HOPTO INC. 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, 2020 which was filed with the Securities and Exchange Commission (the
"SEC") on March 31, 2021 , 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
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 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
The following are the results of our operations for the three months ended
For the Three Months Ended
March 31, March 31,
2021 2020 $ Change
(Unaudited) (Unaudited)
Revenues $ 860,200 $ 844,600 $ 15,600
Cost of revenues 44,200 38,100 6,100
Gross profit 816,000 806,500 9,500
Operating expenses:
Selling and marketing 143,000 104,400 38,600
General and administrative 214,700 229,000 (14,300 )
Research and development 363,100 364,000 (900 )
Total operating expenses 720,800 697,400 23,400
Income from operations 95,200 109,100 (13,900 )
Other income:
Unrealized gain on marketable securities 14,200 - 14,200
Other income 269,800 - 269,800
Total other income 284,000 - 284,000
Income before provision for income taxes 379,200 109,100 270,100
Provision for income taxes - - -
Net income $ 379,200 $ 109,100 $ 270,100
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
14
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
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 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
The decrease in general and administrative expense was due to a reduction in accounting fees and consulting related fees.
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
Liquidity and Capital Resources
As of
The following is a summary of our cash flows from operating, investing and
financing activities for the three months ended
For the Three Months Ended
March 31, March 31,
2021 2020
Cash flows used in operating activities $ (6,300 ) $ (74,900 )
Cash flows provided by investing activities $ 23,800 $ -
Cash flows provided by financing activities $ - $ -
Net cash flows used by operating activities for the three months ended
Net cash flows provided by investing activities for the three months ended
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