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
June 30, June 30,
2021 2020 $ Change
(Unaudited) (Unaudited)
Revenues $ 899,100 $ 1,066,100 $ (167,000 )
Cost of revenues 45,600 37,400 8,200
Gross profit 853,500 1,028,700 (175,200 )
Operating expenses:
Selling and marketing 153,100 151,500 1,600
General and administrative 199,600 239,500 (39,900 )
Research and development 364,500 356,900 7,600
Total operating expenses 717,200 747,900 (30,700 )
Income from operations 136,300 280,800 (144,500 )
Other income:
Unrealized gain on marketable securities 12,400 - 12,400
Other income - 46,900 (46,900 )
12,400 46,900 (34,500 )
Income before provision for income taxes 148,700 327,700 (179,000 )
Provision for income taxes - 5,000 (5,000 )
Net income $ 148,700 $ 322,700 $ (174,000 )
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.
The following is a summary of our revenues by category for the three months
ended
For the Three Months Ended
June 30, June 30,
2021 2020 $ Change
Revenue
Software Licenses
Windows $ 169,300 $ 159,000 $ 10,300
UNIX/Linux 5,500 16,500 (11,000 )
Total 174,800 175,500 (700 )
Software Service Fees
Windows 657,700 582,500 75,200
UNIX/Linux 45,000 56,700 (11,700 )
Total 702,700 639,200 63,500
Other 21,600 251,400 (229,800 )
$ 899,100 $ 1,066,100 $ (167,000 )
Software Licenses
Windows software licenses revenue increased 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
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 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 no board member service fees being incurred versus the prior year, partially offset by higher legal fees and payroll 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 increase by
Other Income
Other income decreased by
Results of Operations for the Six-Month Periods Ended
For the Six Months Ended
June 30, June 30,
2021 2020 $ Change
(Unaudited) (Unaudited)
Revenues $ 1,759,300 $ 1,910,700 $ (151,400 )
Cost of revenues 89,800 75,500 14,300
Gross profit 1,669,500 1,835,200 (165,700 )
Operating expenses:
Selling and marketing 296,100 255,900 40,200
General and administrative 414,300 468,500 (54,200 )
Research and development 727,600 720,900 6,700
Total operating expenses 1,438,000 1,445,300 (7,300 )
Income from operations 231,500 389,900 (158,400 )
Other income:
Unrealized gain on marketable securities 26,600 - 26,600
Other income 269,800 46,900 222,900
296,400 46,900 249,500
Income before provision for income taxes 527,900 436,800 91,100 Provision for income taxes
- 5,000 (5,000 )
Net income $ 527,900 $ 431,800 $ 96,100
Revenues
The following is a summary of our revenues by category for the six months ended
For the Six Months Ended
June 30, June 30,
2021 2020 $ Change
Revenue
Software Licenses
Windows $ 351,200 $ 396,900 $ (45,700 )
UNIX/Linux 23,000 54,900 (31,900 )
Total 374,200 451,800 (77,600 )
Software Service Fees
Windows 1,247,900 1,064,100 183,800
UNIX/Linux 94,100 121,800 (27,700 )
Total 1,342,000 1,185,900 156,100
Other 43,100 273,000 (229,900 )
$ 1,759,300 $ 1,910,700 $ (151,400 )
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 six 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
The decrease in general and administrative expense was due to no board member service fees being incurred versus the prior year, partially offset by higher legal and payroll 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 increased by
The increase in research and development expense was primarily due to an increase in benefit costs and consulting fees associated with a new release of our GO-Global product.
Other Income
Other income increased by
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Liquidity and Capital Resources
As of
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 six months ended
For the Six Months Ended
June 30 , June 30,
2021 2020
Cash flows used in operating activities
- $ 417,000 Net cash flows provided by operating activities for the six months ended
Net cash flows used by investing activities for the six months ended
We did not have cash flow from financing activities for the six months ended
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