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

                                  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 March 31, 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 April 30, 2007 there were issued and outstanding 46,847,401 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 March 31, 2007              2
             Unaudited Condensed Consolidated Statements of Operations for the Three
               Months Ended March 31, 2007 and 2006                                           3
             Unaudited Condensed Consolidated Statements of Cash Flows for the Three
               Months Ended March 31, 2007 and 2006                                           4
             Notes to Unaudited Condensed Consolidated Financial Statements                   5
Item 2.      Management's Discussion and Analysis or Plan of Operation                       10
Item 3.      Controls and Procedures                                                         18
PART II.     OTHER INFORMATION
Item 1.      Legal Proceedings                                                               19
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds                     19
Item 6.      Exhibits                                                                        19
             Signatures

</TABLE>




<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements


<TABLE>
<CAPTION>

                             GraphOn Corporation
                    Condensed Consolidated Balance Sheet


   Assets                                                     (Unaudited)
   Current Assets                                           March 31, 2007
   --------------                                          ----------------
<S>                                                        <C>
     Cash and cash equivalents                             $      1,843,100
     Accounts receivable, net                                       865,600
     Other current assets                                           201,000
                                                           ----------------
      Total Current Assets                                        2,909,700
                                                           ----------------
     Patents, net                                                 3,408,100
     Property and equipment, net, and other assets                  132,000
                                                           ----------------
   Total Assets                                            $      6,449,800
                                                           ================
   Liabilities and Shareholders' Equity
   Current Liabilities
     Accounts payable and accrued expenses                 $        623,500
     Deferred revenue                                             1,109,500
                                                           ----------------
      Total Current Liabilities                                   1,733,000
                                                           ----------------
     Deferred revenue                                             1,761,000
                                                           ----------------
      Total Liabilities                                           3,494,000
                                                           ----------------
   Shareholders' Equity
     Common stock, $0.0001 par value, 195,000,000 shares
     authorized, 46,847,401 shares issued and outstanding             4,700
     Additional paid-in capital                                  58,950,800
     Note receivable - shareholder                                 (260,100)
     Accumulated deficit                                        (55,739,600)
                                                           ----------------
      Shareholders' Equity                                        2,955,800
                                                           ----------------
      Total Liabilities and Shareholders' Equity           $      6,449,800
                                                           ================



<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 March 31,
                                                 ------------------------------------
                                                       2007               2006
                                                 -----------------  -----------------
<S>                                              <C>                <C>
     Revenue                                     $       1,137,600  $       1,306,500
     Cost of Revenue                                       118,900            111,200
                                                 -----------------  -----------------
     Gross Profit                                        1,018,700          1,195,300
                                                 -----------------  -----------------
     Operating Expenses
       Selling and marketing                               432,500            413,800
       General and administrative                          974,000            989,900
       Research and development                            671,500            393,700
                                                 -----------------  -----------------
        Total Operating Expenses                         2,078,000          1,797,400
                                                 -----------------  -----------------
     Loss From Operations                               (1,059,300)          (602,100)
                                                 -----------------  -----------------
     Other Income, net                                      19,600             10,300
                                                 -----------------  -----------------
     Loss Before Provision for Income Tax               (1,039,700)          (591,800)
     Provision for income tax                                1,700                  -
                                                 -----------------  -----------------
     Net Loss                                    $      (1,041,400) $        (591,800)
                                                 =================  =================
     Basic and Diluted Loss per Common Share     $           (0.02) $           (0.01)
                                                 =================  =================
     Weighted Average Common Shares Outstanding         46,238,191         46,183,849
                                                 =================  =================


<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)
                                                           Three Months Ended March 31,
                                                           ----------------------------
    Cash Flows Provided By (Used In) Operating Activities      2007            2006
    -----------------------------------------------------  -------------  -------------
<S>                                                        <C>            <C>
    Net Loss                                               $  (1,041,400) $    (591,800)
    Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
    Depreciation and amortization                                243,500        255,600
    Stock option compensation expense                            138,900        110,000
    Other items                                                    2,400         (2,400)
    Changes in operating assets and liabilities
      Accounts receivable                                       (185,200)       241,600
      Other current assets                                      (135,700)       (58,600)
      Accounts payable and accrued expenses                     (169,800)      (181,000)
      Deferred revenue                                            62,900         62,000
                                                           -------------  -------------
    Net Cash Used In Operating Activities                     (1,084,400)      (164,600)
                                                           -------------  -------------
    Cash Flows Used In Investing Activities
    Capital expenditures                                         (13,400)       (20,300)
                                                           -------------  -------------
    Net Cash Used In Investing Activities                        (13,400)       (20,300)
                                                           -------------  -------------
    Cash Flows Provided By (Used In) Financing Activities
    Proceeds from sale of common stock under ESPP                  3,800          4,500
    Costs of private placement of preferred stock and
    warrants                                                           -        (53,000)
                                                           -------------  -------------
    Net Cash Provided By (Used In) Financing Activities            3,800        (48,500)
                                                           -------------  -------------
    Net Decrease in Cash and Cash Equivalents                 (1,094,000)      (233,400)
    Cash and Cash Equivalents, beginning of period             2,937,100      3,528,100
                                                           -------------  -------------
    Cash and Cash Equivalents, end of period               $   1,843,100  $   3,294,700
                                                           =============  =============

<FN>

      See accompanying notes to unaudited condensed consolidated financial statements
</FN>
</TABLE>




                                       4
<PAGE>


                               GRAPHON CORPORATION
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 March 31, 2007


1. Basis of Presentation

The unaudited condensed consolidated financial statements included herein have
been prepared in accordance with the instructions for Form 10-QSB and,
therefore, do not include all information and footnotes necessary for a complete
presentation of results of operations, financial position and cash flows.

The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments in the
three-month periods ended March 31, 2007 and 2006) 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.

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"), (collectively "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 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


                                       5
<PAGE>

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
-month periods ended March 31, 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 FAS No. 123 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 Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
("FAS123").

Valuation and Expense Information under FAS123R

The Company recorded stock-based compensation expense of $138,900 and $110,000
in the three-month periods ended March 31, 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-month periods ended March 31, 2007 and 2006 by income statement
classification:

<TABLE>
<CAPTION>
                                         Three months ended March 31,
 Income statement classification              2007        2006
 -------------------------------          ----------   ----------
<S>                                       <C>          <C>
 Cost of revenue                          $    4,400   $    4,100
 Selling and marketing expense                10,700       13,300
 General and administrative expense           92,500       84,600
 Research and development expense             31,300        8,000
                                          ----------   ----------
                                          $  138,900   $  110,000
                                          ==========   ==========
</TABLE>

                                       6
<PAGE>

In connection with the adoption of FAS123R, the Company estimated the fair value
of each stock-based award and employee stock purchase plan ("ESPP") share
granted during the three-month periods ended March 31, 2007 and 2006 on the date
of grant using a binomial model, with the assumptions set forth in the following
table:


<TABLE>
<CAPTION>
                                                Expected
   Three                                         Option
   Months                Estimated     Prior      Term     Estimated  Risk-Free
   Ended     Estimated   Forfeiture  Forfeiture  (Years)   Exercise    Interest
  March 31,  Volatility    Rate        Rate        (1)      Factor       Rate     Dividends
 ------------------------------------------------------------------------------------------
<S> <C>       <C>          <C>         <C>         <C>      <C>          <C>
    2007      154.44%      5.06%       5.50%       7.5      10.00%       4.58%        -
    2006      158.69%     10.00%        (2)        7.5      10.00%       4.46%        -
<FN>

     (1) The expected term of the ESPP shares was six months, which is the
     length of time between the ESPP grant dates and the purchase dates.

     (2) There was no prior forfeiture rate for the three-month period ended
     March 31, 2006 as this was the period during which we adopted FAS123R.
</FN>
</TABLE>

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 awards was based on historical award holder exercise patterns and
considered the market performance of the Company's common stock and other items.

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 grants made during the three-month periods ended March 31, 2007 and 2006,
the weighted average fair values of stock-based awards were $0.146 and $0.188,
respectively, and for ESPP shares were $0.156 and $0.09, respectively.

The following table presents a summary of the status and activity of the
Company's stock option awards for the three-month period ended March 31, 2007.

<TABLE>
<CAPTION>
                                                                Weighted
                                                  Weighted      Average
                                                   Average      Remaining     Aggregate
                                     Number of    Exercise     Contractual    Intrinsic
                                       Shares       Price      Term (Years)     Value
                                    -----------  -----------  -------------  -----------
<S>                                   <C>        <C>    <C>           <C>    <C>  <C>
Outstanding - December 31, 2006 (1)   6,876,613  $      0.45
Granted                                 830,000         0.16
Exercised                                     -            -
Forfeited or expired                   (307,576)        0.17
                                    -----------
Outstanding - March 31, 2007 (1)      7,399,037  $      0.43          7.31   $    31,100
                                    -----------
<FN>

    (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.
</FN>
</TABLE>

                                       7
<PAGE>

Of the options outstanding as of March 31, 2007, 5,111,559 were vested and
2,178,427 were estimated to vest in future periods, prior to their estimated
forfeiture.

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.

No stock option awards were exercised during either of the three-month periods
ended March 31, 2007 or 2006. As of March 31, 2007, there was approximately
$517,200 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 March 31, 2007 and 2006 was comprised
as follows:

<TABLE>
<CAPTION>
                                                           Increase (Decrease)
   Revenue                  2007           2006            Dollars      Percent
   ------------------  -------------  --------------   --------------  --------
   Product licenses
<S>                    <C>            <C>              <C>               <C>
   Windows             $     432,800  $      627,400   $     (194,600)   (31.0%)
   Unix                      173,200         257,800          (84,600)   (32.8%)
                       -------------  --------------   --------------
                             606,000         885,200          (279,200)  (31.5%)
                       -------------  --------------   --------------
   Service fees
   Windows                   219,100         213,100            6,000      2.8%
   Unix                      221,700         183,300           38,400     20.9%
                       -------------  --------------   --------------
                             440,800         396,400           44,400     11.2%
                       -------------  --------------   --------------
   Other                      90,800          24,900           65,900
                       -------------  --------------   --------------
   Total Revenue       $   1,137,600  $    1,306,500   $     (168,900)   (12.9%)
                       =============  ==============   ==============
</TABLE>

5. Patents

As of March 31, 2007, patents consisted of the following:

<TABLE>
<S>                                  <C>
       Patents                       $     5,340,400
       Accumulated amortization           (1,932,300)
                                     ---------------
                                     $     3,408,100
                                     ===============
</TABLE>

Patent amortization, which aggregated $222,300 during each of the three-month
periods ended March 31, 2007 and 2006, is a component of general and
administrative expenses.

6. Supplemental Disclosure of Cash Flow Information

The Company disbursed no cash for the payment of income taxes during either of
the three-month periods ended March 31, 2007 or 2006. The Company disbursed no
cash for the payment of interest expense during either of the three-month
periods ended March 31, 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
-month periods ended March 31, 2007 and 2006, 21,248,237 and 19,550,468 shares,
respectively, of common stock equivalents were excluded from the computation of
diluted loss per share since their effect would be antidilutive.

                                       8
<PAGE>


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.

In July 2006, FASB issued 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 financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. In addition, it provides guidance on the
measurement, derecognition, classification and disclosure of tax positions, as
well as the accounting for related interest and penalties. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The Company adopted FIN 48,
effective January 1, 2007, and its adoption did not have a material impact on
consolidated results of operations or financial condition.












                                       9
<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   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 independent software vendors ("ISVs"), value-added
resellers ("VARs")(collectively "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.

We continue to manage our operations to bring our cash expenditures in line with
our revenues in order to determine the most cost effective use of our cash on
hand. We are simultaneously looking at ways to improve our revenue stream.
Additionally, we continue to review potential merger opportunities as they
present themselves to us and at such time as a merger might make financial sense
and add value for our shareholders, we will pursue that merger opportunity. We
believe that improving or maintaining our current revenue stream, coupled with
our cash on hand and other items of working capital will sufficiently support
our operations during 2007. If we are unsuccessful in maintaining our current
revenue level or finding additional alternative sources of financing, we will
face a severe constraint on our ability to sustain operations in a manner that
creates future growth and viability.

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.

                                       10
<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-month periods ended March 31, 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 FAS No. 123 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 Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
("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. 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 5.06% and a prior forfeiture rate of 5.50% by analyzing our
historical forfeiture data, including consideration of the impact of certain
non-recurring events, such as reductions in work force. In estimating our stock
price volatility for grants awarded during the three-month period ended March
31, 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 154.44%. 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 also recognized compensation costs for shares purchased under our Employee
Stock Purchase Plan ("ESPP") during the three months ended March 31, 2007. We
applied the same variables to the calculation of the costs associated with the
ESPP shares purchased as the stock option grants noted above, 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.

The specific valuation assumptions noted above were applied to stock options
that we granted during the three-month period ended March 31, 2007 and ESPP
shares that were granted February 1, 2007. For assumptions used for grants made
during the three-month period ended March 31, 2006, please refer to our
Quarterly Reports on Form 10-QSB as filed with the SEC on May 15, 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 $345,100.

Results of Operations for the Three-Month Periods Ended March 31, 2007 and 2006.

Revenue

The changes in both Windows and Unix-based product licenses revenue for the
three-month period ended March 31, 2007 as compared with the same period of 2006
were reflective of how such revenue can vary from period to period because a
significant portion of this revenue has been, and continues to be earned from a
limited number of significant customers, most of whom are resellers.


                                       11
<PAGE>

Consequently, if any of these significant customers change their 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 March 31, 2007 and 2006 was as
follows:

<TABLE>
<CAPTION>
                                                             Increase (Decrease)
      Revenue                  2007           2006          Dollars      Percent
      -------------------  -------------  -------------  -------------  --------
      Product licenses
<S>                        <C>            <C>            <C>             <C>
      Windows              $     432,800  $     627,400  $    (194,600)  (31.0%)
      Unix                       173,200        257,800        (84,600)  (32.8%)
                           -------------  -------------  -------------
                                 606,000        885,200       (279,200)  (31.5%)
                           -------------  -------------  -------------
      Service fees
      Windows                    219,100        213,100          6,000     2.8%
      Unix                       221,700        183,300         38,400    20.9%
                           -------------  -------------  -------------
                                 440,800        396,400         44,400    11.2%
                           -------------  -------------  -------------
      Other (1)                   90,800         24,900         65,900   264.7%
                           -------------  -------------  -------------
      Total Revenue        $   1,137,600  $   1,306,500  $    (168,900)  (12.9%)
                           =============  =============  =============
<FN>

      (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.
</FN>
</TABLE>

The decrease in Windows product license revenue is primarily due to our
determination, under our accounting policies, to defer revenue recognition for a
$196,000 purchase made during the three-month period ended March 31, 2007 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 will recognize revenue from this
transaction. We expect that future purchases by this customer will also be
deferred for the foreseeable future.

Five Unix product customers, including our most significant Unix customer
(Alcatel-Lucent), purchased an aggregate $143,400 of Unix products, which
accounted for 82.8% of Unix product license revenue for the three-month period
ended March 31, 2007. The decrease in Unix product license revenue for the
three-month period ended March 31, 2007 as compared with the same period of 2006
was primarily due to no 2007 purchases being made by three Unix customers who
had purchased an aggregate $72,700 worth of Unix product licenses in the prior
year.

Our customers typically purchase a maintenance contract at the time they license
our product. Our Windows-based maintenance contracts vary in term from one to
three years and generally are renewed upon expiration. Our Unix-based
maintenance contracts vary in term from one to five years and generally are
renewed upon expiration. Service fees associated with maintenance contracts are
deferred and recognized as revenue ratably over the underlying service period of
the maintenance contract.

The increase in both Windows and Unix-based service fees for the three-month
period ended March 31, 2007, as compared with the same period of the prior year
was primarily due to the high levels of maintenance contract purchases that
occurred throughout 2006. We expect service fees revenue to continue to be
higher throughout 2007 as compared with similar periods of 2006.

Cost of Revenue

Cost of revenue is comprised primarily of service costs, which represent the
costs of customer service, and product costs, which are primarily the
amortization of capitalized technology developed in-house. 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 10.5% and 8.5% of revenue for the three months ended March
31, 2007 and 2006, respectively. For the three months ended March 31, 2007 cost
of revenue increased by $7,700, or 6.9%, to $118,900 from $111,200 for the same
period of 2006.

                                       12
<PAGE>

Cost of revenue for the three-month periods ended March 31, 2007 and 2006 was as
follows:

<TABLE>
<CAPTION>
                                                            Increase (Decrease)
                              2007           2006          Dollars      Percent
                          -------------  -------------  -------------  --------
<S>                       <C>            <C>            <C>             <C>
       Product costs      $       9,500  $      35,200  $     (25,700)  (73.0%)
       Service costs            109,400         76,000         33,400    43.9
                          -------------  -------------  -------------
                          $     118,900  $     111,200  $       7,700     6.9%
                          =============  =============  =============
</TABLE>

The decrease in product costs for the three-month period ended March 31, 2007,
as compared with the same period in 2006 was primarily due to a decrease in the
amortization of capitalized software development costs. We expect product costs
to remain lower throughout 2007, as compared with 2006, as certain elements of
our capitalized software development costs became fully amortized during 2006,
with the remainders becoming fully amortized during the three-month period ended
March 31, 2007.

The increase in service costs for the three-month period ended March 31, 2007,
as compared with the same period 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, as we have sold more maintenance contracts over
the course of the last several quarters. 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 38.0% and 31.7% of revenue for the three
months ended March 31, 2007 and 2006, respectively. Selling and marketing
expenses for the three months ended March 31, 2007 increased by $18,700, or
4.5%, to $432,500 from $413,800 for the same period of 2006.

Selling and marketing expenses for the three months ended March 31, 2007 and
2006 were as follows:

<TABLE>
<CAPTION>
                                                                  Increase (Decrease)
                                      2007           2006          Dollars     Percent
                                   ------------  ------------   ------------  --------
<S>                                <C>           <C>            <C>             <C>
       Employee costs              $    295,600  $    299,100   $     (3,500)   (1.2%)
       Outside services                  78,100        54,300         23,800    43.8%
       Travel and entertainment          25,800        32,400         (6,600)  (20.4%)
       Other                             33,000        28,000          5,000    17.9%
                                   ------------  ------------   ------------
                                   $    432,500  $    413,800   $     18,700     4.5%
                                   ============  ============   ============
</TABLE>

The decrease in employee costs for the three-month period ended March 31, 2007,
as compared with the same period in 2006, resulted primarily from lower
commissions, bonuses and related benefits. A portion of our sales
representatives' compensation package is commissions-based. Since overall sales
were lower during the three months ended March 31, 2007 than 2006, their
commissions were also lower. Additionally, bonuses based on overall sales were
lower during the three months ended March 31, 2007 than the same period in 2006
since overall sales were lower. Certain benefits, primarily those based on total
compensation, were lower as a result of the lower commissions and bonus expenses
during the three months ended March 31, 2007 as compared with the same period in
2006. Partially offsetting these decreases was an increase in wages due to
having two more sales representatives during the three months ended March 31,
2007 as compared with the same period of 2006.

Included in employee costs for the three-month periods ended March 31, 2007 and
2006 are non-cash stock-based compensation costs aggregating approximately
$10,700 and $13,300, respectively.

The increase in outside services for the three-month period ended March 31,
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.
Commissions paid to our consulting Asian sales representative also were higher
during the three months ended March 31, 2007 as compared with the same period of
2006.

                                       13
<PAGE>

The decrease in travel and entertainment for the three-month period ended March
31, 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 to increase our 2007 sales and marketing expenses over 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 85.6% and 75.8% of
revenues for the three-month periods ended March 31, 2007 and 2006,
respectively. General and administrative expenses decreased by $15,900, or 1.6%,
to $974,000 from $989,900 for the three-month period ended March 31, 2007, as
compared with the same period in 2006.

General and administrative expenses for the three months ended March 31, 2007
and 2006 were as follows:

<TABLE>
<CAPTION>
                                                             Increase (Decrease)
                                  2007            2006       Dollars     Percent
                              ------------  ------------  ------------  --------
<S>                           <C>           <C>           <C>             <C>
  Employee costs              $    446,700  $    399,700  $     47,000     11.8%
  Depreciation and
  amortization                     226,200       225,600           600      0.3%
  Legal and accounting             153,400       120,800        32,600     27.0%
  Insurance                         23,900        26,900        (3,000)   (11.2%)
  Rent                              18,200        15,700         2,500     15.9%
  Public costs                      14,500        13,600           900      6.6%
  Outside services                  20,800       106,200       (85,400)   (80.4%)
  Travel and entertainment          26,700        48,400       (21,700)   (44.8%)
  Other                             43,600        33,000        10,600     32.1%
                              ------------  ------------  ------------
                              $    974,000  $    989,900  $    (15,900)    (1.6%)
                              ============  ============  ============
</TABLE>

The increase in employee costs in the three months ended March 31, 2007, as
compared with the same period of 2006, was primarily due to hiring our Chief
Executive Officer on a full-time basis during September 2006. Included in
employee costs for the three-month periods ended March 31, 2007 and 2006 were
non-cash stock-based compensation costs aggregating approximately $92,500 and
$84,500, respectively.

Legal and accounting fees were higher during the three months ended March 31,
2007, as compared with the same period of the previous year, primarily as a
result of fees associated with administrative and pre-trial preparations
associated with our patent portfolio and current lawsuit (discussed elsewhere in
this Form 10-QSB) as well as certain business opportunities we had been
pursuing.

Outside services were lower during the three months ended March 31, 2007 than
during the same period of the prior year primarily as a result of the hiring of
our Chief Executive Officer on a full-time basis during September 2006. Also,
during the three months ended March 31, 2006 we incurred recruiting fees
associated with the hiring of a vice-president whereas no such recruiting fees
were incurred during the same period of 2007.

The $21,700 decrease in travel and entertainment during the three months ended
March 31, 2007, as compared with the same period of the previous year, was
primarily a result of less travel by our Chief Executive Officer. Additional
cost reductions 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 the
three month period ended March 31, 2007, as compared with the same period of the
prior year.

We currently expect 2007 general and administrative expenses to approximate 2006
levels.

                                       14
<PAGE>

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 59.0% and 30.1% of revenues
for the three-month periods ended March 31, 2007 and 2006, respectively.
Research and development expenses for the three-month period ended March 31,
2007 increased by $277,800, or 70.6%, to $671,500 from $393,700 for the
three-month period ended March 31, 2006.

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. No product
development costs were capitalized during either of the three-month periods
ended March 31, 2007 or 2006.

Research and development expenses for the three-months ended March 31, 2007 and
2006 were as follows:

<TABLE>
<CAPTION>
                                                          Increase (Decrease)
                            2007           2006          Dollars     Percent
                        -------------  --------------  -----------  ---------
<S>                     <C>            <C>             <C>              <C>
   Employee costs       $     505,400  $      270,100  $   235,300      87.1%
   Outside services            89,300          75,600       13,700      18.1%
   Rent                        32,800          16,100       16,700     103.7%
   Other                       44,000          31,900       12,100      37.9%
                        -------------  --------------  -----------
                        $     671,500  $      393,700  $   277,800      70.6%
                        =============  ==============  ===========
</TABLE>

Employee costs for the three-month periods ended March 31, 2007 and 2006 are net
of $109,400 and $76,000, respectively, which related to the costs of engineering
time spent performing customer service. Customer service costs are reported as a
component of cost of revenue. The increase in employee costs was primarily due
to costs associated with employees hired subsequent to the three-month period
ended March 31, 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).

Included in employee costs for the three-month periods ended March 31, 2007 and
2006 were non-cash stock-based compensation costs of $31,300 and $8,000,
respectively, which were net of $4,400 and $4,100, respectively, which was
reported as customer service cost of revenue.

The increase in outside services for the three-month period ended March 31,
2007, as compared with the same period of the prior year, was incurred primarily
by expanding our use of consulting engineers to help enhance our product
development efforts. Partially offsetting these costs was the hiring of a former
consultant as a full-time employee during December 2006.

The increase in rent for the three-month period ended March 31, 2007, as
compared with the same period 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.

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

Other Income

During the three-month periods ended March 31, 2007 and 2006, other income
consisted primarily of interest income on excess cash and note receivable -
shareholder. The increase in other income was 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 2005
levels as we anticipate having similar or lower average cash balances for the
remainder of the year, partially offset by higher interest rates.

                                       15
<PAGE>

Net Loss

As a result of the foregoing items, net loss for the three-month period ended
March 31, 2007 was $1,041,400, an increase of $449,600, or 76.0%, from a net
loss of $591,800 for the same period of 2006. As a result of our continued
operating loss we intend to continue to pursue revenue growth opportunities
through all available means.

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 for the
reasons discussed under the "Results of Operations for the Three-Month Periods
Ended March 31, 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 three months ended March 31, 2007 and 2006 our cash and cash
equivalents balances decreased by $1,094,000 and $233,400, respectively,
primarily as a result of our operations consuming approximately $1,084,400 and
$164,600 of cash during the respective periods. During the three month periods
ended March 31, 2007 and 2006 our reported net losses of $1,041,400 and
$591,800, respectively, included two significant non-cash items, namely;
depreciation and amortization of $243,500 and $255,600, respectively, which were
primarily related to amortization of our patents and patent-related assets, and
stock-based compensation expense of $138,900 and $110,000, respectively.

During the three months ended March 31, 2007 and 2006 we closely monitored our
investing activities, spending approximately $13,400 and $20,300, 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 three months ended March 31, 2007 solely resulted from the
sale of stock to our employees under the terms of our employee stock purchase
plan, whereas during the same period of the prior year, such sale of stock
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 March 31, 2007, we had current assets of $2,909,700 and current
liabilities of $1,733,000, which netted to working capital of $1,176,700.
Included in current liabilities was the current portion of deferred revenue of
$1,109,500.

Based on our anticipated 2007 operating revenues, operating cost structure, and
current working capital, we believe that we will be able to support our
operational needs with currently available resources for at least the next
twelve months. However, due to inherent uncertainties associated with predicting
future operations, there can be no assurances that these resources will be
sufficient to fund our anticipated expenses during the next twelve months.

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
first fiscal year beginning after November 15, 2007 and interim periods within


                                       16
<PAGE>

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.

In July 2006, FASB issued 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 financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. In addition, it provides guidance on the
measurement, derecognition, classification and disclosure of tax positions, as
well as the accounting for related interest and penalties. FIN 48 is effective
for fiscal years beginning after December 15, 2006. We adopted FIN 48, effective
January 1, 2007, and its adoption did not have a material impact on consolidated
results of operations or financial condition.








                                       17
<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 March 31, 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
March 31, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




                                       18
<PAGE>


PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

On November 23, 2005, we initiated a 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 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. Autotrader.com filed
its Answer and Counterclaims on January 17, 2006 seeking a declaratory judgment
that it does not infringe the 538 and 940 patents and that both patents are
invalid. On March 24, 2006, Autotrader.com filed a motion for summary judgment
seeking to invalidate the 538 and 940 patents. On May 1, 2006 we filed a
response in opposition to AutoTrader's motion. On August 8, 2006, AutoTrader's
motion for summary judgment was denied. On August 9, 2006, the Court filed a
Docket Control Order setting forth proposed pretrial deadlines. The most
significant dates set were for the Markman Hearing (May 31, 2007) and jury
selection (December 3, 2007).

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three-month period ended March 31, 2007, we granted the following
stock options:

   o  stock options to purchase an aggregate 405,000 shares of common stock,
      at exercise prices ranging from $0.15 to $0.165, were granted to
      various non-executive employees.
   o  stock options to purchase an aggregate 425,000 shares of common stock,
      at an exercise price of $0.165, were granted to our directors and
      executive employees.

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

ITEM 6. Exhibits

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

Exhibit 32 - Section 1350 Certifications



                                       19
<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: May 15, 2007
                                                By: /s/ Robert Dilworth
                                                    -------------------
                                                     Robert Dilworth
                                              Chief Executive Officer and
                                                 Chairman of the Board
                                             (Principal Executive Officer)


                                                 Date: May 15, 2007
                                                 By: /s/ William Swain
                                                     -----------------
                                                       William Swain
                                                  Chief Financial Officer
                                             (Principal Financial Officer and
                                               (Principal Accounting Officer)



                                       20