===============================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001

                         Commission File Number: 0-21683

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

                               GRAPHON CORPORATION
             (Exact name of Registrant as specified in its charter)

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


                 Delaware                             13-3899021
    (State or other jurisdiction of                 (IRS Employer
     incorporation or organization)              Identification No.)


                               400 Cochrane Circle
                          Morgan Hill, California 95037
                    (Address of principal executive offices)

                  Registrant's telephone number: (408) 201-7100

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

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     As of November 9, 2001 there were issued and outstanding  17,321,480 shares
of the Registrant's Common Stock, par value $0.0001.

        ===============================================================

<PAGE>
                               GRAPHON CORPORATION

                                    FORM 10-Q

                                TABLE OF CONTENTS


                                                                     PAGE
                                                                     ----

PART I.

Item 1.      Financial Statements
                Condensed Balance Sheets                               2
                Condensed Statements of Operations                     3
                Condensed Statements of Cash Flows                     4
                Notes to Condensed Financial Statements                5

Item 2.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations                       7

Item 3.      Quantitative and Qualitative Disclosures About
             Market Risk                                              14

PART II.

Item 1.      Legal Proceedings                                        15

Item 2.      Changes in Securities and Use of Proceeds                15

Item 6.      Exhibits and Reports on Form 8-K                         15

Signatures                                                            17

<PAGE>

                          PART I--FINANCIAL INFORMATION

                           ITEM I FINANCIAL STATEMENTS


                               GRAPHON CORPORATION
                            CONDENSED BALANCE SHEETS

                                                   SEPTEMBER 30,    DECEMBER 31,
                                                       2001             2000
        ASSETS                                     -------------    -----------
     ------------                                   (UNAUDITED)
Current Assets:
   Cash and available-for-sale securities            $ 8,946,800    $13,767,100
   Accounts receivable, net of allowance for
    doubtful accounts of $250,000 and $100,000         1,018,200        749,200
   Prepaid expenses and other current assets             267,300        345,800
                                                     -----------    -----------
   Total Current Assets                               10,232,300     14,862,100
                                                     -----------    -----------

Purchased technology, net                              8,104,200      3,053,600
Long-term investment - China joint venture                     -        891,900
Other assets                                           2,448,100      2,232,200
                                                     -----------    -----------
     TOTAL ASSETS                                    $20,784,600    $21,039,800
                                                     ===========    ===========
     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------
Current Liabilities:
   Accounts payable and accrued liabilities          $ 2,705,800    $ 1,834,300
   Deferred Revenue                                      276,700        149,000
                                                     -----------    -----------
   Total Current Liabilities                           2,982,500      1,983,300
                                                     -----------    -----------
Stockholders' Equity
Preferred stock, $0.01 par value, 5,000,000 shares
 authorized, no shares issued and outstanding                  -              -
Common stock, $0.0001 par value, 45,000,000
 shares authorized, 17,226,004 and 14,671,175
 shares issued and outstanding                             1,700          1,500
Additional paid in capital                            45,854,600     39,116,000
Deferred Compensation                                   (294,100)    (1,131,600)
Accumulated other comprehensive income                    13,300          1,900
Accumulated deficit                                  (27,773,400)   (18,931,300)
                                                     -----------    -----------
Total Stockholders' Equity                            17,802,100     19,056,500
                                                     -----------    -----------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $20,784,600    $21,039,800
                                                     ===========    ===========

            See accompanying notes to condensed financial statements.

                                       2
<PAGE>

<TABLE>
<CAPTION>

                                           GRAPHON CORPORATION
                                   CONDENSED STATEMENTS OF OPERATIONS

                                                  THREE MONTHS ENDED            NINE MONTHS ENDED
                                                      SEPTEMBER 30,               SEPTEMBER 30,
                                                    --------------               --------------
                                                 2001           2000           2001           2000
                                             -----------     -----------    -----------    -----------
                                              (UNAUDITED)   (UNAUDITED)    (UNAUDITED)    (UNAUDITED)

<S>                                          <C>             <C>            <C>           <C>
Revenue                                      $ 1,018,300     $ 2,382,500    $ 5,274,500   $  4,226,700
Revenue - related party                                -         350,000              -      2,150,000
                                             -----------     -----------    -----------   ------------
   Total Revenue                               1,018,300       2,732,500      5,274,500      6,376,700
                                             -----------     -----------    -----------   ------------

Cost of revenue                                  933,700         255,000      1,683,600        604,600
Cost of revenue - related party                        -          21,900              -         95,800
                                             -----------     -----------    -----------   ------------
   Total Cost of Revenue                         933,700         276,900      1,683,600        700,400
                                             -----------     -----------    -----------   ------------
   Gross Profit                                   84,600       2,455,600      3,590,900      5,676,300
                                             -----------     -----------    -----------   ------------
Operating Expenses:
Selling and marketing                          2,141,700       1,388,100      5,110,200      4,169,600
General and administrative                     1,264,500       1,150,600      4,119,900      3,022,400
Research and development                       1,090,000       1,195,600      3,559,300      2,658,100
                                             -----------     -----------    -----------   ------------
Total Operating Expenses                       4,496,200       3,734,300     12,789,400      9,850,100
                                             -----------     -----------    -----------   ------------
Loss From Operations                          (4,411,600)     (1,278,700)    (9,198,500)    (4,173,800)
Other Income (Expense):
   Other income (expense), net                    67,900         255,400        397,500        907,000
   Loss on joint venture                            (400)     (1,012,800)       (41,100)    (2,165,600)
                                             -----------     -----------    -----------   ------------
   Total Other Income (Expense)                   67,500        (757,400)       356,400     (1,258,600)
                                             -----------     -----------    -----------   ------------
Loss Before Provision for Income Taxes        (4,344,100)     (2,036,100)    (8,842,100)    (5,432,400)
Provision for Income Taxes                             -         (17,000)             -            800
                                             -----------     -----------    -----------   ------------
Net Loss                                     $(4,344,100)    $(2,019,100)   $(8,842,100)  $ (5,433,200)
                                             -----------     -----------    -----------   ------------
Basic and Diluted Loss per Common Share      $     (0.25)    $     (0.14)   $     (0.57)  $      (0.38)
                                             ===========     ===========    ===========   ============
Weighted Average Common Shares Outstanding    17,225,996      14,651,037     15,579,701     14,394,263
                                             ===========     ===========    ===========   ============
</TABLE>

            See accompanying notes to condensed financial statements.

                                       3
<PAGE>

                               GRAPHON CORPORATION
                       CONDENSED STATEMENTS OF CASH FLOWS

                                                         NINE MONTHS ENDED
                                                            SEPTEMBER 30,
                                                       2001              2000
                                                    -----------      -----------
                                                    (UNAUDITED)      (UNAUDITED)

Cash Flows From Operating Activities:
Net loss                                             $(8,842,100)  $(5,433,200)
Adjustments to reconcile net loss to net cash
used in operating activities:
   Depreciation and amortization                       2,017,800       857,100
   Loss on disposal of fixed assets                       28,200        12,900
   Amortization of deferred compensation                 957,700     1,081,600
   Provision for doubtful accounts                       150,000        75,000
   Loss on joint venture - related party                  41,100     2,165,600
Changes in operating assets and liabilities:
   Accounts receivable                                  (419,000)     (922,900)
   Prepaid expenses and other assets                      78,500      (335,800)
   Accounts payable                                      (54,400)      125,600
   Accrued expenses                                      885,000       716,700
   Deferred revenue                                      127,700       215,400
                                                     -----------   -----------
Net Cash Used In Operating Activities                 (5,029,500)   (1,442,000)
                                                     -----------   -----------
Cash Flows From Investing Activities:
Purchase of available-for-sale securities             (2,734,000)   (6,411,100)
Proceeds from sale of available-for-sale securities    5,910,400       537,400
Capitalization of software development costs            (324,800)     (343,400)
Capital expenditures                                    (422,300)     (606,600)
Other assets                                             (37,200)            -
Purchase of technology                                         -    (2,270,000)
Investment in joint venture - related party             (103,700)   (3,500,000)
Proceeds from dissolution of
   joint venture - related party                         954,500             -
                                                     -----------   -----------
   Net Cash Provided By (Used In) Investing
     Activities                                        3,242,900   (12,593,700)
                                                     -----------   -----------
Cash Flows From Financing Activities:
Proceeds from note payable                               131,200       156,200
Repayment of note payable                                (90,300)            -
Net proceeds from issuance of common stock               118,600    12,248,200
                                                     -----------   -----------
     Net Cash Provided By Financing Activities           159,500    12,404,400
                                                     -----------   -----------
Effect of exchange rate fluctuations on cash and
   cash equivalents                                         (400)         (300)
                                                     -----------   -----------
Net Decrease in Cash and Cash Equivalents             (1,627,500)   (1,631,600)

Cash and Cash Equivalents, beginning of period         8,200,100     8,481,500
                                                     -----------   -----------
Cash and Cash Equivalents, end of period             $ 6,572,600   $ 6,849,900
                                                     ===========   ===========

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest expense                       $     3,700    $     2,400
Cash paid for income taxes                                     -            800

Non-cash transactions:
Issuance of options and warrants for services        $   120,200    $   628,300
Issuance of stock for technology                       6,500,000              -

                See accompanying notes to condensed financial statements.

                                       4

<PAGE>



                               GRAPHON CORPORATION
                    NOTES TO CONDENSED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION

     The unaudited  condensed  financial  statements of GraphOn Corporation (the
Company)  included herein have been prepared in accordance with the instructions
for Form 10-Q and,  therefore,  do not include  all  information  and  footnotes
necessary for a complete  presentation  of the Company's  results of operations,
financial position and cash flows.

     The unaudited  condensed  financial  statements included herein reflect all
adjustments (which include only normal,  recurring adjustments) that are, in the
opinion of  management,  necessary  to state  fairly the results for the periods
presented. This Quarterly Report on Form 10-Q should be read in conjunction with
the Company's  audited  financial  statements  contained in the Company's Annual
Report on Form 10-K for the year ended  December 31, 2000,  which was filed with
the Securities and Exchange  Commission  (the Commission ) on April 2, 2001. The
interim results  presented herein are not necessarily  indicative of the results
of operations  that may be expected for the full fiscal year ending December 31,
2001, or any future period.

2. EARNINGS PER SHARE

     Basic earnings per share are calculated  using the weighted  average number
of  shares  outstanding  during  the  period.  Diluted  earnings  per  share are
calculated  using the weighted average number of shares  outstanding  during the
period plus the dilutive effect of outstanding  stock options and warrants using
the "treasury stock" method and are not included since they are antidilutive.

3. STOCKHOLDERS' EQUITY

     During the nine months ended  September 30, 2001, the Company issued 22,846
shares of common stock to employees  pursuant to the exercise by those employees
of stock  options  granted  under the 1998  Stock  Option/Stock  Issuance  Plan,
resulting in cash  proceeds of $37,000.  During the nine months ended  September
30, 2001, the Company sold 31,983 shares of common stock to employees  under the
Employee  Stock   Purchase   Plan,   resulting  in  cash  proceeds  of  $81,600.
Additionally,  during the nine months  ended  September  30,  2001,  the Company
issued 2,500,000 shares of common stock, valued at $6,500,000, to Menta Software
Ltd. (Menta) in conjunction with the licensing of Menta's proprietary technology
(Note 6).

4. JOINT VENTURE

     GraphOn  China,  Ltd.  (GraphOn  China) was formed in March 2000 as a joint
venture between the Company and Tianjin Development  Holdings Limited (Tianjin).
Upon  inception  of  GraphOn  China,  the  Company  and  Tianjin  each  invested
$3,500,000,  in exchange for 3,500,000  shares of GraphOn  China's common stock,
thereby resulting in each of the two parties owning 50% of GraphOn China.

     On August 27,  2001,  the Company and Tianjin  mutually  agreed to dissolve
GraphOn China.  Effective with the dissolution,  all claims between or among the
Company and Tianjin  relating to GraphOn China were  expressly  and  irrevocably
waived.  Upon  dissolution,  the net  assets of  GraphOn  China  were  returned,

                                       5
<PAGE>


equitably,  to the  Company and  Tianjin.  The  Company  received  approximately
$954,500, which approximated its net investment in GraphOn China.

     Investments  in GraphOn China prior to  dissolution,  were accounted for by
using the equity method, under which the Company's share of earnings (loss) from
GraphOn China were reflected as income earned (lost) and dividends were credited
against  the  investment  in  GraphOn  China as  received.  Up until the time of
dissolution,  the Company had  recorded  losses  from,  and had made  additional
investments in GraphOn China during 2001 that totaled approximately $103,700.

5. LITIGATION

     As last reported in the  Company's  Annual Report on Form 10-K for the year
ended  December 31, 2000,  the Company was engaged in litigation in the Superior
Court of the State of California,  Santa Clara County,  with Insignia  Solutions
plc (Insignia) and Citrix Systems, Inc (Citrix).  On April 3, 2001, the Company,
Insignia  and Citrix  agreed to settle  this  litigation  with  prejudice  by an
exchange of reciprocal releases.

6.   PURCHASED TECHNOLOGY - MENTA

     The Company  acquired during the second quarter of 2001 a perpetual,  fully
paid-up,  exclusive  license  from  Menta,  an Israeli  corporation,  to use and
exploit Menta's proprietary "thin" client and web-based applications  management
software, in exchange for 2,500,000 shares of common stock, which were priced at
fair  market  value,  as quoted  by The  Nasdaq  National  Market.  The  Company
capitalized  $6,500,000 as the historical cost of the licensed  technology.  The
Company amortizes licensed  technology to cost of sales over a three-year period
and began amortizing this technology during the third quarter 2001.

     The Company also acquired the exclusive right, exercisable at the Company's
option at any time up to and through  July 17,  2002,  to acquire  the  software
licensed from Menta, together with all related intellectual property rights, for
an additional 440,000 shares of common stock.

     In a contemporaneous transaction, the Company granted Menta a non-exclusive
license to use and exploit the  Company's  U.S.  Patent No.  5,831,609  entitled
"Method and System for Dynamic  Transaction  between  Different  Graphical  User
Interface Systems."














                                       6
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     The  following  discussion  of  the  financial  condition  and  results  of
operations of the Company contains forward-looking statements within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act of 1934.  Actual  results and the timing of certain  events  could
differ materially from those anticipated in these forward-looking  statements as
a result of certain  factors,  including,  but not limited  to,  those set forth
under "Risk  Factors" in the  Company's  Annual Report on Form 10-K for the year
ended  December  31, 2000 and in other  documents  filed by the Company with the
Securities and Exchange Commission.

OVERVIEW

     We develop,  market and sell business connectivity  software,  with current
products  focused  on remote  access  and  software  application  delivery.  Our
server-based software is designed to enable a diverse range of desktop computers
to access  server-based  Windows and UNIX applications  from any location,  over
fast or slow  Internet  connections.  Utilizing our  server-based  architecture,
organizations  can  provide  web-based  access  to  Windows,   UNIX,  and  Linux
applications  from almost  anywhere in the world. We believe that our technology
allows universal access to software regardless of the operating system.

     Our products are developed to web-enable  Windows,  UNIX and Linux business
applications,  without  any  modifications  to  the  application  itself,  while
retaining  the  full  functionality  of the  original  application.  We  provide
independent software vendors (ISVs) with an affordable,  plug-and-play solution,
a very quick time to market,  and a branded,  fully  functional  product.  Their
applications  retain  their  original  look and feel,  and  appear to be running
directly  on the  desktop  when they are  actually  being run over a local  area
network, the Internet, or a dial-up connection.

     We believe that this  provides a significant  advantage for our  customers.
ISVs can web-enable  their  applications  while retaining the rich look and feel
that their  customers  expect to see.  Organizations  can provide easy access to
their  own  enterprise  applications  over  their  corporate  intranet  with web
browsers.  Application  service  providers  (ASPs) can serve up  applications to
their  users  regardless  of display  device and data  connection.  Through  our
approach, we believe ISVs and ASPs gain significant competitive advantages.

RESULTS OF OPERATIONS FOR THE THREE AND NINE-MONTH  PERIODS ENDED  SEPTEMBER 30,
2001 VERSUS THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000

     REVENUE

     Total revenue for the three-month period ended September 30, 2001 decreased
by $1,714,200,  or 62.7%,  to $1,018,300  from $2,732,500 for the same period in
2000. Total revenue for the nine-month period ended September 30, 2001 decreased
by $1,102,200,  or 17.3%,  to $5,274,500  from $6,376,700 for the same period in
2000.  The decrease in revenue for the  three-month  period ended  September 30,
2001 was comprised of a $1,364,200  decrease in revenue and a $350,000  decrease
in revenue-related  party. The decrease in revenue during the three-month period
ended  September  30, 2001 as compared with the  comparable  period in the prior
year was primarily  attributable  to fewer  licensing  agreements  being signed,

                                       7
<PAGE>

which we believe was due to our weakened  software economy which was intensified
by the terrorist attacks of September 11, 2001. The decrease in  revenue-related
party was attributable to our China Joint Venture. All revenue-related party for
the  three-month  period  ended  September  30,  2000 was from our  China  joint
venture,  whereas no  revenue-related  party was  derived  from our China  joint
venture during the comparable period in the current year.

     The  decrease  for the  nine-month  period  ended  September  30,  2001 was
comprised of a $1,047,800 increase in revenue,  which was offset by a $2,150,000
decrease  in  revenue-related  party.  The  increase  in revenue  was  primarily
attributable to several  significant  licensing  agreements,  which were entered
into  during the first half of 2001.  All of the  revenue-related  party for the
nine-month  period  ended  September  30, 2000 was derived  from our China joint
venture.  We  derived  no  revenue  from our  China  joint  venture  during  the
nine-month period ended September 30, 2001.

     Currently,  a  significant  portion of  licensing  fees is  derived  from a
limited number of customers,  which vary from quarter to quarter. We expect this
trend to continue throughout 2001.

     COST OF REVENUE

     Cost of  revenue  for the  three-month  period  ended  September  30,  2001
increased by $656,800,  or 237.2%, to $933,700 from $276,900 for the same period
in 2000.  Cost of revenue for the  nine-month  period ended  September  30, 2001
increased by  $983,200,  or 140.4%,  to  $1,683,600  from  $700,400 for the same
period in 2000. Cost of revenue consists  primarily of amortization of purchased
technology  and  capitalized   software  costs,   including   acquired  software
technology and software technology  developed in-house.  Other items included in
cost of revenue are customer service costs and shipping and packaging materials.
The increase for the three and  nine-month  periods ended  September 30, 2001 is
substantially  comprised of  amortization  resulting  from the Menta  technology
acquisition  made  at the end of the  second  quarter  of  2001,  as  previously
reported.

     We expect cost of revenue to approximate  third quarter 2001 levels for the
next several quarterly reporting periods.

     Accounting  principles generally accepted in the United States require that
certain costs of software acquired, or developed in-house, that are incurred and
incorporated into products developed for sale, lease, or otherwise marketed,  be
capitalized and amortized over time. Generally, such capitalized costs are those
costs  incurred  between the time the  software  being  developed  has  achieved
technological  feasibility  and the product is available for general  release to
customers.  Generally,  we  amortize  these  costs  to  cost of  revenue  over a
three-year period.

     SELLING AND MARKETING EXPENSES

     Selling and marketing  expenses for the three-month  period ended September
30, 2001 increased by $753,600,  or 54.3%, to $2,141,700 from $1,388,100 for the
same period in 2000.  Selling and marketing  expenses for the nine-month  period
ended  September 30, 2001 increased by $940,600,  or 22.3%,  to $5,110,200  from
$4,169,600 for the same period in 2000. Selling and marketing expenses primarily
consist of salaries,  sales  commissions,  travel  expenses,  trade show related
activities,  promotional,  and advertising  costs.  Also included in selling and
marketing expenses is amortization of non-cash  compensation  resulting from the

                                       8
<PAGE>

issuance of stock  options and warrants to various  outside  sales and marketing
consultants.

     The increase for the three and nine-month  periods ended September 30, 2001
is primarily  comprised of human resources  costs,  including  salaries,  fringe
benefits and  commissions as we had increased our sales and marketing  forces in
an effort to generate additional  revenues.  Offsetting these increased costs is
an approximate  $563,000  decrease in amortization  expense for the three months
related to warrants which had been issued in prior years to outside consultants.
The  majority of these  warrants  became fully  amortized  prior to December 31,
2000. We anticipate  that selling and marketing  expenses will be  significantly
lower in the fourth quarter of 2001, as compared with the third quarter of 2001,
primarily due to the workforce  reduction as further  discussed  below under the
"net loss" discussion.

     GENERAL AND ADMINISTRATIVE EXPENSES

     General  and  administrative  expenses  for the  three-month  period  ended
September 30, 2001 increased by $113,900, or 9.9%, to $1,264,500 from $1,150,600
for the same  period  in  2000.  General  and  administrative  expenses  for the
nine-month period ended September 30, 2001 increased by $1,097,500, or 36.3%, to
$4,119,900   from   $3,022,400  for  the  same  period  in  2000.   General  and
administrative  expenses primarily consist of salaries and associated  benefits,
legal and  professional  services,  and  amortization  of non-cash  compensation
resulting  from the issuance of stock options and warrants to various  financial
consultants.

     Factors  contributing to the increased general and administrative  expenses
for the three and nine-month  periods ended  September 30, 2001 as compared with
the same periods in the prior year included  increased employee related expenses
due to  additional  staff and  related  salary  and fringe  benefits,  increased
accounting  and  legal  fees,   increased  bad  debts  expense,   and  increased
amortization of non-cash  compensation.  Offsetting these increases were various
decreases including costs associated with relocating our corporate  headquarters
from Campbell,  California to Morgan Hill,  California  during the first quarter
2000, and a  corresponding  decrease in the cost of  maintaining  both corporate
facilities once the move was complete.

     We anticipate that the general and  administrative  expenses for the fourth
quarter  of 2001 will be  significantly  lower  than the third  quarter of 2001,
primarily due to the workforce  reduction as further  discussed  below under the
"net loss" discussion.

     RESEARCH AND DEVELOPMENT EXPENSES

     Research  and  development   expenses  for  the  three-month  period  ended
September 30, 2001 decreased by $105,600, or 8.8%, to $1,090,000 from $1,195,600
for  the  same  period  in  2000.  Research  and  development  expenses  for the
nine-month  period ended September 30, 2001 increased by $901,200,  or 33.9%, to
$3,559,300 from $2,658,100 for the same period in 2000. Research and development
expenses  consist  primarily  of salaries  and  benefits to software  engineers,
payments to contract programmers, rent on facilities,  depreciation and computer
related supplies.

                                       9
<PAGE>

     The decrease for the three-month  period ended September 30, 2001 is due to
an increase in the amount of research and development salaries and benefits that
were  capitalized  during the period as compared to the same period in the prior
year. Under accounting  principles  generally accepted in the United States, all
costs of product  development  incurred once technological  feasibility has been
established,  but prior to general release of the product, are to be capitalized
and  amortized to expense over the  estimated  life of the  underlying  product,
rather  than  being  charged  to  expense  in the  period  incurred.  During the
three-month  period ended  September  30,  2001,  we  capitalized  approximately
$192,300  of research  and  development  salaries  and  benefits  related to the
development of our Go-Global:UX  product.  No product  development  amounts were
capitalized in the corresponding period of the previous year.

The increase for the nine-month period ended September 30, 2001 is primarily due
to  increased  employee  related  expenses due to  additional  staff and related
salary and fringe benefits.

We anticipate that fourth quarter 2001 research and development  expense will be
lower  than that of the  third  quarter  2001,  primarily  due to the  workforce
reduction as further discussed under the "net loss" discussion.

     OTHER INCOME (EXPENSE)

     Other income (expense) for the three-month  period ended September 30, 2001
decreased by $187,500,  or 73.4%,  to $67,900 from  $255,400 for the same period
during 2000.  Other income  (expense) for the nine-month  period ended September
30, 2001 decreased by $509,500, or 56.2%, to $397,500 from $907,000 for the same
period during 2000. Other income (expense) consists primarily of interest income
on excess cash,  interest income on  available-for-sale  securities and interest
expense on  short-term  notes  payable.  Part of the  decrease for the three and
nine-month  periods ended  September 30, 2001 was due to lower amounts of excess
cash and available-for-sale securities on-hand as compared with the same periods
in 2000. Also responsible for the decrease for the three and nine-month  periods
ended  September  30, 2001 was the decrease in interest  rates being paid by our
investments.

     LOSS ON JOINT VENTURE

     Loss on joint venture for the  three-month  period ended September 30, 2001
decreased by $1,012,400,  or 99.9%,  to $400 from $1,012,800 for the same period
during 2000. Loss on joint venture for the nine-month period ended September 30,
2001 decreased by $2,124,500,  or 98.1%, to $41,100 from $2,165,600 for the same
period  during  2000.  Operations  of our China joint  venture  began during the
three-month period ended March 31, 2000. During the three and nine-month periods
ended September 30, 2000, the China joint venture charged significant  purchases
of  in-process  research  and  development  costs  to  expense  whereas  no such
purchases were made during the three or nine-month  periods ended  September 30,
2001.

     We dissolved our China joint venture  during the  three-month  period ended
September 30, 2001.

                                       10

<PAGE>

     NET LOSS

     As a result of the foregoing  items,  net loss for the  three-month  period
ended September 30, 2001 was $4,344,100,  an increase of $2,325,000,  or 115.2%,
from a net loss of $2,019,100  for the same period during 2000. Net loss for the
nine-month  period  ended  September  30,  2001 was  $8,842,100,  an increase of
$3,408,900 or 62.7%,  from a net loss of  $5,433,200  for the same period during
2000. In response to the larger than anticipated  operating loss for the quarter
ended September 30, 2001 and disclosed in our Form 8-K dated October 4, 2001, we
reduced our work force by approximately 30% and lowered management  compensation
effective September 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 2001, cash and cash equivalents and  available-for-sale
securities  totaled  $8,946,800,  a  decrease  of  $4,820,300,  or  35.0%,  from
$13,767,100 as of December 31, 2000.

     The decrease in cash and cash equivalents was primarily attributable to net
cash used in operating activities,  which was substantially comprised of our net
loss of  $8,842,100.  Operating  activities  that  increased cash flow included:
non-cash   transactions,   such  as  depreciation  and  amortization,   totaling
$2,975,500;  an increase in deferred revenue totaling  $127,700;  an increase in
accounts  payable  and  accrued  liabilities  totaling  $830,600;  a decrease in
prepaid  expense and other current assets totaling  $78,500;  and an increase in
our provision for doubtful accounts totaling $150,000.  Offsetting these amounts
was an increase in accounts receivable of $419,000.

     The net cash  provided by investing  activities  of  $3,242,900  offset the
decrease  in  cash  and  cash  equivalents.   Significant  investing  activities
included:  purchases of available-for-sale  securities of $2,734,000, which were
offset  by sales of  available-for-sale  securities  of  $5,910,400;  additional
investments in our China joint venture totaling  $103,700,  which were offset by
the proceeds  received upon  dissolution of the China joint venture of $954,500;
the purchase of other capital assets including equipment,  totaling $422,300 and
the  capitalization of engineering wages incurred in the development of software
contained  within  our newly  released  GO-Global  family of  products  totaling
$324,800.

     Accounts  receivable  as of  September  30,  2001  increased,  net  of  the
allowance for doubtful  accounts,  by $269,000,  or 35.9%,  to $1,018,200,  from
$749,200 as of December  31, 2000.  The primary  reason for the increase was the
timing  of  a  significant  royalty  payment  during  the  final  month  of  the
three-month period ended September 30, 2001.

     As  of  September  30,  2001,  purchased  technology,  net  of  accumulated
amortization,  increased by $5,050,600, or 165.4%, to $8,104,200 from $3,053,600
as of December 31, 2000.  Purchased  technology is comprised of various acquired
technologies that have been incorporated into one or more of our products. These
amounts are amortized to cost of revenue,  generally  over a three-year  period.
The  substantial  majority of the increase is due to the licensing of technology
from Menta (Note 6). Offsetting the increase is the amortization expense for the
nine-month  period  ended  September  30,  2001,  which was  charged  to cost of
revenue.

                                       11
<PAGE>

     Deferred revenue as of September 30, 2001 increased by $127,700,  or 85.7%,
to $276,700  from  $149,000 as of December 31, 2000.  The increase is due to the
terms of the various licensing  agreements and maintenance  contracts we entered
into during the nine-month period ended September 30, 2001, which were offset by
previously  deferred  items being  recognized as revenue.  Increases in deferred
revenue reflect the application of generally accepted  accounting  principles in
the United States,  which set forth certain criteria for the current recognition
of revenue in the financial statements. Revenues which do not currently meet the
criteria are charged to deferred revenue and are recognized  either ratably over
the time period  during which  purchased  services are provided to the customer,
such as  maintenance  contracts,  or at such time that all  revenue  recognition
criteria have been met.

     In March  2000 we funded  our China  joint  venture  with  $3,500,000.  Our
initial  investment has been offset by the recognition of our share of the joint
venture's  operations  since  inception.  We dissolved  the China joint  venture
during the three-month period ended September 30, 2001.

     Other current  liabilities  as of September 30, 2001 increased by $871,500,
or 47.5%, to $2,705,800  from $1,834,300 as of December 31, 2000.  Other current
liabilities  are  comprised  of accounts  payable,  accrued  expenses  and notes
payable.  The increase in other  current  liabilities  was  primarily  due to an
increase in accrued  expenses,  which  primarily  included  charges for services
rendered  for which an invoice  had not yet been  received as of  September  30,
2001, such as consulting fees, legal and accounting fees, and utilities.

     As of September 30, 2001, we had cash and cash equivalents of $6,572,600 as
well  as  $2,374,200  in   available-for-sale   securities   compared  to  total
liabilities  of  $2,705,800,  exclusive  of  deferred  revenue of  $276,700.  We
anticipate  that  the  total  of  these  cash  balances  and  available-for-sale
securities,  as well as anticipated revenue from operations,  will be sufficient
to meet our  working  capital  and capital  expenditure  needs  through the next
twelve months.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2001,  the Financial  Accounting  Standards  Board  finalized  FASB
Statements No. 141, "Business  Combinations"  (SFAS 141), and No. 142, "Goodwill
and Other  Intangible  Assets"  (SFAS  142).  SFAS 141  requires  the use of the
purchase method of accounting and prohibits the use of the  pooling-of-interests
method of accounting for business  combinations  initiated  after June 30, 2001.
SFAS 141 also requires that the Company  recognize  acquired  intangible  assets
apart from  goodwill if the acquired  intangible  assets meet certain  criteria.
SFAS 141 applies to all business combinations  initiated after June 30, 2001 and
for purchase business  combinations  completed on or after July 1, 2001. It also
requires,  upon adoption of SFAS 142, that the Company  reclassify  the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

     SFAS 142 requires,  among other things, that the Company no longer amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS 142 requires that the Company  identify  reporting units for the
purposes of assessing  potential  future  impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other

                                      12
<PAGE>

intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  SFAS 142 requires the Company to complete a transitional
goodwill  impairment  test six months from the date of adoption.  The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

     At present,  the Company is currently  assessing but has not yet determined
the  impact  the  adoption  of SFAS 141 and SFAS 142 will have on its  financial
position and results of operations.



































                                       13

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are currently not exposed to any significant financial market risks from
changes in foreign  currency  exchange rates or changes in interest rates and do
not use derivative financial instruments.  A substantial majority of our revenue
and capital spending is transacted in U.S. dollars.  However,  in the future, we
may enter into transactions in other  currencies.  An adverse change in exchange
rates  would  result in a decline in income  before  taxes,  assuming  that each
exchange rate would change in the same direction relative to the U.S. dollar. In
addition  to the  direct  effects of changes in  exchange  rates,  such  changes
typically  affect  the  volume  of  sales or  foreign  currency  sales  price as
competitors' products become more or less attractive.































                                       14
<PAGE>

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Reference is made to Note 5 to the unaudited condensed financial statements
comprising a portion of this report.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     During the  three-month  period ended September 30, 2001, we issued options
to purchase  29,000 shares of our common stock,  at exercise prices ranging from
$1.00 to $2.42 per share,  to various  employees  pursuant to our various  Stock
Option/Stock Issuance Plans.

     The  granting of such stock  options to the  employees  was not  registered
under the  Securities  Act of 1933  because  the stock  options  either  did not
involve an offer or sale for purposes of Section  2(a)(3) of the  Securities Act
of 1933,  in reliance  on the fact that the stock  options  were  granted for no
consideration,  or were offered and sold in transactions  not involving a public
offering,  exempt from registration under the Securities Act of 1933 pursuant to
Section 4(2) and in compliance with Rule 506 thereunder.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

None

(b) Reports of Form 8-K

     On July 23,  2001,  we filed a report on Form 8-K dated July 20,  2001 with
the Commission. We disclosed,  under Item 5 (Other Events) of the Form 8-K, that
on July 17, 2001, we acquired a perpetual, full paid-up,  exclusive license from
Menta, an Israeli  corporation,  to use and exploit Menta's  proprietary  "thin"
client and web-based applications management software, in exchange for 2,500,000
shares of our common stock. We granted Menta certain  registration  rights under
the  Securities  Act of 1933 with  respect to these  shares and Menta  agreed to
certain limitations on the sales of these shares during the first six and twelve
months following the effectiveness of the underlying shares' registration.

     Further,  we disclosed  that we also  acquired an option for the  exclusive
right to acquire the software  licensed  from Menta,  together  with all related
intellectual  property rights,  for an additional  440,000 shares. The option is
exercisable at any time up to and through July 17, 2002.

     We also reported that in a contemporaneous  transaction, we granted Menta a
non-exclusive license to use and exploit our patent.

     On September  20, 2001,  we filed a report on Form 8-K dated  September 11,
2001 with the Commission. We disclosed,  under Item 5 (Other Events) of the Form
8-K, that on September 11, 2001 we, together with Tianjin,  terminated our China
joint venture by mutual agreement  following our  dissatisfaction  both with its
performance and its inability to significantly  penetrate the People's  Republic
of China market.


                                     15

<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                                                 GraphOn Corporation
                                                    (Registrant)

                                       Date: November 13, 2001
                                       By:   /s/ Walter Keller
                                             ---------------------------------
                                                 Walter Keller,
                                       Chief Executive Officer and President
                                            (Principal Executive Officer)

                                       Date: November 13, 2001
                                       By:   /s/ William Swain
                                             ---------------------------------
                                                 William Swain,
                                             Chief Financial Officer
                                        (Principal Financial Officer and
                                          Principal Accounting Officer)




















                                       16