-----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, MhX3wRpU+xhqaI1ixBT0vmA3vjAntVQAHwXCpURTaUnvtf63F9pD+UpShWV+ajdJ 5rN6XoYSwGjCY9GhXWk7Xw== 0001169232-04-005718.txt : 20041115 0001169232-04-005718.hdr.sgml : 20041115 20041115081639 ACCESSION NUMBER: 0001169232-04-005718 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041115 DATE AS OF CHANGE: 20041115 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: 1934 Act SEC FILE NUMBER: 001-08601 FILM NUMBER: 041141796 BUSINESS ADDRESS: STREET 1: 704 EXECUTIVE BOULEVARD STREET 2: SUITE A CITY: VALLEY COTTAGE STATE: NY ZIP: 10989 BUSINESS PHONE: 845-230-3000 MAIL ADDRESS: STREET 1: 704 EXECUTIVE BOULEVARD STREET 2: SUITE A CITY: VALLEY COTTAGE STATE: NY ZIP: 10989 FORMER COMPANY: FORMER CONFORMED NAME: NEW GENERATION FOODS INC DATE OF NAME CHANGE: 19920703 10QSB 1 d61209_10-qsb.txt FORM 10QSB 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: September 30, 2004 |_| 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) 704 Executive Drive, Suite A Valley Cottage, New York 10989 (Address of principal executive offices) (845) 230-3000 (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 -- 7,679,462 shares outstanding as of October 29, 2004. Transitional Small Business Disclosure Format (check one): Yes |_| No |X| CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - September 30, 2004 (Unaudited) and December 31, 2003.................................................2 Consolidated Statements of Operations for the Three Months Ended September 30, 2004 and 2003 (Unaudited).........................3 Consolidated Statements of Operations for the Nine Months Ended September 30, 2004 and 2003 (Unaudited).........................4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (Unaudited).........................5 Condensed Notes to Consolidated Financial Statements..................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................9 Item 3. Controls and Procedures..........................................15 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................16 Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities.................................................16 Item 6. Exhibits and Reports on Form 8-K.................................16 SIGNATURES....................................................................18 EXHIBITS 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.....................19 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.....................21 32.1 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.............................23 32.2 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.............................24 1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
Sept. 30, Dec. 31, 2004 2003 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 943,806 $ 1,138,447 Accounts receivable, net of allowance 481,681 504,591 Other current assets 108,750 102,602 ------------ ------------ Total current assets 1,534,237 1,745,640 Property and equipment, net 119,734 80,000 Goodwill, net 1,954,460 1,954,460 Prepaid and other assets 38,621 18,880 ------------ ------------ Total assets $ 3,647,052 $ 3,798,980 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Deferred revenue $ 2,020,450 $ 2,032,478 Accounts payable 214,576 208,065 Accrued expenses 172,029 112,418 Current portion of long-term debt 97,550 90,328 Current portion of capitalized lease obligations 12,687 10,873 ------------ ------------ Total current liabilities 2,517,292 2,454,162 ------------ ------------ Long-term debt, net of current portion: Promissory note 546,694 620,787 Capitalized lease obligations 17,131 2,757 ------------ ------------ 563,825 623,544 Deferred rent payable 1,913 5,295 Deferred compensation 88,890 238,750 ------------ ------------ Total liabilities 3,171,920 3,321,751 ------------ ------------ Stockholders' equity: Common stock 76,794 74,074 Additional paid-in capital 28,122,383 28,035,096 Accumulated deficit (27,724,045) (27,631,941) ------------ ------------ Total stockholders' equity 475,132 477,229 ------------ ------------ Total liabilities and stockholders' equity $ 3,647,052 $ 3,798,980 ============ ============
See accompanying condensed notes to consolidated financial statements. 2 CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (Unaudited)
2004 2003 ---- ---- Operating revenues $ 851,231 $ 756,999 Operating expenses: Data and product costs 282,366 290,896 Selling, general and administrative expenses 530,357 620,271 Depreciation and amortization 15,499 22,195 ----------- ----------- Total operating expenses 828,222 933,362 ----------- ----------- Income (loss) from operations 23,009 (176,363) Other income 2,193 1,010 Interest expense (18,183) (20,001) Loss on retirement of fixed assets (267) -- ----------- ----------- Income (loss) before income taxes 6,752 (195,354) Provision for state and local income taxes -- (282) ----------- ----------- Net income (loss) $ 6,752 $ (195,636) =========== =========== Net income (loss) per share of common stock: Basic and diluted $ 0.00 $ (0.04) =========== =========== Weighted average number of common shares outstanding: Basic and diluted 7,559,649 5,512,879 =========== ===========
See accompanying condensed notes to consolidated financial statements. 3 CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (Unaudited)
2004 2003 ---- ---- Operating revenues $ 2,484,855 $ 2,210,493 Operating expenses: Data and product costs 801,120 934,580 Selling, general and administrative expenses 1,678,074 1,811,675 Depreciation and amortization 47,759 69,469 ----------- ----------- Total operating expenses 2,526,953 2,815,724 ----------- ----------- Loss from operations (42,098) (605,231) Other income 5,779 5,428 Interest expense (55,292) (61,854) Loss on retirement of fixed assets (267) -- ----------- ----------- Loss before income taxes (91,878) (661,657) Provision for state and local income taxes (226) (982) ----------- ----------- Net loss $ (92,104) $ (662,639) =========== =========== Net loss per share of common stock: Basic and diluted $ (0.01) $ (0.12) =========== =========== Weighted average number of common shares outstanding: Basic and diluted 7,458,191 5,450,379 =========== ===========
See accompanying condensed notes to consolidated financial statements. 4 CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (Unaudited)
2004 2003 ---- ---- Cash flows from operating activities: Net loss $ (92,104) $ (662,639) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 47,759 69,469 Deferred compensation -- 12,500 Deferred rent (3,382) (2,102) Loss on retirement of fixed assets 267 -- Changes in operating assets and liabilities: Accounts receivable 22,910 111,272 Other current assets (6,148) 13,435 Prepaid and other assets (19,741) (3,643) Deferred revenue (12,028) (24,246) Accounts payable 6,511 112,819 Accrued expenses (249) 18,390 ----------- ----------- Net cash used in operating activities (56,205) (354,745) ----------- ----------- Cash flows from investing activities: Purchase of fixed assets (61,365) (6,562) ----------- ----------- Net cash used in investing activities (61,365) (6,562) ----------- ----------- Cash flows from financing activities: Issuance of common stock -- 19,800 Proceeds from exercise of stock options 7 8 Payments on promissory note (66,871) (53,415) Payments on capital lease obligations (10,207) (7,851) ----------- ----------- Net cash used in financing activities (77,071) (41,458) ----------- ----------- Net decrease in cash and cash equivalents (194,641) (402,765) Cash and cash equivalents at beginning of period 1,138,447 988,427 ----------- ----------- Cash and cash equivalents at end of period $ 943,806 $ 585,662 =========== =========== Supplemental schedule of noncash investing and financing activities: Acquisition of computer equipment under capital lease $ 26,395 $ -- =========== ===========
See accompanying condensed notes to consolidated financial statements. 5 CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Basis of Presentation The consolidated financial statements included herein have been prepared by CreditRiskMonitor.com, Inc. (the "Company" or "CRM"), 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 accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto in the Company's annual report on Form 10-KSB for the year ended December 31, 2003. In the opinion of the Company, 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 September 30, 2004 and the results of its operations and its cash flows for the nine-month periods ended September 30, 2004 and 2003. Results of operations for the three and nine-month periods ended September 30, 2004 and 2003 are not necessarily indicative of the results of a full year. Certain prior year amounts have been reclassified to conform with the fiscal 2004 presentation. (2) Stock-Based Compensation The Company accounts for its stock-based employee compensation plan in accordance with the provisions of APB No. 25, "Accounting for Stock Issued to Employees" and related Interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted under this plan had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income (loss) and net income (loss) per share had the Company applied the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", to its stock-based employee compensation plan for periods noted: 6
3 Months Ended 9 Months Ended September 30, September 30, ------------- ------------- 2004 2003 2004 2003 ---- ---- ---- ---- Net income (loss) As reported $ 6,752 $(195,636) $ (92,104) $(662,639) Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax benefits or effects 8,275 (1,324) 958 (7,944) --------- --------- --------- --------- Pro forma $ 15,027 $(196,960) $ (91,146) $(670,583) ========= ========= ========= ========= Net loss per share - basic and diluted As reported $ (0.00) $ (0.04) $ (0.01) $ (0.12) Pro forma $ (0.00) $ (0.04) $ (0.01) $ (0.12)
(3) Recently Issued Accounting Standards In January 2003, the FASB issued Financial Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which addresses consolidation by business enterprises of variable interest entities ("VIEs"). The accounting provisions and disclosure requirements of FIN 46 are effective immediately for VIEs created after January 31, 2003, and are effective for the Company's fiscal period ending March 31, 2004, for VIEs created prior to February 1, 2003. In December 2003, the FASB published a revision to FIN 46 ("FIN 46R") to clarify some of the provisions of the interpretation and to defer the effective date of implementation for certain entities. Under the guidance of FIN 46R, public companies that have interests in VIE's that are commonly referred to as special purpose entities are required to apply the provisions of FIN 46R for periods ending after December 15, 2003. A public company that does not have any interests in special purpose entities but does have a variable interest in a VIE created before February 1, 2003, must apply the provisions of FIN 46R by the end of the first interim or annual reporting period ending after March 14, 2004. The Company holds no interest in variable interest entities, thus the adoption of the provisions of these pronouncements did not have a material effect on the Company's financial statements. (4) Deferred Compensation Beginning January 20, 1999 and continuing through June 30, 2003, the Company's Chief Executive Officer agreed to defer a portion of his annual salary. The cumulative amount deferred of $238,750 is non-interest bearing and is payable at the earlier of (a) the attainment of sustainable cash flow breakeven and (b) the repayment in full of the revised promissory note issued in connection with the Company's acquisition of the assets of CRM from Market Guide Inc. In July 2004, the Company's Board of Directors agreed to issue 200,000 shares of the Company's common stock with a fair value of $90,000 as partial payment of this liability as well as paying to the Chief Executive Officer the tax "gross-up" on this stock award, thereby reducing the cumulative deferred amount by a total of $150,000. (5) Legal Proceedings As previously reported, in November, 2001, the Company commenced the Contempt Proceedings against Samuel Fensterstock and a competitor (collectively the 7 "Defendants") in the Supreme Court of the State of New York, Nassau County; on August 9, 2004, the Court issued a Decision finding that Defendants violated the Settlement Agreement and were in contempt of the July 2001 Order, and awarded compensatory and punitive damages against the Defendants aggregating $821,044, plus attorney fees and legal costs in an amount to be determined. On August 24, 2004, the Court entered a Judgment providing for the enforcement of its award and assigned a Referee to conduct a hearing concerning the amount of attorneys' fees and costs to be awarded. On August 30, 2004, Defendants filed a Notice of Appeal and posted a $900,000 bond to secure the compensatory and punitive damages awarded in the Judgment. On September 10, 2004 the competitor and Samuel Fensterstock served separate Motions to Reargue. In the Company's action against Decision Strategies LLC ("Decision Strategies"), previously reported, Decision Strategies has moved to dismiss the Company's complaint, which Motion is returnable on November 16, 2004. (6) Earnings Per Share The computation of diluted earnings per share excludes all options since their inclusion would be anti-dilutive. During the three months ended September 30, 2004, 483,000 options were excluded. During the three months ended September 30, 2003, 566,000 options were excluded. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES In December 2003, the Company augmented its working capital by raising $834,000 through the sale of approximately 1.85 million common shares at $0.45 per share in a private placement. At September 30, 2004, the Company had cash, cash equivalents and other liquid assets of $944,000 compared to $1.14 million at December 31, 2003. The Company's working capital deficit at September 30, 2004 was approximately $983,000 compared to a working capital deficit of approximately $709,000 at December 31, 2003. This decrement was due primarily to a decrease of $195,000 in cash and cash equivalents and a $60,000 increase in accrued expenses. Additionally, the working capital deficit is mainly derived from the $2.02 million in deferred revenue, which should not require any future cash outlay other than the cost of preparation and delivery of the applicable commercial credit reports. The deferred revenue is taken into income over the subscription term, which approximates twelve months. The Company has no bank lines of credit or other currently available credit sources. For the nine months ended September 30, 2004, the Company reported a $195,000 decrease in cash and cash equivalents compared to a $403,000 decrease for the same period in the prior fiscal year. Excluding payment of expenses incurred in connection with the Contempt Proceeding, the Competitor Action and the other litigation described in Part II, Item 1 (collectively, the "Litigation") the Company had positive cash flow of $34,000 for the nine months ended September 30, 2004 versus a cash flow deficit of $77,000 (also excluding payment of Litigation expenses) for the comparable period in fiscal 2003. The Company believes that its legal fees are likely to continue to be significant as a result of (i) Defendants' motion to reargue in the Contempt Proceedings, (ii) a decision by Defendants to appeal in the Contempt Proceedings if its motion to reargue is denied, (iii) the proceeding before the Referee to determine legal fees and court costs, and (iv) the ongoing litigation involving Decision Strategies. Nevertheless, the Company believes that in the aggregate such legal fees will be materially reduced from their prior level during the Hearing in the Contempt Proceedings (which concluded in November 2003). Additionally, the appellants have posted a bond that will secure the damages awarded by the court. The Company further believes that in the Contempt Proceedings the substantial award of actual and punitive damages as well as its court costs and legal fees should benefit its cash position. In addition, the Defendants should no longer be able to engage in anti-competitive activities which violate the Settlement Agreement, in which event the Company's ability to retain and/or obtain customers should be improved. Moreover, the Company believes that the court, in its discretion, may also award legal fees and court costs incurred in connection with the motions to reargue, Defendants' appeal and the proceeding before the Referee. There can be no assurance that any of the above results will be achieved, or that any amounts awarded in excess of the bond posted by Defendants will be collectible in whole or in part. The parties currently are engaged in discovery in connection with the Competitor Action. The Company believes that (a) the competitor's claims are 9 without merit, (b) in any event, the Company's counterclaims should reduce or eliminate the effect of any recovery the competitor may obtain, and (c) even if the competitor pursues the Competitor Action, the Company's ongoing legal fees nevertheless should be materially reduced. There can be no assurance that any of the above results will be achieved. The Company believes that Decision Strategies' claims are without merit and intends to vigorously prosecute its action and defend Decision Strategies' action. Although the negative cash flow impact of the Company's legal fees has been materially reduced to date in 2004, the Company nevertheless may be cash flow negative, after debt service, during 2004. This is due to incurrence of certain non-recurring capital expenditures in connection with its move to its new leased facility and the Company's decision to co-locate its production servers at an offsite location, both of which occurred in the third quarter of 2004. However, the Company believes that it will have sufficient resources to meet its working capital and capital expenditure needs, including debt service, for at least the next 12 months and, if it is correct in its assessment of the effect of the Litigation on the improvement of its cash flow and gross revenues, for the longer term as well. OFF-BALANCE SHEET ARRANGEMENTS The Company is not a party to any off-balance sheet arrangements. RESULTS OF OPERATIONS
3 Months Ended September 30, ---------------------------- 2004 2003 ---- ---- % of Total % of Total Amount Income Amount Income ------ ------ ------ ------ Operating revenues $ 851,231 100.00% $ 756,999 100.00% Operating expenses: Data and product costs 282,366 33.17% 290,896 38.43% Selling, general & administrative 530,357 62.30% 620,271 81.94% Depreciation and amortization 15,499 1.82% 22,195 2.93% --------- --------- --------- --------- Total operating expenses 828,222 97.30% 933,362 123.30% --------- --------- --------- --------- Income (loss) from operations 23,009 2.70% (176,363) -23.30% Other income 2,193 0.26% 1,010 0.13% Interest expense (18,183) -2.14% (20,001) -2.64% Loss on retirement of fixed assets (267) -0.03% -- 0.00% --------- --------- --------- --------- Income (loss) before income taxes 6,752 0.79% (195,354) -25.81% Provision for income taxes -- 0.00% (282) -0.04% --------- --------- --------- --------- Net income (loss) $ 6,752 0.79% $(195,636) -25.84% ========= ========= ========= =========
Operating revenues increased 12% for the three months ended September 30, 2004. This increase was primarily due to an increase in the number of subscribers to the Company's Internet subscription service offset in part by a decrease in the number of subscribers to the Company's subscription service for third-party international credit reports. Data and product costs decreased 3% for the third quarter of 2004 compared to the same period of fiscal 2003. This decrease was primarily due to the lower cost of acquiring third-party international credit reports, and lower salary and related employee benefits resulting from a decrease in headcount, offset 10 partially by the cost of the co-location facility and consultant fees incurred in connection with the moves described above. Selling, general and administrative expenses decreased 14% for the third quarter of fiscal 2004 compared to the same period of fiscal 2003. This decrease was primarily due to a decrease in legal fees incurred in connection with the Litigation, partially offset by an increase in rent expense due to the incurrence of rental payments on both the Company's old and new leased facilities as well as slightly higher salary and related employee benefit costs due to an increase in the Company's sales force during the past 12 months. Depreciation and amortization decreased 30% for the third quarter of fiscal 2004 compared to the same period of fiscal 2003. This decrease was due to a lower depreciable asset base during most of the quarter, as certain items have been fully depreciated but are still in use, offset by depreciation expense recorded for the assets either purchased or leased in connection with the Company's move and the decision to co-locate its production servers. Other income increased 117% for third quarter of fiscal 2004 compared to the same period last year. This increase was due to a higher level of funds invested in interest bearing accounts during the current quarter compared to the same period last year due to the funds raised in the December 2003 private placement. Interest expense decreased 9% for the third quarter of fiscal 2004 compared to the same period of fiscal 2003. This decrease was due to a lower outstanding promissory note balance. The Company reported net income of $7,000 versus a net loss of $196,000 for the three months ended September 30, 2004 and 2003, respectively. Excluding the Litigation expenses of $29,000 and $187,000 for the three months ended September 30, 2004 and 2003, respectively, the Company would have reported net income (loss) of $36,000 and ($9,000) for the three months ended September 30, 2004 and 2003, respectively.
9 Months Ended September 30, ---------------------------- 2004 2003 ---- ---- % of Total % of Total Amount Income Amount Income ------ ------ ------ ------ Operating revenues $ 2,484,855 100.00% $ 2,210,493 100.00% Operating expenses: Data and product costs 801,120 32.24% 934,580 42.28% Selling, general & administrative 1,678,074 67.53% 1,811,675 81.96% Depreciation and amortization 47,759 1.92% 69,469 3.14% ----------- --------- ----------- --------- Total operating expenses 2,526,953 101.69% 2,815,724 127.38% ----------- --------- ----------- --------- Loss from operations (42,098) -1.69% (605,231) -27.38% Other income 5,779 0.23% 5,428 0.25% Interest expense (55,292) -2.23% (61,854) -2.80% Loss on retirement of fixed assets (267) -0.01% -- 0.00% ----------- --------- ----------- --------- Loss before income taxes (91,878) -3.70% (661,657) -29.93% Provision for income taxes (226) -0.01% (982) -0.04% ----------- --------- ----------- --------- Net loss $ (92,104) -3.71% $ (662,639) -29.98% =========== ========= =========== =========
Operating revenues increased 12% for the nine months ended September 30, 2004. This increase was primarily due to an increase in the number of subscribers 11 to the Company's Internet subscription service offset in part by a decrease in the number of subscribers to the Company's subscription service for third-party international credit reports. Data and product costs decreased 14% for the first nine months of fiscal 2004 compared to the same period of fiscal 2003. This decrease was primarily due to the lower cost of acquiring third-party international credit reports, and lower salary and related employee benefits resulting from a decrease in headcount. Selling, general and administrative expenses decreased 7% for the first nine months of fiscal 2004 compared to the same period of fiscal 2003. This decrease was primarily due to a decrease in legal fees incurred in connection with the Litigation offset somewhat by higher salary and related employee benefit costs due to an increase in commission expense. Depreciation and amortization decreased 31% for the first nine months of fiscal 2004 compared to the same period of fiscal 2003. This decrease is due to a lower depreciable asset base as certain items have been fully depreciated but are still in use. Other income increased 6% for the nine months ended September 30, 2004 compared to the same period last year. This increase was due to a higher level of funds invested in interest bearing accounts during the current quarter compared to the same period last year due to the funds raised in the December 2003 private placement. Interest expense decreased 11% for the first nine months of fiscal 2004 compared to the same period of fiscal 2003. This decrease was due to a lower outstanding promissory note balance. The Company incurred a net loss of $92,000 and $662,000 for the nine months ended September 30, 2004 and 2003, respectively. Excluding the Litigation expenses of $192,000 and $409,000 for the nine months ended September 30, 2004 and 2003, respectively, the Company would have reported net income (loss) of $100,000 and ($253,000) for the nine months ended September 30, 2004 and 2003, respectively. CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS The Company's consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these consolidated financial statements require 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 consolidated 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: Revenue recognition -- CRM's domestic and international service is sold on a subscription basis pursuant to customer contracts that span varying periods of time, but are generally for a period of one year. The Company initially records accounts receivable and defers the related revenue when persuasive evidence of an arrangement exists, fees 12 are fixed or determinable, and collection is reasonably assured. Revenues are recognized ratably over the related subscription period. Revenue from the Company's third-party international credit report service is recognized as information is delivered and products and services are used by customers. Valuation of goodwill -- Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances warrant. If the carrying value of this asset exceeds its estimated fair value, the Company will record an impairment loss to write the asset down to its estimated fair value. Income taxes -- The Company provides for deferred income taxes resulting from temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years' tax returns. Deferred tax assets are recognized for temporary differences that will be deductible in future years' tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. FUTURE OPERATIONS 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 markets in which it competes, the Company's ability to accurately forecast its revenues, gross profits and operating expenses as a percentage of net sales is limited. The Company's current and future expense levels are based largely on its investment plans and estimates of future revenues and to a large extent are fixed. Sales and operating results generally depend on the Company's ability to attract and retain customers and the volume of and timing of their subscriptions for the Company's services, which are difficult to forecast. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to the Company's planned expenditures would have an immediate adverse effect on the Company's business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, the Company may from time to time make certain pricing, service, marketing or acquisition decisions that could have a material adverse effect on its business, prospects, financial condition and results of operations. Achieving 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) extend its brand position, (ii) provide its customers with outstanding value, and (iii) achieve sufficient sales volume to realize economies of scale. Accordingly, the Company intends to continue to invest in marketing and promotion, product development and technology and operating infrastructure development. There can be no 13 assurance that the Company will be able to achieve these objectives within a meaningful time frame. The Company expects to experience significant fluctuations in its future quarterly operating results due to a variety of factors, some of which are outside the Company's control. Factors that may adversely affect the Company's quarterly operating results include, among others, (i) the Company's ability to retain existing customers, attract new customers at a steady rate and maintain customer satisfaction, (ii) the Company's ability to maintain gross margins in its existing business and in future product lines and markets, (iii) the development of new services and products by the Company and its competitors, (iv) price competition, (v) the level of use of the Internet and online services and increasing acceptance of the Internet and other online services for the purchase of products such as those offered by the Company, (vi) the Company's ability to upgrade and develop its systems and infrastructure, (vii) the Company's ability to attract new personnel in a timely and effective manner, (viii) the level of traffic on the Company's Web site, (ix) the Company's ability to manage effectively its development of new business segments and markets, (x) the Company's ability to successfully manage the integration of operations and technology of acquisitions or other business combinations, (xi) technical difficulties, system downtime or Internet brownouts, (xii) the amount and timing of operating costs and capital expenditures relating to expansion of the Company's business, operations and infrastructure, (xiii) governmental regulation and taxation policies, (xiv) disruptions in service by common carriers due to strikes or otherwise, (xv) risks of fire or other casualty, (xvi) continued litigation costs or other unanticipated expenses, and (xvii) general economic conditions and economic conditions specific to the Internet and online commerce. Due to the foregoing factors and the Company's limited forecasting abilities, 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-QSB may contain forward-looking statements, including statements regarding future prospects, industry trends, competitive conditions and litigation issues. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes", "expects", "anticipates", "plans" or words of similar meaning are intended to identify forward-looking statements. This notice is intended to take advantage of the "safe harbor" provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Among others, factors that could cause actual results to differ materially from the Company's beliefs or expectations are those listed under "Results of Operations" and other factors referenced herein or from time to time as "risk factors" or otherwise in the Company's Registration Statements or Securities and Exchange Commission reports. 14 Item 3. Controls and Procedures The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings As previously reported, in November, 2001, the Company commenced the Contempt Proceedings against Samuel Fensterstock and a competitor (collectively the "Defendants") in the Supreme Court of the State of New York, Nassau County; on August 9, 2004, the Court issued a Decision finding that Defendants violated the Settlement Agreement and were in contempt of the July 2001 Order, and awarded compensatory and punitive damages against the Defendants aggregating $821,044, plus attorney fees and legal costs in an amount to be determined. On August 24, 2004, the Court entered a Judgment providing for the enforcement of its award and assigned a Referee to conduct a hearing concerning the amount of attorneys' fees and costs to be awarded. On August 30, 2004, Defendants filed a Notice of Appeal and posted a $900,000 bond to secure the compensatory and punitive damages awarded in the Judgment. On September 10, 2004 the competitor and Samuel Fensterstock served separate Motions to Reargue. In the Company's action against Decision Strategies LLC ("Decision Strategies"), previously reported, Decision Strategies has moved to dismiss the Company's complaint, which Motion is returnable on November 16, 2004. Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities The Company is prohibited from paying dividends pursuant to the Loan Security Agreement that secures its Secured Promissory Note with Market Guide Inc. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 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. 32.2 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. (b) Reports on Form 8-K o On August 11, 2004, we furnished a Current Report on Form 8-K pursuant to "Item 5. Other Events and Regulation FD Disclosure" attaching our press release dated August 11, 2004 that announced the Company was awarded in excess of $820,000 in compensatory and punitive damages, plus its legal fees and costs (the amount of which will be decided in a separate hearing), in its long-pending litigation against its competitor and a former Vice President. 16 o On September 1, 2004, we furnished a Current Report on Form 8-K pursuant to "Item 8.01. Other Events" attaching our press releases dated August 31, 2004 and August 26, 2004 that deal with the posting of a $900,000 bond by its competitor to stay execution by the Company of its previously reported judgment. o On September 30, 2004, we furnished a Current Report on Form 8-K pursuant to "Item 4.01. Changes in Registrant's Certifying Accountant" noting that the Audit Committee of the Company's Board of Directors dismissed BDO Seidman, LLP and engaged J.H. Cohn LLP as the Company's independent registered public accounting firm. 17 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: November 15, 2004 By: /s/ Lawrence Fensterstock Lawrence Fensterstock Chief Financial Officer 18 EX-31.1 2 d61209_ex31-1.txt SECTION 302 CERTIFICATION OF CEO EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jerome S. Flum, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of CreditRiskMonitor.com, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [***Omitted pursuant to extended compliance period] for the small business issuer and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [***Omitted pursuant to extended compliance period]; c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the small business issuer's internal controls over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the 19 audit committee of the small business issuer's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls over financial reporting. Date: November 15, 2004 By: /s/ Jerome S. Flum Jerome S. Flum Chief Executive Officer 20 EX-31.2 3 d61209_ex31-2.txt SECTION 302 CERTIFICATION OF CFO EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Lawrence Fensterstock, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of CreditRiskMonitor.com, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [***Omitted pursuant to extended compliance period] for the small business issuer and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [***Omitted pursuant to extended compliance period]; c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the small business issuer's internal controls over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the 21 audit committee of the small business issuer's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls over financial reporting. Date: November 15, 2004 By: /s/ Lawrence Fensterstock Lawrence Fensterstock Chief Financial Officer 22 EX-32.1 4 d61209_ex32-1.txt SECTION 906 CERTIFICATION OF CEO EXHIBIT 32.1 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 In connection with the Quarterly Report of CreditRiskMonitor.com, Inc. ("CRM") on Form 10-QSB for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jerome S. Flum, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Jerome S. Flum Jerome S. Flum Chief Executive Officer November 15, 2004 23 EX-32.2 5 d61209_ex32-2.txt SECTION 906 CERTIFICATION OF CFO EXHIBIT 32.2 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 In connection with the Quarterly Report of CreditRiskMonitor.com, Inc. ("CRM") on Form 10-QSB for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lawrence Fensterstock, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Lawrence Fensterstock Lawrence Fensterstock Chief Financial Officer November 15, 2004 24 -----END PRIVACY-ENHANCED MESSAGE-----