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

                                  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 June 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 August 3, 2007 there were issued and outstanding 47,322,401 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>
<S>       <C>                                                                         <C>
PART I.   FINANCIAL INFORMATION                                                       Page
                                                                                      ----
Item 1.   Financial Statements
          Unaudited Condensed Consolidated Balance Sheet as of June 30, 2007             2
          Unaudited Condensed Consolidated Statements of Operations for the
             Three and Six Months Ended June 30, 2007 and 2006                           3
          Unaudited Condensed Consolidated Statements of Cash Flows for the Six
             Months Ended June 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                                                       20
PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings                                                             21
Item 6.   Exhibits                                                                      21
          Signatures

</TABLE>





<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

<TABLE>
<CAPTION>
                                GraphOn Corporation
                        Condensed Consolidated Balance Sheet
                        ------------------------------------

     Assets
     ------                                                        (Unaudited)
     Current Assets                                               June 30, 2007
     --------------                                            -----------------
     <S>                                                       <C>
     Cash and cash equivalents                                 $       1,438,200
     Accounts receivable, net                                            784,700
     Other current assets                                                 76,500
                                                               -----------------
       Total Current Assets                                            2,299,400
                                                               -----------------
     Patents, net                                                      3,185,800
     Property and equipment, net, and other assets                       144,700
                                                               -----------------
     Total Assets                                              $       5,629,900
                                                               =================
     Liabilities and Shareholders' Equity
     ------------------------------------
     Current Liabilities
     -------------------
     Accounts payable and accrued expenses                     $         637,200
     Deferred revenue                                                  1,188,700
                                                               -----------------
       Total Current Liabilities                                       1,825,900
                                                               -----------------
     Deferred revenue                                                  1,728,100
                                                               -----------------
       Total Liabilities                                               3,554,000
                                                               -----------------
     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                                       59,071,700
     Note receivable - shareholder                                      (260,100)
     Accumulated deficit                                             (56,740,400)
                                                               -------------------
       Shareholders' Equity                                            2,075,900
                                                               -----------------
     Total Liabilities and Shareholders' Equity                $       5,629,900
                                                               =================
</TABLE>


                  See accompanying notes to unaudited condensed
                        consolidated financial statements



                                       2
<PAGE>

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

                                                                           (Unaudited)
                                                    -------------------------------------------------------
                                                    Three Months Ended June 30,   Six Months Ended June 30,
                                                    ---------------------------   -------------------------
                                                        2007            2006          2007             2006
                                                    ------------   ------------   ------------   ------------
<S>                                                 <C>            <C>            <C>            <C>
Revenue                                             $  1,307,800   $  1,450,800   $  2,445,400   $  2,757,300
Cost of revenue                                          123,300        150,300        242,200        261,500
                                                    ------------   ------------   ------------   ------------
Gross profit                                           1,184,500      1,300,500      2,203,200      2,495,800
                                                    ------------   ------------   ------------   ------------
Operating expenses
   Selling and marketing                                 420,900        426,300        853,400        840,100
   General and administrative                          1,137,400        924,900      2,111,400      1,914,800
   Research and development                              639,200        452,100      1,310,700        845,800
                                                    ------------   ------------   ------------   ------------
      Total operating expenses                         2,197,500      1,803,300      4,275,500      3,600,700
                                                    ------------   ------------   ------------   ------------
Loss from operations                                  (1,013,000)      (502,800)    (2,072,300)    (1,104,900)
                                                    ------------   ------------   ------------   ------------
Other income, net                                         14,400         11,400         34,000         21,700
                                                    ------------   ------------   ------------   ------------
Loss before provision for income tax                    (998,600)      (491,400)    (2,038,300)    (1,083,200)
Provision for income tax                                   2,200          3,100          3,900          3,100
                                                    ------------   ------------   ------------   ------------
Net loss                                            $ (1,000,800)  $   (494,500)  $ (2,042,200)  $ (1,086,300)
                                                    ============   ============   ============   ============
Basic and diluted loss per common share             $      (0.02)  $      (0.01)  $      (0.04)  $      (0.02)
                                                    ============   ============   ============   ============
Weighted average common shares outstanding            46,247,401     46,192,250     46,242,822     46,188,073
                                                    ============   ============   ============   ============

<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)
                                                                             Six Months Ended June 30,
                                                                          --------------------------------
     Cash Flows Provided By (Used In) Operating Activities                      2007              2006
     -----------------------------------------------------                --------------    --------------
     <S>                                                                  <C>               <C>
     Net Loss                                                             $   (2,042,200)   $   (1,086,300)
     Adjustments to reconcile net loss to net cash
       provided by (used in) operating activities:
     Depreciation and amortization                                               482,400           514,400
     Stock option compensation expense                                           262,200           226,200
     Provision for doubtful accounts                                             115,900                 -
     Other items                                                                   1,000            (4,800)
     Changes in operating assets and liabilities
       Accounts receivable                                                      (220,200)          (73,200)
       Prepaid expenses and other current assets                                 (11,200)          (48,200)
       Accounts payable and accrued expenses                                    (156,100)         (158,900)
       Deferred revenue                                                          109,200           342,800
                                                                          --------------    --------------
     Net Cash Used In Operating Activities                                    (1,459,000)         (288,000)
                                                                          --------------    --------------
     Cash Flows Used In Investing Activities
     Capital expenditures                                                        (43,200)          (51,000)
     Other assets                                                                   (500)            2,600
                                                                          --------------    --------------
     Net Cash Used In Investing Activities                                       (43,700)          (48,400)
                                                                          --------------    --------------
     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                        -           (58,000)
                                                                          --------------    --------------
     Net Cash Provided By (Used In) Financing Activities                           3,800           (53,500)
                                                                          --------------    --------------
     Effect of exchange rate fluctuations on cash and cash equivalents                 -               100
     Net Decrease in Cash and Cash Equivalents                                (1,498,900)         (389,800)
     Cash and Cash Equivalents, beginning of period                            2,937,100         3,528,100
                                                                          --------------    --------------
     Cash and Cash Equivalents, end of period                             $    1,438,200    $    3,138,300
                                                                          ==============    ==============

<FN>

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

</TABLE>

                                       4
<PAGE>


                               GRAPHON CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  June 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.

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
       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
and six-month periods ended June 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 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 $123,300 and $116,200
in the three-month periods ended June 30, 2007 and 2006, respectively and
$262,200 and $226,200 in the six-month periods ended June 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 six-month periods ended June 30, 2007 and 2006 by income
statement classification:

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                            Three months ended June 30,    Six months ended June 30,
                                            ---------------------------   ---------------------------
     Income statement classification             2007           2006          2007           2006
     -------------------------------        ------------   ------------   ------------   ------------
<S>                                         <C>            <C>            <C>            <C>
     Cost of revenue                        $      3,600   $      4,400   $      8,000   $      8,500
     Selling and marketing expense                 9,100          3,300         19,800         16,600
     General and administrative expense           84,900         96,700        177,400        181,300
     Research and development expense             25,700         11,800         57,000         19,800
                                            ------------   ------------   ------------   ------------
                                            $    123,300   $    116,200   $    262,200   $    226,200
                                            ============   ============   ============   ============
</TABLE>

In connection with the adoption of FAS123R, the Company estimated the fair value
of each stock-based award granted during the three-month periods ended June 30,
2007 and 2006 on the date of grant using a binomial model, with the assumptions
set forth in the following table:

<TABLE>
<CAPTION>

  Three Months                Estimated      Prior     Expected     Estimated  Risk-Free
  Ended June 30,   Estimated  Forfeiture  Forfeiture  Option Term   Exercise   Interest
    (1)(2)        Volatility    Rate         Rate       (Years)      Factor      Rate     Dividends
  --------------  ----------  ----------  ----------  ------------  ---------  ---------  ---------
      <S>          <C>          <C>          <C>           <C>        <C>         <C>         <C>
    2007 (3)          -           -            -            -           -           -         -
      2006         157.11%      10.00%       10.00%        7.5        10.00%      5.02%       -
</TABLE>

     (1) No new employee stock purchase plan ("ESPP") grants were issued during
     either the three-month period ended June 30, 2007 or 2006.

     (2) Assumptions used to estimate the fair value of each stock-based award
     and ESPP shares granted during the three-month periods ended March 31, 2007
     and 2006 can be found in the Company's Form 10-QSB as filed with the SEC on
     May 15, 2007.

     (3) No new sotck option grants or awards were made during the three months
     ended June 30, 2007.

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 or ESPP purchase periods, respectively.

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
items. The six-month expected term of the ESPP shares was based on the length of
time between the ESPP 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.

No grants were made during the three-month period ended June 30, 2007. For
grants made during the three-month period ended June 30, 2006, the weighted
average fair value of stock-based awards was $0.21. For grants made during the
six-month periods June 30, 2007 and 2006, the weighted average fair value of
stock-based awards was $0.1458 and $0.21, respectively, and the weighted
average fair value of ESPP grants were $0.1605 and $0.1785, respectively.

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


                                       7
<PAGE>

<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
                                                  -----------
      Granted                                              -            -
      Exercised                                            -            -
      Forfeited or expired                          (101,823)        0.17
                                                  -----------
      Outstanding - June 30, 2007 (1)              7,297,214    $    0.43           6.50         $     136,900
                                                  -----------
</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 June 30, 2007, 5,454,194 were vested and
1,843,020 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 six-month periods
ended June 30, 2007 or 2006. As of June 30, 2007, there was approximately
$389,300 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 June 30, 2007 and 2006 was comprised
as follows:

<TABLE>
<CAPTION>
                                                            Increase (Decrease)
                                                         -------------------------
     Revenue                   2007           2006          Dollars       Percent
     ----------------      ------------   ------------   ------------   ----------
     Product licenses
     ----------------
     <S>                   <C>             <C>           <C>              <C>
     Windows               $    584,000    $   432,800   $    151,200       34.9%
     Unix                       313,900        605,100       (291,200)     (48.1%)
                           ------------   ------------   ------------
                                897,900      1,037,900       (140,000)     (13.5%)
                           ------------   ------------   ------------
     Service fees
     ------------
     Windows                    172,200        203,800        (31,600)     (15.5%)
     Unix                       237,700        195,200         42,500       21.8%
                           ------------   ------------   ------------
                                409,900        399,000         10,900        2.7%
                           ------------   ------------   ------------
     Other                            -         13,900        (13,900)    (100.0%)
                           ------------   ------------   ------------
     Total Revenue         $  1,307,800   $  1,450,800   $   (143,000)      (9.9%)
                           ============   ============   ============
</TABLE>

                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                                              Increase (Decrease)
                                                           -------------------------
     Revenue                   2007            2006           Dollars       Percent
     ----------------      ------------    ------------    ------------    ---------
     Product licenses
     ----------------
     <S>                   <C>             <C>             <C>               <C>
     Windows               $  1,016,800    $  1,060,100    $    (43,300)      (4.1%)
     Unix                       487,100         863,000        (375,900)     (43.6%)
                           ------------    ------------    ------------
                              1,503,900       1,923,100        (419,200)     (21.8%)
                           ------------    ------------    ------------
     Service fees
     Windows                    391,300         416,900         (25,600)      (6.1%)
     Unix                       459,400         378,500          80,900       21.4%
                           ------------    ------------    ------------
                                850,700         795,400          55,300        7.0%
                           ------------    ------------    ------------
     Other                       90,800          38,800          52,000      134.0%
                           ------------    ------------    ------------
     Total Revenue         $  2,445,400    $  2,757,300    $   (311,900)     (11.3%)
                           ============    ============    ============
</TABLE>

5. Patents

As of June 30, 2007, patents consisted of the following:
<TABLE>
<CAPTION>

     <S>                            <C>
     Patents                        $   5,340,400
     Accumulated amortization          (2,154,600)
                                    -------------
                                    $   3,185,800
                                    =============
</TABLE>

Patent amortization, which aggregated $222,300 during each of the three-month
periods ended June 30, 2007 and 2006, and $444,600 during each of the six-month
periods ended June 30, 2007 and 2006, respectively, is a component of general
and administrative expenses.

6. Supplemental Disclosure of Cash Flow Information

The Company disbursed approximately an aggregate $2,000 cash for the payment of
income taxes during the three and six-month periods ended June 30, 2007. The
Company disbursed no cash for the payment of income taxes during either of the
three or six-month periods ended June 30, 2006. The Company disbursed no cash
for the payment of interest expense during either of the three or six-month
periods ended June 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 six-month periods ended June 30, 2007 and 2006, 21,146,414 and 19,544,255
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


                                       9
<PAGE>

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 June 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 June 30,
2007.

The Company's policy for deducting interest and penalties is to treat interest
as interest expense and penalties as taxes. As of June 30, 2007, the Company 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.

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   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.

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.

                                       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 six-month periods ended June 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 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.

We did not grant any new options, make any stock awards or have any additional
shares purchased under our Employee Stock Purchase Plan during the three months
ended June 30, 2007.

For assumptions used for grants made during the three and six-month periods
ended June 30, 2006, and the three-month period ended March 31, 2007, please
refer to our Quarterly Reports on Form 10-QSB as filed with the SEC on August
14, 2006 and May 15, 2007, respectively.

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 $220,000.

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

Revenue

The changes in both Windows and Unix-based product licenses revenue for the
three and six-month periods ended June 30, 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 historically been earned from
a limited number of significant customers, most of whom are resellers.
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 June 30, 2007 and 2006 was as follows:


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                            Increase (Decrease)
                                                         -------------------------
     Revenue                   2007           2006          Dollars       Percent
     ----------------      ------------   ------------   ------------   ----------
     Product licenses
     ----------------
     <S>                   <C>             <C>           <C>              <C>
     Windows               $    584,000    $   432,800   $    151,200       34.9%
     Unix                       313,900        605,100       (291,200)     (48.1%)
                           ------------   ------------   ------------
                                897,900      1,037,900       (140,000)     (13.5%)
                           ------------   ------------   ------------
     Service fees
     ------------
     Windows                    172,200        203,800        (31,600)     (15.5%)
     Unix                       237,700        195,200         42,500       21.8%
                           ------------   ------------   ------------
                                409,900        399,000         10,900        2.7%
                           ------------   ------------   ------------
     Other (1)                        -         13,900        (13,900)    (100.0%)
                           ------------   ------------   ------------
     Total Revenue         $  1,307,800   $  1,450,800   $   (143,000)      (9.9%)
                           ============   ============   ============
</TABLE>

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

<TABLE>
<CAPTION>
                                                              Increase (Decrease)
                                                           -------------------------
     Revenue                   2007            2006           Dollars       Percent
     ----------------      ------------    ------------    ------------    ---------
     Product licenses
     ----------------
     <S>                   <C>             <C>             <C>               <C>
     Windows               $  1,016,800    $  1,060,100    $    (43,300)      (4.1%)
     Unix                       487,100         863,000        (375,900)     (43.6%)
                           ------------    ------------    ------------
                              1,503,900       1,923,100        (419,200)     (21.8%)
                           ------------    ------------    ------------
     Service fees
     Windows                    391,300         416,900         (25,600)      (6.1%)
     Unix                       459,400         378,500          80,900       21.4%
                           ------------    ------------    ------------
                                850,700         795,400          55,300        7.0%
                           ------------    ------------    ------------
     Other                       90,800          38,800          52,000      134.0%
                           ------------    ------------    ------------
     Total Revenue         $  2,445,400    $  2,757,300    $   (311,900)     (11.3%)
                           ============    ============    ============
</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 six months ended June
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 $152,700, generated from
various other Windows customers. During the three-month period ended June 30,
2007 we released an upgraded version of GO-Global for Windows and expect that
Windows product licensing revenue for the remaining two quarters of 2007 will
each approximate Windows product licensing revenue for the three-month period
ended June 30, 2007.

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

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
five 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 decrease in Windows-based service fees for the three and six-month periods
ended June 30, 2007, as compared with the same periods of the prior year was
primarily due to lower levels of Windows maintenance contract purchases that
occurred during the last six months of 2006 as compared with the six-months
ended June 30, 2006.

                                       13
<PAGE>

The increase in Unix-based service fees for the three and six-month periods
ended June 30, 2007, as compared with the same periods of the prior year was
primarily due to higher levels of Unix maintenance contract purchases that
occurred during the last six months of 2006 as compared with the six months
ended June 30, 2006.

We expect aggregate 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. 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 9.4% and 10.4% of revenue for the three months ended June
30, 2007 and 2006, respectively, and 9.9% and 9.5% for the six months ended June
30, 2007 and 2006, respectively. For the three months ended June 30, 2007 cost
of revenue decreased by $27,000, or 18.0%, to $123,300 from $150,300 for the
same period of 2006, and for the six months ended June 30, 2007 it decreased by
$19,300, or 7.4%, to $242,200 from $261,500 for the same period of 2006. .

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

<TABLE>
<CAPTION>
                                                   Increase (Decrease)
                                                ------------------------
                         2007         2006        Dollars     Percent
                      ----------   ----------   ----------   ----------
<S>                   <C>          <C>          <C>             <C>
     Product costs    $    3,900   $   29,600   $  (25,700)     (86.8)%
     Service costs       119,400      120,700       (1,300)      (1.1)%
                      ----------   ----------   ----------
                      $  123,300   $  150,300   $  (27,000)     (18.0)%
                      ==========   ==========   ==========

</TABLE>

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

<TABLE>
<CAPTION>
                                                   Increase (Decrease)
                                                 -----------------------
                          2007         2006       Dollars      Percent
                       ----------   ----------   ----------   ----------
<S>                    <C>          <C>          <C>             <C>
      Product costs    $   13,400   $   64,800   $  (51,400)     (79.3)%
      Service costs       228,800      196,700       32,100       16.3
                       ----------   ----------   ----------
                       $  242,200   $  261,500   $  (19,300)      (7.4)%
                       ==========   ==========   ==========
</TABLE>

The decrease in product costs for the three and six-month periods ended June 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 remain lower throughout 2007, as compared with 2006, as certain
elements of our capitalized software development costs became fully amortized
during 2006, with the remainder becoming fully amortized during the six-month
period ended June 30, 2007. We expect product costs to remain significantly
lower throughout 2007, as compared with 2006.

The increase in service costs for the six-month period ended June 30, 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. 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 32.2% and 29.4% of revenue for the three
months ended June 30, 2007 and 2006, respectively, and 34.9% and 30.5% for the
six months ended June 30, 2007 and 2006, respectively. Selling and marketing
expenses for the three months ended June 30, 2007 decreased by $5,400, or 1.3%,
to $420,900 from $426,300 for the same period of 2006. For the six months ended
June 30, 2007 selling and marketing expenses increased by $13,300, or 1.6%, to
$853,400 from $840,100 for the same period of 2006.

                                       14
<PAGE>

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

<TABLE>
<CAPTION>
                                                             Increase (Decrease)
                                                           -----------------------
                                    2007         2006       Dollars      Percent
                                 ----------   ----------   ----------   ----------
     <S>                         <C>          <C>          <C>             <C>
     Employee costs              $  323,400   $  310,000   $   13,400        4.3%
     Outside services                61,400       52,400        9,000       17.2%
     Travel and entertainment        13,100       40,700      (27,600)     (67.8)%
     Other                           23,000       23,200         (200)      (0.9)%
                                 ----------   ----------   ----------
                                 $  420,900   $  426,300   $   (5,400)      (1.3)%
                                 ==========   ==========   ==========

</TABLE>

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

<TABLE>
<CAPTION>
                                                             Increase (Decrease)
                                                           -----------------------
                                    2007         2006       Dollars      Percent
                                 ----------   ----------   ----------   ----------
     <S>                         <C>          <C>          <C>             <C>
     Employee costs              $  622,400   $  608,100   $   14,300        2.4%
     Outside services               138,700      107,700       31,000       28.8%
     Travel and entertainment        42,700       73,200      (30,500)     (41.7%)
     Other                           49,600       51,100       (1,500)      (2.9%)
                                 ----------   ----------   ----------
                                 $  853,400   $  840,100   $   13,300        1.6%
                                 ==========   ==========   ==========
</TABLE>

The increase in employee costs for the three and six-month periods ended June
30, 2007, as compared with the same period in 2006, resulted primarily from
having approximately two more sales people than during the same periods of the
prior year. Partially offsetting increases to wages and benefits resulting from
the increased sales force was a decrease in commissions. Since a portion of our
sales representatives' compensation package is commissions-based and overall
sales were lower during the three and six-month periods ended June 30, 2007, as
compared with the same periods of 2006, overall commissions were also lower.
Additionally, bonuses based on overall sales were lower during the three and
six-month periods ended June 30, 2007 as compared with the same periods in 2006
since overall sales were lower.

Included in employee costs for the three-month periods ended June 30, 2007 and
2006 and for the six-month periods then ended are non-cash stock-based
compensation costs aggregating approximately $9,100 and $3,300, and $19,800 and
$16,600, respectively.

The increase in outside services for the six-month period ended June 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. Contributing to the
increase in outside services for the three and six-month periods ended June 30,
2007, as compared with the same periods of 2006, were higher commissions paid to
our consulting Asian sales representative.

The decrease in travel and entertainment for the three and six-month periods
ended June 30, 2007, as compared with the same periods 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 87.0% and 63.8% of
revenues for the three-month periods ended June 30, 2007 and 2006, respectively,
and approximately 86.3% and 69.4% for the six-month periods ended June 30, 2007
and 2006, respectively. General and administrative expenses increased by
$212,500, or 23.0%, to $1,137,400 from $924,900 for the three-month period ended
June 30, 2007, as compared with the same period in 2006 and increased by
$196,600, or 10.3%, to $2,111,400 from $1,914,800 for the six-month period ended
June 30, 2007, as compared with the same period in 2006..

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


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                                  Increase (Decrease)
                                                                -----------------------
                                         2007         2006       Dollars       Percent
                                      ----------   ----------   ----------   ----------
     <S>                              <C>          <C>          <C>             <C>
     Employee costs                   $  443,900   $  409,900   $   34,000        8.3%
     Depreciation and amortization       226,200      226,800         (600)      (0.3%)
     Legal and accounting                198,900      102,800       96,100       93.5%
     Bad debts                           115,900            -      115,900        na
     Rent                                 17,400       15,700        1,700       10.8%
     Public costs                         16,500       14,200        2,300       16.2%
     Outside services                     29,200       72,900      (43,700)     (60.0%)
     Travel and entertainment             23,800       56,400      (32,600)     (57.8%)
     Other                                65,600       26,200       39,400      150.4%
                                      ----------   ----------   ----------
                                      $1,137,400   $  924,900   $  212,500       23.0%
                                      ==========   ==========   ==========

</TABLE>

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

<TABLE>
<CAPTION>
                                                                  Increase (Decrease)
                                                                -----------------------
                                         2007         2006       Dollars      Percent
                                      ----------   ----------   ----------   ----------
     <S>                              <C>          <C>          <C>             <C>
     Employee costs                   $  890,500   $  809,700   $   80,800       10.0%
     Depreciation and amortization       452,800      452,300          500        0.1%
     Legal and accounting                352,300      217,000      135,300       62.4%
     Bad debts                           115,900            -      115,900        na
     Rent                                 35,600       31,400        4,200       13.4%
     Public costs                         31,000       27,800        3,200       11.5%
     Outside services                     50,100      155,800     (105,700)     (67.8)%
     Travel and entertainment             50,500      104,700      (54,200)     (51.8)%
     Other                               132,700      116,100       16,600       14.3%
                                      ----------   ----------   ----------
                                      $2,111,400   $1,914,800   $  196,600       10.3%
                                      ==========   ==========   ==========
</TABLE>

The increase in employee costs in the three and six-month periods ended June 30,
2007, as compared with the same periods 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 June 30, 2007 and 2006 were
non-cash stock-based compensation costs aggregating approximately $84,900 and
$96,700, respectively, and $177,400 and $181,300 for the six-month periods ended
June 30, 2007 and 2006, respectively.

Legal and accounting fees were higher during the three and six-month periods
ended June 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
(discussed elsewhere in this Form 10-QSB) as well as certain business
opportunities we had been pursuing.

The increase in bad debts during the three and six-month periods ended June 30,
2007, as compared with the same periods 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 lower during the three and six-month periods ended June
30, 2007, as compared with the same periods 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 included in the six-month period ended June 30, 2006 were
recruiting fees associated with the hiring of a vice-president whereas no such
recruiting fees were incurred during the same period of 2007.

The decrease in travel and entertainment during the three and six-month periods
ended June 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 six-month periods ended June 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.

                                       16
<PAGE>

Costs associated with other major components of general and administrative
expense, notably; depreciation and amortization, rent and costs associated with
being a public entity, did not change significantly during either the three or
six-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 approximate 2006
levels.

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 48.9% and 31.2% of revenues
for the three-month periods ended June 30, 2007 and 2006, respectively, and
approximately 53.6% and 30.7% for the six-month periods ended June 30, 2007 and
2006, respectively. Research and development expenses for the three-month period
ended June 30, 2007 increased by $187,100, or 41.4%, to $639,200 from $452,100
for the three-month period ended June 30, 2006. For the six-month period ended
June 30, 2007, research and development expenses increased by $464,900, or
55.0%, to $1,310,700 from $845,800 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. No product
development costs were capitalized during either of the three or six-month
periods ended June 30, 2007 or 2006.

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

<TABLE>
<CAPTION>
                                                     Increase (Decrease)
                                                   -----------------------
                            2007         2006        Dollars     Percent
                         ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>              <C>
     Employee costs      $  508,000   $  238,400   $  269,600       113.1%
     Outside services        54,600      167,000     (112,400)      (67.3%)
     Rent                    36,000       16,100       19,900       123.6%
     Other                   40,600       30,600       10,000        32.7%
                         ----------   ----------   ----------
                         $  639,200      452,100      187,100        41.4%
                         ==========   ==========   ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                      Increase (Decrease)
                                                   -----------------------
                            2007         2006        Dollars      Percent
                         ----------   ----------   ----------   ----------
     <S>                 <C>          <C>          <C>             <C>
     Employee costs      $1,013,400   $  508,500   $  504,900       99.3%
     Outside services       141,700      244,600     (102,900)     (42.1%)
     Rent                    68,800       32,300       36,500      113.0%
     Other                   86,800       60,400       26,400       43.7%
                         ----------   ----------   ----------
                         $1,310,700   $  845,800   $  464,900       55.0%
                         ==========   ==========   ==========
</TABLE>

Employee costs for the three-month periods ended June 30, 2007 and 2006 are net
of $119,400 and $120,700, respectively, which related to the costs of
engineering time spent performing customer service. Employee costs for the
six-month periods ended June 30, 2007 and 2006 are net of $228,800 and $196,700,
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. The increase in employee costs for the three and six-month periods
ended June 30, 2007 as compared with the respective periods 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 both the three
and six-month periods ended June 30, 2007, as compared with the same periods of
2006, was severance costs associated with terminating four engineers at various
times through the three and six-month periods ended June 30, 2007. No such costs
were incurred during the three or six-month periods ended June 30, 2006.

                                       17
<PAGE>

Included in employee costs for the three and six-month periods ended June 30,
2007 and 2006 were non-cash stock-based compensation costs of $25,700 and
$11,800, and $57,000 and $19,800 respectively, which were net of $3,600 and
$4,400, and $8,000 and $8,500 respectively, which were reported as customer
service cost of revenue.

The decrease in outside services for the three and six-month periods ended June
30, 2007, as compared with the same periods of the prior year, was primarily due
to recruiting costs incurred at various times during the six-month period ended
June 30, 2006 related to the hiring of a vice-president of engineering (which
occurred during August 2006). No such recruiting costs were incurred during the
six-month period ended June 2007.

Also contributing to the decrease in outside services for the three and
six-month periods ended June 30, 2007, as compared with the same periods of 2006
were 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 three-months ended June 30, 2007.

The increase in rent for the three and six-month periods ended June 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.

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

Other Income

During the three and six-month periods ended June 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
June 30, 2007 was $1,000,800, an increase of $506,300, or 102.4%, from a net
loss of $494,500 for the same period of 2006. Net loss for the six-month period
ended June 30, 2007 was $2,042,200, and increase of $955,900, or 88.0%, from a
net loss of $1,086,300 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 and have implemented various cost cutting measures,
including the workforce reductions as discussed elsewhere in this Form 10-QSB.

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 and Six-Month
Periods Ended June 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 six months ended June 30, 2007 and 2006 our cash and cash equivalents
balances decreased by $1,498,900 and $389,800, respectively, primarily as a
result of our operations consuming approximately $1,459,000 and $288,000 of cash
during the respective periods. During the six-month periods ended June 30, 2007
and 2006 our reported net losses of $2,042,200 and $1,086,300, respectively,
included two significant non-cash items, namely; depreciation and amortization
of $482,400 and $514,400, respectively, which were primarily related to
amortization of our patents and patent-related assets, and stock-based
compensation expense of $262,200 and $226,200, respectively. Another significant
non-cash item included in our reported net loss during the three and six-month
period ended June 30, 2007 was an increase to our bad debts allowance of
$115,900, as explained elsewhere in this Form 10-QSB.

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<PAGE>

During the six months ended June 30, 2007 and 2006 we closely monitored our
investing activities, spending approximately a net $43,700 and $48,400,
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 six months ended June 30, 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 June 30, 2007, we had current assets of $2,299,400 and current liabilities
of $1,825,900, which netted to working capital of $473,500. Included in current
liabilities was the current portion of deferred revenue of $1,188,700.

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
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.


                                       19
<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 June 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
June 30, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




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<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 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.
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.com's motion. On August 8, 2006,
AutoTrader.com's motion for summary judgment was denied. On August 9, 2006, the
Court filed a Docket Control Order setting forth proposed pretrial deadlines. A
Markman Hearing for consideration of claim construction issues was held on June
6, 2007. The Court issued its claim construction order on June 28, 2007. On July
13, 2007, AutoTrader.com filed a motion for summary judgment seeking to
invalidate the 940 patent, and on July 16, 2007 AutoTrader.com filed an
additional motion for summary judgment seeking to invalidate certain claims of
the 538 patent. The Court has not ruled on either of these motions. We have not
filed any summary judgment motions.

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, which protect our
fundamental network security and firewall technologies. The suit seeks
preliminary and permanent injunctive relief along with unspecified damages and
fees. Juniper's answer to our complaint is due on August 29, 2007.

ITEM 6. Exhibits

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

Exhibit 32 - Section 1350 Certifications



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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: August 14, 2007
                                                By: /s/ Robert Dilworth
                                                    -------------------
                                                     Robert Dilworth
                                              Chief Executive Officer and
                                                 Chairman of the Board
                                             (Principal Executive Officer)

                                                 Date: August 14, 2007
                                                 By: /s/ William Swain
                                                     ------------------
                                                     William Swain
                                                Chief Financial Officer
                                            (Principal Financial Officer and
                                              Principal Accounting Officer)