CREDITRISKMONITOR COM INC - Quarter Report: 2019 June (Form 10-Q)
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 June 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
|
||
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(Address of principal executive offices, including zip code)
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Registrant’s telephone number, including area code: (845) 230-3000
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
None
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N/A
|
N/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
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☐ | Accelerated filer |
☐ | ||
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Non-accelerated filer
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☐ | 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, 2019.
CREDITRISKMONITOR.COM, INC.
|
Page
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|||
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PART I. FINANCIAL INFORMATION
|
|||
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Item 1. Financial Statements
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|||
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2
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|||
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3
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|||
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4
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|||
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5
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|||
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6
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|||
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7
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|||
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8
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|||
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12
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|||
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Item 4. Controls and Procedures
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16
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||
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PART II. OTHER INFORMATION
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|||
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Item 6. Exhibits
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16
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||
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17
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PART I. FINANCIAL INFORMATION
CREDITRISKMONITOR.COM, INC.
JUNE 30, 2019 AND DECEMBER 31, 2018
|
June 30,
2019
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December 31,
2018
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|||||||
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(Unaudited)
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(Note 1)
|
|||||||
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ASSETS
|
||||||||
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Current assets:
|
||||||||
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Cash and cash equivalents
|
$
|
8,403,179
|
$
|
8,066,899
|
||||
|
Accounts receivable, net of allowance
|
1,928,960
|
2,454,585
|
||||||
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Other current assets
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832,965
|
561,861
|
||||||
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Total current assets
|
11,165,104
|
11,083,345
|
||||||
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Property and equipment, net
|
554,820
|
543,762
|
||||||
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Operating lease right-of-use asset
|
2,469,025
|
--
|
||||||
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Goodwill
|
1,954,460
|
1,954,460
|
||||||
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Other assets
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31,607
|
35,613
|
||||||
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Total assets
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$
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16,175,016
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$
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13,617,180
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||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
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Current liabilities:
|
||||||||
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Unexpired subscription revenue
|
$
|
8,860,837
|
$
|
8,560,316
|
||||
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Accounts payable
|
126,553
|
94,767
|
||||||
|
Current portion of operating lease liability
|
140,217
|
--
|
||||||
|
Accrued expenses
|
1,131,349
|
1,311,218
|
||||||
|
Total current liabilities
|
10,258,956
|
9,966,301
|
||||||
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Deferred taxes on income, net
|
473,194
|
490,381
|
||||||
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Unexpired subscription revenue, less current portion
|
229,524
|
178,129
|
||||||
|
Operating lease liability, less current portion
|
2,375,451
|
--
|
||||||
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Other liabilities
|
--
|
24,537
|
||||||
|
Total liabilities
|
13,337,125
|
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
|
||||||
|
Additional paid-in capital
|
29,678,817
|
29,650,760
|
||||||
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Accumulated deficit
|
(26,948,150
|
)
|
(26,800,152
|
)
|
||||
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Total stockholders’ equity
|
2,837,891
|
2,957,832
|
||||||
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Total liabilities and stockholders’ equity
|
$
|
16,175,016
|
$
|
13,617,180
|
||||
See accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
|
2019
|
2018
|
|||||||
|
Operating revenues
|
$
|
3,567,531
|
$
|
3,477,823
|
||||
|
Operating expenses:
|
||||||||
|
Data and product costs
|
1,426,497
|
1,413,694
|
||||||
|
Selling, general and administrative expenses
|
2,147,733
|
2,150,490
|
||||||
|
Depreciation and amortization
|
50,045
|
42,039
|
||||||
|
Total operating expenses
|
3,624,275
|
3,606,223
|
||||||
|
Loss from operations
|
(56,744
|
)
|
(128,400
|
)
|
||||
|
Other income, net
|
43,209
|
30,602
|
||||||
|
Loss before income taxes
|
(13,535
|
)
|
(97,798
|
)
|
||||
|
Benefit from income taxes
|
2,005
|
10,961
|
||||||
|
Net loss
|
$
|
(11,530
|
)
|
$
|
(86,837
|
)
|
||
|
Net loss per share – Basic and diluted
|
$
|
(0.00
|
)
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$
|
(0.01
|
)
|
||
|
Weighted average number of common shares outstanding –
|
|
|
||||||
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Basic and diluted
|
10,722,401
|
10,722,401
|
||||||
See accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
|
2019
|
2018
|
|||||||
|
Operating revenues
|
$
|
7,063,340
|
$
|
6,849,747
|
||||
|
Operating expenses:
|
||||||||
|
Data and product costs
|
2,895,490
|
2,897,685
|
||||||
|
Selling, general and administrative expenses
|
4,315,144
|
4,338,614
|
||||||
|
Depreciation and amortization
|
101,034
|
89,087
|
||||||
|
Total operating expenses
|
7,311,668
|
7,325,386
|
||||||
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Loss from operations
|
(248,328
|
)
|
(475,639
|
)
|
||||
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Other income, net
|
84,099
|
51,644
|
||||||
|
Loss before income taxes
|
(164,229
|
)
|
(423,995
|
)
|
||||
|
Benefit from income taxes
|
16,231
|
81,722
|
||||||
|
Net loss
|
$
|
(147,998
|
)
|
$
|
(342,273
|
)
|
||
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Net loss per share – Basic and diluted
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$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
||
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Weighted average number of common shares outstanding –
|
|
|
||||||
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Basic and diluted
|
10,722,401
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10,722,401
|
||||||
See accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
|
Common Stock
|
Additional
Paid-in
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
|||||||||||||||||
|
Shares
|
Amount
|
Capital | ||||||||||||||||||
|
Balance April 1, 2018
|
10,722,401
|
$
|
107,224
|
$
|
29,585,277
|
$
|
(26,340,136
|
)
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$
|
3,352,365
|
||||||||||
|
Net loss
|
-
|
-
|
-
|
(86,837
|
)
|
(86,837
|
)
|
|||||||||||||
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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
|
||||||||||
See accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
|
Common Stock
|
Additional
Paid-in
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
|||||||||||||||||
|
Shares
|
Amount
|
Capital | ||||||||||||||||||
|
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.
CREDITRISKMONITOR.COM, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
|
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:
|
||||||||
|
Deferred income taxes
|
(17,187
|
)
|
(89,092
|
)
|
||||
|
Depreciation and amortization
|
101,034
|
89,087
|
||||||
|
Deferred rent
|
--
|
78
|
||||||
|
Operating lease right-of-use asset, net
|
22,106
|
--
|
||||||
|
Stock-based compensation
|
28,057
|
50,987
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
525,625
|
334,443
|
||||||
|
Other current assets
|
(271,104
|
)
|
(339,433
|
)
|
||||
|
Other assets
|
4,006
|
(15,855
|
)
|
|||||
|
Unexpired subscription revenue
|
351,916
|
453,520
|
||||||
|
Accounts payable
|
31,786
|
38,095
|
||||||
|
Accrued expenses
|
(179,869
|
)
|
(138,024
|
)
|
||||
|
Net cash provided by operating activities
|
448,372
|
41,533
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of property and equipment
|
(112,092
|
)
|
(12,435
|
)
|
||||
|
Net cash used in investing activities
|
(112,092
|
)
|
(12,435
|
)
|
||||
|
Net increase in cash and cash equivalents
|
336,280
|
29,098
|
||||||
|
Cash and cash equivalents at beginning of period
|
8,066,899
|
8,735,148
|
||||||
|
Cash and cash equivalents at end of period
|
$
|
8,403,179
|
$
|
8,764,246
|
||||
See accompanying condensed notes to financial statements.
CREDITRISKMONITOR.COM, INC.
(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 six months ended June 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.
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 June 30, 2019 to the operating lease liability recorded on the balance sheet:
|
2019 Remainder
|
$
|
125,468
|
||
|
2020
|
255,311
|
|||
|
2021
|
262,970
|
|||
|
2022
|
270,859
|
|||
|
2023
|
278,985
|
|||
|
2024
|
287,355
|
|||
|
Thereafter
|
1,769,054
|
|||
|
Total undiscounted lease payments
|
3,250,002
|
|||
|
LESS: Imputed interest at 4.54%
|
(734,334
|
)
|
||
|
Present value of lease payments
|
$
|
2,515,668
|
||
|
Current portion of operating lease liability
|
$
|
140,217
|
||
|
Operating lease liability
|
2,375,451
|
|||
|
$
|
2,515,668
|
(3) Recently Issued Accounting Standards
The FASB and the SEC have issued certain other accounting pronouncements as of June 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.
(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 six months ended June 30:
|
3 Months Ended
June 30,
|
6 Months Ended
June 30,
|
|||||||||||||||
| 2019 |
2018
|
|
2019 |
|
2018 | |||||||||||
|
Data and product costs
|
$
|
5,969
|
$
|
8,914
|
$
|
12,409
|
$
|
17,828
|
||||||||
|
Selling, general and administrative expenses
|
7,824
|
16,580
|
15,648
|
33,159
|
||||||||||||
|
$
|
13,793
|
$
|
25,494
|
$
|
28,057
|
$
|
50,987
|
|||||||||
(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 June 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
|
||||||||||
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 June 30, 2019 or December 31, 2018.
(7) Net Loss per Share
During the three and six months ended June 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 all 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.
(8) Related Party Transaction
Michael Flum, Vice President of Operations & Alternative Data, 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.
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 June 30, 2019 and December 31, 2018 (dollars in thousands):
|
|
June 30,
2019
|
December 31,
2018
|
||||||
|
Cash and cash equivalents
|
$
|
8,403
|
$
|
8,067
|
||||
|
Accounts receivable, net
|
$
|
1,929
|
$
|
2,455
|
||||
|
Working capital
|
$
|
906
|
$
|
1,117
|
||||
|
Cash ratio
|
0.82
|
0.81
|
||||||
|
Quick ratio
|
1.01
|
1.06
|
||||||
|
Current ratio
|
1.09
|
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 June 30, 2019, the Company had $8.40 million in cash and cash equivalents, an increase of approximately $336,000 from December 31, 2018. This increase was the result of cash provided by operating activities
($448,000) being greater than cash used to acquire property and equipment ($112,000).
The main component of current liabilities at June 30, 2019 is unexpired subscription revenue of $8.86 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.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements.
Results of Operations
|
3 Months Ended June 30,
|
||||||||||||||||
|
2019
|
2018
|
|||||||||||||||
|
Amount
|
% of Total
Operating
Revenues
|
Amount
|
% of Total
Operating
Revenues
|
|||||||||||||
|
Operating revenues
|
$
|
3,567,531
|
100.00
|
%
|
$
|
3,477,823
|
100.00
|
%
|
||||||||
|
Operating expenses:
|
||||||||||||||||
|
Data and product costs
|
1,426,497
|
39.99
|
%
|
1,413,694
|
40.65
|
%
|
||||||||||
|
Selling, general and administrative expenses
|
2,147,733
|
60.20
|
%
|
2,150,490
|
61.83
|
%
|
||||||||||
|
Depreciation and amortization
|
50,045
|
1.40
|
%
|
42,039
|
1.21
|
%
|
||||||||||
|
Total operating expenses
|
3,624,275
|
101.59
|
%
|
3,606,223
|
103.69
|
%
|
||||||||||
|
Loss from operations
|
(56,744
|
)
|
(1.59
|
%)
|
(128,400
|
)
|
(3.69
|
%)
|
||||||||
|
Other income, net
|
43,209
|
1.21
|
%
|
30,602
|
0.88
|
%
|
||||||||||
|
Loss before income taxes
|
(13,535
|
)
|
(0.38
|
%)
|
(97,798
|
)
|
(2.81
|
%)
|
||||||||
|
Benefit from income taxes
|
2,005
|
0.06
|
%
|
|
10,961
|
0.31
|
%
|
|||||||||
|
Net loss
|
$
|
(11,530
|
)
|
(0.32
|
%)
|
$ |
(86,837
|
)
|
(2.50
|
%)
|
||||||
Operating revenues increased $89,708, or 3%, for the three months ended June 30, 2019 compared to the second 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, or 1%, for the second 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. These increases were partially offset by: (1) lower salary and related employee benefits due to employee turnover, and (2) 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, or 0.1%, for the second quarter 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 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 professional and
consulting fees.
Depreciation and amortization increased $8,006, or 19%, for the second 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 for the second quarter of fiscal 2019 compared to the same period last year. This increase was due to greater dividend income received in the second quarter of fiscal 2019 on all
of the Company’s money market fund holdings.
Benefit for income taxes decreased $8,956 for the second quarter of fiscal 2019 compared to the same period of fiscal 2018. This decrease was due to the Company reporting a lower pre-tax loss in 2019 versus 2018,
because of the reasons enumerated above, partially offset by a higher effective tax rate in 2019.
|
6 Months Ended June 30,
|
||||||||||||||||
|
2019
|
2018
|
|||||||||||||||
|
Amount
|
% of Total
Operating
Revenues
|
Amount
|
% of Total
Operating
Revenues
|
|||||||||||||
|
Operating revenues
|
$
|
7,063,340
|
100.00
|
%
|
$
|
6,849,747
|
100.00
|
%
|
||||||||
|
Operating expenses:
|
||||||||||||||||
|
Data and product costs
|
2,895,490
|
41.00
|
%
|
2,897,685
|
42.30
|
%
|
||||||||||
|
Selling, general and administrative expenses
|
4,315,144
|
61.09
|
%
|
4,338,614
|
63.34
|
%
|
||||||||||
|
Depreciation and amortization
|
101,034
|
1.43
|
%
|
89,087
|
1.30
|
%
|
||||||||||
|
Total operating expenses
|
7,311,668
|
103.52
|
%
|
7,325,386
|
106.94
|
%
|
||||||||||
|
Loss from operations
|
(248,328
|
)
|
(3.52
|
%)
|
(475,639
|
)
|
(6.94
|
%)
|
||||||||
|
Other income, net
|
84,099
|
1.19
|
%
|
51,644
|
0.75
|
%
|
||||||||||
|
Loss before income taxes
|
(164,229
|
)
|
(2.33
|
%)
|
(423,995
|
)
|
(6.19
|
%)
|
||||||||
|
Benefit from income taxes
|
16,231
|
0.23
|
%
|
81,722
|
1.19
|
%
|
||||||||||
|
Net loss
|
$
|
(147,998
|
)
|
(2.10
|
%)
|
$
|
(342,273
|
)
|
(5.00
|
%)
|
||||||
Operating revenues increased $213,593, or 3%, for the six months ended June 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, or 0.1%, for the first six months of 2019 compared to the same period of fiscal 2018. This decrease was due primarily to: (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, or 0.5%, for the first six 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 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) the cost of contact
management software to assist in identifying new sales leads for the Company’s service.
Depreciation and amortization increased $11,947, or 13%, for the first six 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 for first six months of fiscal 2019 compared to the same period last year. This increase was due to greater dividend income received in the first half of fiscal 2019 on a U.S.
Treasury Money Market Fund.
Benefit from income taxes decreased $65,491 for the first six months of fiscal 2019 compared to the same period of fiscal 2018. This decrease was due to the Company reporting 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.
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 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.
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.
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
|
|
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.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
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: August 14, 2019
|
By: /s/
|
Lawrence Fensterstock
|
|
Lawrence Fensterstock
|
||
|
Chief Financial Officer &
|
||
|
Principal Accounting Officer
|
||
17