UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
2019 (State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification Number) ☑ No ☐ Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company ☑ QUOTEMEDIA, INC. Page Part I. Financial Information Item 1. Financial Statements (unaudited): Condensed Consolidated Balance Sheets at March 31, 3 4 5 Management’s Discussion and Analysis of Financial Condition and Results of Operations March 31, 2018 December 31, 2017 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Prepaid expenses Other current assets Total current assets Deposits Property and equipment, net Goodwill Intangible assets Total assets LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable and accrued liabilities Deferred revenue Current portion of capital lease obligation Total current liabilities Long-term portion of capital lease obligation Mezzanine equity: Series A Redeemable Convertible Preferred stock, $0.001 par value, 550,000 shares designated, 127,685 shares issued Stockholders’ deficit: Preferred stock, 10,000,000 shares authorized, 550,000 shares designated Common stock, $0.001 par value, 150,000,000 shares authorized, 90,477,798 shares issued and outstanding Additional paid-in capital Accumulated deficit Total stockholders’ deficit Total liabilities and stockholders’ deficit Three months ended March 31, 2018 2017 LICENSING FEES COST OF REVENUE GROSS PROFIT OPERATING EXPENSES Sales and marketing General and administrative Software development Total operating expenses OPERATING PROFIT (LOSS) OTHER INCOME (EXPENSES) Foreign exchange gain (loss) Interest expense - related party Interest expense - other Total other income (expenses) INCOME (LOSS) BEFORE INCOME TAXES Income tax expense NET INCOME (LOSS) EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share Diluted earnings (loss) per share WEIGHTED AVERAGE SHARES OUTSTANDING Basic Diluted Three months ended March 31, 2018 2017 Operating activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization Bad debt expense Stock-based compensation expense Changes in assets and liabilities: Accounts receivable Prepaid expenses Other current assets Deposits Accounts payable and amounts due to related parties Deferred revenue Net cash provided by operating activities Investing activities: Purchase of fixed assets Capitalized application software Net cash used in investing activities Net increase in cash Cash and equivalents, beginning of period Cash and equivalents, end of period Non-cash items: Purchase of fixed assets under capital lease 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. March 29, 2019. 2018. of adopting this guidance. Three months ended March 31, 2018 2017 Portfolio Management Systems: Corporate Quotestream Individual Quotestream Interactive Content and Data Applications Total revenue Balance at January 1, 2018 Revenue recognized in the current period from the amounts in the beginning balance New deferrals, net of amounts recognized in the current period Effects of foreign currency translation Balance at March 31, 2018 March 31, 2018 December 31, 2017 Computer equipment on capital lease Less: accumulated depreciation March 31, 2018 December 31, 2017 Total capital lease obligations Less amount representing interest Present value of minimum lease payments Less current portion Long-term portion 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. 2018. 2018. Three months ended March 31, 2018 2017 Sales and marketing General and administrative Development Stock-based compensation expense Weighted- Average Warrants Exercise Price Outstanding at January 1, 2018 Warrants granted Outstanding at March 31, 2018 2019: Weighted- Average Warrants Exercise Price Outstanding at January 1, 2018 Granted during the period Vested during the period Outstanding at March 31, 2018 2019 and 2018. At March 31, Three months ended March 31, 2018 2017 Net income (loss) Weighted average common shares used to calculate net income per share Stock options and warrants to purchase common stock Weighted average common shares used to calculate diluted net income per share Net income (loss) per share - basic Net income (loss) per share - diluted Three months ended March 31, 2018 2017 Stock options and warrants to purchase common stock Warrants to purchase redeemable convertible preferred stock Redeemable convertible preferred stock Total potential common shares excluded 2019. coverage, as well as new data delivery products. Three months ended March 31, 2018 2017 Change ($) Change (%) Corporate Quotestream Individual Quotestream Total Portfolio Management Systems Interactive Content and Data Applications Total Licensing Revenue 2018. period mainly due to foreign exchange fluctuations. The Canadian dollar depreciated 5.1% when comparing average exchange rates for Q1 2019 to Q1 2018 therefore decreasing Canadian dollar revenue when re-measured into U.S. dollars. system, which has allowed us to attract larger clients. Three months ended March 31, 2018 2017 Change ($) Change (%) Cost of revenue Gross profit Gross margin % 2019 and 2018. Three months ended March 31, 2018 2017 Change ($) Change (%) Sales and marketing General and administrative Software development Total operating expenses 2018. 2018. The increase in capitalized development costs from the comparative period is due to new projects outsourced to a third-party software development firm in 2019. Three months ended March 31, 2018 2017 Foreign exchange gain (loss) Interest expense – related party Interest expense - other Total other income and (expenses) 2018 period. 2018. 2018. Description of Exhibit /s/ Keith J. Randall Keith J. Randall Chief Executive Officer and Chief Financial OfficerxQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19342018¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934QUOTEMEDIA, INC.91-2008633 (Exact name of registrant as specified in its charter)Nevada91-2008633x ☑ No ☐x No☐“smaller"smaller reporting company”company" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act. (Check one):¨ ¨ ¨(Do ☐ (Do not check if a smaller reporting company)x¨x7, 2018.3, 2019. 20183 20182019 and December 31, 20172018 2018 6 Notes to Condensed Consolidated Financial Statements 67 14 15 212222 2Item 4.Controls and Procedures 19 Table of ContentsPart II.Other Information Item 6. Exhibits 20 Signatures 20 $ 465,715 $ 451,151 506,015 344,512 72,914 89,884 151,459 149,379 1,196,103 1,034,926 16,173 16,551 1,522,218 1,420,946 110,000 110,000 63,173 64,657 $ 2,907,667 $ 2,647,080 $ 1,655,121 $ 1,565,972 676,658 706,819 27,077 - 2,358,856 2,272,791 62,095 - 3,082,211 3,082,211 - - 90,479 90,479 18,831,927 18,727,661 (21,517,901 ) (21,526,062 ) (2,595,495 ) (2,707,922 ) $ 2,907,667 $ 2,647,080 3Table of Contents ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Prepaid expenses Other current assets Total current assets Deposits Property and equipment, net Goodwill Intangible assets Operating lease right-of-use assets Total assets LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable and accrued liabilities Deferred revenue Current portion of operating lease liabilities Current portion of finance lease liabilities Total current liabilities Long-term portion of operating lease liabilities Long-term portion of finance lease liabilities Mezzanine equity: Series A Redeemable Convertible Preferred stock, $0.001 par value, 550,000 shares designated, 125,885 shares issued Stockholders’ deficit: Preferred stock, 10,000,000 shares authorized, 550,000 shares designated Common stock, $0.001 par value, 150,000,000 shares authorized, 90,477,798 shares issued and outstanding Additional paid-in capital Accumulated deficit Total stockholders’ deficit Total liabilities and stockholders’ deficit $ 2,667,240 $ 2,288,453 1,371,455 1,307,629 1,295,785 980,824 448,058 394,372 538,355 532,913 303,780 244,234 1,290,193 1,171,519 5,592 (190,695 ) 3,817 (14,440 ) - (275,904 ) (457 ) (410 ) 3,360 (290,754 ) 8,952 (481,449 ) (791 ) (756 ) $ 8,161 $ (482,205 ) $ 0.00 $ (0.01 ) $ 0.00 $ (0.01 ) 90,477,798 90,477,798 101,722,932 90,477,798 4Table of Contents LICENSING FEES COST OF REVENUE GROSS PROFIT OPERATING EXPENSES Sales and marketing General and administrative Software development Total operating expenses OPERATING PROFIT OTHER INCOME (EXPENSES) Foreign exchange gain (loss) Interest expense Total other income (expenses) NET INCOME BEFORE INCOME TAXES Income tax expense NET INCOME EARNINGS PER SHARE Basic Diluted WEIGHTED AVERAGE SHARES OUTSTANDING Basic Diluted $ 8,161 $ (482,205 ) 211,751 209,830 - 30,343 113,116 15,375 (161,503 ) 111,964 16,970 15,634 (2,080 ) (8,991 ) 378 (120 ) 80,299 375,819 (30,161 ) 62,356 236,931 330,005 (25,479 ) (12,522 ) (196,888 ) (182,844 ) (222,367 ) (195,366 ) 14,564 134,639 451,151 271,700 $ 465,715 $ 406,339 $ 89,172 $ - 5Table of Contents OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Bad debt expense Stock-based compensation expense Changes in assets and liabilities: Accounts receivable Prepaid expenses Other current assets Deposits Accounts payable, accrued and other liabilities Deferred revenue Net cash provided by operating activities INVESTING ACTIVITIES: Purchase of fixed assets Capitalized application software Net cash used in investing activities FINANCING ACTIVITIES: Repayment of capital lease financing Net cash used in financing activities Net increase in cash Cash and equivalents, beginning of period Cash and equivalents, end of period Balance, December 31, 2018 Stock-based compensation Net income Balance, March 31, 2019 Balance, December 31, 2017 Costs associated with forgiveness of debt Stock-based compensation Net income Balance, March 31, 2018 20182019 through the filing of this report.For the three months ended2018,2019, the Company has a working capital deficit of $1,162,753.$726,259. Our current liabilities include deferred revenue of $676,658.$703,517. The costs expected to be incurred to realize the deferred revenue in the next 12 months are minimal.20172018 contained in our Form 10-K filed with the Securities and Exchange Commission dated April 11, 2018.company’scompany'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.6Table of Contents$120,000$100,000 as of March 31, 20182019 and December 31, 2017.May 2014, the FASB issued ASU No. 2014-09, which creates Topic 606, Revenue from Contracts with Customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance. On January 1, 2018, we adopted the guidance in ASC 606 and all the related amendments and applied the new revenue standard to all contracts using the modified retrospective method. The impact of the new revenue standard was not material and there was no adjustment required to the opening balance of our accumulated deficit. We expect the impact of the adoption of the new revenue standard to be immaterial to our net income on an ongoing basis. Refer to Note 3, “Revenue” for additional information.Not Yet AdoptedIn January 2017,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,Impairment.Impairment. This ASU simplifies the accounting for goodwill by eliminating step 2 from the goodwill impairment test. Under the new ASU, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized for the amount by which the carrying amount exceeds its fair value. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company believes that this pronouncement will have no impact on its consolidated financial statements and related disclosures.2016,2018, the FASB issued ASU 2016-15, Statement of Cash Flows2018-13,Fair Value Measurement (Topic 230): Classification of Certain Cash Receipts820), which removes, modifies and Cash Payments. This ASU addressesadds various disclosure requirements around the classification of certain cash receipts and payments in the statement of cash flowstopic in order to eliminate diversityclarify 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 practice.unrealized gains and losses for the period and unobservable inputs determining Level 3 fair value measurements will be added. This updatestandard is effective for fiscal yearsinterim and annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with2019, and early adoption is permitted. The Company is evaluating the potential impactbelieves that adoptionthis pronouncement will have no impact on its consolidated financial statements and related disclosures.February 2016,August 2018, the FASB issued ASU No. 2016-02, Leases. This ASU2018-15,Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is intendeda Service Contract, which requires a customer in a cloud computing arrangement that is a service contract to improvefollow the reporting of leasing transactionsinternal-use software guidance in Topic 350, "Intangibles - Goodwill and Other" to provide users of financial statements with more decision-useful information. This ASU will require organizations that leasedetermine which implementation costs to capitalize as assets to recognize on the balance sheet the assetsor expense as incurred. The new standard is effective for fiscal years, and liabilities for the rights and obligations created byinterim periods within those leases. The amendments in this update are effective for fiscal years, beginning after December 15, 2018, including interim periods within those fiscal years, using a modified retrospective approach.2019. Early adoption is permitted.permitted, and an entity can elect to apply the new guidance on a prospective or retrospective basis. The Company is currently evaluating the potential impact that adoption will have on its consolidated financial statements and related disclosures.7Table of Contents$ 865,463 $ 733,421 477,160 407,853 1,324,617 1,147,179 $ 2,667,240 $ 2,288,453 Portfolio Management Systems: Corporate Quotestream Individual Quotestream Interactive Content and Data Applications Total revenue $ 706,819 (319,786 ) 293,845 (4,221 ) $ 676,657 Balance at December 31, 2018 Revenue recognized in the current period from the amounts in the beginning balance New deferrals, net of amounts recognized in the current period Effects of foreign currency translation Balance at March 31, 2019 On December 28, 2017, the Company entered into Debt Exchange and Debt Forgiveness Agreements with Bravenet Web Services, Inc. (“Bravenet”), and Harrison Avenue Holdings Ltd. (“Harrison”). David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc., is a control person of Bravenet and Harrison. Also effective December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan. As a result of these agreements and transactions, all of our related party debt was eliminated effective December 28, 2017; therefore no related party interest expense was incurred for the three months ended March 31, 2018. Interest was accrued at 10% on outstanding balances owed to related parties in the comparative period resulting in $275,904 in interest expenses for the three months ended March 31, 2017. Refer to Note 6, “Stockholders’ Deficit” for additional information.8Table of Contents2018,2019, there were no amounts due to 410734 B.C. Ltd. As a matter of policy all related party transactions are subject to review and approval by the Company’s Board of Directors.CAPITAL The Company’sincludesand finance lease liabilities, respectively, on our consolidated balance sheets. following computer equipment on capital lease:$ 89,120 - 1,485 - $ 87,635 - The Company’s capital lease obligations consistpresent value of the following:$ 102,209 - 13,037 - 89,172 - 27,077 - $ 62,095 - Operating Leases Operating lease right-of-use assets Current portion of operating lease liability Long-term portion of operating lease liability Total operating lease liability Finance Leases Computer equipment on financing lease Less: accumulated depreciation Property and equipment, net Current portion of finance lease liability Long-term portion of finance lease liability Total finance lease liability Weighted Average Remaining Lease Term Operating leases 2.0 years - Finance leases 2.3 years 2.5 years Weighted Average Discount Rate Operating leases 9.7% - Finance leases 8.9% 8.9% Year ending December 31, 2019 (excluding the three months ended March 31, 2019) 2020 2021 2022 and thereafter Total lease payments Less imputed interest Total$ Operating lease costs: Operating lease costs Short-term lease costs Total operating lease costs Finance lease costs: Amortization Interest Total finance lease cost Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Right-of-use assets obtained in exchange for lease obligations: Operating leases 9Table of Contents2018, 127,6852019, 125,885 shares of Series A Redeemable Convertible Preferred Stock have been issued.were outstanding. No shares of Series A Redeemable Convertible Preferred Stock were issued or redeemed during the three months ended March 31, 20182019 and 2017.20182019 and 2017.20182019 and 20172018 was comprised as follows:$ 99,291 $ 5,375 12,700 10,000 1,125 - $ 113,116 $ 15,375 Sales and marketing General and administrative Development Stock-based compensation expense As of2018 there were a total of 26,372,803 options and warrants to purchase common stock outstanding, with a weighted average exercise price of $0.06 and a weighted average remaining contractual life of 11.1 years. As of March 31, 2018 there were a total of 18,747,803 vested and 7,625,000 non-vested options and warrants to purchase common stock with weighted average exercise prices of $0.05 and $0.07, respectively.2019. No stock options or warrants to purchase common stock were granted or exercised during the three months ended March 31, 2019 and 2018. Non-vested at January 1, 2019 Vested during the period Non-vested at March 31, 2019 Weighted Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average March 31, Contractual Exercise March 31, Exercise 2019 Life (Years) Price 2019 Price $0.03-0.10 26,372,803 10.1 $0.06 20,347,803 $0.05 20182019, there was $188,871$119,739 of unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock which is expected to be recognized over a weighted-average period of 3.583.20 years.20182019, the aggregate intrinsic value of options and warrants outstanding was $1,948,241.$2,179,426. The aggregate intrinsic value of options and warrants exercisable was $1,389,366.$1,824,301. 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.10Table of Contentsendingended March 31, 2019 and 2018. At March 31, 20182019, there was $270,000 of unrecognized compensation costs related to the 15,000 Compensation Preferred Stock Warrants granted on January 1, 20182019 which are expected to be recognized over a weighted-average period of 0.75 years.2018.2019. The probability is re-evaluated each reporting period. As of March 31, 2018,2019, there was $9,173,832 in unrecognized stock-based compensation expense related to these Liquidity Preferred Stock Warrants. Since the Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event which is currently determined not determinable orto be probable, we are also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized. Refer to Note 4, “Related Parties” for additional information.2018:383,493 $ 1.00 15,000 $ 1.00 398,493 $ 1.00 Outstanding at December 31, 2018 Granted during the period Outstanding at March 31, 2019 2018:382,243 $ 1.00 15,000 $ 1.00 (3,750 ) $ 1.00 393,493 $ 1.00 11Table of ContentsAs of March 31, 2018, a total of 393,493 preferred stock warrants were outstanding with a2019: Outstanding at December 31, 2018 Granted during the period Vested during the period Outstanding at March 31, 2019 19.8 years. As of March 31, 2018, a total of 5,000 preferred stock warrants were exercisable with a weighted average remaining contractual life of 19.8 years. outstanding at March 31, 2019: Weighted Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average March 31, Contractual Exercise March 31, Exercise 2019 Life (Years) Price 2019 Price $0.03-0.10 413,493 28.8 $1.00 20,000 $1.00 2018 or 2017.20182019, the total aggregate intrinsic value of preferred stock warrants outstanding was $9,563,832.$9,923,832. The aggregate intrinsic value of preferred stock warrants exercisable was $120,000.$480,000. The intrinsic value of our preferred stock warrants is calculated as the amount by which the liquidation value of our Series A Redeemable Convertible Preferred Stock ($25) exceeds the exercise price of the warrant ($1).20182019 and 20172018 are as follows:$ 8,161 $ (482,205 ) 90,477,798 90,477,798 11,245,134 - 101,722,932 90,477,798 $ 0.00 $ (0.01 ) $ 0.00 $ (0.01 ) 12Table of Contents Net income Weighted average common shares used to calculate net income per share Stock options and warrants to purchase common stock Weighted average common shares used to calculate diluted net income per share Net income per share - basic Net income per share - diluted 20182019 and 20172018 are shown below:4,000,000 16,372,803 1,354,113 - 10,639,991 - 15,994,104 16,372,803 13Table of Contents Stock options and warrants to purchase common stock Warrants to purchase redeemable convertible preferred stock Redeemable convertible preferred stock Total potential common shares excluded 20172018 and other reports filed from time to time with the SEC.“quotemedia”“QuoteMedia” refer to QuoteMedia, Inc., and its predecessors, operating divisions, and subsidiaries.20172018 filed with the Securities and Exchange Commission.market depth information,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,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.14Table of Contentsforoffered 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.Quotestream®,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. specifically for use by financial services professionals, offering exceptional coverage and functionality at extremely aggressive pricing. Quotestream Professional features broad market coverage, reliability, complete flexibility, ultra-low-latency tick-by-tick data, as well as completely customizable screens, advanced charting, comprehensive technical analysis, news and research data.We recently completed a financial restructuring in December 2017 that eliminated over $12 million of debt from our balance sheetreduced our annual interest expense by about $1.3 million. This restructuring has significantly improved our operating results in the first quarter of 2018, and we believe that our strengthened financial position will allow us to attract and service much larger clients.Our revenue increased 17% when comparingexpenses once translated into U.S. dollars for the three months ended March 31, 2019 when compared to the same period in 2018 and 2017.but had a minimal impact on our net income.2018,2019, we have experienced nine13 consecutive quarters of revenue growth. OurWe expect our positive revenue growth has led to an improved gross margin percentage of 49%, compared to 43% in the prior period. We expect these trends to continue for the remainder of 2018.15Table of Contents20182019 we will maintain our focus on marketing Quotestream for deployments by brokerage firms to their retail clients and continue our expansion into the investment professional market with Quotestream Professional. We also plan to continue the growth of our Data Feed Services client base, particularly through the addition of major new international data feed coverage.20182019 include broad expansion of data and news coverage, including the addition of a wide array of international exchange data and news and video feeds, (including foreign language sources), expansion of fixed-income coverage, and the introduction of several new and upgraded market information products.$ 865,463 $ 733,421 $ 132,042 18 % 477,160 407,853 69,307 17 % 1,342,623 1,141,274 201,349 18 % 1,324,617 1,147,179 177,438 15 % $ 2,667,240 $ 2,288,453 $ 378,787 17 % 16Table of ContentsThree months ended March 31, Corporate Quotestream Individual Quotestream Total portfolio management systems Interactive content and data applications Total licensing revenue 17%8% when comparing the three months ended March 31, 20182019 and 2017.18%8% when comparing the three monththree-month periods ended March 31, 20182019 and 2017,2018, due to an increase in both Corporate Quotestream Revenue, andoffset by a decrease in Individual Quotestream revenue. The increase is attributable in part to improvements and upgrades made to our Portfolio Management products.18%16% for the three monththree-month period ended March 31, 20182019 from the comparative period in 20172018 due to new contracts signed since the comparative period and increases in the number of subscribers for existing clients.increased 17%decreased 5% from the three monththree-month comparative period in 2017.2018. The increasedecrease is due to increasesa decrease in both the number of subscribers and average revenue per subscriber from the comparative periods.15%7% when comparing the three monththree-month periods ended March 31, 2019 and 2018, and 2017,mainly due to increasesan increase in both the number of clients and the average revenue per client. The increase in average revenue per client which is attributable to the launch of new products such as QMod, our new proprietary Web delivery system.$ 1,371,455 $ 1,307,629 $ 63,826 5 % $ 1,295,785 $ 980,824 $ 314,961 32 % 49 % 43 % Three months ended March 31, Cost of revenue Gross profit Gross margin % 5%7% when comparing the three monththree-month periods ended March 31, 20182019 and 2017.2018. The increase in cost of revenue was mainly due to increased variable stock exchange fees resulting from increased customer usage, as well as new and increased fees levied by our content providers.decreasedremained constant as a percentage of sales, as evidenced by our gross margin percentage ofwhich remained unchanged at 49% for the three monththree-month periods ended March 31, 2018 compared to 43% in 2017.17Table of Contents$ 448,058 $ 394,372 $ 53,686 14 % 538,355 532,913 5,442 1 % 303,780 244,234 59,546 24 % $ 1,290,193 $ 1,171,519 $ 118,674 10 % Three months ended March 31, Sales and marketing General and administrative Software development Total operating expenses increased 14%remained relatively unchanged from the comparative period, decreasing 1% when comparing the three monththree-month periods ended March 31, 20182019 and 2017. The increase was due primarily to additional sales personnel hired since comparative periods.Effective December 28, 2017, the Company entered into a new Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc. In accordance with the Compensation Agreement, the Company issued Mr. Shworan 3,750 warrants to purchase shares of Series A Redeemable Convertible Preferred Stock in lieu of a cash salary. A total of $90,000 of stock-based compensation was included in sales and marketing expenses for the three months ending March 31, 2018 related to warrants granted to Mr. Shworan, effectively offsetting the same amount of salary expense that was accrued for Mr. Shworan in the comparative period.increasing 1%decreasing 3% when comparing the three monththree-month periods ended March 31, 20182019 and 2017 due to increased recruiting costs, offset by decreases bad debt expenses.24%3% for the three monththree-month period ended March 31, 20182019 when compared to the same period in 2017.2018. The increase was mainly due to hiring additional development personnel since the comparative period.$196,888$307,506 of development costs for the three months ended March 31, 2018,2019, compared to $182,844$196,888 for the same period in 2017.2018. These costs relate to the development of application software used by subscribers to access, manage, and analyze information in our databases. Capitalized costs associated with application software are amortized over their estimated economic life of three years.18Table of Contents$ 3,817 $ (14,440 ) - (275,904 ) (457 ) (410 ) $ 3,360 $ (290,754 ) Three months ended March 31, Foreign exchange gain (loss) Interest expense Total other income and (expenses) Exchange primarily arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars. We have a net Canadian dollar liability,liability; therefore, we incur a foreign exchange gain when the Canadian dollar depreciates from the period beginning date, and a loss when the Canadian dollar appreciates.The 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.depreciated 2.5%monetary assets and liabilities into U.S. dollars, as the Canadian dollar appreciated 2.1% versus the U.S. dollar when comparing the foreign exchange rates at March 31, 20182019 to the rate at December 31, 2017. This resulted in2018. In the comparative 2018 period, we incurred a foreign exchange gain of $3,817 attributable to the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars due to the Canadian dollar depreciating 2.5% versus the U.S. dollar.compared to a foreign exchange loss of $14,440 for the same period in 2017 when the Canadian dollar appreciated 1% versus the U.S. dollar.Interest Expense – Related PartyNo related party interest expense was incurred during the three month period ended March 31, 2018.respectively. Interest expense of $275,904 inincrease relates to new financing leases entered into since the comparative 2017 period was accrued at 10% on amounts owed to related parties. On December 28, 2017, the Company entered into Debt Exchange and Debt Forgiveness Agreements with Bravenet Web Services, Inc. (“Bravenet”), and Harrison Avenue Holdings Ltd. (“Harrison”). David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet and Harrison. Also effective December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan. As a result of these agreements and transactions, all of our related party debt and its related interest expense was eliminated.three monththree-month periods ended March 31, 2018,2019, the Company recorded Canadian income tax expense of $791$752 compared to $756$791 in the comparative periods in 2017.19Table of Contents20182019 was $8,161$113,056 compared to a net lossincome of $482,205$8,161 for the three months ended March 31, 2017.2018. Basic and diluted earnings per share were $0.00 for the three months ended March 31, 2018 compared to a basic2019 and diluted $0.01 loss per share for the three months ended March 31, 2017.$465,715$966,167 at March 31, 2018,2019, as compared with $451,151$810,332 at December 31, 2017,2018, an increase of $14,564.$155,835. Net cash of $236,931$601,698 was provided by operations for the three months ended March 31, 2018,2019, primarily due to increases in accounts payable and capital lease obligations, as well as adjustmentsthe net income during the period adjusted for non-cash charges, offset by anthe decrease in accounts receivable and the increase in accounts receivable.payable. Net cash used in investing activities for the three months ended March 31, 20182019 was $222,367$439,470 resulting primarily from capitalized application software costs and the purchase of new computer equipment. There were noequipment and intangible assets. Cash used in financing activities for the three month periodmonths ended March 31, 2018.Our long-term liquidity requirements will depend2019 was $6,393 due to the repayment of capital lease financing.manythe factors including the rate at whichdiscussed above, we expandbelieve that our business,cash on hand and whether we do so internally or through acquisitions. To the extent that the fundscash generated from operations are insufficientwill be sufficient to fund our activitiescurrent 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 the long term, wedilution to our stockholders. Further, current adverse capital and credit market conditions could limit our access to capital. We may be requiredunable to raise additional funds through publiccapital or private financing. No assurance can be givenbear an unattractive cost of capital that additional financing will be available or that, if it is available, it will be on terms acceptable to us.
could reduce our financial flexibility.20Table of Contents20182019 were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosures. In the three months ended March 31, 2018,2019, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.21Table of ContentsInformationINFORMATIONExhibitNumber22Table of ContentsBy: QUOTEMEDIA, INC.Dated: May 14, 2018By:(Principal Executive Officer)By:/s/ Keith J. RandallKeith J. Randall,(Duly authorized officer and principal financial officer) (Principal Accounting Officer)23