Annual Statements Open main menu

QUOTEMEDIA INC - Quarter Report: 2022 March (Form 10-Q)

quotemedia

 

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, 2022

 

OR

 

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

 

 

 

For the transition period _________ to _________         

  

Commission File Number: 0-28599

 

QUOTEMEDIA, INC.

(Exact name of registrant as specified in its charter)  

                

Nevada

 

91-2008633

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification Number) 

 

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

(Address of Principal Executive Offices)

 

(480) 905-7311

(Registrant’s Telephone Number, Including Area Code)

 

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

 

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

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

(Do not check if a smaller reporting company)

 

Emerging growth company

 

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

 

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

 

The Registrant has 90,477,798 shares of common stock outstanding as at May 2, 2022.

 

 

 

 

QUOTEMEDIA, INC.

 

FORM 10-Q for the Quarter Ended March 31, 2022

 

INDEX

 

 

 

 

Page

 

Part I.

Financial Information

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited):

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Series A Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the three months ended March 31, 2022 and 2021

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

 

Item 2.

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

 

14

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

19

 

 

 

 

 

 

Part II.

Other Information

 

 

 

 

 

 

 

 

Item 6.

Exhibits

 

20

 

 

 

 

 

 

Signatures

 

21

 

 

 
2

Table Of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

March 31,

2022

 

 

December 31,

2021

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$395,542

 

 

$258,705

 

Accounts receivable, net

 

 

835,409

 

 

 

624,127

 

Prepaid expenses

 

 

209,989

 

 

 

220,399

 

Other current assets

 

 

22,909

 

 

 

39,226

 

Total current assets

 

 

1,463,849

 

 

 

1,142,457

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

16,204

 

 

 

16,005

 

Property and equipment, net

 

 

3,552,189

 

 

 

3,417,977

 

Goodwill

 

 

110,000

 

 

 

110,000

 

Intangible assets

 

 

63,075

 

 

 

64,856

 

Operating lease right-of-use assets

 

 

817,148

 

 

 

829,960

 

 

 

 

 

 

 

 

 

 

Total assets

 

$6,022,465

 

 

$5,581,255

 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$2,373,264

 

 

$2,434,389

 

Deferred revenue

 

 

953,168

 

 

 

622,497

 

Current portion of operating lease liabilities

 

 

185,660

 

 

 

180,544

 

Current portion of finance lease liabilities

 

 

1,404

 

 

 

2,094

 

Total current liabilities

 

 

3,513,496

 

 

 

3,239,524

 

 

 

 

 

 

 

 

 

 

Long-term portion of operating lease liabilities

 

 

491,115

 

 

 

532,782

 

 

 

 

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

 

 

Preferred stock, 10,000,000 shares authorized: Series A Redeemable Convertible Preferred stock, $0.001 par value, 550,000 shares designated; Shares issued and outstanding: 123,685 at March 31, 2022 and December 31, 2021

 

 

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, 2022 and December 31, 2021

 

 

90,479

 

 

 

90,479

 

Additional paid-in capital

 

 

19,641,998

 

 

 

19,637,759

 

Accumulated deficit

 

 

(20,698,480)

 

 

(20,903,146)

Total stockholders’ deficit

 

 

(966,003)

 

 

(1,174,908)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$6,022,465

 

 

$5,581,255

 

 

 
3

Table Of Contents

 

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

REVENUE

 

$4,263,796

 

 

$3,606,218

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

2,240,116

 

 

 

2,063,640

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

2,023,680

 

 

 

1,542,578

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

692,643

 

 

 

638,864

 

General and administrative

 

 

671,891

 

 

 

607,240

 

Software development

 

 

470,056

 

 

 

407,288

 

 

 

 

1,834,590

 

 

 

1,653,392

 

 

 

 

 

 

 

 

 

 

OPERATING PROFIT (LOSS)

 

 

189,090

 

 

 

(110,814)

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain

 

 

17,590

 

 

 

2,448

 

Interest expense

 

 

(1,224)

 

 

(1,008)

Other income (Note 8)

 

 

-

 

 

 

133,257

 

 

 

 

16,366

 

 

 

134,697

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

205,456

 

 

 

23,883

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(790)

 

 

(796)

 

 

 

 

 

 

 

 

 

NET INCOME

 

$204,666

 

 

$23,087

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$0.00

 

 

$0.00

 

Diluted earnings per share

 

$0.00

 

 

$0.00

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

90,477,798

 

 

 

90,477,798

 

Diluted

 

 

119,835,799

 

 

 

119,810,697

 

 

 
4

Table Of Contents

  

QUOTEMEDIA, INC.

CONDENSED STATEMENTS OF CHANGES IN SERIES A REDEEMABLE CONVERTIBLE

PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 (UNAUDITED)

 

 

 

Series A Redeemable

Convertible

 Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

Total Stockholders’

 

Three months ended March 31, 2022:

 

Number of

Shares

 

 

Amount

 

 

 

Number of

Shares

 

 

Amount

 

 

 Paid-in

Capital

 

 

Accumulated Deficit

 

 

 Equity

(Deficit)

 

Balance, December 31, 2021

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$19,637,759

 

 

$(20,903,146)

 

$(1,174,908)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,239

 

 

 

-

 

 

 

4,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

204,666

 

 

 

204,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2022

 

 

123,685

 

 

$2,983,857

 

 

 

90,477,798

 

 

$90,479

 

 

$19,641,998

 

 

$(20,698,480)

 

$(966,003)

 

 

 

Series A Redeemable

Convertible

 Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 Total

Stockholders’

 

Three months ended March 31, 2021:

 

Number of

Shares

 

 

Amount

 

 

 

Number of

Shares

 

 

Amount

 

 

 Paid-in

Capital

 

 

Accumulated

Deficit

 

 

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)

 

 
5

Table Of Contents

  

QUOTEMEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$204,666

 

 

$23,087

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

487,095

 

 

 

347,788

 

Stock-based compensation expense

 

 

4,239

 

 

 

6,939

 

Gain on forgiveness of PPP loan (Note 8)

 

 

-

 

 

 

(133,257)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(211,282)

 

 

205,174

 

Prepaid expenses

 

 

10,410

 

 

 

(97,139)

Other current assets

 

 

16,317

 

 

 

75,064

 

Deposits

 

 

(199)

 

 

(208)

Accounts payable, accrued and other liabilities

 

 

(84,864)

 

 

511,619

 

Deferred revenue

 

 

330,671

 

 

 

(3,040)

Net cash provided by operating activities

 

 

757,053

 

 

 

936,027

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(13,374)

 

 

(31,059)

Purchase of intangible assets

 

 

-

 

 

 

(9,999)

Capitalized application software

 

 

(606,152)

 

 

(489,307)

Net cash used in investing activities

 

 

(619,526)

 

 

(530,365)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of finance lease obligations

 

 

(690)

 

 

(8,073)

Net cash used in financing activities

 

 

(690)

 

 

(8,073)

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

136,837

 

 

 

397,589

 

 

 

 

 

 

 

 

 

 

Cash and equivalents, beginning of period

 

 

258,705

 

 

 

417,910

 

 

 

 

 

 

 

 

 

 

Cash and equivalents, end of period

 

$395,542

 

 

$815,499

 

 

 
6

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles for interim financial statements and instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for a full year. In connection with the preparation of the condensed consolidated financial statements, the Company evaluated subsequent events after the balance sheet date of March 31, 2022 through the filing of this report.

 

As of March 31, 2022, the Company has a working capital deficit of $2,049,647. Our current liabilities include deferred revenue of $953,168. 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, 2021 contained in our Form 10-K filed with the Securities and Exchange Commission dated March 30, 2022.

 

Risks and Uncertainties

 

Recent events in the Ukraine and Russia have caused disruptions in the global financial markets. While we do not have any operations or customers in the Ukraine or Russia, we will continue to monitor the situation as a prolonged conflict could impact our business.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

a) Nature of operations

 

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

 

b) Basis of consolidation

 

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

 

c) Foreign currency translation and transactions

 

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

 

d) Allowances for doubtful accounts

 

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 $150,000 as of March 31, 2022 and December 31, 2021. Bad debt expense was $5,558 and $19,822 for the three months ended March 31, 2022 and 2021, respectively.

 

 
7

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

e) Accounting Pronouncements

 

Recently Adopted

 

There are no new recently adopted accounting pronouncements for the three months ended March 31, 2022.

 

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.

 

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. The new standard is effective for the Company for fiscal years beginning after December 15, 2023. The Company is currently assessing the timing and impact of adopting ASU 2020-06 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.

 

3. REVENUE

 

Disaggregated Revenue

 

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

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

Portfolio Management Systems:

 

 

 

 

 

 

Corporate Quotestream

 

$1,716,097

 

 

$1,454,072

 

Individual Quotestream

 

 

553,461

 

 

 

562,787

 

Interactive Content and Data APIs

 

 

1,994,238

 

 

 

1,589,359

 

Total revenue

 

$4,263,796

 

 

$3,606,218

 

 

Deferred Revenue

 

Changes in deferred revenue for the period were as follows:

 

Balance at December 31, 2021

 

$622,497

 

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

 

 

(208,768)

New deferrals, net of amounts recognized in the current period

 

 

539,390

 

Effects of foreign currency translation

 

 

49

 

Balance at March 31, 2022

 

$953,168

 

 

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.

 

 
8

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

4. RELATED PARTIES

 

The Company entered into a five-year office lease with 410734 B.C. Ltd. effective May 1, 2021 for approximately $6,500 per month. David M. Shworan is a control person of 410734 B.C. Ltd. At March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, there was $12,383 and $11,970, 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.

 

5. LEASES

 

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

 

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,

2022

 

 

December 31,

2021

 

Operating Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$817,148

 

 

$829,960

 

 

 

 

 

 

 

 

 

 

Current portion of operating lease liability

 

$185,660

 

 

$180,544

 

Long-term portion of operating lease liability

 

 

491,115

 

 

 

532,782

 

Total operating lease liability

 

$676,775

 

 

$713,326

 

 

 

 

 

 

 

 

 

 

Finance Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computer equipment on financing lease

 

$11,929

 

 

$11,929

 

Less: accumulated depreciation

 

 

11,929

 

 

 

11,929

 

Property and equipment, net

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Current portion of finance lease liability

 

 

1,404

 

 

 

2,094

 

Long-term portion of finance lease liability

 

 

-

 

 

 

-

 

Total finance lease liability

 

$1,404

 

 

$2,094

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Weighted Average Remaining Lease Term

 

 

 

 

 

 

    Operating leases

 

3.4 years

 

 

3.6 years

 

    Finance leases

 

0.5 years

 

 

0.8 years

 

Weighted Average Discount Rate

 

 

 

 

 

 

    Operating leases

 

 

9.8%

 

 

9.8%

    Finance leases

 

 

7.5%

 

 

7.5%

 

 
9

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Maturities of lease liabilities were as follows:

 

 

Year ending December 31,

 

Operating

Leases

 

 

Finance

Leases

 

2022 (excluding the three months ended March 31, 2022)

 

$182,538

 

 

$1,433

 

2023

 

 

232,736

 

 

 

-

 

2024

 

 

218,854

 

 

 

-

 

2025

 

 

146,621

 

 

 

-

 

2026

 

 

20,762

 

 

 

-

 

Total lease payments

 

 

801,511

 

 

 

1,433

 

Less imputed interest

 

 

(124,736)

 

 

(29)

Total

 

$676,775

 

 

$1,404

 

 

The components of lease expense for the three months ended March 31, 2022 and 2021 were as follows:

 

 

 

2022

 

 

2021

 

Operating lease costs:

 

 

 

 

 

 

Operating lease costs

 

$63,027

 

 

$65,627

 

Short-term lease costs

 

 

22,403

 

 

 

22,403

 

Total operating lease costs

 

$85,430

 

 

$88,030

 

 

 

 

 

 

 

 

 

 

Finance lease costs:

 

 

 

 

 

 

 

 

Amortization

 

$-

 

 

$10,595

 

Interest

 

 

35

 

 

 

142

 

Total finance lease cost

 

$35

 

 

$10,737

 

 

Supplemental cash flow information for the three months ended March 31, 2022 and 2021 related to leases was as follows:

 

 

 

2022

 

 

2021

 

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

 

 

 

 

 

 

Operating cash flows from operating leases

 

$85,820

 

 

$67,563

 

Operating cash flows from finance leases

 

 

35

 

 

 

142

 

Financing cash flows from finance leases

 

 

690

 

 

 

8,073

 

 

There were no additional right of use assets obtained in exchange for lease obligations for the three months ended March 31, 2022 and 2021.

 

6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 

a) Redeemable Convertible Preferred Stock

 

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

 

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

 

At March 31, 2022, 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, 2022 and 2021.

 

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.

 

 
10

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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, 2022 and 2021.

 

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, 2022 and 2021 was comprised as follows:

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Sales and marketing

 

$4,239

 

 

$4,239

 

General and administrative

 

 

-

 

 

 

2,700

 

Total stock-based compensation expense

 

$4,239

 

 

$6,939

 

 

Common Stock Options and Warrants

 

There were 25,772,803 common stock warrants and options outstanding at March 31, 2022 at a weighted-average grant date exercise price of $0.06. No stock options or warrants to purchase common stock were granted or exercised during the three months ended March 31, 2022 and 2021.

 

The following table summarizes our non-vested common stock option and warrant activity for the three months ended March 31, 2022:

 

 

 

Common Stock

Options

and Warrants

 

 

Weighted-

Average Grant

Date Exercise

Price

 

Non-vested at January 1, 2022

 

 

2,025,000

 

 

$0.08

 

Vested during the period

 

 

(525,000)

 

$0.04

 

Non-vested at March 31, 2022

 

 

1,500,000

 

 

$0.10

 

 

The following table summarizes the weighted average remaining contractual life and exercise price of common stock options and warrants outstanding at March 31, 2022:

 

 

 

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

 

 

 

7.3

 

 

$0.06

 

 

 

24,272,803

 

 

$0.06

 

 

 
11

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

At March 31, 2022, there was $11,274 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 0.7 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, 2022, the aggregate intrinsic value of options and warrants outstanding was 4,178,750. The aggregate intrinsic value of options and warrants exercisable was $3,998,750. 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, 2022. The probability is re-evaluated each reporting period. As of March 31, 2022, 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, 2022, there were a total of 413,493 preferred stock warrants outstanding with a weighted average remaining contractual life of 25.8 years. As of March 31, 2022, 31,250 preferred stock warrants were exercisable. No preferred stock warrants were granted or exercised for the three months ended March 31, 2022 and 2021.

 

7. EARNINGS PER SHARE

 

Basic net income per share is computed by dividing net income during the period by the weighted-average number of common shares outstanding, excluding the dilutive effects of common stock equivalents. Common stock equivalents include redeemable convertible preferred stock, stock options and warrants. Diluted net income per share is computed by dividing net income by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated using the treasury stock method by adding to the weighted shares outstanding any potential shares of common stock from outstanding redeemable convertible preferred stock, stock options and warrants that are in-the-money. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, the calculation of basic and dilutive loss per share results in the same value. The calculations for basic and diluted net income per share for the three months ended March 31, 2022 and 2021 are as follows:

 

 

 

Three months ended March 31,

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Net income

 

$204,666

 

 

$23,087

 

 

 

 

 

 

 

 

 

 

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

 

 

 

2,499,900

 

Redeemable convertible preferred stock

 

 

10,306,671

 

 

 

10,306,671

 

Stock options and warrants to purchase common stock

 

 

16,551,430

 

 

 

16,526,328

 

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

 

 

119,835,799

 

 

 

119,810,697

 

 

 

 

 

 

 

 

 

 

Net income per share – basic

 

$0.00

 

 

$0.00

 

Net income per share – diluted

 

$0.00

 

 

$0.00

 

 

 
12

Table Of Contents

 

QUOTEMEDIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

8. PAYCHECK PROTECTION PROGRAM

 

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

 

 
13

Table Of Contents

 

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, 2021 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, 2021 filed with the Securities and Exchange Commission.

 

Overview

 

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

 

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

 

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

 

Our Data Feed Services consist of raw streaming real-time market data delivered over the Internet or via dedicated telecommunication lines, 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 APIs revenue totals.

 

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

 

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

 

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

 

 
14

Table Of Contents

 

A key feature of QuoteMedia’s business model is that all of our product lines generate recurring monthly licensing revenue from each client. Contracts to license Quotestream to our corporate clients, for example, typically have a term of one to 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 APIs and Market Data Feeds are licensed for a monthly, quarterly, annual, or semi-annual subscription fee. Contracts to license our Financial Data Products and Data Feeds typically have a term of one to 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 couple years due to the 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. Most of our employees, particularly in Canada, continue to work remotely. While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the COVID-19 led some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us in the early stages of the pandemic. 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.

 

Recent events in the Ukraine and Russia have also caused disruptions in the global financial markets. While we do not have any operations or customers in the Ukraine or Russia, we will continue to monitor the situation as a prolonged conflict could impact our business.

 

In 2022 we finalized a contract with a large multinational financial institution that is retroactively effective January 1, 2022, and signed a statement of work with another large multinational financial institution to start services while their contract is being finalized. We expect this contract to be effective April 1, 2022 once finalized. The contracts are for a wide range of services that will be included in both portfolio management and interactive content and data API revenue. Based on those new contracts and our other clients currently under contract, we expect comparable revenue growth in fiscal 2022 to the 22% revenue growth we achieved in fiscal 2021. We also expect to significantly improve upon the $212,372 net income figure reported for fiscal 2021 mainly due to new contracts mentioned above as they have higher gross margins than our typical customer contracts have on average.

 

Plan of Operation

 

For the remainder of 2022 we plan to continue to expand our product lines and improve our infrastructure. We plan to continue to add more features and data to our existing products and release newer versions with improved performance and flexibility for client integration. This expansion is expected to result in both increased revenue and costs for fiscal 2022.

 

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

 

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

 

Important development projects for the remainder of 2022 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.

 

 
15

Table Of Contents

 

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

 

Critical Accounting Policies and Estimates

 

Critical Accounting Policies and Estimates

 

In the 2021 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 31,2021. Readers are encouraged to read the 2021 Annual Report in conjunction.

 

Results of Operations

 

Revenue

 

Three months ended March 31,

 

2022

 

 

2021

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Quotestream

 

$1,716,097

 

 

$1,454,072

 

 

$262,025

 

 

 

18%

Individual Quotestream

 

 

553,461

 

 

 

562,787

 

 

 

(9,326)

 

(2

%)

Total portfolio management systems

 

 

2,269,558

 

 

 

2,016,859

 

 

 

252,699

 

 

 

13%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interactive Content and Data APIs

 

 

1,994,238

 

 

 

1,589,359

 

 

 

404,879

 

 

 

25%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total subscription revenue

 

$4,263,796

 

 

$3,606,218

 

 

$657,578

 

 

 

18%

 

Total subscription revenue increased 18% when comparing the three months ended March 31, 2022 and 2021. The increase is a result of a 13% increase in revenue from licensing our Portfolio Management Systems and 25% increase in revenue from our Interactive Content and Data APIs.

 

Corporate Quotestream revenue increased 18% the three months ended March 31, 2022 from the comparative period in 2021 due to new contracts signed since the comparative period. In particular, the increase was due to the new contract we recently finalized with the large multinational financial institution discussed above in the “Business Environment and Trends” section. The increase was also due to an increase in the number of subscribers for existing clients. We have added new products over the past couple years that are continuing to gain traction in the market and we have made improvements and upgrades to our existing Portfolio Management products as we continue to improve functionality and add new data offerings. These improvements have allowed us to attract larger customers and increase the average revenue for our existing customers. Finally, we 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 decreased 2% for the three months ended March 31, 2022 from the comparative period in 2021. 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, but this increase was more than offset by a decrease in average revenue per subscriber which can fluctuate depending on exchange data selected by our subscribers.

 

Interactive Content and Data APIs revenue increased 25% when comparing the three-months ended March 31, 2022 and 2021, attributable to an increase in the number of clients and 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. In particular, the increase was due to the new contract we recently finalized with the large multinational financial institution as discussed above in the “Business Environment and Trends” section.

 

 
16

Table Of Contents

 

Cost of Revenue and Gross Profit Summary

 

Three months ended March 31,

 

2022

 

 

2021

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$2,240,116

 

 

$2,063,640

 

 

$176,476

 

 

 

9%

Gross profit

 

$2,023,680

 

 

$1,542,578

 

 

$481,102

 

 

 

31%

Gross margin %

 

 

47%

 

 

43%

 

 

 

 

 

 

 

 

 

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.

 

As a result of a major growth initiative, which included investing in infrastructure, new product development, data collection, and the expansion of our global market coverage, our cost of revenue increased 9% for the three months ended March 31, 2022 from the comparative period in 2021. We incurred increased stock exchange fees related to increased usage and new market data added since the comparative period, and increased amortization expenses associated with internally developed application software.

 

Overall, the cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage that increased to 47% for the three months ended March 31, 2022 from 43% in the comparative period. As discussed above in the “Business Environment and Trends” section, we finalized a new contract with a large multinational financial institution. This contract has higher gross margins than our other customer contracts typically have on average, resulting in a significant increase to our gross margin percentage.

 

Operating Expenses Summary

 

Three months ended March 31,

 

2022

 

 

2021

 

 

Change ($)

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$692,643

 

 

$638,864

 

 

$53,779

 

 

 

8%

General and administrative

 

 

671,891

 

 

 

607,240

 

 

 

64,651

 

 

 

11%

Software development

 

 

470,056

 

 

 

407,288

 

 

 

62,768

 

 

 

15%

Total operating expenses

 

$1,834,590

 

 

$1,653,392

 

 

$181,198

 

 

 

11%

 

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 8% when comparing the three months ended March 31, 2022 and 2021. The increase is a result of additional sales personnel hired to support our product growth initiatives.

 

General and Administrative

 

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative expenses increased 11% when comparing the three months ended March 31, 2022 and 2021. The increase is a result of additional personnel and other costs incurred to support our growth initiatives, and in particular the costs associated with obtaining SOC2 Type II certification. SOC2 certification provides independent assurance that an organization maintains a high level of information security, data integrity and business resiliency. We expect to achieve SOC2 Type II certification in late 2022.

 

Software Development

 

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

 

Software development expenses increased 15% for the three months ended March 31, 2022 when compared to the same period in 2021, primarily due to new personnel hired since the comparative period to improve our infrastructure, security, and business continuity management.

 

We capitalized $606,152 of development costs for the three months ended March 31, 2022 compared to $489,306 in the same period in 2021. 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.

 

 
17

Table Of Contents

 

Other Income and (Expense) Summary

 

Three months ended March 31,

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Foreign exchange gain

 

$17,590

 

 

$2,448

 

Interest expense

 

 

(1,224)

 

 

(1,008)

Other income

 

 

-

 

 

 

133,257

 

Total other income and (expenses), net

 

$16,366

 

 

$134,697

 

 

Foreign Exchange Gain

 

We incurred foreign exchange gains of $17,590 and $2,448 for the three months ended March 31, 2022 and 2021, 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 $1,224 was incurred for the three months ended March 31, 2022, compared to $1,008 incurred in the same 2021 period.

 

Other Income

 

There was no other income for the three months ended March 31, 2022. 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 in the 2021 comparative period. See Financial Statement Note 8 “Paycheck Protection Program”.

 

Provision for Income Taxes

 

For the three months ended March 31, 2022, the Company recorded Canadian income tax expense of $790 compared to $796 in the comparative period in 2021.

 

Net Income for the Period

 

As a result of the foregoing, our net income for the three months ended March 31, 2022 was $204,666 compared to $23,087 for the three months ended March 31, 2021. Basic and diluted earnings per share were $0.00 for the three months ended March 31, 2022 and 2021.

 

Liquidity and Capital Resources

 

Our cash totaled $395,542 at March 31, 2022, as compared with $258,705 at December 31, 2021, an increase of $136,837. Net cash of $757,053 was provided by operations for the three months ended March 31, 2022, primarily due to the net income during the period adjusted for non-cash charges and the increase in deferred revenue, offset by an increase in accounts receivable and a decrease in accounts payable. Net cash used in investing activities for the three months ended March 31, 2022 was $619,526 resulting primarily from capitalized application software costs. Cash used in financing activities for the three months ended March 31, 2022 was $690 related to the repayment of finance leases.

 

We typically operate with a working capital deficit. As of March 31, 2022, our working capital deficit is $2,049,647, however current liabilities include $953,168 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 2023. 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.

 

 
18

Table Of Contents

 

Preferred Stock Redemption Rights

 

At March 31, 2022, 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 32% of our consolidated revenue and 34% 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, 2022 and December 31, 2021, 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, 2022 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, 2022, 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.

 

 
19

Table Of Contents

 

PART II - OTHER INFORMATION

 

ITEM 6. EXHIBITS

 

Exhibit Number

 

Description of Exhibit

31.1

 

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.

31.2

 

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.

32.1

 

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 
20

Table Of Contents

 

SIGNATURES

 

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

 

QUOTEMEDIA, INC.

 

By:  

/s/ Keith J. Randall

 

 

Keith J. Randall

 

 

Chief Executive Officer and Chief Financial Officer

 

 

(Duly authorized officer and principal financial officer)

 

 

Dated: May 13, 2022

 

 
21