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

    State issuer's revenues for its most recent fiscal year. $358,191.

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

    As of March 26, 2002 the aggregate market value of our voting and non-voting common equity held by non-affiliates was $5,195,265 based on the average bid and ask for such common equity. The calculation does not account for unexercised warrants and unexercised stock options held by non affiliates and affiliates.

    Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

    At March 26, 2002 we had outstanding 34,248,782 common share equivalents, consisting of 28,148,782 shares of Common Stock, 6,100,000 shares of Common Stock issuable on conversion of all outstanding Exchangeable Shares, represented by one Series A Preferred Stock.

    Transitional Small Business Disclosure Format (check one):

DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the following documents are incorporated by reference into this Form 10-K:

    Registrant's Report on Form 8-K as filed on March 16, 2000 and all amendments thereto is incorporated into Part II of this Form 10-K.

    Information contained in websites referenced in this report are not to be deemed part of this report.

GENERAL INFORMATION

ENFORCEMENT OF LEGAL REMEDIES

    Certain officers and directors of Voice Mobility International, Inc. ("Voice Mobility" or the "Company") and other persons involved with our company as professional advisors are resident in Canada. As a result, it may be difficult to effect service within the United States upon such persons or to realize on any judgment by any court of the United States which is predicated on civil liabilities under the Securities Act of 1933, as amended (the "1933 Act"), or the Securities Exchange Act of 1934, as amended (the "1934 Act"). There is doubt as to the enforceability in Canada, either in original actions or through enforcement of United States judgments, of liabilities predicated solely upon violations of the 1933 Act or the 1934 Act, or the rules and regulations promulgated thereunder.

FORWARD-LOOKING STATEMENTS

    This Annual Report contains forward-looking statements based on our current expectations about our company and our industry. These forward-looking statements can be identified with text containing words such as "expects", "anticipates", "estimates" and other similar expressions. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of risk factors discussed in this Annual Report. We undertake no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

    Unless otherwise indicated, all references to "$", "US$" or "dollars" in this Annual Report refer to United States dollars and all references to "Cdn$" refer to Canadian dollars. For your convenience, the following table sets forth certain exchange rates based on the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York. Such rates are set forth as US dollars per Cdn$1.00.

Period					Rate at
From	To	Average	High	Low	End of Period
01/01/96	12/31/96	US$0.7332	US$0.7521	US$0.7227	US$0.7296
01/01/97	12/31/97	US$0.7220	US$0.7492	US$0.6898	US$0.6991
01/01/98	12/31/98	US$0.6740	US$0.7050	US$0.6309	US$0.6522
01/01/99	12/31/99	US$0.6730	US$0.6930	US$0.6464	US$0.6929
01/01/00	12/31/00	US$0.6731	US$0.6984	US$0.6399	US$0.6669
01/01/01	12/31/01	US$0.6357	US$0.6235	US$0.6711	US$0.6289

    Solely for your convenience, we provide some financial information relating to our business in U.S. dollars based on exchange rates indicated. We caution you that the amounts and rates used may not always be consistent with those used in preparation of our Consolidated Financial Statements. Our functional currency is the Canadian dollar. Accordingly, all assets and liabilities, which are denominated in foreign currencies, are translated at the year end exchange rate and revenues and expenses are translated using a weighted average exchange rate for the applicable period. Any exchange gains and losses resulting are presented as cumulative foreign currency translation gains (losses) within other accumulated comprehensive income.

PART I

    We are a Nevada corporation, incorporated on October 2, 1997, as Equity Capital Group, Inc., and we are the successor to the voice service and related messaging business founded by Voice Mobility Inc. (commonly known as VMI) in 1993. On June 24, 1999, we changed our name to Voice Mobility International, Inc. (commonly known as VMII). Unless otherwise indicated, all references to Voice Mobility means VMII and its predecessor company, VMI. See Background and Recapitalization.

    Our head office is located at 180-13777 Commerce Parkway, Richmond, British Columbia, V6V 2X3. Sales and marketing operations are primarily based out of our Richmond office. Research, development and technical support are based out of our Victoria, British Columbia office. We also have sales staff residing in New York, London, and Halifax. Voice Mobility currently has 38 employees.

Brief History

    VMI was incorporated in 1994 as WGT Teleserve Inc., and was originally focused on providing enhanced telecommunications services such as voice mail, fax handling and Internet access to specific vertical markets. In the spring of 1997, we decided to shift focus and began developing a comprehensive enhanced messaging product. Early versions of its messaging products were subsequently released in 1998, 1999 and 2000.

    In June 1999, VMI completed a reverse acquisition whereby VMI became a wholly owned subsidiary of Nevada-based VMII. At that point we effectively commenced operations as a US company and began trading on the OTCBB under the symbol VMII. Between the period of June 1999 and April 2001 we raised approximately US$12 million, mostly from private investors, to fund our development initiatives and operations.

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

Business Overview

    We are engaged in the messaging area of the telecommunications market. Our Enhanced Messaging software suite allows for legacy voice-mail replacement and incremental offerings such as real time call connect, voice-mail to e-mail, and fax to e-mail services. These unified communication services are facilitated by the creation of a single personal digital mailbox that can receive any type of communication regardless of its incoming format or medium. Currently, with the proliferation of personal communication devices, such as cell phones, PDA's and laptops, the considerable challenge of managing the information retrieval process from these devices has arisen. Users of these multiple communication methods are increasingly demanding a means of managing them. Our offering addresses these demands through providing users access to their messages anytime, anywhere via any device.

    The mobile workforce is growing rapidly, and we expect that as it continues to grow, workers will increasingly demand instant access to voice-mails, faxes and e-mails regardless of which device they have available or their physical location. Subscribers to our service can call a single telephone number that is associated with all other personal contact numbers. The system will cycle through personal numbers until it finds the subscriber. The call is then connected in real time to the subscriber. All messages are gathered in a single box to be reviewed, stored, forwarded, or acted upon from any access device. Fax messages can also be directed to a secondary fax machine or a temporary fax machine such as one in a client's office or in a hotel.

    Our Enhanced Messaging software suite is designed to function on industry standard hardware such as Intel processor-based servers. It also uses peripheral hardware, such as communication boards, based upon open system architectures, which support basic standards. This ensures compatibility with legacy equipment, which allows new customers to use the system without being required to decommission their existing older equipment.

Core Product Offerings

    Our Enhanced Messaging software suite of services include five core service packages: Legacy Voice-mail Replacement, Real Time Call Connect, Voice-mail to E-mail, Fax to E-mail, and a Single Unified Mailbox. The enhanced messaging platform is a combination of our Enhanced Messaging software suite installed on recommended hardware in a specified configuration. We can provide a complete solution including hardware, system configuration, migration, operating support system integration and billing support system integration or simply supply the software with hardware and configuration recommendations.

    Legacy Voice-mail Replacement is the ability to replace existing voice-mail systems currently operating in production environments. This replacement can be achieved by a full-scale service cut-over or an incremental service cut-over. We have the ability to interface with existing "legacy" voice-mail systems, allowing for the transfer of messages between systems.

    Real Time Call Connect is the ability for subscribers to merge all their wired and wireless communications, cellular telephone, pager, fax, home and office numbers, into a single unified phone number.

    Voice-mail to E-mail is the ability to route voice-mail messages to a single e-mail mailbox or multiple e-mail mailboxes. This service gives the subscriber the ability to choose the method of retrieving voice-mail messages, through e-mail, traditional retrieval methods, or e-mail enabled wireless devices.

    Fax to E-mail is the ability to receive faxes through the subscriber's one number and have them delivered to one or more e-mail mailboxes. The subscriber then has the power to determine if and where the fax is printed. Our Fax-to-E-mail service converts faxes to e-mail attachments, and allows subscribers to view them on-screen, print, save, or forward them. This functionality essentially eliminates the need for fax machines and dedicated lines, and it also minimizes the privacy concerns with respect to communal fax machines. Our suite is also capable of providing fax notification via pagers.

    Single Unified Mailbox gives subscribers options on managing and retrieving their messages. The Voice Mobility service is e-mail neutral, so any e-mail application on the market today can be configured as the subscribers unified mailbox. In addition, subscribers are not forced to change their e-mail addresses.

    Customers may license one or more of these services or chose to purchase the entire Enhanced Messaging software suite.

Approach to Market

    We focus on three distinct customer groups: service providers, wholesalers and resellers. We are focused on establishing channel, system integrator and OEM (Original Equipment Manufacturer) distribution relationships with industry-leading partners, in addition to its direct sales campaign, to target each customer group. We feel that a mixture of direct and indirect sales is the most cost-effective and efficient way to quickly build market share. To date we have secured Aliant Inc. as a channel in Eastern Canada.

    Of the three customer segments, we believe service providers represent the largest opportunity for us. Tier 1 service providers in particular tend to have large existing installed bases of voice-mail users. Their legacy voice-mail services are still growing between 10% and 20% per year; the bulk of this growth coming from wireless growth and consumer adoption. The Tier I market currently is looking for methods to limit spending in legacy voice-mail technology that is between 10 and 15 years old and methods to implement enhanced messaging technology.

    Our implementation plan has two macro stages. First, we believe that Tier I providers, no longer willing to invest in legacy systems, will be required to replace legacy systems while at the same time the market will be requiring that they offer and implement enhanced messaging technology solutions. Thus, at the first stage, the provider would install our enhanced messaging platform and migrate their current voice-mail customers over to the new platform without interruption in service. Second, the provider would begin to incrementally market the value-added service available as part of enhanced messaging, such as our Real Time Call Connect, Voice Mail to Email and Fax to Email offerings. To support our customers, we have developed significant research that identifies end users' perceptions of enhanced messaging features, pricing tolerance and willingness to buy. This information will assist service providers in effectively marketing enhanced messaging services to their customer base.

    We currently believe that there may be further opportunities for the deployment of our applications through the consolidation presently occurring amongst telecommunications service providers. As such organizations and networks consolidate, we believe that there likely will be incentives and opportunities to optimize architecture and service delivery platforms. Our messaging products not only facilitate the convergence of, and migration from, legacy systems, they also facilitate the provision of a single mailbox to users with wireline and wireless service.

Pricing Model

    To generate revenues, we utilize a selection of pricing models. Customers can purchase the software outright for a one-time license fee in the $2.50-$6.00 per subscriber range based on volumes and services provided, plus a 7.5%-18% annual support and maintenance fee.

    Customers would also purchase the hardware required for a one time fee of $1.00 - $3.50 per subscriber based on configuration, architecture, and mix of services offered. Professional services fees for system installation, system integration with OAM&P (Operation, Administration, Maintenance and Provisioning) systems, and migration of existing voicemail subscribers would range between 15% and 25% of the software licensing fees based on the complexity of the installation.

    Customers can purchase voice mail licenses to provide services for their growth in end-users, purchase licenses for migration of voicemail customers, and purchase licenses for enhanced messaging services. Our prime target is a Tier 1 carrier that provides messaging services to 100,000 - 10,000,000 end users.

    We can provide a fee based solution including system configuration, migration, operating support system integration, and billing support system integration with the assistance of a system integration partner. We can also help to improve growth of the end-user base by providing marketing services for enhanced messaging.

Market Growth Forecasts

    The Radicati Group published a report entitled "Unified Messaging Market Trends 2000 - 2004" which calls for substantial growth in the unified messaging market over the next several years. The report forecasts that revenues from the sale of unified messaging products will increase, worldwide, from $264 million in 2000 to $3.76 billion by the end of 2004. The most dramatic network growth will come from the Asia-Pacific region, where market share will grow from 8% to 19% by the end of 2004. The unified messaging installed product base is expected to grow, worldwide, from 3.5 million seats in 2000 to approximately 120 million seats by year-end 2004.

    The Radicati report forecasts that in addition to the product sales growth highlighted above, substantial growth will come in the form of services revenue. Radicati forecasts that revenue from unified messaging services will equate to $9.8 billion worldwide by 2004. Europe is expected to display the fastest adoption rate of unified messaging services.

    Within the report, Radicati also predicts that the messaging industry will shift from the e-mail, fax and voice-mail integration of unified messaging towards the enhanced functionality capabilities of unified communications offerings (such as our offering). We consider ourselves to be well positioned to capitalize on this forecasted market growth, with its current technology.

Marketing and Distribution.

    We sell our products through a combination of a technically proficient direct sales force and independent sales representatives. We also utilize a network of independent sales representatives selected for their familiarity with our potential customers and their knowledge of the telecommunications equipment markets. Both the direct sales personnel and independent sales representatives generate product sales, provide product and customer service, and provide customer feedback for product development. In addition, the sales personnel and independent sales representatives receive support from our marketing, product support and customer service departments. Our marketing efforts are focused on establishing and developing long-term relationships with potential customers. Our customers typically conduct significant technical evaluations of our products before making purchase commitments.

Competition

    Well-established suppliers such as Lucent, Comverse, Erickson and Glenayre currently dominate Tier 1 messaging. These competitors have provided voice mail services to both wire line and wireless carriers since the early 1980's. In evaluating the competitive landscape, we believe our closest competitors are companies offering voice-mail and enhanced messaging platforms built to meet the high capacity and high resiliency needs of the telecommunications carrier environment. In this segment, we have identified three core competitors: Comverse, Commworks, and Glenayre. Lucent is also developing a replacement product.

    Our products compete on the basis of the following key characteristics: performance, functionality, reliability, pricing, scalability, time-to-market delivery capabilities and compliance with industry standards. While we believe we compete favorably with respect to the foregoing characteristics, there can be no assurance that we will be able to continue to do so.

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

    Our success depends in large part upon the rate at which Tier 1 carriers incorporate our products into their systems. If we were not successful in increasing the use of our products by the leading Tier 1 carriers, there would be a material adverse effect on our business, financial condition and results of operations.

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

Industry Description

    Difference between Enhanced Messaging, Unified Communications and Unified Messaging.

    Enhanced Messaging is designed to replace legacy voice-mail systems. It encompasses enhanced voice-mail and Unified Communications. Compared to legacy voice-mail systems, Enhanced Messaging is built on the latest technology, can handle significantly more users, has a distributed design, and therefore is more scalable and fully interacts with the Internet.

    Unified Communications is a messaging feature of Enhanced Messaging. However, the term "Unified Communications" is often used interchangeably with "Unified Messaging". There are many significant differences between the two services. Unified Communications tends to be far more comprehensive and technically challenging than Unified Messaging. It combines non-real-time communications, such as message exchange, with real-time communications, such as call delivery, connectivity, line call management and notification options. The "real-time" aspects are critical components to Unified Communications.

    All of the features discussed below should exist in a system in order for it to be considered a true Unified Communications offering:

• One Number/Universal Number: When a caller dials your number a virtual attendant attempts to locate the subscriber.
• Unified Messaging Capabilities: System allows users to access e-mail, voice-mail, and fax messages through a single in-box via telephone or web interface.
• Find Me/Follow Me: Users can specify phone numbers of other locations at which the service will ring.
• Call Screening: Allows users to hear who is calling before answering incoming calls that are forwarded to them.
• Real-time call connection and routing: Upon caller identification, users have the option to accept incoming calls or forward them to voice-mail in real-time.
• Message Notification: Users can be notified of incoming calls and new or urgent messages by voice-mail, e-mail, pager or any wireless device.

    Our product currently offers all of the Enhanced Messaging features. We are not aware of any competitor that has developed a messaging solution that incorporates the ability to emulate existing voice mail technology while also providing advanced Unified Communications features and capabilities. Unified Communications vendors have only been deployed as a new service on the periphery of the carriers network.

Significant Customers

    In June 2001, we signed a three year contract with Haddad Advanced Technology (www.hatc.com) to market unified communications in Malaysia. During the first year, HATC has committed to a minimum of 6,000 mailboxes per month.

    In October 2001, NBTel, a wholly owned subsidiary of Aliant Inc. (www.aliant.ca) which is one of Canada's leading high-tech companies providing integrated communications and IT solutions, installed our UCN 100 v 2.1 and launched its Fax-to-E-mail solution.

Key Strategic Partners

    Aliant Inc.: The close working relationship that we have with Aliant serves as a strong endorsement of our company and our technology, and it also represents a significant revenue generating opportunity for us. In September 1999 Innovatia Inc, a wholly owned subsidiary of Aliant Inc., took an equity position in Voice Mobility, and currently holds approximately 2.0 million shares. Aliant and Voice Mobility have worked on joint development initiatives for two years, and in February 2001 they formalized their relationship by announcing their intentions to jointly develop the specifications for a "Next Generation" messaging platform targeted for Tier 1 carriers. This technology will be owned by Voice Mobility. The development initiative will take place within Aliant's state-of-the-art R&D facility known as the LivingLab innovations environment. Aliant's LivingLab provides development support through conducting rigorous testing and customer trials of new technologies, and as sists in reducing the time-to-market for new technologies.

    We expect that the close relationship with Aliant will translate into revenues for us as soon as Q1 of 2002. The intent of the development agreement is that the resulting product will become Aliant's primary hosted solution for business and residential customers. Aliant is Canada's third largest telecommunications company with approximately 800,000 voice-mail customers.

Other important strategic partners include:

    Microsoft: We are a member of the Microsoft Certified Service Provider program. This provides us with early access to Microsoft's software.

    Dell Computers: Dell is our platform manufacturer, software installer and system tester. Dell's custom factory integration services assist us with installation, efficient delivery and quality assurance.

    Telcordia: Telcordia is working with us in collaboration with Aliant and their LivingLAB.

    NMS Communications: NMS provides access to a broad range of development resources, sales and marketing.

    TARA: We are an associate member of TARA (Telecommunications Applications Research Alliance.) This membership enables us to develop new service applications and products related to communications networks.

International Markets

    We believe international markets should offer us strong opportunities in the long-term. Mature markets are seeking replacement technologies to enhance and replace legacy messaging architecture that is reaching the end of its useful life. Emerging markets are being fueled by the very basic need for high performance, low cost telecommunications infrastructure.

    We perceive a specific opportunity with telecommunications carriers that are either introducing messaging services to their markets for the first time, or are seeking to supplant incumbent, aging, or manufacturer discontinued platforms with next generation technology that creates new revenue opportunities through the delivery of enhanced features and functionality. We believe the latter market opportunity is supported by our ability to migrate users from an existing messaging platform to our application, in a manner that protects one of the carrier's core revenue streams.

    Voice Mobility is currently marketing in Asia, Europe and Latin America, working with and targeting both incumbent and emerging telecommunications service providers. We are engaged with OEM and Systems Integration partners in these international markets as a means to further expand and facilitate market penetration and the acquisition of market share. Key attributes of our applications that facilitate this expansion are the user-friendly ergonomics of the various user interfaces and the ability of our applications to support multi-languages on a single platform.

    In the early part of 2002, we have experienced interest and activity from all of the international markets in which we have a presence. As we continue to offer value propositions for incumbent carriers seeking to replace legacy messaging systems, and provide them the opportunity to enhance and expand existing revenue streams with the deployment of enhanced feature sets, and by delivering an enhanced messaging system to carriers initiating their first deployment of messaging services, we believe our presence in, and revenues from, non-North American markets will continue to expand.

    Revenues from international operations were $56,200 in fiscal 2001 and $196,573 in fiscal 2000. See note 5 to our consolidated financial statements for financial information by geographic area.

Suppliers

    Dell is our platform manufacturer. We currently procure, and expect to continue to procure, certain components from Dell due to unique component designs, quality and performance requirements and volume pricing discounts. If we were to replace Dell as our platform manufacturer we may have to make adjustments to both product designs and production schedules which could result in delays in production and delivery of products. Such delays could have an adverse effect on our operating results and financial condition.

Research and Development

    Our research and development team is primarily located in Victoria, British Columbia. The research and development team also has a research analyst located in an office at the Telecom Applications Research Alliance facility in Halifax. The research and development team designs, develops, tests, documents, and localizes as directed by our product management in our marketing group. The research and development team's business direction on each major feature for each release is detailed in written business requirements created by the business requirements team. A change control board also directs the lower level problems and enhancements for all other development work. Releases are coordinated with both marketing and sales to ensure timely delivery of the grouped features for both the clients and the target market. Appropriate technology is chosen for all work after performing a technical analysis of each requested feature and also ensuring a match for that release's system requ irements. All development work is carried out with reviews and decision gates as part of an overall product development process. The research and development team follows industry best practices for software engineering and encourages continuous process improvement. Research and development expenses for the fiscal years ended December 31, 2001, 2000 and 1999 are $4,618,284, $2,709,048 and $2,250,153 respectfully.

Intellectual Property

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

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

EMPLOYEES

    As of March 26, 2002, we employed 38 people, 11 of who are engaged in marketing and sales, 20 in research, development and support, and 7 in management and administration. We are not subject to any collective bargaining agreements and we consider relations with our employees to be excellent.

RISK FACTORS

    OUR BUSINESS FACES SIGNIFICANT RISKS. THE RISKS DESCRIBED BELOW MAY NOT BE THE ONLY RISKS WE FACE. ADDITIONAL RISKS THAT WE DO NOT YET KNOW OF OR THAT WE CURRENTLY THINK ARE IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.

    The following risks and uncertainties could affect our operating results and financial condition and could cause our actual results to differ materially from our historical results.

Our Business Model is in Its Early Stages and May Not Be as Successful as We Anticipate.

    In early 1998, the focus of our predecessor's business by necessity shifted to research and development efforts needed to develop a Windows 2000 platform-based product line. Given this shift in our business focus, even though our predecessor and we have had limited revenues from operations since 1993, we are at an early stage of entering the commercial marketplace. Our future operating results are subject to a number of risks, including our ability to implement our strategic plan, to attract qualified personnel and to raise sufficient financing as required. Our management's inability to guide growth effectively, including implementing appropriate systems, procedures and controls, could have an adverse effect on our financial condition and operating results.

We Are Located in Canada but Do Business Primarily in the U.S., Which Subjects Us to Risks in Exchange Rate Fluctuations.

    We face foreign currency exchange risk because a majority of our revenue is denominated in U.S. dollars and a majority of our operating costs are incurred in Canadian dollars. We have derived substantially all of our revenues to external customers from sales by our Canadian operations and substantially all of our assets are located in Canada. Significant fluctuations in the foreign exchange rate between U.S. and Canadian currency will result in fluctuations in our annual and quarterly results. If the Canadian dollar were to strengthen in relation to the U.S. dollar, our effective costs would rise in relation to our revenues, adversely affecting our profitability and competitive position. For information on our revenues by geographic areas, see Note 5 to our Consolidated Financial Statements.

We Hold No Patents on Our Technology.

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

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

We May Not Be Able to Obtain Adequate Financing to Implement Our Growth Strategy

    Successful implementation of our growth strategy may require continued access to capital. If we do not generate sufficient cash from operations, our growth could be limited unless we are able to obtain capital through additional debt or equity financings. We cannot assure you that debt or equity financings will be available as required. We have incurred significant operating losses that raises substantial doubt about our ability to raise additional financing and to continue as a going concern. Even if financing is available, it may not be on terms that are favorable to us or sufficient for our needs. If we are unable to obtain sufficient financing, we may be unable to fully implement our growth strategy.

We Are Currently Dependent on a Limited Number of Customers

    Sales to one customer, Aliant, Inc., comprised 56% of our revenues in fiscal 2001. Sales to three customers comprised 93% of revenues in 2000. Sales to three customers comprised 100% of revenues in 1999. If our business strategy is successful, we expect that we will become less dependent on such significant customers in the future as sales increase. However, if we are unable to successfully diversify our customer base, our business, financial condition and results of operations would be materially and adversely affected.

Our Business Is Subject to Risks Related to Rapid Technological Change, Which Could Increase Cost and Uncertainty.

    The telecommunications industry is characterized by rapidly changing technology and evolving industry standards. Our success will depend heavily on our continuing ability to develop and introduce enhancements to our existing systems and new products that meet changing markets. We can make no assurance that our technology or systems will not become obsolete due to the introduction of alternative technologies. If we are unable to continue to innovate successfully, our business and operating results could be adversely affected.

We Operate in a Highly Competitive Industry.

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

We Are Exposed To General Economic Conditions.

    As a result of recent unfavorable economic conditions, revenues and spending within the North American telecommunications industry may have been adversely affected. If the economic conditions in North America continue or worsen or if a wider or global economic slowdown occurs, we may experience a material adverse impact on our business, operating results, and financial condition.

Economic Conditions in the United States, Canada, and Globally, Affecting the Telecommunications Industry, as well other Trends and Factors Affecting the Telecommunications Industry, Are Beyond our Control and May Result in Reduced Demand and Pricing Pressure on our Products.

    There are trends and factors affecting the telecommunications industry, which are beyond our control and may affect our operations. Such trends and factors include:

• adverse changes in the public and private equity and debt markets and our ability, as well as the ability of our customers and suppliers, to obtain financing or to fund working capital and capital expenditures;
• adverse changes in the credit ratings of our customers, potential customers and suppliers;
• adverse changes in the market conditions in our industry and the specific markets for our products;
• visibility to, and the actual size and timing of, capital expenditures by our customers and potential customers;
• inventory practices, including the timing of product and service deployment, of our customers and potential customers;
• policies of our customers and potential customers regarding utilization of single or multiple vendors for the products they purchase;
• the overall trend toward industry consolidation and rationalization among our customers, potential customers, competitors, and suppliers;
• conditions in the broader market for communications products, including data networking products and computerized information access equipment and services;
• the effects of war and acts of terrorism.

    Economic conditions affecting the telecommunications industry, which affect market conditions in the telecommunications and networking industry, in the United States, Canada and globally, affect our business. Reduced capital spending and/or negative economic conditions in the United States, Canada, Europe, Asia, Latin America and/or other areas of the world could result in reduced demand for or pricing pressure on our products.

We May be Materially and Adversely Affected by Continued Reductions in Spending on Telecommunications Infrastructure by Our Customers.

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

BACKGROUND AND RECAPITALIZATION

    Our predecessor company, VMI, was incorporated in 1993, as a British Columbia corporation. In December 1997, the shareholders of VMI entered into a transaction with Acrex Ventures Ltd. ("Acrex"), an inactive company listed on the Vancouver Stock Exchange with no business operations, through which the Voice Mobility business plan would be financed. Prior to entering into the agreement with VMI, Acrex had approximately 150 shareholders, excluding participants in the Acrex private placements.

    The proposed transaction with VMI was intended to be a "reverse takeover" by VMI (the "RTO Concept"), and characterized as a recapitalization of VMI for accounting purposes.

    Between December 1997 through March 1999, Acrex consummated a series of four private placements undertaken in Canada, and raising an aggregate of Cdn$2,022,500 (approximately $1.4 million). In each private placement, investors were offered units ("Acrex Units") consisting of Acrex common shares and warrants to acquire Acrex common shares. Pending regulatory approval and finalization of the transaction between Acrex and VMI, the net proceeds of such private placements of approximately $1.26 million were loaned to VMI to fund research and development activities, operations, and working capital.

    On August 30, 1998, Acrex applied to the Vancouver Stock Exchange to approve its acquisition of VMI as the basis for its first business operations. However, by March 31, 1999, the application had not been approved by the Vancouver Stock Exchange, being still in process, and the share acquisition agreement between Acrex and the VMI shareholders expired. Because of these continuing delays, management of Acrex and VMI decided to pursue other sources of financing to expedite the strategy.

    Thus, in March 1999, as an alternative to financing Voice Mobility's business plan through Acrex, the directors and certain principals and shareholders of VMI and Acrex initiated discussions with Equity Capital Group, Inc. ("Equity Capital"), an unrelated Nevada corporation with shares listed on the OTC Bulletin Board. The discussions were focused on structuring a transaction in which the combined shareholders of VMI and Acrex and the investors in the Acrex private placements would acquire control of Equity Capital. Because the Acrex private placements contemplated the combination of VMI and the financing of Voice Mobility's business plan, the principals of VMI and Acrex effectively worked in concert as the effective shareholder or "stakeholder" group implementing the Voice Mobility business plan and the RTO Concept. Further, the three directors controlling VMI, were also Directors of Acrex and effectively controlled the board of directors of Acrex.

    Equity Capital's acquisition of VMI was intended to mirror Acrex's application to the Vancouver Stock Exchange in August 1998 to provide the investors in the Acrex private placements with essentially the same economic position in Equity Capital as they would have expected in the acquisition of Voice Mobility by Acrex. This would be accomplished by mirroring the capital structure of Equity Capital to the proposed capital structure of Acrex as proposed to the Vancouver Stock Exchange. Thus, the number of common shares and warrants of Equity Capital which each investor in the Acrex private placements would receive was intended to mirror the number of shares and warrants to have been received in the form of Acrex Units.

    On April 1, 1999, certain principals of Voice Mobility Inc. took the first steps to implement the Voice Mobility business plan through Equity Capital by entering into a stock purchase agreement with Equity Capital and its majority shareholder to acquire an aggregate of 8,418,000 common shares of Equity Capital, representing over 90% of the outstanding common stock of Equity Capital for a cash purchase price of $200,000. Of such 8,418,000 shares, 8,293,000 shares were newly issued shares and 125,000 shares were acquired from Equity Capital's majority shareholder. The $200,000 purchase price was placed in trust with Equity Capital's attorney subject to the closing of Equity Capital's acquisition of Voice Mobility (which was consummated on June 24, 1999 as described below) and other conditions. Among others, the April 1, 1999 agreement also contemplated that Equity Capital would be a "shell" corporation, with no assets or liabilities. From April 1999 to June 24, 1999, Equity Capital completed the assignment of its remaining assets and liabilities to Pioneer Growth Corporation, an unrelated third party. The 8,418,000 shares of Equity Capital were held in trust by attorneys-in-fact fo r the purchasers subject to the closing of the acquisition of Voice Mobility.

    Following April 1, 1999, the original shareholders of Voice Mobility Inc. were advised that they could face significant Canadian income tax liability as a result of a cross-border transaction with the U.S. entity Equity Capital. The shareholders of Voice Mobility Inc. immediately thereafter began to seek legal counsel and tax advisors with sufficient professional experience in such dealings. It took some time to find and retain qualified securities counsel and tax accountants with experience in such transactions. Once the tax accountants and securities lawyers were consulted it was determined that the most effective means of minimizing personal Canadian taxes for the Voice Mobility Inc. shareholders and to comply with Canadian tax legislation, required the formation of a new corporation, Voice Mobility Canada Limited ("VM Canada"), as a wholly owned subsidiary of Equity Capital. The formation of VM Canada took time to complete because certain special share rights had to be properly structured and drafted, various name searches needed to be conducted, and the company needed to be incorporated and capitalized.

    Thus, on June 24, 1999, Equity Capital, through its newly created wholly owned subsidiary, VM Canada, acquired 100% of the outstanding common shares of VMI. In such acquisition, the shareholders of VMI exchanged their shares of VMI for 6,600,000 Exchangeable Shares of VM Canada. Each VM Canada Exchangeable Share is exchangeable for one VMII common share at any time at the option of the shareholder, and will be exchanged no later than July 1, 2009, and is entitled to the same voting, dividend and other rights as one VMII common share. In addition, a share of preferred voting stock was issued to the transfer agent in trust for the holders of the VM Canada Exchangeable Shares, to provide a mechanism for holders of the VM Canada Exchangeable Shares to exercise their voting rights. We consider each Exchangeable Share as equivalent to a share of its common stock. Concurrent with this transaction, Equity Capital changed its name to our current name, Voice Mobility International, Inc.

    Following the completion of the acquisition of VMI, on July 1, 1999, the $200,000 purchase price for the 8,418,000 common shares of Equity Capital was released by Equity Capital's attorney.

    Following completion of the acquisition of VMI, VMII (formerly Equity Capital) took the next steps in fulfilling Acrex's obligations to its investors under the Acrex private placements. The 8,418,000 shares of Equity Capital held by the attorneys-in-fact were issued as follows: 5,010,907 shares were issued to the Acrex private placement investors, with each of the Acrex private placement investors allowed to participate in such offering substantially pro rata in relation to their participation in Acrex; 2,256,093 shares were issued to certain original shareholders of Acrex; 101,000 shares were issued to an original shareholder of Voice Mobility Inc.; and 1,050,000 shares were issued to certain finders and outside professional advisors who assisted in the consummation of the combined April 1 and June 24 transaction.

    On June 30, 1999, VMII completed its undertaking to fulfill Acrex's obligations to its investors under the Acrex private placements by issuing warrants to acquire an aggregate of 4,793,000 shares of Common Stock of VMII to the investors in the Acrex private placements. Such warrants were issued to the investors substantially pro rata to the number of warrants the investors were to have received in each of the Acrex private placements, at the same exercise prices, as adjusted for the currency translation from Canadian dollars to U.S. dollars. Thus, upon completion of transactions, the original investors in the Acrex private placements received, in the aggregate through the April 1999 offering of Common Stock and the June 1999 offering of warrants, substantially the equivalent economic terms in the form of VMII Common Stock and warrants, which they would have received in the Acrex Units. As a result, Acrex discharged its obligations under the private placements.

    Upon completion of such transactions at June 24, 1999, the stakeholders in Voice Mobility and Acrex (consisting of the original shareholders of VMI (43%), certain shareholders of Acrex (15%), and the investors in the Acrex private placement (32%)) held approximately 90% of the capital stock of VMII (formerly Equity Capital), thereby constituting a recapitalization of VMI through the acquisition of Equity Capital.

ITEM 2. PROPERTIES.

    Our United States office is located in shared office premises at Suite 200, 5031 South Ulster Parkway, Denver, Colorado, 80237 under a month-to-month arrangement with the lessor of the premises who is not affiliated with us. We pay no rent under an oral understanding.

    We lease the offices of our operating subsidiary, VMI, consisting of approximately 4,900 square feet at 13777 Commerce Parkway, Richmond, BC V6V 2X3 at a basic rate of Cdn$75,950 per year plus expenses. The lease expires on December 31, 2002.

    We also lease an engineering facility at 20 - 3318 Oak Street, Victoria, BC, V8X 1R1, of 8,784 square feet, under a lease with an unaffiliated party that expires on May 31, 2004, at Cdn$9,131 per month plus expenses.

    We believe that existing facilities are adequate for our needs through at least the end of 2002. Should we require additional space at that time, or prior thereto, we believe that such space can be secured on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS.

    On April 23, 2001, Breakthrough Financial Marketing Inc., a former consultant to Voice Mobility, issued to us a Notice of Intention to Arbitrate under the Arbitration Act (Alberta), claiming breach of contract by Voice Mobility Inc. and/or Voice Mobility International, Inc. relating to consulting services and registration of stock options. The relief sought by Breakthrough are damages under several causes of action for an aggregate of approximately $900,000 and an order that the consulting contract be renewed, as well as alternative relief in the form of fair value compensation, interest and costs. On September 25, 2001 a settlement was agreed to by both parties with a payment of $109,975 (Cdn. $170,000) to Breakthrough Financial Marketing Inc.

    On August 8, 2001, Sharon Ho commenced an action in the Superior Court of California against Voice Mobility International, Inc. and the predecessor corporation, Equity Capital Group, to recover damages as a result of an alleged breach of contract. On October 10, 2001, we entered into an indemnification agreement with the former majority shareholder of Equity Capital Group to indemnify us against any claims or liabilities that existed prior to the April 1, 1999 and June 1, 1999 share purchase agreements. Also on October 10, 2001, we entered into a settlement agreement with the former majority shareholder of Equity Capital Group. Under the agreement, the former shareholder is to pay us $290,000 to cover the costs of the Sharon Ho settlement and additional related legal expenses. The settlement amount is to be paid in set installments from October 10, 2001 to October 25, 2002. In addition to the indemnification and settlement agreements, Voice Mobility International, Inc. has also o btained a security agreement, a guaranty agreement and a stock pledge agreement to further protect and collateralize its position. On October 15, 2001, a settlement agreement and mutual release was signed between the Voice Mobility International, Inc. and Ms. Ho. The settlement agreement sets forth payments owing to Ms. Ho by Voice Mobility in the sum of $252,500 to be paid in set installments from October 10, 2001 to October 1, 2002. On March 8, 2002, a shareholder and Director of the Company indemnified the Company against any losses that may be incurred on the collectibility of the settlement amount related to Voice Mobility and the former majority shareholder of Equity Capital Group.

    On August 24, 2001, Manschot Opportunity Fund, LP and Galladio Capital Management, BV filed suit in the Superior Court of the State of California, County of Orange (Case No. 01CC10988) against Voice Mobility International, Inc., Funkart Holdings, Inc., Pioneer Growth Corporation, Robert L. Cashman and Greg Harrington. The suit relates to an alleged December 1998 agreement between Motorsports Promotions, Inc. and Funkart Holdings, Inc., during the time period prior to Voice Mobility Inc.'s April 1999 reverse acquisition of Equity Capital Group, Inc., the predecessor company to Voice Mobility International. Plaintiffs allege to be creditors of Motorsports Promotions, acquiring Motorsports' rights under the alleged agreement at a UCC public sale. Defendant Funkart Holdings is alleged to have been a subsidiary of Equity Capital Group during the period in question, but which was assigned to Pioneer Growth Corporation, a company unaffiliated with Voice Mobility International, pursuant to the reverse acquisition. The suit alleges that during the period in question, Voice Mobility International also was the alter-ego of defendant Cashman. The suit alleges breach of contract and breach of fiduciary duty and seeks compensatory damages in excess of $1,325,000, prejudgment interest and punitive damages. Voice Mobility has tendered the defense and indemnity of such claims to Mr. Cashman. We believe that there is no substantive merit to the claims against Voice Mobility International and we intend to defend the lawsuit vigorously if Mr. Cashman fails to perform the defense and indemnification obligations he has accepted.

    On December 31, 2001, Budd Stewart, a former employee of Voice Mobility, filed a Writ of Summons and Statement of Claim with the Supreme Court of British Columbia, claiming breach of an implied employment contract and stock option agreement by Voice Mobility Inc. The relief sought by Mr. Stewart is damages under several causes of action for an aggregate of approximately $1,825,892. We believe that there is no substantive merit to the claims and we intend to vigorously defend the action.

    We anticipate that, from time to time, we periodically may become subject to other legal proceedings in the ordinary course of our business. We are not a party to any other litigation required to be disclosed under Item 103 of Regulation S-K as at the date of this filing. We are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact of the above matters which seek damages of material or indeterminate amounts, and therefore cannot determine whether these actions, suits, claims or proceedings will, individually or collectively, have a material adverse effect on our business, results of operations, and financial condition. We intend to vigorously defend these actions, suits, claims and proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    There were no matters submitted to a vote of our security holders either through solicitation of proxies or otherwise in the fourth quarter of the fiscal year ended December 31, 2001.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    Our common stock was listed and commenced trading on the OTC Bulletin Board on June 30, 1999 under the symbol "VMII", on the Frankfurt Stock Exchange on April 12, 2000 under the symbol "VMY"and on the Toronto Stock Exchange on July 16, 2001 under the symbol "VMY". Since June 30, 1999, trading in our common stock has been limited and sporadic. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported on the OTC Bulletin Board:

PERIOD	HIGH (U.S.$)	LOW (U.S.$)	VOLUME
2000
First Quarter..............................	$11.00	$2.00	2,339,600
Second Quarter..........................	$9.13	$4.69	1,762,500
Third Quarter.........................	$7.25	$5.00	1,827,500
Fourth Quarter...........................	$5.25	$1.94	1,974,900
2001
First Quarter..............................	$3.00	$1.91	914,700
Second Quarter..........................	$2.00	$1.29	771,600
Third Quarter.........................	$1.52	$0.32	1,075,400
Fourth Quarter...........................	$0.53	$0.20	984,100
2002
January 1 - March 26	$0.35	$0.13	1,185,300

    These quotations were taken from the OTC Bulletin Board Historical Research Service. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark down or commission and may not necessarily represent actual transactions.

    The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported on the Toronto Stock Exchange:

PERIOD	HIGH (Cdn.$)	LOW (Cdn.$)	VOLUME
2001
First Quarter..............................	N/A	N/A	N/A
Second Quarter..........................	N/A	N/A	N/A
Third Quarter.........................	$2.50	$0.60	168,438
Fourth Quarter...........................	$0.75	$0.35	723,940
2002
January 1 - March 26	$0.50	$0.25	2,649,634

    The number of shareholders of record as at March 26, 2002 was 154. At March 26, 2002 we had outstanding 34,248,782 common share equivalents, consisting of 28,148,782 shares of Common Stock and 6,100,000 shares of Common Stock issuable on conversion of all outstanding Exchangeable Shares, represented by one Series A Preferred Stock. The closing sale price for our common stock on March 26, 2002, as reported on the OTC Bulletin Board, was $0.23.

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

RECENT SALES OF UNREGISTERED SECURITIES

    The following sets forth certain information concerning our currently outstanding securities which were sold or issued by us during the last fiscal year without the registration of the securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements.

    On April 3, 2001, in a private placement transaction, we issued special warrants to acquire, for no additional consideration, an aggregate of 6,500,000 units, each unit consisting of one share of our common stock and a one-half of a share warrant to acquire a share of common stock at a price of Cdn$ 2.00 per share. In this transaction, an aggregate of 6,500,000 special warrants were issued at a price of Cdn$ 2.00 per special warrant. To the extent that U.S. securities laws were applicable to the issuance, the issuance was made in reliance on Section 4(2) of the Securities Act and Regulation S thereunder. To the extent that U.S. securities laws were applicable to the issuance of the common stock and share warrants upon exercise of the special warrants, the issuance was made in reliance on Section 4(2) of the Securities Act and Regulation S thereunder.

    On April 3, 2001, in a private placement transaction, we issued special compensation options exercisable for no additional consideration into compensation options. The compensation options will entitle the agents in the special warrant private placement transaction to purchase 650,000 units at the price of Cdn$2.00 per unit. Each unit consists of one common share and one-half of one share warrant. Each whole share warrant will entitle the holder to purchase one additional common share at the price of Cdn$2.25 per share. The compensation options are non-transferable and expire on April 3, 2003. The agents may exercise the agents' compensation options by way of a "cashless" exercise (they may elect, when exercising, to satisfy their obligation to pay the cash exercise price to the company by accepting a lesser number of common shares). To the extent that U.S. securities laws were applicable to the issuance, the issuance was made in reliance on Section 4(2) of the Securities Act and R egulation S thereunder.

    On April 25, 2001, in connection with the issuance of a promissory note in the principal amount of Cdn$300,000, we issued to one purchaser 100,000 Class K warrants, each entitling the holder to one share of common stock per warrant, exercisable at $1.50 per share at any time up to April 25, 2004. To the extent that U.S. securities laws were applicable to the issuance, the issuance was made in reliance on Section 4(2) of the Securities Act and Regulation S thereunder.

    On May 11, 2001, in connection with the issuance of two promissory notes in the aggregate principal amount of Cdn$500,000, we issued to two purchasers an aggregate of 166,667 Class L warrants, each entitling the holder to one share of common stock per warrant, exercisable at $1.50 per share at any time up to May 11, 2004. To the extent that U.S. securities laws were applicable to the issuance, the issuance was made in reliance on Section 4(2) of the Securities Act and Regulation S thereunder.

    On June 14, 2001, in connection with the issuance of two promissory notes in the aggregate principal amount of Cdn$600,000, we issued to two purchasers an aggregate of 200,000 Class M warrants, each entitling the holder to one share of common stock per warrant, exercisable at $1.50 per share at any time up to June 14, 2004. On December 28, 2001, the Class M warrant holders terminated all Class M warrants. To the extent that U.S. securities laws were applicable to the issuance, the issuance was made in reliance on Section 4(2) of the Securities Act and Regulation S thereunder.

    On June 25, 2001, in connection with the issuance of two promissory notes in the aggregate principal amount of Cdn$500,000, we issued to two purchasers an aggregate of 166,667 Class N warrants, each entitling the holder to one share of common stock per warrant, exercisable at $1.50 per share at any time up to June 25, 2004. On December 28, 2001, the Class N warrant holders terminated all Class N warrants. To the extent that U.S. securities laws were applicable to the issuance, the issuance was made in reliance on Section 4(2) of the Securities Act and Regulation S thereunder.

    On March 30, 2001, we retracted 80,969 shares of our Series B Preferred at $3.00 per share for aggregate cash of $242,907. The retraction reduced the number of Series B Preferred shares outstanding from 666,667 to 585,698.

    On December 28, 2001, the Class L, M and N warrants, exercisable into an aggregate of 533,334 shares of common stock were cancelled by the holders.

ITEM 6: SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

(in thousands, except per share data)

    The following table presents selected financial data for us as at December 31, 2001 and for the five fiscal years ended December 31, 2001. We derived the selected financial data set forth below with respect to our statements of operations for the three fiscal years ended December 31, 2001 and our balance sheets as at December 31, 2001 and 2000, from our consolidated financial statements that are included elsewhere in this Form 10-K. The selected financial data set forth below with respect to our statements of operations for each of the two fiscal years ending December 31, 1998 and the balance sheet data as at December 31, 1999, 1998 and 1997, was derived from our consolidated financial statements which are not included in this Form 10-K. The following selected financial data should be read in conjunction with the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Form 10-K. T he statement of operations data and the balance sheet data are derived from our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States.

	Year Ended December 31, 2001	Year Ended December 31, 2000	Year Ended December 31, 1999	Year Ended December 31, 1998	Year Ended December 31, 1997
Statement of Operations Data:
Sales	$358	$275	$56	$119	$520
Expenses:
Cost of sales	50	86	52	75	260
Sales and marketing	2,238	3,589	1,191	190	60
Research and development	4,618	2,709	2,250	284	66
General and administrative and other	3,745	3,542	3,412	501	303
Total expenses	10,651	9,926	6,905	1,050	689
Net loss	(10,293)	(9,651)	(6,849)	(931)	(169)
Deemed dividend on Series B Preferred Stock	--	(1,451)	--	--	--
Dividends paid on preferred stock	57
Reduction of beneficial conversion feature on retraction of 80,969 Series B preferred stock	(110)	--	--	--	--
Net income (loss) attributable to common stockholders	$(10,240)	$(11,102)	$(6,849)	$(931)	$(169)
Basic and diluted net loss per common share	$(0.34)	$(0.46)	$(0.41)	$(0.14)	$ (0.03)
Weighted average number of common stock and common stock equivalents outstanding used in basic and diluted per share calculation	30,068	24,031	16,904	6,600	6,600

	December 31, 2001	December 31, 2000	December 31, 1999	December 31, 1998	December 31, 1997
Balance Sheet Data:
Cash and cash equivalents	$1,732	$603	$121	$37	$1
Working capital	1,506	1,634	(1,126)	(1,432)	(483)
Total assets	4,336	4,665	852	279	82
Current Liabilities	1,049	1,103	1,453	1,577	274
Long term Liabilities	1,576	--	--	--	233
Total Liabilities	2,625	1,103	1,453	1,577	507
Total stockholders' equity (deficiency)	1,711	3,562	(602)	(1,298)	(425)

The foregoing table assumes no exercise of any stock options or warrants outstanding as of December 31, 2001. As of December 31, 2001, there were options and warrants outstanding to purchase a total of 12,019,936 shares of common stock with a weighted average exercise price of $1.89 per share.


The following selected financial data are derived from the continuing financial statements of Voice Mobility Inc., a company incorporated under the laws of the Canada Business Corporation Act in 1993. Through a series of transactions in June 1999, Voice Mobility Inc. was recapitalized and acquired the net assets of Voice Mobility International, Inc. (formerly Equity Capital Group, Inc.), an inactive United States company registered on the OTC Bulletin Board. The Consolidated Financial Statements are a continuation of the financial statements of the accounting acquirer, Voice Mobility Inc.

1. The amount and timing of expenditures required developing strategic relationships to enhance sales and marketing.
   
   
2. Changes in the growth rate of Internet usage and acceptance by consumers of unified messaging systems.
   
   
3. Emergence of new services and technologies in the market in which we compete; and fluctuations of foreign currency exchange rates.
   
   
4. Unanticipated delays in product development that could adversely affect our revenues or results of operations.
   
   
5. The failure or unavailability of third-party technologies and services could limit our ability to generate revenue.
   
   

Name	Age	Position
Randy G. Buchamer	45	Chairman of the Board of Directors and Chief Executive Officer
James J. Hutton	36	President and a Director
James Hewett	49	Chief Financial Officer, Treasurer and Assistant Secretary
David Grinstead	44	Exec. Vice President, Business Development
William Gardiner	46	Vice President, Business Development
William E. Krebs	55	Director
David Scott	67	Director
Morgan Sturdy	49	Director
Robert E. Neal	47	Director
Donald A. Calder	57	Director

THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS


Robert Neal
David Scott
Morgan Sturdy

Comparison of 2.5 Years (6/30/99 to 12/31/01) Cumulative Total Return Among Voice Mobility, The NASDAQ Telecomm Index, and The Peer Group Composite

NAME OF BENEFICIAL OWNER(1)	AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP	PERCENT OF CLASS
Edith M. Both 843 Ida Lane Kamloops, B.C. V2B 6V2	2,650,000i	7.7%
William E. Krebs	2,543,897ii	7.4%
James J. Hutton	2,146,778iii	6.3%
Innovatia Inc. 4th Floor, Collins Bank Building 1869 Upper Water Street Halifax, Nova Scotia Canada B3J 1S9	1,986,071iv	5.8%
Randy Buchamer	83,333v	*
William Gardiner	180,000vi	*
David H. Grinstead	383,333vii	1.1
James C. Hewett	61,250viii	*
Morgan Sturdy	83,333ix	*
David D. Scott	83,333x	*
Robert E. Neal	83,333xi	*
Directors and Executive Officers as a Group (9 persons)	5,648,590	16.5%

	(a) Exhibits
Exhibit No.	Description of Document
3.1	Articles of Incorporation (1)
3.2	Articles of Amendment of Articles of Incorporation (1)
3.6	Amended and Restated Bylaws (4)
4.1	Common Stock Certificate (1)
4.2	Form of Warrant (1)
4.3	Certificate of Designation of Series A Preferred Stock (1)
4.4	Certificate of Designation of Series B Preferred Stock (5)
4.5	Certificate of Amendment to Certificate of Designation of Series B Preferred Stock *
5.1	Opinion of Jones Vargas (6)
10.1	Amended and Restated 1999 Stock Option Plan (4)
10.2	Employment Agreement of James Jay Hutton (1)
10.3	Employment Agreement of William Gardiner (1)
10.4	Employment Agreement of Jason Corless (1)
10.5	Employment Agreement of Budd Stewart (1)
10.6	Employment Agreement of Geoff Heston (1)
10.7	Acquisition Agreement of Voice Mobility Inc. (1)
10.8	Agreement and Plan of Distribution of Equity Capital Group, Inc. (1)
10.9	List of Subsidiaries of Registrant (5)
10.10	Debt Settlement Agreement with Maritime Tel & Tel (1)
10.11	Voting, Support and Exchange Trust Agreement (1)
10.12	Debt Settlement Agreement with Pacific Western Mortgage Corporation (1)
10.13	Debt Settlement Agreement with Ernest Weir Gardiner (1)
10.14	Stock Purchase Agreement (1)
10.15	Form of Subscription Agreement (1)
10.16	Exchange Agreement (1)
10.17	Employment Agreement of Thomas G. O'Flaherty (5)
10.18	Employment Agreement of David Grinstead (5)
10.19	Form of Series B Preferred Stock Subscription Agreement (5)
10.20	Form of Class I Stock Purchase Warrant (5)
10.21	Escrow Agreement, as amended (6)
10.22	Agency Agreement (6)
10.23	Special Warrant Indenture (6)
10.24	Share Warrant Indenture (6)
10.25	Form of Subscription Agreements for Special Warrants (6)
10.26	LivingLAB Agreement Between Voice Mobility Inc. and Innovatia (6)
10.27	Non-Negotiable Promissory Note in favor of Ibex Investments Ltd., as amended (8)
10.28	Class K Stock Purchase Warrant (6)
10.29	Non-Negotiable Promissory Note in favor of Alliance Equities Ltd. (7)
10.30	Non-Negotiable Promissory Note in favor or Interior Holdings Ltd. (7)
10.31	Form of Class L Stock Purchase Warrant (7)
10.32	Non-Negotiable Promissory Note in favor of Alliance Equities Ltd.(8)
10.33	Non-Negotiable Promissory Note in favor of Interior Holdings Ltd.(8)
10.34	Form of Class M Stock Purchase Warrant (8)
10.35	Non-Negotiable Promissory Note in favor of Alliance Equities Ltd. (8)
10.36	Non-Negotiable Promissory Note in favor of Interior Holdings Ltd. (8)
10.37	Form of Class N Stock Purchase Warrant (8)
10.38	Escrow Agreement among the Company, Computershare Trust Company of Canada and certain shareholders of the Company dated July 3, 2001 (8)
10.39	Settlement Agreement between Thomas O'Flaherty and the Company dated June 29, 2001 (8)
10.40	Employment Agreement of Randy Buchamer*
10.41	Amended LivingLAB Agreement Between Voice Mobility Inc. and Innovatia Inc.*
10.42	Addendum to LivingLAB Agreement *
10.43	Employment Agreement of James Hutton *
16.1	Letter of Bedford Curry & Co., Chartered Accountants, regarding change in certifying accountants. (2)
16.2	Letter of Ernst & Young LLP, Chartered Accountants, regarding change in certifying accountants. (2)
23.1	Consent of Ernst & Young LLP, Chartered Accountants *
23.2	Consent of Bedford Curry & Co., Chartered Accountants (8)
23.3	Consent of Jones Vargas (included in Exhibit 5.1) (6)
24.1	Power of Attorney (6)

As at December 31

(expressed in U.S. dollars)

	2001	2000
	$	$
ASSETS
Current
Cash and cash equivalents	1,732,200	602,527
Restricted cash [note 8[c] ]	—	2,000,000
Accounts receivable [net of allowance for doubtful debts:
2001 - $26,014; 2000 - $4,222] [note 4]	222,268	18,634
Other receivables	266,881	50,886
Note receivable [notes 3 and 4]	232,500	—
Prepaid expenses	100,850	65,133
Total current assets	2,554,699	2,737,180
Property and equipment, net [note 6]	1,780,935	1,927,731
	4,335,634	4,664,911
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current
Accounts payable	445,936	413,662
Accrued liabilities	57,062	316,464
Employee related payables	182,154	160,560
Note payable [note 3]	205,000	—
Deferred revenue	158,584	212,500
Total current liabilities	1,048,736	1,103,186
Promissory note payable [note 7]	1,575,930	—
Total liabilities	2,624,666	1,103,186
Commitments and contingencies [note 11]
Stockholders’ equity [note 8]
Common stock, $0.001 par value, authorized 100,000,000,
27,648,782 outstanding [2000 - 20,201,282]	27,649	20,202
Preferred stock, $0.001 par value, authorized 1,000,000
Series A Preferred stock issued and outstanding, 1	1	1
Series B Preferred stock issued and outstanding, 585,698 [2000 - - 666,667]	586	667
Additional paid-in capital	31,323,354	22,871,377
Accumulated deficit	(29,563,804)	(19,323,693)
Other accumulated comprehensive income	(76,818)	(6,829)
Total stockholders’ equity	1,710,968	3,561,725
	4,335,634	4,664,911
See accompanying notes

Voice Mobility International, Inc.

	2001	2000	1999
	$	$	$
Sales [note 5]	358,191	275,190	55,997
Cost of sales	49,999	86,498	51,843
Gross profit	308,192	188,692	4,154
Operating expenses
Sales and marketing [note 8[d] ]	2,237,563	3,588,642	1,190,754
Research and development [note 8[d] ]	4,618,284	2,709,048	2,250,153
General and administrative [note 8[d] ]	3,623,980	3,639,028	2,351,643
Acquisition fee for recapitalization	—	—	200,000
	10,479,827	9,936,718	5,992,550
Loss from operations	10,171,635	9,748,026	5,988,396
Interest income	(160,095)	(113,490)	—
Interest expense	281,017	16,411	70,209
Loss before extraordinary items	10,292,557	9,650,947	6,058,605
Extraordinary loss on settlement of debt [note 8[b] ]	—	—	790,000
Net loss	10,292,557	9,650,947	6,848,605
Foreign currency translation losses	69,989	42,331	39,737
Comprehensive loss	10,362,546	9,693,278	6,888,342
Earnings (loss) per share [note 8[f] ]
Basic and diluted loss per share
before extraordinary items	(0.34)	(0.46)	(0.36)
Basic and diluted loss per share	(0.34)	(0.46)	(0.41)

											Other
	Common Stock		Stock to be Issued		Series A Preferred Stock		Series B Preferred Stock		Additional		Accumulated
	Number		Number		Number		Number		Paid-in	Accumulated	Comprehensive
	of Shares	Amount	of Shares	Amount	of Shares	Amount	of Shares	Amount	Capital	Deficit	Income	Total
	#	$	#	$	#	$	#	$	$	$	$	$
Balance, December 31, 1998	8,400,000	59	—	—	—	—	—	—	—	(1,373,141)	75,239	(1,297,843)
Exchange of Voice Mobility Inc. common stock	(8,400,000)	(59)	—	—	1	1	—	—	58	—	—	—
Acquisition of Equity Capital Group, Inc.	453,756	454	—	—	—	—	—	—	(454)	—	—	—
Stock to be issued pursuant to Acrex Ventures Ltd. stock subscriptions	8,327,099	8,327	90,901	91	—	—	—	—	1,255,582	—	—	1,264,000
Stock subscription receivable from Acrex Ventures Ltd.	—	—	—	—	—	—	—	—	(43,333)	—	—	(43,333)
Acquisition fee for recapitalization	—	—	—	—	—	—	—	—	200,000	—	—	200,000
Stock issued on settlement of Pacific Western Mortgage Corporation note payable	750,000	750	—	—	—	—	—	—	249,250	—	—	250,000
Warrants issued on settlement of Ernest Gardiner note payable	—	—	—	—	—	—	—	—	33,000	—	—	33,000
Warrants issued on settlement of Ibex Investment Ltd. note payable	—	—	—	—	—	—	—	—	957,000	—	—	957,000
Stock issued on settlement of amounts due to Aliant Inc.	1,428,571	1,429	—	—	—	—	—	—	498,571	—	—	500,000
Common stock issued pursuant to exercise of common stock warrants	—	—	3,160,000	3,160	—	—	—	—	1,510,173	—	—	1,513,333
Stock based compensation	—	—	—	—	—	—	—	—	2,910,580	—	—	2,910,580
Foreign currency translation loss	—	—	—	—	—	—	—	—	—	—	(39,737)	(39,737)
Net loss	—	—	—	—	—	—	—	—	—	(6,848,605)	—	(6,848,605)
Balance December 31, 1999	10,959,426	10,960	3,250,901	3,251	1	1	—	—	7,570,427	(8,221,746)	35,502	(601,605)
Stock subscriptions received pursuant to stock subscriptions from Acrex Ventures Ltd.	90,901	91	(90,901)	(91)	—	—	—	—	43,333	—	—	43,333
Common stock issued pursuant to private placements, net of share issue costs of $75,000	3,050,000	3,050	—	—	—	—	—	—	7,238,950	—	—	7,242,000
Common stock issued pursuant to exercise of common stock warrants	5,594,000	5,594	(3,160,000)	(3,160)	—	—	—	—	951,084	—	—	953,518
Common stock issued pursuant to exercise of stock options	506,955	507	—	—	—	—	—	—	430,992	—	—	431,499
Preferred stock and detachable warrants issued pursuant to private placement	—	—	—	—	—	—	666,667	667	1,999,333	—	—	2,000,000
Beneficial conversion feature and deemed dividend on preferred stock	—	—	—	—	—	—	—	—	1,451,000	(1,451,000)	—	—
Stock based compensation	—	—	—	—	—	—	—	—	3,186,258	—	—	3,186,258
Foreign currency translation loss	—	—	—	—	—	—	—	—	—	—	(42,331)	(42,331)
Net loss	—	—	—	—	—	—	—		—	(9,650,947)	—	(9,650,947)
Balance, December 31, 2000	20,201,282	20,202	—	—	1	1	666,667	667	22,871,377	(19,323,693)	(6,829)	3,561,725
Common stock issued pursuant to special warrants	6,500,000	6,500	—	—	—	—	—	—	7,643,334	—	—	7,649,834
Common stock issued on settlement of amounts due to Innovatia Inc.	500,000	500	—	—	—	—	—	—	131,559	—	—	132,059
Common stock issued pursuant to exercise of stock options	447,500	447	—	—	—	—	—	—	405,178	—	—	405,625
Warrants issued pursuant to promissory notes	—	—	—	—	—	—	—	—	226,967	—	—	226,967
Series B preferred stock retraction	—	—	—	—	—	—	(80,969)	(81)	(352,378)	109,552	—	(242,907)
Dividends paid on preferred stock	—	—	—	—	—	—	—	—	—	(57,106)	—	(57,106)
Repurchase of vested stock options	—	—	—	—	—	—	—	—	(31,500)	—	—	(31,500)
Stock based compensation	—	—	—	—	—	—	—	—	428,817	—	—	428,817
Foreign currency translation loss	—	—	—	—	—	—	—	—	—	—	(69,989)	(69,989)
Net loss	—	—	—	—	—	—	—	—	—	(10,292,557)	—	(10,292,557)
Balance, December 31, 2001	27,648,782	27,649	—	—	1	1	585,698	586	31,323,354	(29,563,804)	(76,818)	1,710,968

As at December 31

(expressed in U.S. dollars)

	2001	2000	1999
	$	$	$
OPERATING ACTIVITIES
Net loss	(10,292,557)	(9,650,947)	(6,848,605)
Non-cash items included in net loss
Amortization	909,746	545,988	148,150
Stock issued on settlement of amounts
due to Innovatia, Inc.	132,059	—	—
Promissory note payable issued for services	1,575,930	—	—
Stock issued on settlement of amounts
due to Aliant Inc.	—	—	500,000
Extraordinary loss on settlement of note payable	—	—	790,000
Stock based compensation	428,817	3,186,258	2,910,580
Bad debt expense	59,856	(17,331)	204
Interest on promissory notes payable	226,967	—	—
Loss on disposal of property and equipment	5,391	—	—
	(6,953,791)	(5,936,032)	(2,499,671)
Net change in operating assets and liabilities [note 12]	(655,274)	456,469	406,026
Cash used in operating activities	(7,609,065)	(5,479,563)	(2,093,645)
INVESTING ACTIVITIES
Purchase of property and equipment	(955,808)	(1,857,636)	(519,548)
Proceeds on sale of property and equipment	7,998	—	—
Cash used in investing activities	(947,810)	(1,857,636)	(519,548)
FINANCING ACTIVITIES
Proceeds from issuance of special warrants,
net of financing costs	7,649,834	—	—
Proceeds from issuance of common stock	—	7,102,033	—
Proceeds from release of preferred stock from escrow	1,757,093	—	—
Proceeds on exercise of stock options	405,625	431,499	—
Proceeds on exercise of warrants	—	953,518	1,513,333
Proceeds on promissory notes payable and warrants	1,404,214	—	—
Repayment of promissory notes payable	(1,397,305)	(624,360)	—
Change in amounts due to Acrex Ventures Ltd.	—	—	997,994
Cash proceeds from advances	—	—	183,300
Repurchase of vested stock options	(31,500)	—	—
Dividends paid on preferred stock	(57,106)	—	—
Cash provided by financing activities	9,730,855	7,862,690	2,694,627
Effect of foreign currency on cash	(44,307)	(43,676)	2,165
Increase in cash and cash equivalents	1,129,673	481,815	83,599
Cash and cash equivalents, beginning of year	602,527	120,712	37,113
Cash and cash equivalents, end of year	1,732,200	602,527	120,712

See accompanying notes

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

	Canada	US	Barbados	Other	Consolidated Total
2001	301,991	41,200	—	15,000	358,191
2000	78,611	106,126	90,453	—	275,190
1999	55,997	—	—	—	55,997

6. PROPERTY AND EQUIPMENT

	Accumulated Cost	Amortization	Net Book Value
	$	$	$
2001
Computer equipment	2,256,869	1,059,176	1,197,693
Computer software	556,056	352,959	203,097
Computer equipment for customer use	227,966	17,712	210,254
Office equipment and furniture	183,465	61,967	121,498
Leasehold improvements	108,663	60,270	48,393
	3,333,019	1,552,084	1,780,935
2000
Computer equipment	1,975,443	476,277	1,499,166
Computer software	401,356	185,986	215,370
Office equipment and furniture	177,826	38,456	139,370
Leasehold improvements	107,236	33,411	73,825
	2,661,861	734,130	1,927,731

		Options Outstanding
	Shares Available for Grant	Number of Shares	Price per Share	Weighted Average Exercise Price
Balance, December 31, 1998	—	—	—	—
Shares authorized	5,000,000	—	—	—
Options granted	(3,252,750)	3,252,750	0.75 - 2.38	$0.94
Options forfeited	265,834	(265,834)	0.75	$0.89
Balance, December 31, 1999	2,013,084	2,986,916	0.75 - 2.38	$0.94
Additional shares authorized	5,000,000	—	—	—
Options granted	(4,577,795)	4,577,795	0.75 - 9.50	$4.13
Options forfeited	74,180	(74,180)	0.75 - 2.00	$1.19
Options exercised	—	(506,955)	0.75 -3.05	$0.87
Balance, December 31, 2000	2,509,469	6,983,576	0.75 - 9.50	$3.03
Options granted	(2,207,732)	2,207,732	0.35 - 2.75	$2.04
Options forfeited	2,298,872	(2,298,872)	0.75 - 9.50	$4.48
Options exercised	—	(447,500)	0.75 - 1.00	$0.89
Common shares issued to
Innovatia, Inc. [note 7]	(500,000)	—	—	—
Balance, December 31, 2001	2,100,609	6,444,936	0.35 - 7.25	$2.16

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding at December 31, 2001	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (years)	Number Exercisable at December 31, 2001	Weighted Average Exercise Price
$0.35 - 1.00	2,650,917	$0.84	4.80	1,876,139	$0.86
$1.01 - 3.00	2,662,632	$2.02	4.15	1,393,289	$2.08
$3.01 - 5.00	36,000	$3.05	3.10	21,556	$3.05
$5.01 - 7.00	970,387	$5.49	3.80	598,304	$5.48
$7.01 - 7.25	125,000	$7.25	4.30	125,000	$7.25
	6,444,936	$2.16	4.30	4,014,288	$2.18

	2001	2000	1999
	$	$	$
Sales and marketing	-	1,178,996	597,891
Research and development	257,934	964,673	1,023,429
General and administrative	170,883	1,042,589	1,289,260
	428,817	3,186,258	2,910,580

	2001	2000	1999
	$	$	$
Net loss attributable to common shareholders	(10,240,111)	(11,101,947)	(6,848,605)
Compensation expense	(2,284,347)	(4,112,466)	(439,786)
Pro forma net loss	(12,524,458)	(15,214,413)	(7,288,391)
Basic and diluted loss per share
As reported	(0.34)	(0.46)	(0.41)
Pro forma	(0.42)	(0.63)	(0.43)

	Warrants Outstanding at January 1 #	Warrants Issued #	Warrants Exercised #	Warrants Cancelled #	Warrants Outstanding at December 31 #	Exercise Price $US	Expiry Date	Proceeds on Exercise $
1999
Class A warrants	—	1,600,000	(400,000)	—	1,200,000	0.35	Dec. 29/00	133,333
Class B, C and D warrants	—	3,193,000	(2,760,000)	—	433,000	0.50	Dec. 29/00	1,380,000
Class E warrants	—	601,000	—	—	601,000	0.35	Dec. 29/00	—
	—	5,394,000	(3,160,000)	—	2,234,000			1,513,333
2000
Class A warrants	1,200,000	—	(1,200,000)	—	—	0.35	Dec. 29/00	426,668
Class B, C and D warrants	433,000	—	(433,000)	—	—	0.50	Dec. 29/00	216,500
Class E warrants	601,000	—	(601,000)		—	0.35	Dec. 29/00	210,350
Class F and G warrants	—	3,750,000	—	—	3,750,000	2.25	Nov. 30/03	—
Class H warrants	—	200,000	(200,000)	—	—	0.50	Dec. 29/00	100,000
Class I warrants	—	500,000	—	—	500,000	1.75	Nov. 29/03	—
	2,234,000	4,450,000	(2,434,000)	—	4,250,000			953,518
2001
Class F and G warrants	3,750,000	—	—	2,500,000	1,250,000	2.25	Nov. 30/03	—
Class I warrants	500,000	—	—	500,000	—	—	Cancelled	—
Class K warrants	—	100,000	—	—	100,000	1.50	Apr. 25/04	—
Class L warrants	—	166,667	—	166,667	—	—	Cancelled	—
Class M warrants	—	200,000	—	200,000	—	—	Cancelled	—
Class N warrants	—	166,667	—	166,667	—	—	Cancelled
Special warrants	—	3,250,000	—	—	3,250,000	Cdn.2.25	Apr. 3/03	—
Compensation options	—	650,000	—	—	650,000	Cdn.2.00	Apr. 3/03	—
Compensation warrants	—	325,000	—	—	325,000	Cdn.2.25	Apr. 3/03	—
	4,250,000	4,858,334	—	(3,533,334)	5,575,000			—

	2001	2000	1999
	$	$	$
Numerator:
Loss before extraordinary items	(10,292,557)	(9,650,947)	(6,058,605)
Reduction of beneficial conversion feature on retraction of 80,969 Series B preferred stock	109,552	—	—
Dividends paid on preferred stock	(57,106)	—	—
Deemed dividend on beneficial conversion feature	—	(1,451,000)	—
Loss before extraordinary items attributable to common stockholders	(10,240,111)	(11,101,947)	(6,058,605)
Net loss	(10,292,557)	(9,650,947)	(6,848,605)
Reduction of beneficial conversion feature on retraction of 80,969 Series B preferred stock	109,552	—	—
Dividends paid on preferred stock	(57,106)	—	—
Deemed dividend on beneficial conversion feature		(1,451,000)	—
Net loss attributable to common stockholders	(10,240,111)	(11,101,947)	(6,848,605)
Denominator:
Weighted average number of common stock outstanding	23,468,254	17,430,772	10,304,415
Weighted average number of common stock issuable on exercise of exchangeable shares	6,600,000	6,600,000	6,600,000
Weighted average number of common stock equivalents outstanding	30,068,254	24,030,772	16,904,415
Earnings (loss) per share:
Basic and diluted loss per share before extraordinary items	(0.34)	(0.46)	(0.36)
Basic and diluted loss per share	(0.34)	(0.46)	(0.41)

	2001	2000	1999
	$	$	$
Tax expense (recovery) at U.S. statutory rates	(3,602,000)	(3,860,000)	(2,739,000)
Lower (higher) effective income taxes of
Canadian subsidiary	—	(354,000)	(383,000)
Change in valuation allowance	2,108,000	2,859,000	1,221,000
Change in opening valuation allowance for the
reduction in future enacted tax rates	931,000	—	—
Non-deductible expenses	563,000	1,355,000	1,901,000
Income tax expense (recovery)	—	—	—

	2001	2000
	$	$
Net operating loss carryforwards	6,195,000	4,308,000
Property and equipment	567,000	346,000
Total deferred tax assets	6,762,000	4,654,000
Valuation allowance	(6,762,000)	(4,654,000)
Net deferred tax assets	—	—

	$
Canada
2002	43,000
2003	163,000
2004	78,000
2005	845,000
2006	2,098,000
2007	2,698,000
2008	7,704,000
	13,629,000
U.S.
2019	269,000
2020	2,701,000
2021	713,000
	3,683,000
	17,312,000

	$
2002	116,477
2003	68,801
2004	28,667
2005	--
2006	--
	213,945

	2001	2000	1999
	$	$	$
Change in accounts receivable	(229,442)	24,358	53,591
Change in other receivables	(220,644)	—	—
Change in note receivable	(270,000)	—	—
Change in prepaid expenses	(39,791)	(32,319)	(15,302)
Change in inventory	—	89,575	(75,093)
Change in accounts payable	155,006	(3,957)	225,214
Change in accrued liabilities	(242,016)	167,484	83,641
Change in employee payables	30,115	88,316	43,598
Change in note payable	205,000	—	—
Change in deferred revenue	(43,502)	123,012	90,377
	(655,274)	456,469	406,026

	2001	2000	1999
	$	$	$
Stock issued on settlement of amount due to Innovatia, Inc.	132,059	—	—
Restricted cash proceeds from issuance of preferred stock and detachable warrants	—	2,000,000	—
Stock and warrants issued to Acrex Ventures Ltd. investors	—	—	1,220,667
Stock issued on settlement of amount due to Aliant Inc.		—	500,000
Stock issued on settlement of shareholder debt	—	—	250,000
Warrants issued on settlement of Ibex Investment Ltd. notes payable	—	—	167,000
Warrants issued on settlement of Ernest Gardiner notes payable	—	—	33,000

	2001	2000	1999
	$	$	$
Cash paid for interest	54,000	16,000	70,000
Cash paid for income taxes	1,500	—	—

Signature	Title	Date
/s/ Randy G. Buchamer	Chairman of the Board, Chief Executive Officer	March 28, 2002
Randy G. Buchamer
/s/ James J. Hutton	President, Director	March 28, 2002
James J. Hutton
/s/ William E. Krebs	Director	March 28, 2002
William E. Krebs
/s/ Donald A. Calder	Director	March 28, 2002
Donald Calder
/s/ Robert E. Neal	Director	March 28, 2002
Robert Neal
/s/ Morgan P. Sturdy	Director	March 28, 2002
Morgan P. Sturdy
/s/ F. David D. Scott	Director	March 28, 2002
F. David D. Scott

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-45744 and Form S-8 No. 333-34564) pertaining to the Amended and Restated 1999 Stock Option Plan of Voice Mobility International, Inc. and in Post-Effective Amendment No. 1 to the Registration Statement (Form S-1 No. 333-60678) and related Prospectus and Prospectus Supplement No. 1 of our report dated January 28, 2002 (except for Note 13 which is as of March 8, 2002), with respect to the consolidated financial statements of Voice Mobility International, Inc. in the Annual Report (Form 10-K) for the year ended December 31, 2001.

	/s/ ERNST & YOUNG LLP
Vancouver, Canada,
March 28, 2002	Chartered Accountants

EXHIBIT 4.5

CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF THE DESIGNATIONS,
VOTING POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE
SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK OF

VOICE MOBILITY INTERNATIONAL, INC.

The undersigned, the duly elected and acting President and Assistant Secretary of Voice Mobility International, Inc., a Nevada corporation, pursuant to NRS 78.1955 does hereby certify as follows:

WHEREAS, pursuant to authority conferred upon the Board of Directors by ARTICLE IV of the Articles of Incorporation of the Company (as amended to date, the “Articles” the Board of Directors of the Company by unanimous written consent dated December 27, 2000 adopted a resolution creating a series of Preferred Stock designated as Series B Non-Voting Convertible Preferred Stock of Voice Mobility International, Inc.

WHEREAS, a certificate of designation creating a series of Preferred Stock of the Company designated as Series B Non-Voting Convertible Preferred Stock, was filed with the Nevada Secretary of State on December 29, 2000 (the “Designation”

WHEREAS, a certificate of correction correcting a typographical error in the Original Designation was filed with the Nevada Secretary of State on January 9, 2001 (the Original Designation as so corrected being herein called the “Designation”

WHEREAS, pursuant to the authority conferred upon the Board of Directors of the Company by ARTICLE IV of the Articles and NRS 78.1955, the Board of Directors of the Company at a meeting held June 29, 2001, adopted a resolution adopting an amendment to the New Designation.

WHEREAS, a majority of the holders of the outstanding shares of the Company’s Series B Non-Voting Convertible Preferred Stock have granted their consent to an amendment to the New Designation, and there is no class of stock of the Company senior to such Series B Non-Voting Convertible Preferred Stock as to the payment of distributions upon dissolution of the Company.

WHEREAS, the foregoing approval constitutes the approval required by NRS 78.1955(3) and therefore the approval of the stockholders required by NRS 78.1955(3) has been obtained.

RESOLVED, that pursuant to the authority granted by NRS 78.1955 to the Board of Directors and the holders of the Company’s Series B Non-Voting Convertible Preferred Stock, the New Designation is hereby amended as follows:

Section 4(b) (Automatic Conversion) is hereby amended in its entirety to provide as follows:

"(b)Automatic Conversion. Each share of Series B Preferred shall automatically be converted into shares of Common Stock at the then effective Series B Conversion Rate upon the earlier of either (i) December 31, 2002, or (ii) the written consent of the holders of a majority of the then outstanding shares of Series B Preferred, voting together as a single class."

Except as provided herein, the New Designation remains unaffected hereby.

IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to Certificate of Designations to be duly executed in its corporate name on this 19th day of December, 2001.

VOICE MOBILITY INTERNATIONAL, INC. By: /S/ James Hutton Name: James Hutton Its: President By: /s/ James Hewett Name: James Hewett Its: Assistant Secretary

EXHIBIT 10.40

Private & Confidential


August 16th, 2001


Randy Buchamer
2988 Brookridge Drive
North Vancouver, BC
V7R 3A8

Dear Randy:

This letter will confirm the offer by Voice Mobility Inc. (the "Company") of employment to you in the position of CEO with your start date to be August 16th, 2001. This offer will remain valid until August 16th, 2001. The terms are as follows:

Office: You will be employed in the position noted above, located in Vancouver, British Columbia, reporting to the ____Board of Directors__________. You shall devote the whole of your working time, attention and ability to the business of the Company. You shall not, without written consent of the Company, accept other employment, including part time employment. It is acknowledged that the Company may be asked to approve your working on other projects, outside of working hours, which are not in competition with, or related to, any of your work at the Company. The Company will make reasonable allowances for such work to be done by you outside of working hours. It is agreed, however, that the Company may restrict such work in their sole discretion (not to be unreasonably withheld). Your employment as noted above, subject to the Probationary Clause and the Termination Clause listed below, will continue at the discretion of the Company.

Responsibilities: Your prime responsibilities will include:
Directs the overall business activities and organizational policies. Develops, recommends and implements through subordinates, approved annual and long-term organization policies and goals. Major duties include directing company financial organization and operations planning activities; approving budgetary and operations objectives, monitoring performance relative to established objectives; promoting positive relations with all external groups, including customers, the financial community, government and the general public.

Salary: You will be paid a gross annual salary of $CDN 200,000 plus a $500 per month auto allowance. Salary and auto allowance will be paid on a semi-monthly basis. A review of the salary will be done annually at the sole discretion of the Company.

Hours of Work: We generally recognize "normal" business hours of 40 hours per week, a minimum of 8 hours per day, Monday to Friday inclusive. You can expect, however, that while we have designated "normal" office hours, this position will entail the need to work additional hours from time to time to meet the objectives of the position and overtime will not be paid.

Option Plan: You will be provided with _350,000__ options with a strike price of $.90 US, on a three-year vesting basis. The full details are provided by “Mobility International, Inc. Amended and Restated 1999 Stock Option Plan”and by “MOBILITY INTERNATIONAL, INC. EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT PURSUANT TO THE 1999 STOCK OPTION PLAN”

Benefits: Participation in the company Benefits plan begins September 1st, 2001. VMI pays 50% of the monthly premiums. For full details of the benefits plan, please see the Benefits By Design Benefits Booklet dated November 1,2000.

Vacation: You will be entitled to three weeks of paid vacation per year earned on the basis of 1.25 days per month, to be taken at a time or times acceptable to the Company, acting reasonably, having regard for its operational requirements.

Termination: If your employment is terminated for reasons other than cause, you will receive notice or pay in lieu of notice for the "Notice Period" as defined by the Employment Standards Act.

Proprietary Rights: As a condition of your employment you agree to be bound by and execute the form of Proprietary Rights/ Non Solicitation Agreement set out as
Schedule A.

Governing law and jurisdiction: This agreement shall be governed by and construed in accordance with the law of The Province of British Columbia and the laws of Canada therein.

If you are in agreement with the terms of this offer, please sign and date one copy and return it to me.

Yours very truly

Voice Mobility Inc.

/s/ James Hutton

Jay Hutton
President



I accept employment on the terms and conditions outlined in this letter.


December 5, 2001.

/s/ Randy Buchamer

_____________________________
Employee signature

PROPRIETARY RIGHTS / NON-SOLICITATION AGREEMENT I, ___Randy Buchamer____, recognize that Voice Mobility Inc. (the "Company") is engaged in a continuous program of software research and development and the marketing of software products and computer training programs, and that the Company also provides technical support, consultation and training services. I also recognize the importance of protecting the Company's trade secrets, confidential information, partner and customer relationships and other proprietary information and related rights acquired through the Company's expenditure of time, effort and money.

Therefore, because I wish to be employed by the Company in a capacity in which I will receive and/or contribute to the Company's Confidential Information, and in consideration of the salary or wages I will receive from the Company and for my employment by the Company, I agree to be bound by the following terms and conditions:

1. Non-Disclosure of Confidential Information

At all times during and subsequent to the termination of my employment with the Company, I shall keep in strictest confidence and trust all confidential information. I shall take all necessary precautions against unauthorized disclosure of the confidential information, and I shall not directly or indirectly disclose, allow access to, transmit or transfer the confidential information to a third party, nor shall I copy or reproduce the Confidential Information except as may be reasonably required for me to perform my duties for the Company.

2. At all times during and subsequent to the termination of my employment with the Company, I shall not use the confidential information in any manner except as reasonably required for me to perform my duties for the Company.

3. Upon the request of the Company, and in any event upon the termination of my employment with the Company, I shall immediately return to the Company all materials, including all copies in whatever form, containing confidential information which are in my possession or under my control.

5. I acknowledge and agree that I shall not acquire any right, title or interest in or to the confidential information.

6. I hereby assign and transfer to the Company, and agree that the Company shall be the exclusive owner of, all of my right, title and interest to each development throughout the world, including all trade secrets, patent rights, copyrights and all other intellectual property rights therein. I further agree to cooperate fully at all times during and subsequent to my employment with respect to signing further documents and doing such acts and other things reasonably requested by the Company to confirm such transfer of ownership of rights, including intellectual property rights, effective at or after the time the development is created and to obtain patents or copyrights or the like covering the developments. I agree that the obligations in this clause (b) shall continue beyond the termination of my employment with the Company with respect to Developments created during my employment with the Company.

7. I agree to take all necessary precautions to protect the computer systems and software of the Company and of the suppliers and clients of the Company.

8. I agree that while I am employed by the Company, and for 12 months immediately following the termination of my employment with the Company, I shall not, directly or indirectly, contact or solicit any clients of the Company for the purpose of selling or supplying to these clients or the Company any products or services which are competitive with the products or services sold or supplied by the Company at the time of my termination. The term "Client of the Company" in the preceding sentence means any business or organization that:

(a) was a client of the Company at the time of the termination of my employment with the Company; or

(b) became a client of the Company within six months after the termination of my employment with the Company if I was involved with the marketing effort in respect of such client prior to the termination of my employment with the Company.

9. I agree that while I am employed by the Company, and for 12 months after the termination of my employment with the Company, I shall not directly or indirectly hire any employees of or consultants or contractors to the Company nor shall I solicit or induce or attempt to induce any persons who were employees of or consultants to the Company at the time of such termination or during the 90 days immediately preceding such termination, to terminate their employment or consulting agreement with the Company, without the prior consent of the Company.

10. I acknowledge and agree that damages may not be an adequate remedy to compensate the Company for any breach of my obligations contained in this Agreement, and accordingly I agree that in addition to any and all other remedies available, the Company shall be entitled to obtain relief by way of a temporary or permanent injunction to enforce the obligations contained in this Agreement.


I HAVE READ THIS AGREEMENT. I UNDERSTAND IT, HAVE HAD THE OPPORTUNITY TO OBTAIN INDEPENDENT LEGAL ADVISE IN RESPECT OF IT, AND I AGREE TO ITS TERMS. I acknowledge having received a fully executed copy of this Agreement.

Signed, sealed and delivered
in the presence of:

/s/ James Hutton
___________________________________
Witness

/s/ Randy Buchamer
___________________________________
Employee Signature

James Hutton
___________________________________
(Name of Witness - printed)

Randy Buchamer
__________________________________
(Name of Employee (printed)

December 5, 2001
___________________________________
Date


On Behalf Of:
VOICE MOBILITY INC.

/s/ James Hutton

James Hutton, President
___________________________________
Name (Title)


December 4, 2001
___________________________________
Date

EXHIBIT 10.41

LivingLAB Agreement Between
VMI and Innovatia

Introduction and Scope of the Agreement

The purpose of this document (Agreement) is to present the opportunity for VMI (“Mobility Incorporated”) to participate in a LivingLAB relationship with Innovatia Inc. (“Innovatia”) While the Agreement is with Innovatia, a wholly owned subsidiary of Aliant Inc., the LivingLAB represents the assets of Aliant Telecom Inc. ("Aliant"). Where reference is made to Aliant resources, and engagement thereof, it is deemed to be under the auspices of this agreement and the direction and management of Innovatia. The intent of this Agreement between VMI and Innovatia with respect to the LivingLAB is to work together to jointly innovate and accelerate the launch of new VMI products as well as the sale of existing products in the global market.

Specifically, this Agreement is targeted at VMI development of Unified Communications product and services. VMI has adopted a strategic position as a legacy replacement company that positions Telco's for Unified Communications by replacing legacy product and showing positive ROI in the process. The projects outlined will test this VMI strategy and transition Aliant customers from our Legacy platforms to the VMI platform. The project descriptions are contained in Appendix A.

This project is a joint development project and shall include the following activities:

i. Sign off and mutual agreement of deliverables and time schedules by both parties;
ii. Provision of project managers by both parties whose responsibility it will be to create the project plan; and
iii. Provision of senior managers from both parties whose responsibility it will be to plan and manage the relationship.

The LivingLAB is defined as a package of 5 assets comprising an innovation environment. Combined these assets represent the services outlined in this Agreement.

A.OBLIGATIONS OF INNOVATIA

ALL OBLIGATIONS OF INNOVATIA INCLUDED IN THE AGREEMENT SHALL BE SUBJECT TO THE APPROVAL OF THE BOARD OF DIRECTORS OF ALIANT INC., OR SUCH COMMITTEE IT GRANTS THE AUTHORITY TOO. IF SAID APPROVAL IS NOT GRANTED, THIS AGREEMENT SHALL BE DEEMED NULL AND VOID.

1. License of Aliant Intellectual Property

(a) Aliant is a convergent carrier, with an integrated network and system perspective and owns or has licensed certain intellectual property (including software in source or executable form, confidential information, trade secrets, business methods or processes or patentable matter, for example) used in the LivingLAB environment ("Aliant Intellectual Property"). To the extent there is any such Aliant Intellectual Property used by VMI, Aliant licenses, on a non-exclusive, fully-paid, non-transferable basis, such Aliant Intellectual Property to VMI for use by VMI during the LivingLAB test to last for the duration of the test, to aid in the development and verification of current VMI Products.

Without limiting the foregoing, unless Aliant or Innovatia agree in writing, VMI will not:

1. disassemble, reverse engineer or decompile the Intellectual Property;
   
2. derivative works from the Intellectual Property;
   
3. the Intellectual Property;
   
4. sublicense or transfer the Intellectual Property;
   
5. or merge any part of the Intellectual Property with any other Intellectual Property;
   
6. the Intellectual Property to any third party;
   
7. any Intellectual Property to upgrade any product not involved in the VMI LivingLAB test;
   
8. to discover any trade secrets related to the Intellectual Property; or
   
9. obscure or alter any notice of copyright, trademark or other proprietary right marking affixed or included in the Intellectual Property.
   

(b) All Aliant Intellectual Property and any support services are provided “is” Neither Aliant nor Innovatia make other warranties of any kind, whether express, implied, statutory or otherwise. Notwithstanding, Aliant and Innovatia do warrant that the Aliant Intellectual Property provided to VMI hereunder does not, or will not, infringe the intellectual property rights or other rights of any third party, including without limitation copyright, trademark, trade secret and patent or other rights. Aliant and Innovatia expressly exclude any warranties of merchantability or fitness for a particular purpose. Aliant and Innovatia expressly exclude any warranties or representations with respect to the adequacy, accuracy or utility of any information obtained by VMI under this Agreement.

2. Professional Services and Project Management

(a) Innovatia will provide technical resources to VMI. The technical resources at Aliant are experienced in testing, implementing and integrating new product offerings. These resources will be assigned to VMI LivingLAB projects to aid in the development and verification cycles. The LivingLAB will bring together a multi functional team representing a cross section of divisions of the company to bring the expertise and knowledge developed in the areas that VMI is developing products. They will give insight into the ever-changing requirements of a service provider.

(b) Innovatia will also provide project management resources to support the technical resources in the following manner:

1. Innovatia will make available sufficient Aliant resources to carry out VMI LivingLAB activities as outlined above;
   
2. Innovatia will make available an Account Manager to ensure the relationship between VMI and the LivingLAB is strong and mutually beneficial. The Account Manager is responsible for ensuring a strong commitment to deliver the services outlined above. The Account Manager will ensure that VMI gets the highest level of customer service.
   
3. Innovatia will make available a Project Manager to manage all VMI LivingLAB projects. The Project Manager will ensure that projects are carried out in a timely manner. They will ensure that the mandate given to them for the project by VMI is carried out and the outcomes are relevant. They will act as VMI single point of contact for projects.
   

(d) The Innovatia provided Account Manager and the Project Manager will together provide:

1. at a minimum, bi-monthly updates on all VMI LivingLAB projects, these updates will provide sufficient detail to allow VMI to steer the course of the project.
   
2. a full report at the end of all projects. This report typically is made available both as a bound copy and in an electronic format like a CD Rom. The report is considered the Intellectual Property of VMI and will not be disclosed to any third parties by Aliant or Innovatia. The report may be used internally by Aliant, Innovatia or other wholly owned subsidiaries of Aliant Inc. except in cases where the subject matter is deemed by VMI too sensitive to be distributed beyond the immediate project team and provided that Innovatia has received VMI prior written consent to the disclosure of the report beyond the immediate project team.
   
3. a quarterly summary on all activities (projects, visits, and other pertinent information) undertaken by the LivingLAB on behalf of VMI.
   

(e) Product Management at Innovatia will share their service provider’s business vision. For example, business case analysis, pricing strategies, functional evolution of the product, advertising models, deployment strategies, competitive strategies, regulatory strategies, operational considerations and market learnings. The experience gained at Innovatia in delivering the individual solutions will be used to build the business case for VMI integrated solution.

3. Sales and Marketing

(a) Innovatia has a trusted and privileged relationship with their customers. The LivingLAB research group will facilitate innovation by leveraging this customer relationship. Subject to privacy and other legal and regulatory requirements, VMI will have access to all consumer research undertaken by Aliant. The research group will undertake additional VMI directed consumer research. If the use of an outside research company is necessary VMI will pre-approve and pay for the project. Innovatia will obtain VMI prior written approval of the use of the outside research company who will sign a Non-disclosure Agreement acceptable to VMI. Should the research be of mutual interest, Innovatia and VMI will negotiate a cost-sharing model assessed on a project-by-project basis.

(b) Innovatia will use the LivingLAB innovations environment to assist in the marketing and sales of VMI Products.

(c) Subject to s. 5 (e) (i), Innovatia will arrange and supervise customer and prospective customer visits, within reason and availability, to the LivingLAB where such parties can see first-hand Aliant’s implementation of VMI products

(d) Subject to s. 5 (e) (i), Innovatia will detail the testing and development work done by VMI in the LivingLAB to potential customers. Innovatia will provide sufficient detail about the products to validate the solutions developed by VMI.

(e) Subject to s. 5 (e) (i), Innovatia agrees to give VMI customers and prospects access during these visits to key Innovatia resources that can detail the application of VMI products. The resources will also share elements of Aliant’s Intellectual Property in the form of the strategic plans for new and existing Aliant services. The resources called upon to present during the visits are at Innovatia’s discretion and may vary.

The visits detailed above may include a tour of the Aliant Labs, including the VideoActive Development Centre, a state of the art demonstration facility.


The VideoActive Development Centre may be used to demonstrate VMI Products. The facility hosts over 300 tours a year many of which represent potential customers for VMI.

(f) Innovatia will provide sales leads to VMI as they are identified and proactively involve VMI in other partner’s customer visits to the LivingLAB.

4. Operations Administration and Maintenance ("OAM")

(a) VMI will have access to Aliant OAM standards and processes prior to and during the development and verification cycles of their products. Elements of OAM include all the elements necessary to run successful services including: maintenance, provisioning, billing, for example.

5. Quality Assurance process

(a) Innovatia will use the LivingLAB to aid in product development and verification. The lab environments are not simulated; they duplicate the production environment. This unique environment will allow VMI to test new products in a real world environment ensuring they are delivering a high quality product.

(b) Innovatia has developed a testing methodology that can be used by VMI to test their products. Such methodology is incorporated in the LivingLAB and represents an integrated approach to testing where all elements of a service are incorporated. One of the advantages is that VMI will have a separate and distinct group of resources evaluating their product. Being removed from the development of the product allows for an impartial assessment.

6. Innovatia and Aliant Warranties

(a) Innovatia and Aliant will perform their services under this Agreement in a diligent manner, in accordance with generally accepted professional and industry standards.
(b) Innovatia and Aliant warrant that the performance of their obligations under this Agreement will not contravene any agreements they may have with third parties.

B. OBLIGATIONS OF VMI

7. Payments

(a) VMI will pay Innovatia in cash a royalty of 10% on the gross revenue of VMI between Jan 1st 2002 and ending Dec 31st 2003. VMI will pay the royalty payment in cash within 30 days after the end of each calendar quarter. The royalty will be on gross revenue received for sale of the VMI products globally within that quarter. If the contract is terminated as per paragraph (O) the royalty payments will continue for 6 months after the termination date.

(b) VMI shall reimburse Innovatia for any and all expenses incurred by Innovatia relative to VMI customer visits to the LivingLAB, not paid for by the customers themselves for visits initiated by VMI. VMI Customer visits will be agreed to between the parties from time to time, in writing and prior to the visits. This Agreement will cover 4 free visits by VMI customers over the period of this Agreement.

8. Professional Services and Project Management

(a) VMI shall assign 1 senior manager to the VMI LivingLAB relationship. They will be responsible for the following areas of the business relationship:

1. Managing the strategic direction of the relationship
   
2. project opportunities
   
3. in a quarterly status meeting (via conference call) with the Innovatia Account Manager to review new opportunities and discuss appropriate action items.
   
4. in quarterly strategy reviews. These reviews will set the agenda for the upcoming quarter, address new opportunities and serve as an interface between VMI and the LivingLAB management team. These meetings will have a broad scope and include the General Manager of the LivingLAB as well as any other senior resources from both companies as necessary.
   

(b) VMI shall also assign 1 senior manager to the VMI Product project. They will be responsible for all aspects of the relationship between VMI and Living Lab as it pertains to the VMI Product project including, but not limited to:

1. The overall management and control of the project and attributed deliverables,
   
2. Review and sign off of Innovatia invoices pertaining to Living Lab activities,
   
3. and prioritization of activities and projects performed by Living Lab, as they pertain to the VMI Product project,
   
4. and management of the Product Requirements Document and the Project Plan,
   
5. in a quarterly status meeting (via conference call) with the Innovatia Account Manager to review new opportunities and discuss appropriate action items.
   
6. in quarterly strategy reviews. These reviews will set the agenda for the upcoming quarter, address new opportunities and serve as an interface between VMI and the LivingLAB management team. These meetings will have a broad scope and include the General Manager of the LivingLAB as well as any other senior resources from both companies as necessary.
   

(c) VMI shall provide, at no cost to Aliant or Innovatia, and at VMI discretion, any products necessary to carry out VMI LivingLAB projects.

(d) License Grant: Certain of the items of the VMI Product may contain or be accompanied by software (“Software”) and except as otherwise expressly provided in this Agreement, all references to the VMI Product will include the accompanying Software. Innovatia is granted a non-exclusive, non-transferable, temporary license to use the Software for the duration of the projects specified in the Statement of Work. All rights not specifically granted to Innovatia are reserved for VMI.

Without limiting the foregoing, Innovatia will not:

disassemble, reverse engineer or decompile the Software ;

derivative works from the Software ;

the Software (except that Innovatia may make one copy for archival purposes);

sublicense or transfer the Software;

or merge any part of the Software with any other software;

the Software to any third party;

any Software to upgrade any product not manufactured or sold by VMI;

to discover any trade secrets related to the Software or the VMI Product ; or

obscure or alter any notice of copyright, trademark or other proprietary right marking affixed or included in the VMI Product.

(e) The VMI Products and any support services are provided “is” VMI makes no other warranties of any kind, whether express, implied, statutory or otherwise. Notwithstanding, VMI does warrant that the VMI Product provided to Innovatia and Aliant hereunder does not, or will not, infringe the intellectual property rights or other rights of any third party, including without limitation copyright, trademark, trade secret and patent or other rights. VMI expressly excludes any warranties of merchantability or fitness for a particular purpose. VMI expressly excludes any warranties or representations with respect to the adequacy, accuracy or utility of any information obtained by Innovatia or Aliant under this Agreement.

C. MISCELLANEOUS

(a) Ownership - VMI has exclusive right, title and interest to the VMI Product. Innovatia will not (a) acquire any interest in the VMI Product, (b) misrepresent the true ownership of the VMI Product to any party or (c) in any way encumber or use any portion the VMI Product as collateral for any debt. VMI has exclusive right, title and interest to all of the findings including but not limited to reports of difficulty, all required reports and any recommendations.

(b) Limitation of Liability - EXCEPT AS REQUIRED PURSUANT TO THE EXPRESS PROVISIONS OF SECTION C. (d) and (g) OF THIS AGREEMENT,IN NO EVENT SHALL EITHER PARTY (OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, DISTRIBUTORS, SUPPLIERS, AGENTS, REPRESENTATIVES OR SUBLICENSEES) BE LIABLE TO EACH OTHER OR TO ANY THIRD PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY, FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OF ANY KIND, EVEN IF EITHER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES (AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF LIMITED REMEDY).

Total liability of either party for all claims of any kind for any loss or damage will not exceed the value of the VMI Product being tested which gave rise to the claim. Neither party will be liable for any losses or damages arising from any failure of the VMI Products or Intellectual Property during the projects. No action or proceeding against either party may be commenced more than one year after the event-giving rise to the claim.

(c) Press releases - The parties will mutually agree on and engage in joint public relations activities. However, no communications shall be released to the press, nor shall any test results, advertisements, publicity or promotional material be issued, with regard to this Agreement without mutual consent.

(d) Confidential Information

Although both parties shall have care and control of the project undertaken under this Agreement Innovatia reserves its rights to screen any projects undertaken by third parties at the LivingLAB to ensure there is no conflict of interest or breach of confidentiality with other LivingLAB third party projects. Should there be any conflict or potential of conflict appropriate steps will be taken to isolate the VMI Product project from other third party projects.



For the purpose of this Agreement, “Information” means all oral, written or machine-readable data and information that is not generally known to competitors of either party and is proprietary and/or confidential to either party and its affiliates, which includes, but is not limited to, business and marketing plans, financial information, current and future services and products, sales and customer information (including personal information of customers and potential customers, consisting of any information relating to an identifiable individual), research and development, general business operations, and trade secrets. Confidential Information shall not include information of either party and/or its affiliates that:



is or becomes part of the public domain through no wrongful act of the other party;



is disclosed with the written consent and authorization of the party whose confidential information it is;



is independently developed by the other party;



is received without obligation of confidence from a third party for whom there was no reason to believe was not lawfully in possession of such information, free of any obligation of confidence; or is lawfully required to be disclosed by a court of competent jurisdiction, provided that, before making such disclosure, the disclosing party shall promptly provide the party who owns the Confidential Information written notice of the requirement to disclose, and shall reasonably cooperate with the party who owns the Confidential Information in its actions to secure the confidential treatment of the Confidential Information.

Both parties at all times shall:

treat the Confidential Information as strictly confidential, and shall not disclose or permit the disclosure of the Confidential Information to any person, corporation or organization whatsoever without first obtaining written permission from the other party;

take all reasonable precautions against the Confidential Information being used or acquired by any unauthorized person or persons, which precautions shall entail the same degree of care as they use in preserving the confidentiality of its own confidential information;



promptly return to the other party upon request, or provide confirmation of destruction of, all copies of the Confidential Information, all Confidential Information contained in any retrieval system or database, and any and all tangible material relating to the Confidential Information, including, but not limited to, all copies, notes, computer disks, tapes and compact disks, whether such material was made or compiled by them or furnished by the other party; and



not copy, reproduce in any form, or store in a retrieval system or database, the Confidential Information without the prior written consent of the Disclosing Party, except for such copies and storage as may be reasonably required internally by the Disclosing Party for the purpose of this Agreement.



In the event of a breach, or a threatened breach, of any of the provisions of this section c, both parties acknowledges and agrees that the harm suffered by the other party would not be compensated by monetary damages alone and, accordingly, the other party, in addition to other available legal or equitable remedies, shall be entitled to an injunction against such breach or threatened breach.



(e) Intellectual Property - Innovatia/Aliant agrees that it has no intellectual property rights in or to any VMI developments or the VMI Product created prior to or during the term of this Agreement by VMI. VMI agrees that it has no intellectual property rights in and or to Innovatia/Aliant developments or Intellectual Property created prior to or during the term of this Agreement by Innovatia/Aliant. The parties acknowledge that no activity likely to give rise to the joint creation of intellectual property will be engaged in unless and until the parties enter into an agreement setting forth the rights and obligations of the parties with respect to such intellectual property.



(f) Rights to resell - Innovatia/Aliant shall have full rights to sell its services, applications and intellectual property to any of its and VMI customers without any finder fees or sales fees being charged by VMI. VMI shall have full rights to sell its services, applications and intellectual property to any of its and Innovatia/Aliant’s customers without any finder fees or sales fees being charged by Innovatia/Aliant.


(g) Indemnity - Both Parties agree to defend, indemnify and save harmless the other Party from any and all claims and liabilities made by third parties for actual or alleged infringement of any Canadian or United States of America patent, copyright or other property rights based on any software, program, service and/or other materials furnished by that Party pursuant to the terms of this Agreement, provided that the party seeking the indemnification (the “Party”(i) notifies the other promptly of the receipt of any claim for which it will seek indemnification, (ii) gives the other party exclusive authority to settle the claim (iii) assists the other party and provides all relevant information in its possession and (iv) has not, nor has anyone acting on its behalf compromised the defence of such suit in any way. This article states the entire obligation of the parties for patent, trade secret or copyright infringement.


VMI obligations under this Section C (g) will not apply to (i) any infringement or violation of Intellectual Property Rights caused by modification of the VMI Product, or any component thereof by any person or entity other than VMI, its employees or agents acting on VMI behalf or at its direction, in connection with this Agreement or (ii) any infringement caused directly by any such person's or entity’s use and maintenance of the VMI Product, or any component thereof other than in accordance with the purposes contemplated by this Agreement, except as expressly authorized in writing by VMI. VMI’s obligations under this Section C (g) will not extend to alleged infringements or violations that arise because the VMI Product, the Software, or any component thereof provided by VMI are used in combination with other products or software furnished by third parties, if such combination is what caused the infringement, and where any such combination was not installed, recommended or approved, expressly in writing by VMI.


Aliant and Innovatia 's obligations under this Section C (g) will not apply to (i) any infringement or violation of Intellectual Property Rights caused by modification of the Aliant and Innovatia Intellectual Property, or any component thereof by any person or entity other than Aliant and Innovatia , their employees or agents acting on Aliant and Innovatia 's behalf or at their direction, in connection with this Agreement or (ii) any infringement caused directly by any such person's or entity’s use and maintenance of the Aliant and Innovatia Intellectual Property, or any component thereof other than in accordance with the purposes contemplated by this Agreement, except as expressly authorized in writing by Aliant and Innovatia . Aliant and Innovatia’s obligations under this Section C (g) will not extend to alleged infringements or violations that arise because the Aliant and Innovatia Intellectual Property, or any component thereof provided by Aliant and Innovatia are used in combination with other products or software furnished by third parties, if such combination is what caused the infringement, and where any such combination was not installed, recommended or approved, expressly in writing by Aliant and Innovatia .

(h) Waiver - No term or condition may be waived by either party without the express written consent of the other, and forbearance or indulgence by a party in any regard whatsoever shall not constitute the party’s waiver. No consent or waiver shall be effective unless made in writing by an authorized officer of the party.
(i) Severance - Should any provision of this Agreement be unenforceable at law, it shall be considered separate and severable from the remaining provisions of this Agreement, which shall continue in force and shall be binding as though the said provision had not been included.
(j) Interpretation – In this Agreement, words importing the singular include the plural and vice versa, and words importing gender include all genders and firms or corporations where applicable.



(k) Assignment - This Agreement shall not be assigned, in whole or in part, without the express written consent of both Parties. This Agreement shall be binding upon and shall enure to the benefit of the parties hereto and their respective successors and permitted assigns.

(l) Governing Law - This Agreement shall be interpreted and governed by the laws of the Province of Nova Scotia and the laws of Canada applicable therein.

(m) Headings - The headings inserted in this Agreement are for convenience of reference only and, in no way, define, limit or enlarge the scope or meaning of any of the terms and conditions contained in this Agreement.


(n) Entire Agreement - This Agreement and any documents incorporated by reference, shall constitute the entire Agreement between the parties with respect to subject matter hereof, and shall replace all prior written or verbal promises and representations. This Agreement and everything contained therein shall enure to the benefit of and be binding upon each of the parties hereto and their respective successors and permitted assigns.

(o) Termination – Either party may terminate this Agreement on Sixty (60) business days notice, without cause. In the event of a breach of section 8 (e), either party may terminate this Agreement immediately. In the event of a material breach of section C (d), the non-breaching party may terminate this Agreement immediately. In the event of a material breach of this Agreement or Section C (d), the non-breaching party may terminate this Agreement without further notice provided that it (i) has given the breaching party written notice of the breach, (ii) the written notice clearly describes the nature of the breach and (iii) the breaching party has failed to cure the breach within ten (10) days of the notice.



Upon termination Innovatia will (a) return the VMI Product to VMI in the same condition as it was received but for reasonable wear and tear, (b) permit VMI entrance to the Test location, if applicable, in order for VMI to remove the VMI Product; and (c) deliver any outstanding project reports.


Upon termination VMI will disconnect and remove the VMI Product and will not, in any event, be responsible for any damage or alteration caused to any project location by the original installation or subsequent removal of the VMI Product. Upon Termination, VMI will be responsible for the Fees, and all costs incurred by Innovatia that are to be reimbursed by VMI, as referenced in section 7.



(p) Notices - All notices under this Agreement will be in writing and may be sent by electronic copy or facsimile provided that a hard copy is also mailed to the attention of the legal department of the applicable party at the addresses listed below. Any such notice will be effective: on the first business day after delivery, if sent by electronic means or by facsimile; seven days from the date of mailing if sent by mail; or on the next business day, if sent by courier.



If to VMI:

Voice Mobility Inc.
Suite 180-13777 Commerce parkway
Richmond, B.C.
Canada
V6V 2X3
Attention: James Hewett, CFO
Fax: 604.233.4826

If to Innovatia:

Innovatia Inc.
One Brunswick Square,
P.O. Box 6081
Saint John, NB, Canada
E2L 4R5
Attention: Norm Jacquard

Fax: 902 484 3500

(q) Force majeure - Neither Party is responsible for a failure to fulfill its obligations under this Agreement or for delay in doing so if such failure or delay is due to circumstances beyond its control including but not limited to acts of God, acts of government, war, riots, strikes, accidents in transportation . The parties agree to immediately provide notice of any such circumstances and undertake to restore the status quo as soon as is feasible

(r) Interpretation - No provision of this Agreement will be interpreted against any party merely because that party or its legal representative drafted the provision.


(s) Relationship – The relationship between the parties is that of independent contractors and does not create any right or authority to act on behalf of the other party



(t) CounterpartsThis Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Each party will receive a duplicate original of the counterpart copy or copies executed by it. A signed facsimile or telefaxed copy of this Agreement or any agreement, document or instrument contemplated hereby shall be effectual and valid proof of execution and delivery. Notwithstanding the foregoing, the parties will each deliver original execution copies of the Agreement to one another as soon as practicable following execution thereof.



NOTE: THIS AGREEMENT IS MADE SUBJECT TO ALIANT REQUIRED BOARD APPROVAL.


This Agreement shall commence on January 1, 2002 and will be reviewed annually to set the scope and size of the Agreement for the upcoming year.


Signed as a LivingLAB Agreement dated the day of February, 2002.




VOICE MOBILITY INC.	By: /s/ James Hewett Title: Chief Financial Officer
INNOVATIA INC.	By: /s/Norm Jacquard Title: Business Leader, Unified Communications






EXHIBIT 10.42




Addendum to LivingLAB Agreement



This addendum provides wording which directly replaces and supercedes Section B. (“of VMI”) subsection (a.) of the Living Lab Agreement between Voice Mobility Inc. and Innovatia Inc., dated February 27th, 2001.



B. OBLIGATIONS OF VMI

In consideration of the services provided by Innovatia relative to LivingLAB, both with regard to activities outlined in this document and other activities to be defined, VMI will pay to Innovatia fees based directly on the value of the work performed by Innovatia, ("the Fees"). The initial term of this agreement will be three years beginning Feb 1st 2001, however this term may be extended by mutual consent. The value of this Agreement in Year 1 will be US$1.74 Million, and will be settled in the form of a promissory note (to be attached as Appendix A to this Addendum), in a form to be agreed to by Innovatia, no later than Dec 14th, 2001 (Terms attached as Appendix B to this Addendum)

The scope of services, and payments therefore, for Years 2 and 3 of the Agreement will be negotiated and established by January 31, 2002. It is understood by both parties that the guiding principles for this negotiation will include:

All projects defined by LivingLAB and VMI will be pursuant to a specific scope of work and agreed value for same;



Any future payments by VMI to Innovatia for work performed by LivingLAB will take the form of equity or a royalty stream, which will not exceed 10% of VMI gross revenue in any given year notwithstanding, VMI will be responsible to pay anything they agree to in scope of work under (i);



Services will be provided to VMI by Innovatia will be at the “customer rate applicable”

If a revised LivingLAB agreement is not negotiated and signed by both Innovatia and VMI by Jan 31, 2002, all LivingLAB activities and associated work relative to those activities that Aliant is performing on behalf of LivingLAB will terminate.

VMI and Innovatia agree and acknowledge that should the January 2002 negotiations for new terms of the LivingLAB arrangement between the parties, as described in the Addendum, not result in a continuing LivingLAB Agreement by February 15, 2002, this note shall become immediately due, and payable in cash or shares at VMI ‘s option on or before July1, 2002, until such time as the parties negotiate revised payment terms in good faith.

At the end of each 12-month period beginning Feb 1st, 2001, VMI and Innovatia assigned account and senior managers will review progress on projects and invoiced amounts. Changes to existing projects and payment schedule may be made by mutual consent.




VOICE MOBILITY INC.	INNOVATIA INC.
Per:/s/ James Hewett	Per:/s/Norm Jacquard
Authorized Signatory	Authorized Signatory


Appendix A Promissory Note

SCHEDULE A
PROMISSORY NOTE

All words and phrases with initial capital letters used but not defined herein have the meanings given to them in the Living Lab Agreement (the “Agreement” between Voice Mobility Inc. (“VMI”) and Innovatia Inc. (“Innovatia”) dated February 27, 2001, as amended by Addendum 2 dated December 14, 2001 (“Addendum”)
FOR VALUE RECEIVED, subject to all the terms herein and pursuant to the Agreement and Addendum 2, VMI hereby promises to pay to Innovatia at its head office an aggregate amount, in cash or in common shares of Voice Mobility International, Inc. ("VMII"), Cdn$2,720,142 (the “Amount”) as follows:

1. VMI and Innovatia agree and acknowledge that should the January 2002 negotiations for new terms of the LivingLAB arrangement between the parties, as described in the Addendum, not result in a continuing LivingLAB Agreement by February 15, 2002, this note shall become immediately due, and payable in cash or shares at VMI ‘s option on or before July1, 2002, until such time as the parties negotiate revised payment terms in good faith.



2. On or before the first business day of each period of three calendar months (each of such periods being referred to herein as a “Quarter”) VMI will, commencing on July2002 and for the 10 consecutive Quarters thereafter, either (at VMI's sole option) pay in cash or deliver to Innovatia shares of VMII (the "VMII Shares") that are subject to a 4 month hold period in BC and Ontario, a one year hold period in the US, and such other hold periods as may apply at law (and legended accordingly), or a combination therefore, having an Equity Value equal to the lesser of:

Cdn$226,678; or

of the net aggregate amount of invoices issued by VMI to Aliant Telecom for all products (the "Revenues") in respect of the particular Quarter.

In the event that the Revenues for a Quarter exceed Cdn.$226,678, VMI will carry forward the difference between the Revenues and Cdn.$226,678 and include that amount in the calculation of Revenues for the following Quarter.

Payment for the period between Jan 1, 2002 and June 30, 2002 will be payable in the third quarter beginning July 1, 2002. The determination of the amount owed will be the lesser of $453,356 or 40% of the net aggregate amount of invoices issued by VMI to Aliant Telecom for all products (the "Revenues") in respect in the period between Jan 1, 2002 and June 30, 2002 .

3. Subject to VMI first obtaining the approval from the Toronto Stock Exchange (the “TSE”) to do so, on or before December 28, 2001, VMI will deliver to Innovatia 500,000 common shares of VMII (the “VMII Shares") with such Initial VMII Shares being subject to a 4 month hold period in BC and Ontario, a one year hold period in the US, and such other hold periods as may apply at law (and legended accordingly).



4. The Principal Amount will bear simple interest at the rate of 1% above the Prime Rate as published by the HSBC Bank Canada on the last working day of the month. The Principal Amount will be reduced from time to time by the amount of all payments of cash or delivery of VMII Shares valued at the Equity Value thereof as of the time such Equity Value is determined.

5. part of the Principal Amount or interest accrued thereon not paid after the last payment provided for in paragraph 1 hereof will be paid by VMI in successive Quarters thereafter, in amounts not exceeding the minimum amount referred to in paragraph 1, by the issuance of common shares of VMII in an amount equal to the unpaid amount divided by Cdn$1.56.

6. acknowledges that, other than with respect to the Initial VMII Shares, before VMI can deliver VMII Shares as provided for herein VMII is required by securities law and the TSE to obtain the approval by formal resolution of the majority of its minority shareholders (which will exclude Innovatia and any of its associates from voting as shareholders of VMII) at a meeting of shareholders of VMII and that this will not occur prior to VMII's next annual meeting. Further, the issuance of any VMII Shares is subject to the prior approval of the TSE. In the event such shareholder and TSE approval is not obtained, this Promissory Note will be payable only in cash.

7. will be entitled at any time and from time to time to prepay the whole or any portion of the then remaining Principal Amount and interest accrued thereon without penalty by one or payments in cash or deliveries of VMII Shares valued at its Equity Value.

8. secure its obligations hereunder, VMI hereby grants to Innovatia a security interest in all amounts due from time to time to VMI from Aliant provided that as long as VMI is not in default of any of its obligations under this note Innovatia will have no claim or right to such amounts.

9. the purposes of this note, “Value”means the value of any VMII Shares delivered to Innovatia hereunder determined: (a) as to 500,000 of the VMII Shares at: (i) the lesser of the market price of the common shares of VMII on the TSE; and (ii) Cdn$0.75 per VMII Share; and (b) the balance of the VMII Shares on the basis of the weighted average trading price for VMII's common shares on the TSE over the 10 trading days immediately prior to the date on which such VMII Shares are to be issued, or on such other basis as may be prescribed by the TSE for transactions of this type.

10. note shall be governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.



IN WITNESS WHEREPOF VMI has executed this note by its duly authorized officers as of December 28, 2001.




VOICE MOBILITY INC.	INNOVATIA INC.
Per:/s/James Hewett	Per:/s/Norm Jacquard
Authorized Signatory	Authorized Signatory


EXHIBIT 10.43


Employee EMPLOYMENT CONTRACT



This Agreement made and effective April 1, 2000

Between:

VOICE MOBILITY INC.
With offices at:
180 - 13777 Commerce Court
Richmond, BC V6V 2X3

(the “Company”)

And:


James Hutton
6442 – 180th Street
Surrey, BC
V3S 7K2






(hereafter referred to as the “Executive”)



Whereas:

A. The Company is in the business of communications including the research and development of new technology, and the production, marketing and sales of equipment, software and services related thereto;

B. The Executive possesses certain qualifications which may be of benefit to the Company;

C. The Company is desirous of employing the Executive, who is desirous of working for the Company in the development of its business and its related interests;

Now Therefore, in consideration of the premises and of the mutual covenants, conditions and terms herein, the parties hereto agree as follows:

1.0 Definitions

1.01 In this Agreement, the following words and phrases have the following meanings:


“Opportunities”means all potential business opportunities of any kind whatsoever in connection with the business of the Company including any acquisitions, sales, business arrangements, consulting engagements, contracts or retainers and other transactions or opportunities for new markets, products or services which have been disclosed to or investigated, studied or considered by the Company or by others on behalf of the Company or which come to the attention of the Executive as a result of his engagement with the Company.


“Information”means information pertaining to the Company’s customers and clients, client base and markets including without limitation:


any information the Company has regarding the business of its current and prospective clients;


names, addresses and telephone numbers of the current and prospective clients of the Company;


the names, addresses and telephone numbers of any employees of clients of the Company with whom the Executive has been or will be in contact in the course of his engagement with the Company; and


the Company’s contracts with its clients including details as to pricing and supply.


“Information”means information known to or used by the Company in connection with the business of the Company including but not limited to:


any innovative and proprietary means of testing and related products that have been developed by or for the Company including any software for the application thereof; and


Documents, Financial Information, Marketing Information, Intellectual Property, Business Opportunities or Research and Development, but not including any of the foregoing which was known to the Executive prior to engagement by the Company or which is or becomes a matter of Public Knowledge.


any improvements, formula, design, prototype, compilation of information, data, program, code, method, technique or process, information relating to any product, device, equipment or machine, information pertaining to the Company.


“Documents”means any documents, compiled or uncompiled computer programs (in electronic or other form), specifications, plans, drawings, prototypes, models, manuals, materials, sketches, schematics, compilations of information, analyses, experiments, data, formulae or other information pertaining or relating to the Client Information or the Confidential Information including copies or reproductions (in any form) of the foregoing.


“Information”means any information pertaining to the Company’s fees, costs, sales, income, profit, profitability, pricing, salaries and wages.


“Property”means any and all any trade secrets, Documents, techniques, processes, information relating to any product, service, device, equipment or machine, inventions, designs, ideas, works, creations, developments, methods of doing business, processes, techniques, prototypes, patent or patent applications, tradeor tradeapplications, industrial design or copyright of the Company and includes any modifications or improvements thereto.


“Information”means information related to the Company’s marketing programs, plans, strategies and proposed future products, services, advertising and promotions.


“Knowledge”means information that is generally known to actuaries or is otherwise easily accessible through lawful, non-confidential sources.


“and Development”means information pertaining to any research, development, investigation, study, analysis, experiment or test carried on or proposed to be carried on at any time by the Company in connection with the business of the Company.


2.0 Employment

2.01 The Company agrees to hire the Executive who agrees to perform services for the Company or any of its affiliates, upon the terms set forth herein.

3.0 Term

3.01 This agreement shall be from the April 1, 2000 until December 31, 2002, but may be terminated in accordance with the terms herein.

4.0 Types of Services

4.01 The nature and types of services to be provided to the Company by the Executive are set forth in Schedule “A”hereto. It is understood and agreed that the duties and responsibilities so defined are not exhaustive and may be altered from time to time by the Company; So long as any such changes are reasonable, both with respect to any changing circumstances of the Company and its business and the personal background, training and circumstances of the Executive, the Executive shall not refuse any such changed employment request by the Company.

5.0 Location

5.01 Services provided by the Executive shall be primarily performed at the offices of the Company located in Richmond, it being understood that some travel may be required of the Executive from time to time as determined by the Company. The Company also reserves the right to transfer the Executive to a different location, upon reasonable notice to the Executive.

6.0 Hours

6.01 Except as otherwise specified herein, the Executive shall be expected to work those periods and times normally constituting open or operating times for the Company and its business, however the Executive will be expected to work such additional time or times as may be appropriate with respect to the business requirements and commitments at the time, without claim for overtime or additional remuneration.

6.02 The Executive shall be a liberty to devote reasonable time for serving, as appropriate, on the Boards of Directors of other corporations, from engaging in charitable and public service activities, and from managing his personal investments, provided such activities do not materially interfere with the performance of his duties and responsibilities under this Agreement and do not constitute a conflict of interest with respect to his employment herein.

7.0 Remuneration

7.01 The Company shall provide remuneration to the Executive in the kind, amounts and at such time or times as more particularly set out in Schedule “A”hereto.

8.0 Holidays

8.01 In addition to statutory holidays, the Executive is entitled to the number of weeks ordinary, non-cumulative vacation in each calendar year of employment as is more particularly set out in Schedule “A” hereto. This vacation time accrues after 12 months of employment and is subject to the reasonable control of the Company with respect to scheduling, having consideration for both other employees of the Company and the commitments of the Company from time to time in relation to its business.

8.02 In the event that the Executive leaves the Company, for any reason whatsoever, after having taken unearned vacation, it is agreed that the Company may deduct that unearned portion from any final pay owing to the Executive.

9.0 Company’s Commitments

9.01 Company agrees to pay the remuneration stipulated in accordance with the terms of this agreement.

9.02 Company shall make and remit all required statutory deductions in relation to the salary of the Executive.

9.03 Company shall reimburse the Executive for all reasonable traveling and expenses related thereto incurred by the Executive while engaged in services for the Company at other than the customary site at which the Executive works.

10.0 Executive’s Commitments:

10.01 The Executive agrees to provide the services required by the Company from time to time, in a competent and timely manner.

10.02 The Executive shall devote such time as is required for such services.

10.03 In consideration of receiving a car allowance, as set out in Schedule A, the Executive shall provide his own vehicle, with appropriate insurance, for all local and reasonable travel requirements.

10.04 The Executive shall at all times herein conduct himself in competent and courteous manner and will endeavor to foster and maintain good relations with other Company staff, suppliers, contractors, and customers of the Company.

11.0 Non-Disclosure

11.01 The Executive recognize that, in the course of and as a result of this agreement, he shall or may directly or indirectly obtain Confidential Information and, as a result, the Executive agrees to respect and adhere to the covenants contained in sections 11.02 to 11.03 hereof.

11.02 The Executive covenants that at all times during the term of this Agreement and at all times following the termination of this agreement with the Company for any reason, he shall:


hold in confidence and keep confidential all Confidential Information;


directly or indirectly use any Confidential Information except in the course of performing the obligations of this agreement; and


directly or indirectly disclose any Confidential Information to any person or entity, except in the course of performing the obligations of this agreement with the Company with the knowledge and consent of the Company and in the Company's interests.


11.03 The Executive hereby acknowledges that irreparable damage may result to the Company, its business or property in the event of the breach of any of the covenants and assurances herein agreed to by the Executive and that the present agreement was made by the Company and continues primarily upon the Executive’s covenants and assurances herein, and the Executive hereby covenants that in the event of such breach or danger thereof, the Company shall be entitled, in addition to any other remedies and damages available, to an interlocutory or permanent injunction whereby the Executive shall be ordered to respect the covenants and assurances contained in this Agreement.

12.0 Executive Disclosure

12.01 The Executive agrees to promptly disclose to the Company or its nominee complete information in respect to all Business Opportunities, ideas, discoveries, inventions, improvements, developments, designs, and technical data, whether patentable or not (all of which are herein referred to as the "Improvements"), which are conceived, made, produced or developed by the Executive alone or with others, resulting as a consequence of the Executive’s employment or other association with the Company and relating to the subject matter of the Confidential Information. The Executive shall at the Company's request promptly assign his rights in the Improvements to the Company.

13.0 Copying Confidential Information

13.01 The Executive will not make copies of any specifications, plans, drawings, prototypes, models, documents, computer programs, manuals, materials or other information appertaining or relating to the Confidential Information.

14.0 Return of Documents

14.01 Upon termination of the Executive’s engagement with the Employer for any reason whatsoever, the Executive shall promptly deliver to the Employer all Documents and confirm to the Employer that he retains no Documents or any copies or reproductions thereof.

15.0 Ownership Of Intellectual Property

15.01 Any and all Intellectual Property made or created by the Executive during the course of the Executive' s employment by the Company, whether at the Company's place of business or otherwise, shall be and remain the exclusive property of the Company and the Executive shall have no right, title or interest therein even though the Executive may have created or contributed to the creation of any of the Intellectual Property; and the Company shall have the sole and exclusive right, title and interest in and to the Intellectual Property, which right shall continue notwithstanding the termination of employment of the Executive.

15.02 The Executive shall maintain at all times adequate and current records relating to the creation and development of any Improvements, which records shall be and shall remain the property of the Company.

16.0 Assignment

16.01 The Executive hereby assigns to the Company any and all right, title and interest that the Executive may have in and to the Intellectual Property and in any patent, copyright, industrial design, trade mark and any other similar right pertaining to the Intellectual Property which the Executive may have by virtue of having created, made, conceived or contributed to any such Intellectual Property, either solely or with others, in whole or in part, in the course of employment and while concerned with or involved in the business carried on by the Company. The Executive further agrees to maintain at all times adequate and current records relating to the creation and development of the Intellectual Property, which records shall be and shall remain the property of the Company.

17.0 Intellectual Property Protection

17.01 The Company alone shall have the right to apply for prosecute and obtain patents and copyright, industrial design and trade mark registrations and any other registrations or grants or rights analogous thereto in any and all countries throughout the world in respect of Intellectual Property made or created by the Executive during the course of the Executive's employment by the Company and the Executive agrees to execute on demand, whether during or subsequent to Executive's employment, any applications transfers, assignments and other documents as the Company may consider necessary or desirable from time to time for the purpose of obtaining, maintaining or vesting in or assigning to the Company absolute title to any such patents, copyright, industrial design or trade mark registrations and the Intellectual Property or for the purpose of applying for, prosecuting, obtaining or protecting any such patents, copyright, industrial design or trade mark registrations in any and all countries of the world and the Executive further agrees to cooperate and assist in ever way possible in the prosecution and protection of any such applications and the rights granted in respect thereof.

18.0 Non

18.01 The Executive shall not during the period of this Agreement and for a period of 6 from the date of the termination of this Agreement and/or the Executive’s employment with the Company, (whichever occurs first) if the Company terminates the Agreement without cause and for a period of 12 months from the date of the termination of this Agreement and/or the Executive’s employment with the Company, (whichever occurs first) if terminated for cause, or by the Executive (without prior written consent of the Company, which may be reasonably withheld), either individually or in partnership, or in conjunction with any person or persons, firm, association, syndicate, company or corporation as principal, agent, director, officer, Executive, consultant, investor, or in any other manner whatsoever, carry on or be engaged in or be concerned with or interested in, or advise, lend money to, guarantee the debts or obligations of or permit his/her name or any part thereof to be used or employed by the Company’s competitors in the unified messaging business as at the date of termination, in any geographical location where the Executive was employed during the course of his/her employment with the Company

18.02 The Executive further covenants and agrees that he will not disclose, at any time, any Business Opportunities.

18.03 The Executive hereby acknowledges that irreparable damage may result to the Company, its business or property in the event of the breach of any of the covenants and assurances herein agreed to by the Executive and that this agreement was made by the Company and continues primarily upon the Executive’s covenants and assurances herein, and the Executive hereby covenants that in the event of such breach or danger thereof, the Company shall be entitled, in addition to any other remedies and damages available, to an interlocutory or permanent injunction whereby the Executive shall be ordered to respect the covenants and assurances contained in this Agreement.

18.04 The covenants of the Executive contained in section 18.01 shall survive the termination of this Agreement for any reason including for reason of any breach hereof.

19.0 Nonsolicitation

19.01 The Executive shall not, without the prior written consent of the Company, at any time for a period of 12following the date of termination of this Agreement and the Executive’s employment for whatever reason with or without cause, either on his/her own behalf or on behalf of any other person competing or endeavoring to compete with the Company, directly or indirectly, solicit, endeavor to solicit or gain the custom of, canvass or interfere with any person who:


was a customer or a representative of a customer of the Company as of the date of such termination;


a customer of the Company at any time within the oneperiod immediately preceding the date of such termination;


an employee of the Company at any time within the one-year period immediately preceding the date of such termination;


pursued as a prospective customer by or on behalf of ‘the Company at any time within 12 months prior to the date of such termination in respect of whom the Company had not decided to cease all such pursuit; or use his/her personal knowledge or influence over any such customer to or for his/her own benefit or that of another person competing with or endeavoring to compete with the Company.


19.02 Subclauses (a), (b) and (c) are each separate and distinct covenants severable one from the other and if any such covenant is determined to be void or unenforceable by any court of competent jurisdiction, this shall not affect the validity of any other such covenant.

20.0 Reasonableness of Restrictions

20.01 The Executive hereby acknowledges and agrees that the provisions of and all restrictions contained in sections 18.01 to 18.04 and 19.01 of this Agreement are reasonable in scope, geographical area and time and are necessary for the protection of the Company's legitimate interests and proprietary rights and are an essential condition to and a fundamental term of this Agreement without which The Company would not have entered into this Agreement. The Executive furthermore acknowledges and represents that he have reviewed the provisions hereof with their counsel and that they understand them and are satisfied the provisions hereof are both necessary and reasonable. The Executive hereby furthermore acknowledges that complying with the provisions of sections 18.01 to 18.03 and 19.01 hereof will not unduly or unreasonably prejudice the Executive, and that the current arrangements being made between the Company and the Executive and the other covenants of this agreement constitute adequate and sufficient consideration to enable them to comply with the provisions thereof.

21.0 Notice to Next Company

21.01 The Executive agrees that prior to commencing any engagement with any other company following termination of the engagement of the Executive with the Company he shall disclose to such other company the terms of this Agreement.

22.0 Termination

22.01 This agreement shall be deemed to terminate on the death of the Executive, the expiry of the Term or, at the option of the Company, in the event of the Executive’s absence or inability to render the services required hereunder due to disability, illness, incapacity or otherwise, (but excluding vacation time) for an aggregate of 45 days during any 12 month period during the term herein.

22.02 The Company may terminate this agreement at any time for cause, including but not limited to any breach of any of the terms contained herein, upon written notice specifying same to the Executive.

22.04 In the event of termination, for any reason whatsoever, the Executive shall return to the Company all assets of the Company which may be in the possession of the Executive, whether on or off the normal site of work.

22.05 In the event of termination, any benefits to or on behalf of the Executive which have been pre-paid by the Company shall be adjusted as of the effective date of such termination and reimbursed to the Company by the Executive. The Company shall be entitled to off-set and deduct any such amounts from any compensation remaining to be paid to the Executive.


22.06 In the event of termination for any reason except for termination of the Executive’s employment by the Company for cause, performance for the purposes of any bonus calculation or options based upon performance, will be appraised for the partial year and the Executive will receive a pro-rata entitlement.


23.0 Entire Contract

23.01 There are no representations, warranties, conditions, terms or collateral contracts or agreements affecting the employment contemplated in this agreement except as set out herein.

24.0 Amendment:

24.01 Except for increases in remuneration or extension of employment benefits, the terms of this agreement shall remain in force until terminated and shall only be amended by agreement in writing signed by both parties.

24.02 Should any provision or provisions in this agreement be held to be void or unenforceable by any Court of competent jurisdiction based on any stipulation with respect to area or time herein, this agreement shall be deemed to be amended with such area and/or time altered to reflect the area or time deemed acceptable and enforceable by such Court.

25.0 Severance

25.01 Subject to the aforesaid, should any provision or provisions in the agreement be held to be void or unenforceable by any Court of competent jurisdiction, the same shall be severed and shall not affect the validity of the remainder of this agreement.

26.0 Executive’s Acknowledgment

26.01 The Executive acknowledges that he has fully read this agreement and the terms herein. The Executive acknowledges his concurrence with the same and his opportunity to consult with independent legal counsel before execution.

27.0 Gender

27.01 Wherever the masculine gender is used herein, the same shall be construed as being the feminine gender where the context so requires.

28.0 Headings

28.01 Headings included in this agreement are for ease of reference only and shall not be used in any way in the interpretation of this Agreement.

29.0 Jurisdiction

29.01 This agreement shall be governed by the laws of the Province of British Columbia.

In Witness Whereof, the parties have hereto set their hands effective the date first written above.

Signed on behalf of Voice Mobility Inc.Executive Signature




Per: /s/ Thomas O’Flaherty	/s/ James Hutton
Date: May 5, 2000	Date: May 5, 2000






SCHEDULE “A” - Particulars of Executive Employment Contract.


Position:Chief Executive Officer
Reports To:Board of Directors
Types of Services:

The Executive shall serve as the Chief Executive Officer of the Company, with specific responsibilities for Business Development. He shall also act as the Company visionary, and shall support investor activities.



The Executive will carry out such further functions as may be directed by the Board of Directors of the Company.



Remuneration:

a) Salary:- $150,000.00 (Cdn) per annum, paid bi-monthly


b) Other Benefits: (some of which may be taxable)

Full Medical, Dental and AD&D as provided by the Company to all Executives. The Company reserves the right to alter the benefit plan at any time, in their sole discretion.

Car allowance of $500.00 per month.

c) Options


The Company has provided will provide the Executive with an option to purchase 250,000 shares of Common Stock or Voice Mobility International, Inc., a Nevada corporation, pursuant to the terms and conditions of the 1999 Stock Option Plan (the “Plan”more particularly set out in the Option Agreement, attached as Schedule B hereto.


It is expressly agreed that if the if MBO targets are not met in any given year, the options designated for that year will not vest and will cease to be available.

d) Bonus Targets for Year Ending December 31, 2000

A target bonus of up to $100,000.00 may be earned for 2000 based on achievement of specified objectives. These objectives are to be agreed upon by April 30, 2000 and assessed by December 31, 2000. Details are provided in Schedule C.

Holidays: three weeks per year.