Filing Compare · GoRemote Internet Communications, Inc.

Lease Commitments. The Company leases all of its facilities under operating leases that expire at various dates through 2008. As of June 30, 2004, the Company had $3.4 million in future operating lease commitments.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004
or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number: 000-27871
GoRemote Internet Communications, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware		77-0368092
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
1421 McCarthy Blvd., Milpitas, California		95035
(Address of Principal Executive Offices)		(Zip Code)
408-955-1920
(Registrant’s Telephone Number, Including Area Code)

(Mark One)

~~Indicate~~x Quarterly byreport ~~check~~pursuant ~~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 ý No o~~For the quarterly period ended January 31, 2005

~~Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).~~or

~~Yes ý No~~ o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~The~~For ~~number of shares of~~ the ~~registrant’s~~transition ~~common~~period ~~stock outstanding as of~~from ~~July 30, 2004 was 41,086,991 shares.~~ to

Commission file number: 000-27871

GoRemote Internet Communications, Inc.

~~INDEX~~(Exact Name of Registrant as Specified in Its Charter)

	PART I FINANCIAL INFORMATION
Delaware	77-0368092
Item 1.	Financial Statements:
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
	Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003
1421 McCarthy Blvd., Milpitas, California	95035
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003
(Address of Principal Executive Offices)	(Zip Code)
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
	PART II OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K
SIGNATURE

408-955-1920

(Registrant’s Telephone Number, Including Area Code)

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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

The number of shares of the registrant’s common stock outstanding as of February 28, 2005 was 41,606,684 shares.

GoRemote Internet Communications, Inc.
INDEX

PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of January 31, 2005 and October 31, 2004	3
	Condensed Consolidated Statements of Operations for the Three Months Ended January 31, 2005 and 2004	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2005 and 2004	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 2.	Changes in Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Submission of Matters to a Vote of Security Holders	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
SIGNATURE		39

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GoRemote Internet Communications, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts)

Condensed Consolidated Balance Sheets

	January 31, 2005			October 31, 2004
	(unaudited)
ASSETS
*Current assets:*
Cash and cash equivalents	$	3,765		$	2,407
Short-term investments	15,569			15,614
Accounts receivable, net of allowances of $190 and $211 at January 31, 2005 and October 31, 2004, respectively	5,850			7,243
Inventory	139			119
Deferred installation costs	1,764			1,425
Prepaid expenses and other current assets	631			725
Total current assets	27,718			27,533
Property and equipment, net	1,563			1,694
Goodwill	21,612			21,612
Intangible assets, net	3,631			3,876
Deferred installation costs, less current portion	819			740
Other assets	449			442
Total assets	$	55,792		$	55,897
LIABILITIES AND STOCKHOLDERS’ EQUITY
*Current liabilities:*
Accounts payable	$	6,050		$	6,571
Restructuring accrual	183			434
Accrued compensation and benefits	1,045			1,061
Current portion of deferred revenue	3,624			2,741
Other current liabilities	1,492			1,407
Total current liabilities	12,394			12,214
Deferred revenue, less current portion	1,289			1,305
Restructuring accrual, less current portion	370			416
Total liabilities	14,053			13,935
Stockholders’ equity:
Series A redeemable convertible preferred stock, $0.001 par value: 12,801 shares authorized at January 31, 2005 and October 31, 2004: no shares issued and outstanding	—			—
Preferred stock, 5,000 shares authorized at January 31, 2005 and October 31, 2004: no shares issued and outstanding	—			—
Common stock, $0.001 par value; 100,000 shares authorized at January 31, 2005 and October 31, 2004: 41,585 and 41,159 shares issued and outstanding at January 31, 2005 and October 31, 2004, respectively	42			41
Additional paid-in capital	213,769			213,244
Deferred stock-based compensation	(131		)	(201		)
Accumulated deficit	(171,941		)	(171,122		)
Total stockholders’ equity	41,739			41,962
Total liabilities and stockholders’ equity	$	55,792		$	55,897

~~(in~~The ~~thousands,~~accompanying ~~except~~notes ~~per~~are ~~share~~an ~~amounts)~~integral part of these condensed consolidated financial statements

	Jun 30, 2004			Dec 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,994		$	5,299
Short-term investments	18,011			19,913
Accounts receivable, net of allowances of $261 and $949 at June 30, 2004 and December 31, 2003, respectively	6,891			7,446
Inventory	147			158
Prepaid expenses and other current assets	2,119			1,435
Total current assets	30,162			34,251
Property and equipment, net	2,178			2,009
Goodwill	46,680			46,680
Purchased intangible assets, net	6,717			7,467
Other assets	1,302			721
Total assets	$	87,039		$	91,128
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,732		$	7,205
Accrued compensation and benefits	1,977			1,311
Current portion of deferred revenue	1,903			661
Other current liabilities	754			691
Current portion of capital lease obligations	—			14
Total current liabilities	10,366			9,882
Deferred revenue, less current portion	1,109			114
Commitments and contingencies
Stockholders’ equity:
Series A redeemable convertible preferred stock, $0.001 par value: 12,801 shares authorized, no shares issued and outstanding at June 30, 2004 and 3,019 shares issued and outstanding at December 31, 2003	—			3,927
Common stock, $0.001 par value; 100,000 shares authorized at June 30, 2004 and December 31, 2003: 40,891 and 37,242 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively	41			37
Additional paid-in capital	213,115			208,228
Deferred stock-based compensation	(464		)	(644		)
Accumulated deficit	(137,128		)	(130,416		)
Total stockholders’ equity	75,564			81,132
Total liabilities and stockholders’ equity	$	87,039		$	91,128

See accompanying notes

GoRemote ~~Internet~~ Internet Communications, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited)

Condensed Consolidated Statements of Operations

	Three Months Ended January 31,
	2005			2004
Revenues	$	11,976		$	11,918
Costs and expenses:
Cost of revenues	5,012			4,709
Network and operations	2,159			1,711
Research and development	583			868
Sales and marketing	3,109			4,758
General and administrative	1,595			1,361
Amortization of intangible assets	244			266
Amortization of stock-based compensation(1)	57			60
Restructuring charge	60			—
Total costs and expenses	12,819			13,733
Operating loss	(843		)	(1,815		)
Interest income and other, net	55			(6		)
Loss before income taxes	(788		)	(1,821		)
Provision for income taxes	31			22
Net loss	$	(819	)	$	(1,843	)
Basic and diluted net loss per share	$	(0.02	)	$	(0.05	)
Shares used to compute basic and diluted net loss per share	41,320			34,474

(in thousands, except per share amounts) (unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Revenues	$	12,535		$	9,858		$	25,495		$	19,349
Costs and expenses:
Cost of revenues	5,014			4,442			10,307			8,807
Network and operations	2,300			824			4,605			1,771
Research and development	1,235			554			2,402			1,199
Sales and marketing	5,678			3,312			10,741			6,009
General and administrative	1,638			1,225			3,228			2,625
Amortization of purchased intangible assets	400			—			800			—
Amortization of stock-based compensation (1)	90			20			180			61
Restructuring benefit	—			(79		)	—			(79		)
Total costs and expenses	16,355			10,298			32,263			20,393
Operating loss	(3,820		)	(440		)	(6,768		)	(1,044		)
Interest income and other, net	19			75			112			66
Loss before income taxes	(3,801		)	(365		)	(6,656		)	(978		)
Provision for income taxes	34			11			56			19
Net loss	$	(3,835	)	$	(376	)	$	(6,712	)	$	(997	)
Basic and diluted net loss per share	$	(0.09	)	$	(0.02	)	$	(0.17	)	$	(0.05	)
Shares used to compute basic and diluted net loss per share	40,862			21,255			40,169			20,992

(1) Amortization of stock-based compensation consists of:

Network and operations	$	2621	$	117	$	52	$	3
Research and development	194		213		38		3
Sales and marketing	3726		125		74		1
General and administrative	86		165		16		54
Total amortization of stock-based compensation	$	9057	$	2060	$	~~180~~	$	61

~~See~~The accompanying notes are an integral part of these condensed consolidated financial statements

GoRemote Internet Communications, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Six Months Ended
	Three Months Ended January 31,
	June 30, 2004			June 30, 2003
	2005			2004
Cash flows from operating activities:
Net loss	$	(~~6,712~~819	)	$	(~~997~~1,843	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment	~~725~~293			~~300~~363
Amortization of stock-based compensation	~~180~~57			6160
Amortization of intangibles	~~800~~244			—267
Gain on sales of assets	—			(116		)
Accounts receivable allowances	17			—
Accounts receivable allowances	(235		)	(5		)
Non-cash portion of restructuring charge (benefit)	(21		)	—
Noncash portion of restructuring benefit	—			(79		)
Net changes in assets and liabilities:
Accounts receivable	~~790~~1,376			(~~725~~291		)
Inventory	11			—
Inventories	(20		)	(91		)
Prepaid expenses and other current assets	(~~684~~245		)	~~(360~~421		)
Other assets	(~~581~~86		)	~~161~~(312		)
Accounts payable	(~~1,473~~797		)	~~366~~231
Accrued compensation and benefits	~~666~~(16		)	~~368~~(659		)
Deferred revenue	~~2,237~~867			~~172~~524
Other current liabilities	6386			(8220		)
Other long-term liabilities	—			(88		)
Net cash provided by (used in) operating activities	936			(1,550		)
Net cash used in operating activities	(4,213		)	(950		)
Cash flows from investing activities:
Available-for-sale investments:
Purchases	(131,~~100~~250		)	(91,~~150~~250		)
Maturities	151,~~002~~295			51,~~656~~250
Acquisition of intangibles	(50		)	—
Cash provided by business combination, net	—			1,412
Proceeds from sales of assets	—			117
Capital expenditures	(162		)	(240		)
Capital expenditures	(894		)	(208		)
Net cash provided by (used in) investing activities	(117		)	1,172
Net provided by (used in) investing activities	958			(3,585		)
Cash flows from financing activities:
Payments of capital lease obligations	(14		)	—
Proceeds from sales of common stock, net	539			775
Proceeds from sales of common stock, net	964			647
Net cash provided by financing activities	539			775
Net cash provided by financing activities	950			647
Net increase in cash and cash equivalents	1,358			397
Net decrease in cash and cash equivalents	(2,305		)	(3,888		)
Cash and cash equivalents at beginning of the period	2,407			3,560
Cash and cash equivalents at beginning of the period	5,299			7,314
Cash and cash equivalents at end of the period	$	3,765		$	3,957
Cash and cash equivalents at end of the period	$	2,994		$	3,426
Supplemental disclosures of cash flow information:
Income taxes paid	$	4214		$	203
Supplemental disclosures of non-cash investing activities:
Supplemental disclosures of noncash financing activities:
Conversion of Series A preferred stock into common stock	$	3,927		$	784
Conversion of Series A redeemable convertible preferred stock into common stock	$	—		$	4,032

~~See~~The accompanying notes are an integral part of these condensed consolidated financial statements

GoRemote Internet Communications, Inc. Notes to Condensed Consolidated Financial Statements (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Basis of Presentation

The financial information at ~~June~~January 3031, ~~2004~~2005 and for the three ~~and six~~ months ended ~~June~~January 3031, ~~2004~~2005 and ~~2003~~2004 is unaudited, but includes all adjustments ~~(consisting~~ ~~of normal recurring adjustments)~~ that GoRemote Internet Communications, Inc. (the “Company” ~~or “GoRemote”~~) considers necessary for a fair presentation of the financial information set forth herein, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial information set forth herein does not include all of the information and footnotes required by accounting principles generally accepted in the United States for annual financial statements. The results for the three ~~and six~~ months ended ~~June~~January 3031, ~~2004~~2005 are not necessarily indicative of the results that may be expected for future periods.

The balance sheet at ~~December~~October 31, ~~2003~~2004 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The following information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KKT for the ~~year~~10 months ended ~~December~~October 31, ~~2003. In May~~ 2004~~, the Company changed its corporate name from GRIC Communications, Inc~~. ~~to GoRemote Internet Communications, Inc. to reflect its current vision and service offerings.~~

2. Summary of Significant Accounting Policies

Basis of Presentation. The condensed consolidated financial statements include all the accounts of GoRemote and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States.

Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s broadband service providers are unable to deliver actual accounting information to the Company on a timely basis at month-end. Due to this delay, which is outside the Company’s control, the Company estimates its revenue and cost of sales related to broadband connectivity on a monthly basis, and adjusts them to actual in the subsequent month after receiving information from its service providers. Historically, these adjustments have been immaterial. In addition, the Company made estimates as to its accounts receivable allowance and reserves, the recoverability of a prepaid asset, potential liability as to certain tax obligations and restructuring expenses. Actual results could differ from those estimates.

Foreign Currency Remeasurement. The Company considers the functional currency of its foreign subsidiaries to be the U.S. dollar. Adjustments resulting from the process of remeasurement into U.S. dollars of the foreign currency financial statements of the Company’s foreign subsidiaries are included in operations and have not been material.

Cash Equivalents. Cash equivalents consist of certificates of ~~deposit~~ deposits, money market funds and commercial paper with maturities of 90 days or less at the date of purchase. Cash and cash equivalents are carried at cost, ~~which~~that approximates market value.

Short-term Investments. The Company’s policy is to invest in various short-term instruments with investment grade credit ratings. All of the Company’s investments are classified as available-for-sale, and the Company views its available-for-sale portfolio as available for use in its current operations. Accordingly, the Company has classified all investments as short-term, even though the stated maturity date may be one year or more past the current balance sheet date. Investments with maturities greater than one year are considered short-term and they are classified as available-for-sale in accordance with Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS No. 115”).6

Short-term Investments. The Company’s policy is to invest in various short-term instruments with investment grade credit ratings. All of the Company’s investments are classified as available-for-sale, and the Company views its available-for-sale portfolio as available for use in its current operations. Investments with maturities greater than one year are considered short-term and they are classified as available-for-sale in accordance with Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS No. 115”).

The cost of securities sold is based on the specific identification method. Any realized gains or losses and declines in value, judged to be other-than-temporary, are included in interest income and other. The Company includes unrealized gains or losses in comprehensive income in stockholders’ equity, if material.

Concentration of Credit Risk. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, short-term investments and accounts receivable. The Company maintains its cash and cash equivalents and short-term investments principally in domestic financial institutions of high credit standing. The Company is exposed to credit risks in the event of default by these institutions to the extent of the amount recorded on the balance sheet. The credit risk in the Company’s accounts receivable is mitigated by the Company’s credit evaluation process for both domestic and foreign customers. The Company generally does not require collateral and maintains adequate reserves ~~allowances~~ for potential credit losses. Cash equivalents and short-term investments are recorded at fair value. The carrying value of accounts receivable approximates fair value due to the short-term nature of this instrument.

Inventories. Inventories consist of finished goods and are stated at the lower of cost or market, cost being determined using the first-in, first-out method.

6Property and Equipment. Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the respective assets. The useful lives used by the Company are 36 months for furniture and fixtures, 24 to 42 months for computer equipment and software and the shorter of the useful life or the remaining lease term for leasehold improvements, respectively.

~~Property~~Goodwill. Goodwill represents ~~and~~the ~~Equipment. Property~~excess ~~and~~of ~~equipment~~the ~~are~~purchase ~~stated~~price atof ~~cost,~~an acquired enterprise or assets ~~net~~over the fair value of ~~accumulated~~the ~~depreciation~~identifiable assets acquired and ~~amortization~~liabilities assumed. ~~Depreciation~~The ~~and~~Company ~~amortization are~~does ~~provided~~not amortize goodwill, but tests for impairment of goodwill on aan ~~straight-line~~annual basis ~~over~~in the ~~estimated~~third ~~useful~~fiscal ~~lives~~quarter ofand ~~the~~at any other time ~~respective~~if ~~assets,~~events ~~generally~~occur ~~over~~or circumstances indicate that the ~~lease~~carrying ~~term~~amount orof ~~two~~goodwill may tonot ~~three~~be ~~years~~recoverable. During fiscal year 2005, the third quarter will end July 31, 2005.

Impairment of ~~Long-Lived Assets and Intangible Assets~~Goodwill. ~~The~~ Circumstances ~~Company~~that ~~evaluates~~could ~~the~~trigger ~~carrying~~an ~~amount~~impairment oftest ~~its~~include, ~~long-lived~~but ~~assets,~~are ~~including purchased~~not ~~intangible~~limited ~~assets~~to, ~~when~~a significant ~~events~~adverse orchange ~~changes~~ in ~~business circumstances have occurred, which indicate~~ the ~~carrying~~business ~~amount~~climate ofor ~~such~~legal ~~assets~~factors, ~~may~~an ~~not be~~adverse ~~fully~~action ~~realizable.~~or ~~Determination~~assessment ofby ~~impairment~~a isregulator, ~~based~~unanticipated oncompetition anor ~~estimate~~loss of ~~undiscounted~~ ~~future cash flows resulting from the use of the assets and their~~key ~~eventual disposition~~personnel. IfIn addition, the Company ~~determines~~assesses ~~that~~goodwill ~~any~~for ofrecoverability ~~these~~if ~~assets have~~its ~~been~~market ~~impaired,~~capitalization ~~the~~is ~~impairment~~less ~~charge~~than isthe recorded ~~based~~value onof aits ~~comparison~~net ofassets. If the ~~net~~carrying ~~book~~amount ~~value~~ of the ~~assets~~goodwill ~~and~~exceeds the ~~fair~~implied ~~value. The~~ fair value of ~~the assets~~that isgoodwill, ~~determined~~an byimpairment ~~either~~loss ~~discounted~~is ~~future~~recorded ~~cash~~in ~~flows~~net ~~resulting~~earnings ~~from the use of the assets over their average remaining useful lives or specific appraisal~~(loss).

~~Goodwill. Goodwill~~Purchased ~~represents~~Intangible ~~the excess of the~~Assets. Purchased ~~purchase~~intangible ~~price~~assets consist of ancustomer ~~acquired~~relationships, ~~enterprise~~internal oruse ~~assets~~software ~~over the fair value of the~~and ~~identifiable~~other ~~assets~~purchased ~~acquired~~intangibles ~~and~~such ~~liabilities~~as ~~assumed~~domain names. ~~The~~Intangible ~~Company~~assets ~~does not~~are ~~amortize~~amortized ~~goodwill, but tests for impairment of goodwill~~ on ana ~~annual~~straight-line basis ~~and at~~over ~~any~~the ~~other~~estimated ~~time~~useful iflives ~~events~~ranging ~~occur or circumstances indicate that the carrying~~from ~~amount~~one ofto ~~goodwill may not be recoverable~~five years.

~~Circumstances~~Impairment ~~that~~of ~~could~~Long-Lived ~~trigger~~Assets ~~an impairment test include, but are~~and ~~not~~Intangible ~~limited~~Assets. The ~~to,~~Company aevaluates ~~significant adverse change in~~ the ~~business climate or legal~~carrying ~~factors,~~amount anof ~~adverse~~its ~~action~~long-lived orassets, ~~assessment~~including bypurchased aintangible ~~regulator~~assets, ~~unanticipated~~when ~~competition~~events or ~~loss~~changes ofin ~~key~~business ~~personnel.~~circumstances Inhave ~~addition~~occurred, ~~the~~which ~~Company~~indicate ~~assesses~~the ~~goodwill~~carrying ~~for~~amount ~~recoverability~~of ifsuch ~~its~~assets ~~market~~may ~~capitalization~~not isbe ~~less~~fully ~~than~~realizable. ~~the~~Determination ~~value~~ of impairment ~~its~~is ~~net~~based ~~assets.~~on Ifan ~~the~~estimate ~~carrying amount~~ of ~~the~~undiscounted ~~goodwill~~future ~~exceeds~~cash ~~the~~flows ~~implied~~resulting ~~fair~~from ~~value~~the use of ~~that~~the ~~goodwill,~~assets anand ~~impairment~~their ~~loss~~eventual isdisposition. ~~recorded~~If inthe ~~net earnings~~Company ~~(loss).~~determines ~~Goodwill~~that ~~was~~any ~~not~~of ~~considered~~these ~~impaired~~assets ashave ~~of June 30, 2004.~~

Purchased Intangible Assets. Purchased intangible assets consist of customer relationships, internal use software and other purchased intangibles such as domain names. Intangible assets are amortized on a straight-line method basis over the estimated useful lives ranging from 1 to 5 years. Purchased intangible assets were not considered impaired as of June 30, 2004.

Revenue Recognition. Revenues are recognized when a binding agreement or purchase order from the customer has been received, the services have been delivered, the fee or price was fixed or determinable, the collection of the receivable is reasonably assured, and no significant post-delivery obligations remained. The Company derives revenues primarily from remote Internet access services to customers through its virtual network and by providing monthly security and support services and monthly connectivity services for broadband Internet remote access customers. Remote Internet access services are generally billed on a per-minute basis for usage or at a flat rate per month per user based on negotiated rates. The Company has some customers with minimum commitment arrangements, which are recognized as revenue in the month it has been determined that the minimum commitments have not been achieved, assuming all other criteria for revenue recognition have been met. Revenues from monthly connectivity services for broadband remote access are recognized as earned and amounts billed in advance are recorded as deferred revenue if collected. Revenues from security and support services are recognized in the month the service is provided. Revenues from licenses of the Company’s authentication software, related maintenance and support services, and other optional services related to its GoRemote Mobile Office offering are recognized ratably over the life of the contract under which they are provided, which typically ranges from 1 to 12 months. Revenues from installation services and the sale of equipment related to broadband Internet remote access services and managed security services are recognized ratably over 24 months, the expected term of the user relationship.

The Company records estimated allowances against revenues in the same period the revenues are recorded. These estimated allowances are based upon historical analysis of the Company’s credit memo data and other known factors for pricing and transaction volume disputes that arise in the normal course of business. To date, allowances pertaining to our current business have not been significant.

The Company treats the incremental direct costs of installation services related to broadband Internet remote access services and managed security services (which consist primarily of customer premise equipment and installation and service activation fees paid to broadband providers and telecommunications companies) as deferred charges in amounts that do not exceed the upfront fees that are deferred. The deferred incremental direct costs of installation services are amortized to cost of revenues ratably over 24 months, the expected term of the user relationship.

From time to time, the Company’s customers, including significant customers, may seek protection under bankruptcy laws. When this occurs, the Company determines its risk that an account receivable will prove to be uncollectible, and establishes appropriate allowances for that contingency as necessary. In addition, for each continuing customer in bankruptcy, the Company evaluates the creditworthiness of the customer and determines whether revenue should be recognized on an accrual basis or when cash payments are received. When revenue is recorded on an accrual basis, the Company has based its judgment on the creditworthiness of the debtor-in-possession, its payment experience, and whether the collectability of receivables is reasonably assured, in addition to other revenue recognition criteria having been met.

Allowance for Doubtful Accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. In order to estimate the appropriate level of allowance, the Company analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in its

~~customer~~been ~~payment~~impaired, ~~patterns.~~the impairment Ifcharge is recorded based on a comparison of the ~~financial~~net ~~condition~~book value of the ~~its~~assets ~~customers~~and the fair value. The fair value of the assets is determined by ~~were~~either todiscounted ~~deteriorate,~~future cash flows resulting infrom anthe ~~impairment~~use of ~~their~~the ~~ability~~assets ~~to make~~over ~~payments,~~their ~~additional~~average ~~allowances~~remaining ~~may~~useful belives ~~required~~or specific appraisal.

~~Research~~Revenue Recognition and ~~Development~~Related Allowances. ~~Research~~ The ~~and~~Company ~~development~~derives ~~costs,~~revenues primarily from ~~related~~providing toremote ~~the~~Internet ~~development~~access ofservices ~~software,~~to ~~are~~customers ~~expensed~~through asits ~~incurred until~~virtual ~~technological~~network ~~feasibility~~and ~~has~~by ~~been~~providing ~~established.~~monthly Tosecurity ~~date,~~and ~~the~~support ~~software~~services ~~developed~~and monthly byconnectivity ~~the~~services ~~Company~~to ~~has~~broadband ~~generally~~Internet ~~been~~remote ~~available~~access ~~for~~customers. ~~general~~The Company’s ~~release~~arrangements ~~concurrent~~ with its customers typically have multiple deliverables. ~~the~~These ~~establishment~~deliverables ofmay ~~technological~~include ~~feasibility~~software, ~~and~~installation services, ~~accordingly~~customer premises equipment, noconnectivity ~~software development~~services, ~~costs~~and ~~have~~maintenance ~~been~~and ~~capitalized~~support services.

~~Stock-based Compensation.~~ The Company ~~accounts~~recognizes ~~for~~revenues ~~employee~~when ~~stock-based~~persuasive ~~compensation~~evidence inof ~~accordance~~an ~~with~~arrangement ~~Accounting~~exists, ~~Principles~~service ~~Board~~has ~~Opinion No. 25,~~been ~~“Accounting~~provided ~~for~~to ~~Stock~~the ~~Issued~~customer, the price to ~~Employees”~~the ~~(“APB~~customer ~~No. 25”)~~is fixed or determinable, and collectibility is ~~using~~probable. anMobile ~~intrinsic~~remote ~~value~~Internet ~~approach~~access toservices ~~measure~~are ~~compensation~~generally ~~expense,~~billed ifon ~~any.~~a ~~Under~~per-minute ~~APB~~basis ~~No.~~for ~~25,~~usage ~~the~~or ~~Company~~at ~~generally~~a ~~recognizes~~flat norate ~~compensation~~per ~~expense~~month ~~with respect~~per touser ~~such~~based ~~awards~~on negotiated rates. ~~Appropriate~~Usage ~~disclosures~~fees ~~using~~are arecognized ~~fair-value~~in ~~based~~the period the services are rendered to end ~~method~~users, asand ~~provided~~monthly byfees ~~Statement~~are ofrecognized ~~Financial~~ratably ~~Accounting~~based ~~Standards~~on the number of days that Nohave elapsed. ~~123. “Accounting~~ ~~for Stock-Based~~The ~~Compensation”~~Company ~~(“SFAS~~has Nominimum commitment arrangements with some customers. ~~123”),~~ These customers are ~~also~~not ~~reflected~~contractually ~~herein.~~entitled to use or otherwise ~~Options~~receive ~~issued~~benefit tofor ~~non-employees~~unused service in subsequent periods. Minimum commitment fees are ~~accounted~~recognized ~~for~~as revenue in ~~accordance~~the ~~with~~month ~~SFAS~~it ~~No.~~has been determined that the ~~123~~minimum ~~using~~commitments ahave ~~fair~~not ~~value~~been ~~approach~~achieved, assuming all other criteria for revenue recognition have been met.

~~Pro~~The ~~forma~~Company’s ~~information~~solutions ~~regarding~~sometimes ~~net~~also ~~income~~include installation ~~and~~services, ~~earnings~~the ~~per~~sale ~~share~~of iscustomer premise equipment and managed ~~required~~security byservices ~~SFAS~~related Noto its broadband services offerings. ~~123~~ Depending on the service provided and ~~has~~the ~~been~~nature ~~determined~~of asthe ifarrangement, the Company ~~had~~may charge a ~~accounted~~one-time, annual or monthly fee for ~~awards~~these toadditional ~~employees~~services ~~under~~or deliverables. Revenue from installation services and the ~~fair~~sale ~~value~~of ~~method~~equipment is deferred and recognized ratably over the period of ~~SFAS~~expected usage by its customers since the NoCompany considers these services and products to be an enabler of the related remote access service contracts. ~~123.~~ The ~~fair~~Company’s ~~value~~estimate of ~~stock~~expected ~~options~~usage ~~under~~is 24 months for all periods presented. On a quarterly basis, the Company’s reviews ~~1999~~this ~~Equity~~estimate of expected usage based on actual data. Revenues from ~~Incentive~~managed ~~Plan~~security ~~and~~services ~~stock~~are ~~purchase~~recognized ~~plan~~in ~~rights~~the ~~under~~month the service is provided. To a lesser extent, the Company’s ~~1999~~also ~~Employee~~derives a portion of its revenues from ~~Stock~~licenses ~~Purchase~~of ~~Plan~~its ~~(“Purchase~~authentication ~~Plan”)~~software, ~~was~~related ~~estimated~~maintenance asand support services, and other optional services related to its remote access solutions which are recognized ratably over the term of service. These other revenues amounted to five percent or less of total revenues over the ~~grant~~last ~~date~~three ~~using~~years. Fees generated from maintenance contracts are recognized over the ~~Black-Scholes~~life ~~option-pricing~~of ~~model~~those contracts. The majority of the maintenance contracts cover periods of one to 12 months. Amounts billed in advance of revenue recognition are recorded to deferred revenue as collected. The Company recognizes certain broadband connectivity revenues generated under agency arrangements on a net basis. Product returns and allowances have not been significant.

The ~~fair~~Company ~~values~~provides ofservices ~~stock~~over ~~options~~a ~~granted~~heterogeneous virtual ~~during~~network, ~~the~~which ~~three~~was ~~and~~created ~~six~~by forming contractual relationships with ~~months~~approximately ~~ended~~500 ~~June 30~~Internet service providers, ~~2004~~cable companies, DSL companies and ~~2003~~telecommunications ~~were~~companies. ~~estimated~~These atcompanies may provide their services under either a reseller or an agency arrangement. In applying its revenue recognition policy, the ~~date~~Company must make judgments and estimates with regard to the specific facts and circumstances surrounding each provider relationship to determine which portion of ~~grant~~its revenues the Company provides under a ~~assuming~~reseller noarrangement, ~~expected~~where ~~dividends~~the Company would record gross revenues and cost of revenues, and which portion of its revenues the ~~following~~Company ~~weighted~~provides ~~average~~as an agent, where the Company would record revenues and cost of revenues combined on a net basis. The Company bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as its operating

~~Stock Options~~8

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Expected life (years)	5.09		2.09		4.94		2.04
Expected stock price volatility	4.48		2.50		5.66		1.94
Risk-free interest rate	2.61	%	2.62	%	2.81	%	2.76	%
Stock Purchase
	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Expected life (years)	0.50		0.49		0.50		0.50
Expected stock price volatility	2.88		0.77		3.94		0.77
Risk-free interest rate	1.68	%	2.46	%	1.37	%	2.46	%

environment changes, any of which could cause a material impact on the revenues that the Company has reported.

~~For~~The ~~purposes~~Company ofrecords ~~pro~~estimated ~~forma~~allowances ~~disclosures,~~against revenues for returns and cancellations in the ~~estimated~~same ~~fair~~period ~~value~~the ofrevenues are ~~stock-~~recorded. These estimates are based ~~awards~~upon ishistorical ~~amortized~~analysis onof athe ~~straight~~Company’s service ~~line~~level ~~basis~~agreements, ~~against~~credit ~~pro~~memo ~~forma~~data ~~net~~and other known factors for pricing ~~loss~~and ~~over~~transaction volume disputes that arise in the ~~stock-based~~normal ~~awards~~course of business. To date, allowances pertaining to the Company’s ~~vesting~~current ~~period~~business ~~for~~have ~~options~~not ~~and~~been significant. ~~over~~If the historical data the Company uses to calculate these ~~offering~~estimates ~~period~~does ~~for~~not ~~stock~~accurately ~~purchases~~reflect ~~under~~amounts associated with future disputes, its actual revenues could be higher or lower than what the ~~Purchase~~Company ~~Plan~~has recognized.

Cost of Revenues. Cost of revenues represents the amounts paid to Internet service providers, cable companies, DSL companies and telecommunications companies for the use of their networks, and amounts paid to other third party providers of products or services that the Company includes in its solutions. The Company’s ~~pro~~has ~~forma~~entered into ~~information~~minimum ispurchase commitments with some network service providers for access that the Company expects to utilize during the term of the contracts. Costs of minimum purchase contracts are recognized as ~~follows:~~network access expenses at the greater of the minimum commitment or actual usage. If the Company estimates that the revenues derived from the purchase commitment will be less than the purchase commitment, the Company recognizes a loss on that purchase commitment to the extent of that difference. No such loss has been recognized to date.

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Net loss as reported	$	(3,835	)	$	(376	)	$	(6,712	)	$	(977	)
Add: Amortization of stock compensation measured under APB No. 25	90			20			180			61
Less: Stock-based compensation expense measured under FAS No. 123	(1,441		)	(1,219		)	(2,795		)	(1,953		)
Pro forma net loss	$	(5,186	)	$	(1,575	)	$	(9,327	)	$	(2,869	)
Basic and diluted net loss per share	$	(0.09	)	$	(0.02	)	$	(0.17	)	$	(0.05	)
Pro forma basic and diluted net loss per share	$	(0.13	)	(0.07		)	$	(0.23	)	$	(0.14	)

Allowance for Doubtful Accounts. The Company maintains allowances for doubtful accounts for estimated losses from its customers’ inability to make payments they owe. In order to estimate the appropriate level of this allowance, the Company analyzes historical bad debts, customer concentrations, current customer credit-worthiness, current economic trends and changes in its customer payment patterns. If the financial condition of its customers were to deteriorate and to impair their ability to make payments to the Company, additional allowances might be required in future periods. If the Company determines that collectibility is not probable, revenue is recognized as cash is collected. If the Company’s estimates prove too low, its bad debt expense will increase.

~~Calculated~~Research ~~under~~and ~~SFAS No~~Development. ~~123, the weighted-average fair values of~~ The ~~the~~Company’s ~~employee~~research ~~stock~~and ~~options~~development ~~granted~~costs, ~~during~~which ~~the~~principally ~~three~~have ~~months~~related ~~ended June 30,~~to ~~2004~~development ~~and~~of ~~2003~~internal ~~were~~use ~~$2.93~~software ~~and~~that ~~$2.24~~is ~~per~~also ~~share,~~marketed ~~respectively,~~to ~~and during~~ the ~~six~~Company’s ~~months~~customers, ~~ended~~are ~~June 30,~~expensed ~~2004~~as ~~and~~incurred ~~2003,~~until ~~were~~technological ~~$4.27~~feasibility ~~and~~has ~~$1.94,~~been ~~respectively~~established. ~~The~~ ~~weighted-average estimated~~To ~~fair~~date, ~~value~~the ofsoftware ~~shares~~developed ~~purchased~~by ~~under~~ the ~~Purchase~~Company ~~Plan~~has ~~during~~generally ~~the~~been ~~three~~available ~~months~~for ~~ended~~general ~~June 30,~~release ~~2004~~concurrent ~~and~~with ~~2003~~the ~~were~~establishment ~~$4.48 and $0.66,~~of ~~respectively,~~technological ~~and~~feasibility ~~during the six months ended June 30~~and, ~~2004 and 2003~~accordingly, ~~were $5.13~~no ~~and~~software ~~$0.54~~development ~~per~~costs ~~share,~~have been ~~respectively~~capitalized.

8Stock-based Compensation. As permitted under the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), the Company accounts for employee stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), using an intrinsic value approach to measure compensation expense, if any. Under APB No. 25, the Company generally recognizes no compensation expense with respect to such awards. Appropriate disclosures using a fair-value based method, as provided by SFAS No. 123, are also reflected herein. Options issued to non-employees are accounted for in accordance with SFAS 123 using a fair-value approach.

~~Income~~Pro ~~Taxes. The~~forma ~~Company~~information ~~accounts~~regarding ~~for~~net income ~~taxes under~~and ~~the~~earnings ~~provisions~~per ofshare ~~Statement~~is ofrequired ~~Financial~~by ~~Accounting~~SFAS ~~Standards~~ No. ~~109, “Accounting~~123 ~~for~~and ~~Income~~has ~~Taxes”~~been ~~(“SFAS~~determined ~~No. 109”),~~as if ~~which~~the ~~provides~~Company had accounted for awards to employees under the fair-value ~~establishment~~method of ~~deferred~~SFAS ~~tax~~No. 123. ~~assets~~The ~~and~~fair ~~liabilities~~value ~~based~~of onstock options under the ~~difference~~Company’s ~~between~~stock ~~the~~option ~~carrying~~plan ~~amounts~~and ofstock ~~assets~~purchase ~~and~~plan ~~liabilities~~rights ~~for~~under ~~financial~~the ~~reporting~~Company’s stock ~~purposes~~purchase ~~and~~plan was estimated as of the ~~amounts~~grant ~~used~~date ~~for~~using ~~income~~the ~~tax~~Black-Scholes option-pricing ~~purposes~~model.

Net Loss Per Share. Net loss per common share and diluted net loss per share are presented in conformity with Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”) for all years presented.9

InThe ~~accordance~~fair ~~with~~value ~~SFAS No. 128, basic and diluted net loss per share has been computed using the weighted-average number~~ of ~~shares of common~~ stock options ~~outstanding~~granted during the ~~period.~~three ~~Potentially~~months ~~dilutive~~ended ~~securities~~January 31, ~~have~~2005 ~~been~~and 2004 ~~excluded~~were ~~from~~estimated at the ~~computation~~date of ~~basic~~grant ~~and~~assuming ~~diluted~~no ~~net~~expected ~~loss~~dividends ~~per~~and ~~share, as their~~the ~~effect~~following isweighted ~~antidilutive~~average assumptions.

~~Weighted-average~~Stock options outstanding to purchase approximately 7.9 million and 6.3 million shares of common stock for the three months ended June 30, 2004 and 2003, respectively, and approximately 7.7 million and 5.7 million shares of common stock for the six months ended June 30, 2004 and 2003, respectively, were not included in the computation of diluted net loss per share because the effect would be antidilutive. The increase in weighted-average options outstanding for the three and six months ended June 30, 2004, respectively, compared to the same periods in 2003, respectively, was primarily due to the grant of new options to the Company’s employees and assumption of options held by former Axcelerant, Inc. (“Axcelerant”) employees in connection with the Company’s acquisition of Axcelerant. Such securities, had they been dilutive, would have been included in the computation of diluted net loss per share using the treasury stock method.Options

Indemnifications. The Company from time to time enters into types of contracts that contingently require the Company to indemnify parties against third party claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company may provide customary indemnifications to purchasers of the Company’s assets; (ii) real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises; (iii) agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship; and (iv) agreements with customers and resellers, under which the Company may provide customary indemnifications against claims that its products and services infringe certain copyrights, patents or trademarks, or incorporate misappropriated trade secrets.

	Three Months Ended January 31,
	2005			2004
Expected life (years)		2.88			2.80
Expected stock price volatility		286	%		138	%
Risk-free interest rate		2.79	%		1.28	%

~~The~~Stock terms of such obligations vary. Generally, a maximum obligation is not explicitly stated, except for indemnifications involving infringement of third party intellectual property rights. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make any payments for these obligations, and no liabilities have been recorded for these obligations on its balance sheet at June 30, 2004.Purchase

Reclassifications. To conform to the 2004 presentation, $114,000 previously reported on the 2003 consolidated balance sheet under current liabilities as the current portion of deferred revenue has been reclassified by the Company and is now included in long-term liabilities under deferred revenue.

	Three Months Ended January 31,
	2005			2004
Expected life (years)		0.50			0.50
Expected stock price volatility		246	%		375	%
Risk-free interest rate		2.79	%		1.01	%

3.For ~~Business~~purposes ~~Combination~~of pro forma disclosures, the estimated fair value of stock-based awards is amortized against pro forma net income over the stock-based awards’ vesting period for options and over the offering period for stock purchases under the Company’s 1999 Employee Stock Purchase Plan.

~~On December 1, 2003, the Company completed its acquisition of Axcelerant, a privately held provider of broadband Internet remote access services and managed security services.~~ The Company’s ~~acquired~~pro ~~Axcelerant~~forma ~~to extend~~information ~~its~~is ~~service offerings, enhance retention of existing customers and improve its ability to obtain new enterprise customers. The purchase price was $58.6 million and the transaction was accounted for~~ as ~~a purchase.~~follows:

The purchase price is not final and may be adjusted for a period of one year from the transaction close date based on higher than expected acquisition costs or unforeseen liabilities. A total of approximately 1.5 million shares of the total consideration that was to be delivered to Axcelerant’s stockholders as a result of the acquisition has been set aside as an escrow fund, serving as collateral for the indemnification obligations of Axcelerant stockholders. The Company may make claims against the escrow fund through December 1, 2004.

	Three Months Ended January 31,
	2005				2004
	(in thousands, except per share amounts)
Net loss attributable to common stockholders as reported		$	(819	)		$	(1,843	)
Add: Amortization of stock compensation measured under APB 25		57				60
Less: Stock-based compensation expense measured under SFAS 123		(907		)		(994		)
Pro forma net loss		$	(1,669	)		$	(2,777	)
Basic and diluted net loss per share		$	(0.02	)		$	(0.05	)
Pro forma basic and diluted net loss per share		$	(0.04	)		$	(0.08	)

~~The~~Calculated ~~results~~under ofSFAS ~~operations~~No. 123, the weighted-average fair values of ~~Axcelerant~~the ~~have~~employee ~~been~~stock ~~included~~options ingranted during the ~~Company’s~~three ~~financial~~months ~~statements~~ended ~~subsequent~~January 31, to2005 ~~the~~and ~~date~~2004 were $1.58 and $3.87 per share, respectively. The weighted-average estimated fair value of ~~acquisition~~shares purchased under the Purchase Plan during the three months ended January 31, 2005 and 2004 was $0.95 and $5.25 per share, respectively.

~~Deferred~~Income ~~Stock-based Compensation~~Taxes. The ~~intrinsic value~~ ofCompany ~~unvested~~accounts ~~stock~~for ~~options~~income ~~assumed~~taxes asunder athe ~~result~~provisions of ~~the~~Statement ~~Axcelerant acquisition~~ of ~~approximately~~Financial ~~$674,000~~Accounting ~~have~~Standards ~~been~~No. 109, ~~allocated~~“Accounting tofor ~~deferred~~Income ~~stock-based~~Taxes” ~~compensation~~(“SFAS ~~and~~No. 109”), iswhich ~~being~~provides ~~amortized~~for ~~to expense on a straight-line basis over~~ the ~~vesting period.~~establishment ~~The Company assumed options from Axcelerant to purchase a total~~ of ~~approximately~~ ~~597,000~~deferred ~~shares~~tax ofassets ~~the Company’s common stock, of which~~and ~~approximately~~liabilities ~~462,000~~based ~~were~~on ~~fully vested. Options assumed in connection with~~ the ~~acquisition~~ ~~had~~difference ~~exercise prices~~ between ~~$0.02~~the ~~and~~carrying ~~$5.05~~amounts ~~per~~of ~~share,~~assets ~~with a~~and ~~weighted~~liabilities ~~average~~for ~~exercise~~financial ~~price~~reporting ofpurposes ~~$1.32~~and ~~per~~the ~~share~~amounts ~~and~~used afor ~~weighted average~~income ~~remaining~~tax ~~vesting period of approximately 2~~purposes.~~5 years.~~

9Net Loss Per Share. Net loss per common share and diluted net loss per share are presented in conformity with the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”) for all years presented.

~~4. Property and Equipment, Intangible Assets and Other Assets~~10

~~Property~~In accordance with SFAS No. 128, basic and ~~Equipment~~diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. Weighted-average options outstanding to purchase approximately 8.8 million and 7.0 million shares of common stock for the three months ended January 31, 2005 and 2004, respectively, were not included in the computation of diluted net loss per share because the effect would be antidilutive. The increase in weighted-average options outstanding in the three months ended January 31, 2005 was primarily due to the grant of new options to the Company’s employees. Such securities, had they been dilutive, would have been included in the computation of diluted net loss per share using the treasury stock method.

~~Property~~3. Change ~~and~~in Fiscal ~~equipment~~Year ~~comprised the following:~~End

	June 30, 2004			December 31, 2003
Computer hardware	$	6,190		$	7,843
Software	4,696			4,241
Office furniture and equipment	1,761			1,726
Leasehold improvements	422			418
	13,069			14,228
Less accumulated depreciation and amortization	(10,891		)	(12,219		)
Total	$	2,178		$	2,009

In October 2004, the Company changed its fiscal year end from December 31 to October 31. The consolidated financial information for the first fiscal quarter of 2005 represents the financial results for the three-month period ended January 31, 2005. The 2004 financial results presented in this Form 10-Q are for the three-month period ended January 31, 2004.

~~Purchased Intangible Assets~~4. Business Combination

~~Purchased~~On ~~intangible~~December 1, ~~assets~~2003, ~~are~~the ~~carried~~Company atcompleted ~~cost~~its acquisition ~~less~~of ~~accumulated~~Axcelerant, a privately held provider of broadband Internet ~~amortization~~remote access services and managed security services. ~~Amortization~~The Company’s acquisition of ~~purchased~~Axcelerant ~~intangible~~did ~~assets~~not isresult ~~computed~~in ~~using~~a ~~the~~new reportable segment. The results of ~~straight-line~~operations ~~method~~of ~~over~~Axcelerant ~~their~~have ~~expected~~been ~~useful~~included ~~lives~~in ~~ranging~~the ~~from~~Company’s ~~one~~financial statements subsequent to ~~five years~~the date of the acquisition.

~~Purchased~~A ~~intangible~~total ~~assets~~of approximately ~~consisted~~1.5 million shares of the ~~following~~total ~~(in~~consideration ~~thousands):~~that was to be delivered to Axcelerant’s stockholders as a result of the acquisition was set aside as an escrow fund, serving as collateral for the indemnification obligations of Axcelerant stockholders. The Company made no claims against the escrow fund through December 1, 2004, the expiration date for the escrow period. The escrowed shares were released to the former Axcelerant shareholders during December 2004.

	June 30, 2004
Customer relationships	$	7,500
Internal use software	100
Website URL	50
	7,650
Less accumulated amortization	(933		)
Total	$	6,717

Deferred Stock Compensation. The intrinsic value of unvested stock options assumed in the Axcelerant acquisition in an amount of approximately $674,000 has been allocated to deferred stock compensation and is being amortized to expense on a straight-line basis over the vesting period. The Company assumed options from Axcelerant to purchase a total of approximately 597,000 shares of the Company’s common stock, of which approximately 462,000 were fully vested. Options assumed in connection with the acquisition had exercise prices between $0.02 and $5.05 per share, with a weighted average exercise price of $1.32 per share and a weighted average remaining vesting period of approximately 2.5 years.

~~Other~~5. Property and Equipment and Intangible Assets

~~The~~Property ~~Company entered into an agreement with a wireless service provider during 2001 for the exchange of services, which resulted in a prepayment for future wireless services~~ and ~~the obligation by the Company to provide future~~ Internet roaming services. During September 2003, because these assets had not yet been utilized, the Company and the provider amended the underlying agreement to modify the scope of their business relationship and extend the term of the agreement until September 2007, thus permitting the Company to utilize the assets during the extended term. As a result of this amended agreement, the Company entered into a nonmonetary transaction for the exchange of prepaid wireless services for prepaid roaming services and wireless cards. Because this nonmonetary transaction did not represent a culmination of an earnings process, no revenues or expenses have been, or will be recorded by the Company pursuant to this transaction. In addition, there was no indicated loss on this exchange of services. As of June 30, 2004, there was $537,000 of the asset remaining to be utilized, which the Company believes will be utilized over the period of the agreement.Equipment

5.Property ~~Commitments~~ and ~~Contingencies~~equipment comprised the following (in thousands):

	January 31,				October 31,
	2005				2004
Computer hardware		$	6,414			$	6,319
Software		4,543				4,495
Office furniture and equipment		1,525				1,506
Leasehold improvements		422				422
		12,904				12,742
Less accumulated depreciation and amortization		(11,341		)		(11,048		)
Total		$	1,563			$	1,694

Purchase Commitments. The Company has entered into certain non-cancelable purchase commitments from suppliers who provide network access, software and related services that are utilized by the Company in order to deliver its GoRemote MobileOffice solution. As of June 30, 2004, the Company had $2.7 million in future purchase commitments that expire at various dates through 2005.11

10Purchased Intangible Assets

~~Legal~~Purchased ~~Matters. The~~intangible ~~Company~~assets ~~is subject~~are tocarried ~~various~~at ~~legal~~cost ~~proceedings~~less accumulated ~~and~~amortization. ~~claims~~Amortization ~~arising~~of inpurchased ~~the~~intangible ~~ordinary~~assets ~~course~~is ofcomputed ~~business.~~using ~~The~~the ~~Company’s~~straight-line ~~management~~method ~~does~~over ~~not~~their ~~expect~~expected ~~that~~useful ~~the~~lives ~~results in any~~ of five ~~these~~years ~~legal~~for ~~proceedings~~customer ~~will~~relationships ~~have~~and aWebsite ~~material~~URLs ~~adverse~~and ~~effect~~one onyear ~~the Company’s~~for ~~consolidated~~internal ~~financial~~use ~~condition, results of operations, or cash flows~~software.

~~In July and August 2001, the Company and certain of its~~Purchased ~~officers~~intangible ~~were~~assets ~~named~~consisted ~~as defendants in five purported securities class action lawsuits filed in the United States District Court, Southern District~~ of New York, captioned as In re GRIC Communications, Inc. Initial Public Offering Securities Litigation, No. 01 Civ 6771 (SAS), and consolidated with more than three hundred substantially identical proceedings as In re Initial Public Offering Securities Litigation, Master File No. 21 MC 92 (SAS). The Consolidated Amended Class Action Complaint for Violation of the ~~Federal~~ ~~Securities~~following ~~Laws~~ (~~“Consolidated~~in ~~Complaint”~~thousands) was filed on or about April 19, 2002, and alleges claims against certain of the Company’s officers and against CIBC World Markets Corp., Prudential Securities Incorporated, DB Alex. Brown, as successor to Deutsche Bank, and U.S. Bancorp Piper Jaffray Inc., underwriters of the Company’s December 14, 1999 initial public offering (“underwriter defendants”), under Sections 11 and 15 of the Securities Act of 1933, as amended, and under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended.:

Citing several press articles, the Consolidated Complaint alleges that the underwriter defendants used improper methods in allocating shares in initial public offerings, and claim the underwriter defendants entered into improper commission agreements regarding aftermarket trading in the Company’s common stock purportedly issued pursuant to the registration statement for the initial public offering. The Consolidated Complaint also alleges market manipulation claims against the underwriter defendants based on the activities of their respective analysts, who were allegedly compromised by conflicts of interest. The plaintiffs in the Consolidated Complaint seek damages as measured under Section 11 and Section 10(b) of the Securities Act of 1933, pre-judgment and post-judgment interest, and reasonable attorneys’ and expert witnesses’ fees and other costs; no specific amount is claimed in the plaintiffs’ prayer in the Consolidated Complaint. By Order of the Court, no responsive pleading is yet due, although motions to dismiss on global issues affecting all of the issuers have been filed.

	January 31,
	2005
Customer relationships		$	5,150
Internal use software		100
Website URL		50
		5,300
Less accumulated amortization		(1,669		)
Total		$	3,631

~~In October 2002, certain of the Company’s officers and directors~~The ~~who~~aggregate ~~had~~estimated ~~been~~amortization ~~named~~expense asthrough ~~defendants~~October 31, in2009, ~~the In re Initial Public Offering~~based ~~Securities~~on ~~Litigation~~fiscal ~~were~~years ~~dismissed~~ending ~~without prejudice upon order of the presiding judge. In February~~October ~~2003~~31, ~~the~~is ~~presiding~~as ~~judge~~follows ~~dismissed the Section 10~~(b)in ~~claims against the Company and its named officers and directors with prejudice.~~thousands):

From September 2002 through June 2003, the Company participated in settlement negotiations with a committee of Issuers’ litigation counsel, plaintiffs’ executive committee and representatives of various insurance companies (the “Insurers”). The Company’s Insurers were actively involved in the settlement negotiations, and strongly supported a settlement proposal presented to the Company for consideration in early June 2003. The settlement proposed by the plaintiffs would be paid for by the Insurers and would dispose of all remaining claims against the Company.

	Amortization
2005		709
2006		946
2007		946
2008		946
2009		84
		$	3,631

~~After~~Other ~~careful consideration, the Company approved the settlement~~Intangible proposal in July 2003. Although the Company believes that plaintiffs’ claims are without merit, it decided to accept the settlement proposal (which does not admit wrongdoing) to avoid the cost and distraction of continued litigation. Because the settlement will be funded entirely by its Insurers, the Company does not believe that the settlement will have any effect on the Company’s consolidated financial condition, results or operations or cash flows.Assets

The ~~settlement~~Company ~~was~~entered ~~presented~~into an toagreement ~~the~~with ~~Court~~a wireless service provider during 2001 for ~~approval~~the inexchange of ~~June 2004.~~services, ~~While~~which ~~the~~resulted ~~Court~~in isa ~~expected~~prepayment tofor ~~approve~~future orwireless ~~disapprove~~services and the ~~settlement~~obligation inby the ~~coming~~Company ~~months~~to provide future Internet roaming services. As of January 31, 2005, there ~~can~~was be$53,000 noof ~~guarantee~~the ~~that~~asset ~~the~~remaining ~~settlement~~to be utilized, which the Company believes will be ~~judicially~~utilized ~~approved~~over the period of the agreement.

6. ~~Segment~~ Commitments and ~~Information~~Contingencies

Lease Commitments. The Company ~~operates~~leases inall ~~one~~of ~~segment,~~its ~~providing~~facilities aunder ~~global~~operating ~~remote~~leases ~~access~~that ~~solution~~expire ~~for~~at ~~corporate~~various ~~enterprises~~dates ~~with~~through ~~mobile~~2008. ~~and~~As ~~remote~~of ~~workforces~~January 31, ~~and~~2005, ~~for~~ the Company’s had $2.5 ~~service~~million ~~provider~~in ~~resellers~~future ~~and~~operating ~~value-added~~lease ~~resellers~~commitments.

Purchase Commitments. The ~~following~~Company ishas aentered ~~summary~~into ofcertain ~~revenue~~non-cancelable purchase commitments from suppliers who provide network access, software and related services that are utilized by ~~geographical~~the ~~area~~Company ~~for~~in order to deliver its GoRemote MobileOffice solution. As of January 31, 2005 the ~~periods~~Company had $2.1 million in future purchase ~~presented:~~commitments that expire at various dates through 2007.

	Three months ended June 30,				Six months ended June 30,
	2004		2003		2004		2003
	(in thousands)				(in thousands)
Revenue by external customers:
United States, Canada and Latin America	$	8,703	$	5,454	$	17,356	$	10,479
Japan/Korea	1,906		2,637		4,226		5,221
Asia Pacific	892		792		1,758		1,649
Europe, Middle East and Africa	1,034		975		2,155		2,000
	$	12,535	$	9,858	$	25,495	$	19,349

Legal Matters. The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company’s management does not expect that the results in any of these legal proceedings will have a material adverse effect on its financial condition, results of operations, or cash flows.

11In July and August 2001, the Company and certain of its officers were named as defendants in five purported securities class action lawsuits filed in the United States District Court, Southern District of

~~The following is a summary of long-lived assets by geographical area for the periods presented:~~12

	June 30, 2004		December 31, 2003
	(in thousands)
Long-lived assets:
United States	$	56,048	$	56,633
Rest of World	63		72
	$	56,111	$	56,705

New York, captioned as In re GoRemote Internet Communications, Inc. Initial Public Offering Securities Litigation, No. 01 Civ 6771 (SAS), and consolidated with more than three hundred substantially identical proceedings as In re Initial Public Offering Securities Litigation, Master File No. 21 MC 92 (SAS). The Consolidated Amended Class Action Complaint for Violation of the Federal Securities Laws (“Consolidated Complaint”) was filed on or about April 19, 2002, and alleges claims against certain of the Company’s officers and against CIBC World Markets Corp., Prudential Securities Incorporated, DB Alex. Brown, as successor to Deutsche Bank, and U.S. Bancorp Piper Jaffray Inc., underwriters of the Company’s December 14, 1999 initial public offering (“underwriter defendants”), under Sections 11 and 15 of the Securities Act of 1933, as amended, and under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended.

~~Revenue~~Citing byseveral ~~external~~press ~~customer~~articles, isthe ~~based~~Consolidated Complaint onalleges that the ~~customer~~underwriter defendants used improper methods in allocating shares in initial public offerings, and claim the underwriter defendants entered into improper commission agreements regarding aftermarket trading in the Company’s ~~billing~~common stock purportedly issued pursuant to the ~~locations~~registration statement for the initial public offering. ~~Long-lived~~The ~~assets~~Consolidated Complaint ~~are~~also ~~those~~alleges ~~assets~~market ~~used~~manipulation inclaims ~~each~~against ~~geographic~~the underwriter ~~location. For~~defendants based on the ~~three~~activities ~~and~~of ~~six~~their ~~months~~respective analysts, who were ~~ended~~allegedly ~~June~~compromised by conflicts of interest. The plaintiffs in the Consolidated Complaint seek damages as measured under Section 3011 and Section 10(b) of the Securities Act of 1933, ~~2004~~pre-judgment and post-judgment interest, ~~one~~and reasonable ~~customer~~attorneys’ and ~~two~~expert ~~customers~~witnesses’ fees and other costs; no specific amount is claimed in the plaintiffs’ prayer in the Consolidated Complaint. By Order of the Court, ~~respectively~~no responsive pleading is yet due, although motions to ~~accounted~~dismiss ~~for~~on ~~10%~~global orissues ~~more~~affecting all of the ~~Company’s~~issuers ~~total~~have ~~consolidated~~been ~~revenues~~filed.

~~7. Stockholder~~In October 2002, certain of the Company’s ~~Equity~~officers and directors who had been named as defendants in the In re Initial Public Offering Securities Litigation were dismissed without prejudice upon order of the presiding judge. In February 2003, the presiding judge dismissed the Section 10(b) claims against the Company and its named officers and directors with prejudice.

~~Series~~From ASeptember 2002 ~~Redeemable~~through ~~Convertible~~June 2003, ~~Preferred Stock. During~~ the Company ~~three~~participated ~~months~~in ~~ended~~settlement ~~June 30,~~negotiations ~~2004~~with ~~and~~a ~~2003~~committee of issuers’ litigation counsel, ~~zero~~plaintiffs’ executive committee and ~~286,000~~representatives ~~shares,~~of ~~respectively,~~various ~~and~~insurance ~~during~~companies (the ~~six~~“Insurers”). ~~months~~The ~~ended~~Company’s ~~June 30,~~Insurers ~~2004~~were actively ~~and~~involved ~~2003~~in the settlement negotiations, ~~3.0~~and strongly supported a ~~million~~settlement ~~and~~proposal ~~602,000~~presented ~~shares,~~to ~~respectively,~~the ofCompany ~~Series~~for Aconsideration ~~Preferred~~in ~~Stock~~early ~~were~~June 2003. ~~converted~~The ~~into~~settlement ~~common~~proposed ~~stock. No~~by ~~shares of~~the ~~Series~~plaintiffs Awould ~~Preferred~~be ~~Stock~~paid ~~were~~for ~~outstanding~~by atthe ~~June 30,~~Insurers ~~2004~~and would dispose of all remaining claims against the Company.

~~Series~~After Acareful ~~Preferred~~consideration, ~~Stock~~the ~~Warrants. No~~Company ~~Series~~decided Ato ~~Preferred~~approve ~~Stock~~the ~~warrants~~settlement ~~were~~proposal ~~exercised~~in ~~during~~July 2003. Although the ~~three~~Company believes ~~and~~that ~~six~~plaintiffs’ ~~months~~claims ~~ended June 30~~are without merit, ~~2004. Series~~it Ahas ~~Preferred~~decided to accept ~~Stock~~the ~~warrants~~settlement ~~for~~proposal ~~42,000~~(which ~~shares~~does ~~were~~not ~~exercised~~admit ~~during~~wrongdoing) to avoid the ~~three~~cost and distraction ~~six~~of ~~months~~continued litigation. Because the settlement will be funded ~~ended~~entirely ~~June 30~~by its Insurers, ~~2003. Warrants~~the toCompany does not believe that the settlement will ~~purchase~~have ~~1.5~~any ~~million~~effect ~~shares~~on ofthe ~~Series~~Company’s Afinancial ~~Preferred~~condition, ~~Stock~~results ~~were~~of ~~outstanding~~operations ator ~~June 30,~~cash ~~2004~~flows.

~~Stock~~The ~~Repurchase~~settlement ~~Program. In~~was ~~September 2001,~~presented to the ~~Board~~Court offor ~~Directors~~approval in June 2004. The Court preliminarily approved amost ~~program~~of tothe ~~expend~~settlement upin ~~to $2.0~~February ~~million~~2005, tobut ~~repurchase~~requested ~~shares~~a offew minor ~~the~~modifications ~~Company’s~~be ~~common~~made ~~stock~~to inits ~~open market transactions~~terms. The ~~Company~~parties ~~purchased~~are ~~110,000~~currently ~~shares~~negotiating these ~~for~~modifications ~~approximately~~and intend to present the revised settlement agreement to ~~$99,000~~the ~~during~~Court ~~2001~~shortly. ~~Although~~While the ~~program~~Court ~~approval~~is ~~remains~~expected into ~~effect,~~finally ~~the Company~~approve ~~repurchased~~or nodisapprove the ~~additional~~settlement ~~shares~~in ~~during~~the ~~2002~~coming months, ~~2003~~there orcan ~~during~~be ~~the~~no ~~three and~~guarantee ~~six~~that ~~months~~the settlement ~~ended~~will ~~June 30,~~be ~~2004~~judicially approved.

~~ITEM 2~~7. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF~~ Restructuring ~~OPERATIONS~~Events

~~The~~In ~~following~~August 2004, ~~discussion should be read in conjunction with~~ the ~~selected~~Company ~~consolidated~~undertook ~~financial~~a ~~information and the~~strategic ~~consolidated~~restructuring ~~financial~~to ~~statements~~reduce ~~and~~its ~~notes~~operating ~~appearing~~expense ~~elsewhere~~structure inby ~~this Form~~streamlining ~~10-Q~~operations. The ~~following~~activity ~~discussion~~related ~~contains forward-looking statements, such as statements of expected revenues and expenses that involve risks and uncertainties. We assume no obligation~~ to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those detailed from time to time in our filings with the ~~Securities~~restructuring ~~and~~is ~~Exchange~~accounted ~~Commission~~for ~~and those discussed in this Form 10-Q, particularly in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and~~ under ~~“Factors~~ ~~That~~the ~~May Affect Future Results.”~~

Unless expressly stated or the context otherwise requires, the terms “we”, “our”, “us”, “the Company” and “GoRemote” refer to GoRemote Internet Communications, Inc. and its subsidiaries as a whole.13

~~Overview~~provisions of Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”).

WeIn ~~provide secure managed broadband and remote access solutions to~~the ~~enterprises~~quarter ~~and~~ended ~~service providers. Our solutions enable enterprises to securely~~January 31, ~~reliably~~2005, ~~and~~an ~~cost-effectively~~additional ~~extend their corporate networks and applications to mobile and remote workers outside the corporate firewall. These workers include mobile professionals such as sales professionals~~$69,000 ~~project managers~~provision ~~and engineers; teleworkers, including call center agents;~~was ~~telecommuters;~~accrued ~~and~~for employees inwho ~~branch~~were ~~offices~~terminated ~~and~~in ~~retail~~the ~~settings.~~restructuring ~~We provide comprehensive~~ and ~~integrated~~had ~~managed broadband and global remote access~~periods ~~services~~of ~~that~~service ~~include: intelligent client software; multiple network access types, including broadband, Wi-Fi and dial-up; security capabilities~~ that ~~ensure~~ ~~security~~extended ~~policy~~beyond ~~compliance~~August 2004. byThe ~~remote~~provision ~~workers; a real-time remote access management console; end-to-end managed~~ and ~~value-added services including~~associated ~~managed~~charges ~~security~~against ~~services;~~the ~~and~~provision ~~design,~~for ~~deployment, monitoring, and technical support. Our products and services enable enterprises to reduce~~ the ~~cost, complexity~~August 2004 ~~and~~restructuring ~~risk~~through ~~of remote office networking~~January 31, ~~while maximizing the~~ ~~productivity~~2005 ofare ~~mobile~~as ~~and remote workers.~~follows:

	Employee Severance Costs				Lease Facilities and Other Obligations				Retirement of Fixed Assets				Valuation of Modified Stock Options				Total
	(in thousands)
Provision recorded in the quarter ended September 30, 2004		$	1,492			$	650			$	273			$	53		$	2,468
Non-cash charges		—				15				(273		)		(53		)	(311		)
Cash payments		(1,268		)		(39		)		—				—			(1,307		)
Accruals at October 31, 2004		224				626				—				—			850
Provision recorded in the quarter ended January 31, 2005		69				(9		)		—				—			60
Non-cash charges (recoveries)		—				(16		)		—				—			(16		)
Cash payments		(293		)		(48		)		—				—			(341		)
Accruals at January 31, 2005		$	—			$	553			$	—			$	—		$	553

~~In December 2003, we acquired Axcelerant, Inc~~8.~~, a privately-held~~ Segment provider of broadband Internet remote access services and managed security services. In May 2004, we changed our corporate name from GRIC Communications, Inc. to GoRemote Internet Communications, Inc. to reflect our current vision and service offerings. On August 2, 2004, we announced the appointment of Tom Thimot to serve as our President and Chief Executive Officer, replacing Bharat Davé, who resigned in late July.Information

The ~~majority~~Company ofoperates ~~our~~in ~~revenue~~one ~~comes~~segment, ~~from~~ providing ~~settlement and clearing-house services for our customers. We provide services over~~ a ~~heterogeneous~~ ~~virtual~~global ~~network~~remote ~~known as the GoRemote Global Network. As of August 1, 2004, the GoRemote Global Network included more than 33,000 Internet~~ access~~-dialing~~ ~~locations,~~solution ~~over~~for ~~12,000~~corporate ~~public~~enterprises ~~wireless~~with ~~fidelity—or~~mobile ~~WiFi—hotspots~~ and ~~approximately 1,400 public broadband access points in approximately 150~~remote ~~countries.~~workforces ~~Through the acquisition of Axcelerant, we added a virtual broadband cable modem~~ and DSL network that spans the United States and Canada. This network is an aggregation of the networks of more than 150 broadband providers, including virtually all of the leading cable companies, ILECs and CLECs in the United States. By utilizing this network, we are able to provide comprehensive coverage in the United States for ~~enterprises requiring broadband branch office and broadband teleworker solutions. We created~~ the ~~GoRemote~~Company’s ~~Global Network by forming contractual relationships with over 500 access providers — Internet~~ service providers, cable companies, DSL companies and telecommunication companies. These providers, which we refer to as the GoRemote Global Network members, are able to share their communications networks. Our customers, who are enterprises, value added resellers (VARs) and service provider resellers~~, benefit~~ ~~from the resulting network delivering secure mobile Internet access cost-effectively. Our member providers benefit from the GoRemote Global Network because we manage this shared network~~ and provide settlement services. We have established common technical, service and payment standards to settle charges that our customers incur when their end users access the network facilities of GoRemote Global Network members to conduct Internetvalue-~~based communications, such as Internet roaming. We intend to~~added ~~continue developing our service offering to introduce new Internet-based remote communications services that may be adopted, deployed and managed on a global scale across the GoRemote Global Network~~resellers.

WeThe following ~~have~~is ~~incurred substantial losses since our inception as~~ a ~~result~~summary of ~~expenses~~ ~~associated~~revenue ~~with~~by ~~building~~geographical ~~the~~area ~~GoRemote~~for ~~Global~~the ~~Network and related~~periods network infrastructure, developing our software products and marketing our solutions to our customers. We had an accumulated deficit of approximately $137.1 million as of June 30, 2004. We cannot assure you that we will achieve or sustain profitability. See “Factors That May Affect Future Results—We have a history of net losses and may incur future losses.”presented:

Our business model has evolved in the course of our development and we believe that period-to-period comparisons of our operating results should not be relied upon as indicative of future performance. Our future prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the early stages of development, particularly companies in new and rapidly evolving markets. See “Factors That May Affect Future Results—We have limited experience in our business, which makes it more difficult for us to execute our business plan and for you to evaluate us.”

	Three months ended January 31,
	2005			2004
	(in thousands)
Revenue by external customers:
United States, Canada and Latin America		$	9,183		$	7,432
Japan/Korea		1,131			2,703
Asia Pacific		732			781
Europe, Middle East and Africa		930			1,002
		$	11,976		$	11,918

~~Critical~~The ~~Accounting~~following ~~Policies~~is ~~and~~a summary ~~Estimates~~of long-lived assets by geographical area for the periods presented:

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances when made. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities and reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may vary from what we anticipate, and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical to us, because they are important to the portrayal of our financial statements and they require our most difficult, subjective or complex judgments in the preparation of our consolidated financial statements.

	January 31, 2005			October 31, 2004
	(in thousands)
Long-lived assets:
United States		$	26,739		$	27,169
Rest of World		120			67
		$	26,859		$	27,236

Revenue ~~Recognition~~by ~~and Related Allowances. We enter into agreements to sell our managed~~external ~~broadband and global access solutions, which may include one or more of our services and product offerings. Revenues are recognized when a binding agreement or purchase order from the~~ customer ~~has been received, the services have been delivered, the fee or price~~ is fixed or determinable, the collection of the receivable was reasonably assured, and no significant post-delivery obligations remain. Our revenue recognition policy is one of our critical accounting policies because revenue is a key component of our results of operations and is based on ~~complex~~the ~~rules,~~customer’s ~~which~~billing ~~require us to make certain judgments and estimates~~locations. InLong-lived ~~applying~~assets ~~our revenue recognition policy we must~~are ~~determine~~those ~~which~~assets ~~portions~~used ofin ~~our~~each ~~revenues~~geographic ~~are recognized currently and which portions must be deferred~~location. InFor ~~order to recognize revenue, we make judgments and estimates with regard to~~ the ~~revenues~~three ~~earned~~months ~~for~~ended ~~services—including related installation services and products—and maintenance services~~January 31, ~~as well as the~~ ~~timing of the delivery of such services and products. In addition~~2005, weone ~~provide services~~customer ~~over~~accounted afor ~~heterogeneous~~10 ~~virtual~~percent network, which was created by forming contractual relationships with over 500 access providers — Internet service providers, cable companies, DSL companies and telecommunications companies. These companies may provide us their services under either a reseller or anmore agency arrangement. In applying our revenue recognition policy we must make judgments and estimates with regard to the specific facts and circumstances surrounding each provider relationship to determine which portion of our revenues we provide under a reseller arrangement, where we would record gross revenues and cost of revenues, and which portion of our revenues we provide as an agent, where we would record revenues and cost of revenues combined on a net basis. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the ~~circumstances.~~ ~~These~~Company’s ~~estimates may change as new events occur, as additional~~total ~~information~~consolidated ~~is obtained and as our operating environment changes, any of which could cause a material impact on the~~ revenues ~~that we have reported~~.

1314

Our services for remote Internet access are generally billed on a per-minute basis for usage or at a flat rate per month per user based on negotiated rates for which we recognize revenue in the month the services are provided9. Our solutions may also include installation services, the sale of customer premise equipment and managed security services related to our broadband services offerings. Revenue from broadband installation services and the sale of related equipment is deferred and recognized ratably over a 24-month period. We consider these services and products to be an enabler of the related remote access service contracts and we estimate that, on average, our customer Stockholders’~~s remote broadband access workers use our services for a period of~~ approximately 24 months. Revenues from managed security services are recognized in the month the service is provided. To a lesser extent, we also derive a portion of our revenues from licenses of our authentication software, related maintenance and support services, and other optional services related to our remote access solutions which are recognized ratably over the term of service, which is typically 1 to 12 months. These other revenues amounted to five percent or less of total revenues over the last three years. Amounts billed in advance of revenue recognition are recorded to deferred revenue as collected. We have some customers with minimum commitment arrangements. We record such revenue in the month that we determine that minimum commitments have not been met and for which revenue recognition criteria have been met. We recognize certain broadband connectivity revenues generated under agency arrangements on a net basis.Equity

WeSeries A ~~record~~Convertible ~~estimated allowances against revenues in the same period the~~Preferred ~~revenues are recorded~~Stock. During ~~These estimates are based upon historical analysis of our credit memo data and other known factors for pricing and transaction volume disputes that arise in~~ the ~~normal~~three ~~course~~months ofended ~~business. To date~~January 31, ~~allowances~~ ~~pertaining~~2004, to3.1 ~~our~~million ~~current~~shares ~~business~~of ~~have~~Series A ~~not~~Preferred ~~been~~Stock ~~significant.~~were Ifconverted ~~the historical~~into ~~data~~common westock. ~~use~~No toshares ~~calculate~~of ~~these~~Series A ~~estimates~~Preferred ~~does~~Stock ~~not~~were ~~accurately~~outstanding ~~reflect~~as ~~amounts~~of ~~associated with future disputes~~January 31, ~~our~~2004 ~~actual~~and ~~revenues could be higher or lower than what we have recognized~~2005.

~~From~~Series A ~~time~~Preferred ~~to time our customers, including significant customers, may~~Stock ~~seek protection under bankruptcy laws~~Warrants. No ~~While~~Series A wePreferred ~~assess~~Stock ~~the credit-worthiness of~~warrants ~~our~~were ~~customers~~exercised onduring anthe ~~on-going~~three ~~basis,~~months ~~when~~ended ~~such a bankruptcy event occurs~~January 31, ~~our management~~2005 ~~determines our risk that an account receivable will prove to be uncollectable,~~ and ~~establishes appropriate allowances for that contingency as~~2004, ~~necessary~~respectively. InWarrants ~~addition,~~to ~~for~~purchase each continuing customer in bankruptcy management evaluates the creditworthiness of the customer and determines whether revenue should be recognized on an accrual basis or when cash payments are received1. ~~When~~5 wemillion ~~record~~shares ~~revenue on an accrual basis, management has based their judgment on the creditworthiness~~ of ~~the debtor-in-possession, their payment experience~~Series A ~~and~~Preferred ~~whether~~Stock ~~the~~were ~~collectability~~outstanding ofat ~~receivables is reasonably assured~~January 31, ~~in addition to other revenue recognition criteria having been met~~2005.

~~Allowance~~Stock ~~for~~Repurchase ~~Doubtful Accounts~~Program. ~~We maintain allowances for doubtful accounts~~ In ~~for~~September 2001, ~~estimated~~the ~~losses~~Board ~~from~~of ~~our~~Directors ~~customers’~~approved ~~inability~~a program to ~~make~~expend ~~payments~~up ~~they owe~~to us$2.0 million Into ~~order~~repurchase toshares ~~estimate~~of the ~~appropriate~~Company’s ~~level~~common ofstock ~~this~~in ~~allowance, we analyze~~open ~~historical~~market ~~bad~~transactions. ~~debts,~~The ~~customer~~Company ~~concentrations~~purchased 110,000 ~~current~~shares ~~customer~~for approximately ~~credit-worthiness~~$99,000 ~~current~~during ~~economic trends and changes in our customer payment patterns~~2001. IfAlthough the ~~financial~~program ~~condition~~approval ofremains ~~our~~in ~~customers~~effect, ~~were to deteriorate and~~the toCompany ~~impair~~repurchased ~~their~~no ~~ability~~additional toshares ~~make~~during ~~payments to us~~2002, ~~additional~~2003 ~~allowances~~and ~~might~~2004 beor during ~~required~~the inthree ~~future~~months ~~periods.~~ended ~~If our estimates prove too low~~January 31, ~~our bad debt expense will increase~~2005.

Valuation of Long-Lived Assets including Intangible Assets. We evaluate the carrying amount of our long-lived assets, including purchased intangible assets, whenever events or circumstances indicate the amount of the assets may not be recoverable. Determination of impairment of property and equipment, goodwill and intangible assets is highly subjective and requires significant judgment at many points during the analysis. This analysis is based on our estimate of future cash flows that the assets are expected to generate and their eventual disposition. If we determine that any of these assets have been impaired, the impairment charge will be charged to earnings in the period such determination is made.15

~~Valuation of Goodwill. We test goodwill for possible impairment on~~ITEM ~~an annual basis and at any other time if events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable~~2. ~~Circumstances that~~ MANAGEMENT’S ~~could~~DISCUSSION ~~trigger~~AND anANALYSIS ~~impairment~~OF ~~test~~FINANCIAL ~~include,~~CONDITION ~~but~~AND ~~are~~RESULTS ~~not~~OF limited to, a significant adverse change in the business climate or legal factors, an adverse action or assessment by a regulator, unanticipated competition and loss of key personnel. In addition, we assess goodwill for recoverability if our market capitalization is less than the value of our net assets. The determination as to whether a write down of goodwill is necessary involves significant judgment based on the short-term and long-term projections of our future performance. The assumptions supporting the estimated future cash flows, including the discount rate used and estimated terminal value reflect our best estimates.OPERATIONS

~~Business~~The ~~Combination~~following discussion should be read in conjunction with the selected consolidated financial information and the consolidated financial statements and notes appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements, such as statements of expected revenues and expenses that involve risks and uncertainties. We assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those detailed from time to time in our filings with the Securities and Exchange Commission and those discussed in this Form 10-Q, particularly in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and under “Factors That May Affect Future Results.”

OnIn ~~December~~October 12004, ~~2003,~~ we ~~completed~~changed our ~~acquisition~~fiscal ~~of Axcelerant, a privately~~year-~~held~~end from ~~provider~~December 31 ofto ~~broadband~~October 31. ~~Internet~~As ~~remote~~a ~~access~~result, ~~services~~references ~~and~~in ~~managed~~this Form 10-Q ~~security~~to ~~services.~~the ~~Our~~first ~~acquisition~~quarter of ~~Axcelerant~~2005 ~~did~~are ~~not~~references ~~result~~to inthe athree-month ~~new~~period ended January 31, ~~reportable~~2005 ~~segment.~~and ~~The~~references ~~results~~to ofthe ~~operations~~first quarter of ~~Axcelerant~~2004 ~~have~~are ~~been~~references ~~included~~to the inthree-month ~~our~~period ~~financial~~ended ~~statements~~January 31, ~~subsequent~~2004. toUnless expressly stated or the context ~~date~~otherwise ofrequires, the ~~acquisition.~~terms ~~See~~“we”, ~~Note 3~~“our”, “~~Business~~us”, ~~Combination~~“the Company” ofand “~~Notes~~GoRemote” refer to ~~Condensed~~GoRemote ~~Consolidated~~Internet ~~Financial~~Communications, Inc. and its subsidiaries as a ~~Statements~~whole.”

14Overview

~~Results~~We provide secure managed broadband and remote access solutions to enterprises and service providers. Our solutions enable enterprises to securely, reliably, and cost-effectively extend their corporate networks and applications to mobile and remote workers outside the corporate firewall. These workers include mobile professionals such as sales professionals, project managers and engineers; teleworkers, including call center agents; telecommuters; and employees in branch offices and retail settings. We provide comprehensive and integrated managed broadband and global remote access services that include: intelligent client software; multiple network access types, including broadband, Wi-Fi, dial-up and general packet radio service (or GPRS); security capabilities that ensure security policy compliance by remote workers; a real-time remote access management console; end-to-end managed and value-added services including managed security services; and design, deployment, monitoring, and technical support. Our products and services enable enterprises to reduce the cost, complexity and risk of remote ~~Operations~~office networking, while maximizing the productivity of mobile and remote workers.

~~Three~~In ~~and~~December 2003, ~~Six~~we ~~Month~~acquired ~~Periods~~Axcelerant, Inc., a ~~Ended~~privately held provider of broadband Internet remote access services and ~~June~~managed security services. In May 302004, ~~2004~~we ~~Compared~~changed our corporate name from GRIC Communications, Inc. to ~~Three~~GoRemote ~~and~~Internet ~~Six~~Communications, Inc. to ~~Month~~reflect ~~Periods~~our ~~Ended~~current ~~June~~vision and service offerings. On August 3012, 2004, ~~2003~~we announced a restructuring of our global operations to reduce operating expense and streamline our operations.

~~Overview~~The majority of our revenue comes from providing settlement and clearing-house services for our customers. We provide services over a heterogeneous virtual network known as the ~~Second~~GoRemote ~~Quarter~~Global Network. As of ~~2004~~February 28, 2005, the GoRemote Global Network included approximately 27,000 Internet access—dial-up locations, over 16,500 public wireless fidelity—or WiFi—hotspots and approximately 1,500 public broadband access points in over 150 countries. Through the acquisition of Axcelerant, we added a virtual broadband cable modem and DSL network that spans the United States and Canada. This network is an aggregation of the networks of more than 150 broadband providers, including virtually all of the leading cable companies, incumbent local exchange carriers (or ILECs) and competitive local exchange carriers (or CLECs) in the United States. By utilizing this network, we are able to provide comprehensive coverage in the United States for enterprises requiring broadband branch office and broadband teleworker solutions. We created the GoRemote Global Network by forming contractual relationships with approximately 500 access providers—Internet service providers, cable companies, DSL companies and telecommunication companies. These providers, which we refer to as the GoRemote Global Network

During the second quarter of 2004, we continued to develop our business from being based principally on an indirect sales model — as it was in the second quarter of 2003 when we principally sold our services on a wholesale basis through large telecommunications companies and service providers — to a model under which we sell a significant portion of our services directly or through VARs to enterprise customers. During the second quarter of fiscal 2004 and fiscal 2003, 49% and 16%, respectively, of our quarterly revenues were derived from services sold to enterprise customers both directly and indirectly through our VARs. We continued our focus on acquiring and serving enterprise customers by enhancing the quality and breadth of the GoRemote Global Network and increasing the value of our solution offering by delivering new products such as our management and administrative console for enterprise IT departments and our end–to–end remote access security solution. As a result of our December 2003 acquisition of Axcelerant, the GoRemote Global Network now also includes a virtual broadband cable and DSL network that spans the United States and Canada. By aggregating the networks of more than 150 broadband providers, we are able to provide enterprise branch offices and teleworkers with comprehensive broadband coverage in North America.

~~In the second quarter of 2004~~members, ~~our~~are ~~revenues,~~able ~~expenses and gross margin each increased over the second quarter of 2003. Revenues were higher primarily due~~ to ~~the addition of managed broadband revenues that resulted from our~~share ~~acquisition~~their ofcommunications ~~Axcelerant~~networks. ~~Cost~~Our ofcustomers, ~~revenues~~who ~~was~~are ~~lower~~enterprises, asvalue ~~a percentage of~~added ~~revenues~~resellers ~~principally~~(VARs) asand aservice ~~result~~provider ofresellers, ~~sales~~benefit tofrom ~~enterprise~~the ~~customers representing~~resulting anetwork ~~higher~~delivering ~~percentage~~secure ofmobile ~~our~~Internet ~~total~~access ~~revenues during the first quarter of 2004~~cost-effectively. Our member ~~operating~~providers ~~expenses~~benefit ~~were~~from ~~higher in~~ the ~~second~~GoRemote ~~quarter~~Global ofNetwork ~~2004~~because ~~than~~we inmanage ~~the second~~this ~~quarter~~shared ofnetwork ~~2003~~and ~~principally~~provide ~~due~~settlement toservices. ~~the~~We ~~addition~~have ofestablished ~~personnel at our Irvine,~~common ~~California~~technical, ~~facility~~service ~~that resulted from our acquisition of Axcelerant~~ and ~~our increased~~payment ~~investment~~standards into ~~enterprise~~settle ~~focused~~charges ~~sales~~that ~~and marketing efforts. We expect~~ our ~~quarterly operating expenses~~customers toincur ~~decrease~~when intheir ~~absolute~~end ~~dollar~~users ~~terms~~access in the ~~third~~network ~~quarter~~facilities of ~~2004~~GoRemote ~~as we~~Global ~~continue~~Network members to ~~improve~~conduct ~~our~~Internet-based ~~operating efficiency in support of our enterprise customer base~~communications. ~~During~~We ~~August 2004, we~~ intend to ~~develop~~continue developing aour ~~plan~~solutions tooffering ~~return~~ to ~~profitability~~ ~~and~~introduce ~~build~~new ~~sustainable~~Internet-based ~~revenue~~remote communications ~~growth. In~~solutions ~~the~~that ~~course~~may ofbe ~~developing this plan~~adopted, ~~we expect~~deployed toand ~~identify~~managed ~~additional~~on ~~cost~~a ~~savings~~global scale ~~measures~~across ~~to be implemented during~~ the ~~second~~GoRemote ~~half~~Global ~~of 2004~~Network.

We ~~continue~~have toincurred ~~focus~~substantial onlosses ~~delivering~~since ~~innovative services for~~ our ~~customers~~inception toas ~~drive~~a ~~revenues~~result ~~and~~of ~~achieve~~expenses ~~positive~~associated ~~earnings.~~with Inbuilding ~~fiscal~~the ~~2004~~GoRemote weGlobal ~~plan~~Network toand ~~release~~related ~~additional~~network ~~new value added services~~infrastructure, ~~which~~developing weour ~~expect~~software ~~will~~products ~~augment~~and ~~the~~marketing ~~revenues~~our wesolutions ~~derive~~to ~~from~~ our ~~existing~~ customers. ~~and,~~We ~~together~~had ~~with expanding~~an ~~the~~accumulated ~~global~~deficit ~~footprint~~ of approximately ~~the~~$171.9 ~~GoRemote~~million ~~Global~~as ~~Network~~of January 31, ~~drive~~2005. ~~revenues from~~We ~~new~~cannot ~~enterprise~~assure ~~customers.~~you that ~~Several~~we ~~factors~~ will ~~impact our ability to~~ achieve ~~and~~or sustain profitability,. ~~including~~See ~~the~~“Factors ~~effectiveness~~That ~~of our sales and~~May Affect ~~marketing~~Future ~~efforts~~Results—We ~~through~~have ~~both~~a ~~direct~~history ~~and VAR sales channels, the timely release~~ of ~~new~~net ~~services~~losses and ~~the~~may ~~introduction~~incur offuture ~~new services by existing or new competitors~~losses. ~~Currently, we do not expect to be profitable during 2004. For a discussion of these and other risk factors, see the section titled “Factors That May Affect Future Results.~~”

~~Revenues~~Our business model has evolved in the course of our development and we believe that period-to-period comparisons of our operating results should not be relied upon as indicative of future performance. Our future prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the early stages of development, particularly companies in new and rapidly evolving markets. See “Factors That May Affect Future Results—We have limited experience in our business, which makes it more difficult for us to execute our business plan and for you to evaluate us.”

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
	(in millions)				(in millions)
Revenues	$	12.5	$	9.9	$	25.5	$	19.3

We have changed our fiscal year-end from December 31 to October 31. The consolidated financial information for the first fiscal quarter of 2005 represents the financial results for the three-month period ended January 31, 2005. The 2004 financial results presented in this Form 10-Q are for the three-month period ended January 31, 2004.

~~Total revenues increased approximately $2.7 million in the three months~~Critical ~~ended~~Accounting ~~June 30,~~Policies ~~2004, compared to the three months ended June 30, 2003, which represented an increase of 27%. The increase was principally due to the addition of broadband revenues during the three~~ and six months ended June 30, 2004. Approximately 31% and 28% of our revenues for the three and six months ended June 30, 2004, respectively, were generated from sales of broadband and Wi-Fi services. Fiberlink Communications Corporation accounted for 11% of our consolidated revenues during the three months ended June 30, 2004. Sony Communication Network Corporation and Fiberlink Communications Corporation, both of which are service provider resellers, each accounted for 11%, of our consolidated revenues during the six months ended June 30, 2004. Fiberlink is both a customer and in certain markets a competitor of GoRemote, principally with respect to our dialup remote access offering. Our experience in the first half of 2004 showed us that the decline in dialup revenues from service providers may occur at a more rapid pace than previously projected.Estimates

WeThe ~~expect~~methods, ~~2004~~estimates ~~revenues~~and tojudgments ~~exceed~~we ~~2003~~use ~~revenues,~~in applying ~~based~~our onmost ~~both~~critical ~~sales~~accounting topolicies have a significant impact on the ~~new~~results ~~customers~~we report in our consolidated financial statements. We evaluate our estimates and ~~sales~~judgments ofon ~~additional~~an ~~services,~~on-going ~~such~~basis. asWe base our ~~newer~~estimates ~~broadband~~on ~~teleworker~~historical experience and ~~branch~~on ~~office~~assumptions ~~solutions~~that ~~and~~we ~~managed~~believe ~~security~~to ~~service~~be ~~offering,~~reasonable under tothe ~~our~~circumstances ~~existing~~when ~~customers,~~made. ~~partially~~Our ~~offset~~experience byand ~~competitive~~assumptions ~~pricing~~form ~~pressures~~the onbasis for our ~~legacy~~judgments ~~Internet~~about ~~access~~the ~~services~~carrying value of assets and aliabilities ~~decline~~and inreported amounts ~~dial-up~~of ~~usage~~revenues and expenses that are not readily apparent from other sources. Actual results may vary from what we anticipate, and different assumptions or estimates about the future could change our reported results.

15Revenue Recognition and Related Allowances. We derive revenues primarily from providing remote Internet access services to customers through our virtual network and by providing monthly security and support services and monthly connectivity services to broadband Internet remote access customers. Our arrangements with our customers typically have multiple deliverables. These deliverables may include software, installation services, customer premises equipment, connectivity services, and maintenance and support services.

~~Costs~~We recognize revenues when persuasive evidence of an arrangement exists, service has been provided to the customer, the price to the customer is fixed or determinable, and ~~Expenses~~collectibility is probable. Mobile remote Internet access services are generally billed on a per-minute basis for usage or at a flat rate per month per user based on negotiated rates. Usage fees are recognized in the period the services are rendered to end users, and monthly fees are recognized ratably based on the number of days that have elapsed. We have minimum commitment arrangements with some customers. These customers are not contractually entitled to use or otherwise receive benefit for unused service in subsequent periods.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2004			2003			2004			2003
	(in millions)						(in millions)
Cost of revenues	$	5.0		$	4.4		$	10.3		$	8.8
Percentage of revenues	40.0		%	45.1		%	40.4		%	45.5		%
Network and operations	$	2.3		$	0.8		$	4.6		$	1.8
Percentage of revenues	18.3		%	8.4		%	18.1		%	9.2		%
Research and Development	$	1.2		$	0.6		$	2.4		$	1.2
Percentage of revenues	9.9		%	5.6		%	9.4		%	6.2		%
Sales and Marketing	$	5.7		$	3.3		$	10.7		$	6.0
Percentage of revenues	45.3		%	33.6		%	42.1		%	31.1		%
General and administrative	$	1.6		$	1.2		$	3.2		$	2.6
Percentage of revenues	13.1		%	12.4		%	12.7		%	13.6		%
Amortization of purchased intangibles	$	0.4		$	—		$	0.8		$	—
Percentage of revenues	3.2		%	—		%	3.1		%	—		%
Amortization of stock-based compensation	$	0.09		$	0.02		$	0.2		$	0.06
Percentage of revenues	0.7		%	0.2		%	0.7		%	0.3		%
Restructuring recovery	$	—		$	(0.08	)	$	—		$	(0.08	)
Percentage of revenues	—		%	0.1		%	—		%	0.4		%

~~Cost~~Minimum ofcommitment ~~Revenues. Cost~~fees are ofrecognized ~~revenues~~as ~~consists~~revenue ofin ~~amounts~~the wemonth ~~pay to~~it ~~access~~has ~~the~~been ~~Internet~~determined inthat ~~order~~the tominimum commitments ~~provide~~have ~~remote~~not ~~Internet~~been ~~access~~achieved, ~~services~~assuming ~~for our~~all ~~customers~~other ~~and~~criteria tofor ~~offer~~revenue recognition ~~other~~have ~~mobile~~been ~~broadband services~~met.

~~Cost~~Our ofsolutions ~~revenues~~may ~~increased~~also ~~approximately~~include ~~$572~~installation services,~~000~~ the insale ~~the~~of ~~three~~customer ~~months ended~~premise ~~June 30,~~equipment ~~2004~~and ~~compared~~managed security services related to our broadband services offerings. Depending on the ~~three~~service ~~months~~provided ~~ended~~and ~~June 30~~the nature of the arrangement, ~~2003~~we may charge a one-time, annual or monthly fee for ~~representing~~these anadditional ~~increase~~services ofor ~~13%~~deliverables. ~~The increase~~ ~~was~~Revenue ~~primarily~~from ~~due~~installation toservices and the ~~inclusion~~sale of ~~three~~equipment ~~months~~is ofdeferred and recognized ratably over the ~~cost~~period of ~~broadband~~expected ~~revenues~~usage ~~following~~by our ~~acquisition~~customers ofsince ~~Axcelerant,~~we ~~offset~~consider bythese ~~decreased~~services and products ~~volumes~~to be an enabler of ~~remote~~the ~~Internet~~related remote access service contracts. Our estimate of expected usage is 24 months for ~~Additionally~~all periods presented. On a quarterly basis, we ~~expensed~~review ~~license~~this ~~and~~estimate ~~maintenance~~of expected ~~cost~~usage ~~related~~based toon ~~our new~~actual ~~client~~data. ~~software~~Revenues from managed security services are recognized in the ~~amount~~month ofthe ~~approximately~~service ~~$157,000~~is ~~offset~~provided. byTo ~~the~~a lesser extent, we ~~reversal~~also derive a portion of anour ~~accrual~~revenues from licenses of our authentication software, related tomaintenance ~~unbilled~~and ~~service~~support ~~provider~~services, ~~charges~~and ~~from~~other ~~prior~~optional services ~~periods.~~related ~~Cost~~to ofour ~~revenues~~remote ~~increased~~access ~~approximately~~solutions ~~$1.5~~which ~~million~~are inrecognized ~~the~~ratably ~~six~~over ~~months~~the ~~ended~~term ~~June 30,~~of ~~2004~~service. ~~compared~~These other revenues amounted to ~~the~~five ~~six~~percent ~~months~~or ~~ended~~less ~~June 30,~~of ~~2003,~~total ~~representing~~revenues anover ~~increase~~the oflast ~~17%~~three years. We Fees generated from maintenance contracts ~~expect~~are ~~that~~recognized ~~for~~over the ~~remainder~~life of ~~2004~~those contracts. The majority of the maintenance ~~cost~~contracts cover periods of ~~revenues~~one ~~will~~to ~~increase~~12 months. Amounts billed in ~~absolute~~advance ~~dollars~~of asrevenue ~~remote~~recognition ~~Internet~~are ~~access~~recorded ~~revenues~~to ~~and~~deferred revenue as collected. We recognize certain broadband connectivity revenues ~~increase,~~ ~~but~~generated beunder ~~similar~~agency arrangements toon ~~the~~a ~~quarter~~net ~~ending~~basis. ~~December 31,~~Product ~~2003~~returns asand ~~a percentage~~allowances ofhave ~~revenues~~not been significant.

~~Network~~We provide services over a heterogeneous virtual network, which was created by forming contractual relationships with approximately 500 Internet service providers, cable companies, DSL companies and ~~Operations~~telecommunications companies. ~~Network~~ These companies may provide us their services under either a reseller or an agency arrangement. In applying our revenue recognition policy we must make judgments and ~~operations~~estimates ~~expenses~~with ~~consist~~regard to the specific facts and circumstances surrounding each provider relationship to determine which portion of our revenues we provide under a reseller arrangement, where we ~~salaries~~would record gross revenues and ~~benefits~~cost of revenues, ~~depreciation~~and onwhich ~~network~~portion ~~equipment~~of our revenues we provide as an agent, ~~allocated~~where ~~facility~~we would record revenues and cost of revenues combined on a net basis. We base our estimates on historical experience and ~~management~~on ~~information~~various ~~systems~~other ~~expenses~~assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, ~~administrative~~as ~~expenses~~additional information is obtained and as our operating environment changes, ~~costs~~any of which could cause a material impact on the revenues that we ~~co-location~~have ofreported. ~~network~~We ~~equipment~~record estimated allowances against revenues for returns and cancellations ~~leased~~in ~~telecommunication~~the ~~lines~~same period the revenues are recorded. These estimates are based upon historical analysis of our service level agreements, credit memo data and other known factors for pricing and transaction volume disputes that ~~related~~arise ~~costs~~in the normal course of business. To date, allowances pertaining to our current business have not been significant. If the historical data we use to calculate these estimates does not accurately reflect amounts associated with future disputes, our actual revenues could be higher or lower than what we have recognized.

~~Network~~Cost ~~and~~of ~~operations expenses increased approximately $1~~Revenues.~~5 million in~~ Cost ~~the~~of ~~three~~revenues ~~months~~represents ~~ended~~the ~~June 30,~~amounts ~~2004~~paid ~~compared~~ to ~~the~~Internet ~~three~~service ~~months~~providers, ~~ended~~cable ~~June 30~~companies, ~~2003,~~DSL ~~representing~~companies ~~an increase of 179%. The increase was primarily due to an increase in compensation~~ and ~~benefits-related~~telecommunications ~~expenses~~companies ~~of approximately~~for ~~$1.0~~the ~~million~~use ~~and increased facility allocation~~ of ~~approximately~~their ~~$214~~networks,~~000,~~ ~~both~~and ofamounts ~~which~~paid ~~are~~to ~~primarily~~other ~~related~~third toparty ~~the~~providers ~~inclusion~~ of ~~three~~products ~~months~~or ofservices ~~network~~that ~~and~~we ~~operations~~include ~~expenses incurred~~ in our ~~Irvine, California facility following our acquisition of Axcelerant~~solutions. ~~Additionally,~~ ~~there~~We ~~was~~have ~~approximately~~entered ~~$41,000~~into ~~of increased professional~~minimum ~~fees~~purchase ~~related~~commitments towith ~~post-acquisition~~some ~~integration activities and improving~~ network ~~systems~~ ~~and~~service aproviders ~~reduction~~for ofaccess ~~depreciation~~that ~~expense in the three months ended~~we ~~June 30,~~expect ~~2003 of approximately $74,000 related~~ to ~~property~~utilize ~~and~~during ~~equipment adjustments~~the ~~that~~term ~~related~~of tothe ~~prior periods, which did not reoccur in 2004~~contracts. ~~Network~~ ~~and~~Costs ~~operations~~of ~~expenses~~minimum ~~increased~~purchase ~~approximately~~contracts ~~$2.8~~are ~~million~~recognized inas ~~the~~network ~~six~~access ~~months~~expenses ~~ended~~at ~~June 30, 2004 compared to~~ the ~~six~~greater ~~months ended June 30, 2003, representing an increase~~ of ~~160%. The increase was primarily due to an increase~~the inminimum ~~compensation~~commitment ~~and~~or ~~benefits-related~~actual ~~expenses of approximately $2~~usage.0 ~~million~~If ~~and increased~~we ~~facility~~estimate ~~allocation~~that ofthe ~~approximately~~revenues ~~$468,000, both of which are~~derived ~~primarily~~from ~~related to~~ the ~~inclusion~~purchase ofcommitment ~~three~~will ~~months~~be ofless ~~network~~than ~~and~~the ~~operations expenses~~purchase ~~incurred in our Irvine~~commitment, ~~California facility following our acquisition~~we ofrecognize ~~Axcelerant. We~~a ~~expect~~loss ~~the~~on ~~network~~that ~~and operations~~purchase ~~expenses~~commitment to ~~decrease in absolute dollars and as a percentage of revenues during~~ the ~~remainder~~extent of ~~2004~~that asdifference. ~~we become more efficient in deploying~~No ~~new~~such ~~customers~~loss ~~and~~has inbeen ~~our~~recognized ~~customer~~to ~~service operations~~date.

~~Research~~Allowance ~~and~~for ~~Development~~Doubtful Accounts. ~~Research~~ We maintain ~~and~~allowances ~~development~~for ~~expenses~~doubtful ~~consist~~accounts ~~of salaries~~for ~~and~~estimated ~~benefits,~~losses ~~allocated~~from ~~facility~~our customers’ ~~and~~inability ~~management~~to ~~information~~make ~~systems, depreciation~~payments ~~costs,~~they ~~outside~~owe ~~consultants,~~us. ~~facilities~~In ~~costs,~~order ~~administration~~to ~~and~~estimate the ~~other~~appropriate ~~related~~level ~~costs.~~of

Research and development expenses increased approximately $681,000 in the three months ended June 30, 2004 compared to the three months ended June 30, 2003, representing an increase of 123%. The increase was primarily due to an increase in compensation and benefits expenses of approximately $212,000 primarily related to the inclusion of three months of research and18

16this allowance, we analyze historical bad debts, customer concentrations, current customer credit-worthiness, current economic trends and changes in our customer payment patterns. If the financial condition of our customers were to deteriorate and to impair their ability to make payments to us, additional allowances might be required in future periods. If we determine that collectibility is not probable, revenue is recognized as cash is collected. If our estimates prove too low, our bad debt expense will increase.

~~development~~Valuation ~~expenses incurred in our Irvine, California facility following our acquisition~~ of ~~Axcelerant,~~Long-Lived ~~and approximately $213,000 related to~~Assets ~~increased~~including ~~compensation~~Intangible ~~costs~~Assets. We ~~due~~evaluate ~~to adding staff in~~ the ~~United States and India~~carrying inamount ~~order~~of ~~to service~~ our ~~growing~~long-lived ~~enterprise~~assets, ~~customer~~including ~~base.~~purchased Inintangible ~~addition~~assets, ~~engineering~~whenever ~~consulting~~events ~~fees~~or ~~increased~~circumstances byindicate ~~approximately~~the ~~$55,000~~amount ~~and a reduction~~ of ~~depreciation expense in~~ the ~~three~~assets ~~months~~may ~~ended~~not ~~June 30,~~be recoverable. ~~2003~~Determination of ~~approximately~~ ~~$87,000~~impairment ~~related~~of to property and equipment, ~~adjustments that~~goodwill ~~related~~and tointangible ~~prior~~assets ~~periods,~~is ~~which~~highly ~~did~~subjective ~~not reoccur in 2004. Research~~ and ~~development~~requires ~~expenses~~significant ~~increased~~judgment at ~~approximately~~many ~~$1.2~~points ~~million~~during in the ~~six months ended June 30, 2004 compared to the six months ended June 30, 2003, representing an increase of 100%~~analysis. ~~The~~ ~~increase~~This ~~was~~analysis ~~primarily~~is ~~due~~based toon ~~an increase in compensation and benefits expenses of approximately $465,000 primarily related to the inclusion of six months of research and development expenses incurred in~~ our ~~Irvine,~~estimate ~~California facility following our acquisition~~ of ~~Axcelerant,~~future ~~and~~cash ~~approximately~~flows ~~$342,000~~that ~~related~~the toassets ~~increased~~are ~~compensation~~expected ~~costs due~~ to ~~adding~~generate ~~staff in the United States~~ and ~~India.~~their ~~In addition, engineering~~eventual ~~consulting fees increased by approximately $133,000~~disposition. We ~~expect~~If ~~research~~we ~~and~~determine ~~development~~that ~~expenses to~~any ~~decrease~~of inthese ~~absolute~~assets ~~dollars~~have ~~and~~been asimpaired, ~~a percentage of revenues during~~ the ~~remainder~~impairment ofcharge ~~2004~~will asbe wecharged ~~continue~~ to ~~shift~~earnings ~~staff from our U.S. headquarters to our development center~~ in ~~India~~the ~~where~~period ~~engineering~~such ~~talent~~ determination is ~~available at more favorable rates~~made.

~~Sales~~Valuation ~~and~~of ~~Marketing~~Goodwill. ~~Sales~~ We test goodwill for possible impairment on an annual basis in the third fiscal quarter and ~~marketing~~at ~~expenses~~any ~~consist~~other time if events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. Circumstances that ~~salaries~~could ~~and~~trigger ~~benefits~~an impairment test include, ~~allocated~~but ~~facility~~are ~~and~~not ~~management~~limited ~~information~~to, ~~systems~~a significant ~~costs~~adverse change in the business climate or legal factors, ~~travel~~an adverse action or assessment by a regulator, unanticipated competition and ~~entertainment~~loss ~~costs~~of key personnel. In addition, ~~costs~~we assess goodwill for ~~marketing~~recoverability ~~and~~if ~~promotional~~our market capitalization ~~programs,~~is ~~outside~~less ~~consultants,~~than ~~commissions~~the ~~earned~~value byof ~~sales~~our ~~and~~net ~~marketing~~assets. The determination as to whether a ~~personnel,~~write-down ~~and~~of ~~costs~~goodwill ~~associated~~is ~~with~~necessary ~~domestic~~involves significant judgment based on the short-term and ~~international~~long-term ~~sales~~projections ~~offices~~of our future performance. The assumptions supporting the estimated future cash flows, including the discount rate used and ~~other~~estimated ~~related~~terminal ~~costs~~value reflect our best estimates.

~~Sales~~Restructuring, Workforce Reductions and ~~marketing~~Excess ~~expenses~~Facilities ~~increased $2~~Accrual.4 In order ~~million~~to inbring ~~the~~our ~~three-month period~~operating ~~ended~~expense ~~June 30,~~structure ~~2004~~in ~~compared~~line towith ~~the~~our ~~three-month~~current ~~period ended~~level ~~June 30,~~of ~~2003~~revenues, ~~representing~~we animplemented ~~increase~~a ofrestructuring, ~~71%.~~workforce ~~The~~reduction ~~increase~~and ~~was primarily~~facilities ~~due~~consolidation plan to animprove ~~increase~~our inoperating ~~compensation and benefits of approximately $1~~performance.2 ~~million related~~Restructuring ~~to our increased sales force~~ and facilities ~~marketing~~consolidation ~~personnel,~~costs anconsist ~~increase~~ of ~~approximately $666,000~~expenses inassociated ~~marketing~~with ~~and promotional activities~~workforce reductions, anconsolidation ~~increase~~ of ~~approximately $118,000~~excess infacilities ~~travel~~ and ~~entertainment~~impairment ~~expenses, and an increase~~ of ~~approximately~~leasehold ~~$94,000~~improvements inand ~~outside~~other ~~consulting~~equipment ~~services~~associated aswith weabandoned ~~expanded our marketing activities~~facilities. In ~~addition,~~At ~~allocated facilities costs and~~January 31, ~~administrative~~2005, ~~expenses increased by approximately~~ $~~200~~553,000 ~~and~~was aaccrued ~~reduction~~for ~~of depreciation~~future ~~expense~~facilities inconsolidation ~~the~~costs. ~~three~~In ~~months~~connection with ~~ended~~our ~~June 30~~restructuring plans, ~~2003~~we ~~of approximately~~accrue ~~$79,000~~for ~~related~~severance topayments ~~property~~ and ~~equipment adjustments that~~other related totermination ~~prior~~benefits ~~periods,~~provided ~~which~~to ~~did~~employees ~~not~~in ~~reoccur~~connection inwith involuntary ~~2004~~staff reductions. ~~Sales~~ ~~and~~We ~~marketing~~accrue ~~expenses~~for ~~increased~~these ~~$4.7 million~~benefits in the ~~six-month~~ period ~~ended~~when benefits ~~June 30,~~are ~~2004~~communicated ~~compared~~to the ~~six-month period~~terminated ~~ended~~employees. ~~June 30~~Typically, ~~2003,~~terminated employees ~~representing~~are annot ~~increase~~required ofto ~~79%. The~~provide ~~increase~~continued ~~was~~service ~~primarily due~~ to anreceive ~~increase~~termination ~~in compensation and~~ benefits ~~of approximately $2~~.3 ~~million~~If ~~related~~continued toservice ~~our increased~~is ~~sales force and marketing personnel~~required, anthen ~~increase~~the ofseverance ~~approximately~~liability is ~~$1.3~~accrued ~~million~~over inthe ~~marketing~~required ~~and~~service ~~promotional~~period. ~~programs,~~In ~~an increase of approximately $319~~general,~~000~~ inwe ~~travel~~use ~~and~~a ~~entertainment~~formula ~~expenses,~~based ~~and~~on a ancombination ~~increase~~ of ~~approximately $235,000~~the innumber ~~outside~~of ~~consulting~~years ~~services~~of asservice ~~we expanded our marketing activities. In addition, allocated facilities costs~~ and ~~administrative~~the ~~expenses~~employee’s ~~increased by approximately~~position ~~$403,000. We~~within ~~expect~~ the ~~overall~~Company ~~amount of~~to ~~sales~~calculate ~~and~~the ~~marketing~~termination ~~expenses~~benefits to ~~decrease~~be ~~for~~provided ~~the remainder of 2004 in~~to ~~absolute~~affected ~~dollars~~employees. ~~and~~At asJanuary 31, a2005, ~~percentage~~all ofaffected ~~revenues~~employees aswere terminated weand ~~improve~~there ~~the~~was ~~productivity of~~no ~~our~~remaining ~~sales~~accrual ~~force~~for ~~and~~future ~~refine~~severance ~~our advertising~~ and termination ~~marketing~~benefits ~~strategy~~payments.

~~General and Administrative. General and administrative expenses consist~~Business of general corporate and facility costs as well as salary, benefits and related costs for executive, finance, legal, administrative, human resources, investor relations and management information systems functions and provisions for uncollectible receivables.Combination

~~General~~On ~~and administrative expenses increased approximately $413,000 in the three months ended June~~December 301, ~~2004 compared to the three months ended June 30,~~ 2003, ~~representing an increase of 34%. The increase was primarily~~ ~~due~~we tocompleted ~~higher~~our ~~compensation~~acquisition ~~and benefits expenses~~ of ~~approximately $386~~Axcelerant,~~000 principally~~ ~~due~~a toprivately ~~the~~held ~~inclusion~~provider of ~~three months of general and administrative~~ ~~expenses~~broadband ~~incurred~~Internet inremote ~~our~~access ~~Irvine, California facility following the acquisition of Axcelerant, approximately $308,000 of increased professional fees primarily related to~~ services ~~provided by our independent auditors~~ and ~~services~~managed ~~for Sarbanes-Oxley~~security ~~compliance activities~~services. ~~Additionally,~~ ~~there was a reduction of depreciation expense in the three~~Our ~~months~~acquisition ~~ended June 30, 2003~~ of ~~approximately~~Axcelerant ~~$62,000 related to property and equipment adjustments that related to prior periods, which~~ did not ~~reoccur~~ result in ~~2004. These increases were offset by~~ a ~~reduction~~new ofreportable ~~the allowance for doubtful accounts of approximately $235,000 and a $66,000 reduction in insurance costs~~segment. ~~General~~ ~~and administrative expenses increased approximately $603,000 in the six months ended June 30, 2004 compared to the six months ended June 30, 2003, representing an increase of 23%.~~ The ~~increase~~results ~~was primarily due to higher compensation and benefits expenses~~ of ~~approximately~~ ~~$665,000~~operations ~~principally due to the inclusion~~ of ~~six months of general and administrative expenses incurred in our Irvine, California facility following the acquisition of~~ Axcelerant, ~~approximately~~have ~~$561,000~~been ofincluded increased professional fees primarily related to services provided by our independent auditors and Sarbanes-Oxley compliance consultants. These increases were partially offset by approximately $408,000 for non-recurring costs related to payments made in ~~connection with the resignation of~~ our ~~former Chief Executive Officer during the first quarter~~financial ofstatements ~~2003. We~~subsequent ~~expect the amount of general and administrative expenses~~ to ~~increase during 2004 in absolute dollars while we complete~~ the ~~integration~~date of ~~our Irvine, California operations and update back office processes and procedures company-wide to implement~~ the ~~requirements of the Sarbanes-Oxley Act of 2002 and related regulations, but to stay approximately the same as a percentage of revenues~~acquisition.

Amortization of Purchased Intangibles. Amortization of purchased intangibles includes three and six months of amortization of the intangible assets acquired in connection with the acquisition of Axcelerant. The value assigned to Axcelerant customer relationships was $7.5 million, which is amortized on a straight-line basis over a five-year life at a rate of $125,000 per month. The value assigned to internal use software was $100,000, which is amortized on a straight-line basis over a one-year life at a rate of $8,000 per month.19

17Results of Operations Three Months Ended January 31, 2005 Compared to Three Months Ended January 31, 2004

~~Amortization~~Overview of ~~Stock-Based Compensation. Some stock options previously granted through December 14, 1999 were considered compensatory because~~ the ~~deemed fair~~ ~~value~~First ~~for~~Quarter ~~accounting purposes was higher than the stock option exercise price as determined by the board~~ of ~~directors~~Fiscal on the date of grant. Additionally, in connection with of our acquisition of Axcelerant, we recorded $674,000 of additional deferred stock-based compensation, which will be amortized over the vesting period of the underlying stock options assumed during the acquisition. As a result, we recorded amortization of deferred compensation expense of $90,000 and $20,000 during the three months ended June 30, 2004 and 2003, respectively, and $180,000 and $61,000 during the six months ended June 30, 2004 and 2003, respectively. We expect to record amortization of deferred compensation expense of approximately $359,000 in 2004, related to options assumed by us in connection with our acquisition of Axcelerant.2005

AsDuring the first quarter of ~~June 30~~2005, ~~2004,~~ we ~~had~~continued to evolve our business model from one based principally on an ~~aggregate~~indirect ofsales ~~$464,000~~model to a model under which we sell a significant portion of ~~deferred~~our services directly ~~compensation~~or ~~related~~through VARs to ~~the~~enterprise ~~acquisition~~customers. ofDuring ~~Axcelerant~~the ~~that~~first ~~remained~~quarter toof be2005 and ~~amortized.~~2004, ~~Deferred~~58 ~~compensation~~percent isand ~~amortized~~35 onpercent, arespectively, ~~straight-line~~of ~~basis~~our ~~over~~quarterly ~~the~~revenues were ~~vesting~~derived ~~period~~from ofservices ~~the~~sold ~~options~~to enterprise customers both directly and indirectly through our VARs. We ~~expect~~continued ~~amortization~~our offocus ~~stock-based compensation~~on toacquiring ~~end~~and inserving ~~2007~~enterprise customers.

~~Interest~~In ~~Income~~the ~~and~~first ~~Other~~quarter of 2005, ~~Net~~our revenues and expenses ~~Taxes~~increased slightly over the first quarter of 2004. Revenues were higher quarter over quarter primarily due to the inclusion of three months of managed broadband revenues that resulted from our December 2003 acquisition of Axcelerant whereas two months of broadband revenues are included in the first quarter of 2004. Cost of revenues was higher as a percentage of revenues principally as a result of the amortization of license fees and maintenance cost related to our client software. We expect the trend in our cost of revenues to be similar to that of prior quarters and possibly decrease as sales to enterprise customers grow and represent a higher percentage of total revenues. Our operating expenses were lower in the first quarter of 2005 than in the first quarter of 2004 principally due to the cost savings generated from our strategic restructuring in August 2004 offset by the inclusion of three months of costs incurred at our Irvine, California facility that resulted from our acquisition of Axcelerant whereas two months of Irvine location expense are included in the first quarter of 2004. We expect our quarterly operating expenses to remain approximately the same as a percentage of revenues during fiscal year 2005.

~~Interest~~We ~~income~~continue to focus on delivering innovative services for our customers to drive revenues and ~~other,~~achieve ~~net~~positive earnings. In fiscal 2005 we plan to release additional new value added services, ~~interest~~which ~~expense~~we expect will augment the revenues we earn from our existing customers and, ~~taxes~~together with ~~for~~expanding the global footprint of the GoRemote Global Network, generate ~~three~~revenues from new enterprise customers. Several factors will impact our ability to achieve and ~~six~~sustain ~~months~~profitability, ~~ended~~including ~~June 30~~the effectiveness of our sales and marketing efforts through both direct and VAR sales channels, ~~2004~~the timely release of new services and ~~2003~~the ~~were~~introduction asof ~~follows:~~new services by existing or new competitors. For a discussion of these and other risk factors, see the section titled “Factors That May Affect Future Results.”

	For the three months ended June 30,				For the six months ended June 30,
	2004		2003		2004		2003
	(In thousands)				(In thousands)
Interest income and other, net	$	19	$	75	$	112	$	66
Provision for income taxes	$	34	$	11	$	56	$	19

The results of operations for the three months ended January 31, 2005 includes three months of revenue and expenses related to the acquisition of Axcelerant, which was completed in December 2003. The results of operations for the three months ended January 31, 2004 include two months of revenue and expenses related to Axcelerant.

~~Interest Income and Other, Net~~Revenues

~~Interest~~Revenues ~~income~~for ~~and~~the ~~other, net, primarily represents interest income on~~three ~~cash~~months ~~balances~~ended ~~and on short-term investments~~January 31, ~~gain~~2005 ~~on disposition of assets~~ and ~~sales,~~ ~~use~~2004 ~~and~~were ~~value-added~~as ~~tax.~~follows:

Interest income and other, net, decreased $56,000 in the three months ended June 30, 2004 compared to the three months ended June 30, 2003. This decrease is primarily due to approximately $21,000 loss on foreign currency re-measurement, a reduction in interest income of approximately $11,000 in interest income due to lower interest rate yields and a gain on the disposition of an asset recorded in 2003, which did not reoccur in 2004. Interest income and other, net, increased $46,000 in the six months ended June 30, 2004 compared to the six months ended June 30, 2003. The increase primarily reflects higher sales, use and value-added tax of approximately $177,000 during 2003 offset by a gain on the sale of assets of approximately $116,000 during 2003, which did not reoccur in 2004.

~~Income~~Total ~~Taxes~~revenues increased approximately $58,000 in the three months ended January 31, 2005, compared to the three months ended January 31, 2004. The net increase was principally due to the increased broadband revenues in the amount of $2.5 million during the three months ended January 31, 2005 compared to the inclusion of two months of broadband revenues in the three months ended

The provision for income taxes was $34,000 and $11,000 for the three months ended June 30, 2004 and 2003, respectively, and was $56,000 and $19,000 for the six months ended June 30, 2004 and 2003, respectively. The provision for income taxes consists of foreign tax provisions and state taxes.20

~~Liquidity~~January 31, 2004, offset by reductions in legacy Internet access service and ~~Capital~~dial-up ~~Resources~~revenues in the amount of $2.4 million. Fiberlink Communications Corporation accounted for 12 percent of our consolidated revenues during the three months ended January 31, 2005. Fiberlink is both a customer and in certain markets a competitor of GoRemote, principally with respect to our dial-up remote access offering. Our experience during 2004 and during the first month of 2005 showed us that the decline in dial-up revenues from service providers will likely continue to occur and at a pace that may not be predictable.

	June 30,
	2004			2003
	(in thousands)
Cash and cash equivalents	$	2,994		$	3,426
Net cash used in operating activities	(4,213		)	(950		)
Net cash provided by (used in) investing activities	958			(3,585		)
Net cash provided by financing activities	950			647

We expect our revenues to increase, based on sales to new customers and sales of additional services, such as our newer broadband teleworker and branch office solutions and managed security service offering, to our existing customers. We expect these revenues to be partially offset by a decline in our dial-based Internet access services.

~~Cash~~Costs and Cash Equivalents. Our principal source of liquidity is our cash, cash equivalents and short-term investments. As of June 30, 2004, in addition to our cash and cash equivalents balance of $3.0 million, we had a short-term investment balance of approximately $18.0 million.Expenses

~~Operating~~Costs ~~Activities. Net~~and ~~cash~~expenses ~~used~~for inthe ~~operating~~three ~~activities in the six~~ months ended ~~June~~January 3031, ~~2004~~2005 ~~of $4.2 million was primarily a result of our net operating losses of $6.7 million, decreased accounts payable balances of approximately $1.5 million~~ and ~~increased~~2004 ~~prepaid expenses~~were ~~and~~as other assets of $1.3 million primarily related to deferred installation costs offset by increased deferred revenues of approximately $2.2 million primarily related to deferred installation revenues, an increase of approximately $1.7 millionfollows:

	For the three months ended January 31,
	2005				2004
	(in millions)
Cost of revenues		$	5.0			$	4.7
Percentage of net revenues		41.9		%		39.5		%
Network and operations		$	2.2			$	1.7
Percentage of net revenues		18.0		%		14.4		%
Research and Development		$	0.6			$	0.9
Percentage of net revenues		4.9		%		7.3		%
Sales and Marketing		$	3.1			$	4.8
Percentage of net revenues		26.0		%		39.9		%
General and administrative		$	1.6			$	1.4
Percentage of net revenues		13.3		%		11.4		%
Amortization of intangibles		$	0.2			$	0.3
Percentage of net revenues		2.0		%		2.2		%
Amortization of stock-based compensation		$	0.06			$	0.06
Percentage of net revenues		0.5		%		0.5		%

inCost ~~depreciation, amortization~~ of ~~intangibles and stock-based~~Revenues. Cost ~~compensation~~of ~~and~~revenues ~~lower~~consists ~~accounts receivable balances~~ of ~~approximately~~amounts ~~$790,000 from~~we ~~increased~~pay ~~collection~~to ~~activities.~~access ~~We expect~~ the ~~number~~Internet ofin ~~days~~order itto ~~takes for~~provide usremote toInternet ~~collect~~access services for our ~~accounts~~customers ~~receivable~~and to ~~lengthen~~offer ~~from~~other ~~the~~mobile broadband ~~periods~~services ~~experienced historically,~~and ~~primarily~~includes ~~due~~amortization toof the ~~longer~~deferred ~~payment~~installation ~~cycles generally associated~~costs ~~with~~we ~~enterprise~~incur ~~customers~~to ~~and~~provide ~~the~~broadband ~~increasing~~connectivity ~~percentage~~to of our ~~revenue base represented by such~~ customers.

~~Investing~~Cost ~~Activities. Net~~of ~~cash~~revenues ~~provided~~increased byapproximately ~~investing~~$303,000 ~~activities~~in ~~during~~the three months ended January 31, 2005 compared to the three months ended January 31, 2004, representing an increase of six percent. The increase was primarily due to the inclusion of three months of the cost of broadband revenues in the quarter ended ~~June~~January 3031, 2005 compared to two months of cost in the quarter ended January 31, 2004, following our acquisition of Axcelerant of $1.1 million and approximately $~~958~~184,000 ~~was primarily~~of ~~the~~license ~~result~~and maintenance offees ~~liquidation~~related ofto ~~certain~~our ~~short-term~~MobileOffice ~~instruments~~client software, offset by ~~capital~~decreased ~~expenditures~~volumes of remote Internet access of approximately $~~894~~980,000. We expect that during fiscal year 2005 the cost of revenues will increase in absolute dollars as remote Internet access revenues and broadband revenues increase, but be similar to the three months ended January 31, 2005 as a percentage of revenues.

Financing Activities. Net cash provided by financing activities during the six months ended June 30, 2004 of approximately $950,000 was primarily the result of proceeds of sales of common stock to our employees and option holders.21

~~Commitments. We~~Network ~~lease~~and ~~all of our facilities under~~Operations. Network ~~operating~~and ~~leases~~operations ~~that~~expenses ~~expire~~consist atof ~~various~~salaries ~~dates~~and ~~through~~benefits, ~~2008.~~depreciation ~~We have entered~~on ~~into~~network ~~certain~~equipment, ~~purchase~~allocated ~~commitments~~facility ~~from~~and ~~suppliers~~management ~~who~~information ~~provide~~systems expenses, ~~network~~administrative ~~access~~expenses, ~~software~~ ~~and~~costs ~~related~~of ~~services~~co-location ~~that~~of ~~are~~network ~~utilized~~equipment byand leased ustelecommunication inlines ~~order to deliver our products~~ and ~~services~~other ~~solution~~related costs.

~~During~~Network and operations expenses increased approximately $448,000 in the three months ended January 31, 2005 compared to the three months ended January 31, 2004, werepresenting ~~expect~~an increase of 26 percent. The increase was due primarily to an increase ~~capital~~in ~~equipment~~compensation ~~expenditures~~and benefits-related expenses of approximately $415,000 and increased facility allocation of approximately $165,000, both of which are primarily related to the inclusion of three months of network and operations expenses incurred in ~~absolute~~our ~~dollars~~Irvine, California, facility, as ~~compared~~opposed to ~~2003~~two ~~while~~months weof ~~complete~~Irvine ~~the~~location expenses ~~back~~included ~~office automation~~in ~~and~~first ~~integration~~quarter 2004 due to our acquisition of Axcelerant ~~and~~in December 2003. ~~update~~Additionally, ~~certain~~there ~~other~~was ~~back~~a ~~office processes~~decrease of compensation and benefits ~~procedures~~of ~~required~~approximately ~~for~~$235,000 usoffset toby ~~efficiently~~an ~~run~~increase of approximately $83,000 of professional expenses in our ~~business. We~~Milpitas ~~also~~facility ~~expect~~as toa ~~provide~~result of outsourcing of certain customer support activities. We expect network and ~~premise~~operations ~~equipment~~expenses ~~under~~to remain constant as a ~~monthly~~percentage ~~service~~of ~~arrangement~~revenues ~~for~~during fiscal ayear ~~fee~~2005 as we deploy and support new customers.

~~The~~Research ~~future~~and ~~minimum~~Development. Research and ~~operating~~development ~~lease~~expenses ~~and~~consist ~~purchase~~of ~~commitments~~salaries ~~were~~and asbenefits, allocated facility ~~follows~~and atmanagement ~~June 30~~information systems, ~~2004:~~depreciation costs, outside consultants, facilities costs, administration and other related costs.

	Operating Leases		Purchase Commitments
	(in thousands)
2004	$	982	$	626
2005	993		1,124
2006	784		921
2007	561		—
2008	90		—
Thereafter	—		—
	$	3,410	$	2,671

Research and development expenses decreased approximately $285,000 in the three months ended January 31, 2005 compared to the three months ended January 31, 2004, representing a decrease of 33 percent. The decrease was due primarily to a reduction of approximately $210,000 of compensation and benefits related to reduced California based personnel resulting from the August 2004 strategic restructuring and the relocation of our development activities to our network operations development center in India. Additionally, there was a reduction in the facility allocation expense of approximately $102,000. We expect research and development expenses to remain constant as a percentage of revenues during fiscal year 2005.

~~Indemnifications. From~~Sales ~~time~~and ~~to time we enter into types of contracts that contingently require us to indemnify parties against third party claims~~Marketing. ~~These contracts primarily relate to: (i) divestiture agreements,~~ Sales ~~under~~and ~~which~~marketing weexpenses ~~may~~consist ~~provide customary indemnifications to purchasers~~ of ~~our assets;~~salaries ~~(ii) real~~and ~~estate leases~~benefits, ~~under~~allocated ~~which~~facility ~~we may be required to~~and ~~indemnify~~management ~~property~~information ~~owners~~systems ~~for~~costs, ~~environmental~~travel and ~~other~~entertainment ~~liabilities~~costs, ~~and~~costs ~~other~~for ~~claims~~marketing ~~arising~~and ~~from~~promotional ~~our use of the applicable premises; (iii) agreements with our officers~~programs, ~~directors~~outside ~~and employees~~consultants, ~~under~~commissions ~~which~~earned ~~we may be required to~~by ~~indemnify~~sales ~~such~~and ~~persons~~marketing ~~for~~personnel, ~~liabilities arising out of their employment relationship;~~ and ~~(iv) agreements~~costs associated with ~~customers~~domestic and ~~resellers, under~~ ~~which~~international wesales ~~may~~offices ~~provide customary indemnifications against claims that our products~~ and ~~services~~other ~~infringe~~related ~~certain copyrights, patents or trademarks, or incorporate misappropriated trade secrets~~costs.

~~The~~Sales ~~terms~~and ofmarketing ~~such~~expenses ~~obligations~~decreased ~~vary~~$1.6 ~~Generally~~million in the three-month period ended January 31, a2005 ~~maximum~~compared ~~obligation~~with isthe ~~not~~three-month ~~explicitly~~period ~~stated~~ended January 31, ~~except~~2004, ~~for~~representing ~~indemnifications~~a ~~involving~~decrease ~~infringement~~ of 35 ~~third~~percent. ~~party~~The ~~intellectual~~decrease ~~property~~is ~~rights.~~due ~~Because~~primarily ~~the~~to ~~obligated~~a ~~amounts~~decrease ~~of these~~in ~~types~~compensation and benefits of ~~agreements~~approximately ~~often~~$744,000 ~~are~~as ~~not~~a ~~explicitly~~result ~~stated,~~of ~~the~~our ~~overall~~strategic ~~maximum~~workforce ~~amount~~reduction ofin ~~the~~late ~~obligations~~2004. ~~cannot~~In beaddition, ~~reasonably~~advertising ~~estimated.~~and ~~Historically~~promotional programs decreased by $581,000 as we ~~have not~~realigned ~~been~~our ~~obligated~~marketing toprogram ~~make~~focus ~~any~~and ~~payments~~our facility ~~for~~allocation ~~these~~expense ~~obligations~~decreased by $152,000 ~~and~~as noa result of lower facility ~~liabilities~~costs ~~have~~and ~~been~~reduced ~~recorded~~personnel. We ~~for~~expect sales ~~these~~and ~~obligations~~marketing onexpenses ~~our~~to ~~balance~~be ~~sheet~~constant as a percentage of revenues as we ~~June 30,~~continue ~~2004~~to develop our sales force and redefine our advertising and marketing strategy during 2005.

~~Summary~~General ofand ~~Liquidity~~Administrative. ~~We believe that our available cash, cash~~ General ~~equivalents~~ and ~~short-term~~administrative ~~investments~~expenses consist of ~~$21.0~~general ~~million~~corporate ~~at June 30, 2004~~ and ~~cash~~facility ~~expected~~costs toas well beas ~~generated~~salary, bybenefits ~~operations~~and ~~during~~related ~~the~~costs ~~next~~for ~~twelve~~executive, ~~months~~finance, legal, ~~will~~administrative, ~~fund~~human ~~planned~~resources, ~~operations~~investor ~~for~~relations atand ~~least~~management ~~the next twelve months. We utilized~~information ~~$1.4~~systems ~~million~~functions and ~~$4.2~~provisions ~~million~~for inuncollectible ~~cash during the three and six months ended June 30, 2004, respectively~~receivables.

WeGeneral ~~plan~~and toadministrative ~~invest~~expenses inincreased approximately ~~expanding~~$234,000 ~~our~~in ~~remote~~the ~~access~~three ~~solutions,~~months onended ~~a global basis~~January 31, by2005 ~~continuing~~ compared to ~~build~~the ~~strategic~~three ~~partnering~~months ~~relationships.~~ended ~~This~~January 31, ~~will require us to maintain market acceptance~~2004, ~~and~~representing toan ~~grow~~increase ~~our~~of ~~remote access~~17 ~~solutions~~percent. ~~offerings~~The inincrease ~~order~~was ~~for~~due usprimarily to ~~continue~~$141,000 ~~our~~of ~~research~~increased ~~and development~~professional ~~activities~~fees ~~and~~primarily ~~fund~~related ~~planned~~to ~~operating~~fees ~~expenses.~~charged ~~There~~by ~~can~~our beprevious noindependent ~~assurance~~auditors ~~that~~and ~~our~~services ~~remote~~for ~~access~~Sarbanes-Oxley ~~solutions~~compliance ~~offerings will maintain market acceptance~~activities, ~~growth~~as ~~and operating margins.~~

If we are unable to attain our revenue and margin goals, significant reductions in spending and the delay or cancellation of planned activities or more substantial restructuring may be necessary to enable us to meet our cash requirements through the next 12 months. These actions could have a material adverse effect on our business, results of operations and prospects. Furthermore, we may need to raise additional funds in future periods through public or private financing, or other arrangements, to fund operations and potential acquisitions, if any. If additional financing is needed, it might not be available on reasonable terms or at all. Failure to raise capital when needed could seriously harm our business and results of operations. If additional funds were raised through the issuance of equity securities, the percentage of ownership of our stockholders would be reduced. Furthermore, these equity securities might have rights, preferences or privileges senior to our common stock.22

19well as a net increase in facility allocation expenses of $124,000, and an increase in travel and entertainment of approximately $71,000. Offsetting these increases was a reduction in insurance cost of approximately $92,000 primarily caused by a reduction in our directors’ and officers’ insurance policy premiums. We expect general and administrative expenses to increase in fiscal year 2005 in absolute dollars while we update back office processes and procedures company-wide to meet the requirements of the Sarbanes-Oxley Act of 2002 and related regulations, but to decrease as a percentage of revenues.

~~Factors~~Amortization ~~That~~of ~~May~~Purchased Intangibles. Amortization ~~Affect~~of ~~Future~~purchased ~~Results~~intangibles includes three months of amortization of the intangible assets acquired in connection with the acquisition of Axcelerant. The initial value assigned to Axcelerant customer relationships was $7.5 million, which was amortized on a straight-line basis over a five-year life at a rate of $125,000 per month. At September 30, 2004 an impairment charge of $2.4 million was recognized and the carrying value of the customer relationships was adjusted to $3.9 million, which will be amortized over the remaining 50 months of the original five-year life on a straight-line basis at a rate of $78,000 per month. The value assigned to internal use software was $100,000, which is amortized on a straight-line basis over a one-year life at a rate of $8,000 per month. The internal use software was fully amortized in November 2004.

Amortization of Stock-Based Compensation. In ~~addition~~connection towith ~~the~~our ~~information~~acquisition inof Axcelerant, ~~this~~we ~~Quarterly~~recorded ~~Report~~$674,000 onof ~~Form~~additional 10deferred stock-Qbased compensation, which is being amortized over the vesting period of the underlying stock options assumed during the ~~following~~acquisition. ~~should~~As bea ~~considered~~result, inwe recorded ~~evaluating~~amortization ~~GoRemote~~of deferred compensation expense of $57,000 and $60,000 during the three months ended January 31, 2005 and 2004, respectively. We expect to record amortization of deferred compensation expense of approximately $80,000 in the remainder of fiscal year 2005, related to options assumed by us in connection with our ~~business~~acquisition of Axcelerant.

IfAs of January 31, 2005, we ~~fail~~had inan ~~our~~aggregate ~~strategy~~of $131,000 of ~~focusing~~deferred ~~our~~compensation related to the ~~sales~~acquisition ~~efforts~~of Axcelerant remaining to be amortized. Deferred compensation is amortized on ~~larger~~a ~~companies,~~straight-line ~~our~~basis ~~revenue~~over ~~and~~the ~~profitability~~vesting ~~goals~~period ~~will~~of the options. We ~~likely~~expect ~~not~~amortization beof ~~achieved~~stock-based compensation related to these options assumed by us to end in 2007.

~~Historically,~~Interest ~~a significant portion of our revenues was derived from~~Income ~~smaller~~(Expense) ~~companies in the Internet marketplace, but in recent periods we have attempted to focus our sales~~ and ~~marketing~~Other ~~efforts on larger corporate~~ and ~~enterprise-level~~ customers. This strategy places new demands on our business, such as the longer sales cycles and higher levels of service and support that larger accounts generally require. Some of our competitors with greater financial resources than ours have focused their sales efforts on selling to large enterprises for a longer period of time with more success than we have experienced, which adds to the risk of our strategy. In July 2004, our senior vice president of worldwide sales resigned, which may make execution of this strategy more difficult. If we fail in this strategy, or if we have underestimated the costs of this strategy, we will likely miss our revenue and profitability goals.Taxes

~~The~~Interest ~~markets~~income ~~that~~and weother, net, ~~serve~~interest ~~are~~expense ~~highly competitive~~ and ~~there~~taxes isfor nothe ~~assurance~~three ~~that~~months weended ~~will~~January 31, 2005 beand ~~able~~2004 towere ~~achieve~~as ~~or maintain profitability.~~follows:

We are aware of many companies in related markets that address particular aspects of the features and functions that our products provide. Currently, we compete directly with iPass and Fiberlink Communications Corporation in the market for Internet roaming and related settlement services, and each of iPass and Fiberlink has a network that competes with the GoRemote Global Network. In addition, iPass has greater cash resources than we do and each of iPass and Fiberlink has a larger sales force than our own dedicated to enterprise sales. Large communications service providers such as AT&T, Equant and MCI also have the ability and resources to compete with us in the Internet-based mobile office communications services market. In the mobile broadband services market, our primary competitors include Megapath, ePresence and Netifice. Many of our competitors have longer operating histories, greater name recognition or larger customer bases, which they may leverage in order to obtain more favorable volume discounts from suppliers. In addition, these competitors may be able to undertake more extensive marketing efforts, adopt more aggressive pricing policies and provide more favorable payment terms to customers than we can, which could limit our opportunities to obtain new customers or cause us to lose our existing customers.

	For the three months ended
	January 31,
	2005			2004
	(in thousands)
Interest income and other, net		$	55		$	(6	)
Provision for income taxes		$	31		$	22

IfInterest weIncome ~~are unable to increase revenues~~and ~~associated with broadband services~~Other, ~~our ability to grow our business will be impaired.~~Net

~~Until~~Interest ~~our~~income ~~acquisition~~and ofother, ~~Axcelerant in December 2003~~net, weprimarily ~~generated~~represents ~~our~~interest ~~remote~~income ~~Internet~~on ~~access~~cash ~~services~~balances ~~revenues~~and ~~almost exclusively from the sale of services based~~ on ~~dialup~~short-term ~~access—a~~investments, ~~narrowband~~gain ~~technology. In some countries,~~on ~~including~~disposition ~~the United States, the use~~ of ~~narrowband as a primary means of remote access is expected to decline over time as broadband access technologies~~assets, ~~such as cable modem~~sales, ~~DSL~~use and Wivalue-~~Fi,~~added become more widely adopted and used. Our experience in the first half of 2004 showed us that the decline in dialup revenues from service providers may occur at a more rapid pace than previously projected. Although we have recently begun to generate revenues from managed broadband access following our acquisition of Axceleranttax, ~~the future growth of our business may depend in large part upon our ability to expand the broadband elements of our virtual network~~ and ~~generate~~interest ~~broadband revenues at a substantially higher level and growth rate~~expense. ~~We may not succeed in this expansion and we may not generate substantial new revenues, which could harm our results and cause our stock price to decline.~~

~~Our~~Interest ~~business~~income ~~strategy~~and ~~has~~other, ~~shifted~~net, ~~over~~increased ~~time~~$61,000 in ~~and~~the ~~remains~~three ~~unproven~~months ended January 31, so2005 compared to the ~~success~~three months ended January 31, 2004. This increase was primarily due to $29,000 of ~~our~~additional interest ~~strategy~~income ~~cannot~~based beon ~~assured~~higher interest rate yields combined with approximately $53,000 of lower sales, use and value-added taxes, offset by a $16,000 gain on sales of assets in 2004 and $9,000 of interest expense incurred in 2005.

~~Our~~Interest ~~business~~expense ~~strategy has changed over time. For example, we ceased to~~consists beof anthe ~~Internet~~amortization ~~service~~of ~~provider~~the indiscount ~~1997~~of ~~and~~future ~~abandoned~~facility ~~our~~lease ~~Internet~~payments ~~telephony services business in 2001. We have pursued our current business—remote access, managed security and~~ related ~~mobile office services—for a relatively brief~~ ~~period and in markets that are rapidly changing. We have only been offering managed broadband services~~ to ~~enterprises~~the ~~with~~ceased ~~branch~~use ~~offices and large teleworker populations since December 2003, following our acquisition~~ of ~~Axcelerant.~~ ~~There~~facilities ~~can be no assurance that we will succeed~~ in ~~our~~connection ~~efforts~~with ~~to make~~the ~~our current business profitable, and there can be no assurance that our~~August 2004 ~~recent~~strategic ~~acquisition~~restructuring. ofThe ~~Axcelerant~~discount ~~will~~was ~~make us more likely to succeed.~~

~~We recently appointed a new chief executive officer, which may lead to other unanticipated departures of executives and other key personnel.~~23

Onapproximately ~~August 2~~$50, ~~2004~~000, wewhich ~~announced~~is ~~the~~being ~~appointment~~amortized ofover ~~Tom~~the ~~Thimot~~remaining tolife ~~serve~~of asthe ~~our President and Chief Executive Officer, replacing Bharat Davé who resigned in late July~~lease. ~~Our~~ ~~Senior Vice President~~During ~~Worldwide~~the ~~Sales~~three ~~resigned~~months ~~earlier~~ended ~~in July.~~January It31, is2005, ~~possible~~$9,000 ~~that these executive changes will lead to the departure~~ of ~~other~~interest ~~executives,~~expense ~~senior managers or other key personnel~~was recorded. ~~Because our~~

20Income Taxes

~~management team~~The isprovision ~~relatively~~for ~~small, any single departure can have a significant~~income ~~impact. Unanticipated~~taxes ~~departures~~was ~~of additional~~$31,000 ~~executives~~ and ~~other~~$22,000 ~~key~~for ~~personnel~~the ~~could~~three ~~make~~months itended ~~more~~January 31, ~~difficult for~~2005 usand to2004, ~~run~~respectively. ~~our~~The ~~business~~provision ~~and~~for ~~execute~~income ontaxes ~~our~~consists ~~strategic goal~~ of ~~returning~~foreign totax ~~profitability~~provisions and ~~building~~state ~~sustainable revenue growth~~taxes.

~~Since~~Liquidity weand ~~have~~Capital ~~no assurance that customers will continue to use our services or that our customer base will expand, we will have little ability to predict revenue growth or operating results.~~Resources

Our customers are generally free to use competing products and services and dialup remote access prices are declining, so we could face significant customer losses, at unpredictable times. We had one customer in the three months ended June 30, 2004 that accounted for more than ten percent of our revenues, Fiberlink Communications Corporation (11%). We had two customers in the six months ended June 30, 2004 that each accounted for more than ten percent of our revenues, Sony Communication Network Corporation (11%) and Fiberlink Communications Corporation (11%). This concentration of revenue from two customers, each of which principally purchases our dialup remote access service, makes our business more risky. Losing either of these customers could result in a significant revenue shortfall for us. In addition, large customers have significant negotiating power during contract discussions or in the event of a customer dispute, which may make it more likely that the terms of the customer arrangement or settlement may be more favorable to the customer. We are in direct competition with Fiberlink, which makes it more likely that revenues from Fiberlink will decline in the future. These factors make it difficult to anticipate the level of our future revenues from existing customers. In addition, our success depends on our ability to expand and diversify the composition of our customer base. If we are unable to expand our customer base and increase our average revenues per customer, our business success will be less likely.

	For the three months ended
	January 31,
	2005				2004
	(in thousands)
Cash and cash equivalents		$	3,765			$	3,957
Net cash provided by (used in) operating activities		936				(1,550		)
Net cash provided by (used in) investing activities		(117		)		1,172
Net cash provided by financing activities		539				775

IfCash weand ~~cannot~~Cash ~~effectively integrate~~Equivalents. Our ~~Axcelerant’s~~principal ~~operations~~source ~~with~~of liquidity is our ~~own~~cash, ~~operations~~cash equivalents and short-term investments. As of January 31, we2005, ~~will~~in ~~not~~addition ~~realize~~to ~~the~~our cash and cash ~~potential~~equivalents ~~benefits~~balance of ~~our~~$3.8 ~~recent~~million, ~~merger~~we had a short-term investment balance of approximately $15.6 million.

~~The~~Operating ~~integration~~Activities. Net cash ofprovided ~~Axcelerant~~by ~~into~~operating ~~our~~activities ~~company~~in ~~has~~the ~~been~~three ~~and~~months ~~continues~~ended January 31, to2005 beof a$936,000 ~~time~~was ~~consuming~~primarily ~~and~~a ~~expensive~~result ~~process~~of ~~and~~a ~~may~~reduction ~~disrupt~~in ~~our~~accounts ~~operations if~~receivable itbalances isof ~~not~~approximately ~~completed~~$1.4 inmillion ~~a timely~~ and ~~efficient~~an ~~manner. If~~increase ~~this~~in ~~integration~~deferred ~~effort~~revenue isof approximately ~~not successful~~$867, ~~our~~000 ~~results~~primarily ofrelated ~~operations~~to ~~could~~deferred beinstallation ~~harmed~~revenues, offset ~~employee~~by ~~morale~~our ~~could~~net ~~decline,~~operating ~~key employees~~losses ~~could~~of ~~leave~~$819,000 and ~~customers~~decreased ~~could~~accounts ~~cancel~~payable balances ~~existing~~of ~~orders~~approximately or$797,000 ~~choose~~principally ~~not to~~from ~~place~~reductions ~~new~~in ~~ones~~restructuring accruals. InWhile ~~addition,~~our wedays ~~may~~sales ~~not~~outstanding ~~achieve~~fell ~~anticipated~~significantly ~~synergies~~during orthe three ~~other~~months ~~benefits~~ended ofJanuary 31, ~~the~~2005, ~~merger.~~we ~~Having~~generally ~~completed~~expect the ~~merger,~~number weof ~~must~~days ~~now operate~~it atakes ~~single~~for ~~organization~~us ~~utilizing~~to ~~common~~collect ~~information~~our ~~and~~accounts ~~communication~~receivable ~~systems,~~to lengthen from the periods ~~operating~~experienced ~~procedures~~historically, ~~financial~~primarily ~~controls~~due ~~and~~to ~~human~~the ~~resources~~longer ~~practices.~~payment Wecycles ~~may~~generally ~~encounter~~associated ~~the~~with ~~following~~enterprise ~~difficulties,~~customers ~~costs~~ and ~~delays~~the ~~involved~~increasing inpercentage ~~fully~~of our ~~integrating~~revenue ~~Axcelerant’s~~base ~~operations~~represented ~~into~~by ~~our~~such ~~operations:~~customers.

~~• failure~~Investing Activities. Net cash used in investing activities during the three months ended January 31, 2005 of ~~customers~~approximately to$117,000 ~~accept~~was ~~new~~primarily ~~services~~the result of capital expenditures of approximately $162,000, offset by the ~~combined~~liquidation ~~company;~~of certain short-term instruments.

~~• potential~~Financing Activities. Net ~~incompatibility~~cash provided by financing activities during the three months ended January 31, 2005 of ~~technologies~~approximately ~~and~~$539,000 ~~systems;~~was primarily the result of sales of common stock to our employees and option holders.

~~• potential~~Commitments. We ~~difficulties~~lease inall ~~successfully~~of ~~integrating~~our ~~the~~facilities ~~employees~~under ofoperating ~~GoRemote~~leases that expire at various dates through 2008. We have entered into certain purchase commitments from suppliers who provide network access, software and related services that are utilized by ~~Axcelerant;~~us in order to deliver our products and services.

~~• managing~~During 2005, we expect to continue automating and updating our ~~growth~~critical back office processes and ~~managing~~procedures ~~larger~~that are required for us to efficiently run our business, however, ~~more~~we ~~geographically~~believe ~~dispersed~~that ~~operations;~~our capital equipment expenditures in absolute dollars will be relatively flat as compared to 2004. We expect to continue to provide customer premises equipment to customers for a fee, as part of our solution offerings.

~~• perceived adverse changes in business focus; and~~24

~~• the~~The ~~loss~~future ofminimum ~~key~~operating ~~employees~~lease and ~~diversion~~purchase ofcommitments ~~the~~were ~~attention~~as offollows ~~management~~at ~~from other~~January 31, ~~ongoing~~2005, ~~business~~based ~~concerns.~~on fiscal years ending October 31 (in thousands):

We may not succeed in cost-effectively automating, integrating and updating critical back office systems and processes, which could limit our ability to achieve and maintain profitability.

	Operating Leases			Purchase Commitments
2005		$	921		$	970
2006		786			943
2007		565			149
2008		181			—
Thereafter		—			—
		$2,453			$	2,062

~~Historically,~~Indemnifications. From time weto ~~have~~time ~~invested~~we inenter ~~the~~into ~~automation~~types of ~~back~~contracts ~~office~~that ~~systems and~~contingently ~~processes~~require ~~in order to enable~~ us to indemnify ~~cost~~parties ~~effectively~~against ~~grow~~third ~~our~~party ~~traditional mobile office communications business~~claims. ~~The~~These ~~back~~contracts ~~office~~primarily ~~systems~~relate to: ~~and~~(i) divestiture ~~process of Axcelerant~~agreements, ~~whose~~under ~~business~~which we ~~acquired~~may inprovide ~~December 2003, are largely~~customary ~~manual.~~indemnifications ~~In order~~ to ~~efficiently~~purchasers ~~provision,~~of ~~support~~our ~~and~~assets; ~~service~~(ii) real ~~our~~estate ~~customers~~leases, under which we ~~will~~may be required to ~~cost-effectively~~indemnify ~~update,~~property ~~automate~~owners ~~and,~~for ~~where~~environmental ~~appropriate,~~and ~~integrate~~other ~~these~~liabilities, ~~systems~~ and ~~processes.~~other Weclaims ~~will~~arising ~~need~~from toour ~~ensure~~use ~~that~~ of the ~~combined~~applicable premises; ~~company’s~~(iii) agreements ~~financial~~with ~~reporting~~our officers, ~~financial~~directors ~~controls~~ and employees, ~~documentation~~under ~~processes~~which ~~meet~~we ~~all~~may ~~applicable~~be ~~financial~~required ~~controls~~to ~~certification standards,~~indemnify such aspersons ~~Section 404~~for ofliabilities arising ~~the~~out ~~Sarbanes-Oxley~~of ~~Act.~~their Weemployment ~~may underestimate~~relationship; ~~the~~and ~~investments~~(iv) agreements ~~required~~with customers toand ~~accomplish this automation~~resellers, ~~integration,~~ ~~updating~~under ~~and~~which ~~certification.~~we We may ~~not~~provide ~~succeed~~customary ~~in this effort,~~indemnifications ~~which~~against ~~could~~claims ~~impair~~that our ~~ability~~products toand ~~scale~~services ~~our~~infringe ~~operations,~~certain ~~limit our growth and~~copyrights, ~~lessen~~patents ~~the~~or ~~likelihood~~trademarks, ~~that~~or weincorporate ~~would~~misappropriated ~~achieve~~trade ~~profitability~~secrets.

The ~~market~~terms ~~price~~ of ~~our~~such ~~common~~obligations ~~stock~~vary. ~~has~~Generally, a ~~traditionally~~maximum ~~been~~obligation ~~highly~~is ~~volatile~~not explicitly stated, ~~and~~except iffor weindemnifications doinvolving infringement ~~not~~of ~~meet~~third party intellectual property rights. Because the ~~expectations~~obligated amounts of ~~analysts~~ these types of agreements often are not explicitly stated, the overall ~~market~~maximum ~~price~~amount of ~~our~~the ~~common~~obligations ~~stock~~cannot ~~could~~be ~~decline~~reasonably ~~further~~estimated. Historically, we have not been obligated to make any payments for these obligations, and no liabilities have been recorded for these obligations on our balance sheet at January 31, 2005.

InSummary ~~the~~of ~~past,~~Liquidity. We believe ~~the~~that ~~price of~~ our ~~common~~available ~~stock~~cash, ~~has~~cash ~~experienced~~equivalents ~~large~~and ~~swings up~~short-term ~~and~~investments ~~down~~of $19.3 Asmillion ofat ~~August~~January 131, ~~2004,~~2005 ~~our~~and ~~common~~cash ~~stock~~expected isto ~~valued~~be ~~less~~generated ~~than it~~by ~~was~~operations atduring the ~~time~~next of12 ~~the~~months ~~closing~~will offund ~~our~~planned ~~acquisition~~operations offor ~~Axcelerant.~~at ~~This~~least ~~volatility~~the ~~might~~next ~~occur~~12 ~~again~~months. inWe ~~the~~generated ~~future~~$1.3 ~~Volatility~~million ~~can arise particularly~~ in ~~response~~cash toduring ~~quarter-to-quarter variations in~~ the ~~actual~~quarter orended ~~anticipated~~January 31, ~~financial results of us or~~2005.

21We plan to invest in expanding our managed remote access services, on a global basis, by continuing to build strategic partnering relationships. This will require us to maintain market acceptance, by growing our mobile office communications services offerings, continuing our research and development activities and funding planned operating expenses. There can be no assurance that our managed remote access services will maintain market acceptance, growth and operating margins.

If we are unable to attain our ~~customers~~revenue orand ~~competitors~~margin goals, significant reductions in spending and ~~announcements~~the ~~that~~delay or ~~our~~cancellation ~~competitors~~of planned activities or more substantial restructuring may be wenecessary ~~make~~to ~~regarding~~enable ~~new~~us ~~product~~to ~~and~~meet ~~service~~our ~~introductions.~~cash ~~The~~requirements ~~market~~through ~~price~~the ofnext 12 months. These actions could have a material adverse effect on our ~~common~~business, results ~~stock~~of ~~can~~operations ~~also~~and ~~fluctuate~~prospects. Furthermore, we may need to raise additional funds in ~~response~~future periods through public or private financing, or other arrangements, to ~~price~~fund operations and ~~volume~~potential acquisitions, if any. If ~~fluctuations~~additional infinancing is needed, it might not be available on reasonable terms or at all. Failure to raise capital when needed could seriously harm our business and results of operations. If additional funds were raised through the issuance ~~stock~~of ~~market~~equity securities, ~~particularly~~the ~~those~~percentage ~~that~~of ~~affect~~ownership ~~the~~of ~~market~~our stockholders ~~prices~~would ofbe ~~technology~~reduced. ~~stocks~~Furthermore, these equity securities might have rights, preferences or privileges senior to our common stock.

In addition, the market price of our common stock is subject to decline if we do not achieve the expected benefits of the Axcelerant acquisition as quickly as anticipated or the costs of or operational difficulties arising from the merger are greater than anticipated.25

WeRecent ~~have incurred significant losses to date~~Accounting ~~and expect to continue to incur losses for some period of time. If we fail to generate sufficient revenue to achieve and sustain positive cash flow or profits, our stock price will decline.~~Pronouncements

WeIn ~~have~~December 2004, ~~incurred~~the FASB ~~significant~~issued ~~losses~~a torevision ~~date~~of ~~and~~FASB weStatement ~~expect~~No. 123 to(“SFAS 123 ~~continue~~Revised”), toAccounting ~~incur~~for ~~losses~~Stock-Based Compensation. SFAS 123 Revised establishes standards for ~~some~~the accounting ~~period~~for oftransactions ~~time~~in which an entity exchanges its equity instruments for goods or services. WeIt ~~incurred~~also ~~operating~~addresses ~~losses~~transactions ~~before~~in which an entity incurs ~~income~~liabilities ~~taxes~~in exchange for goods or services that are based on the fair value of ~~approximately~~the ~~$1.8~~entity’s ~~million~~equity ~~for~~instruments ~~2003,~~or ~~$5.0~~that ~~million~~may ~~for~~be ~~2002~~settled ~~and~~by the issuance of ~~$31~~those equity instruments.6 ~~million~~SFAS 123 ~~for~~Revised ~~2001.~~is Aseffective as of the beginning of the first interim or annual reporting period that begins after June 3015, 2005. ~~2004,~~We wehave ~~had~~not ancompleted ~~accumulated~~our ~~deficit~~ evaluation of ~~$137.1~~the ~~million~~impact ~~and~~of ~~incurred~~adoption aof SFAS 123 ~~loss~~Revised ofon $3our consolidated financial position or results of operations.8 ~~million~~We ~~for~~expect to complete our evaluation during the second quarter ~~then~~of ~~ended~~fiscal year 2005.

WeFactors ~~have~~That ~~experienced negative cash flows in each year since our~~May Affect ~~inception~~Future in 1994, and we expect to continue to do so for some time in the future. In addition, we may also incur significant new costs related to possible acquisitions, the development of new products and services, the integration of new technologies or the update of old technologies. Moreover, we might not be able to achieve operating profitability on a quarterly or annual basis. To achieve profits, we will need to maintain our relationships with existing customers, generate additional revenue growth from our existing customers and obtain new customers, while continuing to control our expenses. We expect to continue to invest in network and operations, research and development and sales and marketing, and we expect to face pressure to adopt new pricing arrangements, including volume discounts, that may lower our gross margins. As a result, our ability to achieve and sustain profitability will depend on our ability to sustain and achieve substantially higher revenue while maintaining reasonable cost and expense levels. If we fail to achieve profitability, our stock price could decline.Results

WeIn ~~may~~addition ~~require~~to ~~additional~~the information ~~capital~~elsewhere in ~~for~~this ~~our operations~~Quarterly Report on Form 10-Q, ~~which~~the ~~could~~following ~~have~~should abe considered ~~negative~~in ~~effect~~evaluating onGoRemote ~~your~~and ~~investment~~our business.

If ~~our cash proves to be insufficient to fund our operations,~~ we ~~may need~~fail ~~to raise additional funds at some point~~ in ~~the~~our ~~future.~~strategy ~~In the three and six month periods ended June 30, 2004 we utilized $1.4 million and $4.2 million, respectively, in cash, leaving us with a cash, cash equivalent and short term investment balance~~ of ~~$21.0~~focusing ~~million.~~our ~~If we raise additional funds by~~sales ~~selling~~efforts ~~equity~~on orlarger ~~convertible debt securities~~companies, our ~~stockholders~~revenue ~~may experience additional dilution~~ and ~~these~~profitability ~~new~~goals ~~securities may have powers, preferences and rights that are senior to those of the rights of our common stock. We cannot predict whether additional financing~~ will ~~be available on terms favorable to~~likely ~~us, or at all. If adequate funds are~~ not ~~available or are not available on acceptable terms, we may~~ be ~~unable to fund our business operations, promote our brand identity, take advantage of acquisition opportunities, develop or enhance services or respond to competitive pressures~~achieved. ~~Any inability to do so could have a negative effect on our business, revenues, financial condition and results of operations.~~

IfHistorically, a significant portion of our ~~common~~revenues ~~stock~~was ~~price~~derived ~~falls~~from ~~below~~smaller companies and ~~remains~~service ~~under~~providers ~~$1.00~~in the Internet marketplace, orbut ifin recent periods we ~~otherwise~~have attempted ~~fail~~to focus our sales and marketing efforts on larger corporate and enterprise-level customers. This strategy places new demands on our business, such as the longer sales cycles and higher levels of service and support that larger accounts generally require. Some of our competitors with greater financial resources than ours have focused their sales efforts on selling to ~~comply~~large enterprises for a longer period of time with ~~Nasdaq~~more ~~rules~~success than we have experienced, which adds to the risk of our strategy. In November 2004, ~~common~~we ~~stock~~appointed ~~could~~a benew ~~delisted~~Senior ~~from~~Vice ~~The~~President ~~Nasdaq~~of ~~National~~Worldwide ~~Market~~Sales, ~~which~~and ~~could~~a new Vice ~~severely~~President ~~limit~~of North American New Business Sales, but they may not succeed in executing this strategy. If we fail to execute this strategy, or if we have underestimated the ~~trading~~costs ~~market~~of ~~for~~this strategy, we will likely miss our ~~common~~revenue ~~stock~~and profitability goals.

~~If we fail to meet the criteria for continued listing on~~ The ~~Nasdaq National~~markets ~~Market,~~that ~~our~~we ~~common~~serve ~~stock~~are ~~may~~highly ~~be delisted, which could make it more~~competitive ~~difficult for you to sell your shares. For example, if the market price for our common stock falls~~ and ~~remains~~there ~~below~~is ~~$1.00~~no ~~per~~assurance ~~share~~that ~~for thirty trading days,~~ we ~~would~~will be ~~subject~~able to ~~delisting.~~achieve Onor ~~July 30, 2004, the closing price of~~maintain ~~our common stock was $1~~profitability.~~27.~~

~~The~~We ~~telecommunications~~are ~~industry~~aware ~~continues~~of tomany ~~experience~~companies ~~instability~~in related markets that address particular aspects of the features and functions that our products provide. Currently, ~~which~~we ~~may~~compete ~~cause~~directly ~~consolidation~~with iPass ~~among~~and Fiberlink Communications Corporation in the market for Internet roaming and related settlement services, and each of iPass and Fiberlink has a network ~~service~~that competes with the GoRemote Global Network. In addition, iPass has ~~providers~~greater cash resources than we do and ~~impair~~each of iPass and Fiberlink has a larger sales force than our ~~ability~~own dedicated to ~~provide~~enterprise ~~reliable,~~sales. ~~redundant~~Large communications service providers such as AT&T, Equant and MCI also have the ability and ~~coverage~~resources to compete with us in the Internet-based mobile office communications services market. In the mobile broadband services market, our primary competitors include Megapath, Netifice and ~~negotiate~~New Edge. Many of our competitors have longer operating histories, greater name recognition or larger customer bases, which they may leverage in order to obtain more favorable volume ~~network~~discounts ~~access~~from suppliers. In addition, these competitors may be able to undertake more extensive marketing efforts, adopt more aggressive pricing policies and provide more favorable payment terms to customers than we can, which could limit our opportunities to obtain new customers or cause us to lose our existing customers.

The telecommunications industry continues to experience dramatic technological change and increased competition that have led to significant declines in network access pricing. In addition, the revenues of network service providers have declined as a result of the general economic slowdown. As a result, network service providers have experienced operating difficulties in the last several years, resulting in poor operating results and a number of these providers declaring bankruptcy. If these conditions continue, some of these service providers may consolidate or otherwise cease operations, which would reduce the number of network service providers from which we are able to obtain network access. To the extent this were to occur, while we would still be able to maintain operations and provide enterprise connectivity services with a small number of network service providers, we would potentially not be able to provide sufficient alternative access points in some geographic areas, which could diminish our ability to provide broad, reliable, redundant coverage. Further, our ability to negotiate favorable access rates from network service providers could be impaired, which could increase our network access expenses and harm our operating results.26

22If we are unable to increase revenues associated with broadband services, our ability to grow our business will be impaired.

IfUntil weour ~~fail~~acquisition toof Axcelerant ~~enhance~~in December 2003, we generated our ~~existing~~remote ~~products~~Internet access orservices ifrevenues ~~new~~almost exclusively from the sale of services, ~~products~~based oron ~~features~~dial-up access—a wenarrowband ~~introduce~~technology. doIn ~~not~~some ~~succeed~~countries, inincluding the United States, ~~marketplace~~the use of narrowband as a primary means of remote access is expected to decline over time as broadband access technologies, wesuch as cable modem, DSL and Wi-Fi, become more widely adopted and used. Our experience during 2004 and during the first month of 2005 showed us that the decline in dial-up revenues from service providers will likely continue to occur and possibly at a more rapid pace that may not be ~~able~~predictable. Although we have recently begun to generate ~~new~~revenues from managed broadband access following our acquisition of Axcelerant, the future growth of our business may depend in large part upon our ability to expand the broadband elements of our virtual network and generate broadband revenues at a substantially higher level and growth rate. We may not succeed in this expansion and we ~~will~~may ~~have~~not generate substantial new revenues, which could harm ~~increased~~our ~~costs~~results ~~without~~and ~~the~~cause ~~expected~~our ~~returns~~stock price to decline.

Our ~~target~~business ~~markets~~strategy ~~are~~has ~~characterized~~shifted byover ~~rapid~~time ~~technological advances,~~and ~~changes~~remains ~~in end-user requirements~~unproven, ~~and~~so ~~frequent~~the ~~new product introductions. Our future~~ success ~~will~~of ~~depend on~~ our ~~ability~~strategy to anticipate or adapt to such changes and to offer, on a timely and cost-effective basis, products that meet changing customer demands. For example, our growth prospects will be determined, among other things, by our ability to grow our new branch office services offering, which is an offering into a highly competitive market with a large number of incumbents. We may lack sufficient resources to anticipate technological and market trends, manage long development cycles or develop, introduce and market new products and enhancements. In addition, we cannot ~~predict~~ ~~whether our products and services will meet with market acceptance or~~ be ~~profitable~~assured.

~~Any~~Our ~~strategic~~business ~~acquisitions~~strategy orhas changed ~~investments~~over time. For example, we ~~engage~~ ceased to be an Internet service provider in 1997 ~~could~~and ~~dilute~~abandoned our ~~stockholders~~Internet ~~and/or~~telephony ~~result~~services business in ~~the~~2001. ~~assumption~~We ofhave ~~additional~~pursued ~~liabilities~~our current business—managed remote access solutions—for a relatively brief period, ~~loss~~and ofin ~~sales~~markets that are rapidly changing. We have only been offering managed broadband services to enterprises with branch offices and large ~~disruption~~teleworker populations since December 2003, following our acquisition of Axcelerant. There can be no assurance that we will succeed in our efforts to make our current business profitable.

We ~~expect~~recently ~~that~~appointed wea ~~will~~new ~~consider~~chief ~~future~~executive ~~acquisitions~~officer and ~~of,~~replaced ora ~~investments in,~~number ~~complementary~~of ~~businesses,~~executives ~~products~~and orother ~~technologies.~~key Wepersonnel, which may ~~encounter~~lead to ~~difficulties~~additional inpersonnel ~~identifying~~ and ~~acquiring~~organizational ~~suitable~~changes ~~candidates~~that oncould ~~reasonable~~impact our ability ~~terms~~to achieve our strategic goals.

InOn August 2, 2004, we announced the ~~event~~appointment of ~~any~~Tom ~~future~~Thimot ~~acquisitions~~to serve as our President and Chief Executive Officer. During the third quarter of 2004, we ~~could:~~replaced our senior marketing and operations executives and a number of other senior managers as part of a realignment of our global operations. On November 1, 2004, we appointed two new senior sales leaders, including our Senior Vice President of Worldwide Sales. It is possible that the new management team will introduce additional changes or cause workforce instability as it evaluates how best to achieve our strategic goal of returning to profitability and building sustainable revenue growth.

~~• issue~~We may not be successful in our efforts to transition ~~stock~~to a reduced cost structure, and the actions that ~~would~~we ~~dilute~~take ~~our~~in ~~current~~order ~~stockholders’~~to accomplish ~~percentage~~this ~~ownership;~~transition could have long-term adverse effects on our business.

~~• incur debt~~We ~~that~~have ~~will~~taken, ~~give~~and ~~rise~~continue to ~~interest~~take, ~~charges~~various ~~and~~actions to ~~may~~transition ~~impose~~our ~~material restrictions~~company onto ~~the~~a ~~manner~~reduced cost structure. In response to declining revenues in ~~which~~our legacy dial access and service provider business, we ~~operate~~have scaled back our ~~business;~~operations, reduced our expenses, and initiated facility closures and consolidations.

~~• assume~~There are several risks ~~liabilities;~~inherent in our efforts to transition to a reduced cost structure. These include the risk that we will not be able to hold expenditures at a level necessary to achieve profitability, and that we may have to undertake further cost-reduction initiatives that would entail additional charges. If we are not able to hold down expenses or if we are not able to reduce our non-people-related costs in accordance with our plans, we may have to further reduce our workforce. There is also the risk that the cost-cutting actions we have taken and still plan to take will impair our ability to effectively develop and market products, to remain competitive in the industries in which we compete and to operate effectively. Each of the above measures could have long-term effects on our business by reducing our pool of technical talent,

~~• incur expenses related to impairment of goodwill and other intangible assets; or~~27

~~• incur~~decreasing ~~large~~or ~~write-offs~~slowing improvements in our products, making it more difficult for us to respond to customers, limiting our ability to deploy our solutions to our customers quickly if and when the demand for our solutions increases and limiting our ability to hire and retain key personnel. These circumstances could cause our income to be lower than it otherwise might be, which would adversely affect our stock price.

~~Any~~Since ~~strategic~~we ~~acquisitions~~have orno ~~investments~~assurance that wecustomers ~~make~~will continue into ~~the~~use ~~future will~~our ~~involve~~services ~~many~~or ~~risks~~that our customer base will expand, ~~including~~we ~~the~~will have ~~following:~~little ability to predict revenue growth or operating results.

~~• problems~~Our customers are ~~combining~~generally free to use competing products and services and prices for dial-up remote access and Wi-Fi access are declining, so we could face significant customer losses, at unpredictable times. Fiberlink Communications Corporation accounted for 12 percent of our revenues in the ~~acquired~~three-month ~~operations~~period ended January 31, 2005. ~~technologies~~A majority of the revenue derived from this customer during this period resulted from access to our network in one country, ~~products~~which increases the risk that it may obtain direct access in this country in the future. This concentration of revenue from one customer, which principally purchases our dial-up remote access service, makes our business more risky. Losing this customer could result in a significant revenue shortfall for us. In addition, large customers have significant negotiating power during contract discussions or ~~personnel;~~in the event of a customer dispute, which may make it more likely that the terms of the customer arrangement or settlement may be more favorable to the customer. We are in direct competition with Fiberlink, which makes it more likely that revenues from Fiberlink will decline in the future. These factors make it difficult to anticipate the level of our future revenues from existing customers. In addition, our success depends on our ability to expand and diversify the composition of our customer base. If we are unable to expand our customer base and increase our average revenues per customer, our business success will be less likely.

~~• unanticipated~~We may not succeed in cost-effectively automating, ~~costs;~~integrating and updating critical back office systems and processes, which could limit our ability to achieve and maintain profitability.

~~• diversion~~Historically, we have invested in the automation of ~~management~~back ~~time~~office systems and ~~attention~~processes ~~from~~in order to enable us to cost effectively grow our ~~existing~~traditional mobile office communications business;. The back office systems and processes of Axcelerant, whose business we acquired in December 2003, are largely manual. In order to efficiently provision, support and service our customers, we will be required to cost-effectively update, automate and, where appropriate, integrate these systems and processes. We will need to ensure that the combined company’s financial reporting, financial controls and documentation processes meet all applicable financial controls certification standards, such as Section 404 of the Sarbanes-Oxley Act. We may underestimate the investments required to accomplish this automation, integration, updating and certification. We may not succeed in this effort, which could impair our ability to scale our operations, limit our growth and lessen the likelihood that we would achieve profitability.

~~• adverse~~The market price of our common stock has traditionally ~~effects~~been onhighly ~~existing~~volatile, ~~business~~and ~~relationships~~if ~~with~~we do not meet the expectations of analysts, the market price of our ~~suppliers~~common ~~and~~stock ~~customers;~~could decline further.

~~• risks~~In the past, the price of ~~associated~~our ~~with~~common ~~entering~~stock ~~markets~~has experienced large swings up and down. This volatility might occur again in ~~which~~the wefuture. ~~have~~Volatility nocan arise particularly in response to quarter-to-quarter variations in the actual or ~~limited~~anticipated ~~prior~~financial results of ~~experience;~~our Company or our customers or competitors, and announcements that our competitors or we make regarding new product and service introductions. The market price of our common stock can also fluctuate in response to price and volume fluctuations in the stock market, particularly those that affect the market prices of technology stocks.

~~• potential loss of key employees, particularly those of acquired companies.~~28

We ~~may~~have ~~not~~incurred besignificant ~~able~~losses to ~~successfully~~date ~~integrate~~and ~~the~~we ~~businesses, products,~~may ~~technologies~~continue orto ~~personnel~~incur ~~that~~losses ~~we might acquire~~ in the future. WeIf ~~cannot assure you that any strategic investments~~ we ~~may~~fail ~~make~~to ~~will~~generate ~~meet our financial or other~~sufficient ~~investment~~revenue ~~objectives.~~to ~~Any~~achieve ~~failure~~and tosustain dopositive socash ~~could~~flow ~~seriously~~or ~~harm~~profits, our ~~business,~~stock price ~~financial~~will ~~condition and results of operations~~decline.

~~Our~~We ~~ability~~have toincurred ~~compete~~significant ~~could~~losses beto ~~jeopardized if~~date and we expect ~~are~~to ~~unable~~continue to ~~protect~~incur ~~our~~losses ~~intellectual~~for ~~property~~some period of time. We incurred operating losses before income taxes of approximately $788,000 for the three months ending January 31, 2005, and $40.6 million for the 10 months ending October 31, 2004. As of January 31, 2005, we had an accumulated deficit of $171.9 million.

~~Our~~We ~~products~~have ~~rely~~experienced negative ~~upon~~cash ~~intellectual~~flows ~~property~~in ~~rights.~~each ~~For~~year ~~example,~~since ~~we have~~our ~~been~~inception ~~issued~~in ~~United States Patent Number 5~~1994,~~898,780~~ ~~dated April 27, 1999 for “Method~~ and ~~Apparatus~~we ~~for~~may continue ~~Authorizing~~to ~~Remote~~do ~~Internet~~so ~~Access,”~~in ~~and have~~the ~~other U~~future.S. ~~patents~~In ~~pending.~~addition, Wewe ~~cannot~~may ~~assure~~also ~~you~~incur ~~that~~significant ~~patents will issue~~new ~~from~~costs ~~the~~related ~~pending~~to ~~applications~~possible oracquisitions, ifthe ~~any~~development ~~patents~~of ~~are~~new ~~issued~~products and services, ~~that~~the ~~they~~integration ~~will~~of ~~be sufficiently~~new ~~broad~~technologies toor ~~protect~~the ~~our~~update ~~technology~~of ~~adequately~~old technologies. ~~In addition~~Moreover, we ~~have~~might ~~a number~~not ofbe ~~trademarks~~able ~~and~~to ~~trademark~~achieve ~~applications~~operating ~~and~~profitability on wea ~~use~~quarterly ~~copyright~~or ~~and~~annual ~~trade secret~~basis. ~~protection~~To toachieve ~~protect~~profits, ~~its~~we ~~software~~will ~~and~~need ~~other~~to ~~original works. Because the~~maintain ~~technology~~our ~~and~~relationships ~~intellectual property associated~~ with ~~these~~existing ~~products are evolving rapidly~~customers, ~~current~~generate ~~intellectual~~additional ~~property~~revenue ~~rights~~growth from ~~may~~our ~~not~~existing ~~adequately protect~~customers ~~us.~~and Inobtain ~~addition~~new customers, ~~despite~~while ~~efforts~~continuing to control ~~protect~~ our ~~proprietary~~expenses. ~~rights, unauthorized~~We ~~parties~~expect ~~may~~to ~~attempt~~continue to ~~copy~~invest orin ~~otherwise~~network ~~obtain~~ and ~~use our~~operations, ~~products~~research orand ~~technology.~~development, ~~Monitoring~~and ~~unauthorized~~sales ~~use~~and ~~of technology is difficult~~marketing, and we ~~cannot~~expect ~~assure~~to ~~you that the steps they have taken will prevent~~face ~~unauthorized~~pressure ~~use~~to ofadopt ~~the~~new ~~technology.~~pricing ~~Moreover~~arrangements, ~~effective~~including ~~patent,~~volume ~~trademark~~discounts, that ~~copyright~~may ~~and~~lower ~~trade~~our ~~secret~~gross ~~protection~~margins. ~~may~~As ~~not~~a beresult, ~~available~~our inability ~~some~~to ~~countries~~achieve inand sustain ~~which~~profitability wewill ~~provide,~~depend oron ~~may~~our ~~anticipate~~ability ~~providing,~~to ~~our~~sustain ~~products.~~and ~~Furthermore,~~achieve ~~our~~substantially ~~competitors~~higher ~~may~~revenue ~~independently~~while ~~develop~~maintaining ~~similar~~reasonable ~~technologies~~cost ~~that~~and ~~limit~~expense ~~the value of our intellectual property~~levels. If ~~competitors~~we ~~are able~~ fail to ~~use~~achieve ~~our technology~~profitability, our ~~competitive~~stock ~~edge~~price ~~would~~could ~~be reduced or eliminated~~decline.

23We may require additional capital for our operations, which could have a negative effect on your investment.

WeIf our cash proves to be insufficient to fund our operations, we may ~~become~~need ~~involved~~to raise additional funds at some point in ~~litigation~~the future. In the three-month period ended January 31, 2005 ~~regarding~~we ~~intellectual~~generated ~~property~~$1.3 million of cash, leaving us with a cash, cash equivalent and short term investment balance of $19.3 million. If we raise additional funds by selling equity or convertible debt securities, our stockholders may experience additional dilution and these new securities may have powers, preferences and rights that ~~could~~are senior to those of the rights of our common stock. We cannot predict whether additional financing will be ~~costly,~~available ~~could~~on terms ~~cause~~favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to fund our business ~~lose~~operations, ~~significant~~promote ~~rights~~our brand identity, ~~and~~take ~~divert~~advantage of acquisition opportunities, develop or enhance services or respond to competitive pressures. Any inability to do so could have a negative effect on our ~~management~~business, ~~time~~revenues, financial condition and ~~attention~~results of operations.

InIf ~~the future, we, or~~ our ~~customers,~~common ~~may~~stock ~~become~~price afalls ~~party~~below toand ~~litigation~~remains tounder ~~protect~~$1.00, ~~our intellectual property~~ or toif ~~respond to allegations that~~ we ~~infringe~~ ~~others’~~otherwise ~~intellectual~~fail ~~property.~~to Wecomply ~~may~~with ~~receive~~Nasdaq ~~communications~~rules, ~~from third~~our ~~parties inquiring about their interest in licensing certain of the third~~common ~~party’s~~stock ~~intellectual property or more generally identifying intellectual property that~~ could be ~~the~~delisted ~~basis~~from ofThe aNASDAQ ~~future~~National ~~infringement claim. If a party accuses us of infringing upon its proprietary rights~~Market, wewhich ~~would~~could ~~have to defend~~severely ~~our~~limit ~~company and possibly our customers against~~ the ~~alleged~~trading ~~infringement.~~market ~~These lawsuits,~~for ~~regardless~~our ofcommon ~~their success, would likely be time-consuming and expensive to resolve and would divert management’s time and attention~~stock. ~~Any potential intellectual property litigation could also force us to:~~

~~• stop~~If we fail to meet the orcriteria ~~delay~~for ~~selling~~continued listing on The NASDAQ National Market, ~~incorporating~~our orcommon ~~using~~stock may ~~products~~be ~~that~~delisted, ~~use~~which could make it more difficult for you to sell your shares. For example, if the ~~challenged~~market price for our common stock falls and remains ~~intellectual~~below ~~property;~~$1.00 per share for thirty trading days, we would be subject to delisting. On February 28, 2005, the closing price of our common stock was $1.70 per share.

~~• obtain a~~The ~~license~~telecommunications industry continues to experience ~~sell~~instability, orwhich ~~use~~may ~~the~~cause ~~relevant~~consolidation ~~technology,~~among ~~which~~network ~~license~~service providers ~~might~~and ~~not~~impair ~~be available~~our onability ~~reasonable~~to ~~terms~~provide orreliable, atredundant ~~all;~~service coverage and negotiate favorable network access terms.

~~• redesign~~The telecommunications ~~the~~industry ~~products~~continues to experience dramatic technological change and ~~services~~increased competition that ~~use~~have ~~that~~led ~~technology~~to significant declines in network access pricing. In addition, the revenues of network service providers have declined as a result of the general economic slowdown. Network service providers have experienced related operating difficulties in the last several years, leading

~~If we are forced to take any of these actions, it may have a material adverse effect on our business, financial condition and results of operations.~~29

~~Terrorist~~to ~~acts~~poor operating results and ~~acts~~declarations of ~~war~~bankruptcy ~~may~~by ~~seriously~~a number of these ~~harm~~providers. ~~our~~These ~~business~~conditions have already led to attempts at consolidation, and more ~~revenue~~service providers may consolidate or otherwise cease operations in the future, ~~costs~~which would reduce the number of network service providers from which we are able to obtain network access. To the extent this were to occur, while we would still be able to maintain operations and provide enterprise connectivity services with a small number of network service providers, we would potentially not be able to provide sufficient alternative access points in some geographic areas, which could diminish our ability to provide broad, reliable, redundant coverage. Further, our ability to negotiate favorable access rates from network service providers could be impaired, which could increase our network access expenses and ~~financial~~impact ~~condition~~our operating results.

~~Terrorist~~If ~~acts~~we orfail ~~acts~~to ofenhance ~~war,~~our ~~including~~existing ~~military~~products ~~actions in Iraq and other parts of the Middle East and the geo-political uncertainties in other continents are having an adverse effect on the U.S. economy and could possibly induce~~ or ~~accelerate~~if ~~the advent of a more severe economic recession. The U.S.~~new ~~government’s political~~services, ~~social~~products ~~and~~or ~~economic~~features ~~policies and policy changes as a result of these circumstances could have consequences that~~ we ~~cannot~~introduce ~~predict, including~~do ~~causing~~not ~~further~~succeed ~~weaknesses~~ in the ~~economy. In addition~~marketplace, ~~as a~~ ~~multi-national~~we ~~company~~will ~~with~~not ~~headquarters~~be ~~and~~able ~~significant~~to ~~operations~~generate ~~located~~new ~~in the~~revenues ~~United~~and ~~States,~~ we ~~may be impacted by actions against the United States. We~~ will behave ~~predominantly~~increased ~~uninsured for losses and interruptions caused by~~costs ~~terrorist~~without ~~acts and acts of war. Thus,~~ the ~~long-term~~expected ~~impact of these events on our business is uncertain~~returns. ~~As a result, our operating results and financial condition could be materially and adversely affected.~~

Our ~~customers~~target ~~require~~markets aare ~~high~~characterized by ~~degree~~rapid ~~of reliability~~technological advances, changes in ~~the~~end-user ~~delivery~~requirements, ofand frequent new product introductions. Our future success will depend on our ~~services~~ability to anticipate or adapt to such changes and to offer, on a timely and cost-effective ifbasis, weproducts ~~cannot~~that meet ~~their~~changing ~~expectations~~customer demands. For ~~for~~example, ~~any~~our ~~reason~~growth prospects will be determined, ~~demand~~among ~~for~~other things, by our ability to grow our new branch office services offering in a highly competitive market with a large number of incumbents. We may lack sufficient resources to anticipate technological and market trends, manage long development cycles or develop, introduce and market new products and enhancements. In addition, we cannot predict whether our products and services will ~~suffer~~meet with market acceptance or be profitable.

Our ~~success depends on our~~ ability to ~~assure generally error-free~~ ~~clearinghouse~~compete ~~services,~~could ~~uninterrupted~~be ~~operation~~jeopardized ofif ~~our network and software infrastructure, and a satisfactory experience for our customers’ end users. In the past,~~ we ~~have~~are ~~experienced~~unable ~~problems due~~ to ~~our~~protect inability to detect system malfunctions and due to errors in collecting or processing account usage and settlement data. Due to the high level of performance required for critical communications traffic, any failure to deliver a satisfactory experience to end users, whether or not caused by our ~~own failures, and any failure to provide~~intellectual ~~accurate settlement data in connection with acting as a clearinghouse, could reduce demand for our products and services~~property.

WeOur ~~depend~~products onand ~~our~~services rely ~~reseller~~upon ~~customers~~intellectual toproperty ~~market~~rights. For example, we have been issued United States Patent Number 5,898,780 dated April 27, 1999 for “Method and Apparatus for Authorizing Remote Internet~~-based~~ ~~communications~~Access,” ~~services~~and have other U.S. patents pending. We cannot assure you that patents will issue from the pending applications or, if any patents are issued, that they will be sufficiently broad to ~~their~~protect ~~end~~our ~~users~~technology adequately. In addition, sowe ifhave a number of trademarks and trademark applications and we use copyright and trade secret protection to protect our ~~reseller~~software and other original works. Because the ~~customers~~technology ~~fail~~and intellectual property associated with these products are evolving rapidly, current intellectual property rights may not adequately protect us. In addition, despite efforts to ~~market~~protect ~~their~~our ~~services~~proprietary ~~effectively~~rights, unauthorized parties may attempt to copy or otherwise obtain and use our products ~~revenues~~or technology. Monitoring unauthorized use of technology is difficult, and we cannot assure you that the steps we have taken will prevent unauthorized use of the technology. Moreover, effective patent, trademark, copyright and trade secret protection may not be available in some countries in which we provide, or may anticipate providing, our products. Furthermore, our competitors may independently develop similar technologies that limit the value of our intellectual property. If competitors are able to use our technology, our competitive edge would be reduced or eliminated.

~~Our~~We ~~business~~may ~~depends~~become ininvolved ~~part on the efforts and success of our Internet service provider and telecommunications service customers~~ in ~~marketing Internet-based~~litigation ~~communications services to their end users. Although we have~~regarding ~~recently~~intellectual ~~focused~~property ~~more~~rights ~~heavily on selling to large enterprise customers, the highest percentage of our revenues is derived from our traditional service provider business. It is important~~ that wecould ~~maintain~~be ~~a healthy service provider business while we attempt to grow a more expansive enterprise customer base. Recently~~costly, wecould ~~have~~cause ~~experienced~~us ~~a faster than projected decline in revenues derived from our service provider customers. We have little ability~~ to ~~promote our services, or to promote demand for~~lose ~~our~~significant reseller customers’ services generally. The use of the Internet as a medium for communications services remains unproven. If our reseller customers fail to market their Internet-based communications services effectivelyrights, ~~our~~and ~~revenues will~~divert ~~be reduced. Similarly, if the market for Internet-based communications services fails to grow, or expands more slowly than anticipated,~~ our ~~revenues will~~management betime ~~lower than expected. The Internet-based services we provide are relatively new~~ and ~~have not achieved widespread market acceptance~~attention. ~~Network service providers and communication solutions providers may be reluctant to promote or rely upon our services until they gain greater commercial acceptance, which may never occur.~~

24In the future, we, or our customers, may become a party to litigation to protect our intellectual property or to respond to allegations that we infringe others’ intellectual property. We may receive communications from third parties inquiring about their interest in licensing certain of the third party’s intellectual property or more generally identifying intellectual property that could be the basis of a future infringement claim. If a party accuses us of infringing upon its proprietary rights, we would have to defend our company and possibly our customers against the alleged infringement. These lawsuits, regardless of

~~The unpredictability of our quarterly results may cause the trading price of our common stock to decline.~~30

~~Our~~their ~~quarterly~~success, ~~revenues~~would ~~and~~likely ~~operating~~be ~~results have~~time-consuming ~~varied in the past~~ and expensive ~~are likely~~ to ~~fluctuate~~resolve ~~unpredictably~~and inwould ~~the~~divert ~~future for~~management’s ~~many~~time ~~reasons~~and ~~beyond our control~~attention. Any potential ofintellectual ~~these~~property ~~factors~~litigation could ~~cause~~also ~~our~~force ~~stock price~~us to ~~decline. The primary factors that affect revenues and operating results, in addition to the factors discussed elsewhere in this section, include the following~~:

~~• the~~· stop ~~volume~~or ofdelay ~~transaction-based~~selling, ~~revenues~~incorporating or using products that use the challenged intellectual property;

~~• the~~· obtain ~~timing~~a oflicense ~~deployment~~to ofsell ~~services~~or byuse ~~our~~the ~~customers~~relevant technology, which license might not be available on reasonable terms or at all; and

~~• competitive~~· redesign ~~pricing~~the ~~pressure;~~products and services that use that technology.

~~• changes in~~If ~~global~~we ~~travel~~are ~~patterns~~forced ~~due~~ to ~~past and potential future terrorist activities~~take inany ~~the~~of ~~U.S.~~these ~~and~~actions, ~~the~~it ~~military~~may ~~responses~~have toa ~~them~~material inadverse ~~the~~effect ~~Middle~~on ~~East,~~our ~~Southern~~business, ~~Asia~~financial condition and ~~elsewhere;~~results of operations.

~~• the~~Terrorist ~~mix~~acts and acts of ~~services~~war ~~used~~may byseriously harm our ~~customers’~~business ~~end~~and ~~users;~~revenue, costs and expenses and financial condition.

~~• difficulty collecting~~Terrorist ~~accounts~~acts ~~receivable~~or acts of war, ~~particularly~~including ~~from~~military ~~customers~~actions ~~based~~in ~~outside~~Iraq and other parts of the Middle East and the geo-political uncertainties in other continents are having an adverse effect on the U.S.; economy and could possibly induce or accelerate the advent of a more severe economic recession. The U.S. government’s political, social and economic policies and policy changes as a result of these circumstances could have consequences that we cannot predict, including causing further weaknesses in the economy. In addition, as a multi-national company with headquarters and significant operations located in the United States, we may be impacted by actions against the United States. We will be predominantly uninsured for losses and interruptions caused by terrorist acts and acts of war. Thus, the long-term impact of these events on our business is uncertain. As a result, our operating results and financial condition could be materially and adversely affected.

~~• regulation~~Our customers require a high degree of reliability in the delivery of our services, ~~domestically~~and if we cannot meet their expectations for any reason, demand for our products and ~~internationally~~services will suffer.

Our ~~operating~~success ~~expenses~~depends ~~are~~on ~~largely~~our ability ~~determined~~to ~~based~~assure ongenerally error-free clearinghouse services, uninterrupted operation of our ~~expectations~~network and software infrastructure, and a satisfactory ~~about~~experience ~~revenues~~for our customers’ end users. AIn ~~high~~the ~~percentage~~past, ofwe have experienced problems due to our ~~expenses~~inability ~~are~~to ~~fixed~~detect system malfunctions and due to errors in ~~the~~collecting ~~short~~or ~~term~~processing account usage and settlement data. Due to the high Aslevel of performance required for critical communications traffic, any failure to deliver a ~~result~~satisfactory experience to end users, ~~lower~~whether ~~than~~or ~~anticipated~~not ~~revenues~~caused ~~for~~by our own failures, and any ~~reason~~failure ~~could~~to ~~cause~~provide accurate settlement data in connection ~~substantial~~with ~~operating~~acting ~~losses~~as a clearinghouse, could reduce demand for our products and services.

IfWe depend weon ~~fail~~our reseller customers to ~~attract~~market ~~and~~Internet-based ~~retain~~communications services ~~qualified~~to their end users, so if our reseller customers fail to market their ~~sales~~services ~~personnel~~effectively, our ~~business~~revenues ~~might~~may be ~~harmed~~reduced.

Our ~~success~~business depends in part ~~large~~on ~~part~~the ~~upon~~efforts and success of our ~~ability~~Internet toservice ~~identify,~~provider ~~attract~~ and telecommunications ~~retain~~service ~~qualified~~customers ~~sales~~in ~~individuals.~~marketing ~~Competition~~Internet-based communications ~~for~~services ~~these~~to ~~individuals~~their ~~is often~~end ~~intense,~~users. ~~and~~Although we ~~may~~have ~~not~~recently befocused more ~~able~~heavily on selling to ~~hire~~large ~~the~~enterprise ~~type~~customers, ~~and~~the ~~number~~highest percentage of ~~sales personnel~~our itrevenues ~~needs.~~is ~~The~~derived ~~recent~~from ~~resignation of~~ our ~~Senior~~traditional ~~Vice~~service ~~President~~provider ofbusiness. It ~~Worldwide~~is ~~Sales~~important ~~makes~~that ~~this~~we ~~recruiting~~maintain ~~effort~~a ~~even~~healthy ~~more~~service ~~important~~provider ~~over~~business ~~the~~while ~~next~~we ~~several~~attempt ~~months. Moreover,~~to ~~even~~grow ~~after~~a more expansive enterprise customer base. Recently, we have ~~hire~~experienced ~~salespersons,~~a ~~they~~faster ~~require~~than ~~extensive~~projected ~~training~~decline in ~~our~~revenues ~~combined~~derived ~~products~~from ~~and~~our ~~services~~service provider customers. ~~This~~We ~~training~~have ~~typically~~little ~~covers~~ability ~~several~~to ~~weeks~~promote ofour ~~formal~~services, ~~in-class~~or to ~~and~~promote demand for our reseller customers’ services generally. The use of ~~on-~~the~~-job~~ ~~instruction~~Internet as a medium for communications services remains unproven. If weour reseller ~~are~~customers ~~unable~~fail to ~~continue~~market totheir ~~retain~~Internet-based communications services effectively, our ~~current~~revenues will be reduced. Similarly, if the market ~~employees~~for ~~and~~Internet-based ~~train~~communications ~~new~~services ~~sales~~fails ~~personnel~~to asgrow, ~~rapidly~~or asexpands ~~necessary~~more slowly than anticipated, weour ~~may~~revenues ~~not~~will be ~~able~~ tolower ~~increase~~than ~~market~~expected. ~~awareness~~The ~~and~~Internet-based services ~~sales~~we ofprovide ~~our~~are ~~services,~~relatively ~~which~~new ~~may~~and ~~prevent~~have not achieved widespread market usacceptance. ~~from~~Network ~~generating~~service ~~revenue~~providers and communication solutions providers may be ~~negatively~~reluctant ~~impact~~to promote or rely upon our ~~ability~~services tountil ~~maintain~~they gain greater ~~customer~~commercial ~~relationships~~acceptance, which may never occur.

~~The uncertain economic environment in general could adversely affect our revenue, gross margins and expenses.~~31

~~Our revenue and gross margins depend in part on the overall demand for~~The ~~information~~unpredictability ~~technology~~of ~~products and services, particularly in the product and service segments in which we compete. Softening demand for~~ our ~~products~~quarterly ~~and services~~results ~~caused by the ongoing economic downturn has resulted in decreased revenue growth rates, and~~ may incause the ~~future~~trading ~~result~~price inof ~~decreased revenue, earnings or growth rates and problems with~~ our ~~ability to realize customer~~ ~~receivables.~~common ~~The~~stock ~~global economy has weakened and market conditions continue~~ to be ~~challenging~~decline. As a result, companies are delaying or reducing expenditures, including those for information technology. In addition, if our customers experience financial difficulties, we could suffer losses associated with the outstanding portion of accounts receivable. The global economic downturn has contributed to reported declines in our revenue growth during the first half of 2004. Further delays or reductions in information technology spending could have a material adverse effect on demand for our products and services and consequently our results of operations, prospects and stock price.

~~Security~~Our ~~concerns~~quarterly revenues ~~may~~and ~~deter~~operating ~~the~~results ~~use~~have ofvaried in the past and are likely to ~~Internet~~fluctuate unpredictably in the future for ~~Internet-based~~many ~~communications,~~reasons ~~which~~beyond ~~would~~our ~~reduce~~control. ~~demand~~Any of ~~for~~these factors could cause our stock price to decline. The primary factors ~~products~~that affect revenues and ~~services.~~operating results, in addition to the factors discussed elsewhere in this section, include the following:

The secure transmission of confidential information over public networks is a significant barrier to widespread adoption of electronic commerce and communications. The Internet is a public network and information is sent over this network from many sources. Advances in computer capabilities, new discoveries in · the ~~field of code breaking or other developments could result in~~ ~~compromised~~volume ~~security on our network or the networks~~ of others. Security and authentication concerns with respect to the transmission over the Internet of confidential information, such as corporate access passwords, and the ability of unauthorized computer users, sotransaction-called hackers, to penetrate online security systems may reduce the demand for our services. If any well-publicized compromises of confidential information were to occur, it could reduce demand for Internet-based ~~communications and our products and services.~~revenues;

~~Government regulations and legal~~· the ~~uncertainties~~timing ~~regarding~~of ~~the~~deployment ~~Internet~~of ~~could~~services ~~harm~~by ~~GoRemote’s~~our ~~business.~~customers;

~~GoRemote will be subject to local regulations or laws applicable to~~· competitive ~~access~~pricing to or commerce on the Internet, in addition to regulations applicable to businesses generally. However, the Federal Communications Commission has initiated several proceedings that may change the regulatory and legal framework for the provision of broadband and Internet services and current and future Federal Communications Commission rules and regulations, as well as judicial interpretations of these rules and regulations, couldpressure;

25· the mix of services used by our customers’ end users;

~~negatively affect GoRemote’s business. In addition, international~~· difficulty ~~regulatory~~collecting ~~standards~~accounts will govern GoRemote’s products and services in foreign markets and could impair its ability to develop products and services for international service providers in the future. GoRemote may not be able to obtain or maintain all of the regulatory approvals that may be required to operate its business. The inability to obtain these approvalsreceivable, asparticularly ~~well~~from ~~as any delays caused by its compliance and its~~ customers’ ~~compliance~~based ~~with~~outside ~~regulatory~~the requirements or resulting from uncertainty associated with future regulatory decisions, could result in postponements or cancellations of product orders, which would significantly reduce GoRemote’s revenueU.S.;

~~Recently~~· changes in ~~enacted~~global travel patterns due to past and ~~proposed~~potential ~~regulatory~~future terrorist activities ~~changes~~in ~~may~~the ~~cause~~U.S. usand the military responses to ~~incur~~them ~~increased~~in ~~costs.~~the Middle East, Southern Asia and elsewhere; and

~~Recently enacted and proposed changes in the laws and regulations affecting public companies~~· regulation, ~~including the provisions of the Sarbanes-Oxley Act~~ ofdomestically ~~2002, will increase our expenses as we evaluate the implications of new rules~~ and ~~devote resources to respond to the new requirements~~internationally. In particular, we expect to incur additional administrative expense as we implement Section 404 of the Sarbanes-Oxley Act, which requires management to report on, and our independent auditors to attest to, our internal controls. The Sarbanes-Oxley Act mandates, among other things, that companies adopt new corporate governance measures and imposes comprehensive reporting and disclosure requirements, sets stricter independence and financial expertise standards for audit committee members and imposes increased civil and criminal penalties for companies, their chief executive officers and chief financial officers and directors for securities law violations. In addition, The Nasdaq National Stock Market, on which our common stock is listed, has also adopted comprehensive rules and regulations relating to corporate governance. These laws, rules and regulations have increased and will continue to increase the scope, complexity and cost of our corporate governance, reporting and disclosure practices, which could harm our results of operations and divert management’s attention from business operations. We also expect these developments to make it more difficult and more expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.

~~Further,~~Our ~~our~~operating ~~board~~expenses ~~members, Chief Executive~~are ~~Officer~~largely ~~and~~determined ~~Chief~~based ~~Financial~~on ~~Officer~~our ~~could~~expectations ~~face~~about anrevenues. ~~increased~~A ~~risk~~high percentage of ~~personal liability~~our inexpenses ~~connection~~are ~~with~~fixed in the ~~performance~~short ~~of their duties~~term. As a result, welower than ~~may~~anticipated ~~have~~revenues ~~difficultly~~for ~~attracting~~any ~~and~~reason ~~retaining~~could ~~qualified~~cause ~~board~~substantial ~~members~~operating ~~and executive officers, which would adversely affect our business~~losses.

If we fail to ~~maintain~~attract ~~an effective system of internal controls, we may not be able to report our financial results accurately or detect fraud. As a result, we could be subject to costly litigation,~~ and ~~current~~retain ~~and~~qualified ~~potential shareholders could lose confidence in our~~sales ~~financial reporting~~personnel, ~~which could harm~~ our business ~~and~~might ~~the~~be ~~trading price of our common stock~~harmed.

~~Effective~~Our ~~internal~~success ~~controls~~depends ~~are~~in large ~~necessary~~part ~~for us~~upon toour ~~provide~~ability ~~reliable~~to ~~financial~~identify, ~~reports~~attract and toretain ~~detect~~qualified ~~and~~sales individuals. ~~prevent~~Competition ~~fraud.~~for ~~We are~~these ~~currently~~individuals ~~performing~~is ~~the~~often ~~system~~intense, and ~~process~~we ~~evaluation~~may ~~required~~not be able to ~~comply with~~hire the ~~management~~type ~~certification~~ and ~~auditor~~number ~~attestation requirements~~ of ~~Section 404~~ ofsales ~~the~~personnel ~~Sarbanes-Oxley~~we ~~Act~~need. ~~This~~Our ~~evaluation~~new ~~may~~Senior Vice ~~conclude~~President ~~that~~of ~~enhancements, modifications~~Worldwide orSales ~~changes~~has toonly ~~our~~been ~~internal~~in ~~controls~~this ~~are~~position ~~necessary.~~since ~~Completing~~November 1, ~~this evaluation~~2004, ~~performing testing~~ and ~~implementing~~has ~~any~~not ~~required~~had ~~remedial changes~~sufficient ~~will~~opportunity ~~require~~to ~~significant~~fully ~~expenditures~~evaluate inwhether ~~the short term and on a~~his ~~regular~~sales ~~basis~~team inhas the ~~future.~~resources Weand ~~cannot~~skills berequired ~~certain as~~ to ~~the~~achieve ~~timing of completion of~~ our ~~evaluation,~~revenue ~~testing~~growth objectives. ~~and~~His ~~remediation~~appointment ~~actions~~could orlead to the ~~impact~~departure of ~~the~~ ~~same~~other onkey ~~our operations. We have in~~sales ~~the~~personnel ~~past discovered,~~ and ~~may in~~ the ~~future discover, areas of our internal controls that~~ need ~~improvement. For example, during our 2003 audit, our independent auditor brought~~ to ~~our~~recruit ~~attention~~additional aqualified ~~need~~personnel toin ~~improve~~ the ~~closing~~coming ~~process~~months. ~~used~~Once atqualified ~~our~~salespersons ~~recently-acquired~~are ~~Irvine~~hired, ~~California~~they ~~location~~require byextensive ~~formally~~training ~~documenting~~in our ~~policy~~multiple ~~relating~~services tosolution ~~recognition~~offering. ofThis ~~revenues~~training ~~derived~~typically ~~from agency~~covers ~~arrangements~~several ~~versus~~weeks ~~reseller arrangements, ensuring proper recognition~~ of ~~broadband~~ ~~service~~formal ~~installation~~in-class ~~revenues, training employees performing key finance~~ and ~~accounting~~on-the-job ~~functions and documenting certain judgmental accounting matters~~instruction. ~~The~~As ~~auditor~~of ~~identified these items~~February 28, ~~collectively, as a “reportable~~ ~~condition~~2005,” ~~which~~we ~~means~~had ~~that~~35 itsales ~~was~~personnel. aIf ~~matter~~we ~~that~~are inunable ~~the~~to ~~auditor’s~~retain ~~judgment could adversely affect~~ our ~~ability~~current tosales employees ~~record, process, summarize~~ and ~~report financial~~train ~~data~~new ~~consistent~~sales ~~with~~personnel ~~the~~as ~~assertions~~rapidly ofas ~~management in the financial statements. Completing our evaluation of internal controls, implementing any changes that are~~ necessary, ~~and~~we ~~maintaining an~~may ~~effective~~not ~~system of internal controls will~~ be ~~expensive and require considerable~~ ~~management~~able ~~attention. However, if we fail~~ to ~~maintain~~increase anmarket ~~effective~~awareness ~~system~~and sales of ~~internal~~ ~~controls~~our ~~or prevent fraud~~services, wewhich ~~could be subject to costly litigation, we~~ may ~~be unable to comply with Section 404 of Sarbanes-Oxley we may be~~prevent ~~delisted~~us from ~~trading,~~generating ~~investors~~revenue ~~could~~and ~~lose~~may ~~confidence~~negatively inimpact our ~~reported financial~~ability ~~information~~to ~~and our brand and operating results could be harmed,~~maintain ~~which~~customer ~~could have a negative effect on the trading price of our common stock~~relationships.

The ~~current~~uncertain ~~regulatory~~economic environment ~~affecting accounting principles generally accepted~~ in ~~the~~general ~~United States of America is uncertain and volatile, and significant changes in current principles~~ could adversely affect our ~~financial~~revenue, ~~statements~~gross ~~going~~margins ~~forward~~and expenses.

~~Recent~~Our ~~actions~~revenues ~~and~~depend ~~public~~in part ~~comments~~on ~~from~~ the ~~Securities~~ ~~and~~overall ~~Exchange~~demand ~~Commission~~for ~~have~~information ~~focused~~technology onproducts ~~the~~and ~~integrity~~services, particularly ofin ~~financial reporting~~the ~~generally.~~product Inand ~~addition,~~service ~~the~~segments ~~Financial~~in ~~Accounting~~which ~~Standards~~we ~~Board~~compete. Softening ~~(“FASB”)~~demand for our products and ~~other~~services ~~regulatory~~caused ~~accounting~~by ~~agencies~~the ~~have~~ongoing ~~recently~~economic ~~introduced~~downturn ~~several~~has ~~new~~resulted orin ~~proposed~~decreased ~~accounting~~revenue ~~standards~~growth rates, orand ~~are~~may ~~developing~~in ~~new~~the ~~proposed~~future result in ~~standards~~decreased revenue, ~~such~~earnings asor ~~accounting~~growth ~~for~~rates ~~stock~~and ~~options,~~problems ~~some~~with ofour ~~which~~ability ~~would~~to realize ~~represent~~customer receivables. Global economic and market conditions continue to be challenging. As a ~~significant~~result, ~~change~~companies ~~from~~are ~~current~~delaying ~~industry~~or ~~practices.~~reducing ~~While~~expenditures, including wethose ~~believe~~for ~~that~~information technology. In addition, if our customers experience financial ~~statements~~difficulties, ~~have~~we ~~been~~could ~~prepared~~suffer inlosses ~~accordance~~associated with ~~accounting~~the outstanding ~~principles~~portion ~~generally~~of ~~accepted~~accounts receivable. The global economic downturn contributed to reported declines in ~~the~~our ~~United~~revenue ~~States~~growth ofduring ~~America,~~fiscal weyear ~~cannot~~2004. Further delays ~~predict~~or ~~the~~reductions ~~impact~~in ofinformation ~~the~~technology ~~adoption~~spending ofcould ~~any~~have ~~such~~a ~~proposals~~material adverse effect on demand for our ~~financial~~products and services and consequently our results of ~~statements~~operations, ~~going~~prospects ~~forward~~and stock price.

For example, we currently are not required to record stock-based compensation charges if the employee’s stock option exercise price equals or exceeds the fair value of our common stock at the date of grant. However, several companies have32

26Security concerns may deter the use of the Internet for Internet-based communications, which would reduce demand for our products and services.

~~recently~~The ~~elected~~secure totransmission ~~change~~of confidential ~~their~~information ~~accounting~~over ~~policies~~public ~~and~~networks ~~begun~~is ~~to record~~a ~~the~~significant ~~fair~~barrier ~~value~~to widespread adoption of ~~stock~~electronic ~~options~~commerce asand ~~an expense~~communications. ~~Although~~The ~~the~~Internet ~~standards~~is ~~have~~a ~~not~~public ~~been~~network ~~finalized~~ and ~~the~~information ~~timing~~is ofsent aover ~~final~~this ~~statement~~network ~~has~~from ~~not~~many ~~been~~sources. ~~established,~~Advances ~~the~~in ~~FASB~~computer ~~has~~capabilities, ~~announced~~new ~~its~~discoveries ~~support~~in ~~for recording expense for~~ the ~~fair~~ ~~value~~field of ~~stock~~code breaking ~~options~~or ~~granted.~~other Ifdevelopments wecould ~~were~~result toin ~~change~~compromised ~~our~~security ~~accounting~~on ~~policy~~our innetwork ~~accordance~~or ~~with~~the ~~Statement~~networks of ~~Financial Accounting Standards (SFAS) No~~others. ~~123, Accounting~~Security ~~for Stock-Based Compensation~~ and ~~SFAS~~authentication ~~No.~~concerns ~~148,~~with respect ~~Accounting~~to ~~for~~the ~~Stock- Based~~transmission ~~Compensation—Transition~~over ~~and~~the ~~Disclosure~~Internet ~~and~~of ~~retroactively~~confidential ~~restate~~information, ~~all~~such ~~prior periods~~ as ifcorporate weaccess ~~had~~passwords, ~~adopted~~and ~~SFAS~~the ~~123~~ability ~~for~~of ~~all~~unauthorized ~~periods~~computer ~~presented~~users, ~~then our~~ ~~operating~~so-called ~~expenses~~hackers, ~~would~~to ~~increase~~penetrate byonline ~~approximately~~security ~~$1.4~~systems ~~million~~may ~~and~~reduce ~~$1.2 million~~the demand for ~~the~~our ~~three~~services. ~~months~~If ~~ended~~any ~~June 30,~~well-publicized ~~2004~~compromises ~~and~~of ~~2003, respectively,~~confidential ~~and~~information ~~would~~were ~~increase~~to byoccur, ~~approximately~~it ~~$2.8~~could ~~million~~reduce ~~and~~demand ~~$1.9 million~~ for ~~the six~~Internet-based ~~months~~communications ~~ended~~and ~~June 30,~~our ~~2004~~products and ~~2003, respectively~~services.

~~Provisions~~Government inregulations ~~our~~and ~~charter~~legal ~~documents~~uncertainties ~~might~~regarding ~~deter~~the aInternet ~~company from acquiring us, which~~ could ~~inhibit~~harm ~~your~~our ~~ability to receive an acquisition premium for your shares~~business.

~~Provisions~~We ofwill ~~our~~be ~~certificate~~subject ofto ~~incorporation~~local regulations or laws applicable to access to or commerce on the Internet, in ~~bylaws~~addition ~~and~~to ~~Delaware~~regulations ~~law~~applicable ~~make~~to itbusinesses ~~difficult~~generally. However, the Federal Communications Commission has initiated several proceedings that may change the regulatory and legal framework for athe ~~third~~provision ~~party~~of tobroadband and ~~acquire~~Internet usservices and current and future Federal Communications Commission rules and regulations, ~~despite~~as ~~the~~well ~~possible~~as ~~benefit~~judicial tointerpretations of these rules and regulations, which could negatively affect our ~~stockholders~~business. In addition, international regulatory standards will govern our products and ~~this~~services ~~may~~in ~~potentially~~foreign ~~lower~~markets ~~the~~and ~~price~~could ofimpair our ~~common~~ability ~~stock~~to develop products and services for international service providers in the future. ~~These~~We ~~provisions~~may not be able to obtain or maintain all of the regulatory approvals that may be required to operate our ~~certificate~~business. ofThe ~~incorporation~~inability to obtain these approvals, as well as any delays caused by our compliance and ~~bylaws:~~our customers’ compliance with regulatory requirements or resulting from uncertainty associated with future regulatory decisions, could result in postponements or cancellations of product orders, which would significantly reduce our revenue.

~~• authorize the~~Recently ~~board~~enacted toand ~~issue~~proposed ~~preferred~~regulatory ~~stock~~changes ~~without~~may cause ~~stockholder~~us ~~approval;~~to incur increased costs.

~~• prohibit cumulative~~Recently ~~voting~~enacted and proposed changes in the ~~election~~laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, will increase our expenses as we evaluate the implications of new rules and devote resources to respond to the new requirements. In particular, we expect to incur additional administrative expense as we implement Section 404 of the Sarbanes-Oxley Act, which requires management to report on, and our independent auditors to attest to, our internal controls. The Sarbanes-Oxley Act mandates, among other things, that companies adopt new corporate governance measures and imposes comprehensive reporting and disclosure requirements, sets stricter independence and financial expertise standards for audit committee members and imposes increased civil and criminal penalties for companies, their chief executive officers, chief financial officers and directors; for securities law violations. In addition, The NASDAQ National Market, on which our common stock is listed, has also adopted comprehensive rules and regulations relating to corporate governance. These laws, rules and regulations have increased and will continue to increase the scope, complexity and cost of our corporate governance, reporting and disclosure practices, which could harm our results of operations and divert management’s attention from business operations. We also expect these developments to make it more difficult and more expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.

~~• limit~~Further, our board members, Chief Executive Officer and Chief Financial Officer could face an increased risk of personal liability in connection with the ~~persons~~performance ~~who~~of their duties. As a result, we may ~~call~~have ~~special~~difficultly ~~meetings~~attracting ofand ~~stockholders;~~retaining qualified board members and executive officers, which would adversely affect our business.

• establish advance notice requirements for nominations for the election of the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.33

InIf ~~addition~~we fail to maintain an effective system of internal controls, we ~~have~~may ~~elected~~not be able to ~~remain~~report our financial results accurately or detect fraud. As a result, we could be subject to ~~the~~costly ~~anti-takeover~~litigation, and ~~provisions~~current ofand ~~Delaware~~potential ~~law.~~shareholders ~~These~~could ~~factors~~lose ~~may~~confidence ~~discourage~~in ~~takeover~~our ~~attempts~~financial reporting, which could harm our business and the trading price of our common stock.

~~ITEM~~Effective 3internal controls are necessary for us to provide reliable financial reports and to detect and prevent fraud. ~~QUALITATIVE~~We ~~AND~~are ~~QUANTITATIVE~~currently ~~DISCLOSURES~~performing ~~ABOUT~~the ~~MARKET~~system ~~RISK~~and process evaluation required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. This evaluation may conclude that enhancements, modifications or changes to our internal controls are necessary. Completing this evaluation, performing testing and implementing any required remedial changes will require significant expenditures in the short term and on a regular basis in the future. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. For example, during our 2003 audit, our independent registered public accountant brought to our attention a need to improve the closing process used at our Irvine, California location by formally documenting our policy relating to recognition of revenues derived from agency arrangements as well as reseller arrangements, ensuring proper recognition of broadband service installation revenues, training employees performing key finance and accounting functions and documenting certain judgmental accounting matters. Although these items were subsequently addressed, the auditor initially identified these items, collectively, as a “reportable condition,” which means that they were matters that in the auditor’s judgment could adversely affect our ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. During late 2004, we determined that the internal documentation of our revenue recognition policy was not consistent with our actual practice, which we believe has been and is consistent with accounting principles generally accepted in the United States (“GAAP”). We subsequently revised this documentation to be consistent with our practice. During our 2004 audit, our independent registered public accountant noted deficiencies which they considered to be significant in the aggregate, although they noted no matters involving our internal control structure and our operations that they considered to be a material weakness that had a material impact on the true and fair view of our consolidated financial statements. Going forward, the completion of our evaluation of internal controls, implemention of any changes that are necessary, and maintenance of an effective system of internal controls will be expensive and require considerable management attention. However, if we fail to maintain an effective system of internal controls or prevent fraud, we could be subject to costly litigation, we may be unable to comply with Section 404 of Sarbanes-Oxley, we may be delisted from trading, investors could lose confidence in our reported financial information and our brand and operating results could be harmed, which could have a negative effect on the trading price of our common stock.

~~Foreign~~The ~~Currency~~current ~~Risk. We~~regulatory ~~have~~environment ~~limited~~affecting ~~exposure~~accounting toprinciples ~~financial~~generally ~~market~~accepted ~~risks, including changes~~ in ~~foreign~~the ~~currency exchange~~United ~~rates~~States ~~and~~is ~~interest~~uncertain ~~rates. Although we have foreign operations in~~and ~~Europe~~volatile, and ~~Asia,~~significant tochanges ~~date~~in ~~our~~current ~~exposure~~principles tocould ~~foreign~~affect ~~currency fluctuations has not~~our ~~been~~financial ~~significant.~~statements ~~Therefore,~~going ~~no accompanying table has been provided~~forward.

~~Interest~~Recent ~~Rate~~actions ~~Risk. Our~~and ~~exposure to~~public ~~interest~~comments ~~rate~~from ~~risk~~the ~~relates~~Securities ~~primarily~~and toExchange ~~our~~Commission ~~investment~~have ~~portfolio~~focused ~~and~~on ~~debt~~the ~~obligations.~~integrity ~~Interest~~of ~~rate~~financial ~~risk~~reporting ~~occurs~~generally. ~~when~~In weaddition, ~~cannot~~the ~~hold a purchased~~Financial ~~investment~~Accounting toStandards ~~its~~Board ~~maturity.~~(“FASB”) ~~The~~and ~~weighted-average~~other ~~maturity~~regulatory ofaccounting ~~our investment~~agencies ~~portfolio,~~have ~~when~~recently ~~taking~~introduced ~~into~~new ~~account~~accounting ~~the~~standards, ~~reset~~such ~~feature~~as ofaccounting ~~floating~~for ~~rate~~stock ~~municipal bonds~~options, isand ~~limited~~continue to ~~90 days.~~develop Wenew ~~intend~~proposed tostandards, ~~have~~some ~~our~~of ~~securities~~which would ~~available~~represent ~~for~~a ~~sale.~~significant Wechange dofrom ~~not~~current ~~expect~~industry topractices. ~~recognize~~While ~~an adverse impact on income~~we orbelieve ~~cash~~that ~~flows,~~our ~~although~~financial ~~there~~statements ~~can~~have bebeen noprepared ~~assurance~~in ofaccordance ~~this. We have established~~with ~~policies~~accounting ~~and~~principles ~~business~~generally ~~practices~~accepted ~~regarding~~in ~~our~~the ~~investment~~United ~~portfolio~~States, towe ~~preserve~~cannot ~~principal~~predict ~~while~~the ~~obtaining~~impact ~~reasonable rates~~ of ~~return~~the ~~without~~adoption ~~significantly increasing~~of ~~risk.~~any Wesuch ~~place~~proposals ~~investments~~on ~~with~~our ~~high credit quality issuers~~financial ~~according~~statements togoing ~~our~~forward. ~~investment~~For ~~policy.~~example, Wewe docurrently are not ~~use~~required ~~derivative~~to ~~financial~~record ~~instruments~~stock-based incompensation ~~our~~charges ~~investment~~if ~~portfolio.~~the ~~All~~employee’s ~~investments~~stock ~~were~~option ~~carried at fair~~exercise ~~market~~price ~~value~~equals ator ~~June 30,~~exceeds ~~2004. Due to~~ the ~~short-term~~fair ~~nature~~value of our ~~investments~~ ~~and~~common ~~the~~stock ~~immaterial~~at ~~amount~~the date of grant. ~~our debt obligation~~However, weseveral ~~believe~~companies ~~that there~~have iselected ~~no material exposure~~ to ~~interest~~change ~~fluctuation.~~their ~~Therefore, no~~accounting ~~accompanying~~policies ~~table~~and ~~has~~begun ~~been~~to ~~provided.~~record

2734

~~ITEM~~the fair 4value of stock options as an expense. ~~CONTROLS~~ ~~AND~~In ~~PROCEDURES~~December 2004, the FASB issued a revision of Statement of Financial Accounting Standards (SFAS) No. 123 (“SFAS 123 Revised”), Accounting for Stock-Based Compensation, which is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. We have not completed our evaluation of the impact of adoption of SFAS 123 Revised on our consolidated financial position or results of operations. We expect to complete our evaluation during the second quarter of fiscal year 2005.

~~Evaluation~~Provisions ofin ~~Disclosure~~our ~~Controls~~charter ~~and Procedures. Regulations under~~documents ~~the~~might ~~Securities~~deter ~~Exchange Act of 1934 require public companies to maintain~~a ~~“disclosure~~company ~~controls~~from ~~and~~acquiring ~~procedures~~us,” which ~~are~~could ~~defined~~inhibit toyour ~~mean~~ability ~~a company’s controls and other procedures that are designed~~ to ~~ensure~~receive ~~that information~~an ~~required~~acquisition topremium be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Our Chief Executive Officer and our Chief Financial Officer, based on their evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, concluded that our disclosure controls and procedures were effective for ~~this~~your ~~purpose~~shares.

~~Changes~~Provisions inof ~~Internal~~our certificate ~~Controls. During~~of ~~the period covered by this report~~incorporation, ~~there~~ ~~were~~bylaws noand ~~changes~~Delaware inlaw ~~the~~make ~~Company’s~~it ~~internal~~difficult ~~control~~for ~~over financial~~a ~~reporting~~third ~~that~~party ~~materially~~to ~~affected~~acquire us, ordespite ~~are~~the ~~reasonably~~possible ~~likely~~benefit to ~~materially affect~~our stockholders, and ~~the~~this ~~Company’s~~may ~~internal~~potentially ~~control~~lower ~~over~~the ~~financial~~price ~~reporting. However,~~of weour ~~intend~~common tostock. ~~continue~~These toprovisions of ~~refine~~ our ~~internal~~ ~~controls~~certificate onof anincorporation ~~ongoing~~and ~~basis.~~bylaws:

~~Limitations on~~· authorize Effectiveness of Controls and Procedures. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. While our Chief Executive Officer and our Chief Financial Officer, based on their evaluation of the ~~effectiveness~~board of our disclosure controls and procedures as of the end of the period covered by this report, concluded that our disclosure controls and procedures were effective at that time, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to ~~their~~issue ~~costs.~~preferred ~~Because~~stock ofwithout ~~the~~stockholder inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditionsapproval; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~PART~~· prohibit cumulative ~~II.~~voting ~~OTHER~~in ~~INFORMATION~~the election of directors;

~~ITEM~~· limit ~~1. LEGAL~~the ~~PROCEEDINGS~~persons who may call special meetings of stockholders; and

We· establish advance ~~are~~notice ~~subject~~requirements tofor ~~various~~nominations ~~legal~~for ~~proceedings and claims arising in~~ the ~~ordinary~~ ~~course~~election of ~~business. Our management does not expect that~~ the ~~results~~board inof ~~any~~directors ofor ~~these~~for ~~legal~~proposing ~~proceedings~~matters ~~will~~that ~~have~~can abe ~~material~~acted ~~adverse~~on ~~effect~~by onstockholders ~~our~~at ~~financial~~stockholder ~~condition, results of operations, or cash flows~~meetings.

In ~~July and August 2001~~addition, we ~~and certain of our officers were~~have ~~named~~elected asto ~~defendants~~remain insubject ~~five~~to ~~purported securities class action lawsuits filed in~~ the ~~United~~anti-takeover ~~States~~provisions ~~District Court, Southern District~~ of ~~New~~Delaware ~~York, captioned as In re GRIC Communications, Inc~~law. ~~Initial Public Offering Securities Litigation,~~ ~~No.~~These 01factors ~~Civ~~may ~~6771~~discourage ~~(SAS),~~takeover ~~and consolidated with more than three hundred substantially identical proceedings as In re Initial Public Offering Securities Litigation, Master File No~~attempts. 21 MC 92 (SAS). The Consolidated Amended Class Action Complaint for Violation of the Federal Securities Laws (“Consolidated Complaint”) was filed on or about April 19, 2002, and alleges claims against certain of our officers and against CIBC World Markets Corp., Prudential Securities Incorporated, DB Alex. Brown, as successor to Deutsche Bank, and U.S. Bancorp Piper Jaffray Inc., underwriters of our December 14, 1999 initial public offering (“underwriter defendants”), under Sections 11 and 15 of the Securities Act of 1933, as amended, and under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended.

~~Citing several press articles, the Consolidated Complaint alleges that~~ITEM the underwriter defendants used improper methods in allocating shares in initial public offerings, and claims the underwriter defendants entered into improper commission agreements regarding aftermarket trading in our common stock purportedly issued pursuant to the registration statement for the initial public offering3. ~~The Consolidated Complaint also alleges market manipulation~~ QUALITATIVE ~~claims~~AND ~~against~~QUANTITATIVE ~~the~~DISCLOSURES ~~underwriter~~ABOUT ~~defendants~~MARKET based on the activities of their respective analysts, who were allegedly compromised by conflicts of interest. The plaintiffs in the Consolidated Complaint seek damages as measured under Section 11 and Section 10(b) of the Securities Act of 1933, pre-judgment and post-judgment interest, and reasonable attorneys’ and expert witnesses’ fees and other costs; no specific amount is claimed in the plaintiffs’ prayer in the Consolidated Complaint. By Order of the Court, no responsive pleading is yet due, although motions to dismiss on global issues affecting all of the issuers have been filed.RISK

InForeign ~~October 2002,~~Currency ~~certain~~Risk. We have oflimited ~~our~~exposure ~~officers~~to ~~and~~financial ~~directors~~market ~~who~~risks, ~~had been~~including ~~named~~changes asin ~~defendants~~foreign currency inexchange ~~the~~rates Inand reinterest ~~Initial~~rates. ~~Public~~Although ~~Offering~~we ~~Securities~~have foreign operations ~~Litigation~~in ~~were~~Europe ~~dismissed~~and ~~without~~Asia, ~~prejudice~~to ~~upon~~date, ~~order~~our ofexposure ~~the~~to ~~presiding~~foreign ~~judge.~~currency fluctuations has Innot ~~February 2003,~~been ~~the~~significant. ~~presiding~~We ~~judge~~primarily ~~dismissed~~invoice ~~the~~and ~~Section 10(b) claims~~settle ~~against~~in usU.S. ~~and~~dollars amongst our ~~named~~customers ~~officers~~ and ~~directors~~providers. ~~with~~We ~~prejudice~~do not participate in any foreign currency hedging activities.

28Interest Rate Risk. Our exposure to interest rate risk relates primarily to our investment portfolio. Interest rate risk occurs when we cannot hold a purchased investment to its maturity. The weighted-average maturity of our investment portfolio, when taking into account the reset feature of floating rate municipal bonds, is limited to 90 days. We intend to have our securities available for sale. We do not expect to recognize an adverse impact on income or cash flows, although there can be no assurance of this result. We have established policies and business practices regarding our investment portfolio to preserve principal while obtaining reasonable rates of return without significantly increasing risk. We place investments with high credit quality issuers according to our investment policy. We do not use derivative financial instruments in our investment portfolio. All investments are carried at fair market value at January 31, 2005 and are considered available for sale. Due to the short-term nature of our investments, we believe that there is no material exposure to interest fluctuation. Therefore, no accompanying table has been provided.

~~From~~ITEM September 2002 through June 2003, we participated in settlement negotiations with a committee of issuers’ litigation counsel, plaintiffs’ executive committee and representatives of various insurance companies (the “Insurers”)4. ~~Our Insurers were actively involved in the~~ CONTROLS ~~settlement~~AND negotiations, and strongly supported a settlement proposal presented to us for consideration in early June 2003. The settlement proposed by the plaintiffs would be paid for by the Insurers and would dispose of all remaining claims against us.PROCEDURES

~~After~~Evaluation ~~careful~~of ~~consideration,~~Disclosure weControls and ~~decided~~Procedures. Regulations tounder ~~approve~~ the ~~settlement~~Securities ~~proposal~~Exchange inAct ~~July 2003.~~of ~~Although~~1934 werequire ~~believe~~public ~~that~~companies ~~plaintiffs’~~to ~~claims~~maintain ~~are~~“disclosure controls ~~without~~and ~~merit~~procedures,” wewhich ~~have~~are ~~decided~~defined toas ~~accept~~a ~~the~~company’s ~~settlement~~controls ~~proposal~~and ~~(which~~other ~~does~~procedures ~~not~~designed ~~admit wrongdoing)~~ to ~~avoid~~ensure ~~the~~that ~~cost~~information ~~and~~required ~~distraction~~to ofbe ~~continued litigation.~~disclosed ~~Because~~in the ~~settlement~~reports that ~~will~~it befiles ~~funded~~or ~~entirely~~submits byunder ~~our~~the ~~Insurers,~~Securities ~~we do~~Exchange ~~not~~Act ~~believe~~of ~~that~~1934 ~~the~~is ~~settlement~~recorded, processed, ~~will~~summarized ~~have~~and ~~any~~reported ~~effect~~within onthe ~~our~~time ~~consolidated financial~~periods ~~condition,~~specified ~~results~~in orthe Commission’s ~~operations~~rules and orforms. ~~cash~~Our ~~flows.~~

The settlement was presented to the Court for approval in June 2004. While the Court is expected to approve or disapprove the settlement in the coming months, there can be no guarantee that the settlement will be judicially approved.35

~~ITEM~~Chief Executive Officer ~~2. CHANGES~~and INour ~~SECURITIES~~Chief ~~AND~~Financial ~~USE~~Officer, OFbased on their evaluation of the effectiveness ~~PROCEEDS~~of our disclosure controls and procedures as of the end of the period covered by this report, concluded that our disclosure controls and procedures were effective for this purpose.

~~See~~Changes ~~Note~~in 7Internal ofControls. During the ~~“Notes~~period covered by this report, there were no changes in the Company’s internal controls over financial reporting that materially affected, or are reasonably likely to ~~Condensed~~materially ~~Consolidated~~affect, ~~Financial~~the ~~Statements~~Company’s internal controls over financial reporting.” However, we have in the past and intend in the future to continue to refine our internal controls on an ongoing basis.

~~ITEM~~Limitations on 3Effectiveness of Controls and Procedures. Our management, ~~DEFAULTS~~including ~~UPON~~our ~~SENIOR~~Chief ~~SECURITIES~~Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, the control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Not applicable.~~36

~~ITEM 4~~PART II. ~~SUBMISSION OF MATTERS TO A VOTE OF~~ OTHER ~~SECURITY HOLDERS~~INFORMATION

~~The Company held its annual meeting of~~ITEM ~~stockholders on May 19, 2004~~1. ~~Following~~ LEGAL ~~are descriptions of the matters voted on and the results of such meeting:~~PROCEEDINGS

	Votes For	Votes Against	Votes Abstained	Votes Withheld	Broker Non- Votes
1. Election of Directors
Additional Directors
Dr. Hong Chen	31,105,678			1,102,067
Bharat Davé	32,005,636			202,109
James Goodman	31,403,988			803,757
Roderick C. McGeary	31,819,067			388,678
Olof Pripp	31,795,643			412,102
Walter Sousa	31,719,014			488,731
Tom Thimot	31,896,059			311,686
Gerald Wright	31,316,650			891,095
Joseph M. Zaelit	30,819,470			1,388,275
2. Proposal to ratify the appointment of Ernst & Young LLP as independent registered public accounting firm of the Company for the fiscal year ending December 31, 2003	32,004,426	159,105	44,214
3. Proposal to change the Company name to GoRemote Internet Communications, Inc.	31,919,600	247,460	40,685

We are subject to various legal proceedings and claims arising in the ordinary course of business. Our management does not expect that the results in any of these legal proceedings will have a material adverse effect on our financial condition, results of operations, or cash flows.

~~ITEM~~In July and August 2001, we and certain of 5our officers were named as defendants in five purported securities class action lawsuits filed in the United States District Court, Southern District of New York, captioned as In re GRIC Communications, Inc. ~~OTHER~~ ~~INFORMATION~~Initial Public Offering Securities Litigation, No. 01 Civ 6771 (SAS), and consolidated with more than three hundred substantially identical proceedings as In re Initial Public Offering Securities Litigation, Master File No. 21 MC 92 (SAS). The Consolidated Amended Class Action Complaint for Violation of the Federal Securities Laws (“Consolidated Complaint”) was filed on or about April 19, 2002, and alleges claims against certain of our officers and against CIBC World Markets Corp., Prudential Securities Incorporated, DB Alex. Brown, as successor to Deutsche Bank, and U.S. Bancorp Piper Jaffray Inc., underwriters of our December 14, 1999 initial public offering (“underwriter defendants”), under Sections 11 and 15 of the Securities Act of 1933, as amended, and under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended.

OnCiting ~~July 29,~~several ~~2004~~press articles, ~~Bharat~~the ~~Davé,~~Consolidated Complaint alleges that the ~~Company’s~~underwriter ~~President~~defendants used improper methods in allocating shares in initial public offerings, and ~~Chief~~claims the underwriter ~~Executive~~defendants ~~Officer~~entered into improper commission agreements regarding aftermarket trading in our common stock purportedly issued pursuant to the registration statement for the initial public offering. The Consolidated Complaint also alleges market manipulation claims against the underwriter defendants based on the activities of their respective analysts, ~~submitted~~who ~~his~~were ~~resignation~~allegedly ~~from~~compromised ~~these~~by ~~positions~~conflicts asof interest. ~~well~~The plaintiffs in the Consolidated Complaint seek damages as measured ~~from~~under Section 11 and Section 10(b) of the ~~Company’s~~Securities ~~board~~Act of 1933, ~~directors~~pre-judgment and post-judgment interest, and reasonable attorneys’ and expert witnesses’ fees and other costs; no specific amount is claimed in ~~order~~the plaintiffs’ prayer in the Consolidated Complaint. By Order of the Court, no responsive pleading is yet due, although motions to ~~pursue~~dismiss ~~other~~on ~~interests~~global issues affecting all of the issuers have been filed.

In ~~connection with Mr. Davé’s resignation~~October 2002, ~~the~~certain ~~Company~~of ~~entered~~our ~~into~~officers aand ~~release~~directors ~~agreement~~who ~~with~~had ~~Mr.~~been ~~Davé,~~named ~~which~~as ~~provides~~defendants ~~for~~in the ~~modification~~In ofre ~~certain stock~~Initial ~~option~~Public ~~grants~~Offering Securities toLitigation ~~extend~~were ~~the~~dismissed ~~period~~without ~~during~~prejudice ~~which~~upon ~~Mr.~~order ~~Davé~~of ~~may exercise his~~the ~~vested~~presiding ~~shares~~judge. toIn ~~July~~February 292003, ~~2005. In addition, pursuant to~~ the ~~terms~~presiding ofjudge ~~Mr.~~dismissed ~~Davé’s~~the ~~offer~~Section 10(b) claims against ~~letter~~us ~~with~~and ~~the~~our ~~Company, the~~named ~~Company~~officers ~~will~~and ~~make~~directors awith ~~severance payment~~prejudice.

29From September 2002 through June 2003, we participated in settlement negotiations with a committee of issuers’ litigation counsel, plaintiffs’ executive committee and representatives of various insurance companies (the “Insurers”). Our Insurers were actively involved in the settlement negotiations, and strongly supported a settlement proposal presented to us for consideration in early June 2003. The settlement proposed by the plaintiffs would be paid for by the Insurers and would dispose of all remaining claims against us.

~~equal~~After tocareful ~~six~~consideration, ~~months’~~we ~~base~~decided ~~salary~~to ~~and~~approve ~~will~~the settlement ~~pay~~proposal ~~all~~in ~~accrued~~July 2003. ~~salary~~Although ~~and~~we believe that plaintiffs’ ~~accrued~~claims ~~but~~are ~~unused~~without ~~vacation~~merit, ~~pay. Mr. Davé~~we ~~has~~have ~~agreed~~decided to ~~make~~accept ~~himself~~the ~~reasonably~~settlement ~~available~~proposal (which ~~from~~does ~~time~~not toadmit ~~time~~wrongdoing) ~~for transition~~to ~~consultations~~avoid ~~with~~ the ~~Company’s~~cost ~~new~~and ~~Chief~~distraction ~~Executive~~of continued ~~Officer,~~litigation. ~~for which~~Because the ~~Company~~settlement ~~has~~will ~~agreed~~be tofunded ~~pay~~entirely ~~Mr.~~by ~~Davé~~our Insurers, awe ~~retainer~~do ofnot ~~$5,000~~believe ~~per~~that ~~month over~~ the ~~six~~settlement ~~month~~will ~~period~~have ~~beginning~~any ~~August 1,~~effect ~~2004~~on ~~and ending~~our ~~January 31~~consolidated financial condition, ~~2005~~results or operations or cash flows.

~~Simultaneous~~The ~~with~~settlement Mrwas presented to the Court for approval in June 2004. ~~Davé’s~~The ~~resignation,~~Court preliminarily approved most of the ~~Company~~settlement ~~appointed~~in ~~Tom Thimot~~February 2005, ~~38,~~but asrequested ~~its~~a ~~President~~few minor ~~and~~modifications ~~Chief~~be ~~Executive~~made ~~Officer. Mr.~~to ~~Thimot~~its ~~has~~terms. ~~served~~The onparties ~~the~~are ~~Company’s~~currently ~~board~~negotiating ofthese ~~directors~~modifications ~~since~~and ~~April 2004~~intend ~~and~~to ~~will~~present ~~continue~~the revised settlement agreement to the ~~serve~~Court onshortly. While the ~~Company’s board~~Court ofis ~~directors.~~expected to finally approve or disapprove

From October 2002 to July 2004, Mr. Thimot served as the Vice President of Sales and Services for Netegrity, Inc. From February 2001 to June 2002, he served as President and Chief Operating Officer of Enigma. Between November 1994 and January 2001, he served in various positions at Oracle Corporation, most recently as Area Vice President for Central U.S. Sales. Prior to Oracle, Mr. Thimot held various consulting positions with PriceWaterhouseCoopers and Accenture. Mr. Thimot holds a B.S. degree in Mechanical Engineering from Marquette University.37

~~In connection with Mr. Thimot’s appointment as President and Chief Executive Officer,~~ the ~~Company entered into an offer letter with Mr. Thimot,~~ ~~which~~settlement ~~provides~~in for base salary compensation of $275,000 per annum, payable semi-monthly, an incentive bonus opportunity, reimbursement for up to $100,000 of relocation expenses, as well as standard employee benefits. Mr. Thimot will also receive an incentive stock option for the ~~purchase~~coming ~~of 1,200,000 shares of the Company’s common stock, vesting at a rate of 12.5% after 6~~ months ~~and the balance vesting ratably on a monthly basis over the following 42 months. Mr. Thimot’s base salary will increase to $300~~,~~000~~ ~~per~~there ~~annum~~can ~~after~~be ~~the~~no ~~Company~~guarantee achieves one fiscal quarter of positive income before taxes, measured on a GAAP basis, but excluding non-cash amortization charges (“Adjusted Income”) and to $350,000 per annum after the Company achieves two fiscal quarters of positive Adjusted Income. In the event that the ~~Company terminates Mr.~~settlement ~~Thimot’s employment without cause, the Company~~ will ~~provide~~be ~~Mr.~~judicially ~~Thimot a severance payment equal to six months’ base salary, payable monthly in accordance with its normal payroll policies~~approved. If the Company terminates Mr. Thimot’s employment with cause, Mr. Thimot will receive no severance payment from the Company. The offer letter also provides that upon a change in control of the Company, Mr. Thimot’s options will immediately vest as to an additional 50% of his unvested options upon the effective date of the change in control of the Company.

30ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~ITEM 6. EXHIBITS~~Not ~~AND REPORTS ON FORM 8-K~~applicable.

~~(a) Exhibits~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Exhibit

Incorporated by Reference

Filed or Furnished

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

10.01

Release letter dated July 29, 2004 to Bharat Davé.

10.02

Offer letter dated July 29, 2004 to Tom Thimot.

31.01

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Executive Officer, dated August 9, 2004.

31.02

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Financial Officer, dated August 9, 2004.

32.01*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Executive Officer, dated August 9, 2004.

32.02*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Financial Officer, dated August 9, 2004.

Not applicable.

* TheseITEM ~~certifications accompany GoRemote’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004~~4. SUBMISSION ~~These~~OF ~~certifications~~MATTERS ~~are~~TO ~~not~~A ~~deemed~~VOTE ~~filed~~OF ~~with~~SECURITY the Securities and Exchange Commission and are not to be incorporated by reference in any filing of GoRemote under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.HOLDERS

~~(b) Reports~~Not ~~on Form 8-K~~applicable.

Date Filed or Furnished	Item(s)	Description
	7, 12	On May 5, 2004, we filed a Form 8-K regarding a press release announcing our financial results for the first quarter of 2004.*
	5	On May 19, 2004, we filed a Form 8-K announcing the change in our corporate name following our annual stockholders meeting.

ITEM 5. OTHER INFORMATION

* TheNot ~~information included under Items 7 and 12 of these reports on Form 8-K was furnished, but is not intended to be deemed filed or incorporated by reference into any filing~~applicable.

31ITEM 6. EXHIBITS

~~SIGNATURE~~(a) Exhibits

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 9, 2004.

Exhibit

Incorporated by Reference

Filed or Furnished

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

31.01

Rule 13a-14(a)/15d-14a certification of Registrant’s Chief Executive Officer, dated March 14, 2005.

31.02

Rule 13a-14(a)/15d-14a certification of Registrant’s Chief Financial Officer, dated March 14, 2005.

32.01*

Section 1350 certification of Registrant’s Chief Executive Officer, dated March 14, 2005.

32.02*

Section 1350 certification of Registrant’s Chief Financial Officer, dated March 14, 2005.

* These certifications accompany GoRemote’s ~~Internet~~Quarterly ~~Communications~~Report on Form 10-Q for the quarterly period ended January 31, ~~Inc~~2005. ~~/s/~~These ~~DANIEL~~certifications W.are ~~FAIRFAX~~not ~~Daniel~~deemed W.filed with ~~Fairfax~~the ~~Senior~~Securities ~~Vice~~and ~~President~~Exchange Commission and ~~Chief~~are ~~Financial~~not ~~Officer~~to ~~(principal~~be ~~financial~~incorporated ~~officer~~by reference in any filing of GoRemote under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and ~~duly~~irrespective ~~authorized~~of ~~officer)~~any general incorporation language in any filings.

3238

~~Exhibit Index~~SIGNATURE

Exhibit

Incorporated by Reference

Filed or Furnished

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

10.01

Release letter dated July 29, 2004 to Bharat Davé.

10.02

Offer letter dated July 29, 2004 to Tom Thimot.

31.01

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Executive Officer, dated August 9, 2004.

31.02

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Financial Officer, dated August 9, 2004.

32.01*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Executive Officer, dated August 9, 2004.

32.02*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Registrant’s Chief Financial Officer, dated August 9, 2004.

* These certifications accompany GoRemote’s ~~Quarterly~~Internet ~~Report on Form 10-Q for the quarterly period ended June 30~~Communications, ~~2004~~Inc. ~~These~~ ~~certifications~~/s/ ~~are~~DANIEL ~~not~~W. ~~deemed~~FAIRFAX ~~filed~~Daniel ~~with~~W. ~~the~~Fairfax ~~Securities~~Senior ~~and Exchange~~Vice ~~Commission~~President and ~~are~~Chief ~~not~~Financial toOfficer be(principal ~~incorporated~~financial byofficer ~~reference in any filing of GoRemote under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof~~ and ~~irrespective~~duly ofauthorized ~~any general incorporation language in any filings.~~officer)

3339

For the three months ended
January 31,

(in millions)