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
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to __________
Commission file number 1-8601
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CREDITRISKMONITOR.COM, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 36-2972588
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 Jericho Turnpike, Suite 202
Floral Park, New York 11001
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(Address of principal executive offices)
(516) 620-5400
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(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.
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Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
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CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES
INDEX
Page
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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
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
March 31, Dec. 31,
2000 1999
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(Unaudited) (Audited)
ASSETS
<S> <C> <C>
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
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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
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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
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980,076 958,434
Deferred rent 1,402 467
Deferred compensation 108,750 86,250
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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)
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Total stockholders' equity 1,802,877 2,100,960
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Total liabilities and stockholders' equity $ 4,448,375 $ 4,534,080
=============== ================
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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<PAGE>
CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
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
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Total operating expenses 720,978 503,231
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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)
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Loss before income taxes (295,063) (358,454)
Provision for income taxes 3,020 -
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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
============== ===============
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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CREDITRISKMONITOR.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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Cash flows from operating activities:
<S> <C> <C>
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)
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Net cash provided by operating activities 71,407 1,776
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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)
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Net cash used in investing activities (55,399) (1,299,759)
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Cash flows from financing activities:
Proceeds from private offering, net of
offering expenses - 3,193,053
Payments on capital lease obligation (979) -
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Net cash provided by (used in) financing activities (979) 3,193,053
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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
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Cash and cash equivalents at end of period $ 1,436,914 $ 1,908,470
=============== ================
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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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,
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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.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000315958
<NAME> CREDITRISKMONITOR.COM, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
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</TABLE>
