CREDITRISKMONITOR COM INC - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended September 30,
2009
o TRANSITION REPORT UNDER
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)
|
(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 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 x No
o
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 o No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o Accelerated
filer o
Non-accelerated
filer o Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act).
Yes o No
x
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 -- 7,849,462 shares outstanding as of November 2,
2009.
CREDITRISKMONITOR.COM, INC.
INDEX
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Page
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PART
I. FINANCIAL INFORMATION
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2
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3
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4
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||
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5
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6
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9
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14
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PART
II. OTHER INFORMATION
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14
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15
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PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
CREDITRISKMONITOR.COM,
INC.
BALANCE
SHEETS
SEPTEMBER
30, 2009 AND DECEMBER 31, 2008
|
Sept.
30,
|
Dec.
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
(Unaudited)
|
(Note
1)
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 4,969,790 | $ | 912,591 | ||||
|
Marketable
securities
|
- | 2,958,996 | ||||||
|
Accounts
receivable, net of allowance
|
833,320 | 1,146,066 | ||||||
|
Other
current assets
|
144,120 | 237,883 | ||||||
|
Total
current assets
|
5,947,230 | 5,255,536 | ||||||
|
Property
and equipment, net
|
261,038 | 213,142 | ||||||
|
Goodwill
|
1,954,460 | 1,954,460 | ||||||
|
Prepaid
and other assets
|
30,365 | 28,109 | ||||||
|
Total
assets
|
$ | 8,193,093 | $ | 7,451,247 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Deferred
revenue
|
$ | 4,787,475 | $ | 4,394,803 | ||||
|
Accounts
payable
|
46,940 | 52,758 | ||||||
|
Accrued
expenses
|
502,812 | 610,748 | ||||||
|
Total
current liabilities
|
5,337,227 | 5,058,309 | ||||||
|
Other
liabilities
|
- | 3,424 | ||||||
|
Total
liabilities
|
5,337,227 | 5,061,733 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Preferred
stock, $.01 par value; authorized 5,000,000 shares; none
issued
|
-- | -- | ||||||
|
Common
stock, $.01 par value; authorized 25,000,000 shares; issued and
outstanding 7,849,462 shares
|
78,494 | 78,494 | ||||||
|
Additional
paid-in capital
|
28,319,691 | 28,279,268 | ||||||
|
Accumulated
deficit
|
(25,542,319 | ) | (25,968,248 | ) | ||||
|
Total
stockholders’ equity
|
2,855,866 | 2,389,514 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 8,193,093 | $ | 7,451,247 | ||||
See
accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS
OF OPERATIONS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Unaudited)
|
2009
|
2008
|
|||||||
|
Operating
revenues
|
$ | 2,052,310 | $ | 1,493,498 | ||||
|
Operating
expenses:
|
||||||||
|
Data
and product costs
|
519,005 | 456,891 | ||||||
|
Selling,
general and administrative expenses
|
1,101,815 | 909,565 | ||||||
|
Depreciation
and amortization
|
26,533 | 19,818 | ||||||
|
Total
operating expenses
|
1,647,353 | 1,386,274 | ||||||
|
Income
from operations
|
404,957 | 107,224 | ||||||
|
Other
income, net
|
2,564 | 6,741 | ||||||
|
Income
before income taxes
|
407,521 | 113,965 | ||||||
|
Provision
for income taxes
|
1,020 | 880 | ||||||
|
Net
income
|
$ | 406,501 | $ | 113,085 | ||||
|
Net
income per share of common stock:
|
||||||||
|
Basic
|
$ | 0.05 | $ | 0.01 | ||||
|
Diluted
|
$ | 0.05 | $ | 0.01 | ||||
|
Weighted
average number of common shares outstanding:
|
||||||||
|
Basic
|
7,849,462 | 7,709,139 | ||||||
|
Diluted
|
8,198,544 | 7,848,460 | ||||||
See
accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS
OF OPERATIONS
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Unaudited)
|
2009
|
2008
|
|||||||
|
Operating
revenues
|
$ | 5,717,872 | $ | 4,263,138 | ||||
|
Operating
expenses:
|
||||||||
|
Data
and product costs
|
1,584,503 | 1,335,862 | ||||||
|
Selling,
general and administrative expenses
|
3,641,310 | 2,723,308 | ||||||
|
Depreciation
and amortization
|
75,524 | 57,829 | ||||||
|
Total
operating expenses
|
5,301,337 | 4,116,999 | ||||||
|
Income
from operations
|
416,535 | 146,139 | ||||||
|
Other
income
|
12,921 | 40,285 | ||||||
|
Interest
expense
|
(14 | ) | (9,853 | ) | ||||
|
Income
before income taxes
|
429,442 | 176,571 | ||||||
|
Provision
for income taxes
|
3,513 | 3,237 | ||||||
|
Net
income
|
$ | 425,929 | $ | 173,334 | ||||
|
Net
income per share of common stock:
|
||||||||
|
Basic
|
$ | 0.05 | $ | 0.02 | ||||
|
Diluted
|
$ | 0.05 | $ | 0.02 | ||||
|
Weighted
average number of common shares outstanding:
|
||||||||
|
Basic
|
7,849,462 | 7,699,466 | ||||||
|
Diluted
|
8,070,599 | 8,007,976 | ||||||
See
accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS
OF CASH FLOWS
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Unaudited)
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income
|
$ | 425,929 | $ | 173,334 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
75,524 | 57,829 | ||||||
|
Deferred
rent
|
(3,424 | ) | (2,640 | ) | ||||
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Stock-based
compensation
|
40,423 | 40,422 | ||||||
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Realized
loss on marketable securities
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28,224 | - | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
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Accounts
receivable
|
312,746 | (123,621 | ) | |||||
|
Other
current assets
|
93,763 | 99,682 | ||||||
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Prepaid
and other assets
|
(2,256 | ) | 886 | |||||
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Deferred
revenue
|
392,672 | 438,209 | ||||||
|
Accounts
payable
|
(5,818 | ) | 61,664 | |||||
|
Accrued
expenses
|
(107,936 | ) | 22,448 | |||||
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Other
liabilities
|
- | (58,890 | ) | |||||
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Net
cash provided by operating activities
|
1,249,847 | 709,323 | ||||||
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Cash
flows from investing activities:
|
||||||||
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Purchase
of marketable securities
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(433,761 | ) | - | |||||
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Sale
of marketable securities
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3,364,533 | - | ||||||
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Purchase
of property and equipment
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(123,420 | ) | (143,220 | ) | ||||
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Net
cash provided by (used in) investing activities
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2,807,352 | (143,220 | ) | |||||
|
Cash
flows from financing activities:
|
||||||||
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Proceeds
from exercise of stock options
|
- | 5,015 | ||||||
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Payments
on long-term debt
|
- | (286,940 | ) | |||||
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Net
cash used in financing activities
|
- | (281,925 | ) | |||||
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Net
increase in cash and cash equivalents
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4,057,199 | 284,178 | ||||||
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Cash
and cash equivalents at beginning of period
|
912,591 | 2,973,263 | ||||||
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Cash
and cash equivalents at end of period
|
$ | 4,969,790 | $ | 3,257,441 | ||||
See
accompanying condensed notes to financial statements.
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 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,
2008.
The
results of operations for the three and nine months ended September 30, 2009 are
not necessarily indicative of the results of a full fiscal year.
The
December 31, 2008 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,
2008 included in the Company’s Annual Report on Form 10-K.
In
May 2009, the Financial Accounting Standards Board issued Accounting
Standards Codification (“ASC”) 855, “Subsequent Events” (“ASC 855”). This
standard is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Specifically,
this standard sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. ASC 855 is effective for fiscal
years and interim periods ended after June 15, 2009. We adopted this
standard effective June 15, 2009 and have evaluated any subsequent events
through the date of this filing. We do not believe there are any material
subsequent events which would require further disclosure.
(2)
Stock-Based Compensation
The
Company applies ASC 718, “Compensation-Stock Compensation” (“ASC 718”) to
account for stock-based compensation.
The
following table summarizes the stock-based compensation expense for stock
options that was recorded in the Company’s results of operations in accordance
with ASC 718 for the three and nine months ended September 30:
|
3
Months Ended
|
9
Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Data
and product costs
|
$ | 1,952 | $ | 1,952 | $ | 5,857 | $ | 5,857 | ||||||||
|
Selling,
general and administrative expenses
|
11,522 | 11,522 | 34,566 | 34,565 | ||||||||||||
| $ | 13,474 | $ | 13,474 | $ | 40,423 | $ | 40,422 | |||||||||
(3) Other
Recently Issued Accounting Standards
The
Financial Accounting Standards Board and the SEC had issued certain accounting
pronouncements as of September 30, 2009 that will become effective in subsequent
periods; however, management does not believe that any of those pronouncements
would have significantly affected our 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 our future
financial position or results of operations.
(4) Fair
Value Measurements
The
Company records its financial instruments that are accounted for under ASC 320,
“Investments-Debt and Equity Securities” at fair value. The determination of
fair value is based upon the fair value framework established by ASC 820,
“Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820
provides that a fair value measurement assumes that the transaction to sell an
asset or transfer a liability occurs in the principal market for the asset or
liability or, in the absence of a principal market, the most advantageous market
for the asset or liability. The fair value hierarchy is broken down into three
levels based on the source of inputs as follows: (a) Level 1 – valuations based
on unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities; (b) Level 2
– valuations based on quoted prices in markets that are not active, or financial
instruments for which all significant inputs are observable; either directly or
indirectly; and (c) Level 3 – valuations based on prices or valuation techniques
that require inputs that are both significant to the fair value measurement and
unobservable; thus, reflecting assumptions about the market
participants.
The
Company’s cash and cash equivalents 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. These
instruments include money market securities.
The table
below sets forth the Company’s cash and cash equivalents as of September 30,
2009, which are measured at fair value on a recurring basis by level within the
fair value hierarchy.
|
Total
fair
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
value
|
|||||||||||||
|
Cash
and cash equivalents
|
$ | 4,969,790 | $ | - | $ | - | $ | 4,969,790 | ||||||||
|
Total
|
$ | 4,969,790 | $ | - | $ | - | $ | 4,969,790 | ||||||||
The
Company did not hold financial assets and liabilities which were recorded at
fair value in the Level 2 or 3 categories as of September 30, 2009.
Effective
January 1, 2009, the Company fully adopted the provisions of ASC 820 by
adopting the provisions relating to its nonfinancial assets and liabilities. The
Company adopted the provisions relating to financial assets and liabilities in
the prior year and its adoption of ASC 820 relating to nonfinancial assets and
liabilities did not have a material impact on its financial position or results
of operations.
(5) Net
Income Per Share
Basic net
income per share is based on the weighted average number of common shares
outstanding. Diluted net income per share is based on the weighted average
number of common shares outstanding and the dilutive effect of outstanding stock
options:
|
3
Months Ended
|
9
Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Weighted
average shares outstanding – basic
|
7,849,462 | 7,709,139 | 7,849,462 | 7,699,466 | ||||||||||||
|
Potential
shares exercisable under stock option plans
|
582,500 | 527,500 | 516,167 | 647,500 | ||||||||||||
|
LESS:
Shares which could be repurchased under treasury stock
method
|
(233,418 | ) | (388,179 | ) | (295,030 | ) | (338,990 | ) | ||||||||
|
Weighted
average shares outstanding – diluted
|
8,198,544 | 7,848,460 | 8,070,599 | 8,007,976 | ||||||||||||
For
periods in which the Company has earnings, out-of-the-money stock options (i.e.,
the average stock price during the period is below the exercise price of the
stock option) are not included in diluted earnings per share as their effect is
anti-dilutive. For the three months ended September 30, 2008, 55,000 shares
were excluded from the calculation of diluted earnings per share as their effect
was anti-dilutive. For the nine months ended September 30, 2009 and 2008,
66,333 shares and 55,000 shares, respectively, were excluded from the
calculation of diluted earnings per share as their effect was
anti-dilutive.
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 weakening 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. To
the contrary, monthly bookings of new business subscriptions for first nine
months of 2009 were the highest in the Company’s history, supporting our belief
that the need for credit information is non-cyclical (see discussion on
“Non-cyclical” found on page 5 of our 2008 Form 10-K).
FINANCIAL
CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The
following table presents selected financial information and statistics as of
September 30, 2009 and December 31, 2008 (dollars in thousands):
|
September 30,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
Cash,
cash equivalents, and marketable securities
|
$ | 4,970 | $ | 3,872 | ||||
|
Accounts
receivable, net
|
$ | 833 | $ | 1,146 | ||||
|
Working
capital
|
$ | 610 | $ | 197 | ||||
|
Cash
ratio
|
0.93 | 0.77 | ||||||
|
Quick
ratio
|
1.09 | 0.99 | ||||||
|
Current
ratio
|
1.11 | 1.04 | ||||||
The
Company has invested most of its excess cash in debt instruments of the United
States Government. All highly liquid investments with an original maturity of
three months or less are considered cash equivalents, while those with
maturities in excess of three months are reflected as marketable
securities.
As of
September 30, 2009, the Company had $4.97 million in cash, cash equivalents, and
marketable securities, an increase of $1.10 million from December 31, 2008, and
an increase of $1.71 million from the cash and cash equivalents balance reported
at September 30, 2008. The principal component of this net increase for the last
nine months was the cash generated by operating activities of $1.25
million.
The
Company’s cash generated by operating activities significantly exceeded its net
income due primarily to the increase in deferred revenue. Additionally,
the main component of current liabilities at September 30, 2009 is deferred
revenue of $4.79 million, which should not require significant future cash
outlay other than the cost of preparation and delivery of the applicable
commercial credit reports which cost much less than the deferred revenue shown.
The deferred revenue is recognized as income over the subscription term, which
approximates twelve months. The Company has no bank lines of credit or other
currently available credit sources.
The
Company believes that its existing balances of cash, cash equivalents and cash
generated from operations will be sufficient to satisfy its currently
anticipated cash requirements through at least the next 12 months. Moreover, the
Company has been cash flow positive for the last 4 fiscal years and the balance
of cash and cash equivalents at September 30, 2009 was equal to approximately
87% of its revenues for the first nine months of fiscal 2009. Further, the
Company 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,
|
||||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
Amount
|
%
of Total Operating Revenues
|
Amount
|
%
of Total Operating Revenues
|
|||||||||||||
|
Operating
revenues
|
$ | 2,052,310 | 100.00 | % | $ | 1,493,498 | 100.00 | % | ||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Data
and product costs
|
519,005 | 25.29 | % | 456,891 | 30.59 | % | ||||||||||
|
Selling,
general and administrative expenses
|
1,101,815 | 53.69 | % | 909,565 | 60.90 | % | ||||||||||
|
Depreciation
and amortization
|
26,533 | 1.29 | % | 19,818 | 1.33 | % | ||||||||||
|
Total
operating expenses
|
1,647,353 | 80.27 | % | 1,386,274 | 92.82 | % | ||||||||||
|
Income
from operations
|
404,957 | 19.73 | % | 107,224 | 7.18 | % | ||||||||||
|
Other
income, net
|
2,564 | 0.13 | % | 6,741 | 0.45 | % | ||||||||||
|
Income
before income taxes
|
407,521 | 19.86 | % | 113,965 | 7.63 | % | ||||||||||
|
Provision
for income taxes
|
1,020 | 0.05 | % | 880 | 0.06 | % | ||||||||||
|
Net
income
|
$ | 406,501 | 19.81 | % | $ | 113,085 | 7.57 | % | ||||||||
Operating
revenues increased $558,812, or 37%, for the three months ended September 30,
2009 compared to the third quarter of fiscal 2008. This overall revenue growth
resulted from a $556,469, or 39%, increase in Internet subscription service
revenue, including $315,901 attributable to an increase in the number of
subscribers and $240,568 attributable to increased sales to existing
subscribers, as well as a $2,343, or 3%, increase in the Company’s third-party
international credit report subscription service, attributable to greater usage
by existing subscribers despite a decrease in the number of subscribers to that
service.
Data and
product costs increased $62,114, or 14%, for the third quarter of 2009 compared
to the same period of fiscal 2008. This increase was primarily due to higher
salary and related employee benefits, including the hiring of an additional
senior programmer and the higher cost of third-party content due to the addition
of new sources, partially offset by lower consulting fees.
Selling,
general and administrative expenses increased $192,250, or 21%, for the third
quarter of fiscal 2009 compared to the same period of fiscal 2008. This increase
was primarily due to higher marketing expenses and higher salary and related
employee benefit costs, resulting from an increase in commission expense and in
the Company’s sales force during the past 12 months. The commissions increase is
related to (i) new sales bookings increasing at a much faster rate than the
reported increase in operating revenue for this year’s third quarter versus for
last year’s third quarter, and (ii) a higher commission rate on new sales under
a new commission plan implemented at the beginning of the second quarter of
2008. The
Company records the full commission expense at the beginning of new or renewal
contracts but reflects operating revenue ratably over the term of the
contract.
Depreciation
and amortization increased $6,715, or 34%, for the third quarter of fiscal 2009
compared to the same period of fiscal 2008. This increase is due to a higher
depreciable asset base reflecting the replacement of computer equipment that had
been in operation past its depreciable life.
Other
income, net decreased $4,177, or 62%, for third quarter of fiscal 2009 compared
to the same period last year. This decrease was due to less investment income
being earned for the quarter due to a change in the mix of money market
securities to those with a shorter duration and a lower yield.
|
Nine Months Ended September
30,
|
||||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
Amount
|
%
of Total Operating Revenues
|
Amount
|
%
of Total Operating Revenues
|
|||||||||||||
|
Operating
revenues
|
$ | 5,717,872 | 100.00 | % | $ | 4,263,138 | 100.00 | % | ||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Data
and product costs
|
1,584,503 | 27.71 | % | 1,335,862 | 31.33 | % | ||||||||||
|
Selling,
general and administrative expenses
|
3,641,310 | 63.69 | % | 2,723,308 | 63.88 | % | ||||||||||
|
Depreciation
and amortization
|
75,524 | 1.32 | % | 57,829 | 1.36 | % | ||||||||||
|
Total
operating expenses
|
5,301,337 | 92.72 | % | 4,116,999 | 96.57 | % | ||||||||||
|
Income
from operations
|
416,535 | 7.28 | % | 146,139 | 3.43 | % | ||||||||||
|
Other
income
|
12,921 | 0.23 | % | 40,285 | 0.94 | % | ||||||||||
|
Interest
expense
|
(14 | ) | (0.00 | %) | (9,853 | ) | (0.23 | %) | ||||||||
|
Income
before income taxes
|
429,442 | 7.51 | % | 176,571 | 4.14 | % | ||||||||||
|
Provision
for income taxes
|
3,513 | 0.06 | % | 3,237 | 0.07 | % | ||||||||||
|
Net
income
|
$ | 425,929 | 7.45 | % | $ | 173,334 | 4.07 | % | ||||||||
Operating
revenues increased $1,454,734, or 34%, for the nine months ended September 30,
2009 versus the first nine months of fiscal 2008. This overall revenue growth
resulted from a $1,443,464, or 36%, increase in Internet subscription service
revenue, including $828,535 attributable to an increase in the number of
subscribers and $614,929 attributable to increased sales to existing
subscribers, as well as a $11,270, or 5%, increase in the Company’s third-party
international credit report subscription service, attributable to greater usage
by existing subscribers despite a decrease in the number of subscribers to that
service.
Data and
product costs increased $248,641, or 19%, for the first nine months of fiscal
2009 compared to the same period of fiscal 2008. This increase was primarily due
to higher salary and related employee benefits, including the hiring of an
additional senior programmer, as well as the cost of new third-party content
added to the Company’s website, partially offset by lower consulting
fees.
Selling,
general and administrative expenses increased $918,002, or 34%, for the first
nine months of fiscal 2009 compared to the same period of fiscal 2008. This
increase was primarily due to higher marketing expenses and higher salary and
related employee benefit costs, resulting from an increase in commission expense
and in the Company’s sales force during the past 12 months. The commissions
increase is related to (i) new sales bookings increasing at a much faster rate
than the reported increase in operating revenue for this year’s year-to-date
period versus for last year’s year-to-date period, and (ii) a higher commission
rate on new sales under a new commission plan implemented at the beginning of
the second quarter of 2008. The Company records the full commission expense at
the beginning of new or renewal contracts but reflects operating revenue ratably
over the term of the contract.
Depreciation
and amortization increased $17,695, or 31%, for the first nine months of fiscal
2009 compared to the same period of fiscal 2008. This increase is due to a
higher depreciable asset base reflecting the replacement of computer equipment
that had been in operation past its depreciable life.
Other
income decreased $27,364, or 68%, for the first nine months of fiscal 2009
compared to the same period last year. This decrease was due to a negative
mark-to-market adjustment for marketable securities owned during the period and
a decrease in interest rates.
Interest
expense decreased $9,839, or 100%, for the first nine months of fiscal 2009
compared to the same period of fiscal 2008. This decrease was primarily due to
the Company prepaying its long-term debt in April 2008.
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.
Due to
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 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, 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 fourth quarter of 2009 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 in the fourth
quarter of 2009 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 significant 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 level of use of the Internet and online services and
increasing acceptance of the Internet and other online services for the purchase
of products such as those offered by the Company, (vi) the Company’s ability to
upgrade and develop its systems and infrastructure, (vii) the Company’s ability
to attract new personnel in a timely and effective manner, (viii) the level of
traffic on the Company’s website, (ix) the Company’s ability to manage
effectively its development of new business segments and markets, (x) the
Company’s ability to successfully manage the integration of operations and
technology of acquisitions or other business combinations, (xi) technical
difficulties, system downtime or Internet brownouts, (xii) the amount and timing
of operating costs and capital expenditures relating to expansion of the
Company’s business, operations and infrastructure, (xiii) governmental
regulation and taxation policies, (xiv) disruptions in service by common
carriers due to strikes or otherwise, (xv) risks of fire or other casualty,
(xvi) litigation costs or other unanticipated expenses, (xvii) interest rate
risks and inflationary pressures, and (xviii) 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.
Item 4T. 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 our 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
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.
|
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 12, 2009
|
By:
/s/
|
Lawrence
Fensterstock
|
|
Lawrence
Fensterstock
|
||
|
Chief
Financial Officer &
|
||
|
Principal
Accounting Officer
|
||
15