10-Q: QuoteMedia Q3 2025: Revenue Up, Net Loss Widens Annually

QuoteMedia, Inc. reported a 10% revenue increase for Q3 2025, but a significant rise in software development expenses led to a wider net loss for the nine-month period and a material weakness in internal controls.

Summary

• Revenue increased by 10% to $5,154,555 for the three months ended September 30, 2025, compared to $4,695,845 in the prior year.
• For the nine months ended September 30, 2025, revenue grew 6% to $14,908,122, up from $14,050,991 in the same period of 2024.
• Net loss for the three months ended September 30, 2025, improved to $(367,192) from $(440,941) in the prior year.
• However, the net loss for the nine months ended September 30, 2025, significantly widened to $(1,720,585) from $(720,290) in the comparative period.
• Cash and cash equivalents decreased by $304,176, from $585,319 at December 31, 2024, to $281,143 at September 30, 2025.
• The company reported a stockholders' deficit of $(262,703) as of September 30, 2025, a substantial decline from equity of $1,415,588 at December 31, 2024.
• A material weakness in internal control over financial reporting due to a lack of segregation of duties in financial reporting was identified.

Sentiment

Score: 3

Explanation: While revenue growth is positive, the significant increase in net loss for the nine-month period, the shift to a stockholders' deficit, substantial decrease in operating cash flow, and the identified material weakness in internal controls indicate significant financial and operational challenges. The need for potential future capital raises and the risks associated with it further dampen sentiment, despite strategic initiatives.

Positives

• Revenue growth of 10% for the three-month period and 6% for the nine-month period ended September 30, 2025.
• Corporate Quotestream revenue increased by 18% for the three-month period and 14% for the nine-month period, driven by higher average revenue per customer.
• Gross profit increased by 15% for the three-month period, with gross margin improving to 48% from 46%.
• Operating loss for the three-month period decreased to $(374,376) from $(408,398) in the prior year.
• Net loss for the three-month period decreased to $(367,192) from $(440,941) in the prior year.
• Net cash provided by operating activities was $832,155 for the nine months ended September 30, 2025.
• General and administrative expenses decreased by 25% for the three-month period and 14% for the nine-month period, primarily due to lower bad debt expense and reduced office rent.
• The company expects revenue growth to continue for the remainder of fiscal 2025 based on existing contracts.
• Strategic focus on expanding product lines, improving infrastructure, leveraging AI tools, and growing Data Feed Services and Interactive Content and Data APIs.
• Initiatives to create new proprietary data sets and analytics to lower product cost structure.

Negatives

• Net loss for the nine-month period significantly widened to $(1,720,585) from $(720,290) in the prior year.
• Cash and cash equivalents decreased by $304,176, ending at $281,143 as of September 30, 2025.
• The company moved from stockholders' equity of $1,415,588 at December 31, 2024, to a stockholders' deficit of $(262,703) at September 30, 2025.
• Software development expenses increased significantly by 74% for the three-month period and 55% for the nine-month period, primarily due to a higher percentage of development salaries being expensed rather than capitalized.
• Gross margin percentage for the nine-month period decreased to 46% from 48% in the comparative 2024 period.
• Net cash provided by operating activities decreased substantially to $832,155 for the nine months ended September 30, 2025, from $2,575,327 in the prior year.
• The company operates with a working capital deficit of $4,405,332 as of September 30, 2025.
• Individual Quotestream revenue was relatively flat for the three-month period (1% increase) and decreased by 1% for the nine-month period.

Risks

• Adverse macroeconomic conditions, including inflation, slower growth or recession, and higher interest rates, could materially adversely affect demand for services.
• New tariffs enacted and proposed by the U.S. government could lead to a general slowdown in economic activity, negatively impacting the business.
• The ongoing conflict in Ukraine and Russia could impact the business, despite no direct operations or customers in those regions.
• The company is subject to periodic examinations by stock exchanges, which could result in monetary assessments.
• Future performance is subject to market uncertainty, evolving industry needs and preferences, and the level of competition.
• There is no assurance that additional capital, if required, will be available on commercially reasonable terms or at all.
• Adverse capital and credit market conditions could limit access to capital.
• The company may be unable to successfully implement its marketing strategy, continue revenue growth, or maintain profitable operations.

Future Outlook

The company plans to continue expanding product lines, improving infrastructure, and adding features and data, leveraging AI tools where possible. It will focus on marketing Quotestream to brokerage firms and investment professionals, growing Data Feed Services, and increasing sales of Interactive Content and Data APIs, particularly with QMod for large-scale enterprise deployments. Key development projects include expanding international data and news coverage, video feeds, fixed-income coverage, and new market information products, alongside trade integration capabilities. The company is also creating proprietary data sets to lower costs. Revenue growth is expected to continue for the remainder of fiscal 2025 based on existing contracts, though increased costs are also anticipated for the remainder of 2025 and fiscal year 2026.

Management Comments

• "Based on revenue already under contract we expect our revenue growth to continue to improve for the remainder of fiscal 2025."
• "We reduced the number of development staff in late 2024 as some of our major development projects are near completion."
• "Our development cost expense significantly increased this quarter due to a higher percentage of development salaries being expensed rather than capitalized, as more development time was spent on system maintenance and other development activities that did not meet the criteria for capitalization."
• "We expect this trend [higher expensing of development costs] to continue for the remainder of 2025 and in 2026, although its impact will diminish over that time."
• "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 September 2026."
• "Implementing our business plan may require additional financing."
• "Management, with the participation and supervision of our Chairman of the Board and Chairman of the Audit Committee, Chief Executive Officer and Chief Financial Officer, have evaluated our disclosure controls and procedures... and concluded that our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting."
• "Notwithstanding the material weaknesses described below our management has concluded that our consolidated financial statements for the periods covered by and included in this Quarterly Report are prepared in accordance with accounting principles generally accepted in the United States (GAAP) and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein."

Industry Context

QuoteMedia operates in the competitive financial market data and software industry, providing solutions to financial institutions, media, and public companies. The company's strategy to expand international data coverage, leverage AI, and develop proprietary data sets aligns with broader industry trends towards enhanced data analytics, global market access, and cost optimization. The shift towards expensing more software development costs, while impacting current earnings, could reflect a maturing product lifecycle or a strategic pivot towards maintenance and incremental improvements rather than large-scale new product capitalization, which is a common challenge in the software industry. The macroeconomic headwinds mentioned, such as inflation and higher interest rates, are pervasive industry-wide concerns that could affect client spending and investment in financial technology.

Comparison to Industry Standards

• The company's revenue growth of 6-10% is moderate for a technology company, especially compared to high-growth SaaS or fintech firms that might see 20%+ growth. However, for a mature data provider, this could be considered stable.
• The decline in gross margin for the nine-month period (from 48% to 46%) suggests increasing cost pressures, possibly from data acquisition or infrastructure, which could be a concern if not managed effectively compared to industry leaders like Refinitiv (LSEG) or Bloomberg, which benefit from scale and proprietary data.
• The significant increase in expensed software development costs (74% for the quarter, 55% for nine months) is a notable deviation from typical software company capitalization practices, which often aim to capitalize development for new products to spread costs. This could indicate a shift in development focus or challenges in meeting capitalization criteria, potentially impacting reported profitability more heavily in the short term than competitors with more aggressive capitalization policies.
• The reported material weakness in internal control over financial reporting due to a lack of segregation of duties is a serious governance issue that falls below industry best practices for public companies, regardless of size. Larger, more established competitors would typically have robust internal control frameworks to prevent such deficiencies.

Corporate Governance

Related Party Transactions

• Office lease with 410734 B.C. Ltd. (control person: David M. Shworan, CEO of QuoteMedia Ltd.) for approximately $6,500 per month, with $41,053 due at September 30, 2025.
• Monthly marketing service fee of $3,000 to Bravenet Web Services, Inc. (control person: David M. Shworan), with $55,483 due at September 30, 2025.
• Bravenet Web Services, Inc. advanced the Company $69,000 on February 25, 2025, with no fixed repayment terms or interest.
• $138,760 in unreimbursed expenses owed to Keith Randall, CEO of QuoteMedia, Inc.

Stakeholder Impact

• Shareholders: Potential for dilution from future equity offerings if additional capital is raised. The shift to a stockholders' deficit and widening net loss for the nine-month period negatively impacts shareholder value. The material weakness in internal controls raises concerns about financial reporting reliability.
• Employees: Reduction in development staff in late 2024, though new development activities are ongoing. The shift to remote work for development staff in Vancouver.
• Customers: Continued product expansion, feature additions, and international data coverage aim to enhance service offerings and value. New proprietary data sets could lead to lower product costs for the company, potentially benefiting customers through competitive pricing or improved services.
• Creditors: The working capital deficit and decreased cash position, alongside the need for potential future financing, could increase perceived credit risk.
• Regulatory Authorities: The identified material weakness in internal controls will likely draw scrutiny and require remediation efforts to ensure compliance with SEC regulations.

Next Steps

• Expand product lines and improve infrastructure.
• Add more features and data to existing products and release newer versions with improved performance and flexibility.
• Leverage artificial intelligence (AI) tools to automate processes.
• Maintain focus on marketing Quotestream for deployments by brokerage firms to retail clients.
• Continue expansion into the investment professional market with Quotestream Professional.
• Continue growth of Data Feed Services client base, including adding major new international data feed coverage and new data delivery products.
• Increase sales of Interactive Content and Data APIs, particularly for large-scale enterprise deployments using QMod.
• Broad expansion of data and news coverage, including international exchange data, news, video feeds, and fixed-income coverage.
• Introduction of several new and upgraded market information products.
• Continue new deployments of trade integration capabilities for Quotestream applications.
• Create new proprietary data sets, analytics, and scoring mechanisms by aggregating data direct from sources.
• Opportunistically evaluate and pursue the development of additional new products.
• Address the material weakness in internal control over financial reporting.

Key Dates

Recommendation

The company's financial position has significantly deteriorated, moving from stockholders' equity to a deficit. While revenue shows some growth, the substantial increase in net loss for the nine-month period, coupled with a sharp decline in operating cash flow, indicates worsening profitability and cash generation. The identified material weakness in internal controls over financial reporting is a serious governance concern, suggesting a lack of robust financial oversight. The explicit mention of a potential need for additional financing, which could dilute existing shareholders, further adds to the negative outlook. These factors collectively point to significant financial instability and operational risks, making the stock a 'sell' for a seasoned investor.

Keywords

financial market data, software development, Quotestream, Interactive Content APIs, Data Feed Services, SEC filing, 10-Q, financial technology, fintech, market data solutions, corporate governance, internal controls, stockholders deficit, revenue growth, net loss