UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-QSB
   
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:  September 30, 2006
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________  to _______
   
Commission file number 1-8601
 
CREDITRISKMONITOR.COM, INC.
(Exact name of small business issuer as specified in its charter)
     
Nevada   36-2972588
(State or other jurisdiction of 
incorporation or organization)		   (I.R.S. Employer Identification No.)
 
704 Executive Boulevard, Suite A
Valley Cottage, New York 10989
(Address of principal executive offices)
 
(845) 230-3000
(Issuer’s telephone number)
 
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x   No o
 
Indicated by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes o   No x
 
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 o   No o
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practical date:
 
Common stock $.01 par value — 7,679,462 shares outstanding as of November 10, 2006.
 
Transitional Small Business Disclosure Format (check one):   Yes o   No x


CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY
INDEX
 
    Page  
   
 		  
PART I. FINANCIAL INFORMATION      
           
  Item 1. Financial Statements (Unaudited)      
           
    Consolidated Balance Sheets – September 30, 2006 and
December 31, 2005 		  2  
           
    Consolidated Statements of Operations for the Three Months
Ended September 30, 2006 and 2005 		  3  
           
    Consolidated Statements of Operations for the Nine Months
Ended September 30, 2006 and 2005 		  4  
           
    Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2006 and 2005 		  5  
           
    Notes to Consolidated Financial Statements   6  
           
  Item 2. Management’s Discussion and Analysis of Financial Condition
       and Results of Operations 		  10  
           
  Item 3. Controls and Procedures   14  
           
PART II. OTHER INFORMATION      
           
  Item 2. Changes in Securities and Small Business Issuer Purchases
       of Equity Securities 		  15  
           
  Item 6. Exhibits   15  
           
SIGNATURES   16  
           
EXHIBITS           
           
31.1   Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 		  17  
           
31.2   Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 		  19  
           
32.1   Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 		  21  
           
32.2   Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 		  22  

1


PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
(Unaudited)
 
Sept. 30,
2006 		Dec. 31,
2005
(Note 1)
             
ASSETS        
Current assets:            
     Cash and cash equivalents $ 2,290,216   $ 2,034,786  
     Accounts receivable, net of allowance   467,432     658,603  
     Other current assets   159,831     191,137  
  
         Total current assets   2,917,479     2,884,526  
             
Property and equipment, net   126,668     153,689  
Goodwill   1,954,460     1,954,460  
Prepaid and other assets   26,057     33,854  
  
         Total assets $ 5,024,664   $ 5,026,529  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
     Deferred revenue $ 2,751,509   $ 2,607,569  
     Accounts payable   62,921     125,590  
     Accrued expenses   205,262     157,676  
     Current portion of long-term debt   119,760     110,893  
     Current portion of capitalized lease obligations   25,324     26,467  
  
         Total current liabilities   3,164,776     3,028,195  
  
Long-term debt, net of current portion:            
     Promissory note   318,848     409,810  
     Capitalized lease obligations   —     18,437  
    318,848     428,247  
Other liabilities   97,537     95,812  
  
         Total liabilities   3,581,161     3,552,254  
  
Stockholders’ equity:            
     Preferred stock, $.01 par value; authorized
         5,000,000 shares; none issued		   —     —  
     Common stock, $.01 par value; authorized 25,000,000
         shares; issued and outstanding 7,679,462 shares		   76,794     76,794  
     Additional paid-in capital   28,145,084     28,122,383  
     Accumulated deficit   (26,778,375 )   (26,724,902 )
  
         Total stockholders’ equity   1,443,503     1,474,275  
  
         Total liabilities and stockholders’ equity $ 5,024,664   $ 5,026,529  
 
See accompanying notes to consolidated financial statements.

2


CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
 
2006 2005
             
Operating revenues $ 1,084,838   $ 985,106  
 
 
 
  
Operating expenses:            
     Data and product costs   316,397     300,542  
     Selling, general and administrative expenses   678,013     669,354  
     Depreciation and amortization   16,794     16,725  
  
         Total operating expenses   1,011,204     986,621  
  
Income (loss) from operations   73,634     (1,515 )
Other income   18,349     9,930  
Interest expense   (12,674 )   (16,069 )
  
Income (loss) before income taxes   79,309     (7,654 )
Provision for state and local income taxes   517     563  
  
Net income (loss) $ 78,792   $ (8,217 )
             
Net income (loss) per share of common stock:            
             
     Basic $ 0.01   $ (0.00 )
     Diluted $ 0.01   $ (0.00 )
             
Weighted average number of common shares outstanding:            
             
     Basic   7,679,462     7,679,462  
     Diluted   7,933,052     7,679,462  
 
See accompanying notes to consolidated financial statements.

3


CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
 
2006 2005
             
Operating revenues $ 3,171,089   $ 2,830,106  
  
Operating expenses:            
     Data and product costs   1,009,400     817,158  
     Selling, general and administrative expenses   2,169,792     2,081,969  
     Depreciation and amortization   49,997     49,458  
  
         Total operating expenses   3,229,189     2,948,585  
  
Loss from operations   (58,100 )   (118,479 )
Other income   49,713     19,980  
Gain on settlement of litigation   —     1,100,000  
Interest expense   (40,824 )   (50,902 )
  
Income (loss) before income taxes   (49,211 )   950,599  
Provision for state and local income taxes   4,262     1,738  
  
Net income (loss) $ (53,473 ) $ 948,861  
             
Net income (loss) per share of common stock:            
             
     Basic and diluted $ (0.01 ) $ 0.12  
             
Weighted average number of common shares outstanding:            
             
     Basic and diluted   7,679,462     7,679,462  
 
See accompanying notes to consolidated financial statements.

4


CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
 
2006 2005
             
Cash flows from operating activities:            
     Net income (loss) $ (53,473 ) $ 948,861  
     Adjustments to reconcile net income (loss) to
         net cash provided by operating activities:		            
              Depreciation   49,997     49,458  
              Deferred rent   1,725     3,813  
              Stock-based compensation   22,701     —  
     Changes in operating assets and liabilities:            
         Accounts receivable   191,171     199,978  
         Other current assets   31,306     66,553  
         Prepaid and other assets   7,797     (3,636 )
         Deferred revenue   143,940     42,433  
         Accounts payable   (62,669 )   38,311  
         Accrued expenses   47,586     (78,334 )
  
Net cash provided by operating activities   380,081     1,267,437  
  
Cash flows from investing activities:            
     Purchase of property and equipment   (22,976 )   (50,014 )
  
Net cash used in investing activities   (22,976 )   (50,014 )
  
Cash flows from financing activities:            
     Payments on promissory note   (82,095 )   (74,093 )
     Payments on capital lease obligations   (19,580 )   (20,335 )
  
Net cash used in financing activities   (101,675 )   (94,428 )
  
Net increase in cash and cash equivalents   255,430     1,122,995  
Cash and cash equivalents at beginning of period   2,034,786     877,025  
  
Cash and cash equivalents at end of period $ 2,290,216   $ 2,000,020  
 
See accompanying notes to consolidated financial statements.

5


CREDITRISKMONITOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

(1)    Basis of Presentation

The consolidated financial statements included herein have been prepared by CreditRiskMonitor.com, Inc. (the “Company” or “CRM”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and the notes thereto in the Company’s annual report on Form 10-KSB for the year ended December 31, 2005.

In the opinion of the Company, the unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the Company’s financial position as of September 30, 2006 and its results of operations and cash flows for the periods ended September 30, 2006 and 2005.

Results of operations for the three and nine-month periods ended September 30, 2006 and 2005 are not necessarily indicative of the results of a full year.

Certain prior year amounts have been reclassified to conform with the fiscal 2006 presentation.

(2)    Stock-Based Compensation

The Company’s 1998 Long-Term Incentive Plan authorizes the grant of incentive stock options, non-qualified stock options, stock appreciation rights (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 this plan is 1,500,000 shares of common stock. At September 30, 2006, there were options outstanding for 710,500 shares of common stock under this plan.

Options expire on the date determined, but not more than ten years from the date of grant. The plan terminates ten years from the date of stockholder approval. All of the options granted may be exercised after three years in installments upon the Company attaining certain specified gross revenue and pre-tax margin objectives, unless such objectives are modified in the sole discretion of the Board of Directors. No modifications to these criteria have been made.

Notwithstanding that the objectives may not be met in whole or in part, these options will vest in full on a date that is two years prior to the expiration date of the option or, in the event of a change in control (as defined), will vest in full at the time of such change in control.


6


Prior to January 1, 2006 the Company accounted for stock-based compensation under the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation” (“SFAS 123”). As permitted under this standard, compensation cost for options granted to employees was recognized using the intrinsic value method in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. Effective January 1, 2006, the Company has adopted SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”) using the modified-prospective transition method. Under this transition method, compensation cost recognized for the three and nine-month periods ended September 30, 2006 includes (a) compensation cost for all share-based payments granted prior to, but not yet vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. Results for prior periods have not been restated. In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107, which expresses views of the SEC staff and provides interpretive guidance regarding the application of SFAS 123R.

APB 25 did not require any compensation expense to be recorded in the financial statements if the exercise price of the award was not less than the market price on the date of grant. Since all options granted by the Company had exercise prices equal to or greater than the market price on the date of grant, no compensation expense was recognized for stock option grants prior to January 1, 2006.

For the three and nine months ended September 30, 2006, the Company recognized stock-based compensation expense of $7,567 and $22,701, respectively, related to outstanding stock options according to the provisions of SFAS 123R, using the modified-prospective transition method.

Prior to the adoption of SFAS 123R and for the three and nine months ended September 30, 2006, no tax benefits from the exercise of stock options have been recognized as no options have been exercised. Any future excess tax benefits derived from the exercise of stock options will be recorded prospectively and reported as cash flows from financing activities in accordance with SFAS 123R.

The following table illustrates the pro forma effect on operating results and per share information had the Company accounted for employee stock-based compensation in accordance with SFAS 123 for the three and nine months ended September 30, 2005:


7


3 Months
Ended
9/30/05 		9 Months
Ended
9/30/05
             
Net income (loss)        
     As reported$ (8,217 ) $ 948,861  
     Less: Total stock-based employee compensation
         expense determined under fair value based
         method for all awards, net of related
         tax benefits or effects		 11,188    13,342  
  
     Pro forma$ (19,405 ) $ 935,519  
  
Net income (loss) per share – basic and diluted         
     As reported$ (0.00 ) $ 0.12  
     Pro forma$ (0.00 ) $ 0.12  
 
The above pro forma stock-based employee compensation cost was determined under the fair value based method and was calculated using the Black-Scholes option valuation model with the following weighted-average assumptions:
 
3 Months
Ended
9/30/05 		  9 Months
Ended
9/30/05 		 
 
 
                 
Risk-free interests rate   4.22 %     4.26 %  
Dividend yield   0.00 %     0.00 %  
Volatility factor   2.53       2.93    
Weighted-average expected life of
     options (in years)		   9       9    
 
The table below summarizes stock option activity pursuant to our plan for the nine months ended September 30, 2006:
 
Shares Weighted-
Average
Exercise
Price 		Weighted
Average
Remaining
Contractual
Term
(in years) 		Aggregate
Intrinsic
Value
                         
Outstanding at beginning of period   737,500   $ 0.9461              
Granted   —     —              
Exercised   —     —              
Cancelled   (27,000 ) $ 3.8704              
     
  
Outstanding at end of period   710,500   $ 0.8406     6.47   $ 180,560  
     
  
Exercisable at end of period   165,000   $ 0.0910     1.75   $ 158,235  
     
 
As of September 30, 2006, there was $190,067 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 4.53 years.

8


The following tables summarize the range of exercise prices and the weighted average remaining contractual life of the options outstanding and the range of exercise prices for the options exercisable at September 30, 2006:
 
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
                                     
$ 0.0001 - $ 0.9900     150,000       1.90     $ 0.0001     150,000       $ 0.0001  
$ 1.0000 - $ 1.2000     461,500       7.40     $ 1.0000     15,000       $ 1.0000  
$ 1.2100 - $ 1.6500     99,000       9.08     $ 1.3712     —          
   
               
         
  
       710,500       6.47     $ 0.8406     165,000       $ 0.0910  
   
               
         
 

(3)   Other Recently Issued Accounting Standards

The FASB and the SEC had issued certain accounting pronouncements as of September 30, 2006 that will become effective in subsequent periods; however, management does not believe that any of those pronouncements would have significantly affected our financial accounting measurements or disclosures had they been in effect during the interim periods for which financial statements are included in this quarterly report.

(4)   Net Income (Loss) Per Share

The computation of diluted net income (loss) per share excludes the effects of the assumed exercise of options for the following periods, since their inclusion would be anti-dilutive: during the three months ended September 30, 2005 and nine months ended September 30, 2006, 678,000 and 710,500 options, respectively, were excluded because the Company had losses in those periods, and during the nine months ended September 30, 2005, all of the 546,500 options outstanding were excluded as their average exercise price was above market value.


9


Item    2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2006, the Company had cash and cash equivalents of $2.29 million compared to $2.03 million at December 31, 2005. The Company’s working capital deficit at September 30, 2006 was approximately $247,000 compared to a working capital deficit of approximately $144,000 at December 31, 2005, due primarily to a decrease of $191,000 in accounts receivable, an increase of $144,000 in deferred revenue, a net increase of $55,000 in accrued expenses and current portion of debt and a decrease of $31,000 in other current assets offset somewhat by an increase of $255,000 in cash and a decrease of $63,000 in accounts payable. Additionally, the working capital deficit at September 30, 2006 is mainly derived from $2.75 million in deferred revenue, which should not require any future cash outlay other than the cost of preparation and delivery of the applicable commercial credit reports. The deferred revenue is recognized as income over the subscription term, which approximates twelve months. The Company has no bank lines of credit or other currently available credit sources.

The Company believes that it will have sufficient resources to meet its working capital and capital expenditure needs, including debt service, for the foreseeable future.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is not a party to any off-balance sheet arrangements.

RESULTS OF OPERATIONS

 
Three Months Ended September 30,
2006 2005
Amount % of Total
Operating
Revenues 		Amount % of Total
Operating
Revenues
    
Operating revenues $ 1,084,838     100.00 % $ 985,106     100.00 %
 
 
 
 
 
  
Operating expenses:                        
   Data and product costs   316,397     29.16 %   300,542     30.51 %
   Selling, general & administrative   678,013     62.50 %   669,354     67.95 %
   Depreciation and amortization   16,794     1.55 %   16,725     1.70 %
 
 
 
 
 
     Total operating expenses   1,011,204     93.21 %   986,621     100.16 %
 
 
 
 
 
  
Income (loss) from operations   73,634     6.79 %   (1,515 )   -0.16 %
Other income   18,349     1.69 %   9,930     1.01 %
Interest expense   (12,674 )   -1.17 %   (16,069 )   -1.63 %
 
 
 
 
 
  
Income (loss) before income taxes   79,309     7.31 %   (7,654 )   -0.78 %
Provision for income taxes   517     0.05 %   563     0.06 %
 
 
 
 
 
  
Net income (loss) $ 78,792     7.26 % $ (8,217 )   -0.84 %
 
 
 
 
 
 
Operating revenues increased 10% for the three months ended September 30, 2006. This increase was primarily due to an increase in the number of subscribers to the Company’s Internet subscription service offset in part by a decrease in the number of subscribers to the Company’s subscription service for third-party international credit reports.

10


Data and product costs increased 5% for the third quarter of 2006 compared to the same period of fiscal 2005. This increase was primarily due to higher salary and related employee benefits, including the hiring of additional quality control personnel, offset in part by the lower cost of acquiring additional third-party international credit reports.

Selling, general and administrative expenses increased 1% for the third quarter of fiscal 2006 compared to the same period of fiscal 2005. This increase was primarily due to higher salary and related employee benefit costs as the result of an increase in the Company’s sales force during the past 12 months and an increase in professional fees due to higher audit fees, partially offset by a decrease in marketing expenses.

Depreciation and amortization increased less than 1% for the third quarter of fiscal 2006 compared to the same period of fiscal 2005. This increase was due to a higher depreciable asset base during the quarter resulting from the purchase of new trade booths and computer equipment during the last 12 months, partially offset by lower depreciation expense during the fiscal 2006 period on certain items that have been fully depreciated but are still in use.

Other income increased 85% for third quarter of fiscal 2006 compared to the same period last year. This increase was primarily due to a higher investment balance as well as a higher interest rate received on funds invested in interest bearing accounts during the current period compared to the same period last year.

Interest expense decreased 21% for the third quarter of fiscal 2006 compared to the same period of fiscal 2005. This decrease was primarily due to a lower outstanding promissory note balance.

The Company reported net income of $79,000 versus a net loss of $8,000 for the three months ended September 30, 2006 and 2005, respectively.

     
Nine Months Ended September 30,
2006 2005
Amount % of Total
Operating
Revenues 		Amount % of Total
Operating
Revenues
   
Operating revenues $ 3,171,089     100.00 % $ 2,830,106     100.00 %
 
 
 
 
 
   
Operating expenses:                        
   Data and product costs   1,009,400     31.83 %   817,158     28.87 %
   Selling, general & administrative   2,169,792     68.42 %   2,081,969     73.57 %
   Depreciation and amortization   49,997     1.58 %   49,458     1.75 %
 
 
 
 
 
     Total operating expenses   3,229,189     101.83 %   2,948,585     104.19 %
 
 
 
 
 
   
Loss from operations   (58,100 )   -1.83 %   (118,479 )   -4.19 %
Other income   49,713     1.57 %   19,980     0.71 %
Gain on settlement of litigation   —     0.00 %   1,100,000     38.87 %
Interest expense   (40,824 )   -1.29 %   (50,902 )   -1.80 %
 
 
 
 
 
   
Income (loss) before income taxes   (49,211 )   -1.55 %   950,599     33.59 %
Provision for income taxes   4,262     0.14 %   1,738     0.06 %
 
 
 
 
 
   
Net income (loss) $ (53,473 )   -1.69 % $ 948,861     33.53 %
 
 
 
 
 
 
Operating revenues increased 12% for the nine months ended September 30, 2006 versus the same period of fiscal 2005. This increase was primarily due to an increase in the number of subscribers to the Company’s Internet subscription

11


service offset in part by a decrease in the number of subscribers to the Company’s subscription service for third-party international credit reports.

Data and product costs increased 24% for the first nine months of fiscal 2006 compared to the same period of fiscal 2005. This increase was primarily due to higher salary and related employee benefits including the hiring of additional quality control personnel, higher consulting fees, as well as the cost of new third-party content added to the Company’s website.

Selling, general and administrative expenses increased 4% for the first nine months of fiscal 2006 compared to the same period of fiscal 2005. This increase was primarily due to higher salary and related employee benefit costs due to an increase in the Company’s sales force during the past 12 months and an increase in marketing expenses, partially offset by a decrease in professional fees as a result of the settlement of the litigation that was reached during last year’s second quarter, as previously reported.

Depreciation and amortization increased 1% for the first nine months of fiscal 2006 compared to the same period of fiscal 2005. This increase was due to a higher depreciable asset base during the current period resulting from the purchase of new trade booths and computer equipment during the last 12 months, partially offset by lower depreciation expense during the fiscal 2006 period on certain items that have been fully depreciated but are still in use.

Other income increased 149% for the first nine months of fiscal 2006 compared to the same period last year. This increase was primarily due to the settlement proceeds received at the end of April 2005 that were invested in interest bearing accounts as well as a higher interest rate received on funds invested in interest bearing accounts during the current period compared to the same period last year.

Interest expense decreased 20% for the first nine months of fiscal 2006 compared to the same period of fiscal 2005. This decrease was due to a lower outstanding promissory note balance.

The Company reported a net loss of $53,000 versus net income of $949,000 for the nine months ended September 30, 2006 and 2005, respectively. This decrease was primarily due to the litigation settlement of $1.1 million received in the second quarter of fiscal 2005.

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 Company’s limited operating history and 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 their subscriptions for the Company’s services, which are difficult to forecast. The Company may be


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unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to the Company’s planned expenditures would have an immediate adverse effect on the Company’s business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, the Company may from time to time make certain pricing, service, marketing or acquisition decisions that could have a material adverse effect on its business, prospects, financial condition and results of operations.

Achieving profitability depends on the Company’s ability to generate and sustain increased revenue levels. The Company believes that its success will depend in large part on its ability to (i) 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 invest in marketing and promotion, product development and technology and operating infrastructure development. 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 significant fluctuations in its future quarterly operating results due to a variety of factors, some of which are outside the Company’s control. Factors that may adversely affect the Company’s quarterly operating results include, among others, (i) the Company’s ability to retain existing customers, attract new customers at a steady rate and maintain customer satisfaction, (ii) the Company’s ability to maintain gross margins in its existing business and in future product lines and markets, (iii) the development of new services and products by the Company and its competitors, (iv) price competition, (v) the level of use of the Internet and online services and increasing acceptance of the Internet and other online services for the purchase of products such as those offered by the Company, (vi) the Company’s ability to upgrade and develop its systems and infrastructure, (vii) the Company’s ability to attract new personnel in a timely and effective manner, (viii) the level of traffic on the Company’s Web site, (ix) the Company’s ability to manage effectively its development of new business segments and markets, (x) the Company’s ability to successfully manage the integration of operations and technology of acquisitions or other business combinations, (xi) technical difficulties, system downtime or Internet brownouts, (xii) the amount and timing of operating costs and capital expenditures relating to expansion of the Company’s business, operations and infrastructure, (xiii) governmental regulation and taxation policies, (xiv) disruptions in service by common carriers due to strikes or otherwise, (xv) risks of fire or other casualty, (xvi) 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.

Due to the foregoing factors and the Company’s limited forecasting abilities, the Company believes that period-to-period comparisons of its revenues and operating results are not necessarily meaningful and should not be relied on as an indication of future performance.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB may contain forward-looking statements, including statements regarding future prospects, industry trends, competitive


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conditions and litigation issues. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes”, “expects”, “anticipates”, “plans” or words of similar meaning are intended to identify forward-looking statements. This notice is intended to take advantage of the “safe harbor” provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Among others, factors that could cause actual results to differ materially from the Company’s beliefs or expectations are those listed under “Results of Operations” and other factors referenced herein or from time to time as “risk factors” or otherwise in the Company’s Registration Statements or Securities and Exchange Commission reports.

Item 3. Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, management has decided that considering the employees involved and the control procedures in place, risks associated with such lack of segregation are insignificant and the potential benefit of adding employees to clearly segregate duties do not justify the expenses associated with such increase.


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PART II. OTHER INFORMATION

Item 2.   Changes in Securities and Small Business Issuer Purchases of Equity Securities

The Company is prohibited from paying dividends pursuant to the Loan Security Agreement that secures its Secured Promissory Note with Market Guide Inc.

Item 6. Exhibits

 
31.1
   
 
31.2
   
 
32.1
   
 
32.2

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SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.                                        

 
  CREDITRISKMONITOR.COM, INC.
    (REGISTRANT)
     
Date: November 14, 2006 By: /s/ Lawrence Fensterstock
    Lawrence Fensterstock
    Chief Financial Officer

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