ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
CreditRiskMonitor.com, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of CreditRiskMonitor.com, Inc. (the “Company”) as of December 31, 2020 and 2019, and the related statements of operations, stockholders’ equity and cash flows for the years
then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and
the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2004.
Jericho, New York
March 25, 2021
CREDITRISKMONITOR.COM, INC.
BALANCE SHEETS
December 31, 2020 and 2019
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2020
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2019
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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10,302,732
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$
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8,275,836
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Available-for-sale securities - municipal bonds
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458,237
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--
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Accounts receivable, net of allowance of $30,000
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2,557,443
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2,287,921
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Other current assets
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589,072
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549,821
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Total current assets
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13,907,484
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11,113,578
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Property and equipment, net
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545,675
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477,973
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Operating lease right-of-use asset
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2,200,031
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2,380,974
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Goodwill
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1,954,460
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1,954,460
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Other assets
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84,892
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35,723
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Total assets
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$
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18,692,542
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$
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15,962,708
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Unexpired subscription revenue
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$
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9,646,407
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$
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8,651,843
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Accounts payable
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130,089
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137,500
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Current portion of operating lease liability
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161,874
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147,229
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Current portion of bank loan
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1,299,007
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--
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Accrued expenses
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1,822,485
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1,344,550
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Total current liabilities
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13,059,862
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10,281,122
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Deferred taxes on income, net
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333,432
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521,765
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Unexpired subscription revenue, less current portion
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197,545
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166,169
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Bank loan, less current portion
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262,493
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--
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Operating lease liability, less current portion
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2,137,559
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2.299.433
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Total liabilities
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15,990,891
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13,268,489
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued
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-
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-
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Common stock, $.01 par value; authorized 32,500,000 shares; issued and outstanding 10,722,401 shares
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107,224
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107,224
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Additional paid-in capital
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29,760,533
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29,705,673
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Accumulated deficit
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(27,166,106
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)
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(27,118,678
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)
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Total stockholders’ equity
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2,701,651
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2,694,219
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Total liabilities and stockholders’ equity
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$
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18,692,542
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$
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15,962,708
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The accompanying notes are an integral part of these financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 2020 and 2019
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2020
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2019
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Operating revenues
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$
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15,732,366
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$
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14,501,173
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Operating expenses:
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Data and product costs
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6,026,464
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5,759,660
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Selling, general and administrative expenses
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9,724,182
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8,347,083
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Depreciation and amortization
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219,847
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207,224
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Total operating expenses
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15,970,493
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14,313,967
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Income (loss) from operations
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(238,127
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)
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187,206
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Other income, net
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26,774
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155,852
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Income (loss) before income taxes
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(211,353
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)
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343,058
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Benefit from (provision for) income taxes
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163,925
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(125,464
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)
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Net income (loss)
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$
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(47,428
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)
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$
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217,594
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Net income (loss) per share:
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Basic
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$
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(0.00
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)
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$
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0.02
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Diluted
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$
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(0.00
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)
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$
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0.02
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The accompanying notes are an integral part of these financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2020 and 2019
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Common Stock
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Additional
Paid-in
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Accumulated
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Total
Stockholders’
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Shares
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Amount
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Capital
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Deficit
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Equity
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Balance January 1, 2019
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10,722,401
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$
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107,224
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$
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29,650,760
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$
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(26,800,152
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)
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$
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2,957,832
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Net income
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-
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-
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-
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217,594
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217,594
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Cash dividend paid
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-
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-
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-
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(536,120
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)
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(536,120
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)
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Stock-based compensation
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-
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-
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54,913
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-
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54,913
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|
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Balance December 31, 2019
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10,722,401
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107,224
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29,705,673
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(27,118,678
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)
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2,694,219
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Net loss
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-
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|
-
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-
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(47,428
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)
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(47,428
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)
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Stock-based compensation
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|
-
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-
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54,860
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-
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|
|
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54,860
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|
|
|
|
|
|
|
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|
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|
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Balance December 31, 2020
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10,722,401
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$
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107,224
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|
$
|
29,760,533
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$
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(27,166,106
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)
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$
|
2,701,651
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The accompanying notes are an integral part of these financial statements.
CREDITRISKMONITOR.COM, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2020 and 2019
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2020
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2019
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Cash flows from operating activities:
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|
|
|
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Net income (loss)
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|
$
|
(47,428
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)
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|
$
|
217,594
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Adjustments to reconcile net income (loss) to net
|
|
|
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|
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cash provided by operating activities:
|
|
|
|
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|
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Deferred income taxes
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(188,333
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)
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31,384
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Depreciation and amortization
|
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219,847
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|
|
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207,224
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Stock-based compensation
|
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54,860
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|
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54,913
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Operating lease
|
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33,715
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|
|
|
41,151
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Changes in operating assets and liabilities:
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|
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|
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Accounts receivable, net
|
|
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(269,523
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)
|
|
|
166,664
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Other current assets
|
|
|
3,153
|
|
|
|
12,040
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Other assets
|
|
|
(91,068
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)
|
|
|
(110
|
)
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Unexpired subscription revenue
|
|
|
1,025,940
|
|
|
|
79,567
|
|
Accounts payable
|
|
|
(7,412
|
)
|
|
|
42,733
|
|
Accrued expenses
|
|
|
477,936
|
|
|
|
33,332
|
|
|
|
|
|
|
|
|
|
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Net cash provided by operating activities
|
|
|
1,211,687
|
|
|
|
886,492
|
|
|
|
|
|
|
|
|
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Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of available-for-sale securities - municipal bonds
|
|
|
(458,742
|
)
|
|
|
--
|
|
Purchase of property and equipment
|
|
|
(287,549
|
)
|
|
|
(141,435
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(746,291
|
)
|
|
|
(141,435
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Dividend paid to stockholders
|
|
|
--
|
|
|
|
(536,120
|
)
|
Bank loan
|
|
|
1,561,500
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,561,500
|
|
|
|
(536,120
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
2,026,896
|
|
|
|
208,937
|
|
Cash and cash equivalents at beginning of year
|
|
|
8,275,836
|
|
|
|
8,066,899
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
10,302,732
|
|
|
$
|
8,275,836
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
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Cash paid, net during the year for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
66,000
|
|
|
$
|
41,261
|
|
The accompanying notes are an integral part of these financial statements.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
CreditRiskMonitor.com, Inc. (also referred to as the “Company” or “CreditRiskMonitor”) provides a totally interactive business-to-business Internet-based service designed specifically for credit and supply chain
managers. This service is sold predominantly to corporations located in the United States. In addition, the Company is a re-distributor of international credit reports in the United States.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Issued Accounting Standards
The Financial Accounting Standards Board (“FASB”) and the Securities and Exchange Commission (“SEC”) have issued certain other accounting pronouncements as of December 31, 2020 that will become effective in subsequent
periods; however, management does not believe that any of these pronouncements would have significantly affected the Company’s financial accounting measurements or disclosures had they been in effect during the periods for which financial statements
are included in this annual report, nor does management believe those pronouncements would have a significant effect on the Company’s future financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash in banks and highly liquid instruments with original maturities of three months or less, primarily consisting of investments in institutional money market
funds.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on the straight-line method over the estimated useful life of the asset. Estimated useful lives are generally as follows:
|
•
|
Fixtures, equipment and software -- 3 to 10 years
|
|
•
|
Leasehold improvements -- lower of estimated useful life or term of lease (i.e., 2 to 7 years)
|
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Goodwill
Goodwill and other indefinite-lived intangible assets are subject to annual impairment testing using the specific guidance and criteria described in the accounting guidance. The Company performs its goodwill impairment
testing at least annually in the fourth quarter of each year, unless circumstances dictate the need for more frequent assessment. Goodwill impairment is determined using a two-step process. The first step of the impairment test is used to identify
potential impairment by comparing the fair value of a reporting unit to the book value, including goodwill. If the fair value of a reporting unit exceeds its book value, goodwill of the reporting unit is not considered impaired and the second step of
the impairment test is not required. If the book value of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the
implied fair value of the reporting unit’s goodwill with the book value of that goodwill. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that
excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The Company completed its annual goodwill impairment tests for 2020 and 2019 during the fourth quarter of each
year and determined there was no impairment of existing goodwill.
Long-Lived Assets
The Company reviews its long-lived amortizable assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with accounting
guidance. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to undiscounted pre-tax future net cash flows expected to be generated by that asset. An impairment loss is recognized for the amount by
which the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2020 and 2019, management believes no impairment of long-lived assets has occurred.
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.
Revenue Recognition
The Company applies FASB Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”) to recognize revenue. ASC 606 requires an entity to apply the following five-step
approach: (1) identify the contract(s) with a customer; (2) identify each performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation; and (5) recognize revenue when or
as each performance obligation is satisfied. The Company’s primary source of revenue is subscription income which is recognized ratably over the subscription term.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
The Company has applied the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been
recognized is one year or less.
Lease Accounting
For all leases, at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease
liability represents the present value of the remaining lease payments under the lease. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments and payments for optional renewal
periods where it is reasonably certain the renewal period will be exercised. Lease expense for operating leases consists of the lease payments plus any initial direct costs, and is recognized on a straight-line basis over the lease term.
The Company’s operating lease right-of-use asset and operating lease liability represent the lease for the office space used to conduct its business.
Net Income (Loss) Per Share
Net income (loss) per share is calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted net income (loss) per share is calculated giving effect to all potentially dilutive common shares, assuming such shares were outstanding during the reporting period. The difference between basic and diluted net income (loss) per share is solely attributable to stock options. The Company uses the treasury stock method to calculate the impact of outstanding stock options (see Note 8).
Segment Information
An operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the chief operating decision maker (the “CODM”) to make decisions about resources to be allocated to the
segment and assess its performance. Operating segments may be aggregated only to a limited extent. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis, accompanied by disaggregated
information about revenues for purposes of making operating decisions and assessing financial performance. Accordingly, the Company has determined that it has a single operating and reportable segment. In addition, the Company has no foreign operations
or any assets in foreign locations.
Stock-Based Compensation
The Company recognizes the grant-date fair value of all stock-based awards on a straight-line basis over their respective requisite service periods (generally equal to an award’s vesting period). The
Company records deferred tax assets for awards that will result in deductions on its tax returns, based upon the amount of compensation cost recognized and the statutory tax rate in the jurisdiction in which it will receive a deduction.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
See Note 5 for more information regarding the Company’s stock compensation plans.
Fair Value Measurements
The Company records its financial instruments at fair value in accordance with accounting guidance. The determination of fair value assumes that the transaction to sell an asset or transfer a liability occurs in the
principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The fair value hierarchy is broken down into three levels based on the source
of inputs as follows: (a) Level 1 – valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; (b) Level 2 – valuations based on quoted prices in
markets that are not active, or financial instruments for which all significant inputs are observable; either directly or indirectly; and (c) Level 3 – valuations based on prices or valuation techniques that require inputs that are both significant
to the fair value measurement and unobservable; thus, reflecting assumptions about the market participants.
The Company, in accordance with Accounting Standards Update (“ASU”) 2016-01, classifies its debt securities as “available-for-sale” and are recorded at fair value. Realized gains and losses on available-for-sale debt
securities are reported in net income with unrealized gains and losses reported in other income.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash, cash equivalents, available-for-sale securities and accounts receivable. The Company maintains its
cash and cash equivalents in bank deposit and other accounts, the balances of which, at times, may exceed federally insured limits. Exposure to credit risk is reduced by placing such deposits in high credit quality financial institutions.
The Company closely monitors the extension of credit to its customers. The Company’s accounts receivable balance is net of an allowance for doubtful accounts. The Company does not require
collateral or other security to support credit sales, but provides an allowance for doubtful accounts of $30,000 as of December, 31, 2020 and 2019, based on historical experience and specifically identified risks. Accounts receivable are charged off
against the allowance for doubtful accounts when management determines that recovery is unlikely and the Company ceases collection efforts. The Company does not believe that significant credit risk existed at December 31, 2020 nor 2019.
NOTE 3 – FAIR VALUE MEASUREMENTS
The Company’s cash, cash equivalents and available-for-sale securities are stated at fair value. The carrying value of accounts receivable, other current assets, bank loan and accounts payable approximates fair market
value because of the short maturity of these financial instruments.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
The Company’s cash equivalents are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.
All available-for-sale securities as of December 31, 2020 were municipal bonds. Investments in municipal bonds are valued using pricing models maximizing the use of observable inputs for similar securities. Municipal
bonds are classified as Level 2 of the fair value hierarchy.
The tables below set forth the Company’s cash and cash equivalents, as well as marketable securities as of December 31, 2020 and December 31, 2019, respectively, which are measured at fair value on a recurring basis by
level within the fair value hierarchy.
|
|
December 31, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,302,732
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,302,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
-
|
|
|
$
|
458,237
|
|
|
$
|
-
|
|
|
$
|
458,237
|
|
|
|
December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
8,275,836
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,275,836
|
|
The Company did not hold financial assets and liabilities which were recorded at fair value in the Level 2 or 3 categories as of December 31, 2019.
The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are
appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The cost and fair value of available-for-sale securities at December 31, 2020 is as follows:
|
|
Cost
|
|
|
Unrealized Loss
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
458,742
|
|
|
$
|
(505
|
)
|
|
$
|
458,237
|
|
Maturities of available-for-sale securities were as follows at December 31, 2020:
Available-for-sale securities
|
|
|
|
Due after 10 years
|
|
$
|
458,237
|
|
The fair value of available-for-sale securities are presented in the available-for-sale category by contractual maturity in the preceding table. Expected maturities may differ from contractual maturities because
borrowers have the right to call or prepay obligations without call or prepayment penalties.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Management evaluates securities for other-than-temporary impairment at least on an annual basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of
time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient
to allow for any anticipated recovery in fair value. Management has determined that no other-than-temporary impairment exists as of December 31, 2020.
There were no proceeds from the sale of marketable securities in 2020. Subsequent to December 31, 2020 the Company liquidated all of their municipal bond investments in available-for-sale securities, and transferred the
proceeds to Level 1 cash and cash equivalent investments.
NOTE 4 - INCOME TAXES
The Company’s income tax (benefit) expense consisted of the following:
|
|
2020
|
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
37,373
|
|
|
$
|
67,677
|
|
State
|
|
|
(12,854
|
)
|
|
|
26,404
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(67,742
|
)
|
|
|
23,781
|
|
State
|
|
|
(120,702
|
)
|
|
|
7,602
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(163,925
|
)
|
|
$
|
125,464
|
|
The actual tax (benefit) expense for 2020 and 2019 differs from the “expected” tax expense for those years (computed by applying the applicable United States federal corporate tax rate to income before income taxes) as
follows:
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Computed “expected” (benefit) expense
|
|
$
|
(44,384
|
)
|
|
$
|
72,042
|
|
Permanent differences
|
|
|
11,516
|
|
|
|
25,619
|
|
State and local income tax expense
|
|
|
2,720
|
|
|
|
12,344
|
|
True-up of current taxes
|
|
|
(25,916
|
)
|
|
|
4,763
|
|
True-up of deferred taxes
|
|
|
11,644
|
|
|
|
11,014
|
|
Change in state apportionment
|
|
|
(119,505
|
)
|
|
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
|
$
|
(163,925
|
)
|
|
$
|
125,464
|
|
The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets (liabilities) at December 31, 2020 and 2019 are as follows:
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryovers
|
|
$
|
-
|
|
|
$
|
-
|
|
Stock options
|
|
|
17,556
|
|
|
|
20,085
|
|
Accrued vacation
|
|
|
85,436
|
|
|
|
70,654
|
|
Bad debt allowance
|
|
|
6,411
|
|
|
|
8,314
|
|
Deferred revenue
|
|
|
4,732
|
|
|
|
5,833
|
|
Deferred rent
|
|
|
15,999
|
|
|
|
11,403
|
|
Other
|
|
|
17,212
|
|
|
|
21,972
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
147,346
|
|
|
|
138,261
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
(417,688
|
)
|
|
|
(541,628
|
)
|
Fixed assets
|
|
|
(63,090
|
)
|
|
|
(118,398
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(480,778
|
)
|
|
|
(660,026
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(333,432
|
)
|
|
$
|
(521,765
|
)
|
NOTE 5 - COMMON STOCK AND STOCK OPTIONS
Common Stock
At December 31, 2020 and 2019, there were 575,750 and 456,870 shares, respectively, of the Company’s authorized common stock reserved for issuance upon exercise of outstanding options under its stock option plan.
Preferred Stock
The Company’s Articles of Incorporation provide that the Board of Directors has the authority, without further action by the holders of the outstanding common stock, to issue up to five million shares of preferred stock
from time to time in one or more series. The Board of Directors shall fix the consideration to be paid, but not less than par value thereof, and to fix the terms of any such series, including dividend rights, dividend rates, conversion or exchange
rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price and the liquidation preference of such series. As of December 31, 2020 and 2019, the Company does not have any preferred stock outstanding.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Stock Options
As of December 31, 2020, the Company has two stock option plans: the 2009 Long-Term Incentive Plan (“2009 Plan”) which ended in 2019, and the 2020 Long-Term Incentive Plan (“2020 Plan”).
Both the 2009 and the 2020 Plan authorize the grant of incentive stock options, non-qualified stock options, SARs, restricted stock, bonus stock, and performance shares to employees, consultants, and non-employee
directors of the Company. The exercise price of each option shall not be less than the fair market value of the common stock at the date of grant. The total number of the Company’s shares that may be awarded under the 2009 Plan was 1,000,000 shares of
common stock, and the 2020 Plan was 1,000,000 shares of common stock. At December 31, 2020, there were options outstanding for 393,650 shares of common stock under the 2009 Plan, and 182,100 shares of common stock under the 2020 Plan. As of December,
31 2019, there were options outstanding for 456,870 shares of common stock under the 2009 Plan.
Options expire on the date determined, but not more than ten years from the date of grant. All of the options granted under the 2009 and 2020 Plan may be exercised after four years in installments upon the attainment of
specified length of service, unless otherwise determined by the Compensation Committee as set forth in the Award Agreement. In the event of a change in control (as defined), the options will vest in full at the time of such change in control.
Transactions with respect to the Company’s stock option plans for the years ended December 31, 2020 and 2019 are as follows:
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2019
|
|
|
376,850
|
|
|
$
|
2.98
|
|
Granted
|
|
|
195,800
|
|
|
|
1.45
|
|
Forfeited
|
|
|
(115,780
|
)
|
|
|
3.06
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
456,870
|
|
|
$
|
2.30
|
|
Granted
|
|
|
182,100
|
|
|
|
2.17
|
|
Expired
|
|
|
(26,000
|
)
|
|
|
4.62
|
|
Forfeited
|
|
|
(37,220
|
)
|
|
|
2.15
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
|
575,750
|
|
|
$
|
2.17
|
|
As of December 31, 2020, there were 817,900 shares of common stock reserved for the granting of additional options. The 2009 Plan expired at the end of 2019 and no additional options could be granted.
The following table summarizes the stock-based compensation expense for stock options that was recorded in the Company’s results of operations for the years ended December 31:
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Data and product costs
|
|
$
|
19,928
|
|
|
$
|
22,460
|
|
Selling, general and administrative costs
|
|
|
34,932
|
|
|
|
32,453
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,860
|
|
|
$
|
54,913
|
|
The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted average assumptions noted in the following table. Expected volatilities are based on
historical volatility of our stock through the date of grant. The Company uses the simplified method to estimate the options’ expected term. The risk-free interest rate used is based on the U.S. Treasury constant maturities at the time of grant having
a term that approximates the expected life of the option.
The fair value of options granted during the year ended December 31, 2019 was $125,832. The fair value of options granted during the year ended December 31, 2020 was $206,087. The fair value of options at date of grant
was estimated using the Black-Scholes model with the following assumptions:
|
2020
|
2019
|
Risk-free interest rate
|
0.26%
|
1.78%
|
Expected volatility factor
|
72.57%
|
64.00%
|
Expected dividends
|
0.05
|
0.05
|
Expected life of the option (years)
|
7.17
|
9
|
The Company issues new shares upon the exercise of options.
The following table summarizes information about the Company’s stock options outstanding at December 31, 2020:
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256,100
|
|
|
|
8.36
|
|
|
$
|
1.52
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
279,100
|
|
|
|
5.67
|
|
|
$
|
2.42
|
|
|
|
57,350
|
|
|
$
|
2.49
|
|
|
|
|
|
40,550
|
|
|
|
0.84
|
|
|
$
|
4.51
|
|
|
|
32,550
|
|
|
$
|
4.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
575,750
|
|
|
|
6.53
|
|
|
$
|
2.17
|
|
|
|
89,900
|
|
|
$
|
3.30
|
|
The aggregate intrinsic value represents the total pre-tax intrinsic value, based on options with an exercise price less than the Company’s closing stock price of $2.35 and $1.57 as of December 31, 2020 and 2019,
respectively, which would have been received by the option holders had those option holders exercised their options as of that date. The aggregate intrinsic value of options outstanding as of December 31, 2020 and 2019 was $23,046 and $238,548,
respectively.
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2020, the total compensation cost related to unvested stock-based awards granted to employees under the Company’s stock option plan but not yet recognized was $407,771. This cost will be amortized on a
straight-line basis over a weighted average term of 5.85 years and will be adjusted for subsequent changes in estimated forfeitures.
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Computer equipment and software
|
|
$
|
1,720,814
|
|
|
$
|
1,485,579
|
|
Furniture and fixtures
|
|
|
512,975
|
|
|
|
507,503
|
|
Leasehold improvements
|
|
|
268,741
|
|
|
|
240,328
|
|
|
|
|
2,502,530
|
|
|
|
2,233,410
|
|
Less accumulated depreciation and amortization
|
|
|
(1,956,855
|
)
|
|
|
(1,755,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
545,675
|
|
|
$
|
477,973
|
|
NOTE 7 – OPERATING LEASE
The following table reconciles the undiscounted cash flows for the Company’s operating lease at December 31, 2020 to the operating lease liability recorded on the balance sheet:
2021
|
|
$
|
262,970
|
|
2022
|
|
|
270,859
|
|
2023
|
|
|
278,985
|
|
2024
|
|
|
287,355
|
|
2025
|
|
|
295,975
|
|
Thereafter
|
|
|
1,473,078
|
|
Total future undiscounted lease payments
|
|
|
2,869,222
|
|
LESS: Imputed interest
|
|
|
(569,789
|
)
|
Present value of lease liability
|
|
$
|
2,299,433
|
|
|
|
|
|
|
Current portion of operating lease liability
|
|
$
|
161,874
|
|
Non-current portion of operating lease liability
|
|
|
2,137,559
|
|
|
|
$
|
2,299,433
|
|
CREDITRISKMONITOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is based on the weighted average number of common shares outstanding. Diluted net income (loss) per share is based on the weighted average number of common shares outstanding and the
dilutive effect of outstanding stock options:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(47,428
|
)
|
|
$
|
217,594
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic
|
|
|
10,722,401
|
|
|
|
10,722,401
|
|
Potential shares exercisable under stock option plans
|
|
|
--
|
|
|
|
13,700
|
|
Less: Shares which could be repurchased under treasury stock method
|
|
|
--
|
|
|
|
(11,562
|
)
|
Weighted average common shares outstanding – diluted
|
|
|
10,722,401
|
|
|
|
10,724,539
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
0.02
|
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.02
|
|
Because the Company has reported a net loss for fiscal 2020, diluted net loss per share is the same as basic net loss per share, as the effect of utilizing the fully diluted share count would have reduced the net loss
per share. Therefore, all outstanding stock options were excluded from the computation of diluted net loss per share because their effect was anti‐dilutive for each of the periods presented.
For fiscal 2019, the computation of diluted net income per share excludes the effects of the assumed exercise of 369,455 options, since their inclusion would be anti-dilutive as their exercise prices were above the
average market value.
NOTE 9 - RELATED PARTY TRANSACTION
In October 2020, the Company’s Board of Directors appointed Michael Flum to serve as President and Chief Operating Officer. Previously, he was serving as Senior Vice President and Chief Operating Officer effective
October 2019 and had served as Vice President of Operations & Alternative Data since June 2018. Mr. Flum is the son of Jerome Flum, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and the brother of Joshua Flum, a
Director of the Company.