CREDITRISKMONITOR COM INC - Annual Report: 2021 (Form 10-K)

In addition to historical information, the following discussion of the Company’s business contains forward-looking statements. These forward-looking statements involve risks, uncertainties, and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to, those discussed in the sections in this Annual Report on Form 10-K entitled “The CreditRiskMonitor Business”, “The Company’s Goals”, “Marketing and Sales”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. CreditRiskMonitor.com, Inc. (the “Company” or “CreditRiskMonitor”) undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Overview

CreditRiskMonitor was organized in Nevada in February 1977 and was engaged in the development and sale of nutritional food products from 1982 until October 22, 1993, when it sold substantially all of its assets, as previously reported. Effective January 19, 1999, the Company acquired the assets of the CreditRisk Monitor credit information service (“CM Service”) from Market Guide Inc. Following the closing of the CM Service purchase, the Company commenced doing business under the name “CreditRiskMonitor.com”.

The CreditRiskMonitor Business

The overall focus of the Company’s Software-as-a-Service (“SaaS”) subscription products is on facilitating the analysis of corporate financial risk, in the context of (a) the extension of trade credit from one business to another, (b) the management by businesses of important relationships with suppliers, and/or (c) the management by businesses of significant “counter-party” (i.e., buying and selling) relationships.

CreditRiskMonitor (see our website at www.creditriskmonitor.com; the contents of our website are not incorporated in, or otherwise to be regarded as part of this Annual Report on Form 10-K) sells a suite of web-based, SaaS subscription products providing access to comprehensive commercial credit reports, bankruptcy risk analytics, financial and payment information, and curated news on public and private companies worldwide.  The products help corporate credit and procurement professionals stay ahead of and manage financial risk more quickly, accurately, and cost-effectively. Our subscribers, including more than 35% of the Fortune 1000 and well over a thousand other large corporations worldwide, use the Company’s timely news alerts, research, and reports on public and private companies to make important risk decisions.  The Company’s comprehensive commercial credit reports covering both public and private companies worldwide are published through its web-based platform and feature detailed analyses of financial statements, including ratio analysis and trend reports, and peer analysis.

Academic research has found that, in the United States, about a quarter of corporate debt is trade credit, and the size of this trade credit is roughly three times the size of bank loans. Therefore, more U.S. companies are using trade credit to finance their operations than are using loans from the banking system. Trade credit financing is typically interest-free or even offered at a discount for expedited payment in comparison to alternative sources of working capital financing such as bank or third party (hedge fund) loans, notes, and bonds.  Moreover, many corporations that are starting to show elevated risk are unable to secure bank financing due to poor performance, poor leverage ratios, or a lack of good cash flow metrics.  Finally, the need to tap trade credit financing is highest in points of distress when interest expenses are most burdensome.

In an example business-to-business (“B2B”) transaction: the purchase and sale of $20,000 of merchandise, the seller will usually ship before the buyer pays – this act is an extension of trade credit by the seller. The seller takes a financial risk by extending this credit, commonly referred to as “trade credit” risk. The buyer may pay late, causing the seller to incur increased borrowing costs; the seller may incur extra costs in attempting to collect the $20,000; or the buyer may never pay the full $20,000. Amounts unlikely to be repaid are called “bad debts.” If buyers fail to pay, the seller can suffer substantial losses (e.g., assuming the seller averages a 10% pre-tax margin it will take about $10 of sales to offset each $1 of bad debt).

To help subscribers prioritize and monitor risk, the reports offer the Company’s proprietary FRISK® and PAYCE® scores (measures of financial distress tied to the probability of bankruptcy, powered by Artificial Intelligence including machine learning and deep neural network technology, respectively), as well as the well-known Altman Z” default score, and corporate issuer ratings from key Nationally Recognized Statistical Rating Organizations (“NRSROs”). The FRISK® scoring model also features proprietary, aggregate sentiment inputs based on the crowdsourced usage behaviors of our subscribers providing an improved classification of risk and boosting overall accuracy through the lowering of the false positive rate for the riskiest corporations. We believe the FRISK® score, which can predict public company bankruptcy risk with 96%¹ accuracy within the next 12 months, is the only analytic featuring such inputs in the industry and is trained on our unmatched depth of usage data.  CreditRiskMonitor’s crowdsourced usage behavior specifically identifies the shift in aggregate sentiment among the issuers of trade credit and therefore assists in the monitoring of the most critical situations when trade credit-based working capital liquidity can dry up.  With so much trade credit being utilized in the market, CreditRiskMonitor’s SaaS subscription products, featuring its 96% predictive FRISK® bankruptcy analytic for public companies and its 70%¹ predictive PAYCE® bankruptcy analytic for private companies, are emerging as critical for the accurate evaluation and monitoring of counterparty bankruptcy risk for many subscribers.

CreditRiskMonitor’s reports include company background information, trade payment reports, as well as public filings (i.e., suits, liens, judgments, and bankruptcy information) on millions of companies around the world. To keep subscribers current with changing risk conditions, the Company uses email to “push” selected information to subscribers. These emails include continuously filtered news monitoring that keeps subscribers up to date on events affecting the creditworthiness of companies selected by the subscribers. Subscribers also receive alerts covering such topics as FRISK® score changes, credit limit alerts, financial statement updates, U.S. Securities and Exchange Commission (“SEC”) filings, and changes in agency ratings. All news items are filtered to assure the stories have financial relevance and materiality.  On U.S. banks, reports include financial data from the Federal Financial Institutions Examination Council (“FFIEC”) call reports.

CreditRiskMonitor’s SaaS subscription products are most often purchased to review the risks of extending trade credit by a company to its corporate customers. Within a midsized or large corporation, there is often a professional whose responsibility is managing this credit (often together with managing collections of the company’s accounts receivable). CreditRiskMonitor believes that, with the long-term downsizing of corporations and the related reductions in credit departmental budgets and personnel, corporate credit professionals have to do more with less. It is also notable that trade credit decisions are often made under intense time pressure. Simultaneously, the Company believes, there has been an explosive growth in the volume of data about large businesses. Credit professionals are often faced with an overwhelming amount of available data concerning their most important customers, while the time for research and analysis is severely limited. CreditRiskMonitor’s products are designed to save them time, money, and effort by prioritizing their risk and helping them automatically stay up to date as conditions change.

¹ Claim based on back testing of the model on U.S. companies and continued performance checks to validate if the score indicated “high risk” (a score less than 5) at least 3 month prior to a subject company bankruptcy filing.

A meaningful portion of the Company’s subscribers uses its SaaS subscription products for managing the financial risk of relationships with suppliers and/or “counter-parties” with whom they both buy and sell. Strategic planning is another use of the Company’s products. In the last recession and the COVID-19 pandemic, risks to the “supply chain” became a prominent focus of management concern. Companies were reminded that while the financial distress of a single important customer might jeopardize a large receivable associated with that account, the financial distress of a single important supplier can shut down an entire factory and jeopardize a company’s entire revenue stream. The Company’s revenue from existing subscribers who have added users responsible for procurement functions and new subscribers whose usage is entirely related to supply chain use cases is a growing percentage of total revenue.

In its 2021 10-K Filing, the Dun & Bradstreet Corporation (“Dun & Bradstreet”), our major competitor, disclosed that it generated approximately $834.7 million from its Finance & Risk business (i.e., credit, supply chain, and legal/regulatory information services) in North America (i.e., U.S. and Canada) and $430.3 million the rest of the world, total approximately $1,262.8 million² for 2021, which we believe serves a similar mix of business functions. The remaining market is extremely fragmented with numerous other vendors, notably including Experian plc and Equifax Inc. On that basis, we estimate that our revenue represents a little more than 1% of the Total Addressable Market (“TAM”).

CreditRiskMonitor’s annual-fee, SaaS subscription products represented over 99% of its fiscal 2020 and 2021 operating revenues. These products are sold to a diverse subscriber base with no single subscriber representing more than 2% of 2020 and 2021 operating revenues. Accordingly, the Company is not dependent on a single subscriber nor is the Company dependent on a few large subscribers, such that a loss of any individual subscriber would have a material adverse effect on its financial condition or results of operations.

The Company has contractual agreements with its data suppliers, including leading NRSROs to redistribute their information as part of our service. We also obtain financial statements and other data from Refinitiv US LLC. Although we report some of this “raw” data directly on our web-based platform, the critical elements of our SaaS subscription products – the FRISK® score, PAYCE® score, ratio analysis, trend reports, peer analyses, Altman Z”-Scores, and email alerts– are computed by the Company using its algorithms and weighting techniques, and are delivered in formats carefully designed for the way our subscribers prefer to use this information.

Further, hundreds of subscribers and non-subscribers provide us with confidential data from their accounts receivable systems that we parse, process, aggregate, and report, so subscribers can see how their counterparties are paying the invoices of other suppliers, without disclosing the specific contributors of this information (the “Trade Contributor Program”).  The Trade Contributor Program’s current trade credit file exceeds $2 trillion of transaction data annually.

²  There was an approximately -$2.2 million adjustment to Total Revenue for the Finance & Risk segment from Corporate and other

CreditRiskMonitor’s products are the result of management’s experience in the commercial credit industry and ongoing research concerning the information needs of corporate credit and purchasing/procurement departments. These factors have enabled CreditRiskMonitor to satisfy its subscribers’ needs for a timely, efficient, and low-cost credit information service. CreditRiskMonitor sells the following SaaS subscription products for analyzing commercial financial risk with all additional products requiring an active subscription to its base subscription product (the “Fundamental Service”):

Subscribers can purchase a more limited version of the Fundamental Service coverage of just U.S., Canadian, Mexican and Caribbean companies (the “North American Service”) for a lower annual fee.  The Company’s flagship version of the Fundamental Service (the “Worldwide Service”) covers all public and millions of private non-financial companies internationally.

Subscribers can purchase expanded U.S. private company coverage (the “Experian FSR Scores Enhancement”) via CreditRiskMonitor’s redistribution of Experian’s Financial Stability Risk (“FSR”) Score for an additional annual fee.  The Experian FSR Scores Enhancement provides access to financial distress scores on 3 million private U.S. companies.

Subscribers to the Worldwide Service can purchase expanded European private company coverage (the “European Private Data Enhancement”) for an additional annual fee.  The European Private Data Enhancement provides access to data covering 10 European countries, over 250,000 additional private company FRISK® scores, over 1.2 million Altman Z”-Scores, and over 9 million businesses with financial statements.

The Fundamental Service features the Company’s proprietary credit scores: the FRISK® score and the PAYCE® score. These proprietary scores indicate the level of financial distress, by predicting the probability of bankruptcy within the next 12 months at public and private companies, respectively. The scores provide subscribers with a fast, consistent method for identifying those companies at greatest risk.

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³ Based on the FY2020 global GDP of $84.7 trillion and estimated 2021 GDP growth rate of 5.5% as reported by the World Bank

The viability and potential of CreditRiskMonitor’s business are made possible by the following characteristics:

⁴ As reported by the Bank of International Settlements (“BIS”) in a Statistical Release on November 15, 2021

⁵ As reported by the Securities Industry and Financial Markets Association (“SIFMA”) in its Global Equity Market Primer issued on November 9, 2021

The Company’s Goals

Marketing and Sales

To gain market share for the Company’s products, it will continue to use the Internet (at our website www.creditriskmonitor.com) as the primary mechanism for demonstrating and distributing its offerings. To inform potential subscribers about its products, CreditRiskMonitor uses a combination of telephone sales, Internet demonstration, and inbound and outbound marketing, including but not limited to digital strategies, social media, media/PR outreach, trade show representation, and speaking engagements before credit and procurement groups and associations.

Value Proposition

The Company’s fundamental value proposition is that it creates and sells high-quality, industry-leading commercial credit reports featuring analytics with the highest accuracy levels in the market that help busy risk professionals stay ahead of financial risk quickly, easily, and precisely, at a competitive cost to those from the leading provider. Because Dun & Bradstreet has the largest share of the commercial credit market, their flagship product, DNBi, is the standard by which the market measures both quality and price. The Company’s research shows that its subscribers overwhelmingly agree that CreditRiskMonitor’s products save them time, help them to make better credit decisions, and represent a significant value for the price paid compared to its competitors.

CreditRiskMonitor’s operational strategy is to deliver on its value proposition by continuing to be one of the industry’s lowest-cost producers of high-quality, accurate commercial credit information by continuously collecting data from a wide variety of sources and employing sophisticated, proprietary, algorithms to process that data into an extensive database of valuable reports on companies. Highly automated operations add to the reliability and consistency of these reports while limiting costs. The Company employs a small number of analysts who selectively review data at critical points in its processes to further enhance the quality of its products and their relevance to credit professionals.

Risks Related to Information Systems Security

The Company’s information systems, and those of its third-party service providers and vendors, are vulnerable to an increasing threat of continually evolving cybersecurity risks. These risks may take the form of malware, computer viruses, cyber threats, extortion, employee error, malfeasance, system errors, or other types of risks, and may occur from inside or outside of our organization. Cybersecurity risk is increasingly difficult to identify and quantify and cannot be fully mitigated because of the rapidly evolving nature of the threats, targets, and consequences. Additionally, unauthorized parties may attempt to gain access to these systems or our information through fraud or other means of deceiving our third-party service providers, employees, or vendors. The Company’s operations depend, in part, on how well it and its suppliers protect networks, equipment, information technology (“IT”) systems, and software against damage from several threats. The Company has entered into agreements with third parties for hardware, software, telecommunications, and other services in connection with its operations. The Company’s operations depend on the timely maintenance, upgrade, and replacement of networks, equipment, IT systems, and software. However, if the Company is unable or delayed in maintaining, upgrading, or replacing its IT systems and software, the risk of a cybersecurity incident could materially increase. Any of these and other events could result in information system failures, delays, and/or increases in capital expenses. The failure of information systems or a component of information systems may, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.

In addition, targeted attacks on the Company’s systems (or on systems of third parties that it relies on), failure or non-availability of a key IT system, or a breach of security measures designed to protect its IT systems could result in disruptions to its operations through delays or the corruption and destructions of its data, property damage, loss of confidential information or financial or reputational risks. As the threat landscape is ever-changing, the Company must make continuous mitigation efforts, including risk prioritized controls to protect against known and emerging threats; tools to provide automated monitoring and alerting; frequent employee training; and backup and recovery systems to restore systems and return to normal operations. However, there can be no assurance that the Company’s ability to monitor for or mitigate cybersecurity risks will be fully effective, and the Company may fail to identify cybersecurity breaches or discover them in a timely way.

Any significant compromise or breach of the Company’s data security, whether external or internal, or misuse of its data, could result in significant costs, lost sales, fines, and lawsuits, as well as damage to its reputation. In addition, as the regulatory environment as related to information security, data collection, data use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

Employees

As of March 1, 2022 the Company had approximately 90 employees. None of the Company’s employees are covered by a collective bargaining agreement. The Company believes its relations with its employees to be satisfactory and has suffered no interruption in operations.

The Company established a 401(k) Plan covering all employees effective January 1, 2000 that provides for discretionary Company contributions.  Employees are eligible to participate in the 401(k) plan if they are over the age of 21 and after completing one month of service with the company after their hire date.  The Company has no other retirement, pension, profit sharing, or similar program in effect for its employees. The Company adopted a long-term incentive plan in 2020 that covers its employees, replacing its former 2009 Plan.

Available Information

Copies of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are available free of charge on its website (www.creditriskmonitor.com) as soon as reasonably practicable after the Company electronically files the material with or furnishes it to the SEC. Printed copies of these documents may be requested, free of charge, by contacting the Corporate Secretary, CreditRiskMonitor.com, Inc., 704 Executive Boulevard, Valley Cottage, NY 10989. Additionally, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Information on the Company’s website or linked to its website is not incorporated by reference into this Annual Report.

ITEM 2.

PROPERTIES.

The Company does not own any real property. The Company’s principal office is located in approximately 16,900 square feet of leased space in an industrial warehouse complex located in Valley Cottage, New York. The lease expires on July 31, 2025 and provides for an aggregate total monthly cost of approximately $21,600, subject to annual increases, plus an allocated portion of real estate taxes and insurance.

ITEM 3.

LEGAL PROCEEDINGS.

The Company, at various times, may be involved in legal proceedings arising from the ordinary course of business.  The Company records a liability when it believes it has enough information to assess the probability that a loss will be incurred and the amount of loss or range of loss can be reasonably estimated.  Neither the Company nor its property is a party to or the subject of a pending legal proceeding.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

PART II

The Company’s Common Stock is traded on the OTC Markets OTCQX U.S. under the symbol “CRMZ”. The following table sets forth the high and low closing bid quotations reported on the OTCQX for each calendar quarter of 2020 and 2021. These quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

On March 1, 2022, there were approximately 170 registered holders of the Company’s Common Stock based on information provided by our transfer agent. This number does not reflect the number of individuals or institutional investors holding stock in nominee name through banks, brokerage firms, and others.

In fiscal 2021 and 2020, the Company did not declare a cash dividend.

The Company did not repurchase any of its common stock during the year ending 2021.

ITEM 6.

SELECTED FINANCIAL DATA.

Not applicable.

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 subscribers’ 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 2022 are to continue to build on the improvement initiatives underway to achieve sustainable, profitable growth.

Financial Condition, Liquidity and Capital Resources

 

The following table presents selected financial information and statistics as of December 31, 2021 and 2020 (dollars in thousands):

Off-Balance Sheet Arrangements

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

Results of Operations

Operating revenues increased approximately $1.3 million, or 8%, for fiscal 2021 over the prior year. This overall revenue growth resulted from an increase in SaaS subscription products revenue, attributable to increased sales to new and existing subscribers.

Data and product costs increased approximately $306 thousand, or 5%, for fiscal 2021 compared to fiscal 2020. This increase was due primarily to (1) higher salary and related employee benefits due to pay raises to staff, and (2) higher costs of third-party content, due to price increases instituted by some of the Company’s major suppliers.

Selling, general and administrative expenses decreased approximately $1.59 million, or 16%, for fiscal 2021 compared to fiscal 2020. This decrease was due to lower commissions being paid out in 2021 due to lower-than-expected new sales and lower salary expenses due to employee turnover. This decrease was offset by some higher salary and related employee benefits.

The Company’s PPP loan was forgiven by the Small Business Administration resulting in a gain of $1.56 million.

Other income decreased approximately $17 thousand for fiscal 2021 compared to fiscal 2020. This decrease was due to the lower return received on the Company’s money market fund holdings compared to fiscal 2020.

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.

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 subscribers and the volume of and timing of the subscriptions for the Company’s products, 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 subscribers with outstanding value, thus encouraging 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 into 2022 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 into 2022 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 some of 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) new variants of COVID-19 and government related restrictions on our subscribers and their ongoing businesses and how those effects may impact our sales to them, (ii) the Company’s ability to retain existing subscribers, attract new subscribers at a steady rate and maintain customer satisfaction, (iii) the Company’s ability to maintain gross margins in its existing business and in future product lines and markets, (iv) the development of new services and products by the Company and its competitors, (v) price competition, (vi) the Company’s ability to obtain products and services from its vendors, including information suppliers, on commercially reasonable terms, (vii) the Company’s ability to upgrade and develop its systems and infrastructure, and adapt to technological change, (viii) the Company’s ability to attract and retain personnel in a timely and effective manner, (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, cybersecurity breaches, or Internet brownouts, (xii) the amount and timing of operating costs and capital expenditures relating 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.

Critical Accounting Policies, Estimates and Judgments

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Management continually evaluates its estimates and judgments, the most critical of which are those related to:

Valuation of goodwill -- Goodwill requires critical accounting estimates in the evaluation of the Company’s assets which are subject to valuation judgements.  In addition, the Company uses the publicly traded stock price to estimate fair value, which is subject to market fluctuations and change. See the information in Note 2 to the financial statements under the caption “Goodwill” for accounting polices related to the recognition of goodwill.

Income taxes -- The calculation of income taxes requires critical accounting estimates in budgeting expenses, estimating sales figures, and forecasting staffing and technology needs for the upcoming year, all of which are constantly subject to change as the year progresses. See the information in Note 2 to the financial statements under the caption “Income Taxes” for accounting polices related to the recognition of income taxes.

Recently Issued Accounting Standards

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

A summary of the status of the Company’s non-vested options and changes during the year ended December 31, 2021 is presented below:

Share Repurchase Program

In January of 2022 the Company's Board of Directors authorized a share repurchase program for the repurchase of up to $1,000,000 of the Company's outstanding common stock. The Company has not repurchased any shares under this program.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. In designing and evaluating such controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management is necessarily required to use judgment in evaluating 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 to ensure that all material information required to be disclosed by us in reports that we file or submit under the Exchange Act are accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure and that all such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In the ordinary course of business, the Company reviews its internal control over financial reporting and makes changes to its systems and processes to improve such controls and increase efficiency, while ensuring that the Company maintains an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, updating existing systems and automating manual processes. These changes have not materially affected, and are not reasonably likely to materially affect, the Company’s internal control over financial reporting. However, they allow the Company to continue to enhance its internal control over financial reporting and ensure that its internal control environment remains effective.

Management’s Report on Internal Control Over Financial Reporting

Changes in Internal Control over Financial Reporting

We understand that cyber-attacks and related risks that seek to exploit, damage, and disable business operations will continue in the future.  As a result, the Company has taken steps to strengthen controls and mitigate risks in the future. Such procedures include two-factor authentication for log-ins and engaging Microsoft to host and provide the Company with email related services, including backup and security related to exchange services. The Company also deployed an automated endpoint security monitoring program that utilizes behavior artificial intelligence to automatically eliminate threats in real time for both on-premise and cloud environments.  However, the design of our internal control framework / objectives over financial reporting is unchanged and the Company does not believe that these changes have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 9B.

OTHER INFORMATION.

None.

ITEM 9C.

COVID-19.

On March 11, 2020, the World Health Organization declared the outbreak of Coronavirus Disease 2019 (“COVID-19” or “virus”) as a global pandemic. The extent to which COVID-19 impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information, COVID-19 mutations and variants which may emerge, and the speed and effectiveness of vaccinations. The Company has been operating remotely without any significant disruption of operations. To date, the Company’s data providers have provided an uninterrupted stream of information, thus enabling the Company to deliver its product. The Company is actively monitoring the renewal rates of its current subscribers and those that subscribed after the outbreak.

In response to COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. Additionally, the CARES Act contains relief for small businesses through several new temporary programs, one of which is the Paycheck Protection Program (“PPP”). The PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration (“SBA”) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent or utilities. The Company applied for a loan under this program and received $1.56 million in 2020. The SBA provides a “safe harbor” for borrowers and has deemed certifications regarding the necessity of the loan to have been made in good faith for borrowers of less than $2 million. The PPP loan was scheduled to mature on April 15, 2022, had a 1.00% interest rate, that could have been prepaid at any time without penalty and was subject to the terms and conditions applicable to all loans made pursuant to the PPP as administered by the SBA under the CARES Act. In accordance with the requirements for forgiveness of the PPP loan under the CARES Act, the Company has used the entire proceeds from the PPP loan for eligible payroll, benefits, rent, utility costs, and maintained its employment levels. The Company applied for forgiveness by the deadline set forth by the lender, and the SBA granted full forgiveness to the Company in December of 2021. The Company recognized a gain on debt forgiveness of $1,561,500, total amount of the loan including interest, which is included in other income on the statement of operations and is non-taxable.

ITEM 9D.

CYBER-SECURITY

On September 8, 2021, the Company detected an external security incident impacting its network accessibility. Promptly upon its detection, the Company launched an investigation and engaged the services of specialists. After a thorough review by a third-party cyber specialist, there was no evidence that any sensitive files were exfiltrated from our network.  We understand that cyber-attacks and related risks that seek to exploit, damage, and disable business operations will continue in the future.  As a result, the Company has taken steps to strengthen controls and mitigate risks in the future.

PART III

Directors and Executive Officers

The following table sets forth certain information with respect to the directors and executive officers of the Company and the period such persons held their respective positions with the Company.

Name	Age	Principal Occupation/Position Held with Company	Officer or Director Since
Jerome S. Flum	81	Chairman of the Board/Chief Executive Officer	1983
Michael I. Flum	35	President/Chief Operating Officer	2019
Steven Gargano	45	Senior Vice President/Chief Financial Officer	2020
Andrew J. Melnick	80	Director	2005
Richard Lippe	83	Director	2020
Joshua M. Flum	52	Director	2007

Jerome S. Flum was appointed President and Chief Executive Officer of the Company and Chairman of the Board of Directors in June 1985. Since 1968 he has been in the investment business as an Institutional Security Analyst, Research and Sales Partner at an investment firm and then as a General Partner of a private investment pool. Before entering the investment business, Mr. Flum practiced law, helped manage a U.S. congressional campaign and served as a Legal and Legislative Aide to a U.S. Congressman. He has been a guest lecturer at the Massachusetts Institute of Technology/Sloan School of Management Lab for Financial Engineering. Mr. Flum received a BS degree in business administration from Babson College and a JD degree from Georgetown University Law School. Mr. Flum served as a Lance corporal in the United States Marine Corps Reserve.

Michael I. Flum joined the Company in 2018 as Vice President of Operations & Alternative Data. He was elected Senior Vice President and Chief Operating Officer in October 2019 and subsequently President and Chief Operating Officer in October 2020. He is responsible for operational strategy and implementation, leveraging technology to improve the efficiency of human capital and work processes. Prior to joining CreditRiskMonitor, Mr. Flum served as Vice President of Operations at Gullett & Associates, Inc., a Houston-based midstream oil & gas survey and drafting services firm from 2016-2017. Mr. Flum held various engineering and project management roles at Enterprise Products Partners, a Houston-based oil & gas pipeline owner/operator from 2009 to 2016. Over his time in the oil & gas sector, Mr. Flum successfully completed pipeline and plant projects totaling over $1.3 billion dollars. He was also able to install processes that streamline service offerings and unify customer experience across teams. Mr. Flum holds an MBA from Columbia Business School as well as a BS in Mechanical Engineering and a BA in Religious Studies from Rice University. Mr. Flum is the son of Jerome Flum.

Steven Gargano, CPA joined the Company in January 2020 as Senior Vice President and was elected to Senior Vice President and Chief Financial Officer in April 2020. Mr. Gargano has more than 20 years of experience in financial services, product development, workflow optimization, operations, customer experience, and financial technology. Prior to joining CreditRiskMonitor, he was the Managing Director and Head of Financial Information & Risk Analysis for over $12B in assets at 1199SEIU Pension and Benefit Funds. Before that, he served as a Senior Managing Director and Head of Product Development and Customer Support for U.S. Bancorp Fund Services’ Alternative Investment Solutions division. Prior to that, he was the Managing Director and Head of the Planning, Strategy, and Implementation Group for the Accounting, Finance, and Back Office groups at Mariner Investment Group, a $10B asset manager. Prior to joining Mariner, he worked at Deloitte & Touche within the firm’s Investment Management Business Advisory Services consulting group in New York. Prior to that, he held the Product Controller position at Gabelli Asset Management responsible for managing the middle office and its functions for all alternative products and their respective trading activities. He started his career at Arthur Andersen working as an auditor in the Financial Service Industry Asset Management & Capital Markets Group specializing in brokerage and hedge funds. Recently, he served as Head of Finance & Operations for financial technology platforms specializing in creating technology and service models for private equity, hedge fund, wealth management, and service providers. Mr. Gargano is a graduate of Harvard Business School. In addition, he graduated from Cornell University’s College of Business in Applied Economics, Management, and Accounting.

Andrew J. Melnick has been a Director since March 2005. He has been a Managing Partner of SkyView Investment Advisors since 2010. The firm acts as an investment advisor to various independent investment organizations. From 2014 to 2015, Mr. Melnick was the Chief Investment Strategist and a shareholder in the investment advisory firm BPV Capital Management, which provided investment advisory services to institutions and individual clients. From 2005 to 2009, Mr. Melnick helped manage two hedge funds. He retired from Goldman, Sachs & Co. at the end of 2004. He joined Goldman Sachs in 2002 as Co-Director of its Global Investment Research Division and a member of its Management Committee. Prior to joining Goldman Sachs, Mr. Melnick was Senior Vice President and Director of the Global Securities and Economics Research Group of Merrill Lynch. During his 13 years at Merrill Lynch, he expanded the Firm’s Research Group from primarily a domestic effort to one with research offices in 26 countries around the world. During that period Merrill Lynch was ranked as the top research department in nearly all regions of the world including six straight times as the number one equity research department in the United States. Previous employment: President of Woolcott & Co., a boutique research and investment banking firm; Director of Research and a Partner of L.F. Rothschild Unterberg Towbin; and Senior Analyst at Drexel Burnham Lambert. He was a U.S. Army Signal Corps Officer and served in Vietnam. Mr. Melnick is a Commissioner of the Monmouth County Improvement Authority, a member of the Board of Trustees of the Monmouth Medical Center, and serves on the Board of Governors of the American Jewish Committee and acts as Chairman of their Investment Committee. Mr. Melnick earned a BA in economics and MBA in finance from Rutgers. He is a Chartered Financial Analyst (C.F.A.).

Richard Lippe has been a Director since May 2020. Mr. Lippe was one of the founding members and a partner of the law firm Meltzer, Lippe, Goldstein and Breistone, LLP (1979-2004). Prior to that, he was a founding member and partner of the law firm Lippe, Ruskin, Schlissel and Moscou, LLP (1966-1978), and was Deputy County Attorney for Nassau County, N.Y. (1964-1966). While actively practicing law, among other things, he chaired the Corporate and Technology Groups at the two firms. He has extensive experience representing mature, middle and early stage private and public companies, and has provided other ongoing business related activities and advice to management and boards of directors and general partners. He has frequently served as general counsel and/or a member of the board and an active business advisor to a number of companies. Mr. Lippe has a B.A. degree from Tufts University and a J.D. degree from the University of Pennsylvania.

Joshua M. Flum has been a Director since September 2007. He has been an executive with CVS Health Corporation since July 2004. Mr. Flum began his career at CVS Health in Store Operations and is currently Executive Vice President, Enterprise Strategy and Digital. Mr. Flum is a graduate of the Yale Law School and spent the first years of his professional career clerking for the Honorable Edward R. Becker, Chief Judge of the United States Court of Appeals for the Third Circuit, and then at the law firm of Miller, Cassidy, Larroca and Lewin, LLP. He then joined the Boston Consulting Group where his work focused on the consumer and retail practice area. Mr. Flum is the son of Jerome Flum.

The Company’s By-Laws provide that (a) directors shall be elected to hold office until the next annual meeting of stockholders and that each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which the director was elected and until a successor has been elected, and (b) officers shall hold office until their successors are chosen by the Board of Directors, except that the Board may remove any officer at any time.

Significant Employees

Peter Roma is the Senior Vice President of Sales and Service. He is responsible for both new sales growth and the servicing of our current subscriber base. He joined the Company in October 2004 as an Account Executive. Mr. Roma has over 35 years of sales experience. He started with Metropolitan Insurance Company but spent most of his career in financial services working for Shearson Lehman Bros., Inc. and then Merrill, Lynch, Pierce, Fenner & Smith where he was a Vice President-Private Client.

Michael Broos is the Chief Technology Officer and has been with the company since 2001. He has more than 40 years of experience leading technology teams in the development and implementation of software applications for the Internet, Windows, DOS, and mainframes. Before joining the Company, Mr. Broos was Senior Vice President of Technology for About.com; Chief Technology Officer of Fan2Fan.com; Chief Technology Officer of AKA.com; Vice President of Internet Solutions for Inventure.com; and Vice President of Software Development for Dun & Bradstreet for 8 years. Prior to joining Dun & Bradstreet in 1990, Mr. Broos was an independent consultant and entrepreneur for 10 years, during which time he co-founded several software companies, including Infocom (the creators of Zork). Mr. Broos began his career with a ten-year stint on the academic computer research staff of the M.I.T. Laboratory of Computer Science, where he developed interactive, graphical and email-based applications for the ARPANET (the precursor of today’s Internet).

Michael Clark is the Senior Vice President of Information Technology and is responsible for all aspects of technology. Previously, he had been Vice President of Software Development. Mr. Clark joined the company in 2002.  Mr. Clark brings over 30 years of software design and development experience. Prior to joining the Company, from 1997-2001, Mr. Clark was Director of Software Development for The Technology Group, creating early web-based smart-document and legal expert systems. From 1988 to 1996 he helped develop the award-winning word processing system Nota Bene, enabling multi-lingual document editing in Windows and MS-DOS systems. Mr. Clark has a B.A. in Computational Mathematics from the University of Buffalo.

Camilo Gomez, Ph.D.  is Senior Vice President of Data Science and returned to CreditRiskMonitor in November 2020, having first joined the Company in October of 2009. During his decade-long tenure, which ended in June of 2019, Dr. Gomez served as Senior Vice President of Quantitative Research. In between stints at CreditRiskMonitor, Dr. Gomez held the role of Chief Analytics Officer for Beyond Finance, Inc. Prior to joining the Company in 2009, Dr. Gomez was a principal at Lone Pine Mesa LLC, where he consulted with companies in the area of specialty finance since 2005. Prior to that, he was a Managing Director at Standard & Poor’s Risk Solutions group since 2001. Before S&P, Dr. Gomez was co-founder and Group Head for Financial Analytics for the Center for Adaptive Systems & Applications. Dr. Gomez earned a B.S. in 1980 and a Ph.D. in 1985 from the Massachusetts Institute of Technology.

The Audit Committee

The Audit Committee shall assist the Board of Directors in fulfilling its responsibility to the shareholders, potential shareholders and investment community relating to corporate accounting, reporting practices of the Company and the quality and integrity of the Company’s financial reporting. To fulfill its purposes, the Committee’s duties shall include to:

The Audit Committee currently consists of its outside directors – Andrew Melnick, Richard Lippe, and Joshua Flum.  Both Andrew Melnick and Richard Lippe are independent, and Andrew Melnick is an audit committee financial expert, as such terms are defined by the SEC.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission (“SEC”) initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file.

To the Company’s knowledge, based solely on its review of the copies of such reports received by it with respect to fiscal 2021, or written representations from certain reporting persons, the Company believes that all filing requirements applicable to its directors, officers and persons who own more than 10% of a registered class of the Company’s equity securities have been timely complied with.

Code of Ethics

CreditRiskMonitor’s Board of Directors has adopted a Code of Ethics for its Principal Executive Officer and Senior Financial Officers. This Code applies to the Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer (who also is the Company’s principal accounting officer).

ITEM 11.

EXECUTIVE COMPENSATION.

The following table shows all cash compensation paid or to be paid by the Company during the fiscal years indicated to the chief executive officer and all other executive officers of the Company as of the end of the Company’s last fiscal year.

 ⁽¹⁾ The amounts in this column reflect bonuses awarded for the fiscal year shown but paid in the subsequent fiscal year.

⁽²⁾ Represents the compensation costs of stock option awards for financial reporting purposes for the year under ASC 718, rather than an amount paid to or realized by the Named Executive Officer. See Note 5 of the Notes to Financial Statements for a discussion of the assumptions used in calculating the aggregate grant date fair value computed in accordance with ASC 718. The ASC 718 value as of the grant date for stock options is spread over the number of months of service required for the grant to become non-forfeitable. There can be no assurance that the ASC 718 amounts will ever be realized.

⁽³⁾ Mr. Michael Flum was elected Senior Vice President and Chief Operating Officer on October 24, 2019. He was subsequently elected President on October 29, 2020.

⁽⁴⁾ Mr. Fensterstock resigned as Chief Financial Officer on March 31, 2020, and retired on June 30, 2020.

⁽⁵⁾ Mr. Gargano joined the Company as Senior Vice President in January 2020, and was elected Senior Vice President, and Chief Financial Officer on April 1, 2020.

⁽⁶⁾ Mr. Levy joined the Company as Senior Vice President and General Counsel in September 2019. The General Counsel position was eliminated on December 28, 2020.

Outstanding Equity Awards

The following table sets forth all stock options granted to the Company’s executive officers during the last fiscal year:

The following table reflects outstanding equity grants to the Company’s executive officers as of December 31, 2021:

The closing market price of the Company’s common stock on December 31, 2021 was $1.69 per share.

The options under the above grants may be exercised after four years in installments upon the attainment of specified length of service. In the event of a change in control (as defined), the options will vest in full at the time of such change in control.

Directors’ Fees

Effective January 1, 2016, non-employee directors receive $1,000 per quarter or a total of $4,000 per calendar year.

The following table sets forth as of March 1, 2022 information regarding the beneficial ownership of the Company’s voting securities (i) by each person or group known by the Company to be the owner of record or beneficially of more than five percent of the Company’s voting securities, (ii) by each of the Company’s directors and executive officers, and (iii) by all directors and executive officers of the Company as a group. Except as indicated in the following notes, the owners have sole voting and investment power with respect to the shares. Unless otherwise noted, each owner’s mailing address is c/o CreditRiskMonitor.com, Inc., 704 Executive Boulevard, Valley Cottage, NY 10989.

*less than 1%

⁽¹⁾ Based on the information contained in a Schedule 13G/A filed February 1, 2019. The general partner of Santa Monica Partners, L.P. is SMP Asset Management, LLC. Lawrence J. Goldstein is an individual investor, the sole managing member and the sole owner of SMP Asset Management, LLC, and may be deemed to beneficially own these shares.

⁽²⁾ The general partners of Flum Partners are Jerome S. Flum, Chairman of the Board and Chief Executive Officer of the Company; Michael I. Flum, President and Chief Operating Officer of the Company; and Barbara Schwartz, spouse of Jerome S. Flum.   The controlling general partner is Jerome S. Flum.

⁽³⁾ Includes 5,641,134 shares owned by Flum Partners, of which Mr. Flum is the controlling general partner, which are also deemed to be beneficially owned by Mr. Flum because of his power, as controlling  general partner of Flum Partners, to direct the voting of such shares held by the partnership. Mr. Flum disclaims beneficial ownership of the shares owned by Flum Partners. The 6,239,776 shares of Common Stock, or 57.61% of the outstanding shares of Common Stock, may also be deemed to be owned, beneficially and collectively, by Flum Partners and Mr. Flum, as a “group”, within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Act”).

⁽⁴⁾ Includes 7,800 shares of Common Stock owned by a grandchild of Mr. Flum, the beneficial ownership of which is disclaimed by Mr. Flum. Also, includes 260,000 shares of Common Stock owned by Family Trusts established by Mr. Flum, the beneficial ownership of which is disclaimed by Mr. Flum.

⁽⁵⁾ Includes 55,770 shares of Common Stock and 7,700 shares of Common Stock which may be acquired upon the exercise of stock options which have vested or will vest within 60 days of March 10, 2020.

⁽⁶⁾ Includes 6,500 shares of Common Stock and 7,700 shares of Common Stock which may be acquired upon the exercise of stock options which have vested or will vest within 60 days of March 10, 2020.

The Company’s current equity compensation plan approved by stockholders is the 2020 Long-Term Incentive Plan. The 2020 Long-Term Incentive Plan provides for the grant of options and other awards up to an aggregate of 1,000,000 shares of common stock. The Company’s previous equity compensation plan approved by stockholders was the 2009 Long-Term Incentive Plan. The 2009 Long-Term Incentive Plan provided for the grant of options and other awards up to an aggregate of 1,000,000 shares of common stock.  This plan expired at the end of 2019.

The following table summarizes information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all equity compensation plans of the Company as of December 31, 2021.

There were no such reportable relationships or related transactions in 2021.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The aggregate fees incurred by CohnReznick LLP for professional services rendered to the Company for the last two fiscal years are as follows:

The engagement of CohnReznick LLP for the 2021 and 2020 fiscal years and the scope of audit-related services, including the audits and reviews described above, and tax services were all pre-approved by the Audit Committee.

The policy of the Audit Committee is to pre-approve the engagement of the Company’s independent auditors and the furnishing of all audit and non-audit services.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)          Financial Statements – contained in Item 8:

(b)          Exhibits:

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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