THE ACCEPTANCE OF OUR PRODUCTS AND SERVICES IS UNCERTAIN. 
     Our future financial performance depends in large part on growth in demand
for the Portico service and our other voice-enabled services and products. If
the market for voice-enabled services does not develop or if we are unable to
capture a significant portion of that market either directly or through our
partners, our revenues and our results of operations will be adversely affected.
      The market for voice-enabled services is still evolving. Currently, there
are only a limited number of products and applications in this industry.
Negative consumer perceptions regarding reliability, cost, ease-of- use and
quality of speech-based products affects consumer demand and may impact the
growth of the market. As a result, we cannot guarantee that the market for
voice-enabled services and products will grow or that consumers will accept any
of the services or products built on our magicTalk voice user interfaceplatform.
      In particular, our success is dependent upon the number of subscribers to
our services that we are able to attract and retain, and the number of
subscribers to private-label and other voice-enabled services that our partners
are able to attract and retain. Although Portico was launched in July 1998,
revenues from Portico subscriptions to date have not been significant. In
addition, although we have entered into arrangements with Qwest and Intuit, we
cannot guarantee that any of the services contemplated by these companies will
be commercially launched. Even if these services were commercially launched, our
partners may not be able to attract and retain a sufficient number of
subscribers to attain profitability. If we and our partners are not able to
attract and retain a sufficient number of subscribers, our revenues and results
of operations will be adversely affected. 
WE WILL NEED TO EXPAND OUR DISTRIBUTION CHANNELS IN ORDER TO EXPAND OUR
BUSINESS, AND WE ARE DEPENDENT ON DISTRIBUTION RELATIONSHIPS. 
     We plan to distribute our services through multiple channels. If we do not
successfully implement this multi-channel strategy, our revenues and results of
operations may be adversely affected. We believe that to successfully market our
services, we must: 
     - undertake a marketing campaign to identify and successfully pursue
       effective ways to market General Magic-labeled services to mobile
       professionals and other users; 
     - identify, establish and maintain arrangements with telecommunications
       carriers, device manufacturers and other companies seeking private-label
       versions of our services; and 
     - identify, establish and maintain arrangements with Internet companies and
       other companies seeking to voice enable Web content and other
       network-based services.                                         4 
     If one or more of these distribution channels fails, development and sales
of our products and services could be adversely affected. 
     Competition for relationships with telecommunications carriers, device
manufacturers and Internet companies is extremely intense. In addition,
decisions by these third parties, particularly telecommunications carriers, to
enter into distribution relationships can be a lengthy, expensive process, with
no assurance of success. 
     On November 6, 1998, we entered into an agreement with Intuit Inc. to
develop voice access to certain financial services and information on Intuit's
Quicken.com Web site. The agreement provides for an initial two-year term, with
automatic one-year renewal terms unless either party provides written notice to
the other 60 days prior to the end of the then current term. However, the
agreement will automatically terminate if the services to be provided under the
agreement are not commercially released by December 31, 1999. We cannot
guarantee that this deadline will be met. In addition, Intuit may terminate the
agreement if we fail to perform or observe any material term or obligation under
the agreement. 
     On November 11, 1998, we entered into an agreement with Qwest
Communications Corporation to develop a Qwest-branded version of our Portico
service. The agreement provides for an initial six-month term, with automatic
one-year renewal terms thereafter. However, either party has the right to
terminate the agreement for any reason by providing written notice of
non-renewal 60 days prior to the end of the then current term. We cannot
guarantee that Qwest will renew the agreement in any given year. In addition,
Qwest may terminate the agreement if we fail to perform or observe any material
term or obligation under the agreement. 
     In February 1999, we, along with Wireless Knowledge LLC, announced plans to
provide Revolv service users with voice-enabled access to information and
corporate groupware. Although we have signed a letter of intent with Wireless
Knowledge, the letter of intent is non-binding. Wireless Knowledge may terminate
the arrangement at any time. 
     We may not succeed in maintaining these distribution relationships. In
addition, we may not be successful in establishing additional relationships.
Even if we are able to establish and maintain these relationships, these
companies may be unable to successfully remarket our voice-enabled services. Our
control over the marketing efforts of Qwest, Intuit and Wireless Knowledge are
limited under our agreements. We cannot guarantee that Qwest, Intuit, Wireless
Knowledge or any future partner will actively market the services incorporating
our technology.