Quotemedia Inc 10-Q for FY2020 Q3
Quotemedia Inc (QMCI)
10-Q
2020-11-12
For: 2020-09-30
View Original
Added on
April 06, 2026
About this 10-Q
Quotemedia Inc filed this 10-Q on November 12, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).
Headline figures
Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.14M
- up 6.0% from $2.96M a year earlier
- Net loss
- $75.31K
- compared with net income of $155.93K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
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, 2020
OR
|
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the transition period _________ to
_________
Commission
File
Number:
0-28599
QUOTEMEDIA, INC.
(Exact name
of registrant as specified in its charter)
|
Nevada
|
91-2008633
|
|
|
(State
or Other Jurisdiction of Incorporation or
Organization)
|
(IRS
Employer Identification Number)
|
|
17100 East Shea Boulevard, Suite 230, Fountain Hills, AZ
85268
(Address
of Principal Executive Offices)
(480) 905-7311
(Registrant’s
Telephone Number, Including Area Code)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90
days. Yes ☑ No
☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes ☑ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and "smaller
reporting company" and "emerging growth company" in Rule 12b-2 of
the Exchange Act. (Check one):
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
|
Non-accelerated
filer ☐ (Do not check if a smaller reporting
company)
|
Smaller
reporting company ☑
|
|
|
Emerging
growth company ☐
|
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes
☐ No ☑
The
Registrant has 90,477,798 shares of common stock outstanding as of
November 2, 2020.
QUOTEMEDIA, INC.
FORM 10-Q for the Quarter Ended September 30, 2020
INDEX
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3
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5
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6
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23
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24
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2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
QUOTEMEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
September
30,
2020
|
December
31,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents
|
$678,552
|
$815,487
|
|
Accounts
receivable, net
|
728,740
|
680,759
|
|
Prepaid
expenses
|
135,029
|
103,093
|
|
Other
current assets
|
90,263
|
47,793
|
|
Total
current assets
|
1,632,584
|
1,647,132
|
|
|
|
|
|
Deposits
|
16,755
|
16,084
|
|
Property
and equipment, net
|
2,643,666
|
2,273,087
|
|
Goodwill
|
110,000
|
110,000
|
|
Intangible
assets
|
63,498
|
51,265
|
|
Operating
lease right-of-use assets
|
699,658
|
328,676
|
|
|
|
|
|
Total
assets
|
$5,166,161
|
$4,426,244
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable and accrued liabilities
|
$1,759,714
|
$1,286,340
|
|
Deferred
revenue
|
666,516
|
579,343
|
|
Current
portion of operating lease liabilities
|
171,542
|
172,049
|
|
Current
portion of finance lease liabilities
|
19,583
|
33,914
|
|
Total
current liabilities
|
2,617,355
|
2,071,646
|
|
|
|
|
|
Paycheck Protection
Program loan (Note 8)
|
141,257
|
-
|
|
Long-term portion
of operating lease liabilities
|
520,414
|
167,496
|
|
Long-term portion
of finance lease liabilities
|
2,777
|
13,949
|
|
|
|
|
|
Mezzanine
equity:
|
|
|
|
Series
A Redeemable Convertible Preferred stock, $0.001 par
value,
|
|
|
|
550,000
shares designated; Shares issued and outstanding:
|
|
|
|
123,685
at September 30, 2020 and December 31, 2019
|
2,983,857
|
2,983,857
|
|
|
|
|
|
Stockholders’
deficit:
|
|
|
|
Preferred
stock, 10,000,000 shares authorized, 550,000 shares
designated
|
-
|
-
|
|
Common
stock, $0.001 par value, 150,000,000 shares authorized, shares
issued and
|
|
|
|
outstanding:
90,477,798 at September 30, 2020 and December 31, 2019
|
90,479
|
90,479
|
|
Additional
paid-in capital
|
19,598,944
|
19,568,011
|
|
Accumulated
deficit
|
(20,788,922)
|
(20,469,194)
|
|
Total
stockholders’ deficit
|
(1,099,499)
|
(810,704)
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
$5,166,161
|
$4,426,244
|
|
|
Three-months ended
September 30,
|
Nine-months ended
September 30,
|
||
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2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
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LICENSING
FEES
|
$3,140,358
|
$2,963,172
|
$9,136,141
|
$8,818,637
|
|
|
|
|
|
|
|
COST
OF REVENUE
|
1,706,476
|
1,429,308
|
4,795,150
|
4,355,110
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
1,433,882
|
1,533,864
|
4,340,991
|
4,463,527
|
|
|
|
|
|
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OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
552,960
|
463,929
|
1,602,501
|
1,393,929
|
|
General and
administrative
|
555,002
|
600,329
|
1,817,748
|
1,646,388
|
|
Software
development
|
405,703
|
311,028
|
1,246,722
|
923,218
|
|
|
1,513,665
|
1,375,286
|
4,666,971
|
3,963,535
|
|
|
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|
OPERATING
PROFIT (LOSS)
|
(79,783)
|
158,578
|
(325,980)
|
499,992
|
|
|
|
|
|
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OTHER
INCOME (EXPENSES)
|
|
|
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|
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|
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|
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Foreign exchange
gain (loss)
|
5,930
|
(543)
|
11,887
|
(21,857)
|
|
Interest and other
expense, net
|
(701)
|
(1,349)
|
(3,419)
|
(4,533)
|
|
|
5,229
|
(1,892)
|
8,468
|
(26,390)
|
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|
|
|
|
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INCOME
(LOSS) BEFORE INCOME TAXES
|
(74,554)
|
156,686
|
(317,512)
|
473,602
|
|
|
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Provision for
income taxes
|
(751)
|
(758)
|
(2,216)
|
(2,257)
|
|
|
|
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NET
INCOME (LOSS)
|
$(75,305)
|
$155,928
|
$(319,728)
|
$471,345
|
|
|
|
|
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|
|
EARNINGS
(LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
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|
|
Basic earnings
(loss) per share
|
$(0.00)
|
$0.00
|
$(0.00)
|
$0.01
|
|
Diluted earnings
(loss) per share
|
$(0.00)
|
$0.00
|
$(0.00)
|
$0.00
|
|
|
|
|
|
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|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
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|
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|
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|
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Basic
|
90,477,798
|
90,477,798
|
90,477,798
|
90,477,798
|
|
Diluted
|
90,477,798
|
107,173,219
|
90,477,798
|
105,577,615
|
4
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
|
|
|
|
||
|
Three-months
ended September 30, 2020:
|
Number of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Additional Paid-in
Capital
|
Accumulated
Deficit
|
Total
Stockholders’ Equity (Deficit)
|
|
Balance, June 30,
2020
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,592,005
|
$(20,713,617)
|
$(1,031,133)
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
6,939
|
-
|
6,939
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
(75,305)
|
(75,305)
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2020
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,598,944
|
$(20,788,922)
|
$(1,099,499)
|
|
|
Series A Redeemable
Convertible
Preferred
Stock
|
Common
Stock
|
|
|
|
||
|
Nine-months ended
September 30, 2020:
|
Number of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Additional Paid-in
Capital
|
Accumulated
Deficit
|
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
|
-
|
-
|
-
|
-
|
30,933
|
-
|
30,933
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
(319,728)
|
(319,728)
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2020
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,598,944
|
$(20,788,922)
|
$(1,099,499)
|
|
|
Series A Redeemable
Convertible
Preferred
Stock
|
Common
Stock
|
|
|
|
||
|
Three-months
ended September 30, 2019:
|
Number of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Additional Paid-in
Capital
|
Accumulated
Deficit
|
Total
Stockholders’ Equity (Deficit)
|
|
Balance, June 30,
2019
|
124,485
|
$3,003,528
|
90,477,798
|
$90,479
|
$19,362,858
|
$(20,712,774)
|
$(1,259,437)
|
|
|
|
|
|
|
|
|
|
|
Preferred shares
redeemed
|
(800)
|
(19,671)
|
-
|
-
|
(329)
|
-
|
(329)
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
103,116
|
-
|
103,116
|
|
|
|
|
|
|
|
|
|
|
Net income
|
-
|
-
|
-
|
-
|
-
|
155,928
|
155,928
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2019
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,465,645
|
$(20,556,846)
|
$(1,000,722)
|
|
|
Series A Redeemable
Convertible
Preferred
Stock
|
Common
Stock
|
|
|
|
||
|
Nine-months ended
September 30, 2019:
|
Number of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Additional Paid-in
Capital
|
Accumulated
Deficit
|
Total
Stockholders’ Equity (Deficit)
|
|
Balance, December 31,
2018
|
125,885
|
$3,037,952
|
90,477,798
|
$90,479
|
$19,157,202
|
$(21,028,191)
|
$(1,780,510)
|
|
|
|
|
|
|
|
|
|
|
Preferred shares
redeemed
|
(2,200)
|
(54,095)
|
-
|
-
|
(905)
|
-
|
(905)
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
309,348
|
-
|
309,348
|
|
|
|
|
|
|
|
|
|
|
Net income
|
-
|
-
|
-
|
-
|
-
|
471,345
|
471,345
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2019
|
123,685
|
$2,983,857
|
90,477,798
|
$90,479
|
$19,465,645
|
$(20,556,846)
|
$(1,000,722)
|
|
|
Nine-months ended
September 30,
|
|
|
|
2020
|
2019
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$(319,728)
|
$471,345
|
|
|
|
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
971,274
|
790,563
|
|
Stock-based
compensation expense
|
30,933
|
309,348
|
|
Bad
debt expense
|
120,509
|
12,619
|
|
Changes in assets
and liabilities:
|
|
|
|
Accounts
receivable
|
(168,490)
|
(119,572)
|
|
Prepaid
expenses
|
(31,936)
|
42,044
|
|
Other
current assets
|
(42,470)
|
(68,182)
|
|
Deposits
|
(671)
|
(3,073)
|
|
Accounts
payable, accrued and other liabilities
|
454,803
|
217,678
|
|
Deferred
revenue
|
87,173
|
(82,704)
|
|
Net cash provided
by operating activities
|
1,101,397
|
1,570,066
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
(111,060)
|
(322,124)
|
|
Purchase
of intangible assets
|
(17,127)
|
-
|
|
Capitalized
application software
|
(1,225,899)
|
(1,007,189)
|
|
Net cash used in
investing activities
|
(1,354,086)
|
(1,329,313)
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
Paycheck
Protection Program loan
|
141,257
|
-
|
|
Repayment
of finance lease obligations
|
(25,503)
|
(21,364)
|
|
Redemption
of preferred stock
|
-
|
(55,000)
|
|
Net cash provided
by (used) in financing activities
|
115,754
|
(76,364)
|
|
|
|
|
|
Net increase
(decrease) in cash
|
(136,935)
|
164,389
|
|
|
|
|
|
Cash and
equivalents, beginning of period
|
815,487
|
810,332
|
|
|
|
|
|
Cash and
equivalents, end of period
|
$678,552
|
$974,721
|
|
|
|
|
1.
BASIS
OF PRESENTATION
The accompanying
unaudited condensed consolidated financial statements have been
prepared in accordance with the generally accepted accounting
principles for interim financial statements and instructions for
Form 10-Q. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments
considered necessary for a fair presentation, have been included.
Operating results for any quarter are not necessarily indicative of
the results for any other quarter or for a full year. In connection
with the preparation of the condensed consolidated financial
statements the Company evaluated subsequent events after the
balance sheet date of September 30, 2020 through the filing of this
report.
As of September 30,
2020, the Company has a working capital deficit of $984,771. Our
current liabilities include deferred revenue of $666,516. 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, 2019 contained in our Form 10-K filed with the Securities and
Exchange Commission dated March 27, 2020.
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. The COVID-19 pandemic has also caused
some of our smaller clients to cease operations altogether
resulting in an increase in bad debts from 2019. 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.
7
b)
Basis of consolidation
The consolidated
financial statements include the operations of QuoteMedia, Ltd., a
wholly owned subsidiary of QuoteMedia, Inc. All intercompany
transactions and balances have been eliminated.
c)
Foreign currency translation and transactions
The U.S. dollar is
the functional currency of all our company's operations. Foreign
currency asset and liability amounts are remeasured into U.S.
dollars at end-of-period exchange rates, except for equipment and
intangible assets, which are remeasured at historical rates.
Foreign currency income and expenses are remeasured at average
exchange rates in effect during the period, except for expenses
related to balance sheet amounts remeasured at historical exchange
rates. Exchange gains and losses arising from remeasurement of
foreign currency-denominated monetary assets and liabilities are
included in earnings in the period in which they
occur.
d)
Allowances for doubtful accounts
We maintain an
allowance for doubtful accounts for estimated losses resulting from
the inability of the Company’s customers to make required
payments. The Company determines the allowance by reviewing the age
of the receivables and assessing the anticipated ability of
customers to pay. No collateral is required for any of the
receivables and the Company does not usually apply financing
charges to outstanding accounts receivable balances. If the
financial condition of our customers were to deteriorate, adversely
affecting their ability to make payments, additional allowances
would be required. The allowance for doubtful accounts was $110,000
and $73,500 as of September 30, 2020 and December 31, 2019,
respectively. Bad debt expense was $25,664 and $120,509 for the
three and nine-months ended September 30, 2020, respectively. Bad
debt expense was $13,395 and $12,619 for the three and nine-months
ended September 30, 2019, respectively.
e)
Accounting Pronouncements
Recently Adopted
In January 2017, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2017-04, Intangibles - Goodwill and
Other (Topic 350): Simplifying the Test for Goodwill
Impairment. This ASU simplifies
the accounting for goodwill by eliminating step 2 from the goodwill
impairment test. Under the new ASU, if the carrying amount of a
reporting unit exceeds its fair value, an impairment loss will be
recognized for the amount by which the carrying amount exceeds its
fair value. The Company adopted the new standard on January 1,
2020. There was no impact upon adoption to our consolidated
financial statements and related disclosures.
In August 2018, the FASB issued ASU
2018-13, Fair Value Measurement (Topic
820), which removes, modifies
and adds various disclosure requirements around the topic in order
to clarify and improve the cost-benefit nature of disclosures. For
example, disclosures around transfers between fair value hierarchy
Levels will be removed and further detail around changes in
unrealized gains and losses for the period and unobservable inputs
determining Level 3 fair value measurements will be added. The
Company adopted the new standard on January 1, 2020. There was no
impact upon adoption to our consolidated financial statements and
related disclosures.
In August 2018, the FASB issued ASU
2018-15, Intangibles - Goodwill and
Other - Internal-Use Software (Subtopic 350-40): Customer's
Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That is a Service Contract, which requires a customer in a cloud computing
arrangement that is a service contract to follow the internal-use
software guidance in Topic 350, "Intangibles - Goodwill and
Other" to determine which
implementation costs to capitalize as assets or expense as
incurred. The Company adopted the new standard on January 1, 2020.
There was no impact upon adoption to our consolidated financial
statements and related disclosures.
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.
8
Not Yet Adopted
Other accounting
standards that have been issued by the FASB or other
standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the
Company’s consolidated financial statements upon
adoption.
3.
REVENUE
Disaggregated
Revenue
The Company
provides market data, financial web content solutions and
cloud-based applications. Our revenue by type of service consists
of the following:
|
|
Three-months ended
September 30,
|
Nine-months ended
September 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Portfolio
Management Systems
|
|
|
|
|
|
Corporate
Quotestream
|
$1,127,941
|
$944,122
|
$3,158,076
|
$2,864,166
|
|
Individual
Quotestream
|
485,392
|
458,338
|
1,379,518
|
1,383,196
|
|
Interactive Content
& Data Application
|
1,527,025
|
1,560,712
|
4,598,547
|
4,571,275
|
|
Total
revenue
|
$3,140,358
|
$2,963,172
|
$9,136,141
|
$8,818,637
|
Deferred
Revenue
Changes in deferred
revenue for the period were as follows:
|
Balance at December
31, 2019
|
$579,343
|
|
Revenue recognized
in the current period from the amounts in the beginning
balance
|
(429,616)
|
|
New deferrals, net
of amounts recognized in the current period
|
512,066
|
|
Effects of foreign
currency translation
|
4,723
|
|
Balance at
September 30, 2020
|
$666,516
|
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.
4.
RELATED
PARTIES
The Company entered
into a five-year office lease with 410734 B.C. Ltd. effective May
1, 2016 for approximately $7,365 per month. David M. Shworan is a
control person of 410734 B.C. Ltd. At September 30, 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 September 30, 2020, $7,500 are 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.
9
5.
LEASES
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. The Company
renewed its lease for office space in Vancouver, Canada as of
August 1, 2020 for an additional 5 years resulting in a right of
use asset and an offsetting lease liability of
$507,753.
Operating lease
right-of-use assets and operating lease liabilities are recognized
based on the present value of the future minimum lease payments
over the lease term at commencement date. As most of our leases do
not provide an implicit rate, we use our incremental borrowing rate
based on the information available at commencement date in
determining the present value of future payments. We elected the
short-term lease exception and therefore only recognize
right-of-use assets and lease liabilities for leases with a term
greater than one year. When determining lease terms, we factor in
options to extend or terminate leases when it is reasonably certain
that we will exercise that option. We have lease agreements with
lease and non-lease components, which are generally accounted for
separately. For certain leases we
account for the lease and non-lease components as a single lease
component.
Supplemental
balance sheet information related to leases was as
follows:
|
|
September
30,
2020
|
December
31,
2019
|
|
|
|
|
|
Operating
Leases
|
|
|
|
|
|
|
|
Operating lease
right-of-use assets
|
$699,658
|
$328,676
|
|
|
|
|
|
Current portion of
operating lease liability
|
$171,542
|
$172,049
|
|
Long-term portion
of operating lease liability
|
520,414
|
167,496
|
|
Total operating
lease liability
|
$691,956
|
$339,545
|
|
|
|
|
|
Finance
Leases
|
|
|
|
|
|
|
|
Computer equipment
on financing lease
|
$101,049
|
$101,049
|
|
Less: accumulated
depreciation
|
80,371
|
52,888
|
|
|
$20,678
|
$48,161
|
|
|
|
|
|
Current portion of
finance lease liability
|
19,583
|
33,914
|
|
Long-term portion
of finance lease liability
|
2,777
|
13,949
|
|
Total finance lease
liability
|
$22,360
|
$47,863
|
|
|
|
|
10
QUOTEMEDIA,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
September
30,
2020
|
December
31,
2019
|
|
|
|
|
|
Weighted
Average Remaining Lease Term
|
|
|
|
Operating
leases
|
4.3
years
|
2.9
years
|
|
Finance
leases
|
1.0
years
|
1.5
years
|
|
|
|
|
|
Weighted
Average Discount Rate
|
|
|
|
Operating
leases
|
9.7%
|
9.3%
|
|
Finance
leases
|
8.8%
|
8.9%
|
Maturities of lease
liabilities were as follows:
|
Year
ending December 31,
|
Operating
Leases
|
Finance
Leases
|
|
|
|
|
|
2020 (for the
remainder of the year)
|
$64,571
|
$9,051
|
|
2021
|
213,556
|
12,061
|
|
2022
|
178,695
|
2,151
|
|
2023
|
164,374
|
-
|
|
2024
|
148,877
|
-
|
|
Thereafter
|
79,581
|
-
|
|
Total lease
payments
|
849,654
|
23,263
|
|
Less imputed
interest
|
(157,698)
|
(903)
|
|
Total
|
$691,956
|
$22,360
|
The components of
lease expense for the three and nine-months ended September 30,
2020 and 2019 were as follows:
|
|
Three-months ended
September 30,
|
Nine-months ended
September 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Operating
lease costs:
|
|
|
|
|
|
Operating lease
costs
|
$62,235
|
$38,440
|
$176,396
|
$130,463
|
|
Short-term lease
costs
|
20,661
|
31,765
|
71,660
|
97,526
|
|
Total operating
lease costs
|
$82,896
|
$70,205
|
$248,056
|
$227,989
|
|
|
|
|
|
|
|
Finance
lease costs:
|
|
|
|
|
|
Amortization
|
$8,763
|
$8,763
|
$26,289
|
$26,289
|
|
Interest
|
645
|
1,327
|
2,415
|
4,544
|
|
Total finance lease
costs
|
$9,408
|
$10,090
|
$28,704
|
$30,833
|
11
QUOTEMEDIA,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Supplemental cash
flow information for the nine-months ended September 30, 2020 and
2019 related to leases was as follows:
|
|
2020
|
2019
|
|
Cash paid for amounts included in the measurement of lease
liabilities:
|
|
|
|
Operating
cash flows from operating leases
|
$118,985
|
$131,803
|
|
Operating
cash flows from finance leases
|
2,415
|
4,544
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease
obligations:
|
|
|
|
Operating
leases
|
507,753
|
-
|
6.
STOCKHOLDERS’
DEFICIT
a)
Preferred Shares
We are authorized
to issue up to 10,000,000 non-designated preferred shares at the
Board of Directors’ discretion.
On December 28,
2017, a total of 550,000 shares of the Company’s Preferred
Stock were designated as “Series A Redeemable Convertible
Preferred Stock.” The Series A Redeemable Convertible
Preferred Stock has no dividend or voting rights.
At September 30,
2020, 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, 2020. During the three
and nine-months ended September 30, 2019 2,200 shares of Series A
Redeemable Convertible Preferred Stock were redeemed.
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, a
limited amount of Series A Redeemable Convertible Preferred Stock
may be redeemed at the holder’s option if the following
criteria are met:
(i) If the cash balance
of the Company as reported at the end of each fiscal quarter in
2018 exceeds $350,000, up to an aggregate of 600 Series A
Redeemable Convertible Preferred Stock may be redeemed at the
liquidation value of $25 per share.
(ii) If the cash balance
of the Company as reported at the end of each fiscal quarter in
2019 exceeds $375,000, up to an aggregate of 800 Series A
Redeemable Convertible Preferred Stock may be redeemed at the
liquidation value of $25 per share.
12
QUOTEMEDIA,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(iii) If the cash balance
of the Company as reported at the end of each fiscal quarter in
2020 and in subsequent years exceeds $400,000, up to an aggregate
of 1,000 Series A Redeemable Convertible Preferred Stock may be
redeemed at the liquidation value of $25 per share.
In accordance with
ASC 480-10-S99, because a limited amount 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 and nine-months ended September
30, 2020 and 2019.
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, 2020 and 2019 was comprised as follows:
|
|
Three-months ended
September 30,
|
Nine-months ended
September 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Sales and
marketing
|
$4,239
|
$99,291
|
$22,833
|
$297,873
|
|
General and
administrative
|
2,700
|
2,700
|
8,100
|
8,100
|
|
Development
|
-
|
1,125
|
-
|
3,375
|
|
Stock-based
compensation expense
|
$6,939
|
$103,116
|
$30,933
|
$309,348
|
Common
Stock Options and Warrants
There were
26,372,803 common stock warrants and options outstanding at
September 30, 2020. No stock options or warrants to purchase common
stock were granted or exercised during the three and nine-months
ended September 30, 2020 and 2019.
The following table
summarizes our non-vested common stock option and warrant activity
for the nine-months ended September 30, 2020:
|
|
Common Stock
Options
and
Warrants
|
Weighted-Average
Grant Date Exercise Price
|
|
|
|
|
|
Non-vested at
January 1, 2020
|
5,625,000
|
$0.08
|
|
Vested during the
period
|
(675,000)
|
$0.05
|
|
Non-vested at
September 30, 2020
|
4,950,000
|
$0.09
|
13
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
September 30, 2020:
|
|
Common Stock Options
and Warrants Outstanding |
Common Stock
Options
and Warrants
Exercisable
|
|||
|
|
Weighted
Average
Remaining
|
Weighted
Average
|
|
Weighted
Average
|
|
|
Number
Outstanding
|
Contractual
Life
(Years)
|
Exercise
Price
|
Number
Exercisable
|
Exercise
Price
|
|
|
|
|
|
|
|
|
|
$0.03-0.11
|
26,372,803
|
8.6
|
$0.06
|
21,422,803
|
$0.05
|
At September 30,
2020, there was $50,208 of unrecognized compensation cost related
to non-vested options and warrants granted to purchase common stock
which is expected to be recognized over a weighted-average period
of 2.1 years.
All stock options
and warrants to purchase common stock have been granted with
exercise prices equal to or greater than the market value of the
underlying common shares on the date of grant. At September 30, 2020, the
aggregate intrinsic value of options and warrants outstanding was
$940,785. The aggregate intrinsic value of options and warrants
exercisable was $888,535. The intrinsic value of stock options and
warrants are calculated as the amount by which the market price of
our common stock exceeds the exercise price of the option or
warrant.
Preferred
Stock Warrants
On December 28,
2017, the Company entered into a Compensation Agreement with David
M. Shworan, the President and Chief Executive Officer of
QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc.,
pursuant to which, in lieu of receiving a cash salary the Company
will issue to Mr. Shworan warrants to purchase shares of Series A
Redeemable Convertible Preferred Stock (“Compensation
Preferred Stock Warrants”). Provided that Mr. Shworan is
employed by or otherwise providing services to the Company or its
subsidiaries on each of January 1, 2018 and 2019, the Company will
issue to Mr. Shworan warrants to purchase up to 15,000 shares of
Compensation Preferred Stock Warrants at an exercise price equal to
$1.00 per share. A total of $90,000 of stock-based compensation
expense was recognized related to the Compensation Preferred Stock
Warrants during the comparative three-months ended March 31,
2019.
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, 2020. The probability is
re-evaluated each reporting period. As of September 30, 2020, 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 September 30,
2020, there were a total of 413,493 preferred stock warrants
outstanding with a weighted average remaining contractual life of
27.3 years. As of September 30, 2020; 31,250 preferred stock
warrants were exercisable. No preferred stock warrants were
exercised for the three and nine-months ended September 30, 2020
and 2019.
7.
EARNINGS
PER SHARE
Basic net income
per share is computed by dividing net income during the period
by the
weighted-average number of common shares outstanding, excluding the
dilutive effects of common stock equivalents. Common stock
equivalents include redeemable convertible preferred stock, stock
options and warrants. Diluted net income per share is computed by
dividing net income by the weighted-average number of dilutive
common shares outstanding during the period. Diluted shares
outstanding is calculated using the treasury stock method by adding
to the weighted shares outstanding any potential shares of common
stock from outstanding redeemable convertible preferred stock,
stock options and warrants that are in-the-money. In periods when a
net loss is reported, all common stock equivalents are excluded
from the calculation because they would have an anti-dilutive
effect, meaning the loss per share would be reduced. Therefore, in
periods when a loss is reported, the calculation of basic and
dilutive loss per share results in the same value. The
calculations for basic and diluted net income per share for the
three and nine-months ended September 30, 2020 and 2019 are as
follows:
14
QUOTEMEDIA,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
Three-months ended
September 30,
|
Nine-months ended
September 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Net income
(loss)
|
$(75,305)
|
$155,928
|
$(319,728)
|
$471,345
|
|
|
|
|
|
|
|
Weighted average
common shares used
|
|
|
|
|
|
to
calculate net income per share
|
90,477,798
|
90,477,798
|
90,477,798
|
90,477,798
|
|
Stock options and
warrants to purchase
|
|
|
|
|
|
common
stock
|
-
|
16,695,421
|
-
|
15,099,817
|
|
Weighted average
common shares used
|
|
|
|
|
|
to
calculate diluted net income per share
|
90,477,798
|
107,173,219
|
90,477,798
|
105,577,615
|
|
|
|
|
|
|
|
Net income per
share – basic
|
$(0.00)
|
$0.00
|
$(0.00)
|
$0.01
|
|
Net income per
share – diluted
|
$(0.00)
|
$0.00
|
$(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
and nine-months ended September 30, 2020 and 2019 are shown
below:
|
|
Three-months ended
September 30,
|
Nine-months ended
September 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Stock options and
warrants to purchase
|
|
|
|
|
|
common
stock
|
11,245,134
|
-
|
13,021,821
|
-
|
|
Warrants to
purchase redeemable
|
|
|
|
|
|
convertible
preferred stock
|
2,499,900
|
2,604,063
|
2,499,900
|
2,604,063
|
|
Redeemable
convertible preferred stock
|
10,306,671
|
10,306,671
|
10,306,671
|
10,306,671
|
|
Total potential
common shares excluded
|
24,051,705
|
12,910,734
|
25,828,392
|
12,910,734
|
8.
PAYCHECK
PROTECTION PROGRAM
On April 24, 2020,
the Company received an $8,000 grant as part of the Economic Injury
Disaster Loan (“EIDL”) program through the Small
Business Administration (“SBA”), and 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 amount of forgiveness will be reduced if the
borrower terminates employees or reduces salaries during the
twenty-four-week period. EIDL grants received are also deducted
from the forgivable portion of PPP loans. The unforgiven portion of
the PPP proceeds will be payable over two years at an interest rate
of 1%, with a deferral of payments for the first six-months after
the covered period. The Company is accounting for the PPP loan in
accordance with ASC 470, Debt.
15
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, 2019 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, 2019 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.
16
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 have experienced extreme volatility and
disruption in recent months. The outbreak of the COVID-19 pandemic
and the resulting response by governments and individuals around
the world has caused contraction in global economies. We are
closely monitoring 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.
Our operations also
have been affected by a range of external factors related to the
COVID-19 pandemic that are not within our control. For example,
many jurisdictions imposed a wide range of restrictions on the
physical movement of our employees and vendors to limit the spread
of COVID-19. We have taken numerous steps, and will continue to
take further actions, in our approach to addressing the COVID-19
pandemic. To protect the health and safety of our team members, we
successfully transitioned our workforce to remote work
environments. We are also working closely with our clients to
support them as they implement their own contingency plans, helping
them access our products and services 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. We are focused on maintaining a
strong balance sheet and liquidity position and have been actively
evaluating the potential impact of COVID-19. We have implemented
certain cost control efforts to help us mitigate the impact that
COVID-19 has had on our financial position and operating results.
As much uncertainty still exists, and we will continue to adjust
our COVID-19 response going forward as circumstances
dictate.
On April 24, 2020,
the Company received an $8,000 grant as part of the Economic Injury
Disaster Loan (“EIDL”) program through the Small
Business Administration (“SBA”), and on May 4, 2020,
the Company received a $133,257 loan under the Paycheck Protection
Program (“PPP”). The Company anticipates that it will
meet the requirements for full forgiveness for our PPP loan. See
Financial Statement Note 8 – Paycheck Protection
Program.
The Canadian dollar
depreciated 2% when comparing average exchange rates for the
nine-months ended September 30, 2020 and 2019. The exchange rate
fluctuation decreased both Canadian dollar revenues and expenses
once translated into U.S. dollars for the nine-months ended
September 30, 2020 when compared to the same period in 2019 but had
a minimal impact on our net income.
Our revenue grew 6
% and 4% when comparing the three and nine-months ended September
30, 2020 to the comparative periods in 2019. Based on clients
currently under contract, and new contracts signed subsequent to
September 30, 2020, we expect accelerated revenue growth for the
remainder of 2020 and for 2021 despite current market conditions
related to COVID-19.
Plan
of Operation
For the remainder
of 2020 and for 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.
17
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 2020 and 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.
Results
of Operations
Revenue
|
Three-months
ended September 30,
|
2020
|
2019
|
Change
($)
|
Change
(%)
|
|
|
|
|
|
|
|
Corporate
Quotestream
|
$1,127,941
|
$944,122
|
$183,819
|
19%
|
|
Individual
Quotestream
|
485,392
|
458,338
|
27,054
|
6%
|
|
Total portfolio
management systems
|
1,613,333
|
1,402,460
|
210,873
|
15%
|
|
|
|
|
|
|
|
Interactive content
and data applications
|
1,527,025
|
1,560,712
|
(33,687)
|
(2%)
|
|
|
|
|
|
|
|
Total subscription
revenue
|
$3,140,358
|
$2,963,172
|
$177,186
|
6%
|
|
Nine-months
ended September 30,
|
2020
|
2019
|
Change
($)
|
Change
(%)
|
|
|
|
|
|
|
|
Corporate
Quotestream
|
$3,158,076
|
$2,864,166
|
$293,910
|
10%
|
|
Individual
Quotestream
|
1,379,518
|
1,383,196
|
(3,678)
|
(0%)
|
|
Total portfolio
management systems
|
4,537,594
|
4,247,362
|
290,232
|
7%
|
|
|
|
|
|
|
|
Interactive content
and data applications
|
4,598,547
|
4,571,275
|
27,272
|
1%
|
|
|
|
|
|
|
|
Total subscription
revenue
|
$9,136,141
|
$8,818,637
|
$317,504
|
4%
|
Total subscription
revenue increased 6% and 4% when comparing the three and
nine-months ended September 30, 2020 and 2019,
respectively.
18
Our total Portfolio
Management System revenue increased by 15% and 7%, respectively,
when comparing the three and nine-month periods ended September 30,
2020 and 2019.
Corporate
Quotestream revenue increased 19% and 10% for the three and
nine-month periods ended September 30, 2020, respectively, from the
comparative periods in 2019 due to new Corporate Quotestream
customers signed since the comparative periods and increases in
users for existing customers.
Individual
Quotestream revenue increased 6% for the three-month period ended
September 30, 2020 from the comparative 2019 period but was
relatively unchanged year to date versus the comparative 2019
period. The increase was due mostly to an increase in average
revenue per customer.
Interactive Content
and Data Application revenue decreased 2% when comparing the
three-months ended September 30, 2020 and 2019, primarily due to
the impact of COVID-19 as we have seen an increase in bad debts and
a number of our smaller customers have temporarily suspended their
services or ceased operations altogether. Interactive Content and
Data Application revenue increased 1% when comparing the nine-month
periods ended September 30, 2020 and 2019, mainly attributable to
an increase in the average revenue per client despite a decrease in
number of clients. The increase in average revenue per client
results from the launch of new products such as QMod, our new
proprietary Web delivery system, the expansion of our data
coverage, as well as the general strengthening of our financial
position, all of which have allowed us to attract larger
clients.
Cost
of Revenue and Gross Profit Summary
|
Three-months
ended September 30,
|
2020
|
2019
|
Change
($)
|
Change
(%)
|
|
|
|
|
|
|
|
Cost of
revenue
|
$1,706,476
|
$1,429,308
|
$277,168
|
19%
|
|
Gross
profit
|
$1,433,882
|
$1,533,864
|
$(99,982)
|
(7%)
|
|
Gross margin
%
|
46%
|
52%
|
|
|
|
Nine-months
ended September 30,
|
2020
|
2019
|
Change
($)
|
Change
(%)
|
|
|
|
|
|
|
|
Cost of
revenue
|
$4,795,150
|
$4,355,110
|
$440,040
|
10%
|
|
Gross
profit
|
$4,340,991
|
$4,463,527
|
$(122,536)
|
(3%)
|
|
Gross margin
%
|
48%
|
51%
|
|
|
Our cost of revenue
consists of fixed and variable stock exchange fees and data feed
provisioning costs. Cost of revenue also includes amortization of
capitalized internal-use software costs. We capitalize the costs
associated with developing new products during the application
development stage.
Cost of revenue
increased 19% and 10% when comparing the three and nine-month
periods ended September 30, 2020 and 2019, respectively. The
increases in cost of revenue are primarily due to increases in
stock exchange fees due to increased customer usage from the
comparative periods that are consistent with increases in Corporate
Quotestream revenue. The increases are also due to increases in the
amortization of capitalized internal-use software costs resulting
from increased investment in product development and data
collection.
Overall, our cost
of revenue increases led to a decrease in gross margin percentage,
which decreased to 46% and 48% for the three and nine-month periods
ended September 30, 2020 from 52% and 51% in the comparative
periods.
19
Operating
Expenses Summary
|
Three-months
ended September 30,
|
2020
|
2019
|
Change
($)
|
Change
(%)
|
|
|
|
|
|
|
|
Sales and
marketing
|
$552,960
|
$463,929
|
$89,031
|
19%
|
|
General and
administrative
|
555,002
|
600,329
|
(45,327)
|
(8%)
|
|
Software
development
|
405,703
|
311,028
|
94,675
|
30%
|
|
Total operating
expenses
|
$1,513,665
|
$1,375,286
|
$138,379
|
10%
|
|
Nine-months
ended September 30,
|
2020
|
2019
|
Change
($)
|
Change
(%)
|
|
|
|
|
|
|
|
Sales and
marketing
|
$1,602,501
|
$1,393,929
|
$208,572
|
15%
|
|
General and
administrative
|
1,817,748
|
1,646,388
|
171,360
|
10%
|
|
Software
development
|
1,246,722
|
923,218
|
323,504
|
35%
|
|
Total operating
expenses
|
$4,666,971
|
$3,963,535
|
$703,436
|
18%
|
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 19% and 15% when comparing the three and
nine-month periods ended September 30, 2020 and 2019, respectively.
The increases are primarily a result of additional sales personnel
hired since the comparative periods. We also implemented a new
marketing program in February 2020 targeted at potential new
Individual Quotestream customers.
General
and Administrative
General and
administrative expenses consist primarily of salaries expense,
office rent, insurance premiums, and professional fees. General and
administrative expenses decreased 8% and increased 10% when
comparing the three and nine-month periods ended September 30, 2020
and 2019, respectively. The quarter to date decrease is mainly due
to one-time recruiting fees in the comparative period. The year to
date increase is primarily due to additional hiring of personnel to
meet expected future growth and an increase in bad debts related 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 increased 30% and 35% for the three and
nine-month periods ended September 30, 2020, respectively, when
compared to the same periods in 2019. The increases were mainly due
to hiring additional development personnel since the comparative
periods to accelerate new product development and data
collection.
We capitalized
$460,666 and $1,225,898 of development costs for the three and
nine-month periods ended September 30, 2020, respectively, compared
to $346,949 and $1,007,189 for the same periods in 2019. 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.
Amortization of capitalized costs of software were $290,791 and
$814,410 for the three and nine-month periods ended September 30,
2020, respectively, compared to $229,677 and $648,169 for the same
periods in 2019.
20
Other
Income and (Expense) Summary
|
Three-months
ended September 30,
|
2020
|
2019
|
|
|
|
|
|
Foreign exchange
loss
|
$5,930
|
$(543)
|
|
Interest
expense
|
(701)
|
(1,349)
|
|
Total other income
(expenses)
|
$5,229
|
$(1,892)
|
|
Nine-months
ended September 30,
|
2020
|
2019
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
$11,887
|
$(21,857)
|
|
Interest
expense
|
(3,419)
|
(4,533)
|
|
Total other income
(expenses)
|
$8,468
|
$(26,390)
|
Foreign
Exchange Gain (Loss)
Foreign exchange
gains and losses arise from the re-measurement of Canadian dollar
monetary assets and liabilities into U.S. dollars. We have a net
Canadian dollar liability; therefore, we generally incur a foreign
exchange gain when the Canadian dollar depreciates from the period
beginning date, and a loss when the Canadian dollar appreciates.
Gains and losses arising from exchange rate fluctuations between
transaction and settlement dates for foreign currency denominated
transactions are also included in foreign exchange gains and
losses.
We incurred a
foreign exchange gain of $5,930 for the three-months ended
September 30, 2020. The Company renewed its lease for office space
in Vancouver, Canada as of August 1, 2020 for an additional 5 years
resulting in a right of use asset and an offsetting lease liability
of $CAD681,999 ($US507,753). The remeasurement of this operating
lease liability into U.S. dollars at September 30, 2020 resulted in
a foreign exchange gain as the Canadian dollar depreciated 2%
versus the U.S. dollar from the lease renewal date. This foreign
exchange gain was offset by the foreign exchange re-measurement
loss arising from the Canadian dollar appreciating 2% versus the
U.S. dollar when comparing the foreign exchange rate at June 30,
2020 to the rate at September 30, 2020. We incurred a foreign
exchange loss of $543 for the same quarterly period in 2019 arising
from exchange rate fluctuations between transaction and settlement
dates for foreign currency denominated transactions.
We incurred a
foreign exchange gain of $11,887 for the nine-months ended
September 30, 2020 primarily due to the foreign exchange
re-measurement gain as the Canadian dollar depreciated 5% versus
the U.S. dollar when comparing the foreign exchange rate at
September 30, 2020 to the rate at December 31, 2019. We incurred a
foreign exchange loss of $21,857 for the comparative 2019 period
mainly attributable to the re-measurement of Canadian dollar
monetary assets and liabilities into U.S. dollars as the Canadian
dollar appreciated 2.9% versus the U.S. dollar in
2018.
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 $701 and $3,419 was incurred for the
three and nine-month periods ended September 30, 2020,
respectively, compared to $1,349 and $4,533 incurred in the same
2019 periods.
Provision
for Income Taxes
For the three and
nine-month periods ended September 30, 2020, the Company recorded
Canadian income tax expense of $751 and $2,216, respectively,
compared to $758 and $2,257 in the comparative periods in
2019.
Net
Income (Loss) for the Period
As a result of the
foregoing, the Company recognized net loss of $75,305 and $319,728
for the three and nine-month periods ended September 30, 2020
compared to net income of $155,928 and $471,345 for the three and
nine-month periods ended September 30, 2019. Basic and diluted
earnings per share were $(0.00) for the three and nine-month
periods ended September 30, 2020. Basic and diluted earnings per
share were $0.00 and $0.01 for the three and nine-month periods
ended September 30, 2019.
21
Liquidity
and Capital Resources
Our cash totaled
$678,552 at September 30, 2020, as compared with $815,487 at
December 31, 2019, a decrease of $136,935. Net cash of $1,101,397
was provided by operations for the nine-months ended September 30,
2020, primarily due to cash generated from the results of
operations excluding non-cash charges and the increase in accounts
payable, offset by the increase in accounts receivable and net
loss. Net cash used in investing activities for the nine-months
ended September 30, 2020 was $1,354,086 resulting primarily from
capitalized application software costs and the purchase of new
computer equipment. Cash provided by financing activities for the
nine-months ended September 30, 2020 was $115,754 related to the
PPP loan offset by repayment of capital lease
financing.
We have a working
capital deficit of $984,771 as of September 30, 2020, however
current liabilities include $666,516 in deferred revenue and the
expected costs necessary to realize the deferred revenue are
minimal.
Based on the
factors discussed above, we believe that our cash on hand and cash
generated from operations will be sufficient to fund our current
operations for a period of one year after issuance of these
Financial Statements. However, to implement our business plan may
require additional financing. Additional financings may come from
future equity or debt offerings that could result in dilution to
our stockholders. Further, current adverse capital and credit
market conditions could limit our access to capital. We may be
unable to raise capital or bear an unattractive cost of capital
that could reduce our financial flexibility.
ITEM 4. Controls and Procedures
Under the
supervision and with the participation of our Chairman of the Board
and Chairman of the Audit Committee, Chief Executive Officer and
Chief Financial Officer, we completed an evaluation of the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)). Based on that evaluation, we and our
management have concluded that our disclosure controls and
procedures at September 30, 2020 were effective at the reasonable
assurance level to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC, and are
designed to ensure that information required to be disclosed by us
in these reports is accumulated and communicated to our management,
as appropriate to allow timely decisions regarding required
disclosures. In the three-months ended September 30, 2020, 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.
22
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
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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.
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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.
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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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23
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.
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By:
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/s/ Keith J.
Randall
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Keith J.
Randall
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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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24
Exhibit 31.1
CERTIFICATION
I,
Keith J. Randall, certify that:
1.
I have reviewed
this Quarterly Report on Form 10-Q of Quotemedia,
Inc.;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
b)
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
Date:
November 12, 2020
By: /s/
Keith J. Randall
Keith
J. Randall
Chief
Executive Officer
Exhibit 31.2
CERTIFICATION
I,
Keith J. Randall, certify that:
1.
I have reviewed
this Quarterly Report on Form 10-Q of Quotemedia,
Inc.;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
b)
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
Date:
November 12, 2020
By: /s/
Keith J. Randall
Keith
J. Randall
Chief
Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of Quotemedia,
Inc. (the "Company") for the quarterly period ended September 30,
2020 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Keith J. Randall, Chief Executive
Officer of the Company, certify, to my best knowledge and belief,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d));
and
(2)
The information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Company.
By: /s/ Keith J. Randall
____________________
Keith
J. Randall
Chief
Executive Officer
November
12, 2020
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of Quotemedia,
Inc. (the "Company") for the quarterly period ended September 30,
2020 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Keith J. Randall, Chief Financial
Officer of the Company, certify, to my best knowledge and belief,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d));
and
(2)
The information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Company.
By: /s/
Keith J. Randall
____________________
Keith
J. Randall
Chief
Financial Officer
November
12, 2020