<PAGE>

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

                       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, 1999    Commission file number: 0-21683


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

<TABLE>

<S>                                                                                 <C>
                         Delaware                                                                13-3899021
(State or other jurisdiction of incorporation or organization)                       (I.R.S. employer identification no.)

                 225 Cochrane Circle                                                               95037
                Morgan Hill, California                                                          (Zip Code)
        (Address of principal executive offices)

Registrant's telephone number, including area code:  (408) 776-3232
</TABLE>
                              ---------------------

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

         Securities registered pursuant to Section 12(g) of the Act:

                     Class A 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)

  The aggregate market value of the voting stock of registrant held by non-
affiliates of the registrant as of March 10, 2000 was approximately
$219,054,000.
                              ---------------------

  Number of shares of Common Stock outstanding as of March 10, 2000: 14,323,922
  shares of Common Stock.

                              ---------------------

                      DOCUMENTS INCORPORATED BY REFERENCE

                                                        Location in Form 10-K
          Document                                      in which incorporated
          --------                                      ---------------------

     Portions of the Proxy Statement with                      Part III
     respect to the 2000 Annual Meeting of
     Stockholders to be filed with the SEC not
     later than 120 days after the close of the
     Registrant's fiscal year

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                              GRAPHON CORPORATION

                                   FORM 10-K

                               Table of Contents
<TABLE>
<CAPTION>


PART I                                                                                                                   Page
                                                                                                                         ----
  <S>      <C>                                                                                                           <C>
 Item 1.   Business....................................................................................................     3
 Item 2.   Properties..................................................................................................    11
 Item 3.   Legal Proceedings...........................................................................................    11
 Item 4.   Submission of Matters to a Vote of Security Holders.........................................................    11

PART II

 Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.......................................    14
 Item 6.   Selected Financial Data.....................................................................................    15
 Item 7.   Management's Discussion and Analysis of Financial Condition and Results
                 of Operations.........................................................................................    16
Item 7A.   Quantitative and Qualitative Disclosures About Market Risks
                  of Operations........................................................................................    19
Item 8.    Financial Statements and Supplementary Data.................................................................    23
Item 9.    Changes in and Disagreements with Accountants on Accounting and
                 Financial Disclosure..................................................................................    54

PART III

 Item 10.  Directors and Executive Officers of the Registrant..........................................................    54
 Item 11.  Executive Compensation......................................................................................    54
 Item 12.  Security Ownership of Certain Beneficial Owners and Management..............................................    54
 Item 13.  Certain Relationships and Related Transactions..............................................................    54

PART IV

 Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................................    55

SIGNATURES         ....................................................................................................    57

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                          FORWARD LOOKING INFORMATION

     This report includes, in addition to historical information, "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933.  This section provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about themselves so long
as they identify these statement 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," "Risk
Factors" as well as those discussed elsewhere in this Report.

                                     PART I

ITEM 1.    BUSINESS

General

     We develop, market, sell and support server-based software for the
enterprise computing environment. 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. Our technology uses a small software program at each desktop, which
allows the user to interface with an application as if it where running on the
user's desktop computer. This centralized deployment and management of
applications reduces the complexity and total costs associated with enterprise
computing. 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. 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.

     We have established strategic alliances with technology leaders such as Sun
Microsystems, Alcatel and Corel, who have licensed our technology.  Using our
technology, Sun Microsystems and Alcatel provide their network computers access
to UNIX applications. Corel plans to use our technology to provide Internet
access to its applications, such as WordPerfect, over the Internet.

     We are headquartered in Morgan Hill, California with offices in Bellevue,
Washington; Concord, New Hampshire and Reading, United Kingdom.

Recent Event

     On March 8, 2000, we announced the formation of a joint venture with
Tianjin Development Holdings Ltd., a Hong Kong-based, state-owned publicly-
traded conglomerate, to sell our products to China's business-to-business
software market.  Each joint venturer will own 50% of the joint venture and each
has agreed to initially contribute $3.5 million to the joint venture.  The joint
venture intends to begin immediately targeting industrial, governmental, and
educational markets in China.

Industry Background

     History

     In the 1970's, 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 1980's, 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 1990's, the desktop was provided access to mainframe applications and
databases,

                                       3
<PAGE>

which run on large server computers. Throughout this computing evolution, the
modern desktop has become increasingly complex and costly to administer and
maintain. This is further exacerbated as organizations become more dispersed
with remote employees, and the 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. A leading research firm estimates the annual cost
of operating a corporate PC was as much as $9,382 in 1997 and will increase to
as much as $13,485 by 2001. Industry analysts and enterprise users alike have
begun to recognize that the total cost of ownership of a PC, 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 better 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, which permits server-based Windows applications to be
accessed from the new Windows-based network computers. Both initiatives are
examples of server-based computing, which simplifies the desktop by moving the
responsibility of running applications to a central server, with the promise of
lowering total cost of ownership.

     Cross-Platform Computing

     Today's enterprises contain a diverse collection of desktop computers, each
with its particular operating system, processing power and connection 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.

     A common cross-platform problem 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 are used on the
majority of enterprise desktops. Since the early 1990's, organizations 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, large software programs that require substantial memory and processing
resources on the desktop. Typically, PC X Server software is difficult to
install, configure and maintain. Enterprises are looking for an effective UNIX
connectivity software for PCs and non-PC desktops that is easier and less
expensive to administer and maintain.

     Application Service Providers

     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 site, we expect that
application service providers quickly will play an important role in addressing
an enterprise's computing requirements. Today, application service providers are
faced with the difficult task of creating or rewriting applications to entertain
the broader market. Though the application service provider industry is just
beginning to emerge, we expect it to develop rapidly, due to application
vendors' desire 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

                                       4
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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.

The GraphOn Approach

     Our server-based software deploys, manages, supports and executes
applications entirely on the server computer and distributes them efficiently
and instantaneously to virtually any desktop device. Our technology consists of
three key components:

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

  .   The desktop component is responsible only for sending keystrokes and mouse
      motion to the server, as well as presenting 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.

  .   Our protocol enables efficient communication over fast networks or slow
      dial-up connections and allows applications to be accessed from virtually
      any location with network-like performance and responsiveness.


      The major benefits of our approach are as follows:

           .   Lowers Total Cost of Ownership. Shrinking recurring costs is a
               primary goal of our products. Today, installing enterprise
               applications typically is time-consuming, complex and expensive,
               requiring 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 at the server, avoiding
               desktop software and operating system conflicts and minimizing
               at-the-desk support. According to a leading research firm,
               server-based computing strategies, such as those offered by us,
               may achieve as much as a 30% savings by, among other things,
               simplifying the desktop and moving application processing and
               management from individual desktops to a centralized server-based
               infrastructure. For example, in a 2,500-PC computing environment,
               a leading research firm has calculated that a server-based
               approach would have saved approximately $4.5 million in 1997 and,
               as computing complexity continues to grow, could save
               approximately $16 million in 2001.

           .   Connects Diverse Computing Platforms. Today's computing
               infrastructures are a mix of desktop devices, network connections
               and operating systems. Enterprise-wide communication often
               requires 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 desktop technologies, such as Sun
               Microsystems' and IBM's network computers, access to UNIX is
               impractical without server-based products. To rewrite an
               application for each different desktop 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 desktops,
               utilizing their existing computing infrastructure, without
               rewriting a single line of code or changing or reconfiguring
               desktop hardware. This means that enterprises can maximize their
               investment in existing technology and allow users to work in
               their preferred desktop environment.

                                       5
<PAGE>

  .  Application Service Providers. Many large enterprises have made significant
     investments in developing, marketing and selling enterprise-wide software
     solutions. Our server-based technology is designed to allow Windows, Linux
     and UNIX access from any desktop connected to the Internet. Today's
     packaged applications can be accessed quickly, easily and without
     modification.

  .  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 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 desktop 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 application service providers, bandwidth typically is the
     top recurring expense when web-enabling or renting access to applications
     over the Internet. Our highly efficient 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 all 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 manufacturing flexibility, time-to-market and
     customer satisfaction.

Products

          Our products are designed to allow enterprises to access Windows, UNIX
and Linux applications from centrally managed servers without modification.
Currently, our products provide the UNIX and Linux server-based software.  With
the integration of the Bridges for Windows (formerly known as jBridge)
technology in early 2000, the current product line will be extended to access
Windows applications from centrally managed servers, widening our product
offering and opportunities.

  .  GO-Global is a server-based software product for high performance access to
     UNIX and Linux applications from any Windows PC located virtually anywhere
     on an organization's network, the Internet or even over a phone line. We
     began selling GO-Global in March 1997.

  .  GO-Joe is a server-based software product for accessing Unix and Linux
     applications, from virtually any Java-enabled desktop or device, including
     the Sun Microsystems and IBM network computers, desktops and hand-held
     devices with web browsers such as Microsoft Internet Explorer(TM) or
     Netscape Navigator(TM). We began selling GO-Joe in July 1998. Sun
     Microsystems began shipping GO-Joe for distribution with its network
     computers in July 1998.

  .  GO-Between is a server-based software product for accessing UNIX and Linux
     applications from Microsoft's Windows NT, terminal server edition. GO-
     Between minimizes the impact on server resources over traditional emulator
     solutions for accessing UNIX and Linux applications from Microsoft's
     terminal server edition products. This increases the number of simultaneous
     users that may access UNIX from any one terminal server edition server.
     Microsoft has released a technical whitepaper describing the UNIX access
     benefits of GO-Between for terminal server edition users. We began shipping
     GO-Between in October 1998.

  .  Bridges for Windows is a technology we acquired from Corel in December
     1998. It will enable GO-Global, GO-Between and GO-Joe to access server-
     based Windows applications.

                                       6
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     With the anticipated integration of the Bridges for Windows technology in
     early 2000, we will offer complete cross platform access to Windows
     applications from virtually any desktop. Since the applications are not
     running on the desktop, even a non-Windows desktop will be able to access
     Windows applications. Windows applications can be accessed from desktop
     computers using various operating systems such as Macintosh, UNIX, Linux
     and OS/2, which will appear and function as if they were running locally on
     the desktop.

Target Markets

          The market for our products comprises all organizations that need to
access Windows, UNIX and/or Linux applications from a wide variety of desktops
from any location, including over the Internet and dial-up lines. This includes
large organizations, such as Fortune 1000 companies, government and educational
institutions. Our software is designed to allow these enterprises to use the
best desktop 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:

  .  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 GO-Global 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.

  .  Enterprises That Employ Microsoft's Terminal Server Edition. A leading
     research firm estimates that the Microsoft terminal server market will
     start to accelerate rapidly, with more than 390,000 host servers installed
     by the end of 2000. Each terminal server edition server supports a minimum
     of 10 users, such that the estimated user base for terminal server editions
     will be at least 3.9 million in 2000. A leading research firm reports that
     38% of surveyed terminal server edition users will require access to UNIX
     applications. Our management believes the terminal server edition market to
     be a significant opportunity for GO-Between.

  .  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
     enterprise computing strategies. A leading research firm projects that
     approximately 25 million business users access computing resources remotely
     in 1998 and that this number will grow to approximately 137 million
     worldwide in 2003, with 60% of these users still connecting via low-
     bandwidth modems. Our protocol is designed to enable highly efficient low-
     bandwidth connections.

  .  Application Service Providers. High-end software applications in the fields
     of human resources, enterprise resource planning, enterprise relationship
     management and others historically only have 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.

  .  Extended Enterprise Software Market. Extended enterprises allow access to
     their computing resources to their customers, suppliers, distributors and
     other partners, 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 Internet has facilitated this development and a
     leading research firm has predicted the extended enterprise software market
     will grow to an estimated $5.76 billion in 2002. 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.

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     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
intend to seek suitable new alliances in order to improve our technology and/or
enhance our ability to penetrate relevant target markets. The alliances that we
currently are focusing on are those that have immediate revenue generating
potential, strengthen our position in the server-based software market, add
complementary capabilities and/or raise awareness of our products.

     Sun MicroSystems.  In October 1996, Sun MicroSystems licensed our GO-Joe
for distribution within its network computers and our server component for
distribution with its UNIX computers and operating system. Pursuant to the Sun
Microsystems agreement, Sun has a perpetual, non-exclusive, world-wide and fully
paid up license to, among other things, distribute and sell GO-Joe with its
network computers and to distribute our server component with its UNIX computers
and operating systems.  The license to Sun also allows Sun employees to use GO-
Global internally and remotely. In addition to what is provided for in the Sun
agreement, Sun's network computers currently display the GO-Joe logo, our name
and our website address each time GO-Joe is started, further increasing company
and product awareness. We plan to work with Sun's sales force and resellers to
sell and promote GO-Global and GO-Between as UNIX access solutions for users of
PCs and multi-user NT. As of December 31, 1999, Sun paid us a $2,500,000 one-
time royalty payment for completion of product delivery requirements and for a
site license for GO-Global. The Sun agreement is expected to terminate in
December 2000, although Sun will continue to have rights to our products
licensed pursuant to the agreement after its termination.

     Compuware.  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 will license 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 customers will use GraphOn's server-based solution to provide
enterprise-level UNIFACE applications over the Internet. Compuware will private
label and completely integrate Bridges for Windows into its UNIFACE deployment
architecture as UNIFACE Jti.

     Corel Corporation.  In December 1998, we acquired Corel's jBridge (now
known as Bridges for Windows) technology and its jBridge development team, in
exchange for our securities.  Bridges for Windows is designed to allow any
device running Java to access 32-bit Windows applications remotely and
unmodified.  When combined with our UNIX products, we believe that Bridges for
Windows will provide our customers with a complete enterprise solution, linking
any of such platforms to virtually any desktop over virtually any connection.

     In addition, we entered into a strategic alliance with Corel. We intend
through this alliance to promote our products to Corel's Windows, UNIX and Linux
customers. The alliance has a one year term ending in July 2000 which is
renewable by mutual consent for successive one year periods, and is terminable
at will by either party.

     In October 1999, we entered into an agreement with Corel pursuant to which
we licensed to Corel the right to include our Bridges for Windows technology
with any of Corel's applications.  Under this non-exclusive perpetual license,
Corel will bundle our Bridges for Windows software with certain of its
applications, beginning with its WordPerfect Office 2000 suite and, in the
future, will fully  integrate our software into these applications.  We are to
receive $1,500,000 for this license, of which $1,455,000 has been recognized to
date.

     Alcatel Italia. 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 will license our GO-Global thin client PC X server software
for inclusion with Alcatel's Turn-key Solution software, an optical networking
system. Alcatel customers are expected to use GraphOn's server-based solution to
access Alcatel's UNIX/X Network Management Systems applications from T-based
PCs. In addition, Alcatel will deploy GO-Global internally to provide Alcatel
employees with high-speed network access to Alcatel's own server-based software
over dial-up, LANs and WANs.

                                       8
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Sales, Marketing and Support

          Our customers, to date, are primarily Fortune 1000 companies and large
government organizations. Among our current customers are the following:

<TABLE>

<S>                                                            <C>
Ameritech Corporation                                             Johnson & Johnson
Amoco Corporation                                                 Lucent Technologies, Inc.
AT&T Corporation                                                  Motorola, Inc.
Canadian Meteorological Centre                                    Nortel Technology
Cisco Systems, Inc,                                               National Semiconductor Corp.
Compuware                                                         Pfizer Inc.
Corel Corporation                                                 Shell Oil Company
Ericsson Telecommunicatie B.V.                                    Sun Microsystems, Inc.
Hewlett-Packard Company                                           United States Geological Survey
IBM
</TABLE>

         While previously most of our revenues were from direct sales and OEM
agreements, we currently are developing and expanding relationships with a
select number of resellers. We expect to benefit from these relationships by
availing itself of their established customer-base, co-marketing programs and
marketing and sales capabilities. Such resellers include value-added resellers,
system integrators and OEM licensees.  Our sales and marketing efforts will be
focused on increasing product awareness and demand among large enterprises and
developing formal distribution relationships with UNIX and Windows-oriented
resellers. Current marketing activities include a targeted direct mail campaign,
tradeshows, production of promotional materials, public relations and
maintaining an Internet presence for marketing and sales purposes.

          Due to the nature of our products, remote access via telephone lines
or the Internet can be used to troubleshoot and diagnose problems. We provide
technical support and training to OEMs and resellers that function as the first
line of support for their own customers. We provide 90-day online Internet, e-
mail, fax and telephone-based services for technical support and software
upgrades at no charge. Additionally, purchasers of our products can choose to
purchase an annual extended maintenance program.

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 $840,200 and $2,466,200 in
research and development in 1998 and 1999, respectively. We expect increased
expenditures in 2000. We have made significant investments in our protocol and
in the performance and development of our server-based software.

          In May 1998, we hired a group of eight software engineers located in
Bellevue, Washington.  They have experience in Java, protocol technology and
various Microsoft Windows operating systems.  They are working to enhance our
existing software products as well as beginning to conceptualize and architect
future products. In December 1998, we hired nine additional software engineers
located in Concord, New Hampshire in connection with the acquisition of the
Bridges for Windows technology from Corel.  This group has substantial Windows
and Java experience. We plan to continue to add software engineers in order to
expand our research and development capabilities, although there can be no
assurances that qualified personnel will be available to us as needed.

Operations

          We control 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 also are performed by us. CD-ROM and floppy disk
duplication, printing of documentation and packaging are accomplished through
outside vendors. We generally ship products 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.

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Competition

         The server-based software market in which we participate is highly-
competitive, although we believe 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 desktop hardware and
connections. Our competitors include manufacturers of conventional PC X Server
software and competition is expected from these and other companies in the
server-based software market. Competitive factors in the market in which we
compete 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., SCO, 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, believed to have over 50% of that market. WRQ, Network Computing
Devices and NetManage also offer traditional PC X Server software and have
minority positions within that market.

         SCO introduced Tarantella, a server-based Java-to-Unix connectivity
product which competes with GO-Joe. However, SCO's principal product is a UNIX
operating system that competes with UNIX vendors like Sun Microsystems and IBM.
We believe that SCO, as a competitor to the other UNIX vendors, will have
difficulty in penetrating enterprises who utilize other vendors' UNIX operating
systems, such as Sun Microsystems and IBM.

Proprietary Technology

         We licensed key components of our server-based technology from three
software developers to whom we paid royalties pursuant to exclusive license
agreements.  Such royalty payments were based on a percentage of net revenues
received by us for sales of our products that contain the licensed technology.
The royalty rate under all of these agreements was an aggregate of 4.8% and 2.9%
for 1999 and 2000.  We purchased this licensed technology for an aggregate
purchase price of $378,000 in the third quarter of 1999.  The remaining portion
of such purchase price is $170,000, which amount was paid in the first quarter
of 2000.

         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. See "Legal Proceedings." 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 Window 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 10, 2000, we had a total of 56 employees, including 14 in
marketing, sales and support, 32 in research and development and 10 in
administration and finance. No employees are covered by a collective bargaining
agreement.

                                       10
<PAGE>

ITEM 2.  PROPERTIES

        We currently occupy approximately 7,000 square feet of temporary office
space in Morgan Hill, California pursuant to a lease which expires when we move
into our new permanent headquarters.  We have entered into a five year lease for
approximately 13,000 square feet in Morgan Hill, California.  Such space will be
available to us in July or August 2000.  We were required by the City of
Campbell, California to vacate our prior headquarters due to the acquisition by
Campbell of the office building where such headquarters were located.  The City
of Campbell has agreed to pay us $85,000 to facilitate our relocation.  We also
occupy leased facilities in Bellevue, Washington, Concord, New Hampshire, and
Reading, United Kingdom pursuant to leases expiring at varying dates through
2003.

         The aggregate amount of the annual lease payments under all of our
current leases (including our new permanent headquarters) is approximately
$500,000. We believe our current facilities will be adequate to accommodate our
needs until the end of 2000.

ITEM 3.  LEGAL PROCEEDINGS

         In late 1996, we disclosed numerous aspects of our proprietary
technology on a confidential basis to Insignia Solutions plc, some of whose
assets were later acquired by Citrix Systems, Inc. When we learned of that
acquisition in January 1998, we made inquiry of Citrix and Insignia seeking
assurances that there had been no potential misuse of our confidential
information.

         On November 23, 1998, Citrix instituted litigation in the United States
District Court for the Southern District of Florida seeking a judicial
declaration that neither Citrix nor Insignia had misappropriated or infringed
upon our proprietary technology or breached the non-disclosure agreement. We
responded by filing a motion to dismiss the action for lack of jurisdiction. On
May 14, 1999, the court granted our motion and dismissed the case. Essentially,
the Florida court held there was no existing dispute between us and Citrix.
Citrix has appealed the dismissal of its case to the United States Court of
Appeals for the Eleventh Circuit, where the matter is awaiting oral argument.

         On October 4, 1999, Insignia filed a complaint against us in the
Superior Court of the State of California, Santa Clara County, alleging that we
had attempted to disrupt Insignia's sale to Citrix, on February 5, 1998, of
assets related to Insignia's NTRIGUE software product line. The complaint
alleges that, as a result of such efforts, Insignia was required by Citrix to
place $8.75 million in escrow to enable Citrix to deal with potential claims by
us of proprietary rights in the assets being sold. The complaint seeks
unspecified general and punitive damages. On December 13, 1999 we filed an
answer denying the material allegations in Insignia's complaint.

         Insignia's complaint also names Citrix and its UK subsidiary as
defendants, alleging that these companies have breached their February 5, 1998
contract with Insignia by refusing to release money from the escrow. The
complaint seeks compensatory damages from Citrix related to that company's
refusal to release purchase money from escrow for payment to Insignia and other
unspecified damages.

         On March 14, 2000, we filed a lawsuit against Citrix Systems, Inc. and
Insignia Solutions in California state court.  The complaint asserts these
claims against Citrix and Insignia: (1) trade secret misappropriation; (2)
breach of contract; and (3) unfair competition.

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

         No matters were submitted to a vote of stockholders of the Registrant
during the fourth quarter of the fiscal year ended December 31, 1999.

                                       11
<PAGE>

Executive Officers of the Registrant

    The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                    Name                       Age                   Position
                    ----                       ---                   --------
<S>                                             <C>      <C>
Robert Dilworth                                  58       Chairman of the Board of Directors
Walter Keller                                    49       President, Chief Executive Officer and Director
Robin Ford                                       49       Executive Vice President, Marketing and Sales and Director
Eric Lefebvre                                    33       Vice President, Business Development
William Swain                                    59       Chief Financial Officer and Secretary

</TABLE>

     Robert Dilworth was appointed our Chairman in December 1999. He previously
served as one of our directors since July 1999 and of GraphOn-CA between July
1998 and July 1999. Mr. Dilworth served as Chairman of the Board of Metricom,
Inc. from 1996 until February 2000, and has served as a director of Metricom,
Inc. since 1987. He served as Metricom's CEO from 1987 to 1998. Metricom is a
leading provider of wireless data communication and network solutions. Prior to
joining Metricom, from 1985 to 1987, Mr. Dilworth served as President of Zenith
Data Systems Corporation, a microcomputer manufacturer. Earlier positions
include CEO at Morrow Designs, CEO at Ultramagnetics, Division Manager at Varian
Associates, 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 and Transcept Corporation.

     Walter Keller has served as our President since July 1999 and of GraphOn-CA
between 1982 and July 1999. Mr. Keller, who previously served as our Chairman
since July 1999 until succeeded by Mr. Dilworth in December 1999 and as Chairman
of GraphOn-CA between 1982 and July 1999, was Chief Financial Officer of
GraphOn-CA from 1991 until February 8, 1999. Prior to the founding of GraphOn-CA
in 1992, Mr. Keller's experience included executive staff and senior level
management, sales and engineering positions at United Technologies Corporation
and Honeywell Inc. Mr. Keller is a member of the Society of Professional
Engineers and holds a B.S. in Mechanical Engineering and a M.S. in Electrical
Engineering from Santa Clara University in Santa Clara, CA. Mr. Keller is the
husband of Ms. Ford.

     Robin Ford has served as one of our directors since November 1999 and as
our Executive Vice President, Marketing and Sales since July 1999 and of
GraphOn-CA between 1996 and July 1999. Ms Ford was Vice President, Marketing and
Sales of GraphOn-CA from 1991 to 1996 and held various positions in sales and
marketing at GraphOn-CA from 1983 to 1991. Ms. Ford was a director of GraphOn-CA
from October 1991 to June 1998. Prior to joining GraphOn-CA, Ms. Ford held
various sales management and technical positions at Intel Corporation, National
Semiconductor Corporation and Grid Systems Corporation. Ms. Ford's
responsibilities with GraphOn and GraphOn-CA have included building and
maintaining GraphOn's and GraphOn-CA's sales and marketing operations and
obtaining major government and OEM contracts. Ms. Ford is the wife of Mr.
Keller.

      Eric Lefebvre has served as our Vice President, Business Development since
July 1999 and of GraphOn-CA between June 1999 and July 1999. From April 1997
through June 1999, he served as Director of Strategic Business and Alliances at
Corel Corporation where he was responsible for developing strategic alliances
and seeking new areas of business. From April 1996 to May 1997, Mr. Lefebvre
served as International Corporate Communications Manager at Corel. From November
1991 to April 1996, he served at Corel as Communication and Market Development
Manager and Marketing Manager (Europe). Mr. Lefebvre holds a Masters of
International Affairs from Carleton University and an Honours B.Sc. in
Government and Politics and Business Management from the University of Maryland.

                                       12
<PAGE>

       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 CFO and
Secretary of Metricom Incorporated, a publicly traded, wireless data
communications service provider, from January 1988 until June 1997, during which
time he was instrumental in both 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 top financial positions
with leading companies in the computer industry, including Morrow Designs,
Varian Associates and Univac. Mr. Swain holds a Bachelors degree in Business
Administration from California State University of Los Angeles and is a
Certified Public Accountant in the State of California.


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

                                       13
<PAGE>

                                    PART II

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

          Since August 26, 1999, our common stock, Class A redeemable warrants
and Class B redeemable warrants have been quoted on The Nasdaq SmallCap Market
under the symbols GOJO, GOJOW and GOJOZ, respectively. Prior to such date, such
securities were quoted on the OTC Bulletin Board. The following table sets forth
the range of the high and low bid quotations of such securities on The Nasdaq
SmallCap Market and the OTC Bulletin Board for the periods indicated:

<TABLE>
<CAPTION>
                                                                            Class A
                                                                           Redeemable                            Class B
                                        Common Stock                        Warrants                        Redeemable Warrants
                            --------------------------------  ------------------------------------    ------------------------------
Quarter Ende                     High               Low              High                Low              High               Low
-----------------           -------------      -------------  ---------------        -------------     ----------         ----------

<S>                            <C>                <C>                <C>                  <C>        <C>                <C>
March 31, 1998                  5-1/2              4-3/4              1-1/4                7/16              3/4               1/4

June 30, 1998                   5-5/16             4-3/4              1-1/4                3/8               1/2              3/16

September 30, 1998              5-3/8              4-3/4              1-3/8                1/32              1/2               1/4

December 31, 1998               5-7/16             4-11/16            15/16                11/16             5/8              1/16

March 31, 1999                  5-3/8              5                  1-7/32               1-1/16              1              7/16

June 30, 1999                   7-5/16             5-1/8              2-3/16               1-1/16          1-3/4             11/16

September 30, 1999              9-1/2              3                  4-5/16               1-1/8          3-9/16               3/4

December 31, 1999               23-7/16            6-1/8              14-11/16             3-1/8        12-13/16             2-1/6
</TABLE>

    The above quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not necessarily represent actual
transactions.

    On March 23, 2000, the last reported closing price of our common stock was
$22.00. On that date, there were 131 recordholders of our common stock, although
we believe that there are other persons who are beneficial owners of shares of
our common stock held in street name.

    We have never declared or paid any dividends on our common stock.  We do not
anticipate paying any cash dividends in 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 the Board of Directors and will be dependent upon our
financial condition, operating results, capital requirements and such other
factors as the Board of Directors deems relevant.

                                       14
<PAGE>

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, 1999, 1998, 1997 and 1996
and for the years ended December 31, 1999, 1998, 1997 and 1996 have been derived
from our financial statements which have been audited by BDO Seidman LLP,
independent public accountants.  The data for the year ended December 31, 1995
has been derived from our unaudited condensed financial statements which, in the
opinion of management, include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the information set
forth in such financial statements.

(Amounts in thousands, except share and per share data)
Statement of Operations Data:
<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                       --------------------------------------------------------------------------------------
                                            1999               1998                  1997             1996 (1)     1995 (1)
                                            ----               ----                  ----             --------     --------
<S>                                 <C>                  <C>                    <C>              <C>            <C>
Revenues.........................      $    3,635          $    2,124             $    1,926        $      595    $      588
                                       ------------        ----------             ----------        ----------    ----------
Costs of revenues................           2,800                 344                    463               336           213
                                       ------------        ----------             ----------        ----------    ----------
Gross profit.....................             835               1,780                  1,463               259           375

Operating expenses:
  Selling and Marketing..........           3,279               1,440                    827               193            --
  General and Administrative.....           2,265               1,119                    325               218           389
  Research and Development.......           2,467                 840                    191                42            59
                                       ----------          ----------             ----------         ---------    ----------
    Total operating Expenses.....           8,011               3,399                  1,343               453           448
                                       ----------          ----------             ----------        ----------    ----------
(Loss) income from operations....          (7,176)             (1,619)                   120              (194)          (73)

Other income (expense), net......
                                              144                (529)                     5                 6            --
                                       ----------          ----------             ----------        ----------    ----------
(Loss) income before provision
 for income taxes................          (7,032)             (2,148)                   125              (188)          (73)
Provision for income taxes.......               1                   1                      1                 1           ---
                                       ----------          ----------             ----------        ----------    ----------

Net (loss) income................     $    (7,033)         $   (2,149)            $      124        $     (189)  $       (73)
                                      ===========         ===========             ==========        ==========    ==========
Basic and diluted (loss income
 per share.......................          $(0.71)             $(0.57)                 $0.04            $(0.06)  $        --
                                      ===========          ==========             ==========        ==========    ==========
Weighted average common shares
 outstanding.....................
                                        9,950,120           3,770,863              3,345,600         3,345,600     3,345,600
                                       ==========          ==========             ==========        ==========    ==========
</TABLE>

Balance Sheet Data:

<TABLE>
<CAPTION>
                                   December 31, 1999   December 31, 1998   December 31, 1997   December 31, 1996   December 31, 1999
                                   -----------------   -----------------   -----------------   -----------------   -----------------

<S>                                <C>                 <C>                 <C>                 <C>                 <C>
Working capital..................       $11,941                $1,193               $ 23             $ 61                  $183
Total assets.....................        15,224                 6,544                733              825                   225
Total liabilities................           843                 1,202                615              823                    42

Stockholders' equity.............        14,381                 5,342                118                2                   183
</TABLE>
___________
(1)  During the years ended December 31, 1996 and 1995, we were engaged in the
     business of manufacturing, marketing and selling computer terminal hardware
     in an industry significantly different from that in which we presently do
     business. See "Management's Discussion and Analysis of Financial Condition
     and Results of Operations."

                                       15
<PAGE>

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

Forward Looking Statements

     The following discussion of the financial condition and results of
operations of GraphOn Corporation contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.  Our actual results and the timing of certain
events could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth under "Risk Factors" and elsewhere in this Annual Report and in other
documents filed by the Company with the Securities and Exchange Commission.  The
following discussion should be read together with the financial statements and
the related notes included in Item 8 of this Report and which are deemed to be
incorporated into this section.

Results of Operations

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

   Revenues.  Software revenues have been derived primarily from two sources:
GO-Global product sales and OEM licensing revenues for Bridges for Windows, GO-
Joe, GO-Global and GraphOn's server software. Total revenues for the twelve-
month period ended December 31, 1999 increased by $1,510,300, or 71.1%, to
$3,634,500 from $2,124,200 for the same period in 1998.  The most important
contributing factor was an increase in OEM license sales in 1999 as compared to
1998.  Revenues from OEM licensing agreements from Corel Corporation, IBM and
Sun Microsystems represented 40.0%, 13.3% and 10.3%, respectively, of total
revenues in 1999. Revenues from OEM license agreements with Sun Microsystems,
IBM and Corel, collectively, represented 67.0% of revenues in 1998.

     Revenues also include service fees from maintenance contracts and training
services.  We anticipate that many of our customers will enter into and
periodically review maintenance contracts to assure continued product updates
and support. Service revenue was $178,100 or 4.9% of revenue in 1999 and
$330,700, or 15.6% of revenue in 1998.

     Cost of Revenues.  Cost of revenues consists primarily of royalty payments,
materials such as manuals, media and packaging, expenses associated with product
maintenance and enhancements such as software corrections and updates, and
amortization of capitalized research and development expenses.  In addition,
cost of revenues includes the amortization expense recorded in connection with
the acquisition of technology from Corel Corporation.  Research and development
costs for new product development, after technological feasibility is
established, are treated as "capitalized software" on our balance sheet and
subsequently expensed as cost of revenues over the shorter of three years or the
remaining estimated life of the products, whichever produces the higher expense
for the period.

     Cost of revenues - Amortization of Purchased Technology for the year ended
December 31, 1999 increased by $2,430,600, or 100%, to $2,430,600 from $0 for
the same period in the prior year due to amortization expense recorded in
connection with the acquisition of technology from Corel Corporation.

     Sales and Marketing Expenses.  Sales and marketing expenses primarily
consist of salaries, sales commissions, travel expenses, trade show related
activities and promotional costs. Sales and marketing expenses increased by
$1,838,800, or 127.7%, to $3,279,100, or 90.2% of revenue, for the twelve months
ended December 31, 1999 from $1,440,300, or 67.8% of revenue, for the same
period in 1998. These increases primarily are attributable to the addition of
sales and marketing personnel, a substantial increase in trade show, promotional
and public relations activities, and amortization of deferred compensation for
options issued to consultants. We expect that sales and marketing expenses will
continue to increase in dollar amounts, but decline as a percentage of total
revenues, as we continue to hire additional sales and marketing personnel,
establish reseller channels and expand promotional activities.

                                       16
<PAGE>

     General and Administrative Expenses.  General and administrative expenses
primarily consist of salaries and legal and professional services. In addition,
our corporate rent, utilities and administrative employee benefits are included
in general and administrative expenses. General and administrative expenses
increased by $1,146,600, or 102.5%, to $2,265,200, or 62.3% of revenue, for the
twelve months ended December 31, 1999 from $1,118,600, or 52.7% of revenue, for
the same period in 1998.  This increase is primarily due to:

     .  an increase in legal services;
     .  hiring additional administrative personnel;
     .  we recognized non-cash compensation charges in 1999 due to the
        recognition of deferred compensation charges in the latter part of 1998.

     Research and Development Expenses.   Research and development expenses
consist primarily of salaries and benefits to software engineers, supplies and
payments to contract programmers and rent on facilities. Research and
development expenses increased by $1,626,000, or 193.5%, to $2,466,200, or 67.9%
of revenue, for the twelve months ended December 31, 1999 from $840,200, or
39.6% of revenue, for the same period in 1998.  The increase was primarily due
to the addition of software engineers and the rent on new facility locations.
As of December 31, 1999, we had 30 software engineers compared to 15 as of
December 31, 1998.  We believe that a significant level of investment for
research and development is required to remain competitive and that such
expenses are expected to continue to increase over the foreseeable future.

     Interest Expense. Interest expense decreased in 1999 as compared to 1998
due to the repayment of a convertible note payable in January 1999.

     Provision for Income Taxes.  At December 31, 1999, we had approximately
$7.2 million in federal net operating loss carryforwards. The federal net
operating loss carryforwards will expire through 2019, 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 in the amount of $2.8 million will be limited to
approximately $400,000 per year until such carryforwards are fully utilized. To
date, we have utilized a portion of our net operating loss carryforwards to
reduce our overall income tax liability.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Revenues.  Total revenues for the year ended December 31, 1998 were
$2,124,200, an increase of 10.3% over the same period in 1997. The most
important contributing factor was a 10.4% increase in software-related revenues
to $1,971,000 in 1998 as compared to $1,785,000 in 1997. Our software revenues
have been derived primarily from two sources: GO-Global product sales and OEM
licensing revenues for GO-Joe, GO-Global and our server software. Revenues from
the Sun Microsystems OEM licensing agreement represented 70.0% of total revenue
in 1997 and from OEM license agreements with Sun Microsystems, IBM and Corel,
collectively, represented 67.0% of revenues in 1998.

     Cost of Revenues. Cost of revenues was reduced to 16.2% of revenue in 1998,
as compared to 24.1% in 1997. This primarily is attributed to the reduction in
the royalty rate paid to outside software developers under our exclusive
licensing agreements.

     Sales and Marketing Expenses. Sales and marketing expenses primarily
consist of salaries, sales commissions, travel expenses, trade show related
activities and promotional costs. Sales and marketing expenses increased 74.1%
to $1,440,300, or 67.8% of revenue, in 1998 from $827,300, or 43.0% of revenue,
in 1997. This increase primarily is attributable to the addition of sales and
marketing personnel and a substantial increase in trade show, promotional and
public relations activities.

     General and Administrative. General and administrative expenses primarily
consist of salaries and legal and professional services. In addition, our rent,
utilities and administrative employee benefits are included in general and
administrative expenses. General and administrative expenses increased 244.5% to
$1,118,600, or 52.7% of

                                       17
<PAGE>

revenue, in 1998, from $324,700, or 16.9% of revenue, in 1997. This increase
primarily is attributed to legal services, hiring additional administrative
personnel and increased rent, utilities and benefit expenses necessary to
support expanding operations.

     Research and Development.  Research and development expenses consist
primarily of salaries and benefits to software engineers, supplies and payments
to contract programmers.  Research and development expenses increased by 341.1%
to $840,200, or 39.6% of revenue, in 1998, from $190,500, or 9.9% of revenue, in
1997.

     Interest Expense. Interest expense increased in the amount of $519,800 in
1998 primarily due to the recording of interest expense in the amount of
$475,000 on the convertible note payable as a result of the issuance of 278,800
shares of common stock at $.09 per share in connection with such note.

Liquidity and Capital Resources

     In September 1998, we commenced a private placement of shares of our common
stock and warrants which, when completed in January 1999 resulted in aggregate
proceeds of $5,162,900 from our sale in this placement of 2,878,815 shares of
our common stock and warrants to purchase an additional 575,763 shares of our
common stock.

     In February 1999, we sold 62,525 shares of our common stock and warrants to
purchase an additional 676 shares of our common stock, for gross proceeds of
$97,200.

     On July 12, 1999, we completed a merger with Unity First Acquisition Corp.
pursuant to which each share of our common stock was exchanged for 0.5576 shares
of Unity common stock and each outstanding option and warrant to purchase our
common stock was exchanged for options or warrants to purchase 0.5576 shares of
Unity common stock. The transaction was a forward merger with Unity surviving
the merger and changing its name to GraphOn Corporation and with GraphOn's
management team continuing in their existing roles. The merger provided us with
$5,425,000 in net cash proceeds which was previously held in trust for Unity
until it consummated a merger with an operating business.

     In December 1999, we issued 1,353,028 shares of our common stock in
connection with the exercise of underwriter units and warrants, resulting in net
cash proceeds of $8,402,000.

     As of December 31, 1999, we had cash and cash equivalents of $8,481,500 as
well as $2,027,600 in available-for-sale securities.

     In January 2000, we issued 1,494,767 shares of our common stock in
connection with the exercise of warrants, resulting in net cash proceeds of
$9,870,900.

     We anticipate that our cash balances as of December 31, 1999, together with
the net proceeds of warrant exercises in January 2000 and anticipated revenue
from operations, 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.

Year 2000 Compliance

     Although we believe that we have adequately addressed the Year 2000
problem, having experienced no failures or disruptions in our internal operating
systems or our products or in those of our third party vendors or suppliers
either on or after January 1, 2000 to date, it is possible that future failures
or disruptions stemming from Year 2000 problems may yet result in our ability to
process transactions, send invoices, accept customer orders or provide customers
with products and services.

Adoption Of New Accounting Pronouncements

     In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 132, "Employer's Disclosure about Pensions
and Other Postretirement Benefits," which standardizes

                                       18
<PAGE>

the disclosure requirements for pension and other post-retirement benefits. The
adoption of SFAS No. 132 did not impact our disclosures.

Recently Issued Accounting Standards And Pronouncements Not Yet Adopted

     In June 1998, FASB issued Statement of Financial Accounting Standard No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
standard requires that every derivative instrument, including derivative
instruments embedded in other contracts, be recorded on the balance sheet as
either an asset or liability measured at its fair value. The standard is
effective for all fiscal years beginning after June 15, 2000.  As we currently
are not a party to any derivative financial instruments and do not anticipate
becoming a party to any derivative instruments, management does not expect this
standard to have a significant impact on our financial statements.


ITEM 7A.  Quantitative And Qualitative Disclosures About Market Risk

     We are not exposed to 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.

                                  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 And
Increase, At Least For The Near Future.

     We have experienced significant losses since we began operations. We expect
to continue to incur significant losses for the foreseeable future. We incurred
net losses of approximately $7,033,400 for the year ended December 31, 1999 and
$2,148,500  for the year ended December 31, 1998. We expect our expenses to
increase as we expand our business but cannot assure you that our revenues will
increase as a result of increased spending. 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:

          .  the degree of success of our recently introduced products;
          .  variations in the timing of and shipments of our products;
          .  variations in the size of orders by our customers;
          .  increased competition;
          .  the proportion of overall revenues derived from different sales
             channels such as distributors, OEMs and others;

                                       19
<PAGE>

          .  changes in our pricing policies or those of our competitors;
          .  the financial stability of major customers;
          .  new product introductions or enhancements by us or by competitors;
          .  delays in the introduction of products or product enhancements by
             us or by competitors;
          .  the degree of success of new products;
          .  any changes in operating expenses; and
          .  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 a significant portion 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 decline.

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. We license essential components of our core technology
from two different parties to whom we pay royalties, although we hold an option,
which is exercisable in the year 2001, to purchase the technology under such
licenses. These licenses may be terminated upon material breach of the
agreements, and if they are terminated our business will be harmed. 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 us and any third party may adversely affect
our business.

                                       20
<PAGE>

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 server-based 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 server-based 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 server-based 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 value-added resellers, distributors, OEMs, systems integrators and other
vendors to encourage these parties to recommend or distribute our products and
to add resellers both domestically and internationally. We currently invest in
and intend to continue to invest significant resources to expand our sales and
marketing capabilities. We cannot assure you that we will be able to attract
and/or retain resellers to market our products effectively.  Our inability to
attract resellers and the loss of any current reseller relationships could have
a material adverse effect on our business, results of operations and financial
condition. Additionally, we cannot assure you that resellers will devote enough
resources to provide effective sales and marketing support to our products.

The Bankruptcy On November 15, 1991 Of A Predecessor Company May Expose Us To
Creditors' Claims Of Up To $2.23 Million And Interest, If Any

     On November 15, 1991, GraphOn-CA filed for reorganization under Chapter 11
of the United States Bankruptcy Code and, later, submitted a Debtor's Proposed
Amended Plan of Reorganization. The plan was confirmed by order of the
bankruptcy court on July 11, 1994 and the court established a plan of payment
for the benefit of our creditors. Under the bankruptcy court order, we
established a disbursement account into which 50% of the ongoing terminal
royalties we receive from OEMs with whom we had a current relationship must be
deposited to pay named creditors. For all but one unsecured creditor, payments
from the disbursement account were ordered to continue up to the earlier of:

     .  the limit of our liability to each unsecured creditor; or
     .  through the year 2000.

However, the largest unsecured creditor's claim, which currently totals
approximately $964,000, must be paid from available funds, if any, in the
disbursement account until such amount is fully paid. Our total remaining
liability under the bankruptcy, as of June 30, 1999, is limited to the lesser
of:

     .  approximately $2,230,000; or
     .  50% of future ongoing terminal royalties we receive from the OEMs.

     To date, only royalties received pursuant to some of our license agreements
existing at the time of the bankruptcy have been deposited into the disbursement
account, and we have not deposited into such account or paid creditors out of
royalties received or currently received on our subsequently developed and
licensed server-based technology. We believe that our royalty payment
obligations under the bankruptcy court order relate only to licenses in place as
of July 11, 1994, and no payments to creditors have been made since November 14,
1997. We cannot assure you that a court will not interpret our obligation to
include payments to the disbursement account from royalties earned from
subsequent licenses of the server-based technology or licenses that we secure in
the future, or that our current technology will not be deemed derivative of our
technology existing at July 11, 1994. Consequently, we cannot assure you that we
will not be required to repay creditors referenced in the bankruptcy proceedings
the full amount of our liability, which is approximately $2,230,000, and
interest on any payments that a court deems to

                                       21
<PAGE>

be owed based upon a ruling that our interpretation is wrong. In addition, we
cannot guarantee you that a creditor will not assert a claim for payment out of
the royalties from subsequent licenses of the server-based technology. Such
claims could be costly and time-consuming for us. If any of these events takes
place, it could have a material adverse effect on our business, financial
condition and results of operations.

Our Failure To Manage Expanding Operations Could Adversely Affect Us.

     To exploit the emerging server-based 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:

     .  continue to implement and improve our operational, financial and
        management information systems;
     .  hire and train additional qualified personnel;
     .  continue to expand and upgrade core technologies; and
     .  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.

Competition For Key Management And Other Personnel In Our Industry Is Intense,
And We May Not Be Successful In Attracting And Retaining These Personnel.

          Our success and business strategy is dependent in large part on our
ability to attract and retain key management and other personnel.  Such
individuals are in high demand and often have competing employment offers. In
particular, our success depends on our ability to retain the services of Mr.
Walter Keller, our President and Chief Executive Officer, and Ms. Robin Ford,
our Executive Vice President of Marketing and Sales.  We have entered into
employment agreements with these individuals that each contain non-competition
and confidentiality covenants. We currently anticipate the need to attract
additional sales, marketing, financial and software engineer personnel in the
near future. Competition for such personnel in the computer software and
services industry is intense, and therefore, we cannot assure you we will be
able to attract or retain such personnel. The loss of the services of one or
more members of our management group or the inability to retain or hire
additional personnel as needed may have a material adverse effect on our
business.

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.

                                       22
<PAGE>

ITEM 8.   Financial Statements and Supplementary Data.

                         Index to Financial Statements
                         -----------------------------

                                                                       Page

Independent Auditors' Report...........................................  24

Balance Sheets as of December 31, 1999 and 1998........................  25

Statements of Operations and Comprehensive Loss for
the Years Ended December 31, 1999, 1998 and 1997.......................  27

Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997.......................................  28

Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.......................................  29

Summary of Accounting Policies.........................................  30

Notes to Financial  Statements.........................................  37

                                       23
<PAGE>

Independent Auditors' Report



To the Board of Directors and Shareholders of
GraphOn Corporation

We have audited the accompanying balance sheets of GraphOn Corporation as of
December 31, 1999 and 1998 and the related statements of operations and
comprehensive loss, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1999.  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 generally accepted auditing
standards.  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 financial statements referred to above present fairly, in
all material respects, the financial position of GraphOn Corporation as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.

/s/ BDO Seidman, LLP

San Jose, California
January 27, 2000

                                      24
<PAGE>

                                                             GraphOn Corporation


                                                                  Balance Sheets

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

<TABLE>
<CAPTION>
December 31,                                                            1999           1998
-----------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>

Current Assets:
  Cash and cash equivalents                                           $ 8,481,500    $1,798,400
  Available-for-sale securities                                         2,027,600             -
  Accounts receivable, net of allowance for doubtful accounts of
   $25,000 and $25,000, respectively                                    1,670,600       564,700
  Prepaid expenses and other assets                                       604,300        32,100
-----------------------------------------------------------------------------------------------
Total Current Assets                                                   12,784,000     2,395,200
-----------------------------------------------------------------------------------------------

Property and Equipment, net                                               537,000       423,300

Purchased Technology, net                                               1,264,800     3,645,400

Capitalized Software, net                                                 221,800        74,200

Patent                                                                    400,000             -

Other Assets                                                               16,700         6,400
-----------------------------------------------------------------------------------------------

                                                                      $15,224,300    $6,544,500
===============================================================================================
</TABLE>

                                      25
<PAGE>

                                                             GraphOn Corporation


                                                                  Balance Sheets

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

<TABLE>
<CAPTION>
December 31,                                                            1999           1998
----------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>
Liabilities and Shareholders' Equity

Current Liabilities:
  Convertible note payable                                            $         -    $   475,000
  Accounts payable                                                        259,700        115,700
  Accrued expenses                                                        464,000        498,900
  Deferred revenue                                                        119,000        112,600
------------------------------------------------------------------------------------------------
Total Current Liabilities                                                 842,700      1,202,200
------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 6, 10 and 11)

Shareholders' Equity
  Preferred stock, $0.01 par value, 5,000 shares authorized, no
   shares issued and outstanding                                                -              -
  Common stock, $0.0001 par value, 20,000,000 shares authorized,
   12,342,322, and 7,970,336 shares issued and outstanding,
   respectively                                                             1,200            800
  Additional paid-in capital                                           25,413,500      8,430,700
  Deferred compensation                                                (1,472,100)      (566,000)
  Accumulated other comprehensive loss                                     (4,400)             -
  Accumulated deficit                                                  (9,556,600)    (2,523,200)
------------------------------------------------------------------------------------------------
Shareholders' Equity                                                   14,381,600      5,342,300
------------------------------------------------------------------------------------------------
                                                                      $15,224,300    $ 6,544,500
================================================================================================
</TABLE>

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

                                      26
<PAGE>

                                                             GraphOn Corporation


                                 Statements of Operations and Comprehensive Loss

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

<TABLE>
<CAPTION>
Years Ended December 31,                                 1999           1998           1997
-----------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>
Revenues:
  Product sales                                        $   803,100    $   608,700    $  480,000
  Maintenance                                              178,100        330,700         8,200
  OEM licenses                                           1,198,300      1,184,800     1,437,900
  OEM license, related party                             1,455,000              -             -
-----------------------------------------------------------------------------------------------
Total Revenues                                           3,634,500      2,124,200     1,926,100
-----------------------------------------------------------------------------------------------
Cost of Revenues:
  Product sales                                             13,600         28,500        43,500
  Maintenance                                               37,700         22,200        16,600
  OEM licenses                                             318,000        293,500       403,200
  Amortization of purchased technology                   2,430,600              -             -
-----------------------------------------------------------------------------------------------
Total Cost of Revenues                                   2,799,900        344,200       463,300
-----------------------------------------------------------------------------------------------
Gross Profit                                               834,600      1,780,000     1,462,800

Operating Expenses:
  Selling and marketing                                  3,279,100      1,440,300       827,300
  General and administrative                             2,265,200      1,088,700       324,700
  Research and development                               2,466,200        870,100       190,500
-----------------------------------------------------------------------------------------------
Total Operating Expenses                                 8,010,500      3,399,100     1,342,500
-----------------------------------------------------------------------------------------------
(Loss) Income From Operations                           (7,175,900)    (1,619,100)      120,300

Other Income (Expense):

  Interest and other income                                150,100          9,800         7,200
  Interest expense                                          (6,800)      (521,900)       (2,100)
  Loss on sale of available-for-sale securities                  -        (16,500)            -
-----------------------------------------------------------------------------------------------
(Loss) Income Before Provision for Income Taxes         (7,032,600)    (2,147,700)      125,400

Provision for Income Taxes                                     800            800           900
-----------------------------------------------------------------------------------------------
Net (Loss) Income                                       (7,033,400)    (2,148,500)      124,500
Other Comprehensive Loss, net of tax:
  Reclassification adjustment                                    -         12,100             -
  Unrealized holding gain (loss) on investment              (4,100)             -        (8,100)
  Foreign currency translation adjustment                     (300)             -             -
-----------------------------------------------------------------------------------------------
Comprehensive (Loss) Income                             (7,037,800)    (2,136,400)      116,400
===============================================================================================
Basic and Diluted (Loss) Earnings per Common Share     $     (0.71)   $     (0.57)   $     0.04
===============================================================================================
Weighted Average Common Shares Outstanding               9,950,120      3,770,863     3,345,600
===============================================================================================

See accompanying summary of accounting policies and notes to financial statement.
</TABLE>
                                      27
<PAGE>

                                                             GraphOn Corporation


                                              Statements of Shareholders' Equity

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

<TABLE>
<CAPTION>
                                                                   Common Stock
                                                          ---------------------------    Additional Paid       Deferred
                                                             Shares         Amount         in Capital        Compensation
--------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>            <C>                 <C>
Balances, December 31, 1996                                  3,345,600     $  400         $   504,600         $         -

Change in market value of available-for-sale securities              -          -                   -                   -
Net income                                                           -          -                   -                   -
-------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997                                  3,345,600        400             504,600                   -
-
Proceeds from sale of common stock                             278,800          -              25,000                   -
Interest expense related to issuance of common stock                 -          -             475,000                   -
Proceeds from sale of common stock, net of offering costs
 of $564,700                                                 1,783,762        200           2,634,100                   -
Issuance of common stock and warrants for property and
 equipment and purchased technology                          2,167,114        200           3,886,300                   -
Exchange of convertible notes payable                          111,520          -             200,000                   -
Deferred compensation related to issuance of common stock
 and granted options                                                 -          -             667,600            (667,600)
Amortization of deferred compensation                                -          -                   -             101,600
Proceeds from employee stock purchase                          283,540          -              38,100                   -
Reclassification adjustment                                          -          -                   -                   -
Net loss                                                             -          -                   -                   -
-------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1998                                  7,970,336        800           8,430,700            (566,000)

Proceeds from sale of common stock                              62,525          -              97,200                   -
Repurchase and retirement of common stock                      (71,620)         -             (10,000)                  -
Proceeds from sale of common stock, net of offering costs
 of $255,300                                                 1,095,053        100           1,708,500                   -
Recapitalization of company through merger, net of merger
 costs of $255,700                                           1,875,000        200           5,169,100                   -
Issuance of common stock for patent                             58,000          -             400,000                   -
Issuance of common stock due to the exercise of warrants
 and underwriter units, net of costs of $154,300             1,353,028        100           8,401,900                   -
Deferred compensation related to stock options                       -          -           1,216,100          (1,216,100)
Amortization of deferred compensation                                -          -                   -             310,000
Change in market value of available-for-sale securities              -          -                   -                   -
Foreign currency translation adjustment                              -          -                   -                   -
Net loss                                                             -          -                   -                   -
-------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1999                                 12,342,322     $1,200         $25,413,500         $(1,472,100)
=========================================================================================================================

<CAPTION>
                                                                Comprehensive       Accumulated
                                                                     Loss            Deficit            Totals
---------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>                 <C>
Balances, December 31, 1996                                      $ (4,000)           $  (499,200)        $     1,800

Change in market value of available-for-sale securities            (8,100)                     -              (8,100)
Net income                                                              -                124,500             124,500
--------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997                                       (12,100)              (374,700)            118,200

Proceeds from sale of common stock                                      -                      -              25,000
Interest expense related to issuance of common stock                    -                      -             475,000
Proceeds from sale of common stock, net of offering costs
 of $564,700                                                            -                      -           2,634,300
Issuance of common stock and warrants for property and
 equipment and purchased technology                                     -                      -           3,886,500
Exchange of convertible notes payable                                   -                      -             200,000
Deferred compensation related to issuance of common stock
 and granted options                                                    -                      -                   -
Amortization of deferred compensation                                   -                      -             101,600
Proceeds from employee stock purchase                                   -                      -              38,100
Reclassification adjustment                                        12,100                      -              12,100
Net loss                                                                -             (2,148,500)         (2,148,500)
--------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1998                                             -             (2,523,200)          5,342,300

Proceeds from sale of common stock                                      -                      -              97,200
Repurchase and retirement of common stock                               -                      -             (10,000)
Proceeds from sale of common stock, net of offering costs
 of $255,300                                                            -                      -           1,708,600
Recapitalization of company through merger, net of merger
 costs of $255,700                                                      -                      -           5,169,300
Issuance of common stock for patent                                     -                      -             400,000
Issuance of common stock due to the exercise of warrants
 and underwriter units, net of costs of $154,300                        -                      -           8,402,000
Deferred compensation related to stock options                          -                      -                   -
Amortization of deferred compensation                                   -                      -             310,000
Change in market value of available-for-sale securities            (4,100)                     -              (4,100)
Foreign currency translation adjustment                              (300)                     -                (300)
Net loss                                                                -             (7,033,400)         (7,033,400)
--------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1999                                      $ (4,400)           $(9,556,600)        $14,381,600
====================================================================================================================

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

                                      28
<PAGE>

                                                             GraphOn Corporation

                                                        Statements of Cash Flows

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

<TABLE>
<CAPTION>
 Years Ended December 31,                                          1999                1998                1997
------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>                 <C>
Increase (Decrease) In Cash and Cash Equivalents

Cash Flows From Operating Activities:
  Net (loss) income                                              $(7,033,400)        $(2,148,500)        $ 124,500
  Adjustments to reconcile net (loss) income to net cash
   (used in) provided by operating activities:
  Depreciation and amortization                                    2,637,200              65,200            31,000
  Allowance for doubtful accounts                                          -              25,000                 -
  Loss on sale of available-for-sale securities                            -              16,500                 -
  Compensation expense                                               310,000             101,600                 -
  Interest expense                                                         -             475,000                 -
  Changes in operating assets and liabilities:
         Accounts receivable                                      (1,105,900)           (281,600)          232,000
         Related party receivable                                          -                   -            34,400
         Prepaid expenses and other assets                          (572,200)            (13,900)             (400)
         Accounts payable                                            144,000              87,300            12,900
         Accrued expenses                                            (34,900)            356,000           137,000
         Deferred revenue                                              6,400            (331,200)         (358,300)
------------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Operating Activities               (5,648,800)         (1,648,600)          213,100
------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
  Proceeds from sale of available-for-sale securities                      -               4,300                 -
  Purchase of available-for-sale securities                       (2,031,700)                  -                 -
  Capitalization of software development costs                      (185,300)            (53,100)          (24,000)
  Capital expenditures                                              (332,600)           (179,400)          (39,300)
  Other assets                                                       (10,300)                  -                 -
------------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities                             (2,559,900)           (228,200)          (63,300)
------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
  Proceeds from convertible notes payable                                  -             775,000                 -
  Repayment of convertible notes payable                            (475,000)           (100,000)                -
  Net proceeds from issuance of common stock                      15,377,100           2,697,400                 -
  Purchase and retirement of stock                                   (10,000)                  -                 -
------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities                         14,892,100           3,372,400                 -
------------------------------------------------------------------------------------------------------------------
Effect of exchange rate fluctuations on Cash and Cash
  Equivalents                                                           (300)                  -                 -

Net Increase in Cash and Cash Equivalents                          6,683,100           1,495,600           149,800

Cash and Cash Equivalents, beginning of year                       1,798,400             302,800           153,000
------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, end of year                           $ 8,481,500         $ 1,798,400         $ 302,800
==================================================================================================================

See accompanying summary of accounting policies and notes to financial statements.
</TABLE>
                                      29
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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

The Company                  GraphOn Corporation (the Company) was incorporated
                             in the state of California in May 1982 and has
                             headquarters in Campbell, California. The Company
                             develops, markets, sells and supports server-based
                             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.

Business Combination         On July 12, 1999, GraphOn Corporation ("GraphOn-
                             CA") merged with and into Unity First Acquisition
                             Corporation ("Unity"), a Delaware corporation.
                             Unity, as the surviving entity to the merger and
                             the Registrant, then changed its name to GraphOn
                             Corporation, and the GraphOn-CA management team
                             continued in their existing roles at GraphOn
                             Corporation. For accounting purposes, the merger
                             has been treated as the acquisition of Unity by
                             GraphOn-CA with GraphOn-CA as the acquiror. Since
                             Unity prior to the merger was a public shell
                             corporation with no significant operations, pro-
                             forma information giving effect to the merger is
                             not presented. All shares and per share data prior
                             to the merger have been restated to reflect the
                             stock issuance and related stock split (Note 6).

                             As the former shareholders of GraphOn-CA received
                             approximately 82.9% of the shares in the Company
                             immediately after the acquisition, the financial
                             statements for periods prior to the reorganization
                             are those of GraphOn-CA.

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

                                      30
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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


Marketable                   The Company accounts for investments in marketable
Securities                   securities under the provisions of Statements of
                             Financial Accounting Standards (SFAS) No. 115,
                             Accounting for Certain Investments in Debt and
                             Equity Securities. Under SFAS No. 115, securities
                             are classified and accounted for as follows:

                             .  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.

                             .  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.

                             .  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                 Property and equipment are stated at cost.
Equipment                    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 asset, generally seven years.

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

                                      31
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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


Capitalized Software         Costs incurred internally in creating computer
Costs                        software products to be sold, leased, or otherwise
                             marketed are charged to expense when incurred as
                             research and development until technological
                             feasibility has been established for the product.
                             Thereafter, such costs are capitalized until the
                             product is available for general release to
                             customers and 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, 1999, 1998 and 1997,
                             capitalized costs aggregated $298,300, $113,000 and
                             $59,800, with accumulated amortization of $76,500,
                             $38,800 and $16,600, respectively.

Patent                       Patent cost is amortized on a straight-line basis
                             over the life of the patent or ten years, whichever
                             is less.

Revenue                      In October 1997, the American Institute of
Recognition and              Certified Public Accountants (AICPA) issued
Deferred Revenue             Statement of Position (SOP) 97-2, Software Revenue
                             Recognition, which generally requires revenue
                             earned on software arrangements involving multiple
                             elements to be 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 revenue from the sale of
                             software licenses when all the following conditions
                             are met: the software has been shipped to the
                             customer, no significant obligations remain, and
                             collection is probable. Revenue from sale of
                             maintenance agreements is recognized ratably over
                             the term of the agreement. OEM (Original Equipment
                             Manufacturer) licenses revenue is generally
                             recognized as deliveries are made or at the
                             completion of contractual billing milestones.
                             Deferred revenue, resulting from maintenance and
                             license agreements, aggregated $119,000 and
                             $112,600 as of December 31, 1999 and 1998.

Advertising Costs            The cost of advertising is expensed as incurred.
                             Advertising costs for the years ended December 31,
                             1999, 1998 and 1997, were approximately $557,400,
                             $58,400 and $60,000, respectively.

                                      32
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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

Income Taxes                 Income taxes are calculated using the liability
                             method of accounting for income taxes specified by
                             SFAS No. 109, Accounting for Income Taxes. Deferred
                             income taxes are recognized for the tax
                             consequences of temporary differences between the
                             financial statements 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                The following methods and assumptions were used by
Financial                    the Company in estimating its fair value
Instruments                  disclosures for financial instruments:

                             Cash and cash equivalents:

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

                             Investment securities:

                             The fair values of marketable debt and equity
                             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, 1999 and 1998, the fair values
                             of the Company's financial instruments approximate
                             their historical carrying amounts.

                                      33
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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

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 management 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 management 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.

Stock-Based                  SFAS No. 123, Accounting for Stock-Based
Incentive Programs           Compensation, encourages entities to recognize
                             compensation costs for stock-based employee
                             compensation plans using the fair value-based
                             method of accounting defined in SFAS No. 123, but
                             allows for the continued use of the intrinsic value
                             based method of accounting prescribed by Accounting
                             Principles Board (APB) Opinion No. 25, Accounting
                             for Stock Issued to Employees. The Company
                             continues to use the accounting prescribed by APB
                             Opinion No. 25 and as such is required to disclose
                             pro forma net income and earnings per share as if
                             the fair value-based method of accounting had been
                             applied.

Earnings Per                 In February 1997, the FASB issued SFAS No. 128,
Common Share                 Earnings Per Share, which became effective December
                             28, 1997. Conforming to SFAS No. 128, the Company
                             changed its method of computing earnings per share
                             and restated all prior periods included in the
                             financial statements. Under SFAS No. 128, the
                             dilutive effect of stock options is excluded from
                             the calculation of basic earnings per share.

                                      34
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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

Comprehensive                In June 1997, the FASB issued SFAS No. 130,
Income                       Reporting  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, 1999 accumulated other
                             comprehensive loss was comprised of foreign
                             currency translation loss and unrealized losses on
                             available-for-sale securities. As of December 31,
                             1998 the Company did not have any accumulated other
                             comprehensive income or loss.

Adoption of New              In February 1998, the Financial Accounting
Accounting                   Standards Board (FASB) issued SFAS No. 132,
Pronouncements               Employer's Disclosure about Pensions and Other
                             Postretirement Benefits, which standardizes the
                             disclosure requirements for pension and other
                             postretirement benefits. The adoption of SFAS No.
                             132 did not have a material impact on the Company's
                             current disclosures.

                             In June 1998, the FASB issued SFAS No. 133,
                             Accounting for Derivative Instruments and Hedging
                             Activities. SFAS No. 133 requires companies to
                             recognize all derivatives contracts as either
                             assets or liabilities on the balance sheet and to
                             measure them at fair value. If certain conditions
                             are met, a derivative may be specifically
                             designated as a hedge, the objective of which is to
                             match the timing of gain or loss recognition on the
                             hedging derivative with the recognition of (i) the
                             changes in the fair value of the hedged asset or
                             liability that are attributable to the hedged risk
                             or (ii) the earnings effect of the hedged
                             forecasted transaction. For a derivative not
                             designated as a hedging instrument, the gain or
                             loss is recognized as income in the period of
                             change. In June 1999, the FASB issued SFAS No. 137
                             Accounting for Derivative Instruments and Hedging
                             Activities - Deferral of Effective Date of FASB
                             Statement No. 133, which amends SFAS No. 133 to be
                             effective for all fiscal quarters of all fiscal
                             years beginning after June 15, 2000.

                                      35
<PAGE>

                                                             GraphOn Corporation


                                                  Summary of Accounting Policies

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

                             Historically, the Company has not entered into
                             derivative contracts either to hedge existing risks
                             or for speculative purposes. Accordingly, the
                             Company does not expect adoption of the new
                             standard to have a material impact on the Company's
                             results from operations, financial position or cash
                             flows.

Reclassifications            Certain amounts in the 1998 and 1997 financial
                             statements have been reclassified to conform to the
                             1999 presentation.

                                      36
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

<TABLE>
<CAPTION>

1.   Available-For-          As of December 31, 1999 the Company's available-
     Sale Securities         for-sale securities consisted of investments in
                             corporate bonds at an aggregate par value of
                             $2,035,000. The bonds bear interest in the range of
                             6.19% to 6.50% and mature in 2000 and 2001. A
                             summary of available-for-sale securities follows:


                             December 31,                          1999           1998
                             -----------------------------------------------------------
                             <S>                                <C>            <C>
                             Cost of securities                  $2,031,700     $      -
                             Less unrealized loss                     4,100            -
                             -----------------------------------------------------------
                                                                 $2,027,600     $      -
                             ===========================================================

2.   Property and            Property and equipment consisted of the following:
     Equipment

<CAPTION>
                             December 31,                          1999           1998
                             -----------------------------------------------------------
                             <S>                                <C>            <C>
                             Equipment                           $  558,500     $292,800
                             Furniture and fixtures                 178,500      175,600
                             Leasehold improvements                  27,500       13,500
                             -----------------------------------------------------------
                                                                    764,500      481,900
                             Less accumulated depreciation and
                             amortization                           227,500       58,600
                            ------------------------------------------------------------
                                                                 $  537,000     $423,300
                             ===========================================================
</TABLE>

                                      37
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

================================================================================
<TABLE>
<CAPTION>

3.   Purchased               In December 1998, the Company issued 2,167,114
     Technology              shares of common stock and 216,711 warrants to
                             Corel Corporation in exchange for certain fixed
                             assets and technology for the deployment of Windows
                             NT applications through server-based computing.
                             Based on the fair market value of the securities
                             issued, as determined by the prices associated with
                             the Private Placement Offering (Note 6), the
                             aggregate purchase price was determined to be
                             $3,886,500, which was allocated to the following
                             respective assets based on their fair market value
                             at the time of the transaction:

                             -------------------------------------------------------------
                             <S>                                               <C>
                             Equipment                                          $   77,100
                             Furniture                                             164,000
                             Purchased technology                                3,645,400
                             -------------------------------------------------------------
                                                                                $3,886,500
                             =============================================================

                             Purchased technology consisted of the following:

<CAPTION>
                             December 31,                          1999           1998
                             -------------------------------------------------------------
                             <S>                                <C>            <C>
                             Purchased technology                $3,695,400     $3,645,400
                             Less accumulated amortization        2,430,600              -
                             -------------------------------------------------------------
                                                                 $1,264,800     $3,645,400
                             =============================================================

4.  Accrued Expenses         Accrued expenses consisted of the following:

<CAPTION>
                             December 31,                        1999              1998
                             -------------------------------------------------------------
                             <S>                              <C>               <C>
                             Payroll and related expenses       $  202,400      $  140,600
                             Professional fees                     155,000         180,000
                             Accrued payroll taxes                  76,700          76,700
                             Royalties                               5,500          65,300
                             Other                                  24,400          36,300
                             -------------------------------------------------------------
                                                                $  464,000      $  498,900
                             =============================================================
</TABLE>

                                      38
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

5.  Convertible Note      In March 1998, the Company issued a convertible note
    Payable               payable for $475,000, bearing interest at 10% per
                          annum, to an affiliate (the Agent Affiliate) of the
                          placement agent dated September 2, 1998 for the
                          Company's subsequent private placement offering of
                          common stock (the Offering). In January 1999, the
                          convertible note was redeemed from proceeds from the
                          third closing of the Offering.

                          In September 1998, the Agent Affiliate and the
                          Company's CEO loaned $200,000 and $100,000,
                          respectively, to the Company pursuant to convertible
                          promissory notes bearing interest at 8% per annum. In
                          connection with this transaction, the Agent Affiliate
                          and CEO were issued warrants to purchase 55,760 and
                          27,880 shares, respectively, at $1.79 per share (Note
                          6).

                          On December 31, 1998, the loan by the Agent Affiliate
                          was converted into 111,520 shares of common stock.
                          Also on December 31, 1998, the Company repaid the
                          $100,000 loan from the CEO, plus accrued interest.

6.  Stockholders'         Common Stock
    Equity
                          In January 1998, the CEO personally sold 245,353
                          shares of his stock to various employees and directors
                          of the Company at a price of $0.04, the then fair
                          market value of the stock, and in May and August 1998,
                          107,750 additional shares at $0.14. The ownership of
                          these shares vest over approximately four years, with
                          the CEO having the right to repurchase non-vested
                          shares upon termination of employment. In May 1999,
                          the CEO exercised this right and repurchased 48,324 of
                          such shares.

                          In May 1998, the Company issued and sold 283,540
                          shares under the Stock Grant Program, at $0.14 and
                          granted 11,152 options, under the Stock Option Plan,
                          at $0.14 to employees of the Company, which also vest
                          over a four-year period. The shares sold and options
                          granted from March 1998 forward were ascribed a fair
                          market value of $1.79 per share, the price at which
                          the Company offered its shares through a private
                          placement stock offering in September 1998.

                                      39
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          In 1998, the Company recognized $667,600 in deferred
                          compensation expense associated with the sale of the
                          above securities, to be amortized over the vesting
                          period of the underlying securities.

                          In accordance with APB Opinion No. 25, Accounting for
                          Stock Issued to Employees, the Company recorded, in
                          1999 and 1998, in general and administrative expense,
                          $166,900 and $101,600, respectively, of compensation
                          costs associated with this deferred compensation
                          expense.

                          Additionally, in March 1998, the CEO and Executive
                          Vice President of the Company entered into a
                          contingent sale arrangement with respect to the sale
                          of an aggregate 1,951,600 shares of their common stock
                          in the Company to the Agent Affiliate for aggregate
                          consideration of $3,500,000, comprised of $200,000
                          cash, due and paid with the commencement of the
                          Offering, a non-recourse promissory note in the
                          principal amount of $800,000, which became due in
                          January 1999; a non-recourse promissory note in the
                          principal amount of $1,000,000, which became due in
                          July 1999; and a non-recourse promissory note in the
                          principal amount of $1,500,000, which becomes due in
                          January 2000. Each of the foregoing notes bears
                          interest at 6% per annum, payable quarterly, and each
                          note is secured by a pledge of the shares purchased,
                          with one share pledged for each $1.79 of principal
                          amount. The shares pledged with respect to each note
                          were placed in escrow until payment in full of the
                          principal and accrued interest of the note,
                          representing the purchase price of such shares. The
                          $800,000 note was paid and the 446,080 shares pledged
                          with respect to such note were released from escrow in
                          January 1999. The $1,000,000 note was paid and the
                          557,600 shares pledged with respect to such note were
                          released from escrow in July 1999. In January 2000,
                          the CEO and Executive Vice President received
                          $1,500,000 for the sale of 836,400 shares of their
                          common stock of the Company to the Agent Affiliate.

                                      40
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          In March 1998, the Company sold 278,800 shares of
                          common stock for cash proceeds of $25,000 to the Agent
                          Affiliate, concurrent with the issuance of convertible
                          notes for $475,000. During 1998, the Company
                          recognized interest expense of $475,000 relating to
                          this transaction.

                          In July 1998, the Company's Board of Directors
                          declared a 60,000 to 1 stock split. All references to
                          number of shares and per share data in the financial
                          statements have been adjusted to reflect the stock
                          split on a retroactive basis.

                          In September 1998, the Company offered shares of its
                          common stock through a private placement stock
                          offering (the Offering). The Offering established a
                          minimum and maximum offering of 1,394,000 and
                          2,509,200 shares of common stock, respectively, at
                          $1.79 per share, plus an additional 376,380 shares in
                          the event of over-subscriptions. As part of the
                          Offering, the placement agent received warrants to
                          purchase 11,152 shares of common stock at $1.79 per
                          share for each 55,760 shares sold through the
                          Offering.

                          An aggregate of 2,878,815 shares of common stock were
                          issued and sold in the Offering for an aggregate
                          purchase price of $5,162,900 in three separate
                          closings, the final such closing occurring in January
                          1999.

                          In December 1998, the Company issued 2,167,114 shares
                          of common stock with an ascribed value of $3,886,500,
                          and granted warrants to purchase 216,711 shares of
                          common stock at $1.79 in exchange for certain fixed
                          assets and technology.

                          On July 12, 1999, GraphOn Corporation merged with and
                          into Unity First Acquisition Corporation ("Unity").
                          Unity, as the surviving entity of the merger, then
                          changed its name to GraphOn. Pursuant to the merger,
                          each outstanding share of GraphOn common stock was
                          exchanged for 0.5576 shares of Unity common stock and
                          each outstanding option and warrant to purchase shares
                          of GraphOn common stock was exchanged for 0.5576
                          options and warrants to purchase shares of Unity
                          common stock.

                                      41
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          Additionally, GraphOn received $5,425,000 in cash,
                          which was placed into trust upon Unity's initial
                          public offering in November 1996 and released from
                          trust upon consummation of the merger. As of July 12,
                          1999, GraphOn had 16,296,559 shares of common stock
                          outstanding. As a result of the merger, the GraphOn
                          shareholders acquired approximately 9,086,961 shares
                          of Unity common stock, or approximately 82.9% of the
                          then outstanding Unity common stock. The merger was
                          accounted for as a capital transaction, which is
                          equivalent to the issuance of stock by GraphOn for
                          Unity's monetary assets of approximately $5,425,000,
                          accompanied by a recapitalization of GraphOn. All
                          references to number of shares and per share data in
                          the financial statements have been adjusted to reflect
                          the exchange of stock on a retroactive basis.

                          In November 1999, the Company issued 58,000 shares of
                          common stock in exchange for a U.S. Patent entitled
                          "Method and System for Dynamic Translation Between
                          Different Graphical User Interface Systems". Based on
                          the then fair market value of the shares issued, the
                          purchase price was $400,000.

                                      42
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

================================================================================
                       Stock Purchase Warrants

                       As of December 31, 1999, 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      1/2006
                          Private placement          575,763       $    1.79      1/2006
                          Purchased technology       216,711       $    1.79     12/2003
                          Financing                      676       $    1.79     12/2003
                          IPO redeemable Class A     649,986       $    5.50      1/2000
                          IPO redeemable Class A*    250,000       $    5.50      2/2000
                          IPO Directors Class A      200,000       $    5.50      7/2004
                          IPO redeemable Class B     850,631       $    7.50      1/2000
                          IPO Directors Class B      200,000       $    7.50      7/2004
                          Consulting services        300,000       $    8.50     12/2003
                          ================================================================
</TABLE>

                       The Company had the right to call the Class A redeemable
                       warrants and the Class B redeemable warrants for
                       redemption, each as a class, in whole and not in part, at
                       the Company's option, at a price of $0.05 per IPO warrant
                       at any time upon not less than 30 days' prior written
                       notice, provided that the reported high bid price of the
                       Company's common stock equaled or exceeded $8.50 per
                       share with respect to the Class A warrants ($15.00 per
                       share with respect to the Class A* warrants), and $10.50
                       per share with respect to the Class B warrants, for the
                       20 consecutive trading days immediately prior to the
                       notice of redemption to warrantholders. The
                       warrantholders have exercise rights until the close of
                       business on the date fixed for redemption.

                       On December 21, 1999, the Company called the Class A and
                       B warrants for redemption as the price of the Company's
                       stock had satisfied the redemption criteria. The Company
                       fixed January 24, 2000, as the redemption date.

                                      43
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          Stock Grant Program

                          In June 1998, the Company adopted a stock grant
                          program (Stock Grant Program), which is restricted to
                          employees, officers and consultants of the Company.
                          The Company had authorized the issuance of up to
                          724,880 shares of the Company's common stock in
                          connection with the Stock Grant Program and the Stock
                          Option Plan, discussed below. In May 1999, the number
                          of shares authorized under the Plan was increased by
                          1,505,520 shares to 2,230,400 shares.

                          Under the Stock Grant Program, eligible individuals
                          may, at the Plan Administrator's discretion, be issued
                          shares of common stock directly, either through (a)
                          the purchase of shares at a price not less than 85% of
                          the estimated fair market value of the stock at the
                          time of the issuance, or (b) as a bonus for past
                          services rendered. Ownership of such shares generally
                          vests over a four-year period. During August 1998, the
                          Company issued 283,540 shares under the Stock Grant
                          Program.

                          Stock Option Plan

                          In June 1998, the Company adopted a Stock Option Plan
                          (The Plan). The Plan is restricted to employees,
                          officers, and consultants of the Company. Options
                          granted under the Plan generally vest over three to
                          four years and are exercisable over ten years. Non-
                          statutory options are granted at prices not less than
                          85% of the estimated fair value of the stock on the
                          date of grant as determined by the Board of Directors.
                          Incentive options are granted at prices not less than
                          100% of the estimated fair value of stock on the date
                          of grant. However, options granted to shareholders who
                          own greater than 10% of the outstanding stock are
                          established at no less than 110% of the estimated fair
                          value of the stock on the date of grant.

                                      44
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          A summary of the status of the Company's stock option
                          plan as of December 31, 1999, 1998 and 1997, and
                          changes during the years then ended is presented in
                          the following table:
<TABLE>
<CAPTION>
                                              --------------------------------------------------------------------------------------
                                                                                   Options Outstanding
                                              --------------------------------------------------------------------------------------

                                               December 31, 1999            December 31, 1998             December 31, 1997
                                                          Wtd. Avg.                   Wtd. Avg.                      Wtd. Avg.
                                               Shares     Ex. Price         Shares    Ex. Price           Shares     Ex  Price
                                              --------------------------------------------------------------------------------------
                          <S>                  <C>        <C>             <C>       <C>                <C>        <C>
                          Beginning              11,152   $   0.14                    $      -            -          $      -
                          Granted             1,826,379   $   5.02          11,152    $   0.14            -          $      -
                          Exercised                  -    $                      -    $      -            -          $      -
                          Forfeited              (7,297)  $   5.28                    $      -            -          $      -
                       -------------------------------------------------------------------------------------------------------------

                          Ending              1,830,234   $   4.99          11,152    $   0.14            -          $      -
                       =============================================================================================================

                          Exercisable at
                          year-end              126,234                      1,485                        -
                       =============================================================================================================

                          Weighted-average fair value of options granted during the period:

                                                          $   4.99                    $   0.14                       $      -
                                                          ========                    ========                       ========

                          The following table summarizes information about stock
                          options outstanding as of December 31, 1999:
<CAPTION>
                                                              Options Outstanding                         Options Exercisable
                                                 -----------------------------------------------------------------------------------
                                                                   Wtd. Avg.
                             Range of              Number         Remaining         Wtd. Avg.         Number           Wtd. Avg.
                             Exercise            Outstanding     Contractual        Exercise        Exercisable      Exercisable
                              Prices             at 12/31/99        Life            Price           of 12/31/99         Price
                          ---------------------------------------------------------------------------------------------------------
                             <S>                   <C>            <C>              <C>                  <C>          <C>
                          $0.01-1.00                 11,152      8.65 years       $      0.14          3,220        $      0.14
                          $1.01-3.00                416,243      9.09 years       $      1.52         73,112        $      1.52
                          $3.01-6.00                160,839      9.46 years       $      5.38         12,819        $      5.48
                          $6.01-9.00              1,242,000      9.84 years       $      6.14         37,083        $      6.13
                                                -----------
                                                  1,830,234                       $      4.99        126,234        $      3.24
                                                ===========                       ===========       ========        ===========
</TABLE>

                                      45
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

================================================================================
<TABLE>
                          In connection with the grant of certain warrants and
                          stock options in 1999, the Company recorded deferred
                          compensation of $1,216,100, representing the
                          difference between the deemed fair market value and
                          the exercise price of the warrants and options as
                          determined by the Board of Directors on the date of
                          grant. The deferred compensation is being amortized
                          over the vesting period of the underlying warrants and
                          options. The amount recognized as compensation expense
                          in 1999, relating to these options and warrants,
                          amounted to $143,100.

                          SFAS No. 123, Accounting for Stock-Based Compensation,
                          requires the Company to provide pro forma information
                          regarding net (loss) income and (loss) earnings per
                          share as if compensation cost for the Company's stock
                          option plan had been determined in accordance with the
                          fair value-based method prescribed in SFAS No.123. The
                          Company estimates 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 1999 and 1998: dividend
                          yield of 0; expected volatility of 130% and 112%;
                          risk-free interest rate of 5.6% and 5.7%; and expected
                          lives of four years for all plan options. The Company
                          adopted its Stock Option Plan in June 1998 and
                          consequently had no stock options granted in 1997.
                          Under the accounting provisions of 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.

<CAPTION>
                                                          1999                        1998                       1997
                          ---------------------------------------------------------------------------------------------------------
                          <S>                           <C>                         <C>                         <C>
                          Net income (loss):
                            As reported                 $(7,033,400)                $(2,148,500)                 $ 124,500
                            Pro forma                   $(7,405,400)                $(2,149,800)                 $ 124,500

                          Basic and diluted earnings
                          (loss) per share:
                            As reported                 $     (0.71)                $     (0.57)                 $    0.04
                            Pro forma                   $     (0.74)                $     (0.57)                 $    0.04
</TABLE>

                                      46
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

<TABLE>
7.  Income Taxes          The provision for income taxes for the years ended
                          December 31, 1999, 1998 and 1997 consist of minimum
                          state taxes.

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


<CAPTION>
                          December 31,                                   1999                1998              1997
                        ------------------------------------------------------------------------------------------------------------
                        <S>                                          <C>                 <C>               <C>
                          Federal income tax at statutory rate       $(2,392,900)        $  (599,400)      $  41,600
                          State income taxes, net of federal
                              benefit                                   (422,300)           (102,400)          7,700
                          Utilization of net operating loss
                             carryforwards                                     -                   -         (51,400)
                          Tax benefit not currently recognizable       2,811,800             697,700               -
                          Other                                            4,200               4,900           3,000
                        ------------------------------------------------------------------------------------------------------------

                          Provision for income taxes                 $       800         $       800       $     900
                        ============================================================================================================

                          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:
<CAPTION>
                          December 31,                                1999                     1998                    1997
                       -------------------------------------------------------------------------------------------------------------
                       <S>                                        <C>                       <C>                      <C>
                          Net operating loss carryforward         $ 2,664,600               $ 1,038,800              $ 452,900
                          Tax credit carryforward                     338,900                   112,100                 22,800
                          Capitalized software                        (95,000)                  (29,600)               (17,200)
                          Depreciation and amortization               536,400                    (6,000)                (2,500)
                          Accrued compensation and benefits           521,600                    37,500                  4,200
                          Reserves not currently deductible            33,900                    35,800                 17,900
                       -------------------------------------------------------------------------------------------------------------
                          Total deferred tax asset                  4,000,400                 1,188,600                478,100
                          Valuation allowance                      (4,000,400)               (1,188,600)              (478,100)
                       -------------------------------------------------------------------------------------------------------------

                          Net deferred tax asset                  $         -               $         -              $       -
                       =============================================================================================================

</TABLE>

                                      47
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          The Company has net operating loss carryforwards
                          available to reduce future taxable income, if any, of
                          approximately $7,209,000 for Federal income tax
                          purposes. The benefits from these carryforwards expire
                          through 2019. As of December 31, 1999, management
                          cannot determine that it is more likely than not that
                          these carryforwards and other deferred tax assets will
                          be realized, and accordingly, management has fully
                          reserved for these deferred tax assets.

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

8.  Concentration of      Financial instruments, which potentially subject the
    Credit Risk           Company to concentration of credit risk, consist
                          principally of cash and cash equivalents, investments
                          and trade receivables. The Company places its cash and
                          cash equivalents with high quality financial
                          institutions and, by policy, limits the amounts of
                          credit exposure to any one financial institution.
                          Available-for-sale securities are held in public
                          companies for which there is a ready market.

                          The Company's accounts receivable are derived from
                          many customers in various industries. The Company
                          believes any risk of accounting loss is significantly
                          reduced due to the diversity of its end-customers and
                          geographic sales areas. The Company performs credit
                          evaluation of its customers' financial condition
                          whenever necessary, and generally does not require
                          cash collateral or other security to support customer
                          receivables.

9.  Related Party         In connection with the asset purchase from Corel
    Transactions          Corporation, which was consummated in December 1998,
                          Corel obtained approximately 27% ownership interest in
                          the Company, and at December 31, 1999, such ownership
                          interest was approximately 18%. Corel was in 1999 also
                          a significant customer of the Company. Sales to Corel
                          represented 40% of total Company revenues for the year
                          ended December 31, 1999.

                                      48
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          Management believes that the transaction with Corel is
                          at arms length and is under terms no less favorable to
                          the Company than those with other customers. At
                          December 31, 1999, accounts receivable from Corel
                          totaled $1,500,000.


10.  Major Customers      For the year ended December 31, 1999, three customers
                          accounted for approximately 40%, 13% and 10% of
                          revenues, respectively, with related accounts
                          receivable as of December 31, 1999 of $1,500,000, $0
                          and $0, respectively.

                          For the year ended December 31, 1998, three customers
                          accounted for approximately 29%, 21% and 17% of
                          revenues, respectively, with related accounts
                          receivable as of December 31, 1998 of $0, $500,000 and
                          $0, respectively.

                          For the year ended December 31, 1997, one customer
                          accounted for approximately 70% of revenues, with
                          related account receivable as of December 31, 1997 of
                          $62,500.

11.  Commitments          Operating Leases

                          In April 1995, the Company entered into an operating
                          lease for its current headquarters facility, which is
                          renewable in one-year increments for ten years. The
                          Company will terminate this lease in February 2000 and
                          believes that it will be able to find another lease
                          without experiencing any business interruptions in
                          2000 as a result of the above.

                          In June 1998, the Company entered into a three-year
                          non-cancelable operating lease for a facility in
                          Washington.

                          In December 1998, the Company entered into a five-year
                          operating lease for a facility in New Hampshire, which
                          is cancelable as of October 31, 2001.

                          In October 1999, the Company entered into an 18 months
                          operating lease for a facility in London, United
                          Kingdom.

                                      49
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                    The facility leases require the Company to pay certain
                    maintenance and operating expenses, such as taxes, insurance
                    and utilities. Rent expense for the years ended December 31,
                    1999, 1998 and 1997 aggregated $332,700, $48,300 and
                    $17,120, respectively.

                    Future minimum annual lease payments for these leases are
                    as follows:

<TABLE>
<CAPTION>
                          Year ending December 31,
                          --------------------------------------------------------------------------------
                          <S>                                                        <C>
                          2000                                                       $   298,900
                          2001                                                           206,800
                          ---------------------------------------------------------------------------------
                                                                                     $   505,700
                          =================================================================================
</TABLE>


                    Royalty Agreements

                    The Company licenses key components of its server-based
                    technology from three software developers to whom the
                    Company pays royalties pursuant to exclusive license
                    agreements. Minor elements of its server-based technology
                    are also licensed pursuant to non-exclusive agreements,
                    which call for royalty payments. Such royalty payments are
                    based on a percentage of net revenues received by the
                    Company for sales of the Company's products that contain the
                    licensed technology. The royalty rate under all of these
                    agreements is an aggregate of 4.8% and 2.9% for 1999 and
                    2000, respectively.

                    In the third quarter of 1999, the Company acquired two of
                    the above license agreements for an aggregate purchase price
                    of $378,000. Included in other assets is, as of December 31,
                    1999, $240,000 representing the unamortized portion of these
                    license rights.

                                      50
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          Prior Bankruptcy

                          In July 1999, GraphOn Corporation (the predecessor
                          company) merged with and into Unity First Acquisition
                          Corporation ("Unity"). Unity, as the surviving entity
                          to the merger, then changed its name to GraphOn (the
                          Company). GraphOn Corporation filed a Voluntary
                          Petition for Relief under Chapter 11 of the Bankruptcy
                          Code in November 1991 and may be required to pay up to
                          $2.23 million and interest, if any, to creditors. The
                          Company believes that only royalties received pursuant
                          to some of the predecessor company's license
                          agreements existing at the time of its bankruptcy are
                          subject to claims. 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

                          In late 1996, GraphOn Corporation disclosed numerous
                          aspects of its proprietary technology on a
                          confidential basis to Insignia Solutions plc, some of
                          whose assets were later acquired by Citrix Systems,
                          Inc. In January 1998, when GraphOn learned of that
                          acquisition it made inquiry of Citrix and Insignia
                          seeking assurance that there had been no potential
                          misuse of its confidential information. In November
                          1998, Citrix instituted litigation in the United
                          States District Court for the Southern District of
                          Florida seeking a judicial declaration that neither
                          Citrix nor Insignia had misappropriated or infringed
                          upon GraphOn's proprietary technology or breached the
                          non-disclosure agreement. GraphOn responded by filing
                          a motion to dismiss the action for lack of
                          jurisdiction. In May 1999, the court granted GraphOn's
                          motion and dismissed the case. In effect, the Florida
                          court held there was no existing dispute between
                          GraphOn and Citrix. Citrix has appealed the dismissal
                          of its case to the United States Court of Appeals for
                          the Eleventh Circuit, where the matter is awaiting
                          oral argument.

                                      51
<PAGE>

                                                             GraphOn Corporation


                                                   Notes to Financial Statements

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

                          In October 1999, Insignia filed a complaint against
                          GraphOn in the Superior Court of the State of
                          California, Santa Clara County, alleging that GraphOn
                          had attempted to disrupt Insignia's sale to Citrix, in
                          February 1998, of assets related to Insignia's NTRIGUE
                          software product line.

                          The complaint alleges that, as a result of such
                          efforts, Insignia was required by Citrix to place
                          $8.75 million in escrow to enable Citrix to deal with
                          potential claims by GraphOn of proprietary rights in
                          the assets being sold. The complaint seeks unspecified
                          general and punitive damages. In December 1999,
                          GraphOn filed an answer denying the material
                          allegations in Insignia's complaint.

                          Insignia's complaint also names Citrix and its UK
                          subsidiary as defendants, alleging that these
                          companies have breached their February 1998 contract
                          with Insignia by refusing to release money from the
                          escrow. The complaint seeks compensatory damages from
                          Citrix related to that company's refusal to release
                          purchase money from escrow for payment to Insignia and
                          other unspecified damages.

12.  Employee 401(k)      In December 1998, the Company adopted a 401(k) Plan
     Plan                 ("the Plan") to provide retirement benefits for its
                          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. The Company made no contributions to the Plan
                          in 1999 and 1998.

                                      52
<PAGE>

13.  Supplemental           The following is supplemental disclosure for the
     Disclosure of Cash     statements of cash flows.
     Flow Information
<TABLE>
<CAPTION>

                                        Years Ended December 31,                    1999              1998             1997
                                        --------------------------------------------------------------------------------------------
                                        <S>                                         <C>               <C>              <C>
                                        Cash Paid:
                                        ---------
                                        Income taxes                               $       800        $       900      $     800
                                        Interest                                   $    42,400        $    11,300      $   2,100

                                        Noncash Investing Activities:
                                        ----------------------------
                                        Stock and warrants issued for
                                         purchased technology and
                                         other assets                              $         -        $ 3,886,500      $       -
                                        Stock issued for patent                    $   400,000        $         -      $       -

                                        Noncash Financing Activities:
                                        ----------------------------
                                        Issuance of common stock for
                                          convertible note payable                 $         -         $   200,000     $       -
                                        ============================================================================================
</TABLE>

14.  Supplemental           In November 1999, the Agent Affiliate granted the
     Events                 Company's Chairman of the Board the right to
                            acquire up to 300,000 shares of the Company's
                            common stock at $1.79 per share. Compensation
                            expense associated with this transfer could
                            aggregate $1,302,000 and will be amortized over the
                            33 month period beginning March 2000. In January
                            2000, the Agent Affiliate sold 72,000 shares of the
                            Company's common stock to the Company's Chairman of
                            the Board of Directors, under the terms above.

                            In January 2000, we issued 1,494,767 shares of our
                            common stock in connection with the exercise of
                            warrants, resulting in net cash proceeds of
                            $9,870,900.


                                      53
<PAGE>

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure.

    None.


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant

    (a) Information called for by Item 10 concerning our directors is set forth
under the heading "Election of Directors" in our Proxy Statement related to the
2000 Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after our fiscal year end (the "2000 Proxy
Statement"), which is incorporated herein by reference.

    (b) The information required by this Item concerning our executive officers
is set forth at the end of  Part I of this Form 10-K.

Item 11.   Executive Compensation

     Information called for by Item 11 is set forth under the heading "Executive
Compensation" in the 2000 Proxy Statement, which is incorporated herein by
reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     Information called for by Item 12 is set forth under the heading "Security
Ownership of Certain Beneficial Owners and Management" in the 2000 Proxy
Statement, which is incorporated herein by reference.

Item 13.   Certain Relationships and Related Transactions.

    Information called for by Item 13 is set forth under the heading "Certain
Relationships and Related Transactions" in the 2000 Proxy Statement, which is
incorporated herein by reference.

                                       54
<PAGE>

                                    PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

    (a)  Financial statements filed as a part of this report are listed on the
"Index to Financial Statements" at page 23 herein. All other schedules are
omitted because either (i) they are not required under the instructions, (ii)
they are inapplicable, or (iii) the information is included in the Financial
Statements.

    (b)  The Company did not file any reports on Form 8-K during the fourth
quarter of the year ended December 31, 1999.


<TABLE>
<CAPTION>

                                                   EXHIBITS
 Exhibit
 Number
---------                                          Description of Exhibit
                                                   ----------------------

<C>         <S>
      2.1   Agreement and Plan of Merger and Reorganization dated as of February 1, 1999, between Registrant
            and GraphOn Corporation, a California corporation(2)
      3.1   Amended and Restated Certificate of Incorporation of Registrant(2)
      3.2   Amended and Restated Bylaws of Registrant(2)
      4.1   Form of certificate evidencing shares of common stock of Registrant(3)
      4.2   Form of certificate evidencing Class A Redeemable Warrants of Registrant(3)
      4.3   Form of certificate evidencing Class B Redeemable Warrants of Registrant(3)
      4.4   Warrant Agreement dated November 12, 1996 between Registrant and GKN Securities Corp. and Gaines,
            Berland, Inc.(3)
      4.5   Redeemable Warrant Agreement dated November 12, 1996 between Registrant and American Stock Transfer
            & Trust Company(3)
      4.6   Registration Rights Agreement dated October 28, 1998 between Registrant, Spencer Trask Investors,
            Walter Keller and the investors purchasing units in Registrant's private placement(2)
      4.7   Amendment to Registration Rights Agreement(2)
      4.8   Common Stock Purchase Warrant dated October 12, 1999 issued to SuperTech Holdings Limited(2)

     10.1   1996 Stock Option Plan of Registrant(3)
     10.2   1998 Stock Option/Stock Issuance Plan of Registrant(2)
     10.3   Placement Agency Agreement by and between Registrant and Spencer Trask Securities, Inc., dated as
            of September 2, 1998(2)
     10.4   Asset Purchase Agreement by and among Registrant, Corel Corporation, Corel Corporation Limited and
            Corel, Inc. (collectively, "Corel"), dated as of December 18, 1998(2)
     10.5   Securities Purchase Agreement by and among Registrant and Corel, dated as of December 18, 1998(2)
</TABLE>

                                       55
<PAGE>

<TABLE>
    <S>    <C>
     10.6   Standard Industrial Lease between Registrant and Mildred K. Dibona, dated April 14, 1995, as
            amended on October 2, 1998(2)
     10.7   Hidden Valley Office Park Lease Agreement between Registrant and ASA Properties, Inc., dated June
            5, 1998(2)
     10.8   Lease Agreement between Corel Inc. and CML Realty Corp., dated September, 1998 and assumed by
            Registrant on December 31, 1998(2)
     10.9   Lease Agreement between Registrant and Thoits Brothers, Inc., dated February 24, 2000.
    10.10   Consulting Agreement dated October 14, 1999 between Registrant and SuperTech Holdings Limited(1)
     23.1   Consent of BDO Seidman, LLP
     24.1   Power of Attorney (included on the Signature Page of Part II of this Registration Statement)
     27.1   Financial Data Schedule
</TABLE>
___________
(1)  Incorporated by reference from Registrant's Form S-1, file number
     333-93483, filed with the SEC on December 23, 1999.

(2)  Incorporated by reference from Registrant's Form S-4, file number 333-
     76333, filed with the SEC on April 15, 1999.

(3)  Incorporated by reference from Registrant's Form S-1, file number 333-
     11165, filed with the SEC on August 30, 1996.

                                       56
<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 29, 2000.

                                 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.

<TABLE>
<CAPTION>

          Signature                               Title                               Date
          ----------                              -----                               ----
<S>                                     <C>                                      <C>

/s/ Robert Dilworth                       Chairman of the Board                     March 29, 2000
------------------------------
Robert Dilworth

/s/ Walter Keller                         President (Principal Executive Officer)   March 29, 2000
------------------------------            and Director
Walter Keller

/s/ William Swain                         Chief Financial Officer (Principal        March 29, 2000
------------------------------            Financial and Accounting Officer)
William Swain

/s/ Robin Ford                            Executive Vice President,                 March 29, 2000
------------------------------            Marketing and Sales and Director
Robin Ford

/s/ August P. Klein                       Director                                  March 29, 2000
------------------------------
August P. Klein

/s/ Marshall C. Phelps, Jr.               Director                                  March 29, 2000
------------------------------
Marshall C. Phelps, Jr.
</TABLE>

                                       57