qmci_10q
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 March 31, 2021
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 ☑
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards pursuant to
Section 13(a) of the Exchange
Act. ☐
The
Registrant has 90,477,798 shares of common stock outstanding as at
May 3, 2021.
QUOTEMEDIA, INC.
FORM 10-Q for the Quarter Ended March 31, 2021
INDEX
PART
I-FINANCIAL INFORMATION
Item 1. Financial
Statements
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$815,499
|
$417,910
|
Accounts
receivable, net
|
493,160
|
698,334
|
Prepaid
expenses
|
205,616
|
108,477
|
Other
current assets
|
38,762
|
113,826
|
Total
current assets
|
1,553,037
|
1,338,547
|
|
|
|
Deposits
|
16,094
|
15,886
|
Property
and equipment, net
|
2,929,832
|
2,755,537
|
Goodwill
|
110,000
|
110,000
|
Intangible
assets
|
70,196
|
61,914
|
Operating
lease right-of-use assets
|
642,470
|
671,402
|
|
|
|
Total
assets
|
$5,321,629
|
$4,953,286
|
|
|
|
LIABILITIES,
REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable and accrued liabilities
|
$2,552,890
|
$2,026,741
|
Deferred
revenue
|
541,862
|
544,902
|
Current
portion of operating lease liabilities
|
151,379
|
164,843
|
Current
portion of finance lease liabilities
|
4,560
|
11,951
|
Total
current liabilities
|
3,250,691
|
2,748,437
|
|
|
|
Paycheck Protection
Program loan (Note 8)
|
-
|
133,257
|
Long-term portion
of operating lease liabilities
|
474,785
|
504,783
|
Long-term portion
of finance lease liabilities
|
1,426
|
2,108
|
|
|
|
Mezzanine
equity:
|
|
|
Series
A Redeemable Convertible Preferred stock, $0.001 par
value,
|
|
|
550,000
shares designated; Shares issued and outstanding:
|
|
|
123,685
at March 31, 2021 and December 31, 2020
|
2,983,857
|
2,983,857
|
|
|
|
Stockholders’
deficit:
|
|
|
Common
stock, $0.001 par value, 150,000,000 shares authorized, shares
issued and
|
|
|
outstanding:
90,477,798 at March 31, 2021 and December 31, 2020
|
90,479
|
90,479
|
Additional
paid-in capital
|
19,612,822
|
19,605,883
|
Accumulated
deficit
|
(21,092,431)
|
(21,115,518)
|
Total
stockholders’ deficit
|
(1,389,130)
|
(1,419,156)
|
|
|
|
Total
liabilities and stockholders’ deficit
|
$5,321,629
|
$4,953,286
|
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
|
Three months ended
March 31,
|
|
|
|
|
|
|
REVENUE
|
$3,606,218
|
$2,966,584
|
|
|
|
COST
OF REVENUE
|
2,063,640
|
1,499,484
|
|
|
|
GROSS
PROFIT
|
1,542,578
|
1,467,100
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
Sales and
marketing
|
638,864
|
517,480
|
General and
administrative
|
607,240
|
650,053
|
Software
development
|
407,288
|
425,827
|
|
1,653,392
|
1,593,360
|
|
|
|
OPERATING
LOSS
|
(110,814)
|
(126,260)
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
Foreign exchange
gain
|
2,448
|
11,206
|
Interest
expense
|
(1,008)
|
(1,527)
|
Other income (Note
8)
|
133,257
|
-
|
|
134,697
|
9,679
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
23,883
|
(116,581)
|
|
|
|
Income tax
expense
|
(796)
|
(744)
|
|
|
|
NET
INCOME (LOSS)
|
$23,087
|
$(117,325)
|
|
|
|
EARNINGS
(LOSS) PER SHARE
|
|
|
|
|
|
Basic earnings
(loss) per share
|
$0.00
|
$(0.00)
|
Diluted earnings
(loss) per share
|
$0.00
|
$(0.00)
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
Basic
|
90,477,798
|
90,477,798
|
Diluted
|
119,810,697
|
90,477,798
|
QUOTEMEDIA, INC.
CONDENSED STATEMENTS OF CHANGES IN SERIES A REDEEMABLE
CONVERTIBLE
PREFERRED STOCK AND
STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
Series A Redeemable
Convertible
Preferred
Stock
|
|
|
|
|
|
|
|
|
|
Additional Paid-in
Capital
|
|
Total
Stockholders’ Equity (Deficit)
|
Balance, December
31, 2020
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,605,883
|
$(21,115,518)
|
$(1,419,156)
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
6,939
|
|
6,939
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
23,087
|
23,087
|
|
|
|
|
|
|
|
|
Balance, March 31,
2021
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,612,822
|
$(21,092,431)
|
$(1,389,130)
|
|
Series A Redeemable
Convertible
Preferred
Stock
|
|
|
|
|
|
|
|
|
|
Additional Paid-in
Capital
|
|
Total
Stockholders’ Equity (Deficit)
|
Balance, December
31, 2019
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,568,011
|
$(20,469,194)
|
$(810,704)
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
11,991
|
|
11,991
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
(117,325)
|
(117,325)
|
|
|
|
|
|
|
|
|
Balance, March 31,
2020
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,580,002
|
$(20,586,519)
|
$(916,038)
|
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
|
Three months ended
March 31,
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
Net income
(loss)
|
$23,087
|
$(117,325)
|
|
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
Depreciation
and amortization
|
347,788
|
305,757
|
Stock-based
compensation expense
|
6,939
|
11,991
|
Gain
on forgiveness of PPP loan (Note 8)
|
(133,257)
|
-
|
Changes in assets
and liabilities:
|
|
|
Accounts
receivable
|
205,174
|
(19,899)
|
Prepaid
expenses
|
(97,139)
|
13,118
|
Other
current assets
|
75,064
|
(2,824)
|
Deposits
|
(208)
|
(106)
|
Accounts
payable, accrued and other liabilities
|
511,619
|
185,093
|
Deferred
revenue
|
(3,040)
|
7,670
|
Net cash provided
by operating activities
|
936,027
|
383,475
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
Purchase
of fixed assets
|
(31,059)
|
(33,292)
|
Purchase
of intangible assets
|
(9,999)
|
(17,128)
|
Capitalized
application software
|
(489,307)
|
(335,548)
|
Net cash used in
investing activities
|
(530,365)
|
(385,968)
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
Repayment
of finance lease obligations
|
(8,073)
|
(10,216)
|
Net cash used in
financing activities
|
(8,073)
|
(10,216)
|
|
|
|
Net increase
(decrease) in cash
|
397,589
|
(12,709)
|
|
|
|
Cash and
equivalents, beginning of period
|
417,910
|
815,487
|
|
|
|
Cash and
equivalents, end of period
|
$815,499
|
$802,778
|
|
|
|
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 March 31, 2021 through the
filing of this report.
As of
March 31, 2021, the Company has a working capital deficit of
$1,697,654. Our current liabilities include deferred revenue of
$541,862. 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, 2020 contained in our Form 10-K filed with the
Securities and Exchange Commission dated March 26,
2021.
Risks and Uncertainties
We are
continuing to closely monitor the impact of the COVID-19 pandemic
on all aspects of our business, including how it will impact team
members, customers, suppliers, and global markets. While our
licensed-based revenue is generally more recurring in nature, the
uncertainty caused by the COVID-19 pandemic has led some clients to
delay purchasing decisions, product and service implementations or
cancel or reduce spending with us. Given the dynamic nature of
these circumstances, it is too early to assess the full impact of
the COVID-19 pandemic on our ongoing business, results of
operations, and overall future financial performance.
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.
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
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 $175,000
as of March 31, 2021 and December 31, 2020. Bad debt expense was
$19,822 and $70,931 for the three months ended March 31, 2021 and
2020, respectively.
e) Accounting Pronouncements
Recently Adopted
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic
740): Simplifying the Accounting for Income Taxes, which is
intended to simplify various aspects related to accounting for
income taxes. The standard removes certain exceptions to the
general principles in Topic 740 and also clarifies and amends
existing guidance to improve consistent application. The new
standard will be effective for interim and annual periods beginning
after December 15, 2020, with early adoption permitted. We adopted
this Topic 740 on January 1, 2021. The adoption of the new tax
standard did not have a material effect on our consolidated
financial statements.
Not Yet Adopted
In June
2016, the FASB issued ASU 2016-13, Financial Instruments-Credit
Losses (Topic 326), which changes the impairment model for most
financial assets, including accounts receivable, and replaces the
existing incurred loss impairment model with an expected loss
methodology, which will result in more timely recognition of credit
losses. The guidance is effective for the Company for interim and
annual periods beginning after December 15, 2022. Early adoption is
permitted. The Company is currently assessing the timing and impact
of adopting ASU 2016-13 on the Company’s consolidated
financial statements.
Other
accounting standards that have been issued by the FASB or other
standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the
Company’s consolidated financial statements upon
adoption.
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
March 31,
|
|
|
|
Portfolio
Management Systems:
|
|
|
Corporate
Quotestream
|
$1,454,072
|
$976,917
|
Individual
Quotestream
|
562,787
|
438,634
|
Interactive Content
and Data Applications
|
1,589,359
|
1,551,033
|
Total
revenue
|
$3,606,218
|
$2,966,584
|
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, 2020
|
$544,902
|
Revenue recognized
in the current period from the amounts in the beginning
balance
|
(219,903)
|
New deferrals, net
of amounts recognized in the current period
|
217,232
|
Effects of foreign
currency translation
|
(369)
|
Balance at March
31, 2021
|
$541,862
|
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 March 31, 2021
and December 31, 2020, there were no amounts due to 410734 B.C.
Ltd.
The
Company entered into a marketing agreement with Bravenet Web
Services, Inc. (“Bravenet”) effective November 28, 2019
for approximately $2,500 per month. David M. Shworan is a control
person of Bravenet. At March 31, 2021 and December 31,2020, there
was $6,500 and $7,500, respectively, due to Bravenet related to
this agreement. 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 5 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.
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
Supplemental
balance sheet information related to leases was as
follows:
|
|
|
|
|
|
Operating
Leases
|
|
|
|
|
|
Operating lease
right-of-use assets
|
$642,470
|
$671,402
|
|
|
|
Current portion of
operating lease liability
|
$151,379
|
$164,843
|
Long-term portion
of operating lease liability
|
474,785
|
504,783
|
Total operating
lease liability
|
$626,164
|
$669,626
|
|
|
|
Finance
Leases
|
|
|
|
|
|
Computer equipment
on financing lease
|
$101,049
|
$101,049
|
Less: accumulated
depreciation
|
96,531
|
85,936
|
Property and
equipment, net
|
$4,518
|
$15,113
|
|
|
|
Current portion of
finance lease liability
|
4,560
|
11,951
|
Long-term portion
of finance lease liability
|
1,426
|
2,108
|
Total finance lease
liability
|
$5,986
|
$14,059
|
|
|
|
|
|
|
|
|
|
Weighted
Average Remaining Lease Term
|
|
|
Operating
leases
|
|
|
Finance
leases
|
|
|
Weighted
Average Discount Rate
|
|
|
Operating
leases
|
9.7%
|
9.7%
|
Finance
leases
|
8.2%
|
8.8%
|
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
Maturities
of lease liabilities were as follows:
Year
ending December 31,
|
|
|
|
|
|
2021 (excluding the
three months ended March 31, 2021)
|
$156,583
|
$4,073
|
2022
|
187,609
|
2,157
|
2023
|
173,279
|
-
|
2024
|
157,721
|
-
|
2025
|
84,310
|
-
|
Total lease
payments
|
759,502
|
6,230
|
Less imputed
interest
|
(133,338)
|
(244)
|
Total
|
$626,164
|
$5,986
|
The
components of lease expense for the three months ended March 31,
2021 and 2020 were as follows:
|
|
|
Operating
lease costs:
|
|
|
Operating lease
costs
|
$65,627
|
$56,956
|
Short-term lease
costs
|
22,403
|
25,499
|
Total operating
lease costs
|
$88,030
|
$82,455
|
|
|
|
Finance
lease costs:
|
|
|
Amortization
|
$10,595
|
$8,763
|
Interest
|
142
|
949
|
Total finance lease
cost
|
$10,737
|
$9,712
|
Supplemental
cash flow information for the three months ended March 31, 2021 and
2020 related to leases was as follows:
|
|
|
Cash paid for amounts included in the measurement of lease
liabilities:
|
|
|
Operating
cash flows from operating leases
|
$67,563
|
$54,774
|
Operating
cash flows from finance leases
|
142
|
949
|
There
were no additional right of use assets obtained in exchange for
lease obligations for the three months ended March 31, 2021 and
2020.
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
6.
REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’
DEFICIT
a) Redeemable Convertible Preferred Stock
We are
authorized to issue up to 10,000,000 non-designated preferred
shares at the Board of Directors’ discretion.
A total
of 550,000 shares of the Company’s Preferred Stock are
designated as “Series A Redeemable Convertible Preferred
Stock.” The Series A Redeemable Convertible Preferred Stock
has no dividend or voting rights.
At
March 31, 2021, 123,685 shares of Series A Redeemable Convertible
Preferred Stock were outstanding. No shares of Series A Redeemable
Convertible Preferred Stock were issued or redeemed during the
three months ended March 31, 2021 and 2020.
Redemption 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
addition, 1,000 Series A Redeemable Convertible Preferred Stock may
be redeemed at the holder’s option at the liquidation value
of $25 per share if the cash balance of the Company as reported at
the end of each fiscal quarter exceeds $400,000.
In
accordance with ASC 480-10-S99, because a limited number of Series
A Redeemable Convertible Preferred Stock may be redeemed at the
holder’s option if the above criteria are met, it was
classified as mezzanine equity and not permanent
equity.
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.
b) Common stock
No
shares of common stock were issued during the three months ended
March 31, 2021 and 2020.
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
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
stock-based compensation expense, related to all of the
Company’s stock-based awards, recognized for the three months
ended March 31, 2021 and 2020 was comprised as
follows:
|
Three months ended
March 31,
|
|
|
|
|
|
|
Sales and
marketing
|
$4,239
|
$9,291
|
General and
administrative
|
2,700
|
2,700
|
Total stock-based
compensation expense
|
$6,939
|
$11,991
|
Common Stock Options and Warrants
The
following table summarizes our common stock option and warrant
activity for the three months ended March 31, 2021:
|
Common Stock
Options
and
Warrants
|
Weighted-Average
Grant Date Exercise Price
|
|
|
|
Outstanding at
January 1, 2021
|
26,372,803
|
$0.06
|
Forfeited during
the period
|
(600,000)
|
$0.04
|
Outstanding at
March 31, 2021
|
25,772,803
|
$0.06
|
The
following table summarizes our non-vested common stock option and
warrant activity for the three months ended March 31,
2021:
|
Common Stock
Options
and
Warrants
|
Weighted-Average
Grant Date Exercise Price
|
|
|
|
Non-vested at
January 1, 2021
|
3,700,000
|
$0.08
|
Vested during the
period
|
(425,000)
|
$0.04
|
Non-vested at March
31, 2021
|
3,275,000
|
$0.09
|
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 March 31, 2021:
|
|
Common Stock
Options and Warrants Outstanding
|
|
Common
Stock Options and Warrants
Exercisable
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Remaining
|
|
Average
|
|
|
|
Average
|
|
|
Number
|
|
Contractual
|
|
Exercise
|
|
Number
|
|
Exercise
|
|
|
Outstanding
|
|
Life
(Years)
|
|
Price
|
|
Exercisable
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
$0.03-0.11
|
|
25,772,803
|
|
8.2
|
|
$0.06
|
|
22,497,803
|
|
$0.05
|
At
March 31, 2021, there was $20,817 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 1.6 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 March 31,
2021, the aggregate intrinsic value of options and warrants
outstanding was $4,075,659. The aggregate intrinsic value of
options and warrants exercisable was $3,661,634. 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
Pursuant
to the December 28, 2017 Compensation Agreement with David M.
Shworan, the President and Chief Executive Officer of QuoteMedia,
Ltd., a wholly owned subsidiary of Quotemedia, Inc., the Company
issued Mr. Shworan warrants to purchase shares of Series A
Redeemable Convertible Preferred Stock (“Compensation
Preferred Stock Warrants”) in lieu of a cash salary. From the
period December 28, 2017 to December 31, 2019 the Company issued a
total of 31,250 Compensation Preferred Stock Warrants at an
exercise price equal to $1.00 per share.
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 March 31, 2021. The
probability is re-evaluated each reporting period. As of March 31,
2021, 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.
As of
March 31, 2021, there were a total of 413,493 preferred stock
warrants outstanding with a weighted average remaining contractual
life of 26.8 years. As of March 31, 2021, 31,250 preferred stock
warrants were exercisable. No preferred stock warrants were
exercised for the three months ended March 31, 2021 and
2020.
QUOTEMEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 months ended March 31, 2021 and 2020 are as
follows:
|
Three months ended
March 31,
|
|
|
|
|
|
|
Net income
(loss)
|
$23,087
|
$(117,325)
|
|
|
|
Weighted average
common shares used to calculate net income per share
|
90,477,798
|
90,477,798
|
Warrants to
purchase redeemable convertible preferred stock
|
2,499,900
|
-
|
Redeemable
convertible preferred stock
|
10,306,671
|
-
|
Stock options and
warrants to purchase common stock
|
16,526,328
|
-
|
Weighted average
common shares used to calculate diluted net income per
share
|
119,810,697
|
90,477,798
|
|
|
|
Net income (loss)
per share – basic
|
$0.00
|
$(0.00)
|
Net income (loss)
per share – diluted
|
$0.00
|
$(0.00)
|
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
months ended March 31, 2021 and 2020 are shown below:
|
Three months ended
March 31,
|
|
|
|
|
|
|
Warrants to
purchase redeemable convertible preferred stock
|
-
|
2,499,900
|
Redeemable
convertible preferred stock
|
-
|
10,306,671
|
Stock options and
warrants to purchase common stock
|
-
|
14,751,112
|
Total potential
common shares excluded
|
-
|
27,557,683
|
8.
PAYCHECK
PROTECTION PROGRAM
On May
4, 2020, the Company received a $133,257 loan under the Paycheck
Protection Program (“PPP”). The PPP, established as
part of the Coronavirus Aid, Relief and Economic Security Act
(“CARES Act”), provides qualifying businesses with
these proceeds for amounts up to 2.5 times of the average monthly
payroll expenses of the qualifying business. The proceeds and
accrued interest are forgivable after twenty-four weeks, known as
the covered period, as long as the borrower uses the proceeds for
eligible purposes, including payroll, benefits, rent and utilities,
and maintains its payroll levels. The PPP loan was forgiven in its
entirety on February 19, 2021. In accordance with ASC 470,
Debt, the forgiveness of
the loan was recognized as other income on our consolidated
statements of operations.
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, 2020 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, 2020 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 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 experienced extreme volatility and
disruption over the past year due to COVID-19 pandemic. While
global financial markets are recovering, risk still exists
therefore we will continue to closely monitor the impact of the
COVID-19 pandemic on all aspects of our business, including how it
will impact team members, customers, suppliers, and global markets.
In Canada, our employees are subject to restrictions on their
physical movements therefore most of our workforce in Canada
continue to work remotely.
While
our licensed-based revenue is generally more recurring in nature,
the uncertainty caused by the COVID-19 pandemic has led some
clients to delay purchasing decisions, product and service
implementations or cancel or reduce spending with us. While the
impact of COVID-19 appears to be diminishing, we are focused on
maintaining a strong balance sheet and liquidity position and will
continue to closely monitor the potential impact of COVID-19 and
adjust our response going forward as circumstances
dictate.
On May
4, 2020, the Company received a $133,257 loan under the Paycheck
Protection Program (“PPP”). On February 19, 2021, the
Company received forgiveness from the SBA for its PPP loan in its
entirety. The Company recognized the forgiveness of the loan as
other income on our consolidated statements of operations. See
Financial Statement Note 8 – Paycheck Protection
Program.
Our
revenue grew 22% when comparing the quarter ended March 31, 2021 to
the comparative 2020 period. Based on clients currently under
contract, we expect to maintain similar revenue growth for the
remainder of 2021.
Plan of Operation
For the
remainder of 2021 we plan to continue to expand our product lines
and improve our infrastructure. We plan to continue to add more
features and data to our existing products and release newer
versions with improved performance and flexibility for client
integration.
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 the remainder of 2021 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.
We are
also creating new proprietary data sets, analytics, and scoring
mechanisms. We are now aggregating data direct from the sources to
produce data sets that are proprietary to QuoteMedia. This allows
us to offer our clients new data products and lower our product
costs structure as we replace some of our existing data providers
with our own lower cost data.
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.
Critical Accounting Policies and Estimates
In the
2020 Annual Report, we disclose our critical accounting policies
and estimates upon which our financial statements are derived.
There have been no material changes to these policies since
December 31,2020 that are not included in Note 3 of the
accompanying consolidated financial statements for the three months
ended March 31, 2021. Readers are encouraged to read the 2020
Annual Report in conjunction
Results of Operations
Revenue
Three
months ended March 31,
|
|
|
|
|
|
|
|
|
|
Corporate
Quotestream
|
$1,454,072
|
$976,917
|
$477,155
|
49%
|
Individual
Quotestream
|
562,787
|
438,634
|
124,153
|
28%
|
Total portfolio
management systems
|
2,016,859
|
1,415,551
|
601,308
|
42%
|
|
|
|
|
|
Interactive content
and data applications
|
1,589,359
|
1,551,033
|
38,326
|
2%
|
|
|
|
|
|
Total subscription
revenue
|
$3,606,218
|
$2,966,584
|
$639,634
|
22%
|
Total
subscription revenue increased 22% when comparing the three months
ended March 31, 2021 and 2020.
Our
total Portfolio Management System revenue increased by 42% when
comparing the three months ended March 31, 2021 and 2020, due to
increases in both Corporate Quotestream and Individual Quotestream
revenue.
Corporate
Quotestream revenue increased 49% for the three months ended March
31, 2021 from the comparative period in 2020 primarily due to new
contracts signed since the comparative period and an increase in
the number of subscribers for existing clients. The increase is
attributable in part to improvements and upgrades made to our
Portfolio Management products as the additional data offerings and
improved functionality have contributed to the increase in our
average revenue per customer. We have also been able to take
advantage of new opportunities arising from the economic downturn
related to COVID-19 as financial sector firms are looking for more
efficient and cost-effective solutions to their data and technology
needs. We also believe there has been an increase in the need for
our services for customers working remotely during the pandemic, a
trend we expect to continue for the foreseeable
future.
Individual
Quotestream revenue increased 28% for the three months ended March
31, 2021 from the comparative period in 2020. There was an increase
in total users, which can be attributed to new marketing efforts
initiated since the comparative period and more customers working
remotely due to COVID-19.
Interactive
Content and Data Application revenue increased 2% when comparing
the three-months ended March 31, 2021 and 2020, mainly attributable
to an increase in the average revenue per client. The launch of new
products and the expansion of our data coverage have allowed us to
attract new, larger clients to replace some of our smaller clients
lost due to the economic hardship related to COVID-19.
Cost of Revenue and Gross Profit Summary
Three
months ended March 31,
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
$2,063,640
|
$1,499,484
|
$564,156
|
38%
|
Gross
profit
|
$1,542,578
|
$1,467,100
|
$75,478
|
5%
|
Gross margin
%
|
43%
|
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.
We
launched a major growth initiative in early 2020, investing in
infrastructure, new product development, data collection, and the
expansion of our global market coverage. As a result, our cost of
revenue increased 38% for the three months ended March 31, 2021
from the comparative period in 2020. We incurred increased stock
exchange fees related to increased usage and new market data added
since the comparative period, and increased amortization expense
associated with internally developed application
software.
Overall,
the cost of revenue increased as a percentage of sales, as
evidenced by our gross margin percentage that decreased to 43% for
the three months ended March 31, 2021 from 49% in the comparative
period. Our gross margins have also been impacted by our revenue
mix, as our Portfolio Management System revenue has been growing at
a higher rate than our Interactive Content revenue which typically
has higher gross margins.
Operating Expenses Summary
Three
months ended March 31,
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
$638,864
|
$517,480
|
$121,384
|
23%
|
General and
administrative
|
607,240
|
650,053
|
(42,813)
|
(7%)
|
Software
development
|
407,288
|
425,827
|
(18,539)
|
(4%)
|
Total operating
expenses
|
$1,653,392
|
$1,593,360
|
$60,032
|
4%
|
Sales and Marketing
Sales
and marketing consist primarily of sales and customer service
salaries, investor relations, travel and advertising expenses.
Sales and marketing expenses increased by 23% when comparing the
three months ended March 31, 2021 and 2020. The increase is a
result of additional sales personnel hired to support our growth
initiative.
General and Administrative
General
and administrative expenses consist primarily of salaries expense,
office rent, insurance premiums, and professional fees. General and
administrative expenses decreased 7% when comparing the three
months ended March 31, 2021 and 2020. The decrease is primarily
driven by a decrease in bad debts from the comparative period. Bad
debts in the comparative period were abnormally high due to the
impact of COVID-19.
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 decreased 4% for the three months ended March
31, 2021 when compared to the same period in 2020, primarily due to
a higher capitalization rate. We capitalized $489,306 of
development costs for the three months ended March 31, 2021
compared to $335,549 in the same period in 2020. 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.
Other Income and (Expense) Summary
Three
months ended March 31,
|
|
|
|
|
|
Foreign exchange
gain (loss)
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$2,448
|
$11,206
|
Interest
expense
|
(1,008)
|
(1,527)
|
Other
income
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133,257
|
-
|
Total other income
and (expenses), net
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$134,697
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$9,679
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Foreign Exchange Gain (Loss)
We
incurred foreign exchange gains of $2,448 and $11,206 for the three
months ended March 31, 2021 and 2020, respectively. Foreign
exchange gains and losses arise from the re-measurement of Canadian
dollar monetary assets and liabilities into U.S. dollars and from
exchange rate fluctuations between transaction and settlement dates
for foreign currency denominated transactions.
Interest Expense
Interest
expense relates primarily to the interest expense associated with
our finance leases and was relatively unchanged from the
comparative period. Interest expense of $1,008 was incurred for the
three months ended March 31, 2021, compared to $1,527 incurred in
the same 2020 period.
Other Income
Other
income was $133,257 for the three months ended March 31, 2021. On
May 4, 2020, the Company received a $133,257 loan under the
Paycheck Protection Program (“PPP”). The PPP loan was
forgiven in its entirety on February 19, 2021 and was recognized as
other income. No other income was recognized in the comparative
2020 period. See
Financial Statement Note 8 “Paycheck Protection
Program”.
Provision for Income Taxes
For the
three months ended March 31, 2021, the Company recorded Canadian
income tax expense of $796 compared to $744 in the comparative
period in 2020.
Net Income (Loss) for the Period
As a
result of the foregoing, our net income for the three months ended
March 31, 2021 was $23,087 compared to net loss of $117,325 for the
three months ended March 31, 2020. Basic and diluted earnings per
share were $0.00 for the three months ended March 31, 2021, and
$(0.00) for the three months ended March 31, 2020.
Liquidity and Capital Resources
Our
cash totaled $815,499 at March 31, 2021, as compared with $417,910
at December 31, 2020, an increase of $397,589. Net cash of $936,027
was provided by operations for the three months ended March 31,
2021, primarily due to the net income during the period adjusted
for non-cash charges and the increase in accounts payable. Net cash
used in investing activities for the three months ended March 31,
2021 was $530,365 resulting primarily from capitalized application
software costs. Cash used in financing activities for the three
months ended March 31, 2021 was $8,073 related to the repayment of
capital lease financing.
We
typically operate with a working capital deficit. As of March 31,
2021 our working capital deficit is $1,697,654, however current
liabilities include $541,862 in deferred revenue and the expected
costs necessary to realize the deferred revenue are minimal. If
circumstances dictate, we have the flexibility to reduce
development spending to maintain a strong liquidity
position.
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 at least the next 12 months through May
2022. 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.
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.
Preferred Stock Redemption Rights
At
March 31, 2021, 123,685 shares of Series A Redeemable Convertible
Preferred Stock were outstanding and 1,000 shares may be redeemed
at the holder’s option at the liquidation value of $25 per
share if the cash balance of the Company as reported at the end of
each fiscal quarter exceeds $400,000. See Financial Statement Note
6 a) “Preferred
shares”.
Foreign Exchange Risk
Approximately
28% of our consolidated revenue and 35% percent of our consolidated
expenses are denominated in Canadian dollars; therefore, our
consolidated cashflow may be impacted by foreign exchange
fluctuations.
Off-Balance Sheet Arrangements
At
March 31, 2021 and December 31, 2020, we did not have any
unconsolidated entities or financial partnerships, or other
off-balance sheet arrangements.
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 March 31, 2021 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 March 31, 2021, 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
ExhibitNumber
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Description of Exhibit
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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.
|
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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.
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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:
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/s/
Keith J. Randall
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Keith
J. Randall
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|
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Chief
Executive Officer and Chief Financial Officer
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(Duly
authorized officer and principal financial officer)
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Dated:
May 13, 2021