's business and prospects
which the Company believes to be material, but were not necessarily a
thorough or exhaustive description. The foregoing, however, does not limit
or modify the representations and warranties of the Company in Section 2 of
this Agreement or the right of the Purchasers to rely thereon.

3.6 AUTHORIZATION. This Agreement when executed and delivered by
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to: (i)
judicial principles respecting election of remedies or limiting the
availability of specific performance, injunctive relief, and other equitable
remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights; and (iii) limitations on the enforceability of the
indemnification provisions of the Investor Rights Agreement.

3.7 ACCREDITED INVESTOR. Purchaser acknowledges that he is an
"accredited investor" as defined in Rule 501 of Regulation D as promulgated
by the Securities and Exchange Commission under the Securities Act and shall
submit to the Company such further assurances of such status as may be
reasonably requested by the Company.

3.8 PUBLIC SOLICITATION. Purchaser knows of no public
solicitation or advertisement of an offer in connection with the proposed
issuance and sale of the Shares.

3.9 TAX ADVISORS. Purchaser has reviewed with his own tax
advisors the federal, state and local tax consequences of this investment,
where applicable, and the transactions contemplated by this Agreement.
Purchaser is relying solely on such advisors with respect to tax matters and
not on any statements or representations of the Company or any of its agents
and understands that Purchaser (and not the Company) shall be responsible for
the Purchaser's own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

3.10 PURCHASER COUNSEL. Purchaser acknowledges that it has had
the opportunity to review this Agreement, the exhibits and the schedules
attached hereto and the transactions contemplated by this Agreement with its
own legal counsel. Purchaser is relying solely on such counsel and not on
any statements or representations of the Company or any of its agents for
legal advice with respect to legal matters related to this investment or the
transactions contemplated by this Agreement.

4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations
of Purchaser under subsection 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:

-4-

<PAGE>

4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.

4.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.

4.3 BLUE SKY. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom,
required by any state or country prior to the offer and sale of the Shares.

4.4 OPINION OF COMPANY COUNSEL. Purchaser shall have received
from Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for
the Company, an opinion, dated as of the Closing, in the form attached hereto
as EXHIBIT D.

4.5 INVESTOR RIGHTS AGREEMENT. The Company and Purchaser shall
have entered into the Investor Rights Agreement.

5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to Purchaser under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions
by Purchaser:

5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.

5.2 PAYMENT OF PURCHASE PRICE. Purchaser shall have delivered
the Purchase Price against delivery of the Shares and Warrants as set forth
in Section 1.4 by the Company to such Purchaser.

5.3 BLUE SKY. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom,
required by any state or country for the offer and sale of the Shares.

5.4 INVESTOR RIGHTS AGREEMENTS. Purchaser shall have executed
the Investor Rights Agreement on or prior to the date of the Closing.

5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions,
shall be reasonably satisfactory in substance to the Company and its counsel.

-5-

<PAGE>

6. COVENANTS OF THE COMPANY.

6.1 BOARD OF DIRECTORS. Company will use its best efforts to
present to its shareholders and obtain shareholder approval at its 2000
Annual Meeting of Shareholders of the Company an amendment to its Bylaws to
increase the authorized size of the Company's Board of Directors. Upon
approval of such amendment, the Company will elect Purchaser to the Board of
Directors and will use its best efforts to have Purchaser re-elected at each
Annual Meeting of Shareholders of the Company through 2003. If the there is
a vacancy on the Company's Board of Directors prior to the 2000 Annual
Meeting of Shareholders of the Company, the Company shall appoint Purchaser
to fill such vacancy. The Company's obligations under this section shall
terminate if at any time Purchaser holds less than 250,000 shares of Common
Stock issued pursuant to this Agreement (including shares of Common Stock
issued upon exercise of the Warrants and as appropriately adjusted for stock
splits, stock dividends and recapitalizations).

6.2 ISSUANCE OF ADDITIONAL WARRANTS. Upon the issuance of equity
securities (including the issuance of convertible securities or warrants but
excluding employee stock options or the issuance of shares upon the exercise
of currently outstanding options or warrants) in a Financing (as defined
below) at a price per share less than the price per share at which the Shares
are being sold pursuant to this agreement (or in the case of convertible
securities or warrants with an exercise or conversion price less than such
price per share) then in order to effect an adjustment to Purchaser's
original purchase price:

(i) The exercise price of the outstanding Warrants will be
reduced to the price per share at which such equity securities were sold (or
in the case of the sale convertible securities or warrants reduced to the
exercise or conversion price of such securities) (in all cases, the "ISSUANCE
PRICE"); and

(ii) The Company will issue to Purchaser a warrant in the
form attached hereto as EXHIBIT B with an exercise price of $0.01, a term of
three years and exercisable for that number of shares of Common Stock equal
to:
((P/I)-1) times T
Where P equals the price per share at which the Shares were sold pursuant to
this Agreement, I equals the Issuance Price and T equals the total number of
shares of Common Stock purchased by Purchaser pursuant to this Agreement
including any shares purchased upon the exercise of the Warrants.

For the purposes of this Section 6.2, Financing shall mean an offering
or series of related offerings of securities by the Company for purpose of
raising capital in an amount of $250,000 or more. Financing shall not
include (i) the issuance or sale of shares of Common Stock or options to
purchase Common stock to employees, officers, directors or consultants for
the primary purpose of soliciting or retaining their services as shall have
been approved by the Board of Directors, (ii) the issuance or sale of
Securities to leasing entities or financial institutions in connection with
commercial leasing or borrowing transactions approved by the Board of
Directors, (iv) any issuances of Securities in connection with any stock
split, stock dividend or recapitalization by the Company,

-6-

<PAGE>

(v) the issuance of Securities in connection with the acquisition of another
corporation by the Company by merger, consolidation, or purchase of all or
substantially all of the assets or shares of such corporation, or (vi) the
issuance of Securities in connection with a joint venture or a strategic or
marketing alliance with another company.

The Company's obligations under this Section 6.2 shall terminate upon
the earlier of (i) March 3, 2002 or (ii) the Company's calling its
outstanding public Class A Warrants as provided by the terms of such warrants.

7. MISCELLANEOUS.

7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California, without regard to any
provisions thereof relating to conflicts of laws among different
jurisdictions.

The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California with respect to the
breach or interpretation of this Agreement or the enforcement of any and all
rights, duties, liabilities, obligations, powers, and other relations between
the parties arising under this Agreement.

7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
or the Company and the closing of the transactions contemplated hereby.

7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto; provided, however, that the rights of a Purchaser to purchase Shares
shall not be assignable without the consent of the Company.

7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and Purchaser.

7.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder, shall be in writing and shall be personally
delivered, sent by facsimile, mailed by registered or certified mail, postage
prepaid, return receipt requested, or delivered by a nationally recognized
overnight courier, addressed (a) if to a Purchaser, at such Purchaser's
address or facsimile number set forth on the Schedule of Purchasers, or at
such other address or facsimile number as such Purchaser shall have furnished
to the Company in writing, or (b) if to the Company, at its address or
facsimile number set forth on the signature page to this Agreement addressed
to the attention of the Corporate Secretary, or at such other address or
facsimile number as the Company shall have furnished to the Purchasers. Any
such notice or communication shall be deemed to have been

-7-

<PAGE>

received (A) in the case of personal delivery or delivery by telecopier, on
the date of such delivery, (B) in the case of a commercial overnight courier,
on the next business day after the date when sent and (C) in the case of
mailing, on the third business day following that on which the piece of mail
containing such communication is posted.

7.6 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares upon any breach
or default of the Company under this Agreement shall impair any such right,
power or remedy of such holder, nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing or as
provided in this Agreement. All remedies, either under this Agreement or by
law or otherwise afforded to any holder, shall be cumulative and not
alternative.

7.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE
SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102,
OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.

7.8 EXPENSES. The Company and Purchaser shall each bear their
own expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby, except that the Company
shall pay the legal expenses of counsel to Purchaser in an amount up to
$5,000 in accordance with said counsel's standard hourly rates.

7.9 FINDER'S FEE. The Company and the Purchasers shall each
indemnify and hold the other harmless from any liability for any commission
or compensation in the nature of a finder's fee (including the costs,
expenses and legal fees of defending against such liability) for which the
Company or the Purchasers, or any of their respective partners, employees, or
representatives, as the case may be, is responsible.

7.10 WAIVER OF CONFLICT. Each party to this Agreement that has
been or continues to be represented by Wilson, Sonsini, Goodrich & Rosati,
counsel to the Company, hereby acknowledges that Rule 3-310 of the Rules of
Professional Conduct promulgated by the State Bar of California requires an
attorney to avoid representations in which the attorney has or had a
relationship with another party interested in the representation without the
informed written consent of all parties affected. By executing this
Agreement, each such party gives his or its informed

-8-

<PAGE>

written consent to the representation of the Company by Wilson, Sonsini,
Goodrich & Rosati in connection with this Agreement and the transactions
contemplated hereby.

7.11 ARBITRATION. Company and Purchaser agree that any dispute or
controversy arising out of or relating to any interpretation, construction,
performance or breach of this Agreement, the Investor Rights Agreement or the
Warrants shall be settled by arbitration to be held in Santa Clara County,
California, in accordance with the rules then in effect of the American
Arbitration Association. The arbitrator may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall
be final, conclusive and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having jurisdiction.
The Company and Puchaser shall each pay one-half of the costs and expenses
of such arbitration, and each shall separately pay their own counsel fees and
expenses.

7.12 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force
and effect without said provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this Agreement
to any party.

7.13 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all Purchasers,
each of which shall be enforceable against the parties actually executing
such counterparts, and all of which together shall constitute one instrument.

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<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

NOTIFY TECHNOLOGY PURCHASER:
CORPORATION

By:------------------------------------ ------------------------------------
Paul DePond (Signature)
President

------------------------------------
(Name of Purchaser)

------------------------------------
(Name and Title of Signatory if
Shareholder is not an Individual)

Address for Notices:

David A. Brewer
1918 Frazer Street
Sparks, NV 89431

cc: Jeff Higgins
Gunderson Dettmer, et al
155 Constitution Drive
Menlo Park, CA 94025

[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

<PAGE>

EXHIBIT A-1

FORM OF WARRANT WITH ACCELERATED TERMINATION

<PAGE>

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE PURSUANT TO IT HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

NOTIFY TECHNOLOGY CORPORATION

COMMON STOCK PURCHASE WARRANT
WITH ACCELERATED TERMINATION

1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the
terms and conditions set forth herein, David A. Brewer or a subsequent
transferee ("HOLDER"), is entitled to purchase from Notify Technology
Corporation, a California corporation (the "COMPANY"), at any time after the
date hereof and on or before the date of termination of this Warrant provided
for in Section 10 hereof, up to 155,800 shares (which number of shares is
subject to adjustment and certain conditions as described below) of fully
paid and nonassessable Common Stock of the Company (the "SHARES") upon
surrender hereof at the principal office of the Company, and upon payment of
the purchase price at said office in cash or by check. Subject to adjustment
as hereinafter provided, the purchase price of one share of Common Stock (or
such securities as may be substituted for one share of Common Stock pursuant
to the provisions hereinafter set forth) shall be $3.60. The purchase price
of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
payable from time to time upon the exercise of this Warrant (whether such
price be the price specified above or an adjusted price determined as
hereinafter provided) is referred to herein as the "WARRANT PRICE."

2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time and the Company agrees to provide
notice upon the happening of certain events as follows:

(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time on or after the date hereof the holders of the Common Stock
of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor, other or
additional securities or other property of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon
the exercise hereof, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional
securities or other property of the Company which such holder

<PAGE>

would hold on the date of such exercise had it been the holder of record of
such Common Stock on the date hereof and had thereafter, during the period
from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional securities or other property
receivable by it as aforesaid during such period, giving effect to all
adjustments called for during such period by this paragraph (a) and
paragraphs (b) and (c) of this Section 2.

(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding Common Stock of the
Company or of any reorganization of the Company on or after the date hereof
(other than a merger of the Company with and into another corporation), then
and in each such case the Company shall give the holder of this Warrant at
least ten (10) days notice of the proposed effective date of such
transaction, and the holder of this Warrant, upon the exercise hereof at any
time after the consummation of such reclassification, change or
reorganization, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in paragraphs (a), (b) and (c); in each such case, the terms of this
Section 2 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.

(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately
reduced and the number of shares receivable upon exercise of the Warrant
shall thereby be proportionately increased; and, conversely, if at any time
on or after the date hereof the outstanding number of shares of Common Stock
shall be combined into a smaller number of shares, the Warrant Price in
effect immediately prior to such combination shall thereby be proportionately
increased and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.

3. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay
cash equal to the product of such fraction multiplied by the fair market
value of one share of Common Stock on the date of exercise, as determined in
good faith by the Company's Board of Directors.

4. NO SHAREHOLDER RIGHTS. This Warrant as such shall not entitle its
holder to any of the rights of a shareholder of the Company.

-2-

<PAGE>

who are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the exercise
of this Warrant.

6. EXERCISE OF WARRANT. This Warrant may be exercised, in whole or in
part, by Holder by the surrender of this Warrant (with the notice of exercise
form attached hereto as ATTACHMENT A and the Investment Representation
Statement attached hereto as ATTACHMENT B duly executed) at the principal
office of the Company, accompanied by payment in full of the purchase price
of the Shares purchased thereby, as described above. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on
the date of its surrender for exercise as provided above, and the person
entitled to receive the Shares or other securities issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
and in any event within five (5) days after such date, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided above, and a Warrant in like tenor as this Warrant to
purchase the number of Shares in respect of which this Warrant shall not have
been exercised or waived.

7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or the
number or type of securities issuable upon exercise of this Warrant is
adjusted, as herein provided, the Company shall promptly deliver to the
record holder of this Warrant a certificate of an officer of the Company
setting forth the nature of such adjustment and a brief statement of the
facts requiring such adjustment.

8. TRANSFER OF WARRANT. This Warrant may not be transferred by Holder
without the written consent of the Company, which consent will not be
unreasonably withheld. Any such transfer will require an opinion of counsel
reasonably acceptable the Company stating that such transfer is exempt from
the registration requirements of the Securities Act of 1933.

9. RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
and (ii) any other securities issued in respect of the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with legends in the following
form (in addition to any legend required under applicable state securities
laws):

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES MAY
NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE COMPANY) OR OTHER EVIDENCE
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
A EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT."

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<PAGE>

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET
STAND-OFF AGREEMENT IN THE EVENT OF A PUBLIC OFFERING, A COPY OF WHICH
IS A ON FILE WITH THE SECRETARY OF THE COMPANY."

10. TERMINATION.

(a) This Warrant (and the right to purchase securities upon exercise hereof)
shall terminate upon the earliest of (a) September 3, 2000 or (b) the sale of
all or substantially all of the assets of the Company, or (c) the acquisition
of the Company by means of merger or consolidation resulting in the exchange
of the outstanding shares of the Company for securities or consideration
issued, or caused to be issued, by the acquiring corporation or its
subsidiary in which the shareholders of the Company hold less than 50% of the
shares of the surviving corporation. The Company shall give Holder of this
warrant written notice of such sale, merger or consolidation at least ten
(10) and no more than ninety (90) days prior to the closing of any such sale,
merger or consolidation.

(b) [From Exhibit A-2 to Purchase Agreement]

11. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed
by the Company and the registered holder hereof. All notices and other
communications from the Company to the holder of this Warrant shall be
delivered personally or mailed by first class mail, postage prepaid, to the
address furnished to the Company in writing by the last holder of this
Warrant who shall have furnished an address to the Company in writing, and if
mailed shall be deemed given three days after deposit in the U.S. Mail.

ISSUED this 4th day of March, 1999

NOTIFY TECHNOLOGY CORPORATION
a California corporation

---------------------------------------
By: Paul F. DePond
Title: President

-4-

<PAGE>

ATTACHMENT A

NOTICE OF EXERCISE

TO: NOTIFY TECHNOLOGY CORPORATION

1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of Notify Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full, together with all applicable transfer taxes, if any.

2. Please issue a certificate or certificates representing said shares
of stock in the name of the undersigned or in such other name as is specified
below:

---------------------------------
(Name)

---------------------------------
(Address)

---------------------------------

3. The undersigned represents that the aforesaid shares of stock are
being acquired for the account of the undersigned for investment and not with
a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling
such shares. In support thereof, the undersigned has executed an Investment
Representation Statement included herewith.

------------------------------
WARRANTHOLDER SIGNATURE

------------------------------
(print name)

------------------------------
(Title)

------------------------------
(Date)

-5-

<PAGE>

ATTACHMENT B

INVESTMENT REPRESENTATION STATEMENT

PURCHASER :

COMPANY : NOTIFY TECHNOLOGY CORPORATION

SECURITY : COMMON STOCK

AMOUNT :

DATE :

In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:

(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only
and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933
("Securities Act").

(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand
that, in the view of the Securities and Exchange Commission ("SEC"), the
statutory basis for such exemption may be unavailable if my representation
was predicated solely upon a present intention to hold these Securities for
the minimum capital gains period specified under tax statutes, for a deferred
sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the
future.

(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register the
Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not
required in the opinion of counsel for the Company.

(d) I am aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or

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<PAGE>

indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.

(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.

(f) I further understand that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will
be required; and that, notwithstanding the fact that Rule 144 is not
exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk.

---------------------------
Name of Warrantholder

By:
------------------------

Title:
---------------------

Date: ,
----------------- ---

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<PAGE>

EXHIBIT A-2

FORM OF SECTION 10(b) OF WARRANTS WITH ACCELERATED TERMINATION

1. This warrant shall terminate thirty days after (i) either two Target
Telephone Companies issue letters of intent relating to trials of the
Company's "Got Mail" product or four Target Telephone Companies are selling
or distributing one of the Company's Call Manager products (excluding limited
trial programs), and (ii) the Company provides Holder notice of the Company's
achieving the foregoing milestone. For the purpose of this Section 10(b),
the following 18 companies (and their successors) shall be considered Target
Telephone Companies: Ameritech, Bell Atlantic (Nynex included), Bell South,
GTE, Pacific Bell, SNET, Southwestern Bell, Sprint (local), US West, Aliant,
Alltel, Century, Cincinnatti Bell, Citizens, Commonwealth, Frontier, Puerto
Rico Telephone Company and TDS.

2. This warrant shall terminate thirty days after (i) either two service
launches of the "Got Mail" product with Target Telephone Companies or the
Company receives a purchase order for one of its Call Manager products of
$500,000 or more, and (ii) the Company provides Holder notice of the
Company's achieving the foregoing milestone. For the purpose of this Section
10(b), the following 18 companies (and their successors) shall be considered
Target Telephone Companies: Ameritech, Bell Atlantic (Nynex included), Bell
South, GTE, Pacific Bell, SNET, Southwestern Bell, Sprint (local), US West,
Aliant, Alltel, Century, Cincinnatti Bell, Citizens, Commonwealth, Frontier,
Puerto Rico Telephone Company and TDS.

3. This warrant shall terminate thirty days after (i) the Company receives
purchase orders which in aggregate total $2,000,000 or more in any fiscal
quarter, and (ii) the Company provides Holder notice of the Company's
achieving the foregoing milestone.

4. This warrant shall terminate thirty days after (i) the Company has
fiscal 1999 revenue of $2,800,000 or more, and (ii) the Company provides
Holder notice of the Company's achieving the foregoing milestone.

<PAGE>

EXHIBIT B

FORM OF WARRANT

<PAGE>

NOTIFY TECHNOLOGY CORPORATION

COMMON STOCK PURCHASE WARRANT

1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the
terms and conditions set forth herein, David A. Brewer or a subsequent
transferee ("HOLDER"), is entitled to purchase from Notify Technology
Corporation, a California corporation (the "COMPANY"), at any time after the
date hereof and on or before the date of termination of this Warrant provided
for in Section 10 hereof, up to 721,244 shares (which number of shares is
subject to adjustment and certain conditions as described below) of fully
paid and nonassessable Common Stock of the Company (the "SHARES") upon
surrender hereof at the principal office of the Company, and upon payment of
the purchase price at said office in cash or by check. Subject to adjustment
as hereinafter provided, the purchase price of one share of Common Stock (or
such securities as may be substituted for one share of Common Stock pursuant
to the provisions hereinafter set forth) shall be $3.60. The purchase price
of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
payable from time to time upon the exercise of this Warrant (whether such
price be the price specified above or an adjusted price determined as
hereinafter provided) is referred to herein as the "WARRANT PRICE."

<PAGE>

the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all
other additional securities or other property receivable by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by this paragraph (a) and paragraphs (b) and (c) of this Section 2.

4. NO SHAREHOLDER RIGHTS. This Warrant as such shall not entitle its
holder to any of the rights of a shareholder of the Company.

5. RESERVATION OF STOCK. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.

-2-

<PAGE>

6. EXERCISE OF WARRANT.

(a) MANNER OF EXERCISE. This Warrant may be exercised, in whole
or in part, by Holder by the surrender of this Warrant (with the notice of
exercise form attached hereto as ATTACHMENT A and the Investment
Representation Statement attached hereto as ATTACHMENT C duly executed) at
the principal office of the Company, accompanied by payment in full of the
purchase price of the Shares purchased thereby, as described above. This
Warrant shall be deemed to have been exercised immediately prior to the close
of business on the date of its surrender for exercise as provided above, and
the person entitled to receive the Shares or other securities issuable upon
such exercise shall be treated for all purposes as the holder of such shares
of record as of the close of business on such date. As promptly as
practicable and in any event within five (5) days after such date, the
Company shall issue and deliver to the person or persons entitled to receive
the same a certificate or certificates for the number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share as provided above, and a Warrant in like tenor as this
Warrant to purchase the number of Shares in respect of which this Warrant
shall not have been exercised or waived.

(b) RIGHT TO CONVERT WARRANT. Holder shall have the right to
convert this Warrant, (in whole or in part), by the surrender of this Warrant
(with the Notice of Conversion form attached hereto as ATTACHMENT B) at the
office of the Company at any time during the term of this Warrant into
Shares as provided for in this Section 6(b). Upon exercise of this
conversion right, Holder shall be entitled to receive that number of Shares
of the Company equal to (x) the number of shares of Common Stock specified by
the Holder in its Notice of Conversion up to the maximum number of shares of
Common Stock subject to this Warrant (the "SPECIFIED NUMBER") less (y) the
number of shares of Common Stock equal to the quotient obtained by dividing
(A) the product of the Specified Number and the existing Warrant Price by (B)
the Fair Market Value, as defined below.

"FAIR MARKET VALUE" of a Share shall mean the fair value as determined
in good faith by the Company's Board of Directors; provided, however, that
where there exists a public market for the Company's Common Stock at the time
of Holder's exercise of this conversion right, the Fair Market Value per
Share shall be the average of the closing bid and asked prices of the Common
Stock quoted in the Over-The-Counter Market Summary or the last reported sale
price of the Common Stock or the closing price quoted on the Nasdaq National
Market or on any exchange on which the Common Stock is listed, whichever is
applicable, as published in The Wall Street Journal for the five (5) trading
days prior to the date of determination of fair market value.

Upon conversion of this Warrant, hereof shall be entitled to receive a
certificate for the number of Shares determined as aforesaid.

-3-

<PAGE>

setting forth the nature of such adjustment and a brief statement of the
facts requiring such adjustment.

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET
STAND-OFF AGREEMENT IN THE EVENT OF A PUBLIC OFFERING, A COPY OF WHICH
IS A ON FILE WITH THE SECRETARY OF THE COMPANY."

10. TERMINATION. This Warrant (and the right to purchase securities
upon exercise hereof) shall terminate upon the earliest of (a) March 3, 2003
or (b) the sale of all or substantially all of the assets of the Company, or
(c) the acquisition of the Company by means of merger or consolidation
resulting in the exchange of the outstanding shares of the Company for
securities or consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary in which the shareholders of the Company hold
less than 50% of the shares of the surviving corporation. The Company shall
give Holder of this warrant written notice of such sale, merger or
consolidation at least ten (10) and no more than ninety (90) days prior to
the closing of any such sale, merger or consolidation.

-4-

<PAGE>

and the registered holder hereof. All notices and other communications from
the Company to the holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company in writing by the last holder of this Warrant who shall have
furnished an address to the Company in writing, and if mailed shall be deemed
given three days after deposit in the U.S. Mail.

ISSUED this 4th day of March, 1999

NOTIFY TECHNOLOGY CORPORATION
a California corporation

----------------------------------
By: Paul F. DePond
Title: President

<PAGE>

ATTACHMENT A

NOTICE OF EXERCISE

TO: NOTIFY TECHNOLOGY CORPORATION

2. Please issue a certificate or certificates representing said shares of
stock in the name of the undersigned or in such other name as is specified
below:

_________________________________
(Name)

_________________________________
(Address)

_________________________________

3. The undersigned represents that the aforesaid shares of stock are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement included herewith.

______________________________
WARRANTHOLDER SIGNATURE

______________________________
(print name)

______________________________
(Title)

_______________________________
(Date)

-6-

<PAGE>

ATTACHMENT B

NOTICE OF CONVERSION

TO: NOTIFY TECHNOLOGY CORPORATION

(1) The undersigned hereby elects to convert its right to purchase _______
shares of Common Stock pursuant to the attached Warrant into such number of
shares of Common Stock of Notify Corporation as is determined pursuant to
Section 6(b) of such Warrant, which conversion shall be effected pursuant to the
terms of the attached Warrant.

(2) Please issue a certificate of certificates representing said shares of
stock in the name of the undersigned or in such other name as is specified
below:

Name: _____________________________

Address: __________________________

___________________________________

(3) The undersigned represents that the aforesaid shares of stock are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement included herewith.

__________________________ ________________________________
(Date) (Signature)

________________________________
(Name)

_________________________________
(Title, if signatory is an entity)

-7-

<PAGE>

ATTACHMENT C

INVESTMENT REPRESENTATION STATEMENT

PURCHASER :

COMPANY : NOTIFY TECHNOLOGY CORPORATION

SECURITY : COMMON STOCK

AMOUNT :

DATE :

In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:

(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933 ("Securities Act").

(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission ("SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.

(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In
addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the Company.

(d) I am aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or

-8-

<PAGE>

indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.

(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.

(f) I further understand that in the event all of the requirements
of Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.

___________________________
Name of Warrantholder

By:________________________

Title:_____________________

Date:_____________, ______

-9-

<PAGE>

EXHIBIT C

INVESTOR RIGHTS AGREEMENT

<PAGE>

NOTIFY TECHNOLOGY CORPORATION

INVESTOR RIGHTS AGREEMENT

MARCH 4, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 Restrictions on Transferability; Registration Rights. . . . . . . . 1

1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Restrictive Legend. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Notice of Proposed Transfers. . . . . . . . . . . . . . . . . . . . 3
1.5 Shelf Registration. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Company Registration. . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Expenses of Registration. . . . . . . . . . . . . . . . . . . . . . 6
1.8 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . 6
1.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Transfer of Registration Rights . . . . . . . . . . . . . . . . . . 9
1.12 Standoff Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 9
1.13 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . .10
1.14 Restriction on Sales. . . . . . . . . . . . . . . . . . . . . . . .10

SECTION 2 Affirmative Covenants of the Company. . . . . . . . . . . . . . . .10

2.1 Observer Rights . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.3 Termination of Covenants. . . . . . . . . . . . . . . . . . . . . .10

SECTION 3 Right of First Offer. . . . . . . . . . . . . . . . . . . . . . . .11

3.1 Right of First Offer. . . . . . . . . . . . . . . . . . . . . . . .11
3.2 Sale of Securities by Company . . . . . . . . . . . . . . . . . . .11
3.3 Offer Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.5 Termination of Right of First Offer . . . . . . . . . . . . . . . .12

SECTION 4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . .12

4.1 Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . . . .12
4.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .12
4.3 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.4 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . .12
4.5 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.7 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . .13
4.8 Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . .13
4.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.10 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . .13
</TABLE>

-i-

<PAGE>

INVESTOR RIGHTS AGREEMENT

THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of
March 4, 1999 between Notify Technology Corporation, a California corporation
(the "COMPANY"), and David A. Brewer ("INVESTOR").

RECITALS

WHEREAS, the Company and Investor are entering into a Securities Purchase
Agreement (the "PURCHASE AGREEMENT") of even date herewith, pursuant to which
the Company shall sell, and the Investor shall acquire, Common Stock of the
Company and warrants to purchase Common Stock of the Company.

WHEREAS, in connection with the Purchase Agreement, the Company has agreed
to grant Investor certain rights as described herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:

SECTION 1

RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS

1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:

"COMMON STOCK" shall mean common stock, $0.001 par value of the
Company.

"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

"HOLDER" shall mean any Investor, any person to whom registration
rights under this Agreement have been transferred in accordance with
Section 1.11 hereof, and any financial institution designated by Investor which
holds registrable securities as collateral.

The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

<PAGE>

"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 1.5 and 1.6 hereof, including, without
limitation, all registration, qualification, stock exchange and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company and accountants and other persons retained by or for the Company (but
excluding the fees of counsel for the Holders, if any), blue sky fees and
expenses, accounting fees and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).

"REGISTRABLE SECURITIES" means any shares of Common Stock sold
pursuant to the Purchase Agreement or issued upon exercise of any of the
warrants issued pursuant to the Purchase Agreement and any Common Stock issued
with respect to the foregoing upon any stock split, stock dividend,
recapitalization or similar event; PROVIDED, HOWEVER, that shares of Common
Stock shall be treated as Registrable Securities only if and so long as they
have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale.

"RESTRICTED SECURITIES" shall mean the Securities required to bear
the legends set forth in Section 1.3 hereof.

"SECURITIES" shall mean shares of or securities convertible into or
exercisable for any shares of, any class of capital stock of the Company.

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders not
included in the definition of Registration Expenses.

1.2 RESTRICTIONS. No Registrable Securities shall be sold, assigned,
transferred or pledged except upon the conditions specified in this Agreement.
Investor and any subsequent Holder will cause any proposed purchaser, assignee,
transferee or pledgee of Registrable Securities to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.

1.3 RESTRICTIVE LEGEND. Each certificate representing Registrable
Securities shall (unless otherwise permitted by the provisions of Section 1.4
below) be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):

-2-

<PAGE>

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) OR
OTHER EVIDENCE REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS A EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT."

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET
STAND-OFF AGREEMENT IN THE EVENT OF A PUBLIC OFFERING, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."

Each Investor consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.

1.4 NOTICE OF PROPOSED TRANSFERS. Each Holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the restrictions on transfer contained in this Sections 1.2,
1.3, 1.4, 1.11, 1.12 and 1.14 of this Agreement. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, (other than any
transfer not involving a change in beneficial ownership) unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the Holder thereof shall give written notice to the Company of such
Holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such Holder's expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall be, reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or (iii) any other evidence reasonably satisfactory to counsel to the
Company, whereupon the Holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the Holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such Holder and the
Company, such legend is not required in order to establish compliance with any
provisions of the Securities Act or this Agreement.

-3-

<PAGE>

1.5 SHELF REGISTRATION.

(a) Upon request of Investor, which request may be made any time
after June 3, 1999, the Company will file under the Securities Act, as soon as
practicable after such request but no later than 25 business days therefrom, a
"shelf" registration statement providing for the registration of, and the sale
on a continuous or delayed basis by the Holders, the Registrable Securities,
pursuant to Rule 415 under the Securities Act and/or any similar rule that may
be adopted by the Commission (the "SHELF REGISTRATION"). The Company will
provide Investor with a copy of the Shelf Registration at least three business
days prior to filing. The Company will use its best efforts to cause the Shelf
Registration to become or be declared effective no later than 90 calender days
after receipt of such request and, except as provided in Section 1.5(f) below,
to keep such Shelf Registration continuously effective for a period ending on
the earliest of (i) March 3, 2002, (ii) the date on which Investor has sold all
the Registrable Securities owned by it or (iii) the date described in Section
1.13.

(b) The Company will, if necessary, supplement or make amendments
to the Shelf Registration, if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration or by the Securities Act or rules and regulations thereunder for
shelf registrations, and the Company will furnish to Investor copies of any such
supplement prior to its being used and/or filed with the Commission.

(d) Holders will cooperate with the Company in the preparation of
the Shelf Registration and any amendments or supplements thereto and provide the
Company with any information regarding Investor or such Designees as the Company
may reasonably request.

(e) If the Company issues warrants to purchase additional shares
of Common Stock to Investor pursuant to Section 6.2 of the Purchase Agreement,
the Company will amend the Shelf Registration or file an additional shelf
registration (in accordance with the terms of this Section 1.5) for the shares
of Common Stock issuable upon exercise of such warrants.

(f) Upon notice to the Holders, if any, the Company may suspend
use of the Shelf Registration in order to correct any material misstatements
therein or to include any information required to make the Shelf Registration
not materially misleading PROVIDED HOWEVER that the Company may not suspend use
of the Shelf Registration for more than ninety days in any twelve month period
and shall use diligent and good faith efforts to make corrections or inclusions
as promptly as practicable consistent with the Company's business objectives.

1.6 COMPANY REGISTRATION.

(a) NOTICE OF REGISTRATION. If at any time or from time to time,
the Company shall determine to register any of its Common Stock, either for its
own account or the account of a

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<PAGE>

security holder or holders other than (i) a registration relating to employee
benefit plans, (ii) a registration relating to the offer and sale of debt
securities, (iii) a registration relating to a Commission Rule 145
transaction, or (iv) a registration pursuant to Sections 1.5 hereof, the
Company will:

(i) promptly give to each Holder written notice thereof;
and

(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests made within 15 days after receipt of such written notice from the
Company by any Holder.

(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders in a written notice given pursuant to this
Section 1.6. In such event, the right of any Holder to registration pursuant to
this Section 1.6 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein.

All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 1.6, if the
managing underwriter advises the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement, PROVIDED,
HOWEVER, that shares of Registrable Securities of Holders shall not be excluded
from the underwriting unless all other securities (other than securities being
sold by the Company) are first entirely excluded from the underwriting PROVIDED
FURTHER that the number of Registrable Securities included in any such
registration shall not be reduced below 20% of the shares included in the
registration. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares. The Company may include
shares of Common Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 1.6 to the extent that the
amount of Registrable Securities otherwise includible in such registration
statement would not thereby be diminished.

If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. The Registrable Securities so withdrawn
shall also be withdrawn from such registration, and shall

-5-

<PAGE>

not be transferred in a public distribution prior to ninety (90) days after
the effective date of the registration statement relating thereto.

(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.

1.7 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5 and 1.6 shall be borne
by the Company. If a registration proceeding is begun upon the request of
Investor pursuant to Section 1.5, but such request is subsequently withdrawn at
the request of Investor, then Investor may either: (i) bear all Registration
Expenses of such proceeding in which case the Company shall be deemed not to
have effected a registration pursuant to Section 1.5 of this Agreement as
applicable; or (ii) require the Company to bear all Registration Expenses of
such proceeding, in which case the Company shall be deemed to have fulfilled its
obligations under Section 1.5. Unless otherwise stated, all other Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders of the registered securities included in such registration
pro rata on the basis of the number of shares so registered.

1.8 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:

(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least sixty
(60) days (or such longer period as provided in Section 1.5), or until the
distribution described in the registration statement has been completed.

(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.

(c) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such Holders or underwriters may reasonably request
in order to facilitate the public offering of such securities.

(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of

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<PAGE>

process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act.

(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.

(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange, or quoted in a U.S.
automated inter-dealer quotation system, as the case may be, on which similar
securities issued by the Company are then listed, or quoted.

(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

1.9 INDEMNIFICATION.

(a) The Company will indemnify and defend each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation or any alleged violation by the
Company of the Securities Act or the Exchange Act or any state securities law,
or any rule or regulation promulgated thereunder, applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as such expenses are incurred,

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<PAGE>

provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.

(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as such expenses are incurred, in each case to the extent,
but only if and to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
PROVIDED HOWEVER that the liability of any such Holder shall be limited to the
net amount received by the Holder from the sale of securities pursuant to the
registration statement.

(c) Each party entitled to indemnification under this Section 1.9
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 1 unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to

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<PAGE>

entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

(d) If recovery is not available under the foregoing
indemnification provisions of this Section 1.9, for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution for liabilities and expenses from the parties
liable for indemnification, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the offering of the
securities (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement of omission, and any other
equivalent considerations appropriate under the circumstances.

1.10 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Securities held by them and
the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration referred to in this Section 1.

1.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities granted the Investors under Sections 1.5 and 1.6
may be assigned to a transferee or assignee in connection with any transfer or
assignment of at least 150,000 shares of Registrable Securities by an Investor;
PROVIDED that (a) such transfer may otherwise be effected in accordance with
applicable securities laws, (b) notice of such assignment is given to the
Company and (c) such transfer is pursuant to a written agreement acknowledged by
the Company which acknowledgment shall not be withheld if the transfer
provisions of this Agreement are met.

1.12 STANDOFF AGREEMENT. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of debt
securities, securities in a Rule 145 transaction or with respect to an employee
benefit plan), upon notice by the Company or the underwriters managing any
underwritten public offering of the Company's securities, not to sell, make any
short sale of, loan, pledge (or otherwise encumber or hypothecate), grant any
option for the purchase of, or otherwise directly or indirectly dispose of any
Securities (other than those included in the registration) without the prior
written consent of the Company and such managing underwriters for such period of
time as the Board of Directors establishes pursuant to its good faith
negotiations with such managing underwriters, which period shall not exceed 180
days; PROVIDED THAT the officers and directors of the Company also agree to such
restrictions. Each Holder hereby consents to the placement of stop transfer
orders with the Company's transfer agent in order to enforce the foregoing
provision and agrees to execute a market standoff agreement with said
underwriters in customary form consistent with the provisions of this Section
1.12. This covenant shall not apply to any registration filed after March 3,
2004.

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1.13 TERMINATION OF RIGHTS. The rights of any particular Holder to
cause the Company to register or maintain a registration of securities under
Sections 1.5, and 1.6 shall terminate with respect to such Holder at such
time as Holder may sell all of the Registrable Securities held by him in a
three-month period in the public market to Rule 144.

1.14 RESTRICTION ON SALES. Holders, other than Investor, if any, shall
not sell, whether pursuant to the Shelf Registration or otherwise, in aggregate
more than 15% of the shares of Common Stock purchased by Investor pursuant the
Purchase Agreement in any three month period. For the purposes of the foregoing
calculation, the number of shares of Common Stock purchased by Investor shall
include any shares of Common Stock purchased by Investor upon exercise of any
warrants issued pursuant to the Purchase Agreement. This restriction shall
terminate on March 3, 2002.

SECTION 2

AFFIRMATIVE COVENANTS OF THE COMPANY

2.1 OBSERVER RIGHTS. So long as Investor owns more than 250,000 shares
of Registrable Securities, Investor shall have the right to attend all meetings
of the Board of Directors including the right to participate in any telephonic
board meetings. Investor shall be provided with notice of the meetings in the
same manner at the same time as the members of the Board of Directors. The
foregoing visitation rights may be limited by the Board of Directors if the
Board determines in good faith that Investor has a conflict of interest with
respect to the matters being discussed or, if upon advice of counsel,
limitations are required to maintain attorney-client privilege. In addition,
upon reasonable notice to the Company, Investor shall have the right to inspect
the Company's books and records and discuss the Company's affairs with its
officers and directors.

2.2 CONFIDENTIALITY. Investor agrees that any information obtained by
such Investor pursuant to this Section 2 which may be proprietary to the Company
or otherwise confidential will not be disclosed without the prior written
consent of the Company. Investor further acknowledges and understands that any
information so obtained may be considered "inside" non-public information and
agrees to abide by the Company's Insider Trading Policy. The provisions of this
Section 2 shall not be in limitation of any rights which Investor may have with
respect to the books and records of the Company, or to inspect its properties or
discuss its affairs, finances and accounts, under the laws of the jurisdictions
in which it is incorporated.

2.3 TERMINATION OF COVENANTS. The covenants set forth in Sections 2.1
shall terminate on, and be of no further force or effect after March 3, 2004.
The rights granted pursuant to this Section 2 are not transferable.

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<PAGE>

SECTION 3

RIGHT OF FIRST OFFER

3.1 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 3, the Company hereby grants to Investor, a right of first offer
with respect to future private sales by the Company of its Securities. Each
time the Company proposes to offer any Securities in a Financing (as defined
below), the Company shall first make an offering of such Securities to Investor
in accordance with the following provisions:

(a) The Company shall deliver a notice ("NOTICE") to Investor
stating (i) its intention to offer such Securities for sale, (ii) the number of
such Securities to be offered (the "OFFERED SECURITIES"), (iii) the price, if
any, for which it proposes to offer such Securities, (iv) the terms of such
offer and (v) the Offer Amount (as defined below).

(b) Within fifteen (15) calendar days after receipt of the Notice,
Investor may elect to purchase, at the price and on the terms specified in the
Notice, such Securities in an amount up to the Offer Amount by providing the
Company with written notice of his election.

(c) An election by Investor pursuant to Section 3.1(b) to purchase
Offered Securities shall not be considered a binding commitment unless and until
the Company receives binding commitments to purchase on the terms and conditions
contained in the Notice substantially all of the Offered Securities which the
Investors have not elected to purchase.

3.2 SALE OF SECURITIES BY COMPANY. Within 60 days of the expiration of
the period described in Section 3.1(b), any Offered Securities which the
Investor has not elected to purchase may be sold by the Company to any person
or persons at a price not less than, and upon terms no more favorable to the
offeree than, those specified in the Notice. If the Company does not complete
the sale of all such Offered Securities within said 60 day period, the rights of
the Investor with respect to any such unsold Offered Securities shall be deemed
to be revived.

3.3 OFFER AMOUNT. The Offer Amount shall equal that percentage of the
Offered Securities equal to the percentage of the Company owned by Investor as
determined pursuant to Item 403 of Regulation S-K under the Securities Act.

3.4 FINANCING. Financing shall mean a private offering or series of
related offerings of Securities by the Company for purpose of raising capital in
an amount of $250,000 or more. Financing shall not include (i) the issuance or
sale of shares of Common Stock or options to purchase Common stock to employees,
officers, directors or consultants for the primary purpose of soliciting or
retaining their services as shall have been approved by the Board of Directors,
(ii) the issuance or sale of Securities to leasing entities or financial
institutions in connection with commercial leasing or borrowing transactions
approved by the Board of Directors, (iii) the sale of Securities in a registered
public offering, (iv) any issuances of Securities in connection with any stock
split, stock dividend or recapitalization by the Company, (v) the issuance of
Securities in connection with the acquisition of another corporation by the
Company by merger, consolidation, or purchase of all or substantially all of the
assets or shares of such corporation, or (vi) the issuance of

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Securities in connection with a joint venture or a strategic or marketing
alliance with another company.

3.5 TERMINATION OF RIGHT OF FIRST OFFER. The right of first offer
contained in this Section 3 shall terminate on March 3, 2002. The rights
granted pursuant to this Section 3 are not transferable.

SECTION 4

MISCELLANEOUS

4.1 GOVERNING LAW; JURISDICTION. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California, as applied to agreements entered into, and to be performed entirely
in such state, between residents of such state.

The parties hereto agree to submit to the jurisdiction of the federal and
state courts of the State of California with respect to the breach or
interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers, and other relations between the
parties arising under this Agreement.

4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

4.3 NOTICES, ETC. All notices and other communications required or
permitted hereunder, shall be in writing and shall be sent by facsimile
personally delivered, mailed by registered or certified mail, postage prepaid,
return receipt requested, or otherwise delivered by a nationally-recognized
overnight courier, addressed (a) if to a Holder, at Holder's facsimile number or
address as set forth in the records of the Company or to such other address as
provided by such Holder, and (b) if to the Company, at its facsimile number or
address set forth in its most recent filing under the Exchange Act addressed to
the attention of the President. Any such notice or communication shall be
deemed to have been received (A) in the case of personal delivery, on the date
of such delivery, (B) in the case of a nationally-recognized overnight courier,
on the next business day after the date when sent, (C) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted and (D) in the case of delivery via facsimile, one
(1) business day after the date of transmission provided that said transmission
is confirmed telephonically on the date of transmission.

4.4 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or

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approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing or as
provided in this Agreement. All remedies, either under this Agreement or by
law or otherwise afforded to any holder, shall be cumulative and not
alternative.

4.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.

4.6 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.

4.7 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived only with the written consent of the Company and the Holders
of at least a majority of the outstanding shares of the Registrable Securities
then held by Holders. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder of Registrable Securities and the
Company. In the event that an underwriting agreement is entered into between
the Company and any Holder, and such underwriting agreement contains terms
differing from this Agreement, as to any such Holder the terms of such
underwriting agreement shall govern.

4.8 RIGHTS OF HOLDERS. Each Holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.

4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

4.10 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

NOTIFY TECHNOLOGY CORPORATION INVESTOR:

By: ________________________ ___________________________________________
Paul DePond (Name of Investor)
President
___________________________________________
(Signature)

___________________________________________
(Name and Title of Signatory if Investor is
not an Individual)

[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]

<PAGE>

EXHIBIT D

FORM OF LEGAL OPINION

<PAGE>

March 4, 1999

David A. Brewer
1918 Frazer Street
Sparks, NV 89431

Mr. Brewer:

Reference is made to (i) that certain Securities Purchase Agreement,
complete with all listed exhibits thereto, dated as of March 4, 1999 (the
"Purchase Agreement"), between Notify Technology Corporation, a California
corporation (the "Company"), and yourself (the "Purchaser"), which provides for
the issuance by the Company to Purchaser of 850,000 shares of Common Stock of
the Company (the "Shares") and Warrants to purchase an aggregate of 1,344,444
shares of Common Stock of the Company; and (ii) the related Investor Rights
Agreement dated March 4, 1999 (the "Investor Rights Agreement"). All
capitalized terms used herein are used herein as defined in the Purchase
Agreement unless otherwise defined herein. The Investor Rights Agreement and
the Purchase Agreement are collectively referred to herein as the "Agreements."

We have acted as counsel for the Company in connection with the negotiation
of the Agreements and the anticipated issuance of the Shares and the Warrants
As such counsel, we have made such legal and factual examinations and inquiries
as we have deemed advisable or necessary for the purpose of rendering this
opinion. In addition, we have examined originals or copies of such corporate
records of the Company, certificates of public officials and other documents as
we considered necessary or advisable for the purpose of rendering this opinion.
In such examination we assumed the genuineness of all signatures on original
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.

As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents made available
to us by the Company, and after inquiries of officers of the Company, but
without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and

<PAGE>
David A. Brewer
March 4, 1999

no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of the Company or the rendering of the opinion
set forth below.

For purposes of this opinion, we are assuming that Purchaser has all
requisite power and authority, and has taken any and all necessary corporate or
partnership action, to execute and deliver the Agreements, and that the
representations and warranties made by the Purchaser and the Company in the
Agreements and pursuant thereto are true and correct.

The opinions hereinafter expressed are subject to the following
qualifications:

(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors;

(b) We express no opinion as to the effect of general principles of
equity, including without limitation concepts of materiality, reasonableness,
good faith and fair dealing, and the availability or unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law;

(c) We express no opinion as to the enforceability of Section 1.9 of the
Investor Rights Agreement to the extent the provisions thereof may be subject to
limitations of public policy;

(d) We express no opinion with respect to any matters relating to
patents, mask works, copyrights, trademarks or trade names;

(e) We express no opinion as to the compliance with applicable
anti-fraud provisions of state or federal securities laws;

(f) We express no opinion with respect to the applicability to the
Agreement of the Exon-Florio Amendment to the Defense Production Act of 1950;

(g) We are members of the Bar of the State of California and we are not
expressing any opinion as to any matter relating to the laws of any jurisdiction
other than the federal laws of the United States of America and the laws of the
State of California.

Based upon and subject to the foregoing, we are of the opinion that:

1. The Company is a corporation duly organized and validly existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. The Company has requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted.

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<PAGE>
David A. Brewer
March 4, 1999

2. The Company has all requisite legal and corporate power to execute
and deliver the Agreements, to sell and issue the Shares and Warrants under the
Purchase Agreement, to issue the Warrant Shares and to carry out and perform its
obligations under the terms of the Agreements. The Shares, when issued in
accordance with the terms of the Purchase Agreement, will be validly issued,
fully paid and nonassessable. The Warrant Shares have been duly and validly
reserved, and when issued in accordance with the terms of the Warrants
(including the payment of the consideration described therein) will be validly
issued, fully paid and nonassessable.

3. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution and delivery of the
Agreements by the Company, the authorization, sale, issuance and delivery of the
Shares and the Warrants and the performance of the Company's obligations under
the Agreements has been taken. The Agreements have been duly and validly
executed and delivered by the Company and constitutes valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.

4. No consent, approval or authorization of or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of
the Agreements, or the offer, sale or issuance of the Shares, except the
filing of a notice pursuant to Section 25102(f) of the California Corporate
Securities Law and filing similar notices under other applicable blue sky
laws (but excluding jurisdictions outside of the United States) of the offer
and sale of the Shares.

5. Subject to the accuracy of the Purchaser's representations in
Article 4 of the Purchase Agreement, the offer, issuance and sale of the Shares
pursuant to the Purchase Agreement, and the issuance of the Common Stock upon
exercise of the Warrants will be exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended, and the qualification
requirements of Section 25110 of the California Corporate Securities Law of
1968, as amended.

This opinion is furnished to the Purchaser solely for his benefit in
connection with the purchase of the Shares and the Warrants, and may not be
relied upon by any other person without our prior written consent.

Very truly yours,

WILSON SONSINI GOODRICH & ROSATI
Professional Corporation

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