What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-10 · 52 added, 97 removed, 112 unchanged (57% of the section changed)

Management’s Discussion and Analysis

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this report.

We caution readers regarding certain forward looking statements in the following discussion, elsewhere in this report, and in any other statements, made by, or on behalf of our company, whether or not in future filings with the Securities and Exchange Commission.

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Business Environment and Trends

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;

therefore, we will continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact team members, customers, suppliers, and global markets.

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 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.

While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the recent market volatility, rising inflation and federal debt level payment uncertainty may result in some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us.

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

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Approximately 38% of our revenue and 39% of our expenses are denominated in Canadian dollars.

The Canadian dollar depreciated 4% and 3% when comparing average exchange rates for the three and nine months ended September 30, 2022 and 2021.

This decreased both Canadian dollar revenues and expenses once translated into U.S.

dollars for the three and nine months ended September 30, 2022 when compared to the same periods in 2021, but had a minimal impact on our net income.

In 2022, we finalized contracts with two large multinational financial institutions.

This first contract was effective January 1, 2022, but we did not start recognizing revenue until April 2022 when their services went live.

The second contract was finalized in October 2022 with services starting in November 2022.

Prior to finalizing the contract, we received a partial development fee payment of $218,000 in Q2 2022.

This amount was recorded as a customer deposit and included in accrued liabilities as of September 30, 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.

In our June 30, 2022, Form 10-Q we stated that we expected 19% revenue growth for fiscal 2022.

We have lowered our revenue growth projection to 16% for fiscal 2022 due primarily to the depreciation of the Canadian dollar as it has depreciated approximately 7% versus the U.S.

dollar since Q2 2022, and the contracts discussed above are denominated in Canadian dollars.

We expect similar revenue growth in fiscal 2023, but we expect our 2023 net income to significantly improve.

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.

The Canadian dollar depreciated 7% against the U.S.

dollar when comparing the average exchange rate for the three-months ended March 31,2023 versus the comparative 2022 period.

This decreased both Canadian dollar revenues and expenses by approximately 3% once translated into U.S.

dollars but had a minimal impact on our net income and cash flow.

Our revenue increased 11% for the three-months ended March 31, 2023 versus the comparative 2022 period.

Based on revenue already under contract, we expect our revenue growth and net income to improve for the remainder of fiscal 2023.

Plan of Operation

For the remainder of 2022 and for 2023 we plan to continue to expand our product lines and improve our infrastructure.

For the remainder of 2023 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 and 2023.

This expansion is expected to result in both increased revenue and costs for the remainder of fiscal 2023.

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.

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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 and 2023 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.

Important development projects for the remainder of 2023 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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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.

In the 2022 Annual Report, we disclose our critical accounting policies and estimates upon which our consolidated financial statements are derived.

There have been no material changes to these policies since December 31, 2022.

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Results of Operations

Three-months ended September 30,

Corporate Quotestream

Individual Quotestream

Total Portfolio Management Systems

Interactive Content and Data APIs

Total subscription revenue

Nine-months ended September 30,

Three-months ended March 31,

Corporate Quotestream

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Total subscription revenue

Total subscription revenue increased 15% when comparing the three and nine-months ended September 30, 2022 and 2021.

Total Portfolio Management Systems revenue decreased 1% for the three months ended September 30, 2022 from the comparative period in 2021 and increased 4% for the nine-months ended September 30, 2022 from the comparative period in 2021.

Corporate Quotestream revenue increased 3% and 8% for the three and nine-months ended September 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 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.

Total licensing revenue increased 11% when comparing the three-months ended March 31, 2023 and 2022.

The increase is a result of a 2% increase in revenue from licensing our Portfolio Management Systems and 22% increase in revenue from our Interactive Content and Data APIs.

The depreciation of the Canadian dollar since the comparative period, discussed above in the “Business Environment and Trends” section, significantly impacted our revenue across all product lines, reducing our total revenue by 3%.

Corporate Quotestream revenue increased 6% for the three-months ended March 31, 2023 from the comparative period in 2022 due to an increase in both the number of customers and average revenue per customer since the comparative period.

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.

Individual Quotestream revenue decreased 10% and 7% for the three and nine-months ended September 30, 2022 from the comparative periods in 2021 due mainly to a decrease in total subscribers.

The depreciation of the Canadian dollar, discussed above in the “Business Environment and Trends” section, also significantly impacted Individual Quotestream revenue as approximately 50% of our Individual Quotestream revenue is earned in Canadian dollars.

Interactive Content and Data APIs revenue increased 37% and 30% when comparing the three and nine-months ended September 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 signed with a large multinational financial institution discussed above in the “Business Environment and Trends” section.

Individual Quotestream revenue decreased 12% for the three-months ended March 31, 2023 from the comparative period in 2022 due to both a decrease in total subscribers and average revenue per subscriber.

Interactive Content and Data APIs revenue increased 22% for the three-months ended March 31, 2023 from the comparative period in 2022.

The increase is attributable to an increase in the average revenue per client as the launch of new products and the expansion of our data coverage have allowed us to attract larger clients.

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.

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 5% for the three and nine-months ended September 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 52% and 49% for the three and nine-months ended September 30, 2022 from 47% and 44% in the comparative 2021 periods.

As discussed above in the “Business Environment and Trends” section, we signed 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.

Our cost of revenue increased 4% for the three-months ended March 31, 2023 from the comparative period in 2022.

This was mainly due to increased amortization expenses associated with internally developed application software resulting from our major growth initiative, which included investing in infrastructure, new product development, data collection, and the expansion of our global market coverage.

Overall, the cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage that increased to 51% for the three-months ended March 31, 2023 from 47% in the comparative 2022 period.

New contracts signed since the comparative period have higher gross margins than our other customer contracts typically have on average, resulting in a significant increase in 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 26% and 21% for the three and nine-months ended September 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 and salary increases for existing personnel.

The increases were offset by the depreciation of the Canadian dollar from the comparative periods as most of our sales personnel are located in Canada as well as the $87,127 decrease in fair value during the quarter for our preferred stock warrant liability recorded as a decrease in marketing expense.

Sales and marketing expenses increased 10% for the three-months ended March 31, 2023 when compared to the same period in 2022.

The increase is a result of additional sales personnel hired since the comparative period to support our product growth initiatives and salary increases for existing personnel.

The increase was offset by the depreciation of the Canadian dollar from the comparative period as most of our sales personnel are located in Canada.

General and Administrative

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

General and administrative expenses increased 16% and 14% for the three and nine-months ended September 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.

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

General and administrative expenses increased 27% for the three-months ended March 31, 2023 when compared to the same period in 2022.

The increase is mainly a result of additional professional fees resulting from the change of principal accountants in January 2023.

Software Development

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

Software development expenses increased 32% and 23% for the three and nine-months ended September 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.

The increase in development personnel costs was offset by the depreciation of the Canadian dollar from the comparative periods as most of our development personnel are located in Canada.

We capitalized $735,169 and $2,022,885 of development costs for the three and nine-month periods ended September 30, 2022 compared to $572,795 and $1,621,738 in the same periods in 2021.

Software development expenses increased 34% for the three-months ended March 31, 2023 when compared to the same period in 2022, primarily due to new personnel hired since the comparative period to improve our infrastructure, security, and business continuity management.

The increase in development personnel costs was offset by the depreciation of the Canadian dollar from the comparative period as most of our development personnel are located in Canada.

We capitalized $766,515 of development costs for the three-month period ended March 31, 2023 compared to $606,152 in the same period in 2022.

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 income (expense), net

Total other income, net

Nine-months ended September 30,

Foreign exchange gain (loss)

Interest income (expense), net

Total other income (expense), net

Three-months ended March 31,

Foreign exchange (loss) gain

Interest expense, net

Total other (expense) income, net

Foreign Exchange Gain

We incurred a foreign exchange gain of $102,327 for the three-month period ended September 30, 2022 and a foreign exchange loss of $15,309 for the nine-month period ended September 30, 2022, compared to foreign exchange gains of $55,278 and $77,606 in the comparative 2021 periods, respectively.

We incurred a foreign exchange loss of $8,001 for the three-month period ended March 31, 2023, compared to a foreign exchange gain of $17,590 in the comparative 2022 period.

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

dollars and from exchange rate fluctuations between transaction and settlement dates for foreign currency denominated transactions.

Interest Income (Expense), Net

Interest expense related primarily to our finance leases is netted against interest earned on cash balances.

Net interest income (expenses) of $10 and ($1,721) were incurred for the three and nine-month periods ended September 30, 2022, compared to ($101) and ($1,560) incurred in the same 2021 periods.

There was no other income for the three and nine-months ended September 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 nine-months ended September, 2021 comparative period.

See Financial Statement Note 9 “ Paycheck Protection Program ”.

Interest Expense, Net

Interest expense is netted against interest earned on cash balances.

Net interest expense of $1,452 was incurred for the three-month period ended March 31, 2023, compared to $1,224 incurred in the same 2022 period.

Provision for Income Taxes

For the three and nine-month periods ended September 30, 2022, the Company recorded $751 and $2,321 in Canadian income tax expense compared to $790 and $2,403 in the comparative periods in 2021.

For the three-month period ended March 31, 2023, the Company recorded $730 in Canadian income tax expense compared to $790 in the comparative period in 2022.

Net Income for the Period

As a result of the foregoing, our net income for the three and nine-month periods ended September 30, 2022 was $309,543 and $295,504, respectively.

Our net income for the comparative three and nine-month periods ended September 30, 2021 was $154,931 and $98,393, respectively.

Basic and diluted earnings per share were $0.00 for the three and nine-months periods ended September 30, 2022, respectively.

Basic and diluted losses per share were $0.00 for the three and nine-month periods ended September 30, 2021, respectively.

As a result of the foregoing, our net income for the three-month period ended March 31, 2023 was $113,290 compared to $149,041 in the comparative period in 2022.

Basic and diluted earnings per share were $0.00 for the three-months periods ended March 31, 2023 and 2022, respectively.

Liquidity and Capital Resources

Our cash totaled $303,674 at September 30, 2022, as compared with $258,705 at December 31, 2021, an increase of $44,969.

Net cash of $2,191,890 was provided by operations for the nine-months ended September 30, 2022, primarily due to adjustments for non-cash charges and the increase in deferred revenue.

Net cash used in investing activities for the nine-months ended September 30, 2022 was $2,144,827, primarily due to capitalized application software costs and the purchases of fixed assets.

Cash used in financing activities for the nine-months ended September 30, 2022 was $2,094 related to the repayment of finance leases.

Our cash totaled $675,065 at March 31, 2023, as compared with $477,987 at December 31, 2022, an increase of $197,078.

Net cash of $992,379 was provided by operations for the three-months ended March 31, 2023, primarily due to adjustments for non-cash charges and the increase in deferred revenue, offset by a decrease in accounts payable and accrued liabilities.

Net cash used in investing activities for the three-months ended March 31, 2023 was $795,301, primarily due to capitalized application software costs and the purchases of fixed assets.

We typically operate with a working capital deficit.

As of September 30, 2022, our working capital deficit is $2,337,632, however current liabilities include $1,088,109 in deferred revenue and a $218,000 nonrefundable customer deposit.

As of March 31, 2023, our working capital deficit was $1,806,768, however current liabilities include $1,095,103 in deferred revenue.

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 2023.

However, implementing our business plan may require additional financing.

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Preferred Stock Redemption Rights

At September 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.

At March 31, 2023, 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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Since currently our Canadian dollar revenue and expenses are closely matched, our consolidated cashflows are not significantly impacted by foreign exchange fluctuations.

Looking forward however, based on the new contracts discussed above in the “Business Environment and Trends” section, we expect our Canadian dollar revenue to exceed expenses therefore our consolidated cashflows may be impacted by foreign exchange fluctuations.

Off-Balance Sheet Arrangements

At September 30, 2022 and December 31, 2021, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

At March 31, 2023 and December 31, 2022, 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