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Item 2. Management’s Discussion and Analysis

2022-08-22 compared with 2022-05-13 · 75 added, 52 removed, 123 unchanged (51% of the section changed)

19 unchanged sentences

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 QModTM, our new proprietary Web delivery system.

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

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

Additionally, QMod delivers search engine optimized (SEO) ready responsive content designed to adapt on the fly when rendered on mobile devices or standard Web pages – automatically resizing and reformatting to fit the device on which it is displayed.

Our Data Feed Services consist of raw streaming real-time market data delivered over the Internet or via dedicated telecommunication lines, and supplemental fundamental, historical, and analytical data, keyed to the same symbology, which provides a complete market data solution offered to our customers.

Our Data Feed Services consist of raw streaming real-time market data delivered over the Internet or via dedicated telecommunication lines.

We provide supplemental fundamental, historical, and analytical data, keyed to the same symbology, which provides a complete market data solution offered to our customers.

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 APIs revenue totals.

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

Our Portfolio Management Systems consist of Quotestream TM , 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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A key feature of QuoteMedia’s business model is that all of our product lines generate recurring monthly licensing revenue from each client.

Contracts to license Quotestream to our corporate clients, for example, typically have a term of one to three years and are automatically renewed unless notice is given at least 90 days prior to the expiration of the current license term.

Contracts to license Quotestream to our corporate clients, for example, typically have a term of one to five years and are automatically renewed unless notice is given at least 90 days prior to the expiration of the current license term.

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

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.

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

Business Environment and Trends

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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 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 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 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.

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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.

In 2022, we finalized a contract with a large multinational financial institution that was 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.

Pursuant to the statement of work, we received a partial development fee payment of $300,000 in Q2 2022 which has been deferred until the start of the service component of the contract.

Once finalized, the service component of the contract is expected to start in Q4 2022.

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.

Based on these new contracts and our other clients currently under contract, we expect revenue growth of 19% in fiscal 2022, and similar revenue growth in fiscal 2023.

We also expect to report a profit for fiscal 2022, and we except our net income to significantly improve in 2023.

This is mainly due to the new contracts mentioned above as they have significantly higher gross margins than our typical customer contracts have on average.

Plan of Operation

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

Important development projects for the remainder of 2022 include broad expansion of data and news coverage, including the addition of a wide array of international exchange data and news and video feeds, expansion of fixed-income coverage, and the introduction of several new and upgraded market information products.

Important development projects for the remainder of 2022 include broad expansion of data and news coverage, including the addition of a wide array of international exchange data and news, video feeds, expansion of fixed-income coverage, and the introduction of several new and upgraded market information products.

New deployments of our trade integration capabilities, which allow our Quotestream applications to interact with our brokerage clients’ back-end trade execution and reporting platforms (enabling on-the-fly trade execution and tracking of holdings) are underway and will continue to be a priority in the coming year.

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Results of Operations

Three months ended March 31,

Three-months ended June 30,

Corporate Quotestream

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Total subscription revenue

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.

Six-months ended June 30,

Corporate Quotestream

Individual Quotestream

Total Portfolio Management Systems

Interactive Content and Data APIs

Total subscription revenue

Total subscription revenue increased 12% and 15% when comparing the three and six-months ended June 30, 2022 and 2021.

Total Portfolio Management Systems revenue increased 2% and 7% for the three and six-months ended June 30, 2022 from the comparative periods in 2021.

Corporate Quotestream revenue increased 5% and 11% for the three and six-months ended June 30, 2022 from the comparative periods in 2021 due to new contracts signed since the comparative periods.

In particular, the increases were due to the new contract we recently signed with the two large multinational financial institutions 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.

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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 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.

Individual Quotestream revenue decreased 9% and 5% for the three and six-months ended June 30, 2022 from the comparative periods in 2021 due to a decrease in total subscribers.

Interactive Content and Data APIs revenue increased 27% and 26% when comparing the three and six-months ended June 30, 2022, 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.

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

Cost of Revenue and Gross Profit Summary

Three months ended March 31,

Three-months ended June 30,

Cost of revenue

Gross margin %

Six-months ended June 30,

Cost of revenue

Gross margin %

Our cost of revenue consists of fixed and variable stock exchange fees and data feed provisioning costs.

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

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.

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 3% and 6% for the three and six-months ended June 30, 2022 from the comparative periods in 2021.

This was mainly due to 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 and six-months ended June 30, 2022 from 43% in the comparative 2021 periods.

As discussed above in the “Business Environment and Trends” section, we signed new contracts with two large multinational financial institution.

These contracts have 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 March 31,

Three-months ended June 30,

Sales and marketing

2 unchanged sentences

Total operating expenses

Six-months ended June 30,

Sales and marketing

General and administrative

Software development

Total operating expenses

Sales and Marketing

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

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.

Sales and marketing expenses increased by 20% and 19% for the three and six-months ended June 30, 2022 when compared to the same periods in 2021.

The increases are a result of additional sales personnel hired since the comparative periods 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 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.

General and administrative expenses increased 14% and 13% for the three and six-months ended June 30, 2022 when compared to the same periods in 2021.

The increases are 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.

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

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.

Software development expenses increased 22% and 19% for the three and six-months ended June 30, 2022 when compared to the same periods in 2021, primarily due to new personnel hired since the comparative periods to improve our infrastructure, security, and business continuity management.

We capitalized $681,564 and $1,287,716 of development costs for the three and six-month periods ended June 30, 2022 compared to $489,306 and $1,048,943 in the same periods 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 March 31,

Three-months ended June 30,

Foreign exchange gain (loss)

Interest expense

Total other income (expenses), net

Six-months ended June 30,

Foreign exchange gain

Interest expense

Total other income and (expenses), net

Total other income, net

Foreign Exchange Gain

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

We incurred foreign exchange losses of $135,226 and $117,636 for the three and six-month periods ended June 30, 2022 compared to foreign exchange gains of $19,880 and $22,328 in the comparative 2021 periods, respectively.

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

1 unchanged sentence

Interest Expense

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.

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

Interest expense of $507 and $1,731was incurred for the three and six-month periods ended June 30, 2022, compared to $451 and $1,459 incurred in the same 2021 periods.

There was no other income for the three and six-months ended June 30, 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 in the 2021 comparative period.

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

See Financial Statement Note 9 “ Paycheck Protection Program ”.

Provision for Income Taxes

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.

For the three and six-month periods ended June 30, 2022, the Company recorded Canadian income tax expense of $780 and $1,570 compared to $817 and $1,613 in the comparative periods in 2021.

Net Loss for the Period

As a result of the foregoing, our net loss for the three and six-month periods ended June 30, 2022 was $163,080 and $14,039, respectively.

We incurred net losses of $79,625 and $56,538 for the three and six-month periods ended June 30, 2021.

Basic and diluted loss share were $(0.00) for the three and six-months periods ended June 30, 2022, respectively.

Basic and diluted losses per share were $(0.00) for the three and six-month periods ended June 30, 2021, respectively.

Liquidity and Capital Resources

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.

Our cash totaled $890,292 at June 30, 2022, as compared with $258,705 at December 31, 2021, an increase of $631,587.

Net cash of $2,017,350 was provided by operations for the six-months ended June 30, 2022, primarily due to adjustment for non-cash charges and the increases in deferred revenue and accounts payable, offset by an increase in accounts receivable.

Net cash used in investing activities for the six-months ended June 30, 2022 was $1,384,379, primarily due to capitalized application software costs and the purchases of fixed assets.

Cash used in financing activities for the six-months ended June 30, 2022 was $1,384 related to the repayment of finance leases.

We typically operate with a working capital deficit.

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.

As of June 30, 2022, our working capital deficit is $2,324,203, however current liabilities include $1,482,540 in deferred revenue and a $233,000 nonrefundable customer deposit.

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 May 2023.

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

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Preferred Stock Redemption Rights

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.

At June 30, 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 7 a) “ Preferred shares ”.

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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.

At June 30, 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