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, 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 endedDecember 31, 2020 which was filed with theSecurities and Exchange Commission (the "SEC") onMarch 31, 2021 , and in other documents we have filed with theSEC .
Statements included in this report are based upon information known to us as of
the date that this report is filed with the
Introduction
hopTo, Inc., through its wholly owned subsidiary
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 when we make the estimates. Actual results may differ from these estimates. For a summary of our critical accounting policies, please refer to our 2020 Form 10-K Report Management's Discussion ad Analysis of Operations 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
The following are the results of our operations for the three months ended
For the Three Months Ended September 30, September 30, 2021 2020 $ Change (Unaudited) (Unaudited) Revenues$ 919,400 $ 894,600 $ 24,800 Cost of revenues 36,100 42,500 (6,400 ) Gross profit 883,300 852,100 31,200 Operating expenses: Selling and marketing 152,000 140,300 11,700 General and administrative 162,400 196,100 (33,700 ) Research and development 354,300 355,700 (1,400 ) Total operating expenses 668,700 692,100 (23,400 ) Income from operations 214,600 160,000 54,600 Other income: Unrealized gain on marketable securities 146,800 - 146,800 Other income - - - 146,800 - 146,800 Income before provision for income taxes 361,400 160,000 201,400 Provision for income taxes - 2,500 (2,500 ) Net income$ 361,400 $ 157,500 $ 203,900 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 revenue has been earned, and continues to be earned, from a limited number of direct customers and through a limited number of resellers.
When a software license is sold directly to an end user by us, or by one of our resellers, revenue is recognized immediately upon delivery of the license key, 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, our software licenses revenue could be materially impacted.
The following is a summary of our revenues by category for the three months
ended
For the Three Months Ended September 30, September 30, 2021 2020 $ Change Revenue Software Licenses Windows$ 151,700 $ 188,800 $ (37,100 ) UNIX/Linux 15,900 44,600 (28,700 ) Total 167,600 233,400 (65,800 ) Software Service Fees Windows 684,500 586,000 98,500 UNIX/Linux 45,600 53,600 (8,000 ) Total 730,100 639,600 90,500 Other 21,700 21,600 100$ 919,400 $ 894,600 $ 24,800 Software Licenses
Windows software licenses revenue decreased by
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Software licenses revenue from our UNIX/Linux products decreased by
Software Service Fees
Service fees attributable to our Windows product service increased by
Service fees revenue attributable to our UNIX products decreased by
Other
Other revenue consists of private labeling fees, professional services, and
other non-recurring revenues. Other revenue increased by
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 and costs associated with licenses to third party
software included in our product offerings, and the required import tax
withholdings from
Cost of revenue for the three months ended
Selling and Marketing Expenses
Selling and marketing expenses primarily consisted of employee, outside services and travel and entertainment expenses.
Selling and marketing expenses increased by
15
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
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
Other Income
Other income increased by
Results of Operations for the Nine-Month Periods EndedSeptember 30, 2021 and 2020 For the Nine Months Ended September 30, September 30, 2021 2020 $ Change (Unaudited) (Unaudited) Revenues$ 2,678,700 $ 2,805,300 $ (126,600 ) Cost of revenues 125,800 118,000 7,800 Gross profit 2,552,900 2,687,300 (134,400 ) Operating expenses: Selling and marketing 448,100 396,200 51,900 General and administrative 576,800 664,600 (87,800 ) Research and development 1,081,900 1,076,600 5,300 Total operating expenses 2,106,800 2,137,400 (30,600 ) Income from operations 446,100 549,900 (103,800 ) Other income: Unrealized gain on marketable securities 173,400 - 173,400 Other income 269,800 46,900 222,900 443,200 46,900 396,300 Income before provision for income taxes 889,300 596,800 292,500 Provision for income taxes - 7,500 (7,500 ) Net income$ 889,300 $ 589,300 $ 300,000 Revenues
The following is a summary of our revenues by category for the nine months ended
For the Nine Months Ended September 30, September 30, 2021 2020 $ Change Revenue Software Licenses Windows$ 502,900 $ 585,700 $ (82,800 ) UNIX/Linux 38,900 99,500 (60,600 ) Total 541,800 685,200 (143,400 ) Software Service Fees Windows 1,932,400 1,650,100 282,300 UNIX/Linux 139,700 175,400 (35,700 ) Total 2,072,100 1,825,500 246,600 Other 64,800 294,600 (229,800 )$ 2,678,700 $ 2,805,300 $ (126,600 ) Software Licenses
Windows software licenses revenue decreased by
16
Software licenses revenue from our UNIX/Linux products decreased by
Software Service Fees
Service fees attributable to our Windows product service increased by
Service fees revenue attributable to our UNIX products decreased by
Other
Other revenue consists of private labeling fees, professional services, and
other non-recurring revenues. Other revenue decreased by
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
Cost of revenue for the nine months ended
Selling and Marketing Expenses
Selling and marketing expenses primarily consisted of employee, outside services and travel and entertainment expenses.
Selling and marketing expenses increased by
17
General and Administrative Expenses
General and administrative expenses primarily consist of employee costs, legal, accounting, board fees, 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
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 increased by
Other Income
Other income increased by
18
Liquidity and Capital Resources
As of
The following is a summary of our cash flows from operating, investing and
financing activities for the six months ended
For the Nine Months EndedSeptember 30 ,September 30, 2021 2020
Cash flows provided by operating activities
- Cash flows provided by financing activities $ -$ 2,480,400
Net cash flows provided by operating activities for the nine months ended
Net cash flows used by investing activities for the nine months ended
We did not have cash flow from financing activities for the nine months ended
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