0001493152-17-013212.txt : 20171114 0001493152-17-013212.hdr.sgml : 20171114 20171114161810 ACCESSION NUMBER: 0001493152-17-013212 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 56 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171114 DATE AS OF CHANGE: 20171114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: hopTo Inc. CENTRAL INDEX KEY: 0001021435 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133899021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21683 FILM NUMBER: 171201786 BUSINESS ADDRESS: STREET 1: 1901 S. BASCOM AVENUE STREET 2: SUITE 660 CITY: CAMPBELL STATE: CA ZIP: 95008 BUSINESS PHONE: 8004727466 MAIL ADDRESS: STREET 1: 1901 S. BASCOM AVENUE STREET 2: SUITE 660 CITY: CAMPBELL STATE: CA ZIP: 95008 FORMER COMPANY: FORMER CONFORMED NAME: GRAPHON CORP/DE DATE OF NAME CHANGE: 19990727 FORMER COMPANY: FORMER CONFORMED NAME: UNITY FIRST ACQUISITION CORP DATE OF NAME CHANGE: 19960823 10-Q 1 form10-q.htm

 

 

 

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 September 30, 2017

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.)

 

6 Loudon Road, Suite 200

Concord, NH 03301
(Address of principal executive offices)

 

Registrant’s telephone number:

(800) 472-7466

(408) 688-2674

 

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 [X] 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 [X] 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 [X]
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 [X]

 

As of November 14, 2017, there were issued and outstanding 9,804,400 shares of the registrant’s common stock, par value $0.0001.

 

 

 

 
 

 

hopTo Inc.

FORM 10-Q

Table of Contents

 

PART I.   FINANCIAL INFORMATION   PAGE
Item 1.   Financial Statements   4
    Condensed Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31,2016   4
    Unaudited Condensed Consolidated Statements of Operations for the Three and Nine-Month Periods Ended September 30, 2017 and 2016   5
    Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the Nine-Month Periods Ended September 30, 2017 and 2016   6
    Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2017 and 2016   7
    Notes to Unaudited Condensed Consolidated Financial Statements   8
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   17
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   26
Item 4.   Controls and Procedures   26
         
PART II.   OTHER INFORMATION    
Item 1.   Legal Proceedings   27
Item 1A.   Risk Factors   27
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   27
Item 3.   Defaults Upon Senior Securities   27
Item 4.   Mine Safety Disclosures   27
Item 5.   Other Information   27
Item 6.   Exhibits   27
    Signatures   28

 

2

 

 

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 future results of operations or financial position 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 substantial doubt that exists as to our ability to continue as a going concern;
     
  the success of our 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; 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, 2016, which was filed with the Securities and Exchange Commission (the “SEC”) on April 7, 2017, 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.

 

3

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

hopTo Inc.

Condensed Consolidated Balance Sheets

 

   (Unaudited)     
   September 30, 2017   December 31, 2016 
Assets          
Current Assets:          
Cash  $551,300   $546,200 
Accounts receivable, net   353,300    355,300 
Prepaid expenses   26,800    38,700 
Total Current Assets   931,400    940,200 
           
Property and equipment, net   39,800    143,300 
Other assets   109,000    109,000 
Total Assets  $1,080,200   $1,192,500 
           
Liabilities and Stockholders’ Deficit          
Current Liabilities:          
Accounts payable and accrued expenses  $759,700   $975,800 
Deferred rent   23,400    24,100 
Capital lease       6,800 
Lease liability   24,900     
Deferred revenue   1,579,500    1,759,000 
Other current liabilities   855,100    571,100 
Total Current Liabilities   3,242,600    3,336,800 
           
Deposit liability   93,500    81,400 
Deferred revenue   1,523,600    1,694,600 
Deferred rent   41,500    2,600 
Total Liabilities   4,901,200    5,115,400 
           
Commitments and contingencies          
           
Stockholders’ Deficit:          
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding        
Common stock, $0.0001 par value, 195,000,000 shares authorized, 9,804,400 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively   14,700    14,700 
Additional paid-in capital   78,526,700    78,512,200 
Accumulated deficit   (82,362,400)   (82,449,800)
Total Stockholders’ Deficit   (3,821,000)   (3,922,900)
Total Liabilities and Stockholders’ Deficit  $1,080,200   $1,192,500 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

4

 

 

hopTo Inc.

Condensed Consolidated Statements of Operations

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2017   2016   2017   2016 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Revenue  $1,025,900   $898,500   $2,933,200   $2,864,400 
Costs of revenue   15,900    8,300    53,000    129,500 
Gross profit   1,010,000    890,200    2,880,200    2,734,900 
                     
Operating expenses:                    
Selling and marketing   87,400    93,900    259,400    664,600 
General and administrative   206,700    821,600    1,268,900    2,114,600 
Research and development   383,800    491,500    1,123,900    1,860,900 
Total operating expenses   677,900    1,407,000    2,652,200    4,640,100 
                     
Gain / (loss) from operations   332,100    (516,800)   228,000    (1,905,200)
                     
Other income (expense):                    
Change in fair value of warrants liability       54,400        29,300 
Other income (expense), net   (63,700)   1,100    (123,800)   (3,700)
Loss from operations before provision for income tax   268,400    (461,300)   104,200    (1,872,200)
Provision for income tax   14,800    700    16,800    2,300 
Net profit / (loss)  $253,600   $(462,000)  $87,400   $(1,874,500)
Basic and diluted earnings / (loss) per share  $0.03   $(0.05)  $0.01   $(0.19)
Average weighted common shares outstanding – basic and diluted   9,804,400    9,784,163    9,804,400    9,763,111 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

5

 

 

hopTo Inc.

Condensed Consolidated Statements of Stockholders’ Deficit

 

   Nine Months Ended September 30, 
   2017   2016 
   (Unaudited)   (Unaudited) 
Preferred stock – shares outstanding          
Beginning balance        
Ending balance        
         
Common stock – shares outstanding          
Beginning balance   9,804,400    9,731,233 
Employee stock option issuances       1,800 
Vesting of restricted stock awards       71,429 
Ending balance   9,804,400    9,804,462 
           
Common stock – amount          
Beginning balance  $14,700   $14,600 
Vesting of restricted stock awards       100 
Ending balance   14,700   $14,700 
           
Additional paid-in capital          
Beginning balance  $78,512,200   $78,189,300 
Stock-based compensation expense   14,500    303,400 
Company payment of employee taxes for stock-based compensation       (2,700)
Proceeds from exercise of employee stock options       1,500 
Other rounding       (200)
Ending balance  $78,526,700   $78,491,300 
           
Accumulated deficit          
Beginning balance  $(82,449,800)  $(80,596,900)
Net profit / (loss)   87,400    (1,874,500)
Ending balance  $(82,362,400)  $(82,471,400)
Total Stockholders’ Deficit  $(3,821,000)  $(3,965,400)

 

See accompanying notes to unaudited condensed consolidated financial statements

 

6

 

 

hopTo Inc.

Condensed Consolidated Statements of Cash Flows

 

    Nine Months Ended September 30,  
    2017     2016  
    (Unaudited)     (Unaudited)  
Cash Flows Provided By (Used In) Operating Activities:                
Net profit / (loss)   $ 87,400     $ (1,874,500 )

Adjustments to reconcile net profit / loss to net cash provided by (used in) operating activities:

               
Depreciation and amortization     42,200       76,200  
Write-down of capitalized purchased technology           15,500  
Stock-based compensation expense     14,500       303,400  
Company payment of employee taxes for stock-based compensation           (2,700 )
Change in fair value of derivative instruments – warrants           (29,300 )
Accretion of warrants liability for consulting services           (2,300 )
Changes in severance liability           (5,900 )
Changes in deferred rent           23,200  
Changes to allowance for doubtful accounts     (3,300 )     (12,000 )
Revenue deferred to future periods     1,828,500       1,955,700  
Recognition of deferred revenue     (2,179,000 )     (2,478,800 )
Loss / (gain) on disposal of fixed assets     60,400       (3,200 )
Loss on sublease     63,100        
Interest accrued for capital lease     200       800  
Changes in operating assets and liabilities:                
Accounts receivable     5,300       296,400  
Prepaid expenses     11,900       (40,900 )
Accounts payable and accrued expenses     (216,100 )     (127,300 )
Deposit liability     12,100        
Other liabilities     284,000       392,900  
Net Cash Provided By (Used In) Operating Activities     11,200       (1,431,000 )
                 
Cash Flows Provided By (Used In) Investing Activities:                
Proceeds from sale of equipment     900       23,300  
                 
Cash Flows Provided By (Used In) Financing Activities:                
Proceeds from exercise of employee stock options           1,500  
Payment for capital lease     (7,000 )     (7,000 )
Net Cash Provided By (Used In) Financing Activities     (7,000 )     (5,500 )
                 
Net Increase (Decrease) in Cash     5,100       (1,413,200 )
Cash - Beginning of Period     546,200       1,777,300  
Cash - End of Period   $ 551,300     $ 364,100  

 

See accompanying notes to unaudited condensed consolidated financial statements

 

7

 

 

hopTo Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Basis of Presentation

 

The unaudited condensed consolidated financial statements include the accounts of hopTo Inc. and its subsidiaries (collectively, “we”, “us”,”our” or the “Company”); significant intercompany accounts and transactions are eliminated upon consolidation. The unaudited condensed 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 condensed consolidated financial statements do not include all information and footnote disclosures required in annual financial statements.

 

The unaudited condensed 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, 2016, which was filed with the SEC on April 7, 2017 (“2016 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, 2017 or any future period.

 

2. Going Concern and Management’s Liquidity Plans

 

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Accordingly, the condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Although for the three and nine months ended September 30, 2017, respectively, the Company generated net profits of $253,600 and $87,400, respectively, historically we have incurred significant net losses since our inception. At September 30, 2017, the Company had an accumulated deficit of $82,362,400 and a working capital deficit of $2,311,200. We were unable to generate meaningful revenue from our hopTo Work business and our most recent estimation is that revenue from this product is unlikely in any reasonable time frame. We have, however, recently improved our revenue and operating results from our legacy GO-Global business. If this trend continues, subject to our contingent liabilities, we believe we would have sufficient capital resources to fund our GO-Global business (which is our only active business) for at least the next 12 months. However, due to the uncertainty at the current time about this trend and the outcome of our contingent liabilities, we have determined that our cash resources may not be sufficient to fund our business for at least the next 12 months. The Company’s ability to continue as a going concern is dependent on our ability to continue to generate revenue from our legacy GO-Global business and to raise additional capital through the issuance of new equity, debt financing, or from the sale of certain assets to meet short and long-term operating requirements.

 

If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to the Company’s common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve our working capital position. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.

 

These factors raise substantial doubt about our ability to continue as a going concern.

 

8

 

 

In order to maintain operations, we previously implemented significant expense reductions, including a limited number of employee layoffs, and continue to implement further costs and employment reductions. During the three month period ended September 30, 2016, our CEO and CFO voluntarily agreed with our board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company can reasonably pay such compensation upon approval by the board of directors. See Note 12 – Subsequent Events.

 

Although maintaining our SEC filing status is a significant expense, we currently intend to maintain such status; however, we consider all options to preserve value for shareholders, including potentially suspending or terminating our filing status.

 

We have worked extensively to explore additional sources of capital including the issuance of new shares, securing debt financing, and the sale of assets including certain software products and patents. Although this process is ongoing and we are in active discussions with multiple parties, there is no guarantee that they will result in transactions that are sufficient to provide the Company with the required liquidity to remove the substantial doubt as to our ability to continue as a going concern. See Note 12 – Subsequent Events. We are also in discussions with some parties about the possibility of other strategic transactions although there is no guarantee that these discussions will result in an actual transaction. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of the uncertainties set forth above.

 

3. Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires us 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 reporting period. These estimates include: the amount of stock-based compensation expense; the allowance for doubtful accounts; the estimated lives, valuation, and amortization of intangible assets (including capitalized software); depreciation of long-lived assets; valuation of warrants; post-employment benefits, and accruals for liabilities. While we believe that such estimates are fair, actual results could differ materially from those estimates.

 

Revenue Recognition

 

We market and license our products indirectly through channel distributors, independent software vendors (“ISVs”), value-added resellers (“VARs”) (collectively, “resellers”) and directly to 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.

 

Software license revenues are recognized when:

 

  Persuasive evidence of an arrangement exists, (i.e., when we sign a non-cancellable license agreement wherein the customer acknowledges an unconditional obligation to pay, or upon receipt of the customer’s purchase order), and
     
  Delivery has occurred or services have been rendered and there are no uncertainties surrounding product acceptance (i.e., when title and risk of loss have been transferred to the customer, which occurs when the media containing the licensed program(s) is provided to a common carrier or, in the case of electronic delivery, when the customer is given access to the licensed program(s)), and
     
  The price to the customer is fixed or determinable, as typically evidenced in a signed non-cancellable contract, or a customer’s purchase order, and
     
  Collectability is probable. If collectability is not considered probable, revenue is recognized when the fee is collected.

 

9

 

 

Revenue recognized on software arrangements involving multiple deliverables is allocated to each deliverable based on vendor-specific objective evidence (“VSOE”) or third party evidence of the fair values of each deliverable; such deliverables include licenses for software products, maintenance, private labeling fees, and customer training. We limit our assessment of VSOE for each deliverable to either the price charged when the same deliverable is sold separately or the price established by management having the relevant authority to do so, for a deliverable not yet sold separately.

 

If sufficient VSOE of the fair value does not exist so as to permit the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement is deferred until such evidence exists or until all elements are delivered. If VSOE of the fair value does not exist, and the only undelivered element is maintenance, then we recognize revenue on a ratable basis. If VSOE of the fair value of all undelivered elements exists but does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.

 

Certain resellers (“stocking resellers”) purchase product licenses that they hold in inventory until they are resold to the ultimate end user (an “inventory stocking order”). At the time that a stocking reseller places an inventory stocking order, no product licenses are shipped by us to the stocking reseller; rather, the stocking reseller’s inventory is credited with the number of licenses purchased and the stocking reseller can resell (issue) any number of licenses from their inventory at any time. Upon receipt of an order to issue a license(s) from a stocking reseller’s inventory (a “draw down order”), we will ship the license(s) in accordance with the draw down order’s instructions. We defer recognition of revenue from inventory stocking orders until the underlying licenses are sold and shipped to the end user, as evidenced by the receipt and fulfillment of the stocking reseller’s draw down order, assuming all other revenue recognition criteria have been met.

 

There are no rights of return granted to resellers or other purchasers of our software products.

 

Revenue from maintenance contracts is recognized ratably over the related contract period, which generally ranges from one to five years.

 

All of our software licenses are denominated in U.S. dollars.

 

Deferred Rent

 

The leases for both of the Company’s subleased former offices in Campbell, California contain free rent and predetermined fixed escalations in our minimum rent payments. Rent expense related to these leases is recognized on a straight-line basis over the terms of the leases. Any difference between the straight-line rent amounts and amounts payable under the leases is recorded as part of deferred rent in current or long-term liabilities, as appropriate. The monthly rent payments due to the Company for the sublease of the office at 1919 S. Bascom Avenue fully offset the rent payments due under the Company’s lease for that space. The monthly rent payments due to the Company for the sublease of the office at 51 East Campbell Avenue will offset approximately 62% of the monthly rent payments due to the landlord under the Company’s lease for that space. During the three-month period ended September 30, 2017, the Company recorded a loss of $62,900 representing the total of the shortfall of monthly rent payments over the life of this sublease. As of September 30, 2017, $24,900 remains on the balance sheet as a lease liability to be amortized over the remaining 12 months of the sublease.

 

Incentives that we received upon entering into the S. Bascom Avenue lease agreement are recognized on a straight-line basis as a reduction to rent over the term of the lease. We record the unamortized portion of these incentives as a part of deferred rent in current or long-term liabilities, as appropriate.

 

10

 

 

Long-Lived Assets

 

Long-lived assets are assessed for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, whenever we have committed to a plan to dispose of the assets or, at a minimum, annually. Typically, for long-lived assets to be held and used, measurement of an impairment loss is based on the fair value of such assets, with fair value being determined based on appraisals, current market value, comparable sales value, and discounted future cash flows, among other variables, as appropriate. Assets to be held and used (which assets are affected by an impairment loss) are depreciated or amortized at their new carrying amount over their remaining estimated life; assets to be sold or otherwise disposed of are not subject to further depreciation or amortization. During the three month and nine month period ended September 30, 2016 we determined that an impairment of $0 and $15,500, respectively, existed with certain capitalized software development costs associated with our hopTo Work product and recognized that cost as part of cost of revenue. No such impairment charge was recorded during either of the three or nine-month periods ended September 30, 2017.

 

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.

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the three-month periods ended September 30, 2017 and 2016:

 

   Beginning
Balance
   Charge
Offs
   Recoveries   Provision   Ending
Balance
 
2017  $15,300   $   $   $(10,900)  $4,400 
2016   14,900            (9,600)   5,300 

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the nine-month periods ended September 30, 2017 and 2016

 

   Beginning
Balance
   Charge
Offs
   Recoveries   Provision   Ending
Balance
 
2017  $7,700   $   $   $(3,300)  $4,400 
2016   17,300            (12,000)   5,300 

 

Concentration of Credit Risk

 

For the three and nine-month periods ended September 30, 2017 and 2016 respectively, we considered the customers listed in the following tables to be our most significant customers. The tables set forth the percentage of sales attributable to each customer during the periods presented, and the respective customer’s ending accounts receivable balance as a percentage of reported accounts receivable, net, as of September 30, 2017 and 2016.

 

   Three Months Ended
September 30, 2017
   As of
September 30, 2017
   Three Months Ended
September 30, 2016
   As of
September 30, 2016
 
Customer  Sales   Accounts
Receivable
   Sales   Accounts
Receivable
 
Centric   9.5%   14.3%   2.0%   3.8%
Elosoft   13.6%   26.5%   10.8%   10.4%
Uniface   15.1%   27.0%   6.0%   16.5%
Total   38.2%   67.8%   18.8%   30.7%

 

11

 

 

   Nine Months Ended
September 30, 2017
   As of
September 30, 2017
   Nine Months Ended
September 30, 2016
   As of
September 30, 2016
 
Customer  Sales   Accounts
Receivable
   Sales   Accounts
Receivable
 
Centric   6.9%   14.3%   5.4%   3.8%
Elosoft   13.8%   26.5%   8.9%   10.4%
Uniface   8.2%   27.0%   6.1%   16.5%
Total   28.9%   67.8%   20.4%   30.7%

 

Fair Value of Financial Instruments

 

The fair value of our accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the relative short maturities of these items.

 

The fair value of warrants at issuance and for those recorded as a liability at each reporting date are determined in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement,” which establishes a fair value hierarchy that prioritizes the assumptions (inputs) to valuation techniques used to price assets or liabilities that are measured at fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The guidance for fair value measurements requires that assets, liabilities and certain equity instruments measured at fair value be classified and disclosed in one of the following categories:

 

  Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
     
  Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

 

Recent Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Subsequently FASB has released several updates to ASU 2014-09 including ASU 2016- 20, ASU 2016-12, ASU-2016-10, ASU-2016-08, and ASU-2015-14. The effective date for ASU 2014-09 will be the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. During the three-month period ended June 30, 2017, the Company completed a detailed review of the Topic 606 standard relative to our revenue recognition policies and practice. That review is still in process and the Company expects that it will be completed by November 30, 2017. However, the Company continues to believe that adoption of this standard will not have a material effect on either our historical financial results or future financial results.

 

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4. Property and Equipment

 

Property and equipment was:

 

   September 30, 2017   December 31, 2016 
Equipment  $184,600   $258,700 
Furniture   3,600    190,600 
Leasehold improvements   167,600    167,600 
    355,800    616,900 
Less: accumulated depreciation and amortization   316,000    473,600 
   $39,800   $143,300 

 

Aggregate property and equipment depreciation and amortization expense was $8,900 and $42,200 during the three-month period and nine-month ended September 30, 2017, respectively, and $21,200 and $70,800 during the same periods ended September 30, 2016. During the nine-month periods ended September 30, 2017 and 2016, we disposed of equipment and furniture with a combined net book value of $61,300 and $20,100, respectively.

 

5. Stock-Based Compensation

 

The following table summarizes the stock-based compensation expense, net of amounts capitalized, we recorded in our Unaudited Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2017 and 2016, respectively, by classification:

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
Statement of Operations Classification  2017   2016   2017   2016 
Costs of revenue  $   $2,200   $100   $5,400 
Selling and marketing expense       4,600    200    69,000 
General and administrative expense   (4,100)   40,500    14,100    135,500 
Research and development expense       26,400    100    93,500 
   $(4,100)  $73,700   $14,500   $303,400 

 

6. Revenue

 

Revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
Revenue  2017   2016   Dollars   Percent 
Software Licenses                    
Windows  $360,300   $222,500   $137,800    61.9%
UNIX/Linux   71,200    64,000    7,200    11.3%
    431,500    286,500    145,000    50.6%
Software Service Fees                    
Windows   445,200    444,700    500    0.1%
UNIX/Linux   131,600    149,400    (17,800)   -11.9%
    576,800    594,100    (17,300)   -2.9%
Other   17,600    17,900    (300)   -1.7%
Total Revenue  $1,025,900   $898,500   $127,400    14.2%

 

Revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

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       2017 Over (Under) 2016 
Revenue  2017   2016   Dollars   Percent 
Software Licenses                    
Windows  $939,800   $774,200   $165,600    21.4%
UNIX/Linux   223,300    209,200    14,100    6.7%
    1,163,100    983,400    179,700    18.3%
Software Service Fees                    
Windows   1,324,300    1,367,200    (42,900)   -3.1%
UNIX/Linux   403,400    473,700    (70,300)   -14.8%
    1,727,700    1,840,900    (113,200)   -6.1%
Other   42,400    40,100    2,300    5.7%
Total Revenue  $2,933,200   $2,864,400   $68,800    2.4%

 

7. Cost of Revenue

 

Cost of revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
   2017   2016   Dollars   Percent 
Software service costs  $13,000   $2,100   $10,900    519.0%
Software product costs   2,900    6,200    (3,300)   -53.2%
Total Cost of Revenue  $15,900   $8,300   $7,600    91.6%

 

Cost of revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
   2017   2016   Dollars   Percent 
Software service costs  $44,000   $78,100   $(34,100)   -43.7%
Software product costs   9,000    51,400    (42,400)   -82.5%
Total Cost of Revenue  $53,000   $129,500   $(76,500)   -59.1%

 

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8. Commitments and Contingencies

 

On February 1, 2014, we relocated our corporate offices to a larger suite within our landlord’s office complex on South Bascom Avenue in Campbell, California. We are currently leasing 10,659 square feet under a five-year lease that, unless renewed, will expire in October 2018.

 

On August 11, 2015 we entered into a sublease agreement to sublease the entirety of the South Bascom Avenue office space to a third party. The term of the sublease extends from November 1, 2015 through the end of our office lease term for that space in October 2018. The monthly rent payments due to hopTo under this sublease fully offset the monthly rent payments due to the landlord under hopTo’s lease for that space.

 

On August 24, 2015, we entered into a new office lease for our corporate headquarters at 51 East Campbell Avenue in Campbell, California which was better suited to our California operations and resulted in significant monthly savings. The term of this lease is from October 1, 2015 through September 30, 2018.

 

On April 28, 2017 we entered into a sublease agreement to sublease the entirety of the leased space at 51 East Campbell Avenue to a third party. The term of the sublease began on June 1, 2017 and extends through the end of our office lease term for that space. The monthly rent payments due to hopTo will offset approximately 62% of the monthly rent payments due to the landlord under hopTo’s lease for that space. (See Deferred Rent section of Note 3.)

 

The following table sets forth the net minimum lease payments we will be required to make throughout the remainder of these leases:

 

   Lease
Payments
   Sublease Receipts   Total 
Remainder of 2017  $150,200   $(179,900)  $(29,700)
2018   475,400    (420,800)   54,600 
   $625,600   $(600,700)  $24,900 

 

During the three-month period ended September 30, 2016, our CEO and CFO voluntarily agreed with our board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company can reasonably pay such compensation upon approval by the board of directors. The deferred salaries are recorded as a component of accounts payable and accrued expenses on the Condensed Consolidated Balance Sheet. See Note 12 – Subsequent Events.

 

During the three and nine-month periods ended September 30, 2017, respectively, we reported non-cash expense of $0 and $284,000, respectively, related to potential liquidated damages resulting from delays in filing registration statements for shares and shares underlying warrants for certain of the private placements that the Company closed in prior periods. There were no such expenses recorded in the comparable prior year period. We are in the process of seeking waivers from shareholders for such liquidated damages. The potential liquidated damages is reported as other current liabilities on the condensed consolidated balance sheet and as a component of general and administrative expense on the condensed consolidated statements of operations.

 

9. Supplemental Disclosure of Cash Flow Information

 

We disbursed $200 and $800 for the payment of interest expense during the nine-month periods ended September 30, 2017 and 2016, respectively.

 

We disbursed $2,800 and $2,300 for the payment of foreign income taxes associated with the operation of our Israeli subsidiary during the nine-month periods ended September 30, 2017 and 2016, respectively.

 

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10. Earnings (Loss) Per Share

 

Earnings or loss per share is calculated by dividing the net income or loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share (“Diluted EPS”) is calculated by dividing the net income or loss for the period by the total of the weighted average number of shares of common stock outstanding during the period plus the effects of any dilutive securities. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of such potential shares of common stock would have an anti-dilutive effect. During all periods presented in our Condensed Consolidated Statements of Operations, potentially dilutive securities included shares of common stock potentially issuable upon exercise of stock options, release of unvested restricted stock awards and exercise of warrants. Diluted EPS excludes the impact of potential issuance of shares of common stock related to our stock options in periods in which the exercise price of the stock option is greater than the average market price of our common stock during such periods.

 

For the three and nine-month periods ended September 30, 2017 and for the three and nine-month periods ended September 30, 2016, 1,375,509 and 1,412,507 shares of common stock equivalents, respectively, were excluded from the computation of dilutive loss per share since their effect would be anti-dilutive.

 

11. Segment Information

 

Revenue by country for the three-month and nine-month periods ended September 30, 2017 and 2016 was as follows:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
Revenue by Country  2017   2016   2017   2016 
United States  $292,100   $370,800   $922,300   $1,158,100 
Brazil   220,200    122,900    582,600    418,100 
Other Countries   513,600    404,800    1,428,200    1,288,200 
Total  $1,025,900   $898,500   $2,933,100   $2,864,400 

 

12. Subsequent Events

 

On October 10, 2017, the Company and salesforce.com entered into a Patent Purchase Agreement (effective as of October 5, 2017), pursuant to which the Company sold seven of its patents for an aggregate consideration of $400,000, and also received, subject to various terms, conditions and limitations, a license back of those patents. The patents sold were U.S. Patent numbers: 9395826, 9398111, 9419848, 8745280, 8892782, 8738814 and 8856907.

 

On October 25, 2017, the board of directors of the Company determined that the financial status of the Company had improved from the financial status of the Company during the three month period ended September 30, 2016, when the Company’s CEO and CFO voluntarily agreed with the board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company could reasonably pay such compensation upon approval by the board of directors. Accordingly, the board of directors determined that it was reasonable for the Company to pay 50% of this deferred salary and such payments were made to the CFO and CEO on October 30, 2017.

 

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Update on HopTo Plans

 

As of Q4 2016, we have effectively ceased all of our sales, marketing and development efforts for the hopTo products, and at this time we do not expect any meaningful revenues from these products in the foreseeable future.

 

We continue to actively operate our GO-Global business and we are currently evaluating ways to enhance its performance.

 

Other than recent sales of selected patents (see Note 12 to our Notes to Unaudited Condensed Consolidated Financial Statements), we continue to own all hopTo-related and GO-Global related intellectual property including source-code, related patents, and the relevant trademarks. We continue to believe that we may be able to extract value from these assets and are currently working to do so at this time. For detailed information on the hopTo products and technologies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on April 7, 2017 as well as our other SEC filings which are available at www.sec.gov.

 

Although there is no certainty as to timing or success of these efforts to extract value from these assets, and stockholders should not place any significant reliance on the outcome of such efforts unless and until definitive agreements are reached, this may include additional sale of certain of our hopTo software products, the sale of patents, and the monetization of the GO-Global business or some combinations of these transactions. (See Notes 2 and 12 to our Notes to Unaudited Condensed Consolidated Financial Statements).

 

The following description of our business and business opportunities is expressly qualified by the preceding statement and the going concern disclosure in Note 2 to our Unaudited Condensed Consolidated Financial Statements.

 

Introduction

 

We 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. Our application publishing software solutions are sold under the brand name GO-Global, which is our sole revenue source at this time. GO-Global is an application access solution for use and/or resale 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.

 

Since 2012 we have also been developing several products in the field of software productivity for mobile devices such as tablets and smartphones, which have been marketed under the hopTo brand.

 

The hopTo products were originally marketed to consumers and were later also marketed to small and medium sized businesses and enterprise level customers under the name hopTo Work. hopTo Work allows customers to instantly transform their legacy applications to become touch friendly on modern mobile devices. During 2015 and 2016 we also worked to integrate hopTo Work with certain software products offered by Citrix Systems.

 

Over the years, we have also made significant investments in intellectual property (“IP”). We have filed many patents designed to protect the new technologies embedded in hopTo.

 

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Corporate Background

 

We are a Delaware corporation, founded in May 1996. Our headquarters are located at 6 Loudon Road, Suite 200, Concord, New Hampshire, 03301 and our phone number is 1-800-472-7466. Our phone number for local and international calls is 408-688-2674. Additionally, we have remote employees located in various states, as well as internationally in the United Kingdom and Israel. Our corporate Internet Website is http://www.hopto.com. The information on our website is not part of this quarterly report.

 

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the SEC under sections 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge on our corporate Internet Website: www.hopto.com,, our our home page, click “Financial Reporting”) as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.

 

Our Intellectual Property

 

We believe that intellectual property (IP) is a business tool that potentially maximizes our competitive advantages and product differentiation, grows revenue opportunities, encourages collaboration with key business partners, and protects our long-term growth opportunities. Strategic IP development is therefore a critical component of our overall business strategy. It is a business function that consistently interacts with our research and development, product development, and marketing initiatives to generate further value from those operations.

 

We rely primarily on trade secret protection, copyright law, confidentiality, and proprietary information agreements to protect our proprietary technology and registered trademarks. Despite our precautions, it may be possible for unauthorized third parties to copy portions of our products, or to obtain information we regard as proprietary. The loss of any material trade secret, trademark, trade name or copyright could have a material adverse effect on our results of operations and financial condition. We intend to defend our proprietary technology rights; however, we cannot give any assurance that our efforts to protect our proprietary technology rights will be successful.

 

We also currently hold rights to patents. We occasionally file patent applications to protect innovations arising from our research, development and design.

 

We do not believe our products infringe on the rights of any third parties, but we can give no assurance that third parties will not assert infringement claims against us in the future, or that any such assertion will not result in costly litigation or require us to obtain a license to proprietary technology rights of such parties.

 

ipCapital Group, Inc.

 

On October 11, 2011, we engaged ipCapital Group, Inc., or ipCapital, an affiliate of John Cronin, who is one of our directors, to assist us in the execution of our strategic decision to significantly strengthen, grow and commercially exploit our intellectual property assets. Our engagement agreement with ipCapital, which has been amended three times, affords us the right to request ipCapital to perform a number of diverse services, employing its proprietary processes and methodologies, to facilitate our ability to identify and extract from our current intellectual property base new inventions, potential patent applications, and marketing and licensing opportunities.

 

As a result of ipCapital’s work under the engagement agreement, as amended, as of November 14, 2017, 173 patent applications have been filed. Of these 173 applications, 53 patents have been granted by the United States Patent and Trademark Office (“USPTO”). Due to financial constraints on our operations, we have suspended patent prosecution activity other than to pay issuance fees for patents already approved by USPTO. As of November 14, 2017 there are no patent applications that remain pending with the USPTO. We do not expect to file more applications in 2017.

 

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Our GO-Global Software Products

 

Our GO-Global product offerings, which currently are our only revenue source, can be categorized into product families as follows:

 

  GO-Global for Windows: Allows access to Windows-based applications from remote locations and a variety of connections, including the Internet and dial-up connections. The Windows applications run on a central computer server along with GO-Global Windows Host software. This allows the applications to be accessed remotely via GO-Global Client software, or a Web browser, over many types of data connections, regardless of the bandwidth or operating system. Web-enabling is achieved without modifying the underlying application’s code or requiring costly add-ons.
     
  GO-Global for UNIX: Allows access to UNIX and Linux-based applications from remote locations and a variety of connections, including the Internet and dial-up connections. The UNIX/Linux applications run on a central computer server along with the GO-Global for UNIX Host software. This allows the applications to be accessed and run remotely via GO-Global Client software or a Web browser without having to modify the application’s code or requiring costly add-ons.
     
  GO-Global Client: We offer a range of GO-Global Client software that allows remote application access from a wide variety of local, remote and mobile platforms, including Windows, Linux, UNIX, Apple OS X and iOS, and Google Android. We plan to continue to develop GO-Global Client software for new portable and mobile devices.

 

We intend to continue to operate Go-Global, as it remains a viable stand-alone business and our sole revenue source at this time.

 

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 we make the estimates. Actual results may differ from these estimates. For a summary of our critical accounting policies, please refer to our 2016 10-K Report and Note 3 to our Notes to Unaudited Condensed Consolidated Financial Statements.

 

Results of Operations for the Three and Nine-Month Periods Ended September 30, 2017 and 2016

 

The following operating results should be read in conjunction with our critical accounting policies. See Note 3 to our Notes to Unaudited Condensed Consolidated Financial Statements.

 

Revenue

 

Revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
Revenue  2017   2016   Dollars   Percent 
Software Licenses                    
Windows  $360,300   $222,500   $137,800    61.9%
UNIX/Linux   71,200    64,000    7,200    11.3%
    431,500    286,500    145,000    50.6%
Software Service Fees                    
Windows   445,200    444,700    500    0.1%
UNIX/Linux   131,600    149,400    (17,800)   -11.9%
    576,800    594,100    (17,300)   -2.9%
Other   17,600    17,900    (300)   -1.7%
Total Revenue  $1,025,900   $898,500   $127,400    14.2%

 

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Revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
Revenue  2017   2016   Dollars   Percent 
Software Licenses                    
Windows  $939,800   $774,200   $165,600    21.4%
UNIX/Linux   223,300    209,200    14,100    6.7%
    1,163,100    983,400    179,700    18.3%
Software Service Fees                    
Windows   1,324,300    1,367,200    (42,900)   -3.1%
UNIX/Linux   403,400    473,700    (70,300)   -14.8%
    1,727,700    1,840,900    (113,200)   -6.1%
Other   42,400    40,100    2,300    5.7%
Total Revenue  $2,933,200   $2,864,400   $68,800    2.4%

 

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 (a “stocking reseller”) purchase software licenses that they hold in inventory until they are resold to the ultimate end user. We defer recognition of revenue from these sales (on our Condensed Consolidated Balance Sheet under the caption “Deferred Revenue”) until the stocking reseller sells the underlying software licenses to the ultimate end user. Consequently, if any of our significant stocking resellers materially change the rate at which they resell our software licenses to the ultimate end user, our software licenses revenue could be materially impacted.

 

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

 

Software license revenue from our Windows products increased for the three and nine-month periods ended September 30, 2017, as compared with the same periods of the prior year primarily due to higher license purchases from certain of our OEM partners and stocking resellers.

 

Software license revenue from our UNIX/Linux products increased during the three-month period ended September 30, 2017, as compared with the same period of the prior year, primarily due to higher revenue from certain of our telecommunications customers. Software licenses revenue from our UNIX/Linux products increased during the nine-month period ended September 30, 2017, as compared with the same period of the prior year, primarily due to higher revenue from certain U.S. government customers.

 

We expect aggregate GO-Global software license revenue for both Windows and UNIX in 2017 to be approximately the same as the license revenue levels for 2016.

 

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Software Service Fees

 

The decrease in software service fees revenue attributable to our Windows products, during the nine-month period ended September 30, 2017, as compared to the same period of the prior year, was primarily due to the timing of customer renewals of maintenance contacts.

 

The decrease in service fees revenue attributable to our UNIX products for the three and nine-month periods ended September 30, 2017, as compared with the same period of the prior year, was primarily the result of the lower level of our UNIX product sales during prior years and a resultant decrease in maintenance contract renewals. The majority of this decrease was attributable to our European telecommunications customers.

 

Due to the trends mentioned above we expect that software service fees for 2017 will be modestly lower than those for 2016.

 

Other

 

The increase in other revenue for the three and nine-month periods ended September 30, 2017, as compared with the same period of the prior year was primarily due to increase in professional services and private labeling fees.

 

Costs of Revenue

 

Costs of revenue are comprised primarily of software service costs, which represent the costs of customer service, and software product costs, which are primarily comprised of the amortization of capitalized software development costs, and costs associated with licenses for third party software included in our product offerings. We incur no shipping or packaging costs as all of our deliveries are made via electronic means over the Internet.

 

Under GAAP, development costs for new product development, after technological feasibility is established, are recorded as “capitalized software” on our Condensed Consolidated Balance Sheet. Such capitalized costs are subsequently amortized as cost of revenue (software product costs) over the shorter of three years or the remaining estimated life of the product. During the three-month and nine-month periods ended September 30, 2017 we did not capitalize or impair any software development costs. During the three-month and nine-month periods ended September 30, 2016, we capitalized $0 software development costs and impaired $15,000 associated with the hopTo Work product during the three-month period ended June 30, 2016.

 

Amortization of capitalized software development costs was $0 and $200 during the three-month periods ended September 30, 2017 and 2016, respectively, and $0 and $5,300 during the nine-month periods ended September 30, 2017 and 2016, respectively.

 

Cost of revenue was 1.5% and 0.9% of total revenue for the three months ended September 30, 2017 and 2016, respectively, and 1.8% and 4.5% of total revenue for the nine months ended September 30, 2017 and 2016, respectively.

 

Cost of revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
   2017   2016   Dollars   Percent 
Software service costs  $13,000   $2,100   $10,900    519.0%
Software product costs   2,900    6,200    (3,300)   -53.2%
   $15,900   $8,300   $7,600    91.6%

 

Cost of revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

       2017 Over (Under) 2016 
   2017   2016   Dollars   Percent 
Software service costs  $44,000   $78,100   $(34,100)   -43.7%
Software product costs   9,000    51,400    (42,400)   -82.5%
   $53,000   $129,500   $(76,500)   -59.1%

 

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The increase in software service costs for the three-month period ended September 30, 2017 was due to a reclassification of $15,500 of customer supports costs that was allocated from Selling and Marketing expense to software service costs until three-month period ended December 31, 2016, partially offset by a decrease of $4,600 from lower customer support costs, as compared to the same periods of the prior year. The decrease in software service costs in the nine-month period ended September 30, 2017, as compared with the same periods of the prior year was primarily due to lower customer support costs associated with GoGlobal. Upon release of the commercial versions of hopTo and hopTo Work, we began charging costs associated with supporting the products to costs of revenue. We expect software service costs for 2017 to be lower than those for 2016 as we have been able to reduce headcount costs in this area due to a lower level of effort required.

 

The decreases in software product costs for the three-month and nine-month periods ended September 30, 2017, as compared with the same periods of the prior year, was almost entirely due to decreased amortization of capitalized software development costs. We expect that software costs of revenue for 2017 will be lower than 2016 levels.

 

Selling and Marketing Expenses

 

Selling and marketing expenses primarily consist of employee costs, outside services, advertising, public relations and travel and entertainment expense.

 

Selling and marketing expenses for the three-month period ended September 30, 2017 decreased by $6,500, or 6.9%, to $87,400, from $93,900 for the same period of 2016, which represented approximately 8.5% and 10.5% of revenue during these periods, respectively. Selling and marketing expenses for the nine-month period ended September 30, 2017 decreased by $405,200 or 61.0% to $259,400 from $664,600 for the same period in 2016, which represented approximately 8.8% and 23.2% of revenue during those periods, respectively.

 

The decreases in selling and marketing expenses was due to a combination of lower headcount and a decrease in headcount and promotional costs associated with hopTo Work as we have suspended all sales and marketing activity for that product.

 

We expect to maintain our sales and marketing efforts in 2017 for anticipated GO-Global releases at a level consistent with the second half of 2016; accordingly, we expect 2017 sales and marketing expenses to be lower than 2016.

 

General and Administrative Expenses

 

General and administrative expenses primarily consist of employee costs, depreciation and amortization, 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 debts expense.

 

General and administrative expenses decreased by $614,900, or 74.8%, to $206,700, for the three-month period ended September 30, 2017, from $821,600 for the same period of 2016, which represented approximately 20.1% and 91.4% of revenue during these periods, respectively.

 

General and administrative expenses decreased by $845,700, or 40%, to $1,268,900 for the nine-month period ended September 30, 2017, from $2,114,600 for the same period of 2016, which represented approximately 43.3% and 73.8% of revenue during these periods, respectively.

 

The decreases in general and administrative expense in the three-month and nine-month period ended September 30, 2017, as compared with the same periods of the prior year, were due to a combination of lower administrative salary expense associated with part-time status of our Chief Financial Officer effective April 1, 2017 and the resignation of our Chief Executive Officer in August 2017, combined with the elimination of accruals for potential liquidated damages that had been made in the prior year periods due to delays in filing registration statements for shares and shares underlying warrants for certain of the private placements that the Company closed in prior periods. There were no such liquidated damages accruals recorded in the comparable current year periods as the Company filed the necessary registration statement in May 2017 eliminating the further need for such accruals. These lower expenses were also due to a combination of decreased rent expense associated with lower net operating leases, decreased legal expenses associated with activity related to our patents, lower stock compensation expense associated with the termination of headcount and other lower costs associated with investor relations, and decreased outside services expense.

 

22

 

 

In 2017, we intend to continue cost controls and therefore expect that our 2017 general and administrative costs will be lower than those for 2016.

 

Research and Development Expenses

 

Research and development expenses consist primarily of employee costs, payments to contract programmers, travel and entertainment for all our engineers, and all rent for our leased engineering facilities.

 

Research and development expenses decreased by $107,700, or 21.9%, to $383,800, for the three-month period ended September 30, 2017, from $491,500 for the same period of 2016, which represented approximately 37.4% and 54.7% of revenue for these periods, respectively.

 

Research and development expenses decreased by $737,000, or 39.6%, to $1,123,900, for the nine-month period ended September 30, 2017, from $1,860,900 which represented approximately 38.3% and 65.0% of revenue for these periods, respectively.

 

The decrease in research and development expense is primarily due to lower employee costs associated with lower headcount primarily due to the suspension of efforts on our hopTo Work products, lower payments to contract programmers, and lower operating rent expense.

 

In 2017, we expect to maintain a level of research and development resource lower than the second half of 2016. We therefore expect 2017 research and development expenses, net of capitalized software developments costs, to be lower than 2016 levels.

 

Change in Fair Value of Warrants Liability

 

During the three-month periods and nine-months period ended September 30, 2017, we reported no income or expense due to the change in fair value of our warrants liability as the applicable warrants expired during September and October of 2016. During the same periods of the prior year, we reported non-cash income of $54,400 and $29,300, respectively. Such changes resulted from our liability warrants which expired in the fourth quarter of 2016.

 

Net Profit / (Loss)

 

Based on the foregoing, we reported net profit of $253,600 and a net loss of $462,000 for the three-month periods ended September 30, 2017 and 2016 respectively. Additionally, we reported net profit of $87,400 and a net loss of $1,874,500 for the nine-month periods ended September 30, 2017 and 2016, respectively.

 

Liquidity and Capital Resources

 

Our reported net profit for the nine-month period ended September 30, 2017 of $87,400 included the following non-cash items: depreciation and amortization of $42,200 which was primarily related to depreciation of fixed assets; loss of $60,400 from disposal of fixed assets; loss of $62,900 from sublease; stock-based compensation expense of $14,500; interest expense of $200 from capital lease equipment.

 

For the nine-month period ended September 30, 2017, we disposed of some capitalized equipment at a loss of $60,400 which had net book value of $61,300. We sold some non-capitalized equipment for $900.

 

23

 

 

For the nine-month period ended September 30,2017, we subleased our East Campbell office at a loss of $62,900 with the remaining $46,800 lease amount due to the landlord.

 

See the Update on HopTo Plans at the beginning of this section for a discussion of our future plans and option we are considering.

 

Although for the three and nine months ended September 30, 2017, respectively, the Company generated net profits of $253,400 and $87,400, respectively, historically we have incurred significant net losses since our inception. At September 30, 2017, the Company had an accumulated deficit of $82,362,400 and a working capital deficit of $2,311,200. We were unable to generate meaningful revenue from our hopTo Work business and our most recent estimation is that revenue from this product is unlikely in any reasonable time frame. We have, however, recently improved our revenue and operating results from our legacy GO-Global business. If this trend continues, subject to our contingent liabilities, we believe we would have sufficient capital resources to fund our GO-Global business (which is our only active business) for at least the next 12 months. However, due to the uncertainty at the current time about this trend and the outcome of our contingent liabilities, we have determined that our cash resources may not be sufficient to fund our business for at least the next 12 months. The Company’s ability to continue as a going concern is dependent on our ability to continue to generate revenue from our legacy GO-Global business and to raise additional capital through the issuance of new equity, debt financing, or from the sale of certain assets to meet short and long-term operating requirements.

 

If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to the Company’s common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve our working capital position. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.

 

These factors raise substantial doubt about our ability to continue as a going concern. (See Note 2 to our Notes to Unaudited Condensed Consolidated Financial Statements).

 

In order to maintain operations, we previously implemented significant expense reductions, including a limited number of employee layoffs, and have decided to implement further cost cuts and employment reductions. During the three month period ended September 30, 2016, our CEO and CFO voluntarily agreed with our board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company can reasonably pay such compensation upon approval by the board of directors. (See Note 12 to our Notes to Unaudited Condensed Consolidated Financial Statements).

 

Although maintaining our SEC filing status is a significant expense, we currently intend to maintain such status; however, we consider all options to preserve value for shareholders, including potentially suspending or terminating our filing status.

 

We have worked extensively to explore additional sources of capital including the issuance of new shares, securing debt financing, and the sale of assets including certain of our software products and patents. Although this process is ongoing and we are in active discussions with multiple parties, there is no guarantee that they will result in transactions that are sufficient to provide the Company with the required liquidity to remove the substantial doubt as to our ability to continue as a going concern. See Note 12 – Subsequent Events. We are also in discussions with some parties about the possibility of other strategic transactions although there is no guarantee that these discussions will result in an actual transaction.

 

Cash

 

As of September 30, 2017, our cash balance was $551,300, as compared with $546,200 as of December 31, 2016, an increase of $5,100, or 0.9%. The slight increase primarily resulted from the collection of accounts receivable partially offset by the cash used in our operations.

 

24

 

 

Accounts Receivable, net

 

At September 30, 2017 and December 31, 2016, we reported accounts receivable, net, of $353,300 and $355,300, respectively. Such amounts were reported net of the allowance for doubtful accounts, which allowances totaled $4,400 and $7,700 at September 30, 2017 and December 31, 2016, respectively. The slight decrease in accounts receivable, net, was mainly due to timing of sales and collections during the three-month period ended September 30, 2017, as compared with the three-month period ended December 31, 2016. We collect the significant majority of our quarter-end accounts receivable during the subsequent quarter; accordingly, increases or decreases in accounts receivable from one period to the next tends to be indicative of the trend in our sales from one period to the next. From time to time, we could have individually significant accounts receivable balances due us from one or more of our significant customers. If the financial condition of any of these significant customers should deteriorate, our operating results could be materially affected.

 

Working Capital

 

As of September 30, 2017, we had current assets of $931,400 and current liabilities of $3,242,600, which netted to working capital deficit of $2,311,200. Included in current liabilities was the current portion of deferred revenue of $1,579,500

 

25

 

 

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 September 30, 2017.

 

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 September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As disclosed in a Form 8-K filed with the SEC on August 7, 2017, Mr. Casabonne has agreed to remain as interim CEO and CFO on a part-time month-to-month basis. Should Mr. Casabonne decide to resign these positions the board would need to replace him for these roles.

 

26

 

 

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, 2016, which was filed with the Securities and Exchange Commission on April 7, 2017.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

We did not sell any unregistered securities during the quarter ended September 30, 2017.

 

ITEM 3. Defaults Upon Senior Securities

 

Not applicable

 

ITEM 4. Mine Safety Disclosures

 

Not applicable

 

ITEM 5. Other Information

 

Not applicable.

 

ITEM 6. 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 (furnished, not filed)
     
101*   The following financial information from hopTo Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016, (ii) Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2017 and 2016, (iii) Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the Nine Months ended September 30, 2017 and 2016, (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2017 and 2016, (v) Notes to Unaudited Condensed Consolidated Financial Statements.

 

* Furnished, not filed

 

27

 

 

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)

 

  /s/ Jean-Louis Casabonne
  Jean-Louis Casabonne
 

Interim Chief Executive Officer (Principal Executive Officer) and

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

  November 14, 2017

 

28

 

 

EX-31 2 ex-31.htm

 

Exhibit 31

 

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Jean-Louis Casabonne, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of hopTo Inc. (“registrant”);
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

    (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
       
    (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
       
    (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       
    (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or person performing the equivalent functions):

 

    (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
       
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 14, 2017

  /s/ Jean-Louis Casabonne
  Jean-Louis Casabonne
 

Interim Chief Executive Officer and

Chief Financial Officer

 

 
 

 

 

EX-32 3 ex-32.htm

 

Exhibit 32

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of hopTo Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jean-Louis Casabonne, Interim Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Jean-Louis Casabonne
  Jean-Louis Casabonne
  Interim Chief Executive Officer and Chief Financial Officer
  November 14, 2017

 

 
 
 

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Document and Entity Information - shares
9 Months Ended
Sep. 30, 2017
Nov. 14, 2017
Document And Entity Information    
Entity Registrant Name hopTo Inc.  
Entity Central Index Key 0001021435  
Document Type 10-Q  
Document Period End Date Sep. 30, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   9,804,400
Trading Symbol HPTO  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2017  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Current Assets:    
Cash $ 551,300 $ 546,200
Accounts receivable, net 353,300 355,300
Prepaid expenses 26,800 38,700
Total Current Assets 931,400 940,200
Property and equipment, net 39,800 143,300
Other assets 109,000 109,000
Total Assets 1,080,200 1,192,500
Current Liabilities:    
Accounts payable and accrued expenses 759,700 975,800
Deferred rent 23,400 24,100
Capital lease 6,800
Lease liability 24,900
Deferred revenue 1,579,500 1,759,000
Other current liabilities 855,100 571,100
Total Current Liabilities 3,242,600 3,336,800
Deposit liability 93,500 81,400
Deferred revenue 1,523,600 1,694,600
Deferred rent 41,500 2,600
Total Liabilities 4,901,200 5,115,400
Commitments and contingencies
Stockholders' Deficit:    
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding
Common stock, $0.0001 par value, 195,000,000 shares authorized, 9,804,400 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 14,700 14,700
Additional paid-in capital 78,526,700 78,512,200
Accumulated deficit (82,362,400) (82,449,800)
Total Stockholders' Deficit (3,821,000) (3,922,900)
Total Liabilities and Stockholders' Deficit $ 1,080,200 $ 1,192,500
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Preferred stock par value $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock par value $ 0.0001 $ 0.0001
Common stock, shares authorized 195,000,000 195,000,000
Common stock, shares issued 9,804,400 9,804,400
Common stock, shares outstanding 9,804,400 9,804,400
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]        
Revenue $ 1,025,900 $ 898,500 $ 2,933,200 $ 2,864,400
Costs of revenue 15,900 8,300 53,000 129,500
Gross profit 1,010,000 890,200 2,880,200 2,734,900
Operating expenses:        
Selling and marketing 87,400 93,900 259,400 664,600
General and administrative 206,700 821,600 1,268,900 2,114,600
Research and development 383,800 491,500 1,123,900 1,860,900
Total operating expenses 677,900 1,407,000 2,652,200 4,640,100
Gain / (loss) from operations 332,100 (516,800) 228,000 (1,905,200)
Other income (expense):        
Change in fair value of warrants liability 54,400 29,300
Other income (expense), net (63,700) 1,100 (123,800) (3,700)
Loss from operations before provision for income tax 268,400 (461,300) 104,200 (1,872,200)
Provision for income tax 14,800 700 16,800 2,300
Net profit / (loss) $ 253,600 $ (462,000) $ 87,400 $ (1,874,500)
Basic and diluted earnings / (loss) per share $ 0.03 $ (0.05) $ 0.01 $ (0.19)
Average weighted common shares outstanding - basic and diluted 9,804,400 9,784,163 9,804,400 9,763,111
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Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Total
Beginning balance at Dec. 31, 2015 $ 14,600 $ 78,189,300 $ (80,596,900) $ (3,965,400)
Beginning balance, shares at Dec. 31, 2015 9,731,233      
Employee stock option issuances
Employee stock option issuances, shares 1,800      
Vesting of restricted stock awards $ 100
Vesting of restricted stock awards, shares 71,429      
Stock-based compensation expense 303,400 303,400
Company payment of employee taxes for stock-based compensation (2,700) (2,700)
Proceeds from exercise of employee stock options 1,500 1,500
Other Rounding (200)   (200)
Net profit / (loss) (1,874,500) (1,874,500)
Ending balance at Sep. 30, 2016 $ 14,700 78,491,300 (82,471,400) (3,965,400)
Ending balance, shares at Sep. 30, 2016 9,804,400      
Beginning balance at Dec. 31, 2016 $ 14,700 78,512,200 (82,449,800) (3,922,900)
Beginning balance, shares at Dec. 31, 2016 9,804,400      
Stock-based compensation expense 14,500 14,500
Net profit / (loss) 87,400 87,400
Ending balance at Sep. 30, 2017 $ 14,700 $ 78,526,700 $ (82,362,400) $ (3,821,000)
Ending balance, shares at Sep. 30, 2017 9,804,400      
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash Flows Provided By (Used In) Operating Activities:    
Net profit / (loss) $ 87,400 $ (1,874,500)
Adjustments to reconcile net profit/loss to net cash provided by (used in) operating activities:    
Depreciation and amortization 42,200 76,200
Write-down of capitalized purchased technology 15,500
Stock-based compensation expense 14,500 303,400
Company payment of employee taxes for stock-based compensation (2,700)
Change in fair value of derivative instruments - warrants (29,300)
Accretion of warrants liability for consulting services (2,300)
Changes in severance liability (5,900)
Changes in deferred rent 23,200
Changes to allowance for doubtful accounts (3,300) (12,000)
Revenue deferred to future periods 1,828,500 1,955,700
Recognition of deferred revenue (2,179,000) (2,478,800)
Loss / (gain) on disposal of fixed assets 60,400 (3,200)
Loss on sublease 63,100
Interest accrued for capital lease 200 800
Changes in operating assets and liabilities:    
Accounts receivable 5,300 296,400
Prepaid expenses 11,900 (40,900)
Accounts payable and accrued expenses (216,100) (127,300)
Deposit liability 12,100
Other liabilities 284,000 392,900
Net Cash Provided By (Used In) Operating Activities 11,200 (1,431,000)
Cash Flows Provided By (Used In) Investing Activities:    
Proceeds from sale of equipment 900 23,300
Cash Flows Provided By (Used In) Financing Activities:    
Proceeds from exercise of employee stock options 1,500
Payment for capital lease (7,000) (7,000)
Net Cash Provided By (Used In) Financing Activities (7,000) (5,500)
Net Increase (Decrease) in Cash 5,100 (1,413,200)
Cash - Beginning of Period 546,200 1,777,300
Cash - End of Period $ 551,300 $ 364,100
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Basis of Presentation
9 Months Ended
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

1. Basis of Presentation

 

The unaudited condensed consolidated financial statements include the accounts of hopTo Inc. and its subsidiaries (collectively, “we”, “us”,”our” or the “Company”); significant intercompany accounts and transactions are eliminated upon consolidation. The unaudited condensed 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 condensed consolidated financial statements do not include all information and footnote disclosures required in annual financial statements.

 

The unaudited condensed 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, 2016, which was filed with the SEC on April 7, 2017 (“2016 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, 2017 or any future period.

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Going Concern and Management's Liquidity Plans
9 Months Ended
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern and Management's Liquidity Plans

2. Going Concern and Management’s Liquidity Plans

 

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Accordingly, the condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Although for the three and nine months ended September 30, 2017, respectively, the Company generated net profits of $253,600 and $87,400, respectively, historically we have incurred significant net losses since our inception. At September 30, 2017, the Company had an accumulated deficit of $82,362,400 and a working capital deficit of $2,311,200. We were unable to generate meaningful revenue from our hopTo Work business and our most recent estimation is that revenue from this product is unlikely in any reasonable time frame. We have, however, recently improved our revenue and operating results from our legacy GO-Global business. If this trend continues, subject to our contingent liabilities, we believe we would have sufficient capital resources to fund our GO-Global business (which is our only active business) for at least the next 12 months. However, due to the uncertainty at the current time about this trend and the outcome of our contingent liabilities, we have determined that our cash resources may not be sufficient to fund our business for at least the next 12 months. The Company’s ability to continue as a going concern is dependent on our ability to continue to generate revenue from our legacy GO-Global business and to raise additional capital through the issuance of new equity, debt financing, or from the sale of certain assets to meet short and long-term operating requirements.

 

If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to the Company’s common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve our working capital position. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.

 

These factors raise substantial doubt about our ability to continue as a going concern.

  

In order to maintain operations, we previously implemented significant expense reductions, including a limited number of employee layoffs, and continue to implement further costs and employment reductions. During the three month period ended September 30, 2016, our CEO and CFO voluntarily agreed with our board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company can reasonably pay such compensation upon approval by the board of directors. See Note 12 – Subsequent Events.

 

Although maintaining our SEC filing status is a significant expense, we currently intend to maintain such status; however, we consider all options to preserve value for shareholders, including potentially suspending or terminating our filing status.

 

We have worked extensively to explore additional sources of capital including the issuance of new shares, securing debt financing, and the sale of assets including certain software products and patents. Although this process is ongoing and we are in active discussions with multiple parties, there is no guarantee that they will result in transactions that are sufficient to provide the Company with the required liquidity to remove the substantial doubt as to our ability to continue as a going concern. See Note 12 – Subsequent Events. We are also in discussions with some parties about the possibility of other strategic transactions although there is no guarantee that these discussions will result in an actual transaction. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of the uncertainties set forth above.

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Significant Accounting Policies
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Significant Accounting Policies

3. Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires us 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 reporting period. These estimates include: the amount of stock-based compensation expense; the allowance for doubtful accounts; the estimated lives, valuation, and amortization of intangible assets (including capitalized software); depreciation of long-lived assets; valuation of warrants; post-employment benefits, and accruals for liabilities. While we believe that such estimates are fair, actual results could differ materially from those estimates.

 

Revenue Recognition

 

We market and license our products indirectly through channel distributors, independent software vendors (“ISVs”), value-added resellers (“VARs”) (collectively, “resellers”) and directly to 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.

 

Software license revenues are recognized when:

 

  Persuasive evidence of an arrangement exists, (i.e., when we sign a non-cancellable license agreement wherein the customer acknowledges an unconditional obligation to pay, or upon receipt of the customer’s purchase order), and
     
  Delivery has occurred or services have been rendered and there are no uncertainties surrounding product acceptance (i.e., when title and risk of loss have been transferred to the customer, which occurs when the media containing the licensed program(s) is provided to a common carrier or, in the case of electronic delivery, when the customer is given access to the licensed program(s)), and
     
  The price to the customer is fixed or determinable, as typically evidenced in a signed non-cancellable contract, or a customer’s purchase order, and
     
  Collectability is probable. If collectability is not considered probable, revenue is recognized when the fee is collected.

  

Revenue recognized on software arrangements involving multiple deliverables is allocated to each deliverable based on vendor-specific objective evidence (“VSOE”) or third party evidence of the fair values of each deliverable; such deliverables include licenses for software products, maintenance, private labeling fees, and customer training. We limit our assessment of VSOE for each deliverable to either the price charged when the same deliverable is sold separately or the price established by management having the relevant authority to do so, for a deliverable not yet sold separately.

 

If sufficient VSOE of the fair value does not exist so as to permit the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement is deferred until such evidence exists or until all elements are delivered. If VSOE of the fair value does not exist, and the only undelivered element is maintenance, then we recognize revenue on a ratable basis. If VSOE of the fair value of all undelivered elements exists but does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.

 

Certain resellers (“stocking resellers”) purchase product licenses that they hold in inventory until they are resold to the ultimate end user (an “inventory stocking order”). At the time that a stocking reseller places an inventory stocking order, no product licenses are shipped by us to the stocking reseller; rather, the stocking reseller’s inventory is credited with the number of licenses purchased and the stocking reseller can resell (issue) any number of licenses from their inventory at any time. Upon receipt of an order to issue a license(s) from a stocking reseller’s inventory (a “draw down order”), we will ship the license(s) in accordance with the draw down order’s instructions. We defer recognition of revenue from inventory stocking orders until the underlying licenses are sold and shipped to the end user, as evidenced by the receipt and fulfillment of the stocking reseller’s draw down order, assuming all other revenue recognition criteria have been met.

 

There are no rights of return granted to resellers or other purchasers of our software products.

 

Revenue from maintenance contracts is recognized ratably over the related contract period, which generally ranges from one to five years.

 

All of our software licenses are denominated in U.S. dollars.

 

Deferred Rent

 

The leases for both of the Company’s subleased former offices in Campbell, California contain free rent and predetermined fixed escalations in our minimum rent payments. Rent expense related to these leases is recognized on a straight-line basis over the terms of the leases. Any difference between the straight-line rent amounts and amounts payable under the leases is recorded as part of deferred rent in current or long-term liabilities, as appropriate. The monthly rent payments due to the Company for the sublease of the office at 1919 S. Bascom Avenue fully offset the rent payments due under the Company’s lease for that space. The monthly rent payments due to the Company for the sublease of the office at 51 East Campbell Avenue will offset approximately 62% of the monthly rent payments due to the landlord under the Company’s lease for that space. During the three-month period ended September 30, 2017, the Company recorded a loss of $62,900 representing the total of the shortfall of monthly rent payments over the life of this sublease. As of September 30, 2017, $24,900 remains on the balance sheet as a lease liability to be amortized over the remaining 12 months of the sublease.

 

Incentives that we received upon entering into the S. Bascom Avenue lease agreement are recognized on a straight-line basis as a reduction to rent over the term of the lease. We record the unamortized portion of these incentives as a part of deferred rent in current or long-term liabilities, as appropriate.

  

Long-Lived Assets

 

Long-lived assets are assessed for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, whenever we have committed to a plan to dispose of the assets or, at a minimum, annually. Typically, for long-lived assets to be held and used, measurement of an impairment loss is based on the fair value of such assets, with fair value being determined based on appraisals, current market value, comparable sales value, and discounted future cash flows, among other variables, as appropriate. Assets to be held and used (which assets are affected by an impairment loss) are depreciated or amortized at their new carrying amount over their remaining estimated life; assets to be sold or otherwise disposed of are not subject to further depreciation or amortization. During the three month and nine month period ended September 30, 2016 we determined that an impairment of $0 and $15,500, respectively, existed with certain capitalized software development costs associated with our hopTo Work product and recognized that cost as part of cost of revenue. No such impairment charge was recorded during either of the three or nine-month periods ended September 30, 2017.

 

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.

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the three-month periods ended September 30, 2017 and 2016:

 

    Beginning
Balance
    Charge
Offs
    Recoveries     Provision     Ending
Balance
 
2017   $ 15,300     $     $     $ (10,900 )   $ 4,400  
2016     14,900                   (9,600 )     5,300  

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the nine-month periods ended September 30, 2017 and 2016

 

    Beginning
Balance
    Charge
Offs
    Recoveries     Provision     Ending
Balance
 
2017   $ 7,700     $     $     $ (3,300 )   $ 4,400  
2016     17,300                   (12,000 )     5,300  

 

Concentration of Credit Risk

 

For the three and nine-month periods ended September 30, 2017 and 2016 respectively, we considered the customers listed in the following tables to be our most significant customers. The tables set forth the percentage of sales attributable to each customer during the periods presented, and the respective customer’s ending accounts receivable balance as a percentage of reported accounts receivable, net, as of September 30, 2017 and 2016.

 

    Three Months Ended
September 30, 2017
    As of
September 30, 2017
    Three Months Ended
September 30, 2016
    As of
September 30, 2016
 
Customer   Sales     Accounts
Receivable
    Sales     Accounts
Receivable
 
Centric     9.5 %     14.3 %     2.0 %     3.8 %
Elosoft     13.6 %     26.5 %     10.8 %     10.4 %
Uniface     15.1 %     27.0 %     6.0 %     16.5 %
Total     38.2 %     67.8 %     18.8 %     30.7 %

  

    Nine Months Ended
September 30, 2017
    As of
September 30, 2017
    Nine Months Ended
September 30, 2016
    As of
September 30, 2016
 
Customer   Sales     Accounts
Receivable
    Sales     Accounts
Receivable
 
Centric     6.9 %     14.3 %     5.4 %     3.8 %
Elosoft     13.8 %     26.5 %     8.9 %     10.4 %
Uniface     8.2 %     27.0 %     6.1 %     16.5 %
Total     28.9 %     67.8 %     20.4 %     30.7 %

 

Fair Value of Financial Instruments

 

The fair value of our accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the relative short maturities of these items.

 

The fair value of warrants at issuance and for those recorded as a liability at each reporting date are determined in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement,” which establishes a fair value hierarchy that prioritizes the assumptions (inputs) to valuation techniques used to price assets or liabilities that are measured at fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The guidance for fair value measurements requires that assets, liabilities and certain equity instruments measured at fair value be classified and disclosed in one of the following categories:

 

  Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
     
  Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

 

Recent Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Subsequently FASB has released several updates to ASU 2014-09 including ASU 2016- 20, ASU 2016-12, ASU-2016-10, ASU-2016-08, and ASU-2015-14. The effective date for ASU 2014-09 will be the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. During the three-month period ended June 30, 2017, the Company completed a detailed review of the Topic 606 standard relative to our revenue recognition policies and practice. That review is still in process and the Company expects that it will be completed by November 30, 2017. However, the Company continues to believe that adoption of this standard will not have a material effect on either our historical financial results or future financial results.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment
9 Months Ended
Sep. 30, 2017
Property, Plant and Equipment [Abstract]  
Property and Equipment

4. Property and Equipment

 

Property and equipment was:

 

    September 30, 2017     December 31, 2016  
Equipment   $ 184,600     $ 258,700  
Furniture     3,600       190,600  
Leasehold improvements     167,600       167,600  
      355,800       616,900  
Less: accumulated depreciation and amortization     316,000       473,600  
    $ 39,800     $ 143,300  

 

Aggregate property and equipment depreciation and amortization expense was $8,900 and $42,200 during the three-month period and nine-month ended September 30, 2017, respectively, and $21,200 and $70,800 during the same periods ended September 30, 2016. During the nine-month periods ended September 30, 2017 and 2016, we disposed of equipment and furniture with a combined net book value of $61,300 and $20,100, respectively.

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

5. Stock-Based Compensation

 

The following table summarizes the stock-based compensation expense, net of amounts capitalized, we recorded in our Unaudited Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2017 and 2016, respectively, by classification:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
Statement of Operations Classification   2017     2016     2017     2016  
Costs of revenue   $     $ 2,200     $ 100     $ 5,400  
Selling and marketing expense           4,600       200       69,000  
General and administrative expense     (4,100 )     40,500       14,100       135,500  
Research and development expense           26,400       100       93,500  
    $ (4,100 )   $ 73,700     $ 14,500     $ 303,400  

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Revenue
9 Months Ended
Sep. 30, 2017
Revenue Tables  
Revenue

6. Revenue

 

Revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

          2017 Over (Under) 2016  
Revenue   2017     2016     Dollars     Percent  
Software Licenses                                
Windows   $ 360,300     $ 222,500     $ 137,800       61.9 %
UNIX/Linux     71,200       64,000       7,200       11.3 %
      431,500       286,500       145,000       50.6 %
Software Service Fees                                
Windows     445,200       444,700       500       0.1 %
UNIX/Linux     131,600       149,400       (17,800 )     -11.9 %
      576,800       594,100       (17,300 )     -2.9 %
Other     17,600       17,900       (300 )     -1.7 %
Total Revenue   $ 1,025,900     $ 898,500     $ 127,400       14.2 %

 

Revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

 

          2017 Over (Under) 2016  
Revenue   2017     2016     Dollars     Percent  
Software Licenses                                
Windows   $ 939,800     $ 774,200     $ 165,600       21.4 %
UNIX/Linux     223,300       209,200       14,100       6.7 %
      1,163,100       983,400       179,700       18.3 %
Software Service Fees                                
Windows     1,324,300       1,367,200       (42,900 )     -3.1 %
UNIX/Linux     403,400       473,700       (70,300 )     -14.8 %
      1,727,700       1,840,900       (113,200 )     -6.1 %
Other     42,400       40,100       2,300       5.7 %
Total Revenue   $ 2,933,200     $ 2,864,400     $ 68,800       2.4 %

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Cost of Revenue
9 Months Ended
Sep. 30, 2017
Cost of Revenue [Abstract]  
Cost of Revenue

7. Cost of Revenue

 

Cost of revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

          2017 Over (Under) 2016  
    2017     2016     Dollars     Percent  
Software service costs   $ 13,000     $ 2,100     $ 10,900       519.0 %
Software product costs     2,900       6,200       (3,300 )     -53.2 %
Total Cost of Revenue   $ 15,900     $ 8,300     $ 7,600       91.6 %

 

Cost of revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

          2017 Over (Under) 2016  
    2017     2016     Dollars     Percent  
Software service costs   $ 44,000     $ 78,100     $ (34,100 )     -43.7 %
Software product costs     9,000       51,400       (42,400 )     -82.5 %
Total Cost of Revenue   $ 53,000     $ 129,500     $ (76,500 )     -59.1 %

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

 

On February 1, 2014, we relocated our corporate offices to a larger suite within our landlord’s office complex on South Bascom Avenue in Campbell, California. We are currently leasing 10,659 square feet under a five-year lease that, unless renewed, will expire in October 2018.

 

On August 11, 2015 we entered into a sublease agreement to sublease the entirety of the South Bascom Avenue office space to a third party. The term of the sublease extends from November 1, 2015 through the end of our office lease term for that space in October 2018. The monthly rent payments due to hopTo under this sublease fully offset the monthly rent payments due to the landlord under hopTo’s lease for that space.

 

On August 24, 2015, we entered into a new office lease for our corporate headquarters at 51 East Campbell Avenue in Campbell, California which was better suited to our California operations and resulted in significant monthly savings. The term of this lease is from October 1, 2015 through September 30, 2018.

 

On April 28, 2017 we entered into a sublease agreement to sublease the entirety of the leased space at 51 East Campbell Avenue to a third party. The term of the sublease began on June 1, 2017 and extends through the end of our office lease term for that space. The monthly rent payments due to hopTo will offset approximately 62% of the monthly rent payments due to the landlord under hopTo’s lease for that space. (See Deferred Rent section of Note 3.)

 

The following table sets forth the net minimum lease payments we will be required to make throughout the remainder of these leases:

 

    Lease
Payments
    Sublease Receipts     Total  
Remainder of 2017   $ 150,200     $ (179,900 )   $ (29,700 )
2018     475,400       (420,800 )     54,600  
    $ 625,600     $ (600,700 )   $ 24,900  

 

During the three-month period ended September 30, 2016, our CEO and CFO voluntarily agreed with our board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company can reasonably pay such compensation upon approval by the board of directors. The deferred salaries are recorded as a component of accounts payable and accrued expenses on the Condensed Consolidated Balance Sheet. See Note 12 – Subsequent Events.

 

During the three and nine-month periods ended September 30, 2017, respectively, we reported non-cash expense of $0 and $284,000, respectively, related to potential liquidated damages resulting from delays in filing registration statements for shares and shares underlying warrants for certain of the private placements that the Company closed in prior periods. There were no such expenses recorded in the comparable prior year period. We are in the process of seeking waivers from shareholders for such liquidated damages. The potential liquidated damages is reported as other current liabilities on the condensed consolidated balance sheet and as a component of general and administrative expense on the condensed consolidated statements of operations.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Supplemental Disclosure of Cash Flow Information
9 Months Ended
Sep. 30, 2017
Supplemental Cash Flow Elements [Abstract]  
Supplemental Disclosure of Cash Flow Information

9. Supplemental Disclosure of Cash Flow Information

 

We disbursed $200 and $800 for the payment of interest expense during the nine-month periods ended September 30, 2017 and 2016, respectively.

 

We disbursed $2,800 and $2,300 for the payment of foreign income taxes associated with the operation of our Israeli subsidiary during the nine-month periods ended September 30, 2017 and 2016, respectively.

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Earnings (Loss) Per Share
9 Months Ended
Sep. 30, 2017
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share

10. Earnings (Loss) Per Share

 

Earnings or loss per share is calculated by dividing the net income or loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share (“Diluted EPS”) is calculated by dividing the net income or loss for the period by the total of the weighted average number of shares of common stock outstanding during the period plus the effects of any dilutive securities. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of such potential shares of common stock would have an anti-dilutive effect. During all periods presented in our Condensed Consolidated Statements of Operations, potentially dilutive securities included shares of common stock potentially issuable upon exercise of stock options, release of unvested restricted stock awards and exercise of warrants. Diluted EPS excludes the impact of potential issuance of shares of common stock related to our stock options in periods in which the exercise price of the stock option is greater than the average market price of our common stock during such periods.

 

For the three and nine-month periods ended September 30, 2017 and for the three and nine-month periods ended September 30, 2016, 1,375,509 and 1,412,507 shares of common stock equivalents, respectively, were excluded from the computation of dilutive loss per share since their effect would be anti-dilutive.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information
9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Segment Information

11. Segment Information

 

Revenue by country for the three-month and nine-month periods ended September 30, 2017 and 2016 was as follows:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
Revenue by Country   2017     2016     2017     2016  
United States   $ 292,100     $ 370,800     $ 922,300     $ 1,158,100  
Brazil     220,200       122,900       582,600       418,100  
Other Countries     513,600       404,800       1,428,200       1,288,200  
Total   $ 1,025,900     $ 898,500     $ 2,933,100     $ 2,864,400  

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
9 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
Subsequent Events

12. Subsequent Events

 

On October 10, 2017, the Company and salesforce.com entered into a Patent Purchase Agreement (effective as of October 5, 2017), pursuant to which the Company sold seven of its patents for an aggregate consideration of $400,000, and also received, subject to various terms, conditions and limitations, a license back of those patents. The patents sold were U.S. Patent numbers: 9395826, 9398111, 9419848, 8745280, 8892782, 8738814 and 8856907.

 

On October 25, 2017, the board of directors of the Company determined that the financial status of the Company had improved from the financial status of the Company during the three month period ended September 30, 2016, when the Company’s CEO and CFO voluntarily agreed with the board of directors to defer 50% of their salary beginning September 1, 2016 until such time as the Company could reasonably pay such compensation upon approval by the board of directors. Accordingly, the board of directors determined that it was reasonable for the Company to pay 50% of this deferred salary and such payments were made to the CFO and CEO on October 30, 2017.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires us 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 reporting period. These estimates include: the amount of stock-based compensation expense; the allowance for doubtful accounts; the estimated lives, valuation, and amortization of intangible assets (including capitalized software); depreciation of long-lived assets; valuation of warrants; post-employment benefits, and accruals for liabilities. While we believe that such estimates are fair, actual results could differ materially from those estimates.

Revenue Recognition

Revenue Recognition

 

We market and license our products indirectly through channel distributors, independent software vendors (“ISVs”), value-added resellers (“VARs”) (collectively, “resellers”) and directly to 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.

 

Software license revenues are recognized when:

 

  Persuasive evidence of an arrangement exists, (i.e., when we sign a non-cancellable license agreement wherein the customer acknowledges an unconditional obligation to pay, or upon receipt of the customer’s purchase order), and
     
  Delivery has occurred or services have been rendered and there are no uncertainties surrounding product acceptance (i.e., when title and risk of loss have been transferred to the customer, which occurs when the media containing the licensed program(s) is provided to a common carrier or, in the case of electronic delivery, when the customer is given access to the licensed program(s)), and
     
  The price to the customer is fixed or determinable, as typically evidenced in a signed non-cancellable contract, or a customer’s purchase order, and
     
  Collectability is probable. If collectability is not considered probable, revenue is recognized when the fee is collected.

  

Revenue recognized on software arrangements involving multiple deliverables is allocated to each deliverable based on vendor-specific objective evidence (“VSOE”) or third party evidence of the fair values of each deliverable; such deliverables include licenses for software products, maintenance, private labeling fees, and customer training. We limit our assessment of VSOE for each deliverable to either the price charged when the same deliverable is sold separately or the price established by management having the relevant authority to do so, for a deliverable not yet sold separately.

 

If sufficient VSOE of the fair value does not exist so as to permit the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement is deferred until such evidence exists or until all elements are delivered. If VSOE of the fair value does not exist, and the only undelivered element is maintenance, then we recognize revenue on a ratable basis. If VSOE of the fair value of all undelivered elements exists but does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.

 

Certain resellers (“stocking resellers”) purchase product licenses that they hold in inventory until they are resold to the ultimate end user (an “inventory stocking order”). At the time that a stocking reseller places an inventory stocking order, no product licenses are shipped by us to the stocking reseller; rather, the stocking reseller’s inventory is credited with the number of licenses purchased and the stocking reseller can resell (issue) any number of licenses from their inventory at any time. Upon receipt of an order to issue a license(s) from a stocking reseller’s inventory (a “draw down order”), we will ship the license(s) in accordance with the draw down order’s instructions. We defer recognition of revenue from inventory stocking orders until the underlying licenses are sold and shipped to the end user, as evidenced by the receipt and fulfillment of the stocking reseller’s draw down order, assuming all other revenue recognition criteria have been met.

 

There are no rights of return granted to resellers or other purchasers of our software products.

 

Revenue from maintenance contracts is recognized ratably over the related contract period, which generally ranges from one to five years.

 

All of our software licenses are denominated in U.S. dollars.

Deferred Rent

Deferred Rent

 

The leases for both of the Company’s subleased former offices in Campbell, California contain free rent and predetermined fixed escalations in our minimum rent payments. Rent expense related to these leases is recognized on a straight-line basis over the terms of the leases. Any difference between the straight-line rent amounts and amounts payable under the leases is recorded as part of deferred rent in current or long-term liabilities, as appropriate. The monthly rent payments due to the Company for the sublease of the office at 1919 S. Bascom Avenue fully offset the rent payments due under the Company’s lease for that space. The monthly rent payments due to the Company for the sublease of the office at 51 East Campbell Avenue will offset approximately 62% of the monthly rent payments due to the landlord under the Company’s lease for that space. During the three-month period ended September 30, 2017, the Company recorded a loss of $62,900 representing the total of the shortfall of monthly rent payments over the life of this sublease. As of September 30, 2017, $24,900 remains on the balance sheet as a lease liability to be amortized over the remaining 12 months of the sublease.

 

Incentives that we received upon entering into the S. Bascom Avenue lease agreement are recognized on a straight-line basis as a reduction to rent over the term of the lease. We record the unamortized portion of these incentives as a part of deferred rent in current or long-term liabilities, as appropriate.

Long-Lived Assets

Long-Lived Assets

 

Long-lived assets are assessed for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, whenever we have committed to a plan to dispose of the assets or, at a minimum, annually. Typically, for long-lived assets to be held and used, measurement of an impairment loss is based on the fair value of such assets, with fair value being determined based on appraisals, current market value, comparable sales value, and discounted future cash flows, among other variables, as appropriate. Assets to be held and used (which assets are affected by an impairment loss) are depreciated or amortized at their new carrying amount over their remaining estimated life; assets to be sold or otherwise disposed of are not subject to further depreciation or amortization. During the three month and nine month period ended September 30, 2016 we determined that an impairment of $0 and $15,500, respectively, existed with certain capitalized software development costs associated with our hopTo Work product and recognized that cost as part of cost of revenue. No such impairment charge was recorded during either of the three or nine-month periods ended September 30, 2017.

Allowance for Doubtful Accounts

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.

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the three-month periods ended September 30, 2017 and 2016:

 

    Beginning
Balance
    Charge
Offs
    Recoveries     Provision     Ending
Balance
 
2017   $ 15,300     $     $     $ (10,900 )   $ 4,400  
2016     14,900                   (9,600 )     5,300  

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the nine-month periods ended September 30, 2017 and 2016

 

    Beginning
Balance
    Charge
Offs
    Recoveries     Provision     Ending
Balance
 
2017   $ 7,700     $     $     $ (3,300 )   $ 4,400  
2016     17,300                   (12,000 )     5,300  

Concentration of Credit Risk

Concentration of Credit Risk

 

For the three and nine-month periods ended September 30, 2017 and 2016 respectively, we considered the customers listed in the following tables to be our most significant customers. The tables set forth the percentage of sales attributable to each customer during the periods presented, and the respective customer’s ending accounts receivable balance as a percentage of reported accounts receivable, net, as of September 30, 2017 and 2016.

 

    Three Months Ended
September 30, 2017
    As of
September 30, 2017
    Three Months Ended
September 30, 2016
    As of
September 30, 2016
 
Customer   Sales     Accounts
Receivable
    Sales     Accounts
Receivable
 
Centric     9.5 %     14.3 %     2.0 %     3.8 %
Elosoft     13.6 %     26.5 %     10.8 %     10.4 %
Uniface     15.1 %     27.0 %     6.0 %     16.5 %
Total     38.2 %     67.8 %     18.8 %     30.7 %

  

    Nine Months Ended
September 30, 2017
    As of
September 30, 2017
    Nine Months Ended
September 30, 2016
    As of
September 30, 2016
 
Customer   Sales     Accounts
Receivable
    Sales     Accounts
Receivable
 
Centric     6.9 %     14.3 %     5.4 %     3.8 %
Elosoft     13.8 %     26.5 %     8.9 %     10.4 %
Uniface     8.2 %     27.0 %     6.1 %     16.5 %
Total     28.9 %     67.8 %     20.4 %     30.7 %

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The fair value of our accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the relative short maturities of these items.

 

The fair value of warrants at issuance and for those recorded as a liability at each reporting date are determined in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement,” which establishes a fair value hierarchy that prioritizes the assumptions (inputs) to valuation techniques used to price assets or liabilities that are measured at fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The guidance for fair value measurements requires that assets, liabilities and certain equity instruments measured at fair value be classified and disclosed in one of the following categories:

 

  Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
     
  Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Subsequently FASB has released several updates to ASU 2014-09 including ASU 2016- 20, ASU 2016-12, ASU-2016-10, ASU-2016-08, and ASU-2015-14. The effective date for ASU 2014-09 will be the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. During the three-month period ended June 30, 2017, the Company completed a detailed review of the Topic 606 standard relative to our revenue recognition policies and practice. That review is still in process and the Company expects that it will be completed by November 30, 2017. However, the Company continues to believe that adoption of this standard will not have a material effect on either our historical financial results or future financial results.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Schedule of Allowance for Doubtful Accounts

The following table sets forth the details of the Allowance for Doubtful Accounts for the three-month periods ended September 30, 2017 and 2016:

 

    Beginning
Balance
    Charge
Offs
    Recoveries     Provision     Ending
Balance
 
2017   $ 15,300     $     $     $ (10,900 )   $ 4,400  
2016     14,900                   (9,600 )     5,300  

 

The following table sets forth the details of the Allowance for Doubtful Accounts for the nine-month periods ended September 30, 2017 and 2016

 

    Beginning
Balance
    Charge
Offs
    Recoveries     Provision     Ending
Balance
 
2017   $ 7,700     $     $     $ (3,300 )   $ 4,400  
2016     17,300                   (12,000 )     5,300  

Schedule of Concentration of Credit Risk

The tables set forth the percentage of sales attributable to each customer during the periods presented, and the respective customer’s ending accounts receivable balance as a percentage of reported accounts receivable, net, as of September 30, 2017 and 2016.

 

    Three Months Ended
September 30, 2017
    As of
September 30, 2017
    Three Months Ended
September 30, 2016
    As of
September 30, 2016
 
Customer   Sales     Accounts
Receivable
    Sales     Accounts
Receivable
 
Centric     9.5 %     14.3 %     2.0 %     3.8 %
Elosoft     13.6 %     26.5 %     10.8 %     10.4 %
Uniface     15.1 %     27.0 %     6.0 %     16.5 %
Total     38.2 %     67.8 %     18.8 %     30.7 %

  

    Nine Months Ended
September 30, 2017
    As of
September 30, 2017
    Nine Months Ended
September 30, 2016
    As of
September 30, 2016
 
Customer   Sales     Accounts
Receivable
    Sales     Accounts
Receivable
 
Centric     6.9 %     14.3 %     5.4 %     3.8 %
Elosoft     13.8 %     26.5 %     8.9 %     10.4 %
Uniface     8.2 %     27.0 %     6.1 %     16.5 %
Total     28.9 %     67.8 %     20.4 %     30.7 %

XML 31 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Tables)
9 Months Ended
Sep. 30, 2017
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

Property and equipment was:

 

    September 30, 2017     December 31, 2016  
Equipment   $ 184,600     $ 258,700  
Furniture     3,600       190,600  
Leasehold improvements     167,600       167,600  
      355,800       616,900  
Less: accumulated depreciation and amortization     316,000       473,600  
    $ 39,800     $ 143,300

XML 32 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation (Tables)
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Stock-Based Compensation Expense

The following table summarizes the stock-based compensation expense, net of amounts capitalized, we recorded in our Unaudited Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2017 and 2016, respectively, by classification:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
Statement of Operations Classification   2017     2016     2017     2016  
Costs of revenue   $     $ 2,200     $ 100     $ 5,400  
Selling and marketing expense           4,600       200       69,000  
General and administrative expense     (4,100 )     40,500       14,100       135,500  
Research and development expense           26,400       100       93,500  
    $ (4,100 )   $ 73,700     $ 14,500     $ 303,400  

XML 33 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Revenue (Tables)
9 Months Ended
Sep. 30, 2017
Revenue Tables  
Schedule of Revenue

Revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

          2017 Over (Under) 2016  
Revenue   2017     2016     Dollars     Percent  
Software Licenses                                
Windows   $ 360,300     $ 222,500     $ 137,800       61.9 %
UNIX/Linux     71,200       64,000       7,200       11.3 %
      431,500       286,500       145,000       50.6 %
Software Service Fees                                
Windows     445,200       444,700       500       0.1 %
UNIX/Linux     131,600       149,400       (17,800 )     -11.9 %
      576,800       594,100       (17,300 )     -2.9 %
Other     17,600       17,900       (300 )     -1.7 %
Total Revenue   $ 1,025,900     $ 898,500     $ 127,400       14.2 %

 

Revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

 

          2017 Over (Under) 2016  
Revenue   2017     2016     Dollars     Percent  
Software Licenses                                
Windows   $ 939,800     $ 774,200     $ 165,600       21.4 %
UNIX/Linux     223,300       209,200       14,100       6.7 %
      1,163,100       983,400       179,700       18.3 %
Software Service Fees                                
Windows     1,324,300       1,367,200       (42,900 )     -3.1 %
UNIX/Linux     403,400       473,700       (70,300 )     -14.8 %
      1,727,700       1,840,900       (113,200 )     -6.1 %
Other     42,400       40,100       2,300       5.7 %
Total Revenue   $ 2,933,200     $ 2,864,400     $ 68,800       2.4 %

XML 34 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Cost of Revenue (Tables)
9 Months Ended
Sep. 30, 2017
Cost of Revenue [Abstract]  
Schedule of Cost of Revenue

Cost of revenue for the three-month periods ended September 30, 2017 and 2016 was:

 

          2017 Over (Under) 2016  
    2017     2016     Dollars     Percent  
Software service costs   $ 13,000     $ 2,100     $ 10,900       519.0 %
Software product costs     2,900       6,200       (3,300 )     -53.2 %
Total Cost of Revenue   $ 15,900     $ 8,300     $ 7,600       91.6 %

 

Cost of revenue for the nine-month periods ended September 30, 2017 and 2016 was:

 

          2017 Over (Under) 2016  
    2017     2016     Dollars     Percent  
Software service costs   $ 44,000     $ 78,100     $ (34,100 )     -43.7 %
Software product costs     9,000       51,400       (42,400 )     -82.5 %
Total Cost of Revenue   $ 53,000     $ 129,500     $ (76,500 )     -59.1 %

XML 35 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Tables)
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Future Minimum Lease Payments

The following table sets forth the net minimum lease payments we will be required to make throughout the remainder of these leases:

 

    Lease
Payments
    Sublease Receipts     Total  
Remainder of 2017   $ 150,200     $ (179,900 )   $ (29,700 )
2018     475,400       (420,800 )     54,600  
    $ 625,600     $ (600,700 )   $ 24,900  

XML 36 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information (Tables)
9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Schedule of Revenue by Country

Revenue by country for the three-month and nine-month periods ended September 30, 2017 and 2016 was as follows:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
Revenue by Country   2017     2016     2017     2016  
United States   $ 292,100     $ 370,800     $ 922,300     $ 1,158,100  
Brazil     220,200       122,900       582,600       418,100  
Other Countries     513,600       404,800       1,428,200       1,288,200  
Total   $ 1,025,900     $ 898,500     $ 2,933,100     $ 2,864,400  

XML 37 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Going Concern and Management's Liquidity Plans (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Net profit $ 253,600 $ (462,000) $ 87,400 $ (1,874,500)  
Accumulated deficit 82,362,400   82,362,400   $ 82,449,800
Working capital deficit $ 2,311,200   $ 2,311,200    
CFO And CEO [Member]          
Percentage for employee compensation   50.00%      
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Accounting Policies [Abstract]          
Monthly rent payments, percentage     62.00%    
Loss on sublease $ 62,900   $ 63,100  
Lease liability 24,900   24,900  
Impairment of capitalized computer software 15,500  
Impairment charges of long-lived assets  
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies - Schedule of Allowance for Doubtful Accounts (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Accounting Policies [Abstract]        
Beginning balance $ 15,300 $ 14,900 $ 7,700 $ 17,300
Charge offs
Recoveries
Provision (10,900) (9,600) (3,300) (12,000)
Ending balance $ 4,400 $ 5,300 $ 4,400 $ 5,300
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies - Schedule of Concentration of Credit Risk (Details) - Customer Concentration Risk [Member]
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Sales Revenue, Net [Member]        
Percentage of Concentration of Credit Risk 38.20% 18.80% 28.90% 20.40%
Sales Revenue, Net [Member] | Centric [Member]        
Percentage of Concentration of Credit Risk 9.50% 2.00% 6.90% 5.40%
Sales Revenue, Net [Member] | Elosoft [Member]        
Percentage of Concentration of Credit Risk 13.60% 10.80% 13.80% 8.90%
Sales Revenue, Net [Member] | Uniface [Member]        
Percentage of Concentration of Credit Risk 15.10% 6.00% 8.20% 6.10%
Accounts Receivable [Member]        
Percentage of Concentration of Credit Risk 67.80% 30.70% 67.80% 30.70%
Accounts Receivable [Member] | Centric [Member]        
Percentage of Concentration of Credit Risk 14.30% 3.80% 14.30% 3.80%
Accounts Receivable [Member] | Elosoft [Member]        
Percentage of Concentration of Credit Risk 26.50% 10.40% 26.50% 10.40%
Accounts Receivable [Member] | Uniface [Member]        
Percentage of Concentration of Credit Risk 27.00% 16.50% 27.00% 16.50%
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Property, Plant and Equipment [Abstract]        
Depreciation $ 8,900 $ 21,200 $ 42,200 $ 70,800
Disposed of equipment     $ 61,300 $ 20,100
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Property and equipment gross $ 355,800 $ 616,900
Less: accumulated depreciation and amortization 316,000 473,600
Property and equipment net 39,800 143,300
Equipment [Member]    
Property and equipment gross 184,600 258,700
Furniture [Member]    
Property and equipment gross 3,600 190,600
Leasehold Improvements [Member]    
Property and equipment gross $ 167,600 $ 167,600
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation - Summary Of Stock-Based Compensation Expense (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Compensation expense $ (4,100) $ 73,700 $ 14,500 $ 303,400
Costs of Revenue [Member]        
Compensation expense 2,200 100 5,400
Selling and Marketing Expense [Member]        
Compensation expense 4,600 200 69,000
General and Administrative Expense [Member]        
Compensation expense (4,100) 40,500 14,000 135,500
Research and Development Expense [Member]        
Compensation expense $ 26,400 $ 100 $ 93,500
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Revenue - Schedule of Revenue (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
Other $ 17,600 $ 17,900 $ 42,400 $ 40,100
Increase (Decrease) in Other $ (300)   $ 2,300  
Increase (Decrease) in Other, Percentage (1.70%)   5.70%  
Total Revenue $ 1,025,900 898,500 $ 2,933,200 2,864,400
Increase (Decrease) in Total Revenue $ 127,400   $ 68,800  
Increase (Decrease) in Total Revenue 14.20%   2.40%  
Software Licenses [Member]        
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
Software Licenses $ 431,500 286,500 $ 1,163,100 983,400
Increase (Decrease) in Software Licenses $ 14,500   $ 179,700  
Increase (Decrease) in Software Licenses, Percentage 50.60%   18.30%  
Software Service Fees $ 576,800 594,100 $ 1,727,700 840,900
Increase (Decrease) in Software Service Fees $ (17,300)   $ (113,200)  
Increase (Decrease) in Software Service Fees, Percentage (2.90%)   (6.10%)  
Software Licenses [Member] | Windows [Member]        
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
Software Licenses $ 360,300 222,500 $ 939,800 774,200
Increase (Decrease) in Software Licenses $ 137,800   $ 165,600  
Increase (Decrease) in Software Licenses, Percentage 61.90%   21.40%  
Software Service Fees $ 445,200 444,700 $ 1,324,300 1,367,200
Increase (Decrease) in Software Service Fees $ 500   $ (42,900)  
Increase (Decrease) in Software Service Fees, Percentage 0.10%   3.10%  
Software Licenses [Member] | Unix Linux [Member]        
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
Software Licenses $ 71,200 64,000 $ 223,300 209,200
Increase (Decrease) in Software Licenses $ 7,200   $ 14,100  
Increase (Decrease) in Software Licenses, Percentage 11.30%   6.70%  
Software Service Fees $ 131,600 $ 149,400 $ 403,400 $ 473,700
Increase (Decrease) in Software Service Fees $ (17,800)   $ (70,300)  
Increase (Decrease) in Software Service Fees, Percentage (11.90%)   (14.80%)  
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Cost of Revenue - Schedule of Cost of Revenue (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Costs of Revenue $ 15,900 $ 8,300 $ 53,000 $ 129,500
Increase (Decrease) in Costs of Revenue $ 7,600   $ (76,500)  
Increase (Decrease) in Costs of Revenue, Percentage 91.60%   (59.10%)  
Software Service Costs [Member]        
Costs of Revenue $ 13,000 2,100 $ 44,000 78,100
Increase (Decrease) in Costs of Revenue $ 10,900   $ (34,100)  
Increase (Decrease) in Costs of Revenue, Percentage 519.00%   (43.70%)  
Software Product Costs [Member]        
Costs of Revenue $ 2,900 $ 6,200 $ 9,000 $ 51,400
Increase (Decrease) in Costs of Revenue $ (3,300)   $ (42,100)  
Increase (Decrease) in Costs of Revenue, Percentage (53.20%)   (82.50%)  
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details Narrative)
3 Months Ended 9 Months Ended
Apr. 28, 2014
Feb. 01, 2014
ft²
Sep. 30, 2017
USD ($)
Sep. 30, 2016
Sep. 30, 2017
USD ($)
Monthly rent payments, percentage         62.00%
Non-cash expenses | $     $ 0   $ 284,000
CFO And CEO [Member]          
Percentage for employee compensation       50.00%  
Campbell Facility [Member]          
Lease square feet | ft²   10,659      
Lease term   5 years      
Lease expire date   2018-10      
Campbell Facility [Member] | Sublease Agreement [Member]          
Monthly rent payments, percentage 62.00%        
Lease description The term of the sublease began on June 1, 2017 and extends through the end of our office lease term for that space. The monthly rent payments due to hopTo will offset approximately 62% of the monthly rent payments due to the landlord under hopTo’s lease for that space.        
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies - Schedule of Future Minimum Lease Payments (Details)
Sep. 30, 2017
USD ($)
Remainder of 2017 $ (29,700)
2018 54,600
Total 24,900
Lease Payments [Member]  
Remainder of 2017 150,200
2018 475,400
Total 625,600
Sublease Receipts [Member]  
Remainder of 2017 (179,900)
2018 (420,800)
Total $ (600,700)
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Supplemental Disclosure of Cash Flow Information (Details Narrative) - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Supplemental Cash Flow Elements [Abstract]    
Payment of interest expense $ 200 $ 800
Payment of income taxes $ 2,800 $ 2,300
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Earnings (Loss) Per Share (Details Narrative) - shares
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2016
Earnings Per Share [Abstract]    
Antidilutive securities 1,375,509 1,412,507
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information - Schedule of Revenue by Country (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Revenue by country $ 1,025,900 $ 898,500 $ 2,933,200 $ 2,864,400
United States [Member]        
Revenue by country 292,100 370,800 922,300 1,158,100
Brazil [Member]        
Revenue by country 220,200 122,900 582,600 418,100
Other Countries [Member]        
Revenue by country $ 513,600 $ 404,800 $ 1,428,200 $ 1,288,200
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events (Details Narrative)
3 Months Ended
Oct. 25, 2017
USD ($)
Integer
Sep. 30, 2016
CFO And CEO [Member]    
Percentage for employee compensation   50.00%
Subsequent Event [Member] | CFO And CEO [Member]    
Percentage for employee compensation 50.00%  
Subsequent Event [Member] | Patent Purchase Agreement [Member]    
Number of Patents | Integer 7  
Aggregate consideration received | $ $ 400,000  
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