0001654954-18-012663.txt : 20181114 0001654954-18-012663.hdr.sgml : 20181114 20181114124205 ACCESSION NUMBER: 0001654954-18-012663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 45 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181114 DATE AS OF CHANGE: 20181114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUOTEMEDIA INC CENTRAL INDEX KEY: 0001101433 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 912008633 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28599 FILM NUMBER: 181182060 BUSINESS ADDRESS: STREET 1: 17100 E SHEA BLVD STREET 2: SUITE 230 CITY: FOUNTAIN HILLS STATE: AZ ZIP: 85268 BUSINESS PHONE: 4809057311 MAIL ADDRESS: STREET 1: 17100 E SHEA BLVD STREET 2: SUITE 230 CITY: FOUNTAIN HILLS STATE: AZ ZIP: 85268 FORMER COMPANY: FORMER CONFORMED NAME: QUOTEMEDIA INC DATE OF NAME CHANGE: 20030628 FORMER COMPANY: FORMER CONFORMED NAME: QUOTEMEDIA COM INC DATE OF NAME CHANGE: 19991221 10-Q 1 qmci_10q.htm QUARTERLY REPORT Blueprint
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period _________ to _________                    
    
Commission File Number:   0-28599
 
QUOTEMEDIA, INC.
 (Exact name of registrant as specified in its charter)
 
Nevada
91-2008633
(State or Other Jurisdiction of Incorporation or Organization)
(IRS Employer Identification Number)
 
 
17100 East Shea Boulevard, Suite 230, Fountain Hills, AZ 85268
(Address of Principal Executive Offices)
 
(480) 905-7311
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑   No ⬜
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑    No ⬜
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  ☐
Accelerated filer  ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
Smaller reporting company ☑ 
 
Emerging growth company ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐   No ☑
 
The Registrant has 90,477,798 shares of common stock outstanding as at November 5, 2018.

 
 
 
QUOTEMEDIA, INC.
 
FORM 10-Q for the Quarter Ended September 30, 2018
 
INDEX
 
 
 
Page
Part I.
Financial Information
 
 
 
 
Item 1.
Financial Statements (unaudited):
3
 
 
 
 
Condensed Consolidated Balance Sheets at September 30, 2018 and December 31, 2017
         3
 
 
 
 
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017
4
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017
         5
 
 
 
 
Notes to Condensed Consolidated Financial Statements
6
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
       12
 
 
 
Item 4.
Controls and Procedures
17
 
 
 
Part II.
Other Information
 
 
 
 
Item 6.
Exhibits
18
 
 
 
Signatures
 
18
 
2
 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 
September 30, 2018
 
 
December 31, 2017
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
    Cash and cash equivalents
 $630,208 
 $451,151 
    Accounts receivable, net
  560,577 
  344,512 
    Prepaid expenses
  67,555 
  89,884 
    Other current assets
  170,187 
  149,379 
    Total current assets
  1,428,527 
  1,034,926 
 
    
    
    Deposits
  16,137 
  16,551 
    Property and equipment, net
  1,620,720 
  1,420,946 
    Goodwill
  110,000 
  110,000 
    Intangible assets
  62,517 
  64,657 
 
    
    
        Total assets
 $3,237,901 
 $2,647,080 
 
    
    
LIABILITIES AND STOCKHOLDERS’ DEFICIT
    
    
 
    
    
Current liabilities:
    
    
    Accounts payable and accrued liabilities
 $1,331,538 
 $1,565,972 
    Deferred revenue
  830,026 
  706,819 
    Current portion of capital lease obligation
  28,256 
  - 
        Total current liabilities
  2,189,820 
  2,272,791 
 
    
    
Long-term portion of capital lease obligation
  47,445 
  - 
 
    
    
Mezzanine equity:
    
    
    Series A Redeemable Convertible Preferred stock,
    
    
    $0.001 par value, 550,000 shares designated,
    
    
    126,485 and 127,685 shares issued, respectively
  3,052,705 
  3,082,211 
 
    
    
Stockholders’ deficit:
    
    
    Preferred stock, 10,000,000 shares
    
    
    authorized, 550,000 shares designated
  - 
  - 
    Common stock, $0.001 par value, 150,000,000
    
    
    shares authorized, 90,477,798 shares issued
    
    
    and outstanding
  90,479 
  90,479 
    Additional paid-in capital
  19,054,333 
  18,727,661 
    Accumulated deficit
  (21,196,881)
  (21,526,062)
        Total stockholders’ deficit
  (2,052,069)
  (2,707,922)
 
    
    
        Total liabilities and stockholders’ deficit
 $3,237,901 
 $2,647,080 
 
See accompanying notes 
3
 
 
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LICENSING FEES
 $2,811,872 
 $2,388,146 
 $8,277,682 
 $7,015,864 
 
    
    
    
    
COST OF REVENUE
  1,354,498 
  1,310,995 
  4,140,222 
  3,861,602 
 
    
    
    
    
GROSS PROFIT
  1,457,374 
  1,077,151 
  4,137,460 
  3,154,262 
 
    
    
    
    
OPERATING EXPENSES
    
    
    
    
 
    
    
    
    
Sales and marketing
  470,312 
  397,357 
  1,406,300 
  1,174,706 
General and administrative
  477,231 
  478,805 
  1,515,824 
  1,507,252 
Software development
  289,678 
  251,286 
  878,336 
  746,754 
 
  1,237,221 
  1,127,448 
  3,800,460 
  3,428,712 
 
    
    
    
    
OPERATING PROFIT (LOSS)
  220,153 
  (50,297)
  337,000 
  (274,450)
 
    
    
    
    
OTHER INCOME (EXPENSES)
    
    
    
    
 
    
    
    
    
Foreign exchange loss
  (8,925)
  (96,120)
  (725)
  (169,587)
Interest expense (related party)
  - 
  (297,865)
  - 
  (859,362)
Interest expense - other
  (1,980)
  - 
  (4,765)
  - 
 
  (10,905)
  (393,985)
  (5,490)
  (1,028,949)
 
    
    
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  209,248 
  (444,282)
  331,510 
  (1,303,399)
 
    
    
    
    
Provision for income taxes
  (764)
  (796)
  (2,329)
  (2,295)
 
    
    
    
    
NET INCOME (LOSS)
 $208,484 
 $(445,078)
 $329,181 
 $(1,305,694)
 
    
    
    
    
EARNINGS (LOSS) PER SHARE
    
    
    
    
 
    
    
    
    
Basic earnings (loss) per share
  0.00 
  (0.00)
  0.00 
  (0.01)
Diluted earnings (loss) per share
  0.00 
  (0.00)
  0.00 
  (0.01)
 
    
    
    
    
WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    
    
 
    
    
    
    
Basic
  90,477,798 
  90,477,798 
  90,477,798 
  90,477,798 
Diluted
  104,007,070 
  90,477,798 
  101,577,469 
  90,477,798 
 
See accompanying notes 
4
 
 
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
 
Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 $329,181 
 $(1,305,694)
 
    
    
Adjustments to reconcile net income (loss) to net cash
    
    
provided by operating activities:
    
    
Depreciation and amortization
  656,304 
  628,011 
Bad debt expense
  32,644 
  34,841 
Stock-based compensation expense
  336,016 
  45,716 
Changes in assets and liabilities:
    
    
Accounts receivable
  (248,709)
  66,921 
Prepaid expenses
  22,329 
  41,755 
      Other current assets
  (20,808)
  (35,536)
Deposits
  414 
  (1,204)
Accounts payable and amounts due to related parties
  (243,284)
  1,184,975 
Deferred revenue
  123,207 
  226,595 
Net cash provided by operating activities
  987,294 
  886,380 
 
    
    
INVESTING ACTIVITIES:
    
    
 
    
    
Purchase of fixed assets
  (110,080)
  (76,965)
Capitalized application software
  (654,827)
  (582,699)
Net cash used in investing activities
  (764,907)
  (659,664)
 
    
    
FINANCING ACTIVITIES:
    
    
 
    
    
Repayment of capital lease financing
  (13,330)
  - 
        Redemption of preferred stock
  (30,000)
  - 
Net cash used in financing activities
  (43,330)
  - 
 
    
    
Net increase in cash
  179,057 
  226,716 
 
    
    
Cash and equivalents, beginning of period
  451,151 
  271,700 
 
    
    
Cash and equivalents, end of period
 $630,208 
 $498,416 
 
    
    
 
    
    
NON-CASH ITEMS:
    
    
 
    
    
Purchase of fixed assets under capital lease
 $89,120 
 $- 
Legal fees associated with debt exchange & forgiveness transactions
 $8,850 
 $- 
 
See accompanying notes 
5
 
 
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1. BASIS OF PRESENTATION
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles for interim financial statements and instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for a full year. In connection with the preparation of the condensed consolidated financial statements the Company evaluated subsequent events after the balance sheet date of September 30, 2018 through the filing of this report.
 
As of September 30, 2018, the Company has a working capital deficit of $761,293. Our current liabilities include deferred revenue of $830,026. The costs expected to be incurred to realize the deferred revenue in the next 12 months are minimal.
 
The Company has a plan in place for the next 12 months to ensure ongoing expenditures are balanced with the expected growth rate, and believes cash on hand and cash generated will be sufficient to fund operations for the next 12 months. However, to implement our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. 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. 
 
These financial statements should be read in conjunction with our financial statements and the notes thereto for the fiscal year ended December 31, 2017 contained in our Form 10-K filed with the Securities and Exchange Commission dated April 11, 2018.
 
2. 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 period, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in earnings in the period in which they occur.
 
d) Allowances 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 $120,000 as of September 30, 2018 and December 31, 2017.
 
 
6
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
e) Accounting Pronouncements
 
Not Yet Adopted
 
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill by eliminating step 2 from the goodwill impairment test. Under the new ASU, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized for the amount by which the carrying amount exceeds its fair value. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company believes that this pronouncement will have no impact on its consolidated financial statements and related disclosures.
 
In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU is intended to improve the reporting of leasing transactions to provide users of financial statements with more decision-useful information. This ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, using a modified retrospective approach. Early adoption is permitted. The Company will adopt the standard effective in the first quarter of 2019 and will not restate comparative periods upon adoption. The Company does not expect the adoption will have a material impact on its consolidated statement of earnings. However, the new standard will require the Company to establish liabilities and corresponding right-of-use assets on its consolidated balance sheet for operating leases that exist as of the adoption date.
 
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which removes, modifies and adds various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures. For example, disclosures around transfers between fair value hierarchy Levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs determining Level 3 fair value measurements will be added. This standard is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company believes that this pronouncement will have no impact on its consolidated financial statements and related disclosures.
 
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.
 
3. REVENUE
 
Disaggregated Revenue
 
The Company provides market data, financial web content solutions and cloud-based applications. Our revenue by type of service consists of the following:
 
 
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Portfolio Management Systems:
 
 
 
 
 
 
 
 
 
 
 
 
   Corporate Quotestream
 $886,833 
 $759,952 
 $2,633,853 
 $2,246,365 
   Individual Quotestream
  451,618 
  412,057 
  1,395,666 
  1,232,144 
Interactive Content & Data Applications
  1,473,421 
  1,216,137 
  4,248,163 
  3,537,355 
Total revenue
 $2,811,872 
 $2,388,146 
 $8,277,682 
 $7,015,864 
 
Deferred Revenue
 
Changes in deferred revenue for the period were as follows:
 
Balance at January 1, 2018
 $706,819 
Revenue recognized in the current period from the amounts in the beginning balance
  (620,174)
New deferrals, net of amounts recognized in the current period
  748,291 
Effects of foreign currency translation
  (4,910)
Balance at September 30, 2018
 $830,026 
 
Practical Expedients 
 
As permitted under ASU 2014-09 (and related ASUs), unsatisfied performance obligations are not disclosed, as the original expected duration of substantially all of our contracts is one year or less.
 
 
 
 
7
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
4. RELATED PARTIES
 
On December 28, 2017, the Company entered into Debt Exchange and Debt Forgiveness Agreements with Bravenet Web Services, Inc. (“Bravenet”), and Harrison Avenue Holdings Ltd. (“Harrison”). David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc., is a control person of Bravenet and Harrison. Also effective December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan. As a result of these agreements and transactions, all of our related party debt was eliminated effective December 28, 2017; therefore no related party interest expense was incurred for the three or nine months ended September 30, 2018. Interest was accrued at 10% on outstanding balances owed to related parties in the comparative period resulting in $297,865 and $859,362 in interest expenses for the three and nine months ended September 30, 2017, respectively. Refer to Note 6, “Stockholders’ Deficit” for additional information.
 
The Company entered into a five-year office lease with 410734 B.C. Ltd. effective May 1, 2016 for approximately $7,365 per month. David M. Shworan is a control person of 410734 B.C. Ltd. At September 30, 2018, there were no amounts due to 410734 B.C. Ltd. As a matter of policy all related party transactions are subject to review and approval by the Company’s Board of Directors.
 
5. CAPITAL LEASES
 
The Company’s property and equipment includes the following computer equipment on capital lease:
 
 
 
September 30, 2018
 
 
December 31, 2017
 
 
 
 
 
 
 
 
Computer equipment on capital lease
 $89,120 
  - 
Less: accumulated depreciation
  10,397 
  - 
 
 $78,723 
  - 
 
The Company’s capital lease obligations consist of the following:
 
 
 
September 30, 2018
 
 
December 31, 2017
 
 
 
 
 
 
 
 
Total capital lease obligations
 $85,023 
  - 
Less amount representing interest
  9,322 
  - 
Present value of minimum lease payments
  75,701 
  - 
Less current portion
  28,256 
  - 
Long-term portion
 $47,445 
  - 
 
6. STOCKHOLDERS’ DEFICIT
 
a) Preferred shares
 
We are authorized to issue up to 10,000,000 non-designated preferred shares at the Board of Directors’ discretion.
 
On December 28, 2017, a total of 550,000 shares of the Company’s Preferred Stock were designated as “Series A Redeemable Convertible Preferred Stock.” The Series A Redeemable Convertible Preferred Stock has no dividend or voting rights. Holders of Series A Redeemable Convertible Preferred Stock shall have the right to convert their shares into shares of common stock at the rate of 83.33 shares of common stock for one share of Series A Redeemable Convertible Preferred Stock, at any time following the date the closing price of a share of common stock on a securities exchange or actively traded over-the-counter market has exceeded $0.30 for ninety (90) consecutive trading days. The conversion rights are subject to the availability of authorized but unissued shares of common stock.
 
 
8
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to any holders of any shares of common stock, the holders of shares of Series A Redeemable Convertible Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Company’s capital stock whether such assets are capital, surplus, or earnings, an amount equal to $25.00 per share of Series A Redeemable Convertible Preferred Stock.
 
At September 30, 2018, 126,485 shares of Series A Redeemable Convertible Preferred Stock were outstanding. No shares of Series A Redeemable Convertible Preferred Stock were issued, and 1,200 shares were redeemed during the three and nine month periods ending September 30, 2018. The shares were redeemed at their $25 per share liquidation value. No shares of Series A Redeemable Convertible Preferred Stock were issued or redeemed in the comparative 2017 periods.
 
b) Common stock
 
No shares of common stock were issued during the nine months ended September 30, 2018 and 2017.
 
c) Stock Options and Warrants
 
FASB ASC 718, Stock Compensation, requires 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 three and nine months ended September 30, 2018 and 2017 was comprised as follows:
 
 
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
 $99,291 
 $5,052 
 $297,873 
 $15,716 
General and administrative
  9,368 
  10,000 
  34,768 
  30,000 
Development
  1,125 
  - 
  3,375 
  - 
Total stock-based compensation
 $109,784 
 $15,052 
 $336,016 
 $45,716 
 
Common Stock Options and Warrants
 
As of September 30, 2018 there were a total of 26,372,803 options and warrants to purchase common stock outstanding, with a weighted average exercise price of $0.06 and a weighted average remaining contractual life of 10.6 years. As of September 30, 2018 there were a total of 20,047,803 vested options and warrants to purchase common stock with weighted average exercise price of $0.05.
 
The following table summarizes the total non-vested common stock warrant and stock option activity for the nine months ended September 30, 2018:
 
 
 
Common Stock
 
 
Weighted-
 
 
 
Options and
 
 
Average
 
 
 
Warrants
 
 
Exercise Price
 
Outstanding at January 1, 2018
  7,625,000 
 $0.07 
Vested during the period
  (1,300,000)
 $0.05 
Outstanding at September 30, 2018
  6,325,000 
 $0.08 
 
At September 30, 2018 there was $145,971 of unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock which is expected to be recognized over a weighted-average period of 3.65 years.
 
All stock options and warrants to purchase common stock have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant. At September 30, 2018 the aggregate intrinsic value of options and warrants outstanding was $2,179,426. The aggregate intrinsic value of options and warrants exercisable was $1,792,801. The intrinsic value of stock options and warrants are calculated as the amount by which the market price of our common stock exceeds the exercise price of the option or warrant.
 
 
9
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
Preferred Stock Warrants
 
On December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc., pursuant to which, in lieu of receiving a cash salary the Company will issue to Mr. Shworan warrants to purchase shares of Series A Redeemable Convertible Preferred Stock (“Compensation Preferred Stock Warrants”). Provided that Mr. Shworan is employed by or otherwise providing services to the Company or its subsidiaries on each of January 1, 2018 and 2019, the Company will issue to Mr. Shworan warrants to purchase up to 15,000 shares of Compensation Preferred Stock Warrants at an exercise price equal to $1.00 per share. A total of $90,000 and $270,000 of stock-based compensation expense was recognized related to the Compensation Preferred Stock Warrants during the three and nine months ending September 30, 2018. At September 30, 2018 there was $90,000 of unrecognized compensation costs related to the 15,000 Compensation Preferred Stock Warrants granted on January 1, 2018 which are expected to be recognized over a weighted-average period of 0.25 years.
 
 Also pursuant to the Compensation Agreement with Mr. Shworan, on December 28, 2017 the Company issued Mr. Shworan warrants to purchase up to 382,243 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share (“Liquidity Preferred Stock Warrant”). The Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event as defined in the Company’s Certificate of Designation of Series A Redeemable Convertible Preferred Stock. The probability of the liquidity event performance condition is not currently determinable or probable; therefore, no compensation expense has been recognized as of September 30, 2018. The probability is re-evaluated each reporting period. As of September 30, 2018, there was $9,173,832 in unrecognized stock-based compensation expense related to these Liquidity Preferred Stock Warrants. Since the Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event which is currently not determinable or probable, we are also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized. Refer to Note 4, “Related Parties” for additional information.
 
The following table represents total preferred stock warrant activity for the nine months ended September 30, 2018:
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
Average
 
 
 
Warrants
 
 
Exercise Price
 
Outstanding at January 1, 2018
  383,493 
 $1.00 
Warrants granted
  15,000 
 $1.00 
Outstanding at September 30, 2018
  398,493 
 $1.00 
 
The following table summarizes the total non-vested preferred stock warrant activity for the nine months ended September 30, 2018:
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
Average
 
 
 
Warrants
 
 
Exercise Price
 
Outstanding at January 1, 2018
  382,243 
 $1.00 
Granted during the period
  15,000 
 $1.00 
Vested during the period
  (11,250)
 $1.00 
Outstanding at September 30, 2018
  385,993 
 $1.00 
 
As of September 30, 2018, a total of 398,493 preferred stock warrants were outstanding with a weighted average remaining contractual life of 19.3 years. As of September 30, 2018, a total of 12,500 preferred stock warrants were exercisable with a weighted average remaining contractual life of 19.3 years. There was no cash received from the exercise of preferred stock warrants for the nine months ended September 30, 2018 or 2017.
 
At September 30, 2018 the total aggregate intrinsic value of preferred stock warrants outstanding was $9,563,832. The aggregate intrinsic value of preferred stock warrants exercisable was $300,000. The intrinsic value of our preferred stock warrants is calculated as the amount by which the liquidation value of our Series A Redeemable Convertible Preferred Stock ($25) exceeds the exercise price of the warrant ($1).
 
 
10
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
7. EARNINGS PER SHARE
 
Basic net income per share is computed by dividing net income during the period by the weighted-average number of common shares outstanding, excluding the dilutive effects of common stock equivalents. Common stock equivalents include redeemable convertible preferred stock, stock options and warrants. Diluted net income per share is computed by dividing net income by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated using the treasury stock method by adding to the weighted shares outstanding any potential shares of common stock from outstanding redeemable convertible preferred stock, stock options and warrants that are in-the-money. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported the calculation of basic and dilutive loss per share results in the same value. The calculations for basic and diluted net income per share for the three and nine months ended September 30, 2018 and 2017 are as follows:
 
 
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 $208,484 
 $(445,078)
 $329,181 
 $(1,305,694)
 
    
    
    
    
Weighted average common shares used
    
    
    
    
  to calculate net income per share
  90,477,798 
  90,477,798 
  90,477,798 
  90,477,798 
Stock options and warrants to purchase
    
    
    
    
  common stock
  13,529,272 
  - 
  11,099,671 
  - 
Weighted average common shares used
    
    
    
    
  to calculate diluted net income per share
  104,007,070 
  90,477,798 
  101,577,469 
  90,477,798 
 
    
    
    
    
Net income (loss) per share - basic
 $0.00 
 $(0.00)
 $0.00 
 $(0.01)
Net income (loss) per share - diluted
 $0.00 
 $(0.00)
 $0.00 
 $(0.01)
 
The number of shares of potentially dilutive common stock related to options, warrants and redeemable convertible preferred stock that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the three and nine months ended September 30, 2018 and 2017 are shown below:
 
 
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Stock options and warrants to purchase
 
 
 
 
 
 
 
 
 
 
 
 
  common stock
  - 
  16,372,803 
  4,000,000 
  16,372,803 
Warrants to purchase redeemable
    
    
    
    
  convertible preferred stock
  1,354,113 
  - 
  1,354,113 
  - 
Redeemable convertible preferred stock
  10,539,995 
  - 
  10,539,995 
  - 
Total potential common shares excluded
  11,894,108 
  16,372,803 
  15,894,108 
  16,372,803 
 
    
    
    
    
 
 
11
 
 
ITEM 2. Management’s Discussion and Analysis
 
The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report. We caution readers regarding certain forward looking statements in the following discussion, elsewhere in this report, and in any other statements, made by, or on behalf of our company, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on behalf of, our company. Uncertainties and contingencies that might cause such differences include those risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2017 and other reports filed from time to time with the SEC.
 
We disclaim any obligation to update forward-looking statements. All references to “we”, “our”, “us”, or “quotemedia” refer to QuoteMedia, Inc., and its predecessors, operating divisions, and subsidiaries.
 
This report should be read in conjunction with our Form 10-K for the fiscal year ended December 31, 2017 filed with the Securities and Exchange Commission.
 
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 Applications, 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.
 
Our Interactive Content and Data Applications 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, market depth information, watch lists, and real-time quotes. All of our content solutions are completely customizable and embed directly into client Web pages for seamless integration with existing content. We are continuing to develop and launch new modules of QModTM, our 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) 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, and supplemental fundamental, historical, and analytical data, keyed to the same symbology, which provides a complete market data solution for 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 Applications 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 designed specifically 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.
 
 
12
 
 
Quotestream Mobile is a true companion product to the Quotestream desktop products (Quotestream and Quotestream Professional) – any changes made to portfolios in either the desktop or mobile application are automatically reflected in the other.
 
A key feature of QuoteMedia’s business model is that all of our product lines generate recurring monthly licensing revenue from each client. Contracts to license Quotestream to our corporate clients, for example, typically have a term of one to three 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 Applications 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 three years and are automatically renewed unless notice is given 90 days prior to the expiration of the contract term.
 
Business environment and trends
 
The global financial markets have experienced extreme volatility and disruption in recent years. As a result, financial institutions globally have acted to control or reduce operational spending. While in some areas the anticipated impact of current market conditions may lead to a decision to reduce demand for market data and related services, we expect overall spending on financial information services will grow modestly over the next several years.
 
We recently completed a financial restructuring in December 2017 that eliminated over $12 million of debt from our balance sheet and reduced our annual interest expense by about $1.3 million. This restructuring has significantly improved our operating results through the first two quarters of 2018, and we believe that our strengthened financial position will allow us to attract and service much larger clients.
 
Our revenue increased 18% when comparing the three and nine months ended September 30, 2018 and 2017. Through September 30, 2018, we have experienced 11 consecutive quarters of revenue growth. Our revenue growth has led to an improved gross margin percentage of 52% and 50% for the three and nine months ended September 30, 2018, up from 45% in the comparative 2017 periods. We expect our positive revenue growth to continue for the remainder of 2018 and 2019.
 
Plan of operation
 
For the remainder of 2018 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 Applications, 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 2018 include broad expansion of data and news coverage, including the addition of a wide array of international exchange data and news and 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.
 
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 achieve profitable operations.
 
 
13
 
 
Results of Operations
 
Revenue
 
Three months ended September 30,
 
2018
 
 
2017
 
 
Change ($)
 
 
Change (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Corporate Quotestream
 $886,833 
 $759,952 
 $126,881 
  17%
   Individual Quotestream
  451,618 
  412,057 
  39,561 
  10%
Total Portfolio Management Systems
  1,338,451 
  1,172,009 
  166,442 
  14%
Interactive Content and Data Applications
  1,473,421 
  1,216,137 
  257,284 
  21%
Total Licensing Revenue
 $2,811,872 
 $2,388,146 
 $423,726 
  18%
 
Nine months ended September 30,
 
2018
 
 
2017
 
 
Change ($)
 
 
Change (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Corporate Quotestream
 $2,633,853 
 $2,246,365 
 $387,488 
  17%
   Individual Quotestream
  1,395,666 
  1,232,144 
  163,522 
  13%
Total Portfolio Management Systems
  4,029,519 
  3,478,509 
  551,010 
  16%
Interactive Content and Data Applications
  4,248,163 
  3,537,355 
  710,808 
  20%
Total Licensing Revenue
 $8,277,682 
 $7,015,864 
 $1,261,818 
  18%
 
Total licensing revenue increased 18% when comparing the three and nine months ended September 30, 2018 and 2017.
 
Our Portfolio Management System revenue increased by 14% and 16% when comparing the three and nine month periods ended September 30, 2018 and 2017, due to increases in both Corporate Quotestream Revenue and Individual Quotestream revenue. The increases are attributable in part to improvements and upgrades made to our Portfolio Management products.
 
Corporate Quotestream revenue increased 17% for the three and nine month periods ended September 30, 2018 from the comparative periods in 2017 due to new contracts signed since the comparative periods and increases in the number of subscribers for existing clients.
 
Individual Quotestream revenue increased 10% and 13% from the three and nine month comparative periods in 2017. The increases are due to increases in both the number of subscribers and average revenue per subscriber from the comparative periods.
 
Interactive Content and Data Application revenue increased 21% and 20% when comparing the three and nine month periods ended September 30, 2018 and 2017, due to increases in both the number of clients and the average revenue per client which is attributable to the launch of new products such as QMod, our proprietary Web delivery system.
 
Cost of Revenue and Gross Profit Summary
 
Three months ended September 30,
 
2018
 
 
2017
 
 
Change ($)
 
 
Change (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 $1,354,498 
 $1,310,995 
 $43,503 
  3%
Gross profit
 $1,457,374 
 $1,077,151 
 $380,223 
  35%
Gross margin %
  52%
  45%
    
    
 
Nine months ended September 30,
 
2018
 
 
2017
 
 
Change ($)
 
 
Change (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 $4,140,222 
 $3,861,602 
 $278,620 
  7%
Gross profit
 $4,137,460 
 $3,154,262 
 $983,198 
  31%
Gross margin %
  50%
  45%
    
    
 
Our cost of revenue consists of fixed and variable stock exchange fees and data feed provisioning costs. 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.
 
 
14
 
 
Cost of revenue increased 3% and 7% when comparing the three and nine month periods ended September 30, 2018 and 2017. The increase in cost of revenue was mainly due to increased variable stock exchange fees resulting from increased customer usage, as well as new and increased fees levied by our content providers.
 
Overall, the cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage of 52% and 50% for the three and nine month periods ended September 30, 2018 compared to 45% in the comparative 2017 periods.
 
Operating Expenses Summary
 
Three months ended September 30,
 
2018
 
 
2017
 
 
Change ($)
 
 
Change (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
 $470,312 
 $397,357 
 $72,955 
  18%
General and administrative
  477,231 
  478,805 
  (1,574)
  (0%)
Software development
  289,678 
  251,286 
  38,392 
  15%
Total operating expenses
 $1,237,221 
 $1,127,448 
 $109,773 
  10%
 
Nine months ended September 30,
 
2018
 
 
2017
 
 
Change ($)
 
 
Change (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
 $1,406,300 
 $1,174,706 
 $231,594 
  20%
General and administrative
  1,515,824 
  1,507,252 
  8,572 
  1%
Software development
  878,336 
  746,754 
  131,582 
  18%
Total operating expenses
 $3,800,460 
 $3,428,712 
 $371,748 
  11%
 
Sales and Marketing
 
Sales and marketing consists primarily of sales and customer service salaries, investor relations, travel and advertising expenses. Sales and marketing expenses increased 18% and 20% when comparing the three and nine month periods ended September 30, 2018 and 2017. The increase was due primarily to additional sales personnel hired since comparative periods.
 
Effective December 28, 2017, the Company entered into a new Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc. On January 1, 2018, in accordance with the Compensation Agreement the Company issued Mr. Shworan 15,000 warrants to purchase shares of Series A Redeemable Convertible Preferred Stock in lieu of a cash salary. A total of $90,000 and $180,000 of stock-based compensation was included in sales and marketing expenses for the three and nine months ending September 30, 2018 related to warrants granted to Mr. Shworan, effectively offsetting the same amount of salary expense that was accrued for Mr. Shworan in the comparative period.
 
General and Administrative
 
General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative expenses remained relatively unchanged from the comparative periods, increasing (0%) and 1% when comparing the three and nine month periods ended September 30, 2018 and 2017.
 
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.
 
Software development expenses increased 15% and 18% for the three and nine month period ended September 30, 2018 when compared to the same periods in 2017. The increases are mainly due to hiring additional development personnel since the comparative period.
 
We capitalized $224,045 and $654,827 of development costs for the three and nine months ended September 30, 2018, compared to $212,030 and $582,669 for the same periods in 2017. 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.
 
 
15
 
 
Other Income and (Expense) Summary
 
Three months ended September 30,
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Foreign exchange gain (loss)
 $(8,925)
 $(96,120)
Interest expense – related party
  - 
  (297,865)
Interest expense - other
  (1,980)
  - 
Total other income and (expenses)
 $(10,905)
 $(393,985)
 
Nine months ended September 30,
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Foreign exchange gain (loss)
 $(725)
 $(169,587)
Interest expense – related party
  - 
  (859,362)
Interest expense - other
  (4,765)
  - 
Total other income and (expenses)
 $(5,490)
 $(1,028,949)
 
Foreign Exchange Gain (Loss)
 
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.
 
We incurred a foreign exchange loss of $8,925 for the three months ended September 30, 2018 attributable to both the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars and the settlement of foreign currency denominated transactions. The Canadian dollar appreciated 1.8% versus the U.S. dollar when comparing the foreign exchange rate at September 30, 2018 to the rate at June 30, 2018 resulting in a foreign exchange loss for the three months ended September 30, 2018. We incurred a foreign exchange loss of $96,120 for the comparative 2017 period attributable to the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars as the Canadian dollar appreciated 4.5% versus the U.S. dollar.
 
We incurred a foreign exchange loss of $725 for the nine months ended September 30, 2018 attributable to the loss on the settlement of foreign currency denominated transactions, offset by the gain resulting from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars. The Canadian dollar depreciated 2.8% versus the U.S. dollar when comparing the foreign exchange rate at September 30, 2018 to the rate at December 31, 2017 resulting in a foreign exchange re-measurement gain for the nine months ended September 30, 2018. We incurred a foreign exchange loss of $169,587 for the comparative 2017 period attributable to the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars as the Canadian dollar appreciated 7.7% versus the U.S. dollar
 
Interest Expense – Related Party
 
No related party interest expense was incurred during the three and nine month periods ended September 30, 2018. Interest expense of $297,865 and $859,362 in the comparative 2017 periods was accrued at 10% on amounts owed to related parties. On December 28, 2017, the Company entered into Debt Exchange and Debt Forgiveness Agreements with Bravenet Web Services, Inc. (“Bravenet”), and Harrison Avenue Holdings Ltd. (“Harrison”). David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet and Harrison. Also effective December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan. As a result of these agreements and transactions, all of our related party debt and its related interest expense was eliminated.
 
Provision for Income Taxes
 
For the three and nine month periods ended September 30, 2018, the Company recorded Canadian income tax expense of $764 and $2,329 compared to $796 and $2,295 in the comparative periods in 2017.
 
 
16
 
 
Net Income (Loss) for the Period
 
As a result of the foregoing, net income for the three and nine months ended September 30, 2018 was $208,484 and $329,181 compared to net losses of $445,078 and $1,305,694 for the three and nine months ended September 30, 2017. Basic and diluted earnings per share was $0.00 for the three and nine months ended September 30, 2018 compared to a basic and diluted loss per share of $0.00 and $0.01 for the three and nine months ended September 30, 2017.
 
Liquidity and Capital Resources
 
Our cash totaled $630,208 at September 30, 2018, as compared with $451,151 at December 31, 2017, an increase of $179,057. Net cash of $987,294 was provided by operations for the nine months ended September 30, 2018, primarily due to the net income during the period adjusted for non-cash charges and the increase in deferred revenue, offset by an increase in accounts receivable and the decrease in accounts payable. Net cash used in investing activities for the nine months ended September 30, 2018 was $764,907 resulting from capitalized application software costs and the purchase of new computer equipment. Cash used in financing activities for the nine months ended September 30, 2018 was $43,330 related to the redemption of 1,200 shares of preferred stock and the repayment of capital lease financing.
 
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.
 
ITEM 4. Controls and Procedures
 
Under the supervision and with the participation of our Chairman of the Board and Chairman of the Audit Committee, Chief Executive Officer and Chief Financial Officer, we completed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, we and our management have concluded that our disclosure controls and procedures at September 30, 2018 were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosures. In the three months ended September 30, 2018, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.
 
We will consider further actions and continue to evaluate the effectiveness of our disclosure controls and internal controls and procedures on an ongoing basis, taking corrective action as appropriate. Management does not expect that disclosure controls and procedures or internal controls can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. While management believes that its disclosure controls and procedures provide reasonable assurance that fraud can be detected and prevented, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
 
 
17
 
 
PART II - OTHER INFORMATION
 
ITEM 6.  
EXHIBITS
 
Exhibit Number
Description of Exhibit
 
 
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
QUOTEMEDIA, INC.
 
 
 
 
 
Dated: November 14, 2018
 
 
 
 
 

By:  
/s/ Keith J. Randall
 
 
 
Keith J. Randall, 
 
 
 
Chief Executive Officer
(Principal Executive Officer) 
 
 
 
 
 
 
 
 
 
By:  
/s/ Keith J. Randall
 
 
 
Keith J. Randall,
 
 
 
Chief Financial Officer 
(Principal Accounting Officer)
 
 
 
 
 
 
18
EX-31.1 2 qmci_ex311.htm CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002 Blueprint
 
Exhibit 31.1
CERTIFICATION
 
I, Keith J. Randall, certify that:
 
1.            
I have reviewed this Quarterly Report on Form 10-Q of Quotemedia, Inc.;
 
2. 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)            
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)            
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)            
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)            
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)            
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)            
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: November 14, 2018
By: /s/ Keith J. Randall
 
Keith J. Randall
Chief Executive Officer
 
EX-31.2 3 qmci_ex312.htm CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002 Blueprint
 
Exhibit 31.2
CERTIFICATION
 
I, Keith J. Randall, certify that:
 
1.            
I have reviewed this Quarterly Report on Form 10-Q of Quotemedia, Inc.;
 
2. 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)            
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)            
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)            
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)            
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)            
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)            
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: November 14, 2018
By: /s/ Keith J. Randall
 
Keith J. Randall
Chief Financial Officer
 
EX-32.1 4 qmci_ex321.htm CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Blueprint
 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Quotemedia, Inc. (the "Company") for the quarterly period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, R. Keith Guelpa, Chief Executive Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) 
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
 
(2) 
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
By: /s/ Keith J. Randall
____________________
Keith J. Randall
Chief Executive Officer
November 14, 2018
 
EX-32.2 5 qmci_ex322.htm CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Blueprint
 
Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Quotemedia, Inc. (the "Company") for the quarterly period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Keith J. Randall, Chief Financial Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) 
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
 
(2) 
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
By: /s/ Keith J. Randall
____________________
Keith J. Randall
Chief Financial Officer
November 14, 2018
 
 
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