##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-KSB



---



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

For fiscal year ended December 31, 2005

Commission file number 0-28599



---

QUOTEMEDIA, INC.

(Name of Small Business Issuer in Its Charter)



---

Nevada

(State of incorporation)

91-2008633

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

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

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



---

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

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

Common Stock, par value $.001 per share



---

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

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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

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

Issuers revenue for its most recent fiscal year: $2,466,151.

As of
February 14, 2006, there were outstanding 61,275,626 shares of the issuers common stock, par value $.001 per share. The aggregate market value of common stock held by non-affiliates of the issuer (47,891,254 shares) based on the closing
price of the issuers common stock as reported on the NASD Over the Counter Bulletin Board, or OTCBB, on February 14, 2006, was $20,593,239. For purposes of this computation, all executive officers, directors, and 10% beneficial owners of
the issuer are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the issuer.

Documents incorporated by reference: None



---



---

##### Table of Contents

QUOTEMEDIA, INC.

ANNUAL REPORT ON FORM 10-KSB

FISCAL YEAR ENDED DECEMBER 31, 2005

TABLE OF CONTENTS



|                                           |  |                                                                                                                 |  |     
|------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|                                           |  |                                                                                                                 |  | Page
|                                           |  | PART I                                                                                                          |  |     
|                                           |  |                                                                                                                
|ITEM 1.                                    |  | DESCRIPTION OF BUSINESS                                                                                         |  | 1   
|                                           |  |                                                                                                                
|ITEM 2.                                    |  | DESCRIPTION OF PROPERTY                                                                                         |  | 8   
|                                           |  |                                                                                                                
|ITEM 3.                                    |  | LEGAL PROCEEDINGS                                                                                               |  | 8   
|                                           |  |                                                                                                                
|ITEM 4.                                    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             |  | 8   
|                                           |  |                                                                                                                
|                                           |  | PART II                                                                                                         |  |     
|                                           |  |                                                                                                                
|ITEM 5.                                    |  | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES |  | 9   
|                                           |  |                                                                                                                
|ITEM 6.                                    |  | MANAGEMENTS DISCUSSION AND ANALYSIS                                                                            |  | 10  
|                                           |  |                                                                                                                
|ITEM 7.                                    |  | FINANCIAL STATEMENTS                                                                                            |  | 16  
|                                           |  |                                                                                                                
|ITEM 8.                                    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            |  | 16  
|                                           |  |                                                                                                                
|ITEM 8A.                                   |  | CONTROLS AND PROCEDURES                                                                                         |  | 16  
|                                           |  |                                                                                                                
|ITEM 8B.                                   |  | OTHER INFORMATION                                                                                               |  | 16  
|                                           |  |                                                                                                                
|                                           |  | PART III                                                                                                        |  |     
|                                           |  |                                                                                                                
|ITEM 9.                                    |  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT |  | 17  
|                                           |  |                                                                                                                
|ITEM 10.                                   |  | EXECUTIVE COMPENSATION                                                                                          |  | 19  
|                                           |  |                                                                                                                
|ITEM 11.                                   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                  |  | 25  
|                                           |  |                                                                                                                
|ITEM 12.                                   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                  |  | 26  
|                                           |  |                                                                                                                
|ITEM 13.                                   |  | EXHIBITS                                                                                                        |  | 27  
|                                           |  |                                                                                                                
|ITEM 14.                                   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                          |  | 28  
|                                           | 
|SIGNATURES                                 |  | 29                                                                                                             
|                                           | 
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |  |                                                                                                                

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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



-i-



---

##### Table of Contents

PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

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 are a single source for a wide array of market information and services, including streaming stock market
data feeds, research and analysis information, content applications, portfolio management, software systems, corporate Investor Relations provisioning, news services, wireless applications, and custom development.

We have created a scalable system that aggregates, manages, and streams information from the stock exchanges, and from other information and content
feeds, across both the Web and dedicated telecommunication lines. This allows our clients to license comprehensive financial information applications and raw data feeds more efficiently and cost-effectively compared to the outdated infrastructures
employed by most market data providers. Our array of data-delivery solutions are fast, lightweight, reliable, and easy to implement across all platforms. Our products are highly customizable which allows for quick, seamless client integration.

Our back-end systems are scalable, allowing for easy expansion as our client base grows; redundant, with auto fail-over systems to prevent
outages and downtime; and technologically advanced, running state-of-the-art hardware and software systems for maximum speed and efficiency.

Our corporate head office is located at 17100 East Shea Boulevard, Suite 230, Fountain Hills, Arizona 85268, and our telephone number is (480) 905-7311. All references to our business operations in this report include the operations of
QuoteMedia, Inc. and our operating divisions and subsidiaries.

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



1



---

##### Table of Contents

Competitive Advantage

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



|                                              |  |                                                   
|--------------------------------------------- |  | --------------------------------------------------
|      Online Brokerages                      |  |       Corporate Financial Intranets and Extranets
|                                              | 
|      Full Service Brokerage Firms           |  |       Mutual Fund Companies                      
|                                              | 
|      Banks and other Financial Institutions |  |       Internet Service Providers                 
|                                              | 
|      Financial Web Sites                    |  |       News Providers                             
|                                              | 
|      Web Portals                            |  |       Media Companies                            
|                                              | 
|      Public Companies                       |  |       Publishers                                 
|                                              | 
|      Investor Relations Firms               |  |       Wealth Management Companies                

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

Superior Products  Our goal has always been to create the best products on the market. We develop all of our products in-house and take pride in creating quality applications. Our products stand out for their superior design,
user-friendliness, ease of implementation, customizability, reliability, data speed, accuracy and comprehensiveness. Additionally, we have the ability to custom develop or custom-fit products for our customers, assuring that unique requirements are
accommodated.

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

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

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

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



2



---

##### Table of Contents

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

Products

We offer a complete suite of financial
software applications, market data and research information services, and streaming data feeds. All services are licensed on a monthly, quarterly, or annual basis.

Pre-Formatted Market Data Products

Pre-Formatted Market Data Products are customizable Java
applications that clients can embed in their website to display financial data in a wide variety of formats. Clients may choose from our complete data solution packages or individual components to receive dynamic, timely financial information. Our
financial data solutions offer businesses turnkey applications that will retain website traffic and increase overall customer activity while seamlessly integrating into their current layouts and offerings. Our Pre-Formatted Market Data Products
include the following:

Quote Modules  allow users to enter information and look up various data points on equities, funds,
rates, currencies and the markets. The data returned is compact, customizable, and incorporates comprehensive information, including charts, news, historical stock prices, market depth , SEC filings, insiders, financials, and other information.

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

Market Indices  At-a-glance display of
market conditions, fed directly from the major exchanges.

Charts  Markets and equity charting are available in a variety of
formats. Static thumbnails or dynamic interactive charting is available to allow full market coverage charting or individual stock performance displays.

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

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

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

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

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

Investor Relations  Information on current value, historical data, and news, related to individual public companies,
generating a turnkey and self-updating investor relations solution for corporate websites.



3



---

##### Table of Contents

Data Feeds

We have access to multiple direct connections to the worlds exchanges for equities and derivatives. We redistribute this data to clients over the internet or via dedicated telecommunication lines.

Streaming Data Feeds  Raw streaming real-time or delayed market data delivered over the Internet or via dedicated telecommunication lines.

XML Packaged Market Data Feeds  XML real-time or delayed market data feeds pre-formatted for client implementation. .XML
(Extensible Markup Language) is a cross-platform, independent language for distributing data in a universal data format via the Internet.

Quotestream Desktop and Wireless

Quotestream is a proprietary, Internet delivered software application that provides a
broad range of financial information and services, such as streaming stock quotes, NASDAQ Level 2 data (market depth), Toronto Stock Exchange & TSX Venture Exchange market depth, market indices, dynamic and interactive charts, options, news
and research information in a small (under 150k) Java Applet that requires no downloads or user-resident software.

Quotestream has been
designed specifically for syndication and private branding by brokerage, banking, and other corporate clients. Quotestream is available in both a desktop version as well as a companion wireless version. This allows users to access their portfolios
and stock market data online or Over-The-Air through a wide variety of handheld devices. The following are some key features of the Quotestream companion products:

Comprehensive features  Quotestream is feature rich. It offers the user ten portfolios of up to 52 symbols per portfolio, as well as market summaries, NASDAQ Level 2 data, a last-ten-trade trend meter,
volume leaders, top gainers and losers, company news, insider activity, SEC Filings, research, analysts and opinions, earnings forecasts, news and stock tickers, intraday through twenty year historical charting, interactive charting, news, desktop
pop-up alerts, audio alerts.

Compact application size  Most other financial applications are over 5Mb (5,000 Kb) whereas ours
is much more compact. This is important for a number of reasons including the speed at which the application loads. Users are very impatientif they have to wait more then 20 seconds they move on. This factor is vital for all users still
on 56k modems.

The User interface  Unlike other streaming financial data applications that require the entire screen to
display the pertinent data, Quotestream was designed to be delivered in a small foot print (678 X 430 pixels) and present the user with relevant content at a glance, through a clean, visually appealing, well proportioned design. Users may customize
their views and the order of columns to suit their preference. The design also offers a very simple point and click navigation with little or no typing involved. If the user wishes to view the application in full screen mode, by simply
clicking on the float button, the applet is floated from the web page and maximized to full screen

Interactive Java charting 
We have developed an interactive Java charting module that offers dynamically updating intraday and historical charting. It allows users to zoom in to a specific date range and add technical algorithms such as moving averages, stochastic, Bollinger
bands, money flow, etc. This, too, can be maximized to full screen.

Embedded and Hosted Application  Quotestream
has been designed as an embedded application within a host web page on a private branded, fully hosted basis. Corporate partners can incorporate it as an integral part of their web site and surround it with their own brand.



4



---

##### Table of Contents

Wireless Companion  The recent addition of the Quotestream Wireless companion product has
given investors wireless access to important market information whether at the office or on the road. Quotestream Wireless can be integrated with any brokerage/clearing firms existing on-line trading platform without the installation of
expensive Business Enterprise Servers.

Employees

We currently have 23 full time employees. Our 23 employees include ten contract employees, consisting of three programmers, four sales/marketing personnel, and three customer service/administration staff. Our
employees are not members of any union, nor have we entered into any collective bargaining agreements. We believe that our relationship with our employees is good. With a successful implementation of our business plan, we may hire additional
employees during fiscal 2006 to handle anticipated growth in the areas of administration, programming, sales, marketing, and customer care.

Competition

While there are other financial data providers, we offer clients a full spectrum of web-delivered, embedded and fully integrated static
and streaming financial data products, as well as raw data feeds. We believe there is a small group of competitors for our core market competency as a developer of proprietary Web-based software for the brokerage and financial institution
marketplace. There are over 13,000 brokerage firms and nearly 10,000 financial firms and insurance institutions in the United States today, and very few of those have streaming or content products that are similar to our products, thus leaving a
large market for us to explore. In addition, many of these companies that do currently use competitors products will realize significant savings by switching to our more customizable, faster-loading, more easily implemented, and less expensive
financial data solutions.

Other companies provide stock quotes and related information. Thousands of websites offer stock quotes and
charts on the Web today. The most popular and largest of these websites include MSN Investor, YAHOO Finance, Quicken, MarketWatch, The Street.com, and PC Quote. Many online brokerages also offer detailed market information to their clients, such as
E*Trade, Ameritrade, Charles Schwab, and many others.

Our business model offers strong market differentiation through our strategy of
offering private labeled financial solutions to established Web portals, financial institutions, and brokerages. This should allow us to take advantage of existing brand recognition and loyalties already established between our customers and their
clients

Risk Factors

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

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



5



---

##### Table of Contents

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

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

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

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

New product offerings by competitors or new technologies
could cause our services to become obsolete. We operate in an industry that is characterized by rapid and significant technological change, frequent new services, data content and coverage enhancements, and evolving industry standards. Without
the timely introduction of new services and data content and coverage enhancements, our services could become technologically obsolete or inadequate over time, in which case our revenue and operating results would suffer. We expect our competitors
to continue to improve the performance of their current services, to enhance data content and coverage and to introduce new services and technologies. These competitors may adapt more quickly to new technologies, changes in the industry and changes
in customers requirements than we can. If we fail to adequately anticipate customers needs and technological trends accurately, we will be unable to introduce new services into the market and our ability to compete would be materially
adversely impacted. Further, if we are unsuccessful at developing and introducing new services that are appealing to customers, with acceptable prices and terms, or if any such new services are not made available in a timely manner, our ability to
compete would be materially adversely impacted. In both cases our ability to generate revenue could suffer and our business and operating results could be materially adversely affected. We will need to successfully enhance or add to current services
in order to effectively expand into new geographic areas. In addition, new services, data content and coverage that we may develop and introduce may not achieve market acceptance; lack of market acceptance would result in lower revenue.



6



---

##### Table of Contents

We may need additional capital with which to implement our business plan and there is no agreement
with any third party to provide such capital. Although we have generated positive cash flow and profitability from operations for fiscal 2005, implementing our business plan may require additional equity or debt financing. If we require
additional funding or determine it appropriate to raise additional funding in the future, there is no assurance that adequate funding, whether through additional equity financing, debt financing, or other sources, will be available when needed or on
terms acceptable to us. Further, any such funding may result in significant dilution to existing stockholders. The inability to obtain sufficient funds from operations and external sources when needed would have a material adverse affect on our
business, results of operations, and financial condition.

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

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

The success of our anticipated future growth depends upon our ability to manage successfully the growth
of our proposed operations. We expect to experience significant growth in our number of employees and scope of operations. Our future success will depend upon our ability to manage successfully the expansion of our operations. Our ability to
manage and support our growth effectively will depend on our ability to implement adequate improvements to financial and management controls, reporting, order entry systems, and other procedures and hire sufficient numbers of financial, accounting,
administrative, and management personnel. Our expansion and the resulting growth in the number of our employees will result in increased responsibility for both existing and new management personnel. There can be no assurance that we will be able to
identify, attract, and retain experienced accounting and financial personnel. Our future operating results will depend on the ability of our management and other key employees to implement and improve our systems for operations, financial control,
and information management and to recruit, train, and manage our employee base. There can be no assurance that we will be able to achieve or manage any such growth successfully or to implement and maintain adequate financial and management controls
and procedures. Any inability to do so would have a material adverse effect on our business, results of operations, and financial condition. Our future success depends upon our ability to address potential market opportunities while managing our
expenses to match our ability to finance operations. This need to manage our expenses will place a significant strain on our management and operational resources. If we are unable to manage our expenses effectively, our business, results of
operations, and financial condition will be adversely affected.



7



---

##### Table of Contents

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



| |  |  | a risk disclosure document;
| | - |  | ---------------------------



| |  |  | disclosure of market quotations, if any;
| | - |  | ----------------------------------------



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



| |  |  | monthly account statements showing the market values of our securities held in the customers accounts.
| | - |  | -------------------------------------------------------------------------------------------------------

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

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

ITEM 2. DESCRIPTION OF PROPERTY.

We lease executive office space in Fountain Hills, Arizona. The term
of this lease expires in March 2006.

We lease office space for technical staff in Vancouver, British Columbia, Canada. The term of this
lease expires in July 2008.

We believe that our current leased space is sufficient to meet our needs for the next 12 months and that the
property is currently in acceptable condition. Beyond that, we anticipate the need to expand our lease facilities in all locations as our company grows. We have no other properties and have no agreements to acquire any properties.

ITEM 3. LEGAL PROCEEDINGS.

None.

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

Not applicable.



8



---

##### Table of Contents

PART II

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

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



|                                          |  |      |      |     |   |     
|----------------------------------------- |  | ---- | ---- | --- | - | ----
|                                          |  | High |      | Low
|Year ended December 31, 2004:             |  |      |      |     |   |     
|First Quarter                             |  | $    | 0.51 |     | $ | 0.34
|Second Quarter                            |  |      | 0.65 |     |   | 0.37
|Third Quarter                             |  |      | 0.62 |     |   | 0.40
|Fourth Quarter                            |  |      | 0.56 |     |   | 0.37
|                                          |  |     
|Year ended December 31, 2005:             |  |      |      |     |   |     
|First Quarter                             |  | $    | 0.50 |     | $ | 0.38
|Second Quarter                            |  |      | 0.54 |     |   | 0.37
|Third Quarter                             |  |      | 0.51 |     |   | 0.39
|Fourth Quarter                            |  |      | 0.43 |     |   | 0.35
|                                          |  |     
|Year ended December 31, 2005:             |  |      |      |     |   |     
|First Quarter (through February 14, 2006) |  | $    | 0.47 |     | $ | 0.31

As of February 14, 2006, there were approximately 313 holders of record of our common stock.
As of February 14, 2006, the closing price for our common stock was $0.43.

Dividend Policy

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



9



---

##### Table of Contents

ITEM 6.MANAGEMENTS DISCUSSION AND ANALYSIS

Overview

We are a financial software developer and a distributor of market data and research
information to online brokerages, clearing firms, banks, media properties, public companies and financial service corporations world wide. Through the aggregation of information from many direct data, news, and research sources, we offer a
comprehensive range of solutions for all market related information provisioning requirements.

We have three general product lines:
Pre-Formatted Market Data Products; Data Feeds; and Quotestream portfolio management and market analysis software.

Our Pre-Formatted
Market Data Products line consists 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).

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 data provider, with control over the depth, speed, quality, and security of our market data. Not only will our existing products be powered by highly accurate and low latency market
data, but we are able to redistribute this data to allow us to enter into a new market of providing high quality data in streaming feeds. This agreement will also allow us to offer trade execution to our clients in the future. The trading system
will be accessible throughout QuoteMedia services and applications.

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.

During 2005, we achieved significant revenue growth compared to the previous year. The majority of the revenue growth resulted from increased sales of our Financial Data Products. We continued to expand our line of
Corporate Financial Data Products and added formatted XML market data feeds during the year which helped to contribute to the revenue increase from 2004. Subscriptions to Quotestream continued to grow during the year and also contributed to our
revenue growth. Based on existing contracts as of the date of this report, we anticipate that our revenue generated during fiscal 2006 will be significantly greater than the amount of revenue earned in fiscal 2005. We anticipate our revenue growth
in 2006 will be driven by our Financial Data Products and our new Streaming Data Feed product offerings.

Our expenses grew during 2005, as
our company expansion continued. Our gross profit margin increased, because our revenue increased at a greater rate than the direct expenses incurred to generate that revenue.



10



---

##### Table of Contents

Our plan of operation over the next 12 months will focus on marketing our new Streaming Data Feed
product, as well as adding new data content to expand our line of Corporate Financial Data Products. We will also focus on marketing our streaming, real-time financial software applications. In particular, we will focus on licensing and distributing
our Quotestream Wireless application. These activities may give rise to additional products that may be commercialized by our company. There can be no assurance, however, that our new content development efforts will result in marketable products or
products that can be produced at commercially acceptable costs.

We may require additional capital to execute our proposed plan of
operation. There can be no assurance that such additional capital will be available to our company, on commercially reasonable terms or at all.

Our future performance will be subject to a number of business factors, including those beyond our control, such as economic downturns and evolving industry needs and preferences as well as the level of competition and our ability to
continue to successfully market our products and technology. There can be no assurance that we will be able to successfully implement our marketing strategy, continue our revenue growth, or achieve profitable operations. In addition, because our
company has had only limited operations to date, there can be no assurance that our estimates will prove to be accurate or that unforeseen events will not occur.

Critical Accounting Policies and Estimates

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

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

Revenue recognition

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

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

During 2005 we licensed one of our portfolio management applications in exchange for advertising services of a customer, referred to as barter
revenue whereby advertising credits were received 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. We determine 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. We also ensure that the value of barter delivered does not exceed the value of cash based revenue in any
period. Barter revenue was $150,000 for the year ended December 31, 2005. As the advertising did not occur until 2006, $150,000 of the barter revenue is reflected as a prepaid expense. This amount will be expensed in 2006.



11



---

##### Table of Contents

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued revised Statement of Financial Accounting Standards No. 123 entitled Share-Based Payment (FAS
No. 123R). This revised statement addresses accounting for stock-based compensation and results in the fair value of all stock-based compensation arrangements, including options, being recognized as an expense in a companys
financial statements. The revised Statement eliminates the ability to account for stock-based compensation transactions using APB Opinion No. 25 with supplemental disclosure in the notes to financial statements as previously allowed under FAS
123. FAS No. 123R is effective for public entities that file as small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The Company is currently assessing the impact
that FAS 123R will have on its financial statements. However, if we had followed FAS 123R our results would be similar to the pro forma amounts disclosed in Note 1 h) of our financial statements. Additionally, we expect to record approximately
$173,200 in stock based compensation expense in 2006 for stock options and warrants outstanding at December 31, 2005 that vest in 2006.

Results of
Operations

Revenue



|                  |  |                         |           |        |   |           |  |     |           |  |     |  
|----------------- |  | ----------------------- | --------- | ------ | - | --------- |  | --- | --------- |  | --- | -
|                  |  | Year ended December 31, |           | Change |  
|                  |  | 2005                    |           | 2004   |   | ($)       |  | (%) |          
|Licensing revenue |  | $                       | 2,466,151 |        | $ | 1,009,588 |  | $   | 1,456,563 |  | 144 | %

Licensing revenue has increased 144% when comparing the years ended December 31, 2005 and
2004. The majority of the revenue growth was from increased sales of our Financial Data Products. We continued to expand our line of Financial Data Products and added XML market data feeds which helped to contribute to the revenue increase from the
comparable period. The number of Quotestream subscribers and the average subscription revenue per user were higher than the comparable period, also contributing to the increase in revenue. During 2005 we licensed one of our portfolio management
applications in exchange for advertising services, referred to as barter revenue whereby advertising credits were received for subscription services. Barter revenue was $150,000 for the year ended December 31, 2005. No barter
revenue was earned in 2004.

Cost of Revenue and Gross Profit Summary



|                |  |                         |           |   |        |   |         |     |  |     |           |  |     |  
|--------------- |  | ----------------------- | --------- | - | ------ | - | ------- | --- |  | --- | --------- |  | --- | -
|                |  | Year ended December 31, |           |   | Change |  
|                |  | 2005                    |           |   | 2004   |   |         | ($) |  | (%) |          
|Cost of revenue |  | $                       | 703,271   |   |        | $ | 496,797 |     |  | $   | 206,474   |  | 42  | %
|Gross profit    |  | $                       | 1,762,880 |   |        | $ | 512,791 |     |  | $   | 1,250,089 |  | 244 | %
|Gross margin %  |  |                         | 71        | % |        |   | 51      | %   |  |     |           |  |     |  



12



---

##### Table of Contents

Our cost of revenue consists of stock exchange fees, data feeds, and bandwidth charges. Cost of revenue
increased 42% when comparing the year ended December 31, 2005. The increase is primarily due to the cost of the additional data feeds required for new products and features offered in 2005. The increase is also due to variable stock exchange,
data feed, and bandwidth usage charges resulting from the growth in the number of clients from the comparable period. Overall, the cost of revenue has decreased as a percentage of sales, as evidenced by our gross margin percentage which has
increased from 51% for the year ended December 31, 2004 to 71% for the year ended December 31, 2005. A portion of our cost of revenue consists of fixed costs that do not change with the increase in revenue. This accounts for our increase
in gross margin percentage.

Operating Expenses Summary



|                           |  |                         |           |        |   |         |  |     |         |  |     |  
|-------------------------- |  | ----------------------- | --------- | ------ | - | ------- |  | --- | ------- |  | --- | -
|                           |  | Year ended December 31, |           | Change |  
|                           |  | 2005                    |           | 2004   |   | ($)     |  | (%) |        
|Total operating expenses   |  | $                       | 1,684,226 |        | $ | 750,655 |  | $   | 933,571 |  | 124 | %
|Breakdown:                 |  |                         |           |        |   |         |  |     |         |  |     |  
|Sales and marketing        |  |                         | 413,299   |        |   | 55,440  |  |     | 357,859 |  | 645 | %
|General and administrative |  |                         | 841,101   |        |   | 441,386 |  |     | 399,715 |  | 91  | %
|Software development       |  |                         | 429,826   |        |   | 253,829 |  |     | 175,997 |  | 69  | %

Sales and Marketing

Sales and marketing consists primarily of marketing, investor relations, travel, and printing expenses. Sales and marketing expenses increased $357,859
for the year ended December 31, 2005 when compared to fiscal 2004. The increase is due to the costs associated with initiating the service of a contracted customer promotion and lead generation agency during January 2005. We anticipate that
sales and marketing expense will increase in the future as additional promotion and lead generation services will be required to maintain our sales growth. During 2005 we received advertising credits in exchange for subscription services. As the
advertising did not occur until 2006, the $150,000 of barter revenue is reflected as a prepaid expense and is not included in sales and marketing expense in 2005. This amount will be expensed in 2006.

General and Administrative

General
and administrative expenses consist primarily of salaries, office rent, insurance premiums, and professional fees. General and administrative expenses increased $399,715 for year ended December 31, 2005 when compared to fiscal 2004. The
increase is primarily due to increased salary and director fee expenses. The increase is also due to increased insurance expenses resulting from added liability insurance coverage in 2005 and increased office rent expense resulting from Quotemedia,
Ltd., our wholly owned Canadian subsidiary, moving into larger office premises in June 2005. We anticipate that general and administrative expense will increase in the future primarily as a result of overall expansion. We also anticipate that
general and administrative expense will increase in the future as the company undertakes the activities required to become fully compliant with the requirements of Section 404 of the Sarbanes Oxley Act.



13



---

##### Table of Contents

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 increased $175,997 for year ended December 31, 2005 when compared to fiscal 2004. The increase is due to the cost of additional software development personnel. In 2005, we capitalized $43,721 related to the development of internal use
software. Capitalized software costs include costs incurred in connection with the development of software and purchased software. These costs relate to software used by subscribers to access, manage and analyze information in our databases.
Capitalized costs associated with internally developed software are amortized over three years which is their estimated economic life. No internal use software development costs were capitalized in 2004. We anticipate that software development
expenses will continue to increase in the future as additional new software developers will be required to respond to our growth.

Other
Income and (Expense) Summary



|                              |  |                         |         |   |      |   |         |  
|----------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                              |  | Year ended December 31, |        
|                              |  | 2005                    |         |   | 2004 |  
|Other income and (expenses)   |  |                         |         |   |      |   |         |  
|Breakdown:                    |  |                         |         |   |      |   |         |  
|Foreign exchange loss         |  | $                       | (1,259  | ) |      | $ | (25,260 | )
|Interest expense              |  |                         | (50,091 | ) |      |   | (23,988 | )
|Loss on disposal of equipment |  |                         | (2,587  | ) |      |   | (10,309 | )

Foreign Exchange Loss

Exchange gains and losses arise from the re-measurement of Canadian dollar monetary assets and liabilities into U.S. dollars. Exchange gains and losses
vary with the change in associated exchanges rates.

Interest expense

Interest is accrued on certain amounts owed to related parties and has increased in 2005 due to additional borrowings. Interest is accrued at rates
ranging from 10% per annum to the prime bank rate minus 1%.

Loss on Disposal of Equipment

In June 2005, Quotemedia, Ltd., our wholly owned Canadian subsidiary, moved into larger office premises. As a result of this move, we expensed $2,587
which represented the net book value of the leasehold improvements associated with the previous office premises. During June 2004, we sold obsolete computer equipment for proceeds of $3,133. The equipment had a net book value of $13,442 resulting in
a loss on disposal of $10,309.



14



---

##### Table of Contents

Net income (loss) for the period

As a result of the foregoing, net income for the year ended December 31, 2005 was $24,717 or less than $0.01 per share compared to a loss of $297,421 and $(0.01) per share for the year ended December 31,
2004. We have achieved annual profitability for the first time in our companys history, and based on existing sales under contract, we expect to continue to be profitable in 2006.

Liquidity and Capital Resources

Our cash totaled $670,078 at December 31, 2005, compared to
$131,265 at December 31, 2004, an increase of $538,813. Net cash of $442,032 was provided by operations for the year ended December 31, 2005, primarily resulting from our net income for the year and the increase in accounts payable and
deferred revenue, offset by the increase in accounts receivable and non-cash barter revenue. Net cash used in investing activities for the year ended December 31, 2005, was $99,469, resulting from the purchase of equipment and intangible
assets. Net cash provided by financing activities for the year ended December 31, 2005, was $196,250 resulting from a loan from a related party and issuance of capital stock for cash, offset by the repayment of amounts due to related parties.

We are currently generating positive cash flow from operations. We believe this will continue through fiscal 2006, as our revenue is
recurring in nature based on the existence of contracts with our clients which have one to three year terms.

Our current liabilities
include $30,000 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 $184,683 is also included in our current liabilities. The costs expected to be incurred to realize the deferred revenue in 2006 are minimal.

Based on the factors discussed above, we believe that our cash on hand and cash expected to be generated from operations will be sufficient to fund our
current operations through fiscal 2006, and enable us to continue operations. However, to implement our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution
to our stockholders.

Our long-term liquidity requirements will depend on many factors, including the rate at which we expand our business,
and whether we do so internally or through acquisitions. To the extent that the funds generated from operations are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or private
financing. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.



15



---

##### Table of Contents

ITEM 7. FINANCIAL STATEMENTS.

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

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

None.

ITEM 8A. CONTROLS AND PROCEDURES.

We have evaluated, with the participation of our Chief Executive
Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2005, Based on this evaluation, our CEO and CFO have each concluded that our disclosure controls and procedures are effective to
ensure that we record, process, summarize, and report information required to be disclosed by us in our periodic reports filed under the Exchange Act within the time periods specified by the Securities and Exchange Commissions rules and forms.
During the fiscal year end covered by this report, there have not been any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

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

ITEM 8B. OTHER INFORMATION

Not applicable.



16



---

##### Table of Contents

PART III

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

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



|                   |  |     |  |                                                                        
|------------------ |  | --- |  | -----------------------------------------------------------------------
|Name               |  | Age |  | Position                                                               
|Robert J. Thompson |  | 63  |  | Chairman of the Board                                                  
|R. Keith Guelpa    |  | 59  |  | President, Chief Executive Officer, and Director                       
|David M. Shworan   |  | 38  |  | President and Chief Executive Officer of QuoteMedia, Ltd., and Director
|Keith J. Randall   |  | 39  |  | Vice President, Treasurer, Chief Financial Officer, and Secretary      

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

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

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

David M. Shworan has served as President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned
subsidiary of our company, since December 2004. Mr. Shworan has served as a director of our company since November 2000. Mr. Shworan served as our President and Chief Executive Officer from November 2002 to December 2004. Mr. Shworan
is a veteran of online marketing and Internet business. Mr. Shworan is the founder of Bravenet Web Services, Inc., a webmaster tools and services site for over 6 million web developers, and has served as the Chief Executive Officer of
Bravenet since September 1997. Mr. Shworan is the founder of several Internet companies, and has been a consultant to Internet companies for the past five years.



17



---

##### Table of Contents

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

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors,
officers, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Directors, officers, and greater than 10% stockholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file. Based solely upon our review of the copies of such forms that we received during the fiscal year ended December 31, 2005, and written representations that no other reports were
required, we believe that each person who at any time during the fiscal year was a director, officer, or beneficial owner of more than 10% of our common stock complied with all Section 16(a) filing requirements during such fiscal year.

Information Relating to Our Audit Committee of the Board of Directors

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

Code of Ethics

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

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



18



---

##### Table of Contents

ITEM 10. EXECUTIVE COMPENSATION.

Summary of Cash and Other Compensation

The following table sets forth certain information concerning the compensation for the fiscal years ended December 31, 2003, 2004, and 2005 earned by
our Chief Executive Officer and one other officer who served as our Chief Executive Officer from November 2002 to December 2004. None of our other executive officers cash salary and bonus exceeded $100,000 during fiscal 2005.

SUMMARY COMPENSATION TABLE



|                                                                       |  |              |  |              |                     |           |                           |   |          |                                                            |  |                     |       
|---------------------------------------------------------------------- |  | ------------ |  | ------------ | ------------------- | --------- | ------------------------- | - | -------- | ---------------------------------------------------------- |  | ------------------- | ------
|Name and Principal Position                                            |  | Year         |  | Salary($)(1) |                     |           | RestrictedStockAwards ($) |   |          | Long Term CompensationAwardsSecuritiesUnderlyingOptions(#) | 
|R. Keith Guelpa President and Chief Executive Officer (4)              |  | 200520042003 |  | $            | 120,00060,00060,000 |           |                           | $ | 63,488 | (5)                                                        |  |                  |       
|David M. Shworan President and CEO, Quotemedia, Ltd., and Director (2) |  | 200520042003 |  |              | 225,00099,53958,600 | (3)(3)(3) |                           |   |        |                                                            |  | 2,400,0005,000,000 | (3)(3)

---

|(1) | The executive officers listed also received certain perquisites, the value of which did not exceed 10% of his salary during any year presented.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. Shworan served as our President and Chief Executive Officer from November 13, 2002 to December 30, 2004. Effective December 30, 2004, Mr. Shworan was
named President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of our company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Pursuant to his employment agreement, we started accruing salary payable to Mr. Shworan in June 2003. The salary accrued remains unpaid as of December 31, 2005.
Mr. Shworan received no salary prior to June 2003. In connection with his 2002 employment agreement, we granted to Mr. Shworan as a signing bonus five-year warrants to purchase 4,000,000 shares of common stock, which were vested as of the
date of grant, and warrants to purchase an additional 16,000,000 shares of common stock, which vest the earlier of our company achieving various monthly net revenue targets and common stock price targets, or November 12, 2007. During 2003,
Mr. Shworans employment agreement was amended and he received an additional 2,000,000 warrants that vested as of the date of grant, and an additional 3,000,000 warrants to purchase shares of common stock, which vest the earlier of our
company achieving various monthly net revenue targets and common stock price targets, or November 12, 2007. As of November 30, 2004, 12,000,000 of such warrants had vested pursuant to their terms. On December 30, 2004, after
consideration of various factors and to reward Mr. Shworans overall performance, we elected to accelerate the vesting of the remaining 7,000,000 warrants, effective as of that date. See Item 10, Executive Compensation 
Employment Agreements. On August 1, 2005, we granted Mr. Shworan an additional 2,400,000 warrants. The warrants are fully vested and have an exercise price of $0.465.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mr. Guelpa served as our President and Chief Executive Officer from July 1999 until November 2002, and again was appointed President and Chief Executive Officer during December
2004. He served as our Chief Operating Officer from November 2002 until December 2004. During 2005, we repaid $64,250 of amounts due to Mr. Guelpa for loans made to the company in 2000 and 2001. See Item 12, Certain Relationships and
Related Transactions.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



---

##### Table of Contents

|(5) | Mr. Guelpa elected to take 798,688 shares of common stock in lieu of $63,488 of unpaid salary. The amount of shares was determined using the current market price of $0.08 per
share as of March 10, 2003. The fair market value of the common shares was $375,383 based on a closing stock price of $0.47 at December 31, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Option Grants

The following table provides information on stock options granted to the officers
listed during the fiscal year ended December 31, 2005.

OPTION GRANTS IN LAST FISCAL YEAR



|                 |  |                                                  |     |  |                                                        |   |  |                         |       |                |         
|---------------- |  | ------------------------------------------------ | --- |  | ------------------------------------------------------ | - |  | ----------------------- | ----- | -------------- | --------
|Name             |  | Number ofSecuritiesUnderlyingOptions Granted (#) |     |  | Percent ofTotalOptionsGranted toEmployeesin FiscalYear |   |  | ExercisePrice ($/Sh)(1) |       | ExpirationDate
|David M. Shworan |  | 2,400,000                                        | (2) |  | 82                                                     | % |  | $                       | 0.465 |                | 08/01/15
|R. Keith Guelpa  |  |                                                 |     |  |                                                       |   |  |                         |      |                |        

---

|(1) | The exercise prices of all options and warrants granted were equal to or greater than the fair market value of our common stock on the date of grant.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The warrants were vested immediately upon grant.
|--- | ------------------------------------------------

Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table provides information concerning the exercise of
stock options during the fiscal year ended December 31, 2005 and unexercised stock options held as of December 31, 2005 by the named executive officers.



|                 |  |                             |  |                |           |                                                                        |            |                                                                  |   |             |   |               |  |  
|---------------- |  | --------------------------- |  | -------------- | --------- | ---------------------------------------------------------------------- | ---------- | ---------------------------------------------------------------- | - | ----------- | - | ------------- |  | -
|                 |  |                             |  |                |           | Number of Securities Underlying Unexercised Options at
Fiscal Year-End |            | Value of Unexercised In-the Money Options At Fiscal
Year-End (1)
|Name             |  | Shares Acquired on Exercise |  | Value realized |           | Exercisable                                                            |            | Unexercisable                                                    |   | Exercisable |   | Unexercisable
|R. Keith Guelpa  |  | 3,080,000                   |  | $              | 1,078,000 |                                                                        | 4,884,703  |                                                                  |  |             | $ | 1,033,206     |  | 
|David M. Shworan |  |                            |  |                |          |                                                                        | 27,600,000 |                                                                  |  |             |   | 7,485,000     |  | 

---

|(1) | Calculated based upon the closing price of our common stock as reported on the OTCBB on December 31, 2005 of $0.35 per share.
|--- | -----------------------------------------------------------------------------------------------------------------------------



20



---

##### Table of Contents

1999 Stock Option Plan

During March 1999, we adopted, and our stockholders approved, the 1999 Stock Option Plan to advance the interests of our company by encouraging and enabling key employees to acquire a financial interest in our company
and link their interests and efforts to the long-term interests of our stockholders. A total of 400,000 shares of common stock was initially reserved for issuance under the 1999 plan. In September 1999, this number was increased to 2,500,000. As of
December 31, 2005, 358,333 shares of our common stock had been issued upon exercise of options granted under the 1999 plan, and there were outstanding options to acquire 2,005,000 shares of our common stock under the 1999 plan.

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

The price of any incentive stock options may not be less than
100% of the fair market value of our common stock on the date of grant. The price of any incentive stock options granted to a person who owns more than 10% of our common stock may not be less than 110% of the fair market value of our common stock on
the date of grant. The option price for non-incentive stock options may not be less than 50% of the fair market value of our common stock on the date of grant. Options may be granted for terms of up to but not exceeding ten years from the date of
grant, however, in the case of an incentive stock option granted to an individual who beneficially owns 10% more of the stock of our company, the exercise period shall not exceed five years from the date of grant. Our board of directors may
accelerate the exerciseability of any outstanding options at any time for any reason.

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

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

2003 Equity Incentive Compensation Plan

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

Presently,
the number of shares of common stock that may be issued under the 2003 plan is equal to 10,000,000. As of December 31, 2005, no shares of common stock had been issued upon exercise of options granted under the 2003 plan and there were 4,335,000
options outstanding under the 2003 plan.



21



---

##### Table of Contents

Eligibility and Administration

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

Stock Options
and SARs

The committee or our Board of Directors is authorized to grant stock options, including both incentive stock options, or ISOs,
which can result in potentially favorable tax treatment to the participant, and nonqualified stock options, and SARs entitling the participant to receive the amount by which the fair market value of a share of common stock on the date of exercise
(or defined change in control price following a change in control) exceeds the grant price of the SAR. The exercise price per share subject to an option and the grant price of an SAR are determined by the committee, but in the case of an
ISO must not be less than the fair market value of a share of common stock on the date of grant. For purposes of the 2003 plan, the term fair market value means the fair market value of common stock, awards, or other property as
determined by the committee or our Board of Directors or under procedures established by the committee or our Board of Directors. Unless otherwise determined by the committee or our Board of Directors, the fair market value of common stock as of any
given date shall be the closing sales price per share of common stock as reported on the principal stock exchange or market on which common stock is traded on the date as of which such value is being determined or, if there is no sale on that date,
then on the last previous day on which a sale was reported. The maximum term of each option or SAR, the times at which each option or SAR will be exercisable, and provisions requiring forfeiture of unexercised options or SARs at or following
termination of employment generally are fixed by the committee or our Board of Directors, except that no option or SAR may have a term exceeding ten years. Options may be exercised by payment of the exercise price in cash, shares that have been held
for at least six months, outstanding awards, or other property having a fair market value equal to the exercise price, as the committee or our Board of Directors may determine from time to time. Methods of exercise and settlement and other terms of
the SARs are determined by the committee or our Board of Directors. SARs granted under the 2003 plan may include limited SARs exercisable for a stated period of time following a change in control of our company, as discussed below.

Restricted and Deferred Stock

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

Bonus Stock and Awards in Lieu of Cash Obligations

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



22



---

##### Table of Contents

Acceleration of Vesting; Change in Control

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



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



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

For purposes of the 2003 plan, the term change in control generally means



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



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



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

Amendment and Termination

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



23



---

##### Table of Contents

Equity Compensation Plan Information

The following table sets forth information with respect to our common stock that may be issued upon the exercise of outstanding options, warrants, and rights to purchase shares of our common stock as of
December 31, 2005.



|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                           |          
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                          |  | (a) Number ofSecurities to beIssued UponExercise ofOutstandingOptions, Warrants,and Rights |  | (b)Weighted AverageExercise Price ofOutstandingOptions, Warrants,and Rights |      | (c) Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (ExcludingSecurities Reflected inColumn
(a))
|Equity Compensation Plans approved by stockholders     |  | 7,670,000                                                                                  |  | $                                                                           | 0.25 |                                                                                                                                           | 4,471,667
|Equity Compensation Plans not approved by stockholders |  | 39,616,282                                                                                 |  | $                                                                           | 0.11 |                                                                                                                                           | N/A      
|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                           |          
|Total                                                  |  | 47,286,282                                                                                 |  |                                                                             |      |                                                                                                                                           | 4,471,667
|                                                       |  |                                                                                            |  |                                                                             |      |                                                                                                                                           |          

Employment Agreements

We have a five-year employment agreement with Mr. Guelpa, our President and Chief Executive Officer. This agreement expired in July 2004, but was extended on a month to month basis until such time as it is
replaced by a new agreement. The employment agreement was amended on November 13, 2002 and provides for the same terms but a base salary of $60,000 per year. The agreement provides for incentive-based compensation based upon our company
achieving various profitability levels. In the event we record net income of $10.0 million, we will grant to Mr. Guelpa options to purchase 500,000 shares of our common stock, with an exercise price based on the fair market value of our common
stock on the date of grant. If we terminate Mr. Guelpas employment without cause, we have agreed to pay Mr. Guelpa a lump sum payment of two years salary and all perquisites. If we terminate Mr. Guelpa following a merger,
takeover, or any other event that changes more than 25% ownership of our company, we have agreed to pay Mr. Guelpa a lump sum payment of three years salary and all perquisites. A lump sum payment equal to one years salary and
perquisites will be paid, in the event Mr. Guelpa terminates his employment following a transaction such as a merger, takeover or any other event that changes more than 25% ownership of our company.

We had an employment agreement with Mr. Shworan to serve as the President and Chief Executive Officer of QuoteMedia, Inc. This agreement expired
November 15, 2004, but was extended on a month to month basis until such time as it is replaced by a new agreement. As of December 30, 2004, Mr. Shworans employment agreement with QuoteMedia, Inc. was assumed by QuoteMedia, Ltd.
Upon his employment with QuoteMedia, Inc. during fiscal 2002, we granted to Mr. Shworan five-year warrants to purchase 4,000,000 shares of our common stock at an exercise price of $0.05 per share, vesting immediately. On May 8, 2003, we
revised the original employment agreement with Mr. Shworan. Under the agreement, as amended, we agreed to accrue cash compensation to Mr. Shworan of $8,000 per month effective June 1, 2003. We will continue to accrue but not pay
Mr. Shworans salary until such time that the Board of Directors determines that we have sufficient financial resources. In connection with this amendment, we granted to Mr. Shworan warrants to purchase 2,000,000 shares of our common
stock at an exercise price of $.075 per share, vesting immediately. In addition, we granted to Mr. Shworan warrants to purchase an additional 19,000,000 warrants at exercise prices ranging from $0.05 to $0.075 per share, to vest pursuant to the
Company achieving various monthly net revenue targets and common stock price targets. As of November 30, 2004, 12,000,000 of such warrants had vested pursuant to their terms. On December 30, 2004, after consideration of various factors and
to reward Mr. Shworans overall performance, we elected to accelerate the vesting of the remaining 7,000,000 warrants, effective as of that date.



24



---

##### Table of Contents

We offer our employees, including officers, medical benefits. Our executive officers and other key
personnel are eligible to receive discretionary bonuses, and are eligible to receive stock options under our stock option plans.

Director Compensation
and Other Information

Non independent directors do not receive cash compensation for service on our board of directors. The Chairman of
the Board receives a monthly retainer of $4,500 which commenced November 15, 2004. The Chairman also receives an annual award of stock options determined by the board of directors. All directors receive a grant of options to purchase shares of
common stock upon joining our board of directors, which are vested on the date of grant. From time to time, we grant to our directors options or warrants to purchase additional shares of common stock. In November 2005, the Chairman of the Board was
granted 85,470 warrants to purchase shares of common stock at an exercise price of $0.39.

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

The following table sets forth certain information regarding the shares of our outstanding common stock beneficially owned as of February 14, 2006 by (i) each of our directors and executive officers, (ii) all directors and
executive officers as a group, and (iii) each other person who is known by us to beneficially own or to exercise voting or dispositive control over more than 5% of our common stock.



|                                                               |  |                      |     |  |         |  
|-------------------------------------------------------------- |  | -------------------- | --- |  | ------- | -
|Name and Address of Beneficial Owner(1)                        |  | Number of Shares (2) |     |  | Percent |  
|Directors and Executive Officers                               |  |                      |     |  |         |  
|David M. Shworan                                               |  | 36,151,800           | (3) |  | 40.2    | %
|R. Keith Guelpa                                                |  | 10,593,859           | (4) |  | 16.0    | %
|Robert J. Thompson                                             |  | 1,769,470            | (6) |  | 2.8     | %
|Keith J. Randall                                               |  | 902,708              | (5) |  | 1.5     | %
|All executive officers and directors as a group (four persons) |  | 49,417,837           |     |  | 50.8    | %
|5% Stockholders                                                |  |                      |     |  |         |  
|Duane Nelson                                                   |  | 5,170,317            | (7) |  | 7.8     | %

---

|(1) | Each person named in the table has sole voting and investment power with respect to all common stock beneficially owned by him or her, subject to applicable community property law,
except as otherwise indicated. Except as otherwise indicated, each person may be reached through us at 17100 E. Shea Blvd., Suite 230, Fountain Hills, Arizona 85268.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The percentages shown are calculated based upon 61,891,626 shares of common stock outstanding on February 14, 2006. The numbers and percentages shown include the shares of
common stock actually owned as of February 14, 2006 and the shares of common stock that the identified person or group had the right to acquire within 60 days of such date. In calculating the percentage of ownership, all shares of common stock
that the identified person or group had the right to acquire within 60 days of February 14, 2006 upon the exercise of options are deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by such
person or group, but are not deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by any other person.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



---

##### Table of Contents

|(3) | Represents 1,011,800 shares of common stock owned by Mr. Shworan and 6,502,500 shares owned by Mr. Shworans wife. Also includes 37,500 shares of common stock owed by
Bravenet Web Services, Inc., of which Mr. Shworan is a control person. Mr. Shworan disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Also includes vested options and warrants to acquire
directly 27,600,000 shares of common stock and vested warrants for Bravenet Web Services, Inc. to acquire 1,000,000 shares of common stock. See Item 10, Executive Compensation  Employment Agreements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents 3,709,156 shares of our common stock owned directly and 2,000,000 shares of our common stock owned by Mr. Guelpas wife. Also includes 4,884,703 shares of
common stock issuable upon exercise of stock options and warrants held by Mr. Guelpa. Mr. Guelpa disclaims ownership of any shares of common stock or warrants held by his wife.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents 123,416 shares of common stock and vested options and warrants to acquire 779,292 shares of common stock.
|--- | --------------------------------------------------------------------------------------------------------------------

|(6) | Represents vested options and warrants to acquire 1,769,470 shares of common stock.
|--- | -----------------------------------------------------------------------------------

|(7) | Represents vested options and warrants to acquire 5,170,317 shares of common stock.
|--- | -----------------------------------------------------------------------------------

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In May 2004 we entered into a loan
agreement with Bravenet Web Services, Inc. We borrowed $250,000 from Bravenet with interest at 10% per annum. In September 2005 we borrowed an additional $250,000 from Bravenet under the same terms and conditions. It is anticipated that the
loan will be repaid in 12 equal monthly installments beginning in the first quarter of 2007. The President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet. At December 31, 2005, the
loan balance due to Bravenet including accrued interest is $551,438.

In the first quarter of 2005 we entered into an agreement with
Bravenet to provide customer promotion and lead generation services. For year ended December 31, 2005, $348,445 in sales expenses payable to Bravenet was accrued. Payments of amounts due to Bravenet are expected to commence in the first quarter
of 2007. Interest is accrued at the prime bank rate minus 1%. At December 31, 2005, the balance due to Bravenet for service fees including accrued interest is $357,339.

As at December 31, 2005, we owed Mr. Shworan $167,006 related to unpaid salary for 2003 and 2004. We also owed Mr. Keith Guelpa, our Chief
Executive Officer, $65,278 related to loans made to the company in 2000 and 2001. No interest is accrued on these amounts. An additional $230,814 of unpaid salary is owed to Mr. Shworan. This amount includes interest accrued at the prime bank
rate minus 1%. 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. During
2005, we repaid $64,250 of amounts due to Mr. Guelpa. No repayments were made during 2005 to Mr. Shworan.



26



---

##### Table of Contents

ITEM 13. EXHIBITS

(a) Exhibits



|              |  |                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                                                    
|3.1           |  | Second Amended and Restated Articles of Incorporation (2)                                                                                                 
|              | 
|3.2           |  | Amended and Restated Bylaws (2)                                                                                                                           
|              | 
|10.2          |  | Employment Agreement between the Registrant and R. Keith Guelpa (1)                                                                                       
|              | 
|10.3          |  | Employment Agreement between the Registrant and Keith Randall (1)                                                                                         
|              | 
|10.4          |  | Employment Agreement between the Registrant and Duane Nelson (1)                                                                                          
|              | 
|10.5          |  | Amended 1999 Equity Incentive Compensation Plan (3)                                                                                                       
|              | 
|10.6          |  | Employment Agreement between the Registrant and David M. Shworan (2)                                                                                      
|              | 
|10.7          |  | Amended Employment Agreement between the Registrant and David M. Shworan (3)                                                                              
|              | 
|10.8          |  | 2003 Equity Incentive Compensation Plan (2)                                                                                                               
|              | 
|10.9*         |  | Agreement between Registrant and Samco Financial Services, Inc. and NEXA Technologies, Inc.*                                                              
|              | 
|11.1          |  | Agreement between Registrant and Bravenet Web Services, Inc.                                                                                              
|              | 
|21            |  | List of Subsidiaries                                                                                                                                      
|              | 
|23.1          |  | Consent of Hein & Associates LLP, Independent Auditors                                                                                                    
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
|              | 
|32.1          |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        
|              | 
|32.2          |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        

---

|* | Certain portions of the exhibit have been omitted pursuant to a request for confidential treatment.
|- | ---------------------------------------------------------------------------------------------------

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

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

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



27



---

##### Table of Contents

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Aggregate fees billed to our company for the fiscal
years ended December 31, 2005 and 2004 by our principal accountants are as follows:



|                   |  |      |        |      |   |        |    
|------------------ |  | ---- | ------ | ---- | - | ------ | ---
|                   |  | 2005 |        | 2004 |  
|Audit Fees         |  | $    | 30,000 |      | $ | 29,940 | (1)
|Audit-Related Fees |  |      | 4,000  |      |   |       |    
|Tax Fees           |  |      |       |      |   |       |    
|All Other Fees     |  |      |       |      |   |       |    

---

|(1) | On December 30, 2004, we engaged Hein & Associates LLP as our new independent public accountants and dismissed Allan G. Hutchison, CPA as the principal independent
accountant of our company. Audit fees billed in 2004 include $15,940 in audit fees paid to Allan G. Hutchison, CPA, and $14,000 in audit fees accrued for Hein & Associates LLP.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Audit Committee Pre-Approval Policies

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

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

All of the services provided by Allan Hutchison, CPA and Hein & Associates LLP described above under the
captions Audit Fees, and were approved by our Audit Committee.



28



---

##### Table of Contents

SIGNATURES

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



|                     |  |                  |  |                                      
|-------------------- |  | ---------------- |  | -------------------------------------
|Date: March 30, 2006 |  | QUOTEMEDIA, INC.
|                     |  |                 
|                     |  | By:              |  | /s/ R. Keith Guelpa                  
|                     |  |                  |  | R. Keith Guelpa                      
|                     |  |                  |  | President and Chief Executive Officer

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



|                                          |  |                                                                                                                |  |               
|----------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | --------------
|/s/ Robert J. Thompson Robert J.
Thompson |  | Chairman of the Board                                                                                          |  | March 31, 2006
|                                          |  |                                                                                                               
|/s/ David M. Shworan David M.
Shworan     |  | Director                                                                                                       |  | March 31, 2006
|                                          |  |                                                                                                               
|/s/ Keith J. Randall Keith J.
Randall     |  | Vice President, Treasurer, Secretary, and Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 31, 2006
|                                          |  |                                                                                                               
|/s/ R. Keith Guelpa R. Keith
Guelpa       |  | Chief Executive Officer, President and Director (Principal Executive Officer)                                  |  | March 31, 2006



29



---

##### Table of Contents

Q
uotemedia, Inc.

Index to Consolidated Financial Statements



|                                                 |  |          
|------------------------------------------------ |  | ---------
|Report of Independent Registered Accounting Firm |  | F-1      
|                                                 | 
|Consolidated Balance Sheet                       |  | F-2      
|                                                 | 
|Consolidated Statements of Operations            |  | F-3      
|                                                 | 
|Consolidated Statements of Stockholders Deficit |  | F-4      
|                                                 | 
|Consolidated Statements of Cash Flows            |  | F-5      
|                                                 | 
|Notes to Consolidated Financial Statements       |  | F-6 F-17



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

Board of Directors

Quotemedia, Inc.

Fountain Hills, Arizona

We have audited the accompanying consolidated balance sheet of Quotemedia Inc. and subsidiary as of December 31, 2005 and the related consolidated statements of
operations, changes in stockholders deficit and cash flows for the years ending December 31, 2005 and December 31, 2004. These financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Quotemedia, Inc. and Subsidiary as of December 31, 2005, and the results of their operations and its cash flows for the years ending December 31, 2005 and December 31, 2004
in conformity with accounting principles generally accepted in the United States of America.

HEIN& ASSOCIATES LLP

Phoenix, Arizona

March 8, 2006



F-1



---

##### Table of Contents

QUOTEMEDIA, INC.

CONSOLIDATED BALANCE SHEET



|                                                                                                        |  |                   |            |  
|------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | -
|                                                                                                        |  | DECEMBER 31, 2005 |           
|ASSETS                                                                                                  |  |                   |            |  
|Current assets:                                                                                         |  |                   |            |  
|Cash                                                                                                    |  | $                 | 670,078    |  
|Accounts receivable, net                                                                                |  |                   | 192,760    |  
|Prepaid Expenses                                                                                        |  |                   | 173,486    |  
|Deposits                                                                                                |  |                   | 39,469     |  
|                                                                                                        |  |                   |            |  
|Total current assets                                                                                    |  |                   | 1,075,793  |  
|Property and equipment, net                                                                             |  |                   | 120,038    |  
|Intangible assets                                                                                       |  |                   | 37,324     |  
|                                                                                                        |  |                   |            |  
|Total assets                                                                                            |  | $                 | 1,233,155  |  
|                                                                                                        |  |                   |            |  
|                                                                                                        | 
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                   |  |                   |            |  
|Current liabilities:                                                                                    |  |                   |            |  
|Accounts payable and accrued liabilities                                                                |  | $                 | 186,756    |  
|Deferred revenue                                                                                        |  |                   | 184,683    |  
|Current portion of amounts due to related parties                                                       |  |                   | 30,000     |  
|                                                                                                        |  |                   |            |  
|Total current liabilities                                                                               |  |                   | 401,439    |  
|                                                                                                        |  |                   |            |  
|Other long-term liabilities                                                                             |  |                   | 6,546      |  
|Long-term portion of amounts due to related parties                                                     |  |                   | 1,341,875  |  
|Commitments & Contingencies (Note 2,4,8)                                                                |  |                   |            |  
|Stockholders deficit:                                                                                  |  |                   |            |  
|Preferred stock, non designated, 10,000,000 shares authorized, none issued.                             |  |                   |           |  
|Common stock, $0.001 par value, 100,000,000 shares authorized, 61,167,660 shares issued and outstanding |  |                   | 61,187     |  
|Additional paid-in capital                                                                              |  |                   | 6,451,845  |  
|Accumulated deficit                                                                                     |  |                   | (7,029,737 | )
|                                                                                                        |  |                   |            |  
|Total stockholders deficit                                                                             |  |                   | (516,705   | )
|Total liabilities and stockholders deficit                                                             |  | $                 | 1,233,155  |  
|                                                                                                        |  |                   |            |  

See accompanying notes



F-2



---

##### Table of Contents

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                            |  |                              |            |   |                              |   |            |  
|------------------------------------------- |  | ---------------------------- | ---------- | - | ---------------------------- | - | ---------- | -
|                                            |  | Year ended DECEMBER 31, 2005 |            |   | Year ended DECEMBER 31, 2004 |  
|OPERATING REVENUE                           |  |                              |            |   |                              |   |            |  
|Licensing fees                              |  | $                            | 2,466,151  |   |                              | $ | 1,009,588  |  
|Cost of revenue                             |  |                              | 703,271    |   |                              |   | 496,797    |  
|                                            |  |                              |            |   |                              |   |            |  
|Gross Profit                                |  |                              | 1,762,880  |   |                              |   | 512,791    |  
|                                            |  |                             
|OPERATING EXPENSES                          |  |                              |            |   |                              |   |            |  
|Sales and marketing                         |  |                              | 413,299    |   |                              |   | 55,440     |  
|General and administrative                  |  |                              | 841,101    |   |                              |   | 441,386    |  
|Software development                        |  |                              | 429,826    |   |                              |   | 253,829    |  
|                                            |  |                              |            |   |                              |   |            |  
|                                            |  |                              | 1,684,226  |   |                              |   | 750,655    |  
|                                            |  |                              |            |   |                              |   |            |  
|OPERATING PROFIT (LOSS)                     |  |                              | 78,654     |   |                              |   | (237,864   | )
|                                            |  |                             
|OTHER INCOME AND EXPENSES                   |  |                              |            |   |                              |   |            |  
|Foreign exchange loss                       |  |                              | (1,259     | ) |                              |   | (25,260    | )
|Interest expense                            |  |                              | (50,091    | ) |                              |   | (23,988    | )
|Loss on disposal of equipment               |  |                              | (2,587     | ) |                              |   | (10,309    | )
|                                            |  |                              |            |   |                              |   |            |  
|                                            |  |                              | (53,937    | ) |                              |   | (59,557    | )
|                                            |  |                              |            |   |                              |   |            |  
|NET INCOME (LOSS)                           |  | $                            | 24,717     |   |                              | $ | (297,421   | )
|                                            |  |                              |            |   |                              |   |            |  
|                                            |  |                             
|EARNINGS (LOSS) PER SHARE                   |  |                              |            |   |                              |   |            |  
|Basic and diluted earnings (loss) per share |  | $                            | 0.00       |   |                              | $ | (0.01      | )
|                                            |  |                             
|WEIGHTED AVERAGE SHARES OUTSTANDING         |  |                              |            |   |                              |   |            |  
|Basic                                       |  |                              | 60,110,229 |   |                              |   | 58,664,204 |  
|Diluted                                     |  |                              | 93,416,030 |   |                              |   | 58,664,204 |  

See accompanying notes



F-3



---

##### Table of Contents

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

Years Ended December 31, 2005 and 2004



|                                                                       |  |                 |   |  |        |        |   |                          |   |           |                    |  |   |                           |   |  |   |          |  
|---------------------------------------------------------------------- |  | --------------- | - |  | ------ | ------ | - | ------------------------ | - | --------- | ------------------ |  | - | ------------------------- | - |  | - | -------- | -
|                                                                       |  | Common Stock    |   |  |        |        |   |                          |   |           |                    | 
|                                                                       |  | Number ofShares |   |  | Amount |        |   | AdditionalPaid-inCapital |   |           | AccumulatedDeficit |  |   | TotalStockholdersDeficit |  
|Balance, December 31, 2003                                             |  | 58,664,204      |   |  | $      | 58,665 |   |                          | $ | 6,429,367 |                    |  | $ | (6,757,033                | ) |  | $ | (269,001 | )
|Net Loss                                                               |  |                |   |  |        |       |   |                          |   |          |                    |  |   | (297,421                  | ) |  |   | (297,421 | )
|                                                                       |  |                 |   |  |        |        |   |                          |   |           |                    |  |   |                           |   |  |   |          |  
|Balance, December 31, 2004                                             |  | 58,664,204      |   |  | $      | 58,665 |   |                          | $ | 6,429,367 |                    |  | $ | (7,054,454                | ) |  | $ | (566,422 | )
|                                                                       |  |                 |   |  |        |        |   |                          |   |           |                    |  |   |                           |   |  |   |          |  
|Stock options exercised                                                |  | 3,225,110       |   |  |        | 3,225  |   |                          |   | 337,775   |                    |  |   |                          |   |  |   | 341,000  |  
|Shares returned to the Company for exercise of stock option, cancelled |  | (721,654        | ) |  |        | (703   | ) |                          |   | (315,297  | )                  |  |   |                          |   |  |   | (316,000 | )
|Net Income                                                             |  |                |   |  |        |       |   |                          |   |          |                    |  |   | 24,717                    |   |  |   | 24,717   |  
|                                                                       |  |                 |   |  |        |        |   |                          |   |           |                    |  |   |                           |   |  |   |          |  
|Balance, December 31, 2005                                             |  | 61,167,660      |   |  | $      | 61,187 |   |                          | $ | 6,451,845 |                    |  | $ | (7,029,737                | ) |  | $ | (516,705 | )
|                                                                       |  |                 |   |  |        |        |   |                          |   |           |                    |  |   |                           |   |  |   |          |  

See accompanying notes



F-4



---

##### Table of Contents

QUOTEMEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                        |  |                              |          |   |                              |   |          |  
|----------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ---------------------------- | - | -------- | -
|                                                                        |  | Year ended DECEMBER 31, 2005 |          |   | Year ended DECEMBER 31, 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                   |  |                              |          |   |                              |   |          |  
|Net income (loss)                                                       |  | $                            | 24,717   |   |                              | $ | (297,421 | )
|Adjustments to reconcile loss to net cash used in operating activities: |  |                              |          |   |                              |   |          |  
|Depreciation                                                            |  |                              | 18,333   |   |                              |   | 15,267   |  
|Loss on disposal of equipment                                           |  |                              | 2,587    |   |                              |   | 10,309   |  
|Bad debt expense                                                        |  |                              | 48,350   |   |                              |   | 35,368   |  
|Stock-based compensation expense                                        |  |                              | 14,500   |   |                              |   |         |  
|Non-cash advertising revenue                                            |  |                              | (150,000 | ) |                              |   |         |  
|Changes in assets and liabilities:                                      |  |                              |          |   |                              |   |          |  
|Accounts receivable                                                     |  |                              | (151,895 | ) |                              |   | (96,495  | )
|Prepaid expenses                                                        |  |                              | (14,896  | ) |                              |   | (8,590   | )
|Deposits                                                                |  |                              | (29,305  | ) |                              |   | 8,636    |  
|Accounts payable and amounts due to related parties                     |  |                              | 596,299  |   |                              |   | 252,025  |  
|Deferred revenue                                                        |  |                              | 83,342   |   |                              |   | 61,308   |  
|                                                                        |  |                              |          |   |                              |   |          |  
|Net cash provided by (used) in operating activities                     |  |                              | 442,032  |   |                              |   | (19,593  | )
|                                                                        |  |                              |          |   |                              |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                   |  |                              |          |   |                              |   |          |  
|Proceeds from disposal of equipment                                     |  |                              |         |   |                              |   | 3,133    |  
|Purchase of fixed assets                                                |  |                              | (99,469  | ) |                              |   | (59,187  | )
|                                                                        |  |                              |          |   |                              |   |          |  
|Net cash used in investing activities                                   |  |                              | (99,469  | ) |                              |   | (56,054  | )
|                                                                        |  |                              |          |   |                              |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                   |  |                              |          |   |                              |   |          |  
|Repayment of amounts due to related parties                             |  |                              | (64,250  | ) |                              |   | (54,257  | )
|Loans from related parties                                              |  |                              | 250,000  |   |                              |   | 250,000  |  
|Repayment of note payable                                               |  |                              |         |   |                              |   | (131,865 | )
|Proceeds from exercise of stock options for cash                        |  |                              | 10,500   |   |                              |   |         |  
|                                                                        |  |                              |          |   |                              |   |          |  
|Net cash provided by financing activities                               |  |                              | 196,250  |   |                              |   | 63,878   |  
|                                                                        |  |                              |          |   |                              |   |          |  
|Net increase (decrease) in cash                                         |  |                              | 538,813  |   |                              |   | (11,769  | )
|Cash, beginning of period                                               |  |                              | 131,265  |   |                              |   | 143,034  |  
|                                                                        |  |                              |          |   |                              |   |          |  
|Cash, end of period                                                     |  | $                            | 670,078  |   |                              | $ | 131,265  |  
|                                                                        |  |                              |          |   |                              |   |          |  

See supplementary information (note 9)

See accompanying notes



F-5



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005



|1. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

a) Nature of
operations

We are a software developer and distributor of financial market data and related services to a global marketplace. We
specialize in the collection, aggregation, and delivery of both delayed and real-time financial data content via the Internet. We develop and license software components that deliver dynamic content to banks, brokerage firms, financial institutions,
mutual fund companies, online information and financial portals, media outlets, public companies, and corporate Intranets.

b) Basis of
Consolidation

The consolidated financial statements include the operations of Quotemedia, Ltd., a wholly owned subsidiary of
Quotemedia, Inc. All intercompany transactions and balances have been eliminated.

c) Foreign Currency Translation and Transactions

The U.S. dollar is the functional currency of all our companys operations. Foreign currency asset and liability amounts are
remeasured into U.S. dollars at end-of-period exchange rates, except for equipment and intangible assets, which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average exchange rates in effect during the
year, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in income in the
period in which they occur.

d) Cash and cash equivalents

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

e)
Allowances for doubtful accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of
the Companys customers to make required payments. The Company determines the allowance by reviewing the age of the receivables and assessing the anticipated ability of customers to pay. No collateral is required for any of the receivables. If
the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The allowance for doubtful accounts is $40,000 as at December 31, 2005.



F-6



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

f) Property and Equipment

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

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

In 2005, we changed from the declining balance to the straight-line method of depreciation
for equipment. The change was made because management believes that the straight-line method more closely approximates the equipments useful lives than does the declining balance method. The effect of the change to prior periods was
included in depreciation expense in the current period as the effect was insignificant and had no effect on earnings per share.

g)
Earnings per share

Financial Accounting Standards No. 128 Earnings Per Share requires the presentation of basic and
diluted earnings per share. Basic earnings per share are computed by dividing income by the weighted average number of shares outstanding during the year. Diluted earnings per share takes into account shares outstanding (computed under basic
earnings per share) and potentially dilutive common shares (such as stock options outstanding). The effect of a stock split or reverse split is applied retroactively to preceding periods. For the year ended 2004 all common stock equivalents were
anti-dilutive.

h) Stock based compensation

We have elected to account for employee stock options using the intrinsic value method described in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations as allowed under FAS No. 123. The following pro forma disclosures are provided as required under SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure.

As we grant all stock options with an exercise price equal to the market value of the underlying common shares on the
date of the grant, no compensation expense has been recognized under APB 25. FAS No. 123 uses a fair value method of calculating the cost of stock option grants. Had compensation cost for our employee stock option plan been determined by this
method, our net loss and loss per share would have been as follows:



F-7



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005



|                                                                                                          |  |      |          |   |      |   |          |  
|--------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                                          |  | 2005 |          |   | 2004 |  
|Net income (loss):                                                                                        |  |      |          |   |      |   |          |  
|                                                                                                          |  |     
|As reported                                                                                               |  | $    | 24,717   |   |      | $ | (297,421 | )
|                                                                                                          |  |     
|Add: Stock compensation expense recorded in the financial statements                                      |  |      | 14,500   |   |      |   |         |  
|                                                                                                          |  |     
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards |  |      | (993,416 | ) |      |   | (463,745 | )
|                                                                                                          |  |      |          |   |      |   |          |  
|Pro forma                                                                                                 |  | $    | (954,199 | ) |      | $ | (761,166 | )
|                                                                                                          |  |      |          |   |      |   |          |  
|Basic and diluted earnings (loss) per share:                                                              |  |      |          |   |      |   |          |  
|As reported                                                                                               |  | $    | 0.00     |   |      | $ | (0.01    | )
|Pro forma                                                                                                 |  | $    | (0.02    | ) |      | $ | (0.01    | )

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:



|                                               |  |      |            |   |      |   |         |  
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ------- | -
|                                               |  | 2005 |            |   | 2004 |  
|Expected dividend yield                        |  |      |           |   |      |   |        |  
|Expected stock price volatility                |  |      | 94         | % |      |   | 85      | %
|Risk-free interest rate                        |  |      | 4          | % |      |   | 4       | %
|Expected life of options                       |  |      | 5.22 years |   |      |   | 4 years |  
|Weighted average fair value of options granted |  | $    | 0.37       |   |      | $ | 0.22    |  

i) Income taxes

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

Deferred tax assets are reduced by a valuation allowance, when, in the opinion of
management, it is likely that some portion of the deferred tax asset will not be realized. Deferred taxes are adjusted for the effects of changes in tax laws and rates. No income taxes were paid in 2005.



F-8



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

j) Use of estimates

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

k)
Research and development

Expenditures for research and development are expensed as incurred. The Company expensed $429,826 and $253,829
in research and development costs during the years ended December 31, 2005 and 2004, respectively, primarily related to the development of new services.

l) Revenue recognition

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

m) Barter revenue

During 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 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. We determine
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. We also ensure that the value of barter delivered does not exceed the value of cash based
revenue in any period. As the advertising did not occur until 2006, the advertising credits earned in 2005 are reflected as prepaid expenses. This amount will be expensed in 2006.



|                                        |  |      |         |      |   |  
|--------------------------------------- |  | ---- | ------- | ---- | - | -
|                                        |  | 2005 |         | 2004
|Barter revenue                          |  | $    | 150,000 |      | $ | 
|                                        |  |     
|Advertising credits in prepaid expenses |  |      | 150,000 |      |   | 



F-9



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

n) Financial instruments

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

o) New accounting standards

In December 2004, the Financial Accounting Standards Board (FASB) issued revised Statement of Financial Accounting Standards No. 123
entitled Share-Based Payment (FAS No. 123R). This revised statement addresses accounting for stock-based compensation and results in the fair value of all stock-based compensation arrangements, including options, being
recognized as an expense in a companys financial statements. The revised Statement eliminates the ability to account for stock-based compensation transactions using APB Opinion No. 25 with supplemental disclosure in the notes to financial
statements as previously allowed under FAS 123. FAS No. 123R is effective for public entities that file as small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The
Company is currently assessing the impact that FAS 123R will have on its financial statements. However, if we had followed FAS 123R our results would be similar to the pro forma amounts disclosed in Note 1 h). Additionally, we expect to record
approximately $173,200 in stock based compensation expense in 2006 for stock options and warrants outstanding at December 31, 2005 that vest in 2006.

p) Reclassification

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



|2. | LIQUIDITY
|-- | ---------

The Company has an accumulated deficit
of $7,029,737. As a result, there are concerns about the liquidity of our company at December 31, 2005. The following discussion addresses those concerns.

In 2005 the Company generated positive cash flow from operations. We believe this will continue through fiscal 2006, as our revenue is recurring in nature based on contracts with our clients which have one to three
year terms.



F-10



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

We have a working capital surplus of $674,354 as at December 31, 2005. Our current liabilities include $30,000 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 $184,683
is also included in our current liabilities. The expected costs necessary to realize the deferred revenue in 2006 are minimal.

Implementation of our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. However, based on the factors discussed above,
management believes that our cash on hand and cash to be generated from operations will be sufficient to fund operations through fiscal 2006.



|3. | PROPERTY AND EQUIPMENT
|-- | ----------------------



|                               |  |      |         |                         |   |               |  |   |        
|------------------------------ |  | ---- | ------- | ----------------------- | - | ------------- |  | - | -------
|As at December 31, 2005,       |  | Cost |         | AccumulatedDepreciation |   | Net BookValue
|Computer equipment             |  | $    | 107,232 |                         | $ | 40,440        |  | $ | 66,792 
|Office furniture and equipment |  |      | 17,576  |                         |   | 11,630        |  |   | 5,946  
|Leasehold improvements         |  |      | 6,020   |                         |   | 1,171         |  |   | 4,849  
|Capitalized software           |  |      | 43,721  |                         |   | 1,270         |  |   | 42,451 
|                               |  |      |         |                         |   |               |  |   |        
|                               |  | $    | 174,549 |                         | $ | 54,511        |  | $ | 120,038
|                               |  |      |         |                         |   |               |  |   |        

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 software           |  | 3 years      

In 2005, the Company capitalized $43,721 related to the development of internal use software. In
2005, amortization expense associated with the internally developed software was $1,270. At December 31, 2005, the remaining book value of the software developed for internal use was $42,451

Depreciation expense was $18,333 and $15,267 for the years ended December 31, 2005 and 2004, respectively.



F-11



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005



|4. | RELATED PARTIES
|-- | ---------------

In May 2004 we entered into a loan
agreement with Bravenet Web Services, Inc. (Bravenet). We borrowed $250,000 from Bravenet with interest at 10% per annum. In September 2005 we borrowed an additional $250,000 from Bravenet under the same terms and conditions. It is
anticipated that the loan will be repaid in 12 equal monthly installments beginning in the first quarter of 2007. The President and Chief Executive Officer of Quotemedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet. At
December 31, 2005, the loan balance due to Bravenet including accrued interest is $551,438.

In the first quarter of 2005 we entered
into an agreement with Bravenet to provide customer promotion and lead generation services. Payments of amounts due to Bravenet are expected to commence in the first quarter of 2007. Interest is accrued at the prime bank rate minus 1%. At
December 31, 2005, the balance due to Bravenet for service fees including accrued interest is $357,339, representing all fees earned under the agreement in 2005.

At December 31, 2005, we owed a total of $232,284 to officers of the Company for amounts advanced to the company and for accrued unpaid salary. No interest is required to be accrued on these amounts. An
additional $230,814 of unpaid salary is owed to an officer of the Company. This amount includes interest accrued at the prime bank rate minus 1%.



|5. | INCOME TAXES
|-- | ------------

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

A reconciliation of income taxes computed at the statutory federal rate to income tax expense (benefit) for the year ended December 31, 2005 is as
follows:



|                                              |  |      |        |   |      |   |         |  
|--------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | -
|                                              |  | 2005 |        |   | 2004 |  
|Tax provision at the statutory rate of 34%    |  | $    | 8,404  |   |      | $ | (80,278 | )
|State income taxes, net of federal income tax |  |      | 755    |   |      |   | (7,215  | )
|Increase in subscriptions received in advance |  |      |       |   |      |   | (22,718 | )
|Change in valuation allowance                 |  |      | (9,159 | ) |      |   | 110,211 |  
|                                              |  |      |        |   |      |   |         |  
|Income tax expense (benefit)                  |  | $    |       |   |      | $ |        |  
|                                              |  |      |        |   |      |   |         |  

As of December 31, 2005, we had net operating loss carryforwards for federal income tax
reporting purposes amounting to approximately $7,000,000 which expire in varying amounts through the year 2025.



F-12



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

The components of our deferred tax asset at December 31, 2005 were as follows:



|                                |  |   |            |  
|------------------------------- |  | - | ---------- | -
|Net operating loss carryforward |  | $ | 2,575,000  |  
|Other                           |  |   | 30,000     |  
|Less valuation allowance        |  |   | (2,605,000 | )
|                                |  |   |            |  
|Net deferred tax asset          |  | $ |           |  
|                                |  |   |            |  

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



|6. | STOCKHOLDERS DEFICIT
|-- | ---------------------

a) Preferred
shares

We are authorized to issue up to 10,000,000 non-designated preferred shares at the Board of Directors discretion. As at
December 31, 2005 no preferred shares have been issued.

b) Common stock

During 2005, we issued a total of 3,130,000 shares of common stock to officers of the Company pursuant to the exercise of warrants and stock options at
exercise prices ranging from $0.10 to $0.26. The officers surrendered a total of 703,049 shares of previously held mature shares of our common stock to pay the total exercise cost of $316,000. The surrendered common stock was valued at stock prices
ranging from $0.43 to $0.45 which were the closing prices of our common stock on the dates of the transactions. The surrendered common stock was subsequently cancelled.

During 2005, we issued a total of 45,110 shares of common stock to employees of the Company pursuant to the exercise of stock options. The employees exercised a total of 75,000 stock options at exercise prices ranging
from $0.16 to $0.26. The Company repurchased a total of 29,890 shares of common stock to pay the total exercise cost of $14,500. The repurchased common stock was valued at stock prices ranging from $0.43 to $0.51 per share which were the closing
prices of our common stock on the dates of the transactions. Stock based compensation expense totaling $14,500 was recognized as a result of these transactions.

We issued an additional 50,000 shares of common stock during 2005 pursuant to the exercise of stock options. The stock options had an average exercise price of $0.21. The Company received total cash proceeds of
$10,500 as a result of these transactions.



F-13



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

c) Stock option plan

We have stock
option plans whereby shares of our common stock may be issued pursuant to the exercise of stock options granted to employees, officers, directors, advisors, and our independent contractors. The exercise price of the common stock underlying an option
will be determined by the Board of Directors or compensation committee and may be equal to, greater than, or less than the market value of our common stock at the date of grant but in no event less than 50% of such market value. The options
generally vest in one to four years unless, at the discretion of the Board of Directors, alternative vesting methods are allowed. The term of each option is determined at the time of grant and may extend to a maximum of ten years. At
December 31, 2005, 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 five years. We may grant an unlimited number of options outside our stock option plan at the discretion of the Board of Directors.

The following table sets forth certain stock option and warrant information:



|                                        |  |                     |   |  |                                |     
|--------------------------------------- |  | ------------------- | - |  | ------------------------------ | ----
|                                        |  | Options andWarrants |   |  | Weighted-AverageExercise Price
|Outstanding at December 31, 2003        |  | 43,741,812          |   |  | $                              | 0.09
|                                        |  |                    
|Granted under company stock option plan |  | 2,625,000           |   |  | $                              | 0.40
|Warrants granted                        |  | 1,584,000           |   |  | $                              | 0.40
|Expired                                 |  | (150,000            | ) |  | $                              | 1.06
|                                        |  |                     |   |  |                                |     
|Outstanding at December 31, 2004        |  | 47,800,812          |   |  | $                              | 0.12
|                                        |  |                     |   |  |                                |     
|Granted under company stock option plan |  | 430,000             |   |  | $                              | 0.38
|Warrants granted                        |  | 2,485,470           |   |  | $                              | 0.46
|Stock options exercised                 |  | (175,000            | ) |  | $                              | 0.19
|Warrants exercised                      |  | (3,080,000          | ) |  | $                              | 0.10
|Expired                                 |  | (175,000            | ) |  | $                              | 0.26
|                                        |  |                     |   |  |                                |     
|Outstanding at December 31, 2005        |  | 47,286,282          |   |  | $                              | 0.13
|                                        |  |                     |   |  |                                |     



F-14



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005



|                        |  |                                    |  |                                          |  |                              |      |                                     |            |                               |   |     
|----------------------- |  | ---------------------------------- |  | ---------------------------------------- |  | ---------------------------- | ---- | ----------------------------------- | ---------- | ----------------------------- | - | ----
|                        |  | Options and Warrants Outstanding   |  | Options and WarrantsExercisable         
|Range of Exercise Price |  | NumberOutstanding at Dec. 31, 2005 |  | WeightedAverageRemainingContractual Life |  | WeightedAverageExercisePrice |      | Number Exercisable at Dec. 31, 2005 |            | WeightedAverageExercise Price
|$0.05-0.10              |  | 29,006,026                         |  | 1.96                                     |  | $                            | 0.05 |                                     | 29,006,026 |                               | $ | 0.05
|$0.11-0.30              |  | 11,155,786                         |  | 0.77                                     |  | $                            | 0.18 |                                     | 11,155,786 |                               | $ | 0.18
|$0.31-0.50              |  | 7,124,470                          |  | 8.37                                     |  | $                            | 0.42 |                                     | 5,267,970  |                               | $ | 0.43

As at December 31, 2005 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 therefore no compensation expense has been recognized for grants of stock options and warrants in the statement of operations.

We are authorized to issue up to 100,000,000 common shares and 10,000,000 non-designated preferred shares. 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 Board of Directors would designate the preferred shares with the same rights and preferences as the common shares to accommodate the exercise of the
options or warrants.



|7. | EARNINGS PER SHARE
|-- | ------------------

Basic earnings per share is
calculated by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income applicable to common stockholders,
adjusted to exclude potentially dilutive securities, by the weighted average number of common shares outstanding during the period, plus any additional common shares that would have been outstanding if potentially dilutive common shares had been
exercised, using the treasury stock method. Due to the net loss incurred for the year ended 2004, the diluted loss per share is the same as basic, because any potentially dilutive securities would reduce the loss per share. The following tables
summarize the components of the income (loss) per share and potentially dilutive securities:



F-15



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005



|                                                                                                                    |  |      |            |      |   |            |  
|------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                                                    |  | 2005 |            | 2004 |  
|Numerator:                                                                                                          |  |      |            |      |   |            |  
|Net income (loss)                                                                                                   |  | $    | 24,717     |      | $ | (297,421   | )
|                                                                                                                    |  |      |            |      |   |            |  
|Numerator for basic and diluted earnings (loss) per share                                                           |  |      | 24,717     |      |   | (297,421   | )
|                                                                                                                    |  |     
|Denominator:                                                                                                        |  |      |            |      |   |            |  
|Denominator for basic earnings (loss) per share  weighted average shares                                           |  |      | 60,110,229 |      |   | 58,664,204 |  
|                                                                                                                    |  |     
|Effect of dilutive securities:                                                                                      |  |      |            |      |   |            |  
|Stock Options                                                                                                       |  |      | 3,087,006  |      |   |           |  
|Warrants                                                                                                            |  |      | 30,218,795 |      |   |           |  
|                                                                                                                    |  |      |            |      |   |            |  
|Dilutive potential common shares                                                                                    |  |      | 33,305,801 |      |   |           |  
|                                                                                                                    |  |     
|Denominator for diluted earnings per share  weighted average shares                                                |  |      | 93,416,030 |      |   | 58,664,204 |  
|                                                                                                                    |  |      |            |      |   |            |  
|Basic earnings (loss) per share                                                                                     |  | $    | 0.00       |      | $ | (0.01      | )
|                                                                                                                    |  |      |            |      |   |            |  
|Diluted earnings (loss) per share                                                                                   |  | $    | 0.00       |      | $ | (0.01      | )
|                                                                                                                    |  |      |            |      |   |            |  
|Stock options and warrants excluded from the calculation of dilutive loss per share because they were anti-dilutive |  |      | 2,450,000  |      |   | 47,800,812 |  
|                                                                                                                    |  |      |            |      |   |            |  



|8. | COMMITMENTS
|-- | -----------

We have office lease commitments
totaling $67,756 in 2006, $64,710 in 2007, and $32,255 in 2008.



|9. | SUPPLEMENTARY CASH FLOW INFORMATION
|-- | -----------------------------------



|                           |  |      |       |      |   |       
|-------------------------- |  | ---- | ----- | ---- | - | ------
|                           |  | 2005 |       | 2004
|Cash flow information:     |  |      |       |      |   |       
|                           |  |     
|Cash paid for Interest     |  | $    | 1,556 |      | $ | 36,621
|Cash received for Interest |  |      | 642   |      |   |      
|                           |  |     
|Cash paid for taxes        |  |      |      |      |   |      



F-16



---

##### Table of Contents

QUOTEMEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

As discussed in Note 1 m), we exchanged $150,000 in subscription services for advertising credits, resulting in $150,000 of non-cash barter revenue. As
the advertising did not occur until 2006, the advertising credits earned in 2005 are reflected as prepaid expenses.

As discussed in Note 6
b), during 2005 we issued a total of 3,130,000 shares of common stock to officers of the Company pursuant to the exercise of warrants and stock options. The officers surrendered a total of 703,049 shares of previously held mature shares of our
common stock to pay the total exercise cost of $316,000. We also issued a total of 45,110 shares of common stock to employees of the Company pursuant to the exercise of stock options. The Company repurchased a total of 29,890 shares of common stock
to pay the total exercise cost of $14,500. Stock based compensation expense totaling $14,500 was recognized as a result of these transactions.



F-17