UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

Commission File Number: 0-21683

hopTo Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-3899021
(State of incorporation)		(IRS Employer Identification No.)

189 North Main St., Suite 102

Concord, NH 03301

(Address of principal executive offices)

Registrant’s telephone number:

(800) 472-7466

(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
Common		HPTO		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.

Yes ☒ No ☐

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).

Yes ☒ No ☐

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	☐
Non-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 ☐ No ☒

As of August 21, 2023, there were issued and outstanding 18,976,165 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	17
Item 4.	Controls and Procedures	17

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Exhibits	17
	Signatures	18

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

hopTo Inc.

Consolidated Balance Sheets

(unaudited)

	June 30,			December 31,
	2023			2022

Assets

Current assets
Cash and cash equivalents	$	5,627,700		$	5,037,300
Marketable securities		-			318,700
Accounts receivable, net		499,700			511,200
Prepaid expenses and other current assets		124,300			102,600
Total current assets		6,251,700			5,969,800

Right-of-use assets		36,400			51,600
Property and equipment, net		3,700			5,300
Other assets		22,800			22,900
Total assets	$	6,314,600		$	6,049,600

Liabilities and Stockholder’s Equity

Current liabilities
Accounts payable	$	215,200		$	234,200
Accrued expenses		116,300			61,800
Accrued wages		285,400			150,000
Lease liabilities- current		10,300			10,300
Deferred revenue- current		1,476,500			1,206,100
Total current liabilities		2,103,700			1,662,400
Long-term liabilities
Lease liabilities		25,700			40,900
Deferred revenue		203,700			264,800
Total liabilities		2,333,100			1,968,100

Commitments and contingencies		-			-

Stockholders’ equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022		-			-
Common stock, $0.0001 par value, 195,000,000 shares authorized, 18,976,165 and 18,826,342 shares issued and outstanding as of June 30, 2023 and December 31, 2022		1,900			1,900
Additional paid-in capital		82,145,100			82,145,100
Accumulated deficit		(78,165,500	)		(78,065,500	)
Total stockholders’ equity		3,981,500			4,081,500
Total liabilities and stockholders’ equity	$	6,314,600		$	6,049,600

See accompanying notes to unaudited consolidated financial statements

hopTo Inc.

Consolidated Statements of Operations

(unaudited)

	2023			2022			2023			2022
	For the Three Months Ended						For the Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022

Revenues:
Software licenses	$	98,400		$	132,000		$	236,600		$	313,500
Software service fees		930,100			808,600			1,814,000			1,556,300
Other		29,900			21,000			50,900			42,000
Total revenue		1,058,400			961,600			2,101,500			1,911,800

Cost of revenue:
Software service costs		27,700			13,500			45,600			27,000
Software product costs		51,100			35,300			109,000			99,200
Total cost of revenue		78,800			48,800			154,600			126,200

Gross profit		979,600			912,800			1,946,900			1,785,600

Operating expenses:
Selling and marketing		357,500			315,900			668,400			439,000
General and administrative		382,400			165,900			627,500			370,800
Research and development		416,300			380,800			812,900			763,500
Total operating expenses		1,156,200			862,600			2,108,800			1,573,300

Income from operations		(176,600	)		50,200			(161,900	)		212,300

Other income (loss):
Unrealized gain (loss) in marketable securities		-			(29,800	)		17,700			(85,500	)
Interest and other income		42,000			900			44,200			1,000
Other income (loss)		42,000			(28,900	)		61,900			(84,500	)
Income (loss) before provision for income taxes		(134,600	)		21,300			(100,000	)		127,800
Provision for income taxes		-			-			-			-
Net income (loss)	$	(134,600	)	$	21,300		$	(100,000	)	$	127,800

Net income (loss) per share, basic	$	(0.01	)	$	0.00		$	(0.01	)	$	0.01
Net income (loss) per share, diluted	$	(0.01	)	$	0.00		$	(0.01	)	$	0.01

Weighted average number of common shares outstanding
Basic		18,901,253			18,846,664			18,863,797			18,848,658
Diluted		18,901,253			19,089,238			18,863,797			19,901,102

See accompanying notes to unaudited consolidated financial statements

hopTo Inc.

Consolidated Statements of Stockholders’ Equity

(unaudited)

	Shares			Amount		Capital			Deficit			Total
	Common Stock					Additional Paid-In			Accumulated
	Shares			Amount		Capital			Deficit			Total

Balance at December 31, 2021		18,850,675		$	1,900	$	82,155,200		$	(78,188,500	)	$	3,968,600
Net income		-			-		-			106,500			106,500
Balance at March 31, 2022 (unaudited)		18,850,675		$	1,900	$	82,155,200		$	(78,082,000	)	$	4,075,100
Purchase of hopTo treasury stock		(24,333	)		-		(10,100	)		-			(10,100	)
Net income		-			-		-			21,300			21,300
Balance at June 30, 2022 (unaudited)		18,826,342		$	1,900	$	82,145,100		$	(78,060,700	)	$	4,086,300

Balance at December, 2022		18,826,342		$	1,900	$	82,145,100		$	(78,065,500	)	$	4,081,500
Net income		-			-		-			34,600			34,600
Balance at March 31, 2023 (unaudited)		18,826,342		$	1,900	$	82,145,100		$	(78,030,900	)	$	4,116,100
Balance		18,826,342		$	1,900	$	82,145,100		$	(78,030,900	)	$	4,116,100
Warrant shares exercised		149,823			-		-			-			-
Net loss		-			-		-			(134,600	)		(134,600	)
Net Income (loss)		-			-		-			(134,600	)		(134,600	)
Balance at Jun 30, 2023 (unaudited)		18,976,165		$	1,900	$	82,145,100		$	(78,165,500	)	$	3,981,500
Balance		18,976,165		$	1,900	$	82,145,100		$	(78,165,500	)	$	3,981,500

See accompanying notes to unaudited consolidated financial statements

hopTo Inc.

Consolidated Statements of Cash Flows

(unaudited)

	2023			2022
	For the Six Months Ended
	June 30,			June 30,
	2023			2022

Cash flows from operating activities
Net income (loss)	$	(100,000	)	$	127,800
Adjustments to reconcile net income to net cash provided by and used in operating activities:
Depreciation		1,600			1,300
Changes in allowance for doubtful accounts		(800	)		1,100
Realized (gain) loss from marketable securities		(17,700	)		85,500

Changes in operating assets and liabilities:
Accounts receivable		12,300			52,800
Prepaid expenses and other current assets		(21,600	)		(46,500	)
Accounts payable and accrued expenses		170,900			26,500
Lease liabilities		-			(400	)
Deferred revenue		209,300			213,900
Net cash provided by operating activities		254,000			462,000

Cash flows from investing activities
Purchase of hopTo common stock		-			(10,100	)
Proceeds from sale of marketable securities		336,400			-
Net cash provided (used) by investing activities		336,400			(10,100	)

Net change in cash		590,400			451,900
Cash and cash equivalents, beginning of the period		5,037,300			4,755,300
Cash and cash equivalents, end of the period	$	5,627,700		$	5,207,200

See accompanying notes to unaudited consolidated financial statements

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 valuation of the allowances for doubtful accounts, depreciation of long-lived assets, timing of revenue recognized over time, allowances for deferred tax assets and accruals of liabilities.

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.

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 June 30, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $4,800 and $5,600, respectively.

Concentration of Credit Risk

For the six months ended June 30, 2023 and June 30, 2022, the Company had four resellers comprising 13.7%,13.6%, 12.2% and 11.4%, four resellers comprising 12.1%,11.8%, 10.6% and 10.1%, respectively, of total sales.

As of June 30, 2023 and December 31, 2022, the Company had three resellers comprising 23.0%, 21.3%, and 12.8%, four resellers comprising 18.5%, 18.3%, 17.4% and 16.0%, respectively, of net accounts receivable.

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.

Basic and Diluted Earnings Per Share

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. The company had no dilutive common share equivalents as of June 30, 2023, compared to 248,216 of outstanding in-the-money warrants, were included in the computation of diluted net income per share using the Treasury Stock Method during December 31,2022. During the three months ended June 30, 2023 and 2022, the Company had total common stock equivalents of 0 and 3,200, 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.

Schedule of Property and Equipment

	June 30,			December 31,
	2023			2022

Equipment	$	162,400		$	164,100
Furniture and fixtures		1,600			1,600
Property and equipment gross		164,000			165,700

Less: accumulated depreciation		(160,300	)		(160,400	)
Property and equipment net	$	3,700		$	5,300

Depreciation expense amounted to $1,600 and $1,300 for the six months ended June 30, 2023 and 2022, respectively.

4. Stockholders’ Equity

Shares of Common Stock Issued

During the three and six-month periods ending June 30, 2023, the Company issued 0 and 149,216 shares and for the same periods ending 2022, the Company did not issue any shares of common stock.

Warrants

As of June 30, 2023 and December 31, 2022, the Company had 0 and 248,216 warrants outstanding. There were 149,216 shares of warrants exercised during the three-month periods ending June 30, 2023 and the remaining 98,393 shares were expired as of were expired on May 20, 2023.

5. Sales by Geographical Location

Revenue by country for the three and six months ended June 30, 2023 and 2022 was as follow :

Schedule of Revenue by Country

	2023		2022		2023		2022
	Three Months Ended				Six Months Ended
	2023		2022		2023		2022
Revenue by Country
United States	$	441,800		388,900		859,500		779,500
Brazil		291,100		256,500		573,100		467,500
Japan		81,200		53,000		175,200		125,900
Other Countries		244,300		263,200		493,700		538,900
Total	$	1,058,400	$	961,600		2,101,500		1,911,800

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 six months ended June 30, 2023 and 2022, the Company contributed a total of $9,400 and $15,400, respectively.

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 June 30, 2023 is as follows:


Future minimum lease payments:
2023		15,500
2024		20,700
Thereafter		-
Total future minimum lease payments	$	36,200
Less: Lease imputed interest		200
Total	$	36,000

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.

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, 2021 which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022, 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.

Results of Operations for the Three-Month Periods Ended June 30, 2023 and 2022

The following are the results of our operations for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

	For the Three Months Ended
	June 30,			June 30,
	2023			2022			$ Change
	(unaudited)			(unaudited)

Revenues	$	1,058,400		$	961,600		$	96,800
Cost of revenues		78,800			48,800			30,000
Gross profit		979,600			912,800			66,800

Operating expenses:
Selling and marketing		357,500			315,900			41,600
General and administrative		382,400			165,900			216,500
Research and development		416,300			380,800			35,500
Total operating expenses		1,156,200			862,600			293,600

Income from operations		(176,600	)		50,200			(226,800	)

Other income (loss):
Unrealized gain on marketable securities		-			(29,800	)		29,900
Interest and other income		42,000			900			41,000
Other income (loss)		42,000			(28,900	)		70,900
Income (loss) before provision for income taxes		(134,600	)		21,300			(155,900	)
Net income (loss)	$	(134,600	)	$	21,300		$	(155,900	)

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 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 June 30, 2023 and 2022.

	For the Three Months Ended
	June 30,		June 30,
	2023		2022		$ Change
Revenue
Software Licenses
Windows	$	94,000	$	122,400	$	(28,400	)
UNIX/Linux		4,400		9,600		(5,200	)
Total		98,400		132,000		(33,600	)

Software Service Fees
Windows		903,000		776,600		126,400
UNIX/Linux		27,100		32,000		(4,900	)
Total		930,100		808,600		121,500

Other		29,900		21,000		8,900
	$	1,058,400	$	961,600	$	96,800

Software Licenses

Windows software licenses revenue decreased by $28,400 or 23.2% to $94.000 during the three months ended June 30, 2023, from $122,400 for the same period in 2022. The decrease was primarily due to lower level of new standard Window licenses orders sold for the three months ended June 30,2023.

Software licenses revenue from our UNIX/Linux products decreased by $5,200 or 54.2% to $4.400 for the three months ended June 30, 2023 from $9,600 for the same periods of 2022. The decrease was primarily due to lower revenue from stocking order licenses during the three months ended June 30, 2023

Software Service Fees

Service fees attributable to our Windows product service increased by $126,400 or 16.3% to $903,000 during three months ended June 30, 2023, from $776,600 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 $4,900 or 15.3% to $27,100 during the three months ended June 30, 2023, from $32,000 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 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 June 30, 2023 increased by $30,000, or 61.5%, to $78,800 for the three months ended June 30, 2023 from $48,800 for the same period in 2022. Cost of revenue 7.4% of total revenue for the three months ended June 30, 2023 and 5.1% for the same period in 2022. The increase was due to some increase in personnel costs and combined with import tax withholdings associated with higher revenue from Brazil resellers for the three-month period ended June 30, 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 $41,600, or 13.2%, to $357,500 for the three months ended June 30, 2023 from $315,900 for the same period in 2022. Selling and marketing expenses represented approximately 33.8% and 32.9% of total revenue for the three months ended June 30 2023 and 2022, respectively. The increase in selling and marketing expenses was due to an increase in consulting services as we continue to expand our sales and marketing initiatives for the three months ended June 30, 2023.

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 $216,500, or 130.5%, to $382,400 for the three months ended June 30, 2023 from $165,900 for the same period in 2022. General and administrative expenses represented approximately 36.1% and 17.3% of total revenue for the three months ended June 30, 2023 and 2022, respectively.

The increase in general and administrative expense was primarily due to employee related expenses during the three months ended June 30, 2023.

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 $35,500, or 9.3% to $416,300 for the three months ended June 30, 2023 from $380,800 for the same period in 2022. This represented approximately 39.3% and 39.6% of total revenue for the three months ended June 30, 2023 and 2022, respectively.

The increase in research and development expense was primarily due to an increase personnel and software subscriptions during the three months ended June 30, 2023.

Other Income

Other income increased by $70,900 for the three months ended June 30, 2023, compared to the same periods in 2022. The increase primarily due to interest earned for the three months ended June 30,2023, compared to an unrealized loss from a marketable securities account during the same periods in 2022.

Results of Operations for the Six-Month Periods Ended June 30, 2023 and 2022

	For the Six Months Ended
	June 30,			June 30,
	2023			2022			$ Change
	(Unaudited)			(Unaudited)

Revenues	$	2,101,500		$	1,911,800		$	189,700
Cost of revenues		154,600			126,200			28,400
Gross profit		1,946,900			1,785,600			161,300

Operating expenses:
Selling and marketing		668,400			439,000			229,400
General and administrative		627,500			370,800			256,700
Research and development		812,900			763,500			49,400
Total operating expenses		2,108,800			1,573,300			535,500

Income from operations		(161,900	)		212,300			(374,200	)

Other income:
Realized gain on marketable securities		17,700			(85,500	)		103,200
Interest and other income		44,200			1,000			43,200
		61,900			(84,500	)		146,400
Income (loss) before provision for income taxes		(100,000	)		127,800			(227,800	)
Provision for income taxes		-			-			-
Net income (loss)	$	(100,000	)	$	127,800		$	(227,800	)

Revenues

The following is a summary of our revenues by category for the six months ended June 30, 2023 and 2022.

	For the Six Months Ended
	June 30,		June 30,
	2023		2022		$ Change
Revenue
Software Licenses
Windows	$	222,700	$	299,500	$	(76,800	)
UNIX/Linux		13,900		14,000		(100	)
Total		236,600		313,500		(76,900	)

Software Service Fees
Windows		1,760,100		1,491,200		268,900
UNIX/Linux		53,900		65,100		(11,200	)
Total		1,814,000		1,556,300		257,700

Other		50,900		42,000		8,900
	$	2,101,500	$	1,911,800	$	189,700

Software Licenses

Windows software licenses revenue decreased by $76,800 or 25.6% to $222,700 during the six months ended June 30, 2023, from $299,500 for the same period in 2022. The decrease for the six months ended June 30,2023 was due to lower license orders from standard licenses.

Software licenses revenue from our UNIX/Linux products decreased by $100 or 0.7% to $13,900 for the six months ended June 30, 2023 from $14,000 for the same period of 2022.

Software Service Fees

Service fees attributable to our Windows product service increased by $268,800 or 18.0% to $1,760,100 during the six months ended June 30, 2023, from $1,491,200 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 $11,200 or 17.2% to $53.900 during the six months ended June 30, 2023, from $65,100 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.

Other

Other revenue consists of private labeling fees, professional services, and other non-recurring revenues. Other revenue increased by $8,900 or 21,2% for the six months ended June 30, 2023, compared to the same period in 2022. The increase was primarily due to an increase in professional service revenue.

Cost of Revenues

Cost of revenue for the six months ended June 30, 2022 increased by $28,400, or 22.5%, to $154,600 for the six months ended June 30, 2023 from $126,200 for the same period in 2022. Cost of revenue represented 7.4% and 6.6% of total revenue for the six months ended June 30, 2023 and 2022, respectively. The primarily increase was due increase in personnel expense and import tax withholdings associated with higher revenue from Brazil resellers for the six-month period ended June 30, 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 $229,400, or 52.3%, to $668,400 for the six months ended June 30, 2023 from $439,000 for the same period in 2022. Selling and marketing expenses represented approximately 31.8% and 23.5% of total revenue for the six months ended June 2023 and 2022, respectively. The increase in selling and marketing expenses was due to an increase in personnel related expenses and consulting services as we continue to expand our sales and marketing initiatives.

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 $256,700, or 69.2%, to $627,500 for the six months ended June 30, 2023 from $370,800 for the same period in 2022. General and administrative expenses represented approximately 29.9% and 19.4% of total revenue for the six months ended June 30, 2023 and 2022, respectively.

The increase in general and administrative expense was primarily due to increase in personnel related expenses.

Research and Development Expenses

Research and development expenses increased by $49,400 or 6.5% to $812,900 for the six months ended June 30, 2023 from $763,500 for the same period in 2022. This represented approximately 38.7% and 39.9% of total revenue for the six months ended June 30, 2023 and 2022, respectively.

The increase in research and development expense was primarily due to increase in personnel related expenses and software subscriptions.

Other Income

Other income increased by $146,400 for the six months ended June 30, 2023, compare to the same periods in 2022 was primarily related to income earned for the six month ended June 30,2023 while during prior year for the same periods, the Company had unrealized losses from a marketable securities account.

Liquidity and Capital Resources

As of June 30, 2023, we had cash of $5,627,700 and a working capital position of $4,148,000 as compared to cash of $5,037,300 and a working capital position of $4,307,400 at December 31, 2022. The increase in cash as of June 30, 2023 was the result of cash provided by operations and cash provided by investing activities. 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 six months ended June 30, 2023 and 2022.

	For the Three Months Ended
	June 30,		June 30,
	2023		2022
Cash flows provided by operating activities	$	254,000	$	462,000
Cash flows provided (used) by investing activities	$	336,400	$	(10,100	)
Cash flows provided by financing activities	$	-	$	-

Net cash flows provided by operating activities for the six months ended June 30, 2023 was $254,000 while net cash flows provided for the same periods ended June 30,2022 was $462,000. The decrease in cash flows provided by operating activities is the result of net loss, increase in accrued expenses and change in value in marketable securities compared to the prior year period.

The Company had net cash flows of $336,400 provided by investing activities from the proceeds of the sale of marketable securities for the six months ended June 30, 2023, while the Company had net cash outflows of $10,100 used in marketable securities for the same periods ended June 30, 2022.

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 June 30, 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 June 30, 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

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
101.SCH		Inline XBRL Taxonomy Extension Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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:	August 21, 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)