Forward-Looking Information

This report includes, in addition to historical information, "forward-looking statements". All statements other than statements of historical fact we make in this report are forward-looking statements. In particular, the statements regarding industry prospects and our expectations regarding future results of operations or financial position (including those described in this Management's Discussion and Analysis of Financial Condition and Results of Operations) are forward-looking statements. Such statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ significantly from those described in the forward-looking statements. Factors that may cause such a difference include the following:





  ? the success of products depends on a number of factors including market
    acceptance and our ability to manage the risks associated with product
    introduction;
  ? local, regional, national and international economic conditions and events,
    and the impact they may have on us and our customers;
  ? our revenue could be adversely impacted if any of our significant customers
    reduces its order levels or fails to order during a reporting period; customer
    demand is based on many factors out of our control;
  ? as a result of the new revenue recognition standards, if any significant end
    user customer or reseller substantially changes its order level, or fails to
    order during the reporting period, whether the order is placed directly with
    us or through one of our non-stocking resellers, our software licenses revenue
    could be materially impacted; and
  ? other factors, including, but not limited to, those set forth under Item 1A,
    "Risk Factors" in our Annual Report on Form 10-K for the year ended December
    31, 2019 which was filed with the Securities and Exchange Commission (the
    "SEC") on April 14, 2020, and in other documents we have filed with the SEC.

Statements included in this report are based upon information known to us as of the date that this report is filed with the SEC, and we assume no obligation to update or alter our forward-looking statements made in this report, whether as a result of new information, future events or otherwise, except as otherwise required by applicable federal securities laws.





Introduction

We are developers of application publishing software which includes application virtualization software and cloud computing software for multiple computer operating systems including Windows, UNIX and several Linux-based variants. Our application publishing software solutions are sold under the brand name GO-Global, which is our sole revenue source. GO-Global is an application access solution for use and/or resale by independent software vendors ("ISVs"), corporate enterprises, governmental and educational institutions, and others who wish to take advantage of cross-platform remote access and Web-enabled access to their existing software applications, as well as those who are deploying secure, private cloud environments.

Beginning in 2012, we developed and marketed several products in the field of software productivity for mobile devices such as tablets and smartphones under the hopTo brand. We ceased all our sales, marketing and development for the hopTo products in 2016.

We have made investments in intellectual property ("IP") and filed many patents designed to protect the technologies embedded in the hopTo products. We are currently marketing for sale 49 patents and related source code developed from our hopTo development efforts.





Critical Accounting Policies

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as "critical" because these specific areas require us to make judgments and estimates about matters that are uncertain at the time we make the estimates. Actual results may differ from these estimates. For a summary of our critical accounting policies, please refer to our 2019 10-K Report and Note 2 to our unaudited consolidated financial Statements included under Item 1 - Financial Statements in this Form 10-Q.





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Results of Operations for the Three-Month Periods Ended March 31, 2020 and 2019

The following are the results of our operations for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.





                                                          For the Three Months Ended
                                                         March 31,          March 31,
                                                            2020              2019
                                                        (Unaudited)        (Unaudited)

Revenues                                               $      844,600     $   1,053,800
Cost of revenues                                               38,100            29,200
Gross profit                                                  806,500         1,024,600

Operating expenses:
Selling and marketing                                         104,400           117,000
General and administrative                                    229,000           295,000
Research and development                                      364,000           374,500
Total operating expenses                                      697,400           786,500

Income from operations                                        109,100           238,100

Other income (expense):
Other income (expense)                                              -            13,800

Income before provision for income taxes                      109,100           251,900
Provision for income taxes                                          -                 -
Net income                                             $      109,100     $     251,900

Net income per share, basic                            $         0.01     $        0.03
Net income per share, diluted                          $         0.01     $        0.03

Weighted average number of common shares outstanding
Basic                                                       9,927,990         9,804,400
Diluted                                                     9,938,226        10,031,148




Revenues

Our software revenue is entirely related to our GO-Global product line, and historically has been primarily derived from product licensing fees and service fees from maintenance contracts. The majority of this revenue has been earned, and continues to be earned, from a limited number of significant customers, most of whom are resellers. Many of our resellers purchase software licenses that they hold in inventory until they are resold to the ultimate end user (a "stocking reseller").

When a software license is sold directly to an end user by us, or by one of our resellers who does not stock licenses into inventory, revenue is recognized immediately upon shipment, assuming all other criteria for revenue recognition are met. Consequently, if any significant end user customer substantially changes its order level, or fails to order during the reporting period, whether the order is placed directly with us or through one of our non-stocking resellers, our software licenses revenue could be materially impacted.

Almost all stocking resellers maintain inventories of our Windows products; few stocking resellers maintain inventories of our UNIX products.





Software Licenses

Windows software licenses revenue decreased by $97,600 or 29.1% to $237,900 during the three months ended March 31, 2020, from $335,500 for the same period in 2019. The decrease was entirely due to a certain partner that purchased a large order of Windows licenses from the Company during the three months ended March 31, 2019 that did not recur during the three months ended March 31, 2020. The decrease was partially offset by an increase in purchase activity related to demand for remote access software due to the coronavirus pandemic.





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Software licenses revenue from our UNIX/Linux products increased by $24,800 or 182.4% to $38,400 for the three months ended March 31, 2020 from $13,600 for the same periods of 2019. The increase was primarily due to higher revenue from higher stocking and standard order licenses.

We expect aggregate GO-Global total software license revenue in 2020 to be in-line with 2019 levels as we are observing a mix of both higher and lower aggregate revenue from our various customers.





Software Service Fees

Service fees attributable to our Windows product service decreased by $116,100 or 19.4% to $481,600 during three months ended March 31, 2020, from $597,700 for the same period in 2019. The decrease was primarily due to timing of revenue recognition for maintenance support fees along with a decrease in maintenance support for a large OEM partner and the expiration of a long-term maintenance contract for a European customer. These were partially offset by an increase in maintenance support fees due to an increase in Windows product sales from other customers throughout the prior year.

Service fees revenue attributable to our UNIX products decreased by $19,000 or 22.6% to $65,100 during the three months ended March 31, 2020, from $84,100 for the same period in 2019. The decrease was primarily the result of the lower level of UNIX product sales throughout the prior year and an expiration of certain long-term maintenance contracts.

We expect that software service fees for 2020 will approximate to those for 2019.





Other

Other revenue consists of private labeling fees and professional services. Other revenue decreased by $1,400 or 6.1% for the three months ended March 31, 2020, compared to the same period in 2019.





Cost of Revenues

Cost of revenue is comprised primarily of software service costs, which represent the costs of customer service. Also included in cost of revenue are software product costs, which are primarily comprised of the amortization of capitalized software development costs and costs associated with licenses to third party software included in our product offerings, and the required import tax withholdings from Brazil resellers. We incur no significant shipping or packaging costs as virtually all of our deliveries are made via electronic means over the Internet.

Cost of revenue for the three months ended March 31, 2020 increased by $8,900, or 30.5%, to $38,100 for the three months ended March 31, 2020 from $29,200 for the same period in 2019. Cost of revenue represented 4.5% and 2.8% of total revenue for the three months ended March 31, 2020 and 2019, respectively. The primarily increase was due to increase import tax withholdings associated with higher revenue from Brazil resellers for the three-month period ended March 31, 2020.

We expect 2020 cost of revenue to be slightly higher than 2019 for the above reason.

Selling and Marketing Expenses

Selling and marketing expenses primarily consisted of employee, outside services and travel and entertainment expenses.

Selling and marketing expenses decreased by $12,600, or 10.8%, to $104,400 for the three months ended March 31, 2020 from $117,000 for the same period in 2019. Selling and marketing expenses represented approximately 12.4% and 11.1% of total revenue for the three months ended March 2020 and 2019, respectively. The decrease in selling and marketing expenses was due to a decrease in consulting services and employee benefit costs.

We expect to maintain our sales and marketing efforts in 2020 for anticipated GO-Global releases with select targeted modest investments in promotional activity; accordingly, for this reason, we expect 2020 sales and marketing expenses to be slightly higher than 2019 levels.





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General and Administrative Expenses

General and administrative expenses primarily consist of employee costs, legal, accounting, other professional services (including those related to our patents), rent, travel and entertainment and insurance. Certain costs associated with being a publicly held corporation are also included in general and administrative expenses, as well as bad debt expense.

General and administrative expenses decreased by $66,000, or 22.4%, to $229,000 for the three months ended March 31, 2020 from $295,000 for the same period in 2019. General and administrative expenses represented approximately 27.1% and 28.0% of total revenue for the three months ended March 31, 2020 and 2019, respectively.

The decrease in general and administrative expense was due to lower accounting fees and employee benefit costs.

In 2020, we anticipate a reduction in accounting fees and employee benefit costs compared to 2019 levels due to changes in service providers and improved cost controls by management. We therefore expect that our 2020 general and administrative costs will be slightly lower than those for 2019.

Research and Development Expenses

Research and development expenses consist primarily of employee costs, payments to contract programmers, software subscriptions, travel and entertainment for our engineers, and all rent for our leased engineering facilities.

Research and development expenses decreased by $10,500, or 12.8% to $364,000 for the three months ended March 31, 2020 from $374,500 for the same period in 2019. This represented approximately 43.1% and 35.5% of total revenue for the three months ended March 31, 2020 and 2019, respectively.

The decrease in research and development expense was primarily due to a decrease in consulting fees associated with completing the new releases of our GO-Global products.

In 2020, we expect to continue our investments in research and development resources associated with our GO-Global products based on market feedback. We therefore expect 2020 research and development expenses to be slightly higher than 2019 levels.

Liquidity and Capital Resources

As of March 31, 2020, we had cash of $1,467,000 and a working capital position of $251,500 as compared to cash of $1,541,900 and a working capital position of $101,800 at December 31, 2019. The decrease in cash as of March 31, 2020 was primarily the result of cash used in operations during the period. We expect our results from operations and capital resources will be sufficient to fund our operations for at least the next 12 months from the date of the filing of this quarterly report on Form 10-Q.

The following is a summary of our cash flows from operating, investing and financing activities for the three months ended March 31, 2020 and 2019.





                                                    For the Three Months Ended
                                                    March 31,          March 31,
                                                       2020               2020
    Cash flows provided by operating activities   $      (74,900 )     $  110,200
    Cash flows provided by investing activities   $            -       $        -
    Cash flows provided by financing activities   $            -       $        -

Net cash flows used by operating activities for the three months ended March 31, 2020 amounted to $74,900, compared to cash flows provided by operating activities of $110,200 for the three months ended March 31, 2019. The decrease in cash flows provided by operating activities is primarily the result of lower net income and an increase in accounts receivable and prepaid expenses compared to the prior year period.





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We had no cash flow activity relating to investing or financing activities for the three months ended March 31, 2020 or 2019.

Subsequent to March 31, 2020, we received gross proceeds of $480,191 from the Rights Offering and expect to receive $2.12 million from the closing of the investment pursuant to the Backstop Agreement. We intend to use the proceeds from the Rights Offering and the Backstop Agreement for general corporate purposes, which may include acquisitions (although we do not currently have any plans with respect to any acquisition).

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