UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20162017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____from to______

Commission File Number: 1-8601

CreditRiskMonitor.com, Inc.
(Exact name of registrant as specified in its charter)

Nevada 36-2972588
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 
704 Executive Boulevard, Suite A
Valley Cottage, New York  10989
 
10989
(Address of principal executive offices)offices, including zip code) (Zip Code)

Registrant’s telephone number, including area code: (845) 230-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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     No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer                  ☐ 
Non-accelerated filer  
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:
Common stock $.01 par value – 10,722,401 shares outstanding as of November 4, 2016.7, 2017.
 


CREDITRISKMONITOR.COM, INC.
INDEX

  
Page
   
PART I. FINANCIAL INFORMATION 
   
 Item 1. Financial Statements 
    
  2
    
  3
    
  4
    
  5
    
  6
   
 9
   
 13
   
PART II. OTHER INFORMATION 
   
 
Item 6. Exhibits
1413
   
SIGNATURES1514
 
PART I.FINANCIAL INFORMATION

Item 1.
Financial Statements

CREDITRISKMONITOR.COM, INC.
BALANCE SHEETS
SEPTEMBER 30, 20162017 AND DECEMBER 31, 20152016

 
September 30,
2016
  
December 31,
2015
  
September 30,
2017
  
December 31,
2016
 
 (Unaudited)  (Note 1)  (Unaudited)  (Note 1) 
 
 
          
ASSETS            
Current assets:            
Cash and cash equivalents $9,561,016  $8,717,899  $9,284,650  $9,222,343 
Marketable securities  274,029   245,474 
Accounts receivable, net of allowance  1,490,154   1,927,428   1,512,766   2,090,676 
Other current assets  686,418   555,871   554,607   487,257 
                
Total current assets  12,011,617   11,446,672   11,352,023   11,800,276 
                
Property and equipment, net  403,359   395,026   385,434   430,324 
Goodwill  1,954,460   1,954,460   1,954,460   1,954,460 
Prepaid and other assets  46,676   33,999 
Other assets  33,599   23,763 
                
Total assets $14,416,112  $13,830,157  $13,725,516  $14,208,823 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Deferred revenue $7,857,159  $7,436,764  $7,891,863  $8,088,958 
Accounts payable  162,814   78,267   136,009   96,725 
Accrued expenses  1,249,758   1,241,317   1,267,269   1,282,126 
                
Total current liabilities  9,269,731   8,756,348   9,295,141   9,467,809 
                
Deferred taxes on income  743,757   759,454 
Deferred taxes on income, net  689,831   762,403 
Other liabilities  11,242   4,314   15,709   12,574 
                
Total liabilities  10,024,730   9,520,116   10,000,681   10,242,786 
                
Stockholders’ equity:                
Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued  --   --   --   -- 
Common stock, $.01 par value; authorized 32,500,000 shares; issued and outstanding 10,722,401 and 10,722,321 shares, respectively
  107,224   107,223 
Common stock, $.01 par value; authorized 32,500,000 shares; issued and outstanding 10,722,401 shares
  107,224   107,224 
Additional paid-in capital  29,392,158   29,279,791   29,525,358   29,419,463 
Accumulated deficit  (25,108,000)  (25,076,973)  (25,907,747)  (25,560,650)
                
Total stockholders’ equity  4,391,382   4,310,041   3,724,835   3,966,037 
                
Total liabilities and stockholders’ equity $14,416,112  $13,830,157  $13,725,516  $14,208,823 

See accompanying condensed notes to financial statements.
 
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 20162017 AND 20152016
(Unaudited)

 2016  2015  2017  2016 
            
Operating revenues $3,237,687  $3,153,249  $3,385,352  $3,237,687 
                
Operating expenses:                
Data and product costs  1,254,151   1,134,296   1,332,759   1,254,151 
Selling, general and administrative expenses  1,808,184   1,635,790   2,013,962   1,808,184 
Depreciation and amortization  48,894   54,470   43,410   48,894 
                
Total operating expenses  3,111,229   2,824,556   3,390,131   3,111,229 
                
Income from operations  126,458   328,693 
Other expense, net  (589)  (4,680)
Income (loss) from operations  (4,779)  126,458 
Other income (expense), net  15,362   (589)
                
Income before income taxes  125,869   324,013   10,583   125,869 
Provision for income taxes  (45,916)  (124,614)  (29,700)  (45,916)
                
Net income $79,953  $199,399 
Net income (loss) $(19,117) $79,953 
                
Net income per share of common stock:        
Net income (loss) per share of common stock:        
                
Basic $0.01  $0.02  $0.00  $0.01 
Diluted $0.01  $0.02  $0.00  $0.01 
                
Weighted average number of common shares outstanding:                
                
Basic  10,722,326   10,691,193   10,722,401   10,722,326 
Diluted  10,804,989   10,811,295   10,722,401   10,804,989 

See accompanying condensed notes to financial statements.
 
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20162017 AND 20152016
(Unaudited)
      
  2016  2015 
       
Operating revenues $9,530,462  $9,330,561 
         
Operating expenses:        
Data and product costs  3,682,612   3,534,268 
Selling, general and administrative expenses  5,781,867   5,006,033 
Depreciation and amortization  148,026   167,655 
         
Total operating expenses  9,612,505   8,707,956 
         
Income (loss) from operations  (82,043)  622,605 
Other income, net  33,592   1,014 
         
Income (loss) before income taxes  (48,451)  623,619 
Benefit from (provision for) income taxes  17,424   (242,641)
         
Net income (loss) $(31,027) $380,978 
         
Net income (loss) per share of common stock:        
         
Basic $0.00  $0.04 
Diluted $0.00  $0.04 
         
Weighted average number of common shares outstanding:        
         
Basic  10,722,322   10,596,151 
Diluted  10,722,322   10,773,801 
  2017  2016 
       
Operating revenues $9,963,078  $9,530,462 
         
Operating expenses:        
Data and product costs  4,058,940   3,682,612 
Selling, general and administrative expenses  6,200,518   5,781,867 
Depreciation and amortization  143,132   148,026 
         
Total operating expenses  10,402,590   9,612,505 
         
Loss from operations  (439,512)  (82,043)
Other income, net  29,932   33,592 
         
Loss before income taxes  (409,580)  (48,451)
Benefit from income taxes  62,483   17,424 
         
Net loss $(347,097) $(31,027)
         
Net loss per share – Basic and diluted $(0.03) $(0.00)
         
Weighted average number of common shares outstanding:        
         
Basic and diluted  10,722,401   10,722,322 

See accompanying condensed notes to financial statements.
 
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20162017 AND 20152016
(Unaudited)
  2017  2016 
       
Cash flows from operating activities:      
Net loss $(347,097) $(31,027)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation and amortization  143,132   148,026 
Stock-based compensation  105,895   112,368 
Unrealized gain on marketable securities  --   (27,777)
Deferred income taxes  (72,572)  (15,697)
Deferred rent  3,135   6,928 
Changes in operating assets and liabilities:        
Accounts receivable  577,910   437,274 
Other current assets  (67,350)  (130,547)
Prepaid and other assets  (9,836)  (12,677)
Deferred revenue  (197,095)  420,395 
Accounts payable  39,284   84,547 
Accrued expenses  (14,857)  8,441 
         
Net cash provided by operating activities  160,549   1,000,254 
         
Cash flows from investing activities:        
Purchase of marketable securities  --   (778)
Purchase of property and equipment  (98,242)  (156,359)
         
Net cash used in investing activities  (98,242)  (157,137)
         
Net increase in cash and cash equivalents  62,307   843,117 
Cash and cash equivalents at beginning of period  9,222,343   8,717,899 
         
Cash and cash equivalents at end of period $9,284,650  $9,561,016 

  2016  2015 
       
Cash flows from operating activities:      
Net income (loss) $(31,027) $380,978 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation and amortization  148,026   167,655 
Stock-based compensation  112,368   95,933 
Unrealized (gain) loss on marketable securities  (27,777)  37,292 
Tax benefit from stock option plans  --   (31,912)
Deferred taxes on income  (15,697)  (37,801)
Deferred rent  6,928   (820)
Changes in operating assets and liabilities:        
Accounts receivable  437,274   701,076 
Other current assets  (130,547)  (22,979)
Prepaid and other assets  (12,677)  (21,367)
Deferred revenue  420,395   (281,884)
Accounts payable  84,547   (25,681)
Accrued expenses  8,441   (67,070)
         
Net cash provided by operating activities  1,000,254   893,420 
         
Cash flows from investing activities:        
Purchase of marketable securities  (778)  (12,753)
Purchase of property and equipment  (156,359)  (254,908)
         
Net cash used in investing activities  (157,137)  (267,661)
         
Cash flows from financing activities:        
Proceeds from exercise of stock options  --   39,584 
Tax benefit from stock option plans  --   31,912 
         
Net cash provided by financing activities  --   71,496 
  ��      
Net increase in cash and cash equivalents  843,117   697,255 
Cash and cash equivalents at beginning of period  8,717,899   7,529,468 
         
Cash and cash equivalents at end of period $9,561,016  $8,226,723 
See accompanying condensed notes to financial statements.
 
CREDITRISKMONITOR.COM, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

(1)
(1)Basis of Presentation

The accompanying unaudited condensed financial statements of CreditRiskMonitor.com, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosure required by generally accepted accounting principles (“GAAP”) in the United States for complete financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited condensed financial statements reflect all material adjustments, including normal recurring accruals, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented, and have been prepared in a manner consistent with the audited financial statements for the fiscal year ended December 31, 2015.2016.

The results of operations for the three and nine months ended September 30, 20162017 are not necessarily indicative of the results of a full fiscal year.

The December 31, 20152016 balance sheet has been derived from the audited financial statements at that date, but does not include all disclosures required by GAAP. These financial statements should be read in conjunction with the audited financial statements and the footnotes for the fiscal year ended December 31, 20152016 included in the Company’s Annual Report on Form 10-K.

The Company has identified certain immaterial errors in previously issued financial statements for the years ended December 31, 2015 and 2014 related to the accounting for non-qualified stock options. These immaterial errors resulted in a cumulative overstatement of its deferred tax liability and tax provision in the amount of $46,707 as well as a cumulative overstatement of additional paid-in capital and prepaid taxes in the amount of $194,054. The Company reviewed the accounting errors utilizing SEC Staff Accounting Bulletin No. 99, “Materiality” (“SAB 99”) and SEC Staff Accounting Bulletin No. 108, “Effects of Prior Year Misstatements on Current Year Financial Statements” (“SAB 108”) and determined the impact of the errors to be immaterial to any prior period’s presentation. The accompanying Balance Sheet as of December 31, 2015 reflects the corrections of the aforementioned immaterial error.

(2) Stock Split

On October 21, 2015, the Company’s Board of Directors authorized a 1.3-for-1 split of its common stock, in the form of a 30% stock dividend, payable to stockholders of record as of November 30, 2015. Shares resulting from the split were issued on December 15, 2015. All share and per share amounts for all prior periods presented have been retroactively adjusted to reflect the stock split.

(3)
(2)Stock-Based Compensation

The Company applies ASC 718, “Compensation-Stock Compensation” (“ASC 718”) to account for stock-based compensation.

The following table summarizes the stock-based compensation expense for stock options that was recorded in the Company’s results of operations in accordance with ASC 718 for the three and nine months ended September 30:

  
3 Months Ended
September 30,
  
9 Months Ended
September 30,
 
  2017  2016  2017  2016 
             
Data and product costs $8,915  $8,738  $26,745  $26,029 
Selling, general and administrative expenses  26,714   26,743   79,150   86,339 
                 
  $35,629  $35,481  $105,895  $112,368 

(3)Recently Issued Accounting Standards

In May 2014, new accounting guidance was issued that replaces most existing revenue recognition guidance under U.S. GAAP. Pursuant to this standard and subsequently issued amendments, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Entities have the option of adopting this standard using either a full retrospective approach or a modified retrospective approach (i.e., through a cumulative effect adjustment directly to retained earnings at the time of adoption). The Company is in the process of identifying and implementing appropriate changes to its business processes, systems and controls to support revenue recognition and disclosure under this standard. The Company anticipates that the adoption of this standard will not have a significant impact on its financial statements. The Company expects to adopt this standard at the beginning of its 2018 fiscal year using the modified retrospective approach.
 
  
3 Months Ended
September 30,
  
9 Months Ended
September 30,
 
  2016  2015  2016  2015 
Data and product costs $8,738  $2,945  $26,029  $8,835 
Selling, general and administrative expenses  26,743   29,316   86,339   87,098 
                 
  $35,481  $32,261  $112,368  $95,933 
(4) Other Recently Issued Accounting Standards

The Financial Accounting Standards Board and the SEC hadhave issued certain other accounting pronouncements as of September 30, 20162017 that will become effective in subsequent periods; however, management does not believe that any of those pronouncements would have significantly affected the Company’s financial accounting measurements or disclosures had they been in effect during the interim periods for which financial statements are included in this quarterly report. Management also believes those pronouncements will not have a significant effect on the Company’s future financial position or results of operations.

(5)
(4)Fair Value Measurements

The Company records its financial instruments that are accounted for under ASC 320, “Investments-Debt and Equity Securities” at fair value.value in accordance with accounting guidance. The determination of fair value is based upon the fair value framework established by ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 provides that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: (a) Level 1 – valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; (b) Level 2 – valuations based on quoted prices in markets that are not active, or financial instruments for which all significant inputs are observable, either directly or indirectly; and (c) Level 3 – valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable, thus, reflecting assumptions about the market participants.

The Company’s cash and cash equivalents and marketable securities are stated at fair value. The carrying value of accounts receivable, other current assets, accounts payable and other current liabilities approximates fair market value because of the short maturity of these financial instruments.

The Company’s cash equivalents and marketable securities are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Marketable securities include mutual funds.

The table below sets forth the Company’s cash and cash equivalents and marketable securities as of September 30, 20162017 and December 31, 2015,2016, respectively, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

  September 30, 2016  December 31, 2015 
  Level 1  Level 2  Level 3  Total  Total 
Cash and cash equivalents $
9,561,016
  $-  $-  $9,561,016  $8,717,899 
Marketable securities  274,029   -   -   274,029   245,474 
                     
Total $9,835,045  $-  $-  $9,835,045  $8,963,373 
  Level 1  Level 2  Level 3  Total 
             
September 30, 2017:            
Cash and cash equivalents $
9,284,650
  $-  $-  $9,284,650 
                 
December 31, 2016:                
Cash and cash equivalents $
9,222,343
  $-  $-  $9,222,343 

The Company did not hold financial assets and liabilities which were recorded at fair value in the Level 2 or 3 categories as of either September 30, 20162017 or December 31, 2015.2016.

7

(6)
(5)Net Income (Loss) per Share

Basic net income (loss) per share is based on the weighted average number of common shares outstanding. Diluted net income (loss) per share is based on the weighted average number of common shares outstanding and the dilutive effect of outstanding stock options:
 
  
3 Months Ended
September 30,
  
9 Months Ended
September 30,
 
  2016  2015  2016  2015 
Weighted average number of common shares outstanding – basic  10,722,326   10,691,193   10,722,322   10,596,151 
Potential shares exercisable under stock option plans  360,450   232,700   --   340,817 
LESS: Shares which could be repurchased under treasury stock method  (277,787)  (112,598)  --   (163,167)
                 
Weighted average number of common shares outstanding – diluted  10,804,989   10,811,295   10,722,322   10,773,801 
  
3 Months Ended
September 30,
  
9 Months Ended
September 30,
 
  2017  2016  2017  2016 
            
Weighted average number of common shares outstanding – basic  10,722,401   10,722,326   10,722,401   10,722,322 
Potential shares exercisable under stock option plans  --   360,450   --   -- 
LESS: Shares which could be repurchased under treasury stock method  --   (277,787)  --   -- 
                 
Weighted average number of common shares outstanding – diluted  10,722,401   10,804,989   10,722,401   10,722,322 

All outstanding stock options were excluded from the computation of diluted net income per share for the 3 and 9 months ended September 30, 2017 as they were anti-dilutive. Potential common shares of 60,900 and 114,660 related to the Company's outstanding stock options were excluded from the computation of diluted income per share for the 3 months ended September 30, 2016 and 2015, respectively, as inclusion of these shares would have been anti-dilutive. All outstanding stock options were excluded from the computation of diluted loss per share for the 9 months ended September 30, 2016 as they were anti-dilutive. For the 9 months ended September 30, 2015, the computation of diluted net income per share excludes the effects of the assumed exercise of 178,317 options, since their inclusion would be anti-dilutive as their exercise prices were above market value.
 
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Environment

Despite the continued strengthening of the U.S. economy, theThe continuing uncertainty in the worldwide financial system has negatively impacted general business conditions. It is possible that a weakened economy could adversely affect our clients’ need for credit information, or even their solvency, but we cannot predict whether or to what extent this will occur.

Our strategic priorities and plans for 20162017 are to continue to build on the improvement initiatives underway to achieve sustainable, profitable growth. Global market conditions, however, may affect the level and timing of resources deployed in pursuit of these initiatives in 2016.2017.

Financial Condition, Liquidity and Capital Resources

The following table presents selected financial information and statistics as of September 30, 20162017 and December 31, 20152016 (dollars in thousands):

 September 30,
2016
  
December 31,
2015
  
September 30,
2017
  
December 31,
2016
 
Cash, cash equivalents and marketable securities $9,835  $8,963 
Cash and cash equivalents $9,285  $9,222 
Accounts receivable, net $1,490  $1,927  $1,513  $2,091 
Working capital $2,742  $2,690  $2,057  $2,332 
Cash ratio  1.06   1.02    1.00   0.97 
Quick ratio  1.22   1.24    1.16   1.19 
Current ratio  1.30   1.31    1.22   1.25 

The Company has invested some of its excess cash in debt instruments of the United States Government and mutual funds.cash equivalents. All highly liquid investments with an original maturity of three months or less when purchased are considered cash equivalents, while those with maturities in excess of three months when purchased are reflected as marketable securities.

As of September 30, 2016,2017, the Company had $9.84$9.28 million in cash and cash equivalents, and marketable securities, an increase of approximately $872,000$62,300 from December 31, 2015.2016. The reason for this increase was that cash generated by operating activities ($1,000,000)160,500) exceeded the cash used to acquire property and equipment ($157,000)98,200).

The Company’s cash provided by operating activities was positive despite its net loss for the nine months primarily due to the 23%28% decrease in accounts receivable and the 6% increase in deferred revenue.receivable. Additionally, the main component of current liabilities at September 30, 20162017 is deferred revenue of $7.86$7.89 million, which should not require significant future cash outlay other than the cost of preparation and delivery of the applicable commercial credit reports which cost much less than the deferred revenue shown. The deferred revenue is recognized as income over the subscription term, which approximates twelve months.

The Company has no bank lines of credit or other currently available credit sources.

The Company believes that its existing balances of cash and cash equivalents marketable securities and cash generated from operations will be sufficient to satisfy its currently anticipated cash requirements through at least the next 12 months and the foreseeable future. Moreover, the Company has been cash flow positive for 9 of the last 10 fiscal years and has no long-term debt. However, the Company’s liquidity could be negatively affected if it were to make an acquisition or license products or technologies, which may necessitate the need to raise additional capital through future debt or equity financing. Additional financing may not be available at all or on terms favorable to the Company.
Off-Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements.

Results of Operations

 3 Months Ended September 30,  3 Months Ended September 30, 
 2016  2015  2017  2016 
 Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
 
                        
Operating revenues $3,237,687   100.00% $3,153,249   100.00% $3,385,352   100.00% $3,237,687   100.00%
                                
Operating expenses:                                
Data and product costs  1,254,151   38.73%  1,134,296   35.97%  1,332,759   39.37%  1,254,151   38.73%
Selling, general and administrative expenses  1,808,184   55.85%  1,635,790   51.88%  2,013,962   59.49%  1,808,184   55.85%
Depreciation and amortization  48,894   1.51%  54,470   1.73%  43,410   1.28%  48,894   1.51%
Total operating expenses  3,111,229   96.09%  2,824,556   89.58%  3,390,131   100.14%  3,111,229   96.09%
                                
Income from operations  126,458   3.91%  328,693   10.42%
Other expense, net  (589)  (0.02
%)
  (4,680)  (0.14
%)
Income (loss) from operations  (4,779)  (0.14%)  126,458   3.91%
Other income (expense), net  15,362   0.45%  (589)  (0.02
%)
                                
Income before income taxes  125,869   3.89%  324,013   10.28%  10,583   0.31%  125,869   3.89%
Provision for income taxes  (45,916)  (1.42
%)
  (124,614)  (3.96
%)
  (29,700)  (0.87
%)
  (45,916)  (1.42
%)
                                
Net income $79,953   2.47% $199,399   6.32%
Net income (loss) $(19,117)  (0.56
%)
 $79,953   2.47%

Operating revenues increased $84,438,$147,665, or 3%5%, for the three months ended September 30, 20162017 compared to the same period of fiscal 2015.2016. This overall revenue growth resulted from an increase in Internet subscription service revenue, attributable to increased sales to new and existing subscribers.

Data and product costs increased $119,855,$78,608, or 11%6%, for the third quarter of 20162017 compared to the same period of fiscal 2015.2016. This increase was due primarily to higher salary and related employee benefits, as the Company increased its headcount.headcount in 2017.

Selling, general and administrative expenses increased $172,394,$205,778, or 11%, for the third quarter of fiscal 20162017 compared to the same period of fiscal 2015.2016. This increase was due to higher marketing expenditures and higher salary and related employee benefits, higher marketing expenditures and higher executive recruiting fees paid. The increase in marketing expenses is part of our 20162017 plan to drive increased traffic to the Company’s website and improve customers’ experience using the website, with the hope of incremental future sales. This isThe executive recruiting fees paid relate to the cost of staffing the Company’s first significant marketing campaign and it includes investment in a substantial redesign of the website, which was launched early in the second quarter.department. 

Depreciation and amortization decreased $5,576,$5,484, or 10%11%, for the third quarter of fiscal 20162017 compared to the same period of fiscal 2015.2016. This decrease was due to a lower depreciable asset base reflecting the continued use of certain items that have been fully depreciated. The increase in property and equipment, net since year end is due to a deposit made at the end of the first quarter for a new telephone system that was not installed until mid- September.

Other expense,income (expense), net decreased $4,091increased $15,951 for third quarter of fiscal 20162017 compared to the same period last year. This decreaseincrease was due to a smallerhigher income from cash equivalents recorded in 2017 compared to 2016 and a negative mark-to-market adjustment related to the Company’s investments recorded in thislast year’s third quarter, which were liquidated in 2016’s fourth quarter.

Provision for income taxes decreased $78,698$16,216 for the third quarter of fiscal 20162017 compared to the same period of fiscal 2015.2016. This decrease was due to the Company having lower pre-tax income because of the reasons enumerated above.
 
 9 Months Ended September 30,  9 Months Ended September 30, 
 2016 2015  2017  2016 
 Amount  
% of Total
Operating
Revenues
  Amount 
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
 
                        
Operating revenues $9,530,462   100.00% $9,330,561   100.00% $9,963,078   100.00% $9,530,462   100.00%
                                
Operating expenses:                                
Data and product costs  3,682,612   38.64%  3,534,268   37.88%  4,058,940   40.74%  3,682,612   38.64%
Selling, general and administrative expenses  5,781,867   60.67%  5,006,033   53.65%  6,200,518   62.23%  5,781,867   60.67%
Depreciation and amortization  148,026   1.55%  167,655   1.80%  143,132   1.44%  148,026   1.55%
Total operating expenses  9,612,505   100.86%  8,707,956   93.33%  10,402,590   104.41%  9,612,505   100.86%
                                
Income (loss) from operations  (82,043)  (0.86%)  622,605   6.67%
Loss from operations  (439,512)  (4.41%)  (82,043)  (0.86%)
Other income, net  33,592   0.35%  1,014   0.01%  29,932   0.30%  33,592   0.35%
                                
Income (loss) before income taxes  (48,451)  (0.51%)  623,619   6.68%
Benefit from (provision for) income taxes  17,424   0.18%  (242,641)  (2.60
%)
Loss before income taxes  (409,580)  (4.11%)  (48,451)  (0.51%)
Benefit from income taxes  62,483   0.63%  17,424   0.18%
                                
Net income (loss) $(31,027)  (0.33
%)
 $380,978   4.08%
Net loss $(347,097)  (3.48
%)
 $(31,027)  (0.33%)

Operating revenues increased $199,901,$432,616, or 2%5%, for the nine months ended September 30, 20162017 compared to the same period of fiscal 2015.2016. This overall revenue growth resulted from an increase in Internet subscription service revenue, attributable to increased sales to new and existing subscribers.

Data and product costs increased $148,344,$376,328, or 4%10%, for the first nine months of 20162017 compared to the same period of fiscal 2015.2016. This increase was due primarily to higher salary and related employee benefits, as the Company increased its headcount, partially offset by the lower cost associated with the outsourcingas well as higher data costs due to price increases of certain data entry tasks, as less tasks have been outsourced, and lower data costs, as the Company incurred the cost of a one-time feed in 2015.critical feeds.

Selling, general and administrative expenses increased $775,834,$418,651, or 15%7%, for the first nine months of fiscal 20162017 compared to the same period of fiscal 2015.2016. This increase was due to higher marketing expenditures and higher salary and related employee benefits, higher marketing expenditures and higher executive recruiting fees paid. The increase in marketing expenses is part of our 20162017 plan to drive increased traffic to the Company’s website and improve customers’ experience using the website, with the hope of incremental future sales. This isThe executive recruiting fees paid relate to the cost of staffing the Company’s first significant marketing campaign and it includes investment in a substantial redesign of the website, which was launched early in the second quarter.department. 

Depreciation and amortization decreased $19,629$4,894 or 12%3%, for the first nine months of fiscal 20162017 compared to the same period of fiscal 2015.2016. This decrease was due to a lower depreciable asset base reflecting the continued use of certain items that have been fully depreciated. The increase in property and equipment, net since year end is due to a deposit made at the end of the first quarter for a new telephone system that was not installed until mid- September.

Other income, net increased $32,578decreased $3,660 for first nine months of fiscal 20162017 compared to the same period last year. This increasedecrease was due to a largerthe mark-to-market adjustment recorded in the first 9 months of 2016 related to the Company’s investments recordedinvestment in this year’s first nine months.marketable securities which have since been liquidated.

Provision forBenefit from income taxes decreased $260,065increased $45,059 for the first nine months of fiscal 20162017 compared to the same period of fiscal 2015.2016. This decreaseincrease was due to the Company being in a greater pre-tax loss position in 20162017 versus a pre-tax income position in 20152016 because of the reasons enumerated above.
Future Operations

The Company over time intends to expand its operations by expanding the breadth and depth of its product and service offerings and introducing new and complementary products. Gross margins attributable to new business areas may be lower than those associated with the Company’s existing business activities.

As a result of the evolving nature of the markets in which it competes, the Company’s ability to accurately forecast its revenues, gross profits and operating expenses as a percentage of net sales is limited. The Company’s current and future expense levels are based largely on its investment plans and estimates of future revenues. To a large extent these costs do not vary with revenue. Sales and operating results generally depend on the Company’s ability to attract and retain customers and the volume of and timing of customer subscriptions for the Company’s services, which are difficult to forecast. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to the Company’s planned expenditures would have an immediate adverse effect on the Company’s business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, the Company may from time to time make certain pricing, service, marketing or acquisition decisions that could have a material adverse effect on its business, prospects, financial condition and results of operations.

Achieving greater profitability depends on the Company’s ability to generate and sustain increased revenue levels. The Company believes that its success will depend in large part on its ability to (i) increase its brand awareness, (ii) provide its customers with outstanding value, thus encouraging customer renewals, and (iii) achieve sufficient sales volume to realize economies of scale. Accordingly, the Company intends to continue to increase the size of its sales force and service staff, and to invest in product development, operating infrastructure, marketing and promotion. The Company believes that these expenditures will help it to sustain the revenue growth it has experienced over the last several years. We anticipate that sales and marketing expenses will increase in dollar amount and as a percentage of revenues during the remainder of 20162017 and future periods as the Company continues to expand its business on a worldwide basis. Further, the Company expects that product development expenses and data costs will also continue to increase in dollar amount and may increase as a percentage of revenues during the remainder of 20162017 and future periods because it expects to employ more development personnel on average compared to prior periods, obtain additional data and build the infrastructure required to support the development of new and improved products and services. However, as these expenditures are largely discretionary in nature, the Company expects that the actual amounts incurred will be in line with its projections of future cash flows in order not to negatively impact its future liquidity and capital needs. There can be no assurance that the Company will be able to achieve these objectives within a meaningful time frame.

The Company expects to experience fluctuations in its future quarterly operating results due to a variety of factors, some of which are outside the Company’s control. Factors that may adversely affect the Company’s quarterly operating results include, among others, (i) the Company’s ability to retain existing customers, attract new customers at a steady rate and maintain customer satisfaction, (ii) the Company’s ability to maintain gross margins in its existing business and in future product lines and markets, (iii) the development of new services and products by the Company and its competitors, (iv) price competition, (v) the Company’s ability to obtain products and services from its vendors, including information suppliers, on commercially reasonable terms, (vi) the Company’s ability to upgrade and develop its systems and infrastructure, and adapt to technological change, (vii) the Company’s ability to attract and retain personnel in a timely and effective manner, (viii) the Company’s ability to manage effectively its development of new business segments and markets, (ix) the Company’s ability to successfully manage the integration of operations and technology of acquisitions or other business combinations, (x) technical difficulties, system downtime or Internet brownouts, (xi) the amount and timing of operating costs and capital expenditures relating the Company’s business, operations and infrastructure, (xii) governmental regulation and taxation policies, (xiii) disruptions in service by common carriers due to strikes or otherwise, (xiv) risks of fire or other casualty, (xv) litigation costs or other unanticipated expenses, (xvi) interest rate risks and inflationary pressures, and (xvii) general economic conditions and economic conditions specific to the Internet and online commerce.
Due to the foregoing factors, the Company believes that period-to-period comparisons of its revenues and operating results are not necessarily meaningful and should not be relied on as an indication of future performance.

Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements, including statements regarding future prospects, industry trends, competitive conditions and litigation issues. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes”, “expects”, “anticipates”, “plans” or words of similar meaning are intended to identify forward-looking statements. This notice is intended to take advantage of the “safe harbor” provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Among others, factors that could cause actual results to differ materially from the Company’s beliefs or expectations are those listed under “Results of Operations” and other factors referenced herein or from time to time as “risk factors” or otherwise in the Company’s Registration Statements or Securities and Exchange Commission reports. The Company disclaims any intention or obligation to revise any forward-looking statement, whether as a result of new information, a future event or otherwise.

Item 4.
Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, due to a material weakness in our internal control over financial reporting as described below, ourof the end of such period, the Company’s disclosure controls and procedures were not effective as of September 30, 2016. In light of the material weakness in internal control over financial reporting, we completed substantive procedures, including validating the completeness and accuracy of the underlying data used for accounting for income taxes, prior to filing this Quarterly Report on Form 10-Q.are effective.

These additional proceduresThere have allowed us to conclude that, notwithstanding the material weakness in our internal control over financial reporting, the financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofbeen any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of September 30, 2016, we did not maintain effective monitoring and oversight of controls over the completeness, existence, accuracy and presentation and disclosure of our accounting for income taxes, including the income tax provision and related tax assets and liabilities. Specifically, there were errors in the tax accounting for incentive stock options resulting in errors in the calculation of certain deferred tax balances and incorrect balance sheet classification and disclosure of certain balances in the notes to the financial statements. These errors resulted in adjustments to our financial statements as of and for the year ended December 31, 2015.
The errors arising from the underlying deficiency are not material to the financial statements reported in any interim or annual period. However, this control deficiency could result in misstatements of the aforementioned accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected in a timely manner. Accordingly, we have determined that this control deficiency constitutes a material weakness.
Because of this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of September 30, 2016, based on criteria described in Internal Control – Integrated Framework (2013) issued by COSO.

The Company is evaluating the material weakness and developing a plan of remediation to strengthen our overall internal control over accounting for income taxes. The remediation plan includes implementing additional monitoring controls through revising and formalizing the income tax review processes. The Company is committed to maintaining a strong internal control environment and believes that these remediation efforts will represent significant improvements in our controls. The Company has started to implement these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until these remediation steps are fully implemented and tested, the material weakness described above will continue to exist.
Except as noted above, there has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the most recent fiscal quarter ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
PART II.
OTHER INFORMATION

Item 6.Exhibits

 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 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.
 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.
 101The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016,2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) the Notes to Financial Statements.*
 

*Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
1413

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 CREDITRISKMONITOR.COM, INC.
 (REGISTRANT)
  
Date: November 14, 201613, 2017By: /s//s/ Lawrence Fensterstock
  Lawrence Fensterstock
  Chief Financial Officer &
  Principal Accounting Officer
 
 
1514