UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to

Commission File Number: 1-8601

CreditRiskMonitor.com, Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
36-2972588
(State or other jurisdiction of incorporation or organization
 
 (I.R.S. Employer Identification No.)

704 Executive Boulevard, Suite A
Valley Cottage, New York  10989
(Address of principal executive offices, including zip code)

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

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

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
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 ☐

Accelerated filer
☐

Non-accelerated filer   ☑

Smaller reporting company
☑
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).   Yes ☐    No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common stock $.01 par value – 10,722,401 shares outstanding as of November 12, 2021.

CREDITRISKMONITOR.COM, INC.
INDEX

     
Page
       
PART I. FINANCIAL INFORMATION
 
       
 
Item 1.
Financial Statements
 
       
   
2
       
   
3
       
    Condensed Statements of Operations for the Nine Months Ended September 30, 2021 and 2020 (Unaudited) 4
       
    5
       
    Condensed Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2021 and 2020 (Unaudited) 6
       
    7
       
    8
       
 
Item 2.
12
       
 
Item 4.
17
       
       
PART II. OTHER INFORMATION
 
       
 
Item 6.
18
       
19

1
PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

CREDITRISKMONITOR.COM, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

   
September 30,
2021
   
December 31,
2020
 
   
(Unaudited)
   
(Note 1)
 
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
11,694,046
   
$
10,302,732
 
Available-for-sale securities – municipal bonds
   
-
     
458,237
 
Accounts receivable, net of allowance of $30,000
   
2,272,854
     
2,557,443
 
Other current assets
   
494,466
     
589,072
 
                 
Total current assets
   
14,461,366
     
13,907,484
 
                 
Property and equipment, net
   
611,303
     
545,675
 
Operating lease right-to-use asset
   
2,059,776
     
2,200,031
 
Goodwill
   
1,954,460
     
1,954,460
 
Other assets
   
83,304
     
84,892
 
                 
Total assets
 
$
19,170,209
   
$
18,692,542
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Unexpired subscription revenue
 
$
9,302,926
   
$
9,646,407
 
Accounts payable
   
73,467
     
130,089
 
Current portion of operating lease liability
   
173,442
     
161,874
 
Current portion of bank loan
   
1,561,500
     
1,299,007
 
Accrued expenses
   
1,757,390
     
1,822,485
 
                 
Total current liabilities
   
12,868,725
     
13,059,862
 
                 
Deferred taxes on income, net
   
433,989
     
333,432
 
Unexpired subscription revenue, less current portion
   
108,615
     
197,545
 
Bank loan, less current portion
   
-
     
262,493
 
Operating lease liability, less current portion
   
2,006,414
     
2,137,559
 
                 
Total liabilities
   
15,417,743
     
15,990,891
 
                 
Stockholders’ equity:
               
Preferred stock, $0.01 par value; authorized 5,000,000 shares; none issued
   
-
     
-
 
Common stock, $0.01 par value; authorized 32,500,000 shares; issued and outstanding 10,722,401 shares
   
107,224
     
107,224
 
Additional paid-in capital
   
29,805,574
     
29,760,533
 
Accumulated deficit
   
(26,160,332
)
   
(27,166,106
)
                 
Total stockholders’ equity
   
3,752,466
     
2,701,651
 
                 
Total liabilities and stockholders’ equity
 
$
19,170,209
   
$
18,692,542
 

See accompanying notes to condensed financial statements.

2
CREDITRISKMONITOR.COM, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)

   
2021
   
2020
 
             
Operating revenues
 
$
4,323,676
   
$
4,037,456
 
                 
Operating expenses:
               
Data and product costs
   
1,519,860
     
1,514,659
 
Selling, general and administrative expenses
   
2,024,562
     
2,110,280
 
Depreciation and amortization
   
75,067
     
52,931
 
                 
Total operating expenses
   
3,619,489
     
3,677,870
 
                 
Income from operations
   
704,187
     
359,586
 
Other income
   
263
     
916
 
                 
Income before income taxes
   
704,450
     
360,502
 
Provision for income taxes
   
(209,098
)
   
(79,420
)
                 
Net income
 
$
495,352
   
$
281,082
 
                 
Net income per share – Basic and diluted
 
$
0.05
   
$
0.03
 
                 
Weighted average number of common shares outstanding –
               
Basic
   
10,722,401
     
10,722,401
 
Diluted
   
10,756,727
     
10,746,834
 

See accompanying notes to condensed financial statements.

3
CREDITRISKMONITOR.COM, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)

   
2021
   
2020
 
             
Operating revenues
 
$
12,704,756
   
$
11,598,210
 
                 
Operating expenses:
               
Data and product costs
   
4,721,331
     
4,556,456
 
Selling, general and administrative expenses
   
6,415,736
     
6,919,804
 
Depreciation and amortization
   
206,083
     
160,736
 
                 
Total operating expenses
   
11,343,150
     
11,636,996
 
                 
Income (loss) from operations
   
1,361,606
     
(38,786
)
Other income
   
3,756
     
27,017
 
                 
Income (loss) before income taxes
   
1,365,362
     
(11,769
)
(Provision for) benefit from income taxes
   
(359,588
)
   
123,424
 
                 
Net income
 
$
1,005,774
   
$
111,655
 
                 
Net income per share – Basic and diluted
  $ 0.09    
$
0.01
 
                 
Weighted average number of common shares outstanding –
               
Basic
   
10,722,401
     
10,722,401
 
Diluted
   
10,772,447
     
10,730,545
 

See accompanying notes to condensed financial statements.

4
CREDITRISKMONITOR.COM, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)

          Additional          
Total
 
    Common Stock
   
Paid-in
Capital
   
Accumulated
Deficit
   
Stockholders' Equity
 
 
Shares
   
Amount
 
Balance July 1, 2020
   
10,722,401
   
$
107,224
   
$
29,736,129
   
$
(27,288,105
)
 
$
2,555,248
 
                                         
Net income
   
-
     
-
     
-
     
281,082
     
281,082
 
Stock-based compensation
   
-
     
-
     
11,810
     
-
     
11,810
 
                                         
Balance September 30, 2020
   
10,722,401
   
$
107,224
   
$
29,747,939
   
$
(27,007,023
)
 
$
2,848,140
 
                                         
Balance July 1, 2021
   
10,722,401
   
$
107,224
   
$
29,786,923
   
$
(26,655,684
)
 
$
3,238,463
 
                                         
Net income
   
-
     
-
     
-
     
495,352
     
495,352
 
Stock-based compensation
   
-
     
-
     
18,651
     
-
     
18,651
 
                                         
Balance September 30, 2021
   
10,722,401
   
$
107,224
   
$
29,805,574
   
$
(26,160,332
)
 
$
3,752,466
 

See accompanying notes to condensed financial statements.

5
CREDITRISKMONITOR.COM, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)

          Additional           Total  
   
Common Stock
   
Paid-in
Capital
   
Accumulated
Deficit
   
Stockholders’
Equity
 
 
Shares
   
Amount
 
Balance January 1, 2020
   
10,722,401
   
$
107,224
   
$
29,705,673
   
$
(27,118,678
)
 
$
2,694,219
 
                                         
Net income
   
-
     
-
     
-
     
111,655
   
111,655
Stock-based compensation
   
-
     
-
     
42,266
     
-
     
42,266
 
                                         
Balance September 30, 2020
   
10,722,401
   
$
107,224
   
$
29,747,939
   
$
(27,007,023
)
 
$
2,848,140
 
                                         
Balance January 1, 2021
   
10,722,401
   
$
107,224
   
$
29,760,533
   
$
(27,166,106
)
 
$
2,701,651
 
                                         
Net income
   
-
     
-
     
-
     
1,005,774
     
1,005,774
 
Stock-based compensation
   
-
     
-
     
45,041
     
-
     
45,041
 
                                         
Balance September 30, 2021
   
10,722,401
   
$
107,224
   
$
29,805,574
   
$
(26,160,332
)
 
$
3,752,466
 

See accompanying notes to condensed financial statements.

6
CREDITRISKMONITOR.COM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)

   
2021
   
2020
 
             
Cash flows from operating activities:
           
Net income
 
$
1,005,774
   
$
111,655
 
Adjustments to reconcile net income to net cash
               
 provided by operating activities:                
Deferred income taxes
   
100,557
     
(124,237
)
Depreciation and amortization
   
206,083
     
160,736
 
Operating lease right-to-use asset, net
   
20,678
     
26,389
 
Stock-based compensation
   
45,041
     
42,266
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
284,589
     
342,641
 
Other current assets
   
94,607
     
(46,737
)
Other assets
   
1,588
     
(72,714
)
Unexpired subscription revenue
   
(432,411
)
   
560,717
 
Accounts payable
   
(56,622
)
   
(89,959
)
Accrued expenses
   
(65,095
)
   
(209,044
)
                 
Net cash provided by operating activities
   
1,204,789
     
701,713
 
                 
Cash flows from investing activities:
               
Sale of available-for-sale securities – municipal bonds
   
458,237
     
-
 
Purchase of property and equipment
   
(271,712
)
   
(87,894
)
                 
Net cash provided by (used in) investing activities
   
186,525
     
(87,894
)
                 
Cash flows from financing activities:
               
Proceeds from bank loan
    -       1,561,500
 

               
Net cash provided by financing activities
    -       1,561,500
 
                 
Net increase in cash and cash equivalents
   
1,391,314
     
2,175,319
 
Cash and cash equivalents at beginning of period
   
10,302,732
     
8,275,836
 
                 
Cash and cash equivalents at end of period
 
$
11,694,046
   
$
10,451,155
 

See accompanying notes to condensed financial statements.

7
CREDITRISKMONITOR.COM, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed financial statements of CreditRiskMonitor.com, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosure required by generally accepted accounting principles (“GAAP”) in the United States for complete financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited condensed financial statements reflect all material adjustments, including normal recurring accruals, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented, and have been prepared in a manner consistent with the audited financial statements for the fiscal year ended December 31, 2020.

The results of operations for the three months and nine months ended September 30, 2021 and 2020 are not necessarily indicative of the results for an entire fiscal year.

The December 31, 2020 balance sheet has been derived from the audited financial statements at that date, but does not include all disclosures required by GAAP. These condensed financial statements should be read in conjunction with the audited financial statements and the footnotes for the fiscal year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K.


(2) Recently Issued Accounting Standards



The Financial Accounting Standards Board (“FASB”) and the SEC have issued certain accounting pronouncements 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.

(3) Revenue Recognition

The Company applies FASB Accounting Standards Codification (“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.

(4) Stock-Based Compensation

The Company applies ASC 718, Compensation-Stock Compensation (“ASC 718”) to account for stock-based compensation.

8
The following table summarizes the stock-based compensation expense for stock options that was recorded in the Company’s results of operations in accordance with ASC 718 for the three and nine months ended September 30:
 
    
3 Months Ended
September 30,
   
9 Months Ended
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
                         
Data and product costs
  $
7,093
    $
4,282
    $
17,855
    $
15,448
 
Selling, general and administrative expenses
   
11,558
     
7,528
     
27,186
     
26,818
 
                                 
    $
18,651
    $
11,810
    $
45,041
    $
42,266
 

(5) Fair Value Measurements

The Company’s cash, cash equivalents and available-for-sale securities are stated at fair value. The carrying value of accounts receivable, other current assets, bank loan and accounts payable 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.

All available-for-sale securities as of December 31, 2020 were municipal bonds. Investments in municipal bonds are valued using pricing models maximizing the use of observable inputs for similar securities. Municipal bonds are classified as Level 2 of the fair value hierarchy.

The tables below set forth the Company’s cash and cash equivalents, as well as marketable securities as of September 30, 2021 and December 31, 2020, respectively, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

   
September 30, 2021
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Cash and cash equivalents
 
$
11,694,046
   
$
-
   
$
-
   
$
11,694,046
 

   
December 31, 2020
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Cash and cash equivalents
 
$
10,302,732
   
$
-
   
$
-
   
$
10,302,732
 
                                 
Available-for-sale securities
 
$
-
   
$
458,237
   
$
-
   
$
458,237
 

There were proceeds of $458,237 from the sale of available-for-sale securities for the periods ended September 30, 2021.

9

(6) Net Income per Share

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding and the dilutive effect of outstanding stock options.

   
3 Months Ended
September 30,
   
9 Months Ended
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
                         
Weighted average number of common shares outstanding – basic
   
10,722,401
     
10,722,401
     
10,722,401
     
10,722,401
 
Potential shares exercisable under stock option plans
   
278,100
     
320,200
     
278,100
     
106,733
 
LESS: Shares which could be repurchased under treasury stock method     (243,774 )     (295,767 )     (228,054 )     (98,589 )
                                 
Weighted average number of common shares outstanding – diluted
   
10,756,727
     
10,746,834
     
10,772,447
     
10,730,545
 

For the three and nine months ended September 30, 2021, the computation of diluted net income per share excludes the effects of the assumed exercise of 290,650 and 290,650 options, respectively, since their inclusion would be anti-dilutive as their exercise prices were above market value.

For the three and nine months ended September 30, 2020, the computation of diluted net income per share excludes the effects of the assumed exercise of 148,550 and 362,017 options, respectively, since their inclusion would be anti-dilutive as their exercise prices were above market value.

(7) Related Parties

In October 2020, the Company’s Board of Directors appointed Michael Flum to serve as President and Chief Operating Officer. Previously, he was serving as Senior Vice President and Chief Operating Officer effective October 2019 and had served as Vice President of Operations & Alternative Data since June 2018. 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.

(8) 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 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 customers and those that subscribed after the outbreak.

10
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 has received $1.56 million. 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 is scheduled to mature on April 15, 2022, has a 1.00% interest rate, may be prepaid at any time without penalty and is subject to the terms and conditions applicable to all loans made pursuant to the PPP as administered by the SBA under the CARES Act. The loan and accrued interest is forgivable after eight weeks so long as the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.  The “PPP” was amended on June 5, 2020 by the Paycheck Protection Program Flexibility Act, which stated that payments are deferred until the date on which the amount of forgiveness determined is remitted to the lender, with a maximum deferral of up to 16 months. The President signed the Consolidated Appropriations Act 2021 (the “CAA”) into law on December 27, 2020. The new COVID-19 legislation enhances and expands certain aspects of the CARES Act, most notably allowing borrowers to select their covered period to meet payroll and qualified expense requirements between 8 and 24 weeks.  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 has applied for forgiveness by the deadline set forth by the lender. The current portion of this loan, including interest that is due within the next 12 months is $1,561,500. The Company is waiting on the review process to be completed by the SBA.
11

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

Business Environment

The continuing uncertainty in the worldwide financial system has negatively impacted general business conditions. It is possible that a weakened economy could adversely affect our clients’ need for credit information, or even their solvency, but we cannot predict whether or to what extent this will occur.

Our strategic priorities and plans for 2021 are to continue to build on the improvement initiatives underway to achieve sustainable, profitable growth. Due to COVID-19, the Company has elected to voluntarily close in-office personnel functions for the safety of our employees. Only a limited number of IT and other personnel are periodically visiting our office to ensure the integrity of our computer network, retrieve physical files, and any other function that cannot be done remotely. This has allowed our employee base to work remotely and the Company’s operations to continue normally. Nevertheless, the long-term impact the pandemic will have on the Company’s subscriber base is unknown at this time. The Company may face loss of contracts and/or customers, customer credit risk, and general economic calamities. Accordingly, these global market conditions will affect the level and timing of resources deployed in pursuit of these initiatives in 2021.

12
Financial Condition, Liquidity and Capital Resources

The following table presents selected financial information and statistics as of September 30, 2021 and December 31, 2020 (dollars in thousands):

   
September 30,
2021
   
December 31,
2020
 
Cash and cash equivalents
 
$
11,694
   
$
10,303
 
Accounts receivable, net
 
$
2,273
   
$
2,557
 
Working capital
 
$
1,593
   
$
848
 
Cash ratio
   
0.91
     
0.79
 
Quick ratio
   
1.09
     
0.98
 
Current ratio
   
1.12
     
1.06
 

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 available-for-sale securities (municipal bonds).

As of September 30, 2021, the Company had $11.69 million in cash and cash equivalents, an increase of approximately $1.4 million from December 31, 2020. This increase was primarily the result of cash provided by investing activities from the sale of our municipal bond investments of approximately $458,000 and cash provided from operating activities of approximately $1.2 million being greater than the purchase of equipment totaling approximately $272,000.

The main component of current liabilities at September 30, 2021 was unexpired subscription revenue of $9.3 million, which should not require significant future cash outlay, as this is annual reoccurring revenue, 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 generally approximates 12 months.

The Company has no bank lines of credit or other currently available credit sources.

A major component of short-term liabilities is the Company’s bank loan from the SBA for the PPP program in the amount of $1.56 million. The loan and accrued interest is forgivable after eight weeks so long as the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its employment levels.  In accordance with the requirements of 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 has applied for forgiveness by the deadline set forth by the lender, and the current portion of this loan, including interest that is due within the next 12 months is $1,561,500.  The Company is waiting on the review process to be completed by the SBA.

Given the ongoing COVID-19 pandemic, there is no guarantee that our current business levels can be sustained or that our subscriber base will renew their service(s) at similar spend levels in the future. To ensure we have the financial resources to meet our commitments to our employees and service providers in the upcoming months, and to avoid lay-offs or other cost cutting measures, the Company applied for and received a loan under the Paycheck Protection Program. With the proceeds of this loan, along with its existing balance of cash and cash equivalents and cash generated from operations, the Company expects to have sufficient liquidity to continue operations for the next 12 months.

13
Off-Balance Sheet Arrangements

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

Results of Operations


   
3 Months Ended September 30,
 
   
2021
   
2020
 
   
Amount
   
% of Total
Operating
Revenues
   
Amount
   
% of Total
Operating
Revenues
 
                         
Operating revenues
 
$
4,323,676
     
100
%
 
$
4,037,456
     
100
%
                                 
Operating expenses:
                               
Data and product costs
   
1,519,860
     
35
%
   
1,514,659
     
38
%
Selling, general and administrative expenses
   
2,024,562
     
47
%
   
2,110,280
     
52
%
Depreciation and amortization
   
75,067
     
2
%
   
52,931
     
1
%
Total operating expenses
   
3,619,489
     
84
%
   
3,677,870
     
91
%
                                 
Income from operations
   
704,187
     
16
%
   
359,586
     
9
%
Other income, net
   
263
     
0
%
   
916
     
0
%
                                 
Income before income taxes
   
704,450
     
16
%
   
360,502
     
9
%
Provision for income taxes
   
(209,098
)
   
(5
%)
   
(79,420
)
   
(2
%)
                                 
Net income
 
$
495,352
     
11
%
 
$
281,082
     
7
%

Operating revenues increased approximately $286,000, or 7%, for the three months ended September 30, 2021 compared to the third quarter of fiscal 2020. This overall revenue growth resulted from an increase in internet subscription service revenue, attributable to increased sales to new and existing subscribers.

Selling, general and administrative expenses decreased approximately $86,000, or 4%, for the third quarter of fiscal 2021 compared to the same period of fiscal 2020. This decrease was due to a revised methodology of accruing commissions implemented in December 2020 and lower commission expense for the third quarter of 2021. This decrease was partially offset by higher salary and related employee benefits.

14
   
9 Months Ended September 30,
 
   
2021
   
2020
 
   
Amount
   
% of Total
Operating
Revenues
   
Amount
   
% of Total
Operating
Revenues
 
                         
Operating revenues
 
$
12,704,756
     
100
%
 
$
11,598,210
     
100
%
                                 
Operating expenses:
                               
Data and product costs
   
4,721,331
     
37
%
   
4,556,456
     
39
%
Selling, general and administrative expenses
   
6,415,736
     
50
%
   
6,919,804
     
60
%
Depreciation and amortization
   
206,083
     
2
%
   
160,736
     
1
%
Total operating expenses
   
11,343,150
     
89
%
   
11,636,996
     
100
%
                                 
Income (loss) from operations
   
1,361,606
     
11
%
   
(38,786
)
   
(0
%)
Other income, net
   
3,756
     
0
%
   
27,017
     
0
%
                                 
Income (loss) before income taxes
   
1,365,362
     
11
%
   
(11,769
)
   
(0
%)
(Provision for) benefit from income taxes
   
(359,588
)
   
(3
%)
   
123,424
     
1
%
                                 
Net income
 
$
1,005,774
     
8
%
 
$
111,655
     
1
%

Operating revenues increased approximately $1.1 million, or 10%, for the nine months ended September 30, 2021 compared to the same period of fiscal 2020. 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 approximately $165,000, or 4%, for the nine months ended September 30, 2021 compared to the same period of fiscal 2020. This increase was due primarily to: (1) higher salary and related employee benefits due to pay raises to staff, (2) 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 approximately $504,000, or 7%, for the nine months ended September 30, 2021 compared to the same period of fiscal 2020. This decrease was due to a revised methodology of accruing commissions implemented in December 2020 and lower commission expense in 2021. This decrease was partially offset by higher salary and related employee benefits.

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 and the uncertainties caused by the COVID-19 pandemic, the Company’s ability to accurately forecast its revenues, gross profits and operating expenses as a percentage of net sales is somewhat limited, as the Company cannot fully utilize its historical subscription and renewal rates of its clients for guidance. 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.

15
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. The Company anticipates that sales and marketing expenses will continue to increase in dollar amount and as a percentage of revenues during the remainder of 2021 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 2021 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 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 short-term and long-term effects the COVID-19 outbreak and related developments will have on our customers and their ongoing businesses and how those effects may impact our sales to them, (ii) the Company’s ability to retain existing customers, attract new customers 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 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.

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 “Business Environment” and “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.

16
Item 4.
Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective to ensure that all material information required to be disclosed by us in reports that we file or submit under the Exchange Act is 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.

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.

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.

17
PART II. OTHER INFORMATION

Item 6.
Exhibits

 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
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

18
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
CREDITRISKMONITOR.COM, INC.
     
(REGISTRANT)
       
Date: November 12, 2021
By:
/s/
Steven Gargano
     
Steven Gargano
     
Senior Vice President & Chief Financial Officer
     
(Principal Finance and Accounting Officer)


19
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