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, 20172018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to______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
 
(Address of principal executive offices, including 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company” and “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 7, 2017.5, 2018.



CREDITRISKMONITOR.COM, INC.
INDEX

  
Page
   
PART I. FINANCIAL INFORMATION 
   
 Item 1. Financial Statements 
   
 23
   
 34
   
 45
   
 56
   
 67
   
 910
   
 1314
   
PART II. OTHER INFORMATION 
   
 
Item 6.   Exhibits
1314
   
1415

12

PART I.PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

CREDITRISKMONITOR.COM, INC.
BALANCE SHEETS
SEPTEMBER 30, 20172018 AND DECEMBER 31, 20162017

 
September 30,
2017
  
December 31,
2016
  
September 30,
2018
  
December 31,
2017
 
 (Unaudited)  (Note 1)  (Unaudited)  (Note 1) 
            
ASSETS            
Current assets:            
Cash and cash equivalents $9,284,650  $9,222,343  $8,606,450  $8,735,148 
Accounts receivable, net of allowance  1,512,766   2,090,676   1,570,236   2,139,707 
Other current assets  554,607   487,257   530,563   530,699 
                
Total current assets  11,352,023   11,800,276   10,707,249   11,405,554 
                
Property and equipment, net  385,434   430,324   552,538   437,216 
Goodwill  1,954,460   1,954,460   1,954,460   1,954,460 
Other assets  33,599   23,763   48,282   23,463 
                
Total assets $13,725,516  $14,208,823  $13,262,529  $13,820,693 
        
                
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Deferred revenue $7,891,863  $8,088,958  $8,210,492  $8,304,877 
Accounts payable  136,009   96,725   145,462   58,901 
Accrued expenses  1,267,269   1,282,126   1,160,313   1,344,526 
                
Total current liabilities  9,295,141   9,467,809   9,516,267   9,708,304 
                
Deferred taxes on income, net  689,831   762,403   425,876   514,333 
Other liabilities  15,709   12,574   19,310   15,748 
                
Total liabilities  10,000,681   10,242,786   9,961,453   10,238,385 
                
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 shares
  107,224   107,224   107,224   107,224 
Additional paid-in capital  29,525,358   29,419,463   29,631,971   29,559,784 
Accumulated deficit  (25,907,747)  (25,560,650)  (26,438,119)  (26,084,700)
                
Total stockholders’ equity  3,724,835   3,966,037   3,301,076   3,582,308 
                
Total liabilities and stockholders’ equity $13,725,516  $14,208,823  $13,262,529  $13,820,693 

See accompanying condensed notes to financial statements.

23

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 20172018 AND 20162017
(Unaudited)

  2017  2016 
       
Operating revenues $3,385,352  $3,237,687 
         
Operating expenses:        
Data and product costs  1,332,759   1,254,151 
Selling, general and administrative expenses  2,013,962   1,808,184 
Depreciation and amortization  43,410   48,894 
         
Total operating expenses  3,390,131   3,111,229 
         
Income (loss) from operations  (4,779)  126,458 
Other income (expense), net  15,362   (589)
         
Income before income taxes  10,583   125,869 
Provision for income taxes  (29,700)  (45,916)
         
Net income (loss) $(19,117) $79,953 
         
Net income (loss) per share of common stock:        
         
Basic $0.00  $0.01 
Diluted $0.00  $0.01 
         
Weighted average number of common shares outstanding:        
         
Basic  10,722,401   10,722,326 
Diluted  10,722,401   10,804,989 
    2018    2017 
   
Operating revenues $3,481,359  $3,385,352 
         
Operating expenses:        
Data and product costs  1,416,783   1,332,759 
Selling, general and administrative expenses  2,060,322   2,013,962 
Depreciation and amortization  49,583   43,410 
         
Total operating expenses  3,526,688   3,390,131 
         
Loss from operations  (45,329)  (4,779)
Other income, net  36,710   15,362 
         
Income (loss) before income taxes  (8,619)  10,583 
Provision for income taxes  (2,527)  (29,700)
         
Net loss $(11,146) $(19,117)
         
Net loss per share – Basic and diluted $(0.00) $(0.00)
         
Weighted average number of common shares outstanding –        
Basic and diluted  10,722,401   10,722,401 

See accompanying condensed notes to financial statements.

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20172018 AND 20162017
(Unaudited)

 2017  2016   2018    2017 
         
Operating revenues $9,963,078  $9,530,462  $10,331,106  $9,963,078 
                
Operating expenses:                
Data and product costs  4,058,940   3,682,612   4,314,468   4,058,940 
Selling, general and administrative expenses  6,200,518   5,781,867   6,398,936   6,200,518 
Depreciation and amortization  143,132   148,026   138,670   143,132 
                
Total operating expenses  10,402,590   9,612,505   10,852,074   10,402,590 
                
Loss from operations  (439,512)  (82,043)  (520,968)  (439,512)
Other income, net  29,932   33,592   88,354   29,932 
                
Loss before income taxes  (409,580)  (48,451)  (432,614)  (409,580)
Benefit from income taxes  62,483   17,424   79,195   62,483 
                
Net loss $(347,097) $(31,027) $(353,419) $(347,097)
                
Net loss per share – Basic and diluted $(0.03) $(0.00) $(0.03) $(0.03)
                
Weighted average number of common shares outstanding:        
        
Weighted average number of common shares outstanding –        
Basic and diluted  10,722,401   10,722,322   10,722,401   10,722,401 

See accompanying condensed notes to financial statements.

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20172018 AND 20162017
(Unaudited)

 2017  2016   2018    2017 
         
Cash flows from operating activities:            
Net loss $(347,097) $(31,027) $(353,419) $(347,097)
Adjustments to reconcile net loss to net cash provided by operating activities:                
Deferred income taxes  (88,457)  (72,572)
Depreciation and amortization  143,132   148,026   138,670   143,132 
Stock-based compensation  105,895   112,368   72,187   105,895 
Unrealized gain on marketable securities  --   (27,777)
Deferred income taxes  (72,572)  (15,697)
Deferred rent  3,135   6,928   3,562   3,135 
Changes in operating assets and liabilities:                
Accounts receivable  577,910   437,274   569,471   577,910 
Other current assets  (67,350)  (130,547)  136   (67,350)
Prepaid and other assets  (9,836)  (12,677)
Other assets  (24,819)  (9,836)
Deferred revenue  (197,095)  420,395   (94,385)  (197,095)
Accounts payable  39,284   84,547   86,561   39,284 
Accrued expenses  (14,857)  8,441   (184,213)  (14,857)
                
Net cash provided by operating activities  160,549   1,000,254   125,294   160,549 
                
Cash flows from investing activities:                
Purchase of marketable securities  --   (778)
Purchase of property and equipment  (98,242)  (156,359)  (253,992)  (98,242)
                
Net cash used in investing activities  (98,242)  (157,137)  (253,992)  (98,242)
                
Net increase in cash and cash equivalents  62,307   843,117 
Net increase (decrease) in cash and cash equivalents  (128,698)  62,307 
Cash and cash equivalents at beginning of period  9,222,343   8,717,899   8,735,148   9,222,343 
                
Cash and cash equivalents at end of period $9,284,650  $9,561,016  $8,606,450  $9,284,650 
        
Supplemental disclosure of cash flow information:        
Cash paid (refunded), net for:        
Income taxes $(103,812) $108,647 

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, 2016.2017.

The results of operations for the three and nine months ended September 30, 20172018 are not necessarily indicative of the results of a fullfor an entire fiscal year.

The December 31, 20162017 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, 20162017 included in the Company’s Annual Report on Form 10-K.

(2)Stock-Based Compensation
(2) Recently Issued Accounting Standards

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. PursuantThe core principal of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Using this principle, a comprehensive framework was established for determining how much revenue to recognize and when it should be recognized. To be consistent with this core principle, an entity is required to apply the following five-step approach: (1) identify the contract(s) with a customer; (2) identify each performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation; and (5) recognize revenue when or as each performance obligation is satisfied. The Company adopted this standard and subsequently issued amendments, revenue is recognized atin the time a good or service is transferred to a customer forfirst quarter of 2018 by applying 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 cumulativeapproach. Thus, reported financial information for historical comparable periods is not revised and continues to be reported under the accounting standards in effect adjustment directly to retained earnings at the time of adoption). during those historical periods. 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 willdid not have a significant impact on itsthe Company’s financial statements. The Company expects to adopt this standard atstatements because our primary source of revenue is subscription income which is recognized ratably over the beginning of its 2018 fiscal year using the modified retrospective approach.
6subscription term

The
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and nonlease components in a contract in accordance with the new revenue guidance in ASU 2014-09. The updated guidance is effective for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the effect of ASU 2016-02 on its financial statements.

The FASB and the SEC have issued certain other accounting pronouncements as of September 30, 20172018 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.

(4)Fair Value Measurements
7

(3) Deferred Revenue

The Company’s primary source of revenue is from our annual fixed-price subscription services. Our subscribers are able to access this data on a continuous basis thus representing a single performance obligation satisfied over time. Revenue is recognized ratably over the subscription period and is presented net of the taxes that are collected from subscribers and remitted to governmental authorities.

(4) 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 for the three and nine months ended September 30:

    
3 Months Ended
September 30,
  
9 Months Ended
September 30,
 
2018  2017  2018  2017 
             
Data and product costs $8,914  $8,915  $26,742  $26,745 
Selling, general and administrative expenses  12,286   26,714   45,445   79,150 
                 
  $21,200  $35,629  $72,187  $105,895 

 (5) Fair Value Measurements

The Company records its financial instruments at fair value in accordance with accounting guidance. The determination of fair value 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 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 are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

The table below sets forth the Company’s cash and cash equivalents as of September 30, 20172018 and December 31, 2016,2017, respectively, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

 Level 1  Level 2  Level 3  Total   September 30, 2018  December 31, 2017 
            Level 1  Level 2  Level 3  Total  Total 
September 30, 2017:            
               
Cash and cash equivalents $
9,284,650
  $-  $-  $9,284,650  $
8,606,450
  $-  $-  $8,606,450  $8,735,148 
                
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, 20172018 or December 31, 2016.2017.

(5)Net Income (Loss)
8

(6) Net Loss per Share

During the three and nine months ended September 30, 2018 and 2017 the Company recorded a net loss. Basic net income (loss)loss per share is based oncomputed by dividing the weighted average number of common shares outstanding. Diluted net income (loss) per share is based onloss by the weighted average number of common shares outstanding andduring the dilutiveperiod. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share, as the effect of outstanding stock options:
  
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 

Allutilizing the fully diluted share count would have reduced the net loss per share. Therefore, 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 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 as inclusion of these shares would have been anti-dilutive. All outstanding stock options were excluded from the computation of diluted loss per share because their effect was anti-dilutive for each of the 9 months ended September 30, 2016periods presented.

(7) Related Party Transaction

Michael Flum was employed by the Company in 2018 as they were anti-dilutive.VP, Operations & Alternative Data. Mr. Flum is the son of Jerome Flum, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and the brother of Joshua Flum, a director of the Company.

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Environment

The 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 20172018 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 2017.2018.

Financial Condition, Liquidity and Capital Resources

The following table presents selected financial information and statistics as of September 30, 20172018 and December 31, 20162017 (dollars in thousands):

 
September 30,
2017
  
December 31,
2016
  
September 30,
2018
  
December 31,
2017
 
Cash and cash equivalents $9,285  $9,222  $8,606  $8,735 
Accounts receivable, net $1,513  $2,091  $1,570  $2,140 
Working capital $2,057  $2,332  $1,190  $1,697 
Cash ratio  1.00   0.97   0.90   0.90 
Quick ratio  1.16   1.19   1.07   1.12 
Current ratio  1.22   1.25   1.13   1.17 

The Company has invested some of its excess cash in 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, 2017,2018, the Company had $9.28$8.61 million in cash and cash equivalents, an increasea decrease of approximately $62,300$128,700 from December 31, 2016. The reason for this increase2017. This decrease was thatthe result of cash generated byprovided from operating activities ($160,500) exceeded the125,300) being less than cash used to acquire property and equipment ($98,200)254,000).

The Company’s cash provided by operating activities was positive despite its net loss for the nine months primarily due to the 28% decrease in accounts receivable. Additionally, the main component of current liabilities at September 30, 20172018 is deferred revenue of $7.89$8.21 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 deferredpresented. 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 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 98 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, 
 2017  2016 2018  2017 
 Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
 
                        
Operating revenues $3,385,352   100.00% $3,237,687   100.00% $3,481,359   100.00% $3,385,352   100.00%
                                
Operating expenses:                                
Data and product costs  1,332,759   39.37%  1,254,151   38.73%  1,416,783   40.70%  1,332,759   39.37%
Selling, general and administrative expenses  2,013,962   59.49%  1,808,184   55.85%  2,060,322   59.18%  2,013,962   59.49%
Depreciation and amortization  43,410   1.28%  48,894   1.51%  49,583   1.42%  43,410   1.28%
Total operating expenses  3,390,131   100.14%  3,111,229   96.09%  3,526,688   101.30%  3,390,131   100.14%
                                
Income (loss) from operations  (4,779)  (0.14%)  126,458   3.91%
Other income (expense), net  15,362   0.45%  (589)  (0.02
%)
Loss from operations  (45,329)  (1.30%)  (4,779)  (0.14%)
Other income, net  36,710   1.05%  15,362   0.45%
                                
Income before income taxes  10,583   0.31%  125,869   3.89%
Provision for income taxes  (29,700)  (0.87
%)
  (45,916)  (1.42
%)
Income (loss) before income taxes  (8,619)  (0.25%)  10,583   0.31%
Provision from income taxes  (2,527)  (0.07
%)
  (29,700)  (0.87
%)
                                
Net income (loss) $(19,117)  (0.56
%)
 $79,953   2.47%
Net loss $(11,146)  (0.32
%)
 $(19,117)  (0.56
%)

Operating revenues increased $147,665,$96,007, or 5%3%, for the three months ended September 30, 20172018 compared to the same period of fiscal 2016.2017. 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 $78,608,$84,024, or 6%, for the third quarter of 2017fiscal 2018 compared to the same period of fiscal 2016.2017. This increase was due primarily to to: (1) higher salary and related employee benefits, as the Company increased its headcount, in 2017.(2) higher costs of third-party content, due to minor inflationary increases instituted by some of the Company’s major suppliers, and (3) higher costs associated with the outsourcing of certain data entry tasks, as the Company authorized overtime to catch up on some processing backlogs.

Selling, general and administrative expenses increased $205,778,$46,360, or 11%2%, for the third quarter of fiscal 20172018 compared to the same period of fiscal 2016.2017. This increase was due to higher professional and consulting fees partially offset by lower salary and related employee benefits, higher marketing expenditures and higher executive recruiting fees paid. The increase in marketing expenses is part of our 2017 plan to drive increased traffic to the Company’s website and improve customers’ experience using the website, with the hope of incremental future sales. The executive recruiting fees paid relate to the cost of staffing the Company’s marketing department. benefits.

Depreciation and amortization decreased $5,484,increased $6,173, or 11%14%, for the third quarter of fiscal 20172018 compared to the same period of fiscal 2016. 2017. This decreaseincrease was due to a lowerhigher depreciable asset base reflecting the continued usecost of certain items that have been fully depreciated.furniture and leasehold improvements incurred in connection of additional space effective August 1st as well as the cost of new servers used in back-end operations.

Other income, (expense), net increased $15,951$21,348 for the third quarter of fiscal 20172018 compared to the same period last year. This increase was due to a highergreater dividend income from cash equivalents recordedreceived in 2017 compared to 2016 and a negative mark-to-market adjustment related to the Company’s investments recorded in last year’s third quarter which were liquidated in 2016’s fourth quarter.of fiscal 2018 on a U.S. Treasury Money Market Fund.

ProvisionThe benefit for income taxes decreased $16,216$27,173 for the third quarter of fiscal 20172018 compared to the same period of fiscal 2016. This decrease was due2017. In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The provision for income taxes for the interim quarters of 2017 were calculated under the old tax laws and as such are not comparable to the Company having lower pre-tax income because2018 effective tax rates. The impact of the reasons enumerated above.U.S. Tax Reform is primarily from revaluing the deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The provisional impact of the U.S. Tax Reform is the current best estimate based on the preliminary review of the new law and is subject to revision based on the Company’s existing accounting for income taxes policy as further information is gathered and interpretation and analysis of the tax legislation evolves. The SEC has issued rules allowing for a measurement period of up to one year after the enactment date of the U.S. Tax Reform to finalize the recording of related tax impacts. Any future changes to the provisional estimated impact of the U.S. Tax Reform will be included as an adjustment to the provision for income taxes.

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 9 Months Ended September 30,    9 Months Ended September 30, 
 2017  2016 2018  2017 
 Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
 
                        
Operating revenues $9,963,078   100.00% $9,530,462   100.00% $10,331,106   100.00% $9,963,078   100.00%
                                
Operating expenses:                                
Data and product costs  4,058,940   40.74%  3,682,612   38.64%  4,314,468   41.76%  4,058,940   40.74%
Selling, general and administrative expenses  6,200,518   62.23%  5,781,867   60.67%  6,398,936   61.94%  6,200,518   62.23%
Depreciation and amortization  143,132   1.44%  148,026   1.55%  138,670   1.34%  143,132   1.44%
Total operating expenses  10,402,590   104.41%  9,612,505   100.86%  10,852,074   105.04%  10,402,590   104.41%
                                
Loss from operations  (439,512)  (4.41%)  (82,043)  (0.86%)  (520,968)  (5.04%)  (439,512)  (4.41%)
Other income, net  29,932   0.30%  33,592   0.35%  88,354   0.85%  29,932   0.30%
                                
Loss before income taxes  (409,580)  (4.11%)  (48,451)  (0.51%)  (432,614)  (4.19%)  (409,580)  (4.11%)
Benefit from income taxes  62,483   0.63%  17,424   0.18%  79,195   0.77%  62,483   0.63%
                                
Net loss $(347,097)  (3.48
%)
 $(31,027)  (0.33%) $(353,419)  (3.42
%)
 $(347,097)  (3.48
%)

Operating revenues increased $432,616,$368,028, or 5%4%, for the nine months ended September 30, 20172018 compared to the same period  of fiscal 2016.2017. 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 $376,328,$255,528, or 10%6%, for the first nine months of 2017fiscal 2018 compared to the same period of fiscal 2016.2017. This increase was due primarily to to: (1) higher salary and related employee benefits, as the Company increased its headcount, as well as(2) higher data costs of third-party content, due to priceminor inflationary increases instituted by some of the Company’s major suppliers, and (3) higher costs associated with the outsourcing of certain critical feeds.data entry tasks, as the Company authorized overtime to catch up on some processing backlogs.

Selling, general and administrative expenses increased $418,651, or 7%, for the first nine months of fiscal 2017 compared to the same period of fiscal 2016. This increase was due to higher salary and related employee benefits, higher marketing expenditures and higher executive recruiting fees paid. The increase in marketing expenses is part of our 2017 plan to drive increased traffic to the Company’s website and improve customers’ experience using the website, with the hope of incremental future sales. The executive recruiting fees paid relate to the cost of staffing the Company’s marketing department. 

Depreciation and amortization decreased $4,894$198,418, or 3%, for the first nine months of fiscal 20172018 compared to the same period of fiscal 2016.2017. This increase was due to higher professional and consulting fees as well as higher marketing expenses, as the Company’s marketing effort is fully functional compared to last year when a new Chief Marketing Officer was hired and was re-evaluating the Company’s 2017 marketing plans.

Depreciation and amortization decreased $4,462, or 3%, for the first nine months of fiscal 2018 compared to the same period of fiscal 2017. This decrease was due to a lower depreciable asset base reflecting the continued use of certain items that have been fully depreciated.

Other income, net decreased $3,660increased $58,422 for the first nine months of fiscal 20172018 compared to the same period last year. This decreaseincrease was due to the mark-to-market adjustment recordedgreater dividend income received in the first 9nine months of 2016 related to the Company’s investment in marketable securities which have since been liquidated.fiscal 2018 on a U.S. Treasury Money Market Fund.

Benefit from income taxes increased $45,059$16,712 for the first nine months of fiscal 20172018 compared to the same period of fiscal 2016. This increase was due2017. In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The provision for income taxes for the interim quarters of 2017 were calculated under the old tax laws and as such are not comparable to the Company being in a greater pre-tax loss position in 2017 versus 2016 because2018 effective tax rates. The impact of the reasons enumerated above.U.S. Tax Reform is primarily from revaluing the deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The provisional impact of the U.S. Tax Reform is the current best estimate based on the preliminary review of the new law and is subject to revision based on the Company’s existing accounting for income taxes policy as further information is gathered and interpretation and analysis of the tax legislation evolves. The SEC has issued rules allowing for a measurement period of up to one year after the enactment date of the U.S. Tax Reform to finalize the recording of related tax impacts. Any future changes to the provisional estimated impact of the U.S. Tax Reform will be included as an adjustment to the provision for income taxes.

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 20172018 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 20172018 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, as of the end of such period, the Company’s disclosure controls and procedures are effective.

There have not been any changes 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 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.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, 2017,2018, 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.

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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 13, 20179, 2018By: /s//s/Lawrence Fensterstock
  Lawrence Fensterstock
  Chief Financial Officer &
  Principal Accounting Officer


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