QUOTEMEDIA INC 10-Q

Item 1. Financial Statements QUOTEMEDIA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 271,696 $ 417,910 Accounts receivable, net 683,849 698,334 Prepaid expenses 236,642 108,477 Other current assets 38,323 113,826 Total current assets 1,230,510 1,338,547 Deposits 16,150 15,886 Property and equipment, net 3,289,262 2,755,537 Goodwill 110,000 110,000 Intangible assets 66,636 61,914 Operating lease right-of-use assets 843,973 671,402 Total assets $ 5,556,531 $ 4,953,286 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable and accrued liabilities $ 2,359,299 $ 2,026,741 Deferred revenue 753,409 544,902 Current portion of operating lease liabilities 178,767 164,843 Current portion of finance lease liabilities 2,762 11,951 Total current liabilities 3,294,237 2,748,437 Paycheck Protection Program loan (Note 8) - 133,257 Long-term portion of operating lease liabilities 578,383 504,783 Long-term portion of finance lease liabilities - 2,108 Mezzanine equity: Series A Redeemable Convertible Preferred stock, $ 0.001 par value, 550,000 shares designated; Shares issued and outstanding: 123,685 at September 30, 2021 and December 31, 2020 2,983,857 2,983,857 Stockholders’ deficit: Common stock, $ 0.001 par value, 150,000,000 shares authorized, shares issued and outstanding: 90,477,798 at September 30, 2021 and December 31, 2020 90,479 90,479 Additional paid-in capital 19,626,700 19,605,883 Accumulated deficit ( 21,017,125 ) ( 21,115,518 ) Total stockholders’ deficit (1,299,946 ) ( 1,419,156 ) Total liabilities and stockholders’ deficit $ 5,556,531 $ 4,953,286 3 Table of Contents QUOTEMEDIA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three-months ended September 30, Nine-months ended September 30, 2021 2020 2021 2020 REVENUE $ 3,818,713 $ 3,140,358 $ 11,257,949 $ 9,136,141 COST OF REVENUE 2,033,020 1,706,476 6,283,017 4,795,150 GROSS PROFIT 1,785,693 1,433,882 4,974,932 4,340,991 OPERATING EXPENSES Sales and marketing 623,821 552,960 1,882,807 1,602,501 General and administrative 650,191 555,002 1,943,162 1,817,748 Software development 411,137 405,703 1,257,470 1,246,722 1,685,149 1,513,665 5,083,439 4,666,971 OPERATING INCOME (LOSS) 100,544 ( 79,783 ) ( 108,507 ) ( 325,980 ) OTHER INCOME (EXPENSES) Foreign exchange gain 55,278 5,930 77,606 11,887 Interest expense ( 101 ) ( 701 ) ( 1,560 ) ( 3,419 ) Other income (Note 8) - - 133,257 - 55,177 5,229 209,303 8,468 NET INCOME (LOSS) BEFORE INCOME TAXES 155,721 ( 74,554 ) 100,796 ( 317,512 ) Income tax expense ( 790 ) ( 751 ) ( 2,403 ) ( 2,216 ) NET INCOME (LOSS) $ 154,931 $ ( 75,305 ) $ 98,393 $ ( 319,728 ) EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share $ 0.00 $ ( 0.00 ) $ 0.00 $ ( 0.00 ) Diluted earnings (loss) per share $ 0.00 $ ( 0.00 ) $ 0.00 $ ( 0.00 ) WEIGHTED AVERAGE SHARES OUTSTANDING Basic 90,477,798 90,477,798 90,477,798 90,477,798 Diluted 119,221,520 90,477,798 119,432,085 90,477,798 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 September 30, 2021: Number of Shares Amount Number of Shares Amount Paid-in Capital Accumulated Deficit Equity (Deficit) Balance, June 30, 2021 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,619,761 $ ( 21,172,056 ) $ ( 1,461,816 ) Stock-based compensation - - - - 6,939 - 6,939 Net income - - - - - 154,931 154,931 Balance, September 30, 2021 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,626,700 $ ( 21,017,125 ) $ ( 1,299,946 ) Series A Redeemable Convertible Preferred Stock Common Stock Additional Total Stockholders’ Nine-months ended September 30, 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 - - - - 20,817 - 20,817 Net income - - - - - 98,393 98,393 Balance, September 30, 2021 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,626,700 $ ( 21,017,125 ) $ ( 1,299,946 ) Series A Redeemable Convertible Preferred Stock Common Stock Additional Total Stockholders’ Three-months ended September 30, 2020: Number of Shares Amount Number of Shares Amount Paid-in Capital Accumulated Deficit Equity (Deficit) Balance, June 30, 2020 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,592,005 $ ( 20,713,617 ) $ ( 1,031,133 ) Stock-based compensation - - - - 6,939 - 6,939 Net loss - - - - - ( 75,305 ) ( 75,305 ) Balance, September 30, 2020 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,598,944 $ ( 20,788,922 ) $ ( 1,099,499 ) Series A Redeemable Convertible Preferred Stock Common Stock Additional Total Stockholders’ Nine-months ended September 30, 2020: Number of Shares Amount Number of Shares Amount Paid-in Capital Accumulated Deficit Equity (Deficit) Balance, December 31, 2019 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,568,011 $ ( 20,469,194 ) $ ( 810,704 ) Stock-based compensation - - - - 30,933 - 30,933 Net loss - - - - - ( 319,728 ) ( 319,728 ) Balance, September 30, 2020 123,685 $ 2,983,857 90,477,798 $ 90,479 $ 19,598,944 $ ( 20,788,922 ) $ ( 1,099,499 ) 5 Table of Contents QUOTEMEDIA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine-months ended September 30, 2021 2020 OPERATING ACTIVITIES: Net income (loss) $ 98,393 $ ( 319,728 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,182,917 971,274 Stock-based compensation expense 20,817 30,933 Gain on forgiveness of PPP loan (Note 8) ( 133,257 ) - Changes in assets and liabilities: Accounts receivable 14,485 ( 47,981 ) Prepaid expenses ( 128,165 ) ( 31,936 ) Other current assets 75,503 ( 42,470 ) Deposits ( 264 ) ( 671 ) Accounts payable, accrued and other liabilities 247,511 454,803 Deferred revenue 208,507 87,173 Net cash provided by operating activities 1,586,447 1,101,397 INVESTING ACTIVITIES: Purchase of fixed assets ( 89,627 ) ( 111,060 ) Purchase of intangible assets ( 9,999 ) ( 17,127 ) Capitalized application software ( 1,621,738 ) ( 1,225,899 ) Net cash used in investing activities ( 1,721,364 ) ( 1,354,086 ) FINANCING ACTIVITIES: Paycheck Protection Program loan - 141,257 Repayment of finance lease obligations ( 11,297 ) ( 25,503 ) Net cash provided by (used) in financing activities ( 11,297 ) 115,754 Net decrease in cash ( 146,214 ) ( 136,935 ) Cash and equivalents, beginning of period 417,910 815,487 Cash and equivalents, end of period $ 271,696 $ 678,552 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 September 30, 2021 through the filing of this report. As of September 30, 2021, the Company has a working capital deficit of $ 2,063,727 . Our current liabilities include deferred revenue of $ 753,409 . The costs expected to be incurred to realize the deferred revenue in the next 12 months are minimal. The Company has a plan in place for the next 12 months to ensure ongoing expenditures are balanced with the expected growth rate and believes cash on hand and cash generated will be sufficient to fund operations for the next 12 months. However, to implement our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us. These financial statements should be read in conjunction with our financial statements and the notes thereto for the fiscal year ended December 31, 2020 contained in our Form 10-K filed with the Securities and Exchange Commission dated March 26, 2021. Risks and Uncertainties We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact team members, customers, suppliers, and global markets. While our licensed-based revenue is generally more recurring in nature, the uncertainty caused by the COVID-19 pandemic has led some clients to delay purchasing decisions, product and service implementations or cancel or reduce spending with us. 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 period, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in earnings in the period in which they occur. d) Allowances for doubtful accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company determines the allowance by reviewing the age of the receivables and assessing the anticipated ability of customers to pay. No collateral is required for any of the receivables and the Company does not usually apply financing charges to outstanding accounts receivable balances. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The allowance for doubtful accounts was $ 175,000 as of September 30, 2021 and December 31, 2020. Bad debt expense was $ 9,866 and $ 25,664 for the three-months ended September 30, 2021 and 2020, respectively. Bad debt expense was $ 88,210 and $ 120,509 for the nine-months ended September 30, 2021 and 2020, respectively. 7 Table of Contents QUOTEMEDIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) e) Accounting Pronouncements Recently Adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We adopted this Topic 740 on January 1, 2021. The adoption of the new tax standard did not have a material effect on our consolidated financial statements. Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which changes the impairment model for most financial assets, including accounts receivable, and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The guidance is effective for the Company for interim and annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the timing and impact of adopting ASU 2016-13 on the Company’s consolidated financial statements. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. 3. REVENUE Disaggregated Revenue The Company provides market data, financial web content solutions and cloud-based applications. Our revenue by type of service consists of the following: Three-months ended September 30, Nine-months ended September 30, 2021 2020 2021 2020 Portfolio Management Systems Corporate Quotestream $ 1,665,555 $ 1,127,941 $ 4,754,698 $ 3,158,076 Individual Quotestream 571,201 485,392 1,725,404 1,379,518 Interactive Content & Data Application 1,581,957 1,527,025 4,777,847 4,598,547 Total revenue $ 3,818,713 $ 3,140,358 $ 11,257,949 $ 9,136,141 Deferred Revenue Changes in deferred revenue for the period were as follows: Balance at December 31, 2020 $ 544,902 Revenue recognized in the current period from the amounts in the beginning balance ( 392,540 ) New deferrals, net of amounts recognized in the current period 603,296 Effects of foreign currency translation ( 2,249 ) Balance at September 30, 2021 $ 753,409 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 $ 6,800 per month. David M. Shworan is a control person of 410734 B.C. Ltd. At September 30, 2021 and December 31, 2020, there were no amounts due to 410734 B.C. Ltd. The Company entered into a marketing agreement with Bravenet Web Services, Inc. (“Bravenet”) effective November 28, 2019 for approximately $ 2,500 per month. David M. Shworan is a control person of Bravenet. At September 30, 2021 and December 31,2020, there was $ 7,500 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: September 30, 2021 December 31, 2020 Operating Leases Operating lease right-of-use assets $ 843,973 $ 671,402 Current portion of operating lease liability $ 178,767 $ 164,843 Long-term portion of operating lease liability 578,383 504,783 Total operating lease liability $ 757,150 $ 669,626 Finance Leases Computer equipment on financing lease $ 11,929 $ 101,049 Less: accumulated depreciation 11,333 85,936 Property and equipment, net $ 596 $ 15,113 Current portion of finance lease liability 2,762 11,951 Long-term portion of finance lease liability - 2,108 Total finance lease liability $ 2,762 $ 14,059 September 30, 2021 December 31, 2020 Weighted Average Remaining Lease Term Operating leases 3.9 years 4.1 years Finance leases 1.0 years 0.9 years Weighted Average Discount Rate Operating leases 9.7 % 9.7 % Finance leases 7.5 % 8.8 % 9 Table of Contents QUOTEMEDIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Maturities of lease liabilities were as follows: Operating Leases Finance Leases 2021 (excluding the nine-months ended September 30, 2021) $ 63,554 $ 717 2022 242,018 2,151 2023 229,347 - 2024 215,455 - 2025 144,344 - Thereafter 20,441 - Total lease payments 915,159 2,868 Less imputed interest ( 158,009 ) ( 106 ) Total $ 757,150 $ 2,762 The components of lease expense for the three and nine-month periods ended September 30, 2021 and 2020 were as follows: Three-months ended September 30, Nine-months ended September 30, 2021 2020 2021 2020 Operating lease costs: Operating lease costs $ 64,215 $ 62,235 $ 195,027 $ 176,396 Short-term lease costs 29,880 20,661 67,229 71,660 Total operating lease costs $ 94,095 $ 82,896 $ 262,256 $ 248,056 Finance lease costs: Amortization $ 1,326 $ 8,763 $ 14,517 $ 26,289 Interest 233 645 381 2,415 Total finance lease costs $ 1,559 $ 9,408 $ 14,898 $ 28,704 Supplemental cash flow information for the nine-month period ended September 30, 2021 and 2020 related to leases was as follows: 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 198,147 $ 118,985 Operating cash flows from finance leases 381 2,415 Right-of-use assets obtained in exchange for lease obligations: Operating leases 233,978 507,753 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 September 30, 2021, 123,685 shares of Series A Redeemable Convertible Preferred Stock were outstanding. No shares of Series A Redeemable Convertible Preferred Stock were issued or redeemed during the three and nine-months ended September 30, 2021 and 2020. Redemption Rights Holders of Series A Redeemable Convertible Preferred Stock shall have the right to convert their shares into shares of common stock at the rate of 83.33 shares of common stock for one share of Series A Redeemable Convertible Preferred Stock, at any time following the date the closing price of a share of common stock on a securities exchange or actively traded over-the-counter market has exceeded $ 0.30 for ninety ( 90 ) consecutive trading days. The conversion rights are subject to the availability of authorized but unissued shares of common stock. 10 Table of Contents QUOTEMEDIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In addition, 1,000 Series A Redeemable Convertible Preferred Stock may be redeemed at the holder’s option at the liquidation value of $ 25 per share if the cash balance of the Company as reported at the end of each fiscal quarter exceeds $ 400,000 . In accordance with ASC 480-10-S99, because a limited number of Series A Redeemable Convertible Preferred Stock may be redeemed at the holder’s option if the above criteria are met, it was classified as mezzanine equity and not permanent equity. In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to any holders of any shares of common stock, the holders of shares of Series A Redeemable Convertible Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Company’s capital stock whether such assets are capital, surplus, or earnings, an amount equal to $ 25.00 per share of Series A Redeemable Convertible Preferred Stock. b) Common stock No shares of common stock were issued during the three and nine-months ended September 30, 2021 and 2020. c) Stock Options and Warrants FASB ASC 718, Stock Compensation , requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. Total stock-based compensation expense, related to all of the Company’s stock-based awards, recognized for the three and nine-month periods ended September 30, 2021 and 2020 was comprised as follows: Three-months ended September 30, Nine-months ended September 30, 2021 2020 2021 2020 Sales and marketing $ 4,239 $ 4,239 $ 12,717 $ 22,833 General and administrative 2,700 2,700 8,100 8,100 Stock-based compensation expense $ 6,939 $ 6,939 $ 20,817 $ 30,933 Common Stock Options and Warrants The following table summarizes our common stock option and warrant activity for the nine-months ended September 30, 2021: Common Stock Options and Warrants Weighted-Average Grant Date Exercise Price Outstanding at January 1, 2021 26,372,803 $ 0.06 Forfeited during the period ( 600,000 ) $ 0.04 Outstanding at September 30, 2021 25,772,803 $ 0.06 The following table summarizes our non-vested common stock option and warrant activity for the nine-months ended September 30, 2021: Common Stock Options and Warrants Weighted-Average Grant Date Exercise Price Non-vested at January 1, 2021 3,700,000 $ 0.08 Vested during the period ( 425,000 ) $ 0.04 Non-vested at September 30, 2021 3,275,000 $ 0.09 11 Table of Contents QUOTEMEDIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table summarizes the weighted average remaining contractual life and exercise price of common stock options and warrants outstanding at September 30, 2021: Common Stock Options and Warrants Outstanding Common Stock Options and Warrants Exercisable Weighted Average Weighted Weighted Remaining Average Average Number Contractual Exercise Number Exercise Outstanding Life (Years) Price Exercisable Price $ 0.03 - 0.11 25,772,803 7.7 $ 0.06 22,497,803 $ 0.05 At September 30, 2021, there was $ 6,939 of unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock which is expected to be recognized over a weighted-average period of 1.1 years. All stock options and warrants to purchase common stock have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant. At September 30, 2021, the aggregate intrinsic value of options and warrants outstanding was $ 3,405,566 . The aggregate intrinsic value of options and warrants exercisable was $ 3,076,691 . 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 September 30, 2021. The probability is re-evaluated each reporting period. As of September 30, 2021, there was $ 9,173,832 in unrecognized stock-based compensation expense related to these Liquidity Preferred Stock Warrants. Since the Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event which is currently determined not to be probable, we are also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized. As of September 30, 2021, there were a total of 382,243 preferred stock warrants outstanding with a weighted average remaining contractual life of 24 years. As of September 30, 2021, 31,250 preferred stock warrants were exercisable. No preferred stock warrants were exercised for the three and nine-month periods ended September 30, 2021 and 2020. 12 Table of Contents QUOTEMEDIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. INCOME (LOSS) 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 loss per share for the three and nine-month periods ended September 30, 2021 and 2020 are as follows: Three-months ended September 30, Nine-months ended September 30, 2021 2020 2021 2020 Net income (loss) $ 154,931 $ ( 75,305 ) $ 98,393 $ ( 319,728 ) Weighted average shares outstanding - basic and diluted 90,477,798 90,477,798 90,477,798 90,477,798 Stock options and warrants to purchase common stock 15,937,151 - 16,147,716 - Warrants to purchase redeemable convertible preferred stock 2,499,900 - 2,499,900 - Redeemable convertible preferred stock 10,306,671 - 10,306,671 - Weighted average shares outstanding - basic and diluted 119,221,520 90,477,798 119,432,085 90,477,798 Net income (loss) per share – basic $ 0.00 $ ( 0.00 ) $ 0.00 $ ( 0.00 ) Net income (loss) per share – diluted $ 0.00 $ ( 0.00 ) $ 0.00 $ ( 0.00 ) The number of shares of potentially dilutive common stock related to options, warrants and redeemable convertible preferred stock that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the three and nine-month periods ended September 30, 2021 and 2020 are shown below: Three-months ended September 30, Nine-months ended September 30, 2021 2020 2021 2020 Stock options and warrants to purchase common stock - 11,245,134 - 13,021,821 Warrants to purchase redeemable convertible preferred stock - 2,499,900 - 2,499,900 Redeemable convertible preferred stock - 10,306,671 - 10,306,671 Total potential common shares excluded - 24,051,705 - 25,828,392 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. 13 Table of Contents