QUOTEMEDIA INC - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 (Mark one)

☑

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

For the quarterly period ended March 31, 2021

OR

 

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

For the transition period _________ to _________                    

    

 

QUOTEMEDIA, INC.

 (Exact name of registrant as specified in its charter)

 

Nevada	91-2008633
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification Number)

17100 East Shea Boulevard, Suite 230, Fountain Hills, AZ 85268

(Address of Principal Executive Offices)

 

(480) 905-7311

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☑
	Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐   No ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.    ☐

The Registrant has 90,477,798 shares of common stock outstanding as at May 3, 2021.

 

 

QUOTEMEDIA, INC.

 

FORM 10-Q for the Quarter Ended March 31, 2021

 

INDEX

 

		Page
Part I.	Financial Information
Item 1.	Financial Statements (unaudited):	3
	Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Changes in Series A Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the three months ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 4.	Controls and Procedures	21
Part II.	Other Information
Item 6.	Exhibits	22
Signatures		23

 

 

PART I-FINANCIAL INFORMATION

 

 Item 1.    Financial Statements

 

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

	March 31, 2021	December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$815,499	$417,910
Accounts receivable, net	493,160	698,334
Prepaid expenses	205,616	108,477
Other current assets	38,762	113,826
Total current assets	1,553,037	1,338,547
Deposits	16,094	15,886
Property and equipment, net	2,929,832	2,755,537
Goodwill	110,000	110,000
Intangible assets	70,196	61,914
Operating lease right-of-use assets	642,470	671,402
Total assets	$5,321,629	$4,953,286
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$2,552,890	$2,026,741
Deferred revenue	541,862	544,902
Current portion of operating lease liabilities	151,379	164,843
Current portion of finance lease liabilities	4,560	11,951
Total current liabilities	3,250,691	2,748,437
Paycheck Protection Program loan (Note 8)	-	133,257
Long-term portion of operating lease liabilities	474,785	504,783
Long-term portion of finance lease liabilities	1,426	2,108
Mezzanine equity:
Series A Redeemable Convertible Preferred stock, $0.001 par value,
550,000 shares designated; Shares issued and outstanding:
123,685 at March 31, 2021 and December 31, 2020	2,983,857	2,983,857
Stockholders’ deficit:
Common stock, $0.001 par value, 150,000,000 shares authorized, shares issued and
outstanding: 90,477,798 at March 31, 2021 and December 31, 2020	90,479	90,479
Additional paid-in capital	19,612,822	19,605,883
Accumulated deficit	(21,092,431)	(21,115,518)
Total stockholders’ deficit	(1,389,130)	(1,419,156)
Total liabilities and stockholders’ deficit	$5,321,629	$4,953,286

 

 

 

	Three months ended March 31,
	2021	2020
REVENUE	$3,606,218	$2,966,584
COST OF REVENUE	2,063,640	1,499,484
GROSS PROFIT	1,542,578	1,467,100
OPERATING EXPENSES
Sales and marketing	638,864	517,480
General and administrative	607,240	650,053
Software development	407,288	425,827
	1,653,392	1,593,360
OPERATING LOSS	(110,814)	(126,260)
OTHER INCOME (EXPENSES)
Foreign exchange gain	2,448	11,206
Interest expense	(1,008)	(1,527)
Other income (Note 8)	133,257	-
	134,697	9,679
INCOME (LOSS) BEFORE INCOME TAXES	23,883	(116,581)
Income tax expense	(796)	(744)
NET INCOME (LOSS)	$23,087	$(117,325)
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share	$0.00	$(0.00)
Diluted earnings (loss) per share	$0.00	$(0.00)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	90,477,798	90,477,798
Diluted	119,810,697	90,477,798

 

 

 

	Series A Redeemable Convertible  Preferred Stock		Common Stock
	Number of Shares	Amount	Number of Shares	Amount	Additional Paid-in Capital	Accumulated Deficit	Total Stockholders’ Equity (Deficit)
Balance, December 31, 2020	123,685	$2,983,857	90,477,798	$90,479	$19,605,883	$(21,115,518)	$(1,419,156)
Stock-based compensation					6,939		6,939
Net income						23,087	23,087
Balance, March 31, 2021	123,685	$2,983,857	90,477,798	$90,479	$19,612,822	$(21,092,431)	$(1,389,130)

 

 

	Series A Redeemable Convertible  Preferred Stock		Common Stock
	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					11,991		11,991
Net loss						(117,325)	(117,325)
Balance, March 31, 2020	123,685	$2,983,857	90,477,798	$90,479	$19,580,002	$(20,586,519)	$(916,038)

 

 

 

	Three months ended March 31,
	2021	2020
OPERATING ACTIVITIES:
Net income (loss)	$23,087	$(117,325)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	347,788	305,757
Stock-based compensation expense	6,939	11,991
Gain on forgiveness of PPP loan (Note 8)	(133,257)	-
Changes in assets and liabilities:
Accounts receivable	205,174	(19,899)
Prepaid expenses	(97,139)	13,118
Other current assets	75,064	(2,824)
Deposits	(208)	(106)
Accounts payable, accrued and other liabilities	511,619	185,093
Deferred revenue	(3,040)	7,670
Net cash provided by operating activities	936,027	383,475
INVESTING ACTIVITIES:
Purchase of fixed assets	(31,059)	(33,292)
Purchase of intangible assets	(9,999)	(17,128)
Capitalized application software	(489,307)	(335,548)
Net cash used in investing activities	(530,365)	(385,968)
FINANCING ACTIVITIES:
Repayment of finance lease obligations	(8,073)	(10,216)
Net cash used in financing activities	(8,073)	(10,216)
Net increase (decrease) in cash	397,589	(12,709)
Cash and equivalents, beginning of period	417,910	815,487
Cash and equivalents, end of period	$815,499	$802,778

 

 

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles for interim financial statements and instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for a full year. In connection with the preparation of the condensed consolidated financial statements the Company evaluated subsequent events after the balance sheet date of March 31, 2021 through the filing of this report.

As of March 31, 2021, the Company has a working capital deficit of $1,697,654. Our current liabilities include deferred revenue of $541,862. The costs expected to be incurred to realize the deferred revenue in the next 12 months are minimal.

The Company has a plan in place for the next 12 months to ensure ongoing expenditures are balanced with the expected growth rate and believes cash on hand and cash generated will be sufficient to fund operations for the next 12 months. However, to implement our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

These financial statements should be read in conjunction with our financial statements and the notes thereto for the fiscal year ended December 31, 2020 contained in our Form 10-K filed with the Securities and Exchange Commission dated March 26, 2021.

 

Risks and Uncertainties

 

We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact team members, customers, suppliers, and global markets. While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the COVID-19 pandemic has led some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us. Given the dynamic nature of these circumstances, it is too early to assess the full impact of the COVID-19 pandemic on our ongoing business, results of operations, and overall future financial performance.

 

 

a) Nature of operations

 

We are a software developer and distributor of financial market data and related services to a global marketplace. We specialize in the collection, aggregation, and delivery of both delayed and real-time financial data content via the Internet. We develop and license software components that deliver dynamic content to banks, brokerage firms, financial institutions, mutual fund companies, online information and financial portals, media outlets, public companies, and corporate intranets.

 

b) Basis of consolidation

 

The consolidated financial statements include the operations of QuoteMedia, Ltd., a wholly owned subsidiary of QuoteMedia, Inc. All intercompany transactions and balances have been eliminated.

 

c) Foreign currency translation and transactions

 

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

 

 

 

 

d) Allowances for doubtful accounts

 

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company determines the allowance by reviewing the age of the receivables and assessing the anticipated ability of customers to pay. No collateral is required for any of the receivables and the Company does not usually apply financing charges to outstanding accounts receivable balances. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The allowance for doubtful accounts was $175,000 as of March 31, 2021 and December 31, 2020. Bad debt expense was $19,822 and $70,931 for the three months ended March 31, 2021 and 2020, respectively.

 

e) Accounting Pronouncements

 

Recently Adopted

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We adopted this Topic 740 on January 1, 2021. The adoption of the new tax standard did not have a material effect on our consolidated financial statements.

 

Not Yet Adopted

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which changes the impairment model for most financial assets, including accounts receivable, and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The guidance is effective for the Company for interim and annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the timing and impact of adopting ASU 2016-13 on the Company’s consolidated financial statements.

 

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

 

 

Disaggregated Revenue

 

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

 

	Three months ended March 31,
	2021	2020
Portfolio Management Systems:
Corporate Quotestream	$1,454,072	$976,917
Individual Quotestream	562,787	438,634
Interactive Content and Data Applications	1,589,359	1,551,033
Total revenue	$3,606,218	$2,966,584

 

 

 

 

Deferred Revenue

 

Changes in deferred revenue for the period were as follows:

 

Balance at December 31, 2020	$544,902
Revenue recognized in the current period from the amounts in the beginning balance	(219,903)
New deferrals, net of amounts recognized in the current period	217,232
Effects of foreign currency translation	(369)
Balance at March 31, 2021	$541,862

 

Practical Expedients 

 

As permitted under ASU 2014-09 (and related ASUs), unsatisfied performance obligations are not disclosed, as the original expected duration of substantially all of our contracts is one year or less.

 

 

The Company entered into a five-year office lease with 410734 B.C. Ltd. effective May 1, 2016 for approximately $7,365 per month. David M. Shworan is a control person of 410734 B.C. Ltd. At March 31, 2021 and December 31, 2020, there were no amounts due to 410734 B.C. Ltd.

 

The Company entered into a marketing agreement with Bravenet Web Services, Inc. (“Bravenet”) effective November 28, 2019 for approximately $2,500 per month. David M. Shworan is a control person of Bravenet. At March 31, 2021 and December 31,2020, there was $6,500 and $7,500, respectively, due to Bravenet related to this agreement. As a matter of policy all related party transactions are subject to review and approval by the Company’s Board of Directors.

 

We have operating leases for corporate offices and finance leases for certain equipment. Our leases have remaining lease terms of 1 year to 5 years. We determine if an arrangement is a lease at inception. Operating lease assets and liabilities are included in operating lease right-of-use assets and operating lease liabilities, respectively, on our consolidated balance sheets. Finance lease assets and liabilities are included in property and equipment and finance lease liabilities, respectively, on our consolidated balance sheets.

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. We elected the short-term lease exception and therefore only recognize right-of-use assets and lease liabilities for leases with a term greater than one year. When determining lease terms, we factor in options to extend or terminate leases when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases we account for the lease and non-lease components as a single lease component.

 

 

 

 

Supplemental balance sheet information related to leases was as follows:

 

	March 31, 2021	December 31, 2020
Operating Leases
Operating lease right-of-use assets	$642,470	$671,402
Current portion of operating lease liability	$151,379	$164,843
Long-term portion of operating lease liability	474,785	504,783
Total operating lease liability	$626,164	$669,626
Finance Leases
Computer equipment on financing lease	$101,049	$101,049
Less: accumulated depreciation	96,531	85,936
Property and equipment, net	$4,518	$15,113
Current portion of finance lease liability	4,560	11,951
Long-term portion of finance lease liability	1,426	2,108
Total finance lease liability	$5,986	$14,059

 

	March 31, 2021	December 31, 2020
Weighted Average Remaining Lease Term
Operating leases	4.0 years	4.1 years
Finance leases	1.2 years	0.9 years
Weighted Average Discount Rate
Operating leases	9.7%	9.7%
Finance leases	8.2%	8.8%

 

 

 

 

Maturities of lease liabilities were as follows:

 

Year ending December 31,	Operating Leases	Finance Leases
2021 (excluding the three months ended March 31, 2021)	$156,583	$4,073
2022	187,609	2,157
2023	173,279	-
2024	157,721	-
2025	84,310	-
Total lease payments	759,502	6,230
Less imputed interest	(133,338)	(244)
Total	$626,164	$5,986

 

The components of lease expense for the three months ended March 31, 2021 and 2020 were as follows:

 

	2021	2020
Operating lease costs:
Operating lease costs	$65,627	$56,956
Short-term lease costs	22,403	25,499
Total operating lease costs	$88,030	$82,455
Finance lease costs:
Amortization	$10,595	$8,763
Interest	142	949
Total finance lease cost	$10,737	$9,712

 

Supplemental cash flow information for the three months ended March 31, 2021 and 2020 related to leases was as follows:

 

	2021	2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$67,563	$54,774
Operating cash flows from finance leases	142	949

 

There were no additional right of use assets obtained in exchange for lease obligations for the three months ended March 31, 2021 and 2020.

 

 

 

 

 

a) Redeemable Convertible Preferred Stock

 

We are authorized to issue up to 10,000,000 non-designated preferred shares at the Board of Directors’ discretion.

 

A total of 550,000 shares of the Company’s Preferred Stock are designated as “Series A Redeemable Convertible Preferred Stock.” The Series A Redeemable Convertible Preferred Stock has no dividend or voting rights.

 

At March 31, 2021, 123,685 shares of Series A Redeemable Convertible Preferred Stock were outstanding. No shares of Series A Redeemable Convertible Preferred Stock were issued or redeemed during the three months ended March 31, 2021 and 2020.

 

Redemption Rights

 

Holders of Series A Redeemable Convertible Preferred Stock shall have the right to convert their shares into shares of common stock at the rate of 83.33 shares of common stock for one share of Series A Redeemable Convertible Preferred Stock, at any time following the date the closing price of a share of common stock on a securities exchange or actively traded over-the-counter market has exceeded $0.30 for ninety (90) consecutive trading days. The conversion rights are subject to the availability of authorized but unissued shares of common stock.

 

In addition, 1,000 Series A Redeemable Convertible Preferred Stock may be redeemed at the holder’s option at the liquidation value of $25 per share if the cash balance of the Company as reported at the end of each fiscal quarter exceeds $400,000.

 

In accordance with ASC 480-10-S99, because a limited number of Series A Redeemable Convertible Preferred Stock may be redeemed at the holder’s option if the above criteria are met, it was classified as mezzanine equity and not permanent equity.

 

In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to any holders of any shares of common stock, the holders of shares of Series A Redeemable Convertible Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Company’s capital stock whether such assets are capital, surplus, or earnings, an amount equal to $25.00 per share of Series A Redeemable Convertible Preferred Stock.

 

b) Common stock

 

No shares of common stock were issued during the three months ended March 31, 2021 and 2020.

 

 

 

 

c) Stock Options and Warrants

 

FASB ASC 718, Stock Compensation, requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized.

 

Total stock-based compensation expense, related to all of the Company’s stock-based awards, recognized for the three months ended March 31, 2021 and 2020 was comprised as follows:

 

	Three months ended March 31,
	2021	2020
Sales and marketing	$4,239	$9,291
General and administrative	2,700	2,700
Total stock-based compensation expense	$6,939	$11,991

 

Common Stock Options and Warrants

 

The following table summarizes our common stock option and warrant activity for the three months ended March 31, 2021:

 

	Common Stock Options and Warrants	Weighted-Average Grant Date Exercise Price
Outstanding at January 1, 2021	26,372,803	$0.06
Forfeited during the period	(600,000)	$0.04
Outstanding at March 31, 2021	25,772,803	$0.06

 

The following table summarizes our non-vested common stock option and warrant activity for the three months ended March 31, 2021:

 

	Common Stock Options and Warrants	Weighted-Average Grant Date Exercise Price
Non-vested at January 1, 2021	3,700,000	$0.08
Vested during the period	(425,000)	$0.04
Non-vested at March 31, 2021	3,275,000	$0.09

 

 

The following table summarizes the weighted average remaining contractual life and exercise price of common stock options and warrants outstanding at March 31, 2021:

 

		Common Stock Options and Warrants Outstanding						Common Stock Options and Warrants Exercisable
				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
		Number		Contractual		Exercise		Number		Exercise
		Outstanding		Life (Years)		Price		Exercisable		Price
$0.03-0.11		25,772,803		8.2		$0.06		22,497,803		$0.05

 

At March 31, 2021, there was $20,817 of unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock which is expected to be recognized over a weighted-average period of 1.6 years.

 

All stock options and warrants to purchase common stock have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant. At March 31, 2021, the aggregate intrinsic value of options and warrants outstanding was $4,075,659. The aggregate intrinsic value of options and warrants exercisable was $3,661,634. The intrinsic value of stock options and warrants are calculated as the amount by which the market price of our common stock exceeds the exercise price of the option or warrant.

 

Preferred Stock Warrants

 

Pursuant to the December 28, 2017 Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc., the Company issued Mr. Shworan warrants to purchase shares of Series A Redeemable Convertible Preferred Stock (“Compensation Preferred Stock Warrants”) in lieu of a cash salary. From the period December 28, 2017 to December 31, 2019 the Company issued a total of 31,250 Compensation Preferred Stock Warrants at an exercise price equal to $1.00 per share.

 

Also pursuant to the Compensation Agreement with Mr. Shworan, on December 28, 2017 the Company issued Mr. Shworan warrants to purchase up to 382,243 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share (“Liquidity Preferred Stock Warrant”). The Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event as defined in the Company’s Certificate of Designation of Series A Redeemable Convertible Preferred Stock. The probability of the liquidity event performance condition is not currently determinable or probable; therefore, no compensation expense has been recognized as of March 31, 2021. The probability is re-evaluated each reporting period. As of March 31, 2021, there was $9,173,832 in unrecognized stock-based compensation expense related to these Liquidity Preferred Stock Warrants. Since the Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event which is currently determined not to be probable, we are also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized.

 

As of March 31, 2021, there were a total of 413,493 preferred stock warrants outstanding with a weighted average remaining contractual life of 26.8 years. As of March 31, 2021, 31,250 preferred stock warrants were exercisable. No preferred stock warrants were exercised for the three months ended March 31, 2021 and 2020.

 

 

 

Basic net income per share is computed by dividing net income during the period by the weighted-average number of common shares outstanding, excluding the dilutive effects of common stock equivalents. Common stock equivalents include redeemable convertible preferred stock, stock options and warrants. Diluted net income per share is computed by dividing net income by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated using the treasury stock method by adding to the weighted shares outstanding any potential shares of common stock from outstanding redeemable convertible preferred stock, stock options and warrants that are in-the-money. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, the calculation of basic and dilutive loss per share results in the same value. The calculations for basic and diluted net income per share for the three months ended March 31, 2021 and 2020 are as follows:

 

	Three months ended March 31,
	2021	2020
Net income (loss)	$23,087	$(117,325)
Weighted average common shares used to calculate net income per share	90,477,798	90,477,798
Warrants to purchase redeemable convertible preferred stock	2,499,900	-
Redeemable convertible preferred stock	10,306,671	-
Stock options and warrants to purchase common stock	16,526,328	-
Weighted average common shares used to calculate diluted net income per share	119,810,697	90,477,798
Net income (loss) per share – basic	$0.00	$(0.00)
Net income (loss) per share – diluted	$0.00	$(0.00)

 

The number of shares of potentially dilutive common stock related to options, warrants and redeemable convertible preferred stock that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the three months ended March 31, 2021 and 2020 are shown below:

 

	Three months ended March 31,
	2021	2020
Warrants to purchase redeemable convertible preferred stock	-	2,499,900
Redeemable convertible preferred stock	-	10,306,671
Stock options and warrants to purchase common stock	-	14,751,112
Total potential common shares excluded	-	27,557,683

 

 

On May 4, 2020, the Company received a $133,257 loan under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides qualifying businesses with these proceeds for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The proceeds and accrued interest are forgivable after twenty-four weeks, known as the covered period, as long as the borrower uses the proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The PPP loan was forgiven in its entirety on February 19, 2021. In accordance with ASC 470, Debt, the forgiveness of the loan was recognized as other income on our consolidated statements of operations.

 

 

ITEM 2. Management’s Discussion and Analysis

 

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report. We caution readers regarding certain forward looking statements in the following discussion, elsewhere in this report, and in any other statements, made by, or on behalf of our company, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on behalf of, our company. Uncertainties and contingencies that might cause such differences include those risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2020 and other reports filed from time to time with the SEC.

 

We disclaim any obligation to update forward-looking statements. All references to “we”, “our”, “us”, or “QuoteMedia” refer to QuoteMedia, Inc., and its predecessors, operating divisions, and subsidiaries.

 

This report should be read in conjunction with our Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission.

 

Overview

 

We are a developer of financial software and a distributor of market data and research information to online brokerages, clearing firms, banks, media properties, public companies and financial service corporations worldwide. Through the aggregation of information from many direct data, news, and research sources; we offer a comprehensive range of solutions for all market-related information provisioning requirements.

 

We have three general product lines: Interactive Content and Data Applications, Data Feed Services, and Portfolio Management Systems. For financial reporting purposes, our product categories share similar economic characteristics and share costs; therefore, they are combined into one reporting segment.

 

Our Interactive Content and Data Applications consist of a suite of software applications that provide publicly traded company and market information to corporate clients via the Internet. Products include stock market quotes, fundamentals, historical and interactive charts, company news, filings, option chains, insider transactions, corporate financials, corporate profiles, screeners, market research information, investor relations provisions, level II, watch lists, and real-time quotes. All of our content solutions are completely customizable and embed directly into client Web pages for seamless integration with existing content. We are continuing to develop and launch new modules of QModTM, our new proprietary Web delivery system. QMod was created for secure market data provisioning as well as ease of integration and unlimited customization. Additionally, QMod delivers search engine optimized (SEO) ready responsive content designed to adapt on the fly when rendered on mobile devices or standard Web pages – automatically resizing and reformatting to fit the device on which it is displayed.

 

Our Data Feed Services consist of raw streaming real-time market data delivered over the Internet or via dedicated telecommunication lines, and supplemental fundamental, historical, and analytical data, keyed to the same symbology, which provides a complete market data solution offered to our customers. Currently, QuoteMedia’s Data Feed services include complete coverage of North American exchanges and over 70 exchanges worldwide. For financial reporting purposes, Data Feed Services revenue is included in the Interactive Content and Data Applications revenue totals.

 

Our Portfolio Management Systems consist of QuotestreamTM, Quotestream Mobile, Quotestream Professional, and our Web Portfolio Management systems. Quotestream Desktop is an Internet-based streaming online portfolio management system that delivers real-time and delayed market data to both consumer and corporate markets. Quotestream has been designed for syndication and private branding by brokerage, banking, and Web portal companies. Quotestream’s enhanced features and functionality – most notably tick-by-tick true streaming data, significantly enhanced charting features, and a broad range of additional research and analytical content and functionality – offer a professional-level experience to nonprofessional users.

 

 

Quotestream Professional is specifically designed for use by financial services professionals, offering exceptional coverage and functionality at extremely aggressive pricing. Quotestream Professional features broad market coverage, reliability, complete flexibility, ultra-low-latency tick-by-tick data, as well as completely customizable screens, advanced charting, comprehensive technical analysis, news and research data.

 

Quotestream Mobile is a true companion product to the Quotestream desktop products (Quotestream and Quotestream Professional) – any changes made to portfolios in either the desktop or mobile application are automatically reflected in the other.

 

A key feature of QuoteMedia’s business model is that all of our product lines generate recurring monthly licensing revenue from each client. Contracts to license Quotestream to our corporate clients, for example, typically have a term of one to three years and are automatically renewed unless notice is given at least 90 days prior to the expiration of the current license term. We also generate Quotestream revenue through individual end-user licenses on a monthly or annual subscription fee basis. Interactive Content and Data Applications and Market Data Feeds are licensed for a monthly, quarterly, annual, or semi-annual subscription fee. Contracts to license our Financial Data Products and Data Feeds typically have a term of one to three years and are automatically renewed unless notice is given 90 days prior to the expiration of the contract term.

 

Business Environment and Trends

 

The global financial markets experienced extreme volatility and disruption over the past year due to COVID-19 pandemic. While global financial markets are recovering, risk still exists therefore we will continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact team members, customers, suppliers, and global markets. In Canada, our employees are subject to restrictions on their physical movements therefore most of our workforce in Canada continue to work remotely.

 

While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the COVID-19 pandemic has led some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us. While the impact of COVID-19 appears to be diminishing, we are focused on maintaining a strong balance sheet and liquidity position and will continue to closely monitor the potential impact of COVID-19 and adjust our response going forward as circumstances dictate.

 

On May 4, 2020, the Company received a $133,257 loan under the Paycheck Protection Program (“PPP”). On February 19, 2021, the Company received forgiveness from the SBA for its PPP loan in its entirety. The Company recognized the forgiveness of the loan as other income on our consolidated statements of operations. See Financial Statement Note 8 – Paycheck Protection Program.

 

Our revenue grew 22% when comparing the quarter ended March 31, 2021 to the comparative 2020 period. Based on clients currently under contract, we expect to maintain similar revenue growth for the remainder of 2021.

 

Plan of Operation

 

For the remainder of 2021 we plan to continue to expand our product lines and improve our infrastructure. We plan to continue to add more features and data to our existing products and release newer versions with improved performance and flexibility for client integration.

 

We will maintain our focus on marketing Quotestream for deployments by brokerage firms to their retail clients and continue our expansion into the investment professional market with Quotestream Professional. We also plan to continue the growth of our Data Feed Services client base, particularly through the addition of major new international data feed coverage, as well as new data delivery products.

 

QuoteMedia will continue to focus on increasing the sales of its Interactive Content and Data Applications, particularly in the context of large-scale enterprise deployments encompassing solutions ranging across several product lines. QMod is a major component of this strategy, given the broad demand for mobile-ready, SEO-friendly Web content.

 

Important development projects for the remainder of 2021 include broad expansion of data and news coverage, including the addition of a wide array of international exchange data and news and video feeds, expansion of fixed-income coverage, and the introduction of several new and upgraded market information products.

 

 

New deployments of our trade integration capabilities, which allow our Quotestream applications to interact with our brokerage clients’ back-end trade execution and reporting platforms (enabling on-the-fly trade execution and tracking of holdings) are underway and will continue to be a priority in the coming year.

 

We are also creating new proprietary data sets, analytics, and scoring mechanisms. We are now aggregating data direct from the sources to produce data sets that are proprietary to QuoteMedia. This allows us to offer our clients new data products and lower our product costs structure as we replace some of our existing data providers with our own lower cost data.

 

Opportunistically, efforts will be made to evaluate and pursue the development of additional new products that may eventually be commercialized by our company. Although not currently anticipated, we may require additional capital to execute our proposed plan of operation. There can be no assurance that such additional capital will be available to our company on commercially reasonable terms or at all.

 

Our future performance will be subject to a number of business factors, including those beyond our control; such as a continuation of market uncertainty and evolving industry needs and preferences, as well as the level of competition and our ability to continue to successfully market our products and technology. There can be no assurance that we will be able to successfully implement our marketing strategy, continue our revenue growth, or achieve profitable operations.

 

Critical Accounting Policies and Estimates

 

In the 2020 Annual Report, we disclose our critical accounting policies and estimates upon which our financial statements are derived. There have been no material changes to these policies since December 31,2020 that are not included in Note 3 of the accompanying consolidated financial statements for the three months ended March 31, 2021. Readers are encouraged to read the 2020 Annual Report in conjunction

 

Results of Operations

Revenue

 

Three months ended March 31,	2021	2020	Change ($)	Change (%)
Corporate Quotestream	$1,454,072	$976,917	$477,155	49%
Individual Quotestream	562,787	438,634	124,153	28%
Total portfolio management systems	2,016,859	1,415,551	601,308	42%
Interactive content and data applications	1,589,359	1,551,033	38,326	2%
Total subscription revenue	$3,606,218	$2,966,584	$639,634	22%

 

Total subscription revenue increased 22% when comparing the three months ended March 31, 2021 and 2020.

 

Our total Portfolio Management System revenue increased by 42% when comparing the three months ended March 31, 2021 and 2020, due to increases in both Corporate Quotestream and Individual Quotestream revenue.

 

Corporate Quotestream revenue increased 49% for the three months ended March 31, 2021 from the comparative period in 2020 primarily due to new contracts signed since the comparative period and an increase in the number of subscribers for existing clients. The increase is attributable in part to improvements and upgrades made to our Portfolio Management products as the additional data offerings and improved functionality have contributed to the increase in our average revenue per customer. We have also been able to take advantage of new opportunities arising from the economic downturn related to COVID-19 as financial sector firms are looking for more efficient and cost-effective solutions to their data and technology needs. We also believe there has been an increase in the need for our services for customers working remotely during the pandemic, a trend we expect to continue for the foreseeable future.

 

Individual Quotestream revenue increased 28% for the three months ended March 31, 2021 from the comparative period in 2020. There was an increase in total users, which can be attributed to new marketing efforts initiated since the comparative period and more customers working remotely due to COVID-19.

 

Interactive Content and Data Application revenue increased 2% when comparing the three-months ended March 31, 2021 and 2020, mainly attributable to an increase in the average revenue per client. The launch of new products and the expansion of our data coverage have allowed us to attract new, larger clients to replace some of our smaller clients lost due to the economic hardship related to COVID-19.

 

 

Cost of Revenue and Gross Profit Summary

 

Three months ended March 31,	2021	2020	Change ($)	Change (%)
Cost of revenue	$2,063,640	$1,499,484	$564,156	38%
Gross profit	$1,542,578	$1,467,100	$75,478	5%
Gross margin %	43%	49%

 

Our cost of revenue consists of fixed and variable stock exchange fees and data feed provisioning costs. Cost of revenue also includes amortization of capitalized internal-use software costs. We capitalize the costs associated with developing new products during the application development stage.

 

We launched a major growth initiative in early 2020, investing in infrastructure, new product development, data collection, and the expansion of our global market coverage. As a result, our cost of revenue increased 38% for the three months ended March 31, 2021 from the comparative period in 2020. We incurred increased stock exchange fees related to increased usage and new market data added since the comparative period, and increased amortization expense associated with internally developed application software.

 

Overall, the cost of revenue increased as a percentage of sales, as evidenced by our gross margin percentage that decreased to 43% for the three months ended March 31, 2021 from 49% in the comparative period. Our gross margins have also been impacted by our revenue mix, as our Portfolio Management System revenue has been growing at a higher rate than our Interactive Content revenue which typically has higher gross margins.

 

Operating Expenses Summary

 

Three months ended March 31,	2021	2020	Change ($)	Change (%)
Sales and marketing	$638,864	$517,480	$121,384	23%
General and administrative	607,240	650,053	(42,813)	(7%)
Software development	407,288	425,827	(18,539)	(4%)
Total operating expenses	$1,653,392	$1,593,360	$60,032	4%

 

Sales and Marketing

 

Sales and marketing consist primarily of sales and customer service salaries, investor relations, travel and advertising expenses. Sales and marketing expenses increased by 23% when comparing the three months ended March 31, 2021 and 2020. The increase is a result of additional sales personnel hired to support our growth initiative.

 

General and Administrative

 

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative expenses decreased 7% when comparing the three months ended March 31, 2021 and 2020. The decrease is primarily driven by a decrease in bad debts from the comparative period. Bad debts in the comparative period were abnormally high due to the impact of COVID-19.

 

Software Development

 

Software development expenses consist primarily of costs associated with the design, programming, and testing of our software applications during the preliminary project stage. Software development expenses also include costs incurred to maintain our software applications.

 

Software development expenses decreased 4% for the three months ended March 31, 2021 when compared to the same period in 2020, primarily due to a higher capitalization rate. We capitalized $489,306 of development costs for the three months ended March 31, 2021 compared to $335,549 in the same period in 2020. These costs relate to the development of application software used by subscribers to access, manage, and analyze information in our databases. Capitalized costs associated with application software are amortized over their estimated economic life of three years.

 

 

Other Income and (Expense) Summary

 

Three months ended March 31,	2021	2020
Foreign exchange gain (loss)	$2,448	$11,206
Interest expense	(1,008)	(1,527)
Other income	133,257	-
Total other income and (expenses), net	$134,697	$9,679

 

Foreign Exchange Gain (Loss)

 

We incurred foreign exchange gains of $2,448 and $11,206 for the three months ended March 31, 2021 and 2020, respectively. Foreign exchange gains and losses arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars and from exchange rate fluctuations between transaction and settlement dates for foreign currency denominated transactions.

 

Interest Expense

 

Interest expense relates primarily to the interest expense associated with our finance leases and was relatively unchanged from the comparative period. Interest expense of $1,008 was incurred for the three months ended March 31, 2021, compared to $1,527 incurred in the same 2020 period.

 

Other Income

 

Other income was $133,257 for the three months ended March 31, 2021. On May 4, 2020, the Company received a $133,257 loan under the Paycheck Protection Program (“PPP”). The PPP loan was forgiven in its entirety on February 19, 2021 and was recognized as other income. No other income was recognized in the comparative 2020 period. See Financial Statement Note 8 “Paycheck Protection Program”.

 

Provision for Income Taxes

 

For the three months ended March 31, 2021, the Company recorded Canadian income tax expense of $796 compared to $744 in the comparative period in 2020.

 

Net Income (Loss) for the Period

 

As a result of the foregoing, our net income for the three months ended March 31, 2021 was $23,087 compared to net loss of $117,325 for the three months ended March 31, 2020. Basic and diluted earnings per share were $0.00 for the three months ended March 31, 2021, and $(0.00) for the three months ended March 31, 2020.

 

 

Liquidity and Capital Resources

 

Our cash totaled $815,499 at March 31, 2021, as compared with $417,910 at December 31, 2020, an increase of $397,589. Net cash of $936,027 was provided by operations for the three months ended March 31, 2021, primarily due to the net income during the period adjusted for non-cash charges and the increase in accounts payable. Net cash used in investing activities for the three months ended March 31, 2021 was $530,365 resulting primarily from capitalized application software costs. Cash used in financing activities for the three months ended March 31, 2021 was $8,073 related to the repayment of capital lease financing.

 

We typically operate with a working capital deficit. As of March 31, 2021 our working capital deficit is $1,697,654, however current liabilities include $541,862 in deferred revenue and the expected costs necessary to realize the deferred revenue are minimal. If circumstances dictate, we have the flexibility to reduce development spending to maintain a strong liquidity position.

 

Based on the factors discussed above, we believe that our cash on hand and cash generated from operations will be sufficient to fund our current operations for at least the next 12 months through May 2022. However, to implement our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. Further, current adverse capital and credit market conditions could limit our access to capital. We may be unable to raise capital or bear an unattractive cost of capital that could reduce our financial flexibility.

 

Our long-term liquidity requirements will depend on many factors, including the rate at which we expand our business and whether we do so internally or through acquisitions. To the extent that the funds generated from operations are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or private financing. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

 

Preferred Stock Redemption Rights

 

At March 31, 2021, 123,685 shares of Series A Redeemable Convertible Preferred Stock were outstanding and 1,000 shares may be redeemed at the holder’s option at the liquidation value of $25 per share if the cash balance of the Company as reported at the end of each fiscal quarter exceeds $400,000. See Financial Statement Note 6 a) “Preferred shares”.

 

Foreign Exchange Risk

 

Approximately 28% of our consolidated revenue and 35% percent of our consolidated expenses are denominated in Canadian dollars; therefore, our consolidated cashflow may be impacted by foreign exchange fluctuations.

 

Off-Balance Sheet Arrangements

 

At March 31, 2021 and December 31, 2020, we did not have any unconsolidated entities or financial partnerships, or other off-balance sheet arrangements.

 

ITEM 4. Controls and Procedures

 

Under the supervision and with the participation of our Chairman of the Board and Chairman of the Audit Committee, Chief Executive Officer and Chief Financial Officer, we completed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, we and our management have concluded that our disclosure controls and procedures at March 31, 2021 were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosures. In the three months ended March 31, 2021, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

 

We will consider further actions and continue to evaluate the effectiveness of our disclosure controls and internal controls and procedures on an ongoing basis, taking corrective action as appropriate. Management does not expect that disclosure controls and procedures or internal controls can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. While management believes that its disclosure controls and procedures provide reasonable assurance that fraud can be detected and prevented, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

ExhibitNumber	Description of Exhibit
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES

 

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

 

QUOTEMEDIA, INC.

 

By:	/s/ Keith J. Randall
	Keith J. Randall
	Chief Executive Officer and Chief Financial Officer
	(Duly authorized officer and principal financial officer)

 

Dated: May 13, 2021