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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10  QSB



|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006

Commission File Number: 0-28599

QUOTEMEDIA, INC.

(Exact Name of
Small Business Issuer as Specified in its Charter)



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

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

(Address of Principal Executive Offices)

(480) 905-7311

(Issuers Telephone Number, Including Area Code)

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 ̈.

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

On October 31, 2006, the Registrant had 64,278,135 shares of common stock outstanding.



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##### Table of Contents

QUOTEMEDIA, INC.

INDEX TO QUARTERLY REPORT

ON FORM 10-QSB



|                              |  |            |  |                                                             |  |   
|----------------------------- |  | ---------- |  | ----------------------------------------------------------- |  | --
|                              |  | Page      
|                              | 
|Part I. Financial Information |  |           
|                              |  |            | 
|                              |  | Item 1.    |  | Consolidated Financial Statements                           |  | 3 
|                              |  |            | 
|                              |  |            |  | Consolidated Balance Sheet                                  |  | 3 
|                              |  |            | 
|                              |  |            |  | Consolidated Statements of Operations                       |  | 4 
|                              |  |            | 
|                              |  |            |  | Consolidated Statements of Cash Flows                       |  | 5 
|                              |  |            | 
|                              |  |            |  | Notes to Consolidated Financial Statements                  |  | 6 
|                              |  |            | 
|                              |  | Item 2.    |  | Managements Discussion and Analysis                        |  | 17
|                              |  |            | 
|                              |  | Item 3.    |  | Controls and Procedures                                     |  | 23
|                              | 
|Part II. Other Information    |  |           
|                              |  |            | 
|                              |  | Item 1.    |  | Legal Proceedings                                           |  | 24
|                              |  |            | 
|                              |  | Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 24
|                              |  |            | 
|                              |  | Item 3.    |  | Defaults Upon Senior Securities                             |  | 24
|                              |  |            | 
|                              |  | Item 4.    |  | Submission of Matters to a Vote of Security Holders         |  | 24
|                              |  |            | 
|                              |  | Item 5.    |  | Other Information                                           |  | 24
|                              |  |            | 
|                              |  | Item 6.    |  | Exhibits                                                    |  | 24
|                              |  |           
|                              |  | Signatures |  | 25                                                         



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QUOTEMEDIA, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)



|                                                                                                        |  |                    |            |  
|------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | -
|                                                                                                        |  | September 30, 2006 |           
|ASSETS                                                                                                  |  |                    |            |  
|Current assets:                                                                                         |  |                    |            |  
|Cash                                                                                                    |  | $                  | 823,553    |  
|Accounts receivable, net                                                                                |  |                    | 147,024    |  
|Prepaid expenses                                                                                        |  |                    | 204,329    |  
|Deposits                                                                                                |  |                    | 38,242     |  
|                                                                                                        |  |                    |            |  
|Total current assets                                                                                    |  |                    | 1,213,148  |  
|Property and equipment, net                                                                             |  |                    | 411,527    |  
|Intangible assets                                                                                       |  |                    | 193,995    |  
|                                                                                                        |  |                    |            |  
|Total assets                                                                                            |  | $                  | 1,818,670  |  
|                                                                                                        |  |                    |            |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                   |  |                    |            |  
|Current liabilities:                                                                                    |  |                    |            |  
|Accounts payable and accrued liabilities                                                                |  | $                  | 284,056    |  
|Deferred revenue                                                                                        |  |                    | 315,658    |  
|Current portion of amounts due to related parties                                                       |  |                    | 255,930    |  
|                                                                                                        |  |                    |            |  
|Total current liabilities                                                                               |  |                    | 855,644    |  
|                                                                                                        |  |                    |            |  
|Other long-term liabilities                                                                             |  |                    | 14,309     |  
|Long-term portion of amounts due to related parties                                                     |  |                    | 1,692,663  |  
|Stockholders deficit:                                                                                  |  |                    |            |  
|Preferred stock, non designated, 10,000,000 shares authorized, none issued                              |  |                    |           |  
|Common stock, $0.001 par value, 100,000,000 shares authorized, 64,278,135 shares issued and outstanding |  |                    | 64,278     |  
|Additional paid-in capital                                                                              |  |                    | 6,575,991  |  
|Accumulated deficit                                                                                     |  |                    | (7,384,215 | )
|                                                                                                        |  |                    |            |  
|Total stockholders deficit                                                                             |  |                    | (743,946   | )
|Total liabilities and stockholders deficit                                                             |  | $                  | 1,818,670  |  
|                                                                                                        |  |                    |            |  

See accompanying notes



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QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|----------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                    |  | Three months ended September 30, |            |   | Nine months ended September 30, |  
|                                    |  | 2006                             |            |   | 2005                            |   |            | 2006 |  |   | 2005       |  
|OPERATING REVENUE                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Licensing revenue                   |  | $                                | 960,111    |   |                                 | $ | 667,148    |      |  | $ | 2,651,248  |   |  | $ | 1,665,176  |  
|Cost of revenue                     |  |                                  | 378,116    |   |                                 |   | 184,024    |      |  |   | 990,013    |   |  |   | 494,232    |  
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Gross Profit                        |  |                                  | 581,995    |   |                                 |   | 483,124    |      |  |   | 1,661,235  |   |  |   | 1,170,944  |  
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|OPERATING EXPENSES                  |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Sales and marketing                 |  |                                  | 244,818    |   |                                 |   | 119,354    |      |  |   | 616,878    |   |  |   | 325,366    |  
|General and administrative          |  |                                  | 329,201    |   |                                 |   | 213,062    |      |  |   | 929,428    |   |  |   | 608,811    |  
|Software development                |  |                                  | 134,906    |   |                                 |   | 136,085    |      |  |   | 378,532    |   |  |   | 332,842    |  
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|                                    |  |                                  | 708,925    |   |                                 |   | 468,501    |      |  |   | 1,924,838  |   |  |   | 1,267,019  |  
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|OPERATING INCOME (LOSS)             |  |                                  | (126,930   | ) |                                 |   | 14,623     |      |  |   | (263,603   | ) |  |   | (96,075    | )
|OTHER INCOME AND EXPENSES           |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Foreign exchange loss               |  |                                  | (9,224     | ) |                                 |   | 519        |      |  |   | (13,600    | ) |  |   | (61        | )
|Interest expense, net               |  |                                  | (27,889    | ) |                                 |   | (12,162    | )    |  |   | (75,663    | ) |  |   | (29,520    | )
|Loss on disposal of equipment       |  |                                  |           |   |                                 |   |           |      |  |   | (1,612     | ) |  |   | (2,587     | )
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|                                    |  |                                  | (37,113    | ) |                                 |   | (11,643    | )    |  |   | (90,875    | ) |  |   | (32,168    | )
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|NET INCOME (LOSS)                   |  |                                  | (164,043   | ) |                                 |   | 2,980      |      |  |   | (354,478   | ) |  |   | (128,243   | )
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) PER SHARE             |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted loss per share    |  | $                                | (0.00      | ) |                                 | $ | 0.00       |      |  | $ | (0.01      | ) |  | $ | (0.00      | )
|                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|WEIGHTED AVERAGE SHARES OUTSTANDING |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Basic                               |  |                                  | 63,156,154 |   |                                 |   | 60,841,090 |      |  |   | 62,142,679 |   |  |   | 59,757,978 |  
|Diluted                             |  |                                  | 63,156,154 |   |                                 |   | 94,216,794 |      |  |   | 62,142,679 |   |  |   | 59,757,978 |  

See accompanying notes



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QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                            |  |                                 |          |   |      |   |          |  
|--------------------------------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | -------- | -
|                                                                            |  | Nine Months Ended September 30, |         
|                                                                            |  | 2006                            |          |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                                 |          |   |      |   |          |  
|Net loss                                                                    |  | $                               | (354,478 | ) |      | $ | (128,243 | )
|Adjustments to reconcile loss to net cash provided by operating activities: |  |                                 |          |   |      |   |          |  
|Depreciation                                                                |  |                                 | 60,693   |   |      |   | 11,665   |  
|Loss on disposal of equipment                                               |  |                                 | 1,612    |   |      |   | 2,587    |  
|Bad debt expense                                                            |  |                                 | 39,239   |   |      |   | 14,584   |  
|Stock based compensation expense                                            |  |                                 | 123,987  |   |      |   | 10,500   |  
|Cancellation of capital stock                                               |  |                                 | (12,750  | ) |      |   |         |  
|Non-cash barter revenue                                                     |  |                                 | (225,000 | ) |      |   |         |  
|Non-cash barter advertising expense                                         |  |                                 | 225,000  |   |      |   |         |  
|Changes in assets and liabilities:                                          |  |                                 |          |   |      |   |          |  
|Accounts receivable                                                         |  |                                 | 6,497    |   |      |   | (137,872 | )
|Prepaid expenses                                                            |  |                                 | (30,843  | ) |      |   | (10,816  | )
|Deposits                                                                    |  |                                 | 1,227    |   |      |   | (30,102  | )
|Accounts payable and amounts due to related parties                         |  |                                 | 711,781  |   |      |   | 432,239  |  
|Deferred revenue                                                            |  |                                 | 130,975  |   |      |   | 73,358   |  
|                                                                            |  |                                 |          |   |      |   |          |  
|Net cash provided by operating activities                                   |  |                                 | 677,940  |   |      |   | 237,900  |  
|                                                                            |  |                                 |          |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                                 |          |   |      |   |          |  
|Purchase of equipment and intangible assets                                 |  |                                 | (510,465 | ) |      |   | (29,328  | )
|                                                                            |  |                                 |          |   |      |   |          |  
|Net cash used in investing activities                                       |  |                                 | (510,465 | ) |      |   | (29,328  | )
|                                                                            |  |                                 |          |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       |  |                                 |          |   |      |   |          |  
|Repayment of loans from related parties                                     |  |                                 | (30,000  | ) |      |   | (56,750  | )
|Loans from related parties                                                  |  |                                 |         |   |      |   | 250,000  |  
|Issuance of capital stock for cash, net                                     |  |                                 | 16,000   |   |      |   |         |  
|                                                                            |  |                                 |          |   |      |   |          |  
|Net cash provided by (used in) financing activities                         |  |                                 | (14,000  | ) |      |   | 193,250  |  
|                                                                            |  |                                 |          |   |      |   |          |  
|Net increase in cash                                                        |  |                                 | 153,475  |   |      |   | 401,822  |  
|Cash, beginning of period                                                   |  |                                 | 670,078  |   |      |   | 131,265  |  
|                                                                            |  |                                 |          |   |      |   |          |  
|Cash, end of period                                                         |  | $                               | 823,553  |   |      | $ | 533,087  |  
|                                                                            |  |                                 |          |   |      |   |          |  

See supplementary information (note 5)

See accompanying notes



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



|1. | BASIS OF PRESENTATION
|-- | ---------------------

The accompanying unaudited
consolidated financial statements have been prepared in accordance with the generally accepted accounting principles for interim financial statements and instructions for Form 10  QSB. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have
been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for a full year.

These financial statements should be read in conjunction with our financial statements and the notes thereto for the fiscal year ended December 31, 2005 contained in our Form 10-KSB filed with the Securities and Exchange Commission
dated March 31, 2006.



|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

a) 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.

b) 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).



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



c) Barter revenue

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 September 30, 2006, $150,000 in unused advertising credits was included in prepaid expenses.



|                        |  |                                 |        |                                |   |      |   |         |  |  
|----------------------- |  | ------------------------------- | ------ | ------------------------------ | - | ---- | - | ------- |  | -
|                        |  | Three months endedSeptember 30, |        | Nine months endedSeptember 30,
|                        |  | 2006                            |        | 2005                           |   | 2006 |   | 2005   
|Barter revenue earned   |  | $                               | 75,000 |                                |  |      | $ | 225,000 |  | 
|Advertising credit used |  | $                               | 75,000 |                                |  |      | $ | 225,000 |  | 

d) Property and Equipment



|                                 |  |      |         |                         |   |               |  |   |        
|-------------------------------- |  | ---- | ------- | ----------------------- | - | ------------- |  | - | -------
|As at September 30, 2006:        |  | Cost |         | AccumulatedDepreciation |   | Net BookValue
|Computer equipment               |  | $    | 192,382 |                         | $ | 46,145        |  | $ | 146,237
|Office furniture and equipment   |  |      | 43,775  |                         |   | 12,751        |  |   | 31,024 
|Leasehold improvements           |  |      | 28,579  |                         |   | 3,821         |  |   | 24,758 
|Capitalized application software |  |      | 240,321 |                         |   | 30,813        |  |   | 209,508
|                                 |  |      |         |                         |   |               |  |   |        
|                                 |  | $    | 505,057 |                         | $ | 93,530        |  | $ | 411,527
|                                 |  |      |         |                         |   |               |  |   |        

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      

For the three and nine months ended September 30, 2006, the Company capitalized $78,162 and
$196,599 in 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 three and nine months ended September 30, 2006, amortization expenses associated with the



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



internally developed application software was $15,740 and $29,543 respectively. At September 30, 2006, the remaining book value of the application
software was $209,508.

Depreciation expense totaled $28,479 and $4,879 for the three months ended September 30, 2006 and 2005
respectively. Depreciation expense totaled $60,693 and $11,665 for the nine months ended September 30, 2006 and 2005 respectively.

e) Intangible
Assets



|                                                   |  |      |         |                          |   |                |  |   |      
|-------------------------------------------------- |  | ---- | ------- | ------------------------ | - | -------------- |  | - | -----
|As at September 30, 2006:                          |  | Cost |         | Accumulated Amortization |   | Net Book Value
|Amortized intangible assets                        |  |      |         |                          |   |                |  |   |      
|Purchase option for office building                |  | $    | 10,000  |                          | $ | 179            |  | $ | 9,821
|                                                   |  |      |         |                          |   |                |  |   |      
|                                                   |  | $    | 10,000  |                          | $ | 179            |  | $ | 9,821
|                                                   |  |      |         |                          |   |                |  |   |      
|Unamortized intangible assets                      |  |      |         |                          |   |                |  |   |      
|Goodwill associated with purchase of business unit |  | $    | 110,000 |                          |   |                |  |   |      
|Software licenses                                  |  |      | 63,522  |                          |   |                |  |   |      
|Domain names                                       |  |      | 10,652  |                          |   |                |  |   |      
|                                                   |  |      |         |                          |   |                |  |   |      
|                                                   |  | $    | 184,174 |                          |   |                |  |   |      
|                                                   |  |      |         |                          |   |                |  |   |      

On September 29, 2006, Quotemedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc.,
purchased a business unit of Bravenet Web Services Inc. (see Related Party Transaction Note 3). The business unit had been providing the Company customer promotion and lead generation services. The business unit was comprised of a total of 10 sales
and customer service employees. The purchase price of $110,000 was entirely attributed to intangible assets as there were no tangible assets included in the purchase.

Amortization for amortized intangible assets is based on the assets useful lives. For the three and nine months ended September 30, 2006, amortization expense for amortized intangible assets was $179. There was
no amortization expense for intangible assets in the comparative periods.

f) Stock based compensation

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



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ten years. At September 30, 2006, 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.

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised), Share-Based
Payment (SFAS 123(R)) utilizing the modified prospective approach. Prior to the adoption of SFAS 123(R) we accounted for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees (the
intrinsic value method), and accordingly, recognized no compensation expense for stock option grants.

Under the modified prospective
approach, SFAS 123(R) applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized in fiscal 2006
includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for
all share-based payments granted subsequent to January 1, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Prior periods were not restated to reflect the impact of adopting the new standard.

SFAS 123(R) 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.

As a result of adopting SFAS 123(R) on January 1, 2006, for the three and nine months ended September 30, 2006, our net loss was
$45,225 and $123,987 greater respectively than if we had continued to account for stock-based compensation under APB opinion No. 25. The effect on basic and diluted loss per share for the three and nine months ended September 30, 2006 was
insignificant.

Total estimated stock-based compensation expense, related to all of the Companys stock-based awards, recognized for
the three and nine months ended September 30, 2006 was comprised as follows:



|                                       |  |                                      |        |                                     |   |        
|-------------------------------------- |  | ------------------------------------ | ------ | ----------------------------------- | - | -------
|                                       |  | Three months endedSeptember 30, 2006 |        | Nine months endedSeptember 30, 2006
|Sales and marketing                    |  | $                                    | 7,974  |                                     | $ | 23,922 
|General and administrative             |  |                                      | 2,061  |                                     |   | 4,047  
|Software development                   |  |                                      | 35,190 |                                     |   | 96,018 
|                                       |  |                                      |        |                                     |   |        
|Total stock-based compensation expense |  | $                                    | 45,225 |                                     | $ | 123,987
|                                       |  |                                      |        |                                     |   |        



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



Generally, the company would receive a tax deduction for the amount by which the market price of our
common stock exceeded the exercise price on the date of exercise. Prior to adoption of SFAS 123(R), these tax benefits would have been reported as operating cash flows in our consolidated statements of cash flows. Under SFAS 123(R), we would be
required to revise our consolidated statements of cash flows in order to present these tax benefits as financing cash flows. The company had no reported tax benefits related to stock compensation expense prior to the implementation of SFAS 123(R) on
January 1, 2006 and as such is not required to revise the presentation of its statements of cash flows.

The following table
illustrates the effect on operating results and per share information had the Company accounted for stock-based compensation in accordance with SFAS 123(R), for the three and nine months ended September 30, 2005.



|                                                                                                          |  |                                      |          |   |                                     |   |            |  
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | -------- | - | ----------------------------------- | - | ---------- | -
|                                                                                                          |  | Three months endedSeptember 30, 2005 |          |   | Nine months endedSeptember 30, 2005 |  
|Net income (loss):                                                                                        |  |                                      |          |   |                                     |   |            |  
|As reported                                                                                               |  | $                                    | 2,980    |   |                                     | $ | (128,243   | )
|Add: Stock compensation expense recorded in the financial statements                                      |  |                                      | 10,500   |   |                                     |   | 10,500     |  
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards |  |                                      | (869,149 | ) |                                     |   | (926,687   | )
|                                                                                                          |  |                                      |          |   |                                     |   |            |  
|Pro forma                                                                                                 |  | $                                    | (855,669 | ) |                                     | $ | (1,044,430 | )
|                                                                                                          |  |                                      |          |   |                                     |   |            |  
|Basic and diluted earnings (loss) per share:                                                              |  |                                      |          |   |                                     |   |            |  
|As reported                                                                                               |  | $                                    | 0.00     |   |                                     | $ | (0.00      | )
|Pro forma                                                                                                 |  | $                                    | (0.01    | ) |                                     | $ | (0.02      | )



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



We have estimated the fair value of each option on the date of the grant using the Black-Scholes
option-pricing model with the following assumptions:



|                                               |  |                                 |  |      |                                |   |      |   |            |      |  |   |           |  
|---------------------------------------------- |  | ------------------------------- |  | ---- | ------------------------------ | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                               |  | Three months endedSeptember 30, |  |      | Nine months endedSeptember 30, |  
|                                               |  | 2006                            |  | 2005 |                                |   | 2006 |   |            | 2005 | 
|Expected dividend yield                        |  | n/a                             |  |      |                               |   |      |   |           |      |  |   |          |  
|Expected stock price volatility                |  | n/a                             |  |      | 96                             | % |      |   | 71         | %    |  |   | 96        | %
|Risk-free interest rate                        |  | n/a                             |  |      | 4                              | % |      |   | 4          | %    |  |   | 4         | %
|Expected life of options                       |  | n/a                             |  |      | 5.1 years                      |   |      |   | 6.25 years |      |  |   | 5.1 years |  
|Weighted average fair value of options granted |  | n/a                             |  | $    | 0.34                           |   |      | $ | 0.21       |      |  | $ | 0.34      |  

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.

The following table represents stock option and warrant activity for the nine months ended September 30, 2006:



|                                  |  |                     |   |  |                                |     
|--------------------------------- |  | ------------------- | - |  | ------------------------------ | ----
|                                  |  | Options andWarrants |   |  | Weighted-AverageExercise Price
|Outstanding at December 31, 2005  |  | 47,286,282          |   |  | $                              | 0.13
|                                  |  |                     |   |  |                                |     
|Granted                           |  | 1,000,000           |   |  | $                              | 0.31
|Stock options exercised           |  | (2,710,000          | ) |  | $                              | 0.22
|Warrants exercised                |  | (3,616,408          | ) |  | $                              | 0.15
|Forfeited/expired                 |  | (370,000            | ) |  | $                              | 0.16
|                                  |  |                     |   |  |                                |     
|Outstanding at September 30, 2006 |  | 41,589,874          |   |  | $                              | 0.11
|                                  |  |                     |   |  |                                |     



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



The following table summarizes our non-vested stock option activity for the nine months ended
September 30, 2006:



|                                                            |  |                      |   |  |                                        |     
|----------------------------------------------------------- |  | -------------------- | - |  | -------------------------------------- | ----
|                                                            |  | Options and Warrants |   |  | Weighted-Average Grant Date Fair Value
|Non-vested stock options and warrants at December 31, 2005  |  | 1,856,500            |   |  | $                                      | 0.40
|                                                            |  |                      |   |  |                                        |     
|Granted during the period                                   |  | 1,000,000            |   |  | $                                      | 0.31
|Vested during the period                                    |  | (443,125             | ) |  | $                                      | 0.40
|Forfeited during the period                                 |  | (15,000              | ) |  | $                                      | 0.37
|                                                            |  |                      |   |  |                                        |     
|Non-vested stock options and warrants at September 30, 2006 |  | 2,398,375            |   |  | $                                      | 0.36
|                                                            |  |                      |   |  |                                        |     



|                        |  |                                          |  |                                             |  |                                 |      |                                         |            |                               |   |     
|----------------------- |  | ---------------------------------------- |  | ------------------------------------------- |  | ------------------------------- | ---- | --------------------------------------- | ---------- | ----------------------------- | - | ----
|                        |  | Options and Warrants Outstanding         |  | Options and WarrantsExercisable            
|Range of Exercise Price |  | Number Outstanding at September 30, 2006 |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |      | Number Exercisable at September 30,2006 |            | WeightedAverageExercise Price
|$0.05-0.10              |  | 29,006,026                               |  | 1.21                                        |  | $                               | 0.05 |                                         | 29,006,026 |                               | $ | 0.05
|$0.11-0.30              |  | 4,479,378                                |  | 0.46                                        |  | $                               | 0.17 |                                         | 4,479,378  |                               | $ | 0.17
|$0.31-0.50              |  | 8,104,470                                |  | 7.86                                        |  | $                               | 0.41 |                                         | 5,706,095  |                               | $ | 0.43

As at September 30, 2006 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.

At September 30, 2006 the aggregate
intrinsic value of options and warrants outstanding was $6,743,521 and the aggregate intrinsic value of options and warrants exercisable was $6,743,521. Total intrinsic value of options exercised during the nine months ended September 30, 2006
was $1,608,651. 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.



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



At September 30, 2006 there was $461,968 of unrecognized compensation cost related to non-vested
share-based payments which is expected to be recognized over a weighted-average period of 3.19 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.

g) Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, which clarifies the
accounting for uncertainty in tax positions. This Interpretation clarifies the methodology for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Although for the company this
Interpretation is not effective until January 1, 2007, this statement does require disclosure of the effects of adoption in the December 31, 2006 consolidated financial statements. We are in the process of determining the effect, if any,
the adoption of FIN 48 will have on our financial statements.

In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108), which provides interpretive guidance on the consideration of
the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 is effective as of the end of our 2006 fiscal year, allowing a one-time transitional cumulative effect adjustment
to beginning retained earnings as of January 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The Company does not believe that the adoption of SAB 108 will have an impact on the
financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (SFAS 157), Fair
Value Measurements, which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates
inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Earlier adoption is permitted, provided the company has not yet issued financial statements,
including for interim periods, for that fiscal year. We are currently evaluating the impact of SFAS 157, but do not expect the adoption of SFAS 157 to have a material impact on our consolidated financial position, results of operations or cash
flows.



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



h) Reclassification

Certain figures in the comparative period have been reclassified to conform to the current periods presentation, with no effect on net income
(loss).



|3. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

In 2004 the Company
entered into a loan agreement with Bravenet Web Services, Inc. (Bravenet). As at September 30, 2006, the Company has borrowed a total of $500,000 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. At September 30, 2006, the loan balance due to Bravenet including accrued interest is $594,202.

From January 1, 2005 to April 30, 2006, Bravenet provided the Company customer promotion and lead generation services. Beginning May 1,
2006, Quotemedia, Inc. began negotiations to purchase the Bravenet business unit that provided Quotemedia, Inc. its customer promotion and lead generation services. On May 1, 2006, Quotemedia Ltd., a wholly owned subsidiary of Quotemedia, Inc,
assumed the responsibility for paying the salaries and related expenses for the Bravenet personnel that provided customer promotion and lead generation services to Quotemedia, Inc. Effective May 1, 2006 Quotemedia, Inc. terminated its
obligation to pay Bravenet any fees for customer promotion and lead generation services.

On September 29, 2006, Quotemedia, Ltd.
finalized the purchase of the Bravenet business unit that was responsible for providing the Company customer promotion and lead generation services. The business unit was comprised of a total of 10 sales and customer service employees. The purchase
price of $110,000 was entirely attributed to intangible assets as there were no tangible assets included in the purchase. The $110,000 purchase price due to Bravenet has been accrued in amounts due to related parties, and remains unpaid as at
September 30, 2006. Interest of 7% will be accrued on unpaid amounts due to Bravenet related to this transaction.

For the nine months
ended September 30, 2006 and 2005, Quotemedia incurred $122,279 and $279,451, respectively, of sales expenses related to customer promotion and lead generation services provided by Bravenet. No sales expenses related to services provided by
Bravenet were incurred for the three months ended September 30, 2006, as Quotemedia, Inc. terminated its obligation to pay Bravenet fees for customer promotion and lead generation effective May 1, 2006. For the three months ended
September 30, 2005, Quotemedia incurred $100,400 in sales expenses related to customer promotion and lead generation services provided by Bravenet. At September 20, 2006, all amounts due to Bravenet for customer promotion and lead
generation services have been accrued in amounts due to related parties. Interest is accrued at 10% per annum. At September 30, 2006, the balance due to Bravenet for service fees including accrued interest is $510,425.



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



Commencing May 1, 2006, Bravenet began providing computer hosting and maintenance services to
the Company for approximately $6,250 per month. At September 30, 2006, all amounts due to Bravenet related to computer hosting and maintenance services have been accrued in amounts due to related parties. At September 20, 2006, the balance
due to Bravenet for unpaid computer hosting and maintenance services was approximately $33,700. This amount includes interest accrued at 7%.

Commencing May 1, 2006, the Company began leasing office space from Harrison Avenue Holdings Ltd. (Harrison) for approximately $9,630 per month. The President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned
subsidiary, is a control person of Harrison. At September 30, 2006, all amounts due to Harrison related to the leased office space have been accrued in amounts due to related parties. As at September 30, 2006, the balance due to Harrison
for unpaid office rent is approximately $48,400. This amount includes interest accrued at 7%.

At September 30, 2006, the Company owed
a total of $202,284 to officers of the Company for amounts advanced to the company and for accrued salary. No interest is required to be accrued on these amounts. An additional $415,751 of accrued salary is owed to an officer of the Company. This
amount includes interest accrued at the prime bank rate minus 1%.

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.



|4. | STOCKHOLDERS DEFICIT
|-- | ---------------------

a) Common stock

During the three months ended September 30, 2006, we issued a total of 340,298 shares of common stock to employees and former
consultants of the Company pursuant to the exercise of stock options. A total of 4,516,408 stock options were exercised at an average exercise price of $0.16. The Company repurchased a total of 1,126,000 shares of common stock to pay a total
exercise price of $388,800. An additional 1,043,204 shares of previously held mature shares of our common stock were surrendered to pay an exercise cost of $312,961. The surrendered common stock was subsequently cancelled. The repurchased and
surrendered common stock was valued based on the closing price of our common stock on the dates of the transactions. The average of the value of the shares repurchased and surrendered was $0.32 per share.



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



|5. | SUPPLEMENTARY CASH FLOW INFORMATION
|-- | -----------------------------------



|                                                             |  |      |         |      |   |        
|------------------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|Nine months ended September 30:                              |  | 2006 |         | 2005
|Cash paid for                                                |  |      |         |      |   |        
|Interest                                                     |  | $    | 1,426   |      | $ | 827    
|Cash received for                                            |  |      |         |      |   |        
|Interest                                                     |  |      | 15,522  |      |   |       
|Cash paid for taxes                                          |  |      |        |      |   |       
|Exercise of stock options with mature shares of common stock |  |      | 312,961 |      |   | 258,000



|6. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

QuoteMedia,
Inc. has been named as a defendant in litigation pending in the Ontario Court of Justice, Canada. The action was filed on May 12, 2006 by FRI Corporation (FRI) against QuoteMedia, Inc. as the sole
Defendant.

FRI, a former data provider for QuoteMedia, filed the suit after QuoteMedia ceased using FRIs services. The
Plaintiff is claiming damages in the estimated amount of $200,000.00 Canadian dollars, based on alleged contractual and copyright breaches by QuoteMedia, Inc. QuoteMedia is of the view that the claim is non-meritorious and it will be
aggressively defending itself against the claim while pursuing its own contemplated counterclaim against FRI.

The action is at
its preliminary stage. As stated, the Company believes the action is without merit and its defense will be fully prosecuted. However, there can be no assurance that an unfavorable outcome would not have a material adverse effect
on Quotemedias operating results, liquidity or financial position. The Company has not recorded any accrual for contingent liability associated with the legal proceedings described above based on the Companys belief that a liability,
while possible, is not probable. Further, any possible range of loss cannot be estimated at this time.



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|ITEM 2. | Managements Discussion and Analysis
|------- | ------------------------------------

The
following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report. We caution readers regarding certain forward looking statements in the following discussion, elsewhere in this
report, and in any other statements, made by, or on behalf of our company, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate
to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive uncertainties
and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by, or on behalf of, our company. Uncertainties and contingencies that might cause such differences include those risk factors disclosed in our annual report of Form 10-KSB for
the year ended December 31, 2005 and other reports filed from time to time with the SEC.

We disclaim any obligation to update
forward-looking statements. All references to we, our, us, of quotemedia refer to QuoteMedia, Inc., and it predecessors, operating divisions, and subsidiaries.

This report should be read in conjunction with our Form 10-KSB for the fiscal year ended December 31, 2005 filed with the Securities and Exchange
Commission.

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: Pre-Formatted Market Data Products; Data Feeds; and Quotestream portfolio management and market analysis software.

Our Pre-Formatted Market Data Products 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, investor relations
provisions, level II, watchlists, and real-time snap quotes.

Our Data Feeds products consist of raw streaming real-time market
data delivered over the Internet or via dedicated telecommunication lines and formatted XML market data feeds ready to implement with standardized Document Type Definitions (DTDs).



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Quotestream 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 is available to customers in both a desktop version
accessible via personal computer and, concurrently, in a companion wireless version accessible via a wide variety of wireless handheld devices.

In February 2006, we entered into an agreement with Penson Worldwide, Inc.s technology and brokerage affiliates, Nexa Technologies, Inc. and SAMCO Financial Services, Inc. With this new agreement, we became our own primary data
provider, with control over the depth, speed, quality, and security of our market data. Our existing products are now powered by highly accurate and low latency market data, and we are able to redistribute this data to allow us to enter into a new
market of providing high quality data in streaming feeds.

We generate recurring revenue from each product line by licensing services to
financial institutions, and websites. Contracts to license Quotestream to our corporate clients 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. Financial Data Products and Packaged 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.

Results of Operations  Three and nine month periods ended September 30, 2006 and September 30, 2005

Revenue Summary



|                                         |  |      |           |      |   |            |  |            |         |  |    |  
|---------------------------------------- |  | ---- | --------- | ---- | - | ---------- |  | ---------- | ------- |  | -- | -
|                                         |  | 2006 |           | 2005 |   | Change ($) |  | Change (%) |        
|Licensing revenue                        |  |      |           |      |   |            |  |            |         |  |    |  
|For the three months ended September 30, |  | $    | 960,111   |      | $ | 667,148    |  | $          | 292,963 |  | 44 | %
|For the nine months ended September 30,  |  | $    | 2,651,248 |      | $ | 1,665,176  |  | $          | 986,072 |  | 59 | %

Licensing revenue has increased 44% and 59% when comparing the three and nine month periods ended
September 30, 2006 and 2005. These increases reflect sales growth for both our financial data products and Quotestream offerings.

We
expanded our line of Financial Data Products, which includes XML market data feeds. This resulted in $142,701 (32%) and $501,326 (43%) increases in Financial Data Product revenue when comparing the three and nine month periods ended
September 30, 2006 and 2005. The number of Quotestream subscribers and the average subscription revenue per user increased during the period, resulting in $150,262 (70%) and $484,746 (97%) increases in Quotestream revenue when



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##### Table of Contents

comparing the three and nine month periods ended September 30, 2006 and 2005. Part of this Quotestream revenue growth is attributable to the 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 $75,000 and $225,000
for the three and nine month periods ended September 30, 2006. No barter revenue contributed to revenue reported in the comparative 2005 periods.

Cost of Revenue and Gross Profit Summary



|                                         |  |      |           |   |      |   |           |            |  |            |         |  |     |  
|---------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---------- |  | ---------- | ------- |  | --- | -
|                                         |  | 2006 |           |   | 2005 |   |           | Change ($) |  | Change (%) |        
|For the three months ended September 30, |  |      |           |   |      |   |           |            |  |            |         |  |     |  
|Cost of revenue                          |  | $    | 378,116   |   |      | $ | 184,024   |            |  | $          | 194,092 |  | 105 | %
|Gross profit                             |  | $    | 581,995   |   |      | $ | 483,124   |            |  | $          | 98,871  |  | 20  | %
|Gross margin %                           |  |      | 61        | % |      |   | 72        | %          |  |            |         |  |     |  
|For the nine months ended September 30,  |  |      |           |   |      |   |           |            |  |            |         |  |     |  
|Cost of revenue                          |  | $    | 990,013   |   |      | $ | 494,232   |            |  | $          | 495,781 |  | 100 | %
|Gross profit                             |  | $    | 1,661,235 |   |      | $ | 1,170,944 |            |  | $          | 490,291 |  | 42  | %
|Gross margin %                           |  |      | 63        | % |      |   | 70        | %          |  |            |         |  |     |  

Our cost of revenue consists of stock exchange fees, data feed provisioning costs and bandwidth
charges. Cost of revenue increased 105% and 100% when comparing the three and nine month periods ended September 30, 2006 and 2005. The increase is primarily due to communication costs associated with our new data feed implemented in February
2006. The increase is also due to additional data feeds required for new products and features offered in 2006 and increased variable stock exchange, data feed, and bandwidth usage charges resulting from the growth in the number of clients from the
comparable periods. This resulted in the cost of revenue increasing as a percentage of sales, as evidenced by our gross margin percentage which decreased to 61% for the three month period ended September 30, 2006, from 72% in the comparable
period. Our gross margin percentage decreased to 63% for the nine month period ended September 30, 2006, from 70% in the comparable period.

Operating Expenses Summary



|                                         |  |      |         |      |   |            |  |   |            |   |  |     |   
|---------------------------------------- |  | ---- | ------- | ---- | - | ---------- |  | - | ---------- | - |  | --- | --
|                                         |  | 2006 |         | 2005 |   | Change ($) |  |   | Change (%) |  
|For the three months ended September 30, |  |      |         |      |   |            |  |   |            |   |  |     |   
|Total operating expenses                 |  | $    | 708,925 |      | $ | 468,501    |  | $ | 240,424    |   |  | 51  | % 
|Breakdown:                               |  |      |         |      |   |            |  |   |            |   |  |     |   
|Sales and marketing                      |  |      | 244,818 |      |   | 119,354    |  |   | 125,464    |   |  | 105 | % 
|General and administrative               |  |      | 329,201 |      |   | 213,062    |  |   | 116,139    |   |  | 55  | % 
|Software development                     |  |      | 134,906 |      |   | 136,085    |  |   | (1,179     | ) |  | (1  | %)



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|                                        |  |   |           |  |   |           |  |   |         |  |    |  
|--------------------------------------- |  | - | --------- |  | - | --------- |  | - | ------- |  | -- | -
|For the nine months ended September 30, |  |   |           |  |   |           |  |   |         |  |    |  
|Total operating expenses                |  | $ | 1,924,838 |  | $ | 1,267,019 |  | $ | 657,819 |  | 52 | %
|Breakdown:                              |  |   |           |  |   |           |  |   |         |  |    |  
|Sales and marketing                     |  |   | 616,878   |  |   | 325,366   |  |   | 291,512 |  | 90 | %
|General and administrative              |  |   | 929,428   |  |   | 608,811   |  |   | 320,617 |  | 53 | %
|Software development                    |  |   | 378,532   |  |   | 332,842   |  |   | 45,690  |  | 14 | %

Sales and Marketing

Sales and marketing consists primarily of marketing, investor relations, travel, and advertising expenses. Sales and marketing expenses increased $125,464
and $291,512 for the three and nine month periods respectively ended September 30, 2006 when compared with the same periods in fiscal 2005. The increases are primarily due to $75,000 and $225,000 in non-cash advertising costs incurred in the
three and nine month periods ended September 30, 2006. In the fourth quarter of 2005, we started receiving 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. The increase in sales and marketing expenses is also due to $7,974 and $23,922 in
stock based compensation expenses incurred in the three and nine month periods ended September 30, 2006. Prior to the adoption of SFAS 123(R) on January 1, 2006, we accounted for stock option grants in accordance with APB Opinion
No. 25, and accordingly, recognized no compensation expense for stock option grants.

Commencing May 1, 2006, we moved our lead
generation services in house. Quotemedia Ltd., a wholly owned subsidiary of Quotemedia, Inc, now performs lead generation services for Quotemedia, Inc. Prior to May 2006, lead generation services were performed by Bravenet Web Services Inc. The
President and Chief Executive Officer of Quotemedia, Ltd. is a control person of Bravenet Web Services Inc.

General and Administrative

General and administrative expenses consist primarily of salaries expense, office rent, insurance premiums, and professional fees.
General and administrative expenses increased $116,139 and $320,617 for the three and nine month periods respectively ended September 30, 2006 when compared with the same periods in fiscal 2005. Commencing May 2006, Quotemedia Ltd. rented new
office space for its lead generation personnel, resulting in increased office rent expenses for the three and nine month periods ending September 30, 2006 when compared with the same periods in fiscal 2005. We made competitive salary
adjustments for existing employees and added a new administrative employee, resulting in increased salary expense for the three and nine month periods ending September 30, 2006, when compared to the same fiscal periods in 2005. Depreciation
expense increased when compared to the same fiscal periods in 2005, due to the purchase of new computer equipment and the amortization of capitalized software development costs. Bad debt expenses also increased as a function of the increase in
revenue from the comparable periods.



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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 decreased $1,179 for the three months ended September 30, 2006, and increased $45,690 for the nine months ended September 31, 2006,
when compared to the same periods in fiscal 2005. During 2006, total salary expense for software development personnel increased, as we made competitive salary adjustments for existing employees, and added four new software development personnel
compared to the same fiscal periods in 2005. Additional software development personnel were required for our technology expansion and reconfiguration program. This program is being undertaken in preparation for our entry into the raw financial data
feed provisioning and direct access trading markets, anticipated late 2006.

For the three and six month periods ended September 30,
2006, we incurred $35,190 and $96,018 in stock based compensation expenses, resulting from vesting of stock options granted to software development personnel. Prior to the adoption of SFAS 123(R) on January 1, 2006, we accounted for stock
option grants in accordance with APB Opinion No. 25, and accordingly, recognized no compensation expense for stock option grants.

The
increases in software development expenses noted above were offset by software development costs capitalized in 2006. We capitalized $78,162 and $196,599 of development costs respectively for the three and nine month periods ending
September 30, 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. No application software development costs were capitalized in the comparative periods in 2005.

Other
Income and (Expense) Summary



|                                         |  |      |         |   |      |   |         |  
|---------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                         |  | 2006 |         |   | 2005 |  
|For the three months ended September 30, |  |      |         |   |      |   |         |  
|Total other income and (expenses)        |  | $    | (37,113 | ) |      | $ | (11,643 | )
|Breakdown:                               |  |      |         |   |      |   |         |  
|Foreign exchange loss                    |  |      | (9,224  | ) |      |   | 519     |  
|Interest expense                         |  |      | (27,889 | ) |      |   | (12,162 | )
|Loss of disposal of equipment            |  |      |        |   |      |   |        |  
|For the nine months ended September 30,  |  |      |         |   |      |   |         |  
|Total other income and (expenses)        |  | $    | (90,875 | ) |      | $ | (32,168 | )
|Breakdown:                               |  |      |         |   |      |   |         |  
|Foreign exchange loss                    |  |      | (13,600 | ) |      |   | (61     | )
|Interest expense                         |  |      | (75,663 | ) |      |   | (29,520 | )
|Loss of disposal of equipment            |  |      | (1,612  | ) |      |   | (2,587  | )



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Foreign Exchange Adjustment

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.

Interest expense

Interest is accrued on certain amounts owed to related parties. Interest expense increased in the three and nine month periods ended September 30,
2006 due to additional borrowings compared to same fiscal periods in 2005. Interest is accrued at rates ranging from the prime bank rate minus 1% to 10% per annum.

Loss on Disposal of Equipment

In April 2006, we wrote off obsolete computer equipment that had a net
book value of $1,612. In June 2005, Quotemedia, Ltd., our wholly owned subsidiary, moved into larger office premises. As a result of this move, we wrote off $2,587 which represented the net book value of the leasehold improvements associated with
the previous office premises.

Net income (loss) for the period

As a result of the foregoing, the net loss for the three months ended September 30, 2006 was $164,043 or less than $(0.01) per share compared to net income of $2,980 and less than $0.01 per share for the three months ended
September 30, 2005. The net loss for the nine months ended September 30, 2006 was $354,478 or $(0.01) per share compared to a loss of $128,243 and less than $(0.01) per share for the nine months ended September 30, 2005.

As a result of adopting SFAS 123(R) on January 1, 2006, for the three and nine months ended September 30, 2006, our net loss was $45,225 and $123,987
greater respectively than if we had continued to account for stock-based compensation under APB opinion No. 25.

Liquidity and Capital Resources

Our cash totaled $823,553 at September 30, 2006, as compared with $670,078 at December 31, 2005, an increase of $153,475. Net cash of
$677,940 was provided by operations for the nine months ended September 30, 2006, primarily resulting from an increase in accounts payable and amounts due to related parties, offset by our net loss for the period. Net cash used in investing
activities for the nine months ended September 30, 2006 was $510,465 resulting from the purchase of new equipment and intangible assets and capitalized software development costs. Net cash used in financing activities for the nine months ended
September 30, 2006 was $14,000, resulting from the repayment of amounts due to related parties, offset by cash received from the exercise of stock options during the period.



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We have generated positive cash flows from operations since 2004. We believe this will continue for at least the next 12
months, as our revenue is recurring in nature based on client contracts which have one to three year terms.

Our current liabilities include $255,930 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 $315,658 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.



|ITEM 3. | 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 September 30, 2006. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer 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 quarterly reports filed under the Securities Exchange Act within the time
periods specified by the Securities and Exchange Commissions rules and forms. During the quarterly period 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.



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PART II OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS - Information about legal proceedings is set forth in Note 6 to the unaudited consolidated financial statements included in this report.
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS NONE
|------- | -----------------------------------------------------------------



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES NONE
|------- | -------------------------------------



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  NONE
|------- | ----------------------------------------------------------



|ITEM 5. | OTHER INFORMATION NONE
|------- | -----------------------



|ITEM 6. | EXHIBITS
|------- | --------



|              |  |                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                                                    
|              | 
|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.        



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SIGNATURES

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



QUOTEMEDIA, INC.Dated: November 14, 2006By:

/s/ R. Keith GuelpaR. Keith Guelpa,President and Chief Executive Officer(Principal Executive Officer)By:

/s/ Keith J. RandallKeith J. Randall,Chief Financial Officer(Principal Accounting Officer)




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