CREDITRISKMONITOR.COM, INC. Business Environment
The continuing uncertainty in the worldwide financial system has negatively impacted general business conditions. It is possible that a weakened economy could adversely affect our subscribers' need for credit information, or even their solvency, but we cannot predict whether or to what extent this will occur.
Our strategic priorities and plans for 2023 are to continue to build on the improvement initiatives underway to achieve sustainable, profitable growth.
Financial Condition, Liquidity and Capital Resources
The following table presents selected financial information and statistics as of
2022 2021
Cash and cash equivalents $ 9,867 $ 12,382
Held-to-maturity securities $ 4,028 $ -
Accounts receivable, net $ 3,500 $ 2,803
Working capital $ 5,416 $ 3,964
Cash ratio 0.78 1.04
Quick ratio 1.38 1.28
Current ratio 1.43 1.32
The Company has invested some of its excess cash in cash equivalents, held to
maturity debt securities, and marketable securities. All highly liquid
investments with an original maturity of three months or less when purchased are
considered cash equivalents, while those with maturities in excess of three
months when purchased are reflected as marketable securities, or
held-to-maturity securities.
As of December 31, 2022 , the Company had $9.87 million in cash and cash
equivalents, a decrease of approximately $2.51 million from December 31, 2021 .
This decrease was primarily the result of cash provided by operating activities
of approximately $1.8 million and cash used in investing activities of
approximately $4.3 million .
The main component of current liabilities at December 31, 2022 was unexpired
subscription revenue of $9.98 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
approximates 12 months. The Company has no debt, and expects to meet the
current and long term lease obligations for office space using operating cash
flows. The Company maintains an adequate cash balance to meet the Company's
material cash requirements.
The Company has no bank lines of credit or other currently available credit sources.
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Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements.
Results of Operations
2022 vs. 2021
Year Ended December 31,
2022 2021
% of Total % of Total
Amount Revenue Amount Revenue
Operating revenues $ 17,979,317 100 % $ 17,065,132 100 %
Operating expenses:
Data and product costs 6,984,729 39 % 6,332,091 37 %
Selling, general and administrative expenses 9,040,767 50 % 8,134,694 48 %
Depreciation and amortization 382,342 2 % 296,299 2 %
Total operating expenses 16,407,838 91 % 14,763,084 87 %
Income from operations 1,571,479 9 % 2,302,048 13 %
Gain on forgiveness of bank loan - - 1,561,500 9 %
Other income, net 180,762 1 % 9,962 0 %
Income before income taxes 1,752,241 10 % 3,873,510 23 %
Provision for income taxes (392,003 ) (2 %) (509,806 ) (3 %)
Net income $ 1,360,238 8 % $ 3,363,704 20 %
Operating revenues increased approximately $0.9 million , or 5%, for fiscal 2022
over the prior year. This overall revenue growth resulted from an increase in
SaaS subscription products revenue, attributable to increased sales to new and
existing subscribers, as well as related price increases for subscriptions.
Data and product costs increased approximately $653 thousand , or 10%, for fiscal
2022 compared to fiscal 2021. This increase was due primarily to (1) higher
salary and related employee benefits due to pay raises to staff, and (2) higher
costs of third-party content, due to price increases instituted by some of the
Company's major suppliers.
Selling, general and administrative expenses increased approximately $0.9
million , or 11%, for fiscal 2022 compared to fiscal 2021. This increase was due
to more commissions being paid out in 2022 due to sales of newer product
offerings, higher salary expenses, higher marketing expenses from exhibiting at
trade shows, and sales enablement software.
In 2021 The Company's PPP loan was forgiven by the
Other income increased approximately$171 thousand for fiscal 2022 compared to fiscal 2021. This increase was due to higher return received on the Company's money market fund holdings compared to fiscal 2021. 15
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Future Operations
The Company over time intends to expand its operations by expanding the breadth
and depth of its product and service offerings and introducing new and
complementary products. Gross margins attributable to new business areas may be
lower than those associated with the Company's existing business activities.
The Company's current and future expense levels are based largely on its
investment plans and estimates of future revenues. To a large extent these costs
do not vary with revenue. Sales and operating results generally depend on the
Company's ability to attract and retain subscribers and the volume of and timing
of the subscriptions for the Company's products, which are difficult to
forecast. The Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to the Company's planned expenditures would
have an immediate adverse effect on the Company's business, prospects, financial
condition and results of operations. Further, as a strategic response to changes
in the competitive environment, the Company may from time to time make certain
pricing, service, marketing or acquisition decisions that could have a material
adverse effect on its business, prospects, financial condition and results of
operations.
Achieving greater profitability depends on the Company's ability to generate and
sustain increased revenue levels. The Company believes that its success will
depend in large part on its ability to (i) increase its brand awareness, (ii)
provide its subscribers with outstanding value, thus encouraging renewals, and
(iii) achieve sufficient sales volume to realize economies of scale.
Accordingly, the Company intends to continue to increase the size of its sales
force and service staff, and to invest in product development, operating
infrastructure, marketing and promotion. The Company believes that these
expenditures will help it to sustain the revenue growth it has experienced over
the last several years. We anticipate that sales and marketing expenses will
continue to increase in dollar amount and as a percentage of revenues into 2024
and future periods as the Company continues to expand its business on a
worldwide basis. Further, the Company expects that product development expenses
will also continue to increase in dollar amount and may increase as a percentage
of revenues into 2024 and future periods because it expects to employ more
development personnel on average compared to prior periods and build the
infrastructure required to support the development of new and improved products
and services. However, as some of these expenditures are discretionary in
nature, the Company expects that the actual amounts incurred will be in line
with its projections of future cash flows in order not to negatively impact its
future liquidity and capital needs. There can be no assurance that the Company
will be able to achieve these objectives within a meaningful time frame.
The Company expects to experience fluctuations in its future quarterly operating
results due to a variety of factors, some of which are outside the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include, among others, (i) the Company's ability to retain existing
subscribers, attract new subscribers at a steady rate and maintain customer
satisfaction, (ii) the Company's ability to maintain gross margins in its
existing business and in future product lines and markets, (iii) the development
of new services and products by the Company and its competitors, (iv) price
competition, (v) the Company's ability to obtain products and services from its
vendors, including information suppliers, on commercially reasonable terms, (vi)
the Company's ability to upgrade and develop its systems and infrastructure, and
adapt to technological change, (vii) the Company's ability to attract and retain
personnel in a timely and effective manner, (viii) the Company's ability to
manage effectively its development of new business segments and markets, (ix)
the Company's ability to successfully manage the integration of operations and
technology of acquisitions or other business combinations, (x) technical
difficulties, system downtime, cybersecurity breaches, or Internet brownouts,
(xi) the amount and timing of operating costs and capital expenditures relating
the Company's business, operations and infrastructure, (xii) governmental
regulation and taxation policies, (xiii) disruptions in service by common
carriers due to strikes or otherwise, (xiv) risks of fire or other casualty,
(xv) litigation costs or other unanticipated expenses, (xvi) interest rate risks
and inflationary pressures, and (xvii) general economic conditions and economic
conditions specific to the Internet and online commerce.
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Due to the foregoing factors, the Company believes that period-to-period comparisons of its revenues and operating results are not necessarily meaningful and should not be relied on as an indication of future performance.
Critical Accounting Policies, Estimates and Judgments
The Company's financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America ("U.S. GAAP"). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Management continually evaluates its estimates and judgments, the most critical of which are those related to: Valuation of goodwill --Goodwill requires critical accounting estimates in the evaluation of the Company's assets which are subject to depreciation and valuation judgements. In addition, the Company uses the publicly traded stock price to estimate fair value, which is subject to market fluctuations and change. See the information in Note 2 to the financial statements under the caption "Goodwill" for accounting polices related to the calculation of goodwill. Income taxes -- The calculation of income taxes requires critical accounting estimates in budgeting expenses, estimating sales figures, and forecasting staffing and technology needs for the upcoming year, all of which are constantly subject to change as the year progresses. See the information in Note 2 to the financial statements under the caption "Income Taxes" for accounting polices related to the calculation of income taxes.
Recently Issued Accounting Standards
The information set forth under Note 2 to the financial statements under the caption "Recently Issued Accounting Standards" is incorporated herein by reference.
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