Forward-Looking Statements

The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including:

o our history of operating losses, and expectation that those losses will continue;
o we have a limited amount of cash available to fund our operations, consequently, we may not be able to realize the anticipated benefits of the patent portfolio we acquired from Network Engineering Software;
o that a significant portion of our operating revenue has been and continues to be earned from a very limited number of significant customers;
o that our stock price has been volatile and you could lose your investment; and
o other factors, including those set forth under Item 1A, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2008 10-K Report and in other documents we have filed with the Securities and Exchange Commission.

These factors could have a material adverse effect upon our business, results of operations and financial condition.

Overview

We are developers of business connectivity software, including Unix, Linux and Windows server-based software, with an immediate focus on web-enabling applications for use and/or resale by independent software vendors ("ISVs"), corporate enterprises, governmental and educational institutions, and others. We have also made significant investments in intellectual property and have pursued various means of monetizing such investments. We conduct and manage our business based on these two segments, which we refer to as our "software" and "Intellectual Property" segments, respectively.

Server-based computing, which is sometimes referred to as thin-client computing, is a computing model where traditional desktop software applications are relocated to run entirely on a server, or host computer. This centralized deployment and management of applications reduces the complexity and total costs associated with enterprise computing. Our software architecture provides application developers with the ability to relocate applications traditionally run on the desktop to a server, or host computer, where they can be run over a variety of connections from remote locations to a variety of display devices. With our server-based software, applications can be web-enabled, without any modification to the original application software required, allowing the applications to be run from browsers or portals. Our server-based technology can web-enable a variety of Unix, Linux or Windows applications.

Critical Accounting Policies

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as "critical" because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimates, and different estimates, which also would have been reasonable, could have been used, which would have resulted in different financial results. Our critical accounting policies are identified in our 2008 10-K Report, and include: revenue recognition, long-lived assets, patents, and stock-based compensation. The following operating results should be read in conjunction with our critical accounting policies.

Results of Operations for the Three-Month Periods Ended March 31, 2009 and 2008.

Revenue

Software Revenue

Our software revenue has historically been primarily derived from product licensing fees and service fees from maintenance contracts. Other sources of

software revenue include private labeling fees, sales of software development kits and training. Software development kits are tools that allow end users to develop, interface and brand their own applications for use in conjunction with either our Windows or Unix/Linux products.

Software revenue for the three-month periods ended March 31, 2009 and 2008 was as follows:

                                                                       2009 Over (Under) 2008
                                                                  -------------------------------
Revenue                         2009               2008                 Dollars          Percent
-----------------------    ---------------    ----------------    -----------------    ----------
Product Licenses
  Windows                  $       436,600    $        429,600    $           7,000          2%
  Unix                             326,200             348,200              (22,000)        -6%
                           ---------------    ----------------    -----------------
                                   762,800             777,800              (15,000)        -2%
                           ---------------    ----------------    -----------------
Service Fees
  Windows                          283,700             243,700               40,000         16%
  Unix                             287,600             279,600                8,000          3%
                           ---------------    ----------------    -----------------
                                   571,300             523,300               48,000          9%
                           ---------------    ----------------    -----------------
Other                               75,000              11,200               63,800        570%
                           ---------------    ----------------    -----------------
  Total Revenue            $     1,409,100    $      1,312,300    $          96,800          7%
                           ===============    ================    =================

During the three month period ended March 31, 2009 the increase in Windows-based product licenses revenue was offset by a decrease in Unix-based product licenses revenue, as compared with the same period of the prior year. Such revenue can vary from period to period because a significant portion of this revenue has historically been earned, and continues to be earned, from a limited number of significant customers, most of whom are resellers. Consequently, if any of these significant customers change their order level, or fail to order during the reporting period, our product licenses revenue could be materially impacted. We expect this situation to continue throughout the next several quarterly reporting periods.

The increase in service fees for the three-month period ended March 31, 2009, as compared with the same period of the prior year, was primarily a result of the continued growth of the number of licenses our end-user customers have installed. Since our customers typically purchase maintenance contracts, and, subsequently, renew them upon expiration, as end-user customers continue to deploy more and more of our products, the revenue we are able to recognize from the sale of such maintenance contracts increases. We expect aggregate service fees revenue for 2009 to exceed those of 2008.

Other revenue increased primarily as a result of recognizing revenue from three private labeling transactions during the three-month period ended March 31, 2009, as opposed to recognizing revenue from only one such transaction during the three-month period ended March 31, 2008.

Intellectual Property Revenue

For the three-month periods ended March 31, 2009 and 2008, all of our revenue was derived from our software segment. Revenues from our intellectual property segment are non-predictable and are dependent upon the outcome of pending litigation and the results of licensing discussions with companies potentially infringing upon our patents.

Cost of Revenue

Software Cost of Revenue

Software cost of revenue is comprised primarily of service costs, which represent the costs of customer service, and product costs. We incur no shipping or packaging costs as all of our deliveries are made via electronic means over the Internet. Under accounting principles generally accepted in the United Sates ("GAAP"), research and development costs for new product development, after technological feasibility is established, are recorded as "capitalized software" on our balance sheet. Such capitalized costs are subsequently amortized as cost of revenue over the shorter of three years or the remaining estimated life of the products. No such costs were capitalized during either of the three-month periods ended March 31, 2009 or 2008.

Software cost of revenue decreased by $25,700, or 16%, to $132,900, for the three months ended March 31, 2009, from $158,600 for the same period of 2008. Cost of revenue was 9% and 12% of revenue for the three months ended March 31, 2009 and 2008, respectively.

Software cost of revenue for the three-month periods ended March 31, 2009 and 2008 was as follows:

                                           2009 Over (Under) 2008
                                           ----------------------
     Description      2009        2008       Dollars      Percent
     -------------  ----------  ---------  ------------   -------
     Service costs  $  127,400  $ 144,800  $    (17,400)    -12%
     Product costs       5,500     13,800        (8,300)    -60%
                    ----------  ---------  ------------
                    $  132,900  $ 158,600  $    (25,700)    -16%
                    ==========  =========  ============

Service costs and product costs both decreased during the three-month period ended March 31, 2009, as compared with the same period of the prior year. The decrease in service costs was primarily as a result of a change in the mix of employees providing customer service as well as the time spent by each providing such services. The decrease in product costs was as a result of the timing of the renewal of a service contract for certain software that we license and incorporate into our product offerings.

Included in service costs for the three-month periods ended March 31, 2009 and 2008 was non-cash stock-based compensation costs aggregating approximately $2,400 and $5,300, respectively.

We expect 2009 software cost of revenue to approximate 2008 levels.

Intellectual Property Cost of Revenue

For the three-month periods ended March 31, 2009 and 2008, all of our cost of revenue was incurred from the sales of our software products. Cost of revenue from Intellectual Property sales are non-predictable and are dependent upon the outcome of pending litigation and the results of licensing discussions with companies potentially infringing upon our patents.

Selling and Marketing Expenses

Selling and marketing expenses primarily consist of employee costs (inclusive of non-cash stock-based compensation expense), outside services and travel and entertainment expense.

Selling and marketing expenses for the three-month period ended March 31, 2009 increased by $80,500, or 20%, to $489,000, from $408,500 for the same period of 2008. Selling and marketing expenses were 35% and 31% of revenue for the three-month periods ended March 31, 2009 and 2008, respectively.

Employee costs, the costs of outside services and travel all increased during the three-month period ended March 31, 2009 as compared to the three-month period ended March 31, 2008. Employee costs were $21,800 higher primarily due to higher commissions, resulting from a higher level of sales bookings, and increased health care costs. Outside services were $32,500 higher as a result of certain costs associated with implementing an integrated sales management software package and an increase in general marketing activities. Travel costs were $23,200 higher primarily as a result of costs associated with our Asian sales representative, and others, visiting customers and prospects in Asia.

Included in employee costs were non-cash stock-based compensation costs aggregating approximately $4,400 and $10,600, respectively, for the three-month periods ended March 31, 2009 and 2008.

We currently expect our full-year 2009 sales and marketing expense to be somewhat higher than 2008 levels.

General and Administrative Expenses

General and administrative expenses primarily consist of employee costs (inclusive of non-cash stock-based compensation expense), amortization and depreciation, legal, professional and other outside services (including those related to realizing benefits from our patent-related assets), travel and entertainment, insurance, certain costs associated with being a publicly held corporation, and bad debts expense.

General and administrative expenses decreased by $205,000, or 21%, to $760,000, for the three-month period ended March 31, 2009, from $965,400 for the same period of 2008. General and administrative expenses were approximately 54% and 74% of revenues for the three-month periods ended March 31, 2009 and 2008, respectively.

The main factors that contributed to the decrease in general and administrative expense for the three-month period ended March 31, 2009, as compared with the same period of 2008, were an aggregate $105,100 decrease in depreciation and amortization, primarily as a result of the reduction in the net book value of

our patent portfolio after the recording of an impairment charge against the portfolio during the fourth quarter of the year ended December 31, 2008, and an aggregate $85,700 decrease in employee costs, primarily as a result of termination of one employee in our patent group during the three-month period ended March 31, 2009 and a decrease in non-cash stock-based compensation expense, which resulted from the decrease in, and continued low fair market value of our common stock.

Costs associated with other individual components of general and administrative expense, notably travel and entertainment, insurance, rent, costs associated with being a public entity and bad debts expense did not change significantly during the three-month period ended March 31, 2009, as compared with the same period of the prior year.

Included in general and administrative employee costs was non-cash stock-based compensation expense aggregating $25,300 and $74,900, respectively, for the three-month periods ended March 31, 2009 and 2008.

We currently expect 2009 general and administrative expenses to approximate 2008 levels.

Research and Development Expenses

Research and development expenses consist primarily of employee costs (inclusive of stock-based compensation expense), payments to contract programmers and rent.

Research and development expenses increased by $301,700, or 62%, to $788,100, for the three-month period ended March 31, 2009, from $486,400 for the same period of 2008. Research and development expenses were approximately 56% and 37% of revenues for the three-month periods ended March 31, 2009 and 2008, respectively.

Under GAAP, all costs of product development incurred once technological feasibility has been established, but prior to general release of the product, are typically capitalized and amortized to expense over the estimated life of the underlying product, rather than being charged to expense in the period incurred. No such product development costs were capitalized during either of the three-month periods ended March 31, 2009 or 2008.

Factors contributing to the increase in research and developments costs during the three-month period ended March 31, 2009, as compared with the same period of the prior year included; an $149,200 increase in employee costs, which resulted from having four more employees, and an $149,800 increase in outside services as we increased our use of contract engineers to assist in research and development activities surrounding GO-Global for Windows. Partially offsetting these increases was an $8,500 decrease in rent, related to the closure of our office in Israel during 2008.

Included in research and development employee costs was non-cash stock-based compensation expense aggregating $19,500 and $34,300, respectively, for the three-month periods ended March 31, 2009 and 2008.

We currently expect 2009 research and development expenses to be somewhat higher as compared with 2008 levels as a result of the increases to our engineering staff, and a continued increase in the use of outside consultants and our overall investments in this area.