What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-13 compared with 2021-11-10 · 69 added, 83 removed, 106 unchanged (59% of the section changed)

13 unchanged sentences

We have three general product lines:

Interactive Content and Data Applications, Data Feed Services, and Portfolio Management Systems.

Interactive Content and Data APIs, Data Feed Services, and Portfolio Management Systems.

For financial reporting purposes, our product categories share similar economic characteristics and share costs;

therefore, they are combined into one reporting segment.

Our Interactive Content and Data Applications consist of a suite of software applications that provide publicly traded company and market information to corporate clients via the Internet.

Our Interactive Content and Data APIs consist of a suite of software applications that provide publicly traded company and market information to corporate clients via the Internet.

Products include stock market quotes, fundamentals, historical and interactive charts, company news, filings, option chains, insider transactions, corporate financials, corporate profiles, screeners, market research information, investor relations provisions, level II, watch lists, and real-time quotes.

All of our content solutions are completely customizable and embed directly into client Web pages for seamless integration with existing content.

We are continuing to develop and launch new modules of QMod TM , our new proprietary Web delivery system.

We are continuing to develop and launch new modules of QModTM, our new proprietary Web delivery system.

QMod was created for secure market data provisioning as well as ease of integration and unlimited customization.

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Currently, QuoteMedia’s Data Feed services include complete coverage of North American exchanges and over 70 exchanges worldwide.

For financial reporting purposes, Data Feed Services revenue is included in the Interactive Content and Data Applications revenue totals.

Our Portfolio Management Systems consist of Quotestream TM , Quotestream Mobile, Quotestream Professional, and our Web Portfolio Management systems.

For financial reporting purposes, Data Feed Services revenue is included in the Interactive Content and Data APIs revenue totals.

Our Portfolio Management Systems consist of QuotestreamTM, Quotestream Mobile, Quotestream Professional, and our Web Portfolio Management systems.

Quotestream Desktop is an Internet-based streaming online portfolio management system that delivers real-time and delayed market data to both consumer and corporate markets.

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We also generate Quotestream revenue through individual end-user licenses on a monthly or annual subscription fee basis.

Interactive Content and Data Applications and Market Data Feeds are licensed for a monthly, quarterly, annual, or semi-annual subscription fee.

Interactive Content and Data APIs and Market Data Feeds are licensed for a monthly, quarterly, annual, or semi-annual subscription fee.

Contracts to license our Financial Data Products and Data Feeds typically have a term of one to three years and are automatically renewed unless notice is given 90 days prior to the expiration of the contract term.

Business Environment and Trends

The global financial markets experienced extreme volatility and disruption over the past year due to the COVID-19 pandemic.

The global financial markets experienced extreme volatility and disruption over the past couple years due to the COVID-19 pandemic.

While global financial markets are recovering, risk still exists;

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Most of our employees, particularly in Canada, continue to work remotely.

While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the COVID-19 pandemic led some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us in 2020.

While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the COVID-19 led some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us in the early stages of the pandemic.

While the impact of COVID-19 appears to be diminishing, we are focused on maintaining a strong balance sheet and liquidity position and will continue to closely monitor the potential impact of COVID-19 and adjust our response going forward as circumstances dictate.

On May 4, 2020, the Company received a $133,257 loan under the Paycheck Protection Program (“PPP”).

On February 19, 2021, the Company received forgiveness from the SBA for its PPP loan in its entirety.

The Company recognized the forgiveness of the loan as other income on our consolidated statements of operations.

See Financial Statement Note 8 – Paycheck Protection Program.

Our revenue grew 22% and 23% when comparing the three and nine-month periods ended September 30, 2021 to the comparative 2020 periods.

Based on clients currently under contract, we expect to maintain similar revenue growth for the remainder of 2021.

Recent events in the Ukraine and Russia have also caused disruptions in the global financial markets.

While we do not have any operations or customers in the Ukraine or Russia, we will continue to monitor the situation as a prolonged conflict could impact our business.

In 2022 we finalized a contract with a large multinational financial institution that is retroactively effective January 1, 2022, and signed a statement of work with another large multinational financial institution to start services while their contract is being finalized.

We expect this contract to be effective April 1, 2022 once finalized.

The contracts are for a wide range of services that will be included in both portfolio management and interactive content and data API revenue.

Based on those new contracts and our other clients currently under contract, we expect comparable revenue growth in fiscal 2022 to the 22% revenue growth we achieved in fiscal 2021.

We also expect to significantly improve upon the $212,372 net income figure reported for fiscal 2021 mainly due to new contracts mentioned above as they have higher gross margins than our typical customer contracts have on average.

Plan of Operation

For the remainder of 2021 and into 2022 we plan to continue to expand our product lines and improve our infrastructure.

For the remainder of 2022 we plan to continue to expand our product lines and improve our infrastructure.

We plan to continue to add more features and data to our existing products and release newer versions with improved performance and flexibility for client integration.

This expansion is expected to result in both increased revenue and costs for fiscal 2022.

We will maintain our focus on marketing Quotestream for deployments by brokerage firms to their retail clients and continue our expansion into the investment professional market with Quotestream Professional.

We also plan to continue the growth of our Data Feed Services client base, particularly through the addition of major new international data feed coverage, as well as new data delivery products.

QuoteMedia will continue to focus on increasing the sales of its Interactive Content and Data Applications, particularly in the context of large-scale enterprise deployments encompassing solutions ranging across several product lines.

QuoteMedia will continue to focus on increasing the sales of its Interactive Content and Data APIs, particularly in the context of large-scale enterprise deployments encompassing solutions ranging across several product lines.

QMod is a major component of this strategy, given the broad demand for mobile-ready, SEO-friendly Web content.

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There can be no assurance that such additional capital will be available to our company on commercially reasonable terms or at all.

Our future performance will be subject to a number of business factors, including those beyond our control;

such as a continuation of market uncertainty and evolving industry needs and preferences, as well as the level of competition and our ability to continue to successfully market our products and technology.

Our future performance will be subject to a number of business factors, including those beyond our control, such as a continuation of market uncertainty and evolving industry needs and preferences, as well as the level of competition and our ability to continue to successfully market our products and technology.

There can be no assurance that we will be able to successfully implement our marketing strategy, continue our revenue growth, or maintain profitable operations.

Critical Accounting Policies and Estimates

In the 2021 Annual Report, we disclose our critical accounting policies and estimates upon which our financial statements are derived.

There have been no material changes to these policies since December 31, 2020 that are not included in Note 3 of the accompanying consolidated financial statements for the three and nine-months ended September 30, 2021.

There have been no material changes to these policies since December 31,2021.

Readers are encouraged to read the 2021 Annual Report in conjunction.

Results of Operations

Three-months ended September 30,

Corporate Quotestream

Individual Quotestream

Total portfolio management systems

Interactive content and data applications

Total subscription revenue

Nine-months ended September 30,

Three months ended March 31,

Corporate Quotestream

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Total portfolio management systems

Interactive content and data applications

Interactive Content and Data APIs

Total subscription revenue

Total revenue increased 22% and 23% when comparing the three and nine-month periods ended September 30, 2021 and 2020.

Our total Portfolio Management System revenue increased by 39% and 43% when comparing the three and nine-month periods ended September 30, 2021 from the comparative periods, due to increases in both Corporate Quotestream and Individual Quotestream revenue.

Corporate Quotestream revenue increased 48% and 51% for the three and nine-month periods ended September 30, 2021 from the comparative periods in 2020 primarily due to new contracts signed since the comparative periods and increases in the number of subscribers for existing clients.

The increases are due to new products added over the past couple years that are continuing to gain traction in the market, as well as improvements and upgrades made to our existing Portfolio Management products as we continue to improve functionality and add new data offerings.

The increases are also due to stock exchange fee price increases passed on to our customers.

Total subscription revenue increased 18% when comparing the three months ended March 31, 2022 and 2021.

The increase is a result of a 13% increase in revenue from licensing our Portfolio Management Systems and 25% increase in revenue from our Interactive Content and Data APIs.

Corporate Quotestream revenue increased 18% the three months ended March 31, 2022 from the comparative period in 2021 due to new contracts signed since the comparative period.

In particular, the increase was due to the new contract we recently finalized with the large multinational financial institution discussed above in the “Business Environment and Trends” section.

The increase was also due to an increase in the number of subscribers for existing clients.

We have added new products over the past couple years that are continuing to gain traction in the market and we have made improvements and upgrades to our existing Portfolio Management products as we continue to improve functionality and add new data offerings.

These improvements have allowed us to attract larger customers and increase the average revenue for our existing customers.

Finally, we believe there has been an increase in the need for our services for customers working remotely during the pandemic, a trend we expect to continue for the foreseeable future.

Individual Quotestream revenue increased 18% and 25% for the three and nine-month periods ended September 30, 2021 from the comparative periods in 2020.

There were increases in total users and average revenue per user, which can be attributed to new marketing efforts initiated since the comparative periods and more customers working remotely due to COVID-19.

Interactive Content and Data Application revenue increased 4% when comparing the three and nine-month periods ended September 30, 2021 and 2020, mainly attributable to an increase in new customers.

The success of new products introduced over the past couple years such as QMod TM and the expansion of our data coverage have allowed us to attract new clients.

Individual Quotestream revenue decreased 2% for the three months ended March 31, 2022 from the comparative period in 2021.

There was an increase in total users which can be attributed to new marketing efforts initiated since the comparative period and more customers working remotely due to COVID-19, but this increase was more than offset by a decrease in average revenue per subscriber which can fluctuate depending on exchange data selected by our subscribers.

Interactive Content and Data APIs revenue increased 25% when comparing the three-months ended March 31, 2022 and 2021, attributable to an increase in the number of clients and an increase in the average revenue per client.

The launch of new products and the expansion of our data coverage have allowed us to attract new, larger clients to replace some of our smaller clients lost due to the economic hardship related to COVID-19.

In particular, the increase was due to the new contract we recently finalized with the large multinational financial institution as discussed above in the “Business Environment and Trends” section.

Cost of Revenue and Gross Profit Summary

Three-months ended September 30,

Cost of revenue

Gross margin %

Nine-months ended September 30,

Three months ended March 31,

Cost of revenue

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We capitalize the costs associated with developing new products during the application development stage.

We launched a major growth initiative in early 2020, investing in infrastructure, new product development, data collection, and the expansion of our global market coverage.

As a result, our cost of revenue increased 19% and 31% for the three and nine-month periods ended September 30, 2021 from the comparative periods in 2020, respectively.

We incurred increased stock exchange fees related to increased usage and new market data added since the comparative periods, and increased amortization expenses associated with internally developed application software.

Overall, the cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage that increased to 47% for the three months ended September 30, 2021 from 46% in the comparative period.

The gross margin percentage decreased to 44% for the nine months ended September 30, 2021 from 48% in the comparative period.

There were non-recurring credits to our cost of revenue that resulted in an increase in gross margin percentage for the quarter, but year to date our gross margins have decreased due to the change in our revenue mix, as our Portfolio Management System revenue has been growing at a higher rate than our Interactive Content revenue which typically has higher gross margins.

As a result of a major growth initiative, which included investing in infrastructure, new product development, data collection, and the expansion of our global market coverage, our cost of revenue increased 9% for the three months ended March 31, 2022 from the comparative period in 2021.

We incurred increased stock exchange fees related to increased usage and new market data added since the comparative period, and increased amortization expenses associated with internally developed application software.

Overall, the cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage that increased to 47% for the three months ended March 31, 2022 from 43% in the comparative period.

As discussed above in the “Business Environment and Trends” section, we finalized a new contract with a large multinational financial institution.

This contract has higher gross margins than our other customer contracts typically have on average, resulting in a significant increase to our gross margin percentage.

Operating Expenses Summary

Three-months ended September 30,

Sales and marketing

General and administrative

Software development

Total operating expenses

Nine-months ended September 30,

Three months ended March 31,

Sales and marketing

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Sales and marketing consist primarily of sales and customer service salaries, investor relations, travel and advertising expenses.

Sales and marketing expenses increased by 13% and 17% when comparing the three and nine-month periods ended September 30, 2021 from the comparative periods in 2020.

The increases are a result of additional sales personnel hired to support our growth initiative.

Sales and marketing expenses increased by 8% when comparing the three months ended March 31, 2022 and 2021.

The increase is a result of additional sales personnel hired to support our product growth initiatives.

General and Administrative

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees.

General and administrative expenses increased 17% and 7% when comparing the three and nine-month periods ended September 30, 2021 to the same periods in 2020.

The increases were due to some significant non-recurring professional fees incurred during the third quarter of 2021.

General and administrative expenses increased 11% when comparing the three months ended March 31, 2022 and 2021.

The increase is a result of additional personnel and other costs incurred to support our growth initiatives, and in particular the costs associated with obtaining SOC2 Type II certification.

SOC2 certification provides independent assurance that an organization maintains a high level of information security, data integrity and business resiliency.

We expect to achieve SOC2 Type II certification in late 2022.

Software Development

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Software development expenses also include costs incurred to maintain our software applications.

Software development expenses remained relatively unchanged from the comparative periods, increasing 1% for the three and nine-month periods ended September 30, 2021 due to additional development personnel hired since the comparative 2020 periods, offset by an increase in development costs capitalized during 2021.

Hiring new development personnel was required to expand our product lines and improve our infrastructure in 2021.

We capitalized $572,795 and $1,621,738 of development costs for the three and nine-month periods ended September 30, 2021, compared to $460,666 and $1,225,898 in the same periods in 2020.

Software development expenses increased 15% for the three months ended March 31, 2022 when compared to the same period in 2021, primarily due to new personnel hired since the comparative period to improve our infrastructure, security, and business continuity management.

We capitalized $606,152 of development costs for the three months ended March 31, 2022 compared to $489,306 in the same period in 2021.

These costs relate to the development of application software used by subscribers to access, manage, and analyze information in our databases.

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Other Income and (Expense) Summary

Three-months ended September 30,

Foreign exchange gain

Interest expense

Total other income, net

Nine-months ended September 30,

Three months ended March 31,

Foreign exchange gain

Interest expense

Total other income, net

Total other income and (expenses), net

Foreign Exchange Gain

We incurred foreign exchange gains of $55,278 and $77,606 for the three and nine-month periods ended September 30, 2021 compared to foreign exchange gains of $5,930 and $11,887 in the comparative 2020 periods, respectively.

We incurred foreign exchange gains of $17,590 and $2,448 for the three months ended March 31, 2022 and 2021, respectively.

Foreign exchange gains and losses arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S.

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Interest Expense

Interest expense relates primarily to the interest expense associated with our finance leases and was relatively unchanged from the comparative periods.

Interest expense of $101 and $1,560 was incurred for the three and nine-month periods ended September 30, 2021, compared to $701 and $3,419 incurred in the same 2020 periods.

Other income was $133,257 for the nine-month period ended September 30, 2021.

Interest expense relates primarily to the interest expense associated with our finance leases and was relatively unchanged from the comparative period.

Interest expense of $1,224 was incurred for the three months ended March 31, 2022, compared to $1,008 incurred in the same 2021 period.

There was no other income for the three months ended March 31, 2022.

On May 4, 2020, the Company received a $133,257 loan under the Paycheck Protection Program (“PPP”).

The PPP loan was forgiven in its entirety on February 19, 2021 and was recognized as other income.

No other income was recognized in the comparative 2020 periods.

The PPP loan was forgiven in its entirety on February 19, 2021 and was recognized as other income in the 2021 comparative period.

See Financial Statement Note 8 “ Paycheck Protection Program ”.

Provision for Income Taxes

For the three and nine-month periods ended September 30, 2021, the Company recorded Canadian income tax expense of $790 and $2,403 compared to $751 and $2,216 in the comparative periods in 2020.

Net Income (Loss) for the Period

As a result of the foregoing, our net income for the three and nine-month periods ended September 30, 2021 were $154,931 and $98,393 compared to net losses of $75,305 and $319,728 for the three and nine-month periods ended September 30, 2020.

Basic and diluted income per share was $0.00 for the three and nine-month periods ended September 30, 2021, compared to a basic and diluted loss per share of $(0.00) for the three and nine-month periods ended September 30, 2020.

For the three months ended March 31, 2022, the Company recorded Canadian income tax expense of $790 compared to $796 in the comparative period in 2021.

Net Income for the Period

As a result of the foregoing, our net income for the three months ended March 31, 2022 was $204,666 compared to $23,087 for the three months ended March 31, 2021.

Basic and diluted earnings per share were $0.00 for the three months ended March 31, 2022 and 2021.

Liquidity and Capital Resources

Our cash totaled $271,696 at September 30, 2021, as compared with $417,910 at December 31, 2020, a decrease of $146,214.

Net cash of $1,586,447 was provided by operations for the nine-month period ended September 30, 2021, primarily due to the net income during the period adjusted for non-cash charges and the increase in accounts payable and deferred revenue.

Net cash used in investing activities for the nine-month period ended September 30, 2021 was $1,721,364 resulting primarily from capitalized application software costs.

Cash used in financing activities for the nine-month period ended September 30, 2021 was $11,297 related to the repayment of capital lease financing.

Our cash totaled $395,542 at March 31, 2022, as compared with $258,705 at December 31, 2021, an increase of $136,837.

Net cash of $757,053 was provided by operations for the three months ended March 31, 2022, primarily due to the net income during the period adjusted for non-cash charges and the increase in deferred revenue, offset by an increase in accounts receivable and a decrease in accounts payable.

Net cash used in investing activities for the three months ended March 31, 2022 was $619,526 resulting primarily from capitalized application software costs.

Cash used in financing activities for the three months ended March 31, 2022 was $690 related to the repayment of finance leases.

We typically operate with a working capital deficit.

As of September 30, 2021 our working capital deficit is $2,063,727, however current liabilities include $753,409 in deferred revenue and the expected costs necessary to realize the deferred revenue are minimal.

As of March 31, 2022, our working capital deficit is $2,049,647, however current liabilities include $953,168 in deferred revenue and the expected costs necessary to realize the deferred revenue are minimal.

If circumstances dictate, we have the flexibility to reduce development spending to maintain a strong liquidity position.

Based on the factors discussed above, we believe that our cash on hand and cash generated from operations will be sufficient to fund our current operations for at least the next 12 months through November 2022.

However, to implement our business plan may require additional financing.

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Preferred Stock Redemption Rights

At September 30, 2021, 123,685 shares of Series A Redeemable Convertible Preferred Stock were outstanding and 1,000 shares may be redeemed at the holder’s option at the liquidation value of $25 per share if the cash balance of the Company as reported at the end of each fiscal quarter exceeds $400,000.

At March 31, 2022, 123,685 shares of Series A Redeemable Convertible Preferred Stock were outstanding and 1,000 shares may be redeemed at the holder’s option at the liquidation value of $25 per share if the cash balance of the Company as reported at the end of each fiscal quarter exceeds $400,000.

See Financial Statement Note 6 a) “ Preferred shares ”.

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Off-Balance Sheet Arrangements

At September 30, 2021 and December 31, 2020, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

At March 31, 2022 and December 31, 2021, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis