UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State of incorporation) | (IRS Employer Identification No.) |
(Address of principal executive offices)
Registrant’s telephone number:
(408) 688-2674
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| OTC Market |
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of May15, 2023, there were issued and outstanding shares of the registrant’s common stock, par value $0.0001.
Table of Contents
| PAGE | ||
| PART I. | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 15 |
| Item 4. | Controls and Procedures | 15 |
| PART II. | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 15 |
| Item 1A. | Risk Factors | 15 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
| Item 3. | Defaults Upon Senior Securities | 15 |
| Item 4. | Mine Safety Disclosures | 15 |
| Item 5. | Exhibits | 16 |
| Signatures | 17 |
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
hopTo Inc.
Consolidated Balance Sheets
(unaudited)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholder’s Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued wages | ||||||||
| Lease liabilities | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Lease liabilities | ||||||||
| Deferred revenue | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding as of March 31, 2023 and December 31, 2022 | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding as of March 31, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements
| 3 |
hopTo Inc.
Consolidated Statements of Operations
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Software licenses | $ | $ | ||||||
| Software service fees | ||||||||
| Other | ||||||||
| Total revenue | ||||||||
| Cost of revenue: | ||||||||
| Software service costs | ||||||||
| Software product costs | ||||||||
| Total cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| Other income (loss): | ||||||||
| Realized gain (loss) in marketable securities | ( | ) | ||||||
| Interest and other income | ||||||||
| Other income (loss) | ( | ) | ||||||
| Income before provision for income taxes | ||||||||
| Provision for income taxes | ||||||||
| Net income | $ | $ | ||||||
| Net income per share, basic | $ | $ | ||||||
| Net income per share, diluted | $ | $ | ||||||
| Weighted average number of common shares outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to unaudited consolidated financial statements
| 4 |
hopTo Inc.
Consolidated Statements of Stockholders’ Equity
(unaudited)
| Common Stock | Additional | |||||||||||||||||||
| Shares | Amount | Paid-In Capital | Accumulated Deficit | Total | ||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at March 31, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance at December, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at March 31, 2023 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited consolidated financial statements
| 5 |
hopTo Inc.
Consolidated Statements of Cash Flows
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by and used in operating activities: | ||||||||
| Depreciation | ||||||||
| Changes in allowance for doubtful accounts | ( | ) | ||||||
| Realized (gain) loss from marketable securities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Lease liabilities | ( | ) | ||||||
| Deferred revenue | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Proceeds from sale of marketable securities | ||||||||
| Net cash provided by investing activities | ||||||||
| Net change in cash | ||||||||
| Cash and cash equivalents, beginning of the period | ||||||||
| Cash and cash equivalents, end of the period | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements
| 6 |
hopTo Inc.
Notes to Unaudited Consolidated Financial Statements
1. Organization
hopTo Inc., a Delaware corporation, through its wholly-owned subsidiary GraphOn Corporation (collectively, “we”, “us,” “our” or the “Company”) 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.
The Company sells a family of products under the brand name GO-Global, which is a software application publishing business and is the Company’s sole revenue source at this time. GO-Global is an application access solution for use and/or resale by independent software vendors, hosting service providers, 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.
2. Significant Accounting Policies
Basis of Presentation
The unaudited consolidated financial statements include the accounts of hopTo Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated upon consolidation. The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial information and the rules and regulations promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, such unaudited consolidated financial statements do not include all information and footnote disclosures required in annual financial statements.
The unaudited consolidated financial statements included herein reflect all adjustments, which include only normal, recurring adjustments, that are, in our opinion, necessary to state fairly the results for the periods presented. This Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on April 14, 2023 (“2022 10-K Report”). The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 2023, or any future period.
Certain prior year information has been reclassified to conform to current year presentation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Amounts could materially change in the future. These estimates include the allowance for doubtful accounts and timing of revenue recognized over time. While the Company believes that such estimates are fair, actual results could differ materially from those estimates.
| 7 |
Revenue Recognition
The Company markets and licenses its products indirectly through channel distributors, value-added resellers, independent software vendors (“ISVs”), hosting service providers, corporate enterprises, governmental and educational institutions and others. Our product licenses are perpetual. We also separately sell intellectual property licenses, maintenance contracts, which are comprised of license updates and customer service access, as well as other products and services.
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.” Revenues under ASC 606 are recognized when the promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services.
Product Sales
All of our licenses are delivered to the customer electronically. The Company sends the license key to the customer to download the related software from the Company portal. We recognize revenue upon delivery of these licenses.
Services Revenue
The Company has maintenance contracts that entitle customers to support and certain updates to the product. Revenue from maintenance contracts is recognized ratably over the related contract period, which generally ranges from one to five years.
Subscription Revenue
The Company sells subscription licenses that provide the customer with the right to use the software, maintenance and support and certain updates to the product. Subscription licenses are delivered electronically by either the Company’s cloud licensing server or by sending a term license key to the customer to download the related software from the Company portal. Revenue from subscription licenses is recognized ratably over the related contract period, which generally ranges from one month to one year.
The Company’s product sales by geographic area are presented in Note 5.
Cash and Cash Equivalents
The
Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents.
The Company had cash equivalents of $
Allowance for Doubtful Accounts
We
maintain an allowance for doubtful accounts that reflects our best estimate of potentially uncollectible trade receivables. The allowance
is based on assessments of the collectability of specific customer accounts and the general aging and size of the accounts receivable.
We regularly review the adequacy of our allowance for doubtful accounts by considering such factors as historical experience, credit
worthiness, and current economic conditions that may affect a customer’s ability to pay. We specifically reserve for those accounts
deemed uncollectible. We also establish, and adjust, a general allowance for doubtful accounts based on our review of the aging and size
of our accounts receivable. As of March 31, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $
| 8 |
Concentration of Credit Risk
For
the three months ended March 31, 2023 and March 31, 2022, the Company had four resellers comprising
As
of March 31, 2023 and December 31, 2022, the Company has two resellers comprising
For the purposes of this description, “sales” refers to the dollar value of orders received from these customers and partners in the period indicated. The sales values do not necessarily equal recognized revenue for these periods due to our revenue recognition policies which require deferral of revenue associated with prepaid software service fees. The loss of one of these resellers would not have a material impact as the Company could take over the end customer relationship.
In accordance with ASC 260, “Earnings Per Share,” the basic income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted average common shares outstanding during the period. Diluted income (loss) per share reflects per share amounts that would have resulted if diluted potential common stock had been converted to common stock. Dilutive common share equivalents as of March 31, 2023 and December 31, 2022, representing of outstanding in-the-money warrants, were included in the computation of diluted net income per share using the Treasury Stock Method. During the three months ended March 31, 2023 and 2022, the Company had total common stock equivalents of and respectively, which were excluded from the computation of net income per share because they are anti-dilutive.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of these financial instruments approximates fair value due to the nature of the accounts and their short-term maturities.
3. Property and Equipment
Property and equipment consisted of the following.
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense amounted to $
| 9 |
4. Stockholders’ Equity
Stock-Based Compensation Plans
During the three-month period ending March 31, 2022 and 2021, the Company had and stock option shares outstanding. As of March 31, 2023, the Company does not have any active stock-based compensation plan.
Shares of Common Stock Issued
During the three-month period ending March 31, 2023 and 2022, the Company did not issue any shares of common stock.
Warrants
As
of March 31, 2023 and December 31, 2022, the Company had
5. Sales by Geographical Location
Revenue by country for the three months ended March 31, 2023 and 2022 was as follows:
| Three Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Revenue by Country | ||||||||
| United States | $ | $ | ||||||
| Brazil | ||||||||
| Japan | ||||||||
| Other Countries | ||||||||
| Total | $ | $ | ||||||
6. Commitments and Contingencies
Profit Sharing Plans
The
Company has adopted a 401(k) plan to provide retirement benefits for employees under which the Company makes discretionary matching
contributions. During the three months ended March 31, 2023 and 2022, the Company contributed a total of $
Contingencies
During the ordinary course of business, the Company is subject to various potential claims and litigation. Management is not aware of any outstanding litigation which would have a significant impact on the Company’s financial statements.
Lease
Supplemental balance sheet information related to leases as of March 31, 2023 is as follows:
| Future minimum lease payments: | ||||
| 2023 | ||||
| 2024 | ||||
| Thereafter | ||||
| Total future minimum lease payments | $ | |||
| Less: Lease imputed interest | ||||
| Total | $ | |||
The Company leases its’ headquarters office in Concord, New Hampshire under a thirty-six-month noncancelable operating lease agreement which will expire on August 31, 2024. The terms of certain lease agreement provide for increasing rental payments at fixed twelve-month intervals.
| 10 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, 2022 which was filed with the Securities and Exchange Commission (the “SEC”) on April 14, 2023, 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
hopTo, Inc., through its wholly owned subsidiary GraphOn Corporation (collectively, “we”, “us,” “our” or the “Company”), is a developer 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 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.
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 2022 10-K Report and Note 2 to our unaudited consolidated financial Statements included under Item 1 – Financial Statements in this Form 10-Q.
| 11 |
Results of Operations for the Three-Month Periods Ended March 31, 2023 and 2022
The following are the results of our operations for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
| For the Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Software licenses | $ | 138,200 | $ | 181,500 | ||||
| Software service fees | 883,900 | 747,700 | ||||||
| Other | 21,000 | 21,000 | ||||||
| Total revenue | 1,043,100 | 950,200 | ||||||
| Cost of revenue: | ||||||||
| Software service costs | 17,900 | 13,500 | ||||||
| Software product costs | 57,900 | 63,900 | ||||||
| Total cost of revenue | 75,800 | 77,400 | ||||||
| Gross profit | 967,300 | 872,800 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 310,900 | 123,100 | ||||||
| General and administrative | 245,100 | 204,900 | ||||||
| Research and development | 396,600 | 382,700 | ||||||
| Total operating expenses | 952,600 | 710,700 | ||||||
| Income from operations | 14,700 | 162,100 | ||||||
| Other income (loss): | ||||||||
| Realized gain (loss) in marketable securities | 17,700 | (55,600 | ) | |||||
| Interest and other income | 2,200 | - | ||||||
| Other income (loss) | 19,900 | (55,600 | ) | |||||
| Income before provision for income taxes | 34,600 | 106,500 | ||||||
| Provision for income taxes | - | - | ||||||
| Net income | $ | 34,600 | $ | 106,500 | ||||
| Net income per share, basic | $ | 0.00 | $ | 0.01 | ||||
| Net income per share, diluted | $ | 0.00 | $ | 0.01 | ||||
| Weighted average number of common shares outstanding | ||||||||
| Basic | 18,826,342 | 18,850,675 | ||||||
| Diluted | 19,068,916 | 19,093,118 | ||||||
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 $48,400 or 27.3% to $128,700 during the three months ended March 31, 2023, from $177,100 for the same period in 2022.
| 12 |
Software licenses revenue from our UNIX/Linux products increased by $5,100 or 115.9% to $9,500 for the three months ended March 31, 2023 from $4,400 for the same periods of 2022. The increase was primarily due to higher standard order licenses.
Software Service Fees
Service fees attributable to our Windows product service increased by $142,500 or 19.9% to $857,100 during three months ended March 31, 2023, from $714,600 for the same period in 2022. The increase was due to an increase in maintenance renewals from existing customers and higher subscription license orders.
Service fees revenue attributable to our UNIX products decreased by $6,300 or 19.0% to $26,800 during the three months ended March 31, 2023, from $33,100 for the same period in 2022. The decrease was primarily the result of the lower level of UNIX product sales throughout the prior year and an expiration of a long-term maintenance contract.
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, 2023 decreased by $1,600, or 2.1%, to $75,800 for the three months ended March 31, 2023 from $77,400 for the same period in 2022. Cost of revenue 7.3% and 8.1% of total revenue for the three months ended March 31, 2023 and 2022, respectively. The net increase was due to increase in customer service wages offset by lower import tax withholding receipts from Brazil resellers for the three months period ending March 31, 2023
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 $187,800, or 152.6%, to $310,900 for the three months ended March 31, 2023 from $123,100 for the same period in 2022. Selling and marketing expenses represented approximately 29.8% and 13.0% of total revenue for the three months ended March 2023 and 2022, respectively. The increase in selling and marketing expenses was due to higher payroll expenses and additional investments in sales and marketing related activities during the first three months of March 31, 2023.
| 13 |
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 increased by $40,200, or 19.6%, to $245,100 for the three months ended March 31, 2023 from $204,900 for the same period in 2022. General and administrative expenses represented approximately 23.5% and 21.6% of total revenue for the three months ended March 31, 2023 and 2022, respectively. The increase in general and administrative expense was primarily due to the increase in personnel expenses.
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 $13,900, or 3.6% to $396,600 for the three months ended March 31, 2023 from $382,700 for the same period in 2022. This represented approximately 38.0% and 40.3% of total revenue for the three months ended March 31, 2023 and 2022, respectively.
Liquidity and Capital Resources
As of March 31, 2023, we had cash of $5,559,100 and a working capital position of $4,316,200 as compared to cash of $5,037,300 and a working capital position of $4,307,400at December 31, 2022. The increase in cash as of March 31, 2023 was primarily the result of cash provided by operations and the sale of marketable securities 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.
The following is a summary of our cash flows from operating, investing and financing activities for the three months ended March 31, 2023 and 2022.
| For the Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Cash flows provided by operating activities | $ | 185,400 | $ | 278,000 | ||||
| Cash flows used by investing activities | $ | 336,400 | $ | - | ||||
| Cash flows provided by financing activities | $ | - | $ | - | ||||
Net cash flows provided by operating activities for the three months ended March 31, 2023 and 2022 was $185,400 and 278,000, respectively The decrease in cash flows provided by operating activities is primarily the result of lower net income and decreases from accounts receivable offset by an increase from deferred revenue and accrued wages compared to the prior year period.
The Company had net cash flows of 336,400 provided by investing activities from the proceeds of selling the marketable securities while the Company had no cash related to investment activities for the same periods ended March 31, 2022. The Company had no cash related to financing activities for the three months ended March 31, 2023 and 2022.
| 14 |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
ITEM 4. Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023.
There has not been any change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable
ITEM 1A. Risk Factors
There have been no material changes in our risk factors from those set forth under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on April 14, 2023.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Mine Safety Disclosures
Not applicable
| 15 |
ITEM 5. Exhibits
| Exhibit Number | Exhibit Description | |
| 31 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
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| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 16 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| hopTo Inc. | ||
| (Registrant) | ||
| Date: | May 15, 2023 | |
| By: | /s/ Jonathon R. Skeels | |
| Jonathon R. Skeels | ||
| Chief Executive Officer (Principal Executive Officer) and | ||
| Interim Chief Financial Officer | ||
| (Principal Financial Officer and | ||
| Principal Accounting Officer) | ||
| 17 |