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 June 30, 2019
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
August 1, 2019.
QUOTEMEDIA, INC.
FORM 10-Q for the Quarter Ended June 30, 2019
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$1,015,468
|
$810,332
|
Accounts
receivable, net
|
658,573
|
538,081
|
Prepaid
expenses
|
81,914
|
132,356
|
Other
current assets
|
205,360
|
170,914
|
Total
current assets
|
1,961,315
|
1,651,683
|
|
|
|
Deposits
|
18,565
|
15,339
|
Property
and equipment, net
|
1,992,373
|
1,702,875
|
Goodwill
|
110,000
|
110,000
|
Intangible
assets
|
54,147
|
57,029
|
Operating
lease right-of-use assets
|
228,229
|
-
|
|
|
|
Total
assets
|
$4,364,629
|
$3,536,926
|
|
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|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable and accrued liabilities
|
$1,541,383
|
$1,495,064
|
Deferred
revenue
|
776,564
|
707,880
|
Current
portion of operating lease liabilities
|
176,147
|
-
|
Current
portion of finance lease liabilities
|
32,189
|
30,083
|
Total
current liabilities
|
2,526,283
|
2,233,027
|
|
|
|
Long-term portion
of operating lease liabilities
|
63,204
|
-
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Long-term portion
of finance lease liabilities
|
31,051
|
46,457
|
|
|
|
Mezzanine
equity:
|
|
|
Series
A Redeemable Convertible Preferred stock, $0.001 par
value,
|
|
|
550,000
shares designated, 124,485 and 125,885 shares issued
|
3,003,528
|
3,037,952
|
|
|
|
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
|
19,362,858
|
19,157,202
|
Accumulated
deficit
|
(20,712,774)
|
(21,028,191)
|
Total
stockholders’ deficit
|
(1,259,437)
|
(1,780,510)
|
|
|
|
Total
liabilities and stockholders’ deficit
|
$4,364,629
|
$3,536,926
|
|
|
|
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
|
Three months
ended June 30,
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
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|
LICENSING
FEES
|
$2,984,846
|
$2,798,570
|
$5,855,465
|
$5,465,810
|
|
|
|
|
|
COST
OF REVENUE
|
1,463,090
|
1,414,269
|
2,925,802
|
2,785,724
|
|
|
|
|
|
GROSS
PROFIT
|
1,521,756
|
1,384,301
|
2,929,663
|
2,680,086
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
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Sales and
marketing
|
486,401
|
487,930
|
930,000
|
935,988
|
General and
administrative
|
524,923
|
500,238
|
1,046,059
|
1,038,593
|
Software
development
|
298,562
|
284,878
|
612,190
|
588,658
|
|
1,309,886
|
1,273,046
|
2,588,249
|
2,563,239
|
|
|
|
|
|
OPERATING
PROFIT
|
211,870
|
111,255
|
341,414
|
116,847
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
(7,256)
|
4,383
|
(21,314)
|
8,200
|
Interest expense -
other
|
(1,506)
|
(2,328)
|
(3,184)
|
(2,785)
|
|
(8,762)
|
2,055
|
(24,498)
|
5,415
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
203,108
|
113,310
|
316,916
|
122,262
|
|
|
|
|
|
Provision for
income taxes
|
(747)
|
(774)
|
(1,499)
|
(1,565)
|
|
|
|
|
|
NET
INCOME
|
$202,361
|
$112,536
|
$315,417
|
$120,697
|
|
|
|
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|
EARNINGS
PER SHARE
|
|
|
|
|
|
|
|
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|
Basic earnings per
share
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
Diluted earnings
per share
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
Basic
|
90,477,798
|
90,477,798
|
90,477,798
|
90,477,798
|
Diluted
|
108,113,462
|
99,803,542
|
104,356,197
|
101,186,441
|
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
|
Six months ended
June 30,
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
Net
income
|
$315,417
|
$120,697
|
|
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
511,333
|
431,799
|
Stock-based
compensation expense
|
206,232
|
226,232
|
Changes in assets
and liabilities:
|
|
|
Accounts
receivable
|
(120,492)
|
(161,013)
|
Prepaid
expenses
|
50,442
|
17,988
|
Other
current assets
|
(34,446)
|
(7,985)
|
Deposits
|
(3,226)
|
655
|
Accounts
payable, accrued and other liabilities
|
57,441
|
(38,279)
|
Deferred
revenue
|
68,684
|
83,020
|
Net cash provided
by operating activities
|
1,051,385
|
673,114
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
Purchase
of fixed assets
|
(137,709)
|
(99,593)
|
Purchase
of intangible assets
|
-
|
(2,570)
|
Capitalized
application software
|
(660,240)
|
(430,781)
|
Net cash used in
investing activities
|
(797,949)
|
(532,944)
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
Repayment
of capital lease financing
|
(13,300)
|
(6,610)
|
Redemption
of preferred stock
|
(35,000)
|
-
|
Net cash used in
financing activities
|
(48,300)
|
(6,610)
|
|
|
|
Net increase in
cash
|
205,136
|
133,560
|
|
|
|
Cash and
equivalents, beginning of period
|
810,332
|
451,151
|
|
|
|
Cash and
equivalents, end of period
|
$1,015,468
|
$584,711
|
|
|
|
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SERIES A REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
Series A
Redeemable Convertible
Preferred
Stock
|
|
|
|
|
Three and six
months ended June 30, 2019:
|
|
|
|
|
Additional
Paid-in Capital
|
|
Total
Stockholders’ Equity (Deficit)
|
Balance, December
31, 2018
|
125,885
|
$3,037,952
|
90,477,798
|
$90,479
|
$19,157,202
|
$(21,028,191)
|
$(1,780,510)
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
103,116
|
|
103,116
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
113,056
|
113,056
|
|
|
|
|
|
|
|
|
Balance, March 31,
2019
|
125,885
|
3,037,952
|
90,477,798
|
90,479
|
19,260,318
|
(20,915,135)
|
(1,564,338)
|
|
|
|
|
|
|
|
|
Preferred shares
issued (redeemed)
|
(1,400)
|
(34,424)
|
|
|
(576)
|
|
(576)
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
103,116
|
|
103,116
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
202,361
|
202,361
|
|
|
|
|
|
|
|
|
Balance, June 30,
2019
|
124,485
|
$3,003,528
|
90,477,798
|
$90,479
|
$19,362,858
|
$(20,712,774)
|
$(1,259,437)
|
|
Series A
Redeemable Convertible
Preferred
Stock
|
|
|
|
|
Three
and six months ended June 30, 2018:
|
|
|
|
|
Additional
Paid-in Capital
|
|
Total
Stockholders’ Equity (Deficit)
|
Balance, December
31, 2017
|
127,685
|
$3,082,211
|
90,477,798
|
$90,479
|
$18,727,661
|
$(21,526,062)
|
$(2,707,922)
|
|
|
|
|
|
|
|
|
Costs associated
with forgiveness of debt
|
|
|
|
|
(8,850)
|
|
(8,850)
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
113,116
|
|
113,116
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
8,161
|
8,161
|
|
|
|
|
|
|
|
|
Balance, March 31,
2018
|
127,685
|
3,082,211
|
90,477,798
|
90,479
|
18,831,927
|
(21,517,901)
|
(2,595,495)
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
113,116
|
|
113,116
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
112,536
|
112,536
|
|
|
|
|
|
|
|
|
Balance, June 30,
2018
|
127,685
|
$3,082,211
|
90,477,798
|
$90,479
|
$18,945,043
|
$(21,405,365)
|
$(2,369,843)
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 June 30, 2019 through the
filing of this report.
As of
June 30, 2019, the Company has a working capital deficit of
$564,968. Our current liabilities include deferred revenue of
$776,564. 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, 2018 contained in our Form 10-K filed with the
Securities and Exchange Commission dated March 29,
2019.
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 $100,000
as of June 30, 2019 and December 31, 2018.
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
e) Accounting Pronouncements
Recently Adopted
In February 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 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 Company adopted the new leasing standards on
January 1, 2019, using a modified retrospective transition approach
to be applied to leases existing as of, or entered into after,
January 1, 2019. Upon adoption of the new leasing standards, we
recognized an initial lease liability and related right-of-use
asset on our consolidated balance sheet of $307,549. The impact of
adoption of the new leasing standards had an immaterial impact to
our consolidated statements of operations and cash
flows.
In
June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic
718). This ASU expands the scope of FASB ASC 718,
Stock Compensation, by
accounting for share-based payments granted to nonemployees for
goods and services. The Company adopted the new stock compensation
standards on January 1, 2019. There was no impact upon adoption to
our consolidated financial statements and related
disclosures.
Not Yet Adopted
In January 2017, the FASB issued 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 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.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and
Other - Internal-Use Software (Subtopic 350-40): Customer's
Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That is a Service Contract, which requires a customer in a cloud computing
arrangement that is a service contract to follow the internal-use
software guidance in Topic 350, "Intangibles - Goodwill and
Other" to determine which
implementation costs to capitalize as assets or expense as
incurred. The new standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December
15, 2019. Early adoption is permitted, and an entity can elect to
apply the new guidance on a prospective or retrospective basis. The
Company is currently evaluating the impact of adopting this
guidance.
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.
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 June 30,
|
Six months ended
June 30,
|
|
|
|
|
|
Portfolio
Management Systems
|
|
|
|
|
Corporate
Quotestream
|
$915,335
|
$881,557
|
$1,920,044
|
$1,747,020
|
Individual
Quotestream
|
473,137
|
466,888
|
924,858
|
944,048
|
Interactive Content
& Data Application
|
1,596,374
|
1,450,125
|
3,010,563
|
2,774,742
|
Total
revenue
|
$2,984,846
|
$2,798,570
|
$5,855,465
|
$5,465,810
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Deferred Revenue
Changes
in deferred revenue for the period were as follows:
Balance at December
31, 2018
|
$707,880
|
Revenue recognized
in the current period from the amounts in the beginning
balance
|
(461,992)
|
New deferrals, net
of amounts recognized in the current period
|
523,233
|
Effects of foreign
currency translation
|
7,443
|
Balance at June 30,
2019
|
$776,564
|
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.
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 June 30, 2019,
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.
We have
operating leases for corporate offices and finance leases for
certain equipment. Our leases have remaining lease terms of 1 year
to 4 years. We determine if an
arrangement is a lease at inception. Operating lease assets and
liabilities are included in operating lease right-of-use assets and
operating lease liabilities, respectively, on our consolidated
balance sheets. Finance lease assets and liabilities are included
in property and equipment and finance lease liabilities,
respectively, on our consolidated balance
sheets.
Operating
lease right-of-use assets and operating lease liabilities are
recognized based on the present value of the future minimum lease
payments over the lease term at commencement date. As most of our
leases do not provide an implicit rate, we use our incremental
borrowing rate based on the information available at commencement
date in determining the present value of future payments. We
elected the short-term lease exception and therefore only recognize
right-of-use assets and lease liabilities for leases with a term
greater than one year. When determining lease terms, we factor in
options to extend or terminate leases when it is reasonably certain
that we will exercise that option. We have lease agreements with
lease and non-lease components, which are generally accounted for
separately. For certain leases we
account for the lease and non-lease components as a single lease
component.
Supplemental
balance sheet information related to leases was as
follows:
|
|
|
|
|
|
Operating
Leases
|
|
|
|
|
|
Operating lease
right-of-use assets
|
$228,229
|
$-
|
|
|
|
Current portion of
operating lease liability
|
$176,147
|
$-
|
Long-term portion
of operating lease liability
|
63,204
|
-
|
Total operating
lease liability
|
$239,351
|
$-
|
|
|
|
Finance
Leases
|
|
|
|
|
|
Computer equipment
on financing lease
|
$101,049
|
$101,049
|
Less: accumulated
depreciation
|
35,362
|
17,836
|
Property and
equipment, net
|
$65,687
|
$83,213
|
|
|
|
Current portion of
finance lease liability
|
32,189
|
30,083
|
Long-term portion
of finance lease liability
|
31,051
|
46,457
|
Total finance lease
liability
|
$63,240
|
$76,540
|
|
|
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Weighted
Average Remaining Lease Term
|
|
|
Operating
leases
|
|
-
|
Finance
leases
|
|
|
|
|
Weighted
Average Discount Rate
|
|
|
Operating
leases
|
9.7%
|
-
|
Finance
leases
|
8.9%
|
8.9%
|
Maturities
of lease liabilities were as follows:
Year
ending December 31,
|
|
|
|
|
|
2019 (excluding the
six months ended June 30, 2019)
|
$95,654
|
$18,266
|
2020
|
139,063
|
36,531
|
2021
|
22,855
|
12,170
|
2022 and
thereafter
|
-
|
2,151
|
Total lease
payments
|
257,572
|
69,118
|
Less imputed
interest
|
(18,221)
|
(5,878)
|
Total
|
$239,351
|
$63,240
|
The
components of lease expense were as follows:
|
Three months
ended
June 30,
2019
|
Six months
ended
June 30,
2019
|
Operating
lease costs:
|
|
|
Operating lease
costs
|
$46,090
|
$92,023
|
Short-term lease
costs
|
33,311
|
65,761
|
Total operating
lease costs
|
$79,401
|
$157,784
|
|
|
|
Finance
lease costs:
|
|
|
Amortization
|
$8,763
|
$17,526
|
Interest
|
1,543
|
3,217
|
Total finance lease
cost
|
$10,306
|
$20,743
|
Supplemental
cash flow information related to leases was as
follows:
|
Three months
ended
June 30,
2019
|
Six months
ended
June 30,
2019
|
Cash paid for amounts included in the measurement of lease
liabilities:
|
|
|
Operating
cash flows from operating leases
|
$46,150
|
$92,307
|
Operating
cash flows from finance leases
|
1,543
|
3,217
|
Financing
cash flows from finance leases
|
8,656
|
15,049
|
|
|
|
Right-of-use assets obtained in exchange for lease
obligations:
|
|
|
Operating
leases
|
-
|
307,549
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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 June
30, 2019, 124,485 shares of Series A Redeemable Convertible
Preferred Stock were outstanding. During the three and six months
ended June 30, 2019 1,400 shares of Series A Redeemable Convertible
Preferred Stock were redeemed. No shares of Series A Redeemable
Convertible Preferred Stock were issued or redeemed during the
three and six months ended June 30, 2018.
b) Common stock
No
shares of common stock were issued during the six months ended June
30, 2019 and 2018.
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
six months ended June 30, 2019 and 2018 was comprised as
follows:
|
Three months
ended June 30,
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
$99,291
|
$99,291
|
$198,582
|
$198,582
|
General and
administrative
|
2,700
|
12,700
|
5,400
|
25,400
|
Development
|
1,125
|
1,125
|
2,250
|
2,250
|
Stock based
compensation expense
|
$103,116
|
$113,116
|
$206,232
|
$226,232
|
Common Stock Options and Warrants
There
were 26,372,803 common stock warrants and options outstanding at
June 30, 2019. No stock options or warrants to purchase common
stock were granted or exercised during the six months ended June
30, 2019 and 2018.
The
following table summarizes our non-vested common stock option and
warrant activity for the six months ended June 30,
2019:
|
Common Stock
Options
and
Warrants
|
Weighted-Average
Grant Date Exercise Price
|
|
|
|
Non-vested at
January 1, 2019
|
6,225,000
|
$0.08
|
Vested during the
period
|
(200,000)
|
$0.04
|
Non-vested at June
30, 2019
|
6,025,000
|
$0.08
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
following table summarizes the weighted average remaining
contractual life and exercise price of common stock options and
warrants outstanding at June 30, 2019:
|
|
Common Stock
Options and Warrants Outstanding
|
|
Common Stock
Options
and
Warrants Exercisable
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Number
|
|
Average
|
|
Weighted
|
|
Number
|
|
Weighted
|
|
|
Outstanding
at
|
|
Remaining
|
|
Average
|
|
Exercisable
at
|
|
Average
|
|
|
June
30,
|
|
Contractual
|
|
Exercise
|
|
June
30,
|
|
Exercise
|
|
|
2019
|
|
Life
(Years)
|
|
Price
|
|
2019
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
$0.03-0.10
|
|
26,372,803
|
|
9.9
|
|
$0.06
|
|
20,347,803
|
|
$0.05
|
At June
30, 2019, there was $106,623 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 2.95 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 June 30,
2019, the aggregate intrinsic value of options and warrants
outstanding was $2,443,154. The aggregate intrinsic value of
options and warrants exercisable was $2,027,779. 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.
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
$180,000 of stock-based compensation expense was recognized related
to the Compensation Preferred Stock Warrants during the three and
six months ended June 30, 2019 and 2018, respectively. At June 30,
2019, there was $180,000 of unrecognized compensation costs related
to the 15,000 Compensation Preferred Stock Warrants granted on
January 1, 2019 which are expected to be recognized over a
weighted-average period of 0.75 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 June 30, 2019. The
probability is re-evaluated each reporting period. As of June 30,
2019, 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 determined not to be probable, we are also unable to
determine the weighted-average period over which the unrecognized
compensation cost will be recognized.
The
following table represents total preferred stock warrant activity
for the six months ended June 30, 2019:
|
|
Weighted-Average
Exercise Price
|
|
|
|
Outstanding at
December 31, 2018
|
398,493
|
$1.00
|
Granted during the
period
|
15,000
|
$1.00
|
Outstanding at June
30, 2019
|
413,493
|
$1.00
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
following table summarizes the total non-vested preferred stock
warrant activity for the six months ended June 30,
2019:
|
|
Weighted-Average
Exercise Price
|
|
|
|
Outstanding at
December 31, 2018
|
382,243
|
$1.00
|
Granted during the
period
|
15,000
|
$1.00
|
Vested during the
period
|
(7,500)
|
$1.00
|
Outstanding at June
30, 2019
|
389,743
|
$1.00
|
The
following table summarizes the weighted average remaining
contractual life and exercise price of preferred stock warrants
outstanding at June 30, 2019:
|
|
Preferred Stock
Warrants Outstanding
|
|
Preferred
Stock
Warrants
Exercisable
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Number
|
|
Average
|
|
Weighted
|
|
Number
|
|
Weighted
|
|
|
Outstanding
at
|
|
Remaining
|
|
Average
|
|
Exercisable
at
|
|
Average
|
|
|
June
30,
|
|
Contractual
|
|
Exercise
|
|
June
30,
|
|
Exercise
|
|
|
2019
|
|
Life
(Years)
|
|
Price
|
|
2019
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
$0.03-0.10
|
|
413,493
|
|
28.6
|
|
$1.00
|
|
23,750
|
|
$1.00
|
No
preferred stock warrants were exercised for the six months ended
June 30, 2019 and 2018. At June 30, 2019, the total aggregate
intrinsic value of preferred stock warrants outstanding was
$9,923,832. The aggregate intrinsic value of preferred stock
warrants exercisable was $570,000. 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).
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 six months ended June 30, 2019 and 2018 are as
follows:
|
Three
months ended June 30,
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$202,361
|
$112,536
|
$315,417
|
$120,697
|
|
|
|
|
|
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
|
17,635,664
|
9,325,744
|
13,878,399
|
10,708,643
|
Weighted average
common shares used
|
|
|
|
|
to
calculate diluted net income per share
|
108,113,462
|
99,803,542
|
104,356,197
|
101,186,441
|
|
|
|
|
|
Net income per
share – basic
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
Net income per
share - diluted
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 six months ended June 30, 2019 and 2018 are shown
below:
|
Three months
ended June 30,
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
Stock options and
warrants to purchase
|
|
|
|
|
common
stock
|
-
|
4,000,000
|
-
|
4,000,000
|
Warrants to
purchase redeemable
|
|
|
|
|
convertible
preferred stock
|
2,604,063
|
1,354,113
|
2,604,063
|
1,354,113
|
Redeemable
convertible preferred stock
|
10,489,997
|
10,639,991
|
10,489,997
|
10,639,991
|
Total potential
common shares excluded
|
13,094,060
|
15,994,104
|
13,094,060
|
15,994,104
|
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, 2018 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, 2018 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, level
II, 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 new
proprietary Web delivery system. QMod was created for secure market
data provisioning as well as ease of integration and unlimited
customization. Additionally, QMod delivers search engine optimized
(SEO) ready responsive content designed to adapt on the fly when
rendered on mobile devices or standard Web pages –
automatically resizing and reformatting to fit the device on which
it is displayed.
Our
Data Feed Services consist of raw streaming real-time market data
delivered over the Internet or via dedicated telecommunication
lines, and supplemental fundamental, historical, and analytical
data, keyed to the same symbology, which provides a complete market
data solution offered to our customers. Currently,
QuoteMedia’s Data Feed services include complete coverage of
North American exchanges and over 70 exchanges worldwide. For
financial reporting purposes, Data Feed Services revenue is
included in the Interactive Content and Data Applications revenue
totals.
Our
Portfolio Management Systems consist of QuotestreamTM, Quotestream
Mobile, Quotestream Professional, and our Web Portfolio Management
systems. Quotestream Desktop is an Internet-based streaming online
portfolio management system that delivers real-time and delayed
market data to both consumer and corporate markets.
Quotestream has been designed for syndication and private branding
by brokerage, banking, and Web portal companies.
Quotestream’s enhanced features and functionality –
most notably tick-by-tick true streaming data, significantly
enhanced charting features, and a broad range of additional
research and analytical content and functionality – offer a
professional-level experience to nonprofessional
users.
Quotestream
Professional is specifically designed for use by financial services
professionals, offering exceptional coverage and functionality at
extremely aggressive pricing. Quotestream Professional features
broad market coverage, reliability, complete flexibility,
ultra-low-latency tick-by-tick data, as well as completely
customizable screens, advanced charting, comprehensive technical
analysis, news and research data.
Quotestream
Mobile is a true companion product to the Quotestream desktop
products (Quotestream and Quotestream Professional) – any
changes made to portfolios in either the desktop or mobile
application are automatically reflected in the other.
A key
feature of QuoteMedia’s business model is that all 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 six 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 six 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.
The
Canadian dollar depreciated 3.6% and 4.3% when comparing average
exchange rates for the three and six months ended June 30, 2019 and
2018. The exchange rate fluctuation decreased both Canadian dollar
revenues and expenses once translated into U.S. dollars for the
three and six months ended June 30, 2019 when compared to the same
periods in 2018 but had a minimal impact on our net
income.
Our
revenue grew 7% when comparing the three and six months ended June
30, 2019 to the comparative periods in 2018. Through June 30, 2019,
we have experienced 14 consecutive quarters of revenue growth. We
expect our positive revenue growth to continue for the remainder of
2019 and into 2020.
Plan of operation
For the
remainder of 2019 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 2019 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.
Results of Operations
Revenue
Three
months ended June 30,
|
|
|
|
|
|
|
|
|
|
Corporate
Quotestream
|
$915,335
|
$881,557
|
$33,778
|
4%
|
Individual
Quotestream
|
473,137
|
466,888
|
6,249
|
1%
|
Total portfolio
management systems
|
1,388,472
|
1,348,445
|
40,027
|
3%
|
|
|
|
|
|
Systems
|
|
|
|
|
Interactive content
and data applications
|
1,596,374
|
1,450,125
|
146,249
|
10%
|
|
|
|
|
|
Total licensing
revenue
|
$2,984,846
|
$2,798,570
|
$186,276
|
7%
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
Corporate
Quotestream
|
$1,920,044
|
$1,747,020
|
$173,024
|
10%
|
Individual
Quotestream
|
924,858
|
944,048
|
(19,190)
|
(2%)
|
Total portfolio
management systems
|
2,844,902
|
2,691,068
|
153,834
|
6%
|
|
|
|
|
|
Systems
|
|
|
|
|
Interactive content
and data applications
|
3,010,563
|
2,774,742
|
235,821
|
8%
|
|
|
|
|
|
Total licensing
revenue
|
$5,855,465
|
$5,465,810
|
$389,655
|
7%
|
Total
licensing revenue increased 7% when comparing the three and six
months ended June 30, 2019 and 2018.
Our
Portfolio Management System revenue increased by 3% and 6% when
comparing the three and six-month periods ended June 30, 2019 and
2018, due to increases in Corporate Quotestream
Revenue.
Corporate
Quotestream revenue increased 4% and 10% for the three and
six-month periods ended June 30, 2019 from the comparative periods
in 2018 due to new contracts signed since the comparative periods
and increases in the number of subscribers for existing
clients.
Individual
Quotestream revenue remained relatively unchanged from the
comparative 2018 periods, increasing 1% and decreasing 2% for the
three and six months ended June 30, 2019, respectively. Increases
in the number of Individual Quotestream subscribers were offset by
decreases in the average revenue per subscriber from the
comparative periods. This was mainly due to foreign exchange
fluctuations as 55% of our Individual Quotestream revenue is earned
in Canadian dollars and the Canadian dollar depreciated 3.6% and
4.3% when comparing average exchange rates for the three and six
months ended June 30, 2019 and 2018.
Interactive
Content and Data Application revenue increased 10% and 8% when
comparing the three and six-month periods ended June 30, 2019 and
2018, mainly due to an increase in the average revenue per client.
The increase in average revenue per client is attributable to the
launch of new products such as QMod, our new proprietary Web
delivery system, which has allowed us to attract larger
clients.
Cost of Revenue and Gross Profit Summary
Three
months ended June 30,
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
$1,463,090
|
$1,414,269
|
$48,821
|
3%
|
Gross
profit
|
$1,521,756
|
$1,384,301
|
$137,455
|
10%
|
Gross margin
%
|
51%
|
49%
|
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
$2,925,802
|
$2,785,724
|
$140,078
|
5%
|
Gross
profit
|
$2,929,663
|
$2,680,086
|
$249,577
|
9%
|
Gross margin
%
|
50%
|
49%
|
|
|
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.
Cost of
revenue increased 3% and 5% when comparing the three and six-month
periods ended June 30, 2019 and 2018. The increase in cost of
revenue was mainly due to new and increased fees levied by our
content providers. It is also due to an increase in the
amortization of capitalized internal-use software costs related to
the increase in capitalized development costs in 2019.
Overall,
the cost of revenue decreased as a percentage of sales, as
evidenced by our gross margin percentage which increased to 51% and
50% for the three and six months ended June 30, 2019 from 49% in
the comparative 2018 periods.
Operating Expenses Summary
Three months ended June 30,
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
$486,401
|
$487,930
|
$(1,529)
|
0%
|
General and
administrative
|
524,923
|
500,238
|
24,685
|
5%
|
Software
development
|
298,562
|
284,878
|
13,684
|
5%
|
Total operating
expenses
|
$1,309,886
|
$1,273,046
|
$36,840
|
3%
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
$930,000
|
$935,988
|
$(5,988)
|
(1%)
|
General and
administrative
|
1,046,059
|
1,038,593
|
7,466
|
1%
|
Software
development
|
612,190
|
588,658
|
23,532
|
4%
|
Total operating
expenses
|
$2,588,249
|
$2,563,239
|
$25,010
|
1%
|
Sales and Marketing
Sales
and marketing consists primarily of sales and customer service
salaries, investor relations, travel and advertising expenses.
Sales and marketing expenses remained relatively unchanged from the
comparative period, decreasing 0% and 1% when compared to the three
and six-month periods ended June 30, 2019 and 2018.
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 5% and 1% when comparing the three
and six-month periods ended June 30, 2019 and 2018.
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 5% and 4% for the three and
six-month periods ended June 30, 2019 when compared to the same
periods in 2018. The increase was mainly due to hiring additional
development personnel since the comparative period.
We
capitalized $348,528 and $660,240 of development costs for the
three and six month periods ended June 30, 2019, compared to
$233,893 and $430,781 for the same periods in 2018. 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 six years. The
increase in capitalized development costs from the comparative
period is due to new projects outsourced to a third-party software
development firm in 2019.
Other Income and (Expense) Summary
Three months
ended June 30,
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
$(7,256)
|
$4,383
|
Interest
expense
|
(1,506)
|
(2,328)
|
Total other income
and (expenses)
|
$(8,762)
|
$2,055
|
Six months ended June 30,
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
$(21,314)
|
$8,200
|
Interest
expense
|
(3,184)
|
(2,785)
|
Total other income
and (expenses)
|
$(24,498)
|
$5,415
|
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.
The
Canadian dollar appreciated 1.7% versus the U.S. dollar when
comparing the foreign exchange rate at June 30, 2019 to the rate at
March 31, 2019 resulting in a foreign exchange loss of $7,256 for
the three months ended June 30, 2019, compared to a foreign
exchange gain of $4,383 for the same period in 2018 when the
Canadian dollar depreciated 2.0% versus the U.S.
dollar.
The
Canadian dollar appreciated 3.8% versus the U.S. dollar when
comparing the foreign exchange rate at June 30, 2019 to the rate at
December 31, 2018 resulting in a foreign exchange loss of $21,314
for the six months ended June 30, 2018, compared to a foreign
exchange gain of $8,200 for the same period in 2018 when the
Canadian dollar depreciated 4.6% versus the U.S.
dollar.
Interest Expense
Interest
expense relates primarily to the interest expense associated with
our finance and operating leases. Interest expense of
$1,506 and $3,184 was incurred for the three and six months ended
June 30, 2019, compared to $2,328 and $2,785 incurred in the same
2018 periods. The increase in interest expense in 2019 is due
mainly to the interest associated with operating leases with the
adoption of ASU 2016-02, Leases effective January 1,
2019.
Provision for Income Taxes
For the
three and six month periods ended June 30, 2019, the Company
recorded Canadian income tax expense of $747 and $1,499 compared to
$774 and $1,565 in the comparative periods in 2018.
Net Income for the Period
As a
result of the foregoing, net income for the three and six months
ended June 30, 2019 was $202,361 and $315,417 compared to net
income of $112,536 and $120,697 for the three and six months ended
June 30, 2018. Basic and diluted earnings per share were $0.00 for
each of the three and six month periods ended June 30, 2019 and
2018, respectively.
Liquidity and Capital Resources
Our
cash totaled $1,015,468 at June 30, 2019, as compared with $810,332
at December 31, 2018, an increase of $205,136. Net cash of
$1,051,385 was provided by operations for the six months ended June
30, 2019, primarily due to the net income during the period
adjusted for non-cash charges and the increase in accounts payable,
offset by the increase in accounts receivable. Net cash used in
investing activities for the six months ended June 30, 2019 was
$797,949 resulting primarily from capitalized application software
costs and the purchase of new computer equipment. Cash used in
financing activities for the six months ended June 30, 2019 was
$48,300 related to the redemption of 1,400 shares of preferred
stock and the repayment of capital lease financing.
We have
a working capital deficit of $564,968 as of June 30, 2019, however
current liabilities include $776,564 in deferred revenue and the
expected costs necessary to realize the deferred revenue are
minimal.
Based
on the factors discussed above, we believe that our cash on hand
and cash generated from operations will be sufficient to fund our
current operations for a period of one year after issuance of these
Financial Statements. 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. Further, current adverse capital and credit
market conditions could limit our access to capital. We may be
unable to raise capital or bear an unattractive cost of capital
that could reduce our financial flexibility.
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 June 30, 2019 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 six months ended June 30, 2019, 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.
PART II - OTHER INFORMATION
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.
|
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.
By:
|
/s/
Keith J. Randall
|
|
|
Keith
J. Randall
|
|
|
Chief
Executive Officer and Chief Financial Officer
|
|
|
(Duly
authorized officer and principal financial officer)
|
|
Dated:
August 13, 2019