Edgar Filing: QUOTEMEDIA INC

Form 10-KSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

x	ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2007

Commission file number 0-28599

QUOTEMEDIA, INC.

(Name of Small Business Issuer in Its Charter)

Nevada

(State of incorporation)

91-2008633

(I.R.S. Employer Identification No.)

17100 East Shea Boulevard, Suite 230, Fountain Hills, Arizona 85268 (480) 905-7311

(Address, zip code, and telephone number, including area code, of issuer’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, par value $.001 per share

Check whether the issuer is not required to file reports pursuant to Section 13or 15(d) of the Exchange Act. ¨

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 x No ¨

Check if there is no disclosure of delinquent filers in response to item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x

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

Issuer’s revenue for its most recent fiscal year: $5,569,107.

As of March 3, 2008, there were outstanding 88,763,365 shares of the issuer’s common stock, par value $.001 per share. The aggregate market value of common stock held by non-affiliates of the issuer (51,252,681 shares) based on the closing price of the issuer’s common stock as reported on the FINRA Over the Counter Bulletin Board, or OTCBB, on March 3, 2008, was $11,275,590. For purposes of this computation, all executive officers, directors, and 10% beneficial owners of the issuer are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the issuer.

Documents incorporated by reference: None

QUOTEMEDIA, INC.

ANNUAL REPORT ON FORM 10-KSB

FISCAL YEAR ENDED DECEMBER 31, 2007

TABLE OF CONTENTS


		Page

PART I

ITEM 1.	DESCRIPTION OF BUSINESS	2

ITEM 2.	DESCRIPTION OF PROPERTY	10

ITEM 3.	LEGAL PROCEEDINGS	10

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	10

PART II

ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES	11

ITEM 6.	MANAGEMENT’S DISCUSSION AND ANALYSIS	11

ITEM 7.	FINANCIAL STATEMENTS	19

ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	19

ITEM 8A.	CONTROLS AND PROCEDURES	19

ITEM 8B.	OTHER INFORMATION	20

PART III

ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT	21

ITEM 10.	EXECUTIVE COMPENSATION	23

ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	25

ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	29

ITEM 13.	EXHIBITS	30

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	31

SIGNATURES		32

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this report on Form 10-KSB that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our “expectations,” “anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future. Our actual results could differ materially from those in the forward-looking statements. Among the factors that could cause actual results to differ materially are the factors discussed in Item 1, “Description of Business - Risk Factors.”

PART I

ITEM 1.

DESCRIPTION OF BUSINESS

General

QuoteMedia, Inc. (OTCBB: QMCI) is a leading provider of financial stock market data, market news feeds, market research information, and financial software solutions to online brokerages, clearing firms, banks, financial service companies, media portals, and public corporations. We are a single source for a wide array of market information and services, including streaming stock market data feeds, research and analysis information, content applications, portfolio management systems, software products, corporate Investor Relations provisioning, news services, wireless applications, and custom development.

We have created a scalable system that aggregates, manages, and streams information from the stock exchanges, and from other information and content feeds, across both the Web and dedicated telecommunication lines. Because QuoteMedia™ is a comprehensive single source market data provider, our clients are not required to deal with multiple data vendors, many of which continue to employ outdated infrastructures and delivery technologies. This allows our clients to license comprehensive financial information applications and raw data feeds more efficiently and cost-effectively.

QuoteMedia™ offers clients the advantages of a single source for a broad range of data, information and services, including:

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Streaming Real-time Data Feeds

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Mobile/PDA Wireless Solutions

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News Feed Aggregation and Delivery

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Streaming, Dynamic Content

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Complete Portfolio Management

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Corporate Investor Relations Solutions

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Internet Data and Product Provisioning

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Custom Software Application Development

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Research Information Supply

Our array of data-delivery solutions are fast, lightweight, reliable, and easy to implement across all platforms. Our products are technologically advanced, providing a framework for quick implementation, seamless client integration and complete customization.

We are a United States reporting public company which was incorporated in the State of Nevada. Our shares are listed on the NASDAQ:OTCBB under the trading symbol QMCI. Our corporate head office is located at 17100 East Shea Boulevard, Suite 230, Fountain Hills, Arizona 85268, and our telephone number is (480) 905-7311. All references to our business operations in this report include the operations of QuoteMedia, Inc. and our operating divisions and subsidiaries.

Our website is located at www.quotemedia.com. Through our website we make available free of charge the following company information: our annual reports on Form 10-KSB; our quarterly reports on Form 10-QSB; our current reports on Form 8-K; our proxy statements; and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These reports are available as soon as reasonably practical after we electronically file these reports with the SEC. We also post on our website the charter of our Audit Committee; our Corporate Governance Guidelines; our Code of Business Conduct/Ethics and Code of Ethics for the CEO and Senior Financial Officers, and any amendments or waivers thereto; and any other corporate governance materials contemplated by SEC or applicable regulations. These documents are also available in print to any stockholder requesting a copy from our corporate secretary at our principal executive offices.

Products and Services

QuoteMedia has developed a full range of financial data and market information solutions which are licensed to our clients on a monthly, quarterly, or annual basis. Our products and services are divided into three main categories: Data Feed Services; Interactive Content and Data Applications; and Portfolio Management and Real-Time Quote Systems.

Data Feed Services

QuoteMedia offers comprehensive, ultra low latency, tick-by-tick enterprise level streaming market data feeds with complete coverage of all North American Exchanges as well as the London Stock Exchange. Data Feeds coverage includes equities, options, futures, commodities, currencies, mutual funds, and indices. Supplemental fundamental, historical, and analytical data is also available, keyed to the same symbology for a complete market data solution. The data is normalized for ease of use, and is available in a wide range of formats and delivery methods, from streaming tick-by-tick; real-time feeds delivered via dedicated telecommunications lines to XML feeds, delivering aggregated data to clients over the Internet. Data is available in real-time, delayed, as well as end of day format.

Interactive Content and Data Applications

QuoteMedia’s proprietary financial software applications comprise a unique suite of custom web technologies, encompassing customizable Java Applets, JavaScript Inserts, XML data sets and Java Servlets. These technologies combine the power and depth of established financial databases with the flexibility and efficiency of the Web to deliver customized high quality content to clients around the world. QuoteMedia financial data delivery application products and components make up a extensive product line that spans the spectrum of Quote Modules, Charts, Market Movers, News, Watch Lists, Tickers, Market Summaries, Option Chains, SEC Filings, Investor Relations Solutions, Component Fundamentals and much more. Our lightweight and fast-loading applications provide an extensive array of information in a variety of delivery vehicles. Services are purchased on a subscription basis for products ranging from fully integrated backend-compliant systems to highly portable and user friendly solutions that can be deployed in minutes to deliver robust and timely data. Our Interactive Content and Data Applications include the following:

Quote Modules – allow users to enter information and look up various data points on equities, funds, rates, currencies and the markets. Our Quote Modules provide complete market data and supplemental data coverage. This comprehensive coverage consists of fundamental data (EPS, P/E ratio, dividends, yield, shares outstanding, market cap, etc.), analytical statistics (52 wk high/low, moving averages, average volumes, moving performance numbers), historical EOD data (fully adjusted and keyed historical data), market updates, North American indices, market movers, actives, gainers, losers, Company Information (business description, address, phone, fax, auditors, officers, etc.), classification codes (sector, industry, NAICS, SIC, CIK, etc.), share statistics (shares outstanding, float, holdings, profitability, management effectiveness, short interest, short interest ratio), as well as broader market information such as bank rates and currency values. The data returned is compact, customizable, and incorporates comprehensive information, including charts, news, historical stock prices, market depth, SEC filings, insiders, financials, and other information.

Real-Time Snap Quotes – Cost-effective, customizable, instant Real-Time Quotes and Market data, Real-Time Charts, Real-Time Level II, and Real-Time Options. The Real-Time Snap Quote Service features client-controlled entitlements, comprehensive online tracking, detailed reporting capabilities, and North American Exchange Fee Capping. These features are unique to our company and result in greater efficiency and cost savings for our clients.

Market Indices – At-a-glance display of market conditions, fed directly from the major North American and International exchanges and index providers.

Charts – Markets and equity charting are available in a variety of formats. Static thumbnails or dynamic interactive charting is available to allow full market charting or individual stock performance displays, including comparisons to other equities or indices, as well as the ability to plot a wide range of technical studies.

Stock Tickers – Fully customizable vertical or horizontally scrolling tickers supply instant market information.

Stock Screeners – Allow users to filter stocks based on a wide variety of selection criteria, including sector/industry, share price, market cap, exchange, EPS, P/E ratio, etc.

News – Topic-based, sector-based and equity-based lookup of news stories and commentary relating to the markets, individual companies, or specific areas of interest.

Watch Lists – Display current values and trends for a group of user-defined equities and indices.

Market Statistics – Top gainers and losers on the day for a variety of exchanges and detailed statistical analysis of most actively traded stocks.

Investor Relations – Information on current value, historical data, charting and news, and other data related to individual public companies for investor relations information provisioning. These products provide a turnkey and self-updating Investor Relations solution for corporate websites and their investors.

Portfolio Management Systems

QuoteMedia offers four leading edge portfolio managements systems: Quotestream™ II Desktop; Quotestream™ Wireless; Quotestream™ Professional; and a Web Portfolio Management product. Each of these systems can be implemented independently, or they can be employed in conjunction with each other to provide a complete portfolio management solution for both non-professionals and professionals.

Quotestream™ II Desktop

QuoteMedia’s proprietary software, Quotestream II, is our new, unique web-delivered, embedded application providing real-time tick-by-tick streaming market quotes and research information. Coverage includes North American and LSE real-time data, NASDAQ, TSX, TSXV and LSE Level 2 data (market depth), market indices, dynamic and interactive charts, options, news and research information, as well as end of day quote data for over 35 international exchanges, in an easy-to-use and highly configurable interface.

No downloads or installations are required with this quick, lightweight and robust application. It is a sophisticated streaming portfolio management solution that can readily be embedded in any web environment, allowing users to track investments and access research data with ease.

Quotestream II has been designed specifically for syndication and private branding by brokerage, banking, and other corporate clients. It can be fully integrated into existing user registration databases, portfolio systems and on-line trading systems, thus enabling any brokerage, clearing firm, bank or other corporation to seamlessly complement their existing product offerings and differentiate themselves from their competition.

QuoteMedia corporate clients purchase volume licenses for their customers, gaining significant increases in customer attraction, retention and activity, and increased revenues as a result.

Quotestream offers the user ten portfolios, as well as market summaries, NASDAQ Level 2 data, a last-ten-trade trend meter, volume leaders, top gainers and losers, company news, insider activity, SEC Filings, research, analysts and opinions, earnings forecasts, news, stock ticker, intraday through twenty year historical charting, interactive charting, desktop pop-up alerts, and email alerts. Users may fully customize their workspaces to suit their needs. The design also offers a very simple point-and-click, and drag-and-drop navigation with little or no typing involved. Quotestream II displays in full screen mode, providing a comprehensive professional trade-style interface.

Quotestream™ Wireless

QuoteMedia’s Quotestream Wireless is a revolutionary wireless companion to the desktop product that allows users to access financial data, news, and charting in real time or delayed modes, from many different handheld devices. Users are able to access and manage their Quotestream portfolios over-the-air through a cellular telephone or PDA. Quotestream Wireless offers an extensive array of features and advanced functionality, and supports RIM BlackBerry™, PalmOne™, Sony Ericsson™, Motorola™, Nokia™ and countless other handheld devices and cellular telephones.

Quotestream Wireless can be integrated with any brokerage/clearing firm’s existing on-line trading platform without the installation of expensive Business Enterprise Servers. QuoteMedia’s Quotestream Wireless is a revolutionary wireless companion to the desktop product that allows users to access financial data, news, and charting in real time or delayed modes, from many different handheld devices.

Quotestream supports the largest selection of web based phone/pda’s of any supplier in the market. Quotestream Wireless and Quotestream Desktop are true companion products as any changes made to portfolios in either application are automatically reflected in the other.

Quotestream™ Professional

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

Quotestream Professional was created with the latest technology, making QuoteMedia’s professional application one of the most sophisticated, user friendly and dependable market data and technical analysis solution available to market professionals today. It provides true thin client access as there is no software to download, no upgrades to install, and no technical staff required. QuoteMedia Professional is accessed via the internet, avoiding expensive server and circuit infrastructure requirements.

Quotestream Professional also features Wireless access to the same portfolios and market data entitlements through your mobile device. The Desktop and Wireless applications work in a co-companion relationship, where any changes made on one device immediately transfer to the other.

Web Portfolio Manager

The Web Portfolio Manager is a user friendly yet powerful solution allowing users to track their holdings, conduct in-depth research and analyze performance for all stocks, mutual funds and indices listed on any of the major global exchanges.

The Web Portfolio Manager provides immediate web access to detailed Quote Data, Market and Company News, Charting, Depth / Level II, Filings, Historical Data, Snap Quotes and more, the Web Portfolio Manager is an efficient and economical solution for both the new and experienced investor.

The Web Portfolio Manager offers corporate clients such as banks, wealth management companies, brokerages, clearing firms and web portals an ideal opportunity to cost-effectively provide premium online portfolio management services for their investor customers.

The Web Portfolio Manager can be integrated with the Quotestream products, so that changes in any one platform are reflected across the other systems, and real-time data entitlements are consistent across the board.

New Products and Services

We introduced Quotestream II and Quotestream Professional to the market in limited release in 2007. Quotestream II is our next generation portfolio management system for non-professional users, with enhanced features and functionality compared to our original Quotestream product – most notably tick-by-tick true streaming data, significantly enhanced charting features, and a broad range of additional research and analytical content and custom functionality. Quotestream II is geared towards providing a professional level experience to non-professional users. New and upgraded versions of our interactive web-based content applications in such areas as streaming news, charting, screening, mutual funds, FOREX, and advanced research information are also in development for 2008.

Products Competitive Advantage

Our products attract a broad market base, targeting corporate clients worldwide and providing comprehensive financial data services in a wide selection of custom packages. Markets for our services include:

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Online Brokerages

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Full Service Brokerage Firms

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Banks and other Financial Institutions

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Financial Web Sites

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Web Portals

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Public Companies

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Investor Relations Firms

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Corporate Financial Intranets and Extranets

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Mutual Fund Companies

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Internet Service Providers

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Media Companies

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Publishers

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Wealth Management Companies

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Individual Traders and Investors

Our financial data services provide a sensible solution to the high up-front cost of in-house developed software. We leverage our technical talent and innovative infrastructure across multiple client platforms, thus creating an economical, efficient and scalable system that can manage and deliver information application capabilities to an unlimited number of entities from data centers and content feeds across the worldwide web and over dedicated lines. Our data feeds have among the lowest latency of any available in the market and are developed and delivered using technology that is more current than that used by many major competitors in this market. Our marketing strategy is based on the following key competitive advantages:

Superior Products – Our goal has always been to create the best products on the market. We develop all of our products in-house and take pride in creating quality applications. Our products stand out for their superior design, user-friendliness, and ease of implementation, customizability, reliability, data speed, accuracy and comprehensiveness.

Custom Development – QuoteMedia’s ability to provide complete custom design and development services differentiates us from our competitors. We are able to create custom market data applications and software architected precisely to our clients’ specifications, and the speed that we are able to take a product from concept to deliverable, truly sets us apart.

Data Speed and Quality – Our connections to the world’s exchanges for equities and derivatives have most sources of latency removed. This allows us to deliver extremely fast, accurate, and reliable data.

Single Source Provider – Clients are eager to acquire premium market data feeds, financial applications, streaming solutions, and news and research information from a single source provider. Rather than having to license applications, information and market data from multiple sources, our clients enjoy the benefits of dealing with a single comprehensive market data supplier.

Cutting Edge Data Delivery Technology - We use state-of-the-art hardware and software systems for maximum speed and efficiency. This provides us with a distinct advantage over our competitors, most of whom use outdated data delivery technologies based on legacy style data networks.

Effective Marketing – We have implemented a marketing strategy that focuses on multiple markets for our products and services, from individual non-professional end users to corporate and institutional clients and their customer bases. In furtherance of our marketing strategy, we have entered into agreements with Forbes Magazine and Equities Magazine which have resulted in the recent launch of extensive marketing and advertising campaigns, as well as online advertising on select websites.

Low Infrastructure Costs – Because of the unique technological advancements in data delivery developed by our company, our distribution model and the strategic partnerships that are in place, we have maintained very low corporate overhead. All of our development is completed in-house, resulting in significant cost efficiencies. This allows us to focus our resources on data management, data acquisition, customer satisfaction, and business development activities. Our low cost base of development and operation also allows us to maintain very competitive pricing.

Competition

Many companies provide financial market data and related information. Companies such as Bloomberg, Reuters, Thompson, Comstock, IDC (eSignal), Telekurs, Stockgroup, Financial Content and Money.net are some of the data providers in this highly competitive market place.

While there are many financial data providers, what mainly differentiates us from others is that we offer clients a comprehensive solution for stock market related information provisioning with more advanced technologies than employed by our competitors. Our diversity of technical expertise, agile responsiveness to custom corporate requirements and development needs, and proven commitment to superior delivery technologies have established QuoteMedia as a frontrunner in the financial market data industry.

QuoteMedia’s array of products benefit clients with an exceptional number of strong technical differentiators in embedded, fully private-labeled and seamlessly integrated environments which combine to offer strong market differentiation.

Trademarks, Domain Names and Intellectual Property

We own the trademarks for “Quotemedia™” and “Quotestream™” and the domain names such as www.quotemedia.com; www.quotestream.com; www.quotestream.ca; www.quotemedia.co.uk. We will continue to own and protect these key assets into the future.

We protect our other intellectual property by a combination of copyrights, trademarks and confidentiality agreements with our employees, customers and other agents.

Regulatory Issues

We are not subject to any special governmental regulation concerning our supplying of products and services to the market place and we believe we are in compliance in all material respects with all existing regulations governing other aspects of our businesses.

Employees

We currently have 40 full time employees. Our employees are not members of any union, nor have we entered into any collective bargaining agreements. We believe that our relationship with our employees is good. With a successful implementation of our business plan, we may hire additional employees during fiscal 2008 to handle anticipated growth in the areas of administration, programming, sales, marketing, and customer care.

Risk Factors

You should consider carefully the following factors, in addition to those discussed elsewhere in this report, in evaluating our company and our business.

If we are unable to maintain relationships with key suppliers and providers of market data, we would not be able to provide our services to our customers. We depend on key suppliers for the data we provide to our customers. Some of this data is exclusive to particular suppliers, such as national stock exchanges, and cannot be obtained from other suppliers. In other cases, although the data may be available from secondary sources, the secondary source may not be as adequate or reliable as the primary or preferred source, or we may not be able to obtain replacement data from an alternative supplier without undue cost and expense, if at all. We generally obtain data via license agreements. The disruption of any license agreement with a major data supplier, such as Nexa Technologies, Inc., could disrupt our operations and lead to an adverse impact on our results of operations.

A prolonged outage at one of our data centers that we share could result in reduced revenue and the loss of customers. Our customers rely on us for time-sensitive, up-to-date data that is reliably delivered. Our business is dependent on our ability to rapidly and efficiently process substantial quantities of data and transactions on our computer-based networks and systems. Our computer operations and those of our suppliers and customers are vulnerable to interruption by fire, natural disaster, power loss, telecommunications failure, terrorist attacks, acts of war, Internet failures, computer viruses and other events beyond our reasonable control. We maintain a back-up facility for our major data center that we share with Nexa Techologies, Inc. to seek to minimize the risk that any such event will disrupt operations. In addition, we maintain insurance for such events. However, the business interruption insurance we carry may not be sufficient to compensate us fully for losses or damages that may occur as a result of such events. Any such losses or damages incurred by us could have a material adverse effect on our business. Although we seek to minimize these risks through security measures, controls and a back-up data center, there can be no assurance that such efforts will be successful or effective.

A decline in activity levels in the securities markets could lower demand for our services. Our business is dependent upon the health of the financial markets as well as the financial health of the participants in those markets. Some of the financial data and information market demand is dependent upon activity levels in the securities markets while other demand is static and is not dependent on activity levels. In the event that the US or international financial markets suffer a prolonged downturn that results in a significant decline in investor activity, our revenue levels could be materially adversely affected.

Consolidation of financial services within and across industries could lower demand for our services. As consolidation occurs and synergies are achieved, the number of potential customers for our services decreases. This consolidation has two forms: consolidations within an industry, such as banking, and across industries, such as consolidations of insurance, banking and brokerage companies. When two companies that separately subscribe to or use our services combine, they may terminate or reduce duplicative subscriptions for our services or if they are billed on a usage basis, usage may decline due to synergies created by the business combination. A large number of cancellations, or lower utilization resulting from consolidations, could have a material adverse effect on our revenue.

We compete against companies with greater financial resources. We operate in highly competitive markets in which we compete with other distributors of financial and business information and related services. We expect competition to continue to be rigorous. Some of our competitors and potential competitors have significantly greater financial, technical and marketing resources than we have. These competitors may be able to expand product offerings and data content more effectively, and to respond more rapidly than us to new or emerging technologies, changes in the industry or changes in customer needs. They may also be in a position to devote greater resources to the development, promotion and sale of their products. Increased competition in the future could limit our ability to maintain or increase our market share or maintain our margins, and could have a material adverse effect on our business, financial condition or operating results.

New product offerings by competitors or new technologies could cause our services to become obsolete. We operate in an industry that is characterized by rapid and significant technological change, frequent new services, data content and coverage enhancements, and evolving industry standards. Without the timely introduction of new

services and data content and coverage enhancements, our services could become technologically obsolete or inadequate over time, in which case our revenue and operating results would suffer. We expect our competitors to continue to improve the performance of their current services, to enhance data content and coverage and to introduce new services and technologies. These competitors may adapt more quickly to new technologies, changes in the industry and changes in customers’ requirements than we can. If we fail to adequately anticipate customers’ needs and technological trends accurately, we will be unable to introduce new services into the market and our ability to compete would be materially adversely impacted. Further, if we are unsuccessful at developing and introducing new services that are appealing to customers, with acceptable prices and terms, or if any such new services are not made available in a timely manner, our ability to compete would be materially adversely impacted. In both cases our ability to generate revenue could suffer and our business and operating results could be materially adversely affected. We will need to successfully enhance or add to current services in order to effectively expand into new geographic areas. In addition, new services, data content and coverage that we may develop and introduce may not achieve market acceptance; lack of market acceptance would result in lower revenue.

We may need additional capital with which to implement our business plan and there is no agreement with any third party to provide such capital. Implementing our business plan may require additional equity or debt financing. If we require additional funding or determine it appropriate to raise additional funding in the future, there is no assurance that adequate funding, whether through additional equity financing, debt financing, or other sources, will be available when needed or on terms acceptable to us. Further, any such funding may result in significant dilution to existing stockholders. The inability to obtain sufficient funds from operations and external sources when needed would have a material adverse affect on our business, results of operations, and financial condition.

We depend on key personnel and expect to hire additional personnel. Our performance substantially depends on the services of R. Keith Guelpa, our Chief Executive Officer and President, and David M. Shworan, President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of our company. The loss of Mr. Guelpa or Mr. Shworan, or our other key employees, could have a material adverse affect on our business. Our future success will also depend in large part upon our ability to attract and retain highly skilled management, technical engineers, sales and marketing personnel, and finance and technical personnel. Competition for such personnel is intense and there can be no assurance that we will be able to attract and retain such personnel. The loss of the services of any key personnel, the inability to attract or retain qualified personnel in the future, or any delays in hiring required personnel, particularly technical engineers and sales personnel, could have a material adverse affect on our business, results of operations, and financial condition.

We may spend significant amounts of money to protect against security breaches. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our Internet operations. We may be required to expend significant capital and resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Consumer concern over Internet security has been, and could continue to be, a barrier to commercial activities requiring consumers to send their credit card information over the Internet. Computer viruses, break-ins, or other security problems could lead to misappropriation of proprietary information and interruptions, delays, or cessation in service to our customers. Moreover, until more comprehensive security technologies are developed, the security and privacy concerns of existing and potential customers may inhibit the growth of the Internet as a merchandising medium. Were these risks to occur, our business, results of operations, and financial condition could be materially adversely affected.

The success of our anticipated future growth depends upon our ability to manage successfully the growth of our proposed operations. We expect to experience significant growth in our number of employees and scope of operations. Our future success will depend upon our ability to manage successfully the expansion of our operations. Our ability to manage and support our growth effectively will depend on our ability to implement adequate improvements to financial and management controls, reporting, order entry systems, and other procedures and hire sufficient numbers of financial, accounting, administrative, and management personnel. Our expansion and the resulting growth in the number of our employees will result in increased responsibility for both existing and new management personnel. There can be no assurance that we will be able to identify, attract, and retain experienced accounting and financial personnel. Our future operating results will depend on the ability of our management and other key employees to implement and improve our systems for operations, financial control, and information management and to recruit, train, and manage our employee base. There can be no assurance that we will be able to achieve or manage any such growth successfully or to implement and maintain adequate financial and management

controls and procedures. Any inability to do so would have a material adverse effect on our business, results of operations, and financial condition. Our future success depends upon our ability to address potential market opportunities while managing our expenses to match our ability to finance operations. This need to manage our expenses will place a significant strain on our management and operational resources. If we are unable to manage our expenses effectively, our business, results of operations, and financial condition will be adversely affected.

Penny stock rules may make buying or selling our common stock difficult. Our common stock in the past has been, and from time to time in the future may be, subject to the “penny stock” rules as promulgated under the Securities Exchange Act of 1934. In the event that no exclusion from the definition of a “penny stock” under the Exchange Act is available, then any broker engaging in a transaction in our common stock will be required to provide each customer with:

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a risk disclosure document;

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disclosure of market quotations, if any;

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disclosure of the compensation of the broker-dealer and its salesperson in the transaction; and

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monthly account statements showing the market values of our securities held in the customer’s accounts.

The bid and offer quotation and compensation information must be provided prior to effecting the transaction and must be contained on the customer’s confirmation. Certain brokers are less willing to engage in transactions involving “penny stocks” as a result of the additional disclosure requirements described above, which may make it more difficult for holders of our common stock to dispose of their shares.

Investors should not expect to receive a dividend in the future. We have never paid any cash dividends on our common stock and do not currently anticipate that we will pay dividends in the foreseeable future. Instead, we intend to apply earnings to the expansion and development of our business.

ITEM 2.

DESCRIPTION OF PROPERTY.

We lease executive office space in Fountain Hills, Arizona. The term of this lease expires in July 2010.

We lease office space for technical staff in Vancouver, British Columbia, Canada. The term of this lease expires in July 2008. We lease office space for sales and customer support staff in Parksville, British Columbia, Canada. The term of this lease expires April 2011.

We believe that our current leased space is sufficient to meet our needs for the next 12 months and that the property is currently in acceptable condition. Beyond that, we anticipate the need to expand our lease facilities in all locations as our company grows. We have no other properties and have no agreements to acquire any properties. We do own a right of first refusal to purchase the building we currently lease for our sales and customer support staff in Parksville, British Columbia, Canada. This right expires in April 2011.

ITEM 3.

LEGAL PROCEEDINGS.

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

PART II

ITEM 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is quoted on the OTCBB under the symbol “QMCI.” The following table sets forth the high and low sales prices for our common stock for the calendar quarters indicated.


	High		Low
Year ended December 31, 2006:
First Quarter	$	0.50	$	0.31
Second Quarter		0.40		0.28
Third Quarter		0.40		0.25
Fourth Quarter		0.38		0.25
Year ended December 31, 2007:
First Quarter	$	0.40	$	0.29
Second Quarter		0.32		0.23
Third Quarter		0.25		0.18
Fourth Quarter		0.22		0.18
Year ended December 31, 2008:
First Quarter (through March 3, 2008)	$	0.22	$	0.13

As of March 3, 2008, there were approximately 309 holders of record of our common stock. As of March 3, 2008, the closing price for our common stock was $0.22.

Dividend Policy

For the foreseeable future, we intend to retain any earnings to finance our operations and do not anticipate paying cash dividends with respect to our common stock. Subject to the preferences that may be applicable to any then-outstanding preferred stock, the holders of our common stock will be entitled to receive such dividends, if any, as may be declared by our board of directors, from time to time, out of legally available funds. Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by our board of directors.

ITEM 6.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Overview

We are a financial software developer and a distributor of market data and research information to online brokerages, clearing firms, banks, media properties, public companies and financial service corporations world wide. 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: Data Feed Services; Interactive Content and Data Applications; and Portfolio Management Systems.

Our Data Feed Services consist of raw streaming real-time market data delivered over the Internet or via dedicated telecommunication lines, as well as supplemental fundamental, historical, and analytical data, keyed to the same symbology which provides a complete market data solution to be offered to our customers.

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, and comprise only a single line of code for quick installation and fast loading efficiency.

Our Portfolio Management Systems consist of Quotestream Desktop, Quotestream Wireless, 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 Wireless is a true companion product to both Quotestream Desktop and Quotestream Professional – any changes made to portfolios in either application are automatically reflected in the other. We introduced Quotestream II to the market in limited release in 2007. Quotestream II is our next generation portfolio management system, with enhanced features and functionality compared to our original Quotestream product – most notably tick-by-tick true streaming data, significantly enhanced charting features, and a broad range of additional research and analytical content and functionality. We expect that Quotestream II will be available for general release in the third quarter of 2008.

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 two to three years and are automatically renewed unless notice is given within 90 days. 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 biannual subscription fee. Contracts to license our Financial Data Products and Data Feeds typically have a term of one to two years and are automatically renewed unless notice is given within 90 days.

During 2007 we achieved significant revenue growth compared to the previous year. The growth resulted from increased sales of our Interactive Content and Data Applications as we continued to expand our line of financial data products and the depth of our data offerings throughout the year. Increased subscriptions to Quotestream during the year also contributed to our revenue growth. Based on existing revenue under contract as of the date of this report, we anticipate that our revenue for fiscal 2008 will be significantly greater than the revenue earned in fiscal 2007. We expect revenue growth in 2008 to be primarily driven by our Interactive Content and Data Applications and our new Quotestream II and Quotestream Professional product offerings. We also anticipate growth as we expand our product line to include international market data consisting of equity quotes from many of the major world exchanges as well as other additional new data sets. We also anticipate acquiring new customers for our Data Feed Services.

Our comparative gross profit margin decreased in 2007 compared to the prior year resulting from the addition of new fixed data costs to support the new products developed during the period, including Quotestream II, Quotestream Professional, and our new Market Data Feeds. Because a significant portion of these costs are fixed, we expect higher gross margins as revenue increases in future periods.

Our operating expenses were also significantly greater in fiscal 2007 than in the comparative period. This growth was as result of increasing our staffing and operating capacities during the past 18 months to develop and support the new products we have recently launched, and new products that we plan to introduce to the market in 2008.

Our plan of operation for 2008 will focus on marketing Quotestream II for deployments by brokerage firms to their clients, and moving strongly into the investment professional market with Quotestream Professional. We also plan to release new international data sets and market our Data Feed Services. We will continue to add new data content to expand our line of Interactive Content and Data Applications and to license our Quotestream Wireless applications.

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 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 economic downturns and evolving industry needs and preferences as well as the level of competition and our ability to continue to successfully market our products and technology. There can be no assurance that we will be able to successfully implement our marketing strategy, continue our revenue growth, or achieve profitable operations.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policy affects our more significant judgments and estimates used in the preparation of our financial statements.

Revenue recognition

Revenue is recognized over contractual periods as services are performed and when collection of the amount due is reasonably assured. Amounts recognized as revenue are determined based upon contractually agreed upon fee schedules with our customers. We account for subscription revenues received in advance of service being performed by deferring such amounts until the related services are performed. We consider the following factors when determining if collection of a fee is reasonably assured: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If these factors do not indicate collection is reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash.

We exercise judgment in assessing the credit worthiness of our customers and therefore in our determination of whether collectibility is reasonably assured. Should changes in conditions cause us to determine these criteria are not met for future transactions, revenue recognized for future reporting periods could be adversely affected.

Commencing in October 2005, the Company licensed one of its portfolio management applications in exchange for advertising services of a customer, referred to as “barter revenue”, whereby advertising credits were received in exchange for subscription services. This revenue is recognized in the period in which the applications are licensed based on the fair market value of the services delivered. The Company determines the fair market value of the service delivered based upon amounts charged for similar services in non-barter arrangements within the previous six-month period. The Company also ensures that the value of barter delivered does not exceed the value of cash based revenue in any period. Unused advertising credits are reflected as prepaid expenses. As at December 31, 2007, $180,000 in unused advertising credits was included in prepaid expenses.

The following table summarizes our barter revenue transactions for the years ended December 31, 2007 and 2006:


	2007		2006
Barter revenue earned	$	360,000	$	300,000
Advertising credits used	$	330,000	$	300,000

Capitalized Application Software

Capitalized software costs include costs incurred in connection with the development of software and purchased software. These costs relate to software used by subscribers to access, manage and analyze information in the Company’s databases. Capitalized costs associated with internally developed software are amortized over three years which is their estimated economic life.

We exercise significant judgment in determining that capitalized application software costs meet the criteria established in FASB Statement no. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Software production costs for computer software that is to be used as an integral part of a product or process shall not be capitalized until both (a) technological feasibility has been established for the software and (b) all research and development activities for the other components of the product or process have been completed.

For the years ended December 31, 2007 and 2006, the Company capitalized $492,625 and $273,405 of costs, respectively, related to the development of new software applications and enhancements made to existing software applications. Software applications are used by our subscribers to access, manage and analyze information in our databases. For the years ended December 31, 2007 and 2006, amortization expenses associated with the internally developed application software was $169,265 and $51,751 respectively. At December 31, 2007, the remaining book value of the application software was $587,465.

Recent Accounting Pronouncements

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48 entitled “Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation prescribes a recognition threshold and measurement method for the recognition of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance related to uncertain tax positions on the derecognition, measurement (according to the more likely than not criterion), classification, interest and penalties, accounting in interim periods and disclosure. We have evaluated all tax positions in accordance with FIN 48, and have concluded that there is no impact to our consolidated financial statements. Refer to Note 6 for additional disclosure.

In February 2007, FASB issued SFAS No. 159 entitled “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“FAS No. 159”). FAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. FAS No. 159 is effective for fiscal years beginning after November 15, 2007. The impact, if any, that FAS No. 159 will have on our consolidated financial statements is not yet determinable.

In September 2006, FASB issued SFAS No. 157 entitled “Fair Value Measurements” (“FAS No. 157”). This statement clarifies the definition of fair value to provide greater consistency and clarity on existing accounting pronouncements that require fair value measurements, provides a framework for using fair value to measure assets and liabilities and expands disclosures about fair value measurements. FAS No. 157 is required to be applied for fiscal years beginning after November 15, 2007 and interim periods within that year. We do not believe that the implementation of FAS No. 157 will impact our consolidated financial statements.

On December 4, 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“Statement 141R”). Statement 141R requires that, upon a business combination, the acquired assets, assumed liabilities, contractual contingencies and contingent liabilities, be recognized and measured at their fair value at the acquisition date. Statement 141R also requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred. In addition, Statement 141R requires that acquired in-process research and development be measured at fair value and capitalized as an indefinite-lived intangible asset, and it is therefore not subject to amortization until the project is completed or abandoned. Moreover, Statement 141R requires changes in deferred tax asset valuation allowances and acquired income tax uncertainties that are recognized after the measurement period be recognized in income tax expense. Statement 141R is to be applied prospectively and is effective for fiscal years beginning on or after December 15, 2008, which for us will be our fiscal 2010. We are currently evaluating the impact Statement 141R may have on our financial position, results of operations and cash flows.

On December 4, 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“Statement 160”). Statement 160 requires that noncontrolling interests (previously referred to as minority interests) be clearly identified and presented as a component of equity, separate from the parent’s equity. Statement 160 also requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; that changes in ownership interest be accounted for as equity transactions; and that when a subsidiary is deconsolidated, any retained noncontrolling equity investment in that subsidiary and the gain or loss on the deconsolidation of that subsidiary be measured at fair value. Statement 160 is to be applied prospectively, except for the presentation and disclosure requirements (which are to be applied retrospectively for all periods presented) and is effective for fiscal years beginning after December 15, 2008, which for us will be our fiscal 2010. We do not believe that the implementation of Statement 160 will impact our consolidated financial statements.

Results of Operations

Revenue


	Years ended December 31,
	2007		2006		Change ($)		Change (%)
Licensing revenue	$	5,569,107	$	3,742,534	$	1,826,573	49	%

Licensing revenue has increased 49% when comparing the years ended December 31, 2007 and 2006. This increase reflects sales growth for both our Interactive Content and Data Applications and our Portfolio Management Systems.

We expanded our line of Interactive Content and Data Applications, which includes XML market data feeds. This resulted in a $1,352,108 (58%) increase in Interactive Content and Data Application revenue when comparing the years ended December 31, 2007 and 2006. The number of Quotestream subscribers and the average subscription revenue per user increased during the year; resulting in a $474,465 (34%) increase in Portfolio Management System revenue when comparing the years ended December 31, 2007 and 2006. Included in Portfolio Management System revenue is revenue earned from licensing of one of our portfolio management applications in exchange for advertising services, referred to as “barter revenue” whereby advertising credits were received for subscription services. This barter revenue amounted to $360,000 for the year ended December 31, 2007, compared to $300,000 earned in 2006.

Cost of Revenue and Gross Profit Summary


	Years ended December 31,
	2007			2006			Change ($)		Change (%)
Cost of revenue	$	2,386,925		$	1,412,945		$	973,980	69	%
Gross profit	$	3,182,182		$	2,329,589		$	852,593	37	%
Gross margin %		57	%		62	%

Our cost of revenue consists of fixed and variable stock exchange fees, data feed provisioning costs and bandwidth charges. Cost of revenue increased 69% when comparing the years ended December 31, 2007 and 2006. The increase is primarily due to communication costs associated with our new data feed which was implemented, on a graduated basis, starting February 2006. The new data feed was necessary to support the major technology expansion and reconfiguration program completed during 2007. The increase is also due to the acquisition of data content required to support the new products and features that we have recently launched, and new products that we plan to introduce to the market in 2008. We also incurred increases in variable stock exchange, data feed, and bandwidth usage charges resulting from the growth in the number of clients from the comparable period. This resulted in the cost of revenue increasing as a percentage of sales, as evidenced by our gross margin percentage which decreased to 57% for the year ended December 31, 2007, from 62% in the prior year. We do not anticipate that our primary data feed costs will increase significantly in the foreseeable future, therefore we expect higher gross margins as our revenues increase to offset these costs in future periods.

Operating Expenses Summary


	Years ended December 31,
	2007		2006		Change ($)		Change (%)
Sales and marketing		1,854,400		958,498		895,902	93	%
General and administrative		1,588,744		1,334,860		253,884	19	%
Software development		917,861		515,181		402,680	78	%

Total operating expenses	$	4,361,005	$	2,808,539	$	1,552,466	55	%

Sales and Marketing

Sales and marketing consists primarily of sales and customer service salaries, investor relations, travel, and advertising expenses. Sales and marketing expenses increased $895,902 (93%) for the year ended December 31, 2007 when compared to fiscal 2006.

The increase is due primarily to the Company moving its lead generation services in house effective May 1, 2006. Quotemedia Ltd., a wholly owned subsidiary of QuoteMedia, Inc., now performs sales and customer support functions for QuoteMedia, Inc. Prior to May 2006, lead generation services were performed by Bravenet Web Services Inc. (a related party). The increase is also due to additional sales personnel hired since the comparative period, additional travel expense associated with marketing our new product lines, and increase investor relations expenses compared to the prior year.

Sales and marketing expenses were also affected by the devalued U.S. dollar versus the Canadian dollar. A significant portion of our sales and marketing expenses are incurred in Canadian dollars and converted to U.S. dollars at the average exchange rate during the period, therefore the weakening U.S. dollar contributed to cost increases from the comparative periods.

Included in sales and marketing expense is $330,000 in non-cash advertising costs incurred in the year ended December 31, 2007. We receive advertising credits in exchange for subscription services. The advertising credits are with a large national magazine and are part of a significant advertising campaign launched in 2006. The advertising credits are expensed as used, and unused advertising credits are reflected as prepaid expenses. We used $300,000 in advertising credits during the comparative period in 2006.

General and Administrative

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees. General and administrative expenses increased $253,884 (19%) for year ended December 31, 2007 when compared to fiscal 2006. Commencing May 2006, QuoteMedia Ltd. rented new office space for its lead generation personnel, resulting in increased office rent expense from the comparative periods, as well as increased costs incurred for computer hosting and maintenance services for the new office. The increase in general and administrative expenses is also due to increased bad debt expenses compared to the prior year. The increase in bad debts is directly related to the increase in sales from the prior year. Depreciation expense also increased due to the purchase of new computer equipment during the year.

Software Development

Software development expenses consist primarily of costs associated with the design, programming, and testing of our software applications prior to the establishment of technological feasibility. Software development expenses also include costs incurred to maintain our software applications. Software development expenses increased $402,680 (78%) for year ended December 31, 2007 when compared to fiscal 2006.

Salary expense for software development personnel increased from the comparative periods, as we made competitive salary adjustments for existing employees, and added new software development personnel. Additional software development personnel were required to develop our Quotestream II and Quotestream Professional products, as well as our new and upgraded versions of our web-based applications and market data feeds.

Software development costs were also affected by the devalued U.S. dollar versus the Canadian dollar. The majority of our development expenses are incurred in Canadian dollars and converted to U.S. dollars at the average exchange rate during the period, therefore the weakening U.S. dollar contributed to cost increases from the comparative periods.

The increase in software development expenses noted above was offset by software development costs capitalized during the period. We capitalized $492,625 of development costs for the year ended December 31, 2007, compared to $273,405 in 2006. 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 three years which is their estimated economic life.

Other Income and (Expense) Summary


	Years ended December 31,
	2007			2006
Foreign exchange loss	$	(91,532	)	$	(2,396	)
Interest expense		(239,663	)		(111,665	)
Loss on disposal of equipment		—			(1,612	)

Total other income and (expenses)	$	(331,195	)	$	(115,673	)

Foreign Exchange Loss

Exchange gains and losses arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars. Exchange gains and losses vary with the change in associated exchanges rates. The increase in the foreign exchange loss from the comparative periods is due to the combination of a weakened U.S. dollar and increased Canadian dollar liabilities.

Interest Expense

Interest is accrued on certain amounts owed to related parties. Interest expense increased for the year ended December 31, 2007 due to additional borrowings compared to same period in 2006. Interest is accrued at 10% per annum. Interest income earned on cash balances is netted against interest income.

Loss on Disposal of Equipment

In April 2006 of the comparative period, we wrote off obsolete computer equipment that had a net book value of $1,612.

Provision for Income Taxes

In 2007, the Company recorded Canadian income tax expense of $51,191 based on a transfer pricing study performed during the year.

Net Income (Loss) for the Period

As a result of the foregoing, net loss for the year ended December 31, 2007 was $(1,561,209) or $(0.02) per share compared to a net loss of $(594,623) or $(0.01) per share for the year ended December 31, 2006.

Liquidity and Capital Resources

Our cash totaled $357,316 at December 31, 2007, as compared with $886,251 at December 31, 2006, a decrease of $528,935. Net cash of $436,853 was used by operations for the year ended December 31, 2007, primarily due to the net loss for the period and an increase in accounts receivable, offset by the increase in accounts payable and amounts due to related parties. Net cash used in investing activities for the year ended December 31, 2007 was $564,304 resulting from capitalized application software costs and the purchase of new computer equipment. Net cash provided by financing activities for the year ended December 31, 2007 was $472,222, resulting from a $500,000 loan from a related party and the proceeds from the exercise of stock options, offset by the repayment of amounts due to related parties.

Our current liabilities include $501,642 due to related parties. All repayments of amounts due to related parties must be approved by our Board of Directors. Repayments are subject to our company having sufficient cash on hand and are intended not to impair continuing business operations. Deferred revenue of $433,630 is also included in our current liabilities. The costs incurred to realize the deferred revenue in the next 12 months 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 at least 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.

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.

Off-Balance Sheet Arrangements

Other than office lease commitments discussed in Note 9 to our financial statements, we do not have any off-balance sheet arrangements.

ITEM 7.

FINANCIAL STATEMENTS.

Reference is made to the Financial Statements, the Notes thereto, and the Report of Independent Public Accountants thereon commencing at page F-1 of this Report, which Financial Statements, Notes, and report are incorporated herein by reference.

ITEM 8.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 8A.

CONTROLS AND PROCEDURES.

We have evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2007, Based on this evaluation, our CEO and CFO have each concluded that our disclosure controls and procedures are effective to ensure that we record, process, summarize, and report information required to be disclosed by us in our periodic reports filed under the Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. During the fiscal year end covered by this report, there have not been any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

Management’s Report on Internal Control over Financial Reporting

The management of QuoteMedia, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of December 31, 2007, the Company’s internal control over financial reporting was effective based on those criteria.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

ITEM 8B.

OTHER INFORMATION

Not applicable.

PART III

ITEM 9.

DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth certain information regarding our directors and executive officers.


Name	Age	Position
Robert J. Thompson	65	Chairman of the Board

R. Keith Guelpa	61	President, Chief Executive Officer, and Director

David M. Shworan	40	President and Chief Executive Officer of QuoteMedia, Ltd., and Director

Keith J. Randall	41	Vice President, Treasurer, Chief Financial Officer, and Secretary

Our listed directors will serve until the next annual meeting of stockholders or until their death, resignation, retirement, removal, disqualification, or until their successors have been duly elected and qualified. Vacancies in our existing Board of Directors are filled by majority vote of the remaining directors. Our officers serve at the will of our Board of Directors. There is no family relationship between any executive officer and director.

Robert J. Thompson has served as our Chairman of the Board since February 2000. Since December 2002, Mr. Thompson has been President of Corpus Investments Inc., a private holding company which manages investments in a wide range of enterprises. Since 1996, Mr. Thompson has also served as the President of BIMSI Marketing Services Inc., a privately held company that manages the worldwide marketing activities on behalf of suppliers of web-based, human resource management software products used by management consulting firms and large corporations. Mr. Thompson, until recently, was Chairman of the Board of C.M. Oliver Inc., a Canadian regulated, publicly traded investment dealer/broker involved in investment banking activities throughout North America and in Europe. Mr. Thompson also acts as a Director of several privately owned corporations. For almost 30 years, Mr. Thompson practiced as a Chartered Accountant and Certified Management Consultant. He was a Partner of KPMG LLP (formerly Peat Marwick Mitchell & Co.), Woods Gordon/Clarkson Gordon (Arthur Young & Co.) and Ernst & Whinney. In 1989, he withdrew from public practice after serving for 5 years as the National Partner in Charge of the Senior Management Services Division of Stevenson Kellogg Ernst & Whinney.

R. Keith Guelpa served as our President and Chief Executive Officer from July 1999 until November 2002, and again was appointed President and Chief Executive Officer in December 2004. He served as our Chief Operating Officer from November 2002 until December 2004. Mr. Guelpa has served as a director of our company since 1999. Prior to 1999, Mr. Guelpa served as President and Chief Executive Officer of a number of companies in the technology and financial areas.

David M. Shworan has served as President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of our company, since December 2004. Mr. Shworan has served as a director of our company since November 2000. Mr. Shworan served as our President and Chief Executive Officer from November 2002 to December 2004. Mr. Shworan is a veteran of online marketing and Internet business. Mr. Shworan is the founder of Bravenet Web Services, Inc., a webmaster tools and services site for over 8 million web developers, and has served as the Chief Executive Officer of Bravenet since September 1997. Mr. Shworan is the founder of several Internet companies, and has been a consultant to a number of other Internet companies.

Keith J. Randall has served as our Vice President, Treasurer, and Chief Financial Officer since September 1999 and Secretary since July 2000. Mr. Randall served as Vice President and Chief Financial Officer of Datawest Solutions, Inc. (formerly C.M. Oliver, Inc.) from August 1999 until March 2000. From August 1998 until August 1999, Mr. Randall served as Controller of C.M. Oliver & Company Ltd., a publicly held Canadian corporation offering brokerage/financial planning and investment banking services. Mr. Randall is a licensed Chartered Accountant in Canada and a licensed Certified Public Accountant in the United States. He received a Bachelor of Commerce degree with Honors from Queen’s University in May 1991.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors, officers, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Directors, officers, and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon our review of the copies of such forms that we received during the fiscal year ended December 31, 2007, and written representations that no other reports were required, we believe that each person who at any time during the fiscal year was a director, officer, or beneficial owner of more than 10% of our common stock complied with all Section 16(a) filing requirements during such fiscal year.

Information Relating to Our Audit Committee of the Board of Directors

The purpose of the Audit Committee is to assist our board of directors in the oversight of the integrity of the consolidated financial statements of our company, our company’s compliance with legal and regulatory matters, the independent auditor’s qualifications and independence, and the performance of our company’s independent auditors. The primary responsibilities of the Audit Committee are set forth in its charter, and include various matters with respect to the oversight of our company’s accounting and financial reporting process and audits of the consolidated financial statements of our company on behalf of our board of directors. The Audit Committee also selects the independent certified public accountants to conduct the annual audit of the consolidated financial statements of our company; reviews the proposed scope of such audit; reviews accounting and financial controls of our company with the independent public accountants and our financial accounting staff; and reviews and approves transactions between us and our directors, officers, and their affiliates.

Code of Ethics

Our Board of Directors has adopted Corporate Governance Guidelines; a Code of Business Conduct/Ethics, Code of Ethics from the CEO and Senior Financial Officers, and any amendments or waivers thereto; an Audit Committee Charter; and any other corporate governance materials contemplated by SEC or applicable regulations. We post on our website at www.quotemedia.com/qmci/investors.php, these corporate governance materials. These documents are also available in print to any stockholder who requests by contacting our corporate secretary at our executive offices.

We also post on our website the charter of our Audit Committee; our Corporate Governance Guidelines; our Code of Business Conduct/Ethics and Code of Ethics for the CEO and Senior Financial Officers, any amendments or waivers thereto; and any other corporate governance materials contemplated by SEC or applicable regulations. These documents are also available in print to any stockholder requesting a copy from our corporate secretary at our principal executive offices.

ITEM 10.

EXECUTIVE COMPENSATION.

Summary of Cash and Other Compensation

The following table sets forth certain information concerning the compensation for the fiscal years ended December 31, 2007 and 2006 earned by our Chief Executive Officer and one other executive officer (collectively, the “Named Executive Officers”). None of our other executive officers cash salary and bonus exceeded $100,000 during fiscal 2007.

Summary Compensation Table


Name and Principal Position	Year	Salary ($)		Bonus ($)	Option Awards ($) (1)		All Other Compensation ($) (2)	Total ($)
R. Keith Guelpa (3)	2007	$	192,000	—		—	—	$	192,000
Chief Executive Officer,	2006	$	135,000	—		—	—	$	135,000
QuoteMedia, Inc.
David M. Shworan (4)	2007	$	300,000	—	$	96,000	—	$	396,000
Chief Executive Officer,	2006	$	225,000	—		—	—	$	225,000
QuoteMedia, Ltd.
Keith J. Randall (5)	2007	$	108,000	—	$	19,000	—	$	127,000
Chief Executive Officer,	2006	$	87,000	—		—	—	$	87,000
QuoteMedia, Inc.

(1)	The executive officers listed also received certain perquisites, the aggregate value of which did not exceed $10,000 for any year presented.

(2)	Options Awards represent the fair value of option awards granted, computed in accordance with FAS 123R.

(3)

Mr. Guelpa is our President and Chief Executive Officer, and serves as our “Principal Executive Officer”. During 2007 and 2006, we repaid $35,278 and $30,000, respectively, of amounts due to Mr. Guelpa for loans made to the company in 2000 and 2001. See Item 12, “Certain Relationships and Related Transactions.”

(4)

Mr. Shworan is President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of QuoteMedia, Inc. Pursuant to his employment agreement, we started accruing salary payable to Mr. Shworan in June 2003. From June 2003 to December 31, 2006 we did not pay a salary to Mr. Shworan, however amounts due were accrued and expensed. During 2007 we paid $175,000 in salary to Mr. Shworan, and accrued and expensed the remaining $125,000 salary due to him. Unpaid salary owed to Mr. Shworan accrues interest at the prime bank rate minus 1%. In September 2007, we cancelled 2,400,000 warrants held by Mr. Shworan with an exercise price of $0.465, and reissued warrants to Mr. Shworan with an exercise price of $0.19. The fully vested warrants previously held by Mr. Shworan were exchanged for warrants that vest in equal monthly installments over a two year period beginning September 2007. The expiry date of the warrants remained unchanged.

(5)

Mr. Randall is our Chief Financial Officer, and serves as our “Principal Financial and Accounting Officer”. In April 2007, we granted Mr. Randall 50,000 of stock options. The options vest equally over five years and had an exercise price of $0.27. The options expire in April 2017. In September 2007, we cancelled the 50,000 options granted to Mr. Randall in April 2007, as well as 50,000 options granted to Mr. Randall in 2005 that had an exercise price of $0.39. The options were reissued to Mr. Randall with exercise prices of $0.19. The vesting period and the expiry dates of the repriced options remained unchanged. In December 2007, we granted Mr. Randall 50,000 warrants. The warrants were fully vested and had an exercise price of $0.19. The options expire in December 2017.

Outstanding Equity Awards at Fiscal Year End


	Number of Securities Underlying Unexercised Options
Name	Exercisable	Unexercisable	Option Exercise Price ($)		Option Exercise Date
David M. Shworan	200,000	—	$	0.05	4-Apr-2008
	2,000,000	—	$	0.05	08-May-2008
	3,000,000	—	$	0.075	08-May-2008
	300,000	2,100,000	$	0.19	01-Aug-2015
Keith J. Randall	100,000	—	$	0.05	4-Apr-2008
	34,375	15,625	$	0.19	31-Jan-2015
	10,000	40,000	$	0.19	12-Apr-2017
	50,000	—	$	0.19	21-Dec-2017

Employment Agreements

The employment agreement with Mr. Guelpa, our President and Chief Executive Officer expired in July 2004. We expect that a new employment agreement for Mr. Guelpa will be executed in 2008. Mr. Shworan has served as President and Chief Executive Officer of QuoteMedia Ltd., a wholly owned subsidiary of QuoteMedia, Inc., since December 30, 2004. Mr. Shworan does not currently have an employment agreement. We expect that an employment agreement for Mr. Shworan will be executed in 2008.

Director Compensation and Other Information

The following table shows the amount of compensation earned by our independent director in 2007. We compensate our independent director with directors’ fees and stock options. Options Awards represent the fair value of option awards granted in 2007, computed in accordance with FAS 123R.


Name	Fees Earned or Paid in Cash ($)		Option Awards ($)		All Other Compensation ($)	Total ($)
Robert J. Thompson	$	82,020	$	21,417	—	$	103,437

The Chairman of the Board, Robert J. Thompson, receives a monthly retainer of $6,835. In September 2007, we cancelled a total of 802,803 warrants held by Mr. Thompson with an exercise prices ranging from $0.25 to $0.40, and reissued warrants to Mr. Thompson with an exercise prices of $0.19. The fully vested warrants previously held by Mr. Thompson were exchanged for warrants that vest in equal monthly installments over a two year period beginning September 2007. The expiry dates of the warrants remained unchanged.

Non independent directors do not receive cash compensation for service on our board of directors. All directors receive a grant of options to purchase shares of common stock upon joining our board of directors, which are vested on the date of grant. From time to time, we grant to our directors options or warrants to purchase additional shares of common stock.

ITEM 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the shares of our outstanding common stock beneficially owned as of March 2, 2007 by (i) each of our directors and executive officers, (ii) all directors and executive officers as a group, and (iii) each other person who is known by us to beneficially own or to exercise voting or dispositive control over more than 5% of our common stock.


Name of Beneficial Owner (1)	Number of Shares of Common Stock Owned (2)	Percentage of Common Stock Beneficially Owned (2)
Directors
David M. Shworan (3)	34,551,800	36.5	%
R. Keith Guelpa (4)	8,241,061	9.3	%
Robert J. Thompson (5)	1,075,084	1.2	%
Executive Officers
Keith J. Randall (6)	665,132	0.7	%
All executive officers and directors as a group	44,533,077	46.5	%
5% Stockholders (7)	—	—

(1)

Each person named in the table has sole voting and investment power with respect to all common stock beneficially owned by him or her, subject to applicable community property law, except as otherwise indicated. Except as otherwise indicated, each person may be reached through us at 17100 E. Shea Blvd., Suite 230, Fountain Hills, Arizona 85268.

(2)

The percentages shown are calculated based upon 88,763,365 shares of common stock outstanding on March 3, 2008. The numbers and percentages shown include the shares of common stock actually owned as of March 3, 2008 and the shares of common stock that the identified person or group had the right to acquire within 60 days of such date. In calculating the percentage of ownership, all shares of common stock that the identified person or group had the right to acquire within 60 days of March 3, 2008 upon the exercise of options are deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by such person or group, but are not deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by any other person.

(3)

Represents 10,511,800 shares of common stock owned by Mr. Shworan and 17,002,500 shares owned by Mr. Shworan’s wife. Also includes 1,037,500 shares of common stock owed by Bravenet Web Services, Inc., of which Mr. Shworan is a control person. Mr. Shworan disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Also includes vested options and warrants to acquire directly 6,000,000 shares of common stock. See Item 10, “Executive Compensation – Employment Agreements.”

(4)	Represents 6,241,061 shares of our common stock owned directly and 2,000,000 shares of our common stock owned by Mr. Guelpa’s wife. Mr. Guelpa disclaims ownership of any shares of common stock or warrants held by his wife.

(5)	Represents 257,483 shares of common stock and vested options and warrants to acquire 817,601 shares of common stock.

(6)	Represents 460,340 shares of common stock and vested options and warrants to acquire 204,792 shares of common stock.

(7)	We are unaware of any stockholders who beneficially own or exercise voting or dispositive control over more than 5% of our common stock.

Equity Compensation Plan Information

The following table sets forth information with respect to our common stock that may be issued upon the exercise of outstanding options, warrants, and rights to purchase shares of our common stock as of December 31, 2007.


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a)	Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity Compensation Plans approved by stockholders	4,688,000	$	0.22	5,389,653
Equity Compensation Plans not approved by stockholders	9,877,803	$	0.14	N/A

Total	14,565,803			5,389,653

1999 Stock Option Plan

During March 1999, we adopted, and our stockholders approved, the 1999 Stock Option Plan to advance the interests of our company by encouraging and enabling key employees to acquire a financial interest in our company and link their interests and efforts to the long-term interests of our stockholders. A total of 400,000 shares of common stock were initially reserved for issuance under the 1999 plan. In September 1999, this number was increased to 2,500,000. As of December 31, 2007, 1,144,817 shares of our common stock had been issued upon exercise of options granted under the 1999 plan, and there were outstanding options to acquire 1,355,183 shares of our common stock under the 1999 plan.

The 1999 plan is administered by our board of directors or a committee appointed by our board. Our board or the committee has the authority to grant options, determine the purchase price of shares of our common stock covered by each option, determine the persons who are eligible under the 1999 plan, interpret the 1999 plan, determine the terms and provisions of an option agreement, and make all other determinations deemed necessary for the administration of the 1999 plan. Options may be granted to any director, officer, key employee, or any advisory board member of our company. Incentive stock options may not be granted to a director, consultant, or advisory board member that is not an employee of our company.

The price of any incentive stock options may not be less than 100% of the fair market value of our common stock on the date of grant. The price of any incentive stock options granted to a person who owns more than 10% of our common stock may not be less than 110% of the fair market value of our common stock on the date of grant. The option price for non-incentive stock options may not be less than 50% of the fair market value of our common

stock on the date of grant. Options may be granted for terms of up to but not exceeding ten years from the date of grant, however, in the case of an incentive stock option granted to an individual who beneficially owns 10% more of the stock of our company, the exercise period shall not exceed five years from the date of grant. Our board of directors may accelerate the exerciseability of any outstanding options at any time for any reason.

In the event of any change in the number of shares of our common stock, the number of shares of common stock covered by outstanding options and the price per share of such options will be adjusted accordingly to reflect any such changes. Similar changes will also be made if our company engages in any merger, consolidation, or reclassification in which is it the surviving entity. In the event that we are not the surviving entity, each option shall terminate provided that each holder will have the right to exercise during a ten period ending on the fifth day prior to such corporate transaction. In the event of a change of control, our board or the committee may terminate each option, provided that each holder receive the amount of cash equal to the difference between the exercise price of the each option and the fair market value of each share of stock subject to such option.

Our board may suspend, terminate, modify, or amend the 1999 plan provided that, in certain instances, the holders of a majority of our common stock issued and outstanding approve the amendment.

2003 Equity Incentive Compensation Plan

Our Board of Directors has approved our 2003 Equity Incentive Compensation Plan, or the 2003 plan, approved by our stockholders at the annual meeting held on February 14, 2003. The purpose of the 2003 plan is to assist our company in attracting, motivating, retaining, and rewarding high-quality executives and other employees, directors, officers, and independent contractors by enabling such persons to acquire or increase a proprietary interest in our company in order to strengthen the mutuality of interests between such persons and our stockholders, and providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of stockholder value.

Presently, the number of shares of common stock that may be issued under the 2003 plan is equal to 10,000,000. As of December 31, 2007, 1,277,530 shares of common stock had been issued upon exercise of options granted under the 2003 plan and there were 4,688,000 options outstanding under the 2003 plan.

Eligibility and Administration

The persons eligible to receive awards under the 2003 plan are the officers, directors, employees, and independent contractors of our company. The 2003 plan is to be administered by a committee designated by our Board of Directors consisting of not less than two directors, each member of which must be a “non-employee director” as defined under Rule 16b-3 under the Exchange Act and an “outside director” for purposes of Section 162(m) of the Code. However, except as otherwise required to comply with Rule 16b-3 of the Exchange Act, or Section 162(m) of the Code, our Board of Directors may exercise any power or authority granted to the committee. Subject to the terms of the 2003 plan, the committee or our Board of Directors is authorized to select eligible persons to receive awards, determine the type and number of awards to be granted and the number of shares of common stock to which awards will relate, specify times at which awards will be exercisable or settleable (including performance conditions that may be required as a condition thereof), set other terms and conditions of awards, prescribe forms of award agreements, interpret and specify rules and regulations relating to the 2003 plan, and make all other determinations that may be necessary or advisable for the administration of the 2003 plan.

Stock Options and SARs

The committee or our Board of Directors is authorized to grant stock options, including both incentive stock options, or ISOs, which can result in potentially favorable tax treatment to the participant, and nonqualified stock options, and SARs entitling the participant to receive the amount by which the fair market value of a share of common stock on the date of exercise (or defined “change in control price” following a change in control) exceeds the grant price of the SAR. The exercise price per share subject to an option and the grant price of an SAR are determined by the committee, but in the case of an ISO must not be less than the fair market value of a share of common stock on the date of grant. For purposes of the 2003 plan, the term “fair market value” means the fair market value of common stock, awards, or other property as determined by the committee or our Board of Directors or under procedures established by the committee or our Board of Directors. Unless otherwise determined by the

committee or our Board of Directors, the fair market value of common stock as of any given date shall be the closing sales price per share of common stock as reported on the principal stock exchange or market on which common stock is traded on the date as of which such value is being determined or, if there is no sale on that date, then on the last previous day on which a sale was reported. The maximum term of each option or SAR, the times at which each option or SAR will be exercisable, and provisions requiring forfeiture of unexercised options or SARs at or following termination of employment generally are fixed by the committee or our Board of Directors, except that no option or SAR may have a term exceeding ten years. Options may be exercised by payment of the exercise price in cash, shares that have been held for at least six months, outstanding awards, or other property having a fair market value equal to the exercise price, as the committee or our Board of Directors may determine from time to time. Methods of exercise and settlement and other terms of the SARs are determined by the committee or our Board of Directors. SARs granted under the 2003 plan may include “limited SARs” exercisable for a stated period of time following a change in control of our company, as discussed below.

Restricted and Deferred Stock

The committee or our Board of Directors is authorized to grant restricted stock and deferred stock. Restricted stock is a grant of shares of common stock that may not be sold or disposed of, and that may be forfeited in the event of certain terminations of employment, prior to the end of a restricted period specified by the committee or our Board of Directors. A participant granted restricted stock generally has all of the rights of a stockholder of our company, unless otherwise determined by the committee or the Board. An award of deferred stock confers upon a participant the right to receive shares of common stock at the end of a specified deferral period, subject to possible forfeiture of the award in the event of certain terminations of employment prior to the end of a specified restricted period. Prior to settlement, an award of deferred stock carries no voting or dividend rights or other rights associated with share ownership, although dividend equivalents may be granted, as discussed below.

Bonus Stock and Awards in Lieu of Cash Obligations

The committee or our Board of Directors is authorized to grant shares of common stock as a bonus free of restrictions, or to grant shares of common stock or other awards in lieu of company obligations to pay cash under the 2003 plan or other plans or compensatory arrangements, subject to such terms as the committee or our Board of Directors may specify.

Acceleration of Vesting; Change in Control

The committee or our Board of Directors may in the case of a “change of control” of our company, as defined in the 2003 plan, in its discretion, accelerate the exercisability, the lapsing of restrictions, or the expiration of deferral or vesting periods of any award (including the cash settlement of SARs and “limited SARs” which may be exercisable in the event of a change in control). In addition, the committee or our Board of Directors may provide in an award agreement that the performance goals relating to any performance based award will be deemed to have been met upon the occurrence of any “change in control.” Upon the occurrence of a change in control, if so provided in the award agreement, stock options and limited SARs (and other SARs which so provide) may be cashed out based on a defined “change in control price,” which will be the higher of

•

the cash and fair market value of property that is the highest price per share paid (including extraordinary dividends) in any reorganization, merger, consolidation, liquidation, dissolution, or sale of substantially all assets of our company; or

•

the highest fair market value per share (generally based on market prices) at any time during the 60 days before and 60 days after a change in control.

For purposes of the 2003 plan, the term “change in control” generally means

•

approval by stockholders of any reorganization, merger, or consolidation or other transaction or series of transactions if persons who were shareholders immediately prior to such reorganization, merger, or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power of the reorganized, merged, or consolidated company’s then outstanding, voting securities, or a liquidation or dissolution of our company or the sale of all or substantially all of the assets of our company (unless the reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned),

•

a change in the composition of our Board of Directors such that the persons constituting the Board of Directors on the date the award is granted, or the Incumbent Board, and subsequent directors approved by the Incumbent Board (or approved by such subsequent directors), cease to constitute at least a majority of our Board of Directors, or

•

the acquisition by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more than 50% of either the then outstanding shares of our common stock or the combined voting power of our company’s then outstanding voting securities entitled to vote generally in the election of directors excluding, for this purpose, any acquisitions by (1) our company, (2) any person, entity, or “group” that as of the date on which the award is granted owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a controlling interest, or (3) any employee benefit plan of our company.

Amendment and Termination

Our Board of Directors may amend, alter, suspend, discontinue, or terminate the 2003 plan or the committee’s authority to grant awards without further stockholder approval, except stockholder approval must be obtained for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock exchange or quotation system on which shares of common stock are then listed or quoted. Thus, stockholder approval may not necessarily be required for every amendment to the 2003 plan which might increase the cost of the 2003 plan or alter the eligibility of persons to receive awards. Stockholder approval will not be deemed to be required under laws or regulations, such as those relating to ISOs, that condition favorable treatment of participants on such approval, although our Board of Directors may, in its discretion, seek stockholder approval in any circumstance in which it deems such approval advisable. Unless earlier terminated by our Board of Directors, the 2003 plan will terminate at such time as no shares of common stock remain available for issuance under the 2003 plan and we have no further rights or obligations with respect to outstanding awards under the 2003 plan.

ITEM 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In 2004 the Company entered into a loan agreement with Bravenet Web Services, Inc. (“Bravenet”). On March 30, 2007, the Company borrowed an additional $500,000. As at December 31, 2007, the Company has borrowed a total of $1,000,000 from Bravenet with interest at 10% per annum. The President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet. In November 2007, we issued 21,000,000 shares of common stock to the President and Chief Executive Officer of QuoteMedia, Ltd. pursuant to the exercise of warrants at an exercise price of $0.05. Exercise proceeds totaling $1,050,000 were used to pay down the loan from Bravenet. At December 31, 2007, the remaining loan balance due to Bravenet including accrued interest is $152,995.

From January 1, 2005 to November 30, 2006, Bravenet provided the Company customer promotion and lead generation services. In April 2007, the Company made a payment of $78,358 towards amounts due to Bravenet for accrued customer promotion and lead generation services. At December 31, 2007, all amounts due to Bravenet for customer promotion and lead generation services have been accrued in amounts due to related parties, and total $578,088 including accrued interest at 10% per annum.

On September 29, 2006, QuoteMedia, Ltd. purchased the Bravenet business unit that was responsible for providing the Company customer promotion and lead generation services. The $110,000 purchase price due to Bravenet has been accrued in amounts due to related parties, and remains unpaid as at December 31, 2007. At December 31, 2007, the balance due to Bravenet for the unpaid purchase price is $141,123, which includes interest accrued at 10%.

Commencing May 1, 2006, Bravenet began providing computer hosting and maintenance services to the Company for approximately $7,000 per month. In April 2007, the Company paid Bravenet $102,820 which represented the total amount due to Bravenet, including interest, for services provided from May 1, 2006 to March 31, 2007. At December 31, 2007, the balance due to Bravenet for unpaid computer hosting and maintenance services is $70,979. This amount includes interest accrued at 10%.

Commencing May 1, 2006, the Company began leasing office space from Harrison Avenue Holdings Ltd. (“Harrison”) for approximately $10,000 per month. The President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, is a control person of Harrison. At December 31, 2007, all amounts due to Harrison related to the leased office space have been accrued in amounts due to related parties. As at December 31, 2007, the balance due to Harrison for unpaid office rent is $252,070. This amount includes interest accrued at 10%.

At December 31, 2007, the Company owed $840,001 to an officer of the Company for accrued salary. This amount includes interest accrued at 10%.

As a matter of policy, all related party transactions are subject to review and approval by the Company’s Board of Directors. All repayments of amounts due to related parties must be approved by our Board of Directors. Repayments are subject to our company having sufficient cash on hand and are intended not to impair continuing business operations.

ITEM 13.

EXHIBITS

(a)

Exhibits


Exhibit Number		Description of Exhibit

3.1		Second Amended and Restated Articles of Incorporation (2)

3.2		Amended and Restated Bylaws (2)

10.2		Employment Agreement between the Registrant and R. Keith Guelpa (1)

10.3		Employment Agreement between the Registrant and Keith Randall (1)

10.4		Employment Agreement between the Registrant and Duane Nelson (1)

10.5		Amended 1999 Equity Incentive Compensation Plan (3)

10.6		Employment Agreement between the Registrant and David M. Shworan (2)

10.7		Amended Employment Agreement between the Registrant and David M. Shworan (3)

10.8		2003 Equity Incentive Compensation Plan (2)

21		List of Subsidiaries

23.1		Consent of Hein & Associates LLP, Independent Auditors

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

(1)	Incorporated by reference to the Registrant’s Registration Statement on Form 10-SB filed with the Commission on December 21, 1999.

(2)	Incorporated by reference to the Annual Report on Form 10-KSB filed with the Commission on March 10, 2003.

(3)	Incorporated by reference to the Quarterly Report on Form 10-QSB filed with the Commission on August 8, 2003.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Aggregate fees billed to our company for the fiscal years ended December 31, 2007 and 2006 by our principal accountants are as follows:


	2007		2006
Audit Fees	$	58,860	$	37,065
Audit-Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—

Audit Committee Pre-Approval Policies

The duties and responsibilities of our Audit Committee include the pre-approval of all audit, audit related, tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent auditor. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also require specific pre-approval by the Audit Committee. Unless otherwise specified by the Audit Committee in pre-approving a service, the pre-approval will be effective for the 12-month period following pre-approval. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which will not be supported by the Internal Revenue Code and related regulations.

To the extent deemed appropriate, the Audit Committee may delegate pre-approval authority to the Chairman of the Board or any one or more other members of the Audit Committee provided that any member of the Audit Committee who has exercised any such delegation must report any such pre-approval decision to the Audit Committee at its next scheduled meeting. The Audit Committee will not delegate the pre-approval of services to be performed by the independent auditor to management.

All of the services provided by Hein & Associates LLP described above under the captions “Audit Fees,” and were approved by our Audit Committee.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: April 3, 2008	QUOTEMEDIA, INC.

	By:	/s/ R. Keith Guelpa
		R. Keith Guelpa
		President and Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



/s/ Robert J. Thompson Robert J. Thompson	Chairman of the Board	April 3, 2008

/s/ David M. Shworan David M. Shworan	Director	April 3, 2008

/s/ Keith J. Randall Keith J. Randall	Vice President, Treasurer, Secretary, and Chief Financial Officer (Principal Financial and Accounting Officer)	April 3, 2008

/s/ R. Keith Guelpa R. Keith Guelpa	Chief Executive Officer, President and Director (Principal Executive Officer)	April 3, 2008

Quotemedia, Inc.

Index to Consolidated Financial Statements


Report of Independent Registered Accounting Firm		F-1

Consolidated Balance Sheet		F-2

Consolidated Statements of Operations		F-3

Consolidated Statements of Stockholders’ Deficit		F-4

Consolidated Statements of Cash Flows		F-5

Notes to Consolidated Financial Statements		F-6 – F-20

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

Board of Directors

Quotemedia, Inc.

Fountain Hills, Arizona

We have audited the accompanying consolidated balance sheet of Quotemedia Inc. and subsidiary as of December 31, 2007 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years ending December 31, 2007 and December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Quotemedia, Inc. and Subsidiary as of December 31, 2007, and the results of their operations and their cash flows for the years ending December 31, 2007 and December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assertion about the effectiveness of Quotemedia Inc.’s internal control over financial reporting as of December 31, 2007 included in the accompanying Management’s Report on Internal Control of Financial reporting and, accordingly, we do not express an opinion thereon.

/s/ HEIN & ASSOCIATES LLP

Denver, Colorado

April 3, 2008

F-1

QUOTEMEDIA, INC.

CONSOLIDATED BALANCE SHEET


	DECEMBER 31, 2007
ASSETS
Current assets:
Cash	$	357,316
Accounts receivable, net		299,806
Prepaid expenses		265,868
Deposits		9,027

Total current assets		932,017
Property and equipment, net		803,117
Intangible assets		198,050

Total assets	$	1,933,184

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	560,333
Deferred revenue		433,630
Current portion of amounts due to related parties		501,642

Total current liabilities		1,495,605

Long-term portion of amounts due to related parties		1,571,085
Commitments & Contingencies (Note 2,5,9)
Stockholders’ deficit:
Preferred stock, non designated, 10,000,000 shares authorized, none issued.		—
Common stock, $0.001 par value, 100,000,000 shares authorized, 88,763,365 shares issued and outstanding		88,764
Additional paid-in capital		7,963,299
Accumulated deficit		(9,185,569	)

Total stockholders’ deficit		(1,133,506	)
Total liabilities and stockholders’ deficit	$	1,933,184

See accompanying notes

F-2

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year ended DECEMBER 31, 2007			Year ended DECEMBER 31, 2006
OPERATING REVENUE
Licensing fees	$	5,569,107		$	3,742,534
Cost of revenue		2,386,925			1,412,945

Gross Profit		3,182,182			2,329,589
OPERATING EXPENSES
Sales and marketing		1,854,400			958,498
General and administrative		1,588,744			1,334,860
Software development		917,861			515,181

		4,361,005			2,808,539

OPERATING LOSS		(1,178,823	)		(478,950	)
OTHER INCOME AND (EXPENSES)
Foreign exchange loss		(91,532	)		(2,396	)
Interest expense		(239,663	)		(111,665	)
Loss on disposal of equipment		—			(1,612	)

		(331,195	)		(115,673	)

NET LOSS BEFORE INCOME TAXES		(1,510,018	)		(594,623	)

Provision for income taxes		51,191			—

NET LOSS	$	(1,561,209	)	$	(594,623	)

LOSS PER SHARE
Basic and diluted loss per share	$	(0.02	)	$	(0.01	)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted		69,183,701			62,768,422

See accompanying notes

F-3

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Years Ended December 31, 2007 and 2006


	Common Stock
	Number of Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Deficit
Balance, December 31, 2005	61,167,660		$	61,187		$	6,451,845		$	(7,029,737	)	$	(516,705	)
Stock options and warrants exercised	5,174,277			5,154			331,007			—			336,161
Return of capital stock from vendor settlement, cancelled	(75,000	)		(75	)		(12,675	)		—			(12,750	)
Shares returned to the Company for exercise of stock option, cancelled	(1,043,204	)		(1,043	)		(311,918	)		—			(312,961	)
Stock based compensation	—			—			194,128			—			194,128
Net loss	—			—			—			(594,623	)		(594,623	)

Balance, December 31, 2006	65,223,733		$	65,223		$	6,652,387		$	(7,624,360	)	$	(906,750	)

Stock options and warrants exercised	24,849,226			24,851			1,396,128			—			1,420,979
Shares returned to the Company for exercise of stock option, cancelled	(1,309,594	)		(1,310	)		(362,169	)		—			(363,479	)
Stock based compensation	—			—			276,953			—			276,953
Net loss	—			—			—			(1,561,209	)		(1,561,209	)

Balance, December 31, 2007	88,763,365		$	88,764		$	7,963,299		$	(9,185,569	)	$	(1,133,506	)

See accompanying notes

F-4

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year ended DECEMBER 31, 2007			Year ended DECEMBER 31, 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,561,209	)	$	(594,623	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		238,702			97,497
Loss on disposal of equipment		—			1,612
Bad debt expense		144,977			64,291
Stock-based compensation expense		276,953			194,128
Return of capital stock from vendor settlement		—			(12,750	)
Non-cash advertising revenue		(360,000	)		(300,000	)
Non-cash barter advertising expense		330,000			300,000
Changes in assets and liabilities:
Accounts receivable		(274,750	)		(41,564	)
Prepaid expenses		(29,661	)		(32,721	)
Deposits		2,532			27,910
Accounts payable and amounts due to related parties		725,758			957,403
Deferred revenue		69,845			179,102

Net cash provided by (used in) operating activities		(436,853	)		840,285

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(64,946	)		(187,058	)
Purchase of intangible assets		(6,733	)		(273,404	)
Capitalized application software		(492,625	)		(156,850	)

Net cash used in investing activities		(564,304	)		(617,312	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of amounts due to related parties		(35,278	)		(30,000	)
Loans from related parties		500,000			—
Proceeds from exercise of stock options for cash		7,500			23,200

Net cash provided by (used in) financing activities		472,222			(6,800	)

Net increase (decrease) in cash		(528,935	)		216,173
Cash, beginning of period		886,251			670,078

Cash, end of period	$	357,316		$	886,251

See supplementary information (note 10)

See accompanying notes

F-5

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

1.	SIGNIFICANT ACCOUNTING POLICIES

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.

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.

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. 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. A significant portion of expenses are paid in Canadian dollars, therefore changes to the exchange rate between the U.S. and Canadian dollar will affect future operating results.

Cash and cash equivalents

Cash equivalents include money market investments that are redeemable on demand. We maintain our accounts primarily at one financial institution. At times throughout the year, our cash and cash equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation.

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. 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 is $52,585 as at December 31, 2007.

F-6

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

Property and equipment

Fixed assets are recorded at cost less accumulated depreciation. Furniture and equipment are depreciated using the straight-line method over their estimated useful lives of five years. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or useful lives, whichever is shorter. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with the resulting gain or loss reflected in income.

Earnings per share

Financial Accounting Standards No. 128 “Earnings Per Share” requires the presentation of basic and diluted earnings per share. Basic earnings per share are computed by dividing income by the weighted average number of shares outstanding during the year. Diluted earnings per share takes into account shares outstanding (computed under basic earnings per share) and potentially dilutive common shares (such as stock options outstanding). The effect of a stock split or reverse split is applied retroactively to preceding periods. For the years ended 2007 and 2006 all common stock equivalents were anti-dilutive.

Stock based compensation

SFAS No. 123 (revised), “Share-Based Payments” 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 estimated stock-based compensation expense, related to all of the Company’s stock-based awards, recognized for the years ended December 31, 2007 and 2006 was comprised as follows:


	Year ended December 31,
	2007		2006
Sales and marketing	$	85,722	$	33,880
General and administrative		17,709		29,040
Software development		173,522		131,208

Total stock-based compensation	$	276,953	$	194,128

F-7

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

At December 31, 2007 there was $466,999 of unrecognized compensation cost related to non-vested share-based payments which is expected to be recognized over a weighted-average period of 2.01 years.

We calculate the fair value of stock options granted under the provisions of FAS No. 123R using the Black-Scholes valuation model with the following assumptions:


	Year ended December 31,
	2007			2006
Expected dividend yield		—			—
Expected stock price volatility		93	%		75	%
Risk-free interest rate		4	%		4	%
Expected life of options		4.7 years			6.07 years
Weighted average fair value of options granted	$	0.14		$	0.20

Expected volatility is based on the historical volatility of the Company’s share price in the period prior to option grant equivalent to the expected life of the options. The expected term is determined under the “simplified” method as allowed under the provisions of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 107 and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Income taxes

Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between income for financial statement purposes and income for tax purposes as well as operating loss carry forwards. Deferred tax expenses or recovery result from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance, when, in the opinion of management, it is likely that some portion of the deferred tax asset will not be realized. Deferred taxes are adjusted for the effects of changes in tax laws and rates. In 2007, the Company recorded Canadian income tax expense of $51,191 (see note 6).

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities as at the year end and the reported amount of revenues and expenses during the year. Actual results may vary from the estimates.

F-8

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

Software development expenses

Software development costs incurred prior to establishing the technological feasibility of our software application products, and costs incurred to maintain existing products and services are expensed as incurred. The Company expensed $917,861 and $515,181 in software development costs during the years ended December 31, 2007 and 2006, respectively.

Revenue recognition

Revenue is recognized over contractual periods as services are performed and when collection of the amount due is reasonably assured. Amounts recognized as revenue are determined based upon contractually agreed upon fee schedules with our customers. The Company accounts for subscription revenues received in advance of service being performed by deferring such amounts until the related services are performed. The Company considers the following factors when determining if collection of a fee is reasonably assured: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If these factors do not indicate collection is reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash (also see description of barter revenue below).

Barter revenue

The Company licenses one of its portfolio management applications in exchange for advertising services of a customer, referred to as “barter revenue”, whereby advertising credits are received in exchange for subscription services. This revenue is recognized in the period in which the applications are licensed based on the fair market value of the services delivered. The Company determines the fair market value of the service delivered based upon amounts charged for similar services in non-barter arrangements within the previous six-month period. The Company also ensures that the value of barter delivered does not exceed the value of cash based revenue in any period. Unused advertising credits are reflected as prepaid expenses. As at December 31, 2007, $180,000 in unused advertising credits was included in prepaid expenses.

The following table summarizes our barter revenue transactions for the years ended December 31, 2007 and 2006:


	2007		2006
Barter revenue earned	$	360,000	$	300,000
Advertising credits used	$	330,000	$	300,000

F-9

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

Financial instruments

Financial instruments consist principally of cash, accounts receivables, accounts payable and notes payable. We believe that that the fair value of financial instruments approximates the recorded book value of those instruments due to the short term nature of the instruments, or stated interest rates that approximate market interest rates.

New accounting standards

F-10

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

uncertainties that are recognized after the measurement period be recognized in income tax expense. Statement 141R is to be applied prospectively and is effective for fiscal years beginning on or after December 15, 2008, which for us will be our fiscal 2010. We are currently evaluating the impact Statement 141R may have on our financial position, results of operations and cash flows.

Reclassification

Certain figures in the comparative period have been reclassified to conform to the current year’s presentation, with no effect on net loss.

2.	LIQUIDITY

The Company has an accumulated deficit of $9,185,569, had a net loss of $1,561,209, and used $436,853 of cash in operating activities. As a result, there are concerns about the liquidity of our company at December 31, 2007. The following discussion addresses those concerns.

We have a working capital deficit of $563,588 as at December 31, 2007. Included in current liabilities, however, are $501,642 in amounts due to related parties and $433,630 in deferred revenue. All repayments of amounts due to related parties must be approved by our Board of Directors. Repayments are subject to our company having sufficient cash on hand and are intended not to impair continuing business operations. The expected costs necessary to realize the deferred revenue in 2007 are minimal.

F-11

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

Implementation of 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. Although the Company must ultimately achieve profitable operations, based on the factors discussed above, management believes that our cash on hand and cash to be generated from operations will be sufficient to fund operations through fiscal 2008.

3.	PROPERTY AND EQUIPMENT


	Cost		Accumulated Depreciation		Net Book Value
As at December 31, 2007:
Computer equipment	$	265,241	$	104,754	$	160,487
Office furniture and equipment		65,004		26,914		38,090
Leasehold improvements		29,478		12,403		17,075
Capitalized application software		809,751		222,286		587,465

	$	1,169,474	$	366,357	$	803,117

Property and Equipment are recorded at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the assets estimated useful lives as follows:


Computer equipment		5 years
Office Furniture and equipment		5 years
Leasehold improvements		Term of lease
Capitalized application software		3 years

Depreciation expense for equipment and leaseholds for the years ended December 31, 2007 and 2006 was $67,294 and $45,032 respectively.

F-12

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

4.	INTANGIBLE ASSETS


	Cost		Accumulated Amortization		Net Book Value
As at December 31, 2007:
Amortized intangible assets:
Purchase option for office building	$	10,000	$	2,857	$	7,143

		10,000		2,857		7,143

Unamortized intangible assets:
Goodwill associated with purchase of business unit		110,000		—		110,000
Perpetual software licenses		70,256		—		70,256
Domain names		10,651		—		10,651

		190,907		—		190,907

Total intangible assets	$	200,907	$	2,857	$	198,050

Amortization for amortized intangible assets is calculated on a straight-line basis over the assets estimated useful lives. The useful life of the purchase option is 5 years which is the term of the option. For the years ended December 31, 2007 and 2006, amortization expense for amortized intangible assets was $2,143 and $714 respectively.

The Company assesses potential impairments to its unamortized intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the carrying amount of the unamortized intangible asset is not recoverable and exceeds its fair value. The carrying amount of an unamortized intangible asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of an unamortized intangible asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results.

In accordance with SFAS 142, we evaluate goodwill for impairment on a reporting unit basis. Reporting units are operating segments or components of operating segments for which discrete financial information is available. The evaluation of goodwill for each reporting unit is based upon the following approach. We compare the fair value of a reporting unit to its carrying value. Where the carrying value is greater than the fair value, the implied fair value of the reporting unit goodwill is determined by allocating the fair value of the reporting unit to all the assets and liabilities of the reporting unit with any of the remainder being allocated to goodwill. The implied fair value of the reporting unit goodwill is then compared to the carrying value of that goodwill to determine the impairment loss.

F-13

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

5.	RELATED PARTIES

In 2004 the Company entered into a loan agreement with Bravenet Web Services, Inc. (“Bravenet”). On March 30, 2007, the Company borrowed an additional $500,000. As at December 31, 2007, the Company has borrowed a total of $1,000,000 from Bravenet with interest at 10% per annum. The President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet. In November 2007, we issued 21,000,000 shares of common stock to the President and Chief Executive Officer of Quotemedia, Ltd. pursuant to the exercise of warrants at an exercise price of $0.05. Exercise proceeds totaling $1,050,000 were used to pay down the loan from Bravenet. At December 31, 2007, the remaining loan balance due to Bravenet including accrued interest is $152,995.

On September 29, 2006, Quotemedia, Ltd. purchased the Bravenet business unit that was responsible for providing the Company customer promotion and lead generation services. The $110,000 purchase price due to Bravenet has been accrued in amounts due to related parties, and remains unpaid as at December 31, 2007. At December 31, 2007, the balance due to Bravenet for the unpaid purchase price is $141,123, which includes interest accrued at 10%.

Commencing May 1, 2006, the Company began leasing office space from Harrison Avenue Holdings Ltd. (“Harrison”) for approximately $10,000 per month. The President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned subsidiary, is a control person of Harrison. At December 31, 2007, all amounts due to Harrison related to the leased office space have been accrued in amounts due to related parties. As at December 31, 2007, the balance due to Harrison for unpaid office rent is $252,070. This amount includes interest accrued at 10%.

At December 31, 2007, the Company owed $840,001 to an officer of the Company for accrued salary. This amount includes interest accrued at 10%.

F-14

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

6.	INCOME TAXES

We account for income taxes according to the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” SFAS No. 109 prescribes an asset and liability approach for computing deferred income taxes.

Reconciliations of income taxes computed at the statutory federal rate to income tax expense (benefit) for the years ended December 31, 2007 and 2006 are as follows:


	2007			2006
Tax provision (benefit) at the statutory rate of 34%	$	(523,668	)	$	(202,172	)
State income taxes, net of federal income tax		(50,827	)		(19,623	)
Stock based compensation		94,164			62,733
Change in valuation allowance and other		480,331			159,062
Provision for Canadian income tax		51,191			—

Income tax expense (benefit)	$	51,191		$	—

In 2007, the Company recorded Canadian income tax expense of $51,191 based on a transfer pricing study. The Company does not have any material Canadian deferred tax assets or deferred tax liabilities.

As of December 31, 2007, we had net operating loss carryforwards for federal income tax reporting purposes amounting to approximately $8,000,000 which expire in varying amounts through the year 2027.

The components of our deferred tax asset (liabilities) at December 31, 2007 were as follows:


Tax effect of net operating loss carryforward	$	3,218,000
Accrued liabilities		590,000
Property & equipment		(11,000	)
Capitalized software		(218,000	)
Other		20,000
Less valuation allowance		(3,599,000	)

Net deferred tax asset	$	—

A valuation allowance has been recognized to offset the entire effect of the Company’s net deferred tax asset as the realization of this deferred tax benefit is uncertain.

F-15

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

7.	STOCKHOLDERS’ DEFICIT

Preferred shares

We are authorized to issue up to 10,000,000 non-designated preferred shares at the Board of Directors’ discretion. As at December 31, 2007 no preferred shares have been issued.

Common stock

During 2007, we issued a total of 2,796,295 shares of common stock to an officer of the Company pursuant to the exercise of warrants at exercise prices ranging from $0.05 to $0.13. The officer surrendered a total of 1,309,594 shares of previously held mature shares of our common stock to pay the total exercise cost of $363,479. The surrendered common stock was valued at stock prices ranging from $0.21 to $0.29 which were the closing prices of our common stock on the dates of the transactions. The surrendered common stock was subsequently cancelled.

During 2007, we issued a total of 1,000,931 shares of common stock to employees, an officer, and a former consultant of the Company pursuant to the exercise of stock options and warrants. A total of 1,583,259 stock options and warrants were exercised at exercise prices ranging from $0.05 to $0.20. The Company repurchased a total of 582,328 shares of common stock to pay the total exercise cost of $157,366. The repurchased common stock was valued at stock prices ranging from $0.19 to $0.37 per share which were the closing prices of our common stock on the dates of the transactions. Pursuant to the terms of the option agreements, the Company’s Board of Director is required to approve the repurchase of the shares. The average of the value of the shares repurchased and surrendered was $0.27 per share.

In November 2007, we issued 21,000,000 shares of common stock to the President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned subsidiary, pursuant to the exercise of warrants at an exercise price of $0.05. The exercise proceeds totaling $1,050,000 were used to pay down a loan from Bravenet Web Services, Inc. (“Bravenet”). The officer is a control person of Bravenet.

We issued an additional 50,000 shares of common stock to former consultants during 2007 pursuant to the exercise of stock options. The stock options had exercise prices of $0.15. The Company received total cash proceeds of $7,500 as a result of these transactions.

F-16

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

Stock option plan

We have stock option plans whereby shares of our common stock may be issued pursuant to the exercise of stock options granted to employees, officers, directors, advisors, and our independent contractors. The exercise price of the common stock underlying an option will be determined by the Board of Directors or compensation committee and may be equal to, greater than, or less than the market value of our common stock at the date of grant but in no event less than 50% of such market value. The options generally vest in one to four years unless, at the discretion of the Board of Directors, alternative vesting methods are allowed. The term of each option is determined at the time of grant and may extend to a maximum of ten years. At December 31, 2007, we had reserved 12,500,000 options for issuance under the stock option plan. Options may also be granted outside our stock option plan. Options granted outside the plan generally contain terms that are more restrictive in nature and have a maximum expiration term of ten years. We may grant an unlimited number of options outside our stock option plan at the discretion of the Board of Directors.

The following table represents stock option and warrant activity for the years ended December 31, 2007 and 2006:


	Options and Warrants		Weighted-Average Exercise Price
Outstanding at December 31, 2005	47,286,282		$	0.13
Granted under company stock option plan	1,350,000		$	0.32
Warrants granted	133,333		$	0.25
Stock options exercised	(3,215,000	)	$	0.20
Warrants exercised	(5,215,258	)	$	0.16
Forfeited/Expired	(370,000	)	$	0.23

Outstanding at December 31, 2006	39,969,357		$	0.10

Granted under company stock option plan	3,791,000		$	0.19
Warrants granted	3,202,803		$	0.19
Stock options exercised	(725,000	)	$	0.07
Warrants exercised	(24,706,554	)	$	0.06
Forfeited/Expired	(6,965,803	)	$	0.40

Outstanding at December 31, 2007	14,565,803		$	0.16

F-17

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

The following table summarizes our non-vested stock option activity for the year ended December 31, 2007:


	Options and Warrants		Weighted-Average Grant Date Fair Value
Non-vested stock options and warrants at December 31, 2006	2,601,000		$	0.36

Granted during the period	6,943,803		$	0.19
Vested during the period	(3,196,976	)	$	0.23
Forfeited during the period	(1,821,875	)	$	0.35

Non-vested stock options and warrants at December 31, 2007	4,525,952		$	0.20


		Options and Warrants Outstanding				Options and Warrants Exercisable
Range of Exercise Price		Number Outstanding at December 31, 2007	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2007	Weighted Average Exercise Price
$	0.05-0.10	5,925,000	0.33	$	0.06	5,925,000	$	0.06
$	0.11-0.30	6,830,803	7.52	$	0.19	2,464,851	$	0.19
$	0.31-0.50	1,810,000	3.72	$	0.40	1,650,000	$	0.40

On September 12, 2007, the Company’s Board of Directors and Compensation Committee authorized a reduction of the exercise price of stock options and warrants granted to all employees and directors who held options or warrants with exercise prices greater than $0.24. The new exercise price for those options and warrants were fixed at $0.19 per share, which was the market price of the Company’s Common Stock at the time of the repricings. The vesting period and the expiry dates of the repriced options and warrants remained unchanged, except for fully vested warrants held by certain officers and directors that were exchanged for warrants that vest in equal monthly installments over a two year period beginning September 12, 2007. The repricing of the options and warrants was accounted for as an exchange of the original awards for new awards. The incremental increase in fair value of the new awards resulted in additional stock-based compensation expenses totaling $197,297 that will be recognized over the expected term of the new awards.

As at December 31, 2007 all stock options and warrants have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant.

F-18

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

At December 31, 2007 the aggregate intrinsic value of options and warrants outstanding was $695,250 and the aggregate intrinsic value of options and warrants exercisable was $695,250. Total intrinsic value of options exercised during the year ended December 31, 2007 was $4,020,927. 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.

At December 31, 2007 there was $466,999 of unrecognized compensation cost related to non-vested share-based payments which is expected to be recognized over a weighted-average period of 2.01 years.

The Company is authorized to issue up to 100,000,000 common shares and 10,000,000 non-designated preferred shares. Until such time as the Company is able to increase its authorized number of shares of common stock, in the event that an exercise of warrants or stock options would result in the number of issued common shares exceeding the authorized limit, the Company would designate the preferred shares with the same rights and preferences as the common shares to accommodate the exercise of the options or warrants.

8.	LOSS PER SHARE

Basic earnings per share is calculated by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income applicable to common stockholders, adjusted to exclude potentially dilutive securities, by the weighted average number of common shares outstanding during the period, plus any additional common shares that would have been outstanding if potentially dilutive common shares had been exercised, using the treasury stock method. Due to the net loss incurred for the years ended 2007 and 2006, the diluted loss per share is the same as basic, because any potentially dilutive securities would reduce the loss per share. The following tables summarize the components of the loss per share:


	2007			2006
Numerator:
Net loss	$	(1,561,209	)	$	(594,623	)

Denominator:
Weighted average shares outstanding – basic and diluted		69,183,701			62,768,422

Loss per share – basic and diluted	$	(0.02	)	$	(0.01	)

Stock options and warrants excluded from the calculation of dilutive loss per share because they were anti-dilutive		14,565,803			39,969,357

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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

9.	COMMITMENTS AND CONTINGENCIES

We have office lease commitments totaling $195,949 in 2008, $161,274 in 2009, $148,739 in 2010, and $43,730 in 2011.

10.

SUPPLEMENTARY CASH FLOW INFORMATION


	2007		2006
Cash flow information:
Cash paid for Interest	$	10,922	$	1,847
Cash received for Interest		17,697		21,518
Cash paid for taxes		—		—

As discussed in Note 7 b), during 2007 we issued 2,798,295 shares of common stock to an officer of the Company pursuant to the exercise of warrants. The officer surrendered 1,309,594 shares of previously held mature shares of our common stock to pay the exercise cost of $363,479. We also issued a total of 1,000,931 shares of common stock to employees, an officer, and a former consultant of the Company pursuant to the exercise of stock options. The Company repurchased a total of 582,328 shares of common stock to pay the total exercise cost of $157,366.

As discussed in Note 7 b), in November 2007, we issued 21,000,000 shares of common stock to the President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned subsidiary, pursuant to the exercise of warrants at an exercise price of $0.05. The exercise proceeds totaling $1,050,000 were used to pay down a loan from Bravenet Web Services, Inc. (“Bravenet”). The officer is a control person of Bravenet.

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