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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 ---------------

                                   FORM 10-QSB
                                 ---------------

 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934

                For the quarterly period ended September 30, 2007

       [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                        For the transition period from to

                         Commission File Number: 0-21683
                                 --------------
                               GraphOn Corporation
        (Exact name of small business issuer as specified in its charter)
                                 --------------

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

                          5400 Soquel Avenue, Suite A2
                              Santa Cruz, CA 95062
                    (Address of principal executive offices)

                    Issuer's telephone number: (800) 472-7466

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

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

      As of November 6, 2007 there were issued and outstanding 47,571,401 shares
of the issuer's Common Stock, par value $0.0001.

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


<PAGE>


                               GRAPHON CORPORATION

                                   FORM 10-QSB

                                Table of Contents

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                                       Page
                                                                                     ----
Item 1.  Financial Statements
<S>      <C>                                                                           <C>
         Unaudited Condensed Consolidated Balance Sheet as of September 30, 2007        2
         Unaudited Condensed Consolidated Statements of Operations for the
            Three and Nine Months Ended September 30, 2007 and 2006                     3
         Unaudited Condensed Consolidated Statements of Cash Flows for the Nine
            Months Ended September 30, 2007 and 2006                                    4
         Notes to Unaudited Condensed Consolidated Financial Statements                 5
Item 2.  Management's Discussion and Analysis or Plan of Operation                     11
Item 3.  Controls and Procedures                                                       21
PART II. OTHER INFORMATION
Item 1.  Legal Proceedings                                                             22
Item 6.  Exhibits                                                                      22
         Signatures

</TABLE>




<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements


                                      GraphOn Corporation
                             Condensed Consolidated Balance Sheet

<TABLE>
<CAPTION>

     Assets
     ------                                                               (Unaudited)
     Current Assets                                                   September 30, 2007
     --------------                                                   ------------------
<S>                                                                   <C>
     Cash and cash equivalents                                        $        1,357,000
     Accounts receivable, net                                                    711,100
     Prepaid expenses and other current assets                                    54,000
                                                                      ------------------
       Total Current Assets                                                    2,122,100
                                                                      ------------------

     Patents, net                                                              2,963,500
     Property and equipment, net, and other assets                               149,900
                                                                      ------------------
     Total Assets                                                     $        5,235,500
                                                                      ==================
     Liabilities and Shareholders' Equity
     ------------------------------------
     Current Liabilities
     -------------------
     Accounts payable and accrued expenses                            $          891,400
     Deferred revenue                                                          1,335,600
                                                                      ------------------
       Total Current Liabilities                                               2,227,000
                                                                      ------------------
     Deferred revenue                                                          1,738,000
                                                                      ------------------
       Total Liabilities                                                       3,965,000
                                                                      ------------------
     Shareholders' Equity
     --------------------
     Common stock, $0.0001 par value, 195,000,000 shares
     authorized, 47,571,401 shares issued and outstanding                          4,800
     Additional paid-in capital                                               59,245,800
     Note receivable - shareholder                                              (260,100)
     Accumulated deficit                                                     (57,720,000)
                                                                      ------------------
     Total Shareholders' Equity                                                1,270,500
                                                                      ------------------
     Total Liabilities and Shareholders' Equity                       $        5,235,500
                                                                      ==================

<FN>

      See accompanying notes to unaudited condensed consolidated financial statements

</FN>
</TABLE>



                                       2
<PAGE>


<TABLE>
<CAPTION>
                                                   GraphOn Corporation
                                     Condensed Consolidated Statements of Operations


                                                                           (Unaudited)
                                              Three Months Ended September 30,      Nine Months Ended September 30,
                                            ------------------------------------  -----------------------------------
                                                    2007               2006              2007               2006
                                            ------------------  ----------------  -----------------  ----------------
<S>                                         <C>                 <C>               <C>                <C>
Revenue                                     $        1,270,300  $      1,141,900  $       3,715,700  $      3,899,200
Cost of revenue                                        113,900           115,700            356,100           377,200
                                            ------------------  ----------------  -----------------  ----------------
Gross profit                                         1,156,400         1,026,200          3,359,600         3,522,000
                                            ------------------  ----------------  -----------------  ----------------
Operating expenses
   Selling and marketing                               438,100           372,600          1,291,500         1,212,700
   General and administrative                        1,261,000         1,061,500          3,372,400         2,976,300
   Research and development                            446,600           594,600          1,757,300         1,440,400
                                            ------------------  ----------------  -----------------  ----------------
      Total operating expenses                       2,145,700         2,028,700          6,421,200         5,629,400
                                            ------------------  ----------------  -----------------  ----------------
Loss from operations                                  (989,300)       (1,002,500)        (3,061,600)       (2,107,400)
                                            ------------------  ----------------  -----------------  ----------------
Other income, net                                       11,400             9,700             45,400            31,400
                                            ------------------  ----------------  -----------------  ----------------
Loss before provision for income tax                  (977,900)         (992,800)        (3,016,200)       (2,076,000)
Provision for income tax                                 1,700             2,400              5,600             5,500
                                            ------------------  ----------------  -----------------  ----------------
Net loss                                    $         (979,600) $       (995,200) $      (3,021,800) $     (2,081,500)
Other comprehensive loss
Foreign currency translation gain                            -               800                  -               800
                                            ------------------  ----------------  -----------------  ----------------
Comprehensive loss                          $         (979,600) $       (994,400) $      (3,021,800) $     (2,080,700)
                                            ==================  ================  =================  ================
Basic and diluted loss per common share     $            (0.02) $          (0.02) $           (0.07) $          (0.04)
                                            ==================  ================  =================  ================
Weighted average common shares outstanding          46,764,015        46,706,450         46,418,462        46,362,764
                                            ==================  ================  =================  ================

<FN>

                See accompanying notes to unaudited condensed consolidated financial statements

</FN>
</TABLE>


                                       3
<PAGE>


<TABLE>
<CAPTION>
                                                GraphOn Corporation
                                  Condensed Consolidated Statements of Cash Flows

                                                                                       (Unaudited)
                                                                             Nine Months Ended September 30,
                                                                            ---------------------------------
       Cash Flows Provided By (Used In) Operating Activities                     2007               2006
       -----------------------------------------------------                --------------    ---------------
<S>                                                                         <C>               <C>
       Net Loss                                                             $   (3,021,800)   $    (2,081,500)
       Adjustments to reconcile net loss to net cash
         provided by (used in) operating activities:
       Depreciation and amortization                                               720,600            768,700
       Stock option compensation expense                                           375,500            347,100
       Provision for doubtful accounts                                             115,900                  -
       Other items                                                                  (1,400)            (7,100)
       Changes in operating assets and liabilities
         Accounts receivable                                                      (146,600)           149,600
         Prepaid expenses and other current assets                                  11,300            (14,900)
         Accounts payable and accrued expenses                                      98,100           (179,400)
         Deferred revenue                                                          266,000            643,600
                                                                            --------------    ---------------
       Net Cash Used In Operating Activities                                    (1,582,400)          (373,900)
                                                                            --------------    ---------------
       Cash Flows Provided By (Used In) Investing Activities
       Capital expenditures                                                        (64,700)           (58,700)
       Other assets                                                                   (100)             2,600
                                                                            --------------    ---------------
       Net Cash Used In Investing Activities                                       (64,800)           (56,100)
                                                                            --------------    ---------------
       Cash Flows Provided By (Used In) Financing Activities
       Proceeds from sale of common stock under ESPP                                 7,100              8,500
       Proceeds from exercise of stock options                                      60,000                  -
       Costs of private placement of preferred stock and warrants                        -            (58,000)
                                                                            --------------    ---------------
       Net Cash Provided By (Used In) Financing Activities                          67,100            (49,500)
                                                                            --------------    ---------------
       Effect of exchange rate fluctuations on cash and cash equivalents                 -                800
       Net Decrease in Cash and Cash Equivalents                                (1,580,100)          (478,700)
       Cash and Cash Equivalents, beginning of period                            2,937,100          3,528,100
                                                                            --------------    ---------------
       Cash and Cash Equivalents, end of period                             $    1,357,000    $     3,049,400
                                                                            ==============    ===============

<FN>

               See accompanying notes to unaudited condensed consolidated financial statements

</FN>
</TABLE>


                                       4
<PAGE>


                               GRAPHON CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                               September 30, 2007


1. Basis of Presentation

The unaudited condensed consolidated financial statements included herein have
been prepared in accordance with accounting principles generally accepted in the
United States applicable to interim financial information and the rules and
regulations promulgated by the Securities and Exchange Commission. Accordingly,
such financial statements do not include all information and footnote
disclosures required in annual financial statements.

The unaudited condensed consolidated 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-QSB should be read in
conjunction with the audited consolidated financial statements of GraphOn
Corporation (the "Company") contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2006, which was filed with the Securities
and Exchange Commission (the "SEC") on April 2, 2007. 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, 2007, or any
future period.

The Company's condensed consolidated financial statements have been presented on
a going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. The Company has
suffered from recurring losses and has absorbed significant cash in its
operating activities. These matters raise substantial doubt about the ability of
the Company to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of assets or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.

Management believes that the Company will be able to support its operational
needs for the next twelve months if the Company can increase its revenue stream
and/or obtain additional equity investments or debt. Should the Company be
unsuccessful in increasing its revenue stream or obtaining additional equity
investments or debt, then it would need to reduce its current level of
operations to a level sustainable with current revenue. Additionally, the
Company continues to reviewpotential business combination opportunities as they
present themselves and at such time as one might make financial sense and add
value for the shareholders, the Company will pursue it.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the condensed
consolidated financial statements and accompanying notes. While the Company
believes that such estimates are fair when considered in conjunction with the
condensed consolidated financial statements and accompanying notes, the actual
amount of such estimates, when known, will vary from those estimates.

Intercompany Accounts and Transactions

Significant intercompany accounts and transactions are eliminated upon
consolidation.

Revenue Recognition

The Company markets and licenses products through various means, such as;
channel distributors, independent software vendors ("ISVs"), value-added
resellers ("VARs" and collectively with channel distributors and ISVs,
"resellers") and direct sales to enterprise end users. Its product licenses are
generally perpetual. The Company also separately sells maintenance contracts,
which are comprised of license updates and customer service access,
private-label branding kits, software developer kits and product training
services.

Generally, software license revenues are recognized when:

   o   Persuasive evidence of an arrangement exists, (i.e., when the Company


                                       5
<PAGE>

       signs a non-cancelable license agreement wherein the customer
       acknowledges an unconditional obligation to pay, or upon receipt of the
       customer's purchase order) and
   o   Delivery has occurred or services have been rendered and there are no
       uncertainties surrounding product acceptance (i.e., when title and risk
       of loss have been transferred to the customer, which generally occurs
       when the media containing the licensed programs is provided to a
       common carrier or, in the case of electronic delivery, when the customer
       is given access to the licensed programs) and
   o   The price to the customer is fixed or determinable, as typically
       evidenced in a signed non-cancelable contract, or a customer's
       purchase order, and
   o   Collectibility is probable. If collectibility is not considered
       probable, revenue is recognized when the fee is collected.

Revenue recognized on software arrangements involving multiple elements is
allocated to each element of the arrangement based on vendor-specific objective
evidence ("VSOE") of the fair values of the elements; such elements include
licenses for software products, maintenance, and customer training. The Company
limits it assessment of VSOE for each element to either the price charged when
the same element is sold separately or the price established by management
having the relevant authority to do so, for an element not yet sold separately.

If sufficient VSOE of fair values does not exist so as to permit the allocation
of revenue to the various elements of the arrangement, all revenue from the
arrangement is deferred until such evidence exists or until all elements are
delivered. If evidence of VSOE of all undelivered elements exists but evidence
does not exist for one or more delivered elements, then revenue is recognized
using the residual method. Under the residual method, the fair value of the
undelivered elements is deferred and the remaining portion of the arrangement
fee is recognized as revenue.

Certain resellers prepay for licenses they intend to resell bundled together
with maintenance that provides the reseller with license updates and customer
service. Upon receipt of the prepayment, if all other revenue recognition
criteria outlined above have been met, product licensing revenue is recognized
when the reseller is given access to the licensed program(s). The resellers are
required to provide periodic (monthly or quarterly) sell-through reports that
detail, for the respective period, various items, such as the number of licenses
purchased, the number sold to other parties and the ending balance of licenses
held as inventory available for future sale. The recognition of maintenance
revenue for these resellers is based on estimated reseller inventory turnover
levels reconciled to actual upon receipt of the sell-through report.

There are no rights of return granted to resellers or other purchasers of the
Company's software programs.

Revenue from maintenance contracts is recognized ratably over the related
contract period, which generally ranges from one to five years.

3. Stock-Based Compensation

On January 1, 2006 the Company adopted the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123R, "Share-Based Payment,"
("FAS123R") and related interpretations using the modified prospective
transition method. Under that method, compensation cost recognized in the three
and nine-month periods ended September 30, 2007 and 2006 includes (a)
compensation cost for all stock-based awards granted prior to, but not yet
vested as of January 1, 2006 based on the grant date fair value estimated in
accordance with the original provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," ("FAS123") and (b)
compensation cost for all stock-based awards granted on or subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with
the provisions of FAS123R.

The valuation provisions of FAS123R apply to new awards and to awards that were
outstanding on the adoption date and subsequently modified or cancelled.
Estimated compensation expense for awards outstanding at the adoption date is
recognized over the remaining service period using the compensation cost
calculated for pro forma disclosure purposes under FAS123.

                                       6
<PAGE>

Valuation and Expense Information under FAS123R

The Company recorded stock-based compensation expense of $113,300 and $120,800
in the three-month periods ended September 30, 2007 and 2006, respectively and
$375,500 and $347,100 in the nine-month periods ended September 30, 2007 and
2006, respectively. As required by FAS123R, the Company estimates forfeitures of
employee stock-based awards and recognizes compensation cost only for those
awards expected to vest. Forfeiture rates are estimated based on an analysis of
historical experience and are adjusted to actual forfeiture experience as
needed.

The following table illustrates the stock-based compensation expense recorded
during the three and nine-month periods ended September 30, 2007 and 2006 by
income statement classification:

<TABLE>
<CAPTION>
                                                Three months ended               Nine months ended
                                                   September 30,                    September 30,
                                             -------------------------     --------------------------
Income Statement Classification                  2007          2006              2007         2006
-------------------------------              ------------  ------------    ------------  ------------
<S>                                          <C>           <C>             <C>           <C>
Cost of revenue                              $      2,600  $      4,100    $     10,600  $     12,600
Selling and marketing expense                       6,300         9,600          26,100        26,200
General and administrative expense                 80,900        77,400         258,300       258,800
Research and development expense                   23,500        29,700          80,500        49,500
                                             ------------  ------------    ------------  ------------
                                             $    113,300  $    120,800    $    375,500  $    347,100
                                             ============  ============    ============  ============
</TABLE>

In connection with the adoption of FAS123R, the Company estimated the fair value
of each option to purchase common stock granted under the employee stock
purchase plan ("ESPP") during the three-month period ended September 30, 2007.
Such fair value estimate was comprised of two parts: one of which is based on
the fair market value of a share of the Company's common stock at the date of
grant of the option to purchase common stock under the ESPP and the other which
is based on what the fair value of a stock option to purchase one share of the
Company's common stock would be if the Company were to have issued a stock
option on the same day.

The fair value of all stock-based awards granted during the three-month periods
ended September 30, 2007 and 2006 were calculated as of the date of grant using
a binomial model, with the assumptions set forth in the following table:

<TABLE>
<CAPTION>
                                                              Expected
  Three Months                   Estimated        Prior        Option       Estimated     Risk-Free
      Ended       Estimated      Forfeiture    Forfeiture       Term        Exercise      Interest
  Sept. 30, (1)   Volatility        Rate          Rate         (Years)       Factor         Rate         Dividends
  -------------  -------------  ------------  -------------  ------------  ------------  ------------  ------------
<S>   <C>           <C>            <C>             <C>            <C>        <C>            <C>
      2007          154.22%        5.37%           5.25%          7.5        10.00%         4.60%            -
      2006          155.45%        5.00%          10.00%          7.5        10.00%         4.85%            -

</TABLE>
 (1) Assumptions used to estimate the fair value of each stock-based award
     granted during the three-month periods ended March 31, 2007 and 2006,
     including options to purchase common stock granted pursuant to the terms of
     the Company's ESPP, can be found in the Company's Form 10-QSB as filed with
     the SEC on May 15, 2007. Assumptions used to estimate the fair value of
     each stock-based award granted during the three-month periods ended June
     30, 2007 and 2006 can be found in the Company's Form 10-QSB as filed with
     the SEC on August 14, 2007. No new options to purchase common stock
     pursuant to the terms of the Company's ESPP were granted during either the
     three-month period ended June 30, 2007 or 2006.

The Company does not anticipate paying dividends on its common stock for the
foreseeable future. Expected volatility is based on the historical volatility of
the Company's common stock over the period commensurate with the expected life
of the options.

The approximate risk free interest rate was based on the implied yield available
on U.S. Treasury issues with remaining terms equivalent to the Company's
expected term on its stock-based awards. The expected term of the Company's
stock-based option awards was based on historical award holder exercise patterns
and considered the market performance of the Company's common stock and other


                                       7
<PAGE>

items. The six-month expected term of options to purchase common stock pursuant
to the terms of the Company's ESPP was based on the length of time between the
option's grant and purchase dates.

The estimated forfeiture rate was based on an analysis of historical data and
considered the impact of events such as the work force reductions the Company
carried out during previous years. The estimated exercise factor was based on an
analysis of historical data and included a comparison of historical and current
share prices.

For stock-based awards granted during the three-month periods ended September
30, 2007 and 2006, exclusive of options to purchase common stock pursuant to the
Company's ESPP, the weighted average fair values were $0.23 and $0.36,
respectively. For stock-based awards granted during the nine-month periods
September 30, 2007 and 2006, exclusive of options to purchase common stock
pursuant to the Company's ESPP, the weighted average fair values were $0.15 and
$0.45, respectively. The weighted average fair value of options to purchase
common stock pursuant to the Company's ESPP granted during the three-month
periods ended September 30, 2007 and 2006 were $0.14 and $0.15, respectively,
and the weighted average fair value of such options granted during the
nine-month periods ended September 30, 2007 and 2006 were $0.14 and $0.16,
respectively.

The following table presents a summary of the status and activity of the
Company's stock option awards for the three and nine-month periods ended
September 30, 2007.

<TABLE>
<CAPTION>
                                                                                Weighted
                                                              Weighted          Average
                                                               Average          Remaining         Aggregate
                                             Number of        Exercise         Contractual        Intrinsic
                                             Shares (1)         Price          Term (Years)          Value
                                            -------------    ------------    ----------------   --------------
<S>                                            <C>              <C>                <C>               <C>
Outstanding - December 31, 2006                6,876,613        $   0.45
Granted                                          830,000            0.16
Exercised                                              -               -
Forfeited or expired                            (307,576)           0.17
                                            ------------
Outstanding - March 31, 2007                   7,399,037            0.43           7.31              $  31,100
Granted                                                -               -
Exercised                                              -               -
Forfeited or expired                            (101,823)           0.17
                                            ------------
Outstanding - June 30, 2007                    7,297,214            0.43           6.50              $ 136,900
Granted                                           20,000            0.26
Exercised                                       (500,000)           0.12
Forfeited or expired                            (242,928)           0.42
                                            ------------
Outstanding - September 30, 2007               6,574,286        $   0.46           7.00              $  27,900
                                            ============

</TABLE>
   1) Excludes 1,000,000 shares of common stock previously awarded pursuant
      to a restricted stock award of 600,000 shares (subject to service vesting
      conditions) and two restricted stock units awards aggregating 400,000
      shares (each subject to performance vesting conditions). Of such awarded
      shares, 600,000 are considered outstanding as of their award date for
      voting and other purposes.

Of the options outstanding as of September 30, 2007, 5,108,770 were vested,
1,340,341 were estimated to vest in future periods and 125,175 were estimated to
be forfeited prior to their vesting.

All options are exercisable immediately upon grant. Options vest, generally
ratably over a 33-month period commencing in the fourth month after the grant
date. The Company has the right to repurchase exercised options that have not
vested upon their forfeiture at the respective option's exercise price.

                                       8
<PAGE>

During the three and nine-month periods ended September 30, 2007, 500,000 stock
option awards were exercised. Such awards had a weighted average exercise price
of $0.12 resulting in proceeds of $60,000 being received by the Company. No
stock option awards were exercised during either of the three or nine-month
periods ended September 30, 2006. As of September 30, 2007, there was
approximately $278,900 of total unrecognized compensation cost, net of estimated
forfeitures, related to stock-based compensation. That cost is expected to be
recognized over a weighted-average period of approximately one year.

4. Revenue

Revenue for the three-month periods ended September 30, 2007 and 2006 was
comprised as follows:

<TABLE>
<CAPTION>
        Revenue                        2007            2006          Dollars         Percent
        ----------------------    ------------    ------------    ------------    ------------
          Product Licenses
<S>                               <C>             <C>             <C>                  <C>
        Windows                   $    415,700    $    425,300    $     (9,600)         -2.3%
        Unix                           372,800         295,200          77,600          26.3%
                                  ------------    ------------    ------------
                                       788,500         720,500          68,000           9.4%
                                  ------------    ------------    ------------
            Service Fees
        Windows                        229,800         186,300          43,500          23.3%
        Unix                           248,400         216,600          31,800          14.7%
                                  ------------    ------------    ------------
                                       478,200         402,900          75,300          18.7%
                                  ------------    ------------    ------------
        Other                            3,600          18,500         (14,900)        -80.5%
                                  ------------    ------------    ------------
        Total Revenue             $  1,270,300    $  1,141,900    $    128,400          11.2%
                                  ============    ============    ============

</TABLE>
Revenue for the nine-month periods ended September 30, 2007 and 2006 was
comprised as follows:

<TABLE>
<CAPTION>
         Revenue                          2007            2006          Dollars         Percent
         -------------------------    ------------    ------------   ------------    -------------
             Product Licenses
<S>                                   <C>             <C>            <C>                 <C>
         Windows                      $  1,432,400    $  1,485,400   $    (53,000)        -3.6%
         Unix                              860,000       1,158,200       (298,200)       -25.7%
                                      ------------    ------------   ------------
                                         2,292,400       2,643,600       (351,200)       -13.3%
                                      ------------    ------------   ------------
               Service Fees
         Windows                           621,100         603,200         17,900          3.0%
         Unix                              707,800         595,100        112,700         18.9%
                                      ------------    ------------   ------------
                                         1,328,900       1,198,300        130,600         10.9%
                                      ------------    ------------   ------------
         Other (1)                          94,400          57,300         37,100         64.7%
                                      ------------    ------------   ------------
         Total Revenue                $  3,715,700    $  3,899,200   $   (183,500)        -4.7%
                                      ============    ============   ============

</TABLE>
5. Patents

As of September 30, 2007, patents consisted of the following:

       Patents                    $  5,340,400
       Accumulated amortization     (2,376,900)
                                  ------------
                                  $  2,963,500
                                  ============

Patent amortization, which aggregated $222,300 during each of the three-month
periods ended September 30, 2007 and 2006, and $666,900 during each of the
nine-month periods ended September 30, 2007 and 2006, respectively, is a
component of general and administrative expenses.

                                       9
<PAGE>

6. Supplemental Disclosure of Cash Flow Information

The Company disbursed approximately $2,000 and $0 cash for the payment of income
taxes during the nine-month periods ended September 30, 2007 and 2006,
respectively. The Company disbursed no cash for the payment of income taxes
during either of the three-month periods ended September 30, 2007 or 2006. The
Company disbursed no cash for the payment of interest expense during either of
the three or nine-month periods ended September 30, 2007 or 2006.

7. Loss Per Share

Potentially dilutive securities have been excluded from the computation of
diluted loss per common share, as their effect is antidilutive. For the three
and nine-month periods ended September 30, 2007 and 2006, 20,343,486 and
19,705,817 shares, respectively, of common stock equivalents were excluded from
the computation of diluted loss per share since their effect would be
antidilutive.

8. New Accounting Pronouncements

In February 2007, FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities" ("SFAS 159") which permits entities to choose
to measure many financial instruments and certain other items at fair value. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of an entity's
first fiscal year that begins after November 15, 2007. The Company is assessing
the impact of SFAS 159, but does not expect it to have a material impact on its
results of operations, cash flows or financial position.

In September 2006, FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
157") which defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, FASB having previously concluded in
those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value
measurements, however, for some entities; application of SFAS 157 will change
current practice. SFAS 157 is effective for financial statements issued for the
first fiscal year beginning after November 15, 2007 and interim periods within
those fiscal years. The Company is assessing the impact of SFAS 157, but does
not expect it to have a material impact on its results of operations, cash flows
or financial position.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48,
"Accounting for Uncertainties in Income Taxes - An Interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
uncertain tax positions taken or expected to be taken in a company's income tax
return, and also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition.

As a result of the implementation of FIN 48, the Company recognized no change in
the liability for unrecognized tax benefits related to tax positions taken in
prior years, and no corresponding change in retained deficit. Additionally, the
Company recognized no material adjustment in the liability for unrecognized
income tax benefits as of the January 1, 2007 adoption date and September 30,
2007. Also, the Company had no amounts of unrecognized tax benefits that, if
recognized, would affect its effective tax rate for January 1, 2007 and
September 30, 2007.

The Company's policy for deducting interest and penalties is to treat interest
as interest expense and penalties as taxes. As of September 30, 2007, the
Company had no amount accrued for the payment of interest and penalties related
to the unrecognized tax benefits as of the adoption date of FIN 48.

The Company files federal consolidated income tax returns and income tax returns
in various state jurisdictions. The Company's 2003, 2004 and 2005 federal tax
years and state tax years from 2002 through 2005, inclusive, remain subject to
income tax examinations by the respective tax jurisdictions. Net operating loss
carryforwards generated in 1991 through 2006, and from 2000 through 2006, for
federal and state tax purposes, respectively, remain open to examination by the
respective tax jurisdictions.


                                       10
<PAGE>


ITEM 2. Management's Discussion and Analysis or Plan of Operation

Forward-Looking Statements

The following discussion of our financial condition and results of operations
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:

   o  that we have suffered from recurring losses and have absorbed
      significant cash in our operating activities and if we are unable to
      generate a positive cash flow from operations or are unsuccessful in
      securing alternative means of financing, we may not be able to continue
      our operations;
   o  our history of operating losses, and expectation that those losses will
      continue;
   o  the uncertainty as to whether or not we will realize the anticipated
      benefits of acquiring Network Engineering Software, Inc. ("NES");
   o  that a significant portion of our revenue has been and continues to be
      earned from a very limited number of significant customers;
   o  that our stock price has been volatile and you could lose your investment;
      and
   o  other factors, including those set forth under Item 6. "Management's
      Discussion and Analysis or Plan of Operation - Risk Factors" in our Annual
      Report on Form 10-KSB for the year ended December 31, 2006 and in other
      documents we filed with the Securities and Exchange Commission, could have
      a material adverse effect upon our business, results of operations and
      financial condition.

Overview

We are developers of business connectivity software, including Unix, Linux and
Windows server-based software, with an immediate focus on web-enabling
applications for use by channel distributors, independent software vendors
("ISVs"), value-added resellers ("VARs" and collectively with channel
distributors and ISVs, "resellers"), corporate enterprises, governmental and
educational institutions, and others.

Server-based computing, sometimes referred to as thin-client computing, is a
computing model where traditional desktop software applications are relocated to
run entirely on a server, or host computer. This centralized deployment and
management of applications reduces the complexity and total costs associated
with enterprise computing. Our software architecture provides application
developers with the ability to relocate applications traditionally run on the
desktop to a server, or host computer, where they can be run over a variety of
connections from remote locations to a variety of display devices. With our
server-based software, applications can be web-enabled, without any modification
to the original application software required, allowing the applications to be
run from browsers or portals. A variety of Unix, Linux or Windows applications
can be web-enabled with our server-based technology.

In order to ensure that we will be able to realize our assets and settle our
liabilities within the normal course of our business operations, we must
consider several aggressive strategic initiatives aimed at increasing revenue,
significantly reducing expenses or securing additional alternative sources of
financing. We also are continuing to review potential business combination
opportunities as they present themselves and at such time as one might make
financial sense and add value for our shareholders, we will pursue it.

Critical Accounting Policies

We believe that several accounting policies are important to understanding our
historical and future performance. We refer to these policies as "critical"
because these specific areas generally require us to make judgments and
estimates about matters that are uncertain at the time we make the estimates,
and different estimates, which also would have been reasonable, could have been
used, which would have resulted in different financial results. Our critical
accounting policies are identified in our most recent Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006, as filed with the SEC on
April 2, 2007, and included: revenue recognition, the allowance for doubtful
accounts, patents, capitalized software development costs, impairment of
intangible assets, loss contingencies and stock-based compensation expense. The
following operating results should be read in conjunction with our critical
accounting policies.

                                       11
<PAGE>

Stock-Based Compensation

On January 1, 2006, we adopted the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123R, "Share-Based Payment,"
("FAS123R") and related interpretations using the modified prospective
transition method. Under that method, compensation cost recognized in the three
and nine-month periods ended September 30, 2007 and 2006 includes (a)
compensation cost for all stock-based awards granted prior to, but not yet
vested as of January 1, 2006 based on the grant date fair value estimated in
accordance with the original provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," ("FAS123") and (b)
compensation cost for all stock-based awards granted on or subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with
the provisions of FAS123R.

The valuation provisions of FAS123R apply to new awards and to awards that were
outstanding on the adoption date and subsequently modified or cancelled.
Estimated compensation expense for awards outstanding at the adoption date is
recognized over the remaining service period using the compensation cost
calculated for pro forma disclosure purposes under FAS123.

The valuation of employee stock options is an inherently subjective process
since market values are generally not available for long-term, non-transferable
employee stock options. Accordingly, an option pricing model is utilized to
derive an estimated fair value. In calculating the estimated fair value of our
stock options, we used a binomial pricing model which requires the consideration
of the following variables for purposes of estimating fair value:

   o  the expected volatility of our common stock,
   o  the annualized forfeiture/termination rate,
   o  the prior forfeiture/termination rate,
   o  the expected term of the option,
   o  the exercise factor for optionees,
   o  the risk free interest rate for the expected option term, and
   o  expected dividends on our common stock (we do not anticipate paying
      dividends for the foreseeable future).

Of the variables above, the selection of an expected term, an annualized
forfeiture rate and expected stock price volatility are the most subjective. In
estimating our stock price volatility for stock option grants awarded during the
three-month period ended September 30, 2007, we analyzed our historic volatility
over the period commensurate with the expected life of the options, by reference
to actual stock prices, and calculated an estimated volatility of approximately
154.22%. Our estimate of the expected option term was 7.5 years and was derived
based on our analysis of historical data and future projections. We derived an
annualized forfeiture rate of 5.37% and a prior forfeiture rate of 5.25% by
analyzing our historical forfeiture data, including consideration of the impact
of certain non-recurring events, such as reductions in work force. We believe
that each of these estimates is reasonable in light of the data we analyzed.
However, as with any estimate, the ultimate accuracy of these estimates is only
verifiable over time.

We applied the same variables to the valuation of shares purchased under our
Employee Stock Purchase Plan ("ESPP"), except that the expected term was 0.5
years, as the time span from the date of grant of ESPP shares to the date of
purchase is six months.

For assumptions used for grants made during the three and nine-month periods
ended September 30, 2006, please refer to our Quarterly Report on Form 10-QSB as
filed with the SEC on November 20, 2006.

We expect that stock-based compensation expense will continue to have a material
impact on our financial results for the remainder of the fiscal year. For the
remainder of fiscal 2007 we expect to incur stock-based compensation expense of
approximately $108,800.

Results of Operations for the Three and Nine-Month Periods Ended September 30,
2007 and 2006.

Revenue

The changes in both Windows and Unix-based product licenses revenue for the
three and nine-month periods ended September 30, 2007 as compared with the same
periods of 2006 were reflective of how such revenue can vary from period to
period because a significant portion of this revenue has historically been
earned from a limited number of significant customers, most of whom are
resellers. Consequently, if any of these significant customers change their


                                       12
<PAGE>

order level or fail to order during the reporting period, our revenue could be
materially impacted. We expect this situation to continue throughout the next
several quarterly reporting periods.

Revenue for the three-month periods ended September 30, 2007 and 2006 was as
follows:

<TABLE>
<CAPTION>
        Revenue                        2007            2006          Dollars         Percent
        ----------------------    ------------    ------------    ------------    ------------
          Product Licenses
<S>                               <C>             <C>             <C>                  <C>
        Windows                   $    415,700    $    425,300    $     (9,600)         -2.3%
        Unix                           372,800         295,200          77,600          26.3%
                                  ------------    ------------    ------------
                                       788,500         720,500          68,000           9.4%
                                  ------------    ------------    ------------
            Service Fees
        Windows                        229,800         186,300          43,500          23.3%
        Unix                           248,400         216,600          31,800          14.7%
                                  ------------    ------------    ------------
                                       478,200         402,900          75,300          18.7%
                                  ------------    ------------    ------------
        Other                            3,600          18,500         (14,900)        -80.5%
                                  ------------    ------------    ------------
        Total Revenue             $  1,270,300    $  1,141,900    $    128,400          11.2%
                                  ============    ============    ============
</TABLE>

Revenue for the nine-month periods ended September 30, 2007 and 2006 was as
follows:

<TABLE>
<CAPTION>
         Revenue                          2007            2006          Dollars         Percent
         -------------------------    ------------    ------------   ------------    -------------
             Product Licenses
<S>                                   <C>             <C>            <C>                 <C>
         Windows                      $  1,432,400    $  1,485,400   $    (53,000)        -3.6%
         Unix                              860,000       1,158,200       (298,200)       -25.7%
                                      ------------    ------------   ------------
                                         2,292,400       2,643,600       (351,200)       -13.3%
                                      ------------    ------------   ------------
               Service Fees
         Windows                           621,100         603,200         17,900          3.0%
         Unix                              707,800         595,100        112,700         18.9%
                                      ------------    ------------   ------------
                                         1,328,900       1,198,300        130,600         10.9%
                                      ------------    ------------   ------------
         Other (1)                          94,400          57,300         37,100         64.7%
                                      ------------    ------------   ------------
         Total Revenue                $  3,715,700    $  3,899,200   $   (183,500)        -4.7%
                                      ============    ============   ============
</TABLE>

  (1) Private labeling and other fees. Private labeling fees are derived when
      we contractually agree to allow a customer to brand our product with their
      name.

The decrease in Windows product license revenue for the nine months ended
September 30, 2007 was primarily due to our determination, under our accounting
policies, to defer revenue recognition for a $196,000 purchase made by a
significant customer. We determined that sufficient vendor-specific objective
evidence did not exist for the allocation of revenue to the various elements of
the purchase. When such evidence exists we expect to recognize revenue from this
transaction. We expect that future purchases by this customer will also be
deferred for the foreseeable future. This decrease was partially offset by
increases in Windows product license revenue aggregating approximately $143,000,
generated from various other Windows customers. During the second quarter of
2007 we released an upgraded version of GO-Global for Windows and expect that
aggregate Windows product licensing revenue for the remaining quarter of 2007
will each approximate Windows product licensing revenue for the three-month
period ended September 30, 2007.

The increase in Unix product license revenue for the three-month period ended
September 30, 2007 was primarily due to increased purchases from just two
customers, including our most significant Unix customer, Alcatel-Lucent. These
two customers purchased an aggregate $250,900 worth of Unix product licenses
during the period, an increase of $70,300 over their purchases for the same
period of the prior year.

The decrease in Unix product license revenue for the nine-month period ended
September 30, 2007 was primarily due to a $250,000 one-time sale to an
enterprise customer during the nine-month period ended September 30, 2006. The
remainder of the decrease in Unix product license revenue for the nine-month
period ended September 30, 2007 was due to an overall net reduction in sales
made to various other Unix customers.

Our customers typically purchase a maintenance contract at the time they license
our product. Such maintenance contracts vary in term from one to five years and
generally are renewed upon expiration. Service fees associated with maintenance


                                       13
<PAGE>

contracts are deferred and recognized as revenue ratably over the underlying
service period of the maintenance contract.

The increase in service fees for the three and nine-month periods ended
September 30, 2007, as compared with the same periods of the prior year is due
to the higher levels of maintenance contract purchases that have occurred since
September 30, 2006 as compared with the nine months ended September 30, 2006.

We expect aggregate service fees revenue for the fourth quarter of 2007 to
approximate those of the three months ended September 30, 2007.

Cost of Revenue

Cost of revenue is comprised primarily of service costs, which represent the
costs of customer service, and product costs. Shipping and packaging materials
are immaterial as virtually all of our deliveries are made via electronic means
over the Internet. Under accounting principles generally accepted in the United
States, research and development costs for new product development, after
technological feasibility is established, are recorded as "capitalized software"
on our balance sheet. Such capitalized costs are subsequently amortized as cost
of revenue over the shorter of three years or the remaining estimated life of
the products.

Cost of revenue was 9.0% and 10.1% of revenue for the three months ended
September 30, 2007 and 2006, respectively, and 9.6% and 9.7% for the nine months
ended September 30, 2007 and 2006, respectively. For the three months ended
September 30, 2007 cost of revenue decreased by $1,800 or 1.6%, to $113,900 from
$115,700 for the same period of 2006, and for the nine months ended September
30, 2007 it decreased by $21,100, or 5.6%, to $356,100 from $377,200 for the
same period of 2006.

Cost of revenue for the three-month periods ended September 30, 2007 and 2006
was as follows:

<TABLE>
<CAPTION>
                                                          Increase (Decrease)
                                                       ------------------------
                               2007          2006        Dollars      Percent
                           ----------    ----------    ----------    ---------
<S>                        <C>           <C>           <C>              <C>
           Product costs   $    7,700    $   23,800    $  (16,100)     -67.6%
           Service costs      106,200        91,900        14,300       15.6%
                           ----------    ----------    ----------
                           $  113,900    $  115,700    $   (1,800)      -1.6%
                           ==========    ==========    ==========
</TABLE>

Cost of revenue for the nine-month periods ended September 30, 2007 and 2006 was
as follows:

 <TABLE>
<CAPTION>
                                                          Increase (Decrease)
                                                       ------------------------
                               2007         2006         Dollars       Percent
                           ----------    ----------    ----------    ----------
<S>                        <C>           <C>           <C>              <C>
           Product costs   $   21,100    $   88,600    $  (67,500)      -76.2%
           Service costs      335,000       288,600        46,400        16.1%
                           ----------    ----------    ----------
                           $  356,100    $  377,200    $  (21,100)       -5.6%
                           ==========    ==========    ==========
</TABLE>

The decrease in product costs for the three and nine-month periods ended
September 30, 2007, as compared with the same periods in 2006 was primarily due
to a decrease in the amortization of capitalized software development costs. We
expect product costs to be lower for 2007, as compared with 2006, as certain
elements of our capitalized software development costs became fully amortized
during 2006 and the remainders became fully amortized during the nine-month
period ended September 30, 2007.

The increase in service costs for the three and nine-month periods ended
September 30, 2007, as compared with the same periods in 2006, resulted
primarily from increasing the amount of engineering time spent performing
customer service, in order to better meet the needs of our customers. We expect
service costs to remain higher throughout 2007, as compared with 2006, as we
plan on having a higher number of engineers performing such activities.

Selling and Marketing Expenses

Selling and marketing expenses primarily consist of employee costs (inclusive of
non-cash stock-based compensation expense), outside services and travel and
entertainment expense.

Selling and marketing expenses were 34.5% and 32.6% of revenue for the three
months ended September 30, 2007 and 2006, respectively, and 34.8% and 31.1% for


                                       14
<PAGE>

the nine months ended September 30, 2007 and 2006, respectively. Selling and
marketing expenses for the three months ended September 30, 2007 increased by
$65,500, or 17.6%, to $438,100 from $372,600 for the same period of 2006. For
the nine months ended September 30, 2007 selling and marketing expenses
increased by $78,800, or 6.5%, to $1,291,500 from $1,212,700 for the same period
of 2006.

Selling and marketing expenses for the three months ended September 30, 2007 and
2006 were as follows:

<TABLE>
<CAPTION>
                                                                Increase (Decrease)
                                                             ------------------------
                                    2007          2006        Dollars        Percent
                                 ----------    ----------    ----------    ----------
<S>                              <C>           <C>           <C>              <C>
      Employee costs             $  333,100    $  263,900    $   69,200        26.2%
      Outside services               59,800        63,100        (3,300)       -5.2%
      Travel and entertainment       23,800        27,700        (3,900)      -14.1%
      Other                          21,400        17,900         3,500        19.6%
                                 ----------    ----------    ----------
                                 $  438,100    $  372,600    $   65,500        17.6%
                                 ==========    ==========    ==========
</TABLE>

Selling and marketing expenses for the nine months ended September 30, 2007 and
2006 were as follows:

<TABLE>
<CAPTION>
                                                                 Increase (Decrease)
                                                              ------------------------
                                    2007           2006         Dollars       Percent
                                -----------    -----------    -----------    ---------
<S>                             <C>            <C>            <C>              <C>
     Employee costs             $   948,200    $   871,100    $    77,100        8.9%
     Outside services               198,500        170,800         27,700       16.2%
     Travel and entertainment        62,100        100,900        (38,800)     -38.5%
     Other                           82,700         69,900         12,800       18.3%
                                -----------    -----------    -----------
                                $ 1,291,500    $ 1,212,700    $    78,800        6.5%
                                ===========    ===========    ===========
</TABLE>

The increase in employee costs for the three and nine-month periods ended
September 30, 2007, as compared with the same periods in 2006, resulted
primarily from having approximately two more sales people than during the same
periods of the prior year. Included in employee costs for the three and
nine-month periods ended September 30, 2007 and 2006 are non-cash stock-based
compensation costs aggregating approximately $6,300 and $9,600, and $26,100 and
$26,200, respectively.

The increase in outside services for the nine-month period ended September 30,
2007, as compared with the same period in 2006, was primarily the result of
recruiting costs incurred in the hiring of a new sales representative. Also
contributing to the increase in outside services for the nine-month period ended
September 30, 2007, as compared with the same period of 2006, was higher
commissions paid to our consulting Asian sales representative.

The decrease in travel and entertainment for the nine-month period ended
September 30, 2007, as compared with the same period in 2006, resulted primarily
from costs associated with a 2006 incentive program that was not repeated during
2007.

We currently expect our full-year 2007 sales and marketing expense will exceed
2006 levels.

General and Administrative Expenses

General and administrative expenses primarily consist of employee costs
(inclusive of non-cash stock-based compensation expense), amortization and
depreciation, legal, professional and other outside services (including those
related to realizing benefits from our patent-related assets), travel and
entertainment, certain costs associated with being a publicly held corporation,
and bad debts expense.

General and administrative expenses were approximately 99.3% and 93.0% of
revenues for the three-month periods ended September 30, 2007 and 2006,
respectively, and approximately 90.8% and 76.3% for the nine-month periods ended
September 30, 2007 and 2006, respectively. General and administrative expenses
increased by $199,500, or 18.8%, to $1,261,000 from $1,061,500 for the
three-month period ended September 30, 2007, as compared with the same period in
2006 and increased by $396,100, or 13.3%, to $3,372,400 from $2,976,300 for the
nine-month period ended September 30, 2007, as compared with the same period in
2006.

                                       15
<PAGE>

General and administrative expenses for the three months ended September 30,
2007 and 2006 were as follows:

<TABLE>
<CAPTION>
                                                                            Increase (Decrease)
                                                                       ----------------------------
                                            2007           2006           Dollars         Percent
                                       ------------    ------------    ------------    ------------
<S>                                    <C>             <C>             <C>                 <C>
       Employee costs                  $    421,500    $    519,900    $    (98,400)       -18.9%
       Legal and accounting                 242,200         107,500         134,700        125.3%
       Outside services                     242,800          52,400         190,400        363.4%
       Depreciation and amortization        226,400         226,200             200          0.1%
       Travel and entertainment              30,900          52,100         (21,200)       -40.7%
       Insurance                             23,900          27,200          (3,300)       -12.1%
       Rent                                  20,100          15,900           4,200         26.4%
       Public costs                          16,500          18,800          (2,300)       -12.2%
       Other                                 36,700          41,500          (4,800)       -11.6%
                                       ------------    ------------    ------------
                                       $  1,261,000    $  1,061,500    $    199,500         18.8%
                                       ============    ============    ============
</TABLE>

General and administrative expenses for the nine months ended September 30, 2007
and 2006 were as follows:

<TABLE>
<CAPTION>
                                                                           Increase (Decrease)
                                                                       --------------------------
                                           2007            2006           Dollars        Percent
                                       ------------    ------------    ------------    ----------
<S>                                    <C>             <C>             <C>                <C>
       Employee costs                  $  1,312,100    $  1,329,500    $    (17,400)       -1.3%
       Legal and accounting                 594,500         324,400         270,100        83.3%
       Outside services                     292,900         208,200          84,700        40.7%
       Bad debts                            115,900               -         115,900          na
       Depreciation and amortization        679,200         678,600             600         0.1%
       Travel and entertainment              81,400         156,800         (75,400)      -48.1%
       Insurance                             71,700          81,000          (9,300)      -11.5%
       Rent                                  55,700          47,300           8,400        17.8%
       Public costs                          47,500          46,700             800         1.7%
       Other                                121,500         103,800          17,700        17.1%
                                       ------------    ------------    ------------
                                       $  3,372,400    $  2,976,300    $    396,100        13.3%
                                       ============    ============    ============
</TABLE>

The decrease in employee costs in the three and nine-month periods ended
September 30, 2007, as compared with the same periods of 2006, was primarily due
to having one less employee. Included in employee costs for the three-month
periods ended September 30, 2007 and 2006 were non-cash stock-based compensation
costs aggregating approximately $80,900 and $77,400, respectively, and $258,300
and $258,800 for the nine-month periods ended September 30, 2007 and 2006,
respectively.

Legal and accounting fees were higher during the three and nine-month periods
ended September 30, 2007, as compared with the same periods of the previous
year, primarily as a result of fees associated with administrative and pre-trial
preparations associated with our patent portfolio and Autotrader lawsuit as well
as certain business opportunities we had been pursuing. See Item 1 Legal
Proceedings in Part II of this Form 10-QSB for a discussion of the legal
proceedings against Autotrader.

The increase in bad debts during the nine-month period ended September 30, 2007,
as compared with the same period of the previous year was primarily the result
of a downward evaluation of the current financial condition of a significant
customer's aggregate outstanding balance due us. Although we currently
anticipate continuing our relationship with this customer, we do not anticipate
delivering further product until their receivable has been fully satisfied.

Outside services were higher during the three and nine-month periods ended
September 30, 2007, as compared with the same periods of the prior year,
primarily as a result of fees associated with pre-trial preparations associated
with our patent enforcement action against Autotrader. Partially offsetting
these fees was a decrease to outside services resulting from the hiring of our
Chief Executive Officer on a full-time basis during September 2006.

The decrease in travel and entertainment during the three and nine-month periods


                                       16
<PAGE>

ended September 30, 2007, as compared with the same periods of the previous
year, was primarily a result of less travel by our Chief Executive Officer.
Additional cost reductions during the three and nine-month periods ended
September 30, 2007, as compared with the same periods of 2006, resulted from
using short-term housing versus hotels for extended trips to our New Hampshire
engineering facility.

Costs associated with other major components of general and administrative
expense, notably; depreciation and amortization, insurance, rent and costs
associated with being a public entity, did not change significantly during
either the three or nine-month periods ended June 30, 2007, as compared with the
same period of the prior year.

We currently expect 2007 general and administrative expenses to exceed 2006
levels, primarily due to increased costs associated with our patent enforcement
action against Autotrader.

Research and Development Expenses

Research and development expenses consist primarily of employee costs (inclusive
of stock-based compensation expense), payments to contract programmers and rent.

Research and development expenses were approximately 35.2% and 52.1% of revenues
for the three-month periods ended September 30, 2007 and 2006, respectively, and
approximately 47.3% and 36.9% for the nine-month periods ended September 30,
2007 and 2006, respectively. Research and development expenses for the
three-month period ended September 30, 2007 decreased by $148,000, or 24.9%, to
$446,600 from $594,600 for the three-month period ended September 30, 2006. For
the nine-month period ended September 30, 2007, research and development
expenses increased by $316,900, or 22.0%, to $1,757,300 from $1,440,400 for the
same period of 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 typically
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 and nine-month periods ended September 30, 2007 and 2006, capitalized
product development costs aggregated $3,600 and $0 and $3,600 and $0,
respectively.

Research and development expenses for the three-months ended September 30, 2007
and 2006 were as follows:

<TABLE>
<CAPTION>
                                                                Increase (Decrease)
                                                             ------------------------
                                    2007          2006         Dollars       Percent
                                 ----------    ----------    ----------    ----------
<S>                              <C>           <C>           <C>              <C>
     Employee costs              $  317,900    $  358,000    $  (40,100)      -11.2%
     Outside services                39,000       130,600       (91,600)      -70.1%
     Rent                            32,400        28,500         3,900        13.7%
     Travel and entertainment        19,900        13,400         6,500        48.5%
     Supplies                        14,200        45,700       (31,500)      -68.9%
     Other                           23,200        18,400         4,800        26.1%
                                 ----------    ----------    ----------
                                 $  446,600    $  594,600    $ (148,000)      -24.9%
                                 ==========    ==========    ==========
</TABLE>

Research and development expenses for the nine-months ended September 30, 2007
and 2006 were as follows:

<TABLE>
<CAPTION>
                                                                    Increase (Decrease)
                                                                --------------------------
                                     2007            2006          Dollars       Percent
                                ------------    ------------    ------------    ----------
<S>                             <C>             <C>             <C>                <C>
     Employee costs             $  1,331,400    $    875,400    $    456,000        52.1%
     Outside services                180,100         375,100        (195,000)      -52.0%
     Rent                            101,200          60,700          40,500        66.7%
     Travel and entertainment         46,200          30,500          15,700        51.5%
     Supplies                         28,600          58,800         (30,200)      -51.4%
     Other                            69,800          39,900          29,900        74.9%
                                ------------    ------------    ------------
                                $  1,757,300    $  1,440,400    $    316,900        22.0%
                                ============    ============    ============
</TABLE>

Employee costs for the three-month periods ended September 30, 2007 and 2006 are
net of $106,200 and $91,900, respectively, which related to the costs of
engineering time spent performing customer service. Employee costs for the
nine-month periods ended September 30, 2007 and 2006 are net of $335,000 and
$288,600, respectively, which relate to the costs of engineering time spent
performing customer service. Customer service costs are reported as a component
of cost of revenue.

                                       17
<PAGE>

The increase in employee costs for the nine-month period ended September 30,
2007 as compared with the respective period of 2006, was primarily due to costs
associated with employees hired beginning in and subsequent to the three-month
period ended June 30, 2006; a vice-president of engineering (August 2006), a
president for our Israeli subsidiary (July 2006), and two additional engineers
(May 2006 and January 2007).

Another factor contributing to the increase in employee costs for the nine-month
period ended September 30, 2007, as compared with the same period of 2006, was
severance costs associated with terminating four engineers at various times
through the nine-month period ended September 30, 2007. No such costs were
incurred during the nine-month period ended September 30, 2006. These increases
were partially offset by having an aggregate three fewer engineers during the
three-month period ended September 30, 2007, as compared with the same period of
the prior year.

Included in employee costs for the three and nine-month periods ended September
30, 2007 and 2006 were non-cash stock-based compensation costs of $23,500 and
$29,700, and $80,500 and $49,500 respectively, which were net of $2,600 and
$4,100, and $10,600 and $12,600 respectively, which were reported as customer
service cost of revenue.

The decrease in outside services for the three and nine-month periods ended
September 30, 2007, as compared with the same periods of the prior year, was
primarily due to reductions in the use of certain outside consultants as their
assignments completed, including consultants who were involved in providing
engineering services for our upgraded version of GO-Global for Windows, which
was released during the second quarter of 2007. During the nine-month period
ended September 30, 2006, outside services also included fees charged to us by
the president of our Israeli subsidiary as an outside consultant prior to our
hiring him on a full-time basis in July 2006.

Also included in outside services were recruiting costs. Such costs were lower
during the nine-month period ended September 30, 2007, as compared with the same
period in 2006, resulting from costs that we had incurred at various times
during the comparable period of the prior year that related to the hiring of a
vice-president of engineering (which occurred during August 2006). No such
recruiting costs were incurred during the nine-month period ended September
2007.

The increase in rent for the three and nine-month periods ended September 30,
2007, as compared with the same periods of the prior year, was primarily due to
the opening of our Israeli engineering facility, as well as the expansion of the
office space we rent in New Hampshire.

The decrease in supplies expense for the three and nine-month periods ended
September 30, 2007, as compared with the same periods of the prior year,
primarily resulted from higher than normal purchases of supplies during the
three-month period ended September 30, 2006, which were made in conjunction with
the expansion of our New Hampshire office and the opening of our Israeli
engineering subsidiary.

We currently expect 2007 research and development expenses to be higher as
compared with 2006 levels.

Other Income

During the three and nine-month periods ended September 30, 2007 and 2006, other
income consisted primarily of interest income on excess cash and note receivable
- shareholder. The increases in other income were primarily as a result of
higher interest rates being earned by our idle cash balances.

We anticipate that interest and other income for 2007 will approximate 2006
levels as we anticipate having similar or lower average cash balances for the
remainder of the year, partially offset by higher interest rates.

Net Loss

As a result of the foregoing items, net loss for the three-month period ended
September 30, 2007 was $979,600, a decrease of $15,600, or 1.6%, from a net loss
of $995,200 for the same period of 2006. Net loss for the nine-month period
ended September 30, 2007 was $3,021,800, and increase of $940,300, or 45.2%,
from a net loss of $2,081,500 for the same period of 2006. As a result of our
continued operating loss we intend to continue to pursue revenue growth
opportunities and sources of additional liquidity through all available means
and have implemented various cost cutting measures, including the workforce
reductions as discussed elsewhere in this Form 10-QSB.

                                       18
<PAGE>

Liquidity and Capital Resources

We believe that continued investment in our products and patent activities is
vital to our future growth and will enhance current, and provide new avenues, of
capital resources. We will continue to monitor such investments closely,
commensurate with the results of our operations. We plan on managing our
liquidity and capital resources very closely over the course of the next twelve
months. Although we expect 2007 revenue to approximate 2006 levels, we expect to
increase 2007 expenses on a year over year basis compared with 2006 primarily
due to costs associated with our patent enforcement action against Autotrader,
as discussed under the "Results of Operations for the Three and Nine-Month
Periods Ended September 30, 2007 and 2006."

We will continue to actively pursue potential merger activities and additional
sources of capital from external sources, and at such time as a merger or source
of capital might make financial sense and add value for our shareholders, we
will endeavor to consummate such merger or financing arrangement.

During the nine months ended September 30, 2007 and 2006 our cash and cash
equivalents balances decreased by $1,580,100 and $478,700, respectively,
primarily as a result of our operations consuming approximately $1,582,400 and
$373,900 of cash during the respective periods. During the nine-month periods
ended September 30, 2007 and 2006 our reported net losses of $3,021,800 and
$2,081,500, respectively, included two significant non-cash items, namely;
depreciation and amortization of $720,600 and $768,700, respectively, which were
primarily related to amortization of our patents and patent-related assets, and
stock-based compensation expense of $375,500 and $347,100, respectively. Another
significant non-cash item included in our reported net loss during the
nine-month period ended September 30, 2007 was an increase to our bad debts
allowance of $115,900, as explained elsewhere in this Form 10-QSB.

During the nine months ended September 30, 2007 and 2006 we closely monitored
our investing activities, spending approximately a net $64,800 and $56,100,
respectively, in those activities. Our investing activities were primarily
comprised of fixed asset purchases, mainly office furniture and computer
equipment. Our financing activities during the nine months ended September 30,
2007 were comprised of sale of stock to our employees under the terms of our
employee stock purchase plan and proceeds received from the exercise of employee
stock options. During the same period of the prior year, such employee stock
purchase plan proceeds were offset by the payment of the final costs associated
with a private placement of our stock that occurred during 2005.

Working Capital

As of September 30, 2007, we had current assets of $2,122,100 and current
liabilities of $2,227,000, which netted to working capital of ($104,900).
Included in current liabilities was the current portion of deferred revenue of
$1,335,600.

We believe that we will be able to support our operations for the next twelve
months if we can increase our revenue stream and/or obtain additional equity
investments or debt. Should we be unsuccessful in increasing our revenue stream
or obtaining additional equity investments or debt, then we would need to reduce
our current level of operations to a level sustainable with current revenue. We
are considering several aggressive strategic initiatives aimed at increasing
revenue, significantly reducing expenses or securing additional alternative
sources of financing. However, due to inherent uncertainties associated with
predicting future operations and results of the strategic initiatives, there can
be no assurances that we will be successful in any specific initiative.

New Accounting Pronouncements

In February 2007, FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities" ("SFAS 159") which permits entities to choose
to measure many financial instruments and certain other items at fair value. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of an entity's
first fiscal year that begins after November 15, 2007. We are assessing the
impact of SFAS 159, but do not expect it to have a material impact on results of
operations, cash flows or financial position.

In September 2006, FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
157") which defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, FASB having previously concluded in
those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value
measurements, however, for some entities; application of SFAS 157 will change
current practice. SFAS 157 is effective for financial statements issued for the


                                       19
<PAGE>

first fiscal year beginning after November 15, 2007 and interim periods within
those fiscal years. We are assessing the impact of SFAS 157, but do not expect
it to have a material impact on its results of operations, cash flows or
financial position.

Effective January 1, 2007, we adopted FASB Interpretation No. 48, "Accounting
for Uncertainties in Income Taxes - An Interpretation of FASB Statement No. 109"
("FIN 48"). FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of uncertain tax
positions taken or expected to be taken in a company's income tax return, and
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.

As a result of the implementation of FIN 48, we recognized no change in the
liability for unrecognized tax benefits related to tax positions taken in prior
years, and no corresponding change in retained deficit. Additionally, we
recognized no material adjustment in the liability for unrecognized income tax
benefits as of the January 1, 2007 adoption date and June 30, 2007. Also, we had
no amounts of unrecognized tax benefits that, if recognized, would affect its
effective tax rate for January 1, 2007 and June 30, 2007.

Our policy for deducting interest and penalties is to treat interest as interest
expense and penalties as taxes. As of June 30, 2007, we had no amount accrued
for the payment of interest and penalties related to the unrecognized tax
benefits and no amounts as of the adoption date of FIN 48.

We file federal consolidated income tax returns and income tax returns in
various state jurisdictions. Our 2003, 2004 and 2005 federal tax years and state
tax years from 2002 through 2005, inclusive, remain subject to income tax
examinations by the respective tax jurisdictions. Net operating loss
carryforwards generated in 1991 through 2006, and from 2000 through 2006, for
federal and state tax purposes, respectively, remain open to examination by the
respective tax jurisdictions.



                                       20
<PAGE>


ITEM 3. Controls and Procedures

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934) as of and for the period
covered by this report. Based upon that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of September 30, 2007.

There has not been any change in our internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended
September 30, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.



                                       21
<PAGE>


PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

On November 23, 2005, we initiated a proceeding (the "proceeding") against
AutoTrader.com in the United States District Court in the Eastern District of
Texas, (the "Court") alleging that AutoTrader.com was infringing two of our
patents, namely U.S. Patent Nos. 6,324,538 and 6,850,940 (the "538" and "940"
patents, respectively), which protect our unique method of maintaining an
automated and network accessible database, on its AutoTrader.com website. We
seek preliminary and permanent injunctive relief along with unspecified damages
and fees. In response to our proceeding, Autotrader has taken several actions,
including; seeking declaratory judgments that it does not infringe the 538 and
940 patents and that both patents are invalid, filing motions seeking to
invalidate the 538 and 940 patents in whole or in part, and filing a motion
seeking to limit potential damages, amongst others. We have filed certain
responses in opposition to Autotrader's actions and we have filed motions aimed
at enhancing our position in the proceeding. The Court has yet to rule on
certain outstanding motions and adjudication of the proceeding is scheduled to
begin in December 2007.

On May 31, 2007, we initiated a proceeding against Juniper Networks, Inc.
("Juniper") in the United States District Court in the Eastern District of Texas
alleging that certain of Juniper's products infringe three of our patents,
namely; U.S. Patent Nos. 5,826,014, 6,061,798 and 7,028,336, (the "014," "798"
and "336" patents, respectively) which protect our fundamental network security
and firewall technologies. On August 28, 2007, at our request, this proceeding
was dismissed without prejudice, and we immediately refiled our proceeding. We
seek preliminary and permanent injunctive relief along with unspecified damages
and fees. Juniper filed its Answer and Counterclaims on October 26, 2007 seeking
a declaratory judgment that it does not infringe the 014, 798 and 336 patents
and that all three of these patents are invalid and unenforceable.

ITEM 6. Exhibits

Exhibit 31 - Rule 13a-14(a)/15d-14(a) Certifications

Exhibit 32 - Section 1350 Certifications


                                       22
<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 14, 2007

                                                 By: /s/ Robert Dilworth
                                                     ----------------------
                                                       Robert Dilworth
                                                 Chief Executive Officer and
                                                   Chairman of the Board
                                                (Principal Executive Officer)

                                                 Date: November 14, 2007

                                                  By: /s/ William Swain
                                                      ------------------
                                                       William Swain
                                                   Chief Financial Officer
                                               (Principal Financial Officer and
                                                 (Principal Accounting Officer)