Delaware
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13-3899021
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(State of incorporation)
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(IRS Employer
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Identification No.)
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[X]
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PART I.
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FINANCIAL INFORMATION
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PAGE
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Item 1.
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Financial Statements
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Item 2.
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Item 3.
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Item 4.
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PART II.
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OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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GraphOn Corporation
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||||||||
Condensed Consolidated Balance Sheets
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||||||||
(Unaudited)
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||||||||
Assets
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March 31, 2012
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December 31, 2011
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||||||
Current Assets:
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||||||||
Cash
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$ | 6,673,400 | $ | 7,237,500 | ||||
Accounts receivable, net
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685,300 | 732,100 | ||||||
Prepaid expenses
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139,400 | 151,900 | ||||||
Total Current Assets
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7,498,100 | 8,121,500 | ||||||
Property and equipment, net
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363,800 | 43,900 | ||||||
Capitalized software development costs, net
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262,300 | 303,800 | ||||||
Other assets
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32,000 | 39,400 | ||||||
Total Assets
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$ | 8,156,200 | $ | 8,508,600 | ||||
Liabilities and Stockholders’ Equity (Deficit)
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||||||||
Current Liabilities:
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||||||||
Accounts payable and accrued expenses
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$ | 1,044,600 | $ | 758,700 | ||||
Deferred revenue
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2,894,600 | 2,878,500 | ||||||
Total Current Liabilities
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3,939,200 | 3,637,200 | ||||||
Warrants liability
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3,773,900 | 3,696,600 | ||||||
Deferred revenue
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705,800 | 457,200 | ||||||
Deferred rent
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113,500 | — | ||||||
Total Liabilities
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8,532,400 | 7,791,000 | ||||||
Commitments and contingencies
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||||||||
Stockholders' Equity (Deficit):
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||||||||
Common stock, $0.0001 par value, 195,000,000 shares authorized, 81,943,015 and 81,886,926 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively
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8,200 | 8,200 | ||||||
Additional paid-in capital
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61,591,900 | 61,398,600 | ||||||
Accumulated deficit
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(61,976,300 | ) | (60,689,200 | ) | ||||
Total Stockholders' Equity (Deficit)
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(376,200 | ) | 717,600 | |||||
Total Liabilities and Stockholders' Equity (Deficit)
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$ | 8,156,200 | $ | 8,508,600 |
Condensed Consolidated Statements of Operations
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||||||||
Three Months Ended March 31,
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||||||||
2012
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2011
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Revenue
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$ | 1,610,600 | $ | 1,462,700 | ||||
Costs of revenue
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138,500 | 147,500 | ||||||
Gross profit
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1,472,100 | 1,315,200 | ||||||
Operating expenses:
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||||||||
Selling and marketing
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574,500 | 526,600 | ||||||
General and administrative
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1,074,400 | 700,200 | ||||||
Research and development
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1,053,100 | 457,500 | ||||||
Total operating expenses
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2,702,000 | 1,684,300 | ||||||
Loss from operations
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(1,229,900 | ) | (369,100 | ) | ||||
Other expense - change in fair value of warrants liability
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(58,600 | ) | — | |||||
Other income, net
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2,400 | 200 | ||||||
Loss before provision for income tax
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(1,286,100 | ) | (368,900 | ) | ||||
Provision for income tax
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1,000 | 800 | ||||||
Net loss
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$ | (1,287,100 | ) | $ | (369,700 | ) | ||
Loss per share – basic and diluted
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$ | (0.02 | ) | $ | (0.01 | ) | ||
Average weighted common shares outstanding – basic and diluted
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81,914,393 | 46,003,569 |
Condensed Consolidated Statements of Cash Flows
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||||||||
Three Months Ended March 31,
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||||||||
2012
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2011
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Cash Flows Provided By (Used In) Operating Activities:
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||||||||
Net Loss
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$ | (1,287,100 | ) | $ | (369,700 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
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55,200 | 80,500 | ||||||
Stock-based compensation expense
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189,400 | 10,800 | ||||||
Change in fair value of warrants liability
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58,600 | — | ||||||
Accretion of warrants liability for consulting services
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18,700 | — | ||||||
Changes in deferred rent
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9,400 | — | ||||||
Changes to allowance for doubtful accounts
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200 | (8,700 | ) | |||||
Revenue deferred to future periods
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1,363,900 | 721,900 | ||||||
Recognition of deferred revenue
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(1,099,200 | ) | (827,600 | ) | ||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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46,600 | 354,300 | ||||||
Prepaid expenses
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19,200 | (46,200 | ) | |||||
Accounts payable and accrued expenses
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243,400 | 35,000 | ||||||
Other long term assets
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7,400 | — | ||||||
Net Cash Used In Operating Activities
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(374,300 | ) | (49,700 | ) | ||||
Cash Flows Used In Investing Activities:
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||||||||
Capital expenditures
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(193,700 | ) | (6,300 | ) | ||||
Capitalized software development costs
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— | (182,000 | ) | |||||
Net Cash Used In Investing Activities
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(193,700 | ) | (188,300 | ) | ||||
Cash Flows Provided By (Used In) Financing Activities:
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||||||||
Proceeds from exercise of stock options
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3,900 | — | ||||||
Net Cash Provided By Financing Activities
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3,900 | — | ||||||
Net Increase (Decrease) in Cash
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(564,100 | ) | (238,000 | ) | ||||
Cash - Beginning of Period
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7,237,500 | 1,891,000 | ||||||
Cash - End of Period
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$ | 6,673,400 | $ | 1,653,000 |
Beginning Balance
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Charge Offs
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Recoveries
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Provision
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Ending Balance
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||||||||||||||||
2012
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$ | 25,000 | $ | — | $ | — | $ | 200 | $ | 25,200 | ||||||||||
2011
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32,800 | — | — | (8,700 | ) | 24,100 |
·
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Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
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·
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Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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·
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Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets
and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.
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March 31, 2012
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December 31, 2011
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|||||||
Equipment
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$ | 1,127,000 | $ | 1,077,200 | ||||
Furniture
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391,700 | 236,000 | ||||||
Leasehold improvements
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151,100 | 23,000 | ||||||
1,669,800 | 1,336,200 | |||||||
Less: accumulated depreciation and amortization
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1,306,000 | 1,292,300 | ||||||
$ | 363,800 | $ | 43,900 |
Estimated Volatility
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Annualized Forfeiture Rate
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Expected Option Term (Years)
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Estimated Exercise Factor
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Risk-Free Interest Rate
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Dividends
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|||||||||||||||||||
2011 Private Placement
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202 | % | — | 4.42 | 10 | 1.04 | % | — | ||||||||||||||||
ipCapital
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201 | % | — | 4.54 | 10 | 1.04 | % | — |
Warrants liability – December 31, 2011 fair value
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$ | 3,696,600 | ||
Change in fair value of warrant liability recorded in other income
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58,600 | |||
Accretion of warrant liability recorded in general and administrative expense
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18,700 | |||
Warrants liability – March 31, 2012 fair value
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$ | 3,773,900 |
Three Months Ended March 31,
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||||||||
Statement of Operations Classification
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2012
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2011
|
||||||
Costs of revenue
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$ | 6,300 | $ | 1,000 | ||||
Selling and marketing expense
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26,400 | 4,700 | ||||||
General and administrative expense
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73,100 | 2,900 | ||||||
Research and development expense
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83,600 | 2,200 | ||||||
$ | 189,400 | $ | 10,800 |
Estimated Volatility
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Annualized Forfeiture Rate
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Expected Option Term (Years)
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Estimated Exercise Factor
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Risk-Free Interest Rate
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Dividends
|
|||||||||||||||||||
2012
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174 | % | 0.00% - 5.62 | % | 10.0 | 5 - 15 | 2.04 | % | — | |||||||||||||||
2011
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185 | % | 2.00 | % | 7.5 | 20 | 2.82 | % | — |
Number of Shares
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Weighted Average Exercise Price
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Weighted Average Remaining Contractual Terms (Years)
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Aggregate Intrinsic Value
|
|||||||
Outstanding – December 31, 2011
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11,636,694 | $ | 0.18 | |||||||
Granted
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2,502,500 | 0.22 | ||||||||
Exercised
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(56,089 | ) | 0.07 | |||||||
Forfeited or expired
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(100,000 | ) | 0.20 | |||||||
Outstanding - March 31, 2012
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13,983,105 | $ | 0.19 |
8.46
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$ 281,300
|
Three Months Ended March 31,
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2012 Over (Under) 2011
|
|||||||||||||||
Revenue
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2012
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2011
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Dollars
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Percent
|
||||||||||||
Software Licenses
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||||||||||||||||
Windows
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$ | 632,600 | $ | 576,800 | $ | 55,800 | 9.7 | % | ||||||||
UNIX/Linux
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263,500 | 232,200 | 31,300 | 13.5 | % | |||||||||||
896,100 | 809,000 | 87,100 | 10.8 | % | ||||||||||||
Software Service Fees
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||||||||||||||||
Windows
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425,200 | 371,500 | 53,700 | 14.5 | % | |||||||||||
UNIX/Linux
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237,400 | 276,300 | (38,900 | ) | (14.1 | )% | ||||||||||
662,600 | 647,800 | 14,800 | 2.3 | % | ||||||||||||
Other
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51,900 | 5,900 | 46,000 |
nm
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||||||||||||
Total Revenue
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$ | 1,610,600 | $ | 1,462,700 | $ | 147,900 | 10.1 | % |
Three Months Ended March 31,
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2012 Over (Under) 2011
|
|||||||||||||||
2012
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2011
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Dollars
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Percent
|
|||||||||||||
Software service costs
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$ | 73,000 | $ | 110,100 | $ | (37,100 | ) | -33.7 | % | |||||||
Software product costs
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65,500 | 37,400 | 28,100 | 75.1 | % | |||||||||||
$ | 138,500 | $ | 147,500 | $ | (9,000 | ) | -6.1 |
March 31, 2011
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December 31, 2011
|
|||||||
Software development costs
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$ | 487,700 | $ | 487,700 | ||||
Accumulated amortization
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(225,400 | ) | (183,900 | ) | ||||
$ | 262,300 | $ | 303,800 |
Three Months Ended March 31,
|
||||||||
Revenue
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2012
|
2011
|
||||||
Software
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$ | 1,610,600 | $ | 1,462,700 | ||||
Intellectual Property
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— | — | ||||||
Consolidated Revenue
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$ | 1,610,600 | $ | 1,462,700 |
Three Months Ended March 31,
|
||||||||
Income (Loss) From Operations
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2012
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2011
|
||||||
Software
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$ | (941,100 | ) | $ | (210,800 | ) | ||
Intellectual Property
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(288,800 | ) | (158,300 | ) | ||||
Consolidated Loss From Operations
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$ | (1,229,900 | ) | $ | (369,100 | ) |
Long-Lived Assets
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Cost Basis
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Accumulated Depreciation /Amortization
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Net, as Reported
|
|||||||||
Software
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$ | 2,157,600 | $ | (1,531,500 | ) | $ | 626,100 | |||||
Intellectual Property
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2,839,000 | (2,839,000 | ) | — | ||||||||
Unallocated
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32,000 | — | 32,000 | |||||||||
$ | 5,028,600 | $ | (4,370,500 | ) | $ | 658,100 |
·
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On the Release Effective Date, Mr. Dilworth’s outstanding options became fully vested and exercisable and will remain exercisable until the earlier of (i) the expiration dates of each of such options or (ii) the date that is 30 months after the Release Effective Date. The number of shares of common stock issuable upon exercise of such outstanding options is 2,000,000.
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·
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On the Release Effective Date, Mr. Dilworth was granted an option to purchase 500,000 shares of common stock at an exercise price of $0.20 per share. Such option has a term of 30 months from the date of grant and will vest and become exercisable at a rate of 62,500 shares per quarter commencing on July 1, 2012.
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·
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From May 2012 through April 2013, Mr. Dilworth will be paid $27,268 per month. From May 2013 through April 2014, Mr. Dilworth will be paid $13,634 per month.
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·
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For a period of 18 months, we will pay the premium costs to continue medical coverage for Mr. Dilworth and his spouse under the Employment Retirement Income Security Act of 1974.
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·
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We paid Mr. Dilworth $15,000 as reimbursement for a portion of his legal fees in connection with negotiation of the separation agreement and the release.
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·
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GO-Global Host:
Host products allow access to applications from remote locations and a variety of connections, including the Internet and dial-up connections. Such access allows applications to be run via a Web browser, over many types of data connections, regardless of the bandwidth or operating system. Web-enabling is achieved without modifying the underlying application’s code or requiring costly add-ons.
Host family products include GO-Global Windows Host 4 and all currently available versions of our legacy GO-Global products (GO-Global for Windows 3.2 and GO-Global for UNIX 2.2).
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·
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GO-Global Cloud:
Cloud products offer a centralized management suite that gives users the ability to access and share applications, files and documents on Windows, UNIX and Linux computers via simple hyperlinks. They give administrators extensive control over user rights and privileges, and allow them to monitor and manage clusters of GO-Global Hosts that support thousands of users. GO-Global Cloud products give application developers the ability to integrate Windows, UNIX and Linux applications into their Web-based enterprise and workflow applications. GO-Global Cloud products include GO-Global Host capabilities. We expect to release GO-Global Cloud for Linux in the second half of 2012.
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·
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GO-Global Client:
We plan to develop Client products for portable and mobile devices. We released client products for the iPad and Android tablets in June 2011 and February 2012, respectively.
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2012 Over (Under) 2011
|
||||||||||||||||
Revenue
|
2012
|
2011
|
Dollars
|
Percent
|
||||||||||||
Software Licenses
|
||||||||||||||||
Windows
|
$ | 632,600 | $ | 576,800 | $ | 55,800 | 9.7 | % | ||||||||
UNIX/Linux
|
263,500 | 232,200 | 31,300 | 13.5 | % | |||||||||||
896,100 | 809,000 | 87,100 | 10.8 | % | ||||||||||||
Software Service Fees
|
||||||||||||||||
Windows
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425,200 | 371,500 | 53,700 | 14.5 | % | |||||||||||
UNIX/Linux
|
237,400 | 276,300 | (38,900 | ) | -14.1 | % | ||||||||||
662,600 | 647,800 | 14,800 | 2.3 | % | ||||||||||||
Other
|
51,900 | 5,900 | 46,000 |
nm
|
||||||||||||
Total Revenue
|
$ | 1,610,600 | $ | 1,462,700 | $ | 147,900 | 10.1 | % |
2012 Over (Under) 2011
|
||||||||||||||||
Description
|
2012
|
2011
|
Dollars
|
Percent
|
||||||||||||
Software service costs
|
$ | 73,000 | $ | 110,100 | $ | (37,100 | ) | -33.7 | % | |||||||
Software product costs
|
65,500 | 37,400 | 28,100 | 75.1 | % | |||||||||||
$ | 138,500 | $ | 147,500 | $ | (9,000 | ) | -6.1 | % |
Three Months Ended March 31,
|
||||||||
Loss From Operations
|
2012
|
2011
|
||||||
Software
|
$ | (941,100 | ) | $ | (210,800 | ) | ||
Intellectual Property
|
(288,800 | ) | (158,300 | ) | ||||
Consolidated Loss From Operations
|
$ | (1,229,900 | ) | $ | (369,100 | ) |
March 31, 2012
|
December 31, 2011
|
|||||||
Software Segment
|
$ | 2,157,600 | $ | 1,824,000 | ||||
Accumulated depreciation/amortization
|
(1,531,500 | ) | (1,476,300 | ) | ||||
626,100 | 347,700 | |||||||
Intellectual Property Segment
|
2,839,000 | 2,839,000 | ||||||
Accumulated depreciation/amortization
|
(2,839,000 | ) | (2,839,000 | ) | ||||
— | — | |||||||
Unallocated
|
32,000 | 39,400 | ||||||
Total Long-Lived, net
|
$ | 658,100 | $ | 387,100 |
Exhibit Number
|
Exhibit Description
|
10.1
|
Addendum #3, dated January 30, 2012, between ipCapital Group, Inc. and Registrant (1)
|
10.2
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Consulting Agreement, dated February 1, 2012, by and between Registrant and Steven Ledger/Tamalpais Partners LLC (2)
|
10.3
|
Separation Agreement, dated April 12, 2012, between Registrant and Robert Dilworth
|
10.4
|
Release, dated April 12, 2012, between Registrant and Robert Dilworth
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certifications
|
32.1
|
Section 1350 Certifications
|
101
|
The following financial information from GraphOn Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011, (iv) Notes to Condensed Consolidated Financial Statements.
|
|
(1)
|
Filed on February 14, 2012 as an exhibit to the Registrant’s Current Report on Form 8-K, and incorporated herein by reference
|
(2)
|
Filed on April 16, 2012 as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, and incorporated herein by reference
|
GraphOn Corporation
|
||||
(Registrant)
|
||||
Date:
|
May 21, 2012
|
Date:
|
May 21, 2012
|
|
By:
|
/s/ Eldad Eilam
|
By:
|
/s/ Robert Dixon
|
|
Eldad Eilam
|
Robert Dixon
|
|||
Interim Chief Executive Officer
|
Interim Chief Financial Officer
|
|||
(Principal Executive Officer)
|
(Principal Financial Officer and
|
|||
Principal Accounting Officer)
|
1.
|
Resignations; Separation from Employment
. Executive hereby resigns, effective at the close of business Pacific Time on the Execution Date (the “Separation Date”), from his employment with the Company and any affiliates, from his position of Chief Executive Officer and member of the Board of Directors of the Company (“Board”), and from any and all other director and officer position(s), and any trusteeships or administrative or investment positions with employee benefit plans, if any, that he held or may have held with the Company or any affiliate of the Company. The Board (on behalf of itself, the Company and its affiliates) has accepted all such resignations. Executive represents that he is not resigning because of any disagreement between the Company and Executive on any matter relating to the Company’s operations, policies or practices.
|
2.
|
Accrued Obligations.
The Company will: (a) pay Executive for any earned but unpaid salary through the Separation Date, and four weeks of vacation pay at Executive’s current salary rate, each as determined by the Company in a manner consistent with its customary practices and in accordance with applicable law, less any required or authorized withholding and deductions, and (b) reimburse Executive for any appropriate unreimbursed business expenses existing as of the Separation Date subject to and in accordance with Section IV below and any applicable Company policies and practices. Executive’s rights (if any) under any applicable Company pension and welfare benefit plans shall be determined in accordance with the terms and conditions of those plans, which plans, terms and conditions the Company (and, as applicable, its affiliates) may amend, modify, suspend or terminate at any time for any or no reason in its discretion.
|
3.
|
Severance Payments.
Subject to the terms of this Agreement, and provided that Executive signs and returns this Agreement and the attached release (“Release”) to the Company within twenty-one (21) days after his receipt thereof, complies with the terms of this Agreement and the Release, and does not revoke the Release in accordance with its terms (the 8th day after the Release is executed and not revoked being hereinafter referred to as the “Release Effective Date”), the Company shall pay or provide Executive the following:
|
A.
|
On the Release Effective Date, Executive’s outstanding stock options for Company common stock, a schedule of which is attached as
Exhibit B
, shall become fully vested and exercisable and shall remain exercisable by the Executive (or his beneficiary in the event of his death) until the earlier of (i) the date that is after the 30-month anniversary of the Release Effective Date, or (ii) the original expiration date of the option set forth on
Exhibit B
.
|
B.
|
On the Release Effective Date, Executive shall be granted options under the Company’s 2008 Equity Incentive Plan to purchase 500,000 shares of Company common stock at the price per share of the greater of (i) $0.20, or (ii) the per-share fair market value of the common stock on the Release Effective Date (the “Supplemental Options”). The Supplemental Options will have a term of 30 months from the date of grant and will vest and become exercisable at a rate of 12.5% on the first day of each calendar quarter following the Release Effective Date, commencing with July 1, 2012; provided that the Supplemental Options shall accelerate and vest in full upon a Change in Control of the Company, as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi) (applying a 50% acquisition standard) or (vii) (applying a 50% of total gross fair market value standard). In the event of the death of Executive prior to the expiration of the term of the Supplemental Options, the Supplemental Options shall become fully vested and Executive’s beneficiary shall be entitled to exercise such options until the original expiration date of such options at the end of their original term.
|
C.
|
Commencing on the first business day of the calendar month next beginning after the Release Effective Date and continuing for a total of 24 months (the “Separation Payment Period”), the Company shall pay the Executive (or his beneficiary in the event of his death) salary continuation payments at a monthly rate of $27,268 for the months of May 2012 through April 2013, and at a monthly rate of $13,634 for the months of May 2013 through April 2014, in each case less any required or authorized withholding or deductions, with the first monthly payment being made no earlier than the Release Effective Date. The Company may elect to make these payments using its normal payroll system and payment calendar if doing so would be administratively more convenient for the Company and would provide cash flow that is not materially less favorable to Executive compared than the payment schedule set forth above.
|
D.
|
For a period of eighteen (18) months after the Separation Date (the “First Coverage Period”), the Company shall pay same the portion of the premium costs to continue medical coverage under Sections 601-08 of the Employee Retirement Income Security Act of 1974 (“COBRA”) for Executive and his spouse under the Company group medical plan as it was paying for Executive and his spouse for coverage under such plan immediately prior to the Separation Date (the “Group Medical Plan”), on the same terms and conditions (including co-payments, deductibles and levels of coverage) as the Company provides from time to time to actively employed senior management employees and their eligible dependents, provided, however, that Executive (and his spouse as applicable) shall make such
|
E.
|
For a period of eighteen (18) months immediately following the First Coverage Period (the “Second Coverage Period”), Executive and his spouse shall be permitted to continue their coverage under the Group Medical Plan pursuant to the provisions of Cal-COBRA, at no cost to the Company, provided that they continue during the Second Coverage Period to maintain a California residence, remain eligible for Cal-COBRA and pay the premiums that are required by the insurance company for such coverage under the Group Medical Plan.
|
F.
|
Within five business days after the Release Effective Date, the Company shall pay Executive $15,000 as reimbursement for a portion of his legal fees in connection with negotiation of this Agreement and the Release.
|
G.
|
It is understood that (i) Executive’s participation in the Key Employee Severance Plan and the Director Severance Plan approved by the Company’s Board of Directors on October 18, 2011 shall automatically terminate on the Release Effective Date, and (ii) the Indemnification Agreement between Executive and the Company, a copy of which is attached as
Exhibit C
, shall, in accordance with its terms, survive the execution of this Agreement and the termination of Executive’s service with the Company.
|
4.
|
Taxes; Compliance with Internal Revenue Code Section 409A.
|
|
A.
|
The payments and benefits provided pursuant to clause (a) of the first sentence of Section II and Section III.C above shall, subject to confirmation of the correct tax treatment from the Company’s accountants, be reduced by any and all required and authorized withholding and deductions. With respect to other payments the Company shall, as applicable, and with advice as to the correct tax treatment from the Company’s accountants, issue Executive a Form 1099 or a Form W-2. It is expected that, subject to the advice of the Company’s tax accountants, amounts subject to being reported on a Form W-2 shall be reduced by all required and authorized withholding and deductions. Executive acknowledges and agrees that he is and shall be solely responsible for the payment of any and all applicable personal federal, state, local, and other taxes relating to any and all payments and benefits under this Agreement.
|
|
B.
|
Executive further agrees to indemnify, defend, and hold harmless the Company and the other Company Released Parties (defined in the Release) for and against any and all personal federal, state, local or other tax liability for payments under this Agreement. The Company and Executive shall be responsible for the corporate and personal tax consequences, respectively, of any prior travel and entertainment expenses as to the proper accounting and tax treatment, under SEC and/or IRS guidelines, of these expenses.
|
|
C.
|
It is intended that any amounts and benefits payable under this Agreement will be exempt from or comply with Section 409A of the Code, and treasury regulations relating thereto, so as not to subject Executive to the payment of any interest and tax penalty which may be imposed under Section 409A of the Code, and this Agreement shall be interpreted and construed accordingly,
provided
,
however
, that the Company and its affiliates shall not be responsible for any such interest and tax penalties. The timing of the payments or benefits provided herein may be modified to so comply with Section 409A of the Code.
|
|
D.
|
Any reimbursement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to Executive in accordance with Company practices following receipt of such expense reports (or invoices). Any amount of expenses eligible for reimbursement or in-kind benefit provided during a calendar year shall not affect the amount of expenses eligible for reimbursement or in-kind benefit to be provided during any other calendar year. The right to reimbursement or to an in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.
|
5.
|
Return of Property
. Executive will not remove from the Company’s premises any property of the Company and/or the other Company Released Parties, including without limitation any documents or things containing any Confidential Information, computer programs and electronic or hardcopy diskettes, files, forms, notes, records, charts, or any copies thereof (collectively, “Property”). Also, as of the Release Effective Date, Executive shall have returned to the Company all Property, including without limitation any and all Company computer equipment, blackberries and similar devices, credit cards, office and car keys and other access cards, and electronic and hardcopy files.
|
6.
|
Confidential Information
.
|
|
A.
|
Except as required by law or as expressly permitted under this Agreement, Executive shall not at any time prior to, on or after the Separation Date directly or indirectly use, disclose, or take any action which may result in the use or disclosure of, any “Confidential Information.” “Confidential Information” as used in this Agreement includes all competitive, pricing, marketing, proprietary and other information or materials relating or belonging to the Company or any of its affiliates (whether or not reduced to writing), including without limitation all confidential or proprietary information furnished or disclosed to or otherwise obtained by Executive in the course of his employment, and further includes without limitation: computer programs; patented or unpatented inventions, discoveries and improvements; marketing, organizational, operating and business plans and processes; strategies; research and development; policies and manuals; sales forecasts; personnel information (including without limitation the identity of
|
|
B.
|
Nothing herein prohibits Executive from disclosing Confidential Information or the terms of this Agreement as legally required pursuant to a validly issued subpoena or order of a court or administrative agency of competent jurisdiction. Executive shall promptly notify the Company if Executive receives a subpoena, court order or other order requiring any such disclosure, to allow the Company to seek protection therefrom in advance of any such legally compelled disclosure.
|
7.
|
Intellectual Property
. Executive hereby acknowledges and reaffirms his continuing obligations under the Proprietary Information and Inventions Agreement between Executive and the Company, signed by Executive on August 30, 2006, a copy of which is attached hereto as
Exhibit D
.
|
8.
|
Nondisparagement
. As additional consideration for the payments in Section III and the Release, as applicable,
|
|
A.
|
For five (5) years after the Separation Date, Executive shall refrain from all intentional conduct, verbal or otherwise, that disparages or damages the reputation, goodwill, or standing in the community of the Company or any other Released Party (as defined in the Release), provided that nothing herein shall prohibit Executive from giving truthful testimony or evidence to a governmental entity or in a court of law, or if properly subpoenaed or otherwise required to do so under applicable law. Executive shall promptly notify the applicable Released Party (in care of the Company pursuant to the notice provision in Section XII below) if Executive receives a subpoena, court order or other order requiring any such disclosure, to allow the Released Party to seek protection therefrom in advance of any such legally compelled disclosure.
|
|
B.
|
For five (5) years after the Separation Date, the Company shall cause its senior executive officers to, and each of its directors shall, refrain from all intentional conduct, verbal or otherwise, that disparages or damages the reputation, goodwill, or standing in the community of Executive, provided that nothing herein shall prohibit the Company or any such director or senior executive officer from giving truthful testimony or evidence to a governmental entity or in a court of law, or if properly subpoenaed or otherwise required to do so under applicable law. The
|
9.
|
Remedies
. Each of the Company and Executive agrees that any breach by such party of any provision of Sections II through VIII of this Agreement will result in immediate and irreparable harm to the other party (and in the case of the Company, its affiliates) for which damages alone are an inadequate remedy and cannot readily be calculated. Accordingly, Executive agrees that the Company and its affiliates shall, and the Company agrees that Executive shall, be entitled to temporary, preliminary and permanent injunctive relief to prevent any such actual or threatened breach, without posting a bond or other security or limiting other available remedies.
|
10.
|
Notices
. Any notice, request, or other communication required or permitted to be given hereunder shall be made to the following addresses or to any other address designated by either of the parties hereto by notice similarly given: (a) if to the Company or any other Released Party, to the Secretary of the Company at the Company’s principal office (in Santa Cruz, California or other location to which the Company’s principal office may be located from time to time); and (b) if to Executive, to Executive’s last known home address on the Company’s records. All such notices, requests, or other communications shall be sufficient if made in writing either (i) by personal delivery to the party entitled thereto, (ii) by facsimile with confirmation of receipt, (iii) by certified mail, return receipt requested, or (iv) by express courier service, and shall be effective upon personal delivery, upon confirmation of receipt of facsimile transmission, upon the fourth business day after mailing by certified mail, or upon the second business day after sending by express courier service.
|
11.
|
No Admission
. Nothing in this Agreement is intended to be or shall be construed as an admission by the Company or any of the other Company Released Parties that any of them violated any law, interfered with any right, breached any obligation or otherwise engaged in any improper or illegal conduct with respect to Executive or otherwise. The Company and each of the other Company Released Parties expressly denies any such illegal or wrongful conduct. The Executive hereby acknowledges that there are no disagreements between the Company and Executive relative to his resignation.
|
12.
|
Assignment; Beneficiaries
. This Agreement may be assigned or transferred to, and shall be binding upon and shall inure to the benefit of: (a) the Company, (b) any of the other Company Released Parties, and (c) any person or entity that at any time (whether by merger, purchase or otherwise) acquires all or substantially all of the assets, ownership interests or business of the Company or any of the other Company Released Parties. The Company shall assign its obligations under this Agreement to any person or entity that at any time (whether by merger, purchase or otherwise) acquires all or substantially all of the assets, ownership interests or business of the Company. Executive may not assign any of his rights or obligations under this Agreement. If Executive dies before receiving any amounts to which Executive is entitled under this Agreement, such amounts shall be paid in accordance with the terms of this Agreement to the beneficiary designated in
|
13.
|
Entire Agreement; Survival
. This Agreement and the Release, including the exhibits hereto, embody the entire agreement and understanding of the parties hereto with regard to the matters described herein and supersede any and all prior and/or contemporaneous agreements and understandings, oral or written, actual or alleged, between said parties regarding such matters. Section I through XVII herein shall survive and continue in full force and effect in accordance with their respective terms.
|
14.
|
Governing Law; Amendment; Waiver; Headings; No Construction Against Any Drafter
. This Agreement shall be construed and interpreted in accordance with the internal laws of the State of California. The parties agree that this Agreement may be modified only in writing signed by both parties (except as provided in Section XV below), and that either party’s failure to enforce this Agreement in the event of one or more events which violate this Agreement shall not constitute a waiver of any right to enforce this Agreement against any subsequent violations. The headings used in this Agreement are for convenience only and are not to be used in interpreting or construing this Agreement. The parties respectively acknowledge and agree that they are sophisticated parties, that they were each represented by legal counsel of their own choosing throughout the negotiation and drafting of this Agreement, that this Agreement is the product of their equal mutual contributions through such process, and that neither party shall be considered the drafter or primary drafter of this Agreement or shall have this Agreement construed against them as such.
|
15.
|
Modification and Severability
. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. The parties agree that in the event any of the prohibitions or restrictions set forth in Sections V through VIII are found by a court of competent jurisdiction to be unreasonable or otherwise unenforceable, it is the purpose and intent of the parties that any such prohibitions or restrictions be deemed modified or limited so that, as modified or limited, such prohibitions or restrictions may be enforced to the fullest extent possible. If any provision of this Agreement is held to be prohibited by or invalid under applicable law (notwithstanding any attempted modification or limitation pursuant to the preceding sentence), such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
|
16.
|
Counterparts; Electronic Signatures
. This Agreement may be executed in two counterparts, each of which taken together shall constitute one and the same instrument. For purposes of this Agreement and the Release, a facsimile or electronic file containing a signature by Executive or on behalf of the Company and/or a signature printed by a receiving facsimile machine or printer shall be deemed an original signature.
|
GRAPHON CORPORATION
By:
/s/ Steven Ledger
Steven Ledger
Title: Chairman of the Board
|
Executive
/s/ Robert Dilworth
Robert Dilworth
|
2.
|
ADEA Waiver and Release
|
3.
|
Effective Date
|
4.
|
Miscellaneous
|
Grant Date
|
Type
|
Shares Issuable Upon Exercise
|
Exercise Price
|
Expiration Date
|
||||||
5/5/2003
|
NQ
|
40,000 | $ | 0.18 |
5/5/2013
|
|||||
1/26/2006
|
NQ
|
125,000 | $ | 0.21 |
1/26/2016
|
|||||
1/15/2007
|
ISO
|
125,000 | $ | 0.165 |
1/14/2017
|
|||||
1/2/2009
|
NQ
|
125,000 | $ | 0.05 |
1/1/2019
|
|||||
5/2/2011
|
ISO
|
187,500 | * | $ | 0.18 |
5/1/2021
|
||||
10/12/2011
|
NQ
|
100,000 | * | $ | 0.202 |
10/11/2021
|
||||
10/12/2011
|
NQ
|
260,000 | * | $ | 0.202 |
10/11/2021
|
||||
10/12/2011
|
NQ
|
40,000 | * | $ | 0.202 |
10/11/2021
|
||||
10/12/2011
|
NQ
|
200,000 | * | $ | 0.202 |
10/11/2021
|
||||
10/12/2011
|
NQ
|
125,000 | * | $ | 0.202 |
10/11/2021
|
||||
2/22/2012
|
NQ
|
672,500 | * | $ | 0.23 |
2/21/2022
|
1.
|
Certain Definitions.
For purposes of this Agreement:
|
2.
|
Indemnification and Expense Advancement.
|
7.
|
Contribution.
|
1.
|
The following is a complete list of all Inventions or improvements relevant to the subject matter of my employment by the Company that have been made or discovered or conceived or first reduced to practice by me or jointly with others prior to my employment by the Company that I desire to remove from the operation of the Company’s Proprietary Information and Inventions Agreement:
|
_ __
|
No inventions or improvements.
|
____
|
See below: Any and all inventions regarding:
|
____
|
Additional sheets attached.
|
2.
|
I propose to bring to my employment the following materials and documents of a former employer:
|
____
|
No materials or documents
|
____
|
See below:
|
1.
|
I have reviewed this quarterly report on Form 10-Q of GraphOn Corporation (“registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or person performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Eldad Eilam
|
|
Eldad Eilam
|
|
Interim Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of GraphOn Corporation (“registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or person performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Robert Dixon
|
|
Robert Dixon
|
|
Interim Chief Financial Officer
|