QMCI Quotemedia Inc (QB)

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	Emerging growth company ☐

	Series A Redeemable Convertible  Preferred Stock		Common Stock
Three and six months ended June 30, 2018:	Number of Shares	Amount	Number of Shares	Amount	Additional Paid-in Capital	Accumulated Deficit	Total Stockholders’ Equity (Deficit)
Balance, December 31, 2017	127,685	$ 3,082,211	90,477,798	$ 90,479	$ 18,727,661	$ (21,526,062 )	$ (2,707,922 )
Costs associated with forgiveness of debt					(8,850 )		(8,850 )
Stock-based compensation					113,116		113,116
Net income						8,161	8,161
Balance, March 31, 2018	127,685	3,082,211	90,477,798	90,479	18,831,927	(21,517,901 )	(2,595,495 )
Stock-based compensation					113,116		113,116
Net income						112,536	112,536
Balance, June 30, 2018	127,685	$ 3,082,211	90,477,798	$ 90,479	$ 18,945,043	$ (21,405,365 )	$ (2,369,843 )

Year ending December 31,	Operating Leases	Finance Leases
2019 (excluding the six months ended June 30, 2019)	$ 95,654	$ 18,266
2020	139,063	36,531
2021	22,855	12,170
2022 and thereafter	-	2,151
Total lease payments	257,572	69,118
Less imputed interest	(18,221 )	(5,878 )
Total	$ 239,351	$ 63,240

	Three months ended June 30, 2019	Six months ended June 30, 2019
Operating lease costs:
Operating lease costs	$ 46,090	$ 92,023
Short-term lease costs	33,311	65,761
Total operating lease costs	$ 79,401	$ 157,784
Finance lease costs:
Amortization	$ 8,763	$ 17,526
Interest	1,543	3,217
Total finance lease cost	$ 10,306	$ 20,743

	Three months ended June 30, 2019	Six months ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 46,150	$ 92,307
Operating cash flows from finance leases	1,543	3,217
Financing cash flows from finance leases	8,656	15,049
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	-	307,549

Common Stock Options and Warrants

 

There were 26,372,803 common stock warrants and options outstanding at June 30, 2019. No stock options or warrants to purchase common stock were granted or exercised during the six months ended June 30, 2019 and 2018.

 

The following table summarizes our non-vested common stock option and warrant activity for the six months ended June 30, 2019:

 

	Common Stock Options and Warrants	Weighted-Average Grant Date Exercise Price
Non-vested at January 1, 2019	6,225,000	$ 0.08
Vested during the period	(200,000 )	$ 0.04
Non-vested at June 30, 2019	6,025,000	$ 0.08

	Preferred Stock Warrants	Weighted-Average Exercise Price
Outstanding at December 31, 2018	398,493	$ 1.00
Granted during the period	15,000	$ 1.00
Outstanding at June 30, 2019	413,493	$ 1.00

		Preferred Stock Warrants Outstanding						Preferred Stock Warrants Exercisable
				Weighted
		Number		Average		Weighted		Number		Weighted
		Outstanding at		Remaining		Average		Exercisable at		Average
		June 30,		Contractual		Exercise		June 30,		Exercise
		2019		Life (Years)		Price		2019		Price
$0.03-0.10		413,493		28.6		$1.00		23,750		$1.00

I TEM 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, 2018 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, 2018 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 QMod TM , 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 Quotestream TM , 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.

 

 

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

 

Business environment and trends

 

The global financial markets have experienced extreme volatility and disruption in recent years. As a result, financial institutions globally have acted to control or reduce operational spending. While in some areas the anticipated impact of current market conditions may lead to a decision to reduce demand for market data and related services, we expect overall spending on financial information services will grow modestly over the next several years.

 

The Canadian dollar depreciated 3.6% and 4.3% when comparing average exchange rates for the three and six months ended June 30, 2019 and 2018. The exchange rate fluctuation decreased both Canadian dollar revenues and expenses once translated into U.S. dollars for the three and six months ended June 30, 2019 when compared to the same periods in 2018 but had a minimal impact on our net income.

 

Our revenue grew 7% when comparing the three and six months ended June 30, 2019 to the comparative periods in 2018. Through June 30, 2019, we have experienced 14 consecutive quarters of revenue growth. We expect our positive revenue growth to continue for the remainder of 2019 and into 2020.

 

Plan of operation

 

For the remainder of 2019 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 2019 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.

 

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.

 

 

 

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Results of Operations

 

Revenue

 

Three months ended June 30,	2019	2018	Change ($)	Change (%)
Corporate Quotestream	$ 915,335	$ 881,557	$ 33,778	4 %
Individual Quotestream	473,137	466,888	6,249	1 %
Total portfolio management systems	1,388,472	1,348,445	40,027	3 %
Systems
Interactive content and data applications	1,596,374	1,450,125	146,249	10 %
Total licensing revenue	$ 2,984,846	$ 2,798,570	$ 186,276	7 %

 

Six months ended June 30,	2019	2018	Change ($)	Change (%)
Corporate Quotestream	$ 1,920,044	$ 1,747,020	$ 173,024	10 %
Individual Quotestream	924,858	944,048	(19,190 )	(2 %)
Total portfolio management systems	2,844,902	2,691,068	153,834	6 %
Systems
Interactive content and data applications	3,010,563	2,774,742	235,821	8 %
Total licensing revenue	$ 5,855,465	$ 5,465,810	$ 389,655	7 %

 

Total licensing revenue increased 7% when comparing the three and six months ended June 30, 2019 and 2018.

 

Our Portfolio Management System revenue increased by 3% and 6% when comparing the three and six-month periods ended June 30, 2019 and 2018, due to increases in Corporate Quotestream Revenue.

 

Corporate Quotestream revenue increased 4% and 10% for the three and six-month periods ended June 30, 2019 from the comparative periods in 2018 due to new contracts signed since the comparative periods and increases in the number of subscribers for existing clients.

 

Individual Quotestream revenue remained relatively unchanged from the comparative 2018 periods, increasing 1% and decreasing 2% for the three and six months ended June 30, 2019, respectively. Increases in the number of Individual Quotestream subscribers were offset by decreases in the average revenue per subscriber from the comparative periods. This was mainly due to foreign exchange fluctuations as 55% of our Individual Quotestream revenue is earned in Canadian dollars and the Canadian dollar depreciated 3.6% and 4.3% when comparing average exchange rates for the three and six months ended June 30, 2019 and 2018.

 

Interactive Content and Data Application revenue increased 10% and 8% when comparing the three and six-month periods ended June 30, 2019 and 2018, mainly due to an increase in the average revenue per client. The increase in average revenue per client is attributable to the launch of new products such as QMod, our new proprietary Web delivery system, which has allowed us to attract larger clients.

 

Cost of Revenue and Gross Profit Summary

 

Three months ended June 30,	2019	2018	Change ($)	Change (%)
Cost of revenue	$ 1,463,090	$ 1,414,269	$ 48,821	3 %
Gross profit	$ 1,521,756	$ 1,384,301	$ 137,455	10 %
Gross margin %	51 %	49 %

 

 

Six months ended June 30,	2019	2018	Change ($)	Change (%)
Cost of revenue	$ 2,925,802	$ 2,785,724	$ 140,078	5 %
Gross profit	$ 2,929,663	$ 2,680,086	$ 249,577	9 %
Gross margin %	50 %	49 %

 

 

 

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

 

Cost of revenue increased 3% and 5% when comparing the three and six-month periods ended June 30, 2019 and 2018. The increase in cost of revenue was mainly due to new and increased fees levied by our content providers. It is also due to an increase in the amortization of capitalized internal-use software costs related to the increase in capitalized development costs in 2019.

 

Overall, the cost of revenue decreased as a percentage of sales, as evidenced by our gross margin percentage which increased to 51% and 50% for the three and six months ended June 30, 2019 from 49% in the comparative 2018 periods.

 

Operating Expenses Summary

 

Three months ended June 30,	2019	2018	Change ($)	Change (%)
Sales and marketing	$ 486,401	$ 487,930	$ (1,529 )	0 %
General and administrative	524,923	500,238	24,685	5 %
Software development	298,562	284,878	13,684	5 %
Total operating expenses	$ 1,309,886	$ 1,273,046	$ 36,840	3 %

 

Six months ended June 30,	2019	2018	Change ($)	Change (%)
Sales and marketing	$ 930,000	$ 935,988	$ (5,988 )	(1 %)
General and administrative	1,046,059	1,038,593	7,466	1 %
Software development	612,190	588,658	23,532	4 %
Total operating expenses	$ 2,588,249	$ 2,563,239	$ 25,010	1 %

 

Sales and Marketing

 

Sales and marketing consists primarily of sales and customer service salaries, investor relations, travel and advertising expenses. Sales and marketing expenses remained relatively unchanged from the comparative period, decreasing 0% and 1% when compared to the three and six-month periods ended June 30, 2019 and 2018.

 

General and Administrative

 

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative expenses remained relatively unchanged from the comparative periods, increasing 5% and 1% when comparing the three and six-month periods ended June 30, 2019 and 2018.

 

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 5% and 4% for the three and six-month periods ended June 30, 2019 when compared to the same periods in 2018. The increase was mainly due to hiring additional development personnel since the comparative period.

 

We capitalized $348,528 and $660,240 of development costs for the three and six month periods ended June 30, 2019, compared to $233,893 and $430,781 for the same periods in 2018. These costs relate to the development of application software used by subscribers to access, manage, and analyze information in our databases. Capitalized costs associated with application software are amortized over their estimated economic life of six years. The increase in capitalized development costs from the comparative period is due to new projects outsourced to a third-party software development firm in 2019.

 

 

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Other Income and (Expense) Summary

 

Three months ended June 30,	2019	2018
Foreign exchange gain (loss)	$ (7,256 )	$ 4,383
Interest expense	(1,506 )	(2,328 )
Total other income and (expenses)	$ (8,762 )	$ 2,055

 

Six months ended June 30,	2019	2018
Foreign exchange gain (loss)	$ (21,314 )	$ 8,200
Interest expense	(3,184 )	(2,785 )
Total other income and (expenses)	$ (24,498 )	$ 5,415

 

Foreign Exchange Gain (Loss)

 

Foreign exchange gains and losses arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars. We have a net Canadian dollar liability; therefore, we incur a foreign exchange gain when the Canadian dollar depreciates from the period beginning date, and a loss when the Canadian dollar appreciates. Gains and losses arising from exchange rate fluctuations between transaction and settlement dates for foreign currency denominated transactions are also included in foreign exchange gains and losses.

 

The Canadian dollar appreciated 1.7% versus the U.S. dollar when comparing the foreign exchange rate at June 30, 2019 to the rate at March 31, 2019 resulting in a foreign exchange loss of $7,256 for the three months ended June 30, 2019, compared to a foreign exchange gain of $4,383 for the same period in 2018 when the Canadian dollar depreciated 2.0% versus the U.S. dollar.

 

The Canadian dollar appreciated 3.8% versus the U.S. dollar when comparing the foreign exchange rate at June 30, 2019 to the rate at December 31, 2018 resulting in a foreign exchange loss of $21,314 for the six months ended June 30, 2018, compared to a foreign exchange gain of $8,200 for the same period in 2018 when the Canadian dollar depreciated 4.6% versus the U.S. dollar.

 

Interest Expense

 

Interest expense relates primarily to the interest expense associated with our finance and operating leases. Interest expense of $1,506 and $3,184 was incurred for the three and six months ended June 30, 2019, compared to $2,328 and $2,785 incurred in the same 2018 periods. The increase in interest expense in 2019 is due mainly to the interest associated with operating leases with the adoption of ASU 2016-02, Leases effective January 1, 2019.

 

Provision for Income Taxes

 

For the three and six month periods ended June 30, 2019, the Company recorded Canadian income tax expense of $747 and $1,499 compared to $774 and $1,565 in the comparative periods in 2018.

 

Net Income for the Period

 

As a result of the foregoing, net income for the three and six months ended June 30, 2019 was $202,361 and $315,417 compared to net income of $112,536 and $120,697 for the three and six months ended June 30, 2018. Basic and diluted earnings per share were $0.00 for each of the three and six month periods ended June 30, 2019 and 2018, respectively.

 

Liquidity and Capital Resources

 

Our cash totaled $1,015,468 at June 30, 2019, as compared with $810,332 at December 31, 2018, an increase of $205,136. Net cash of $1,051,385 was provided by operations for the six months ended June 30, 2019, primarily due to the net income during the period adjusted for non-cash charges and the increase in accounts payable, offset by the increase in accounts receivable. Net cash used in investing activities for the six months ended June 30, 2019 was $797,949 resulting primarily from capitalized application software costs and the purchase of new computer equipment. Cash used in financing activities for the six months ended June 30, 2019 was $48,300 related to the redemption of 1,400 shares of preferred stock and the repayment of capital lease financing.

 

We have a working capital deficit of $564,968 as of June 30, 2019, however current liabilities include $776,564 in deferred revenue and the expected costs necessary to realize the deferred revenue are minimal.

 

Based on the factors discussed above, we believe that our cash on hand and cash generated from operations will be sufficient to fund our current operations for a period of one year after issuance of these Financial Statements. However, to implement our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. Further, current adverse capital and credit market conditions could limit our access to capital. We may be unable to raise capital or bear an unattractive cost of capital that could reduce our financial flexibility.

 

 

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I T EM 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 June 30, 2019 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 six months ended June 30, 2019, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

 

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.

 

 

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P ART II - OTHER INFORMATION

 

I T EM 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.

S IGNATURES

 

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: August 13, 2019

 

 

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