Room 4561
June 9, 2005
William Swain
Secretary and Chief Financial Officer
GraphOn Corporation
3130 Winkle Avenue
Santa Cruz, California 95065
Re: GraphOn Corporation
Registration Statement on Form S-1
Filed May 10, 2005
File No. 333-124791
Form 10-K for the Year Ended December 31, 2004
Filed on April 15, 2005
Form 10-Q for the Quarter Ended March 31, 2005
Filed on May 23, 2005
File No. 0-21683
Dear Swain:
We have limited our review of your filings to those issues
we
have addressed in our comments. Where indicated, we think you
should
revise your documents in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Registration Statement on Form S-1
Certain Transactions
1. We note your disclosure in the third paragraph of your Item 404
certain relationships disclosure regarding the terms of the NES
acquisition and role of Mr. Wesinger. Please advise us as to
whether
you believe Mr. Wesinger is an "affiliate" of the registrant. In
providing us with your analysis, please consider Mr. Wesinger`s
former role as director, president and the majority shareholder of
NES, his current 10.6% ownership in the registrant and the nature
of
his current employment with the issuer. Further, please describe
his
employment responsibilities and duties. If there is a written
position description, please provide a copy with your response.
2. We note Mr. Wesinger`s receipt of nearly five million shares in
connection with the NES acquisition. It appears that under the
stock
pledge agreement with Mr. Wesinger filed as Exhibit 10.11 Mr.
Wesinger agreed to pay you 25% of the gross proceeds of any sale
or
transfer of Mr. Wesinger`s shares. Please clarify whether the
shares
of Graphon offered by Mr. Wesinger are subject to this agreement
to
share sale proceeds. Further, analyze whether as a consequence of
the
company`s participation in the offering proceeds, Mr. Wesinger
will
be acting as an underwriter within the meaning of Section 2(a)(11)
of
the Securities Act. Tell us why you believe the offering of Mr.
Wesinger`s shares should not be viewed as an indirect primary
offering conducted on your behalf.
Financial Statements
3. Please update the financial statements pursuant to Rule 3-12 of
Regulation S-X. Also include currently dated consents of
independent
accountants in the next amended registration statement.
Item 15. Recent Sales of Unregistered Securities
4. Revise your disclosure of the 9,599,993 share issuance on
January
31, 2005 to disclose the number of purchasers in the class of
persons
to whom these unregistered shares were sold. Further, please
describe more precisely the nature of the transaction and
aggregate
amount or value of the non-cash consideration received. See Items
701(b) and (c) of Regulation S-K.
Form 10-K for the Year Ending December 31, 2004
Summary of Significant Accounting Policies
Revenue Recognition, Page 32
5. We note that you market and sell your products through
independent
software vendors (ISV`s), value-added resellers (VAR`s) and
application service providers (ASP`s) (your pages 5 and 6). Tell
us
your revenue recognition policy on sales made through these third-
party channels. Indicate how you confirm that an end-user has
purchased your product and the product has been shipped. Describe
the type of evidence obtained from the ISV`s, VAR`s and ASP`s and
the
timeliness of this evidence. Indicate whether there are any
rights
of return held by the third party channels or end user. If so,
tell
us how your accounting complies with paragraph 6 of SFAS 48. Tell
us
what consideration you gave to including any of the foregoing
revenue
recognition policies in your notes to consolidated financial
statements.
Note 10. Stockholders` Equity, Page 39
6. We note that you granted warrants to purchase 500,000 shares of
common stock at $.23 share and warrants to purchase an aggregate
of
250,000 shares of common stock at $.33 share to Griffin Securities
and its affiliates as a placement fee for the January 29, 2004
private placement of common stock. See your Item 15 of your Form
S-1
filed May 10, 2005. Tell us how you accounted for and recognized
the
value of these warrants. See SFAS No. 123, EITF 96-18 and EITF
00-
18.
Form 10-Q For the Period Ending March 31, 2005
Note 3. 2005 Private Placement, Page 6
7. Tell us how you allocated the proceeds of the private placement
between the preferred stock and the warrants and how you
considered
if a beneficial conversion feature existed at the commitment date.
See EITF 98-5 and 00-27. In addition, tell us how you accounted
for
the warrants issued pursuant to the finder`s agreement. Please be
specific in your response.
* * *
As appropriate, please amend your registration statement and
periodic reports in response to these comments. You may wish to
provide us with marked copies of the amendment to expedite our
review. Please furnish a cover letter with your amendment that
keys
your responses to our comments and provides any requested
information. Detailed cover letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings include all information required under the Securities Act
of
1933 and Securities Exchange Act of 1934 and that they have
provided
all information investors require for an informed investment
decision. Since the company and its management are in possession
of
all facts relating to a company`s disclosure, they are responsible
for the accuracy and adequacy of the disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rule 461 regarding requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Steven Williams at (202) 551-3478 or Stephen
Krikorian, Branch Chief-Accounting, at (202) 551-3488 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Neil Miller at (202) 551-3442 or me at
(202)
551-3462 or Barbara C. Jacobs, Assistant Director at (202) 551-
3730
with any other questions.
Sincerely,
Mark P. Shuman
Branch Chief-Legal
Cc: Ira I. Roxland, Esq. (via facsimile)
Sonnenschein Nath & Rosenthal LLP
1221 Avenue of the Americas
New York New York 10020
Fax No.: (212) 768-6800
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Mr. William Swain
GraphOn Corporation
June 9, 2005
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