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Jasper Commerce Inc. Management Reports 2023
48130_rns_2023-11-28_8c41108b-1b14-4aa6-ac98-3567bd8ad394.pdf
Management Reports
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF JASPER FOR THE THREE AND TWELVE MONTH PERIODS ENDED JULY 31, 2023
The following Management's Discussion and Analysis ("MD&A") for Jasper Commerce Inc. ("Jasper" or the "Company") provide a review of the results of operations, financial condition, and cash flows of the Company for the three and twelve month periods ended July 31, 2023. This document should be read in conjunction with the Company's audited consolidated financial statements, and the accompanying notes, as of and for the twelve month periods ended July 31, 2023 and 2022. The financial statements, including the notes thereto, and the financial information presented in this MD&A have been prepared in accordance with International Financial Reporting Standards ("IFRS"). All amounts are stated in Canadian currency unless otherwise indicated. Whenever used in this MD&A, the term "Common Shares" means Class A common shares in the capital of the Company.
The content of this MD&A has been approved by the board of directors of the Company (the "Board" or "Board of Directors") on November 27, 2023.
FORWARD LOOKING STATEMENTS AND DISCLAIMER
Certain information set out in this MD&A constitutes forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "hope", "plan", "continue", "estimate", "expect", "may", "will", "intend", "could", "might", "should", "scheduled", "believe" and similar expressions.
Forward-looking statements are based upon the opinions, expectations and estimates of management and, in some cases, information received from or disseminated by third parties, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. These factors include such things as the Company's current stage of development, the lack of a track record with respect to the generation of revenues from performance-based arrangements with users, its reliance on third parties and third party technology, the existence of competition, the availability of external financing, the inherent risks associated with research and development activities and commercialization of emerging technologies (such as lack of market acceptance), timing of execution of various elements of the Company's business plan, the availability of human resources, the emergence of competing business models, new laws (domestic or foreign), lack of acceptance by users, management's estimates of project requirements being incorrect, information received from third parties with respect to anticipated transaction volumes being incorrect, a lack of advertising sources for integration into the Company's platform, management's understanding of the competitive and regulatory environment being incorrect and the other risk factors noted below under the heading "Business Risks and Uncertainties". Accordingly, readers should not place undue reliance upon the forward-looking information contained herein and the forward-looking statements contained in this MD&A should not be considered or interpreted as guarantees of future outcomes or results.
The Company does not assume responsibility for the accuracy and completeness of the forward-looking statements set out in this MD&A and, subject to applicable securities laws, does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Jasper's forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statement.
INTRODUCTION AND OVERVIEW
Jasper PIM is a leading Product Information Management ("PIM") solution that empowers eCommerce retailers, wholesalers, or distributors to centralize, organize, and merchandise their products from a single central repository. By leveraging Jasper PIM, merchants can enhance their eCommerce storefronts or marketplaces, reach new consumer markets, and increase their online sales.
Jasper PIM also offers powerful utilities that streamline product data management operations, saving merchants significant time and money. With Jasper PIM, eCommerce merchants can schedule promotional pricing, enrich product data with complex imagery, videos, and marketing content, manage complex attribution, and set up product relationships between multiple products to upsell or cross-sell their goods and services – all from a single dashboard. The PIM also supports the batch management of product information, including multiple languages, currencies, and inventory locations, and affords merchants the ability to manage multiple storefronts or marketplaces quickly and accurately.
Jasper's primary revenue model is subscription-based, with customers signing up for a month-to-month or annual term and agreeing to pay Jasper a fee for utilizing the PIM platform. In addition to subscription revenue, Jasper generates revenue from professional services that assist merchants with the setup, management, and optimization of their PIM. Jasper's shares trade on the TSX Venture Exchange in Canada under the symbol "JPIM".
PRODUCT AND SERVICES
Jasper PIM is a powerful SaaS solution that enables eCommerce retailers, wholesalers, or distributors to streamline their product data management operations. With Jasper PIM, customers can save significant amounts of time and money by centralizing, organizing, and enriching their product information from a single source of truth.
Jasper's platform provides a seamless integration between the PIM and the customers' existing eCommerce storefronts and marketplaces, such as Shopify or Amazon, allowing them to reach new consumer markets and increase online sales. Customers can also manage multiple storefronts or marketplaces quickly and accurately through Jasper PIM's batch management of product information, which supports multiple languages, currencies, and inventory locations.
Customers have indicated that they spend a significant portion of their time managing their product or service information. Jasper PIM offers utilities that enable them to schedule promotional pricing, manage complex attribution, and set up product relationships to cross-sell or upsell their goods and services. The PIM also allows customers to enrich their product data with complex imagery, videos, and marketing content, creating a compelling online shopping experience.
Jasper PIM's deep integration with customers' back-office systems, such as inventory management, customer relationship management, or accounting platforms, further enhances their operational efficiency. Jasper's primary revenue model is subscription-based, with customers agreeing to pay monthly or annually for utilization of the PIM platform. In addition to the subscription-based revenue model, Jasper offers professional services to assist customers with the setup, management, and optimization of their PIM.
Jasper offers three distinct product plans to suit the varying needs of their customers.
The Growth plan is designed for businesses looking to scale their product information management. Priced at $999 per month, this plan includes features such as data import/export, data validation, user roles and permissions, image and video management, and access to Jasper's API.
For those seeking more advanced features, the Pro plan is priced at $1,999 per month and includes everything in the Growth plan, plus features such as advanced attribute management, projects and workflows, multi-language support, localization, and integrations with popular eCommerce platforms.
For larger enterprises with more complex needs, Jasper offers an Enterprise plan. This plan is designed for businesses with over 100,000 SKUs or unique needs that require custom solutions. Customers interested in this plan should contact Jasper directly for pricing information. The Enterprise plan includes all the features of the Pro plan, plus advanced digital asset management, generic entities, reporting and analytics, custom data feeds, and priority support.
PARTNERSHIPS
Jasper has established valuable partnerships with leading eCommerce agencies, system integrators, and digital service providers that offer complementary listing capabilities to specialty marketplaces such as Wayfair, Costco, Home Depot, and Target. Jasper's largest distribution opportunities are through its partnerships with eCommerce platforms like Square, Shopify, and BigCommerce.
Jasper's primary revenue stream comes from its subscription-based model, which offers customers flexible month-to-month, annual, or multi-year contract terms. Customers agree to pay Jasper a monthly or annual fee for access to the PIM platform, which serves as a single source of truth for centralized product information management. Additionally, Jasper generates revenue through its professional services, which are designed to assist customers with PIM setup, best-practices training, and solution planning. These services also include integration with other business systems such as ERPs, CRMs, inventory and warehouse management systems, POS systems, and search indexing tools.
SALES AND MARKETING ACTIVITIES
Jasper employs a variety of sales and marketing strategies to reach potential customers and develop its sales pipeline. This includes a mix of direct selling, digital marketing, and channel partnerships.
Direct selling involves a team of sales professionals who work to identify and engage with potential customers through various means, such as cold calling, email outreach, and in-person meetings. This approach allows Jasper to develop direct relationships with its customers and provide personalized support throughout the sales process.
In addition to direct selling, Jasper leverages digital marketing tactics to reach a broader audience and generate leads. This includes search engine optimization (SEO), pay-per-click (PPC) advertising, and social media marketing. These tactics help Jasper increase brand awareness and drive traffic to its website, where potential customers can learn more about the product and initiate contact with the sales team.
Finally, Jasper partners with channel partners, such as eCommerce agencies, system integrators, and other digital service providers, to extend its reach and expand its sales pipeline. These partnerships allow Jasper to tap into the networks and expertise of these partners to reach new customers and offer additional value-added services to existing customers.
SIGNIFICANT EVENTS
On February 16, 2022, Jasper completed an RTO transaction pursuant to an agreement between Jasper Interactive Studios Inc. ("JISI") and SaaSquatch Capital Corp. ("SCC") whereby JISI amalgamated with a subsidiary of SCC. The amalgamation constituted a reverse acquisition of SCC by JISI (the subsidiary for legal purposes and the acquirer for accounting purposes). SCC then changed its name to Jasper Commerce Inc. The historical operations, assets, and liabilities of JISI, which is deemed to be the continuing entity for financial reporting purposes, are included as the comparative figures.
The RTO and associated concurrent financing had the impact of eliminating the company's non-Government debt by converting $3,483,000 principal amount of unsecured debentures plus $125,942 accrued interest into 11,104,447 common shares.
On February 15, 2023 and April 5, 2023, Jasper closed two tranches of non-brokered private placement of convertible debenture units for aggregate gross proceeds of $900,000. Each convertible debenture unit is comprised of $1,000 principal amount of 12% secured convertible debentures and 20,000 common share purchase warrants. The maturity date for the convertible debentures is February 15, 2028, and each debenture is convertible at the holder's option into common shares of the Company at any time prior to the maturity date. The exercise price is $0.05 per common share before February 15, 2024, and at $0.10 per Common Share thereafter, with a conversion ratio of 20,000 Common Shares per $1,000 principal amount of Convertible Debentures during the first year of issuance and 10,000 Common Shares per $1,000 principal amount of Convertible Debentures thereafter. The warrants are exercisable into one common share of the Company at an exercise price of $0.10 and expire on February 15, 2027.
If the volume-weighted average price of the common shares for any 60-day period before the maturity date equals or exceeds $0.35 per common share, any outstanding convertible debentures at that time will be converted into common shares at the then applicable conversion price effective the 60th day of such period. The convertible debentures will be secured obligations of the Company and will have a floating charge over the Company's assets but will be subordinate to existing secured loans.
SUBSEQUENT EVENTS
A lawsuit relating to a former employee was resolved after year-end. Since resolution of the matter confirmed conditions existing at year end, a provision of $75,000 was recognized in accounts payable and accrued liabilities on July 31, 2023.
A unit financing announced by press release on October 5, 2023, didn't close on October 27, 2023, as indicated in that press release. Promissory notes were received from a shareholder of the company as described below.
The company obtained funding from a shareholder on August 16, September 7, October 11, October 30, and November 9, 2023 in the form of five secured promissory notes of $50,000 each, totaling $250,000 in aggregate. Four of the notes are payable 6 months from issuance and the fifth note is due December 31, 2023. All notes bear interest at a rate of eight percent (8%) per annum.
On August 24, 2023, the Company's Term Loans were extended as described in note 5 of the financial statements.
OUTLOOK
In the coming fiscal year of 2024, management is optimistic about the growth of the SaaS PIM Subscription business and anticipates acceleration in revenue growth. As the Company continues to focus on expanding and enhancing its PIM platform, revenue from professional services is expected to decrease as a percentage of overall revenue. Jasper is committed to investing in research and development to further improve its PIM platform and to increase its market share in the global PIM market. The Company will also continue to explore strategic partnerships to expand its distribution network and increase its reach in the eCommerce industry. While there may be some market volatility and uncertainty, Jasper is well-positioned to navigate these challenges and capitalize on emerging opportunities in the eCommerce space.
OVERALL PERFORMANCE
| Revenue | 2023 | 2022 |
|---|---|---|
| SaaS PIM subscriptions | $ 1,281,255 | $ 1,221,167 |
| Professional services | 158,569 | 457,922 |
| Total | $ 1,439,824 | $ 1,679,089 |
An increase in monthly subscription revenue during the year was offset by a larger drop in professional services revenue. In the 12 months ended July 31, 2023, Jasper had revenues of $1,439,824 (2022 – $1,679,089), a decrease of 14% from 2022, operating expenses of $4,892,850 (2022 – $9,565,128), a decrease of 49% from 2022, and a net loss of $3,374,900 (2022 – $7,886,039), an improvement of 57% from 2022. The loss in 2022 included non-recurring financing costs of $2,292,750 related to the Company's RTO transaction.
On December 22, 2022, management established a strategic plan targeting a significant reduction in monthly expenses. Changes were implemented late in the second quarter (November 2022 to January 2023) which continue to benefit future quarters.
SELECTED FINANCIAL INFORMATION
The following table sets out selected financial and share information of the Company for the periods then ended.
| 12 months ended | 12 months ended | 12 months ended | |
|---|---|---|---|
| KEY FINANCIAL METRICS | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 |
| Revenue | |||
| SaaS PIM subscriptions | 1,281,255 | 1,221,167 | 857,410 |
| Professional services | 158,569 | 457,922 | 511,912 |
| 1,439,824 | 1,679,089 | 1,369,322 | |
| Expenses | |||
| General and administrative | 1,656,561 | 2,455,461 | 846,814 |
| Research and development | 940,219 | 1,010,519 | 818,804 |
| Selling and marketing | 1,075,276 | 1,342,048 | 291,832 |
| Hosting | 375,029 | 324,680 | 132,614 |
| Customer support | 615,348 | 1,003,447 | 92,835 |
| Stock-based compensation | 111,837 | 441,000 | 58,205 |
| Depreciation | 48,943 | 21,855 | 9,848 |
| Foreign exchange loss | 6,058 | 9,410 | 15,428 |
| Finance costs | 63,579 | 2,956,708 | 759,606 |
| 4,892,850 | 9,565,128 | 3,025,986 | |
| Net loss before income tax | (3,453,026) | (7,886,039) | (1,656,664 |
| Income tax | 78,126 | - | - |
| Net loss | (3,374,900) | (7,886,039) | (1,656,664) |
| Weighted Average number of | |||
| Shares Outstanding | 58,079,619 | 41,172,599 | 27,034,386 |
| Loss per share (weighted) | (0.06) | (0.19) | (0.06) |
| As at | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 |
| Total assets | 440,701 | 3,250,220 | 1,931,969 |
| Total current liabilities | 812,819 | 1,013,432 | 1,104,108 |
| Total non-current liabilities | 657,345 | 229,014 | 3,802,272 |
RESULTS OF OPERATIONS
Revenues
Jasper's primary revenue model is subscription based, whereby customers sign up for a month-to-month or annual term, agreeing to pay Jasper monthly (or annually) for ongoing usage of the PIM platform.
The secondary revenue model is from carefully curated strategic professional services, offered by qualified Jasper staff to assist Jasper PIM customers with the setup of the product, training on best-practices, and solution planning with the intent of integrating the PIM with other business systems.
Subscription revenue grew $60,088 or 5% in the 12 months ended July 31, 2023, over the prior year. This was offset by a $299,353 drop in services revenue, resulting in a decline of $239,265 or 14% in revenue overall. The 12 month period reflected Jasper's strategic decision not to pursue low-margin services contracts as a part of its overall renewed emphasis on recurring revenue and profitability.
General and administrative
General and administrative costs consist primarily of the salaries of the CEO, CFO, COO/CTO and administrative support, office costs, and various professional and advisory services. Jasper reduced spending on general and administrative expenses as a part of its strategic plan to reduce expenses. Jasper expects a further decrease in general and administrative costs in future periods.
Research and development
Research and development costs consist of employee salaries and fees from contractors. Increased investment in software development was offset by reductions in contractors in the quarter. Jasper expects a further decrease in research and development costs in future periods.
Selling and marketing
Jasper reduced spending on selling and marketing expenses as a part of its strategic plan to reduce expenses. Jasper expects to make strategic use of lead generation services and programs to pursue revenue growth.
Hosting
Jasper is transitioning to a new hosting provider for each of its customers. Hosting costs increased over the prior year. Hosting costs have fallen from the prior quarter as the duplication of services (between the old provider of hosting services, and the new cheaper one) was reduced as customers made the transition to the cheaper provider. Jasper expects a further decrease as all customers move to the new cheaper hosting provider, while the addition of customers may still require infrastructure investment. Jasper continues to optimize its current infrastructure to reduce spending as a percentage of growing subscription revenue.
Customer support
Jasper reduced spending on customer support as a part of its strategic plan to reduce expenses. Jasper expects a further decrease in customer support costs in future periods.
Stock based compensation
On October 24, 2022, Jasper granted 1,490,000 new stock options to employees and consultants valued at $88,209, which will be expensed over a period of 3 years.
On May 12, 2023, the Company granted 1,725,000 new stock options to employees and consultants valued at $40,597, which will be expensed over a period of 3 years.
On July 31, 2023, the remaining unvested value of the Company's stock options is $114,251 which will be recognized through May 2026.
Depreciation
Jasper does not expect significant capital costs in future periods.
Finance costs
Finance costs consist primarily of interest paid on loaned funds offset by interest earned on invested funds. In February and April of 2023 Jasper closed two tranches of non-brokered private placement of convertible debentures for aggregate gross proceeds of $900,000. The convertible debentures have a 12% coupon payable annually and mature on February 15, 2028. Finance costs in the prior year included significant fees related to the Company's RTO that are not expected to recur.
SUMMARY OF QUARTERLY RESULTS
The following table sets out selected financial information of the Company for the quarters indicated.
| (000's,exceptper | shareQ1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|---|---|---|---|
| amounts) | 2022 | 2022 | 2022 | 2022 | 2023 | 2023 | 2023 | 2023 |
| Revenue | ||||||||
| SaaS PIM subscriptions | 285 | 292 | 309 | 335 | 309 | 325 | 315 | 333 |
| Professional services | 167 | 179 | 72 | 40 | 71 | 38 | 29 | 20 |
| Other | - | - | 3 | (3) | - | - | - | - |
| 452 | 471 | 383 | 373 | 380 | 363 | 344 | 353 | |
| Expenses | ||||||||
| General and administrative | 392 | 588 | 710 | 766 | 545 | 661 | 352 | 99 |
| Research and development | 207 | 329 | 361 | 114 | 337 | 233 | 183 | 187 |
| Selling and marketing | 238 | 266 | 345 | 493 | 351 | 325 | 181 | 219 |
| Hosting | 64 | 71 | 86 | 103 | 105 | 108 | 97 | 65 |
| Customer support | 241 | 109 | 315 | 339 | 267 | 176 | 99 | 74 |
| Stock-based compensation | 70 | 71 | 148 | 152 | 81 | 3 | 22 | 5 |
| Depreciation | 2 | 4 | 3 | 12 | 14 | 12 | 11 | 12 |
| Foreign currency | 1 | (2) | 5 | 6 | (2) | 2 | (3) | 9 |
| Finance costs | 229 | 242 | 3,210 | (725) | (5) | 2 | 25 | 41 |
| 1,444 | 1,678 | 5,183 | 1,260 | 1,693 | 1,522 | 965 | 711 | |
| Net loss before income tax | (992) | (1,207) | (4,800) | (887) | (1,313) | (1,159) | (623) | (358) |
| Loss per share (weighted) | (0.04) | (0.04) | (0.09) | (0.02) | (0.02) | (0.02) | (0.01) | (0.01) |
Revenue reflects Jasper's emphasis on SaaS PIM subscriptions and strategic decision not to pursue low-margin services contracts as a part of its overall renewed emphasis on recurring revenue and profitability. Expenses fell after Jasper announced strategic changes in management, and a breakeven strategic plan in Q2 2023.
FOURTH QUARTER
The following table sets out selected financial and share information of the Company for the quarters then ended.
| 3 months ended | 3 months ended | |
|---|---|---|
| KEY FINANCIAL METRICS | Jul 31, 2023 | Jul 31, 2022 |
| (unaudited) | (unaudited) | |
| Revenue | ||
| SaaS PIM subscriptions | 332,892 | 332,627 |
| Professional services | 20,202 | 40,171 |
| 353,094 | 372,798 | |
| Expenses | ||
| General and administrative | 99,285 | 765,894 |
| Research and development | 187,174 | 113,672 |
| Selling and marketing | 218,538 | 492,580 |
| Hosting | 65,323 | 103,084 |
| Customer support | 74,120 | 338,765 |
| Stock-based compensation | 5,121 | 151,738 |
| Depreciation | 11,514 | 12,436 |
| Foreign exchange loss (gain) | 8,695 | 5,679 |
| Finance costs | 40,980 | (724,595) |
| 710,750 | 1,259,253 | |
| Net lossbefore income tax | (357,656) | (886,455) |
| Weighted Average number of Shares Outstanding | 58,079,619 | 58,079,619 |
| Loss per share (weighted) | (0.01) | (0.02) |
In the fourth quarter when compared to the prior year quarter, Jasper experienced flat SaaS PIM subscriptions. Services revenue fell as Jasper made the strategic decision not to pursue low-margin services contracts, as a part of its overall renewed emphasis on recurring revenue and profitability. Fourth quarter expenses fell in all categories reflecting success in execution of Jasper's breakeven strategic plan announced in Q2 2023.
The $724,595 reversal of finance costs in the prior year was due to a reduction in the estimated value of non-cash financial instruments issued as a part of the IPO/RTO transaction that occurred in 3Q 2022.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity risk is the risk that Jasper will not be able to meet its financial obligations as they fall due. The reported financial position of the Company presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. On July 31, 2023, Jasper has accumulated a deficit of $19,209,889 since the Company commenced operations in 2010. On July 31, 2023, the Company had a cash balance of $142,853 and a working capital deficit of $404,693.
Cash flows from operating activities primarily consist of the Company's loss before adjusting for certain non-cash items such as depreciation, stock-based compensation and finance costs, and changes in working capital.
Net cash outflows from operating activities for the 12 months of 2023 decreased to $2,921,755, compared to $4,572,540 in 2022. Excluding changes in working capital balances, net outflows from operating activities decreased by $1,237,809. The decrease was due to a reduction in expenditures consistent with the Jasper's strategic plan.
Cash inflows from financing activities for the 12 months of 2023 totaled $752,652, including $856,573 in net proceeds from a non-brokered convertible debt financing offset mainly by $100,070 in loan repayments.
Jasper's ability to continue operations remains dependent upon its ability to: 1) raise additional funds; 2) realize transaction revenues from existing users; and 3) secure new users that provide the Company with adequate funds to cover projected expenditures (or a combination of the foregoing). If the Company does not generate sufficient funds from existing or new customer relationships and is unable to raise additional financing, the Company will have to consider strategic alternatives, which may include, among other things, exploring the monetization of certain intangible assets, modification of planned operating expenditures, or the sale of the Company.
DEBT OBLIGATIONS
On February 15, 2023 and April 5, 2023, Jasper closed two tranches of non-brokered private placement of convertible debenture units for aggregate gross proceeds of $900,000. Each convertible debenture unit is comprised of $1,000 principal amount of 12% secured convertible debentures and 20,000 common share purchase warrants. The maturity date for the convertible debentures is February 15, 2028, and each debenture is convertible at the holder's option into common shares of the Company at any time prior to the maturity date. The exercise price is $0.05 per common share before February 15, 2024, and at $0.10 per Common Share thereafter. The warrants are exercisable into one common share of the Company at an exercise price of $0.10 and expire on February 15, 2027.
If the volume-weighted average price of the common shares for any 60-day period before the maturity date equals or exceeds $0.35 per common share, any outstanding convertible debentures at that time will be converted into common shares at the then applicable conversion price effective the 60th day of such period. The convertible debentures will be secured obligations of the Company and will have a floating charge over the Company's assets but will be subordinate to existing secured loans.
The following table sets out the next three years and thereafter of payments of Jasper's debt obligations:
| Debt Obligations toJul 31, | Total | 2024 | 2025 | 2026 | After 3 yrs |
|---|---|---|---|---|---|
| Accounts payable and accrued | |||||
| liabilities | 606,104 | 606,104 | - | - | - |
| Business Development Bank of | |||||
| Canada ("BDC") loans | 153,355 | 50,640 | 64,340 | 32,040 | 6,335 |
| Canada Emergency Business Account | |||||
| ("CEBA") loan | 60,000 | 60,000 | - | - | - |
| Convertible debentures | 567,476 | - | - | - | 567,476 |
| Total | 1,386,935 | 716,744 | 64,340 | 32,040 | 573,811 |
OFF-BALANCE SHEET ARRANGEMENTS
Jasper did not have any off-balance sheet arrangements on July 31, 2023. The Company neither had any commitments for capital expenditures on July 31, 2023 nor any financing sources arranged, but not yet used.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
On July 31, 2023, the Company held various forms of financial instruments as follows:
| Financial assets/liabilities | Carrying Value($) | Fair Value ($) | ||
|---|---|---|---|---|
| Designation | Measurement | Jul 31, 2023 | Jul 31, 2023 | |
| Cash and cash equivalents | FVTPL | Fair value | 142,853 | 142,853 |
| Accounts receivable | Loans and | |||
| (excluding commodity tax) | receivables | Amortized cost | 85,227 | 85,227 |
| Accounts payable and | Other financial | |||
| accrued liabilities | liabilities | Amortized cost | 606,104 | 606,104 |
| CEBA loan | Other financial | |||
| liabilities | Amortized cost | 60,000 | 60,000 | |
| BDCloans | Other financial | |||
| liabilities | Amortized cost | 153,355 | 134,332 | |
| Convertible debentures | Other financial | |||
| liabilities | Amortized cost | 567,476 | 644,063 |
The nature of these financial instruments and the Company's operations exposes Jasper to a number of financial risks, including credit risk, liquidity risk, foreign currency risk and interest rate risk. The Company manages its exposure to these risks by operating in a manner that minimizes its exposure to the extent practical.
Financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. On July 31, 2023, all of the Company's cash and cash equivalents were held at a major Canadian bank.
Accounts receivables are subject to normal credit risks. Any amounts not provided for would be considered fully collectible.
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. Senior management is also actively involved in the review and approval of planned expenditures. See the section titled "Liquidity and Capital Resources" above for further discussion.
The Company operates internationally and is exposed to risk from changes in foreign currency rates. Foreign currency risk arises from the fluctuation of foreign exchange rates and the degree of volatility of these rates relative to the Canadian dollar. The Company sells PIM software subscriptions and consulting services in both Canadian and foreign currencies. The sale of software and services in foreign currencies gives rise to the risk that the Company's income and cash flows may be adversely impacted by fluctuations in foreign exchange rates. Certain purchases of services and equipment are also made in non-Canadian currencies. The Company does not actively manage this risk and uses its natural hedge to mitigate, to the extent possible, the impact of foreign exchange fluctuations.
The Company is primarily exposed to foreign exchange risk from transactions in U.S. dollars. The sensitivity analysis of its exposure to currency risk has been determined based on a hypothetical change in the foreign exchange rates taking place at the reporting date. Fluctuations of 10% in the exchange rates for these currencies, when compared to the Canadian dollar, are not expected to individually have a material effect on the Company's results of financial performance.
The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial instruments. The fair value for loans payable and convertible debentures are estimated assuming a market rate of interest for arms length debt would be 25%.
BUSINESS RISKS AND UNCERTAINTIES
The business of the Company is subject to numerous risk factors, including those more particularly described below. An investment in or ownership of Common Shares should be considered highly speculative due to the nature of the Company's business, its current stage of development and the potential requirement for additional financing.
COVID-19
The outbreak of the novel strain of the coronavirus, specifically identified as the COVID-19 pandemic, has caused governments worldwide to enact emergency measures to combat the spread of the virus. The Company applied for and received certain government funding which was integral to the Company's financial condition. The full extent of the impact of this outbreak and related containment measures on the Company's operations cannot be reliably estimated at the date these financial statements were approved, and the Company continues to seek available government support.
Substantial Capital Requirements; Liquidity; Going Concern
Because of the costs associated with further development of Jasper's technology and business, and the fact that Jasper's ability to generate revenue will depend on a variety of factors (including the ability of Jasper to meet its development schedule and consumer acceptance of Jasper technologies), additional funds may be required to support Jasper's business. Jasper has accumulated a substantial deficit and continues to have operating losses. These conditions indicate the existence of material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. Additional funds (whether through additional equity financing, debt financing or other sources) may not be available (at all or on terms acceptable to Jasper) or may result in significant dilution to Jasper shareholders or significant interest obligations. The inability to obtain additional funds in the short term will have a material adverse effect on Jasper's business, results of operations, and financial condition and could result in the Company ceasing operations.
No Record of Profit
Jasper has incurred significant losses to date, and there can be no assurance that the future business activities of Jasper will be profitable. Since its organization, Jasper has incurred costs to develop and enhance its technology, to establish strategic relationships and to build administrative support systems. Jasper has incurred negative operational cash flow to date. Jasper incurred losses of $3,374,900 for the 12 months ending July 31, 2023. Jasper's ability to operate profitably and generate positive cash-flow in the future will be affected by a variety of factors (including: its ability to further develop and test its technology on schedule and on budget, the pace at which it secures additional users, the time and expense required for the roll-out of its technology, its success in marketing its applications, the intensity of the competition experienced by Jasper and the availability of additional capital to pursue its business plan, including development of new solutions and services). An inability to generate sufficient funds from operations will have a material adverse effect on Jasper's business, results of operations and financial condition.
Developing Market
Jasper is engaged in the development and marketing of an application that is relatively new and, as such, the primary market for Jasper's applications is underdeveloped and continues to evolve. As is typical in the case of a new evolving industry segment, the demand for the Company's applications is subject to a high level of uncertainty. If the markets for the Jasper applications fail to develop, develop more slowly than expected or become saturated with competitors, or if the Company's applications do not achieve and maintain market acceptance, the Company's business, results of operations and financial condition will be materially adversely affected.
Current Enterprise Value assigned by the Market Liquidity
The actions of all stakeholders in the business may be adversely affected by the current market capitalization of the Company. These stakeholders include users, potential users, competitors, and current or prospective employees. These stakeholders may ascribe a higher business risk to the Company due to its relatively low market capitalization, and any perception of higher risks may have a material adverse effect on Jasper's business, results, and financial condition.
Third-Party Technology
In providing its solutions and services, Jasper is, and will continue to be, dependent on technologies and infrastructure that are beyond Jasper's control, including smartphones, computers, cellular telephone networks, cloud computing services, and payment systems. There can be no assurance that, if weaknesses or errors in thirdparty software or hardware are detected, Jasper will be able to correct or compensate for such weaknesses or errors. If Jasper is unable to address weaknesses or errors and the Company's technology is therefore unable to meet consumer needs or expectations, Jasper's business, results of operations and financial condition will be materially adversely affected. In addition, there can be no assurance that the Company will continue to have access to required third-party technology on terms acceptable to Jasper. If Jasper is unable to obtain third-party technology on acceptable terms, Jasper's business, results of operations and financial condition will be materially adversely affected.
Rapid Technological Change
The technology industry is subject to rapid change, and the inability of Jasper to adapt to such change may have an adverse effect on Jasper's business, results of operations and financial condition. The effect of new developments and technological changes on the business sector in which Jasper is active cannot be predicted. Such developments would include but are not limited to: change in web browser technology, how mobile advertising is delivered by advertisers and transacted with potential consumers, changes to or the development of alternative payment systems, changes to smartphone technology, a change in the success rate on the application of analytics in advertising, consumer backlash resulting from the collection and use of demographic intelligence, and industry consolidation. Jasper's failure to adapt to any of the above could have a material adverse effect on Jasper's business, results of operations and financial condition.
Competition
Jasper is subject to competition from other organizations (many of which have substantially greater human and financial resources) and there can be no assurance that Jasper will be able to compete effectively in its target markets. Technologies do exist that are competitive with the Company's offerings. Certain organizations with substantially greater financial and human resources than the Company have active research and development initiatives involving the development and implementation of consumer online and mobile buy/sell/trade solutions. The inability of Jasper to preserve existing users and secure additional users due to competitive technologies will have a material adverse effect on Jasper's business, results of operations and financial condition.
In addition, advances in communications technology as well as changes in the marketplace and the regulatory environment are constantly occurring and any such change could have a material adverse effect on Jasper.
Need for Research and Development
To achieve its business objectives and obtain market share and profitability, Jasper will need to continually research, develop and refine the Company's applications. Many factors may limit Jasper's ability to develop and refine required technologies or to create, acquire or negotiate access to new technologies. Jasper may also be exposed to marketplace resistance to new technology and services. Any failure of Jasper to develop new technologies or refine its existing technologies or offer new applications could have a material adverse effect on Jasper's business, results of operations and financial condition.
Defects and Liability
The software utilized to deliver the Company's applications is complex and sophisticated and may contain design defects or software errors that are difficult to detect and correct. There can be no assurance that the Company's technologies will be free from errors or defects, or, if discovered, that Jasper will be able to successfully correct such errors in a timely manner or at all. Errors or failures in the Company's technologies could result in loss of or delay in market acceptance and usage of the Company's applications and correcting such errors and failures could require significant expenditures. Because of the competitive nature of the marketplace in which the Company's applications is delivered, the reputational harm resulting from errors and failures could be very damaging to Jasper. The consequences of such errors and failures could have a material adverse effect on Jasper's businesses, results of operations and financial condition.
Patents and Other Intellectual Property
Competitors may have filed patent applications or hold issued patents relating to services or processes competitive with those of Jasper. Others may independently develop similar services or duplicate unpatented elements of the Company's technologies.
Jasper's success will be largely dependent upon its ability to protect its proprietary technologies. Jasper relies upon copyrights, trademarks, and trade secrets to protect its intellectual property. Where appropriate, Jasper also enters into non-disclosure agreements with persons to whom it reveals proprietary information. Any failure or inability on the part of Jasper to protect its intellectual property could have a material adverse effect on Jasper's business, results of operations and financial condition.
Jasper may be required to engage in litigation in the future to enforce or protect its intellectual property rights or to defend against claims of invalidity and Jasper may incur substantial costs as a result. Any claims or litigation initiated by Jasper to protect its intellectual property could result in significant expense to Jasper and diversion of the efforts of Jasper's technical and management resources, whether or not the claims or litigation are determined in favor of Jasper.
Ability to Manage Growth
Responding to consumer demands, expansion into other geographical markets and targeted growth in Jasper's business has placed, and is likely to continue to place, significant strains on Jasper's administrative and operational resources and increased demands on its management, internal systems, procedures and controls. If Jasper experiences rapid acceptance of its applications, the need to manage such growth will add to the demands on Jasper's management, resources, systems, procedures and controls. There can be no assurance that Jasper's administrative infrastructure, systems, procedures and controls will be adequate to support Jasper's operations or that Jasper's officers and personnel will be able to manage any significant expansion of operations. If Jasper is unable to manage growth effectively, Jasper's business, operating results and financial condition will be materially adversely affected.
Personnel Resources
Jasper is (and will continue to be) reliant upon its management and technical personnel in all aspects of its business, including to anticipate and address consumer demands in areas such as software development, customer service, marketing, finance, strategic planning and management. There can be no assurance that qualified management or technical personnel will be available to Jasper in the future. The loss of services of any of the Company's management or technical personnel could have a material adverse effect on its business, results of operations and financial condition.
Potential Fluctuations in Quarterly Operating Results
Jasper expects to be exposed to significant fluctuations in quarterly operating results caused by many factors, including: changes in the demand for and or usage of the Company's applications, the introduction of competing technologies, market acceptance of enhancements to the Company's applications, delays in the introduction of enhancements to the Company's applications, changes in Jasper's pricing policies or those of its competitors, the mix of solutions and services sold, foreign currency exchange rates and general economic conditions. Such fluctuations could have a material adverse effect on Jasper's business, results of operations and financial condition.
Risk of Industry Consolidation
Jasper may have established working relationships that are undermined by a business combination or other transaction with another business in the marketplace. This could have a material adverse effect on Jasper's business, results of operations and financial conditions.
Government Regulation
The marketplace within which Jasper operates is in constant flux in relation to government regulation. Areas being regulated include regulation relating to online payments, privacy, restricted category (or class) of goods for resale, consumer protection laws, and opt-in requirements for mobile applications. Regulation is also being considered for use and application of consumer demographic information for mobile advertising purposes and other areas impacting on mobile advertising. The consequences of such regulation or changes to such regulation could have a material adverse effect on Jasper's business, results of operations and financial condition.
OUTSTANDING SHARE DATA
Jasper's outstanding share capital consists of common shares. The Company is authorized to issue an unlimited number of common shares. On July 31, 2023, the Company had 58,079,619 (2022 – 58,079,619) common shares outstanding.
On July 31, 2023 Jasper had 31,796,781 (2022 – 14,383,933) share purchase warrants outstanding with an approximate weighted average exercise price of $0.30. On February 15, 2023 and April 5, 2023 Jasper closed two tranches of non-brokered private placement of convertible debt units and issued 18,000,000 common share purchase warrants. Each warrant is exercisable into one common share of the Company at an exercise price of $0.10 for a period of 48 months. In connection with the private placement Jasper issued 476,000 finder' warrants. Each warrant is exercisable into one common share of the Company at an exercise price of $0.05 for a period of 24 months.
On July 31, 2023, Jasper had 5,099,964 (2022 – 3,216,605) stock options outstanding with an approximate weighted average exercise price of $0.24 per share. The Company granted 3,265,000 stock options to employees in the 12 months of 2023, offset by 1,381,641 stock options that were cancelled or forfeited by departing staff.
RELATED PARTY TRANSACTIONS
A shareholder also has a controlling interest in one of Jasper's customers. During the year ended July 31, 2023, Jasper earned revenue of $11,700 (2022 – $241,603) from the customer. On July 31, 2023, Jasper was owed $3,305 (2022 – $10,170) from the customer.
A director of the company also provides services to the firm. During the year ended July 31, 2023, the director's firm charged $16,497 (2022 – $119,074) to Jasper.
All related party transactions are measured at the amounts agreed upon between the related parties.
KEY MANAGEMENT COMPENSATION
| 2023 | 2022 | |
|---|---|---|
| Salaries | $ 541,125 | $ 725,561 |
| Stock-based compensation | 60,886 | 131,874 |
| $ 602,011 | $ 857,435 |
Key management includes the senior officers of the Company and directors.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's audited financial statements for the 12 months ended July 31, 2023 were prepared in accordance with IFRS, as issued by the International Accounting Standards Board ("IASB"). Please refer to Note 2 of the Company's audited financial statements for a detailed discussion regarding the significant accounting policies relied upon in the preparation of the financial statements, the application of critical estimates and judgements in the preparation of the financial statements and recent accounting pronouncements.