10-Q 1 qmci_10q.htm FORM 10-Q qmci_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark one)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

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)

 

(602) 830-1443

(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

£

Smaller reporting company

(Do not check if a 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 of November 3, 2023.

 

 

 

 

QUOTEMEDIA, INC.

 

FORM 10-Q for the Quarter Ended September 30, 2023

 

INDEX

 

 

 

Page

Part I.

Financial Information

 

 

 

 

Item 1.

Consolidated financial statements (unaudited):

3

 

 

 

 

Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine-months ended September 30, 2023 and 2022

4

 

 

 

 

Condensed Consolidated Statements of Changes in Series A Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the three and nine-months ended September 30, 2023 and 2022

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine-months ended September 30, 2023 and 2022

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

 

Item 4.

Controls and Procedures

21

 

 

 

Part II.

Other Information

 

 

 

 

Item 6.

Exhibits

22

 

 

 

Signatures

 

23

 

 
2

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1.   Financial Statements

 

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

September 30,

2023

 

 

December 31,

2022

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

    Cash and cash equivalents

 

$820,939

 

 

$477,987

 

    Accounts receivable, net

 

 

1,028,148

 

 

 

910,277

 

    Prepaid expenses

 

 

161,258

 

 

 

231,694

 

    Other current assets

 

 

86,707

 

 

 

29,092

 

        Total current assets

 

 

2,097,052

 

 

 

1,649,050

 

 

 

 

 

 

 

 

 

 

    Deposits

 

 

20,181

 

 

 

15,002

 

    Property and equipment, net

 

 

4,728,954

 

 

 

4,208,250

 

    Goodwill

 

 

110,000

 

 

 

110,000

 

    Intangible assets

 

 

67,620

 

 

 

73,572

 

    Operating lease right-of-use assets (see note 6)

 

 

442,384

 

 

 

506,219

 

 

 

 

 

 

 

 

 

 

        Total assets

 

$7,466,191

 

 

$6,562,093

 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

    Accounts payable and accrued liabilities

 

$2,201,664

 

 

$2,512,837

 

    Current portion of deferred revenue (see note 4)

 

 

1,676,949

 

 

 

1,166,848

 

    Current portion of operating lease liabilities (see note 6)

 

 

198,239

 

 

 

174,166

 

        Total current liabilities

 

 

4,076,852

 

 

 

3,853,851

 

 

 

 

 

 

 

 

 

 

Long-term portion of deferred revenue (see note 4)

 

 

372,715

 

 

 

-

 

Long-term portion of operating lease liabilities (see note 6)

 

 

239,080

 

 

 

323,685

 

Preferred stock warrant liability (see note 7)

 

 

710,000

 

 

 

629,375

 

 

 

 

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

 

 

    Preferred stock, 10,000,000 shares authorized:

 

 

 

 

 

 

 

 

    Series A Redeemable Convertible Preferred stock, $0.001 par value,

 

 

 

 

 

 

 

 

    550,000 shares designated; shares issued and outstanding:

 

 

 

 

 

 

 

 

    123,685 at September 30, 2023 and December 31, 2022 (see note 7)

 

 

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 September 30, 2023 and December 31, 2022

 

 

90,479

 

 

 

90,479

 

    Additional paid-in capital

 

 

18,903,272

 

 

 

18,903,272

 

    Accumulated deficit

 

 

(19,910,064)

 

 

(20,222,426)

        Total stockholders’ deficit

 

 

(916,313)

 

 

(1,228,675)

 

 

 

 

 

 

 

 

 

        Total liabilities, mezzanine equity and stockholders’ deficit

 

$7,466,191

 

 

$6,562,093

 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 
3

Table of Contents

 

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three-months ended September 30,

 

 

Nine-months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE (see note 4)

 

$4,762,442

 

 

$4,390,667

 

 

$14,225,467

 

 

$12,953,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

2,296,736

 

 

 

2,096,773

 

 

 

6,941,469

 

 

 

6,599,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

2,465,706

 

 

 

2,293,894

 

 

 

7,283,998

 

 

 

6,354,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

711,861

 

 

 

784,094

 

 

 

2,365,626

 

 

 

2,276,526

 

General and administrative

 

 

924,249

 

 

 

757,318

 

 

 

2,546,950

 

 

 

2,213,189

 

Software development

 

 

725,449

 

 

 

544,525

 

 

 

2,039,537

 

 

 

1,549,454

 

 

 

 

2,361,559

 

 

 

2,085,937

 

 

 

6,952,113

 

 

 

6,039,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

 

104,147

 

 

 

207,957

 

 

 

331,885

 

 

 

314,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain (loss)

 

 

21,803

 

 

 

102,327

 

 

 

(16,271)

 

 

(15,309)

Interest income (expense), net

 

 

825

 

 

 

10

 

 

 

(1,031)

 

 

(1,721)

 

 

 

22,628

 

 

 

102,337

 

 

 

(17,302)

 

 

(17,030)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME BEFORE INCOME TAXES

 

 

126,775

 

 

 

310,294

 

 

 

314,583

 

 

 

297,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

739

 

 

 

751

 

 

 

2,221

 

 

 

2,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$126,036

 

 

$309,543

 

 

$312,362

 

 

$295,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE (see note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 (see note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

90,477,798

 

 

 

90,477,798

 

 

 

90,477,798

 

 

 

90,477,798

 

Diluted

 

 

121,479,248

 

 

 

119,432,085

 

 

 

121,103,306

 

 

 

119,517,746

 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 
4

Table of Contents

 

QUOTEMEDIA, INC.

CONDENSED STATEMENTS OF CHANGES IN SERIES A REDEEMABLE CONVERTIBLE

PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 (UNAUDITED)

 

 

 

Series A Redeemable Convertible

 Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

Total

 

Three-months ended September 30, 2023:

 

Number of Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Accumulated Deficit

 

 

Stockholders’ Deficit

 

Balance, June 30, 2023

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,903,272

 

 

$

(20,036,100)

 

$(1,042,349)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

126,036

 

 

 

126,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,903,272

 

 

$(19,910,064)

 

$(916,313)

 

 

 

Series A Redeemable Convertible

 Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

Three-months ended September 30, 2022:

 

Number of Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Accumulated Deficit

 

 

Stockholders’ Deficit

 

Balance, June 30, 2022

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,896,237

 

 

$(20,680,935)

 

$(1,694,219)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,239

 

 

 

-

 

 

 

4,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

309,543

 

 

 

309,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2022

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,900,476

 

 

$(20,371,392)

 

$(1,380,437)

 

 

 

Series A Redeemable Convertible

 Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

Total

 

Nine-months ended September 30, 2023:

 

Number of Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Accumulated Deficit

 

 

Stockholders’ Deficit

 

Balance, December 31, 2022

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,903,272

 

 

$(20,222,426)

 

$(1,228,675)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

312,362

 

 

 

312,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,903,272

 

 

$(19,910,064)

 

$(916,313)

 

 

 

Series A Redeemable Convertible

 Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

Nine-months ended September 30, 2022:

 

Number of Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Accumulated Deficit

 

 

Stockholders’ Deficit

 

Balance, December 31, 2021

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,887,759

 

 

$(20,666,896)

 

$(1,688,658)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,717

 

 

 

-

 

 

 

12,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

295,504

 

 

 

295,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2022

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$18,900,476

 

 

$(20,371,392)

 

$(1,380,437)

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 
5

Table of Contents

 

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine-months ended September 30,

 

 

 

2023

 

 

2022

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$312,362

 

 

$295,504

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

    Depreciation and amortization

 

 

1,944,271

 

 

 

1,544,810

 

    Stock-based compensation expense – common stock warrants

 

 

-

 

 

 

(720)

    Stock-based compensation expense – preferred stock warrants

 

 

80,625

 

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

    Accounts receivable

 

 

(300,133)

 

 

(99,542)

    Prepaid expenses

 

 

(52,764)

 

 

76,570

 

    Other current assets

 

 

(57,615)

 

 

27,316

 

    Deposits

 

 

(5,179)

 

 

(40,528)

    Accounts payable, accrued and other liabilities

 

 

(184,670)

 

 

(77,132)

    Deferred revenue

 

 

1,065,078

 

 

 

465,612

 

Net cash provided by operating activities

 

 

2,801,975

 

 

 

2,191,890

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Purchase of fixed assets

 

 

(71,249)

 

 

(105,629)

    Purchase of intangible assets

 

 

-

 

 

 

(16,313)

    Capitalized application software

 

 

(2,387,774)

 

 

(2,022,885)

Net cash used in investing activities

 

 

(2,459,023)

 

 

(2,144,827)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Repayment of finance lease obligations

 

 

-

 

 

 

(2,094)

Net cash used in financing activities

 

 

-

 

 

 

(2,094)

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

342,952

 

 

 

44,969

 

 

 

 

 

 

 

 

 

 

Cash and equivalents, beginning of period

 

 

477,987

 

 

 

258,705

 

 

 

 

 

 

 

 

 

 

Cash and equivalents, end of period

 

$820,939

 

 

$303,674

 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 
6

Table of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles for interim financial statements and instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for a full year. In connection with the preparation of the condensed consolidated financial statements, management evaluated subsequent events after the balance sheet date of September 30, 2023 through the filing of this report.

 

These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2022 contained in the Form 10-K filed with the Securities and Exchange Commission dated March 31, 2023.

 

Risks and Uncertainties

 

Adverse macroeconomic conditions, including inflation, slower growth or recession, and higher interest rates could materially adversely affect demand for the Company’s services.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

a) Nature of operations

 

QuoteMedia, Inc. (the “Company”) is a software developer and distributor of financial market data and related services to a global marketplace. The Company specializes in the collection, aggregation, and delivery of both delayed and real-time financial data content via the Internet. The Company develops 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

 

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

 

d) Allowances for doubtful accounts

 

The Company maintains 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 the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.

 

On January 1, 2023, the Company adopted Accounting Standards Update (“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 adoption of ASU 2016-13 had no impact on the Company’s consolidated financial statements.

 

The allowance for doubtful accounts was $275,000 and $200,000 as of September 30, 2023 and December 31, 2022, respectively. Bad debt expenses were $155,980 and $19,745 for the three-months ended September 30, 2023 and 2022, respectively. Bad debt expenses were $117,739 and $55,936 for the nine-months ended September 30, 2023 and 2022, respectively.

 

 
7

Table of Contents

 

QUOTEMEDIA, INC.

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

e) Revenue

 

The Company generates substantially all of its revenue from subscriptions for access to its software products and related support.  The Company licenses financial market data information on a monthly, quarterly, or annual basis. The Company’s products and services are divided into two main categories:

 

Interactive Content and Data Applications

 

 

·

Proprietary financial software applications and streaming market data feeds

 

·

Subscriptions are typically sold for a fixed fee and revenue is recognized ratably over the term of the subscription.

 

Portfolio Management and Real-Time Quote Systems

 

 

1.

Corporate Quotestream (Business-to-Business)

 

o

Web-delivered, embedded applications providing real-time, streaming market quotes and research information targeted to both professionals and non-professional users.

 

o

Revenue is typically earned based on customer usage.

 

2.

Individual Quotestream (Business-to-Consumer)

 

o

Web-delivered, embedded applications providing real-time, streaming market quotes and research information targeted to non-professional users.

 

o

Subscriptions are typically sold for a fixed fee and revenue is recognized ratably over the term of the subscription.

 

The Company does not provide its customers with the right to take possession of its software products at any time.

 

The Company determines revenue recognition through the following steps:

 

 

·

Identification of the contract, or contracts, with a customer

 

 

 

 

·

Identification of the performance obligations in the contract

 

 

 

 

·

Determination of the transaction price

 

 

 

 

·

Allocation of the transaction price to the performance obligations in the contract

 

 

 

 

·

Recognition of revenue when, or as, the Company satisfies a performance obligation

 

The Company executes a signed contract with the customer that specifies services to be provided, the payment amounts and terms, and the period of service, among other terms.

 

Contract Balances

 

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Upfront set-up or development fees are deferred and recognized over the service term of the contract, as set-up and development fees are not distinct from the market data service contracts to which they relate.

 

The Company considers the following factors when determining if collection of a fee is reasonably assured: customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms.

 

Cost of revenue

 

Cost of revenue primarily consists of customer support personnel-related compensation expenses, including salaries, bonuses, benefits, payroll taxes, and stock-based compensation expense, as well as expenses related to third-party hosting costs, software license fees, amortization of capitalized software development costs, amortization of acquired technology, intangible assets, and allocated overhead.

 

f) Accounting Pronouncements

 

Not Yet Adopted

 

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying U.S. Generally Accepted Accounting Principles (“GAAP”) for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity's own equity. The new standard is effective for the Company for fiscal years beginning after December 15, 2023. The Company does not expect that the adoption of ASU 2020-06 will have a significant impact on the Company’s consolidated financial statements.

 

 
8

Table of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

 

3. PRIOR PERIOD RESTATEMENTS

 

Subsequent to the filing of its Quarterly Report for the quarterly period ended March 31, 2022, the Company reassessed its classification of warrants to purchase shares of Series A Redeemable Convertible Preferred Stock (“Compensation Preferred Stock Warrants” – see Financial Statement Note 9 “Redeemable Convertible Preferred Stock and Stockholders’ Deficit”).  The Company concluded that its original classification of the Preferred Stock Warrants as equity was incorrect and that the Preferred Stock Warrants should have been classified as a liability in accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities From Equity, resulting in the following revisions in the Company’s comparative consolidated financial statements:

 

Statement of Changes in Series A Redeemable Convertible Preferred Stock and Stockholders’ Deficit as of December 31, 2021:

 

 

·

Additional Paid-in Capital was reduced by $750,000.

 

·

Accumulated Deficit was reduced by $236,250.

 

4. REVENUE

 

Disaggregated Revenue

 

The Company provides market data, financial web content solutions and cloud-based applications. Revenue by type of service consists of the following:

 

 

 

Three-months ended September 30,

 

 

Nine-months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Portfolio Management Systems

 

 

 

 

 

 

 

 

 

 

 

 

   Corporate Quotestream

 

$1,782,581

 

 

$1,708,627

 

 

$5,486,732

 

 

$5,146,298

 

   Individual Quotestream

 

 

458,428

 

 

 

512,142

 

 

 

1,420,138

 

 

 

1,606,133

 

Interactive Content and Data APIs

 

 

2,521,433

 

 

 

2,169,898

 

 

 

7,318,597

 

 

 

6,200,989

 

Total revenue

 

$4,762,442

 

 

$4,390,667

 

 

$14,225,467

 

 

$12,953,420

 

 

Deferred Revenue

 

Changes in deferred revenue for the nine-months ended September 30, 2023 and 2022 were as follows:

 

 

 

September 30, 2023

 

 

September 30, 2022

 

Deferred revenue at beginning of period

 

$1,166,848

 

 

$622,497

 

Revenue recognized in the current period from the amounts in the beginning balance

 

 

(995,364)

 

 

(522,431)

New deferrals, net of amounts recognized in the current period

 

 

1,873,614

 

 

 

988,102

 

Effects of foreign currency translation

 

 

4,566

 

 

 

(59)

Deferred revenue at end of period

 

$2,049,664

 

 

$1,088,109

 

 

 

 

 

 

 

 

 

 

Current portion of deferred revenue

 

$1,676,949

 

 

$1,088,109

 

Long-term portion of deferred revenue

 

 

372,715

 

 

 

-

 

Total deferred revenue

 

$2,049,664

 

 

$1,088,109

 

 

Practical Expedients 

 

The Company applies a practical expedient and does not disclose the value of the remaining performance obligations for contracts that are less than one year in duration, which represent a substantial majority of its revenue.

 

 
9

Table of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

5. RELATED PARTIES

 

The Company entered into a five-year office lease with 410734 B.C. Ltd. effective May 1, 2021 for approximately $6,500 per month.  David M. Shworan, President & CEO of QuoteMedia Ltd., is a control person of 410734 B.C. Ltd. At September 30, 2023, there were no amounts due to 410734 B.C. Ltd.  At December 31, 2022, there was $13,343 due to 410734 B.C. Ltd.

 

The Company entered into a marketing agreement with Bravenet Web Services, Inc. (“Bravenet”) effective November 28, 2019. The Company agreed to pay Bravenet an upfront setup fee of $7,000 upon signing the agreement and a monthly service fee of $2,500 starting February 2020. At September 30, 2023 and December 31, 2022, there was $7,000 and $12,500 due to Bravenet related to this agreement, respectively. David M. Shworan is a control person of Bravenet. At September 30, 2023 and December 31, 2022, there were $48,628 and $70,100 in unreimbursed expenses owed to Keith Randall, CEO of QuoteMedia, Inc., respectively.  As a matter of policy all significant related party transactions are subject to review and approval by the Company’s Board of Directors.

 

6. LEASES

 

The Company has operating leases for corporate offices and finance leases for certain equipment. The leases have remaining lease terms of 1 year to 5 years. Management determines 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 the consolidated balance sheets. Finance lease assets and liabilities are included in property and equipment and finance lease liabilities, respectively, on the 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 the leases do not provide an implicit rate, an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments is used. Management 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, management factors in options to extend or terminate leases when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases the Company accounts for the lease and non-lease components as a single lease component.

 

Supplemental balance sheet information related to leases was as follows:

 

 

 

September 30,

2023

 

 

December 31,

2022

 

Operating Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$442,384

 

 

$506,219

 

 

 

 

 

 

 

 

 

 

Current portion of operating lease liability

 

$198,239

 

 

$174,166

 

 

 

 

239,080

 

 

 

323,685

 

Total operating lease liability

 

$437,319

 

 

$497,851

 

 

 

 

September 30,

2023

 

 

December 31,

2022

 

 

 

 

 

 

Weighted Average Remaining Lease Term

 

 

 

 

    Operating leases

 

2.2 years

 

 

2.7 years

 

Weighted Average Discount Rate

 

 

 

 

 

 

    Operating leases

 

 

9.5%

 

9.9%

 

 

Maturities of lease liabilities were as follows:

 

 

 

Operating

Leases

 

 

 

 

 

2023 (excluding the nine-months ended September 30, 2023)

 

$57,437

 

2024

 

 

230,067

 

2025

 

 

164,285

 

2026 and thereafter

 

 

34,006

 

Total lease payments

 

 

485,795

 

Less imputed interest

 

 

(48,476)

Total

 

$437,319

 

 

 
10

Table of Contents

 

QUOTEMEDIA, INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The components of lease expense for the three and nine-months ended September 30, 2023 and 2022 were as follows:

 

 

 

Three-months ended September 30,

 

 

Nine-months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating lease costs:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease costs

 

$58,504

 

 

$57,543

 

 

$176,096

 

 

$179,152

 

Short-term lease costs

 

 

27,111

 

 

 

22,387

 

 

 

81,091

 

 

 

67,189

 

Total operating lease costs

 

$85,615

 

 

$79,930

 

 

$257,187

 

 

$246,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$-

 

 

$7

 

 

$-

 

 

$64

 

Total finance lease costs

 

$-

 

 

$7

 

 

$-

 

 

$64

 

 

Supplemental cash flow information for the nine-months ended September 30, 2023 and 2022 related to leases was as follows:

 

 

 

2023

 

 

2022

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows used in operating leases

 

$172,454

 

 

$173,682

 

Operating cash flows used in finance leases

 

 

-

 

 

 

64

 

Financing cash flows used in finance leases

 

 

-

 

 

 

2,094

 

 

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

    Operating leases

 

 

78,304

 

 

 

-

 

 

7. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 

a) Redeemable Convertible Preferred Stock

 

The Company is 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 September 30, 2023, 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 and nine-months ended September 30, 2023 and 2022.

 

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 Accounting Standards Update (“ASU”) 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.

 

 
11

Table of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

b) Common stock

 

No shares of common stock were issued during the three and nine-months ended September 30, 2023 and 2022.

 

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 and nine-months ended September 30, 2023 and 2022 was comprised as follows:

 

 

 

Three-months ended September 30,

 

 

Nine-months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$(57,188)

 

$(82,888)

 

$80,625

 

 

$(720)

Total stock-based compensation expense

 

$(57,188)

 

$(82,888)

 

$80,625

 

 

$(720)

 

Common Stock Options and Warrants

 

There were 25,772,803 fully vested common stock warrants and options outstanding at September 30, 2023 and December 31, 2022 at a weighted-average grant date exercise price of $0.06. No stock options or warrants to purchase common stock were granted or exercised during the three and nine-months ended September 30, 2023 and 2022. 

 

The following table summarizes the weighted average remaining contractual life and exercise price of common stock options and warrants outstanding and exercisable at September 30, 2023:

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

Weighted

 

 

 

 

 

Remaining

 

 

Average

 

 

 

Number

 

 

Contractual

 

 

Exercise

 

 

 

Outstanding

 

 

Life (Years)

 

 

Price

 

 

 

 

 

 

 

 

 

 

 

$0.03-0.11

 

 

25,772,803

 

 

 

5.81

 

 

$0.06

 

 

At September 30, 2023, there was no unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock.

 

All stock options and warrants to purchase common stock have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant. At September 30, 2023, the aggregate intrinsic value of options and warrants outstanding and exercisable was $5,725,118. The intrinsic value of stock options and warrants are calculated as the amount by which the market price of the Company’s 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 September 30, 2023. The probability is re-evaluated each reporting period. As of September 30, 2023, there was $7,185,430 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, management is also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized.

 

 
12

Table of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

As of September 30, 2023, there were a total of 413,493 preferred stock warrants outstanding with a weighted average remaining contractual life of 24.3 years. As of September 30, 2023, 31,250 preferred stock warrants were exercisable. No preferred stock warrants were granted or exercised for the three and nine-months ended September 30, 2023 and 2022.

 

Fair Value Measurement of Compensation Preferred Stock Warrants

 

The Company adheres to ASC 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

 

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

 

 

·

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company could access.

 

 

 

 

·

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.

 

 

 

 

·

Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

The estimated fair value of the Preferred Stock Warrant liability is determined using Level 3 inputs. As of September 30, 2023 and December 31, 2022, the fair value of the Preferred Stock Warrant Liability was $710,000 and $629,375, respectively. The Preferred Stock Warrants were valued using a bond plus option framework reflecting the cash flow of the Preferred Stock Warrants and used a probability weighted sum of the value in each potential year before expiration to estimate the fair value of the Preferred Stock Warrants. Volatility was based on public peer companies, adjusted for size and leverage. Risk-free rate was selected based on term matched Treasury securities. Bond repayment depends on the Company’s timely access to the required cash and as such, is discounted at the Company’s assumed borrowing rate. This model was run based on the Management's expected term and probabilities of a liquidity event.  The key inputs for the framework were as follows as of September 30, 2023 and December 31, 2022:

 

Valuation Inputs

 

September 30,     2023

 

 

December 31, 2022

 

Expected Time to Expiration (years)

 

 

24.30

 

 

 

25.05

 

Stock Price on Valuation Date

 

$0.28

 

 

$0.21

 

Peer Volatility

 

 

46.56%

 

 

52.31%

Cash Flow Discount Rate

 

 

15.47%

 

 

12.93%

 

 
13

Table of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The following table sets forth a summary of the changes in the fair value of the Level 3 Preferred Stock Warrant Liability for the three and nine-months ended September 30, 2023:

 

 

Preferred Stock Warrant Liability

 

Fair value as of December 31, 2022

 

$629,375

 

Change in fair value

 

 

137,813

 

Fair value as of June 30, 2023

 

 

767,188

 

Change in fair value

 

 

(57,188)

Fair value as of September 30, 2023

 

$710,000

 

 

The changes in fair value attributable to the Preferred Stock Warrants are recorded as an adjustment to stock compensation expense and reported in Sales and Marketing expense on the Statements of Operations.

 

8. EARNINGSPER SHARE

 

Basic net income per share is computed by dividing net income during the period by the weighted-average number of common shares outstanding, excluding the dilutive effects of common stock equivalents. Common stock equivalents include redeemable convertible preferred stock, stock options and warrants. Diluted net income per share is computed by dividing net income by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated using the treasury stock method by adding to the weighted shares outstanding any potential shares of common stock from outstanding redeemable convertible preferred stock, stock options and warrants that are in-the-money. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, the calculation of basic and dilutive loss per share results in the same value. The calculations for basic and diluted net income per share for the three and nine-months ended September 30, 2023 and 2022 are as follows:

 

 

 

Three-months ended September 30,

 

 

Nine-months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$126,036

 

 

$309,543

 

 

$312,362

 

 

$295,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares used to calculate net income per share - basic

 

 

90,477,798

 

 

 

90,477,798

 

 

 

90,477,798

 

 

 

90,477,798

 

Warrants to purchase redeemable convertible preferred stock

 

 

2,499,900

 

 

 

2,499,900

 

 

 

2,499,900

 

 

 

2,499,900

 

Redeemable convertible preferred stock

 

 

10,306,671

 

 

 

10,306,671

 

 

 

10,306,671

 

 

 

10,306,671

 

Stock options and warrants to purchase common stock

 

 

18,194,879

 

 

 

16,147,716

 

 

 

17,818,937

 

 

 

16,233,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares used to calculate net income per share - diluted

 

 

121,479,248

 

 

 

119,432,085

 

 

 

121,103,306

 

 

 

119,517,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 
14

Table of Contents

 

ITEM 2. Management’s Discussion and Analysis

 

The following discussion should be read in conjunction with our consolidated 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, 2022 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, 2022 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 APIs, 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 APIs 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.  We provide 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 APIs 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.

 

 
15

Table of Contents

 

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 five 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 APIs 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 five years and are automatically renewed unless notice is given 90 days prior to the expiration of the contract term.

 

Business Environment and Trends

 

While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the recent market volatility, rising inflation  and federal debt level payment uncertainty may result in some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us.  Recent events in the Ukraine and Russia have also caused disruptions in the global financial markets. While we do not have any operations or customers in the Ukraine or Russia, we will continue to monitor the situation as a prolonged conflict could impact our business.

 

Approximately 38% of our consolidated revenue, and 39% of our consolidated expenses are denominated in Canadian dollars. The Canadian dollar depreciated 5% against the U.S. dollar when comparing the average exchange rate for the nine-months ended September 30,2023 versus the comparative 2022 period.  This decreased both Canadian dollar revenues and expenses by approximately 2% once translated into U.S. dollars but had a minimal impact on our net income and cash flow.

 

Our revenue increased 10% for the nine-months ended September 30, 2023 versus the comparative 2022 period.  Based on revenue already under contract, we expect lower revenue growth but an improvement in net income for the remainder of fiscal 2023 and for 2024.

 

Plan of Operation

 

For the remainder of 2023 and for 2024 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.  This expansion is expected to result in both increased revenue and costs for the remainder of fiscal 2023.

 

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 APIs, 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 2023 include broad expansion of data and news coverage, including the addition of a wide array of international exchange data and news, 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 maintain profitable operations.

 

 
16

Table of Contents

 

Critical Accounting Policies and Estimates

 

Critical Accounting Policies and Estimates

 

In the 2022 Annual Report, we disclose our critical accounting policies and estimates upon which our consolidated financial statements are derived.  There have been no material changes to these policies since December 31, 2022. Readers are encouraged to read the 2022 Annual Report in conjunction.

 

Results of Operations

 

Revenue

 

Three-months ended September 30,

 

2023

 

 

2022

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Corporate Quotestream

 

$1,782,581

 

 

$1,708,627

 

 

$73,954

 

 

 

4%

   Individual Quotestream

 

 

458,428

 

 

 

512,142

 

 

 

(53,714)

 

(11

%) 

Total Portfolio Management Systems

 

 

2,241,009

 

 

 

2,220,769

 

 

 

20,240

 

 

 

1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interactive Content and Data APIs

 

 

2,521,433

 

 

 

2,169,898

 

 

 

351,535

 

 

 

16%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total subscription revenue

 

$4,762,442

 

 

$4,390,667

 

 

$371,775

 

 

 

8%

 

Nine-months ended September 30,

 

2023

 

 

2022

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Corporate Quotestream

 

$5,486,732

 

 

$5,146,298

 

 

$340,434

 

 

 

7%

   Individual Quotestream

 

 

1,420,138

 

 

 

1,606,133

 

 

 

(185,995)

 

(12

%)

Total Portfolio Management Systems

 

 

6,906,870

 

 

 

6,752,431

 

 

 

154,439

 

 

 

2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interactive Content and Data APIs

 

 

7,318,597

 

 

 

6,200,989

 

 

 

1,117,608

 

 

 

18%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total subscription revenue

 

$14,225,467

 

 

$12,953,420

 

 

$1,272,047

 

 

 

10%

 

Total licensing revenue increased 8% and 10% when comparing the three and nine-months ended September 30, 2023 and 2022. The depreciation of the Canadian dollar since the comparative periods, discussed above in the “Business Environment and Trends” section, significantly impacted our revenue across all product lines, reducing our total revenue by approximately 2%.

 

Corporate Quotestream revenue increased 4% and 7% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022 due to an increase in both the number of customers and average revenue per customer since the comparative periods.  We have added new products over the past couple years that are continuing to gain traction in the market, and we have made improvements and upgrades to our existing Portfolio Management products as we continue to improve functionality and add new data offerings.  These improvements have allowed us to attract larger customers and increase the average revenue for our existing customers.

 

Individual Quotestream revenue decreased 11% and 12% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022 due to decreases in both total subscribers and average revenue per subscriber.

 

Interactive Content and Data APIs revenue increased 16% and 18% for the three and nine-months ended September 30, 2023 from the comparative periods in 2022.  The increases are attributable to an increase in the average revenue per client as the launch of new products and the expansion of our data coverage have allowed us to attract larger clients.

 

 
17

Table of Contents

 

Cost of Revenue and Gross Profit Summary

 

Three-months ended September 30,

 

2023

 

 

2022

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$2,296,736

 

 

$2,096,773

 

 

$199,963

 

 

 

10%

Gross profit

 

$2,465,706

 

 

$2,293,894

 

 

$171,812

 

 

 

7%

Gross margin %

 

 

52%

 

 

52%

 

 

 

 

 

 

 

 

 

Nine-months ended September 30,

 

2023

 

 

2022

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$6,941,469

 

 

$6,599,396

 

 

$342,073

 

 

 

5%

Gross profit

 

$7,283,998

 

 

$6,354,024

 

 

$929,974

 

 

 

15%

Gross margin %

 

51%

 

 

 

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.

 

Our cost of revenue increased 10% and 5%  for the three and nine-months ended September 30, 2023 from the comparative periods in 2022. This was mainly due to increased amortization expenses associated with internally developed application software resulting from our major growth initiative, which included investing in infrastructure, new product development, data collection, and the expansion of our global market coverage.

 

For the three-months ended September 30, 2023, our cost of revenue was unchanged as a percentage of sales, as evidenced by our gross margin percentage that was 52% for the three-month ended September 30, 2023 and 2022.    For the nine-months ended September 30, 2023, our cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage that increased to 51% from 49% in the comparative 2022 period. New contracts signed since the comparative periods have higher gross margins than our other customer contracts typically have on average, resulting in an increase in our gross margin percentage.

 

Operating Expenses Summary

 

Three-months ended September 30,

 

2023

 

 

2022

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$711,861

 

 

$784,094

 

 

$(72,233)

 

(9

%)

General and administrative

 

 

924,249

 

 

 

757,318

 

 

 

166,931

 

 

 

22%

Software development

 

 

725,449

 

 

 

544,525

 

 

 

180,924

 

 

 

33%

Total operating expenses

 

$2,361,559

 

 

$2,085,937

 

 

$275,622

 

 

 

13%

 

Nine-months ended September 30,

 

2023

 

 

2022

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$2,365,626

 

 

$2,276,526

 

 

$89,100

 

 

 

4%

General and administrative

 

 

2,546,950

 

 

 

2,213,189

 

 

 

333,761

 

 

 

15%

Software development

 

 

2,039,537

 

 

 

1,549,454

 

 

 

490,083

 

 

 

32%

Total operating expenses

 

$6,952,113

 

 

$6,039,169

 

 

$912,944

 

 

 

15%

 

Sales and Marketing

 

Sales and marketing consist primarily of sales and customer service salaries, investor relations, travel and advertising expenses. Sales and marketing expenses decreased 9% for the three-months ended September 30, 2023 due to a one-time bonus accrual made in the comparative 2022 period.  Sales and marketing expenses increased 4% for the nine-months ended September 30, 2023 when compared to the same period in 2022. The increase is a result of additional sales personnel hired since the comparative periods to support our product growth initiatives and salary increases for existing personnel. The increases were offset by the depreciation of the Canadian dollar from the comparative periods as most of our sales personnel are located in Canada.

 

 
18

Table of Contents

 

General and Administrative

 

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative expenses increased 22% and 15% for the three and nine-months ended September 30, 2023 when compared to the same periods in 2022. The increases for the three and nine-months ended September 30, 2023 are mainly a result of additional professional fees resulting from the change of principal accountants in January 2023 as well as an increase in bad debt expenses from the comparative periods in 2022.

 

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 33% and 32% for the three and nine-months ended September 30, 2023 when compared to the same periods in 2022, primarily due to new personnel hired since the comparative periods to improve our infrastructure, security, and business continuity management.  The increases in development personnel costs were offset by the depreciation of the Canadian dollar from the comparative periods as most of our development personnel are located in Canada.

 

We capitalized $812,428 and $2,387,774 of development costs for the three and nine-month periods ended September 30, 2023 compared to $735,169 and $2,022,885 in the same periods in 2022.  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 (Expenses)

 

Three-months ended September 30,

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Foreign exchange gain

 

$21,803

 

 

$102,327

 

Interest income, net

 

 

825

 

 

 

10

 

Total other expenses, net

 

$22,628

 

 

$102,337

 

 

Nine-months ended September 30,

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Foreign exchange loss

 

$(16,271)

 

$(15,309)

Interest expense, net

 

 

(1,031)

 

 

(1,721)

Total other expenses, net

 

$(17,302)

 

$(17,030)

 

Foreign Exchange Gain

 

We incurred foreign exchange gains of $21,803 and $102,327 for the three-months ended September 30, 2023 and 2022, respectively. We incurred foreign exchange losses of $16,271 and $15,309 for the nine-months ended September 30, 2023 and 2022, 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, Net

 

Interest expense is netted against interest earned on cash balances.  Net interest income of $825 and $10 was earned for the three-months ended September 30, 2023 and 2022.  Net interest expenses of $1,031 and $1,721 were incurred for the nine-months ended September 30, 2023 and 2022..

 

Provision for Income Taxes

 

For the three and nine-months ended September 30, 2023, the Company recorded $739 and $2,221 in Canadian income tax expense compared to $751 and $2,321 in the respective comparative periods in 2022.

 

Net Income for the Period

 

As a result of the foregoing, our net income for the three and nine-month ended September 30, 2023 was $126,036 and $312,362 compared to $309,543 and $295,504 in the respective comparative periods in 2022.  Basic and diluted earnings per share were $0.00 for the three and nine-months periods ended September 30, 2023 and 2022, respectively.

 

 
19

Table of Contents

 

Liquidity and Capital Resources

 

Our cash totaled $820,939 at September 30, 2023, as compared with $477,987 at December 31, 2022, an increase of $342,952.  Net cash of $2,801,975 was provided by operations for the nine-months ended September 30, 2023, primarily due to adjustments for non-cash charges and the increase in deferred revenue, offset by a decrease in accounts payable and accrued liabilities and an increase in accounts receivable. Net cash used in investing activities for the nine-months ended September 30, 2023 was $2,459,023, primarily due to capitalized application software costs and the purchases of fixed assets.

 

We typically operate with a working capital deficit.  As of September 30, 2023, our working capital deficit was $1,979,800, however current liabilities include $1,676,949 in deferred revenue. 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 July 2024. However, implementing our business plan may require additional financing. Additional financing 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 September 30, 2023, 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 7 a) “Preferred shares”.

 

Foreign Exchange Risk

 

Currently, approximately 38% of our consolidated revenue, and 39% of our consolidated expenses are denominated in Canadian dollars.  Since currently our Canadian dollar revenue and expenses are closely matched, our consolidated cashflows are not significantly impacted by foreign exchange fluctuations. 

 

Off-Balance Sheet Arrangements

 

At September 30, 2023 and December 31, 2022, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

 

 
20

Table of Contents

 

ITEM 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation and supervision of our Chairman of the Board and Chairman of the Audit Committee, Chief Executive Officer and Chief Financial Officer, have evaluated 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”)) as of September 30, 2023, and concluded that our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our management identified the following material weaknesses in our internal control over financial reporting, as described below.

 

Notwithstanding the material weaknesses described below our management has concluded that our consolidated financial statements for the periods covered by and included in this Quarterly Report are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein.

 

The following material weaknesses were identified during the preparation and review of the current period financial statements:

 

 

·

There is a lack of segregation of duties in financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
21

Table of Contents

 

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

 

Exhibit Number

 

Description of Exhibit

31.1

 

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.

31.2

 

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.

32.1

 

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.

32.2

 

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.

 

 
22

Table of Contents

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Quotemedia, inc.

 

By:  

/s/ Keith J. Randall

 

 

Keith J. Randall

 

 

Chief Executive Officer and Chief Financial Officer

 

 

(Duly authorized officer and principal financial officer)

 

 

Dated: November 13, 2023

 

 
23