SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2015

Significant Accounting Policies

Note 1. SIGNIFICANT ACCOUNTING POLICIES

a) Nature of operations

We are a software developer and distributor of financial market data and related services to a global marketplace. We specialize in the collection, aggregation, and delivery of both delayed and real-time financial data content via the Internet. We develop and license software components that deliver dynamic content to banks, brokerage firms, financial institutions, mutual fund companies, online information and financial portals, media outlets, public companies, and corporate intranets.

b) Basis of consolidation

The consolidated financial statements include the operations of QuoteMedia, Ltd., a wholly owned subsidiary of QuoteMedia, Inc. All intercompany transactions and balances have been eliminated.

c) Foreign currency translation and transactions

The U.S. dollar is the functional currency of all our company's operations. Foreign currency asset and liability amounts are remeasured into U.S. dollars at end-of-period exchange rates, except for equipment and intangible assets, which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Because the U.S. dollar is the functional currency, exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in income in the period in which they occur.

d) Cash and cash equivalents

Cash equivalents include money market investments that have an original maturity of three months or less and are redeemable on demand. We maintain our accounts primarily at one financial institution. At times throughout the year, our cash and cash equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation.

e) Allowance for doubtful accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of the Company's customers to make required payments. The Company determines the allowance by reviewing the age of the receivables and assessing the anticipated ability of customers to pay. No collateral is required for any of the receivables and the Company does not usually apply financing charges to outstanding accounts receivable balances. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The allowance for doubtful accounts was $90,000 at December 31, 2015 and 2014. Bad debt expense for the years ended December 31, 2015 and 2014 were $108,306 and $33,030 respectively.

f) Property and equipment

Fixed assets are recorded at cost less accumulated depreciation. Furniture and equipment are depreciated using the straight-line method over their estimated useful lives of five years. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or useful lives, whichever is shorter. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with the resulting gain or loss reflected in income.

Capitalized software costs include costs incurred in connection with the development of software and purchased 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.

Depreciable and amortizable assets are evaluated for impairment upon a significant change in the operating environment. In these circumstances, if an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on discounted future cash flows. Useful lives are periodically evaluated to determine whether events or circumstances have occurred which indicate the need for revision. There were no impairments recorded for the years ended December 31, 2015 and 2014.

g) Earnings per share

Basic earnings per share are computed by dividing income by the weighted average number of shares outstanding during the year. Diluted earnings per share takes into account shares outstanding (computed under basic earnings per share) and potentially dilutive common shares (such as stock options outstanding). The effect of a stock split or reverse split is applied retroactively to preceding periods. For the years ended 2015 and 2014 all common stock equivalents were anti-dilutive.

h) Stock-based compensation

FASB ASC 718, Stock Compensationrequires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized.

Total estimated stock-based compensation expense, related to all of the Company's stock-based awards, recognized for the years ended December 31, 2015 and 2014 was comprised as follows:

	2015		2014
Sales and marketing	$	280,508	$	22,934
General and administrative		18,912		26,390
Development		60		18,125
Total stock-based compensation	$	299,480	$	67,449

At December 31, 2015 there was $99,454 of unrecognized compensation cost related to nonvested share-based payments which is expected to be recognized over a weighted-average period of 3.86 years.

We calculate the fair value of stock options granted under the provisions of FASB ASC 718 using the Black-Scholes valuation model with the following assumptions:

	2015			2014
Expected dividend yield		-			-
Expected stock price volatility		257	%		244	%
Risk-free interest rate		4	%		4	%
Expected life of options		5.0			5.14
Weighted average fair value of options and
warrants granted	$	0.10		$	0.03

Expected volatility is based on the historical volatility of the Company's share price in the period prior to option grant equivalent to the expected life of the options. The expected term is determined under the "simplified" method as allowed under the provisions of the Securities and Exchange Commission's Staff Accounting Bulletins No. 107 and No. 110, and represents the period of time that options granted are expected to be outstanding. We believe that it is appropriate to use this simplified method as there is not sufficient historical exercise data to provide a reasonable basis upon which to estimate an expected term. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

i) Income taxes

Income taxes are provided in accordance with FASB ASC 740, Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between income for financial statement purposes and income for tax purposes as well as operating loss carryforwards. Deferred tax expenses or recovery result from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance, when, in the opinion of management, it is likely that some portion of the deferred tax asset will not be realized. Deferred taxes are adjusted for the effects of changes in tax laws and rates. Interest and penalties, if applicable, would be recorded in operations. In 2015, the Company recorded Canadian income tax expense of $3,129. In 2014 the Company recorded Canadian income tax expense of $3,622 (see note 7).

j) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities as of the year end and the reported amount of revenues and expenses during the year. Such estimates include (i) fair values used to test goodwill and capitalized development costs for impairment; (ii) the amount of allowance for doubtful accounts, (iii) the capitalization of software development costs. Actual results and outcomes may differ from management's estimates and assumptions.

k) Software development expenses

Software development costs incurred prior to establishing the technological feasibility of our software application products, and costs incurred to maintain existing products and services are expensed as incurred. The Company expensed $1,026,106 and $1,068,694 in software development costs during the years ended December 31, 2015 and 2014, respectively (see note 3).

l) Revenue recognition

Revenue is recognized over contractual periods as services are performed and when collection of the amount due is reasonably assured. Amounts recognized as revenue are determined based upon contractually agreed-upon fee schedules with our customers. The Company accounts for subscription revenues received in advance of services being performed by deferring such amounts until the related services are performed. The Company considers the following factors when determining if collection of a fee is reasonably assured: customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If these factors do not indicate collection is reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash.

m) Financial instruments

Financial instruments consist principally of cash, accounts receivables, foreign exchange forward contracts, accounts payable and notes payable. We believe that the fair value of financial instruments approximates the recorded book value of those instruments due to the short-term nature of the instruments, or stated interest rates that approximate market interest rates. Forward contract fair value is disclosed in Note 6 a).

n) Accounting Pronouncements

New Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 (as subsequently amended) is effective for annual reporting periods beginning after December 15, 2017 (beginning in calendar year 2018 for the Company), with earlier application permitted as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on our consolidated financial statements.

In August 2014, FASB issued ASU No. 2014 15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments in this update will explicitly require a company's management to assess an entity's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016. Early adoption is permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-15 will have on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. The amendment requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. The new standard is limited to the presentation of debt issuance costs and does not affect the recognition or measurement of debt issuance costs. This update will become effective for all annual periods and interim reporting periods beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842) which amends lease accounting by lessors and lessees. This new standard will require, among other things, that lessees recognize a right-to-use asset and related lease liability for all significant financing and operating leases, and specifies where in the statement of cash flows the related lease payments are to be presented. The standard is effective for years beginning after December 15, 2018, including interim periods within those years (beginning in calendar year 2019 for the Company), and early adoption is permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2016-02 will have on its 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.

o) Reclassification

Certain figures in the comparative period have been reclassified to conform to the current year's presentation, with no effect on net loss.