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 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 2022 are to continue to build on the
improvement initiatives underway to achieve sustainable, profitable growth. The
Company's top priority is the sale of our newly launched procurement risk
platform, SupplyChainMonitor™, which was officially launched during the second
quarter of 2022.
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Due to COVID-19 variants, 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 2022.
Financial Condition, Liquidity and Capital Resources
The following table presents selected financial information and statistics as of
September 30, December 31,
2022 2021
Cash and cash equivalents $ 13,606 $ 12,382
Accounts receivable, net $ 2,951 $ 2,803
Working capital $ 5,230 $ 3,964
Cash ratio 1.13 1.05
Quick ratio 1.37 1.29
Current ratio 1.43 1.34
As of September 30, 2022 , the Company had $13.60 million in cash and cash
equivalents, an increase of approximately $1.2 million from December 31, 2021 .
This increase was primarily the result of cash provided by operating activities
of approximately $1.4 million and the purchase of equipment totaling
approximately $197 thousand .
The main component of current liabilities at September 30, 2022 was unexpired
subscription revenue of approximately $10 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 bank lines of credit or other currently available credit sources.
The Company believes that its existing balances of cash and cash equivalents and cash generated from operations will be sufficient to satisfy its currently anticipated cash requirements through at least the next 12 months and the foreseeable future. Moreover, the Company has no long-term debt. However, the Company's liquidity could be negatively affected if it were to make an acquisition or license products or technologies, which may necessitate the need to raise additional capital through future debt or equity financing. Additional financing may not be available at all or on terms favorable to the Company.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements.
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Results of Operations
3 Months Ended September 30,
2022 2021
% of Total % of Total
Operating Operating
Amount Revenues Amount Revenues
Operating revenues $ 4,547,708 100 % $ 4,323,676 100 %
Operating expenses:
Data and product costs 1,644,489 36 % 1,519,860 35 %
Selling, general and administrative expenses 2,230,553 49 % 2,024,562 47 %
Depreciation and amortization 100,448 2 % 75,067 2 %
Total operating expenses 3,975,490 87 % 3,619,489 84 %
Income from operations 572,218 13 % 704,187 16 %
Other income, net 54,581 1 % 263 0 %
Income before income taxes 626,799 14 % 704,450 16 %
Provision for income taxes (140,822 ) (3 %) (209,098 ) (5 %)
Net income $ 485,977 11 % $ 495,352 11 %
Operating revenues increased approximately $224 thousand , or 5%, for the three
months ended September 30, 2022 compared to the third quarter of fiscal 2021.
This overall revenue growth resulted from price increases, an increase in
subscription service revenue, attributable to increased sales to new and
existing subscribers.
Data and product costs increased approximately $125 thousand , or 8%, for the
third quarter of 2022 compared to the same period of 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
inflationary increases instituted by some of the Company's suppliers.
Selling, general and administrative expenses increased approximately $206
thousand , or 10%, for the third quarter of fiscal 2022 compared to the same
period of fiscal 2021. This increase was primarily due to: (1) higher salary and
related employee benefits due to pay raises to staff, and (2) higher commission
expense due to increased sales.
9 Months Ended September 30,
2022 2021
% of Total % of Total
Operating Operating
Amount Revenues Amount Revenues
Operating revenues $ 13,335,927 100 % $ 12,704,756 100 %
Operating expenses:
Data and product costs 5,117,975 38 % 4,721,331 37 %
Selling, general and administrative expenses 6,864,354 52 % 6,415,736 50 %
Depreciation and amortization 301,656 2 % 206,083 2 %
Total operating expenses 12,283,985 92 % 11,343,150 89 %
Income from operations 1,051,942 8 % 1,361,606 11 %
Other income, net 66,368 0 % 3,756 0 %
Income before income taxes 1,118,310 8 % 1,365,362 11 %
Provision for income taxes (268,544 ) (2 %) (359,588 ) (3 %)
Net income $ 849,766 6 % $ 1,005,774 8 %
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Operating revenues increased approximately$631 thousand , or 5%, for the nine months endedSeptember 30, 2022 compared to the same period of fiscal 2021. This overall revenue growth resulted from price increases, an increase in subscription service revenue, attributable to increased sales to new and existing subscribers. Data and product costs increased approximately$397 thousand , or 8%, for the nine months endedSeptember 30, 2022 compared to the same period of 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 inflationary increases instituted by some of the Company's suppliers. Selling, general and administrative expenses increased approximately$449 thousand , or 7%, for the nine months endedSeptember 30, 2022 compared to the same period of fiscal 2021. This increase was primarily due to: (1) higher salary and related employee benefits due to pay raises to staff, and (2) higher commission expense due to increased sales.
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, 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. 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.
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 expects to experience fluctuations in its future quarterly operating
results due to a variety of factors, some of which are outside the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include, among others, (i) new variants of COVID-19 and government
related restrictions on our subscribers and their ongoing businesses and how
those effects may impact our sales to them, (ii) the Company's ability to retain
existing subscribers, attract new subscribers at a steady rate and maintain
customer satisfaction, (iii) the Company's ability to maintain gross margins in
its existing business and in future product lines and markets, (iv) the
development of new services and products by the Company and its competitors, (v)
price competition, (vi) the Company's ability to obtain products and services
from its vendors, including information suppliers, on commercially reasonable
terms, (vii) the Company's ability to upgrade and develop its systems and
infrastructure, and adapt to technological change, (viii) the Company's ability
to attract and retain personnel in a timely and effective manner, (ix) the
Company's ability to manage effectively its development of new business segments
and markets, (x) the Company's ability to successfully manage the integration of
operations and technology of acquisitions or other business combinations, (xi)
technical difficulties, system downtime, cybersecurity breaches, or Internet
brownouts, (xii) the amount and timing of operating costs and capital
expenditures relating the Company's business, operations and infrastructure,
(xiii) governmental regulation and taxation policies, (xiv) disruptions in
service by common carriers due to strikes or otherwise, (xv) risks of fire or
other casualty, (xvi) litigation costs or other unanticipated expenses, (xvii)
interest rate risks and inflationary pressures, and (xviii) general economic
conditions and economic conditions specific to the Internet and online commerce.
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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.
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 orSecurities 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.
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