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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------
                                    Form 10-K
                             ----------------------

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2008

                        Commission File Numbers: 0-21683

                               GraphOn Corporation
             (Exact name of Registrant as specified in its charter)

               Delaware                               13-3899021
    (State or other jurisdiction of                (I.R.S. Employer
    incorporation or organization)              Identification Number)

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

                                 (800) 472-7466
                         (Registrant's telephone number)

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                         Common Stock, $0.0001 par value
                                (Title of Class)

  Indicate by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.                       Yes |_|  No |X|

  Indicate by check mark if the Registrant is not required to file reports
 pursuant to Section 13 or Section 15(d)of the Exchange Act.     Yes |_|  No |X|

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

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.                                                 |X|

  Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

|_| Large accelerated filer |_| Accelerated filer |_|Non-Accelerated filer
|X| Smaller reporting company

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

  As of June 30, 2008, the aggregate market value of the Registrant's common
stock held by non-affiliates was $8,581,100.

  As of March 18, 2009, there were outstanding 47,342,292 shares of the
Registrant's common stock.


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

                               GRAPHON CORPORATION

                           ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                    PART I                                  Page
                                                                            ----
<S>  <C>   <C>                                                                <C>
Item 1.    Business....................................................        1
Item 1A.   Risk Factors................................................        8
Item 1B.   Unresolved Staff Comments...................................       12
Item 2.    Properties..................................................       12
Item 3.    Legal Proceedings...........................................       12
Item 4.    Submission of Matters to a Vote of Security Holders.........       13

                                     PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder
           Matters and Issuer Purchases of Equity Securities...........       14
Item 6.    Selected Financial Data.....................................       15
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................       16
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk..       25
Item 8.    Financial Statements and Supplementary Data.................       26
Item 9.    Changes in and Disagreements With Accountants on Accounting
           and Financial Disclosure....................................       49
Item 9A(T) Controls and Procedures.....................................       49
Item 9B.   Other Information.............................................     50

                                    PART III
Item 10.   Directors, Executive Officers and Corporate Governance......       51
Item 11.   Executive Compensation......................................       53
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters..................       56
Item 13.   Certain Relationships and Related Transactions, and
           Director Independence.......................................       59
Item 14.   Principal Accounting Fees and Services......................       60

                                     PART IV
Item 15.   Exhibits, Financial Statement Schedules.....................       61

</TABLE>

                           Forward-Looking Information


This report includes, in addition to historical information, "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. This act provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about themselves so long
as they identify these statements as forward-looking and provide meaningful
cautionary statements identifying important factors that could cause actual
results to differ from the projected results. All statements other than
statements of historical fact we make in this report are forward-looking
statements. In particular, the statements regarding industry prospects and our
future results of operations or financial position are forward-looking
statements. Such statements are based on management's current expectations and
are subject to a number of uncertainties and risks that could cause actual
results to differ significantly from those described in the forward looking
statements. Factors that may cause such a difference include, but are not
limited to, those discussed in "Risk Factors," as well as those discussed
elsewhere in this report. Statements included in this report are based upon
information known to us as of the date that this report is filed with the SEC,
and we assume no obligation to update or alter our forward-looking statements
made in this report, whether as a result of new information, future events or
otherwise, except as otherwise required by applicable federal securities laws.


<PAGE>


                                     PART I

ITEM 1. BUSINESS

General

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 and/or resale by independent software vendors (ISVs),
corporate enterprises, governmental and educational institutions, and others.
We have also made significant investments in intellectual property and have
pursued various means of monetizing such investments. We conduct and manage our
business based on these two segments, which we refer to as our "Software" and
"Intellectual Property" segments, respectively.

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. Our server-based technology can web-enable a
variety of Unix, Linux or Windows applications.

Through our acquisition of Network Engineering Solutions, Inc. (NES) in January
2005, we acquired the rights to 11 patents, which are primarily method patents
that describe software and network architectures to accomplish certain tasks, as
well as other intellectual property rights. During 2005, 2007 and 2008, we
initiated litigation against certain companies that we believed violated one or
more of our patents. In December 2007 we entered into a $6.25 million settlement
and licensing agreement with one of these companies. In the fourth quarter of
2008 we recorded an impairment charge of $868,200 against certain of the
patents we acquired from NES. Due to our limited cash availability, we have
determined that we will not be initiating any new litigation or attempting to
seek licensing revenue with respect to any of the NES patents that were not
involved in any of our on-going litigation as of December 31, 2008.

We are a Delaware corporation, founded in May of 1996. Our headquarters are
located at 5400 Soquel Avenue, Suite A2, Santa Cruz, California, 95062 and our
phone number is 1-800-GRAPHON (1-800-472-7466). Our Internet website is
http://www.graphon.com. The information on our website is not part of this
annual report. We also have offices in Concord, New Hampshire and Irvine,
California.

You may read and copy any materials that we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an Internet website
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information that we file electronically with the SEC from time to
time. We post our annual, quarterly and periodic filings that we have made with
the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 on our website as soon as reasonably practicable after such reports and
other materials have been electronically filed with, or furnished to, the SEC.
You may obtain these filings by visiting our website and clicking on "About
GraphOn," then "Investors," and then "View GraphOn SEC Filings".

Business Connectivity Software

   History

In the 1970s, software applications were executed on central mainframes and
typically accessed by low-cost display terminals. Information technology
departments were responsible for deploying, managing and supporting the
applications to create a reliable environment for users. In the 1980s, the PC
became the desktop of choice: empowering the user with flexibility, a graphical
user interface, and a multitude of productive and inexpensive applications. In
the 1990s, the desktop provided access to mainframe applications and databases,
which run on large, server computers. Throughout the computing evolution, the
modern desktop has become increasingly complex and costly to administer and
maintain. This situation is further worsened as organizations become more
decentralized with remote employees, and as their desire increases to become
more closely connected with vendors and customers through the Internet.

<PAGE>


   Lowering Total Cost of Ownership

PC software in general has grown dramatically in size and complexity in recent
years. As a result, the cost of supporting and maintaining PC desktops has
increased substantially. Industry analysts and enterprise users alike have begun
to recognize that the total cost of PC ownership, taking into account the
recurring cost of technical support, administration, security and end-user down
time, has become high, both in absolute terms and relative to the initial
hardware purchase price.

With increasing demands to control corporate computing costs, industry leaders
are developing technology to address total cost of ownership issues. One
approach, led by Sun Microsystems and IBM, utilizes Java-based network
computers, which operate by downloading small Java programs to the desktop,
which in turn are used for accessing server-based applications. Another approach
is Microsoft's Windows Terminal Services(TM), introduced in June 1998. It
permits server-based Windows applications to be accessed from Windows-based
network computers. Both initiatives are examples of server-based computing. They
simplify the desktop by moving the responsibility of running applications to a
central server, with the promise of lowering total cost of ownership.

   Enterprise Cross-Platform Computing

Today's enterprises contain a diverse collection of end user devices, each with
its particular operating system, processing power and connection type.
Consequently, it is becoming increasingly difficult to provide universal access
to business-critical applications across the enterprise. As a result,
organizations resort to emulation software, new hardware or costly application
rewrites in order to provide universal application access.

A common cross-platform problem for the enterprise is the need to access Unix or
Linux applications from a PC desktop. While Unix-based computers dominate the
enterprise applications market, Microsoft Windows-based PCs dominate the
enterprise desktop market. Since the early 1990s, enterprises have been striving
to connect desktop PCs to Unix applications over all types of connections,
including networks and standard phone lines. This effort, however, is complex
and costly. The primary solution to date is known as PC X Server software. PC X
Server software is a large software program that requires substantial memory and
processing resources on the desktop. Typically, PC X Server software is
difficult to install, configure and maintain. Enterprises are looking for
effective Unix connectivity software for PCs and non-PC desktops that is easier
and less expensive to administer and maintain.

Today businesses are exploring alternatives to the Windows desktop. The Linux
desktop is a popular choice as it promises lower acquisition costs and avoids
"single vendor lock-in." The Linux desktop and the Unix desktop, popular in many
engineering organizations, both need to access the large number of applications
written for the Microsoft operating environment, such as Office 2003. Our
technology enables Windows applications to be published to any client device
running our GO-Global client software, including: Linux, Unix, Windows and
Macintosh desktops and devices.

   Remote Computing

The cost and complexity of contemporary enterprise computing has been further
complicated by the growth in remote access requirements. As business activities
become physically distributed, computer users have looked to portable computers
with remote access capabilities to stay connected in a highly dispersed work
environment. One problem facing remote computing over the Internet, or direct
telephone connections, is the slow speed of communication in contrast to the
high speed of internal corporate networks. Today, applications requiring remote
access must be tailored to the limited speed and lower reliability of remote
connections, further complicating the already significant challenge of
connecting desktop users to business-critical applications.

   Our Technology

Our server-based software deploys, manages, supports and executes applications
entirely on a server computer by interfacing efficiently and instantaneously to
the user's desktop device. Introduction of our Windows-based Bridges software
during 2000 enabled us to enter the Windows application market by allowing us to
provide support for Windows applications to enterprise customers and to leverage
independent software vendors (ISVs) as a distribution channel. We introduced our
GO-Global for Windows product in 2002, which features increased application


                                       2
<PAGE>

compatibility, server scalability and improved application performance over our
Bridges software.

Our technology consists of three key components:

   o  A server component, which runs alongside the server-based
      application, that is responsible for intercepting user-specific
      information for display at the desktop.

   o  A desktop component, which is responsible only for sending keystrokes
      and mouse motion to the server, displays the appearance of the
      application to the desktop user. This keeps the desktop simple, or
      thin, as well as independent of application requirements for
      resources, processing power and operating systems.

   o  Our protocol, which enables efficient communication over both fast
      networks and slow dial-up connections, allows applications to be
      accessed from remote locations with network-like performance and
      responsiveness.

We believe that the major benefits of our technology are as follows:

   o  Lowers Total Cost of Ownership.  Reducing information technology (IT)
      costs is a primary goal of our products. Today, installing enterprise
      applications is time-consuming, complex and expensive.  It typically
      requires administrators to manually install and support diverse desktop
      configurations and interactions.  Our server-based software simplifies
      application management by enabling deployment, administration and support
      from a central location.  Installation and updates are made only on the
      server, thereby avoiding desktop software and operating system conflicts
      and minimizing at-the-desk support.

   o  Supports Strong Information Security Practices.  The distributed nature
      of most organizations' computing environments makes information security
      difficult. Corporate assets in the form of data are often dispersed
      among desktop systems.  Our server-based approach places the application
      and data on servers behind firewalls.  This allows the corporation to
      centrally manage its applications and data.

   o  Web Enables Existing Applications.  The Internet represents a fundamental
      change in distributed computing. Organizations now benefit from ubiquitous
      access to corporate resources by both local and remote users. However, to
      fully exploit this opportunity, organizations need to find a way to
      publish existing applications to Internet enabled devices.  Our technology
      is specifically targeted at solving this problem.  With GO-Global, an
      organization can publish an existing application to an Internet-enabled
      device without the need to rewrite the application.  This reduces
      application development costs while preserving the rich user interface so
      difficult to replicate in a native Web application.

   o  Connects Diverse Computing Platforms.  Today's computing infrastructures
      are a mix of computing devices, network connections and operating systems.
      Enterprise-wide application deployment is problematic due to this
      heterogeneity, often requiring costly and complex emulation software or
      application rewrites.  Our products provide organizations the ability to
      access applications from virtually all devices, utilizing their existing
      computing infrastructure, without rewriting a single line of code or
      changing or reconfiguring hardware.  This means that enterprises can
      maximize their investment in existing technology and allow users to work
      in their preferred environment.

   o  Leverages Existing PCs and Deploys New Desktop Hardware. Our software
      brings the benefits of server-based computing to users of existing PC
      hardware, while simultaneously enabling enterprises to begin to take
      advantage of and deploy many of the new, less complex network computers.
      This assists organizations in maximizing their current investment in
      hardware and software while, at the same time, facilitating a manageable
      and cost effective transition to newer devices.

   o  Efficient Protocol.  Applications typically are designed for
      network-connected desktops, which can put tremendous strain on congested
      networks and may yield poor, sometimes unacceptable, performance over
      remote connections.  For application service providers, bandwidth
      typically is the top recurring expense when web-enabling, or renting,


                                       3
<PAGE>

      access to applications over the Internet.  In the wireless market,
      bandwidth constraints limit application deployment.  Our protocol sends
      only keystrokes, mouse clicks and display updates over the network,
      resulting in minimal impact on bandwidth for application deployment, thus
      lowering cost on a per user basis.  Within the enterprise, our protocol
      can extend the reach of business-critical applications to many areas,
      including branch offices, telecommuters and remote users over the
      Internet, phone lines or wireless connections.  This concept may be
      extended further to include vendors and customers for increased
      flexibility, time-to-market and customer satisfaction.

  Our Products

We are dedicated to creating business connectivity technology that brings
Windows, Unix, and Linux applications to the web without modification. Our
customers include ISVs, Value-Added Resellers (VARs), and small to medium-sized
enterprises. We believe that by employing our technology, our customers can
benefit from a very quick time to market, overall cost savings via centralized
computing, a client neutral cross-platform solution, and high performance remote
access.

Our primary product offerings are:

   o  GO-Global for Windows allows access to Windows applications from remote
      locations and a variety of connections, including the Internet and dial-up
      connections.  GO-Global for Windows allows Windows applications to be run
      via a browser from Windows or non-Windows devices, over many types of data
      connections, regardless of the bandwidth or operating system.  With
      GO-Global for Windows, web enabling is achieved without modifying the
      underlying Windows applications' code or requiring costly add-ons.

   o  GO-Global for Unix web-enables Unix and Linux applications, thus allowing
      them to be run via a browser from many different display devices, over
      various types of data connections, regardless of the bandwidth or
      operating systems being used.  GO-Global for Unix web-enables individual
      Unix and Linux applications, or entire desktops.  When using GO-Global for
      Unix, Unix and Linux web enabling is achieved without modifying the
      underlying applications' code or requiring costly add-ons.

  Target Markets

The target market for our products comprises organizations that need to access
Windows, Unix and/or Linux applications from a wide variety of devices, from
remote locations, including over the Internet, dial-up lines, and wireless
connections. This includes organizations such as small to medium-sized
companies, governmental and educational institutions, ISVs, and VARs. Our
software is designed to allow these enterprises to tailor the configuration of
the end user device for a particular purpose, rather than following a "one PC
fits all," high total cost of ownership model. We believe our opportunities are
as follows:

   o  ISVs. By web enabling their applications through use of our products,
      we believe that our ISV customers can accelerate their time to market
      without the risks and delays associated with rewriting applications
      or using other third party solutions, thereby opening up additional
      revenue opportunities and securing greater satisfaction and loyalty
      from their customers.

      Our technology quickly integrates with their existing software
      applications without sacrificing the full-featured look and feel of
      their original software application, thus providing ISVs with
      out-of-the-box web enabled versions of their software applications
      with their own branding for licensed, volume distribution to their
      enterprise customers. We further believe that ISVs who effectively
      address the web computing needs of customers and the emerging
      application service provider market will have a competitive advantage
      in the marketplace.

   o  Enterprises Employing a Mix of Unix, Linux, Macintosh and Windows.
      Small to medium-sized companies that utilize a mixed computing
      environment require cross-platform connectivity solutions, like
      GO-Global, that will allow users to access applications from different
      client devices. It has been estimated that PCs represent over 90% of
      enterprise desktops.  We believe that our products are well positioned
      to exploit this opportunity and that our server-based software products


                                       4
<PAGE>

      will significantly reduce the cost and complexity of connecting PCs to
      various applications.

   o  Enterprises With Remote Computer Users and/or Extended Markets.  Remote
      computer users and enterprises with extended markets comprise two of the
      faster growing market segments in the computing industry.  Extended
      enterprises allow access to their computing resources to customers,
      suppliers, distributors and other partners, thereby gaining flexibility
      in manufacturing and increasing speed-to-market and customer satisfaction.
      For example, extended enterprises may maintain decreased inventory via
      just-in-time, vendor-managed inventory and related techniques, or they may
      license their proprietary software application on a "pay-per-time" model,
      based on actual time usage by the user.  The early adoption of extended
      enterprise solutions may be driven in part by enterprises' needs to
      exchange information over a wide variety of computing platforms. We
      believe that our server-based software products, along with our
      low-impact protocol, which has been designed to enable highly efficient
      low-bandwidth connections, are well positioned to provide enabling
      solutions for extended enterprise computing.

   o  VARs.  The VAR channel potentially presents an additional sales force for
      our products and services.  In addition to creating broader awareness of
      GO-Global, VARs also provide integration and support services for our
      current and potential customers.  Our products allow VARs to offer a cost
      effective competitive alternative for server-based thin client computing.
      In addition, reselling our GO-Global software creates new revenue streams
      for our VARs through professional services and maintenance renewals.

  Strategic Relationships

We believe it is important to maintain our current strategic alliances and to
seek suitable new alliances in order to enhance shareholder value, improve our
technology and/or enhance our ability to penetrate relevant target markets. We
also are focusing on strategic relationships that have immediate revenue
generating potential, strengthen our position in the server-based software
market, add complementary capabilities and/or raise awareness of our products
and us. Our strategic relationships include the following:

   o  In July 1999, we entered into a five-year, non-exclusive agreement with
      Alcatel, a telecommunications, network systems and services company.
      Pursuant to this agreement, Alcatel has licensed our GO-Global for Unix
      software for inclusion with their Turn-key Solution software, an optical
      networking system.  Alcatel's customers are using our server-based
      solution to access Alcatel's UNIX/X Network Management Systems
      applications from T-based PCs.  Additionally, Alcatel has deployed
      GO-Global internally to provide their employees with high-speed network
      access to their own server-based software over dial-up connections, local
      area networks (LANs) and wide area networks (WANs).  Alcatel consummated
      a merger with Lucent Technologies during November 2006 and has continued
      operations under the name Alcatel-Lucent. Although this agreement expired
      in July 2004, our relationship with Alcatel-Lucent continues under the
      terms of the contract.  We anticipate continuing our relationship with
      Alcatel-Lucent throughout 2009.

   o  We are a party to a non-exclusive licensing agreement with FrontRange, an
      international software and services company, which affords FrontRange the
      right to include our GO-Global for Windows software with its HEAT help
      desk software system.  FrontRange has completely integrated GO-Global for
      Windows into HEAT as iHEAT.  We have also licensed our GO-Global for
      Windows software to FrontRange for integration with its Goldmine client
      relationship management software package.  FrontRange has completely
      integrated GO-Global for Windows into Goldmine as iGoldmine.  This
      agreement automatically renewed during March 2009 for an additional one
      year term. We may terminate this agreement immediately by written notice
      upon the occurrence of certain predetermined events. We anticipate
      continuing our relationship with FrontRange throughout 2009.

   o  We are a party to a non-exclusive distribution agreement with Ericsson,
      a global provider of telecommunications equipment and related services
      to mobile and fixed network operations. Pursuant to this agreement,
      Ericsson has licensed our GO-Global for Unix software for inclusion with
      their ServiceON Optical and ServiceON Access teleco network management
      systems. Our agreement with Ericsson, which was originally entered into
      in September 2000, automatically renews annually. Either party may


                                       5
<PAGE>

      terminate the contract upon written notice to the other party at least
      one month prior to the expiration of the then current term. We anticipate
      continuing our relationship with Ericsson throughout 2009.

   o  We are a party to a non-exclusive channel partner agreement with Elosoft
      Informatica Ltda, a South American distributor of various technology
      products, including both hardware and software offerings, and related
      services. Under the terms of this agreement, Elosoft has licensed both
      our GO-Global for Windows and GO-Global for Unix software for deployment
      throughout their distribution network with both sub-distributors and end
      users. Our agreement with Elosoft, which was originally entered into in
      February 2005, automatically renews annually. Either party may terminate
      the agreement upon 60-days written notice to the other party. We
      anticipate continuing our relationship with Elosoft throughout 2009.

  Sales, Marketing and Support

Sales and marketing efforts of our software products are directed at increasing
product awareness and demand among ISVs, small to medium-sized enterprises, and
VARs who have a vertical orientation or are focused on Unix, Linux or Windows
environments. Current marketing activities include: direct mail, targeted
advertising campaigns, tradeshows, production of promotional materials, public
relations and maintaining an Internet presence for marketing and sales purposes.

We currently consider Alcatel-Lucent, FrontRange, and Ericsson to be our most
significant customers. Sales to Alcatel-Lucent, FrontRange and Ericsson
represented approximately 15.3%, 6.2% and 7.3% of total software product sales
during 2008, respectively, and 21.3%, 8.1% and 5.0% of total software product
sales during 2007, respectively.

Many of our customers enter into, and periodically renew, maintenance contracts
to ensure continued product updates and support. Currently, we offer maintenance
contracts for one, two, three or five-year periods.

  Research and Development

Our research and development efforts currently are focused on further enhancing
the functionality, performance and reliability of existing products and
developing new products. We invested approximately $2,373,500 and $2,162,700
into research and development with respect to our software products in 2008 and
2007, respectively. No significant amount invested in research and development
was capitalized during either 2008 or 2007. We historically have made
significant investments in our protocol and in the performance and development
of our server-based software and expect to continue to make significant product
investments during 2009.

During 2006 we established GraphOn Research Labs Limited, a wholly-owned
research and development subsidiary in Tel Aviv, Israel. GraphOn Research Labs,
which began operations during July 2006, is focused on further enhancing the
functionality, performance and reliability of our existing products and
developing new products.

  Competition

The server-based software market in which we participate is highly competitive.
We believe that our products offer certain advantages over our competitors,
particularly in product performance and market positioning. The market for our
products ranges from remote access for a single PC user to server-based software
for large numbers of users over many different types of device and network
connections. Our competitors include manufacturers of conventional PC X server
software. Competition is expected from these and other companies in the
server-based software market. Competitive factors in our market space include:
price, product quality, functionality, product differentiation and a range of
product offerings and product features.

We believe our principal competitors for our current products include Citrix
Systems, Inc., Hummingbird Communications, Ltd., WRQ, Network Computing Devices
and NetManage. Citrix is the established leading vendor of server-based
computing software. Hummingbird is the established market leader in PC X
Servers. WRQ, Network Computing Devices, and NetManage also offer traditional PC
X Server software.

  Proprietary Technology - Intellectual Property Portfolio

We rely primarily on trade secret protection, copyright law, confidentiality and
proprietary information agreements to protect our proprietary technology and
registered trademarks. The loss of any material trade secret, trademark, trade
name or copyright could have a material adverse effect on our results of


                                       6
<PAGE>

operations and financial condition. We intend to defend our proprietary
technology rights; however, we cannot give assurance that our efforts to
protect our proprietary technology rights will be successful.
Despite our precautions, it may be possible for unauthorized third parties to
copy portions of our products, or to obtain information we regard as
proprietary. We do not believe our products infringe on the rights of any third
parties, but we can give no assurance that third parties will not assert
infringement claims against us in the future, or that any such assertion will
not result in costly litigation or require us to obtain a license to proprietary
technology rights of such parties.

Upon our acquisition of Network Engineering Software ("NES") on January 31,
2005, we acquired the rights to 11 patents, which are primarily method patents
that describe software and network architectures to accomplish certain tasks, as
well as the rights to an additional 43 patent applications in process.
Generally, our patents, which have applicability to computer networks, virtual
private networks and the Internet, describe:

   o  methods to collect, store and display information developed and accessed
      by users and stored on host computer servers;
   o  methods to provide multiple virtual websites on one computer;
   o  methods to protect computers and computer networks from unauthorized
      access; and
   o  methods to provide on-line information and directory service.

As of March 18, 2009 we have 23 issued patents, within the NES family of
patents, that will expire at various times between December 2014 and October
2016. Also as of March 18, 2009, we have 38 applications for patents filed in
the United States Patent Office relating to the various aspects of submission,
storage, retrieval and security of information stored on computers accessed
remotely, typically through computer networks or the Internet. At that date, the
applications had been pending for various periods ranging from approximately 12
to 72 months. Of the 38 applications, 36 are continuations of previously issued
patents and 2 are continuations-in-part applications. Continuation applications
are applications that are identical to an issued patent or another application
but have different claims. Continuation-in-part applications are applications
that are similar to an issued patent or another application but have additional
description.

No applications for patents have been filed in any foreign jurisdiction.

As of March 18, 2009, the United States Patent and Trademark office (the "PTO")
has ordered the reexamination of three of our patents. Further discussion of
this item, as well as the current status of actions we have initiated with
respect to our patents, are explained more fully in Item 3 "Legal Proceedings"
in this Annual Report on Form 10-K.

As discussed more fully in Item 7 in this Annual Report on Form 10-K, during
2008 we recorded an $868,200 impairment charge against certain patent families
within our patent portfolio.

  Operations

We perform all purchasing, order processing and shipping of products and
accounting functions related to our operations. We also perform production of
software masters, development of documentation, packaging designs, quality
control and testing. When required by a customer, CD-ROM and floppy disk
duplication, printing of documentation and packaging are also accomplished
through in-house means. We generally ship products electronically immediately
upon receipt of order. As a result, we have relatively little backlog at any
given time, and do not consider backlog a significant indicator of future
performance. Additionally, since virtually all of our orders are currently being
fulfilled electronically, we do not maintain any prepackaged inventory.

  Employees

As of March 18, 2009, we had a total of 34 employees, including 6 in marketing,
sales and support, 20 in research and development (which is inclusive of
employees who may also perform customer service related activities), 7 in
administration and finance and 1 in our patent group. We believe our
relationship with our employees is good. No employees are covered by a
collective bargaining agreement.


                                       7
<PAGE>


ITEM 1A.   RISK FACTORS

The risks and uncertainties described below are not the only ones facing our
company. Additional risks and uncertainties not presently known to us, or risks
that we do not consider significant, may also impair our business. This Annual
Report on Form 10-K also contains forward-looking statements that involve risks
and uncertainties, and actual results may differ materially from the results we
discuss in the forward-looking statements. If any of the following risks
actually occur, they could have a severe negative impact on our financial
results and stock price.

   The current adverse changes in general economic conditions on a global basis
   could adversely affect our business, results of operations and financial
   condition.

The current economic recession, coupled with continued uncertainty about future
economic conditions, could negatively impact our current and prospective
customers, resulting in delays or reductions in their technology purchases. As a
result, we could experience fewer new orders, fewer renewals, longer sales
cycles, the impact of the slower adoption of newer technologies and increased
price competition, any of which could have a material and adverse impact on our
business, results of operations and financial condition. Continuation of the
current adverse economic conditions also may negatively impact our ability to
collect payment for outstanding debts owed to us by our customers or other
parties with whom we do business. We can not predict the timing, strength or
duration of this severe global economic recession or subsequent recovery.

   Our business could be adversely impacted by conditions affecting the
   information technology market.

Demand for our products and services can be significantly impacted by the
general demand for business-related information technology, which demand
fluctuates based on numerous factors, including: capital spending levels, the
spending levels and growth of our current and prospective customers, and general
economic conditions. Fluctuations in the demand for our products and services
could have a material adverse effect on our business, results of operations and
financial condition. As a result of the poor general economic and market
conditions, future economic projections for the information technology sector
are uncertain as companies reassess their spending for technology products and
services. If an unfavorable environment for information technology spending
continues, our business, results of operations and financial condition could be
adversely impacted.

   We have a history of operating losses and expect these losses to continue, at
   least for the near future.

We have experienced significant operating losses since we began operations. We
expect that our Intellectual Property segment will generate an operating loss in
2009. We project that our software segment will not generate enough revenue to
offset such operating loss, nor are we projecting that our software segment will
be profitable on its own. Consequently, we expect to report an operating loss on
a consolidated basis for 2009. In subsequent reporting periods, if revenues grow
more slowly than anticipated, or if aggregate operating expenses exceed
expectations, we may not become profitable. Even if we become profitable, we may
be unable to sustain such profitability.

   We have a limited amount of cash available to fund our operations,
   consequently, we may not be able to realize the anticipated benefits of
   the patent portfolio we acquired from NES.

Although we entered into a $6.25 million settlement and licensing agreement with
Autotrader.com in December 2007, we have not generated further revenue from our
patent portfolio since their acquisition from NES in January 2005. Due to our
limited cash availability, we have determined that we will not be initiating any
new infringement litigation or attempting to seek licensing revenue with respect
to any of the NES patents that were not involved in any of our on-going
litigation as of December 31, 2008. As a result of such decision, during the
fourth quarter of 2008 we recorded an $868,200 non-cash impairment charge
against certain of the patents acquired from NES. If we determine that any of
our patents are further impaired, we would be required to write down the value
of the patents even further, which would result in additional non-cash
impairment charges.

   Our revenue is typically generated from a very limited number of significant
   customers.

A material portion of our revenue during any reporting period is typically
generated from a very limited number of significant customers. Consequently, if
any of these significant customers reduce their order level or fail to order
during a reporting period, our revenue could be materially adversely impacted.

                                       8
<PAGE>


Several of our significant customers are ISVs who have bundled our products with
theirs to sell as web-enabled versions of their products. Other significant
customers include distributors who sell our products directly. We do not control
our significant customers. Some of our significant customers maintain
inventories of our products for resale to smaller end-users. If they reduce
their inventory of our products, our revenue and business could be materially
adversely impacted.

   If we are unable to develop new products and enhancements to our existing
   products, our business, results of operations and financial condition could
   be materially adversely impacted.

The market for our products and services are characterized by:

   o  frequent new product and service introductions and enhancements;
   o  rapid technological change;
   o  evolving industry standards;
   o  fluctuations in customer demand; and
   o  changes in customer requirements.

Our future success depends on our ability to continually enhance our current
products and develop and introduce new products that our customers choose to
buy. If we are unable to satisfy our customers' demands and remain competitive
with other products that could satisfy their needs by introducing new products
and enhancements, our business, results of operations and financial condition
could be materially adversely impacted. Our future success could be hindered by:

   o  delays in our introduction of new products and/or enhancements of
      existing products;
   o  delays in market acceptance of new products and/or enhancements of
      existing products; and
   o  our, or a competitor's, announcement of new products and/or product
      enhancements or technologies that could replace or shorten the life
      cycle of our existing products.

For example, sales of our GO-Global for Windows software could be affected by
the announcement from Microsoft of the intended release and subsequently, the
actual release of a new Windows-based operating system or an upgrade to a
previously released Windows-based operating system version as these new or
upgraded systems may contain similar features to our products or they could
contain architectural changes that temporarily prevent our products from
functioning properly within a Windows-based operating system environment.

   Our business could be adversely impacted by changes pending in both the PTO
   and the United States Congress.

Currently, proposed rule changes are pending in the PTO that will affect how
currently pending and new patent applications are processed by the PTO. These
rule changes may have an adverse affect on our presently pending patent
applications and any patent applications we may file in the future.

Additionally, legislation is pending in Congress that would reform patent law.
The legislation, if passed, may affect our ability to file lawsuits in certain
jurisdictions and may adversely impact our ability to collect damages if enacted
as currently drafted.

   Sales of products within our GO-Global product line constitute a substantial
   majority of our revenue.

We anticipate that sales of products within our GO-Global product line, and
related enhancements, will continue to constitute a substantial majority of our
revenue for the foreseeable future. Our ability to continue to generate revenue
from our GO-Global product line will depend on continued market acceptance of
GO-Global. Declines in demand for our GO-Global product line could occur as a
result of:

   o  lack of success with our strategic partners;
   o  new competitive product releases and updates to existing
      competitive products;
   o  decreasing or stagnant information technology spending levels;
   o  price competition;
   o  technological changes, or;
   o  general economic conditions in the market in which
      we operate.

                                       9
<PAGE>

If our customers do not continue to purchase GO-Global products as a result of
these or other factors, our revenue would decrease and our results of operations
and financial condition would be adversely affected.

   Our stock price has been historically volatile and you could lose the value
   of your investment.

Our stock price has historically been volatile; it has fluctuated significantly
to date. The trading price of our stock is likely to continue to be highly
volatile and subject to wide fluctuations. Your investment in our stock could
lose value.

   Our operating results in one or more future periods are likely to fluctuate
   significantly and may fail to meet or exceed the expectations of securities
   analysts or investors.

Our operating results are likely to fluctuate significantly in the future on a
quarterly and annual basis due to a number of factors, many of which are outside
our control. Factors that could cause our revenues to fluctuate include the
following:

   o  our ability to maximize the revenue opportunities of our patents;
   o  variations in the size of orders by our customers;
   o  increased competition; and
   o  the proportion of overall revenues derived from different sales channels
      such as distributors, original equipment manufacturers (OEMs) and others.

In addition, our royalty and license revenues are impacted by fluctuations in
OEM licensing activity from quarter to quarter, which may involve one-time
orders from non-recurring customers, or customers who order infrequently. Our
expense levels are based, in part, on expected future orders and sales;
therefore, if orders and sales levels are below expectations, our operating
results are likely to be materially adversely affected. Additionally, because
significant portions of our expenses are fixed, a reduction in sales levels may
disproportionately affect our net income. Also, we may reduce prices or increase
spending in response to competition or to pursue new market opportunities.
Because of these factors, our operating results in one or more future periods
may fail to meet or exceed the expectations of securities analysts or investors.
In that event, the trading price of our common stock would likely be adversely
affected.

   We may not be successful in attracting and retaining key management or other
   personnel.

Our success and business strategy is dependent in large part on our ability to
attract and retain key management and other personnel in certain areas of our
business. The loss of the services of one or more key members of our management
group and other key personnel, including our Chief Executive Officer, may have a
material adverse effect on our business. We do not have long-term employment
agreements with any of our key personnel and any officer or other employee can
terminate their relationship with us at any time. The successful implementation
of our business strategy could be dependent upon our ability to retain
highly-skilled key management, technical, sales and finance personnel. If any of
these employees were to leave, we would need to attract and retain replacements
for them. We may also need to add key personnel in the future, in order to
successfully implement our business strategies. The market for such qualified
personnel is competitive and it includes other potential employers whose
financial resources for such qualified personnel are more substantial than ours.
Consequently, we could find it difficult to attract, assimilate or retain such
qualified personnel in sufficient numbers to successfully implement our business
strategies.

   Our failure to adequately protect our proprietary rights may adversely affect
   us.

Our commercial success is dependent, in large part, upon our ability to protect
our proprietary rights. We rely on a combination of patent, copyright and
trademark laws, and on trade secrets and confidentiality provisions and other
contractual provisions to protect our proprietary rights. These measures afford
only limited protection. We cannot assure you that measures we have taken will
be adequate to protect us from misappropriation or infringement of our
intellectual property. Despite our efforts to protect proprietary rights, it may
be possible for unauthorized third parties to copy aspects of our products or
obtain and use information that we regard as proprietary. In addition, the laws
of some foreign countries do not protect our intellectual property rights as
fully as do the laws of the United States. Furthermore, we cannot assure you
that the existence of any proprietary rights will prevent the development of
competitive products. The infringement upon, or loss of any proprietary rights,
or the development of competitive products despite such proprietary rights,
could have a material adverse effect on our business.


                                       10
<PAGE>

As regards our intention to maximize the revenue opportunities from the
portfolio of patents that we acquired from NES:

   o  Although we believe the NES patents to be strong, there can be no
      assurance that they will not be found invalid either in whole or in part;
   o  Invalidation of their broadest claims could result in very narrow claims
      that do not have the potential to produce meaningful license revenues;
   o  Many of the companies that we intend to seek licenses from are very large
      with significant financial resources. We currently lack the ability to
      defend our patents against claims of invalidity if such litigation is
      heavily contested over an extended period of months or even years;
   o  We have engaged attorneys that work on our behalf on a contingent fee
      basis and intend to pursue litigation until a resolution is achieved that
      is favorable to us. Such attorneys may seek to limit their exposure
      either by advocating licensing settlements that are not favorable to us
      or may abandon their efforts on our behalf; and
   o  Because Network Engineering Software obtained no foreign patents or
      filed any foreign patent applications, infringing companies may seek to
      avoid our demand for licenses by moving the infringing activities
      offshore where U.S. patents cannot be enforced.

   We face risks of claims from third parties for intellectual property
   infringement that could adversely affect our business.

At any time, we may receive communications from third parties asserting that
features or content of our products may infringe upon their intellectual
property rights. Any such claims, with or without merit, and regardless of their
outcome, may be time consuming and costly to defend. We may not have sufficient
resources to defend such claims and they could divert management's attention and
resources, cause product shipment delays or require us to enter into new royalty
or licensing agreements. New royalty or licensing agreements may not be
available on beneficial terms, or may not be available at all. If a successful
infringement claim is brought against us and we fail to license the infringed or
similar technology, our business could be materially adversely affected.

   Our business significantly benefits from strategic relationships and there
   can be no assurance that such relationships will continue in the future.

Our business and strategy relies to a significant extent on our strategic
relationships with other companies. There is no assurance that we will be able
to maintain or develop any of these relationships or to replace them in the
event any of these relationships are terminated. In addition, any failure to
renew or extend any licenses between any third party and us may adversely affect
our business.

   We rely on indirect distribution channels for our products and may not be
   able to retain existing reseller relationships or to develop new reseller
   relationships.

Our products are primarily sold through several distribution channels. An
integral part of our strategy is to strengthen our relationships with resellers
such as OEMs, systems integrators, VARs, distributors and other vendors to
encourage these parties to recommend or distribute our products and to add
resellers both domestically and internationally. We currently invest, and intend
to continue to invest, significant resources to expand our sales and marketing
capabilities. We cannot assure you that we will be able to attract and/or retain
resellers to market our products effectively. Our inability to attract resellers
and the loss of any current reseller relationships could have a material adverse
effect on our business, results of operations and financial condition.
Additionally, we cannot assure you that resellers will devote enough resources
to provide effective sales and marketing support to our products.

   The market in which we participate is highly competitive and has more
   established competitors.

The market we participate in is intensely competitive, rapidly evolving and
subject to technological changes. We expect competition to increase as other
companies introduce additional competitive products. In order to compete
effectively, we must continually develop and market new and enhanced products
and market those products at competitive prices. As markets for our products
continue to develop, additional companies, including companies in the computer
hardware, software and networking industries with significant market presence,
may enter the markets in which we compete and further intensify competition. A
number of our current and potential competitors have longer operating histories,
greater name recognition and significantly greater financial, sales, technical,
marketing and other resources than we do. We cannot give assurance that our
competitors will not develop and market competitive products that will offer
superior price or performance features, or that new competitors will not enter
our markets and offer such products. We believe that we will need to invest
increased financial resources in research and development to remain competitive


                                       11
<PAGE>

in the future. Such financial resources may not be available to us at the time
or times that we need them, or upon terms acceptable to us. We cannot assure you
that we will be able to establish and maintain a significant market position in
the face of our competition and our failure to do so would adversely affect our
business.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters currently occupies approximately 1,850 square feet of
office space in Santa Cruz, California, under a lease that will expire in July
2011. Rental of these premises will average approximately $3,800 per month over
the remaining term of the lease, which is inclusive of our pro rata share of
utilities, facilities maintenance and other costs.

In Concord, New Hampshire, our domestic research and development team currently
occupies approximately 5,560 square feet of office space under a lease that will
expire in September 2009. Rent on the Concord facility will approximate $8,400
per month over the remaining term of the lease.

We currently occupy approximately 150 square feet of office space in Irvine,
California, under a lease that expires in March 2010. Monthly rental payments
for this sales office are approximately $1,100.

We believe our current facilities will be adequate to accommodate our needs for
the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

Due to our limited cash availability, we determined that we will not be
initiating any new infringement litigation or attempting to seek licensing
revenue with respect to any of the NES patents that were not involved in any of
the following litigation that was on-going as of December 31, 2008.

On August 13, 2008, we initiated a proceeding against Google Inc. ("Google") in
the United States District Court in the Eastern District of Texas alleging
infringement of four of our patents, namely; U.S. Patent Nos. 6,324,538,
6,850,940, 7,028,034 and 7,269,591, which protect our unique method of
maintaining an automated and network-accessible database. The suit alleges that
Google infringes our patents on their Web sites. The suit seeks permanent
injunctive relief along with unspecified damages. On October 8, 2008, Google
filed its Answers and Counterclaims seeking a declaratory judgment that they do
not infringe the patents referenced in the suit and that each of the patents in
the suit are invalid and unenforceable. On October 31, 2008, we filed our
answers to each of the counterclaims.

On March 10, 2008, we initiated a proceeding against Classified Ventures, LLC;
IAC/InterActiveCorp; Match.com (an operating business of IAC/InterActiveCorp);
Yahoo! Inc.; eHarmony.com; and CareerBuilder, LLC in the United States District
Court in the Eastern District of Texas alleging infringement of four of our
patents, namely; U.S. Patent Nos. 6,324,538, 6,850,940, 7,028,034 and 7,269,591,
which protect our unique method of maintaining an automated and
network-accessible database. The suit alleges that the named companies infringe
our patents on each of their Web sites. The suit seeks permanent injunctive
relief along with unspecified damages. During late April and early May 2008, the
opposing parties in the proceeding filed their Answers and Counterclaims seeking
a declaratory judgment that they do not infringe the patents in the suit and
that each of the patents in the suit are invalid and unenforceable. On June 5,
2008, we filed our answers to each of the opposing parties' counterclaims. On
August 13, 2008, the opposing parties filed their respective motions for early
hearing on inequitable conduct. Responses and replies were filed during August
and September 2008 addressing this motion. On August 21, 2008, IAC/interactive
Corp. was dismissed from the lawsuit without prejudice. On December 2, 2008 the
court issued a Docket Control Order setting the dates of April 27, 2011 for the
Markman Hearing and November 7, 2011 for jury selection.

On August 28, 2007, we filed a proceeding against Juniper Networks, Inc.
("Juniper") in the United States District Court in the Eastern District of Texas
(the "court") alleging that certain of Juniper's products infringe three of our
patents, namely; U.S. Patent Nos. 5,826,014, 6,061,798 and 7,028,336, (the
"'014," "'798" and "'336" patents, respectively) which protect our fundamental
network security and firewall technologies. We seek preliminary and permanent
injunctive relief along with unspecified damages and fees. Juniper filed its
Answer and Counterclaims on October 26, 2007 seeking a declaratory judgment that
it does not infringe the `014, `798 and `336 patents and that all three of these
patents are invalid and unenforceable. Subsequent to October 26, 2007 and


                                       12
<PAGE>

through March 18, 2009, we and Juniper have filed further replies and responses
addressing the issues raised in our original complaint and Juniper's Answer and
Counterclaims. On May 30, 2008 the court issued a Docket Control Order setting
the dates of April 7, 2010 for the Markman Hearing and July 6, 2010 for jury
selection. Also on May 30, 2008, we served our Asserted Claims and Infringement
Contentions. On July 25, 2008, we filed an amended complaint removing the `336
patent from our infringement claim. Juniper responded with its answer and
counterclaim to the amended complaint on August 11, 2008. On September 5, 2008,
we filed a second amended complaint to correct Juniper's corporate name, which
was followed by Juniper's answer and our reply during October 2008. On January
27, 2009, Juniper filed a motion to change the venue to the Northern District of
California.

On March 16, 2009, Juniper initiated a proceeding against us and one of our
resellers in the United States District Court in the Eastern District of
Virginia alleging infringement of one of their patents, namely; U.S. Patent No.
6,243,752 which protects Juniper's unique method of transmitting data between a
host computer and a terminal computer. We have not yet responded to the claim.

Separately, Juniper has petitioned the PTO to reexamine the `014 and `798
patents. On April 17, 2008, the PTO ordered the reexamination of the `798
patent, and on July 25, 2008, the PTO ordered the reexamination of the `014
patent. Juniper has also asked the PTO to reexamine our U.S. Patent No.
7,127,464 (the "'464" patent), a patent unrelated to any litigation. The PTO
ordered the reexamination of the `464 patent on April 17, 2008.

On November 23, 2005, we initiated a proceeding (the "proceeding") against
AutoTrader.com in the United States District Court in the Eastern District of
Texas, (the "Court") alleging that AutoTrader.com was infringing two of our
patents, namely U.S. Patent Nos. 6,324,538 and 6,850,940 (the "'538" and "'940"
patents, respectively), which protect our unique method of maintaining an
automated and network accessible database, on its AutoTrader.com website. On
December 19, 2007 we entered into a $6.25 million settlement and licensing
agreement with AutoTrader.com, which ended all legal disputes between us and
AutoTrader.com, and granted to AutoTrader.com, its parent company Cox
Enterprises, Inc. and all of their affiliates an irrevocable, perpetual,
world-wide, non-exclusive license to all of our patents and patent applications,
including the `538 and `940 patents.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our 2008 Annual Meeting of Stockholders was held on November 19, 2008. At the
meeting, one director was reelected, to serve for a three-year term. The vote
was as follows:
<TABLE>
<CAPTION>
                                        For           Withheld
                                  -------------------------------
<S>                                  <C>             <C>
                Gordon Watson        35,092,796      1,607,424
</TABLE>

The following individuals continue in their capacity as directors: Michael
Volker, Robert Dilworth and August P. Klein.  Their current terms expire
during 2009, 2010 and 2010, respectively.

The stockholders also ratified the reappointment of Macias Gini & O'Connell LLP
as our independent auditors for fiscal 2008. The vote was as follows:

<TABLE>
<CAPTION>
                        For         Against       Abstain
                 -------------------------------------------
<S>                 <C>            <C>            <C>
                    35,096,339     1,336,234      267,646
</TABLE>


                                       13
<PAGE>


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth, for the periods indicated, the high and low
reported sales price of our common stock. Since March 27, 2003 our common stock
has been quoted on the Over-the-Counter Bulletin Board. Our common stock is
quoted under the symbol "GOJO."

<TABLE>
<CAPTION>
                                Fiscal 2008 *     Fiscal 2007 *
                              -------------------------------
<S>                 <C>       <C>     <C>       <C>     <C>
                    Quarter    High    Low       High    Low
                    1st       $0.46   $0.27     $0.28   $0.15
                    2nd       $0.35   $0.24     $0.22   $0.13
                    3rd       $0.33   $0.17     $0.29   $0.16
                    4th       $0.22   $0.05     $0.45   $0.14
</TABLE>

    * The quotations reflect inter-dealer prices, without retail mark-up,
      mark-down or commission and may not represent actual transactions.

On March 18, 2009 there were approximately 152 holders of record of our common
stock. Between January 1, 2009 and March 18, 2009 the high and low reported
sales price of our common stock was $0.09 and $0.04, respectively, and on March
18, 2009 the closing price of our common stock was $0.09.

We have never declared or paid dividends on our common stock, nor do we
anticipate paying any cash dividends for the foreseeable future. We currently
intend to retain future earnings, if any, to finance the operations and
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of our Board of Directors and will be dependent upon the
earnings, financial condition, operating results, capital requirements and other
factors as deemed necessary by the Board of Directors.

During the three-month period ended December 31, 2008, we granted stock options
to purchase an aggregate 35,000 shares of common stock, at exercise prices
ranging between $0.08 and $0.20, to certain non-executive employees. The grants
of such stock options were not registered under the Securities Act of 1933
because the stock options were offered and sold in transactions not involving a
public offering, thus, they were exempt from registration under the Securities
Act pursuant to Section 4(2).

On January 8, 2008, our Board of Directors authorized a stock buy back program
to repurchase up to $1,000,000 of our outstanding common stock. Under terms of
the program, we are not obligated to repurchase any specific number of shares
and the program may be suspended or terminated at management's discretion.

The following is a summary of our share repurchases of our common stock during
the year ended December 31, 2008 under our Board authorized buy back program:

<TABLE>
<CAPTION>
                                           Total Number
                                            of Shares                   Approximate
                                            Purchased      Total       Dollar Value
    Three-Month      Total                  as Part of    Dollars     of Shares That
      Period       Number of    Average      Publicly    Purchased      May Yet Be
     Ended in       Shares     Price Per    Announced    Under the    Purcahsed Under
       2008        Purchased     Share       Program      Program       the Program
    -------------------------------------------------------------------------------
<S>           <C>   <C>        <C>            <C>        <C>            <C>
    March 31             -           -             -            -
    June 30              -           -             -            -
    September 30    294,000    $  0.30        294,000    $ 87,700
    December 31          -           -             -            -
                   ---------               -----------------------
      Totals        294,000    $  0.30        294,000    $ 87,700       $  912,300
                   =========               =======================
</TABLE>


                                       14
<PAGE>


ITEM 6.    SELECTED FINANCIAL DATA


Not applicable for smaller reporting companies.



                                       15
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated
financial statements and related notes provided in Item 8, "Financial Statements
and Supplementary Data," in this Annual Report on Form 10-K.

Critical Accounting Policies. The preparation of financial statements and
related disclosures in conformity with accounting principles generally accepted
in the United States requires management to make judgments, assumptions and
estimates that affect the amounts reported in the Consolidated Financial
Statements and accompanying notes. The Summary of Significant Accounting
Policies appears in Part II, Item 8 - Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K, which summary describes the
significant accounting policies and methods used in the preparation of the
Consolidated Financial Statements. Estimates are used for, but not limited to,
the amount of stock-based compensation expense, the allowance for doubtful
accounts, the estimated lives and valuation of intangible assets, depreciation
of fixed assets, accruals for liabilities and taxes. Actual results could differ
materially from these estimates. The following critical accounting policies are
impacted significantly by judgments, assumptions and estimates used in the
preparation of the Consolidated Financial Statements.

Revenue Recognition
We market and license 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.
Our product licenses are generally perpetual. We also separately sell
intellectual property licenses, maintenance contracts, which are comprised of
license updates and customer service access, private-label branding kits,
software developer kits ("SDKs") and product training services.

Generally, software license revenues are recognized when:

   o  Persuasive evidence of an arrangement exists, (i.e., when we sign 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 program(s) 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, or customer training. We limit our
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 value 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 purchase product licenses that they hold in inventory until
they are resold to the ultimate end user (an "inventory stocking order"). We
provide maintenance services to these resellers for such licenses at no charge.
Generally, we defer the recognition of revenue for inventory stocking orders
until the underlying licenses are sold to the end user. We allocate revenue to
the service fee (maintenance) component based on VSOE prorated to the time
period between the inventory order date and date of sale to the end user. For
certain resellers, assuming all other revenue recognition criteria have been


                                       16
<PAGE>

met, we recognize and allocate revenue for inventory stocking orders based upon
the estimated time frame the licenses will be held by the reseller. Such
estimates are based upon our historical experience with the reseller.

There are no rights of return granted to resellers or other purchasers of our
software programs.

We recognize revenue from maintenance contracts ratably over the related
contract period, which generally ranges from one to five years.

Long-Lived Assets
Long-lived assets, which consist primarily of patents, are assessed for possible
impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable, whenever we have committed to a plan to
dispose of the assets or, at a minimum, as it relates to our patents, annually.
Typically, for long-lived assets to be held and used, measurement of an
impairment loss is based on the fair value of such assets, with fair value being
determined based on appraisals, current market value, comparable sales value,
and undiscounted future cash flows, among other variables, as appropriate.
Assets to be held and used affected by an impairment loss are depreciated or
amortized at their new carrying amount over their remaining estimated life;
assets to be sold or otherwise disposed of are not subject to further
depreciation or amortization. During the fourth quarter of 2008, we recorded an
impairment charge of $868,200 against certain of our patent families as we
determined that due to our limited cash availability we will not be initiating
any new infringement litigation or attempting to seek licensing revenue with
respect to any of the NES patents that were not involved in any of our on-going
litigation as of December 31, 2008; thus, we reduced them to a net realizable
value of $0 as of December 31, 2008. No such impairment charge was recorded
during 2007.

Patents
Our patents are being amortized over their estimated remaining economic lives,
currently estimated to be approximately two years, as of December 31, 2008.
Costs associated with filing, documenting or writing method patents are expensed
as incurred. Contingent legal fees paid in connection with a patent lawsuit, or
settlements thereof, are charged to cost of goods sold. All other non-contingent
legal fees and costs incurred in connection with a patent lawsuit, or
settlements thereof, are charged to general and administrative expense. During
the fourth quarter of 2008, we recorded an impairment charge of $868,200 against
certain of our patents. No such impairment charge was recorded during 2007.

Stock-Based Compensation
We apply the fair value recognition provisions of Statement of Financial
Accounting Standards No. 123R, "Share-Based Payment," ("FAS No. 123R") and
related interpretations using the modified prospective transition method. Under
that method, compensation cost recognized 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 FAS No. 123R.

We estimated the fair value of each stock-based award granted during the years
ended December 31, 2008 and 2007 on the date of grant using a binomial model,
with the assumptions set forth in the following table:

<TABLE>
<CAPTION>
                                                    2008              2007
                                              ---------------   ---------------
<S>                                           <C>      <C>      <C>      <C>
        Estimated volatility                  158.0% - 173.0%   154.2% - 154.4%
        Annualized forfeiture rate                       4.0%     5.1% -   5.4%
        Expected option term (years)                     7.5               7.5
        Estimated exercise factor                       10.0%             10.0%
        Approximate risk-free interest rate     2.6% -   3.5%              4.6%
        Expected dividend yield                            -                 -
</TABLE>

In estimating our stock price volatility for grants awarded during the years
ended December 31, 2008 and 2007, we analyzed our historic volatility over the
7.5 year period ended December 31, 2008 and December 2007, respectively, by
reference to actual stock prices during this period. We derived an annualized
forfeiture rate by analyzing our historical forfeiture data, including
consideration of the impact of certain non-recurring events, such as reductions
in our work force. Our estimates of the expected option term and the estimated
exercise factor were derived from our analysis of historical data and future
projections. The approximate risk-free interest rate was based on the implied
yield available on U. S. Treasury issues with remaining terms equivalent to our


                                       17
<PAGE>

expected option term. 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 years ended December 31, 2008 and 2007.
We applied the same variables to the calculation of the costs associated with
the ESPP shares purchased in each respective year as the stock option grants
noted above, except that the expected term was 0.5 years in each year and the
approximate risk-free interest rate was 1.9% - 3.8% for ESPP shares purchased
during 2008. The time span from the date of grant of ESPP shares to the date of
purchase is six months.

We have not historically paid dividends on our common stock and do not
anticipate doing so for the foreseeable future.

Results of Operations

Set forth below is statement of operations data for the years ended December 31,
2008 and 2007 along with the dollar and percentage changes from 2007 to 2008 in
the respective line items. Percentage changes that are not meaningful are marked
NM.

<TABLE>
<CAPTION>
                                     Year Ended December 31,           Change in
                                    -------------------------   -----------------------
                                       2008           2007        Dollars    Percentage
Revenue:                            -----------   -----------   -----------  ----------
<S>                                 <C>           <C>           <C>           <C>
Product licenses                    $ 4,468,900   $ 3,325,100   $ 1,143,800       34.4%
Intellectual property licenses                -     6,250,000    (6,250,000)        NM
Service fees                          2,168,700     1,794,400       374,300       20.9
Other                                    71,100       116,100       (45,000)     (38.8)
                                    -----------   -----------   -----------
   Total Revenue                      6,708,700    11,485,600    (4,776,900)     (41.6)
Cost of revenue                         575,100     2,623,000    (2,047,900)     (78.1)
                                    -----------   -----------   -----------
Gross profit                          6,133,600     8,862,600    (2,729,000)     (30.8)
                                    -----------   -----------   -----------
Operating expenses:
Selling and marketing                 1,816,100     1,819,900        (3,800)      (0.2)
General and administrative            3,796,100     4,703,000      (906,900)     (19.3)
Research and development              2,373,500     2,162,700       210,800        9.7
Impairment of patents                   868,200             -       868,200         NM
                                    -----------   -----------   -----------
   Total operating expenses           8,853,900     8,685,600       168,300        1.9
                                    -----------   -----------   -----------
(Loss) Income from operations        (2,720,300)      177,000    (2,897,300)  (1,636.9)
                                    -----------   -----------   -----------
Other income (expense):
Interest and other income                89,100        62,700        26,400       42.1
Interest and other expense               (7,300)       (4,100)       (3,200)     (78.0)
                                    -----------   -----------   -----------
   Total other income                    81,800        58,600        23,200       39.6
                                    -----------   -----------   -----------

(Loss) income before income taxes    (2,638,500)      235,600    (2,874,100)  (1,219.9)
Provision for income taxes              (11,700)       42,100       (53,800)    (127.8)
                                    -----------   -----------   -----------
Net (loss) income attributable to
 common shareholders                $(2,626,800)  $   193,500   $(2,820,300)  (1,457.5)
</TABLE>

Revenue. Our software revenue has historically been primarily derived from
product licensing fees and service fees from maintenance contracts. Other
sources of software revenue include sales of software development kits and
training. Software development kits are tools that allow end users to develop,
interface and brand their own applications for use in conjunction with either
our Windows or Unix/Linux products. Currently, we do not generate a significant
amount of revenue from the sale of software development kits nor do we
anticipate generating a significant amount from them during 2009.

The table that follows summarizes product licensing fees for the years ended
December 31, 2008 and 2007 and calculates the change in dollars and percentage
from 2007 to 2008 in the respective line item.


                                       18
<PAGE>

<TABLE>
<CAPTION>
                             Year Ended December 31,           Increase/(Decrease)
                            -------------------------------------------------------
   Product licensing fees        2008         2007            Dollars    Percentage
   --------------------------------------------------------------------------------
<S>                         <C>            <C>             <C>              <C>
   Windows                  $ 3,117,400    $ 1,959,500     $ 1,157,900      59.1%
   Unix/Linux                 1,351,500      1,365,600         (14,100)     (1.0)
                            ------------------------------------------
   Total                    $ 4,468,900    $ 3,325,100     $ 1,143,800      34.4%
                            ==========================================
</TABLE>

During the fourth quarter of the year ended December 31, 2008, we recognized
$946,000 of Windows product licensing fees revenue that had previously been
deferred, all of which had been derived from various prior transactions we had
entered into with our former distributor in Japan. At the time that we had
entered into these transactions, not all criteria necessary for recognizing
revenue had been met so all such revenue had been deferred. During the fourth
quarter of 2008 all such criteria was met, thus the revenue was recognized.

After giving affect to the impact of the preceding paragraph, the remaining
changes in both Windows and Unix-based product licensing fees revenue for the
year ended December 31, 2008, as compared with the prior year, was primarily
reflective of how such revenue varies because a significant portion of this
revenue has historically been earned, and continues to be 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,
our product licensing fees revenue can be materially adversely impacted.

Another factor that lead to increased Windows product licensing fees was the
release of an updated version of our Windows product, GO-Global for Windows,
version 3.2, during June 2007, which enhanced the functionality and performance
of earlier versions. Version 3.2 has been well-received by our customers with
2008 being the first full year that it was available for sale.

During December 2007, we entered into a $6,250,000 settlement and licensing
agreement with AutoTrader.com, under which they, their parent company Cox
Enterprises, Inc. and all of their affiliates received an irrevocable,
perpetual, world-wide, non-exclusive license to all of our patents and patent
applications, including the `538 and `940 patents. We did not enter into any
such settlement and licensing agreement during 2008. Although we have initiated
various actions with respect to our patents, there can be no assurances that we
will be successful.

Segment Revenue.  Segment revenue was as follows:

<TABLE>
<CAPTION>
                                                            Increase (Decrease)
                                                         -----------------------
   Year Ended December 31,       2008          2007         Dollars   Percentage
   ----------------------------------------------------------------------------
<S>                         <C>           <C>             <C>           <C>
   Software                 $ 6,708,700   $  5,235,600    $ 1,473,100     28.1%
   Intellectual Property              -      6,250,000     (6,250,000)  (100.0)
                            -----------------------------------------
   Consolidated Total       $ 6,708,700   $ 11,485,600     (4,776,900)   (41.6)%
                            =========================================
</TABLE>

With respect to our software segment revenue, the increases in software revenues
for the comparative periods presented was due primarily to the factors
previously discussed above. During December 2007 we recognized $6,250,000 of
revenue related to the settlement and licensing agreement of our intellectual
property that we entered into with Autotrader.com. We did not license our
intellectual property during 2008, hence our intellectual property segment
recorded no revenue during 2008. For additional information on our segment
revenues, please refer to Note 13 of our consolidated financial statements
included elsewhere in this Annual Report.

Cost of Revenue. Cost of revenue is comprised primarily of service costs, which
represent the costs of customer service (and is inclusive of non-cash
stock-based compensation expense calculated in accordance with FAS123R), product
costs and, when applicable, contingent legal fees resulting from settlements
and/or licensing agreements incurred as a result of our patent litigation
efforts. Shipping and packaging materials are immaterial as virtually all of our
license 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 decreased by $2,047,900, or 78.1%, to $575,100 for the year
ended December 31, 2008 from $2,623,000 for the prior year. Cost of revenue for
the year ended December 31, 2008 represented approximately 8.6% of total
revenue, as compared with 22.8% for the prior year. During the year ended
December 31, 2007, cost of revenue included contingent legal fees that resulted


                                       19
<PAGE>

from the settlement and licensing agreement we entered into with Autotrader.com,
which aggregated approximately $2,119,100. No such fees were incurred during the
year ended December 31, 2008. Net of these contingent legal fees, cost of
revenue increased by $71,200, or 14.1%, to $575,100 for the year ended December
31, 2008 from $503,900 for the prior year. This increase was mainly due to
increased engineering time spent performing customer service in effort to better
meet the support needs of our customers.

Service costs for the years ended December 31, 2008 and 2007 were inclusive of
$24,500 and $13,300 of non-cash stock-based compensation expense, respectively.

We expect that cost of revenue for 2009, assuming that we incur no contingent
legal fees during 2009, will approximate 2008 levels.

Selling and Marketing Expenses. Selling and marketing expenses primarily consist
of employee costs (inclusive of non-cash stock-based compensation expense
calculated in accordance with FAS123R), outside services and travel and
entertainment expenses.

Selling and marketing expenses for the year ended December 31, 2008 approximated
those for the prior year. Selling and marketing expenses represented
approximately 27.1% and 15.8% of total revenue, respectively, for the years
ended December 31, 2008 and 2007. Included in selling and marketing expenses for
the years ended December 31, 2008 and 2007 were approximately $30,600 and
$32,100, respectively, of non-cash stock-based compensation expense.

Although 2008 selling and marketing expenses approximated those for 2007,
employee costs were lower in 2008 , as compared with 2007, mainly as a result of
a decrease in bonuses and commissions as certain performance-based targets were
not achieved. Partially offsetting the decrease in employee costs was an
increase in outside services. During 2008 we incurred costs associated with
market research for a potential new product whereas no such market research
costs were incurred during 2007.

We expect aggregate 2009 selling and marketing expenses to approximate 2008
levels.

General and Administrative Expenses. General and administrative expenses
primarily consist of employee costs (inclusive of non-cash stock-based
compensation expense calculated in accordance with FAS123R), amortization and
depreciation, legal, professional and other outside services (including those
related to realizing benefits from our patents), rent, travel and entertainment
and insurance. Certain costs associated with being a publicly-held corporation
are also included in general and administrative expenses, as well as bad debts
expense.

General and administrative expenses for the year ended December 31, 2008
decreased by $906,900, or 19.3%, to $3,796,100 from $4,703,000 for 2007. General
and administrative expenses for the years ended December 31, 2008 and 2007
represented approximately 56.6% and 40.9% of total revenue, respectively.
Included in general and administrative expenses for the years ended December 31,
2008 and 2007 were approximately $182,900 and $366,300, respectively, of
non-cash stock-based compensation expense.

The main factors that contributed to the decrease in general and administrative
expenses for 2008, as compared to 2007, were an aggregate $636,500 decrease in
outside services related to the non-contingent fees associated with our patent
litigation, and an aggregate $169,600 decrease in bad debts expense, due to an
adjustment we made to our bad debts reserve during 2008 that resulted from an
evaluation of our current customers' outstanding balances, and decreased
employee costs, primarily as a result of the decrease in non-cash stock-based
compensation expense outlined in the preceding paragraph. Typically, the
non-contingent legal fees incurred in conjunction with our lawsuits become much
higher as the respective lawsuit approaches trial. None of our currently active
lawsuits approached their trial dates during 2008, whereas one such suit
approached its trial date in 2007. We deemed the entire outstanding receivable
balances from two customers, which had been fully reserved during or prior to
2007, to be uncollectible during 2008 and removed them from our books. Upon
removal of such balances and analysis of all remaining receivables, we
determined that a lower bad debts reserve was appropriate for 2008. The decrease
in non-cash stock-based compensation expense in 2008, as compared to 2007, was
primarily due to the significant drop in our stock price in 2008, as compared
with 2007, which significantly reduced the non-cash stock-based compensation
expense of options awarded during 2008, and the compensation expense associated
with certain large stock option grants granted in 2005 became fully recognized
early in 2008.


                                       20
<PAGE>

Other costs associated with major components of general and administrative
expenses, notably, depreciation and amortization, insurance, rent and costs
associated with being a public entity did not change significantly during the
year ended December 31, 2008, as compared with the prior year.
The ending balance of our allowance for doubtful accounts as of December 31,
2008 and 2007 was $32,000 and $229,000, respectively. Bad debts expense was
approximately $12,600 and $182,200 for the years ended December 31, 2008 and
2007, respectively.

We anticipate that cumulative general and administrative expense in 2009 will
approximate those incurred during 2008.

Research and Development Expenses. Research and development expenses consist
primarily of employee costs (inclusive of non-cash stock-based compensation
expense calculated in accordance with FAS123R), payments to contract
programmers, all costs of GraphOn Research Labs Limited, and rent.

Under accounting principles generally accepted in the United States, all costs
of product development incurred once technological feasibility has been
established, but prior to the 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. There was
no significant capitalization of product development costs during either 2008 or
2007.

Research and development expenses increased by $210,800, or 9.7%, to $2,373,500
for the year ended December 31, 2008 from $2,162,700 in the prior year. Research
and development expenses for the years ended December 31, 2008 and 2007
represented approximately 35.4% and 18.8% of total revenue, respectively.

Research and development costs for the years ended December 31, 2008 and 2007
are inclusive of $104,400 and $101,500, respectively, of non-cash stock-based
compensation.

During 2008, we incurred $220,400 of increased costs associated with the use of
outside engineering consultants than we did during 2007. We increased our level
of using outside consultants in order to accelerate development work on the next
release of our GO-Global products, which is scheduled for later in 2009, to
supplement our engineering staff's efforts in new product development and to
allow certain members of our engineering staff to devote more time to customer
service.

Other costs associated with major components of research and development
expenses, notably, employees costs, depreciation and rent did not change
significantly during the year ended December 31, 2008, as compared with the
prior year.

Our research and development efforts currently are focused on further enhancing
the functionality, performance and reliability of existing products. We
historically have made significant investments in our protocol and in the
performance and development of our server-based software, and we expect to
continue to make significant product investments during 2009, including
investments in new product offerings. We expect 2009 research and development
expense to approximate 2008 levels.

Impairment of Patents. During the fourth quarter of 2008 we recorded an $868,200
impairment charge against certain of our patent families as we determined that
due to our limited cash availability we will not be initiating any new
infringement litigation or attempting to seek licensing revenue with respect to
any of the NES patents that were not involved in any of our on-going litigation
as of December 31, 2008; thus, we reduced them to a net realizable value of $0
as of December 31, 2008. No such impairment charge was recorded during 2007.

Interest and Other Income. During 2008 the primary component of interest and
other income was interest income derived on excess cash. Our excess cash was
held in interest bearing money market accounts with institutions whose minimum
net assets were greater than or equal to one billion U.S. dollars. During 2007,
interest and other income also included interest income on note receivable -
shareholder. The increase in interest and other income in 2008, as compared with
2007, was primarily as a result of interest income earned on higher average cash
balances throughout 2008 as a result of the December 2007 AutoTrader.com
settlement. Partially offsetting the increased interest income on our cash
balances was a decreased in interest income note receivable - shareholder in
2008 as such note was repaid in full during December 2007.

Interest and other income was approximately 1.3% and 0.5% of total revenues for
the years ended December 31, 2008 and 2007, respectively.


                                       21
<PAGE>

Segment Operating Income (Loss). As a result of the foregoing items, segment
operating income (loss) was as follows:

<TABLE>
<CAPTION>
   Year Ended December 31           2008            2007
   --------------------------------------------------------
   <S>                        <C>             <C>
   Software                   $    (54,200)   $ (1,413,700)
   Intellectual Property (1)    (2,666,100)      1,590,700
   Unallocated                      81,800          58,600
                              ----------------------------
   Consolidated Total         $ (2,638,500)   $    235,600
                              ============================
</TABLE>

(1) The year ended December 31, 2008 includes the $868,200 patent impairment
    charge recorded against against certain of our patent assets, as more fully
    explained above.

We do not allocate interest and other income, interest and other expense or
income tax to our segments.

Provision for Income Taxes. For the years ended December 31, 2008 and 2007 we
recorded a current tax (benefit) and provision of approximately $(11,700) and
$42,100, respectively. At December 31, 2008, we had approximately $41 million of
federal net operating loss carryforwards, which will begin to expire in 2018.
Also at December 31, 2008, we had approximately $14 million of California state
net operating loss carryforwards available to reduce future taxable income,
which will begin to expire in 2010. During the year ended December 31, 2008, we
did not utilize any of our federal and California net operating losses and have
recorded a full valuation allowance against each of them.

Net Income (Loss). As a result of the foregoing items, we reported a net loss of
$2,626,800 for the year ended December 31, 2008, as compared with net income of
$193,500 for the prior year. Absent the $6,250,000 December 2007 settlement and
licensing agreement with Autotrader.com we would have reported a net loss of
approximately $3,901,300 for the year ended December 31, 2007.

Liquidity and Capital Resources

During 2008 our cash and cash equivalents balance decreased by $1,518,600,
primarily as a result of our operations consuming approximately $1,332,700 of
cash during the year. Our reported net loss of $2,626,800 included four
significant non-cash items, three of which related to expense items and the
fourth related to a revenue item. The three non-cash expense items were;
depreciation and amortization of $975,600, which was primarily related to
amortization of our patents; stock-based compensation expense of $342,400, which
was calculated in accordance with FAS123R; and an $868,200 asset impairment
charge recorded against the value of certain of our patents. The non-cash
revenue item we recognized during 2008 was the $946,000 of revenue that had been
previously deferred. Our stock-based compensation charges, patent impairment
charge and recognition of the previously deferred revenue are explained
elsewhere in this Annual Report.

During 2008, we closely monitored our investing activities, spending
approximately $106,500, primarily on fixed asset purchases, mainly comprised of
computer equipment. Our financing activities consumed approximately $79,400 of
cash, which was primarily as a result of repurchases of our own stock under our
board-approved stock buy-back program.

We are aggressively looking at ways to improve our revenue stream, including
through the development of new products and further acquisitions. 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
maintaining our current revenue stream, coupled with our cash on hand, will be
sufficient to support our operational plans for 2009.

Cash and cash equivalents
As of December 31, 2008, cash and cash equivalents were approximately $3,742,200
as compared with $5,260,800 as of December 31, 2007. The $1,332,700 of cash
consumed by our operations during 2008 was the substantial majority of the year
to year change in our cash and cash equivalents. We anticipate that our cash and
cash equivalents as of December 31, 2008, together with revenue from 2009
operations will be sufficient to fund our anticipated expenses during the next
twelve months.

Accounts receivable, net
At December 31, 2008 and 2007, we had approximately $970,000 and $886,600,
respectively, in accounts receivable, net of allowances totaling $32,000 and
$229,000, respectively. The increase in our net accounts receivable balance was


                                       22
<PAGE>

primarily due to the increased sales of our GO-Global for Windows product we
have been experiencing since the release of version 3.2 during June 2007. The
reduction in our allowance for doubtful accounts resulted from the determination
that certain long outstanding balances were worthless as of December 31, 2008.
An amount due us from our former distributor in Japan represented the majority
of such reduction.

Segment fixed assets
As of December 31, 2008, segment fixed assets (long-lived assets) were as
follows:

<TABLE>
<CAPTION>
                                           Accumulated
                                           Depreciation       Net,
                            Cost Basis    /Amortization   as Reported
                           ------------------------------------------
<S>                        <C>            <C>             <C>
   Software                $  1,254,200   $ (1,071,500)   $   182,700
   Intellectual Property      4,472,200     (3,488,200)       984,000
   Unallocated                   20,200              -         20,200
                           ------------------------------------------
                           $  5,746,600   $ (4,559,700)   $ 1,186,900
                           ==========================================
</TABLE>

Fixed assets attributable to our software segment are primarily comprised of
equipment, furniture and leasehold improvement and those attributable to our
intellectual property segment are primarily comprised of our patents and patent
related assets. We do not allocate other assets, which consists primarily of
deposits, to our segments.

Commitments and contingencies
We do not have nor do we anticipate any material capital expenditure commitments
for the next twelve months.

The following table discloses our contractual commitments for future periods,
which consist entirely of leases for office space. The table assumes that we
will occupy all currently leased facilities for the full term of each respective
leases:

<TABLE>
<CAPTION>
   Year ending December 31,
<S>     <C>                       <C>
        2009                      $  137,200
        2010                      $   51,100
        2011                      $   27,800
</TABLE>

Rent expense aggregated approximately $191,200 and $195,700 for the years ended
December 31, 2008 and 2007, respectively.

New Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"),
which is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with GAAP for
nongovernmental entities. SFAS 162 is effective as of November 15, 2008. The
adoption of SFAS 162 did not have a material impact on results of operations,
cash flows or financial position.

In April 2008, FASB issued FSP FAS 142-3, "Determination of the Useful Life of
Intangible Assets" ("FSP"), which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
142 and the period of expected cash flows used to measure the fair value of the
asset under FASB Statement No. 141 (revised 2007), "Business Combinations," and
other accounting principles generally accepted in the United States. This FSP is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption
is prohibited. We are currently evaluating the impact of adoption of this FSP
and do not expect adoption to have a material impact on results of operations,
cash flows or financial position.

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivatives
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133"
("SFAS 161"). SFAS 161 requires enhanced disclosures about a company's
derivative and hedging activities. SFAS 161 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. We are
currently evaluating the impact of the adoption of SFAS 161 and do not expect
adoption to have a material impact on results of operations, cash flows or
financial position.


                                       23
<PAGE>

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R") which replaces SFAS No. 141, "Business
Combinations." SFAS 141R establishes principles and requirements for recognizing
and measuring identifiable assets and goodwill acquired, liabilities assumed and
any noncontrolling interest in a business combination at their fair value at
acquisition date. SFAS 141R alters the treatment of acquisition related costs,
business combinations achieved in stages (referred to as a step acquisition),
the treatment of gains from a bargain purchase, the recognition of contingencies
in business combinations, the treatment of in-process research and development
in a business combination as well as the treatment of recognizable deferred tax
benefits. SFAS 141R is effective for business combinations closed in fiscal
years beginning after December 15, 2008. We are currently evaluating the impact
of SFAS 141R and expect that results of operations, cash flows or financial
position would only be impacted in relation to future business combination
activities, if any.

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 adoption of SFAS 159
did not 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 GAAP 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.
In February 2008, FASB issued FASB Staff Position No. 157-2 that defers the
effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis, to fiscal years beginning after November 15,
2008. In addition, FASB also agreed to exclude from the scope of FASB 157 fair
value measurements made for purposes of applying SFAS No. 13, "Accounting for
Leases" and related interpretive accounting pronouncements. The adoption of SFAS
157 did not have a material impact on results of operations, cash flows or
financial position.


                                       24
<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for smaller reporting companies.


                                       25
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





<TABLE>
<CAPTION>
                   Index to Consolidated Financial Statements
                                                                            Page
                                                                            ----
<S>                                                                           <C>
   Report of Independent Registered Public Accounting Firm                    27
   Consolidated Balance Sheets as of December 31, 2008 and 2007               28
   Consolidated Statements of Operations for the Years Ended
    December 31, 2008 and 2007                                                29
   Consolidated Statements of Shareholders' Equity for the Years
    Ended December 31, 2008 and 2007                                          30
   Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2008 and 2007                                                31
   Notes to Consolidated Financial Statements                                 32

</TABLE>


                                       26
<PAGE>


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of GraphOn Corporation

We have audited the accompanying consolidated balance sheets of GraphOn
Corporation and subsidiaries (the "Company") as of December 31, 2008 and 2007
and the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GraphOn Corporation
and subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.


/s/ Macis Gini & O'Connell LLP
------------------------------
Macias Gini & O'Connell LLP
Sacramento, California
March 31, 2009


                                       27
<PAGE>

<TABLE>
<CAPTION>
                               GraphOn Corporation
                           Consolidated Balance Sheets
                        As of December 31, 2008 and 2007
                        --------------------------------
   Assets                                                    2008          2007
   ------                                               --------------------------
   Current Assets:
   ---------------
<S>                                                     <C>           <C>
   Cash and cash equivalents                            $ 3,742,200   $ 5,260,800
   Accounts receivable, net of allowance for doubtful
    accounts of $32,000 and $229,000, respectively          970,000       886,600
   Prepaid expenses and other current assets                 63,400        42,600
                                                        --------------------------
   Total Current Assets                                   4,775,600     6,190,000
                                                        --------------------------
   Property and equipment, net                              182,700       134,700
   Capitalized software, net                                      -         3,600
   Patents, net                                             984,000     2,741,300
   Other assets                                              20,200         4,800
                                                        --------------------------
   Total Assets                                         $ 5,962,500   $  9,074,400
                                                        ==========================
   Liabilities and Shareholders' Equity
   ------------------------------------
   Current Liabilities:
   --------------------
   Accounts payable                                         205,700        196,200
   Accrued expenses                                         155,800        222,900
   Accrued wages                                            434,200        448,100
   Deferred revenue                                       1,744,600      1,475,000
                                                        --------------------------
   Total Current Liabilities                              2,540,300      2,342,200
                                                        --------------------------
   Long Term Liabilities:
   Deferred revenue                                         858,500      1,833,100
   Other liabilities                                         28,400              -
                                                        --------------------------
   Total Liabilities                                    $ 3,427,200   $  4,175,300
                                                        --------------------------
   Commitments and contingencies (Note 9)                         -              -

   Shareholders' Equity:
   ---------------------
   Preferred stock, $0.01 par value, 5,000,000 shares
    authorized, no shares issued and outstanding        $         -   $          -
   Common stock, $0.0001 par value, 195,000,000 shares
    authorized, 47,322,292 and 47,576,401 shares
    issued and outstanding, respectively                      4,700          4,800
   Additional paid-in capital                            59,662,100     59,399,000
   Accumulated deficit                                  (57,131,500)   (54,504,700)
                                                        --------------------------
   Total Shareholders' Equity                             2,535,300      4,899,100
                                                        --------------------------
   Total  Liabilities and Shareholders' Equity          $ 5,962,500   $ 9,074,400
                                                        ==========================
</TABLE>

          See accompanying notes to consolidated financial statements

                                       28
<PAGE>

<TABLE>
<CAPTION>
                               GraphOn Corporation
                      Consolidated Statements Of Operations

                                                 For the Year Ended December 31,
                                                 ------------------------------
   Revenue                                           2008              2007
   -------                                       ------------      ------------
<S>                                              <C>               <C>
   Product licenses                              $  4,468,900      $  3,325,100
   Intellectual property license                            -         6,250,000
   Service fees                                     2,168,700         1,794,400
   Other                                               71,100           116,100
                                                 ------------      ------------
   Total Revenue                                    6,708,700        11,485,600
                                                 ------------      ------------
   Cost of revenue
   Service costs                                      530,100           475,600
   Product costs                                       45,000            28,300
   Contingent legal fees                                    -         2,119,100
                                                 ------------      ------------
   Total Cost of Revenue                              575,100         2,623,000
                                                 ------------      ------------
   Gross Profit                                     6,133,600         8,862,600
                                                 ------------      ------------
   Operating Expenses
   Selling and marketing                            1,816,100         1,819,900
   General and administrative                       3,796,100         4,703,000
   Research and development                         2,373,500         2,162,700
   Impairment of patents                              868,200                 -
                                                 ------------      ------------
   Total Operating Expenses                         8,853,900         8,685,600
                                                 ------------      ------------
   (Loss) Income from Operations                   (2,720,300)          177,000
                                                 ------------      ------------
   Other Income (Expense)
   Interest and other income                           89,100            62,700
   Interest and other expense                          (7,300)           (4,100)
                                                 ------------      ------------
   Total other income                                  81,800            58,600
                                                 ------------      ------------
   (Loss) income before (benefit) provision
    for income Tax                                 (2,638,500)          235,600
   (Benefit) provision for income taxes               (11,700)           42,100
                                                 ------------      ------------
   Net (Loss) Income                             $ (2,626,800)     $    193,500
                                                 ============      ============

   (Loss) Earnings per Common Share - Basic      $      (0.06)     $       0.00
   (Loss) Earnings per Common Share - Diluted    $      (0.06)     $       0.00
   Weighted Average Common Shares
    Outstanding - Basic                            47,022,803        46,804,504
   Weighted Average Common Shares
   Outstanding - Diluted                           47,022,803        46,804,504
</TABLE>

          See accompanying notes to consolidated financial statements

                                       29
<PAGE>

<TABLE>
<CAPTION>
                                       GraphOn Corporation
                         Consolidated Statements Of Shareholders' Equity
                         -----------------------------------------------
                                                                     For the Year Ended December 31,
                                                                     -------------------------------
                                                                          2008              2007
   Preferred stock - shares outstanding                              -------------     -------------
   ------------------------------------
<S>                                                                  <C>               <C>
   Beginning balance                                                             -                 -
                                                                     -------------     -------------
   Ending balance                                                                -                 -
                                                                     =============     =============
   Common stock - shares outstanding
   ---------------------------------
   Beginning balance                                                    47,576,401        46,819,772
   Employee stock purchase plan issuances                                   39,891            51,629
   Stock purchased and retired through stock buy-back program             (294,000)                -
   Employee stock options exercised issuances                                    -           505,000
   Restricted stock awards                                                       -           200,000
                                                                     -------------     -------------
   Ending balance                                                       47,322,292        47,576,401
                                                                     =============     =============
   Common stock - amount
   ---------------------
   Beginning balance                                                 $       4,800     $       4,700
   Stock purchased and retired through stock buy-back program                 (100)                -
   Employee stock options exercised                                              -               100
                                                                     -------------     -------------
   Ending balance                                                    $       4,700     $       4,800
                                                                     -------------     -------------
   Additional paid-in capital
   --------------------------
   Beginning balance                                                 $  59,399,000     $  58,805,700
   Accrued interest on note receivable - shareholder                             -            21,200
   Exercise of employee stock options                                            -            61,000
   Stock-based compensation expense                                        342,400           513,200
   Employee stock purchase plan issuances                                    8,300             7,100
   Stock purchased and retired through stock buy-back program              (87,600)                -
   Employee stock options exercised                                              -              (100)
   Accrued interest on note receivable - shareholder                             -            (9,100)
                                                                     -------------     -------------
   Ending balance                                                    $  59,662,100     $  59,399,000
                                                                     -------------     -------------
   Shareholder note receivable
   ---------------------------
   Beginning balance                                                 $           -     $    (260,100)
   Note payments - shareholder                                                   -           260,100
                                                                     -------------     -------------
   Ending balance                                                    $           -     $           -
                                                                     -------------     -------------
   Accumulated deficit
   -------------------
   Beginning balance                                                 $ (54,504,700)    $ (54,698,200)
   Net (loss) income                                                    (2,626,800)          193,500
                                                                     -------------     -------------
   Ending balance                                                    $ (57,131,500)    $ (54,504,700)
                                                                     -------------     -------------
   Total Shareholders' Equity                                        $   2,535,300     $   4,899,100
                                                                     =============     =============

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

                                       30
<PAGE>

<TABLE>
<CAPTION>
                                      GraphOn Corporation
                             Consolidated Statements of Cash Flows
                             -------------------------------------
                                                                 For the Year Ended December 31,
                                                                 -------------------------------
                                                                      2008              2007
   Cash Flows From Operating Activities:                         ------------       ------------
<S>                                                              <C>                <C>
   Net (loss) income                                             $ (2,626,800)      $    193,500
   Adjustments to reconcile net (loss) income to net cash
    (used in) provided by operating activities:
   Depreciation and amortization                                      972,100            958,700
   Stock based compensation expense                                   342,400            513,200
   (Decreases) increases to allowance for doubtful accounts          (197,000)           182,200
   Impairment of patents                                              868,200                  -
   Proceeds from note receivable - shareholder                              -            260,100
   Loss on disposal of fixed assets                                     7,100              1,000
   Proceeds from accrued interest on note receivable shareholder            -             21,200
   Interest accrued on note receivable shareholder                          -             (9,100)
   Changes in operating assets and liabilities:
   --------------------------------------------
     Accounts receivable                                              113,600           (388,400)
     Prepaid expenses and other current assets                        (20,800)            22,700
     Accounts payable                                                   9,500            (36,300)
     Accrued expenses                                                 (82,100)            53,700
     Accrued wages                                                    (13,900)            56,500
     Deferred revenue                                                (705,000)           500,500
                                                                 ------------        -----------
   Net Cash (Used In) Provided By Operating Activities:            (1,332,700)         2,329,500
                                                                 ------------        -----------
   Cash Flows Used In Investing Activities:
   Capital expenditures                                              (106,300)          (73,800)
   Other assets                                                          (200)             (100)
                                                                 ------------        -----------
   Net Cash Used In Investing Activities:                            (106,500)          (73,900)
                                                                 ------------        -----------
   Cash Flows (Used In) Provided By Financing Activities:
   Proceeds from Employee Stock Purchase Plan                           8,300              7,100
   Proceeds from exercise of employee stock options                         -             61,000
   Amounts paid for stock buy back                                    (87,700)                 -
                                                                 ------------       ------------
   Net Cash (Used In) Provided By Financing Activities:               (79,400)            68,100
                                                                 ------------       ------------
   Net (Decrease) Increase in Cash and Cash Equivalents            (1,518,600)         2,323,700
   Cash and Cash Equivalents, beginning of period                   5,260,800          2,937,100
                                                                 ------------       ------------
   Cash and Cash Equivalents, end of period                      $  3,742,200       $  5,260,800
                                                                 ============       ============

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

                                       31
<PAGE>

GraphOn Corporation
Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies.

The Company. GraphOn Corporation (the "Company") was founded in May 1996 and is
incorporated in the state of Delaware. The Company's headquarters are currently
in Santa Cruz, California. The Company develops, markets, sells and supports
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), corporate enterprises, governmental and
educational institutions, and others, primarily in the United States, Asia and
Europe.

The Company acquired Network Engineering Solutions, Inc. (NES) in January 2005
and acquired the rights to 11 patents, which are primarily method patents that
describe software and network architectures to accomplish certain tasks, as well
as other intellectual property rights. The Company initiated litigation during
2005, 2007 and 2008 against certain companies that it believed violated one or
more of the patents. In December 2007, the Company entered into a $6.25 million
settlement and licensing agreement with one of the companies (Note 12).

Basis of Presentation and Use of Estimates. The consolidated financial
statements include the accounts of the Company and its subsidiaries
(collectively, the "Company"), significant intercompany accounts and
transactions are eliminated upon consolidation. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. These estimates
include the amount of stock-based compensation expense, the allowance for
doubtful accounts, the estimated lives and valuation of intangible assets,
depreciation of fixed assets and accruals for liabilities. Actual results could
differ materially from those estimates.

Cash and Cash Equivalents. The Company considers all highly liquid investments
purchased with remaining maturities of three months or less to be cash
equivalents.

Property and Equipment. Property and equipment are stated at cost. Depreciation
is calculated using the straight-line method over the estimated useful lives of
the respective assets, generally three to seven years. Amortization of leasehold
improvements is calculated using the straight-line method over the lesser of the
lease term or useful lives of the respective assets, generally seven years.

Shipping and Handling. Shipping and handling costs are included in cost of
revenue for all periods presented.

Purchased Technology. Purchased technology is amortized on a straight-line basis
over the expected life of the related technology or five years, whichever is
less.

Patents. The patents acquired in the Network Engineering Software acquisition
are being amortized over their estimated remaining economic lives, currently
estimated to be approximately 2 years, as of December 31, 2008. Costs associated
with filing, documenting or writing patents are expensed as incurred. Contingent
legal fees paid in connection with a patent lawsuit, or settlements thereof, are
charged to cost of good sold. All other non-contingent legal fees and costs
incurred in connection with a patent lawsuit, or settlements thereof, are
charged to general and administrative expense. During the year ended December
31, 2008 the Company recorded an impairment charge of $868,200 against certain
of its patents as a result of reviewing such assets for impairment in accordance
with Statement of Financial Accounting Standards No. 144 (SFAS No. 144),
"Accounting for the Impairment or Disposal of Long-Lived Assets" (Note 2).
During the year ended December 31, 2007, no such impairment charge was recorded
as the result of such review.

Capitalized Software Costs. Under the criteria set forth in SFAS No. 86,
"Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise
Marketed," development costs incurred in the research and development of new
software products are expensed as incurred until technological feasibility, in
the form of a working model, has been established, at which time such costs are
capitalized until the product is available for general release to customers.
Capitalized costs are amortized to cost of sales based on either (a) estimated
current and future revenue for each product or straight-line amortization over
the shorter of three years or (b) the remaining estimated life of the product,
whichever produces the higher expense for the period.


                                       32
<PAGE>

Revenue. 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 intellectual property licenses, maintenance contracts, which are comprised
of license updates and customer service access, private-label branding kits,
software developer kits ("SDKs") 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 program(s) 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, or customer training. The Company
limits its 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 value 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 for 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 purchase product licenses that they hold in inventory until
they are resold to the ultimate end user (an "inventory stocking order"). The
Company provides maintenance services to these resellers for such licenses at no
charge. Generally, the Company defers the recognition of revenue for inventory
stocking orders until the underlying licenses are sold to the end user. The
Company allocates revenue to the service fee (maintenance) component based on
VSOE prorated to the time period between the inventory order date and date of
sale to the end user.

For certain resellers, assuming all other revenue recognition criteria have been
met, the Company recognizes and allocates revenue for inventory stocking orders
based upon the estimated time frame the licenses will be held by the reseller.
Such estimates are based upon the Company's historical experience with the
reseller.

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

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

Segment information. The Company has determined that it operates its business in
two segments; software and intellectual property, in accordance with SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information" (Note
13).

Allowance for Doubtful Accounts. The allowance for doubtful accounts is based on
assessments of the collectibility of specific customer accounts and the aging of
the accounts receivable. If there is a deterioration of a major customer's
credit worthiness or actual defaults are higher than historical experience, the
allowance for doubtful accounts is increased.

Income Taxes. On January 1, 2007. the Company adopted the provisions of FASB
Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes." As
a result of the implementation of FIN No. 48, the Company recognized no change


                                       33
<PAGE>

in its liability for unrecognized tax benefits related to tax positions taken in
prior years, thus there was no change to its opening retained earnings balance
as of the adoption date.

The Company and one or more of its subsidiaries are subject to United States
federal income taxes, as well as income taxes of multiple state and foreign
jurisdictions. The Company is no longer subject to U.S. federal, state and
local, or non-U.S. income tax examinations by tax authorities for years prior to
2004. The Company is not currently subject to an examination of any of its prior
year's tax returns in any taxing jurisdiction.

Under SFAS No. 109, "Accounting for Income Taxes," deferred income taxes are
recognized for the tax consequences of temporary differences between the
financial statement and income tax bases of assets, liabilities and
carryforwards using enacted tax rates. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be
realized. Realization is dependent upon future pre-tax earnings, the reversal of
temporary differences between book and tax income, and the expected tax rates in
effect in future periods.

Fair Value of Financial Instruments. The fair value of the Company's cash, cash
equivalents, accounts receivable, accounts payable and other current liabilities
approximate their carrying amounts due to the relative short maturities of these
items.

Long-Lived Assets. Long-lived assets, which consist primarily of patents assets,
are assessed for possible impairment whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable, whenever the Company
has committed to a plan to dispose of the assets or, at a minimum, as it relates
to the Company's patents, annually. Typically, for long-lived assets to be held
and used, measurement of an impairment loss is based on the fair value of such
assets, with fair value being determined based on appraisals, current market
value, comparable sales value, and undiscounted future cash flows, among other
variables, as appropriate. Assets to be held and used affected by an impairment
loss are depreciated or amortized at their new carrying amount over their
remaining estimated life; assets to be sold or otherwise disposed of are not
subject to further depreciation or amortization. During the fourth quarter of
2008, the Company recorded an impairment charge of $868,200 against certain of
its patent families as the Company determined that due to its limited cash
availability it will not be initiating any new infringement litigation or
attempting to seek licensing revenue with respect to any of the NES patents that
were not involved  in any of its on-going litigation as of December 31, 2008;
thus, the Company reduced them to a net realizable value of $0 as of December
31, 2008 (Note 2). No such impairment charge was recorded for 2007.

Loss Contingencies. The Company is subject to the possibility of various loss
contingencies arising in the ordinary course of business. The Company considers
the likelihood of the loss or impairment of an asset or the incurrence of a
liability as well as its ability to reasonably estimate the amount of loss in
determining loss contingencies. An estimated loss contingency is accrued when it
is probable that a liability has been incurred or an asset has been impaired and
the amount of the loss can be reasonably estimated. The Company regularly
evaluates current information available to it to determine whether such accruals
should be adjusted.

Stock-Based Compensation. The Company applies the fair value recognition
provisions of Statement of Financial Accounting Standards No. 123R, "Share-Based
Payment" and related interpretations ("FAS No. 123R") using the modified
prospective transition method. Under that method, compensation cost recognized
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 FAS No. 123R.

Valuation and Expense Information under FAS No. 123R

The Company recorded stock-based compensation expense of $342,400 and $513,200
in the years ended December 31, 2008 and 2007, respectively. As required by FAS
No. 123R, 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 years ended December 31, 2008 and 2007 by income statement
classification:


                                       34
<PAGE>

<TABLE>
<CAPTION>
                                                 Year Ended              Year Ended
   Income statement classification           December  31, 2008      December 31, 2007
   -------------------------------           -----------------------------------------
<S>                                          <C>                     <C>
   Cost of revenue                           $           24,500      $          13,300
   Selling and marketing expense                         30,600                 32,100
   General and administrative expense                   182,900                366,300
   Research and development expense                     104,400                101,500
                                             -----------------------------------------
                                             $          342,400      $         513,200
                                             =========================================
</TABLE>

The Company estimated the fair value of each stock-based award granted during
the years ended December 31, 2008 and 2007 on the date of grant using a binomial
model, with the assumptions set forth in the following table:

<TABLE>
<CAPTION>
                                                2008                2007
                                          ---------------     ---------------
<S>                                       <C>      <C>        <C>      <C>
   Estimated volatility                   158.0% - 173.0%     154.2% - 154.4%
   Annualized forfeiture rate                        4.0%       5.1% -   5.4%
   Expected option term (years)                      7.5                 7.5
   Estimated exercise factor                        10.0%               10.0%
   Approximate risk-free interest rate      2.6% -   3.5%                4.6%
   Expected dividend yield                             -                   -
</TABLE>

The Company also recognized compensation costs for common shares purchased under
its Employee Stock Purchase Plan ("ESPP") during the years ended December 31,
2008 and 2007 applying the same variables as noted in the table above to the
calculation of such costs, except that the expected term was 0.5 years for each
respective year. The time span from the date of grant of ESPP shares to the date
of purchase is six months. Additionally, the risk free interest rate was
approximately 1.9% - 3.8% for ESPP shares purchased during 2008.

The Company does not anticipate paying dividends on its common stock for the
foreseeable future. The Company used the average historical volatility of its
daily closing price for each 7.5 year period ended on the end of each quarterly
reporting period during 2008 and 2007 as the basis of the volatility component
within its calculation for stock-based compensation expense.

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 years ended December 31, 2008 and 2007, the weighted
average fair value of ESPP shares was $0.30 and $0.14, respectively.

As of December 31, 2008, there were 7,501,255 options outstanding with a
weighted average exercise price of $0.45 per share, a weighted average remaining
contractual term of 6.1 years and an aggregate intrinsic value of $0. Of the
options outstanding as of December 31, 2008, 6,405,159 were vested, 1,058,045
were estimated to vest in future periods and 38,051 were estimated to be
forfeited or expire.

Generally, all options are exercisable immediately upon grant and they vest
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.

As of December 31, 2008, there was approximately $159,800 of total unrecognized
compensation cost, net of estimated forfeitures, related to unvested awards.
That cost is expected to be recognized over a weighted-average period of
approximately one year.

Earnings Per Share of Common Stock. SFAS No. 128, "Earnings Per Share," provides
for the calculation of basic and diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income attributable to
common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities by adding other common stock equivalents, including common stock
options, warrants and redeemable convertible preferred stock, in the weighted
average number of common shares outstanding for a period, if dilutive.


                                       35
<PAGE>

Potentially dilutive securities are excluded from the computation if their
effect is antidilutive. For the years ended December 31, 2008 and 2007,
19,268,955 and 17,936,986 shares of common stock equivalents were excluded from
the computation of diluted earnings per share since their effect would be
antidilutive, respectively.

Comprehensive Loss. SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for reporting comprehensive income and its components in a financial
statement that is displayed with the same prominence as other financial
statements. Comprehensive income, as defined, includes all changes in equity
(net assets) during the period from non-owner sources. Examples of items to be
included in comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gain/loss of
available-for-sale securities. The individual components of comprehensive income
(loss) are reflected in the consolidated statement of operations. For the years
ended December 31, 2008 and 2007, there were no changes in equity (net assets)
from non-owner sources.

New Accounting Pronouncements. In May 2008, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS 162"), which is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with GAAP for nongovernmental entities. SFAS 162 is
effective as of November 15, 2008. The adoption of SFAS 162 did not have a
material impact on results of operations, cash flows or financial position.

In April 2008, FASB issued FSP FAS 142-3, "Determination of the Useful Life of
Intangible Assets" ("FSP"), which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
142 and the period of expected cash flows used to measure the fair value of the
asset under FASB Statement No. 141 (revised 2007), "Business Combinations," and
other accounting principles generally accepted in the United States. This FSP is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption
is prohibited. The Company is currently evaluating the impact of adoption of
this FSP and does not expect adoption to have a material impact on results of
operations, cash flows or financial position.

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivatives
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133"
("SFAS 161"). SFAS 161 requires enhanced disclosures about a company's
derivative and hedging activities. SFAS 161 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
Company is currently evaluating the impact of the adoption of SFAS 161 and does
not expect adoption to have a material impact on results of operations, cash
flows or financial position.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R") which replaces SFAS No. 141, "Business
Combinations." SFAS 141R establishes principles and requirements for recognizing
and measuring identifiable assets and goodwill acquired, liabilities assumed and
any noncontrolling interest in a business combination at their fair value at
acquisition date. SFAS 141R alters the treatment of acquisition related costs,
business combinations achieved in stages (referred to as a step acquisition),
the treatment of gains from a bargain purchase, the recognition of contingencies
in business combinations, the treatment of in-process research and development
in a business combination as well as the treatment of recognizable deferred tax
benefits. SFAS 141R is effective for business combinations closed in fiscal
years beginning after December 15, 2008. The Company is currently evaluating the
impact of SFAS 141R and expects results of operations, cash flows or financial
position would only be impacted in relation to future business combination
activities, if any.

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 adoption of SFAS 159
did not 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 GAAP 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.
In February 2008, FASB issued FASB Staff Position No. 157-2 that defers the


                                       36
<PAGE>

effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis, to fiscal years beginning after November 15,
2008. In addition, FASB also agreed to exclude from the scope of FASB 157 fair
value measurements made for purposes of applying SFAS No. 13, "Accounting for
Leases" and related interpretive accounting pronouncements. The adoption of SFAS
157 did not have a material impact on results of operations, cash flows or
financial position.

2.   Impairment of Patents.

During the fourth quarter of 2008, the Company recorded an asset impairment
charge of $868,200 against certain of its patent assets related to its
Intellectual Property segment. The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. In the case of its
patents assets, the Company performs such review at least annually. Examples of
events or changes in circumstances that indicate that the recoverability of the
carrying amount of a long-lived asset should be reviewed include the following:

   o  A significant decrease in the market value of an asset;
   o  A significant change in the extent or manner in which an asset is used;
   o  A significant adverse change in the business climate that could affect the
      value of the asset; and
   o  Current and historical operating or cash flow losses.

The Company determined that due to its limited cash availability it will not be
initiating any new infringement litigation or attempting to seek licensing
revenue with respect to any of the NES patents that were not involved in any of
its on-going litigation as of December 31, 2008; thus, the Company reduced them
to a net realizable value of $0 as of December 31, 2008. No such impairment
charge was recorded during 2007.

The following table summarizes the impact of the patent impairment charge
recorded in the Company's Intellectual Property segment for 2008:

<TABLE>
<CAPTION>
                  Net Book                        Net Book
                    Value                           Value
                   Before                          After
                 Impairment       Impairment     Impairment
               ---------------------------------------------
<S>            <C>             <C>             <C>
      Patents  $  1,852,200    $    868,200    $    984,000
</TABLE>

After giving effect to the impairment charge outlined above, patents as of
December 31, 2008 and 2007 consisted of the following:

<TABLE>
<CAPTION>
   As of December 31,                    2008          2007
   ------------------               --------------------------
<S>                                 <C>            <C>
   Patents                          $ 4,472,200    $ 5,340,400
   Less: accumulated amortization     3,488,200      2,599,100
                                    --------------------------
                                    $   984,000    $ 2,741,300
                                    ==========================
</TABLE>

Patent amortization expense for the year ended December 31, 2008 aggregated
$889,100. Estimated aggregate annual amortization expense for the patents for
future years ending December 31 is as follows:

<TABLE>
<CAPTION>
<S>                 <C>         <C>
                    2009        $     472,300
                    2010              472,300
                    2011               39,400
                                -------------
                    Total       $     984,000
                                =============
</TABLE>

3.  Property and Equipment.

Property and equipment as of December 31, 2008 and 2007 consisted of the
following:

<TABLE>
<CAPTION>
   As of December 31,                                       2008         2007
                                                      ---------------------------
<S>                                                   <C>            <C>
   Equipment                                          $    995,100   $    862,300
   Furniture                                               236,000        239,400
   Leasehold improvements                                   23,000         24,900
                                                      ---------------------------
                                                         1,254,100      1,126,600

                                       37
<PAGE>

   Less: accumulated depreciation and amortization       1,071,400        991,900
                                                      ---------------------------
                                                      $    182,700   $    134,700
                                                      ===========================
</TABLE>

Aggregate property and equipment depreciation expense for the years ended
December 31, 2008 and 2007 was $83,000 and $69,600, respectively.

4.  Accrued Expenses.

Accrued expenses as of December 31, 2008 and 2007 consisted of the following:

<TABLE>
<CAPTION>
   As of December 31,            2008           2007
                            ----------------------------
<S>                         <C>             <C>
   Professional fees        $    107,200    $    124,500
   Software licensing fees        28,400               -
   Income taxes payable              400          50,600
   Other                          19,800          47,800
                            ----------------------------
                            $    155,800    $    222,900
                            ============================
</TABLE>

5.  Other Liabilities.

During March 2008, the Company entered into a three year agreement with a
software vendor to provide the Company with software, training and support
services. Other liabilities are comprised of the final principal payment due
under such agreement. A similar amount, which is due and payable during April
2009, has been accrued as a component of accrued expenses. The initial payment,
plus interest, was made during the nine-month period ended September 30, 2008.
See Note 11.

Interest, which aggregates approximately $6,700 over the three-year agreement,
is expensed ratably upon payment.

6.  Stockholders' Equity.

Common Stock. During 2008 and 2007 the Company issued 39,891 and 51,629 shares
of common stock to employees in connection with its Employee Stock Purchase
Plan, resulting in cash proceeds of $8,300 and $7,100, respectively.

During 2008, the Company awarded 75,000 restricted shares of common stock to a
non-executive employee, which will vest in three equal installments, ratably, on
each of the first three grant date anniversaries, assuming that employee's
continued service with the Company. The shares were awarded at $0.38, the fair
market value on the date of the award. The Company recognized approximately
$9,500 of non-cash stock-based compensation expense associated with this award,
which was reported as research and development expense. (See Note 1).

During 2007, the Company issued 200,000 performance-based restricted shares of
common stock to a non-executive employee, upon that employee's satisfaction of
certain performance-based criteria. Such restricted shares will vest in two
equal installments, ratably, on each of the first two grant date anniversaries,
assuming that employee's continued service with the Company. The shares were
awarded at $0.16, the fair market value on the date of the award. The Company
recognized approximately $9,800 and $15,300 of non-cash stock-based compensation
expense associated with this award for 2008 and 2007, respectively, which was
reported as research and development expense. (See Note 1).

During the year ended December 31, 2008, the Company repurchased 294,000 shares
of its common stock, at an average price of $0.30, for an aggregate cost of
$87,700 in accordance with the stock buy-back program authorized by its Board
during January 2008. The stock buy-back program commenced during 2008. As of
December 31, 2008, approximately $912,300 of the Board approved $1,000,000 stock
buy back program remained available for future purchases. The Company is not
obligated to repurchase any specific number of shares and the program may be
suspended or terminated at any time at the Company's discretion.

The following is a summary of the Company's share repurchases of its common
stock during the year ended December 31, 2008 under the Board authorized buy
back program:


                                       38
<PAGE>

<TABLE>
<CAPTION>
                                          Total Number
                                           of Shares                   Approximate
                                           Purchased      Total       Dollar Value
   Three-Month      Total                  as Part of    Dollars     of Shares That
     Period       Number of    Average      Publicly    Purchased      May Yet Be
    Ended in       Shares     Price Per    Announced    Under the    Purcahsed Under
      2008        Purchased     Share       Program      Program       the Program
   -------------------------------------------------------------------------------
<S>          <C>   <C>        <C>            <C>        <C>            <C>
   March 31             -           -             -            -
   June 30              -           -             -            -
   September 30    294,000    $  0.30        294,000    $ 87,700
   December 31          -           -             -            -
                  ---------               -----------------------
     Totals        294,000    $  0.30        294,000    $ 87,700       $  912,300
                  =========               =======================
</TABLE>

Stock Purchase Warrants.  As of December 31, 2008, the following common
stock warrants were issued and outstanding:

<TABLE>
<CAPTION>
                                    Shares
                                  subject to       Exercise     Expiration
   Issued with respect to:          warrant         price         date
   -----------------------        ---------------------------------------
<S><C>                             <C>             <C>             <C>
   2004 Private placement          2,750,000       $   0.33        01/09
   2004 Private placement            470,000       $   0.23        01/09
   2005 Private placement          8,147,700       $   0.40        02/10
   2005 Private placement          1,481,500       $   0.27        02/10
</TABLE>

Subsequent to December 31, 2008, all warrants with respect to the 2004 Private
Placement expired unexercised.

1996 Stock Option Plan. In May 1996 the Company's 1996 Stock Option Plan (the
"96 Plan") was adopted by its Board and approved by its stockholders. The 96
Plan is restricted to employees, including officers, and to non-employee
directors. As of December 31, 2006, the 96 Plan expired and no future options
may be granted from this plan.

As of December 31, 2008, options to purchase 54,625 shares of common stock were
outstanding. No options previously granted under the 96 Plan were exercised
during the years ended December 31, 2008 or 2007.

1998 Stock Option/Stock Issuance Plan. In June 1998 the Company's 1998 Stock
Option/Stock Issuance Plan (the "98 Plan") was adopted by its Board and approved
by its stockholders. Pursuant to the terms of the 98 Plan, options or stock may
be granted and issued, respectively, to officers and other employees,
non-employee directors and independent consultants who render services to the
Company. As of December 31, 2008, the Company is authorized to issue options to
purchase up to 4,455,400 shares of common stock or stock in accordance with the
terms of the 98 Plan.

Under the 98 Plan the exercise price of options granted is to be not less than
85% of the fair market value of the Company's common stock on the date of the
grant. The purchase price of stock issued under the 98 Plan shall also not be
less than 85% of the fair market value of the Company's stock on the date of
issuance or as a bonus for past services rendered to the Company. As of December
31, 2008, options to purchase 3,418,661 shares of common stock were outstanding,
823,904 options had been exercised, 248,157 shares of common stock had been
issued directly under the 98 Plan, an aggregate 40,558 unvested options and
common stock previously issued had been repurchased and 5,236 shares remained
available for grant/issuance.

During the year ended December 31, 2008, options to purchase 215,000 shares of
common stock, with a weighted average grant date fair value of $0.38 per share,
were granted under the 98 Plan. No options were granted under the 98 Plan during
the year ended December 31, 2007.

During the year ended December 31, 2007 the total intrinsic value of options
exercised that had been previously granted under the 98 Plan was $50,000. No
such options were exercised during the year ended December 31, 2008.

Supplemental Stock Option Plan. In May 2000, the Board approved an additional
stock option plan (the "Supplemental Plan"). Pursuant to the terms of the
Supplemental Plan, options are restricted to employees who are neither officers


                                       39
<PAGE>

nor directors at the grant date. As of December 31, 2008, the Company is
authorized to issue options to purchase up to 400,000 shares of common stock in
accordance with the terms of the Supplemental Plan.

Under the Supplemental Plan the exercise price of options granted is to be not
less than 85% of the fair market value of the Company's common stock on the date
of the grant or, in the case when the grant is to a holder of more than 10% of
the Company's common stock, at least 110% of the fair market value of the
Company's common stock on the date of the grant. As of December 31, 2008,
options to purchase 386,757 shares of common stock were outstanding and 13,243
remained available for issuance under the Supplemental Plan.

During the year ended December 31, 2007, options to purchase 15,000 shares of
common stock, with a weighted average grant date fair value of $0.16 per share,
were granted under the Supplemental Plan. During the year ended December 31,
2008, options to purchase 25,000 shares of common stock, with a weighted average
grant date fair value of $0.38 per share, were granted under the Supplemental
Plan.

No options previously granted under the Supplemental Plan were exercised during
the years ended December 31, 2008 or 2007.

NES Stock Option Plan. In January 2005, the Board approved an additional stock
option plan (the "NES Plan"). Pursuant to the terms of the NES Plan, options are
restricted to a named employee who was neither an officer nor director of the
Company at the grant date. The Company is authorized to issue options to
purchase up to 1,000,000 shares of common stock in accordance with the terms of
the NES Plan.

Under the NES Plan the exercise price of options granted is to be equal to the
fair market value of the Company's common stock on the date of the grant. As of
December 31, 2008, options to purchase 1,000,000 shares of common stock were
outstanding and none remained available for issuance under the NES Plan.

No options were granted under the NES Plan during the years ended December 31,
2008 or 2007.

GG Stock Plan. In February 2005, the Board approved an additional stock option
plan (the "GG Plan"). Pursuant to the terms of the GG Plan, options are
restricted to a named employee who was neither an officer nor director of the
Company at the grant date. The Company is authorized to issue options to
purchase up to 250,000 shares of common stock in accordance with the terms of
the GG Plan.

Under the GG Plan the exercise price of options granted is to be equal to the
fair market value of the Company's common stock on the date of the grant. As of
December 31, 2008, options to purchase 250,000 shares of common stock were
outstanding and none remained available for issuance under the GG Plan.

No options were granted under the GG Plan during the years ended December 31,
2008 or 2007.

2005 Equity Incentive Plan. In December 2005, the Company's 2005 Equity
Incentive Plan (the "05 Plan") was adopted by the Board and approved by the
stockholders. Pursuant to the terms of the 05 Plan, options or performance
vested stock may be granted to officers and other employees, non-employee
directors and independent consultants and advisors who render services to the
Company. The Company is authorized to issue options to purchase up to 3,500,000
shares of common stock or performance vested stock in accordance with the terms
of the 05 Plan.

In the case of a performance vested stock award, the entire number of shares
subject to such award would be issued at the time of the grant and subject to
vesting provisions based on time or other conditions specified by the Board or
an authorized committee of the Board. For awards based on time, should the
grantee's service to the Company end before full vesting occurred, all unvested
shares would be forfeited and returned to the Company. In the case of awards
granted with vesting provisions based on specific performance conditions, if
those conditions are not met, then all shares would be forfeited and returned to
the Company. Until forfeited, all shares issued under a performance vested stock
award would be considered outstanding for dividend, voting and other purposes.

Under the 05 Plan the exercise price of non-qualified stock options granted is
to be no less than 100% of the fair market value of the Company's common stock
on the date the option is granted. The exercise price of incentive stock options
granted is to be no less than 100% of the fair market value of the Company's
common stock on the date the option is granted provided, however, that if the
recipient of the incentive stock option owns greater than 10% of the voting
power of all shares of the Company's capital stock then the exercise price will
be no less than 110% of the fair market value of the Company's common stock on

                                       40
<PAGE>

the date the option is granted. The purchase price of the performance-vested
stock issued under the 05 Plan shall also not be less than 100% of the fair
market value of the Company's common stock on the date the performance-vested
stock is granted. As of December 31, 2008, options to purchase 2,366,212 shares
of common stock were outstanding, awards of 1,075,000 shares of restricted
common stock had been granted, 5,000 options had been exercised and 53,788
remained available for issuance.

During the year ended December 31, 2007, options to purchase 835,000 shares of
common stock, with a weighted average grant date fair value of $0.17 per share,
were granted under the 05 Plan. During the year ended December 31, 2008, options
to purchase 715,000 shares of common stock, with a weighted average grant date
fair value of $0.37 per share, were granted under the 05 Plan. Also, during the
year ended December 31, 2008, 75,000 shares of restricted stock, with a grant
date fair value of $0.38 per share, were granted to a non-executive employee
under the 05 Plan. No shares of restricted stock were granted under the 05 Plan
during the year ended December 31, 2007.

During the year ended December 31, 2007, the total intrinsic value of options
exercised that had been previously issued under the 05 Plan was $0. No such
options were exercised during the year ended December 31, 2008.

During the year ended December 31, 2007, 300,000 shares awarded under the 05
Plan vested. Such shares had a weighted average grant date fair value of $0.16
per share. During the year ended December 31, 2008, 400,000 shares awarded under
the 05 Plan vested. Such shares had a weighted average grant date fair value of
$0.16 per share.

2008 Equity Incentive Plan. In November 2008, the Board approved an additional
stock option/stock issuance plan (the "08 Plan"). Pursuant to the terms of the
08 Plan, options or restricted stock may be granted to officers and other
employees, non-employee directors and independent consultants and advisors who
render services to the Company. The Company is authorized to issue options to
purchase up to 3,000,000 shares of common stock or restricted stock in
accordance with the terms of the 08 Plan.

In the case of a restricted stock award, the entire number of shares subject to
such award would be issued at the time of the grant and subject to vesting
provisions based on time or performance conditions specified by the Board or an
authorized committee of the Board. For awards based on time, should the
grantee's service to the Company end before full vesting occurred, all unvested
shares would be forfeited and returned to the Company. In the case of awards
granted with vesting provisions based on specific performance conditions, if
those conditions are not met, then all shares would be forfeited and returned to
the Company. Until forfeited, all shares issued under a performance vested stock
award would be considered outstanding for dividend, voting and other purposes.

Under the 08 Plan the exercise price of options granted is to be no less than
100% of the fair market value of the Company's common stock on the date the
option is granted. The purchase price of performance-vested stock issued under
the 08 Plan shall also not be less than 100% of the fair market value of the
Company's common stock on the date the performance-vested stock is granted. As
of December 31, 2008, options to purchase 25,000 shares of common stock were
outstanding and 2,975,000 remained available for issuance.

During the year ended December 31, 2008, options to purchase 25,000 shares of
common stock, with a weighted average grant date fair value of $0.09 per share,
were granted under the 08 Plan.

No options previously granted under the 08 Plan were exercised during 2008.

Employee Stock Purchase Plan. In February 2000, the Employee Stock Purchase Plan
(the "ESPP") was adopted by the Board and approved by the stockholders in June
2000. The ESPP provides for the purchase of shares of the Company's common stock
by eligible employees, including officers, at semi-annual intervals through
payroll deductions. No participant may purchase more than $25,000 worth of
common stock under the ESPP in one calendar year or more than 2,000 shares on
any purchase date. Purchase rights may not be granted to an employee who
immediately after the grant would own or hold options or other rights to
purchase stock and cumulatively possess 5% or more of the total combined voting
power or value of common stock of the Company.

Pursuant to the terms of the ESPP, shares of common stock are offered through a
series of successive offering periods, each with a maximum duration of six
months beginning on the first business day of February and August each year. The
purchase price of the common stock purchased under the ESPP is equal to 85% of
the lower of the fair market value of such shares on the start date of an


                                       41
<PAGE>

offering period or the fair market value of such shares on the last day of such
offering period. As of December 31, 2008, the ESPP is authorized to offer for
sale to participating employees 400,000 shares of common stock, of which,
347,790 shares have been purchased and 52,210 are available for future purchase.

A summary of the status of the Company's stock option plans as of December 31,
2008 and 2007, and changes during the years then ended is presented in the
following table:

<TABLE>
<CAPTION>
                                        2008                    2007
                               ----------------------   ------------------
                                             Weighted               Weighted
                                              Average                Average
                                             Exercise               Exercise
   Options Outstanding            Shares      Price       Shares      Price
   --------------------------  -----------   --------   ----------- --------
<S>                             <C>           <C>        <C>         <C>
   Beginning                    6,569,286     $ 0.46     6,876,613   $ 0.45
   Granted                        980,000       0.37       850,000     0.17
   Exercised                            -          -      (505,000)    0.12
   Forfeited or expired           (48,031)      0.26      (652,327)    0.26
                               ----------               -----------
   Ending                       7,501,255       0.45     6,569,286     0.46
                               ==========               ===========
   Exercisable at year-end      7,501,255       0.45     6,569,286     0.46
                               ==========               ===========
   Weighted average fair
   value of options granted
   during the period                          $ 0.33                 $ 0.15
</TABLE>

The following table summarizes information about stock options outstanding as of
December 31, 2008:

<TABLE>
<CAPTION>
                                     Options Outstanding               Options Exercisable
                       ---------------------------------------------------------------------
                                                         Weighted                   Weighted
                         Number           Weighted        Average      Number        Average
                       Outstanding    Average Remaining  Exercise   Exercisable     Exercise
    Exercise Price     Dec.31, 2008   Contractual Life     Price    Dec.31, 2008      Price
   -----------------------------------------------------------------------------------------
<S>           <C>        <C>              <C>             <C>         <C>             <C>
   $ 0.08  -  $ 0.21     2,133,253        6.81   Yrs.     $ 0.18      2,133,253       $ 0.18
   $ 0.23  -  $ 0.38     1,891,216        7.23   Yrs.     $ 0.35      1,891,216       $ 0.35
   $ 0.39  -  $ 0.43     1,615,900        4.81   Yrs.     $ 0.42      1,651,900       $ 0.42
   $ 0.46  -  $ 0.56     1,601,500        5.93   Yrs.     $ 0.49      1,601,500       $ 0.49
   $ 0.91  -  $ 7.31       259,386        1.55   Yrs.     $ 3.23        259,386       $ 3.23
                        ----------                                    ---------
                         7,501,255        6.11   Yrs.     $ 0.45      7,501,255       $ 0.45
                        ==========                                    =========
</TABLE>

7. Income Taxes.

The components of the (benefit) provision for income taxes consisted of the
following:

<TABLE>
<CAPTION>
                     For the Year Ended December 31,
                     -------------------------------
   Current                2008             2007
   -------           --------------   --------------
<S>                   <C>              <C>
   Federal            $           -    $     (10,300)
   State                          -           36,100
   Foreign                  (11,700)          16,300
                     --------------   --------------
                            (11,700)          42,100
                     --------------   --------------
   Deferred
   --------
   Federal            $           -    $           -
   State                          -                -
   Foreign                        -                -
                     --------------   --------------
                                  -                -
                     --------------   --------------
   Total              $     (11,700)   $      42,100
                     ==============   ==============
</TABLE>

                                       42
<PAGE>

The following summarizes the differences between income tax expense and the
amount computed applying the federal income tax rate of 34%:

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                      ----------------------------
                                                          2008             2007
                                                      -----------      -----------
<S>                                                   <C>              <C>
   Federal income tax (benefit) at statutory rate     $  (877,300)     $    80,100
   State income taxes, net of federal benefit                   -           36,100
   Foreign taxes                                          (11,700)          16,300
   Patent impairment write down                           295,200                -
   Temporary differences                                   54,200          727,800
   Federal net operating loss not utilized (applied)      461,400         (771,300)
   Stock-based compensation expense                        59,800          (26,100)
   Compensation expense - non-qualified stock options           -          (17,000)
   Meals and entertainment (50%)                            6,700            6,500
   Accrual reversal                                             -          (10,300)
                                                      -----------      -----------
   Provision for income tax                           $   (11,700)     $    42,100
                                                      ===========      ===========
</TABLE>

Deferred income taxes and benefits result from temporary timing differences in
the recognition of certain expense and income items for tax and financial
reporting purposes, as follows:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                          -----------------------------
                                                               2008             2007
                                                          ------------     ------------
<S>                                                       <C>              <C>
   Net operating loss carryforwards                       $ 14,735,000     $ 14,105,000
   Tax credit carryforwards                                  1,059,000        1,059,000
   Capitalized software                                              -           (1,000)
   Depreciation and amortization                               123,000        1,230,000
   Compensation expense - non-qualified stock options          230,000          235,000
   Deferred revenue and maintenance service contracts        1,037,000        1,318,000
   Reserves and other                                           74,000          148,000
                                                          ------------     ------------
   Total deferred tax assets                                17,258,000       18,094,000
   Deferred tax liability - patent amortization               (394,000)      (1,097,000)
                                                          ------------     ------------
   Net deferred tax asset                                   16,864,000       16,997,000
   Valuation allowance                                     (16,864,000)     (16,997,000)
                                                          ------------     ------------
   Net deferred tax asset                                 $          -     $          -
                                                          ============     ============
</TABLE>

For financial reporting purposes, with the exception of the year ended December
31, 2007, the Company has incurred a loss in each year since inception. Based on
the available objective evidence, management believes it is more likely than not
that the net deferred tax assets will not be fully realizable. Accordingly, the
Company has provided a full valuation allowance against its net deferred tax
assets at December 31, 2008 and 2007. The net change in valuation allowance was
($133,000) and $381,000 for the years ended December 31, 2008 and 2007,
respectively, and was due primarily to changes in the amount of net operating
losses and patent amortization and impairment.

At December 31, 2008, the Company had approximately $41 million of federal net
operating loss carryforwards and approximately $14 million of California state
net operating loss carryforwards available to reduce future taxable income. The
federal loss carry forward will begin to expire in 2018 and the California state
loss carry forward will begin to expire in 2010. During the year ended December
31, 2008, the Company did not utilize any of its federal or California net
operating losses.

During the year ended December 31, 2007, the Company utilized $2,268,700 and
$1,289,000 of its federal and California net operating losses, respectively


                                       43
<PAGE>

Under the Tax Reform Act of 1986, (the "86 TRA Act") the amounts of benefits
from net operating loss carryforwards may be impaired or limited if the Company
incurs a cumulative ownership change of more than 50%, as defined in the 86 TRA
Act, over a three year period.

At December 31, 2008, the Company had approximately $1 million of federal
research and development tax credits that will begin to expire in 2012.

8. Concentration of Credit Risk.

Financial instruments, which potentially subject the Company to concentration of
credit risk, consist principally of cash and cash equivalents, trade receivables
and notes receivable. The Company places cash and cash equivalents with high
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution. As of December 31, 2008, the Company
had approximately $3,408,300 and $12,300 of cash and cash equivalents with
financial institutions, in excess of FDIC and SIPC insurance limits,
respectively. As of December 31, 2007, the Company had $5,135,500 of cash and
cash equivalents with financial institutions in excess of FDIC insurance limits.
As of December 31, 2007, the Company had no cash or cash equivalents at
institutions in excess of SIPC limits.

For the year ended December 31, 2008, the three customers the Company considered
its most significant, namely; Alcatel-Lucent, FrontRange and Ericsson,
respectively, accounted for approximately 15.3%, 6.2% and 7.3%, respectively, of
total software product sales. These three customers' December 31, 2008 year-end
accounts receivable balances represented approximately 23.3%, 5.1%, and 10.0% of
reported net accounts receivable.

For the year ended December 31, 2007, the three customers the Company considered
its most significant, namely; Alcatel-Lucent, FrontRange and Ericsson,
respectively, accounted for approximately 21.3%, 8.1% and 5.0%, respectively, of
total software product sales. These three customers' December 31, 2007 year-end
accounts receivable balances represented approximately 43.2%, 2.6%, and 8.9% of
reported net accounts receivable and included a significant sale made to the
Company's largest customer during the last few days of December 2007.

The Company performs credit evaluations of customers' financial condition
whenever necessary, and generally does not require cash collateral or other
security to support customer receivables.

9.  Commitments and Contingencies.

During May 2008, the Company's Board of Directors approved a Director Severance
Plan and a Key Employee Severance Plan.

Director Severance Plan: This agreement provides for accelerated vesting of a
director's stock options in the event of any transaction or series of
transactions that constitute a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the assets of the
Company, as defined in regulations promulgated under Section 409A of the
Internal Revenue Code of 1986, as amended (the "Code"), and the termination of
the director.

Key Employee Severance Plan: This agreement provides for 12-month salary
continuation for key employees (24 months for certain senior management),
accelerated vesting of key employees' stock options, the payment of bonuses that
key employees would have been entitled to under the Company's incentive bonus
plan and provides key employees with certain health plan and other benefits in
the event of Involuntary Termination or Constructive Termination (as both terms
are defined in the Key Employee Severance Plan) upon any transaction or series
of transactions that constitute a change in the ownership or effective control
of the Company, or in the ownership of a substantial portion of the assets of
the Company, as defined in the Code.

The Company has the right to amend or terminate each of the above listed
severance plans; however, the plans may not be amended or terminated following
the occurrence of a change in control, or in the case of the Key Employee
Severance Plan, a relocation, as outlined above. In any event, each of the above
listed plans will terminate no later than December 31, 2010.

Juniper Networks, Inc. has petitioned the United States Patent and Trademark
Office (the "PTO") to reexamine two of the Company's patents, namely; U. S.
Patent Nos. 5,826,014 and 6,061,798 (the "'014" and "'798" patents,
respectively). On April 5, 2008, the PTO ordered the reexamination of the `798
patent, and on July 25, 2008, the PTO ordered the reexamination of the `014
patent. Juniper also asked the PTO to reexamine the Company's U.S. Patent No.
7,127,464 (the "'464" patent), a patent unrelated to any litigation. The PTO
ordered the reexamination of the `464 patent on April 17, 2008. Such


                                       44
<PAGE>

reexaminations will result in the PTO either: confirming all of the patent's
claims, narrowing all, or some, of the patent's claims, or cancelling all of the
patent's claims in their entirety. Pending completion of the reexamination
processes of these patents, the Company does not believe such patents have been
impaired.

On March 16, 2009, Juniper initiated a proceeding against the Company and one of
its resellers in the United States District Court in the Eastern District of
Virginia alleging infringement of one of their patents, namely; U.S, Patent No.
6,243,752 (the "'752 patent") which protects Juniper's unique method of
transmitting data between a host computer and a terminal computer. The Company
has not yet responded to the claim.

Effective August 1, 2008, the Company's wholly-owned Israeli subsidiary, GraphOn
Research Labs, Ltd. ("GRLL") vacated its office space upon expiration of its
lease. GRLL's two current engineer employees currently operate from home
offices. The Company believes that adequate office space is available in Israel
should it be deemed necessary to secure such space for GRLL's operations in the
future. The Company continues to maintain its offices in Santa Cruz and Irvine,
California as well as Concord, New Hampshire.

Operating Leases. The Company currently occupies approximately 1,850 square feet
of office space in Santa Cruz, California. The office space is rented pursuant
to a three-year operating lease, which will expire in July 2011. Rent on the
Santa Cruz facility will average approximately $3,800 per month over the term of
the lease, which is inclusive of a pro rata share of utilities, facilities
maintenance and other costs.

During September 2006, the Company renewed the lease for its office space in
Concord, New Hampshire, for a three-year term, which is cancelable upon 180-days
written notice. Additionally, the Company increased the space it is renting by
approximately 2,030 square feet, to 5,560 square feet, from 3,530 square feet.
Rent on the Concord facility will approximate $8,400 per month throughout the
duration of the lease renewal.

The Company currently occupies approximately 150 square feet of office space in
Irvine, California, under a lease that expires in March 2009. Under the terms of
the lease, monthly rental payments are approximately $1,100.

Future minimum lease payments, which consist entirely of leases for office
space, are set forth below. The table assumes that the Company will occupy all
currently leased facilities for the full term of each respective lease:

<TABLE>
<CAPTION>
   Year ending December 31,
<S>     <C>                       <C>
        2009                      $  137,200
        2010                      $   51,100
        2011                      $   27,800
</TABLE>

Rent expense aggregated approximately $191,200 and $195,700 for the years ended
December 31, 2008 and 2007, respectively.

Contingencies. Under its Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws and certain agreements with officers and directors,
the Company has agreed to indemnify its officers and directors for certain
events or occurrences arising as a result of the officer or director's serving
in such capacity. Generally, the term of the indemnification period is for the
officer's or director's lifetime. The maximum potential amount of future
payments the Company could be required to make under these indemnification
agreements is limited as the Company currently has a directors and officers
liability insurance policy that limits its exposure and enables it to recover a
portion of any future amounts paid. The Company believes the estimated fair
value of these indemnification agreements is minimal and has no liabilities
recorded for these agreements as of December 31, 2008.

The Company enters into indemnification provisions under (i) its agreements with
other companies in its ordinary course of business, including contractors and
customers and (ii) its agreements with investors. Under these provisions, the
Company generally indemnifies and holds harmless the indemnified party for
losses suffered or incurred by the indemnified party as a result of the
Company's activities or, in some cases, as a result of the indemnified party's
activities under the agreement. These indemnification provisions often include
indemnifications relating to representations made by the Company with regard to
intellectual property rights, and often survive termination of the underlying
agreement. The maximum potential amount of future payments the Company could be
required to make under these indemnification provisions is unlimited. The
Company has not incurred material costs to defend lawsuits or settle claims
related to these indemnification agreements. As a result, the Company believes
the estimated fair value of these agreements is minimal. Accordingly, the
Company has no liabilities recorded for these agreements as of December 31,
2008.

The Company's software license agreements also generally include a performance
guarantee that the Company's software products will substantially operate as
described in the applicable program documentation for a period of 90 days after


                                       45
<PAGE>

delivery. The Company also generally warrants that services that the Company
performs will be provided in a manner consistent with reasonably applicable
industry standards. To date, the Company has not incurred any material costs
associated with these warranties.

10.  Employee 401(k) Plan.

In December 1998, the Company adopted a 401(k) Plan (the Plan) to provide
retirement benefits for employees. As allowed under Section 401(k) of the
Internal Revenue Code, the Plan provides tax-deferred salary deductions for
eligible employees. Employees may contribute up to 15% of their annual
compensation to the Plan, limited to a maximum annual amount as set periodically
by the Internal Revenue Service. In addition, the Company may make
discretionary/matching contributions. During 2008 and 2007, the Company
contributed a total of approximately $34,000 and $39,600, to the Plan,
respectively.

11. Supplemental Disclosure of Cash Flow Information.

The following is supplemental disclosure for the statements of cash flows.

<TABLE>
<CAPTION>
                             Year Ended December 31,
                            -------------------------
                                 2008          2007
           Cash paid:       -------------------------
<S>                         <C>            <C>
           Income taxes     $   47,900     $  14,000
           Interest         $    2,200     $       -
</TABLE>

During the year ended December 31, 2008, the Company capitalized approximately
$28,200 of fixed assets, related to software purchased for internal use, and
recorded approximately $15,200 of other assets, related to future support
services for the software purchased, for which no cash was disbursed. The
Company accrued $15,000 as a current liability and $28,400 as a long term
liability, for these items. See Note 5.

12.  Litigation.

On August 13, 2008, the Company initiated a proceeding against Google Inc.
("Google") in the United States District Court in the Eastern District of Texas
alleging infringement of four of its patents, namely; U.S. Patent Nos.
6,324,538, 6,850,940, 7,028,034 and 7,269,591, which protect its unique method
of maintaining an automated and network-accessible database. The suit alleges
that Google infringes the Company's patents on their Web sites. The suit seeks
permanent injunctive relief along with unspecified damages. On October 8, 2008,
Google filed its Answers and Counterclaims seeking a declaratory judgment that
they do not infringe the patents referenced in the suit and that each of the
patents in the suit are invalid and unenforceable. On October 31, 2008, the
Company filed its answers to each of the counterclaims.

On March 10, 2008, the Company initiated a proceeding against Classified
Ventures, LLC; IAC/InterActiveCorp; Match.com (an operating business of
IAC/InterActiveCorp); Yahoo! Inc.; eHarmony.com; and CareerBuilder, LLC in the
United States District Court in the Eastern District of Texas alleging
infringement of four of the Company's patents, namely; U.S. Patent Nos.
6,324,538, 6,850,940, 7,028,034 and 7,269,591 which protect the Company's unique
method of maintaining an automated and network-accessible database. The suit
alleges that the named companies infringe these patents on each of their Web
sites. The suit seeks permanent injunctive relief along with unspecified
damages. During late April and early May 2008, the opposing parties in the
proceeding filed their Answers and Counterclaims seeking a declaratory judgment
that they do not infringe the patents in the suit and that each of the patents
in the suit are invalid and unenforceable. On June 5, 2008, the Company filed
its answers to each of the opposing parties' counterclaims. On August 13, 2008,
the opposing parties filed their respective motions for early hearing on
inequitable conduct. Responses and replies were filed during August and
September 2008 addressing this motion. On August 21, 2008, IAC/interactive Corp.
was dismissed from the lawsuit without prejudice. On December 2, 2008 the court
issued a Docket Control Order setting the dates of April 27, 2011 for the
Markman Hearing and November 7, 2011 for jury selection.

On August 28, 2007, the Company filed 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 the
Company's patents, namely; U.S. Patent Nos. 5,826,014, 6,061,798 and 7,028,336,
(the "'014," "'798" and "'336" patents, respectively) which protect the


                                       46
<PAGE>

Company's fundamental network security and firewall technologies. The Company
seeks preliminary and permanent injunctive relief along with unspecified damages
and fees. Juniper filed its Answer and Counterclaims on October 26, 2007 seeking
a declaratory judgment that it does not infringe the `014, `798 and `336 patents
and that all three of these patents are invalid and unenforceable. Subsequent to
October 26, 2007 and through March 18, 2009, the Company and Juniper have filed
further replies and responses addressing the issues raised in the original
complaint and Juniper's Answer and Counterclaims. On May 30, 2008 the court
issued a Docket Control Order setting the dates of April 7, 2010 for the Markman
Hearing and July 6, 2010 for jury selection. Also on May 30, 2008, the Company
served its Asserted Claims and Infringement Contentions. On July 25, 2008, the
Company filed an amended complaint removing the `336 patent from its
infringement claim. Juniper responded with its answer and counterclaim to the
amended complaint on August 11, 2008. On September 5, 2008, the Company filed a
second amended complaint to correct Juniper's corporate name, which was followed
by Juniper's answer and the Company's reply during October 2008. On January 27,
2009, Juniper filed a motion to change the venue to the Northern District of
California.

On March 16, 2009 Juniper initiated a proceeding against the Company and one of
its resellers in the United States District Court in the Eastern District of
Virginia alleging infringement of one of their patents, namely; U.S, Patent No.
6,243,752 (the "'752" patent) which protects Juniper's unique method of
transmitting data between a host computer and a terminal computer. The Company
has not yet responded to the claim.

Separately, Juniper has petitioned the United States Patent and Trademark Office
(the "PTO") to reexamine the `014 and `798 patents. On April 17, 2008, the PTO
ordered the reexamination of the `798 patent, and on July 25, 2008, the PTO
ordered the reexamination of the `014 patent. Juniper has also asked the PTO to
reexamine the Company's U.S. Patent No. 7,127,464 (the "'464" patent), a patent
unrelated to any litigation. The PTO ordered the reexamination of the `464
patent on April 17, 2008.

On November 23, 2005, the Company initiated a proceeding against AutoTrader.com
in United States District Court in the Eastern District of Texas, alleging that
Autotrader.com was infringing two of the Company's patents, namely Nos.
6,324,538 and 6,850,940 (the "'538" and "'940" patents, respectively), which
protect the Company's unique method of maintaining an automated and network
accessible database, on its AutoTrader.com website. The Company was seeking
preliminary and permanent injunctive relief along with unspecified damages and
fees. On December 19, 2007, the Company entered into a $6.25 million settlement
and licensing agreement with AutoTrader.com which ended all legal disputes with
AutoTrader.com, and granted to AutoTrader.com, its parent company Cox
Enterprises, Inc. and all of their affiliates an irrevocable, perpetual,
world-wide, non-exclusive license to all of the Company's patents and patent
applications, including the `538 and `940 patents.

13.  Segment Information.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments. This standard requires segmentation based on the Company's internal
organization and reporting of revenue and operating income based upon internal
accounting methods. The Company's financial reporting systems present various
data for management to operate the business prepared in methods consistent with
accounting principles generally accepted in the United States. The segments were
defined in order to allocate resources internally. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to allocate resources
and in assessing performance. The Company's chief operating decision maker is
its Chief Executive Officer. For the years ended December 31, 2008 and 2007, the
Company has determined that it operated its business in two segments, namely
Software and Intellectual Property.

Segment revenue was as follows:

<TABLE>
<CAPTION>
                                                            Increase (Decrease)
                                                         -----------------------
   Year Ended December 31,       2008          2007         Dollars   Percentage
   ----------------------------------------------------------------------------
<S>                         <C>           <C>             <C>           <C>
   Software                 $ 6,708,700   $  5,235,600    $ 1,473,100     28.1%
   Intellectual Property              -      6,250,000     (6,250,000)  (100.0)
                            -----------------------------------------
   Consolidated Total       $ 6,708,700   $ 11,485,600     (4,776,900)   (41.6)%
                            =========================================
</TABLE>

Segment operating income (loss) was as follows:

<TABLE>
<CAPTION>
   Year Ended December 31           2008            2007
   --------------------------------------------------------
   <S>                        <C>             <C>
   Software                   $    (54,200)   $ (1,413,700)
   Intellectual Property (1)    (2,666,100)      1,590,700


                                       47
<PAGE>

   Unallocated                      81,800          58,600
                              ----------------------------
   Consolidated Total         $ (2,638,500)   $    235,600
                              ============================
</TABLE>

(1)  The year ended December 31, 2008 includes the $868,200 patent impairment
     charge (Note 2) recorded against certain of the Company's patents assets.

The Company does not allocate interest and other income, interest and other
expense or income tax to its segments.

As of December 31, 2008 segment fixed assets (long-lived assets) were as
follows:

<TABLE>
<CAPTION>
                                           Accumulated
                                           Depreciation       Net,
                            Cost Basis    /Amortization   as Reported
                           ------------------------------------------
<S>                        <C>            <C>             <C>
   Software                $  1,254,200   $ (1,071,500)   $   182,700
   Intellectual Property      4,472,200     (3,488,200)       984,000
   Unallocated                   20,200              -         20,200
                           ------------------------------------------
                           $  5,746,600   $ (4,559,700)   $ 1,186,900
                           ==========================================
</TABLE>

The Company does not allocate other assets, which consists primarily of
deposits, to its segments. The Company does not maintain any significant
long-lived assets outside of the United States.

Products and services provided by the software segment include all currently
available versions of GO-Global for Windows, GO-Global for Unix, OEM private
labeling kits, software developer's kits, maintenance contracts and product
training and support. The Intellectual property segment provides licenses to our
intellectual property. The Company's two segments do not engage in cross-segment
transactions.


                                       48
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None

ITEM 9A(T).     CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports that we file under the
Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed,
summarized and reported within the time periods specified in the Security and
Exchange Commission's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow for timely decisions regarding
required disclosures. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can only provide reasonable assurance of
achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible 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 the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end
of 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 December 31, 2008.

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
December 31, 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rules 13a-15(f) under the Exchange Act as a process designed by, or
under the supervision of our Chief Executive Officer and Chief Financial Officer
and effected by our board of directors, management and other personnel to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States and includes
those policies and procedures that:

   o  pertain to the maintenance of records that in reasonable detail
      accurately and fairly reflect the transactions and dispositions of our
      assets; and
   o  provide reasonable assurance that transactions are recorded as necessary
      to permit preparation of financial statements in accordance with
      accounting principles generally accepted in the United States, and our
      receipts and expenditures are being made only in accordance with
      authorizations of our management and directors; and
   o  provide reasonable assurance regarding prevention or timely detection
      of unauthorized acquisition, use or disposition of our assets that could
      have a material impact on the financial statements.

Because of inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Our evaluation of
internal control over financial reporting includes using the COSO framework, an
integrated framework for the evaluation of internal control issued by the
Committee of Sponsoring Organizations of the Treadway Commission, to identify
the risks and control objectives related to the evaluation of our control
environment.

Based on our evaluation under the framework described above, our management has
concluded that our internal control over financial reporting was effective as of
December 31, 2008.

This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation requirements by our


                                       49
<PAGE>

registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.

ITEM 9B.   OTHER INFORMATION

Not applicable.


                                       50
<PAGE>

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below is information concerning each of our directors and executive
officers as of March 18, 2009.

   Name                Age     Position
   -------------------------------------------------------------------
   Robert Dilworth      67     Chairman of the Board of Directors and
                               Chief Executive Officer
   William Swain        68     Chief Financial Officer and Secretary
   August P. Klein      72     Director
   Michael Volker       60     Director
   Gordon Watson        73     Director

Robert Dilworth, age 67, has served as one of our directors since July 1998
and was appointed Chairman in December 1999. In January 2002, Mr. Dilworth
was appointed Interim Chief Executive Officer. Mr. Dilworth was appointed our
full-time Chief Executive Officer in September 2006. From 1987 to 1998, Mr.
Dilworth served as the Chief Executive Officer and Chairman of the Board of
Metricom, Inc., a leading provider of wireless data communication and network
solutions. Prior to joining Metricom, from 1985 to 1988, Mr. Dilworth served
as President of Zenith Data Systems Corporation, a microcomputer
manufacturer. Earlier positions included: Chief Executive Officer and
President of Morrow Designs; Chief Executive Officer of Ultramagnetics; Group
Marketing and Sales Director of Varian Associates Instruments Group; Director
of Minicomputer Systems at Sperry Univac; and Vice President of Finance and
Administration at Varian Data Machines. Mr. Dilworth is currently a director
of eOn Communications and Amber Communications.  Mr. Dilworth previously
served as director of Mobility Electronics, Get2Chip.com, Inc., Sky Pipeline
and Yummy Interactive.

William Swain, age 68, has served as our Chief Financial Officer and
Secretary since March 2000. Mr. Swain was a consultant from August 1998 until
February 2000, working with entrepreneurs in the technology industry in
connection with the start-up and financing of new business opportunities. Mr.
Swain was Chief Financial Officer and Secretary of Metricom Inc., from
January 1988 until June 1997, during which time he was instrumental in
private financings as well as Metricom's initial public offering and
subsequent public financing activities. Mr. Swain continued as Senior Vice
President of Administration with Metricom from June 1997 until July 1998.
Prior to joining Metricom, Mr. Swain held top financial positions with
leading companies in the computer industry, including Morrow Designs, Varian
Associates and Univac. Mr. Swain holds a Bachelors degree in Business
Administration from California State University of Los Angeles and is a
Certified Public Accountant in the State of California.

August P. Klein, age 72, has served as one of our directors since August
1998. In 1995 Mr. Klein founded JSK Corporation, a general contracting firm.
Mr. Klein was an initial member of JSK Corporation's board of directors and
served as its initial Chief Executive Officer until his retirement in 1999.
Mr. Klein remains a member of JSK Corporation's board of directors. From 1989
to 1993, Mr. Klein was founder and Chief Executive Officer of Uniquest, Inc.,
an object-oriented application software company. From 1984 to 1988, Mr. Klein
served as Chief Executive Officer of Masscomp, Inc., a developer of high
performance real time mission critical systems and UNIX-based applications.
Mr. Klein has served as Group Vice President, Serial Printers at Data
Products Corporation and President and Chief Executive Officer at Integral
Data Systems, a manufacturer of personal computer printers. Mr. Klein spent
25 years with IBM Corporation, rising to a senior executive position as
General Manager of the Retail/Distribution Business Unit. Mr. Klein is a
director of QuickSite Corporation and has served as a trustee of the Computer
Museum in Boston, Massachusetts since 1988. Mr. Klein holds a B.S. in
Mathematics from St. Vincent College.

Michael Volker, age 60, has served as one of our directors since July 2001.
Since 1996 Mr. Volker has been Director of Simon Fraser University's Industry
Liaison Office. He is also Chief Executive Officer of WUTIF Capital, an "angel"
fund that invests in technology startup companies. From 1996 to 2001, Mr. Volker
was Chairman of the Vancouver Enterprise Forum, a non-profit organization
dedicated to the development of British Columbia's technology enterprises. From
1987 to 1996, Mr. Volker was Chief Executive Officer and Chairman of the Board
of Directors of RDM Corporation, a developer of specialized hardware and
software products for both Internet electronic commerce and paper payment
processing. From 1988 to 1992, Mr. Volker was Executive Director of BC Advanced
Systems Institute, a hi-tech research institute. Since 1982, Mr. Volker has been
active in various early stage businesses as a founder, investor, director and
officer. Mr. Volker, a registered professional engineer in the Province of
British Columbia, holds a Bachelor's and Master's degree from the University of
Waterloo. Mr. Volker is also a director of Visiphor Corporation, Plutonic Power
Corporation, Cyberlink Technologies, Inc. and Angelwest Capital Corporation.


                                       51
<PAGE>

Gordon Watson, age 73, has served as one of our directors since April 2002.
In 1997 Mr. Watson founded Watson Consulting, LLC, a consulting company for
early stage technology companies, and has served as its President since its
inception. From 1996 to 1997, Mr. Watson served as Western Regional Director,
Lotus Consulting of Lotus Development Corporation. From 1988 to 1996, Mr.
Watson held various positions with Platinum Technology, Incorporated, most
recently serving as Vice President Business Development, Distributed
Solutions. Earlier positions included: Senior Vice President of Sales for
Local Data, Incorporated; President, Troy Division, Data Card Corporation;
and Vice President and General Manager, Minicomputer Division, Computer
Automation, Incorporated. Mr. Watson also held various executive and director
level positions with TRW, Incorporated, Varian Data Machines, and Computer
Usage Company. Mr. Watson holds a Bachelors of Science degree in electrical
engineering from the University of California at Los Angeles and has taught
at the University of California at Irvine. Mr. Watson is also a director of
PATH Reliability, SoftwarePROSe, Inc. and Pound Hill Software.

Our Board of Directors has determined that each of our non-employee directors
(August Klein, Michael Volker and Gordon Watson), who collectively constitute a
majority of the Board, meets the general independence criteria set forth in the
Nasdaq Marketplace Rules.

Our Board of Directors has an audit committee consisting of three directors. The
current members of the audit committee are August P. Klein (committee chairman),
Michael Volker and Gordon Watson. The board has determined that each member of
the audit committee meets the Nasdaq Marketplace Rules' definition of
"independent" for audit committee purposes. Our Board of Directors has
determined that Mr. Klein meets the SEC's definition of an audit committee
financial expert.

Our Board of Directors has adopted a Code of Ethics applicable to all of our
employees, including our chief executive officer, chief financial officer and
controller. This code of ethics was filed with the SEC on March 30, 2004 as an
exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003.

All executive officers serve at the discretion of the Board of Directors.

Compliance With Section 16(a) of the Securities Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, as well as those persons who own more than 10% of our common stock,
to file reports of ownership and changes in ownership with the SEC. These
persons are required by SEC rule to furnish us with copies of all Section 16(a)
forms they file.

Based solely on our review of the copies of such forms, or written
representations from certain reporting persons that no such forms were required,
we believe that during the year ended December 31, 2008, all filing requirements
applicable to our officers, directors and greater than 10% owners of our common
stock were complied with.


                                       52
<PAGE>

ITEM 11.   EXECUTIVE COMPENSATION

Summary Compensation

The following table sets forth information for the fiscal years ended December
31, 2008 and 2007, respectively, concerning compensation we paid to our Chief
Executive Officer and our other executive officers whose total compensation
exceeded $100,000 for the year ended December 31, 2008.

<TABLE>
<CAPTION>
                                  Summary Compensation Table
   -------------------------------------------------------------------------------------------
   Name and                                            Option         All Other
   Principal Position          Year      Salary       Awards (1)     Compensation     Total
   -------------------------------------------------------------------------------------------
<S>                            <C>      <C>           <C>            <C>      <C>    <C>
   Robert Dilworth             2008     $ 311,131     $  35,743      $         -     $ 346,874
   Chief Executive Officer     2007     $ 296,852     $  36,734      $         -     $ 333,586
   -------------------------------------------------------------------------------------------
   William Swain               2008     $ 157,511     $  22,045      $  2,000 (2)    $ 181,556
   Chief Financial Officer     2007     $ 149,569     $  28,085      $  2,000 (2)    $ 179,654
</TABLE>

(1) The amounts listed in the Option Awards column reflect the dollar amount
   recognized for financial statement reporting purposes for the respective
   fiscal year in accordance with Statement of Financial Accounting Standards
   No. 123R, "Share-Based Payment," ("FAS No. 123R"), and include amounts from
   awards granted in and prior to 2008 and 2007, respectively. Prior to our
   adoption of FAS No. 123R, on January 1, 2006, we used the intrinsic-value
   method, as prescribed by Accounting Principles Board ("APB") Opinion No. 25,
   "Accounting for Stock Issued to Employees" and interpretations thereof
   (collectively "APB 25"). We estimated the fair value of stock options at
   their grant date by using the Black-Scholes option pricing model with the
   following weighted average assumptions for grants made prior to 2006 that are
   included in the Summary Compensation Table: dividend yield, 0; risk free
   interest of 1.5% to 2.5%; expected volatility of 60%; and an expected life of
   5 years. The assumptions used in the valuations of the stock options awarded
   in 2008 and 2007, subsequent to our adoption of FAS No. 123R, are set forth
   in Note 1 to our consolidated financial statements, appearing in Item 8,
   "Financial Statements and Supplementary Data," in this Annual Report.

(2) Company contribution to the 401(k) Plan.

Mr. Dilworth began as Chief Executive Officer (Interim) during January 2002 and
became full-time Chief Executive Officer during September 2006. Mr. Dilworth
elected during his term as interim Chief Executive Officer, to forgo the cash
compensation we pay all directors for their attendance at board and committee
meetings as well as the quarterly retainer.

The recognized stock-based compensation expense listed as Option Awards for Mr.
Dilworth in the above Summary Compensation Table for the year ended December 31,
2008 was derived from option awards made on January 27, 2005, January 26, 2006,
January 15, 2007 and January 2, 2008 in the amount of 200,000, 125,000, 125,000
and 125,000 options, respectively, at exercise prices of $0.43, $0.21, $0.17 and
$0.38 per share, respectively.

The recognized stock-based compensation expense listed as Option Awards for Mr.
Dilworth in the above Summary Compensation Table for the year ended December 31,
2007 was derived from option awards made on November 11, 2004, January 27, 2005,
January 26, 2006 and January 15, 2007 in the amount of 40,000, 200,000, 125,000
and 125,000 options, respectively, at exercise prices of $0.34, $0.43, $0.21 and
$0.17 per share, respectively.

The recognized stock-based compensation expense listed as Options Awards for Mr.
Swain in the above Summary Compensation Table for the year ended December 31,
2008 was derived from option awards made on January 27, 2005, January 26, 2006,
January 15, 2007 and January 2, 2008 in the amount of 160,000, 75,000, 75,000
and 75,000 options, respectively, at exercise prices of $0.43, $0.21, $0.17 and
$0.38 per share, respectively.

The recognized stock-based compensation expense listed as Options Awards for Mr.
Swain in the above Summary Compensation Table for the year ended December 31,
2007 was derived from option awards made on January 27, 2005, January 26, 2006
and January 15, 2007 in the amount of 160,000, 75,000 and 75,000 options,
respectively, at exercise prices of $0.43, $0.21 and $0.17 per share,
respectively.

All such options granted to Mr. Dilworth and Mr. Swain were immediately
exercisable upon their respective grant date and vest in thirty-three equal
monthly installments, beginning in the fourth month after their respective grant
date. Should either Mr. Dilworth's or Mr. Swain's service cease prior to full
vesting of the options, we have the right to repurchase any shares issued upon
exercise of options not vested.


                                       53
<PAGE>

Pursuant to his employment letter agreement, Mr. Swain would be entitled to
three-months' severance of his then base salary in the event of a merger or
acquisition which lead to a change in the nature, reduction or elimination of
his duties, a reduction in his level of compensation, relocation of the
corporate office by more than 50 miles from its then current location or his
termination.

Outstanding Equity Awards at Fiscal Year-End

<TABLE>
<CAPTION>
              Outstanding Equity Awards At Fiscal Year-End
   --------------------------------------------------------------------
                                            Option Awards (1)
                               ----------------------------------------
                                Number of
                               Securities
                               Underlying
                               Unexercised       Option         Option
                                 Options        Exercise      Expiration
                               Exercisable       Price           Date
   --------------------------------------------------------------------
<S>                            <C>     <C>      <C>            <C>
   Robert Dilworth             100,000 (2)      $  0.25        03/04/12
   Chief Executive Officer      40,000 (2)      $  0.18        05/04/13
                               300,000 (3)      $  0.34        11/14/14
                               200,000 (2)      $  0.43        01/26/15
                               125,000 (2)      $  0.21        01/25/16
                               125,000 (2)      $  0.17        01/14/17
                               125,000 (2)      $  0.38        01/01/18
   --------------------------------------------------------------------
   William Swain                40,000 (2)      $  0.18        05/04/13
   Chief Financial Officer     380,000 (3)      $  0.34        11/14/14
                               160,000 (2)      $  0.43        01/26/15
                                75,000 (2)      $  0.21        01/25/16
                                75,000 (2)      $  0.17        01/14/17
                                75,000 (2)      $  0.38        01/01/18
</TABLE>

      (1) As of December 31, 2008. On January 2, 2009, Mr. Dilworth and Mr.
      Swain were granted 125,000 and 75,000 options, respectively, at an
      exercise price of $0.05 per share, with such exercise price being equal to
      the fair market value on the grant date. All such options were immediately
      exercisable upon grant and vest in thirty-three equal monthly
      installments, beginning in the fourth month after their respective grant
      date. Each of these options will be fully vested on January 2, 2012 and
      will expire on January 1, 2019. If Mr. Dilworth's or Mr. Swain's
      employment ceases prior to full vesting of the options, we have the right
      to repurchase, at the exercise price, any shares issued upon exercise of
      options not vested.

      (2) All such options were immediately exercisable upon grant and vest in
      thirty-three equal monthly installments, beginning in the fourth month
      after their respective grant date. For Mr. Dilworth, the options
      identified in this footnote were, or will be, fully vested on the
      following dates: March 4, 2005, May 4, 2006, January 25, 2008, January 25,
      2009, January 15, 2010 and January 1, 2011, respectively. For Mr. Swain,
      the options identified in this footnote were, or will be, fully vested on
      the following dates: May 4, 2006, January 26, 2008, January 25, 2009,
      January 15, 2010 and January 1, 2011, respectively. If Mr. Dilworth's or
      Mr. Swain's employment ceases prior to full vesting of the options, we
      have the right to repurchase any shares issued upon exercise of options
      not vested.

      (3) Mr. Dilworth and Mr. Swain voluntarily surrendered, on May 14, 2004,
      260,000 and 380,000 out-of-the-money options, respectively, in conjunction
      with participation in a voluntary stock option exchange program. New
      option grants equal to the number cancelled were made on November 15,
      2004. All such options were fully vested as of November 14, 2005. On
      November 15, 2004, Mr. Dilworth was granted 40,000 options in his capacity
      as a director. These options became fully vested on November 14, 2007.

Compensation of Directors

During the years ended December 31, 2008 and 2007, our non-employee directors
were eligible to be compensated at the rate of $1,000 for attendance at each
meeting of our board, $500 if their attendance was via telephone, $500 for

                                       54
<PAGE>

attendance at each meeting of a board committee, and a $1,500 quarterly
retainer. Additionally, non-employee directors are granted stock options
periodically, typically on a yearly basis.

<TABLE>
<CAPTION>
                                  Director Compensation
------------------------------------------------------------------------------------
                                 Fees
                              Earned or      Option        All Other
                   Year      Paid in Cash   Awards (1)    Compensation       Total
------------------------------------------------------------------------------------
<S>                <C>        <C>           <C>           <C>        <C>    <C>
August Klein       2008       $  18,000     $  22,045     $          -      $ 40,045
                   2007          16,500        31,306                -        47,806
------------------------------------------------------------------------------------
Michael Volker     2008          16,000        22,045                -        38,045
                   2007          15,500        30,662                -        46,162
------------------------------------------------------------------------------------
Gordon Watson      2008          17,000        22,045                -        39,045
                   2007          15,500        30,146                -        45,646
</TABLE>

      (1) The amounts listed in the Option Awards column reflect the dollar
      amount recognized for financial statement reporting purposes for the
      fiscal years ended December 31, 2008 and 2007, in accordance with FAS No.
      123R, and include amounts from awards granted in and prior to 2008 and
      2007, respectively. We estimated the fair value of stock options at their
      grant date by using the Black-Scholes option pricing model with the
      following weighted average assumptions for grants made prior to 2006 that
      are included in the Summary Compensation Table: dividend yield, 0; risk
      free interest of 1.5% to 2.5%; expected volatility of 60%; and an expected
      life of 5 years. The assumptions used in the valuations of the stock
      options awarded in 2008 and 2007, subsequent to our adoption of FAS No.
      123R, appear in Note 1 to our consolidated financial statements, which
      appear in Item 8, "Financial Statements and Supplementary Data," in this
      Annual Report.

The recognized stock-based compensation expense listed as Option Awards for all
three non-employee directors in the above table for the year ended December 31,
2008 was derived from option awards made on January 27, 2005, January 26, 2006,
January 15, 2007 and January 2, 2008 at exercise prices of $0.43, $0.21, $0.17
and $0.38 per share respectively. On such dates, Messrs. Klein, Volker and
Watson were each granted 160,000, 75,000, 75,000 and 75,000 options,
respectively. All such options granted to our non-employee directors were
immediately exercisable upon their respective grant date and vest in
thirty-three equal monthly installments, beginning in the fourth month after
their respective grant date.

The recognized stock-based compensation expense listed as Option Awards for all
three non-employee directors in the above table for the year ended December 31,
2007 was derived from option awards made on May 14, 2004, January 27, 2005,
January 26, 2006 and January 15, 2007 at exercise prices of $0.56, $0.43, $0.21
and $0.17 per share respectively. On such dates, Mr. Klein was granted 62,500,
160,000, 75,000 and 75,000 options, respectively; Mr. Volker was granted 50,000,
160,000, 75,000 and 75,000 options, respectively; and Mr. Watson was granted
40,000, 160,000, 75,000 and 75,000 options, respectively. All such options
granted to our non-employee directors were immediately exercisable upon their
respective grant date and vest in thirty-three equal monthly installments,
beginning in the fourth month after their respective grant date.

Should any non-employee director's service cease prior to full vesting of the
options, we have the right to repurchase any shares issued upon exercise of
options not vested.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2008, the Compensation Committee was
comprised of Gordon Watson and August Klein, each of whom is a non-employee
director. August Klein is the committee chairman.


                                       55
<PAGE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
       RELATED STOCKHOLDER MATTERS

The following table sets forth certain information, as of March 18, 2009, with
respect to the beneficial ownership of shares of our common stock held by: (i)
each director; (ii) each person known by us to beneficially own 5% or more of
our common stock; (iii) each executive officer named in the summary compensation
table; and (iv) all directors and executive officers as a group. Unless
otherwise indicated, the address for each stockholder is c/o GraphOn
Corporation, 5400 Soquel Avenue, Suite A2, Santa Cruz, California 95062.

<TABLE>
<CAPTION>
                                        Number of Shares       Percent
                                        of Common Stock          of
                                         Beneficially           Class
Name and Address of Beneficial Owner     Owned (1)(2)            (%)
----------------------------------------------------------------------
<S>                                         <C>                 <C>
Robert Dilworth (3)                         1,193,820            2.5
William Swain (4)                             915,000            1.9
August P. Klein (5)                           745,760            1.6
Michael Volker (6)                            638,200            1.3
Gordon Watson (7)                             580,000            1.2
AIGH Investment Partners, LLC (8)           9,120,417           18.1
  6006 Berkeley Avenue
  Baltimore, MD  21209
Ralph Wesinger (9)                          4,230,207            8.8
Kennedy Capital Management, Inc. (10)       3,199,498            6.8
  10829 Olive Boulevard
  St. Louis, MO 63141
Paul Packer (11)                            4,111,210            8.4
  60 Broad Street, 38th Floor
  New York, NY 10004
All current executive officers and          4,072,780            8.0
directors as a group (5 persons)(12)
</TABLE>

  (1)    As used in this table, beneficial ownership means the sole or shared
         power to vote, or direct the voting of, a security, or the sole or
         shared power to invest or dispose, or direct the investment or
         disposition, of a security. Except as otherwise indicated, based on
         information provided by the named individuals, all persons named herein
         have sole voting power and investment power with respect to their
         respective shares of our common stock, except to the extent that
         authority is shared by spouses under applicable law, and record and
         beneficial ownership with respect to their respective shares of our
         common stock. With respect to each stockholder, any shares issuable
         upon exercise of options and warrants held by such stockholder that are
         currently exercisable or will become exercisable within 60 days of
         March 18, 2009 are deemed outstanding for computing the percentage of
         the person holding such options, but are not deemed outstanding for
         computing the percentage of any other person.
  (2)    Percentage ownership of our common stock is based on 47,342,292 shares
         of common stock outstanding as of March 18, 2009.
  (3)    Includes 1,140,000 shares of common stock issuable upon the exercise of
         outstanding options.
  (4)    Includes 880,000 shares of common stock issuable upon the exercise of
         outstanding options.
  (5)    Includes 595,000 shares of common stock issuable upon the exercise of
         outstanding options.
  (6)    Includes 560,000 shares of common stock issuable upon the exercise of
         outstanding options.
  (7)    Includes 580,000 shares of common stock issuable upon the exercise of
         outstanding options.
  (8)    Based on information contained in a Schedule 13G/A filed by AIGH
         Investment Partners, LLC on March 3, 2008. Includes 3,040,139 shares of
         common stock issuable upon the exercise of outstanding warrants. Orin
         Hirschman is the managing member of AIGH Investment Partners, LLC.
  (9)    Based on information provided to us by Mr. Wesinger. Includes 1,000,000
         shares of common stock issuable upon exercise of outstanding options.
  (10)   Based on information contained in a Schedule 13G/A filed by Kennedy
         Capital Management, Inc., an investment advisor, on February 13, 2009.
         Kennedy Capital Management has the sole power to vote or direct the
         vote of 2,891,898 shares and the sole power to dispose or direct the
         disposition of 3,199,498 shares.
  (11)   Based on information contained in a Schedule 13G/A filed by Paul Packer
         and related parties on February 13, 2009. Mr. Packer has sole voting


                                       56
<PAGE>

         and dispositive power with respect to 1,215,017 shares held or issuable
         upon exercise of outstanding warrants held by Mr. Packer and Mr. Packer
         shares voting and dispositive power with respect to an aggregate
         2,896,193 shares held or issuable upon exercise of outstanding warrants
         held by Globis Overseas Fund Ltd. and Globis Capital Partners, LP.
  (12)   Includes 3,755,000 shares of common stock issuable upon the exercise of
         outstanding options.

Equity Compensation Plan Information.  The following table sets forth
information related to all of our equity compensation plans as of December
31, 2008:

<TABLE>
<CAPTION>
                                        Number of
                                        Securities        Weighted
                                          to be           Average
                                       Issued Upon        Exercise
                                       Exercise of        Price of         Number of
                                       Outstanding       Outstanding      Securities
                                         Options,          Options,        Remaining
                                         Warrants        Warrants and    Available for
Plan Category                           and Rights          Rights      Future Issuance
---------------------------------------------------------------------------------------
<S>                                      <C>                <C>               <C>
Equity compensation plans approved
by security holders:
  1996 Stock Option Plan                    54,625          $  0.80                   -
  1998 Stock Option/Stock                3,418,661          $  0.58               5,236
Issuance Plan
  2005 Equity Incentive Plan             2,366,212          $  0.24              53,788
  Employee Stock Purchase Plan (1)              NA               NA              52,210
Equity compensation plans not
approved by security holders:
  Stock option plans (2)                 1,661,757          $  0.45           2,988,243
                                         ---------                            ---------
Total - all plans                        7,501,255          $  0.45           3,099,477
                                         =========                            =========
</TABLE>

(1)   Under terms of the employee stock purchase plan, employees who participate
      in the plan are eligible to purchase shares of common stock. As of
      December 31, 2008, 347,790 shares had been purchased through the plan, at
      an average cost of $0.59 per share, and 52,210 shares are available for
      future purchase.
 (2)  (a) In May 2000 our board of directors approved a supplemental stock
      option plan (the "supplemental plan"). Participation in the supplemental
      plan is limited to those employees who are, at the time of the option
      grant, neither officers nor directors. The supplemental plan is authorized
      to issue options for up to 400,000 shares of common stock. The exercise
      price per share is subject to the following provisions:

        o   The exercise price per share shall not be less than 85% of the fair
            market value per share of common stock on the option grant date.
        o   If the person to whom the option is granted is a 10% shareholder,
            then the exercise price per share shall not be less than 110% of the
            fair market value per share of common stock on the option grant
            date.
      All options granted are immediately exercisable by the optionee. The
      options vest, ratably, over a 33-month period, however no options vest
      until after three months from the date of the option grant. The exercise
      price is immediately due upon exercise of the option. Shares issued upon
      exercise of options are subject to our repurchase, which right lapses as
      the shares vest. The supplemental plan will terminate no later than April
      30, 2010. As of December 31, 2008, options to purchase 386,757 shares were
      outstanding under the supplemental plan and options to purchase 13,243
      shares remained available for issuance.

      (b) On January 27, 2005 our board of directors approved a stock option
      plan (the "NES Plan") for a named employee, who at the time of the option
      grant was neither an officer nor a director. The NES Plan is authorized to
      issue options for up to 1,000,000 shares of common stock. Under the terms
      of the NES Plan, the exercise price of all options issued under the NES
      Plan would be equal to the fair market value of our common stock on the
      date of the grant.

      All options granted under the NES Plan are immediately exercisable by the
      optionee; however, there is a vesting period for the options. No options
      vest until after three months from the date of the option grant.
      Commencing in the fourth month, options representing approximately 8.33%


                                       57
<PAGE>

      of the shares vest with the remainder vesting ratably over a 32-month
      period, commencing in the fifth month. The exercise price is immediately
      due upon exercise of the option. Shares issued upon exercise of options
      are subject to our repurchase, which right lapses as the shares vest. The
      NES Plan will terminate no later than January 31, 2015. As of December 31,
      2008, options to purchase 1,000,000 shares of common stock had been issued
      under the NES plan and no shares remained available for issuance.

      (c) On February 14, 2005 our board of directors approved a stock option
      plan (the "GG Plan") for a named employee, who at the time of the option
      grant was neither an officer nor a director. The GG Plan is authorized to
      issue options for up to 250,000 shares of common stock. Under the terms of
      the GG Plan, the exercise price of all options issued under the GG Plan
      would be equal to the fair market value of our common stock on the date of
      the grant.

      All options granted under the GG Plan are immediately exercisable by the
      optionee; however, there is a vesting period for the options. The options
      vest, ratably, over a 33-month period, however no options vest until after
      three months from the date of the option grant. The exercise price is
      immediately due upon exercise of the option. Shares issued upon exercise
      of options are subject to our repurchase, which right lapses as the shares
      vest. The GG Plan shall terminate no later than February 15, 2015. As of
      December 31, 2008, options to purchase 250,000 shares of common stock had
      been issued under the GG Plan and no shares remained available for
      issuance.

      (d) On November 19, 2008 our board of directors approved a stock
      option/stock issuance plan (the "08 Plan") pursuant to which options or
      restricted stock may be granted to officers and other employees,
      non-employee directors and independent consultants and advisors who render
      services to the Company. The 08 Plan is authorized to issue options or
      restricted stock for up to 3,000,000 shares of common stock. Under the 08
      Plan the exercise price of options granted is to be no less than 100% of
      the fair market value of the Company's common stock on the date the option
      is granted. The purchase price of performance-vested stock issued under
      the 08 Plan shall also not be less than 100% of the fair market value of
      the Company's common stock on the date the performance-vested stock is
      granted.

      In the case of a restricted stock award, the entire number of shares
      subject to such award would be issued at the time of the grant and subject
      to vesting provisions based on time or performance conditions specified by
      the Board or an authorized committee of the Board. For awards based on
      time, should the grantee's service to the Company end before full vesting
      occurred, all unvested shares would be forfeited and returned to the
      Company. In the case of awards granted with vesting provisions based on
      specific performance conditions, if those conditions are not met, then all
      shares would be forfeited and returned to the Company. Until forfeited,
      all shares issued under a performance vested stock award would be
      considered outstanding for dividend, voting and other purposes.

      All options granted under the 08 Plan are immediately exercisable by the
      optionee; however, there is a vesting period for the options. The options
      vest, ratably, over a 33-month period, however no options vest until after
      three months from the date of the option grant. The exercise price is
      immediately due upon exercise of the option. Under the terms of the 08
      Plan, the exercise price of all options issued under the 08 Plan would be
      equal to the fair market value of our common stock on the date of the
      grant. Shares issued upon exercise of options are subject to our
      repurchase, which right lapses as the shares vest. The 08 Plan shall
      terminate no later than November 19, 2018. As of December 31, 2008,
      options to purchase 25,000 shares of common stock had been issued under
      the 08 Plan, no restricted shares had been awarded and 2,975,000 shares
      remained available for issuance.

For additional information concerning our equity compensation plans, see Note 6
to our consolidated financial statements appearing in Item 8, "Financial
Statements and Supplementary Data," in this Annual Report on Form 10-K.


                                       58
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information set forth in Item 9 of this Annual Report on Form 10-K
concerning director independence is incorporated herein by reference.



                                       59
<PAGE>

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Fees for professional services provided by Macias Gini & O'Connell LLP for the
years ended December 31, 2008 and 2007 were as follows:

<TABLE>
<CAPTION>
           Category                     2008          2007
           --------                 ------------------------
<S>                                 <C>           <C>
           Audit fees               $  144,300    $  154,900
           Audit - related fees              -         1,300
           Tax fees                     15,000        14,000
           Other fees                        -             -
                                    ------------------------
           Totals                   $  159,300    $  170,200
                                    ========================
</TABLE>

Audit fees include fees associated with our annual audit, the reviews of our
quarterly reports on Form 10-Q, and assistance with and review of documents
filed with the Securities and Exchange Commission (the "SEC"). Audit-related
fees include consultations regarding revenue recognition rules, and new
accounting pronouncements, particularly FIN 48 (2007), and interpretations
thereof, as they related to the financial reporting of certain transactions. Tax
fees included tax compliance and tax consultations.

The audit committee has adopted a policy that requires advance approval of all
audit, audit-related, tax services and other services performed by our
independent auditor. The policy provides for pre-approval by the audit committee
of specifically defined audit and non-audit services. Unless the specific
service has been previously pre-approved with respect to that year, the audit
committee must approve the permitted service before the independent auditor is
engaged to perform it.


                                       60
<PAGE>

                                     PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 (a)  Financial Statements

Our financial statements as set forth in the Index to Consolidated Financial
Statements under Part II, Item 8 of this Annual Report on Form 10-K are hereby
incorporated by reference.

 (b)  Exhibits

The following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed as part of this Annual Report on Form 10-K or, as
noted, incorporated by reference herein:

Exhibit
Number                           Exhibit Description
--------------------------------------------------------------------------------
3.1     Amended and Restated Certificate of Incorporation of Registrant, as
        amended (1)
3.2     Amended and Restated Bylaws of Registrant (2)
4.1     Form of certificate evidencing shares of common stock of Registrant (3)
4.2     Form of Warrant issued by Registrant on February 2, 2005 (4)
4.3     Investors Rights Agreement, dated February 2, 2005, by and among
        Registrant and the investors named therein (4)
10.1    1996 Stock Option Plan of Registrant (3)
10.2    1998 Stock Option/Stock Issuance Plan of Registrant (5)
10.3    Supplemental Stock Option Agreement, dated as of June 23, 2000 (5)
10.4    Employee Stock Purchase Plan of Registrant (5)
10.5    Lease Agreement between Registrant and Central United Life Insurance,
        dated as of October 24, 2003 (6)
10.6    Amendment to Lease Agreement between Registrant and Central United
        Life Insurance, dated as of September 15, 2006 (1)
10.7    Holder Agreement, dated January 31, 2005, by and between Registrant
        and the holders named therein (4)
10.8    2005 Equity Incentive Plan (7)
10.9    Stock Option Agreement, dated February 1, 2005 by and between
        Registrant and Ralph Wesinger (8)
10.10   Stock Option Agreement, dated January 29, 2005 by and between
        Registrant and Gary Green (8)
10.11   Employment Agreement, dated February 11, 2000, by and between
        Registrant and William Swain (9)
10.12   Director Severance Plan (10)
10.13   Key Employee Severance Plan (10)
10.14   2008 Equity Incentive Plan (11)
14.1    Code of Ethics (5)
21.1    Subsidiaries of Registrant
23.1    Consent of Macias Gini & O'Connell LLP
31.1    Rule 13a-14(a)/15d-14(a) Certifications
32.1    Section 1350 Certifications
----------

       (1)         Filed on April 2, 2007 as an exhibit to Registrant's Annual
                   Report on Form 10-KSB for the year ended December 31, 2006,
                   and incorporated herein by reference.
       (2)         Filed on June 4, 1999 as an exhibit to Amendment No. 1 to the
                   Registrant's Registration Statement on Form S-4 (File
                   No.333-76333), and incorporated herein by reference
       (3)         Filed as an exhibit to the Registrant's Registration
                   Statement on Form S-1 (File No. 333-11165), and incorporated
                   herein by reference
       (4)         Filed on February 4, 2005 as an exhibit to the Registrant's
                   Current Report on Form 8-K, dated January 31, 2005, and
                   incorporated herein by reference
       (5)         Filed on June 23, 2000 as an exhibit to the Registrant's
                   Registration Statement on Form S-8 (File No. 333-40174) and
                   incorporated herein by reference
       (6)         Filed on March 30, 2004 as an exhibit to the Registrant's


                                       61
<PAGE>

                   Annual Report on Form 10-K for the year ended December 31,
                   2003, and incorporated herein by reference
       (7)         Filed on November 25, 2005 as an exhibit to the Registrant's
                   definitive Proxy Statement for the Registrant's 2005 Annual
                   Meeting, and incorporated herein by reference
       (8)         Filed on April 17, 2006 as an exhibit to the Registrant's
                   Annual Report on Form 10-KSB for the year ended December 31,
                   2005, and incorporated herein by reference
       (9)         Filed on February 6, 2007 as an exhibit to Post-Effective
                   Amendment No. 4 to the Registrant's Registration Statement to
                   Form S-1 on Form SB-2 (File No. 333-124791), and incorporated
                   herein by reference
       (10)        Filed on August 14, 2008 as an exhibit to the Registrant's
                   Quarterly Report on Form 10-Q for the quarterly period ended
                   June 30, 2008, and incorporated herein by reference
       (11)        Filed on December 17, 2008 as an exhibit to the Registrant's
                   Registration Statement on Form S-8 (File No. 333-156229) and
                   incorporated herein by reference

 (c)  Financial Statement Schedule

Not applicable for smaller reporting companies.


                                       62
<PAGE>

                                   SIGNATURES

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

                                          GraphOn Corporation

March 31, 2009                            By:  /s/ Robert Dilworth
                                              --------------------------------
                                              Robert Dilworth
                                              Chief Executive Officer

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

        Signature                            Title                    Date
--------------------------------------------------------------------------------
                                Chairman of the Board, and
/s/ Robert Dilworth               Chief Executive Officer         March 31, 2009
-------------------------      (Principal Executive Officer)
Robert Dilworth

                                Chief Financial Officer, and
/s/ William Swain                         Secretary               March 31, 2009
-------------------------      (Principal Financial Officer, and
William Swain                    Principal Accounting Officer)


/s/ August P. Klein                        Director               March 31, 2009
-------------------------
August P. Klein


/s/ Michael Volker                         Director               March 31, 2009
-------------------------
Michael Volker


/s/ Gordon Watson                          Director               March 31, 2009
-------------------------
Gordon Watson