QUOTEMEDIA INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview 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. We have three general product lines: 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. 13 Table of Contents 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 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, 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. 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 Quotestream, 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. Quotestream has been designed for syndication and private branding by brokerage, banking, and Web portal companies. Quotestream’s enhanced features and functionality – most notably tick-by-tick true streaming data, significantly enhanced charting features, and a broad range of additional research and analytical content and functionality – offer a professional-level experience to nonprofessional users. Quotestream Professional is specifically designed for use by financial services professionals, offering exceptional coverage and functionality at extremely aggressive pricing. Quotestream Professional features broad market coverage, reliability, complete flexibility, ultra-low-latency tick-by-tick data, as well as completely customizable screens, advanced charting, comprehensive technical analysis, news, and research data. 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 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. 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 five years and are automatically renewed unless notice is given 90 days prior to the expiration of the contract term. Business Environment and Trends While our licensed-based revenue is generally recurring in nature, the uncertainty caused by the recent market downturn and rising inflation may result in some clients delaying purchasing decisions, product and service implementations or cancel or reduce spending with us. New tariffs proposed by the U.S. government could lead to a general slowdown in economic activity, which could negatively impact our business. 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. 14 Table of Contents Approximately 39% of our revenue and 38% of our expenses are denominated in Canadian dollars. The Canadian dollar depreciated 2% against the U.S. dollar when comparing the average exchange rate for the year ended December 31, 2024 versus the comparative 2023 year. This decreased both Canadian dollar revenues and expenses once translated into U.S. dollars, but because our Canadian dollar revenue and expenses are evenly matched, the exchange rate fluctuation had minimal impact on our net income and cash flows. Our revenue decreased 1% in 2024 versus the comparative 2023 year. For fiscal 2025, based on revenue already under contract we expect to return to positive revenue growth and expect a significant improvement to the net loss we incurred in 2024. Plan of Operation For 2025 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. We plan to leverage artificial intelligence (AI) tools, where possible, to automate this process. This expansion is expected to result in both increased revenue and costs for the fiscal year 2025. 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 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. Important development projects for 2025 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. We are now aggregating data direct from the sources to produce data sets that are proprietary to QuoteMedia. This allows us to offer our clients new data products and lower our product cost structure as we replace some of our existing data providers with our own lower cost data. Opportunistically, efforts will be made to evaluate and pursue the development of additional new products that may eventually be commercialized by our company. Although not currently anticipated, we may require additional capital to execute our proposed plan of operation. 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. There can be no assurance that we will be able to successfully implement our marketing strategy, continue our revenue growth, or maintain profitable operations. 15 Table of Contents Critical Accounting Policies and Estimates Management’s Discussion and Analysis discusses our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis we evaluate our estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. Revenue recognition In accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), we recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services by applying the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. We exercise judgment in assessing the creditworthiness of our customers and therefore in our determination of whether collectability is reasonably assured. Should changes in conditions cause us to determine that these criteria are not met for future transactions, revenue recognized in future reporting periods could be adversely affected. Capitalized Application Software Capitalized software costs include costs incurred in connection with the internal development of software. These costs relate to software used by subscribers to access, manage and analyze information in the Company’s databases. Capitalized costs associated with internally developed software are amortized over three years which is their estimated economic life. We exercise significant judgment in determining that capitalized application software costs meet the criteria established in Financial Accounting Standards Board (“FASB”) ASC 350-40, Internal-Use Software. The most significant estimates are the allocation of our development personnel’s time working on capitalized internally developed software. For the years ended December 31, 2024, and 2023, the Company capitalized $3,399,893 and $ 3,203,045 of costs, respectively, related to upgrades and enhancements made to existing software applications. Software applications are used by the Company’s subscribers to access, manage and analyze information in the Company’s databases. For the years ended December 31, 2024, and 2023, amortization expenses associated with the internally developed application software were $2,911,259 and $2,448,510, respectively. At December 31, 2024 and 2023, the remaining book value of the capitalized application software was $5,041,544 and $4,552,910. Recent Accounting Pronouncements Recently Adopted In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). This standard improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-07 will be applied retrospectively to all prior periods presented in the consolidated financial statements. The adoption of ASU 2023-07 did not have a significant impact on the Company’s consolidated financial statements 16 Table of Contents Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The ASU requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. Additionally, the amendment requires a qualitative description of the amounts remaining in the relevant expense captions that are not separately disaggregated quantitatively, and to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. For public business entities, the new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. An entity may apply the amendments prospectively for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company does not expect that the adoption of ASU 2023-09 will have a significant impact on the Company’s consolidated financial statements other than the additional disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure (“ASU 2023-09”). This standard provides transparency to income tax disclosures related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 for public entities with early adoption permitted. The amendments in ASU 2023-09 will be applied prospectively in the consolidated financial statements. The Company does not expect that the adoption of ASU 2023-09 will have a significant impact on the Company’s consolidated financial statements. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. Results of Operations Revenue Years ended December 31 2024 2023 Change($) Change(%) Corporate Quotestream $ 7,219,382 $ 7,275,615 $ (56,233 ) (1 )% Individual Quotestream 1,833,633 1,861,396 (27,763 ) (1 )% Total Portfolio Management Systems 9,053,015 9,137,011 (83,996 ) (1 )% Interactive Content and Data APIs 9,689,237 9,770,714 (81,477 ) (1 )% Total Licensing Revenue $ 18,742,252 $ 18,907,725 $ (165,473 ) (1 )% Total licensing revenue decreased by 1% when comparing the years ended December 31, 2024, and 2023. Total Portfolio Management System revenue decreased by 1% when comparing the years ended December 31, 2024, and 2023. Corporate Quotestream decreased by 1% due to a decrease in the number of customers offset by an increase in average revenue per customer. Individual Quotestream revenue also decreased 1% for the year ended December 31, 2024, from the comparative period in 2023 due mainly to a decrease in total subscribers offset by an increase in pricing for Individual Quotestream effective January 1, 2024. The depreciation of the Canadian dollar, discussed above in the “Business Environment and Trends” section, also impacted Individual Quotestream revenue as approximately 43% of our Individual Quotestream revenue is earned in Canadian dollars. Interactive Content and Data APIs revenue decreased by 1% for the year ended December 31, 2024, from the comparative period in 2023 due mainly to a decrease in the average revenue per client. 17 Table of Contents Cost of Revenue and Gross Profit Summary Years ended December 31 2024 2023 Change ($) Change(%) Cost of revenue $ 9,868,830 $ 9,263,073 $ 605,757 7 % Gross profit $ 8,873,422 $ 9,644,652 $ (771,230 ) (8 %) Gross margin % 47 % 51 % Our cost of revenue consists of fixed and variable stock exchange fees and data feed provisioning costs. The cost of revenue also includes amortization of capitalized internal-use software costs. We capitalize the costs associated with developing new products during the application development stage. Our cost of revenue increased 7% for the year ended December 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. Overall, the cost of revenue increased as a percentage of sales, as evidenced by our gross margin percentage which decreased to 47% in 2024 from 51% in 2023. Operating Expenses Summary Years ended December 31 2024 2023 Change ($) Change (%) Sales and marketing $ 3,341,673 $ 3,130,051 $ 211,622 7 % General and administrative 3,645,321 3,346,157 299,164 9 % Software development 3,167,712 2,757,031 410,681 15 % Total operating expenses $ 10,154,706 $ 9,233,239 $ 921,467 10 % Sales and Marketing Sales and marketing expenses consist primarily of sales and customer service salaries, investor relations, travel, and advertising expenses. Sales and marketing expenses increased 7% when comparing the years ended December 31, 2024, and 2023. 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 2% depreciation of the Canadian dollar from the comparative period as most of our sales personnel are in Canada. General and Administrative General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative increased 9% when comparing the years ended December 31, 2024, and 2023. The increase is mainly due to an increase in bad debt expenses. Software Development Software development expenses consist primarily of costs associated with the design, programming, and testing of our software applications during the preliminary project stage. Software development expenses also include costs incurred to maintain our software applications. 18 Table of Contents Software development expenses increased 15% for the year ended December 31, 2024, when compared to fiscal 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 2024 when compared to the same period in 2023. The increase in development personnel costs was offset by the 2% depreciation of the Canadian dollar from the comparative period as most of our development personnel are in Canada. We capitalized $3,399,893 of development costs for the year ended December 31, 2024, compared to $3,203,045 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) Summary Years ended December 31, 2024 2023 Foreign exchange gain (loss) $ 103,736 $ (45,017 ) Interest expense (2,508 ) (1,846 ) Total other income (expenses) $ 101,228 $ (46,863 ) Foreign Exchange Gain (Loss) We incurred a foreign exchange gain of $103,736 for the year ended December 31, 2024, compared to a foreign exchange loss of $45,017 for the year ended December 31, 2023. Foreign exchange gains and losses arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars. We have a net Canadian dollar liability; therefore, we incur a foreign exchange gain when the Canadian dollar depreciates from the period beginning date, and a loss when the Canadian dollar appreciates. Gains and losses arising from exchange rate fluctuations between transaction and settlement dates for foreign currency denominated transactions are also included in foreign exchange gains and losses. 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 $2,508 was incurred for the year ended December 31, 2024, compared to $1,846 incurred for the year ended December 31, 2023. Provision for Income Taxes In 2024, the Company recorded income tax expense of $146,981 compared to income tax expense of $2,966 in 2023. Net Income for the Period As a result of the foregoing, our net loss for the year ended December 31, 2024, was $1,327,037 compared to net income of $361,584 for the year ended December 31, 2023. Basic and diluted (loss) earnings per share were ($0.01) and $0.00 for the years ended December 31, 2024, and 2023, respectively. Liquidity and Capital Resources Our cash totaled $585,319 at December 31, 2024, as compared with $342,014 at December 31, 2023, an increase of $243,305. Net cash of $3,680,860 was provided by operations for the year ended December 31, 2024, primarily due to adjustments for non-cash charges and the increase in accounts payable and accrued liabilities and deferred revenue, offset by our net loss and an increase in accounts receivable. Net cash used in investing activities for the year ended December 31, 2024, was $3,437,555 resulting primarily from capitalized application software costs. If circumstances dictate, however, we have the flexibility to reduce development spending to maintain a strong liquidity position. 19 Table of Contents We typically operate with a working capital deficit. As of December 31, 2024, our working capital deficit is $ 3,476,362, however current liabilities include $1,704,743 in deferred revenue and the expected costs necessary to realize the deferred revenue are minimal. 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. However, implementing our business plan may require additional financing. Additional financing may come from future equity or debt offerings that could result in dilution to our stockholders. Further, current adverse capital and credit market conditions could limit our access to capital. We may be unable to raise capital or bear an unattractive cost of capital that could reduce our financial flexibility. Our long-term liquidity requirements will depend on many factors, including the rate at which we expand our business and whether we do so internally or through acquisitions. To the extent that the funds generated from operations are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or private financing. 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. Foreign Exchange Risk Currently, approximately 39% of our consolidated revenue and 38% of our 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 December 31, 2024 and 2023, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required.