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, 2002
                     Commission file number: 0-21683

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

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

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

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

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

       Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, $.0001 Par Value
                            (Title of class)

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

  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 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 an accelerated
filer (as defined in Exchange Act Rule 12b-2)
  Yes [  ] No [X]

  The aggregate market value of the common equity of registrant held
by non-affiliates of the registrant as of June 28, 2002 was
approximately $2,804,600.

  Number of shares of Common Stock outstanding as of March 4, 2003:
16,629,387 shares of Common Stock.
<PAGE>

                         GRAPHON CORPORATION

                              FORM 10-K

                          Table of Contents
                                                                Page
PART I.
Item 1.    Business                                                2
Item 2.    Properties                                              8
Item 3.    Legal Proceedings                                       8
Item 4.    Submission of Matters to a Vote of Security Holders     8

PART II.
Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters                                     9
Item 6.    Selected Financial Data                                 9
Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                    10
Item 7A.   Quantitative and Qualitative Disclosures About
           Market Risks                                           21
Item 8.    Financial Statements and Supplementary Data            21
Item 9.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure                    49

PART III.
Item 10.   Directors and Executive Officers of the Registrant     50
Item 11.   Executive Compensation                                 51
Item 12.   Security Ownership of Certain Beneficial Owners
           and Management and Related Stockholder Matters         52
Item 13.   Certain Relationships and Related Transactions         54
Item 14.   Controls and Procedures                                54

PART IV.
Item 15.   Exhibits, Financial Statement Schedules, and Reports
           on Form 8-K                                            55

SIGNATURES                                                        56


                     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 or in any document incorporated by reference
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 "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as well as those discussed elsewhere
in this report.
<PAGE>

                                PART I

ITEM 1.  BUSINESS

General

We are developers of business connectivity software, including server-based
software, with an immediate focus on web-enabling applications for use by
various parties, including independent software vendors (ISVs), application
service providers (ASPs), corporate enterprises, governmental and educational
institutions, and others.  Server-based computing, sometimes referred to as
thin-client computing, is a computing model where traditional desktop software
applications are relocated to run entirely on a server, or host computer.  This
centralized deployment and management of applications reduces the complexity
and total costs associated with enterprise computing.  Our software architecture
provides application developers with the ability to relocate applications
traditionally run on the desktop to a server, or host computer, where they can
be run over a variety of connections from remote locations to a variety of
display devices.  Our server-based technology works on today's most powerful
personal computer, or low-end network computer, without application rewrites or
changes to the corporate computing infrastructure.

With our 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.  In addition, the ability to access such applications
over the Internet creates new operational models and sales channels.  We provide
the technology to access applications over the Internet.

We entered both the Unix and Linux server-based computing and web enabling
markets as early as 1996.  We expanded our product offerings by shipping
Windows web-enabling software in early 2000.

We are headquartered in Morgan Hill, California and have offices in
Concord, New Hampshire and Berkshire, England, United Kingdom.

Industry Background

   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.

   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 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.  The other approach is Microsoft's Windows NT(TM), terminal
server edition, 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 desktop computers,
each with its particular operating system, processing power and connection


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type.  Consequently, it is becoming increasingly difficult to provide
universal desktop access to business-critical applications across the
enterprise.  As a result, organizations resort to desktop emulation
software, new hardware or costly application rewrites in order to provide
universal desktop 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.

   Application Service Providers (ASPs)

With the ubiquitous nature of the Internet, new operational models and
sales channels are emerging.  Traditional high-end software packages that
were once too expensive for many companies are now available for rent over
the Internet.  By servicing customers through a centralized operation,
rather than installing and maintaining applications at each customer's
site, ASPs play an important role in addressing an enterprise's computing
requirements.  Today, ASPs are faced with the difficult task of creating,
or rewriting, applications to entertain the broader market.  Though the
ASP industry is just beginning to emerge, we expect it to develop rapidly,
due to the ASPs and their vendors' desires to expand their markets.

   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 Approach

Our server-based software deploys, manages, supports and executes
applications entirely on the server computer and publishes their user
interface efficiently and instantaneously to desktop devices.  The
introduction of the Windows-based version of our Bridges software, during
2000, enabled us to enter the Windows application market.    This allowed
us to provide support for Windows applications to both enterprise
customers and to leverage independent software vendors (ISVs) as a
channel.  During the fourth quarter of 2002 we introduced GO-Global for
Windows, a significant upgrade to our product offerings in the Windows
market.  This new version has increased application compatibility, server
scalability and improved application performance over our previous version.

Our technology consists of three key components:

o     The server component runs alongside the server-based application and is
      responsible for intercepting user-specific information for display at
      the desktop.

o     The desktop component is responsible only for sending keystrokes and
      mouse motion to the server.  It also presents the application
      interface 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 enables efficient communication over fast networks or slow
      dial-up connections and 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:

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


                                       3
<PAGE>

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.

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
GoGlobal, 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.

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.  For example, Windows PCs typically may not
access a company's Unix applications without installing complex PC X
Server software on each PC.  Typical PC X Servers are large and require an
information technology professional to properly install and configure each
desktop.  For Macintosh, the choices are even fewer, requiring the
addition of yet another vendor product.  For the newer technologies, such
as tablet PCs or handheld devices, application access will be challenging.

To rewrite an application for each different display device (be that a
desktop PC or tablet PC) and their many diverse operating systems is often
a difficult and time-consuming task.  In addition to the development
expense, issues of desktop performance, data compatibility and support
costs often make this option prohibitive.  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.

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.

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 ASPs, bandwidth typically is the top recurring
expense when web-enabling, or renting, access to applications over the
Internet.  In the emerging 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.

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 Fortune 1000
enterprises.  By employing our technology, customers 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 product offerings include GoGlobal for Windows, GoGlobal for Unix and
legacy products, such as Bridges for Windows, Bridges for Unix/Linux and
GO Joe.

GoGlobal for Windows allows access to Windows applications from remote
locations and a variety of connections, including the Internet and dial-up
connections.  GoGlobal 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
GoGlobal for Windows, web enabling is achieved without modifying the
underlying Windows applications' code or requiring costly add-ons.

GoGlobal for Unix web-enables Unix and Linux applications 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.  GoGlobal for Unix web-enables individual Unix and
Linux applications, or entire desktops.  When using GoGlobal for Unix,
Unix and Linux web enabling is achieved without modifying the underlying
applications' code or requiring costly add-ons.

                                       4
<PAGE>

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
Fortune 1000 companies, governmental and educational institutions, ISVs,
VARs and ASPs.  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.  Our opportunity within the marketplace is more specifically broken
down as follows:

o     ISVs.  By web-enabling their applications, software developers can
      strengthen the value of their product offerings, opening up
      additional revenue opportunities and securing greater satisfaction
      and loyalty from their customers.  We believe that ISVs who
      effectively address the web computing needs of customers and the
      emerging ASP market will have a competitive advantage in the
      marketplace.

      By combining our products with desktop versions of their software
      applications, our ISV customers have been able to accelerate the time
      to market for web-enabled versions of their software applications
      without the risks and delays associated with rewriting applications
      or using third party solutions.  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.

o     Enterprises Employing a Mix of Unix and Windows.  Most major
      enterprises employ a mix of Unix computers and Windows PCs.
      Companies that utilize a mixed computing environment require
      cross-platform connectivity solutions, like GoGlobal for Unix that
      will allow users to access Unix applications from desktop PCs.  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
      will significantly reduce the cost and complexity of connecting PCs
      to Unix applications.

o     Enterprises With Remote Computer Users.  Remote computer users comprise
      one of the fastest growing market segments in the computing
      industry.  Efficient remote access to applications has become an
      important part of many enterprises' computing strategies.  Our
      protocol is designed to enable highly efficient low-bandwidth
      connections.

o     ASPs.  High-end software applications in the fields of human resources,
      enterprise resource planning, enterprise relationship management and
      others, historically have only been available to organizations able
      to make large investments in capital and personnel.  The Internet has
      opened up global and mid-tier markets to vendors of this software who
      may now offer it to a broader market on a rental basis.  Our products
      enable the vendors to provide Internet access to their applications
      with minimal additional investment in development implementation.

o     VARs.  The VAR channel presents an additional sales force for our
      products and services.  In addition to creating broader awareness of
      Go-Global, the VAR channel also provides integration and support
      services for our current and potential customers.  Our products allow
      software resellers to offer a cost effective competitive alternative
      for Server-Base Thin Client computing.  In addition, reselling our
      Go-Global software, creates new revenue streams for our VARs through
      professional services and maintenance renewals.

o     Extended Enterprise Software Market.  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.

The early adoption of extended enterprise solutions may be driven in part
by enterprises' need to exchange information over a wide variety of
computing platforms.  We believe that our server-based software products,
along with our low-impact protocol, are well positioned to provide
enabling solutions for extended enterprise computing.

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


                                       5
<PAGE>

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.

In July 1999, we entered into a five-year, non-exclusive agreement with
Alcatel Italia, the Italian Division of Alcatel, the telecommunications,
network systems and services company.  Pursuant to this agreement, Alcatel
has licensed our GoGlobal thin client PC X server 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.  Alcatel has deployed GoGlobal 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).

In September 1999, we entered into a three-year, non-exclusive agreement
with Compuware, an international software and services company.  Pursuant
to this agreement, we licensed our Bridges for Windows server-based
software for inclusion with Compuware's UNIFACE software, a powerful
development and deployment environment for enterprise customer-facing
applications.  Compuware's customers are using our server-based solution
to provide enterprise-level UNIFACE applications over the Internet.
Compuware has private labeled and completely integrated Bridges for
Windows into its UNIFACE deployment architecture as UNIFACE Jti.
Negotiations are currently underway with Compuware on a renewal involving
our latest Windows-based product, GoGlobal for Windows.

In February 2002 we signed a three-year, non-exclusive agreement with
Agilent Technologies, an international provider of technologies, solutions
and services to the communications, electronics, life sciences and
chemical analysis industries.  Pursuant to this agreement, we licensed our
Unix-based web-enabling products to Agilent for inclusion in their Agilent
OSS Web Center, an operations support system that provides access to
mission-critical applications remotely via a secure Internet browser.

In December 2002, we agreed to an eighteen-month extension of our
exclusive agreement with KitASP, a Japanese application service provider,
which was founded by companies within Japan's electronics and
infrastructure industries, including NTT DATA, Mitsubishi Electric, Omron,
RICS, Toyo Engineering and Hitachi.  Pursuant to the original agreement,
KitASP was granted an exclusive right, within Japan, to distribute our
web-enabling technology, bundled with their ASP services, and to resell
our software.  The original agreement provided for an optional second
year, which was exercisable at our discretion.  As a result of the
extension, KitASP's one-year exclusivity period has been extended for an
additional 18 months in lieu of the optional second year that we had
formerly held.

In March 2003, we entered into a fourth consecutive one-year,
non-exclusive agreement with FrontRange, an international software and
services company.  Pursuant to the original agreement, we licensed our
Bridges for Windows server-based software for integration with
FrontRange's HEAT software, which is a state-of-the-art help desk software
system.  FrontRange has private labeled and completely integrated Bridges
for Windows into its HEAT help desk software as iHEAT.  As part of the
2003 renewal, we have licensed our GoGlobal for Windows server-based
software for integration with both FrontRange's HEAT and its Client
Relationship Management software package Goldmine.

Sales, Marketing and Support

Our customers, to date, include Fortune 1000 enterprises, ISVs and large
governmental organizations.  The following customers, listed
alphabetically, generated 10% or more of our revenues in either 2002 or
2001- Alcatel, Citrix, FrontRange and Verizon.  We consider FrontRange to
be our most significant customer.  Sales to FrontRange represented 26.9%
and 24.5% of revenues in 2002 and 2001, respectively.

Our sales and marketing efforts will be focused on increasing product
awareness and demand among ISVs, Fortune 1000 enterprises, and developing
formal distribution relationships with Unix and Windows oriented
resellers.  Current marketing activities include a targeted advertising
campaign of insertions in online newsletters, tradeshows, production of
promotional materials, public relations and maintaining an Internet
presence for marketing and sales purposes.

Research and Development

Our research and development efforts currently are focused on developing
new products and further enhancing the functionality, performance and
reliability of existing products.  We invested $2,831,300, $4,134,400, and
$4,060,000 in research and development in 2002, 2001, and 2000,
respectively.  We expect expenditures in 2003 to approximate 2002 levels.
We have made significant investments in our protocol and in the
performance and development of our server-based software.

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Competition

The server-based software market in which we participate is highly
competitive.  We believe that we have significant advantages over our
competitors, both in product performance and market positioning.  This
market 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 breadth.

We believe our principal competitors for our current products include
Citrix Systems, Inc., Hummingbird Communications, Ltd., Tarantella, 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.

Operations

Our current staffing levels provide us with adequate resources to perform
all purchasing, inventory, order processing and shipping of our products
and accounting functions related to our operations.  Production of
software masters, development of documentation, packaging designs, quality
control and testing are also performed by us.  CD-ROM and floppy disk
duplication, printing of documentation and packaging are accomplished
through outside vendors.  We generally ship products 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.

Proprietary Technology

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 operations and financial
condition.  There can be no 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 there can be 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.

In November 1999, we acquired a U.S. patent for the remote display of
Microsoft Windows applications on Unix and Linux desktops with X Windows.
As a result, we believe that we have acquired patent protection and
licensing rights for the deployment of all Windows applications remoted,
or displayed, over a network or any other type of connection to any X
Windows systems.  This patent, which covers our Bridges for Windows
(formerly jBridge) technology, was originally developed by a team of
engineers formerly with Exodus Technology and hired by us in May 1998.

Employees

As of March 14, 2003, we had a total of 27 employees, including eight in
marketing, sales and support, 15 in research and development and four in
administration and finance.  No employees are covered by a collective
bargaining agreement.

Proposed Acquisition.

On August 21, 2002, we announced that we had signed an agreement to
acquire three privately held, affiliated entities in the
telecommunications industry.  We had expected that these businesses would
benefit from our software development expertise and experience, while
providing us with a revenue stream and platform for future growth and
profitability.  As a consequence of our subsequent due diligence
investigations upon the financial statements and operations of these
entities, we concluded that the proposed acquisition transaction, as
initially structured, would not be in the best interests of our
shareholders.  The August 21, 2002 agreement expired by its
terms on December 31, 2002.  While our efforts to achieve a mutually agreeable
restructuring are ongoing, there can be no assurance that we will enter
into a new agreement with any or all of these affiliated entities.

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ITEM 2.  PROPERTIES

We currently occupy approximately 13,000 square feet of office space in
Morgan Hill, California.  The office space is rented pursuant to a
five-year lease, which became effective in October 2000.  We are currently
in negotiations with various third parties to sublet our lease and we plan
to move to a smaller facility once we successfully sublet our current
office space.  The Morgan Hill lease contains provisions outlining our
rights and responsibilities in order to affect a sublease that will meet
with our landlord's approval.  We are contractually obligated to continue
paying rent on the Morgan Hill space, whether the space is occupied or
not, while we negotiate a sublease.  Rent on the Morgan Hill facility is
approximately $19,000 per month, which is inclusive of various taxes and
other fees proportioned to us under the terms of the lease agreement.

In May 2001, we began renting approximately 5,000 square feet of office
space in Bellevue, Washington pursuant to a five-year lease.  During
September 2002 we ceased operations in this facility.  We are actively
seeking a sublessee for this facility and have begun lease cancellation
negotiations with our landlord.  Rent on the Bellevue facility is
approximately $13,000 per month.

We also occupy leased facilities in Concord, New Hampshire, Rolling Hills
Estates, California and Berkshire, England, United Kingdom.  The New
Hampshire lease expires at the end of October 2003 and we anticipate that
we can renew the lease with terms favorable to current market conditions
at that time.  Rent on the Concord facility is approximately $17,000 per
month.  We currently sublet approximately half of the Concord facility to
a tenant whose lease term coincides with ours.  We collect approximately
$8,400 in rent from our tenant on a monthly basis.  The Rolling Hills
Estates and Berkshire offices are very small and each are leased on a
month-to-month basis.  Together, the monthly rent on these two offices
approximates $3,500 and will fluctuate slightly depending on movement in
the exchange rate between the dollar and the British Pound.

The net aggregate amount of the annual lease payments made under all of
our leases in the years 2002, 2001 and 2000 was approximately $525,700,
$558,700 and $537,100, respectively.  We believe our current facilities
will be adequate to accommodate our needs for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

We are currently not party to any legal proceedings that we believe will
have a material negative impact on our operations.

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

Our 2002 Annual Meeting of Stockholders was held on December 30, 2002.  At
the meeting, one director was elected.  The vote was as follows:

                              For      Withheld
           Gordon Watson  11,655,753  2,558,313

Also at the meeting, the shareholders ratified the reappointment of BDO
Seidman, LLP as our independent auditors for fiscal 2002.  The vote was as
follows:

           For      14,158,186
           Against      38,175
           Abstain           -

                                       8
<PAGE>

                              PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The following table sets forth, for the periods indicated, the high and
low reported sales price of our common stock.  From August 9, 2000 to May
27, 2002, our common stock was quoted on the Nasdaq National Market System
and since May 28, 2002, our common stock has been quoted on the Nasdaq
SmallCap Market System under the symbol "GOJO".

                        Fiscal 2002           Fiscal 2001
                      --------------        --------------
      Quarter         High        Low       High       Low
                    -------    -------    ---------  -------
        1st         $  0.80    $  0.24    $    3.38  $  1.00
        2nd         $  0.37    $  0.15    $    4.05  $  0.81
        3rd         $  0.52    $  0.08    $    3.05  $  1.00
        4th         $  0.29    $  0.12    $    1.26  $  0.50

On March 4, 2003, there were approximately 138 holders of record of our
common stock.  On March 19, 2003, the last reported sales price was $0.194.

On March 19, 2003, we received a Nasdaq Staff Determination letter
indicating our non-compliance with the $1.00 minimum closing bid price
per share requirement for continued listing as set forth in Marketplace
Rule 4310(c)(4) and that our securities are, therefore, subject to
delisting from the Nasdaq SmallCap Market.  We have requested a hearing
before a Nasdaq Listing Qualifications Panel to review the Staff
Determination.  There can be no assurance that the Panel will grant our
request for continued listing on the Nasdaq SmallCap Market.

We have never declared or paid dividends on our common stock.  We do not
anticipate paying any cash dividends for the foreseeable future.  We
currently intend to retain future earnings, if any, to finance operations
and the 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.

ITEM 6.   SELECTED FINANCIAL DATA

The following selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis" and our historical
financial statements and the notes thereto included elsewhere herein.  Our
selected historical financial data as of December 31, 2002, 2001, 2000,
1999 and 1998, and for the years ended December 31, 2002, 2001, 2000, 1999
and 1998 have been derived from our financial statements which have been
audited by BDO Seidman LLP, independent public accountants.

Statement of Operations Data:
<TABLE>
<CAPTION>

                                                    Year Ended December 31,
                                                    -----------------------
                                    2002         2001        2000         1999         1998
                                 ----------- -----------  -----------  ----------  -----------
                                    (Amounts in thousands, except share and per share data)

<S>                               <C>        <C>          <C>          <C>         <C>
Revenues                          $    3,535 $     5,911  $     7,567  $    3,635  $     2,124
Costs of revenues                      1,680       2,613        1,044       2,800          344
                                  ---------- -----------  -----------  ----------  -----------
Gross profit                           1,855       3,298        6,523         835        1,780
                                  ---------- -----------  -----------  ----------  -----------

Operating expenses:
  Selling and marketing                2,235       5,989        5,750       3,279        1,440
  General and administrative           2,801       4,561        4,653       2,265        1,119
  Research and development             2,831       4,134        4,060       2,467          840
  Asset impairment loss                  914       4,501            -           -            -
  Restructuring charge                 1,943           -            -           -            -
                                  ---------- -----------  -----------  ----------  -----------
    Total operating expenses          10,724      19,185       14,463       8,011        3,399
                                  ---------- -----------  -----------  ----------  -----------

Loss from operations                  (8,869)    (15,887)      (7,940)     (7,176)      (1,619)
Other income (expense) net                77         410       (1,434)        144         (529)
                                  ---------- -----------  -----------  ----------  -----------
Loss before provision
  for income taxes                    (8,792)    (15,477)      (9,374)     (7,032)      (2,148)
Provision for income taxes                 -           1            1           1            1
                                  ---------- -----------  -----------  ----------  -----------
Net loss                          $   (8,792)$   (15,478) $    (9,375) $   (7,033) $    (2,149)
                                  ========== ===========  ===========  ==========  ===========

Basic and diluted loss per share  $    (0.50)$     (0.97) $     (0.65) $    (0.71) $    (0.57)
                                  ========== ===========  ===========  ==========  ===========

Weighted average common
  shares outstanding              17,465,099  16,007,763   14,396,435   9,950,120    3,770,863
                                  ========== ===========  ===========  ==========  ===========
</TABLE>
<TABLE>
<CAPTION>

Balance Sheet Data:
                                                      As of December 31,
                                     2002        2001        2000         1999         1998
                                  ---------- -----------  -----------  ----------  -----------
                                                    (Amounts in thousands)

<S>                               <C>        <C>          <C>          <C>         <C>
Working capital                   $      668 $     6,173  $    12,879  $   11,701  $     1,193
Total assets                           4,550      12,986       21,040      15,224        6,545
Total liabilities                      1,820       1,660        1,983         842        1,203
Shareholders' equity                   2,730      11,326       19,057      14,382        5,342
</TABLE>

                                       9
<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 provided under Part II, ITEM 8 of 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 effect 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 Form 10-K, which describes the
significant accounting polices and methods used in the preparation of the
Consolidated Financial Statements.  Estimates are used for, but not
limited to, the accounting for the allowance for doubtful accounts, the
impairment of intangible assets, contingencies and other special charges
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.

The recognition of revenue is based on our assessment of the facts and
circumstances of the sales transaction.  In general, software license
revenues are recognized when a non-cancelable license agreement has been
signed and the customer acknowledges an unconditional obligation to pay,
the software product has been delivered, there are no uncertainties
surrounding product acceptance, the fees are fixed or determinable and
collection is considered probable.  Delivery is considered to have
occurred when title and risk of loss have been transferred to the
customer, which generally occurs when the media containing the licensed
programs is provided to a common carrier.  In the case of electronic
delivery, delivery occurs when the customer is given access to the
licensed programs.  If collectibility is not considered probable, revenue
is recognized when the fee is collected.

Under Statement of Position (SOP) 97-2, "Software Revenue Recognition,"
revenue earned on software arrangements involving multiple elements is
allocated to each element arrangement based on the relative fair values of
the elements.  If there is no evidence of the fair value for all the
elements in a multiple element arrangement, all revenue from the
arrangement is deferred until such evidence exists or until all elements
are delivered.  In accordance with SOP 97-2, we recognize revenue from the
sale of software licenses when all the following conditions are met:

Persuasive evidence of an arrangement exists;
o     Delivery has occurred or services have been rendered;
o     Our price to the customer is fixed or determinable; and
o     Collectibility is reasonably assured

The allowance for doubtful accounts is based on our assessment 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 our historical experience,
our estimates of the recoverability of amounts due us could be adversely
affected.

                                       10
<PAGE>

We perform impairment tests on our intangible assets on an annual basis
and between annual tests in certain circumstances.  In response to changes
in industry and market conditions, we may strategically realign our
resources and consider restructuring, disposing of, or otherwise exiting
businesses, which could result in an impairment of intangible assets.
During 2002 and 2001 we recorded significant write-downs to the value of
our intangible assets as a result of the impairment tests performed.  A
significant consideration impacting the results of the impairment tests
was the substantial delay in getting our most recently released
Windows-based product upgrade, GoGlobal for Windows, into marketable
condition.  The engineering delays we encountered resulted in a
substantial decrease in our revenue in both 2002 and 2001, which
ultimately caused us to consume almost all of our cash balances in our
day-to-day operations.

We are subject to the possibility of various loss contingencies arising in
the ordinary course of business.  We consider the likelihood of the loss
or impairment of an asset or the incurrence of a liability as well as our
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.  We regularly
evaluate current information available to us to determine whether such
accruals should be adjusted.

Results of Operations

The first table that follows sets forth our income statement data for the
years ended December 31, 2002 and 2001, respectively, and calculates the
dollar change and percentage change from 2001 to 2002 in the respective
line items.  The second table that follows presents the same information
for the years ended December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                              2002          2002
                                    Year Ended               Dollars     Percentage
                                    December 31,          Over (Under)   Over (Under)
                               ----------------------     --------------------------
(Dollars in 000s)                2002          2001           2001           2001
-----------------              -------       --------        -------       --------
<S>                            <C>           <C>             <C>           <C>
Revenue                        $ 3,535       $  5,911        $(2,376)        (40.20%)
Cost of sales                    1,680          2,613           (933)        (35.71)
                               -------       --------        -------       ---------
Gross Profit                     1,855          3,298         (1,443)        (43.75)
                               -------       --------        -------       ---------
Operating expenses:
Selling & marketing              2,235          5,989         (3,754)        (62.68)
General & administrative         2,801          4,561         (1,760)        (38.59)
Research & development           2,831          4,134         (1,303)        (31.52)
Fixed assets impairment            914          4,501         (3,587)        (79.69)
Restructuring charge             1,943              -          1,943            n/a
                               -------       --------        -------       --------
Total operating expenses        10,724         19,185         (8,461)        (44.10)
                               -------       --------        -------       --------
Loss from operations            (8,869)       (15,887)         7,018          44.17
                               -------       --------        -------       --------
Other income (expense):
Interest & other income            153            516           (363)        (70.35)
Interest & other expense           (76)           (65)           (11)        (16.92)
Loss on long-term investment-
  China joint venture                -           (41)             41         100.00
                               -------       -------        --------       --------
Total other income (expense)        77            410           (333)        (81.22)
                               -------       --------       --------       --------
Loss before tax                 (8,792)       (15,477)         6,685          43.19
Tax provision                        -              1             (1)        100.00
                               -------       --------       --------       --------
Net loss                       $(8,792)     $(15,478)       $  6,686         43.20%
                               =======      =========        =======       ========
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                2001         2001
                                         Year Ended           Dollars     Percentage
                                         December 31,       Over (Under)  Over (Under)
(Dollars in 000s)                     2001         2000         2000          2000
-----------------                   --------    ---------    ----------    ---------
<S>                                 <C>         <C>          <C>           <C>
Revenue                             $  5,911    $   5,067    $      844        16.67%
Revenue - related party                    -        2,500        (2,500)     (100.00)
                                    --------    ---------    ----------    ---------
Total revenue                          5,911        7,567        (1,656)      (21.88)
                                    --------    ---------    ----------    ---------
Cost of sales                          2,613          946         1,667       176.22
Cost of sales - related party              -           98           (98)     (100.00)
                                    --------    ---------    ----------    ---------
Total cost of sales                    2,613        1,044         1,569       150.29
                                    --------    ---------    ----------    ---------
Gross profit                           3,298        6,523        (3,225)      (49.44)
                                    --------    ---------    ----------    ---------
Operating expenses:
Selling & marketing                    5,989        5,750           239         4.16
General & administrative               4,561        4,653           (92)       (1.98)
Research & development                 4,134        4,060            74         1.82
Fixed assets impairment                4,501            -         4,501          n/a
                                    --------    ---------    ----------    ---------
Total operating expenses              19,185       14,463         4,722        32.65
                                    --------    ---------    ----------    ---------
Loss from operations                 (15,887)      (7,940)       (7,947)     (100.09)
                                    --------    ---------    ----------    ---------
Other income (expense)
Interest & other income                  516        1,181          (665)      (56.31)
Interest & other expense                 (65)          (7)          (58)     (828.57)
Loss on long-term investment -
   China joint venture                   (41)      (2,608)        2,567        98.43
                                    --------    ---------    ----------    ---------
Total other income (expense)             410       (1,434)        1,844      (128.59)
                                    --------    ---------    ----------    ----------
Loss before tax                      (15,477)      (9,374)       (6,103)      (65.11)
Tax provision                              1            1             -            -
                                    --------    ---------     ---------    ---------
Net loss                            $(15,478)   $  (9,375)    $  (6,103)      (65.11%)
                                    =========   =========     =========    ==========
</TABLE>

Revenues.  Our revenues are primarily derived from product and patent
technology licensing fees.  Other sources of revenues include service fees
from maintenance contracts and training fees.  The decrease in revenues in
2002 from 2001 was due primarily to a decrease in third party licensing
fees derived from licensing our patented technology.  During 2002 we
recognized $0 in third party patent licensing revenue as compared to
approximately $2,200,000 during 2001.  We believe that the market for
licensing our patented technology is very limited, accordingly, we wrote
the carrying value of our patent down to $0 as part of our year end 2001
asset impairment write off.  We do not anticipate recognizing licensing
revenue from our patent in the future.

The decrease in revenues in 2001 from 2000 was primarily due to a decrease
in revenues - related party.  During 2001 we recognized $0 in revenue from
our joint venture in China, as compared with $2,500,000 during 2000.  The
joint venture began operations in 2000 and was dissolved during 2001.  The
joint venture was not able to satisfactorily penetrate the Chinese market
on a timetable agreeable to our joint venture partner or us.
Consequently, through mutual agreement, it was dissolved during 2001.  We
do not anticipate reactivating the joint venture in the near future as we
have formed alternative strategic relationships to penetrate the Chinese
as well as other Asian markets.

The decrease in revenues in 2001 from 2000 related to the decrease in
revenues - related party was offset by an increase in revenues from third
parties.  The increase in revenues from third parties was due primarily to
an increase in third party licensing fees derived from licensing our
patented technology.  We recognized approximately $2,200,000 in revenue
from licensing our patented technology in 2001 as compared with
approximately $1,500,000 in 2000.

We recognized approximately $1,629,500 of revenue from licensing fees for
our Windows-based products during 2002 as compared with approximately
$1,767,200 during 2001.  The decrease was due to the overall decrease in
corporate spending pervasive throughout the economy as well as the delay
in releasing the latest upgraded version of our Windows product, GoGlobal
for Windows, until the fourth quarter of 2002.  We expect 2003 revenue
from our Windows-based products to exceed 2001 levels.  The amount of
revenue we recognized from our Windows-based products in 2001 decreased
from 2000, to approximately $1,767,200 as compared with $2,330,300,
respectively.  Approximately 60% of the 2001 Windows-based revenue was
recognized in the first half of the year.  The downward trend in revenue
that began during the second half of 2001 carried over into 2002 as the
overall economy continued to be weak.

We recognized approximately $1,457,200 of revenue from licensing our
Unix-based products during 2002 as compared with approximately $1,630,400
during 2001 and approximately $993,600 in 2000.  The decrease in 2002 from
2001 was principally due to the continued weakness in the overall
economy.  The increase in 2001 from 2000 was primarily due to the


                                       12
<PAGE>

competitiveness of Bridges for Unix/Linux, which was released in early
2000, and Go-Global:UX, which was released in early 2001.  We expect 2003
Unix sales to approximate 2001 levels.

Our licensing fees have been realized from a limited number of customers.
As such, revenues from these products have varied from quarter to quarter
reflecting the aggregate demand of the individual customers.  We expect
our quarterly licensing fees to continue to vary during 2003.

Revenues from our three largest customers for 2002 represented
approximately 26.9%, 23.4% and 12.5%, respectively, of total revenues.
These three customers' December 31, 2002 year-end accounts receivable
balances represented approximately 0.0%, 0.0%, and 15.1% of reported net
accounts receivable.  By March 21, 2003, we had collected the substantial
majority of the only outstanding balance from December 31, 2002.  Revenues
from our three largest customers in 2001 represented approximately 27.1%,
26.3% and 10.1%, respectively, of total revenues.  These three customers'
December 31, 2001 year-end accounts receivable balances represented
approximately 0.0%, 43.5% and 0.0% of reported net accounts receivable.
All amounts outstanding from these three customers as of December 31, 2001
were collected during February 2002.

We anticipate that many of our customers will enter into, and periodically
renew, maintenance contracts to ensure continued product updates and
support.  Service revenue was approximately $448,300, or 12.7% of revenue
in 2002, $313,100, or 4.8% of revenue in 2001, and $242,600, or 3.2% of
revenue in 2000.  We expect service revenue in 2003 to approximate 2002
levels.

Cost of Revenues.  Cost of revenues consists primarily of the amortization
of acquired technology and the amortization of capitalized technology
developed in-house.  Research and development costs for new product
development, after technological feasibility is established, are recorded
as "capitalized software" on our balance sheet and subsequently amortized
as cost of revenues over the shorter of three years or the remaining
estimated life of the products.

The decrease in cost of revenues in 2002 from 2001 was due to the
write-downs of the estimated remaining carrying values of our intangible
assets that were recorded during the third quarter of 2002 as well as the
fourth quarter of 2001.  The increase in cost of revenues in 2001 from
2000 was due to the significant acquisition of technology from Menta
Corporation, which we began amortizing during the third quarter of 2000,
and the capitalization of costs associated with technology developed
in-house during 2000.  The costs of both the Menta technology and the
capitalized technology developed in-house were only amortized for a
portion of 2000 whereas each was amortized for a full year during 2001.

As more fully explained below under Asset Impairment Loss, during
September 2002 and December 2001, we wrote down the historical cost of
various components of our purchased technology assets as part of our
periodic assessments of asset impairment.  The amortization of our
technology assets, as explained above, is recorded as a component of Cost
of Revenues.  As a result of these write-downs, we expect that our cost of
revenues will be significantly lower in 2003 as compared with 2002.  Cost
of revenues were approximately 47.5%, 44.2% and 20.6% of total revenues
for the years 2002, 2001 and 2000, respectively.

Sales and Marketing Expenses.  Sales and marketing expenses primarily
consist of salaries, sales commissions, non-cash compensation, travel
expenses, trade show related activities and promotional costs.

The decrease in selling and marketing expense in 2002 from 2001 was due to
the cumulative impact of the workforce reductions we have undergone over
the last two years.  We began 2002 with 24 employees in selling and
marketing.  By the end of the first quarter we had reduced this number to
14 and by the end of the second quarter, we had reduced this number to
nine.  These reductions were a direct result of our effort to reduce our
operating costs to a bare minimum, in order to preserve our cash balances,
while achieving our operating objectives.

The increase in selling and marketing expense in 2001 from 2000 was due an
increase in selling and marketing headcount over the first half of 2001,
which was partially offset be a decrease over the second half of 2001.  We
began 2001 with 23 employees in selling and marketing.  By the end of the
first quarter of 2001 we had increased this number to 27, by the end of
the second quarter we had increased this number to 31, and by the end of
the third quarter, we had reduced this number to 24.  Headcount remained
at 24 through the remainder of 2001.  We had increased headcount
throughout the first half of 2001 in anticipation of the release of
upgraded versions of our Windows product, GoGlobal: XP, as well as our
Unix product, GoGlobal:UX.  The ultimate release of GoGlobal:XP was
delayed and when finally released, it was not received as warmly in the
marketplace as originally anticipated.  The release of GoGlobal:UX was
accomplished in a timely manner and was well received, however; the Unix
market is estimated to be much smaller than the Windows market.  As a
result, we began reducing the selling and marketing workforce to more
sustainable levels, while work continued on the next version of the
Windows product.

                                       13
<PAGE>

We expect that cumulative sales and marketing expenses in 2003 will be
significantly lower than those incurred during 2002.  We expect to focus
our selling and marketing efforts in the Windows market during 2003.  We
have based this decision on the positive feedback we received from
customers and others during the beta testing phase of our latest Windows
release, GoGlobal for Windows.  Sales and marketing expenses were
approximately 63.2 %, 101.3% and 113.5% of total revenues for the years
2002, 2001 and 2000, respectively.

General and Administrative Expenses.  General and administrative expenses
primarily consist of salaries, legal and professional services, non-cash
compensation and bad debts expense.

The decrease in general and administrative expense in 2002 from 2001, as
well as in 2001 from 2000 were primarily due to the cumulative impact of
the workforce reductions that we have undergone over the last two years.
We began 2002 with nine general and administrative employees.  By the end
of the second quarter we had reduced this number to six and by the end of
the third quarter we had reduced this number to four.  We began 2001 with
15 general and administrative employees.  We reduced this number to 14 by
the end of the first quarter, to 13 by the end of the second quarter, to
nine by the end of the third quarter and maintained nine general and
administrative employees from the end of the third quarter until year end
2001.  In addition to these workforce reductions, various general and
administrative employees began reduced workweek schedules.  All of these
reductions were a direct result of our effort to reduce our operating
costs to a bare minimum, in order to preserve our cash balances, while
achieving our operating objectives.

Changes to our allowance for doubtful accounts are also charged to bad
debts expense within general and administrative expense.  The ending
balance of our allowance for doubtful accounts as of December 31, 2002,
2001 and 2000, was $50,300, $350,000 and $100,000, respectively.  Bad
debts expense is more fully explained at Schedule II - Valuation and
Qualifying Accounts.

We anticipate that cumulative general and administrative expense in 2003
will be significantly lower than those incurred during 2002.  General and
administrative expenses were approximately 79.2%, 77.2% and 91.8% of 2002,
2001 and 2000 total revenues, respectively.

Research and Development Expenses.  Research and development expenses
consist primarily of salaries and benefits paid to software engineers,
payments to contract programmers, and facility expenses related to our
remotely located engineering offices.

The decrease in research and development expense in 2002 from 2001 was
primarily due to the cumulative impact of the workforce reductions that we
have undergone over the last two years.  We began 2002 with 28 research
and development employees.  At the end of the third quarter, we reduced
this number to 15.  We began 2001 with approximately 35 employees in
research and development.  This number increased slightly, to
approximately 40, immediately prior to the work force reduction in
September 2001, and then was reduced to 28 as a result of the workforce
reduction.

We believe that a significant level of investment for research and
development is required to remain competitive.  Accordingly, during 2003
we will continue working towards our goal of full maturity for our
products through a combination of in-house and contracted research and
development efforts.  Research and development expense was approximately
80.1%, 70.0% and 80.1% of total revenues for the years 2002, 2001 and
2000, respectively.

Asset Impairment Loss.  During the third quarter of 2002 and the fourth
quarter of 2001, we recorded impairment charges of $914,000 and
$4,500,900, respectively, against several of our intangible assets,
primarily capitalized technology assets.  We review our long-lived assets
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.  Examples of
events or changes in circumstances that indicate that the recoverability
of the carrying amount of an asset should be addressed, including 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 an asset; and
o     Current and historical operating or cash flow losses.

We believed that a review of our current carrying values to evaluate
whether the value of any of our long-lived technology assets had been
impaired was warranted, due to several factors, including:

o     The challenges we faced in bringing our GoGlobal for Windows and
      GoGlobal:XP products to maturity;
o     The continued pervasive weakness in the world-wide economy;


                                       14
<PAGE>

o     How we were incorporating and planning to incorporate each element of
      the purchased technologies into our legacy technology;
o     Our continued and historical operating and cash flow losses.

Based on studies of the various factors affecting asset impairment, as
outlined above, the following asset impairment charges were determined to
be necessary in order to reduce the carrying value of these assets to our
current estimate of the present value of the expected future cash flows to
be derived from these assets:

<TABLE>
<CAPTION>
                            Net Book Value           Impairment        Net Book Value
                           Before Impairment         Write Down       After Impairment
                          ------------------      ----------------    ----------------
 2001 Impairment
<S>                       <C>                     <C>                 <C>
 Purchased Technology     $        7,283,300      $      4,150,900    $      3,132,400
 Patent                              350,000               350,000                   -
                          ------------------      ----------------    ----------------
 Totals                   $        7,633,300      $      4,500,900    $      3,132,400
                          ==================      ================    ================

 2002 Impairment (1)
 Purchased Technology     $        2,145,200      $        775,100    $      1,370,100
 Capitalized Software                277,800               138,900             138,900
                          ------------------      ----------------    ----------------
 Totals                   $        2,423,000     $         914,000    $      1,509,000
                          ==================     =================    ================
</TABLE>

(1) The net book value after impairment for the 2002 impairment is shown
    as of September 30, 2002.  There was no impairment charge recorded in the
    fourth quarter 2002.

The asset impairment charges were approximately 25.9%, 76.2% and 0.0% of
total revenues for the years 2002, 2001 and 2000, respectively.

Restructuring charge.  During 2002 we closed our Morgan Hill, California
and Bellevue Washington office locations as part of our strategic
initiatives to reduce operating costs.  In conjunction with these
closures, we reduced headcount in all of our operating departments and
wrote off the costs of leasehold improvements and other assets that were
abandoned.  A summary of the restructuring charges recorded during 2002 is
as follows:

<TABLE>
<CAPTION>
                                                                                        Ending Balance
                                                         Cash            Non-cash        Restructuring
                                  Restructuring        Payments           Charges       Charge Accrual
Category                            Charge            During 2002       During 2002    December 31, 2002
--------                         -------------      --------------    -------------    -----------------
Quarter ended
March 31, 2002:
<S>                              <C>                <C>               <C>              <C>
  Employee severance             $     752,100      $    (752,100)    $          -     $               -
  Fixed assets abandonment             558,100                  -        (558,100)                     -
  Minimum lease payments               180,200           (122,300)               -                57,900
                                 -------------      --------------    -------------    -----------------
  Subtotal                           1,490,400           (874,400)        (558,100)               57,900
                                 -------------      --------------    -------------    -----------------
Quarter ended
September 30, 2002:
  Employee severance                    78,900            (78,900)               -                     -
  Fixed assets abandonment              99,700                  -          (99,700)                    -
  Minimum lease payments               263,600            (39,300)               -               224,300
  Other                                 10,200            (10,200)               -                     -
                                 -------------      --------------    -------------    -----------------
  Subtotal                             452,400           (128,400)         (99,700)              224,300
                                 -------------      --------------    -------------    -----------------
Totals                           $   1,942,800      $  (1,002,800)    $   (657,800)    $         282,200
                                 =============      ==============    =============    =================
</TABLE>

Included in employee severance are the payments made to our co-founders,
which aggregated $500,000, upon their departure in January 2002.  The
costs associated with fixed assets abandonment are comprised of the
estimated net book value of the assets, including furniture and fixtures,
equipment and leasehold improvements, which were written off upon the
closure of the two facilities, as the assets were deemed to not have any
future utility.  No material disposal costs were incurred to dispose of
any of the assets.  The minimum lease payments were an estimate of the
cash payments that we would need to disburse in order to fulfill our
obligations under each of the respective leases until we could find a
suitable sublessee.

                                       15
<PAGE>

As of March 21, 2003, we had not found a sublessee for our Bellevue,
Washington office and had entered into negotiations with out landlord on a
lease buyout.  Additionally, approximately six employees are now
temporarily using our Morgan Hill facility until we can find a suitable
sublessee, or negotiate a lease buyout with our landlord, whichever occurs
first.  The restructuring charge was approximately 55.0% of total revenues
for 2002.  No restructuring charges were recorded in either 2001 or 2000.

Interest and Other Income.  During 2002, 2001 and 2000, the primary
component of interest and other income was interest income derived on
excess cash.  Our excess cash was held in relatively low-risk, highly
liquid investments, such as U.S. Government obligations, bank and/or
corporate obligations rated "A" or higher by independent rating agencies,
such as Standard and Poors, or interest bearing money market accounts with
minimum net assets greater than or equal to one billion U.S. dollars.  The
decrease in interest income in 2002 over 2001, and 2001 over 2000, was due
to lower average cash and cash equivalents, and available-for-sale
securities balances in 2002 as compared with 2001, and 2001 as compared
with 2000.  Additionally, the decreases were reflective of a decrease in
our portfolio's average yield rate, which reflected the market's response
to the continued cuts made in interest rates by the Federal Reserve.

The lower average cash and cash equivalents and available-for-sale
securities balances in 2002 as compared with 2001 is primarily due to the
outflow of approximately $4,606,000, resulting from our operations.  The
lower average cash and cash equivalents and available-for-sale securities
balances in 2001 as compared with 2000 is primarily due to the outflow of
approximately $6,752,700, resulting from our operations.  Interest and
other income was approximately 4.3%, 8.7% and 23.3% of total revenues for
the years 2002, 2001 and 2000, respectively.

Interest and Other Expense.  Interest and other expense consists primarily
of the cost of accrued interest on bonds and other investments that we
purchased with our excess cash.  The increase in 2002 from 2001, and in
2001 from 2000 was primarily due to faster rollovers of investments, as we
required more readily available cash to finance our operations.  The
faster rollovers were reflective of the shorter time frame that we could
keep the excess cash invested.  These increases were partially offset by
cumulative marked-to-market gains recorded on the value of the securities
held in our investment account.

Interest and other expense was approximately 2.2%, 1.1% and 0.1% of total
revenues for the years 2002, 2001 and 2000, respectively.

Provision for Income Taxes.  At December 31, 2002, we had approximately
$36,625,000 in federal net operating loss carryforwards.  The federal net
operating loss carryforwards will expire at various times from 2007
through 2020, if not utilized.  In addition, the Tax Reform Act of 1986
contains provisions that may limit the net operating loss carryforwards
available for use in any given period upon the occurrence of various
events, including a significant change in ownership interests.  In 1998,
we experienced a "change of ownership" as defined by the provisions of the
Tax Reform Act of 1986.  As such, our utilization of our net operating
loss carryforwards through 1998 will be limited to approximately $400,000
per year until such carryforwards are fully utilized or expire.

Liquidity and Capital Resources

We have suffered recurring losses and have absorbed significant cash in
our operating activities.  Further, we have limited alternative sources of
financing available to fund any additional cash required for our
operations or otherwise.  These matters raise substantial doubt about our
ability to continue as a going concern.  Our plan in regard to these
matters is described below.  The consolidated financial statements
included in this report do not include any adjustments that might result
from the outcome of this uncertainty.

We are continuing to operate the business on a cash basis while looking at
ways to reduce cash expenses.  We are simultaneously looking at ways to
improve or maintain our revenue stream.  Additionally, we continue to
review potential merger opportunities as they present themselves to us and
at such time as a merger might make financial sense and add value for our
shareholders, we will pursue that merger opportunity.

In June 2001, we issued 2,500,000 shares of our common stock to Menta
Software in connection with the acquisition of software technology, which
was assigned a historical cost of $6,500,000 based on the then fair market
value of our common stock.  In an extemporaneous transaction in June of
2001, we licensed our patented technology to Menta Software in a
transaction valued at $2,000,000, of which they paid us $600,000 in cash.
In December 2002, we accepted 933,333 shares of our common stock from
Menta Software in full settlement of the outstanding $1,400,000 due us
from them under the terms of the June 2001 patented technology licensing
agreement.

                                       16
<PAGE>

During 2002 we used $4,606,000 of cash from our operating activities that
related primarily to our net loss of $8,792,500, offset by non-cash items
including depreciation and amortization totaling $2,085,800, the non-cash
portion of the restructuring charge of $657,800, and the asset impairment
loss of $914,000.  Operating cash inflow was generated by an aggregate
increase in cash flow from operating assets and liabilities of $828,200,
which was partially offset by a $299,700 decrease in our provision for
doubtful accounts.

Depreciation and amortization primarily relates to our purchased
technology, as outlined above in Costs of Revenues.  Also included in
depreciation and amortization is the amortization of deferred compensation
expense related to non-cash compensation paid to various third parties,
primarily consultants, who provide us services.  This amortization is
recorded as sales and marketing expense or general and administrative
expense, depending on the nature of the underlying services provided.

The cash inflow generated from aggregated operating assets and liabilities
was primarily due to the collection of a significant portion of our year
end 2001 accounts receivable balance during 2002, including accounts that
had previously been deemed uncollectible.

We are exploring all options available to aggressively reduce costs, to
increase revenues and to find alternative sources of financing our
operations.  Such options will likely include further work force
reductions, exiting of facilities, or the disposition of certain
operations.  If we were unsuccessful in obtaining any of these strategic
goals, we would face a severe constraint on our ability to sustain
operations in a manner that would create future growth and viability, and
we may need to cease operations entirely.

During 2002 we generated $2,628,200 of cash from our investing activities
that included $3,776,300 from the sale of investments, partially offset by
the purchase of investments, totaling $768,300, the capitalization of
software development costs, totaling $298,500 and other capital
expenditures totaling $82,900.

Throughout the year, we buy various high-grade securities for investment
purposes with our excess cash.  The securities are usually held until
maturity, at which time any excess cash is used to reinvest in new
securities.  We treat the investment as cash used in investing activities
and the maturity as cash provided by investing activities.  The
capitalized software development costs were incurred in the development of
GoGlobal for Windows, our latest Windows-based product upgrade.  Other
capital expenditures incurred during 2002 consisted primarily of computer
equipment for our research and development team.

During 2002, we used $20,200 of cash in our financing activities that were
primarily related to the repayment of the note payable that was
outstanding as of year end 2001, partially offset by the proceeds from the
issuance of stock through our employee stock purchase program.

As of December 31, 2002, cash and cash equivalents were approximately
$1,958,200.  We anticipate that our cash and cash equivalents as of
December 31, 2002, together with anticipated revenue from operations, cost
savings from the 2002 restructuring and asset impairment charges, and
future potential cost reduction measures, will be sufficient to meet our
working capital and capital expenditure needs through the next twelve
months.  We have no material capital expenditure commitments for the next
twelve months.  However, due to the inherent uncertainties associated with
predicting future operations, there can be no assurances that such
anticipated revenue and cumulative operational savings will ultimately be
realized during the next twelve months.

During 2002 we implemented several strategic initiatives intended to
control operating expenses and capital expenditures.  These initiatives
have been successful in reducing our operating expenses.  As explained
above, our 2002 operating expenses are significantly lower in every
category, as compared with 2001.

The following table discloses our contractual commitments for future
periods (See footnote 12):

        Year ending
        December 31,
           2003      $  548,900
           2004         395,400
           2005         328,100
           2006          55,000
           2007               -
                     ----------
                     $1,327,400

                                       17
<PAGE>

New Accounting Pronouncements

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

SFAS 142 requires, among other things, that we no longer amortize
goodwill, but instead test goodwill for impairment at least annually.  In
addition, SFAS 142 requires that we identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess
the useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life.  An
intangible asset with an indefinite useful life should be tested for
impairment in accordance with the guidance in SFAS 142.  SFAS 142 is
required to be applied in fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized at that date,
regardless of when those assets were initially recognized.  SFAS 142
requires us to complete a transitional goodwill impairment test six months
from the date of adoption.  We are also required to reassess the useful
lives of other intangible assets within the first interim quarter after
adoption of SFAS 142.

Pursuant to SFAS 142, during 2002 we conducted periodic tests for asset
impairment and recorded an asset impairment charge accordingly (See Note 6
to the Consolidated Financial Statements).  As of December 31, 2002 we do
not have any intangible assets with indefinite useful lives, nor do we have
any goodwill on our balance sheet.  Our intangible assets are comprised of
acquired technology and technology developed in-house, both of which have
been incorporated into one or more of our products.  As such, all of our
intangible assets are being amortized to cost of revenue over the estimated
useful lives of the underlying products, or three years, whichever is
shorter.

In June 2001, the FASB finalized Statements No. 143, "Accounting for Asset
Retirement Obligations," (SFAS 143) which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.  SFAS 143 is
effective for financial statements issued for fiscal years beginning after
June 15, 2002.  There was no material result on our results of operations
and financial position from the adoption of SFAS 143.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit Activities," (SFAS 146) which addresses financial
accounting and reporting for costs associated with exit activities and
supersedes Emerging Issues Task Force (EITF) statement 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)."
SFAS 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized and measured initially at fair value only
when the liability is incurred.  This differs from EITF 94-3, which
required that a liability for an exit cost be recognized at the date of an
entity's commitment to an exit plan.  However, under SFAS 146, a liability
for one-time termination benefits is recognized when an entity has
committed to a plan of termination, provided certain other requirements
have been met.  In addition, under SFAS 146, a liability for costs to
terminate a contract is not recognized until the contract has been
terminated, and a liability for costs that will continue to be incurred
under a contract's remaining term without economic benefit to the entity
is recognized when the entity ceases to use the right conveyed by the
contract.  SFAS 146 is effective for exit or disposal activities initiated
after December 31, 2002.  We will adopt the provisions of SFAS 146 for
restructuring activities initiated after December 31, 2002.  It is
expected that the adoption of SFAS 146 will not have a material impact on
our consolidated results of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
including Indirect Guarantees of Indebtedness of Others," which clarifies
disclosure and recognition/measurement requirements related to certain
guarantees.  The disclosure requirements are effective for financial
statements issued after December 31, 2002 and the recognition/measurement
requirements are effective on a prospective basis for guarantees issued or
modified after December 31, 2002.  The application of the requirements of
FIN 45 did not have a material impact on our financial position or results
of operations.

In December 2002, the FASB issued Statement No. 148, " Accounting for
Stock-Based Compensation - Transition and Disclosure." (SFAS 148)  This
Statement amends SFAS 123, "Stock-Based Compensation," (SFAS 123) to
provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation.  Additionally, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results.  SFAS 148 is effective for financial statements for fiscal years


                                       18
<PAGE>

ended after December 31, 2002.  In compliance with SFAS 148 we have
elected to continue to follow the intrinsic value method in accounting for
our stock-based employee compensation arrangement as defined by Accounting
Principles Board Opinion No. 25, (APB 25) "Accounting for Stock Issued to
Employee," (See Critical Accounting Policies, below.)

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 document 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.

   We Have A History Of Operating Losses And Expect These Losses To
   Continue, At Least For The Near Future.

We have experienced significant losses since we began operations.  We
expect to continue to incur losses for the foreseeable future.  We
incurred net losses of approximately $8,792,500, $15,478,000 and
$9,374,700 for the years ended December 31, 2002, 2001 and 2000,
respectively.  We expect our expenses to decrease as we have implemented
several substantial cost cutting measures, however, we cannot give
assurance that revenues will increase sufficiently to exceed costs.  If
revenues grow more slowly than anticipated, or if operating expenses
exceed expectations, we may not become profitable.  Even if we become
profitable, we may be unable to sustain profitability.

   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 on an 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     The degree of success of our recently introduced products;
o     Variations in the timing of and shipments of our products;
o     Variations in the size of orders by our customers;
o     Increased competition;
o     The proportion of overall revenues derived from different sales
      channels such as distributors, original equipment manufacturers
      (OEMs) and others;
o     Changes in our pricing policies or those of our competitors;
o     The financial stability of major customers;
o     New product introductions or enhancements by us or by competitors;
o     Delays in the introduction of products or product enhancements by us or
      by competitors;
o     The degree of success of new products;
o     Any changes in operating expenses; and
o     General economic conditions and economic conditions specific to the
      software industry.

In addition, our royalty and license revenues are impacted by fluctuations
in OEM licensing activity from quarter to quarter, which may involve
one-time royalty payments and license fees.  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 affected.

   We May Not Be Successful In Attracting And Retaining Key Management Or
   Other Personnel.

Our success and business strategy is also dependent in large part on our
ability to attract and retain key management and other personnel.  We
currently need to attract a permanent Chief Executive Officer and we
cannot assure you we will be able to attract or retain such a person.  The
loss of the services of one or more members of our management group and
other key personnel, including our interim Chief Executive Officer, may
have a material adverse effect on our business.

                                       19
<PAGE>

   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.

   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,
and 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.

   Because Our Market Is New And Emerging, We Cannot Accurately Predict
   Its Future Growth Rate Or Its Ultimate Size, And Widespread Acceptance
   Of Our Products Is Uncertain.

The market for business infrastructure software, which enables programs to
be accessed and run with minimal memory resident on a desktop computer or
remote user device, still is emerging, and we cannot assure you that our
products will receive broad-based market acceptance or that this market
will continue to grow.  Additionally, we cannot accurately predict our
market's future growth rate or its ultimate size.  Even if business
infrastructure software products achieve market acceptance and the market
for these products grows, we cannot assure you that we will have a
significant share of that market.  If we fail to achieve a significant
share of the business infrastructure software market, or if such market
does not grow as anticipated, our business, results of operations and
financial condition may be adversely affected.

   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 primarily are sold through several distribution channels.  An
integral part of our strategy is to strengthen our relationships with
resellers such as OEMs, systems integrators, value-added resellers,
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.

   Our Failure To Manage Expanding Operations Could Adversely Affect Us.

To exploit the emerging business infrastructure software market, we must
rapidly execute our business strategy and further develop products while
managing our anticipated growth in operations.  To manage our growth, we
must:

                                       20
<PAGE>

o     Continue to implement and improve our operational, financial and
      management information systems;
o     Hire and train additional qualified personnel;
o     Continue to expand and upgrade core technologies; and
o     Effectively manage multiple relationships with various licensees,
      consultants, strategic and technological partners and other third
      parties.

We cannot assure you that our systems, procedures, personnel or controls
will be adequate to support our operations or that management will be able
to execute strategies rapidly enough to exploit the market for our
products and services.  Our failure to manage growth effectively or
execute strategies rapidly could have a material adverse effect on our
business, financial condition and results of operations.

   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 assure you 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 increasing financial resources in research and development
to remain competitive 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 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            Index to Consolidated Financial Statements
                                                                           Page
Report of Independent Certified Public Accountants........................... 22
Consolidated Balance Sheets as of December 31, 2002 and
2001..........................................................................23
Consolidated Statements of Operations and Comprehensive Loss for
  the Years Ended December 31, 2002, 2001, and 2000...........................24
Consolidated Statements of Shareholders' Equity for the Years Ended
  December 31, 2002, 2001 and 2000............................................25
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 2002, 2001 and 2000............................................26
Summary of Significant Accounting Policies....................................27
Notes to Consolidated Financial Statements....................................30
Report of Independent Certified Public Accountants on
  Supplemental Schedule.......................................................40
Supplemental Schedule II......................................................41

                                       21
<PAGE>


Report of Independent Certified Public Accountants

To the Board of Directors and Shareholders of GraphOn Corporation

We have audited the accompanying consolidated balance sheets of GraphOn
Corporation and Subsidiary (the Company) as of December 31, 2002 and 2001
and the related consolidated statements of operations and comprehensive
loss, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2002.  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 auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes 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 Subsidiary as of December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business.  As discussed
in Note 1 to the financial statements, the Company has suffered recurring
losses and has absorbed significant cash in its operating activities.
Further, the Company has limited alternative sources of financing
available to fund any additional cash required for its operations or
otherwise.  These matters raise substantial doubt about the ability of the
Company to continue as a going concern.  Management's plan in regard to
these matters is also described in Note 1.  The accompanying financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.





/s/ BDO Seidman, LLP
San Jose, California
February 7, 2003



                                       22
<PAGE>


<TABLE>
<CAPTION>

                                       GraphOn Corporation
                                   Consolidated Balance Sheets

December 31,                                                      2002                  2001
------------                                               ----------------      ----------------

CURRENT ASSETS
<S>                                                        <C>                   <C>
     Cash and cash equivalents                             $      1,958,200      $      3,952,600
     Available-for-sale securities                                        -             3,008,000
     Accounts receivable, net of allowance
      for doubtful accounts of $50,300 and $350,000                 337,900               620,400
     Prepaid expenses and other current assets                      192,000               251,300
                                                           ----------------      ----------------
TOTAL CURRENT ASSETS                                              2,488,100             7,832,300
                                                           ----------------      ----------------
Property and equipment, net                                         421,900             1,436,100
Purchased technology, net                                         1,163,100             3,132,400
Capitalized software, net                                           406,500               513,400
Other Assets                                                         70,000                71,600
                                                           ----------------      ----------------
TOTAL ASSETS                                               $      4,549,600      $     12,985,800
                                                           ================      ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                      $        228,700      $        319,900
     Accrued liabilities                                            795,100               735,500
     Notes payable                                                        -                26,600
     Deferred revenue                                               796,100               577,800
                                                           ----------------      ----------------
TOTAL CURRENT LIABILITIES                                         1,819,900             1,659,800
                                                           ----------------      ----------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
     Preferred stock, $0.01 par value, 5,000,000 shares
       authorized, no shares issued and outstanding                       -                     -
     Common stock, $0.0001 par value, 45,000,000 shares
        authorized, 16,580,719 and 17,288,332 shares
        issued and outstanding                                        1,700                 1,700
     Additional paid-in capital                                  45,982,500            45,925,900
     Deferred compensation                                                -              (193,800)
     Notes receivable                                               (50,300)                    -
     Accumulated other comprehensive gain                            (2,400)                1,500
     Accumulated deficit                                        (43,201,800)          (34,409,300)
                                                           ----------------      ----------------
TOTAL SHAREHOLDERS' EQUITY                                        2,729,700            11,326,000
                                                           ----------------      ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $      4,549,600      $     12,985,800
                                                           ================      ================
<FN>

See accompanying summary of significant accounting policies and notes to consolidated financial statements
</FN>
</TABLE>


                                       23
<PAGE>


<TABLE>
<CAPTION>
                                              GraphOn Corporation
                         Consolidated Statements of Operations and Comprehensive Loss

                                                                  Years Ended December 31,
                                                   -------------------------------------------------
                                                         2002             2001             2000
                                                   ---------------  ---------------  ---------------
<S>                                                <C>              <C>              <C>
   Revenue                                         $     3,535,000  $     5,910,700  $     5,066,500
   Revenue - related party                                       -                -        2,500,000
                                                   ---------------  ---------------  ---------------
     Total Revenue                                       3,535,000        5,910,700        7,566,500
                                                   ---------------  ---------------  ---------------
   Cost of revenue                                       1,679,900        2,612,600          945,900
   Cost of revenue - related party                               -                -           97,800
                                                   ---------------  ---------------  ---------------
     Total Cost of Revenue                               1,679,900        2,612,600        1,043,700
                                                   ---------------  ---------------  ---------------
     Gross Profit                                        1,855,100        3,298,100        6,522,800
                                                   ---------------  ---------------  ---------------
Operating Expenses
   Selling and marketing                                 2,235,100        5,989,400        5,749,900
   General and administrative                            2,801,000        4,560,800        4,653,300
   Research and development                              2,831,300        4,134,400        4,060,000
   Asset impairment loss                                   914,000        4,500,900                -
   Restructuring charges                                 1,942,800                -                -
                                                   ---------------  ---------------  ---------------
     Total Operating Expenses                           10,724,200       19,185,500       14,463,200
                                                   ---------------  ---------------  ---------------
Loss From Operations                                    (8,869,100)     (15,887,400)      (7,940,400)
                                                   ---------------  ---------------  ---------------

Other Income (Expense)
   Interest and other income                               152,500          516,100        1,181,400
   Interest and other expense                              (75,900)         (64,800)          (6,800)
   Loss on long-term investment -
     China joint venture                                         -          (41,100)      (2,608,100)
                                                   ---------------  ---------------  ---------------
     Total Other Income (Expense)                           76,600          410,200       (1,433,500)
                                                   ---------------  ---------------  ---------------
Loss Before Provision for Income Taxes                  (8,792,500)     (15,477,200)      (9,373,900)
Provision for Income Taxes                                       -              800              800
                                                   ---------------  ---------------  ---------------
Net Loss                                                (8,792,500)     (15,478,000)      (9,374,700)
Other Comprehensive Income (Loss), net of tax
   Unrealized holding gain (loss)
     on investment                                          (7,500)             200             6,900
   Foreign currency translation adjustment                   3,600             (600)             (600)
                                                   ---------------  ---------------   ---------------
Comprehensive Loss                                 $    (8,796,400) $   (15,478,400)  $    (9,368,400)
                                                   ===============  ===============   ===============
Basic and Diluted Loss per Common Share            $         (0.50) $         (0.97)  $         (0.65)
                                                   ===============  ===============   ===============
Weighted Average Common Share Outstanding               17,465,099       16,007,763        14,396,435
                                                   ===============  ===============   ===============
<FN>

See accompanying summary of significant accounting policies and notes to consolidated financial statements
</FN>
</TABLE>





                                       24
<PAGE>

<TABLE>
<CAPTION>

                                            GraphOn Corporation
                              Consolidated Statements of Shareholders' Equity


                                                                                              Accumulated
                                                          Additional                             Other
                                          Common Stock      Paid-in     Deferred      Notes   Comprehensive Accumulated
                                         Shares   Amount    Capital   Compensation  Receivable Income(Loss)   Deficit      Totals
                                      ---------- ------- ------------ ------------  ---------- ----------- ------------ -----------
<S>                                   <C>        <C>     <C>          <C>           <C>        <C>         <C>          <C>
Balances, December 31, 1999           12,342,322 $ 1,200 $ 25,413,500 $ (1,472,100) $      -   $   (4,400) $ (9,556,600)$14,381,600
Issuance of common stock due to the
 exercise of warrants, options and
 underwriter units, net of costs
 of $177,800                           2,328,853     300   12,262,700            -         -             -            -  12,263,000
Deferred compensation related to
 stock options                                 -       -    1,439,800   (1,439,800)        -             -            -           -
Amortization of deferred
 compensation                                  -       -            -    1,780,300         -             -            -   1,780,300
Change in market value of
 available-for-sale securities                 -       -            -            -         -         6,900            -       6,900
Foreign currency translation
 adjustment                                    -       -            -            -         -          (600)           -        (600)
Net Loss                                       -       -            -            -         -             -   (9,374,700) (9,374,700)
                                      ---------- ------- ------------ ------------  ---------- ----------- ------------ -----------
Balances, December 31, 2000           14,671,175   1,500   39,116,000   (1,131,600)        -         1,900  (18,931,300) 19,056,500

Issuance of common stock due to the
 exercise of options                      52,199       -       37,000            -         -             -            -      37,000
Proceeds from employee stock
 purchase                                 64,958       -      152,900            -         -             -            -     152,900
Issuance of common stock to
 acquire technology                    2,500,000     200    6,499,800            -         -             -            -   6,500,000
Deferred compensation related to
 stock options and warrants                    -       -      120,200     (120,200)        -             -            -           -
Amortization of deferred
 compensation                                  -       -            -    1,058,000         -             -            -   1,058,000
Change in market value of
 available-for-sale securities                 -       -            -            -         -           200            -         200
Foreign currency translation
 adjustment                                    -       -            -            -         -          (600)           -        (600)
Net Loss                                       -       -            -            -         -             -  (15,478,000)(15,478,000)
                                      ---------- ------- ------------ ------------  ---------- ----------- ------------ -----------
Balances, December 31, 2001           17,288,332   1,700   45,925,900     (193,800)        -         1,500  (34,409,300) 11,326,000

Issuance of common stock due to the
 exercise of options (See Note 8)        200,000     200       50,000            -     (50,000)          -            -         200
Proceeds from employee stock
 purchase                                 25,720       -        6,400            -         -             -            -       6,400
Noncash redemption of common
 stock                                  (933,333)   (200)         200            -         -             -            -           -
Amortization of deferred
 compensation                                  -       -            -      193,800         -             -            -     193,800
Accrued interest receivable                    -       -            -            -        (300)          -            -        (300)
Change in market value of
 available-for-sale securities                 -       -            -            -         -        (7,500)           -      (7,500)
Foreign currency translation                   -       -            -            -         -         3,600            -       3,600
Net Loss                                       -       -            -            -         -             -   (8,792,500) (8,792,500)
                                      ---------- ------- ------------ ------------  ---------- ----------- ------------ -----------
Balances, December 31, 2002           16,580,719 $ 1,700 $ 45,982,500 $          -  $  (50,300)$    (2,400)$(43,201,800)$ 2,729,700
                                     =========== ======= ============ ============  ========== =========== ============ ===========
<FN>

See accompanying summary of significant accounting policies and notes to consolidated financial statements
</FN>
</TABLE>



                                       25
<PAGE>

<TABLE>
<CAPTION>

                                            GraphOn Corporation
                                   Consolidated Statement of Cash Flows

Years ended December 31,                         2002            2001            2000
------------------------                    ------------    ------------    -------------
Cash Flows From Operating Activities:
<S>                                         <C>             <C>             <C>
  Net loss                                  $ (8,792,500)   $(15,478,000)   $  (9,374,700)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
  Depreciation and amortization                1,892,000       3,051,800        1,423,900
  Restructuring charge                           657,800               -                -
  Asset impairment loss                          914,000       4,500,900                -
  Loss on disposal of fixed assets                   400         110,000            6,900
  Amortization of deferred compensation          193,800       1,058,000        1,780,300
  Provision for doubtful accounts               (299,700)        250,000           75,000
  Loss on long-term investment                         -          41,100        2,608,100
  Changes in operating assets
   and liabilities:
    Accounts receivable                          582,200        (121,200)         846,400
    Prepaid expenses and other assets             59,300          94,500           18,500
    Accounts payable                             (91,200)        (41,600)         101,800
    Accrued expenses                              59,600        (647,000)         918,500
    Deferred revenue                             218,300         428,800           30,000
                                            ------------     -----------    -------------
Net cash used in operating activities:        (4,606,000)     (6,752,700)      (1,565,300)
                                            ------------     -----------    -------------
Cash Flows From Investing Activities:
  Purchase of available-for-sale securities     (768,300)     (4,779,900)      (7,020,400)
  Proceeds from sale of available-
    for-sale securities                        3,776,300       7,338,900        3,481,000
  Capitalization of software
    development costs                           (298,500)       (396,500)        (343,400)
  Capital expenditures                           (82,900)       (596,500)      (1,262,000)
  Purchase of technology                               -               -       (2,406,300)
  Other assets                                     1,600         (37,200)         (17,700)
  Investment in related party                          -        (103,700)      (3,500,000)
  Proceeds from dissolution of joint
    venture - related party                            -         954,500                -
                                            ------------    ------------    -------------
Net cash provided by (used in) investing
  activities:                                  2,628,200       2,379,600      (11,068,800)
                                            ------------    ------------    -------------
Cash Flows From Financing Activities:
  Proceeds from note payable                           -         131,200          156,200
  Repayment of note payable                      (26,600)       (194,900)         (65,900)
  Net proceeds from issuance of
    common stock                                   6,400         189,900       12,263,000
  Purchase and retirement of common stock              -               -                -
                                            ------------    ------------    -------------
Net cash provided by financing activities:       (20,200)        126,200       12,353,300
                                            ------------    ------------    -------------
Effect of exchange rate fluctuations on
    cash and cash equivalents                      3,600            (600)            (600)
Net Decrease in Cash
  and Cash Equivalents                        (1,994,400)     (4,247,500)        (281,400)
Cash and Cash Equivalents:
    Beginning of year                          3,952,600       8,200,100        8,481,500
                                            ------------    ------------    -------------
    End of year                             $  1,958,200    $  3,952,600    $   8,200,100
                                            ============    ============    =============
<FN>

See accompanying summary of significant accounting policies and notes to consolidated
financial statements
</FN>
</TABLE>


                                       26
<PAGE>

GraphOn Corporation
Summary of Significant Accounting Policies

The Company.  GraphOn Corporation (the Company) was incorporated in the
state of Delaware in July of 1999.  The Company's headquarters are
currently in Morgan Hill, California.  The Company develops, markets,
sells and supports business infrastructure software that empowers a
diverse range of desktop computing devices (desktops) to access
server-based Windows, Unix and Linux applications from any location, over
network or Internet connections.  The Company has a wholly-owned inactive
subsidiary in the United Kingdom.

Basis of Presentation and Use of Estimates.  In the Company's opinion, the
consolidated financial statements presented herein include all necessary
adjustments, consisting of only normal recurring adjustments, except for
the restructuring and asset impairment charges, as discussed below, to
fairly state the Company's financial position, results of operations and
cash flows for the periods indicated.  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.  Actual results could differ materially from those
estimates.

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

Marketable Securities.  Under Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," securities are classified and accounted for as follows:

o     Debt securities that the enterprise has the positive intent and ability
      to hold to maturity are classified as held-to-maturity securities and
      reported at amortized cost.
o     Debt and equity securities that are bought and held principally for the
      purpose of selling them in the near term are classified as trading
      securities and reported at fair value, with unrealized gains and
      losses included in earnings.
o     Debt and equity securities not classified as either held-to-maturity
      securities or trading securities are classified as available-for-sale
      securities and reported at fair value, with unrealized gains and
      losses excluded from earnings and reported in a separate component of
      shareholders' equity.

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.

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.

Capitalized Software Costs.  Under the criteria set forth in Statement of
Financial Accounting Standards No. 86 (SFAS 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 based on either estimated
current and future revenue for each product or straight-line amortization
over the shorter of three years or the remaining estimated life of the
product, whichever produces the higher expense for the period.  As of
December 31, 2002 and 2001, capitalized costs aggregated $1,198,100 and
$1,038,600, with accumulated amortization of $791,600 and $525,200,
respectively.

Revenue.  The recognition of revenue is based on our assessment of the facts
and circumstances of the sales transaction.  In general, software license
revenues are recognized when a non-cancelable license agreement has been
signed and the customer acknowledges an unconditional obligation to pay, the
software product has been delivered, there are no uncertainties surrounding
product acceptance, the fees are fixed or determinable and collection is
considered probable.  Delivery is considered to have occurred when title and
risk of loss have been transferred to the customer, which generally occurs
when the media containing the licensed programs is provided to a common
carrier.  In the case of electronic delivery, delivery occurs when the
customer is given access to the licensed programs.  If collectibility is not
considered probable, revenue is recognized when the fee is collected.

Under Statement of Position (SOP) 97-2, Software Revenue Recognition,
revenue earned on software arrangements involving multiple elements is
allocated to each element arrangement based on the relative fair values of
the elements.  If there is no evidence of the fair value for all the
elements in a multiple element arrangement, all revenue from the
arrangement is deferred until such evidence exists or until all elements
are delivered.  In accordance with SOP 97-2, the Company recognizes


                                       27
<PAGE>

revenue from the sale of software licenses when all the following
conditions are met:

o     Persuasive evidence of an arrangement exists,
o     Delivery has occurred, or services have been rendered, and no
      significant obligations remain,
o     The price to the buyer is fixed or determinable, and
o     Collectibility is reasonably assured.

Revenue from the sale of maintenance agreements is recognized ratably over
the term of the agreement.  OEM license revenues are generally recognized
as deliveries are made or at the completion of contractual billing
milestones.  Deferred revenue, resulting from maintenance and license
agreements, and from transactions that have yet to meet all of the
above-listed conditions, aggregated $796,100 and $577,800 as of December
31, 2002 and 2001, respectively.

Advertising Costs.  The cost of advertising is expensed as incurred.
Advertising costs for the years ended December 31, 2002, 2001, and 2000
were approximately $114,300, $94,900 and $353,500, respectively.
Advertising consists primarily of various printed material.

Income Taxes.  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 Company used the following
methods and assumptions in estimating the fair value disclosures for
financial instruments:

    Cash and cash equivalents:  The carrying amount reported on the
    balance sheet for cash and cash equivalents approximates fair value.

    Available-for-sale securities:  The fair values of available-for-sale
    securities are based on quoted market prices.

    Short-term debt:  The fair value of short-term debt is estimated based
    on current interest notes available to the Company for debt
    instruments with similar terms and maturities.

As of December 31, 2002 and 2001, the fair values of the Company's
financial instruments approximate their historical carrying amounts.

Investments in Joint Venture:  Investments in the China joint venture were
accounted for by using the equity method under which the Company's share
of earnings (loss) from the joint venture was reflected as income (loss)
against the investment account.  No dividends were ever declared by the
joint venture.

The Company's investment of $3,500,000 in the China joint venture was
reduced by the Company's proportionate share of the joint venture's
operating loss.  On August 27, 2001, the China joint venture was
dissolved.  Accordingly, as of December 31, 2001, the carrying value of
the joint venture was $0.

Long-Lived Assets.  Long-lived assets are assessed for possible impairment
whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable, or whenever the Company has committed to a
plan to dispose of the assets.  Such assets are carried at the lower of
book value or fair value as estimated by the Company based on appraisals,
current market value, comparable sales value, and undiscounted future cash
flows as appropriate.  Assets to be held and used affected by such
impairment loss are depreciated or amortized at their new carrying amount
over the remaining estimated life; assets to be sold or otherwise disposed
of are not subject to further depreciation or amortization.

Restructuring Charge.  In accordance with EITF 94-3, charges related to
the restructuring of the Company's operations are estimated, accrued and
expensed in the period in which the Board of Directors has committed to
and approved a restructuring plan.  The restructuring accrual is reduced
in any period in which one or more of the planned restructuring activities
occur.  The restructuring accrual is adjusted for material differences
between the actual cost of a restructuring activity and the estimated cost
of the restructuring activity in the period the actual cost becomes known.

                                       28
<PAGE>

Stock-Based Incentive Programs.  The Company accounts for its stock-based
incentive programs using the intrinsic value method, as prescribed by APB
25 and interpretations thereof (collectively APB 25).  Accordingly, the
Company records deferred compensation expense costs related to its
employee stock options when the market price of the underlying stock
exceeds the exercise price of each option on the date of grant.  The
Company records and measures deferred compensation for stock options
granted to non-employees, other than members of the board, at their fair
value.  Deferred compensation is expensed on a straight-line basis over
the vesting period of the related stock option for options issued to
employees.  Deferred compensation is expensed on a straight-line basis
over the shorter of the vesting period of the related stock option or the
contractual period of service for option grants to non-employees.  The
Company did not grant any stock options at exercise prices below the fair
market value of the Company's common stock on the grant date during the
years ended December 31, 2002, 2001 and 2000.

As of December 31, 2001, the Company's deferred compensation balance
primarily related to stock options granted in 2001, 2000 and 1999 to
non-employees.  The accompanying statement of operations reflects
stock-based compensation expense of $193,800, $1,058,000 and $1,780,300
for the years ended December 31, 2002, 2001 and 2000, respectively.

An alternative to the intrinsic value method of accounting for stock-based
compensation is the fair value approach prescribed by SFAS 123, as amended
by SFAS 148 (hereinafter collectively referred to as SFAS 123).  If the
Company followed the fair value approach, the Company would be required to
record deferred compensation based on the fair value of the stock option
at the date of grant.  The fair value of the stock option must be computed
using an option-pricing model, such as the Black-Scholes option valuation
method, at the date of grant.  The deferred compensation calculated under
the fair value method would then be amortized over the respective vesting
period of the stock option.

Under SFAS No. 123, the Company's pro forma net loss and the basic and
diluted net loss per common share would have been adjusted to the pro
forma amounts below.

<TABLE>
<CAPTION>
                               2002            2001          2000
                            ------------   -------------  ------------
Net loss:
<S>                       <C>              <C>            <C>
   As reported            $  (8,792,500)   $(15,478,000)  $ (9,374,700)

   Add: stock-based
   compensation expense
   included in reported
   net loss, net of
   related tax effects          193,800       1,058,000      1,780,300

   Deduct: total stock-
   based compensation
   expense determined
   under fair value-
   based method for all
   awards, net of related
   tax effects               (1,725,200)     (3,752,000)    (4,841,300)
                          -------------    ------------   ------------
   Pro forma              $ (10,323,900)   $(18,172,000)  $(12,435,700)

Basic and diluted loss
   per share
   As reported            $       (0.50)   $     (0.97)   $     (0.65)
   Pro forma              $       (0.59)   $     (1.05)   $     (0.86)
</TABLE>

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 available 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.  Potentially dilutive
securities have been excluded from the computation, as their effect is
antidilutive.  For the years ended December 31, 2002, 2001 and 2000,
2,584,307, 3,765,232, and 2,528,461 shares, respectively, of common stock
equivalents were excluded from the computation of diluted earnings per
share since their effect would be antidilutive.

Comprehensive Income.  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 unrealizable gain/loss of available-for-sale
securities.  The individual components of comprehensive income (loss) are
reflected in the statements of shareholders' equity.  As of December 31,
2002, 2001 and 2000, accumulated other comprehensive loss was comprised of
foreign currency translation loss and the cumulative change in the market
value of the available-for-sale securities.

Adoption of New Accounting Pronouncements.  In June 2001, the FASB
finalized SFAS 141 and SFAS 142  SFAS 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interests
method of accounting for business combinations initiated after June 30,
2001.  SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets
meet certain criteria.  SFAS 141 applies to all business combinations
initiated after June 30, 2001 and for purchase business combinations
completed on or after July 1, 2001.  It also requires, upon adoption of
SFAS 142 that the Company reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS 141.

                                       29
<PAGE>

SFAS 142 requires, among other things, that the Company no longer amortize
goodwill, but instead test goodwill for impairment at least annually.  In
addition, SFAS 142 requires that the Company identify reporting units for
the purposes of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized intangible assets,
and cease amortization of intangible assets with an indefinite useful
life.  An intangible asset with an indefinite useful life should be tested
for impairment in accordance with the guidance in SFAS 142.  SFAS 142 is
required to be applied in fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized at that date,
regardless of when those assets were initially recognized.  SFAS 142
requires the Company to complete a transitional goodwill impairment test
six months from the date of adoption.  The Company is also required to
reassess the useful lives of other intangible assets within the first
interim quarter after adoption of SFAS 142.

Pursuant to SFAS 142, during 2002 the Company conducted periodic tests for
asset impairment and recorded an asset impairment charge accordingly (See
Note 6 to the Consolidated Financial Statements).  As of December 31, 2002
the Company does not have any intangible assets with indefinite useful
lives, nor does the Company have any goodwill on its balance sheet.
Intangible assets are comprised of acquired technology and technology
developed in-house, both of which have been incorporated into one or more
products.  As such, all intangible assets are being amortized to cost of
revenues over the estimated useful lives of the underlying products, or
three years, whichever is shorter.

In June 2001, the FASB finalized SFAS 143 which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs.
SFAS 143 is effective for financial statements issued for fiscal years
beginning after June 15, 2002.  There was no material result on results of
operations and financial position from the adoption of SFAS 143.

In June 2002, the FASB issued SFAS 146, which addresses financial
accounting and reporting for costs associated with exit activities and
supersedes EITF 94-3.  SFAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value only when the liability is incurred.  This differs
from EITF 94-3, which required that a liability for an exit cost be
recognized at the date of an entity's commitment to an exit plan.
However, under SFAS 146, a liability for one-time termination benefits is
recognized when an entity has committed to a plan of termination, provided
certain other requirements have been met.  In addition, under SFAS 146, a
liability for costs to terminate a contract is not recognized until the
contract has been terminated, and a liability for costs that will continue
to be incurred under a contract's remaining term without economic benefit
to the entity is recognized when the entity ceases to use the right
conveyed by the contract.  SFAS 146 is effective for exit or disposal
activities initiated after December 31, 2002.  The Company will adopt the
provisions of SFAS 146 for any restructuring activities initiated after
December 31, 2002.  It is expected that the adoption of SFAS 146 will not
have a material impact on the Company's consolidated results of operations
or financial position.

In November 2002, the FASB issued FIN 45, which clarifies disclosure and
recognition/measurement requirements related to certain guarantees.  The
disclosure requirements are effective for financial statements issued
after December 31, 2002 and the recognition/measurement requirements are
effective on a prospective basis for guarantees issued or modified after
December 31, 2002.  The application of the requirements of FIN 45 did not
have a material impact on financial position or results of operations.

In December 2002, the FASB issued SFAS 148.  This Statement amends SFAS
123 to provide alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation.  Additionally, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results.  SFAS 148 is effective for financial statements for fiscal years
ended after December 31, 2002.  In compliance with SFAS 148 the Company
has elected to continue to follow the intrinsic value method in accounting
for its stock-based employee compensation arrangement as defined by APB 25
and has made the applicable disclosure in Note 8 to the financial
statements.

Reclassifications.  Certain amounts in the prior years' financial
statements have been reclassified to conform to the current year's
presentation.

Notes to Consolidated Financial Statements

1.  Future Prospects.

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business.  The Company
has suffered recurring losses and has absorbed significant cash in its
operating activities.  Further, the Company has limited alternative


                                       30
<PAGE>

sources of financing available to fund any additional cash required for
its operations or otherwise.  These matters raise substantial doubt about
the ability of the Company to continue as a going concern.  The
accompanying financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

 The Company continues to operate the business on a cash basis while
looking at ways to reduce cash expenses.  The Company is simultaneously
looking at ways to improve or maintain its revenue stream.  Additionally,
the Company continues to review potential merger opportunities as they
present themselves and at such time as a merger might make financial sense
and add value for the shareholders, the Company will pursue that merger
opportunity.

On March 19, 2003, the Company received a Nasdaq Staff Determination
letter indicating that it fails to comply with the $1.00 minimum closing
bid price per share requirement for continued listing as set forth in
Marketplace Rule 4310(c)(4) and that its securities are, therefore,
subject to delisting from the Nasdaq SmallCap Market.  The Company has
requested a hearing before a Nasdaq Listing Qualifications Panel to review
the Staff Determination.  There can be no assurance that the Panel will
grant the Company's request for continued listing on the Nasdaq SmallCap
Market.

2.  Available-For-Sale Securities.

As of December 31, 2002 and 2001 available-for-sale securities consisted
of investments in corporate debt securities (bonds) with an aggregate par
value of $0 and $2,950,000, respectively.  As of December 31, 2001, the
bonds bore interest in the range of 1.98% to 6.44% and matured at various
times in 2002.  In 2002, 2001, and 2000, proceeds from the sale of
securities were $3,776,300, $7,338,900 and $3,481,000, respectively.  In
all years, proceeds from the sale of securities were used either to fund
operations or to reinvest in additional securities.  Realized gains and
losses were not material in 2002, 2001 and 2000.  A summary of
available-for-sale securities follows:

<TABLE>
<CAPTION>

      December 31,              2002            2001
      ------------         ------------   ------------
      <S>                  <C>            <C>
      Cost of securities   $          -   $  3,007,800
      Unrealized gain                 -            200
                           ------------   ------------
                           $          -   $  3,008,000
                           ============   ============
</TABLE>

The Company chose to maintain a highly-liquid cash position throughout
2002.  Accordingly, as available-for-sale securities matured, the proceeds
were transferred from available-for-sale securities to cash and cash
equivalents in order to finance the day-to-day operations of the Company.
The Company anticipates maintaining a highly-liquid cash position during
2003.

3.  Property and Equipment.

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
      December 31,                        2002          2001
      ------------                    ------------  ------------
      <S>                             <C>           <C>
      Equipment                       $    976,100  $  1,430,700
      Furniture and fixtures               266,200       644,700
      Leasehold improvements                30,400       337,300
                                      ------------  ------------
                                         1,272,700     2,412,700
      Less: accumulated depreciation
         and amortization                  850,800       976,600
                                      ------------  ------------
                                      $    421,900  $  1,436,100
                                      ============  ============
</TABLE>

The Company substantially reduced its operations during 2002, including
the removal from service and write-off of significant portions of its
property and equipment as part of its restructuring charges. (See Note
7).  The Company may record further write downs to its assets in 2003 as
it continues to aggressively implement cost cutting measures.

4.  Purchased Technology.

Purchased technology consisted of the following:

<TABLE>
<CAPTION>
        December 31,                         2002             2001
        ------------                    --------------  ---------------
        <S>                             <C>             <C>
        Purchased technology            $    7,915,700  $     8,690,800
        Less: accumulated amortization       6,752,600        5,558,400
                                        --------------  ---------------
                                        $    1,163,100  $     3,132,400
                                        ==============  ===============
</TABLE>

                                       31
<PAGE>

Pursuant to SFAS No. 142, during 2002 we conducted periodic tests for asset
impairment and recorded an asset impairment charge accordingly (See Note
6).  As of December 31, 2002 we do not have any intangible assets with
indefinite useful lives, nor do we have any goodwill on our balance sheet.
Intangible assets are comprised of acquired technology and technology
developed in-house, both of which have been incorporated into one or more
products.  As such, all intangible assets are being amortized to cost of
revenues over the estimated useful lives of the underlying products, or
three years, whichever is shorter.

5.  Accrued Liabilities.

Accrued liabilities consisted of the following:

<TABLE>
<CAPTION>
        December 31,                          2002             2001
        ------------                     --------------  ---------------
        <S>                              <C>             <C>
        Payroll and related liabilities  $      304,500  $       392,300
        Professional  fees                      123,800          220,100
        Restructuring charge (Note 7)           282,200                -
        Accrued taxes                            18,700           31,900
        Other                                    65,900           91,200
                                         --------------  ---------------
                                         $      795,100  $       735,500
                                         ==============  ===============
</TABLE>

6.  Asset Impairment Charge.

During the third quarter of 2002 and the fourth quarter of 2001, the
Company recorded impairment charges of $914,000 and $4,500,900,
respectively, against several intangible assets, primarily capitalized
technology assets.  We review our long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.  Examples of events or changes
in circumstances that indicate that the recoverability of the carrying
amount of an asset should be addressed, including 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 an asset; and
o     Current and historical operating or cash flow losses.

The Company believed that a review of the current carrying values to
evaluate whether the value of any of its long-lived technology assets had
been impaired was warranted, due to several factors, including:

o     The challenges faced in bringing GoGlobal for Windows and GoGlobal:XP
      products to maturity;
o     The continued pervasive weakness in the world-wide economy;
o     How the Company was incorporating and planning to incorporate each
      element of the purchased technologies into its legacy technology; and
o     The Company's continued and historical operating and cash flow losses.

Based on studies of the various factors affecting asset impairment, as
outlined above, the following asset impairment charges were determined to
be necessary in order to reduce the carrying value of these assets to the
Company's current estimate of the present value of the expected future
cash flows to be derived from these assets:

<TABLE>
<CAPTION>
                          Net Book Value        Impairment      Net Book Value
                         Before Impairment      Write Down     After Impairment
                        ------------------    --------------   ---------------
 2001 Impairment:
 ----------------
 <S>                    <C>                   <C>              <C>
 Purchased Technology   $        7,283,300    $    4,150,900   $     3,132,400
 Patent                            350,000           350,000                 -
                        ------------------    --------------   ---------------
 Totals                 $        7,633,300    $    4,500,900   $     3,132,400
                        ==================    ==============   ===============

 2002 Impairment: (1)
 -------------------
 Purchased Technology   $        2,145,200    $      775,100   $     1,370,100
 Capitalized Software              277,800           138,900           138,900
                        ------------------    --------------   ---------------
 Totals                 $        2,423,000    $      914,000   $     1,509,000
                        ==================    ==============   ===============
</TABLE>

                                       32
<PAGE>

(1) The net book value after impairment for the 2002 impairment is shown
as of September 30, 2002.  There was no impairment charge recorded in the
fourth quarter 2002.

The asset impairment charges were approximately 25.9%, 76.2% and 0.0% of
total revenues for the years 2002, 2001 and 2000, respectively.

7.  Restructuring Charge.

During 2002 the Company closed its Morgan Hill, California and Bellevue
Washington office locations as part of its strategic initiatives to reduce
operating costs.  In conjunction with these closures, headcount was
reduced in all operating departments and the costs of leasehold
improvements and other assets that were abandoned were written off.  A
summary of the restructuring charges recorded during 2002 is as follows:

<TABLE>
<CAPTION>
                                                                          Ending Balance
                                                 Cash        Non-cash     Restructuring
                            Restructuring      Payments       Charges     Charge Accrual
  Category                      Charge        During 2002   During 2002  December 31, 2002
  --------                   -----------     -----------   ------------  ----------------
  Quarter ended
  March 31, 2002:
<S>                          <C>             <C>            <C>          <C>
    Employee severance       $   752,100     $  (752,100)  $         -   $              -
    Fixed assets abandonment     558,100               -      (558,100)                 -
    Minimum lease payments       180,200        (122,300)            -             57,900
                             -----------     -----------   -----------   ----------------
    Subtotal                   1,490,400        (874,400)     (558,100)            57,900
                             -----------     -----------   -----------   ----------------
  Quarter ended
  September 30, 2002:
    Employee severance            78,900         (78,900)            -                  -
    Fixed assets abandonment      99,700               -       (99,700)                 -
    Minimum lease payments       263,600         (39,300)            -            224,300
    Other                         10,200         (10,200)            -                  -
                             -----------     -----------   -----------   ----------------
    Subtotal                     452,400        (128,400)      (99,700)           224,300
                             -----------     -----------   -----------   ----------------
Totals                       $ 1,942,800     $(1,002,800)   $ (657,800)  $        282,200
                             ===========    ============   ===========   ================
</TABLE>

Included in employee severance are the payments made to the Company's
co-founders, which aggregated $500,000, upon their departure in January
2002.  The costs associated with fixed assets abandonment are comprised of
the estimated net book value of the assets, including furniture and
fixtures, equipment and leasehold improvements, which were written off
upon the closure of the two facilities, as the assets were deemed to not
have any future utility.  No material disposal costs were incurred to
dispose of any of the assets.  The minimum lease payments were an estimate
of the cash payments that would need to be disbursed in order to fulfill
obligations under each of the respective leases until suitable sublessees
could be found.

As of March 21, 2003, the Company had not yet found a sublessee for the
Bellevue, Washington office and had entered into negotiations with its
landlord on a lease buyout.  Additionally, approximately six employees
were temporarily using the Morgan Hill facility until a suitable sublessee
could be found, or a negotiated lease buyout could be made with the
landlord, whichever were to occur first.  The restructuring charges were
approximately 55.0% of total revenues in 2002.  No restructuring charges
were recorded in either 2001 or 2000.

8.  Stockholders' Equity.

Common Stock  In the first quarter of 2000, the Company issued 2,273,156
shares of common stock in connection with the exercise of warrants and
underwriter units, resulting in net cash proceeds of $12,171,400.  During
the remainder of 2000, the Company issued 55,697 shares of the Company
common stock in connection with the exercise of warrants, options, and
underwriter units resulting in net cash proceeds of $91,600.

During 2000 and 1999, the Company issued options to various third parties
in exchange for services provided.  Using the Black-Scholes option-pricing
model, the Company capitalized $1,439,800 and $1,216,100 during 2000 and
1999, respectively, as deferred compensation, using the following
assumptions: dividend yield of 0, expected volatility of 70%, risk-free
interest rate of 5.25%, and expected life of five years.  Such deferred
compensation is amortized over the life of the underlying service
agreements.  The Company amortized $1,780,300 and $310,000, in 2000 and
1999, respectively, of deferred compensation related to options that had
been issued to various third parties.

                                       33
<PAGE>

During 2001, the Company issued options and warrants to various third
parties in exchange for services provided.  Using the Black-Scholes
option-pricing model, the Company capitalized $120,200 as deferred
compensation.  The following assumptions were used for pricing the options
and warrants: dividend yield of 0, expected volatility of 60%, risk-free
interest rate of 5.25%, and expected life of one year.  During 2002 and
2001, the Company amortized $23,900 and $96,300, respectively, of deferred
compensation related to the issuance of the options and warrants to these
various third parties.

In June 2001, the Company issued 2,500,000 shares of common stock to Menta
Software in connection with the acquisition of software technology, which
was assigned a historical cost of $6,500,000 based on the then fair market
value of the common stock.  In an extemporaneous transaction in June of
2001, the Company licensed its patented technology to Menta Software in a
transaction valued at $2,000,000, of which $600,000 was paid in cash.  In
December 2002, the Company accepted 933,333 shares of its common stock
from Menta Software in full settlement of the outstanding $1,400,000 due
the Company from Menta Software under the terms of the June 2001 patented
technology licensing agreement.  Also during 2001, the Company issued
64,958 shares of common stock to employees in connection with the Employee
Stock Purchase Plan resulting in net cash proceeds of $152,900.

During 2002 the Company issued 100,000 shares of common stock to each of two
directors who exercised options granted under the Company's 1998 Stock
Option/Stock Issuance Plan.  Each of the two directors exercising the
options issued a $25,000 promissory note to the Company to pay for the
options.  The notes are for a term of three years, are due on or before
March 5, 2005 and bear semi-annual interest at 2.67% per annum, which is
equal to the applicable federal short-term interest rate in effect at the
time the promissory notes were signed.  In the event of default, the Company
can take back all 100,000 of the shares of common stock so issued.
Additionally, during 2002, the Company issued 25,720 shares of common stock
to employees in connection with the Employee Stock Purchase Plan, resulting
in net cash proceeds of $6,400.

Stock Purchase Warrants.  As of December 31, 2002, the following common
stock warrants were issued and outstanding:

<TABLE>
<CAPTION>
                         Shares subject   Exercise   Expiration
Issued with respect to:      to Warrant      Price         Date
-----------------------      ----------      -----         ----
<S>                             <C>       <C>             <C>
Convertible notes                83,640   $   1.79        01/06
Private placement               373,049   $   1.79        01/06
Financing                           676   $   1.79        12/03
IPO Directors Class A           111,667   $   5.50        07/04
IPO Directors Class B           180,000   $   7.50        07/04
Consulting Services             300,000   $   5.25        12/03
Consulting Services              50,000   $   1.00        04/04
Consulting Services             125,000   $   1.75        04/04
</TABLE>

1996 Stock Option Plan.  In May 1996 the Company's 1996 Stock Option Plan
(the 96 Plan) was adopted by the board and  approved by the stockholders.
The 96 Plan is restricted to employees, including officers, and to
non-employee directors.  As of December 31, 2002 the Company is authorized
to issue up to 187,500 shares of its common stock in accordance with the
terms of the 96 Plan.

Under the 96 Plan the exercise price of options granted is either at least
equal to 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, 2002, options to purchase 100,759 shares of common stock were
outstanding, 538 options had been exercised and options to purchase 86,203
shares of common stock remained available for further issuance under the
96 Plan.

1998 Stock Option/Stock Issuance Plan.  In June 1998 the Company's 1998
Stock Option/Stock Issuance Plan (the 98 Plan) was adopted by the board
and approved by the stockholders.  Pursuant to the terms on the 98 Plan,
options or stock may be granted and issued, respectively, to officers and
other employees, non-employee board members and independent consultants
who render services to the Company.  As of December 31, 2002 the Company
is authorized to issue up to 3,655,400 options or stock in accordance with
the terms of the 98 Plan, as amended.

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, 2002, options to purchase 2,456,749
shares of common stock were outstanding, 323,904 options had been
exercised, 248,157 shares that had been issued directly under the 98 Plan
and 667,148 shares remained available for grant/issuance.  The Company did
not issue any direct shares under the 98 Plan in 2002, 2001, or 2000 and
does not anticipate issuing shares in 2003.

                                       34
<PAGE>

Supplemental Stock Option Plan.  In May 2000, the board approved a
supplement (the Supplemental Plan) to the 98 Plan.  Pursuant to the terms
of the Supplemental Plan, options are restricted to employees who are
neither Officers nor Directors at the grant date.  As of December 31, 2002
the Company is authorized to issue up to 400,000 shares 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, 2002, options to purchase 26,799 shares of common stock
were outstanding, no options had been exercised and options to purchase
373,201 shares of common stock remained available for further issuance
under the 96 Plan.

Employee Stock Purchase Plan.  In February 2000, the Employee Stock
Purchase Plan (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 my
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 offering period or the fair market value of
such shares on the lst day of such offering period.  As of December 31,
2002, 90,678 shares of common stock have been purchased through the ESPP
and 109,322 are available for future purchase.

A summary of the status of the Company's stock option plan as of December
31, 2002, 2001, and 2000, and changes during the years then ended is
presented in the following table:

<TABLE>
<CAPTION>
                                                     Options Outstanding
                            December 31, 2002        December 31, 2001          December 31, 2000
                          ---------------------    ---------------------      --------------------
                                      Wtd. Avg.                Wtd. Avg.                  Wtd. Avg.
                             Shares   Ex. Price       Shares   Ex. Price         Shares   Ex. Price
                          ---------   ---------    ---------   ---------      ---------   --------
<S>                       <C>         <C>          <C>         <C>            <C>         <C>
Beginning                 2,541,200   $    4.32    2,179,489   $    5.42      1,830,234   $   4.99
Granted                   1,193,000   $    0.17    1,045,150   $    1.30        825,750   $   5.65
Exercised                  (200,000)  $    0.25      (23,627)  $    1.51       (100,815)  $   1.99
Forfeited                  (949,893)  $    3.45     (659,812)  $    3.27       (375,680)  $   4.72
                          ---------   ---------    ---------   ---------      ---------   --------
Ending                    2,584,307   $    3.05    2,541,200   $    4.32      2,179,489   $   5.42
                          =========   =========    =========   =========      =========   ========

Exercisable at
  year-end                2,584,307                2,541,200                    873,535
                          =========                =========                  =========

Weighted-average fair value
 of options granted during
 the period:                          $    0.09                $    0.73                  $   3.72
                                      =========                =========                  ========
</TABLE>

The following table summarizes information about stock options outstanding
as of December 31, 2002:

<TABLE>
<CAPTION>
                             Options Outstanding
                                  Wtd. Avg.                      Options Exercisable
                        No.       Remaining                     Number
    Range of        Outstanding  Contractual   Wtd. Avg.    Exercisable     Wtd. Avg.
    Ex. Price       at 12/31/02     Life       Ex. Price    at 12/31/02     Ex. Price
    ---------       -----------     ----       ---------    -----------     ---------
<S>       <C>       <C>            <C>         <C>            <C>           <C>
  $0.01 -  3.00     1,716,937      8.73 yrs.   $    0.69      1,716,937     $  0.69
  $3.01 -  6.00        43,039      6.43 yrs.   $    5.37         43,039     $  5.37
  $6.01 -  9.00       689,331      6.90 yrs.   $    6.30        689,331     $  6.30
  $9.01 - 16.00       135,000      7.13 yrs.   $   15.62        135,000     $ 15.62
                    ---------                  ---------    -----------     -------
                    2,584,307                  $    3.05      2,584,307     $  3.05
                    =========                  =========    ===========     =======
</TABLE>

                                       35
<PAGE>

SFAS No. 123 requires the Company to provide pro forma information
regarding net (loss) income and (loss) earnings per share as if
compensation cost for the stock option plan had been determined in
accordance with the fair value-based method prescribed in SFAS No.123
throughout the year.  The Company estimated the fair value of stock
options at the grant date by using the Black-Scholes option pricing-model
with the following weighted average assumptions used for grants in 2002,
2001 and 2000, respectively: dividend yield (all years) of 0; expected
volatility of 60%, 60%, and 70%; risk-free interest rate of 2.50%, 5.25 %
and 5.25%; and expected lives of five, five, and five years, respectively,
for all plan options.

9.  Income Taxes.

The provision for income taxes for the years ended December 31, 2001 and
2000 consists of minimum state taxes.  There is no provision for income
taxes for 2002.

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

<TABLE>
<CAPTION>
December 31,                      2002            2001            2000
------------                 ------------    ------------    ------------
Federal income tax at
<S>                          <C>             <C>             <C>
 statutory rate              $ (2,989,400)   $ (5,262,500)   $ (3,187,200)
State income taxes, net
 of federal benefit              (556,200)       (902,400)       (544,400)
Tax benefit not
  currently recognizable        3,475,800       6,260,300       3,717,200
Research and development
  Credit                         (100,000)       (100,000)              -
Other                              30,200           5,400          15,200
                             ------------    ------------    ------------
Provision for income taxes   $          -    $        800    $        800
                             ============    ============    ============
</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,                            2002              2001
------------                        -------------     --------------
<S>                                 <C>               <C>
Net operating loss carryforwards    $  13,376,300     $    9,586,500
Tax credit carryforwards                  627,500            443,800
Capitalized software                     (161,900)          (204,500)
Depreciation and amortization           1,886,800          2,517,900
Reserves not currently deductible         420,600            407,800
Deferred compensation                   1,202,600          1,125,400
                                    -------------     --------------
Total deferred tax asset               17,351,900         13,876,900
Valuation allowance                   (17,351,900)       (13,876,900)
                                    -------------     --------------
Net deferred tax asset              $           -     $            -
                                    =============     ==============
</TABLE>

The Company has net operating loss carryforwards available to reduce
future taxable income, if any, of approximately $36,625,000 and
$15,845,000 for Federal and California income tax purposes, respectively.
The benefits from these carryforwards expire at various times from 2007
through 2022.  As of December 31, 2002, the Company cannot determine that
it is more likely than not that these carryforwards and other deferred tax
assets will be realized, and accordingly, the Company has fully reserved
for these deferred tax assets.  Furthermore, approximately $1,202,600 of
the valuation allowance related to the amortization of deferred
compensation will be credited to equity upon its reversal.

In 1998 the Company experienced a "change of ownership" as defined by the
provisions of the Tax Reform Act of 1986.  As such, utilization of the
Company's net operating loss carryforwards through 1998 will be limited to
approximately $400,000 per year until such carryforwards are fully
utilized or expire.

10.  Concentration of Credit Risk.

Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and cash
equivalents, available-for-sale securities and trade receivables.  The


                                       36
<PAGE>

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.  Available-for-sale securities are held in
public companies for which there are ready markets.  As of December 31,
2002, the Company had approximately $1,858,200 of cash and cash
equivalents with financial institutions, in excess of FDIC insurance
limits.

For the year ended December 31, 2002, the Company's three largest
third-party customers accounted for approximately 26.9%, 23.4% and 12.5%
of total revenues, respectively, with related accounts receivable as of
December 31, 2002 of $0, $0 and $58,800, respectively.  Approximately
$52,400 of the outstanding balance had been collected through March 21,
2003.  For the year ended December 31, 2001, these three third-party
customers accounted for approximately 24.5%, 0.0% and 6.1% of total
revenues, respectively, with related accounts receivable as of December
31, 2001 of $270,000, $0, and $182,900, respectively.  The $270,000
outstanding balance was collected during January 2001 and approximately
$143,200 of the $182,900 outstanding balance was collected by March 31,
2002.

For the year ended December 31, 2001, the Company's three largest
third-party customers accounted for approximately 25.2%, 24.5% and 9.5%
of total revenues, respectively, with related accounts receivable as of
December 31, 2001 of $0, $270,000, and $0, respectively.  The outstanding
balance was collected during February 2002.  For the year ended December
31, 2000, these three third-party customers accounted for approximately
0.0%, 14.4% and 0.0% of total revenues, respectively, with related
accounts receivable as of December 31, 2000 of $0, $150,000, and $0,
respectively.  The outstanding balance was collected during January 2001.

For the year ended December 31, 2000, the Company's three largest
third-party customers accounted for approximately 19.8%, 14.4% and 10.8%
of total revenues, respectively, with related accounts receivable as of
December 31, 2000 of $0, $150,000, and $0, respectively.  The December 31,
2000 outstanding amount was collected in January 2001.  There were no
significant sales to any of these three customers during 1999.

Accounts receivable are derived from many customers in various
industries.  The Company believes any risk of loss is reduced due to the
diversity of customers and geographic sales areas.  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.

11.  Related Party Transactions.

In March 2000, the Company invested $3,500,000 for a 50% interest in
GraphOn China Limited, (the joint venture) a joint venture in China.  Also
during 2000, the Company licensed a total of $2,500,000 of technology to
the joint venture.  Payment in full for the licensed technology was
received prior to year-end 2000.  Additionally, the Company recognized 50%
of the joint venture's operating loss since inception, in proportion with
the Company's ownership interest.

On August 27, 2001, the Company dissolved the joint venture.  There were
no transactions with the joint venture during 2001.  Summarized financial
data of the joint venture, as of inception, March 8, 2000 through year-end
December 31, 2000 and for the period from January 1, 2001 through
dissolution, August 27, 2001, is as follows:

<TABLE>
<CAPTION>
  (US $)                               2000
                                  ------------
  <S>                             <C>
  Current assets                  $  1,949,600
  Other assets                          15,000
                                  ------------
  Total assets                    $  1,964,600
                                  ============
  Current liabilities             $    181,000
  Other liabilities                          -
                                  ------------
  Total liabilities               $    181,000
                                  ------------
  Total joint venturers' equity      1,783,600
                                  ------------
  Total liabilities and equity    $  1,964,600
                                  ============
  Net revenues                    $          -
                                  ------------
  Net loss                        $ (5,216,300)
                                  ============
</TABLE>

The Company believes that the transactions with the joint venture were at
arms length and were under terms no less favorable than those with other
customers.

Also see Note 8.

                                       37
<PAGE>

12.  Commitments and Contingencies.

Operating Leases.  In October 1998, the Company entered into a five-year
operating lease for a facility in New Hampshire.  In October 2000, the
Company sublet approximately 6,300 square feet of the New Hampshire
facility, which was otherwise idle, for a term of three years.

In October 1999, the Company entered into an 18 months operating lease for
a facility in London, United Kingdom, which provided for month-to-month
tenancy upon expiration of the initial lease term.  In February 2000, the
Company entered into a five-year operating lease for the Company's
corporate headquarters in Morgan Hill, California.  In May 2001, the
Company entered into a five year operating lease for a facility in
Bellevue, Washington.

The facility leases require payment of certain maintenance and operating
expenses, such as taxes, insurance and utilities.  Rent payments for the
years ended December 31, 2002, 2001 and 2000 aggregated $525,700,
$558,700 and $537,100, respectively.

Future minimum annual lease payments for these leases, assuming that no
sublessee is found to sublet either the Company's Morgan Hill, California
or Bellevue, Washington office space before expiration of these leases in
2005 and 2006, respectively, and that the Company were to be unsuccessful
in negotiating lease buyouts with either of the respective office's
landlords are as follows:

        Year ending
        December 31,
           2003      $  548,900
           2004         395,400
           2005         328,100
           2006          55,000
           2007               -
                     ----------
                     $1,327,400

Prior Bankruptcy.  GraphOn Corporation (a predecessor company) filed a
Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code in
November 1991 and may be required to pay up to $964,000 to a creditor.  To
date, the Company has not received any claims related to the bankruptcy.
There can be no assurance that future claims will not arise from the
predecessor company's creditors or that a former creditor may assert a
claim relating to royalties earned from subsequent licenses, which could
be costly and could have a material effect on the Company's business,
financial condition and/or results of operations.

Legal Proceedings.  During 2001, 2000 and 1999, the Company had been
engaged in litigation in the Superior Court of the State of California,
Santa Clara County, with Insignia Solutions plc and Citrix Systems, Inc.,
which stemmed from the Company's disclosure in late 1996 of certain
aspects of the Company's proprietary technology on a confidential basis to
Insignia Solutions, plc, some of whose assets were later acquired by
Citrix Systems, Inc.  On April 3, 2001, the Company, Citrix and Insignia
agreed to settle this litigation with prejudice, by an exchange of
reciprocal agreements.

13.  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 2002, 2001 and
2000, the Company contributed a total of $52,400, $44,700 and $11,000 to
the Plan, respectively.

14.  Supplemental Disclosure of Cash Flow Information.

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

<TABLE>
<CAPTION>
Years Ended December 31,                        2002          2001           2000
------------------------                    ------------  ------------- -------------
Cash Paid:
<S>                                         <C>           <C>           <C>
Income Taxes                                $          -  $         800 $         800
Interest                                    $        200  $       5,800 $       6,800
Noncash Investing and Financing Activities:
-------------------------------------------
Stock and warrants issued for
    purchased technology and
    other assets                            $          -  $   6,500,000 $           -
</TABLE>

                                       38
<PAGE>

As explained more fully in Note 8, during 2002, the Company accepted
933,333 shares of its common stock from Menta Software as full settlement
of the outstanding $1,400,000 due the Company under the terms of the
patent license agreement the Company entered into in May 2001.

15.  Quarterly Information (Unaudited).

The summarized quarterly financial data presented below reflect all
adjustments, which, except as discussed below, in the opinion of
management, are of a normal and recurring nature necessary to present
fairly the results of operations for the periods presented.  In the third
quarter of 2002 and in the fourth quarter of 2001, the Company recorded
asset impairment charges of $914,000 and $4,500,000, respectively, against
several of its intangible assets, as discussed in Note 6.  Also, during
2002, the Company recorded  non-recurring restructuring charges related to
the closure of certain office locations, and other cost reduction
measures, as discussed in Note 7.

In thousands, except per share data.
<TABLE>
<CAPTION>

Year ended                    First     Second       Third       Fourth        Full
December 31, 2002            Quarter    Quarter     Quarter      Quarter       Year
-----------------          ---------- -----------  -----------  ----------  -----------

<S>                        <C>        <C>          <C>          <C>         <C>
Total revenues             $      586 $       525  $       837  $    1,587  $     3,535
Gross profit                      131          64          382       1,278        1,855
Asset impairment charge             -           -         (914)          -         (914)
Restructuring charge           (1,490)          -         (453)          -       (1,943)
Operating loss                 (3,625)     (2,174)      (2,992)        (78)      (8,869)
Net loss                       (3,591)     (2,148)      (2,981)        (73)      (8,793)
Basic and diluted
  loss per common share         (0.21)      (0.12)       (0.17)      (0.00)       (0.50)
</TABLE>

<TABLE>
<CAPTION>
Year ended                  First       Second       Third       Fourth        Full
December 31, 2001          Quarter      Quarter     Quarter      Quarter       Year
-----------------        ----------- -----------  -----------  ----------  -----------

<S>                      <C>         <C>          <C>          <C>         <C>
Total revenues           $     2,321 $     1,936  $     1,018  $      636  $     5,911
Gross profit (loss)            1,939       1,568           85        (293)       3,298
Asset impairment charge            -           -            -      (4,501)      (4,501)
Operating loss                (2,347)     (2,440)      (4,412)     (6,689)     (15,887)
Net loss                      (2,171)     (2,327)      (4,344)     (6,636)     (15,478)
Basic and diluted
  loss per common share        (0.15)      (0.16)       (0.25)      (0.38)       (0.97)
</TABLE>

                                       39
<PAGE>


Report of Independent Certified Public Accountants on Supplemental Schedule

To the Board of Directors and Shareholders of GraphOn Corporation

The audits referred to in our report dated February 7, 2003 (which report
contains an explanatory paragraph regarding the ability of GraphOn
Corporation and Subsidairy to continue as a going concern) relating to the
consolidated financial statements of GraphOn Corporation and Subsidiary,
which is contained in Item 8 of this Form 10-K, included the audit of the
financial statement schedule listed in the accompanying index.  This
financial statement schedule is the responsibility of the Company's
management.  Our responsibility is to express an opinion on this financial
statement schedule based upon our audits.

In our opinion such consolidated financial statement schedule presents
fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP
San Jose, California
February 7, 2003



                                       40
<PAGE>



<TABLE>
<CAPTION>

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 Balance       Charged
                                   At         to costs                      Balance
                                Beginning        and                       at end of
Description                     of period     expenses     Deductions       period
-----------                  -------------  ------------  ------------- -------------

Allowance for Doubtful accounts:

<C>                          <C>            <C>           <C>           <C>
2002                         $     350,000  $     31,600  $     331,300 $      50,300
2001                         $     100,000  $    250,000  $           - $     350,000
2000                         $      25,000  $     75,000  $           - $     100,000

</TABLE>







                                       41
<PAGE>



                     GraphOn China Limited
                 Index to Financial Statements

                                                              Page

      Report of Independent Certified Public Accountants        43

      Statement of Operations and Comprehensive Loss
      for the Period From Inception (March 8, 2000) through
      December 31, 2000                                         44

      Statement of Joint Venturers' Equity for the Period From
      Inception (March 8,2000) through December 31, 2000        45

      Statement of Cash Flows for the Period From
      Inception (March 8,2000) through December 31, 2000        46

      Summary of Significant Accounting Policies                47

      Notes to Financial Statements                             48



                                       42
<PAGE>


Report of Independent Certified Public Accountants

To the Board of Directors and Shareholders
GraphOn China Limited

We have audited the accompanying statements of operations and
comprehensive loss, joint venturers' equity, and cash flows of GraphOn
China Limited for the period from inception (March 8, 2000) through
December 31, 2000.  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 audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
GraphOn China Limited for the period from inception (March 8, 2000)
through December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in the "Going-Concern" paragraph of the Summary of Significant
Accounting Policies, on August 27, 2001, GraphOn China Limited was dissolved.


/s/ BDO Seidman, LLP
San Jose, California
February 2, 2001, except for the "Going-Concern" paragraph of
the Summary of Significant Accounting Policies,
as to which the date is August 27, 2001



                                       43
<PAGE>

<TABLE>
<CAPTION>

                  GraphOn China Limited
                 A Dissolved Corporation
     Statements of Operations and Comprehensive Loss
   Inception (March 8, 2000) Through December 31, 2000

(USD)

                                              Inception (March
                                              8, 2000) through
                                              December 31, 2000

Operating Expenses
<S>                                          <C>
  Selling and marketing                      $         360,600
  General and administrative                         2,988,700
  Research and development                           2,000,000
                                             -----------------
    Total Operating Expenses                         5,349,300
                                             -----------------

Loss From Operations                                (5,349,300)
                                             -----------------

Other Income (Expense):

  Interest and other income                            133,000
  Interest and other expense                                 -
                                             -----------------
    Total Other Income (Expense)                       133,000
                                             -----------------

Net Loss                                            (5,216,300)

Other Comprehensive Income (Loss), net of tax:

  Foreign currency translation adjustment                 (100)
                                             -----------------

Comprehensive Loss                           $      (5,216,400)
                                             =================

Basic and Diluted Loss per Common Share      $           (0.75)
                                             =================

Weighted Average Common Shares Outstanding           7,000,000
                                             =================
<FN>


See accompanying summary of significant accounting policies and notes
               to financial statements
</FN>
</TABLE>


                                       44
<PAGE>

<TABLE>
<CAPTION>

                                                           GraphOn China Limited
                                                          A Dissolved Corporation
                                                   Statement of Joint Venturers' Equity

                                                                                                         Deficit
                                                                                                       Accumulated
                                       Common Stock                 Additional                            During
                             ---------------------------------       Paid in        Comprehensive      Development
                                 Shares            Amount            Capital           (Loss)             Stage           Total
                             ---------------   ---------------   ---------------   ---------------   ---------------   ------------
<S>                          <C>               <C>               <C>               <C>               <C>               <C>
Balances, March 8, 2000                    -   $             -   $             -   $             -   $            -    $          -
Issuance of common stock
   to founders, March 2000         7,000,000            70,000         6,930,000                 -                -       7,000,000
Foreign currency translation
   adjustment                              -                 -                 -              (100)               -            (100)
Net loss                                   -                 -                 -                 -       (5,216,300)     (5,216,300)
                             ---------------   ---------------   ---------------   ---------------   --------------    -------------
Balances,
   December 31, 2000               7,000,000            70,000         6,930,000             (100)       (5,216,300)       1,783,600
                             ---------------   ---------------   ---------------   --------------    --------------    -------------

<FN>

                            See accompanying summary of significant accounting policies and notes to financial statements

</FN>
</TABLE>



                                       45
<PAGE>

<TABLE>
<CAPTION>

                   GraphOn China Limited
                  A Dissolved Corporation
                  Statement of Cash Flows
   From Inception (March 8, 2000) Through December 31, 2000

                                                    Inception (March
                                                    8, 2000) Through
                                                    December 31, 2000

Cash Flows From Operating Activities:
<S>                                                <C>
  Net loss                                         $       (5,216,300)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
  Depreciation and amortization                                 1,100
  Foreign currency translation                                    100
  Changes in operating assets and liabilities:
    Due from related party                                   (132,500)
    Accrued expenses                                          181,000
                                                   ------------------
Net cash used in operating activities                      (1,565,300)
                                                   ------------------
Cash Flows From Investing Activities:
  Capital expenditures                                     (1,262,000)
                                                   ------------------
Net cash used in investing activities                      (1,262,000)
                                                   ------------------
Cash Flows From Financing Activities:
  Proceeds from issuance of common stock                    7,000,000
  Dissolution proceeds to joint venturers                           -
                                                   ------------------
Net cash provided (used in) by financing
 Activities                                                 7,000,000
                                                   ------------------
Net Increase (Decrease) in Cash
  and Cash Equivalents                                      1,817,100
Cash and Cash Equivalents:
    Beginning of period                                             -
                                                   ------------------
    End of period                                  $        1,817,100
                                                   ==================
<FN>

See accompanying summary of significant accounting policies
        and notes to financial statements
</FN>
</TABLE>



                                       46
<PAGE>

GraphOn China, Ltd.
Summary of Significant Accounting Policies

The Company.  GraphOn China, Ltd. (the Company) was formed in March 2000
as a joint venture between GraphOn Corporation (GraphOn) and Tianjin
Development Holdings, Ltd. (Tianjin) with each of the two parties owning
50% of the Company.  The purpose of the joint venture was to bring
GraphOn's Bridges software and other technology solutions to China's
business-to-business internet and software market.  Upon inception of the
Company, GraphOn and Tianjin invested $3,500,000 each, in exchange for
3,500,000 shares, each, of the Company's common stock.  The information
with respect to 2001 is unaudited.

On August 27, 2001, the Company was dissolved and all remaining net assets
of the Company were equitably returned to GraphOn and Tianjin in
accordance with the then current balances of their equity accounts.

Going Concern.  As indicated in the accompanying financial statements, the
Company has incurred a net loss since inception and as of December 31,
2000, has an accumulated deficit of $5,216,300.  This factor, as well as
the uncertainty regarding the Company's ability to obtain additional
financing, creates an uncertainty about the Company's ability to continue
as a going concern.  Management is developing a plan to continue
development of technology and to obtain continued financing.  The
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.  As
discussed above, on August 27, 2001, the Company was dissolved.

Use of Estimates.  The preparation of financial statements in conformity
with generally accepted accounting principles 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.  Actual results could differ from
those estimates.

Cash and Cash Equivalents.  The Company considers all highly liquid
investments purchased with original 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.  Property and equipment as
of December 31, 2000 consisted of office equipment of $16,100 with related
accumulated depreciation of $1,100.

Advertising Costs.  The cost of advertising is expensed as incurred.
Advertising consists primarily of various printed material and was
insignificant during 2000.

Income Taxes.  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 Company used the following
methods and assumptions in estimating the fair value disclosures for
financial instruments:

    Cash and cash equivalents:  The carrying amount reported on the
    balance sheet for cash and cash equivalents approximates fair value.

As of December 31, 2000, the fair value of the Company's financial
instruments approximated their historical carrying amounts.

Long-Lived Assets.  Long-lived assets are assessed for possible impairment
whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable, or whenever the Company has committed to a
plan to dispose of the assets.  Such assets are carried at the lower of
book value or fair value as estimated by the Company based on appraisals,
current market value, comparable sales value, and undiscounted future cash
flows as appropriate.  Assets to be held and used affected by such
impairment loss are depreciated or amortized at their new carrying amount
over the remaining estimated life; assets to be sold or otherwise disposed
of are not subject to further depreciation or amortization.

                                       47
<PAGE>

Earnings Per Share of Common Stock.  The Company has adopted the
provisions of SFAS No. 128, Earnings Per Share.  SFAS No. 128 provides for
the calculation of basic and diluted earnings per share.  Basic earnings
per share includes no dilution and is computed by dividing income
available 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.  For 2001 and 2000, there
were no potentially dilutive securities.

Comprehensive Income.  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 unrealizable gain/loss of available-for-sale
securities.  The individual components of comprehensive income (loss) are
reflected in the statements of shareholders' equity.  As of December 31,
2000 accumulated other comprehensive loss was comprised of foreign
currency translation loss.

Notes to Financial Statements

1.  Related Party Transactions.

In addition to the initial investments by GraphOn and Tianjin in March
2000, the Company has had various transactions with these related parties,
as follows:

GraphOn:  During 2000, the Company incurred $ 11,300 selling and
marketing, $488,700 general and administrative, and $2,000,000 research
and development expenses from GraphOn.

Tianjin:  During 2000, the Company incurred $2,500,000 general and
administrative expenses from Tianjin.  Additionally, the Company
transferred funds to Tianjin during 2000, in order for Tianjin to make
payments on the Company's behalf.  As of December 31, 2000, the Company
had a balance of $132,500 due from Tianjin, representing payments made by
the Company to Tianjin during 2000, which Tianjin will pay on the
Company's behalf during 2001.  These amounts were paid by Tianjin to
various third party vendors during 2001, prior to dissolution.

2.  Commitments.

Leases:  Effective November 2000, the Company leases office space under an
operating lease, which requires monthly payments through October 2001.
Minimum rental payments for 2001 are $10,000.  Rent expense during 2000
was $2,000.  Immediately prior to dissolution in August 2001, all amounts
outstanding under the lease were paid in full to the landlord and the
lease was cancelled.

Employment Agreements:  Effective September 1, 2000, the Company entered
into an employment agreement with an officer of the Company.  Under the
terms of the agreement, the Company is obligated to pay an initial annual
salary of $102,600 with future increases to be determined by management.
For the annual periods ending December 31, 2001 and 2002, the employee is
eligible to receive a bonus equal to 3% of net sales.  For periods after
December 31, 2002, the bonus percentage will be based on profit after tax
and is to be negotiated between the Board of Directors of the Company and
the employee.

The Company or the employee may terminate the employment agreement on not
less than 180 days written notice.  The Company may terminate the
agreement without 180 days written notice, however, the employee shall be
entitled to compensation for 180 days on the date of termination notice in
such event.

Effective with the dissolution of the Company, on August 27, 2001, the
officer of the Company became an employee of one of the two joint venture
owners of the Company, GraphOn Corporation, and agreed to release the
Company from all present and future claims arising form the original
employment agreement with the Company.

3.  Supplemental Disclosure of Cash Flow Information

During 2000, the Company made no payments for interest or income taxes.

                                       48
<PAGE>

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

None.


                                       49
<PAGE>

                       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers and Directors of the Registrant

      Set forth below is information concerning each of our directors and
executive officers as of March 23, 2003.

   Name                 Age    Position

   Robert Dilworth      61     Chairman of the Board of Directors and
                               Chief Executive Officer (Interim)
   William Swain        62     Chief Financial Officer and Secretary
   August P. Klein      66     Director
   Michael Volker       54     Director
   Gordon Watson        67     Director

Robert Dilworth 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 upon the termination, by mutual
agreement, of our former Chief Executive Officer, Walter Keller.  From
1987 to 1998 he 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 also a director of eOn Communications, Mobility Electronics,
Transcept Corporation, Yummy Interactive and Get2Chip.com, Inc.

William Swain 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.  He continued as Senior Vice
President of Administration with Metricom from June 1997 until July 1998.
Prior to joining Metricom, Mr. Swain held senior 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 has served as one of our directors since August 1998.  Mr.
Klein has been, since 1995, the founder, Chief Executive Officer and
Chairman of the Board of JSK Corporation.  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.  From 1957 to 1982, he was
General Manager of the Retail Distribution Business Unit and Director of
Systems Marketing at IBM.  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's
College.

Michael Volker has served as one of our directors since July 2001.  Mr.
Volker has been, since 1996, Director of the Industry Liaison Office, which
has primary responsibility for the transfer of technology at Simon Fraser
University.  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 1991 to 1996, Mr. Volker
was Chief Executive Officer and Chairman of the Board of Directors of RDM
Corporation, a publicly-listed company Mr. Volker founded in 1987.  RDM is 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 Advances Systems Institute, a hi-tech
research institute, and currently continues as a Trustee of BC as well a
member of various charitable and educational boards.  Prior to 1988, Mr.
Volker had been active in various early stage businesses as a founder,
investor, director and officer.  Mr. Volker holds a Master of Applied
Science and a Professional Engineer designation from the University of
Waterloo.

Gordon Watson founded Watson Consulting, LLC, a consulting company for
early stage technology companies, in 1997, and has served as its President since
its inception.  From 1996 to 1997 he served as Western Regional Director, Lotus


                                       50
<PAGE>

Consulting of Lotus Development Corporation.  Prior to joining 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 include 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 BS degree in electrical engineering from the
University of California at Los Angeles.  Mr. Watson is also a director of
DPAC Technologies, and SoftwarePROSe, Inc.

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, 2002, all
filing requirements applicable to our officers, directors and greater than
10% owners of our common stock were complied with.

ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation Table.  The following table sets forth information for
the fiscal years ended December 31, 2002, 2001 and 2000 concerning
compensation we paid to our Chief Executive Officer and our other executive
officers whose total annual salary and bonus exceeded $100,000 for the year
ended December 31, 2002.

<TABLE>
<CAPTION>
                                                                                      Long-term Compensation
                                                                                  -----------------------------
                                             Annual Compensation                       Awards             Payouts
                                      ---------------------------------        ---------------------      -------
---------------------------- ------ ------------ ---------- ----------------- ------------ ------------- ---------- ----------------
                                                                 Other        Restricted    Securities                    All
         Name and                                                Annual          Stock      Underlying     LTIP          Other
         Principal                    Salary       Bonus      Compensation      Awards       Options      Payouts     Compensation
         Position            Year
---------------------------- ------ ------------ ---------- ----------------- ------------ ------------- ---------- ----------------
<S>                          <C>    <C>          <C>               <C>            <C>        <C>             <C>      <C>
Robert Dilworth              2002   $ 256,000        -             -               -         100,000         -             -
Chairman of the Board        2001        -           -             -               -          60,000         -             -
Chief Executive Officer      2000        -           -             -               -            -            -             -
(Interim) (1)
---------------------------- ------ ------------ ---------- ----------------- ------------ ------------- ---------- ----------------
William Swain                2002   $ 147,692        -             -               -            -            -        $ 2,000 (3)
Chief Financial Officer      2001   $ 117,785        -             -               -         135,000         -        $ 1,000 (3)
Secretary (2)                2000   $ 132,100    $ 28,715          -               -         245,000         -        $ 1,000 (3)
---------------------------- ------ ------------ ---------- ----------------- ------------ ------------- ---------- ----------------
<FN>

(1)   Mr. Dilworth began as Chief Executive Officer (Interim) during January
        2002.  As an interim Chief Executive Officer, Mr. Dilworth is
        compensated as a consultant and not an employee, consequently; he is
        eligible to receive compensation for his services as a director.

(2)   Mr. Swain joined our company in March 2000.

(3)   Company matching contribution to the 401(K) Plan.
</FN>
</TABLE>

Option Grants in Last Fiscal Year.  The following table shows the stock
option grants made to the executive officers named in the Summary
Compensation Table during the 2002 fiscal year:

                                       51
<PAGE>

<TABLE>
<CAPTION>
                                                                                                              Potential Realizable
                          Number of Shares of       Percent of Total Options                                Value at Assumed Annual
                        Common Stock Underlying            Granted to                                            Rates of Stock
                                Options                    Employees              Exercise      Expiration   Appreciation for Option
                               Granted (1)               In Fiscal Year          Price (2)         Date               Term
                                                                                                                  5%          10%
Name
--------------------- ----------------------------- ------------------------- ---------------- ------------- -----------------------
<S>                           <C>                            <C>                   <C>            <C>         <C>           <C>
Robert Dilworth               100,000                        10.5%                 $ 0.25         03/05/12    $ 327,549     $431,639
--------------------- ----------------------------- ------------------------- ---------------- ------------- -----------------------
William Swain                   -                              -                       -            -               -           -
--------------------- ----------------------------- ------------------------- ---------------- ------------- -----------------------
<FN>

(1)   Options are immediately exercisable upon issuance to the optionee.
(2)   Options were granted at an exercise price equal to the fair market
      value of our common stock, as determined by the closing sales price
      reported on The Nasdaq Stock Market on the date of grant.
</FN>
</TABLE>

Fiscal Year-End Option Values.  The following table shows information with
respect to unexercised stock options held by the executive officers named in
the Summary Compensation Table as of December 31, 2002.  No options held by
such individuals were exercised during 2002.

<TABLE>
<CAPTION>
                                           (1)
                             Number of Securities Underlying                       (2)
                              Unexercised Options at Fiscal        Value of Unexercised In-The-Money
                                       YearEnd                        Options at Fiscal YearEnd
                           Exercisable         Unexercisable     Exercisable          Unexercisable
                           -----------         -------------     -----------          -------------
     Name
     --------------------- ------------------------------------- ----------------------------------------
     <S>                   <C>                       <C>             <C>                     <C>
     Robert Dilworth       360,000                   -               -                       -
     --------------------- ------------------------------------- ----------------------------------------
     William Swain         380,000                   -               -                       -
     --------------------- ------------------------------------- ----------------------------------------
<FN>

(1)   Shares issued upon exercise of the options are subject to our
      repurchase, which right lapses in 33 equal monthly installments
      beginning three months after the date of the grant.
(2)   The per share exercise price of each of the unexercised stock options
      set forth in the table above exceeded $0.13, the fair market value of a
      share of our common stock as of December 31, 2002.
</FN>
</TABLE>

Compensation of Directors.  During the year ended December 31, 2002,
directors who were not otherwise our employees were compensated at the rate
of $1,000 for attendance at each meeting of our board, $500 for attendance
at each meeting of a board committee, and a $1,500 quarterly retainer.
Additionally, outside directors are granted stock options periodically,
typically on a yearly basis.

Compensation Committee Interlocks and Insider Participation.  During the
year ended December 31, 2002, the Compensation Committee was comprised of
Robert Dilworth, our Interim Chief Executive Officer and Chairman of the
Board, and August Klein, a non-employee director.

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

The following table sets forth certain information, as of March 4, 2003,
with respect to the beneficial ownership of shares of our common stock held
by:

      o    each director;
      o    each person known by us to beneficially own 5% or more of our
           common stock;
      o    each executive officer named in the summary compensation table; and
      o    all directors and executive officers as a group:

Unless otherwise indicated, the address for each stockholder is c/o GraphOn
Corporation, 400 Cochrane Circle, Morgan Hill, California 95023.

                                       52
<PAGE>
<TABLE>
<CAPTION>

                                              Number of Shares of Common Stock
     Name and Address Beneficial Owner               Beneficially Owned (1)          Percent of Class
------------------------------------------ --------------------------------------- ---------------------
<S>                                                          <C>       <C>                  <C>
Corel Corporation                                            1,193,824 (2)                  7.2%
  1600 Carling Avenue
  Ottawa, Ontario
  K1Z 8R7, Canada
------------------------------------------ --------------------------------------- ---------------------
Robert Dilworth                                                413,820 (3)                   2.4%
------------------------------------------ --------------------------------------- ---------------------
August P. Klein                                                183,260 (4)                   1.1%
------------------------------------------ --------------------------------------- ---------------------
Michael Volker                                                 110,700 (5)                     *
------------------------------------------ --------------------------------------- ---------------------
Gordon Watson                                                   40,000 (6)                     *
------------------------------------------ --------------------------------------- ---------------------
William Swain                                                  391,000 (7)                    2.3%
------------------------------------------ --------------------------------------- ---------------------
All current executive officers and                           1,138,780 (8)                    6.5%
     Directors as a group (5 persons)
------------------------------------------ --------------------------------------- ---------------------
* Denotes less than 1%.
</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, 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 all options held by such stockholder as of March 4,
      2003 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.  Percentage ownership of our common
      stock is based on 16,629,387 shares of our common stock outstanding as
      of March 4, 2003.
(2)   Based on information contained in a Schedule 13D filed by Corel
      Corporation on June 26, 2000.
(3)   Includes 360,000 shares of common stock issuable upon the exercise of
      outstanding options.
(4)   Includes 32,500 shares of common stock issuable upon exercise of
      outstanding options.
(5)   Includes 10,000 shares of common stock issuable upon exercise of
      outstanding options.
(6)   Includes 40,000 shares of common stock issuable upon exercise of
      outstanding options.
(7)   Includes 380,000 shares of common stock issuable upon exercise of
      outstanding options.
(8)   Includes 822,500 shares of common stock issuable upon 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, 2002:

<TABLE>
<CAPTION>
                                    Number of Securities to be
                                      Issued Upon Exercise of         Weighted Average Exercise
                                       Outstanding Options,              Price of Outstanding             Number of Securities
        Plan Category                   Warrants and Rights             Options, Warrants and            Remaining Available for
                                                                                Rights                       Future Issuance
------------------------------ --------------------------------- -------------------------------- ---------------------------------
Equity compensation plans
approved by security holders:
     Stock option plans
<S>                                          <C>                                <C>                              <C>
     Employee stock purchase                 2,557,508                          $ 3.07                           753,351
     plan
                                                (1)                              (1)                               (1)
------------------------------ --------------------------------- -------------------------------- ---------------------------------
Equity compensation plans
not approved by security
holders:
     Stock option plan (2)                    26,799                            $ 1.52                           373,201

------------------------------ --------------------------------- -------------------------------- ---------------------------------
Total                                        2,584,307                          $ 3.05                          1,126,552
------------------------------ --------------------------------- -------------------------------- ---------------------------------
</TABLE>



                                       53
<PAGE>

(1)   Under terms of the employee stock purchase plan ( ESPP), employees who
      participate in the plan are eligible to purchase shares of common
      stock.  As of December 31, 2002, 90,678 shares had been purchased
      through the ESPP, at an average cost of $1.76 per share and 109,322
      shares are available for future purchase.
(2)   On April 30, 2000 our board approved a supplemental stock option 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 was initially 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.  The
      supplemental plan shall terminate no later than April 30, 2010.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 2002 we issued 100,000 shares of common stock to each of August Klein
and Michael Volker, non-employee directors, who exercised options granted
under our 1998 Stock Option/Stock Issuance Plan.  Each of the two directors
exercising the options issued a $25,000 promissory note, dated March 5,
2002, to us to pay for the options.  The notes are for a term of three
years, are due on or before March 5, 2005 and bear semi-annual interest at
2.67% per annum, which is equal to the applicable federal short-term
interest rate in effect at the time the promissory notes were signed.  In
the event of default, we can take back all 100,000 of the shares of common
stock so issued.

ITEM 14.  CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, under the supervision
and with the participation of management, including our Chief Executive
Officer and Chief Financial Officer, we have evaluated the effectiveness of
the design and operation of our disclosure controls and procedures pursuant
to Exchange Act Rule 13a-14.  Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective in timely alerting them
about material information relating to us (including our consolidated
subsidiary) required to be included in our periodic SEC filings.  There have
been no significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of their
evaluation.


                                       54
<PAGE>

                            PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)   The following documents are filed as part of this report:
      (1) Financial statements filed as part of this report are listed on the
          "Index to Consolidated Financial Statements" at page 21 herein.
      (2) Financial Statement Schedules.  The applicable financial statement
          schedules required under Regulation S-X have been included
          beginning on page 40 of this report, as follows:
            i. Report of Independent Certified Public Accountants on Financial
               Statement Schedule:  page 40
           ii. Schedule II - Valuation and Qualifying Accounts:  page 41
      (3) Financial statements of GraphOn China Limited, a 50% owned venture not
          consolidated by the registrant, are listed on the "Index to
          Financial Statements" at page 42 herein.
(b)   Reports on Form 8-K:  The Company filed the following reports on Form
       8-K during the fourth quarter of the year ended December 31, 2002:
        o On November 19, 2002, the Company reported under Item 9 of Form 8-K,
          dated November 19, 2002, the Certification of Quarterly Report
          by its Chief Executive Officer and the Certification of
          Quarterly Report by its Chief Financial Officer for its
          quarterly report on Form 10-Q for the period ended September
          30, 2002.
        o On November 21, 2002, the Company reported under Item 5 of Form 8-K,
          dated November 21, 2002, that it had issued a press release
          announcing its financial results for the third quarter and
          nine-month period ended September 30, 2002.
(c)   Exhibits.  The exhibits required by Item 601 of Regulation S-K are
       listed below.

                              EXHIBITS

Exhibit
Number   Description of exhibit
2.1      Agreement and Plan of Merger and Reorganization dated as of
         February 1, 1999, between registrant and GraphOn Corporation, a
         California corporation (1)
3.1      Amended and Restated Certificate of Incorporation of Registrant (1)
3.2      Amended and Restated Bylaws of Registrant (1)
4.1      Form of certificate evidencing shares of common stock of
         Registrant (2)
4.2      Registration Rights Agreement dated October 28, 1998 between
         Registrant, Spencer Trask Investors, Walter Keller and the
         investors purchasing units in Registrant's private placement (1)
4.3      Amendment to Registration Rights Agreement (1)
10.1     1996 Stock Option Plan of Registrant (2)
10.2     1998 Stock Option/Stock Issuance Plan of Registrant (1)
10.3     Supplemental Stock Option Agreement, dated as of June 23, 2000 (3)
10.4     Securities Purchase Agreement by and among Registrant and Menta
         Software Limited, dated as of May 31, 2001 (4)
10.5     Technology License Agreement by and among Registrant and Menta software
         Limited, dated as of May 31, 2001 (4)
10.6     Lease Agreement between Corel Inc., and CML realty Corp., dated
         September 1998 and assumed by Registrant on December 31, 1998 (1)
10.7     Lease Agreement between Registrant and Thoits Brothers, Inc., dated
         February 24, 2000 (5)
23.1     Consent of BDO Seidman, LLP

(1)   Incorporated by reference from Registrant's Form S-4, file number
      333-76333.
(2)   Incorporated by reference from Registrant's Form S-1, file number
      333-11165.
(3)   Incorporated by reference from Registrant's Form S-8, file number
      333-40174.
(4)   Incorporated by reference from Registrant's current report on Form 8-K,
      dated July 20, 2001.
(5)   Incorporated by reference from Registrant's annual report on Form 10-K
      for the year ended December 31, 1999.


                                       55
<PAGE>


                             SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Morgan Hill, State of California, on March 31, 2003.

                         GRAPHON CORPORATION

                                          By:  /s/ William Swain
                                              William Swain
                                           Chief Financial 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.

Name                                Title

/s/ Robert Dilworth                 Chairman of the Board and
-------------------
Robert Dilworth                     Interim Chief Executive Officer
March 31, 2003                      (Principal Executive Officer)

/s/ William Swain                   Chief Financial Officer and Secretary
-----------------
William Swain                       (Principal Financial Officer and
March 31, 2003                       Principal Accounting Officer)

/s/ August P. Klein                 Director
-------------------
August P. Klein
March 31, 2003

/s/ Michael Volker                  Director
-------------------
Michael Volker
March 31, 2003

/s/ Gordon Watson                   Director
-------------------
Gordon Watson
March 31, 2003


                                       56
<PAGE>

I, Robert Dilworth, certify that:

1. I have reviewed this annual report on Form 10-K of GraphOn Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this annual report;

3. Based on my knowledge, the financial statements, and other financial
   information included in this annual report, fairly present in all material
   respects the financial condition, results of operations and cash flows of
   the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
   information relating to the registrant, including its consolidated
   subsidiaries, is made known to us by others within those entities,
   particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
   procedures as of a date within 90 days prior to the filing date of this
   annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
   of the disclosure controls and procedures based on our evaluation as of the
   Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
   on our most recent evaluation, to the registrant's auditors and the audit
   committee of registrant's board of directors (or persons performing the
   equivalent functions):

a) all significant deficiencies in the design or operation of internal
   controls which could adversely affect the registrant's ability to record,
   process, summarize and report financial data and have identified for the
   registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
   employees who have a significant role in the registrant's internal controls;
   and

6. The registrant's other certifying officer and I have indicated in this
   annual report whether there were significant changes in internal controls or
   in other factors that could significantly affect internal controls
   subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.

Date: March 31, 2003

                                    /s/ Robert Dilworth
                                    -------------------
                                    Robert Dilworth
                                    Chief Executive Officer
                                    (Interim)


                                       57
<PAGE>

I, William Swain, certify that:

1. I have reviewed this annual report on Form 10-K of GraphOn Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this annual report;

3. Based on my knowledge, the financial statements, and other financial
   information included in this annual report, fairly present in all material
   respects the financial condition, results of operations and cash flows of
   the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
   material information relating to the registrant, including its consolidated
   subsidiaries, is made known to us by others within those entities,
   particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
   procedures as of a date within 90 days prior to the filing date of this
   annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
   of the disclosure controls and procedures based on our evaluation as of the
   Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
   on our most recent evaluation, to the registrant's auditors and the audit
   committee of registrant's board of directors (or persons performing the
   equivalent functions):

a) all significant deficiencies in the design or operation of internal
   controls which could adversely affect the registrant's ability to record,
   process, summarize and report financial data and have identified for the
   registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
   employees who have a significant role in the registrant's internal controls;
   and

6. The registrant's other certifying officer and I have indicated in this
   annual report whether there were significant changes in internal controls or
   in other factors that could significantly affect internal controls
   subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.

Date: March 31, 2003

                                    /s/ William Swain
                                    -----------------
                                    William Swain
                                    Chief Financial Officer


                                       58