What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-13 compared with 2023-11-13 · 56 added, 78 removed, 107 unchanged (56% of the section changed)

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We are a developer of financial software and a distributor of market data and research information to online brokerages, clearing firms, banks, media properties, public companies, and financial service corporations worldwide.

Through the aggregation of information from many direct data, news, and research sources;

we offer a comprehensive range of solutions for all market-related information provisioning requirements.

Through the aggregation of information from many direct data, news, and research sources, we offer a comprehensive range of solutions for all market-related information provisioning requirements.

We have three general product lines:

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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.

All our content solutions are completely customizable and embedded 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.

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Quotestream Mobile is a true companion product to the Quotestream desktop products (Quotestream and Quotestream Professional) – any changes made to portfolios in either the desktop or mobile application are automatically reflected in the other.

A key feature of QuoteMedia’s business model is that all of our product lines generate recurring monthly licensing revenue from each client.

Table of Contnts

A key feature of QuoteMedia’s business model is that all 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 five years and are automatically renewed unless notice is given at least 90 days prior to the expiration of the current license term.

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Business Environment and Trends

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.

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.

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

The Canadian dollar depreciated 5% against the U.S.

dollar when comparing the average exchange rate for the nine-months ended September 30,2023 versus the comparative 2022 period.

This decreased both Canadian dollar revenues and expenses by approximately 2% once translated into U.S.

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

Our revenue increased 10% for the nine-months ended September 30, 2023 versus the comparative 2022 period.

Based on revenue already under contract, we expect lower revenue growth but an improvement in net income for the remainder of fiscal 2023 and for 2024.

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

Events in Ukraine and Russia have continued to cause disruptions in the global financial markets.

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

Approximately 40% of our revenue and 41% of our expenses are denominated in Canadian dollars.

The Canadian dollar remained relatively unchanged against the U.S.

dollar when comparing the average exchange rate for the three-months ended March 31,2024 versus the comparative 2023 period.

Because our Canadian dollar revenue and expenses are evenly matched, exchange rate fluctuations have minimal impact on our net income and cash flows.

Our revenue decreased 1% for the three-months ended March 31, 2024 versus the comparative 2023 period.

Based on revenue already under contract, we expect positive revenue growth and net income for fiscal 2024.

Plan of Operation

For the remainder of 2023 and for 2024 we plan to continue to expand our product lines and improve our infrastructure.

For the remainder of 2024 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.

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Important development projects for the remainder of 2024 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.

We are also creating new proprietary data sets, analytics, and scoring mechanisms.

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

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Critical Accounting Policies and Estimates

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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 licensing revenue increased 8% and 10% when comparing the three and nine-months ended September 30, 2023 and 2022.

The depreciation of the Canadian dollar since the comparative periods, discussed above in the “Business Environment and Trends” section, significantly impacted our revenue across all product lines, reducing our total revenue by approximately 2%.

Corporate Quotestream revenue increased 4% and 7% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022 due to an increase in both the number of customers and average revenue per customer since the comparative periods.

Total licensing revenue decreased 1% when comparing the three-months ended March 31, 2024 and 2023.

Total Portfolio Management Systems revenue decreased 3%.

Corporate Quotestream revenue decreased 2% for the three-months ended March 31, 2024 from the comparative period in 2023 due to a decrease in the number of customers, offset by an increase in 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 11% and 12% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022 due to decreases in both total subscribers and average revenue per subscriber.

Interactive Content and Data APIs revenue increased 16% and 18% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022.

The increases are 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.

Individual Quotestream revenue decreased 4% for the three-months ended March 31, 2024 from the comparative period in 2023 due to a decrease in total subscribers, offset by an increase in average revenue per subscriber.

Interactive Content and Data APIs revenue was relatively unchanged for the three-months ended March 31, 2024 from the comparative period in 2023.

The decrease in the number of customers was offset by an increase in average revenue per customer since the comparative period.

The launch of new products and the expansion of our data coverage have allowed us to attract larger clients, increasing our average revenue per customer.

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.

Our cost of revenue increased 10% and 5% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022.

Our cost of revenue increased 1% for the three-months ended March 31, 2024 from the comparative period in 2023.

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.

For the three-months ended September 30, 2023, our cost of revenue was unchanged as a percentage of sales, as evidenced by our gross margin percentage that was 52% for the three-month ended September 30, 2023 and 2022.

For the nine-months ended September 30, 2023, our cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage that increased to 51% from 49% in the comparative 2022 period.

New contracts signed since the comparative periods have higher gross margins than our other customer contracts typically have on average, resulting in an increase in our gross margin percentage.

Overall, the cost of revenue increased as a percentage of sales, as evidenced by our gross margin percentage that decreased slightly to 50% for the three-months ended March 31, 2024 from 51% in the comparative 2023 period.

Table of Contnts

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 decreased 9% for the three-months ended September 30, 2023 due to a one-time bonus accrual made in the comparative 2022 period.

Sales and marketing expenses increased 4% for the nine-months ended September 30, 2023 when compared to the same period in 2022.

The increase is 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.

Sales and marketing expenses decreased 6% for the three-months ended March 31, 2024 when compared to the same period in 2023.

The decrease is due to $78,125 in stock-based compensation expense incurred in the comparative 2023 period related to the fair value adjustment to our preferred stock warrant liability.

This was offset by additional sales personnel hired since the comparative period to support our product growth initiatives and salary increases for existing personnel.

General and Administrative

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

General and administrative expenses increased 22% and 15% for the three and nine-months ended September 30, 2023 when compared to the same periods in 2022.

The increases for the three and nine-months ended September 30, 2023 are mainly a result of additional professional fees resulting from the change of principal accountants in January 2023 as well as an increase in bad debt expenses from the comparative periods in 2022.

General and administrative expenses decreased 5% for the three-months ended March 31, 2024, when compared to the same period in 2023.

The decrease is mainly a result of additional professional fees incurred in the comparative 2023 period 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 33% and 32% for the three and nine-months ended September 30, 2023 when compared to the same periods in 2022, primarily due to new personnel hired since the comparative periods to improve our infrastructure, security, and business continuity management.

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

We capitalized $812,428 and $2,387,774 of development costs for the three and nine-month periods ended September 30, 2023 compared to $735,169 and $2,022,885 in the same periods in 2022.

Software development expenses increased 27% for the three-months ended March 31, 2024 when compared to the same period in 2023, primarily due to new personnel hired since the comparative period to improve our infrastructure, security, and business continuity management.

The increase in software development expenses was also due to a decrease in the percentage of total development costs capitalized during the three-month period ending March 31, 2024, when compared to the same period in 2023.

We capitalized $815,315 of development costs for the three-month period ended March 31, 2024 compared to $766,515 in the same period in 2023.

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

Capitalized costs associated with application software are amortized over their estimated economic life of three years.

Other Income (Expenses)

Three-months ended September 30,

Foreign exchange gain

Interest income, net

Total other expenses, net

Nine-months ended September 30,

Foreign exchange loss

Other Income and (Expense) Summary

Three-months ended March 31,

Foreign exchange gain (loss)

Interest expense, net

Total other expenses, net

Total other income (expense), net

Foreign Exchange Gain

We incurred foreign exchange gains of $21,803 and $102,327 for the three-months ended September 30, 2023 and 2022, respectively.

We incurred foreign exchange losses of $16,271 and $15,309 for the nine-months ended September 30, 2023 and 2022, respectively.

We incurred a foreign exchange gain of $25,307 for the three-month period ended March 31, 2024, compared to a foreign exchange loss of $8,001 in the comparative 2023 period.

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 is netted against interest earned on cash balances.

Net interest income of $825 and $10 was earned for the three-months ended September 30, 2023 and 2022.

Net interest expenses of $1,031 and $1,721 were incurred for the nine-months ended September 30, 2023 and 2022..

Net interest expense of $953 was incurred for the three-month period ended March 31, 2024, compared to $1,452 incurred in the same 2023 period.

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Provision for Income Taxes

For the three and nine-months ended September 30, 2023, the Company recorded $739 and $2,221 in Canadian income tax expense compared to $751 and $2,321 in the respective comparative periods in 2022.

Net Income for the Period

As a result of the foregoing, our net income for the three and nine-month ended September 30, 2023 was $126,036 and $312,362 compared to $309,543 and $295,504 in the respective comparative periods in 2022.

Basic and diluted earnings per share were $0.00 for the three and nine-months periods ended September 30, 2023 and 2022, respectively.

For the three-month period ended March 31, 2024, the Company recorded $738 in Canadian income tax expense compared to $730 in the comparative period in 2023.

Net Income (Loss) for the Period

As a result of the foregoing, our net loss for the three-month period ended March 31, 2024 was $28,176 compared to a net income of $113,290 in the comparative period in 2023.

The basic and diluted loss share was $(0.00) for the three-month period ended March 31, 2024, compared to the basic and diluted earnings per share of $0.00 for the three-month period ended March 31, 2023.

Liquidity and Capital Resources

Our cash totaled $820,939 at September 30, 2023, as compared with $477,987 at December 31, 2022, an increase of $342,952.

Net cash of $2,801,975 was provided by operations for the nine-months ended September 30, 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 and an increase in accounts receivable.

Net cash used in investing activities for the nine-months ended September 30, 2023 was $2,459,023, primarily due to capitalized application software costs and the purchases of fixed assets.

Our cash totaled $244,277 at March 31, 2024, as compared with $342,014 at December 31, 2023, a decrease of $97,737.

Net cash of $727,667 was provided by operations for the three-months ended March 31, 2024, primarily due to adjustments for non-cash charges and the increase in accounts payable and accrued liabilities, offset by an increase in accounts receivable.

Net cash used in investing activities for the three-months ended March 31, 2024 was $825,404, due to capitalized application software costs and purchases of computer equipment.

We typically operate with a working capital deficit.

As of September 30, 2023, our working capital deficit was $1,979,800, however current liabilities include $1,676,949 in deferred revenue.

As of March 31, 2024, our working capital deficit was $2,365,763, however current liabilities include $1,505,807 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 July 2024.

However, implementing our business plan may require additional financing.

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No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

Preferred Stock Redemption Rights

At September 30, 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 ”.

Foreign Exchange Risk

Currently, approximately 38% of our consolidated revenue, and 39% of our consolidated expenses are denominated in Canadian dollars.

Currently, approximately 40% of our consolidated revenue and 41% percent of our consolidated expenses are denominated in Canadian dollars.

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

Off-Balance Sheet Arrangements

At September 30, 2023 and December 31, 2022, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

At March 31, 2024 and December 31, 2023, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

Table of Contnts

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