-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P/IjfbeWJs5OXoVA6TXjPneh5fxZ0A5KWtNkIPuJxXX/Pnk1RQ7CQUfJIVWyiWoa IVd/T+uAg+dyknUyrYBGjw== 0000891554-00-001241.txt : 20000509 0000891554-00-001241.hdr.sgml : 20000509 ACCESSION NUMBER: 0000891554-00-001241 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREDITRISKMONITOR COM INC CENTRAL INDEX KEY: 0000315958 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SERVICES, NEC [8900] IRS NUMBER: 362972588 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-08601 FILM NUMBER: 621386 BUSINESS ADDRESS: STREET 1: 2001 MARCUS AVE W290 CITY: LAKE SUCCESS STATE: NY ZIP: 11042-1011 BUSINESS PHONE: 9147222410 MAIL ADDRESS: STREET 1: 2001 MARCUS AVE W290 CITY: LAKE SUCCESS STATE: NY ZIP: 11042-1011 FORMER COMPANY: FORMER CONFORMED NAME: NEW GENERATION FOODS INC DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2000 -------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _________ to __________ Commission file number 1-8601 ------ CREDITRISKMONITOR.COM, INC. - ------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 36-2972588 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 110 Jericho Turnpike, Suite 202 Floral Park, New York 11001 - ------------------------------------------------------------------------------- (Address of principal executive offices) (516) 620-5400 - ------------------------------------------------------------------------------- (Issuer's telephone number) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: Common stock $.01 par value -- 5,341,129 shares outstanding as of May 4, 2000. - ------------------------------------------------------------------------------- Transitional Small Business Disclosure Format (check one): Yes [ ] No [x] CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2000 (Unaudited) and December 31, 1999 (Audited)......................................3 Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 1999 (Unaudited)............................4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (Unaudited)............................5 Condensed Notes to Consolidated Financial Statements.................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................11 SIGNATURES...................................................................12 -2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2000 AND DECEMBER 31, 1999
March 31, Dec. 31, 2000 1999 ---- ---- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 1,436,914 $ 1,421,885 Accounts receivable, net of allowance of $32,500 and $32,500, respectively 460,908 575,048 Other 25,891 15,798 --------------- ---------------- Total current assets 1,923,713 2,012,731 Property and equipment, net of accumulated depreciation of $85,255 and $61,771, respectively 335,162 316,999 Goodwill, net of accumulated amortization 2,154,673 2,183,275 Other assets 34,827 21,075 ---------------- ---------------- Total assets $ 4,448,375 $ 4,534,080 =============== ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Unearned subscription income $ 1,407,831 $ 1,263,145 Deferred advertising revenue 16,725 - Accrued expenses 67,773 55,598 Accounts payable 28,798 23,388 Current portion of capitalized lease obligation 4,173 4,070 Other 29,970 41,768 --------------- ---------------- Total current liabilities 1,555,270 1,387,969 Long-term debt, net of current portion: Secured promissory note, net of unamortized discount of $147,190 and $167,643, respectively 852,810 832,357 Expense promissory note 108,358 106,087 Capitalized lease obligation 18,908 19,990 --------------- ---------------- 980,076 958,434 Deferred rent 1,402 467 Deferred compensation 108,750 86,250 --------------- ---------------- Total liabilities 2,645,498 2,433,120 Stockholders' equity: Common stock 53,411 53,411 Additional paid-in capital 27,192,567 27,192,567 Accumulated deficit (25,443,101) (25,145,018) --------------- ---------------- Total stockholders' equity 1,802,877 2,100,960 --------------- ---------------- Total liabilities and stockholders' equity $ 4,448,375 $ 4,534,080 =============== ================
See accompanying condensed notes to consolidated financial statements. -3- CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (Unaudited)
2000 1999 ---- ---- Operating revenues $ 427,344 $ 274,639 Operating expenses: Data and product costs 184,027 130,078 Selling, general and administrative expenses 484,865 344,920 Depreciation and amortization 52,086 28,233 -------------- ---------------- Total operating expenses 720,978 503,231 -------------- ---------------- Loss from operations (293,634) (228,592) Other income 21,902 21,115 Interest expense (23,331) (16,901) Write-off of intangible assets - (134,076) -------------- --------------- Loss before income taxes (295,063) (358,454) Provision for income taxes 3,020 - -------------- --------------- Net loss $ (298,083) $ (358,454) ============== =============== Net loss per share of common stock: Basic $ (0.06) $ (0.07) ============== =============== Diluted $ (0.06) $ (0.07) ============== =============== Weighted average number of common shares outstanding: Basic 5,341,129 5,300,129 ============== =============== Diluted 5,341,129 5,300,129 ============== ===============
See accompanying condensed notes to consolidated financial statements. -4- CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (Unaudited)
2000 1999 ---- ---- Cash flows from operating activities: Net loss $ (298,083) $ (358,454) Adjustments to reconcile net loss to net cash provided by operations: Goodwill amortization 28,602 19,068 Depreciation 23,484 9,165 Write-off of intangible assets - 134,076 Deferred compensation 22,500 18,750 Amortization of debt discount 20,453 15,505 Deferred interest expense 2,271 1,396 Deferred rent 935 - Changes in operating assets and liabilities, net of effect of purchase of assets from Market Guide Inc.: Accounts receivable 114,140 35,786 Other current assets (10,093) (11,724) Unearned subscription income 144,686 57,699 Deferred advertising revenue 16,725 - Accounts payable 5,410 47,709 Accrued expenses 12,175 34,373 Other current liabilities (11,798) (1,573) --------------- ---------------- Net cash provided by operating activities 71,407 1,776 --------------- ---------------- Cash flows from investing activities: Purchase of assets from Market Guide Inc., net of debt issued - (1,273,547) Purchase of fixed assets (41,647) (19,639) Increase in other assets (13,752) (6,573) --------------- ---------------- Net cash used in investing activities (55,399) (1,299,759) --------------- ---------------- Cash flows from financing activities: Proceeds from private offering, net of offering expenses - 3,193,053 Payments on capital lease obligation (979) - --------------- ---------------- Net cash provided by (used in) financing activities (979) 3,193,053 --------------- ---------------- Net increase in cash and cash equivalents 15,029 1,895,070 Cash and cash equivalents at beginning of period 1,421,885 13,400 --------------- ---------------- Cash and cash equivalents at end of period $ 1,436,914 $ 1,908,470 =============== ================
See accompanying condensed notes to consolidated financial statements. -5- CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Basis of Presentation The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in the Company's annual report on Form 10-KSB for the year ended December 31, 1999. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the Company's financial position as of March 31, 2000 and the results of its operations and its cash flows for the three months ended March 31, 2000 and 1999. Results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results of a full year. Certain prior year amounts have been reclassified to conform with the current year presentation. (2) Purchase of CreditRisk Monitor and Capital Transactions In September 1998, the Company entered into an option agreement (the "Purchase Option") to purchase the assets of the CreditRisk Monitor ("CRM") credit information service from Market Guide Inc. ("MGI"). CRM is an Internet based service providing credit reports to corporate personnel on retailing and other companies incorporating MGI developed financial information, peer and trend analysis, news, and other vital information. The Company paid $60,000 for the Purchase Option in addition to paid and accrued legal fees totaling $55,000. On December 29, 1998, the Company notified MGI of its intention to exercise this Purchase Option, which was consummated on January 19, 1999. On January 19, 1999, the Company exercised its option to purchase the assets of CRM. The assets purchased included customer contracts, receivables, equipment, software, and intangibles. The net present value of the purchase price was approximately $2.15 million (inclusive of the $60,000 paid for the Purchase Option in September 1998), of which $1.23 million was paid at closing and the balance is represented by two secured promissory notes (one for approximately $100,000 and the other for $760,000, net of $240,000 discount). These promissory notes provide for the deferral of principal amortization until February 2001 (for the $100,000 note which bears interest at 8.5 percent) and July 2001 (for the $1.0 million note which bears interest at 6 percent), respectively. Both notes are then payable over 24 months and are secured by the assets purchased and substantially all other assets of the Company. The $1.0 million note provides for no interest through June 30, -6- 2001, while the other note provides for the deferral of interest until debt servicing commences. Concurrently, the Company completed a private placement of 1,300,000 shares of its common stock to approximately 25 "accredited investors" at a purchase price of $2.50 per share, for gross proceeds of $3.25 million. The proceeds from this offering were used to finance the cash portion of the CRM acquisition and the remainder will be used for future working capital needs. These securities were subsequently registered under a Registration Statement on Form SB-2 declared effective by the Securities and Exchange Commission on May 17, 1999. In anticipation of the exercise of the Purchase Option, in November 1998, Flum Partners, a related party, provided the Company with a line of credit of up to $20,000 of which only $5,500 was drawn upon and, in consideration thereof, the Company agreed to issue to Flum Partners 2,000 shares of common stock. As a participant in the private placement, Flum Partners purchased 160,000 shares of common stock. In addition, as a condition to the private placement, Flum Partners agreed to convert all of its 1,100,000 shares of senior preferred stock into 3,598,299 shares of common stock on or prior to the closing of the private placement. This conversion was effected as of January 19, 1999. This acquisition was accounted for using the purchase method of accounting. Accordingly, a portion of the purchase price was allocated to net tangible and intangible assets acquired based on their estimated fair values. A portion was also allocated to in-process research and development projects that have not reached technological feasibility and have no probable alternative future uses. This amount ($134,076) was written-off in the first quarter of 1999. The balance of the purchase price was recorded as goodwill, and is being amortized over 20 years. (3) Net Income (Loss) Per Share Income (loss) per share is computed under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 requires the dual presentation of basic and diluted EPS on the face of the statement of income. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations In January 1999, the Company acquired the assets of the CRM and commenced operations. Accordingly, the three month periods ended March 31, 2000 and 1999 reflect the operating results of the Company's credit information service business. This business began selling its product in April 1997 and is still in its early stages of development. Operating revenues for the first quarter of fiscal 2000 increased 56% to $427,344 compared to $274,639 for the first quarter of fiscal 1999. The increase in operating revenue was primarily due to an increase in the number of subscribers to the Company's subscription service and the selling of advertising space on its web site during the first quarter of fiscal 2000. Data and product costs for the first quarter of fiscal 2000 was $184,027 compared to $130,078 for the first quarter of fiscal 1999. The dollar increase was primarily due to higher salary and related employee benefits due to an increase in headcount. The Company added personnel to deliver its expanded product line, the Company is currently tracking in excess of 8,500 public companies versus less than 600 companies at the end of the first quarter of fiscal 1999. Data and product costs as a percentage of operating revenues decreased to 43% in the first quarter of fiscal 2000 from 47% in the first quarter of fiscal 1999. For the first quarter of fiscal 2000, selling, general and administrative expenses were $484,865 or 113% of operating revenues, compared to $344,920 million or 126% of revenues for the first quarter of fiscal 1999. The dollar increase from the first quarter of fiscal 1999 was primarily due to an increase in headcount as the Company has added salespeople and customer support personnel over the past 12 months. Depreciation and amortization increased to $52,086 for the first quarter of fiscal 2000 compared to $28,233 for the first quarter of fiscal 1999, primarily due to higher depreciation expense related to the acquisition of computer equipment and other fixed assets during the last 12 months. The Company incurred a net loss of $298,083 and $358,454 for the three months ended March 31, 2000 and 1999, respectively. Included in the results for the three months ended March 31, 1999 is a write-off of $134,076 representing a portion of the purchase price paid for the CRM assets allocated to in-process research and development projects that have not reached technological feasibility and have no probable alternative future uses. The Company over time intends to expand its operations by expanding the breadth and depth of its product and service offerings and the introduction of new or 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 Company's limited operating history and the emerging nature of the market in which it competes, the Company is unable to accurately forecast its revenues. The Company's current and future expense levels are based largely on its investment plans and estimates of future -8- revenues and are to a large extent fixed. Sales and operating results generally depend on the volume of, timing of and ability to sign new subscribers, 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, purchasing, service, marketing or acquisition decisions that could have a material adverse effect on its business, prospects, financial condition and results of operations. Factors that may adversely affect the Company's quarterly operating results include, among others: (i) the Company's ability to retain existing subscribers, attract new subscribers at a steady rate and maintain subscriber satisfaction, (ii) the development, announcement or introduction of new services and products by the Company and its competitors, (iii) price competition, (iv) the increasing acceptance of the Internet for the purchase of credit information such as that offered by the Company, (v) the Company's ability to upgrade and develop its systems and infrastructure, (vi) the Company's ability to attract new personnel in a timely and effective manner, (vii) the Company's ability to manage effectively the broadening of its product to encompass additional companies monitored and the development of new products, (viii) the Company's ability to successfully manage the integration of third-party data into its Internet site, (ix) technical difficulties, system downtime or Internet brownouts, (x) the amount and timing of operating costs and capital expenditures relating to expansion of the Company's business, operations and infrastructure, and (xi) general economic conditions and economic conditions specific to the Internet and the credit information industry. Liquidity and Capital Resources During 1998 the Company located, investigated and negotiated the purchase of the CRM business then owned by MGI. In September 1998 the Company purchased an option to purchase the assets of the CRM business and it exercised its option on December 29, 1998. The transaction closed effective January 19, 1999. In order to raise funds to pay the $1.23 million cash portion of the purchase price for the CRM assets, the costs of the acquisition and to have sufficient working capital to continue to develop and run that business, the Company completed a private placement of 1,300,000 shares on January 19, 1999 of its Common Stock to approximately 25 "accredited investors" at a purchase price of $2.50 per share, for gross proceeds of $3.25 million. Management believes that the proceeds of this offering will provide adequate working capital to fund operating losses of CRM until cash breakeven has been achieved. The transactions described above, along with the issuance of 2,000 shares of Common Stock to Flum Partners in November 1998 in consideration of its provision to the Company of a line of credit and the conversion by Flum Partners of its Senior Preferred shares into Common Stock on or about January 20, 1999, resulted in Flum Partners owning more than 72% of the Company's outstanding Common Stock (which is its only equity security now outstanding) after the 1999 Private Placement. -9- Funds from the 1999 Private Placement became available to the Company on or about January 19, 1999, at which date the Company paid the cash portion of the purchase price for the CRM assets, paid the expenses of the purchase transaction and retained the remaining proceeds for use as working capital. At March 31, 2000, the Company had cash and cash equivalents of $1,436,914 compared to $1,421,885 at December 31, 1999. Working capital at March 31, 2000 was $368,443 compared to working capital of $624,762 at December 31, 1999. The decline in working capital from December 31, 1999 is due primarily to a decrease in accounts receivable, reflecting the seasonality of the Company's billing cycle, and the use of cash to fund the Company's operating loss. The Company has no bank lines of credit or other currently available credit sources. YEAR 2000 ISSUES The Company did not experience any material disruptions in its operations or activities as a result of the so-called "Y2K Problem". Nor did the Company incur material expenses in correcting perceived or suspected Y2K problems. In addition, the Company is not aware that any of its suppliers, customers or on-line partners has experienced any material disruptions in their operations or activities. The Company does not expect to encounter any such problems in the foreseeable future, although it continues to monitor its computer operations for signs or indications of such a problem. FORWARD-LOOKING STATEMENTS Part I, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of this Quarterly Report on Form 10-QSB may contain forward-looking statements, including statements regarding future prospects, industry trends, competitive conditions, litigation and Year 2000 systems 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 in Part I, Item 2 under "Results of Operations" and other factors referenced herein or from time to time as "risk factors" or otherwise in the Company's Registration Statements or Securities and Exchange Commission reports. -10- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27. Financial Data Schedule. (b) Reports on Form 8-K None. -11- SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CREDITRISKMONITOR.COM, INC. (REGISTRANT) Date: May 8, 2000 By: /s/ Lawrence Fensterstock Lawrence Fensterstock Chief Financial Officer -12- EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CREDITRISKMONITOR.COM, INC.'S MARCH 31, 2000 FORM 10-QSB FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000315958 CREDITRISKMONITOR.COM, INC. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1,437 0 493 32 0 1,924 420 85 4,448 1,555 0 0 0 53 1,749 4,448 427 427 184 721 0 0 23 (295) 3 (298) 0 0 0 (298) (0.06) (0.06)
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