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 JuneSeptember 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period 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
 
 (Address of principal executive offices, including zip code) 

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

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

Title of each classTrading Symbol(s)Name of each exchange on which registered
NoneN/AN/A

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 every Interactive Data File required to be submitted 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 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,” “accelerated 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 provided 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 ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common stock $.01 par value – 10,722,401 shares outstanding as of August 6,November 4, 2019.



CREDITRISKMONITOR.COM, INC.
INDEX

PART I. FINANCIAL INFORMATION
Page
  
PART I. FINANCIAL INFORMATION

 
Item 1. Financial Statements
 
   
  
2
    
  3
    
  4
    
  5
    
  6
  

  7
    
  
8
    
 
12
   
 
16
   
PART II. OTHER INFORMATION
 
  
 
Item 6. Exhibits
16
   
17

PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

CREDITRISKMONITOR.COM, INC.
BALANCE SHEETS
JUNESEPTEMBER 30, 2019 AND DECEMBER 31, 2018

 
June 30,
2019
  
December 31,
2018
  
September 30,
2019
  
December 31,
2018
 
 (Unaudited)  (Note 1)  (Unaudited)  (Note 1) 
            
ASSETS            
Current assets:            
Cash and cash equivalents $8,403,179  $8,066,899  $8,568,350  $8,066,899 
Accounts receivable, net of allowance 1,928,960  2,454,585  1,845,325  2,454,585 
Other current assets  832,965   561,861   522,645   561,861 
            
Total current assets 11,165,104  11,083,345  10,936,320  11,083,345 
            
Property and equipment, net 554,820  543,762  514,917  543,762 
Operating lease right-of-use asset 2,469,025  --  2,425,195  -- 
Goodwill 1,954,460  1,954,460  1,954,460  1,954,460 
Other assets  31,607   35,613   48,654   35,613 
            
Total assets $16,175,016  $13,617,180  $15,879,546  $13,617,180 
      
            
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Unexpired subscription revenue $8,860,837  $8,560,316  $8,358,081  $8,560,316 
Accounts payable 126,553  94,767  25,970  94,767 
Current portion of operating lease liability 140,217  --  143,694  -- 
Accrued expenses  1,131,349   1,311,218   1,234,271   1,311,218 
            
Total current liabilities 10,258,956  9,966,301  9,762,016  9,966,301 
            
Deferred taxes on income, net 473,194  490,381  511,656  490,381 
Unexpired subscription revenue, less current portion 229,524  178,129  213,955  178,129 
Operating lease liability, less current portion 2,375,451  --  2,337,973  -- 
Other liabilities  --   24,537  
--   24,537 
            
Total liabilities  13,337,125   10,659,348   12,825,600   10,659,348 
            
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 29,678,817  29,650,760  29,691,282  29,650,760 
Accumulated deficit  (26,948,150)  (26,800,152)  (26,744,560)  (26,800,152)
            
Total stockholders’ equity  2,837,891  ��2,957,832   3,053,946   2,957,832 
            
Total liabilities and stockholders’ equity $16,175,016  $13,617,180  $15,879,546  $13,617,180 

See accompanying condensed notes to financial statements.

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
(Unaudited)

 2019  2018  2019  2018 
            
Operating revenues $3,567,531  $3,477,823  $3,673,241  $3,481,359 
            
Operating expenses:            
Data and product costs 1,426,497  1,413,694  1,421,290  1,416,783 
Selling, general and administrative expenses 2,147,733  2,150,490  1,962,150  2,060,322 
Depreciation and amortization  50,045   42,039   52,667   49,583 
            
Total operating expenses  3,624,275   3,606,223   3,436,107   3,526,688 
            
Loss from operations (56,744) (128,400)
Income (loss) from operations 237,134  (45,329)
Other income, net  43,209   30,602   40,223   36,710 
            
Loss before income taxes (13,535) (97,798)
Benefit from income taxes  2,005   10,961 
Income (loss) before income taxes 277,357  (8,619)
Provision for income taxes  (73,767)  (2,527)
            
Net loss $(11,530) $(86,837)
Net income (loss) $203,590  $(11,146)
            
Net loss per share – Basic and diluted
 $(0.00) $(0.01)
Net income (loss) per share – Basic and diluted 
$
0.02
  
$
(0.00
)
            
Weighted average number of common shares outstanding –
 
  
       
Basic and diluted 10,722,401  10,722,401  
10,722,401
  
10,722,401
 

See accompanying condensed notes to financial statements.

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
(Unaudited)

 2019  2018  2019  2018 
            
Operating revenues $7,063,340  $6,849,747  $10,736,581  $10,331,106 
            
Operating expenses:            
Data and product costs 2,895,490  2,897,685  4,316,780  4,314,468 
Selling, general and administrative expenses 4,315,144  4,338,614  6,277,294  6,398,936 
Depreciation and amortization  101,034   89,087   153,701   138,670 
            
Total operating expenses  7,311,668   7,325,386   10,747,775   10,852,074 
            
Loss from operations (248,328) (475,639) (11,194) (520,968)
Other income, net  84,099   51,644   124,322   88,354 
            
Loss before income taxes (164,229) (423,995)
Benefit from income taxes  16,231   81,722 
Income (loss) before income taxes 113,128  (432,614)
Benefit (provision) for income taxes  (57,536)  79,195 
            
Net loss $(147,998) $(342,273)
Net income (loss) $55,592  $(353,419)
            
Net loss per share – Basic and diluted $(0.01) $(0.03)
Net income (loss) per share – Basic and diluted 
$
0.01
  
$
(0.03
)
            
Weighted average number of common shares outstanding –
 
  
       
Basic and diluted 10,722,401  10,722,401 
Basic 
10,722,401
  
10,722,401
 
Diluted 
10,725,252
  
10,722,401
 

See accompanying condensed notes to financial statements.

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
(Unaudited)



Common Stock

Additional
Paid-in


Accumulated
Deficit


Total
Stockholders’
Equity

Shares  AmountCapital
 



           
Balance April 1, 2018  
10,722,401
  
$
107,224

 
$
29,585,277
  
$
(26,340,136
)
 
$
3,352,365
 
                     
Net loss  
-
   
-
   
-
   
(86,837
)
  
(86,837
)
Stock-based compensation  
-
   
-
   
25,494
   
-
   
25,494
 
                     
Balance June 30, 2018  
10,722,401
  
$
107,224
  
$
29,610,771
  
$
(26,426,973
)
 
$
3,291,022
 

                    
Balance April 1, 2019  
10,722,401
  
$
107,224
  
$
29,665,024
  
$
(26,936,620
)
 
$
2,835,628
 
                     
Net loss  
-
   
-
   
-
   
(11,530
)
  
(11,530
)
Stock-based compensation  
-
   
-
   
13,793
   
-
   
13,793
 
                     
Balance June 30, 2019  
10,722,401
  
$
107,224
  
$
29,678,817
  
$
(26,948,150
)
 
$
2,837,891
 
        
Additional
Paid-in
  Accumulated  
Total
Stockholders’
 
  Common Stock 
  Shares  Amount  
Capital
  
Deficit
  Equity 
                
Balance July 1, 2018  
10,722,401
  
$
107,224
  
$
29,610,771
  
$
(26,426,973
)
 
$
3,291,022
 
                     
Net loss  --   --  
--   
(11,146
)
  
(11,146
)
Stock-based compensation 
--  
--   
21,200
  
--   
21,200
 
                     
Balance September 30, 2018  
10,722,401
  
$
107,224
  
$
29,631,971
  
$
(26,438,119
)
 
$
3,301,076
 
                     
Balance July 1, 2019  
10,722,401
  
$
107,224
  
$
29,678,817
  
$
(26,948,150
)
 
$
2,837,891
 
                     
Net income  --   --   
--
   
203,590
   
203,590
 
Stock-based compensation 
--  
--   
12,465
   --   
12,465
 
                     
Balance September 30, 2019  
10,722,401
  
$
107,224
  
$
29,691,282
  
$
(26,744,560
)
 
$
3,053,946
 

See accompanying condensed notes to financial statements.

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
(Unaudited)

  Common Stock  
Additional
Paid-in
  Accumulated  
Total
Stockholders’
 
  Shares  Amount  
Capital
  
Deficit
  Equity 
Balance January 1, 2018  
10,722,401
  
$
107,224
  
$
29,559,784
  
$
(26,084,700
)
 
$
3,582,308
 
                     
Net loss  
-
   
-
   
-
   
(353,419
)
  
(353,419
)
Stock-based compensation  
-
   
-
   
72,187
   
-
   
72,187
 
                     
Balance September 30, 2018  
10,722,401
  
$
107,224
  
$
29,631,971
  
$
(26,438,119
)
 
$
3,301,076
 
                     
Balance January 1, 2019  
10,722,401
  
$
107,224
  
$
29,650,760
  
$
(26,800,152
)
 
$
2,957,832
 
                     
Net income  
-
   
-
   
-
   
55,592
   
55,592
 
Stock-based compensation  
-
   
-
   
40,522
   
-
   
40,522
 
                     
Balance September 30, 2019  
10,722,401
  
$
107,224
  
$
29,691,282
  
$
(26,744,560
)
 
$
3,053,946
 


Common Stock

Additional
Paid-in


Accumulated
Deficit


Total
Stockholders’
Equity

Shares  AmountCapital

               
Balance January 1, 2018  
10,722,401
  
$
107,224
  
$
29,559,784
  
$
(26,084,700
)
 
$
3,582,308
 
                     
Net loss  
-
   
-
   -
   
(342,273
)
  
(342,273
)
Stock-based compensation  
-
   
-
   
50,987
   
-
   
50,987
 
                     
Balance June 30, 2018  
10,722,401
  
$
107,224
  
$
29,610,771
  
$
(26,426,973
)
 
$
3,291,022
 
                     
Balance January 1, 2019  
10,722,401
  
$
107,224
  
$
29,650,760
  
$
(26,800,152
)
 
$
2,957,832
 
                     
Net loss  
-
   
-
   
-
   
(147,998
)
  
(147,998
)
Stock-based compensation  
-
   
-
   
28,057
   
-
   
28,057
 
                     
Balance June 30, 2019  
10,722,401
  
$
107,224
  
$
29,678,817
  
$
(26,948,150
)
 
$
2,837,891
 

See accompanying condensed notes to financial statements.

6

CREDITRISKMONITOR.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
(Unaudited)

 2019  2018  2019  2018 
            
Cash flows from operating activities:            
Net loss $(147,998) $(342,273)
Adjustments to reconcile net loss to net cash provided by operating activities:
      
Net income (loss) $55,592  $(353,419)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
      
Deferred income taxes (17,187) (89,092) 74,099  (88,457)
Depreciation and amortization 101,034  89,087  153,701  138,670 
Deferred rent --  78  --  3,562 
Operating lease right-of-use asset, net 22,106  --  31,935  -- 
Stock-based compensation 28,057  50,987  40,522  72,187 
Changes in operating assets and liabilities:            
Accounts receivable 525,625  334,443  609,260  569,471 
Other current assets (271,104) (339,433) 39,216  136 
Other assets 4,006  (15,855) (13,041) (24,819)
Unexpired subscription revenue 351,916  453,520  (166,409) (94,385)
Accounts payable 31,786  38,095  (68,797) 86,561 
Accrued expenses  (179,869)  (138,024)  (129,771)  (184,213)
            
Net cash provided by operating activities  448,372   41,533   626,307   125,294 
            
Cash flows from investing activities:            
Purchase of property and equipment  (112,092)  (12,435)  (124,856)  (253,992)
            
Net cash used in investing activities  (112,092)  (12,435)  (124,856)  (253,992)
            
Net increase in cash and cash equivalents 336,280  29,098 
Net increase (decrease) in cash and cash equivalents 501,451  (128,698)
Cash and cash equivalents at beginning of period  8,066,899   8,735,148   8,066,899   8,735,148 
            
Cash and cash equivalents at end of period $8,403,179  $8,764,246  $8,568,350  $8,606,450 
      
      
Supplemental disclosure of cash flow information:      
Cash paid (refunded), net for:      
Income taxes $5,956  $(103,812)

See accompanying condensed notes to financial statements.

7

CREDITRISKMONITOR.COM, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

(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, 2018.

The results of operations for the three and sixnine months ended JuneSeptember 30, 2019 are not necessarily indicative of the results for an entire fiscal year.

The December 31, 2018 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, 2018 included in the Company’s Annual Report on Form 10-K.

Certain prior year amounts have been reclassified to conform to the current year presentation. The noncurrent portion of unexpired subscription revenue was reclassified to noncurrent liabilities, which had no effect on previously reported net loss or total stockholders’ equity.

(2) Adoption of ASC 842

On January 1, 2019, the Company adopted FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), which requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet. As permitted by ASC 842, the Company elected the adoption date of January 1, 2019, which is the date of initial application. As a result, the Company’s balance sheet as of December 31, 2018 was not restated, continues to be reported under ASC Topic 840, Leases (“ASC 840”), which did not require the recognition of operating lease liabilities on the balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the statement of operations. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The expense recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant difference in the Company’s results of operations presented in its statement of operations for each period presented.

The Company adopted ASC 842 using a modified retrospective approach for all leases existing at January 1, 2019. The adoption of ASC 842 had a substantial impact on its balance sheet. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, upon adoption, leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and the Company recorded an adjustment of $2.59 million to operating lease right-of-use assets and the related lease liability. The lease liability is based on the present value of the remaining minimum lease payments. As permitted under ASC 842, the Company elected several practical expedients that permits it to not reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability.

8

The impact of the adoption of ASC 842 on the balance sheet at January 1, 2019 was:

  
As reported
Dec. 31, 2018
  
Adoption of
ASC 842
Increase
  
Balance
Jan. 1, 2019
 
Operating lease right-to-use asset 
$
-
  
$
2,589,875
  
$
2,589,875
 
Total assets  
13,617,180
   
2,589,875
   
16,207,055
 
Current portion of operating lease liability  
-
   
143,213
   
143,213
 
Operating lease liability  
-
   
2,446,662
   
2,446,662
 
Total liabilities and stockholders’ equity  
13,617,180
   
2,589,875
   
16,207,055
 

For all leases, at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the remaining lease payments under the lease. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments and payments for optional renewal periods where it is reasonably certain the renewal period will be exercised. Lease expense for operating leases consists of the lease payments plus any initial direct costs, and is recognized on a straight-line basis over the lease term.

The Company’s operating lease right-of-use asset and operating lease liability represents the lease for the office space used to conduct its business.

The following table reconciles the undiscounted cash flows for the Company’s operating lease at JuneSeptember 30, 2019 to the operating lease liability recorded on the balance sheet:

2019 Remainder $125,468  
$
63,040
 
2020 255,311  
255,311
 
2021 262,970  
262,970
 
2022 270,859  
270,859
 
2023 278,985  
278,985
 
2024 287,355  
287,355
 
Thereafter  1,769,054   
1,769,054
 
Total undiscounted lease payments 3,250,002  
3,187,574
 
LESS: Imputed interest at 4.54%  
(734,334
)
  
(705,907
)
Present value of lease payments $2,515,668  
$
2,481,667
 
      
Current portion of operating lease liability $140,217  
$
143,694
 
Operating lease liability  2,375,451   
2,337,973
 
 $2,515,668  
$
2,481,667
 

(3) Recently Issued Accounting Standards

The FASBFinancial Accounting Standards Board and the SEC have issued certain other accounting pronouncements as of JuneSeptember 30, 2019 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) Revenue Recognition

The Company applies ASC 606, Revenue from Contract with Customers (“ASC 606”) to recognize revenue. ASC 606 requires an entity 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’s primary source of revenue is subscription income which is recognized ratably over the subscription term.

9

(5) 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 for the three and sixnine months ended JuneSeptember 30:

  
3 Months Ended
June 30,
  
6 Months Ended
June 30,
  
3 Months Ended
September 30,
  
9 Months Ended
September 30,
 



 2019


2018


2019 

  2018  2019  2018  2019  2018 
                        
Data and product costs 
$
5,969
  
$
8,914
  
$
12,409
  
$
17,828
  
$
4,789
  
$
8,914
  
$
17,198
  
$
26,742
 
Selling, general and administrative expenses  
7,824
   
16,580
   
15,648
   
33,159
   
7,676
   
12,286
   
23,324
   
45,445
 
                            
 
$
13,793
  
$
25,494
  
$
28,057
  
$
50,987
  
$
12,465
  
$
21,200
  
$
40,522
  
$
72,187
 

(6) 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 JuneSeptember 30, 2019 and December 31, 2018, respectively, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

  June 30, 2019 December 31, 2018 

 Level 1 Level 2 Level 3 Total Total 
            
Cash and cash equivalents $
8,403,179
  $-  $-  $8,403,179  $8,066,899 
  September 30, 2019  December 31, 2018 
  Level 1  Level 2  Level 3  Total  Total 
                
Cash and cash equivalents 
$
8,568,350
  
$
-
  
$
-
  
$
8,568,350
  
$
8,066,899
 

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 JuneSeptember 30, 2019 or December 31, 2018.

10

(7) Net LossIncome (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,
 
  2019  2018  2019  2018 
             
Weighted average number of common shares outstanding – basic
  
10,722,401
   
10,722,401
   
10,722,401
   
10,722,401
 
Potential shares exercisable under stock option plans
  
--
   
--
   
36,533
  
--
 
LESS: Shares which could be repurchased under treasury stock method
 
--  
--
   
(33,682
)
 
--
 
                 
Weighted average number of common shares outstanding – diluted
  
10,722,401
   
10,722,401
   
10,725,252
   
10,722,401
 

For the three and nine months ended September 30, 2019, the computation of diluted net income per share excludes the effects of the assumed exercise of 376,850 and 340,317 options, respectively, since their inclusion would be anti-dilutive as their exercise prices were above market value.

During the three and sixnine months ended JuneSeptember 30, 2019 and 2018, the Company recorded a net loss. Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Because the Company has reported a net loss for allthese periods, presented, diluted net loss per share is the same as basic net loss per share, as the effect of utilizing 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 loss per share because their effect was anti-dilutive for each of the periods presented.these periods.

(8) Related Party Transaction

On October 24, 2019, the Company’s Board of Directors appointed Michael Flum to serve as Senior Vice President and Chief Operating Officer effective immediately. Mr. Flum had served as Vice President of Operations & Alternative Data since August 3, 2018. He joined the Company on a part-time basis on June 4, 2018 and became a full-time employee on June 2, 2019. 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.

(9) Subsequent Event

On October 24, 2019, the Company’s Board of Directors declared a dividend of $0.05 per outstanding share of its common stock, payable on December 2, 2019 to stockholders of record of the Company at the close of business on November 14, 2019.

11

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 2019 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 2019.

Financial Condition, Liquidity and Capital Resources

The following table presents selected financial information and statistics as of JuneSeptember 30, 2019 and December 31, 2018 (dollars in thousands):


 
June 30,
2019
 
December 31,
2018
 

      
September 30,
2019
  
December 31,
2018
 
Cash and cash equivalents $8,403  $8,067  
$
8,568
  
$
8,067
 
Accounts receivable, net $1,929  $2,455  
$
1,845
  
$
2,455
 
Working capital $906  $1,117  
$
1,174
  
$
1,117
 
Cash ratio  0.82   0.81  
0.88
  
0.81
 
Quick ratio  1.01   1.06  
1.07
  
1.06
 
Current ratio  1.09   1.11  
1.12
  
1.11
 

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 JuneSeptember 30, 2019, the Company had $8.40$8.57 million in cash and cash equivalents, an increase of approximately $336,000$501,000 from December 31, 2018. This increase was the result of cash provided by operating activities ($448,000)626,000) being greater than cash used to acquire property and equipment ($112,000)125,000).

The main component of current liabilities at JuneSeptember 30, 2019 is unexpired subscription revenue of $8.86$8.57 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 unexpired subscription revenue shown. Unexpired subscription 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 7 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.

12

Off-Balance Sheet Arrangements

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

Results of Operations

 3 Months Ended June 30,  3 Months Ended September 30, 
 2019 2018  2019  2018 
 Amount  
% of Total
Operating
Revenues
  
Amount
  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
 
                     
Operating revenues $3,567,531   100.00% $3,477,823   100.00% $3,673,241   100.00% $3,481,359   100.00%
                            
Operating expenses:                            
Data and product costs  1,426,497   39.99%  
1,413,694
   40.65% 1,421,290  38.69% 1,416,783  40.70%
Selling, general and administrative expenses  2,147,733   60.20%  
2,150,490
   61.83% 1,962,150  53.42% 2,060,322  59.18%
Depreciation and amortization  50,045   1.40%  42,039   1.21%  52,667   1.43%  49,583   1.42%
Total operating expenses  3,624,275   101.59%  
3,606,223
   103.69%  3,436,107   93.54%  3,526,688   101.30%
                            
Loss from operations  (56,744)  (1.59%)  (128,400)  (3.69%)
Income (loss) from operations 237,134  6.46% (45,329) (1.30%)
Other income, net  43,209   1.21%  30,602   0.88%  40,223   1.09%  36,710   1.05%
                            
Loss before income taxes  (13,535)  (0.38%)  (97,798)  (2.81%)
Benefit from income taxes  2,005   0.06% 

10,961
   0.31%
Income (loss) before income taxes 277,357  7.55% (8,619) (0.25%)
Provision for income taxes  (73,767)  (2.01%)  (2,527)  (0.07%)
                            
Net loss $(11,530)  (0.32%)  $(86,837)  (2.50%)
Net income (loss) $203,590   5.54% $(11,146)  (0.32%)

Operating revenues increased $89,708,$191,882, or 3%6%, for the three months ended JuneSeptember 30, 2019 compared to the secondthird quarter of fiscal 2018. 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 $12,803,$4,507, or 1%0.3%, for the secondthird quarter of 2019 compared to the same period of fiscal 2018. This increase was due primarily to: (1) higher costs of third-party content, due to minor inflationary increases instituted by some of the Company’s major suppliers, and (2) higher security consulting fees.increases in salaries and related employee benefits. These increases were partially offset by: (1) lower salary and related employee benefits due to employee turnover, and (2)by lower costs associated with the outsourcing of certain data entry tasks, as the Company authorized overtime to catch up on some processing backlogs in 2018 which were not incurred in 2019.

Selling, general and administrative expenses decreased $2,757,$98,172, or 0.1%5%, for the secondthird quarter of fiscal 2019 compared to the same period of fiscal 2018. This decrease was due to: (1) lower professional fees as the Company hired in-house counsel as of the beginning of the third quarter, and (2) lower marketing expenses related to lower salary and related employee benefits, becausethe timing of a headcount reduction as well as a lower bonus accrual.trade show attendance. This decrease was offset in part by: (1) higher rent and related expenses resulting from the Company’s expansion of its office in mid-2018, and (2) higher professionalincreases in salaries and consulting fees.related employee benefits.

Depreciation and amortization increased $8,006,$3,084, or 19%6%, for the secondthird quarter of fiscal 2019 compared to the same period of fiscal 2018. This increase was due to the leasehold improvements incurred in connection with the Company’s expansion of its office in mid-2018.

Other income, net increased $12,607$3,513 for the secondthird quarter of fiscal 2019 compared to the same period last year. This increase was due to greater dividend income received in the secondthird quarter of fiscal 2019 on all of the Company’s money market fund holdings.

BenefitProvision for income taxes decreased $8,956increased $71,240 for the secondthird quarter of fiscal 2019 compared to the same period of fiscal 2018. This decreaseincrease was due to the Company reporting a lowerpre-tax income in 2019 versus a pre-tax loss in 2019 versus 2018, because of the reasons enumerated above, partially offset by a higherlower effective tax rate in 2019.

13

 6 Months Ended June 30,  9 Months Ended September 30, 
 2019  2018  2019  2018 
 Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
  Amount  
% of Total
Operating
Revenues
 
                        
Operating revenues $7,063,340   100.00% $6,849,747   100.00% $10,736,581   100.00% $10,331,106   100.00%
                        
Operating expenses:                        
Data and product costs 2,895,490  41.00% 2,897,685  42.30% 4,316,780  40.20% 4,314,468  41.76%
Selling, general and administrative expenses 4,315,144  61.09% 4,338,614  63.34% 6,277,294  58.47% 6,398,936  61.94%
Depreciation and amortization  101,034   1.43%  89,087   1.30%  153,701   1.43%  138,670   1.34%
Total operating expenses  7,311,668   103.52%  7,325,386   106.94%  10,747,775   100.10%  10,852,074   105.04%
                        
Loss from operations (248,328) (3.52%) (475,639) (6.94%) (11,194) (0.10%) (520,968) (5.04%)
Other income, net  84,099   1.19%  51,644   0.75%  124,322   1.15%  88,354   0.85%
                        
Loss before income taxes (164,229) (2.33%) (423,995) (6.19%)
Benefit from income taxes  16,231   0.23%  81,722   1.19%
Income (loss) before income taxes 113,128  1.05% (432,614) (4.19%)
Benefit (provision) for income taxes  (57,536)  (0.53%)  79,195   0.77%
                        
Net loss $(147,998)  (2.10%) $(342,273)  (5.00%)
Net income (loss) $55,592   (0.52%) $(353,419)  (3.42%)

Operating revenues increased $213,593,$405,475, or 3%4%, for the sixnine months ended JuneSeptember 30, 2019 compared to the same period of fiscal 2018. 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 decreased $2,195,increased $2,312, or 0.1%, for the first sixnine months of 2019 compared to the same period of fiscal 2018. This decreaseincrease was due primarily to:to higher costs of third-party content, due to minor inflationary increases instituted by some of the Company’s major suppliers, partially offset by: (1) lower salary and related employee benefits, due to a decrease in the stock-based compensation expense for stock options, (2) a decrease in the cost of the third-party hosted facility expense because of non-recurring data charges incurred last year, and (3) lower costs associated with the outsourcing of certain data entry tasks, as last year the Company authorized overtime to catch up on some processing backlogs. This decrease was partially offset by higher costs of third-party content, due to minor inflationary increases instituted by some of the Company’s major suppliers.

Selling, general and administrative expenses decreased $23,470,$121,642, or 0.5%2%, for the first sixnine months of fiscal 2019 compared to the same period of fiscal 2018. This decrease was due to lower salary and related employee benefits, because of a headcount reduction as well as a lower bonus accrual. This decrease wasaccrual, partially offset in part by: (1) higher rent and related expenses resulting from the Company’s expansion of its office in mid-2018, and (2) the cost of contact management software to assist in identifying new sales leads for the Company’s service.

Depreciation and amortization increased $11,947,$15,031, or 13%11%, for the first sixnine months of fiscal 2019 compared to the same period of fiscal 2018. This increase was due to the leasehold improvements incurred in connection with the Company’s expansion of its office in mid-2018.

Other income, net increased $32,455$35,968 for first sixnine months of fiscal 2019 compared to the same period last year. This increase was due to greater dividend income received in the first halfnine months of fiscal 2019 on a U.S. Treasury Money Market Fund.all of the Company’s money market fund holdings.

Benefit fromThe Company recorded an income taxes decreased $65,491tax provision of $57,536 for the first sixnine months of fiscal 2019 as it had pre-tax income compared to a tax benefit of $79,195 for the same period of fiscal 2018. This decrease was due to the Company reporting2018 as it had a lower pre-tax loss in 2019 versus 2018, because of the reasons enumerated above, as well as a lower effective tax rate in 2019.loss.

14

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.

14

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 continue to increase in dollar amount and as a percentage of revenues during the remainder of 2019 and future periods as the Company continues to expand its business on a worldwide basis. Further, the Company expects that product development expenses will also continue to increase in dollar amount and may increase as a percentage of revenues during the remainder of 2019 and future periods because it expects to employ more development personnel on average compared to prior periods and build the infrastructure required to support the development of new and improved products and services. However, as these expenditures are 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.

15

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. OTHER INFORMATION

PART II.Item 6.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
 101.INSXBRL Instance Document
 101.SCHXBRL Taxonomy Extension Schema Document
 101.CALXBRL Taxonomy Extension Calculation Linkbase Document
 101.DEFXBRL Taxonomy Extension Definition Linkbase Document
 101.LABXBRL Taxonomy Extension Label Linkbase Document
 101.PREXBRL Taxonomy Extension Presentation Linkbase Document

16

Index
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: AugustNovember 14, 2019
By: /s/
Lawrence Fensterstock
 
Lawrence Fensterstock
 
Chief Financial Officer &
  
Principal Accounting Officer


17