##### Table of Contents

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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 June 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 orOrganization) |  | (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 July 28, 2006, the Registrant had
61,930,931 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                        |  | 15  
|         |  |                       | 
|         |  | Item 3.               |  | Controls and Procedures                                     |  | 21  
|         |  |                      
|Part II. |  | Other Information     |  |                                                            
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                           |  | 22  
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 22  
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                             |  | 22  
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders         |  | 22  
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                           |  | 22  
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                    |  | 22  
|         |  |                      
|         |  | Signatures            |  | 23                                                         



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##### Table of Contents

QUOTEMEDIA, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)



|                                                                                                        |  |              |            |  
|------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | -
|                                                                                                        |  | June 30,2006 |           
|ASSETS                                                                                                  |  |              |            |  
|Current assets:                                                                                         |  |              |            |  
|Cash                                                                                                    |  | $            | 734,958    |  
|Accounts receivable, net                                                                                |  |              | 199,262    |  
|Prepaid expenses                                                                                        |  |              | 193,845    |  
|Deposits                                                                                                |  |              | 41,151     |  
|                                                                                                        |  |              |            |  
|Total current assets                                                                                    |  |              | 1,169,216  |  
|Property and equipment, net                                                                             |  |              | 328,169    |  
|Intangible assets                                                                                       |  |              | 74,174     |  
|                                                                                                        |  |              |            |  
|Total assets                                                                                            |  | $            | 1,571,559  |  
|                                                                                                        |  |              |            |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                   |  |              |            |  
|Current liabilities:                                                                                    |  |              |            |  
|Accounts payable and accrued liabilities                                                                |  | $            | 248,835    |  
|Deferred revenue                                                                                        |  |              | 253,853    |  
|Current portion of amounts due to related parties                                                       |  |              | 73,100     |  
|                                                                                                        |  |              |            |  
|Total current liabilities                                                                               |  |              | 575,788    |  
|                                                                                                        |  |              |            |  
|Other long-term liabilities                                                                             |  |              | 18,420     |  
|Long-term portion of amounts due to related parties                                                     |  |              | 1,602,479  |  
|Stockholders deficit:                                                                                  |  |              |            |  
|Preferred stock, non designated, 10,000,000 shares authorized, none issued                              |  |              |           |  
|Common stock, $0.001 par value, 100,000,000 shares authorized, 61,930,931 shares issued and outstanding |  |              | 61,931     |  
|Additional paid-in capital                                                                              |  |              | 6,533,113  |  
|Accumulated deficit                                                                                     |  |              | (7,220,172 | )
|                                                                                                        |  |              |            |  
|Total stockholders deficit                                                                             |  |              | (625,128   | )
|Total liabilities and stockholders deficit                                                             |  | $            | 1,571,559  |  
|                                                                                                        |  |              |            |  

See accompanying notes



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##### Table of Contents

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|----------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                    |  | Three months ended June 30, |            |   | Six months ended June 30, |  
|                                    |  | 2006                        |            |   | 2005                      |   |            | 2006 |  |   | 2005       |  
|OPERATING REVENUE                   |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Licensing revenue                   |  | $                           | 852,871    |   |                           | $ | 554,605    |      |  | $ | 1,691,137  |   |  | $ | 998,028    |  
|Cost of revenue                     |  |                             | 326,644    |   |                           |   | 179,765    |      |  |   | 611,897    |   |  |   | 310,208    |  
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Gross Profit                        |  |                             | 526,227    |   |                           |   | 374,840    |      |  |   | 1,079,240  |   |  |   | 687,820    |  
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|OPERATING EXPENSES                  |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Sales and marketing                 |  |                             | 208,226    |   |                           |   | 108,808    |      |  |   | 372,060    |   |  |   | 206,012    |  
|General and administrative          |  |                             | 288,453    |   |                           |   | 206,338    |      |  |   | 600,227    |   |  |   | 395,749    |  
|Software development                |  |                             | 116,110    |   |                           |   | 108,776    |      |  |   | 243,626    |   |  |   | 196,757    |  
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|                                    |  |                             | 612,789    |   |                           |   | 423,922    |      |  |   | 1,215,913  |   |  |   | 798,518    |  
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|OPERATING LOSS                      |  |                             | (86,562    | ) |                           |   | (49,082    | )    |  |   | (136,673   | ) |  |   | (110,698   | )
|OTHER INCOME AND EXPENSES           |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Foreign exchange loss               |  |                             | (2,989     | ) |                           |   | (59        | )    |  |   | (4,376     | ) |  |   | (580       | )
|Interest expense, net               |  |                             | (27,260    | ) |                           |   | (9,695     | )    |  |   | (47,774    | ) |  |   | (17,358    | )
|Loss on disposal of equipment       |  |                             | (1,612     | ) |                           |   | (2,587     | )    |  |   | (1,612     | ) |  |   | (2,587     | )
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|                                    |  |                             | (31,861    | ) |                           |   | (12,341    | )    |  |   | (53,762    | ) |  |   | (20,525    | )
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|NET LOSS                            |  |                             | (118,423   | ) |                           |   | (61,423    | )    |  |   | (190,435   | ) |  |   | (131,223   | )
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|LOSS PER SHARE                      |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted loss per share    |  | $                           |           |   |                           | $ |           |      |  | $ |           |   |  | $ |           |  
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|WEIGHTED AVERAGE SHARES OUTSTANDING |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted                   |  |                             | 61,764,757 |   |                           |   | 59,744,717 |      |  |   | 61,627,542 |   |  |   | 59,207,445 |  
|                                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  

See accompanying notes



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QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                            |  |                           |          |   |      |   |          |  
|--------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | -------- | -
|                                                                            |  | Six Months Ended June 30, |         
|                                                                            |  | 2006                      |          |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                           |          |   |      |   |          |  
|Net loss                                                                    |  | $                         | (190,435 | ) |      | $ | (131,223 | )
|Adjustments to reconcile loss to net cash provided by operating activities: |  |                           |          |   |      |   |          |  
|Depreciation                                                                |  |                           | 32,152   |   |      |   | 6,786    |  
|Loss on disposal of equipment                                               |  |                           | 1,612    |   |      |   | 2,587    |  
|Bad debt expense                                                            |  |                           | 33,014   |   |      |   | 13,087   |  
|Stock based compensation expense                                            |  |                           | 78,762   |   |      |   |         |  
|Cancellation of capital stock                                               |  |                           | (12,750  | ) |      |   |         |  
|Non-cash barter revenue                                                     |  |                           | (150,000 | ) |      |   |         |  
|Non-cash barter advertising expense                                         |  |                           | 150,000  |   |      |   |         |  
|Changes in assets and liabilities:                                          |  |                           |          |   |      |   |          |  
|Accounts receivable                                                         |  |                           | (39,516  | ) |      |   | (35,499  | )
|Prepaid expenses                                                            |  |                           | (20,359  | ) |      |   | (9,965   | )
|Deposits                                                                    |  |                           | (1,682   | ) |      |   | (473     | )
|Accounts payable and amounts due to related parties                         |  |                           | 407,657  |   |      |   | 307,938  |  
|Deferred revenue                                                            |  |                           | 69,170   |   |      |   | 53,050   |  
|                                                                            |  |                           |          |   |      |   |          |  
|Net cash provided by operating activities                                   |  |                           | 357,625  |   |      |   | 206,288  |  
|                                                                            |  |                           |          |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                           |          |   |      |   |          |  
|Purchase of equipment and intangible assets                                 |  |                           | (278,745 | ) |      |   | (28,567  | )
|                                                                            |  |                           |          |   |      |   |          |  
|Net cash used in investing activities                                       |  |                           | (278,745 | ) |      |   | (28,567  | )
|                                                                            |  |                           |          |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       |  |                           |          |   |      |   |          |  
|Repayment of loans from related parties                                     |  |                           | (30,000  | ) |      |   | (49,250  | )
|Issuance of capital stock for cash, net                                     |  |                           | 16,000   |   |      |   |         |  
|                                                                            |  |                           |          |   |      |   |          |  
|Net cash used in financing activities                                       |  |                           | (14,000  | ) |      |   | (49,250  | )
|                                                                            |  |                           |          |   |      |   |          |  
|Net increase in cash                                                        |  |                           | 64,880   |   |      |   | 128,471  |  
|Cash, beginning of period                                                   |  |                           | 670,078  |   |      |   | 131,265  |  
|                                                                            |  |                           |          |   |      |   |          |  
|Cash, end of period                                                         |  | $                         | 734,958  |   |      | $ | 259,736  |  
|                                                                            |  |                           |          |   |      |   |          |  

See supplementary information (note 5)

See accompanying notes



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##### Table of Contents

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



|                        |  |                             |        |                           |   |      |   |         |  |  
|----------------------- |  | --------------------------- | ------ | ------------------------- | - | ---- | - | ------- |  | -
|                        |  | Three months ended June 30, |        | Six months ended June 30,
|                        |  | 2006                        |        | 2005                      |   | 2006 |   | 2005   
|Barter revenue earned   |  | $                           | 75,000 |                           |  |      | $ | 150,000 |  | 
|Advertising credit used |  | $                           | 75,000 |                           |  |      | $ | 150,000 |  | 

d) Property and Equipment



|                                 |  |      |         |                         |   |               |  |   |        
|-------------------------------- |  | ---- | ------- | ----------------------- | - | ------------- |  | - | -------
|As at June 30, 2006:             |  | Cost |         | AccumulatedDepreciation |   | Net BookValue
|Computer equipment               |  | $    | 173,037 |                         | $ | 36,692        |  | $ | 136,345
|Office furniture and equipment   |  |      | 40,781  |                         |   | 10,850        |  |   | 29,931 
|Leasehold improvements           |  |      | 17,360  |                         |   | 2,552         |  |   | 14,808 
|Capitalized application software |  |      | 162,159 |                         |   | 15,074        |  |   | 147,085
|                                 |  |      |         |                         |   |               |  |   |        
|                                 |  | $    | 393,337 |                         | $ | 65,168        |  | $ | 328,169
|                                 |  |      |         |                         |   |               |  |   |        

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 six months ended June 30, 2006, the Company capitalized $75,680 and $118,438
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 six months ended June 30, 2006, amortization expenses associated with the internally



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



developed application software was $9,240 and $13,803 respectively. At June 30, 2006, the remaining book value of the application software was $147,085.

Depreciation expense totaled $19,899 and $4,706 for the three months ended June 30, 2006 and 2005 respectively. Depreciation expense
totaled $32,152 and $6,786 for the six months ended June 30, 2006 and 2005 respectively.

e) 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 ten years. At June 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.



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



As a result of adopting SFAS 123(R) on January 1, 2006, for the three and six months ended
June 30, 2006, our net loss was $44,907 and $78,762 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 six months
ended June 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 six months ended June 30, 2006 was comprised as follows:



|                                       |  |                                |        |                              |   |       
|-------------------------------------- |  | ------------------------------ | ------ | ---------------------------- | - | ------
|                                       |  | Three monthsendedJune 30, 2006 |        | Six monthsendedJune 30, 2006
|Sales and marketing                    |  | $                              | 7,974  |                              | $ | 15,948
|General and administrative             |  |                                | 993    |                              |   | 1,986 
|Software development                   |  |                                | 35,940 |                              |   | 60,828
|                                       |  |                                |        |                              |   |       
|Total stock-based compensation expense |  | $                              | 44,907 |                              | $ | 78,762
|                                       |  |                                |        |                              |   |       

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.



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



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 six months ended June 30, 2005.



|                                                                                                          |  |                                |         |   |                              |   |          |  
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---------------------------- | - | -------- | -
|                                                                                                          |  | Three monthsendedJune 30, 2005 |         |   | Six monthsendedJune 30, 2005 |  
|Net loss:                                                                                                 |  |                                |         |   |                              |   |          |  
|As reported                                                                                               |  | $                              | (61,423 | ) |                              | $ | (131,223 | )
|Add: Stock compensation expense recorded in the financial statements                                      |  |                                |        |   |                              |   |         |  
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards |  |                                | (28,769 | ) |                              |   | (57,538  | )
|                                                                                                          |  |                                |         |   |                              |   |          |  
|Pro forma                                                                                                 |  | $                              | (90,192 | ) |                              | $ | (188,761 | )
|                                                                                                          |  |                                |         |   |                              |   |          |  
|Basic and diluted earnings (loss) per share:                                                              |  |                                |         |   |                              |   |          |  
|As reported                                                                                               |  | $                              | (0.00   | ) |                              | $ | (0.00    | )
|Pro forma                                                                                                 |  | $                              | (0.00   | ) |                              | $ | (0.00    | )

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 ended June 30, |            | Six months ended June 30, |     
|                                               |  | 2006                        |            |                           | 2005 |     | 2006 |   |            | 2005 | 
|Expected dividend yield                        |  |                             |           |                           |      | n/a |      |   |           |      |  |   |           |  
|Expected stock price volatility                |  |                             | 71         | %                         |      | n/a |      |   | 71         | %    |  |   | 100        | %
|Risk-free interest rate                        |  |                             | 4          | %                         |      | n/a |      |   | 4          | %    |  |   | 4          | %
|Expected life of options                       |  |                             | 6.25 years |                           |      | n/a |      |   | 6.25 years |      |  |   | 6.25 years |  
|Weighted average fair value of options granted |  | $                           | 0.21       |                           |      | n/a |      | $ | 0.21       |      |  | $ | 0.32       |  

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.



10



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##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



The following table represents stock option and warrant activity for the six months ended
June 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          |  | (1,810,000          | ) |  | $                              | 0.25
|Forfeited/expired                |  | (220,000            | ) |  | $                              | 0.27
|                                 |  |                     |   |  |                                |     
|Outstanding at June 30, 2006     |  | 46,256,282          |   |  | $                              | 0.13
|                                 |  |                     |   |  |                                |     

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



|                                                           |  |                     |   |  |                                      |     
|---------------------------------------------------------- |  | ------------------- | - |  | ------------------------------------ | ----
|                                                           |  | Options andWarrants |   |  | Weighted-AverageGrant Date FairValue
|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                                   |  | (295,750            | ) |  | $                                    | 0.40
|Forfeited during the period                                |  | (15,000             | ) |  | $                                    | 0.37
|                                                           |  |                     |   |  |                                      |     
|Non-vested stock options and warrants at June 30, 2006     |  | 2,545,750           |   |  | $                                    | 0.36
|                                                           |  |                     |   |  |                                      |     



|                        |  |                                    |  |                                          |  |                              |      |                                     |            |                               |   |     
|----------------------- |  | ---------------------------------- |  | ---------------------------------------- |  | ---------------------------- | ---- | ----------------------------------- | ---------- | ----------------------------- | - | ----
|                        |  | Options and WarrantsOutstanding    |  | Options and WarrantsExercisable         
|Range of Exercise Price |  | NumberOutstanding at June 30, 2006 |  | WeightedAverageRemainingContractual Life |  | WeightedAverageExercisePrice |      | Number Exercisable at June 30, 2006 |            | WeightedAverageExercise Price
|$0.05-0.10              |  | 29,006,026                         |  | 1.47                                     |  | $                            | 0.05 |                                     | 29,006,026 |                               | $ | 0.05
|$0.11-0.30              |  | 9,145,786                          |  | 0.40                                     |  | $                            | 0.16 |                                     | 9,145,786  |                               | $ | 0.16
|$0.31-0.50              |  | 8,104,470                          |  | 8.11                                     |  | $                            | 0.41 |                                     | 5,558,720  |                               | $ | 0.43



11



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##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



As at June 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 June 30, 2006 the aggregate intrinsic
value of options and warrants outstanding was $9,194,780 and the aggregate intrinsic value of options and warrants exercisable was $9,184,780. Total intrinsic value of options exercised during the six months ended June 30, 2006 was $340,700.
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 June 30, 2006 there was $513,625 of unrecognized compensation cost related to non-vested share-based payments which is expected to be recognized
over a weighted-average period of 3.39 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.

f) Reclassification

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



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

In 2004 the Company
entered into a loan agreement with Bravenet Web Services, Inc. (Bravenet). As at June 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 June 30, 2006, the loan balance due to Bravenet including accrued interest is $579,591.

From January 1, 2005 to April 30, 2006, Bravenet provided the Company customer promotion and lead generation services. For the three months
ended June 30, 2006 and 2005, $31,320 and $93,380 in sales expenses payable to Bravenet were accrued respectively. For the six months ended June 30, 2006 and 2005, $122,279 and $179,051 in sales expenses payable to Bravenet were accrued
respectively. Interest is accrued at 10% per annum. At June 30, 2006, the balance due to Bravenet for service fees including accrued interest is $497,874.



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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. As at June 30, 2006, the balance due to Bravenet for unpaid computer hosting and maintenance services was $12,500. No interest is required to be accrued on this amount.

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. As at June 30, 2006, the balance due to Harrison for unpaid office rent is $19,262. No interest is required to be
accrued on this amount.

At June 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 $352,729 of accrued salary is owed to an officer of the Company. This amount includes interest accrued at the prime bank rate minus 1%.



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

a) Common stock

During the three months ended June 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 710,000 stock options were exercised at an average exercise price of $0.22. The Company received total cash proceeds of $16,000 related to the exercise of 80,000 stock
options. The average exercise price was $0.20 per share. The Company repurchased a total of 369,702 shares of common stock to pay a total exercise price of $137,000 for the exercise of 630,000 stock options. The repurchased 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 was $0.37 per share.



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



|                                                             |  |      |       |      |   |        
|------------------------------------------------------------ |  | ---- | ----- | ---- | - | -------
|Six months ended June 30:                                    |  | 2006 |       | 2005
|Cash paid for                                                |  |      |       |      |   |        
|Interest                                                     |  | $    | 1,035 |      | $ | 827    
|Cash received for                                            |  |      |       |      |   |        
|Interest                                                     |  |      | 9,085 |      |   |       
|Cash paid for taxes                                          |  |      |      |      |   |       
|Exercise of stock options with mature shares of common stock |  |      |      |      |   | 258,000



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QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED STATEMENTS

(Unaudited)



|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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##### Table of Contents

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

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

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 six month periods ended June 30, 2006 and June 30, 2005

Revenue Summary



|                                    |  |      |           |      |   |            |  |            |         |  |    |  
|----------------------------------- |  | ---- | --------- | ---- | - | ---------- |  | ---------- | ------- |  | -- | -
|                                    |  | 2006 |           | 2005 |   | Change ($) |  | Change (%) |        
|Licensing revenue                   |  |      |           |      |   |            |  |            |         |  |    |  
|For the three months ended June 30, |  | $    | 852,871   |      | $ | 554,605    |  | $          | 298,266 |  | 54 | %
|For the six months ended June 30,   |  | $    | 1,691,137 |      | $ | 998,028    |  | $          | 693,109 |  | 69 | %

Licensing revenue has increased 54% and 69% when comparing the three and six month periods ended
June 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 $109,084 (28%) and $358,625 (50%) increases in Financial Data Product revenue when comparing the three and six month periods ended
June 30, 2006 and 2005. The number of Quotestream subscribers and the average subscription revenue per user increased during the period, resulting in $189,182 (118%) and $334,484 (117%) increases in Quotestream revenue when comparing
the three and six month periods ended June 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



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received for subscription services. This barter revenue amounted to $75,000 and $150,000 for the three and six month periods ended June 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 June 30, |  |      |           |   |      |   |         |            |  |            |         |  |    |  
|Cost of revenue                     |  | $    | 326,644   |   |      | $ | 179,765 |            |  | $          | 146,879 |  | 82 | %
|Gross profit                        |  | $    | 526,227   |   |      | $ | 374,840 |            |  | $          | 151,387 |  | 40 | %
|Gross margin %                      |  |      | 62        | % |      |   | 68      | %          |  |            |         |  |    |  
|For the six months ended June 30,   |  |      |           |   |      |   |         |            |  |            |         |  |    |  
|Cost of revenue                     |  | $    | 611,897   |   |      | $ | 310,208 |            |  | $          | 301,689 |  | 97 | %
|Gross profit                        |  | $    | 1,079,240 |   |      | $ | 687,820 |            |  | $          | 391,420 |  | 57 | %
|Gross margin %                      |  |      | 64        | % |      |   | 69      | %          |  |            |         |  |    |  

Our cost of revenue consists of stock exchange fees, data feed provisioning costs and bandwidth
charges. Cost of revenue increased 82% and 97% when comparing the three and six month periods ended June 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 62% for the three month period ended June 30, 2006, from 68% in the comparable period. Our gross
margin percentage decreased to 64% for the six month period ended June 30, 2006, from 69% in the comparable period.

Operating Expenses Summary



|                                    |  |      |           |      |   |            |  |            |         |  |    |  
|----------------------------------- |  | ---- | --------- | ---- | - | ---------- |  | ---------- | ------- |  | -- | -
|                                    |  | 2006 |           | 2005 |   | Change ($) |  | Change (%) |        
|For the three months ended June 30, |  |      |           |      |   |            |  |            |         |  |    |  
|Total operating expenses            |  | $    | 612,789   |      | $ | 423,922    |  | $          | 188,867 |  | 45 | %
|Breakdown:                          |  |      |           |      |   |            |  |            |         |  |    |  
|Sales and marketing                 |  |      | 208,226   |      |   | 108,808    |  |            | 99,418  |  | 91 | %
|General and administrative          |  |      | 288,453   |      |   | 206,338    |  |            | 82,115  |  | 40 | %
|Software development                |  |      | 116,110   |      |   | 108,776    |  |            | 7,334   |  | 7  | %
|For the six months ended June 30,   |  |      |           |      |   |            |  |            |         |  |    |  
|Total operating expenses            |  | $    | 1,215,913 |      | $ | 798,518    |  | $          | 417,395 |  | 52 | %
|Breakdown:                          |  |      |           |      |   |            |  |            |         |  |    |  
|Sales and marketing                 |  |      | 372,060   |      |   | 206,012    |  |            | 166,048 |  | 81 | %
|General and administrative          |  |      | 600,227   |      |   | 395,749    |  |            | 204,478 |  | 52 | %
|Software development                |  |      | 243,626   |      |   | 196,757    |  |            | 46,869  |  | 24 | %



17



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##### Table of Contents

Sales and Marketing

Sales and marketing consists primarily of marketing, investor relations, travel, and advertising expenses. Sales and marketing expenses increased $99,418 and $166,048 for the three and six month periods respectively
ended June 30, 2006 when compared with the same periods in fiscal 2005. The increases are primarily due to $75,000 and $150,000 in non-cash advertising costs incurred in the three and six month periods ended June 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 $15,948 in stock based compensation expenses incurred in the three and six month periods ended
June 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 $82,115 and $204,478 for the three and
six month periods respectively ended June 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 six month periods ending June 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 six month periods ending June 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.

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 $7,334 and $46,869 for the three and six month periods respectively ended June 30, 2006 when compared to the same periods in fiscal 2005. The increase is due to competitive salary adjustments for existing employees, and the addition
of four new software development personnel compared to the same fiscal periods in 2005. The



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increase in development costs are a result of 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.

The increases in software
development costs are also due to $35,942 and $60,828 in stock based compensation expenses recognized in the three and six month periods ended June 30, 2006, 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.

We capitalized $75,680 and $118,438 of development costs respectively for the three and six month periods ending June 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.

We anticipate that software development
expenses will continue to increase in the future as additional software developers are added.

Other Income and (Expense) Summary



|                                    |  |      |         |   |      |   |         |  
|----------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                    |  | 2006 |         |   | 2005 |  
|For the three months ended June 30, |  |      |         |   |      |   |         |  
|Total other income and (expenses)   |  | $    | (31,861 | ) |      | $ | (12,341 | )
|Breakdown:                          |  |      |         |   |      |   |         |  
|Foreign exchange loss               |  |      | (2,989  | ) |      |   | (59     | )
|Interest expense                    |  |      | (27,260 | ) |      |   | (9,695  | )
|Loss of disposal of equipment       |  |      | (1,612  | ) |      |   | (2,587  | )
|For the six months ended June 30,   |  |      |         |   |      |   |         |  
|Total other income and (expenses)   |  | $    | (53,762 | ) |      | $ | (20,525 | )
|Breakdown:                          |  |      |         |   |      |   |         |  
|Foreign exchange loss               |  |      | (4,376  | ) |      |   | (580    | )
|Interest expense                    |  |      | (47,774 | ) |      |   | (17,358 | )
|Loss of disposal of equipment       |  |      | (1,612  | ) |      |   | (2,587  | )

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.



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Interest expense

Interest is accrued on certain amounts owed to related parties. Interest expense increased in the three and six month periods ended June 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 June 30, 2006 was $118,423 or less than $(0.01) per share compared to a loss of $61,423 and less than $(0.01) per share for the three months ended June 30, 2005. The net loss for the six months ended
June 30, 2006 was $190,435 or less than $(0.01) per share compared to a loss of $131,223 and less than $(0.01) per share for the six months ended June 30, 2005.

As a result of adopting SFAS 123(R) on January 1, 2006, for the three and six months ended June 30, 2006, our net loss was $44,907 and $78,762 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 $734,958 at June 30, 2006, as compared with $670,078 at December 31, 2005, an increase of $64,880. Net cash of $357,625 was provided by
operations for the six months ended June 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 six months
ended June 30, 2006 was $278,745 resulting from the purchase of new equipment and intangible assets and capitalized software development costs. Net cash used in financing activities for the six months ended June 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.

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 $73,100 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 $253,853 is also included in our current liabilities. The costs incurred to realize the deferred revenue in
the next 12 months are minimal.



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##### Table of Contents

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 June 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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##### Table of Contents

SIGNATURES

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



QUOTEMEDIA, INC.Dated: August 10, 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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