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PAID INC - Quarter Report: 2021 September (Form 10-Q)

payd20210930_10q.htm
 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

For the quarterly period ended September 30, 2021

 

COMMISSION FILE NUMBER 0-28720

payd20210930_10qimg001.jpg

 

(Exact Name of Registrant as Specified in its Charter)

  

Delaware

73-1479833

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

 

225 Cedar Hill Street, Marlborough, Massachusetts 01752

(Address of Principal Executive Offices) (Zip Code)

 

(617) 861-6050

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

None

None

None

 

Securities registered under Section 12(g) of the Act:

Common Stock, $0.001 Par Value

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer

Accelerated Filer

Non-accelerated filer

Smaller reporting Company 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

 

Yes ☐     No ☒

 

As of November 15, 2021, the issuer had outstanding 7,773,263 shares of its Common Stock.

 



 

 

 

PAID, INC.

FORM 10-Q

 

TABLE OF CONTENTS

 

 
       

Part I  Financial Information

 
       
 

Item 1.

Financial Statements

 
       
   

Condensed Consolidated Balance Sheets September 30, 2021 (unaudited) and December 31, 2020 (audited)

1

       
   

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

2
    Three and Nine months ended September 30, 2021 and 2020  
       
   

Unaudited Condensed Consolidated Statements of Cash Flows

3

    Nine months ended September 30, 2021 and 2020  
       
   

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

4

    Three and Nine months ended September 30, 2021 and 2020  
       
   

Notes to Condensed Consolidated Financial Statements (unaudited)

6

       
 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

       
 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

20

       
 

Item 4.

Controls and Procedures

20

       

Part II  Other Information

 
       
 

Item 1.

Legal Proceedings

21

       
 

Item 1A.

Risk Factors

21

       
 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

       
 

Item 3.

Defaults Upon Senior Securities

21

       
 

Item 4.

Mine Safety Disclosures

21

       
 

Item 5.

Other Information

21

       
 

Item 6.

Exhibits

21

       
 

Signatures

22

 

 
 

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

PAID, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

  

September 30, 2021

  

December 31,

 
  

(Unaudited)

  

2020

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $2,480,524  $1,644,210 

Accounts receivable, net

  223,276   171,785 

Prepaid expenses and other current assets

  139,933   184,366 

Total current assets

  2,843,733   2,000,361 
         

Property and equipment, net

  44,261   59,848 

Intangible assets, net

  3,288,828   3,633,420 

Operating lease right-of-use assets

  69,444   93,457 

Total assets

 $6,246,266  $5,787,086 
         

LIABILITIES AND SHAREHOLDERS' EQUITY

        

Current liabilities:

        

Accounts payable

 $1,653,284  $1,460,484 

Finance leases - current portion

  -   2,844 

Accrued expenses

  404,682   276,254 

Contract liabilities

  10,535   9,046 

Operating lease obligations – current portion

  36,169   33,118 

Total current liabilities

  2,104,670   1,781,746 

Long-term liabilities:

        

Operating lease obligations – net of current portion

  33,843   61,794 

Deferred tax liability, net

  965,965   960,947 

Total liabilities

  3,104,478   2,804,487 

Commitments and contingencies

          

Shareholders' equity:

        

Series A Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

  -   - 

Common stock, $0.001 par value, 25,000,000 shares authorized; 7,807,103 shares issued and 7,773,263 shares outstanding at September 30, 2021, 6,489,004 shares issued and 6,455,164 shares outstanding at December 31, 2020

  7,807   6,489 

Accrued common stock bonus

  -   2,005,500 

Additional paid-in capital

  72,590,095   70,083,486 

Accumulated other comprehensive income

  582,168   570,761 

Accumulated deficit

  (69,980,435)  (69,625,790)

Common stock in treasury, at cost, 33,840 shares at September 30, 2021 and December 31, 2020

  (57,847)  (57,847)

Total shareholders' equity

  3,141,788   2,982,599 
         

Total liabilities and shareholders' equity

 $6,246,266  $5,787,086 

 

See accompanying notes to condensed consolidated financial statements

 

 

 
-1-

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

2021

   

September 30,

2020

   

September 30,

2021

   

September 30,

2020

 

Revenues, net

  $ 3,480,109     $ 3,409,316     $ 11,008,692     $ 9,303,510  

Cost of revenues

    2,703,160       2,548,833       8,419,679       7,056,764  

Gross profit

    776,949       860,483       2,589,013       2,246,746  
                                 

Operating expenses:

                               

Salaries and related

    430,752       360,702       1,314,201       1,109,922  

General and administrative

    274,078       178,930       757,479       629,076  

Share-based compensation

    94,613       329,140       502,427       311,129  

Amortization of other intangible assets

    122,054       115,439       368,595       340,875  

Total operating expenses

    921,497       984,211       2,942,702       2,391,002  

Loss from operations

    (144,548 )     (123,728 )     (353,689 )     (144,256 )
                                 

Other income:

                               

Other income, net

    -       6       -       13,201  

Total other income, net

    -       6       -       13,201  
                                 

Loss before provision for income taxes

    (144,548 )     (123,722 )     (353,689 )     (131,055 )

Provision for income taxes

    -       -       956       500  

Net loss

    (144,548 )     (123,722 )     (354,645 )     (131,555 )

Preferred dividends

    -       -       -       (28,532 )

Net loss available to common shareholders

  $ (144,548 )   $ (123,722 )   $ (354,645 )   $ (160,087 )
                                 

Net loss per share – basic

  $ (0.02 )   $ (0.02 )   $ (0.05 )   $ (0.03 )

Weighted average number of common shares outstanding – basic

    7,773,263       6,181,044       7,334,018       5,139,206  

Net loss per share – diluted

  $ (0.02 )   $ (0.02 )   $ (0.05 )   $ (0.03 )

Weighted average number of common shares outstanding – diluted

    7,773,263       6,181,044       7,334,018       5,139,206  

Condensed consolidated statements of comprehensive loss

                               

Net loss

  $ (144,548 )   $ (123,722 )   $ (354,645 )   $ (131,555 )

Other comprehensive loss:

                               

Foreign currency translation adjustments

    (75,131 )     57,659       11,407       (71,398 )

Comprehensive loss

  $ (219,679 )   $ (66,063 )   $ (343,238 )   $ (202,953 )

 

See accompanying notes to condensed consolidated financial statements

 

 
-2-

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

 

 

   

2021

   

2020

 

Cash flows from operating activities:

               

Net loss

  $ (354,645 )   $ (131,555 )

Adjustments to reconcile net loss to net cash provided by operating activities:

               

Depreciation and amortization

    385,848       364,273  

Amortization of operating lease right-of-use assets

    24,840       20,957  

Provision for bad debts

    -       20,125  

Share-based compensation

    502,427       311,129  

Gain on sale of property and equipment

    -       (739 )

Changes in assets and liabilities:

               

Accounts receivable

    (50,447 )     (87,361 )

Prepaid expenses and other current assets

    44,588       (17,686 )

Accounts payable

    188,237       246,405  

Accrued expenses

    129,232       127,860  

Contract liabilities

    1,462       4,211  

Operating lease obligations

    (25,747 )     (21,660 )

Net cash provided by operating activities

    845,795       835,959  
                 

Cash flows from investing activities:

               

Purchase of property and equipment

    (1,120 )     -  

Proceeds from sale of property and equipment

    -       739  

Net cash (used in) provided by investing activities

    (1,120 )     739  
                 

Cash flows from financing activities:

               

Payments on finance leases

    (2,907 )     (7,065 )

Proceeds from warrant exercise

    -       35,636  

Payments of preferred dividends

    -       (26,252 )

Net cash (used in) provided by financing activities

    (2,907 )     2,319  

Effect of exchange rate changes on cash and cash equivalents

    (5,454 )     2,476  
                 

Net increase in cash and cash equivalents

    836,314       841,493  
                 

Cash and cash equivalents, beginning of period

    1,644,210       475,881  

Cash and cash equivalents, end of period

  $ 2,480,524     $ 1,317,374  
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

               

Cash paid during the period for:

               

Income taxes

  $ 956     $ 500  

Interest

  $ 86     $ 496  

SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS

               

Issuance of common shares in settlement of accrued expenses

  $ 2,005,500     $ -  

Issuance of preferred shares in settlement of dividends

  $ -     $ 358,638  

 

See accompanying notes to condensed consolidated financial statements

 

-3-

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(Unaudited)

 

   

Common Stock

   

Accrued Common Stock

   

Additional Paid-in

   

Accumulated Other Comprehensive

   

Accumulated

   

Treasury Stock

   

 

 
   

Shares

   

Amount

     Bonus      Capital       Income       Deficit     

Shares

   

Amount

     Total   

Balance, January 1, 2021

    6,489,004     $ 6,489     $ 2,005,500     $ 70,083,486     $ 570,761     $ (69,625,790 )     (33,840 )   $ (57,847 )   $ 2,982,599  

Foreign currency translation adjustment

    -       -       -       -       40,512       -       -       -       40,512  

Share-based compensation expense

    -       -       -       24,863       -       -       -       -       24,863  

Issuance of common stock for accrued bonus and compensation

    1,300,000       1,300       (2,005,500 )     2,242,950       -       -       -       -       238,750  

Net loss

    -       -       -       -       -       (179,733 )     -       -       (179,733 )

Balance, March 31, 2021

    7,789,004     $ 7,789     $ -       72,351,299     $ 611,273     $ (69,805,523 )     (33,840 )   $ (57,847 )   $ 3,106,991  

Foreign currency translation adjustment

    -       -       -       -       46,026       -       -       -       46,026  

Share-based compensation expense

    -       -       -       104,201       -       -       -       -       104,201  

Issuance of common stock for compensation

    18,099       18       -       39,982       -       -       -       -       40,000  

Net loss

    -       -       -       -       -       (30,364 )     -       -       (30,364 )

Balance, June 30, 2021

    7,807,103     $ 7,807     $ -       72,495,482     $ 657,299     $ (69,835,887 )     (33,840 )   $ (57,847 )   $ 3,266,854  

Foreign currency translation adjustment

    -       -       -       -       (75,131 )     -       -       -       (75,131 )

Share-based compensation expense

    -       -       -       94,613       -       -       -       -       94,613  

Net loss

    -       -       -       -       -       (144,548 )     -       -       (144,548 )

Balance, September 30, 2021

    7,807,103     $ 7,807     $ -       72,590,095     $ 582,168     $ (69,980,435 )     (33,840 )   $ (57,847 )   $ 3,141,788  

 

 

 

-4-

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

(Unaudited)

 

   

Preferred Stock

   

Common Stock

   

Additional Paid-in Capital

   

Accumulated Other Comprehensive

   

Accumulated

   

Treasury Stock

         
   

Shares

   

Amount

    Shares    

Amount

   

Amount

    Income     Deficit     Shares    

Amount

   

Total

 

Balance, January 1, 2020

    4,438,578     $ 4,439       1,648,657     $ 1,649     $ 69,242,412     $ 512,894     $ (67,008,347 )     (33,840 )   $ (57,847 )   $ 2,695,200  

Foreign currency translation adjustment

    -       -       -       -       -       (235,181 )     -       -       -       (235,181 )

Share-based compensation expense

    -       -       -       -       (20,789 )     -       -       -       -       (20,789 )

Preferred dividends paid in shares

    126,727       127       -       -       358,511       -       (358,638 )     -       -       -  

Exchange of Preferred to Common

    (4,125,500 )     (4,126 )     4,126,422       4,126       -       -       -       -       -       -  

Preferred dividends paid

    -       -       -       -       -       -       (26,252 )     -       -       (26,252 )

Net loss

    -       -       -       -       -       -       (113,242 )     -       -       (113,242 )

Balance, March 31, 2020

    439,805     $ 440       5,775,079     $ 5,775     $ 69,580,134     $ 277,713     $ (67,506,479 )     (33,840 )   $ (57,847 )   $ 2,299,736  

Foreign currency translation adjustment

    -       -       -       -       -       106,124       -       -       -       106,124  

Share-based compensation expense

    -       -       -       -       2,778       -       -       -       -       2,778  

Exchange of Preferred to Common

    (439,805 )     (440 )     439,805       440       -       -       -       -       -       -  

Net income

    -       -       -       -       -       -       105,409       -       -       105,409  

Balance, June 30, 2020

    -     $ -       6,214,884     $ 6,215     $ 69,582,912     $ 383,837     $ (67,401,070 )     (33,840 )   $ (57,847 )   $ 2,514,047  

Foreign currency translation adjustment

    -       -       -       -       -       57,659       -       -       -       57,659  

Share-based compensation expense

    -       -       -       -       10,247       -       -       -       -       10,247  

Warrant exercise

    -       -       274,120       274       35,362       -       -       -       -       35,636  

Warrant reprice

    -       -       -       -       318,893       -       -       -       -       318,893  

Net loss

    -       -       -       -       -       -       (123,722 )     -       -       (123,722 )

Balance, September 30, 2020

    -     $ -       6,489,004     $ 6,489     $ 69,947,414     $ 441,496     $ (67,524,792 )     (33,840 )   $ (57,847 )   $ 2,812,760  

 

See accompanying notes to condensed consolidated financial statements

 

-5-

 

 

PAID, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2021

 

 

Note 1. Organization and Significant Accounting Policies

 

PAID, Inc. (“PAID”, the “Company”, “we”, “us”, or “our”) has developed AuctionInc, which is a suite of online shipping and tax management tools assisting businesses with e-commerce storefronts, shipping solutions, tax calculation, inventory management, and auction processing. The product has tools to assist with other aspects of the fulfillment process, but the main purpose of the product is to provide accurate shipping and tax calculations and packaging algorithms that provide customers with the best possible shipping and tax solutions.

 

BeerRun Software (“BeerRun”) is a brewery management and Alcohol and Tobacco Tax and Trade Bureau tax reporting software. Small craft brewers can utilize the product to manage brewery schedules, inventory, packaging, sales and purchasing. Tax reporting can be processed with a single click and is fully customizable by state or province. The software is designed to integrate with QuickBooks accounting platforms by using our powerful sync engine. We currently offer two versions of the software BeerRun and BeerRun Light which excludes some of the enhanced features of BeerRun without disrupting the core functionality of the software. Additional features include Brewpad and Kegmaster and can be added on to the base product. Craft brewing is on the rise in the United States, and we feel that there is a large potential to grow this portion of our business.

 

ShipTime Canada Inc. (“ShipTime”) has developed a SaaS-based application, which focuses on the small and medium business segments. This offering allows members to quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. The application provides customers with a choice of today’s leading couriers and freight carriers all with discounted pricing allowing members to save on every shipment. ShipTime can also be integrated into on-line shopping carts to facilitate sales via e-commerce. We actively sell directly to small and medium businesses and through long-standing partnerships with selected associations throughout Canada. 

 

PaidPayments provides commerce solutions to small - and medium-sized businesses by enabling them to sell their goods and services, accept payment, and create repeat sales though an online payment processing solution. The Company has operated as a Payment Facilitator since 2019, which enables our merchants to get the benefit of instant boarding and discounted rates. Our platform provides all aspects required for payment processing, including merchant boarding, underwriting, fraud monitoring, settlement, funding to the sub-merchant, and monthly reporting and statements. The Company controls all of these necessary aspects in the payment process and is then able to supply a one-step boarding process for our partners and value-added resellers. This capability also provides cost advantages, rapid response to market needs, simplified processes for boarding business and a seamless interface for our merchant customers.

 

General Presentation and Basis of Consolidated Financial Statements

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and with the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020 that was filed on March 31, 2021.

 

In the opinion of management, the Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as its audited consolidated financial statements, and these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2021.

 

- 6-

 
 

Liquidity and Managements Plans

 

As of and for the three months ended September 30, 2021, the Company reported cash and cash equivalents of $2,480,524 and cash flows from operations of $845,795 and net working capital of $739,063. The Company has reported a net loss of $354,645 for the nine months ended September 30, 2021 and has an accumulated deficit of $69,980,435 at September 30, 2021.

 

Management believes that the growth of the PAID platform of services in addition to the continued profitability of ShipTime’s services will return a valuable impact on the Company’s success in the future. The ongoing positive cash flows from operations is a significant indicator of our successful transition to the new shipping and eCommerce services. In addition to the existing services provided, ShipTime will launch products in the United States that are complementary to the current offerings. The Company also continues to seek alternate sources of capital to support future operations.

 

Although there can be no assurances, the Company believes that the above management plans will be sufficient to meet the Company's working capital requirements through the end of November 2022 and will have a positive impact on the Company for the foreseeable future.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of PAID, Inc. and its wholly owned subsidiaries, PAID Run, LLC and ShipTime Canada, Inc. All intercompany accounts and transactions have been eliminated.

 

Reclassifications

 

Certain reclassifications have been made to prior year’s financial statements to conform to classifications used in the current year.

 

Foreign Currency

 

The currency of ShipTime, the Company’s international subsidiary, is in Canadian dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at September 30, 2021 and December 31, 2020. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a separate component of shareholders’ equity in accumulated other comprehensive income.

 

Geographic Concentrations

 

The Company conducts business in the U.S. and Canada. For customers headquartered in their respective countries, the Company derived approximately 99% of its revenues from Canada and 1% from the U.S. during the three and nine months ended September 30, 2021. For the three months ended September 30, 2020, the Company derived approximately 96% of its revenues from Canada and 4% from the U.S. compared to 95% from Canada and 5% from the U.S. for the nine months ended September 30, 2020.

 

At September 30, 2021, the Company maintained 100% of its property and equipment net of accumulated depreciation in Canada.

 

Right-of-Use Assets

 

A right-of-use asset represents a lessee’s right to use a leased asset for the term of the lease. Our right-of-use assets generally consist of an operating lease for a building.

 

Right-of-use assets are measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial direct costs, such as commissions paid to obtain a lease.

 

Right-of-use assets are subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and any initial direct costs not yet expensed.

 

- 7-

 
 

Long-Lived Assets

 

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were recognized during the three and nine months ended September 30, 2021 and 2020. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

 

Revenue Recognition

 

The Company generates revenue principally from fees for coordinating shipping services, sales of shipping calculator subscriptions, brewery management software subscriptions, merchant processing services and client services.

 

Nature of Goods and Services

 

For label generation service revenues, the Company recognizes revenue when a customer has successfully prepared a shipping label and scheduled a pickup. Customers with pickups after the end of the reporting period are recorded as contract liabilities on the condensed consolidated balance sheets. The service is offered to consumers via an online registration and allows users to create a shipping label using a credit card on their account (all customers must have a valid credit card on file to process shipments on the ShipTime platform).

 

For shipping calculator revenues and brewery management software revenues, the Company recognizes subscription revenue on a monthly basis. Shipping calculator customers’ renewal dates are based on their date of installation and registration of the shipping calculator line of products. The timing of the revenue recognition and cash collection may vary within a given quarter and the deposits for future services are recorded as contract liabilities on the condensed consolidated balance sheets. Brewery management software subscribers are billed monthly at the first of the month. All payments are made via credit card for the following month.

 

Merchant processing revenue consists of fees a seller pays us to process their payment transactions and is recognized upon authorization of a transaction. Revenue is recognized net of estimated refunds, which are reversals of transactions initiated by sellers. We act as the merchant of record for our sellers, which puts us in their shoes with respect to card networks and puts the risk for refunds and chargebacks on us. The gross transaction fees collected from sellers is recognized as revenue as we are the primary obligor to the seller and are responsible for processing the payment, have latitude in establishing pricing with respect to the sellers and other terms of service, have sole discretion in selecting the third party to perform the settlement, and assume the credit risk for the transaction processed.

 

Revenue Disaggregation

 

The Company operates in five reportable segments (see below).

 

Performance Obligations

 

At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when the performance obligation has been met, which is when the customer has successfully prepared a shipping label and scheduled a pickup for shipping coordination and label generation services. The Company considers control to have transferred at that time because the Company has a present right to payment at that time, the Company has provided the shipping label, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the shipping label.

 

For arrangements under which the Company provides a subscription for shipping calculator services and brewery management software, the Company satisfies its performance obligations over the life of the subscription, typically twelve months or less.

 

- 8-

 
 

Customers of PaidPayments receive a merchant identification number which allows them to process credit card transactions. Once the transaction is approved, the funds are disbursed in an overnight feed and the Company has met its performance obligation.

 

The Company has no shipping and handling activities related to contracts with customers.

 

Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to government authorities.

 

Significant Payment Terms

 

Pursuant to the Company’s contracts with its customers, amounts are collected up front primarily through credit/debit card transactions. The Company has offered to its customers consolidated payments which are billed weekly and are paid with a credit card on file. Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.

 

Variable Consideration

 

In some cases, the nature of the Company’s contracts may give rise to variable consideration, including rebates and cancellations or other similar items that generally decrease the transaction price.

 

Variable consideration is estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available.

 

Revenues are recorded net of variable consideration, such as rebates, refunds, and cancellations.

 

Warranties

 

The Company’s products and services are provided on an “as is” basis and no warranties are included in the contracts with customers. Also, the Company does not offer separately priced extended warranty or product maintenance contracts.

 

Contract Assets

 

Typically, the Company has already collected revenue from the customer at the time it has satisfied its performance obligation. Accordingly, the Company has only a small balance of accounts receivable, totaling $223,276 and $171,785 as of September 30, 2021, and December 31, 2020, respectively. Generally, the Company does not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed.

 

Contract Liabilities (Deferred Revenue)

 

Contract liabilities are recorded when cash payments are received in advance of the Company’s performance (including rebates). Contract liabilities were $10,535 and $9,046 at September 30, 2021 and December 31, 2020, respectively. During the nine months ended September 30, 2021, the Company recognized revenues of $9,046 related to contract liabilities outstanding at the beginning of the year.

 

Earnings (Loss) Per Common Share

 

Basic earnings (loss) per share represent income (loss) available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. The potential common shares that may be issued by the Company relate to outstanding stock options and are excluded from the computation of diluted earnings (loss) per share if they would reduce the reported loss per share and therefore have an anti-dilutive effect.

 

- 9-

 
 

For the three months ended September 30, 2021 and 2020, and the nine months ended September 30, 2021 and 2020, there were approximately 38,000 and 35,000 and 37,000 and 57,000, respectively, of potentially dilutive shares excluded from the diluted loss per share calculation, as their effect would be anti-dilutive.

 

The Company computes its income (loss) applicable to common shareholders by adding/subtracting dividends on preferred stock, including undeclared or unpaid dividends if cumulative, and any deemed dividends or discounts on redeemed preferred stock from its reported net income (loss) and reports the same on the face of the condensed consolidated statements of operations and comprehensive income (loss).

 

The following is a reconciliation of the numerators and denominators of the basic earnings (loss) per common share and diluted earnings (loss) per common share computation for the three and nine months ended September 30, 2021 and 2020.

 

  

Three Months Ended

September 30, 2021

  

Three Months Ended

September 30, 2020

 

Numerator:

        

Net loss available to common shareholders

 $(144,548) $(123,722)

Denominator:

        

Basic weighted-average shares outstanding

  7,773,263   6,181,044 

Effect of dilutive securities

  -   - 

Diluted weighted-average shares outstanding

  7,773,263   6,181,044 

Basic loss per common share

 $(0.02) $(0.02)

Diluted loss per common share

 $(0.02) $(0.02)

 

  

Nine Months Ended

September 30, 2021

  

Nine Months Ended

September 30, 2020

 

Numerator:

        

Net loss available to common shareholders

 $(354,645) $(160,087)

Denominator:

        

Basic weighted-average shares outstanding

  7,334,018   5,139,206 

Effect of dilutive securities

  -   - 

Diluted weighted-average shares outstanding

  7,334,018   5,139,206 

Basic loss per common share

 $(0.05) $(0.03)

Diluted loss per common share

 $(0.05) $(0.03)

 

Segment Reporting

 

The Company reports information about segments of its business in its annual consolidated financial statements and reports selected segment information in its quarterly reports issued to shareholders. The Company also reports on its entity-wide disclosures about the products and services it provides and reports revenues and its major customers. The Company’s five reportable segments are managed separately based on fundamental differences in their operations. At September 30, 2021, the Company operated in the following five reportable segments:

 

 

a.

Client services;

 

b.

Shipping calculator services;

 

c.

Brewery management software;

 

d.

Merchant processing services;

 

e.

Shipping coordination and label generation services; and

 

f.

Corporate operations

 

- 10-

 
 

The Company evaluates performance and allocates resources based upon operating income. The accounting policies of the reportable segments are the same as those described in this summary of significant accounting policies. The Company’s chief operating decision maker is the Chief Executive Officer/Chief Financial Officer.

 

The following table compares total revenue for the periods indicated.

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

2021

  

September 30,

2020

  

September 30,

2021

  

September 30,

2020

 

Client services

 $1,548  $1,878  $3,057  $3,283 

Shipping calculator services

  5,565   6,321   17,284   22,114 

Brewery management software

  12,825   25,600   48,050   93,413 

Merchant processing services

  13,828   105,713   40,806   379,012 

Shipping coordination and label generation services

  3,446,343   3,269,804   10,899,495   8,805,688 

Total revenues

 $3,480,109  $3,409,316  $11,008,692  $9,303,510 

 

The following table compares total income (loss) from operations for the periods indicated.

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

2021

  

September 30,

2020

  

September 30,

2021

  

September 30,

2020

 

Client services

 $1,250  $1,417  $2,445  $2,517 

Shipping calculator services

  3,346   3,749   8,763   9,908 

Brewery management software

  1,656   17,830   19,674   35,845 

Merchant processing services

  4,803   37,548   15,129   86,477 

Shipping coordination and label generation services

  104,847   268,434   484,272   417,545 

Corporate operations

  (260,450)  (452,706)  (883,972)  (696,548)

Total income (loss) from operations

 $(144,548) $(123,728) $(353,689) $(144,256)

 

Subsequent Events

 

The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the notes thereto, other than as disclosed herein.

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes” to identify, evaluate, and improve areas of GAAP for which costs and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments for ASU No. 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company’s adoption of ASU No. 2019-12 in January 2021 had no impact on its consolidated financial position, results of operations, cash flows or disclosures.

 

 

Note 2. Accrued Expenses

 

Accrued expenses are comprised of the following:

 

  

September 30, 2021

(unaudited)

  

December 31, 2020

 

Payroll and related costs

 $9,410  $25,319 

Royalties

  47,803   47,803 

Accrued cost of revenues

  315,157   170,928 

Sales tax

  31,902   31,902 

Other

  410   302 

Total

 $404,682  $276,254 

 

- 11-

 
 
 

Note 3. Intangible Assets

 

The Company holds several patents for the real-time calculation of shipping costs for items purchased through online auctions using a zip code as a destination location indicator. It includes shipping charge calculations across multiple carriers and accounts for additional characteristics of the item being shipped, such as weight, special packaging or handling, and insurance costs. These patents help facilitate rapid and accurate estimation of shipping costs across multiple shipping carriers and also include real-time calculation of shipping.

 

In addition, the Company has various other intangibles from past business combinations.

 

At September 30, 2021, intangible assets consisted of the following:

 

  

Patents

  

Trade Name

  

Technology & Software

  

Customer Relationships

  

Total

 

Gross carrying amount

 $16,000  $844,169  $622,874  $4,952,537  $6,435,580 

Accumulated amortization

  (16,000)  (799,022)  (622,874)  (1,708,856)  (3,146,752)
  $-  $45,147  $-  $3,243,681  $3,288,828 

 

At December 31, 2020, intangible assets consisted of the following:

 

  

Patents

  

Trade Name

  

Technology & Software

  

Customer Relationships

  

Total

 

Gross carrying amount

 $16,000  $839,816  $620,094  $4,928,102  $6,404,012 

Accumulated amortization

  (16,000)  (668,929)  (620,094)  (1,465,569)  (2,770,592)
  $-  $170,887  $-  $3,462,533  $3,633,420 

 

Amortization expense of intangible assets for the three months ended September 30, 2021 and 2020 was $122,054 and $115,439, respectively, and for the nine months ended September 30, 2021 and 2020 was $368,595 and $340,875, respectively.

 

 

Note 4. Commitments and Contingencies

 

Legal Matters

 

In the normal course of business, the Company periodically becomes involved in litigation and disputes. During 2020, the Company was notified of a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company's former CEO, in which Mr. Pratt appears to be treating it as a termination which would trigger a two-year severance payment. By further action filed in the Court of Chancery of the State of Delaware on July 6, 2021, Mr. Pratt is seeking to be reinstated as a director by challenging the Board’s approval process in reducing the board size from five to three, which was effective as of the time in which Mr. Pratt’s and Mr. Austin Lewis’ terms expired in April 2020. As of September 30, 2021, in the opinion of management, the Company had no pending litigation and disputes that would have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

 

Indemnities and Guarantees

 

The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility leases, the Company has agreed to indemnify its lessors for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies and is generally tied to the life of the agreements. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying condensed consolidated balance sheets.

 

- 12-

 
 
 

Note 5. Shareholders Equity

 

Preferred Stock

 

The Company’s amended Certificate of Incorporation authorizes the issuance of 20,000,000 shares of blank-check preferred stock at $0.001 par value. The Board of Directors will be authorized to fix the designations, rights, preferences, powers and limitations of each series of the preferred stock.

 

The Company filed a Certificate of Designations effective on December 30, 2016 which sets aside 5,000,000 shares of Preferred Stock as Series A Preferred Stock. The Series A Preferred Stock carries a coupon payment obligation of 1.5% of the liquidation value per share ($3.03) per year in cash or additional Series A Preferred Stock, calculated by taking the 30-day average closing price for a share of common stock for the month immediately preceding the coupon payment date which is made annually. For the year ended December 31, 2020, the annual coupon was $28,532. The Series A Preferred Stock has no voting or conversion rights. If purchased, redeemed, or otherwise acquired (other than conversion), the preferred stock may be reissued. The Company paid the 2018 and 2019 coupon payments totaling $358,638 by issuing 126,727 preferred shares and a cash payment of $26,252 for the 2020 coupon payment for the nine months ended September 30, 2020. In 2020, all 4,565,305 shares of Series A Preferred Stock were exchanged for common stock (see below). As of September 30, 2021 and December 31, 2020, there are no outstanding shares of Series A Preferred Stock.

 

Common Stock

 

In February 2020, ShipTime Canada amended its rights to exchange one share of ShipTime Canada stock from 45 PAID common shares and 311 PAID preferred shares to 356 PAID common shares. The Company made available to its ShipTime Canada exchangeable preferred shareholders the one-time option to convert existing book entry preferred shares and exchangeable rights to preferred shares into PAID common shares. As a result, certain ShipTime exchangeable shareholders exercised their rights to receive 1,461,078 shares of PAID Series A Preferred Stock for 1,461,078 shares of PAID common stock. At the same time, the Company made available to its Series A Preferred Stock shareholder the option to exchange existing Series A preferred shares for PAID common shares. The exchange was offered on a one-to-one basis. Shareholders holding 1,015,851 shares of Series A Preferred Stock exchanged such shares for 1,015,851 shares of PAID common stock. Furthermore, because of the amended exchange rights, the Company reflected an additional exchange of PAID Series A Preferred Stock shares totaling 2,089,298 to PAID common shares, representing the additional amount of PAID common shares that will be issued to the ShipTime shareholders upon the exchange. During 2020, two shareholders sold 500 ShipTime exchangeable shares which were subsequently exchanged for 178,000 common shares. In total, the Company has reserved for future issuance of 2,213,608 shares of PAID common stock with respect to the remaining 6,218 exchangeable shares to be issued as a result of the ShipTime acquisition which are considered issued and outstanding as of September 30, 2021 for financial reporting purposes.

 

During 2020, the Company issued 274,120 shares of PAID common stock as a result of the exercise of an investor warrant for 770 ShipTime exchangeable shares. The Company received gross proceeds of $35,636 in connection with the warrant exercise. On March 29, 2021, the Company's Board of Directors authorized the issuance of 1,050,000 bonus shares of PAID common stock to the interim CEO/CFO for services rendered during 2019 and 2020. This bonus was valued at $2,005,500 based on the closing price of the Company's common stock at March 29, 2021 and is recorded in accrued common stock bonus in shareholders’ equity at December 31, 2020. These shares were issued on March 31, 2021. On March 29, 2021, the Board of Directors approved the issuance of 250,000 shares of PAID common stock valued at $1.91 per share to W. Austin Lewis IV as it relates to his 2021 employment agreement, of which 125,000 of the shares are subject to repurchase at the award value of $1.91 per share if Mr. Lewis terminates employment prior to January 1, 2022, as defined in the employment agreement.  These shares were issued on March 31, 2021. The value of the shares that are subject to repurchase will be recognized ratably as share-based compensation expense through December 31, 2021. For the three and nine months ended September 30, 2021, the Company recognized $79,583 and $397,916, respectively, related to these shares as share-based compensation. Unrecognized compensation expense related to these shares is $79,584. During the second quarter of 2021, the Company issued 18,099 shares valued at $2.21 per share for a total of $40,000 to two employees as bonus compensation which is included in share-based compensation in the condensed statements of operations and comprehensive income (loss) for the nine months ended September 30, 2021. The shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder.

 

On September 30, 2020, the Company issued 274,120 shares of the Company’s common stock as a result of the exercise of an investor warrant for 770 ShipTime exchangeable shares. The Company received gross proceeds of $35,636 and issued 274,120 shares of the Company’s common stock with an exercise price of $0.13 per share in connection with the warrant exercise.

 

- 13-

 
 

Share-based Incentive Plans

 

On March 23, 2018, the Board of Directors voted to approve the 2018 Stock Option Plan which reserves 450,000 non-qualified stock options to be granted to employees. The Company has three additional stock option plans that include both incentive and non-qualified stock options to be granted to certain eligible employees, non-employee directors, or consultants of the Company. On November 10, 2020, the board voted to increase the 2018 Stock Option Plan from 450,000 options to 900,000 options. For the year ended December 31, 2020, the Company granted 105,000 stock options to employees, consultants and directors. The 2020 options have vesting periods of immediately and over a three-year period, they expire if not exercised within ten years from grant date, and the exercise price is $2.885 per share. During 2020, as a result of the termination of several employees, the Company recorded 61,948 expired options and an additional 20,459 that were cancelled. During the first quarter of 2021, the Company granted 10,000 stock options to one employee. These options have a three-year vesting schedule with one-third vesting immediately, one-third vesting in 18 months and the final one-third vesting in 36 months, they expire if not exercised in ten years from the grant date, and their exercise price is $1.91 per share. During the second quarter of 2021, the Company granted 7,000 stock options to one employee. These options have a three-year vesting schedule with one-third vesting immediately, one-third vesting in 18 months and the final one-third vesting in 36 months, they expire if not exercised in ten years from the grant date, and their exercise price was $2.21 per share. During the third quarter of 2021, the Company reversed $3,944 unvested stock option expenses for the termination of one employee.

 

For the three- and nine-month periods ended September 30, 2021, the Company recorded $15,030 and $64,511, respectively, of share-based compensation expense related to the vesting of applicable options granted in 2021 and prior years. For the three- and nine-month periods ended September 30, 2020, the Company recorded $329,140 and $311,129 respectively, of share-based compensation expense related to the vesting of applicable options granted in 2020 and prior years and the repricing of 770 warrants in the third quarter of 2020. Share-based compensation expense for the nine months ended September 30, 2020, included the reversal of unvested stock option expense for the termination of several employees totaling $42,549.

 

On August 14, 2020, the Board of Directors approved an amendment to ShipTime’s December 30, 2016 Warrant Agreement with an entity controlled by the Company’s Interim CEO/CFO to reprice the outstanding warrants. The modification of the warrant resulted in a charge to the Company’s share-based compensation expense of $318,893.

 

 

Note 6. Leases

 

We have an operating lease for our corporate offices in Canada and finance leases for furniture and equipment. Our leases have remaining lease terms of twenty-two months to twenty-three months, and our primary operating leases include options to extend the leases for four years. Future renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.

 

We report operating leased assets, as well as operating lease current and noncurrent obligations on our balance sheets for the right to use the building in our business. Our finance leases represent furniture and office equipment; we report the furniture and equipment, as well as finance lease current and noncurrent obligations on our balance sheet.

 

Generally, interest rates are stated in our leases for equipment. When no interest rate is stated in a lease, however, we review the interest rates implicit in our recent finance leases to estimate our incremental borrowing rate. We determine the rate implicit in a lease by using the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.

 

The components of lease expense were as follows:

 

  

Three Months Ended

September 30, 2021

  

Three Months Ended

September 30, 2020

 

Operating lease cost

 $10,150  $9,612 
         

Finance lease cost:

        

Amortization of leased assets

 $-  $2,698 

Interest on lease liabilities

  -   168 

Total finance lease cost

 $-  $2,866 

 

  

Nine Months Ended

September 30, 2021

  

Nine Months Ended

September 30, 2020

 

Operating lease cost

 $30,652  $28,347 
         

Finance lease cost:

        

Amortization of leased assets

 $5,557  $7,763 

Interest on lease liabilities

  86   664 

Total finance lease cost

 $5,643  $8,427 

 

- 14-

 
 

Supplemental cash flow information related to leases was as follows:

 

  

Nine Months Ended
September 30, 2021

  

Nine Months Ended
September 30, 2020

 

Cash paid for amounts included in leases:

        

Operating cash flows from operating leases

 $31,562  $29,402 

Operating cash flows from finance leases

 $86  $664 

Financing cash flows from finance leases

 $2,907  $7,065 
         

Right-of-use assets obtained in exchange for lease obligations:

        

Operating leases

 $-  $- 

Finance leases

 $-  $- 

 

Supplemental balance sheet information related to leases was as follows:

 

  

September 30,

2021

  

December 31,

2020

 

Operating leases:

        

Operating lease right-of-use assets

 $69,444   93,457 

Current portion of operating lease obligations

 $36,169   33,118 

Operating lease obligations, net of current portion

  33,843   61,794 

Total operating lease liabilities

 $70,012   94,912 
         

Finance leases:

        

Property and equipment, at cost

 $54,346   54,066 

Accumulated depreciation

  (54,346)  (48,659)

Property and equipment, net

 $-   5,407 
         

Current portion of finance lease obligations

 $-   2,844 

Finance lease obligations, net of current portion

  -   - 

Total finance lease liabilities

 $-   2,844 

 

  

September 30,

2021

  

December 31,

2020

 

Weighted Average Remaining Lease Term

        

Operating lease (years)

  1.8   2.6 

Finance leases (years)

  0.0   0.3 
         

Weighted Average Discount Rate

        

Operating lease

  9.0 %  9.0%

Finance leases

  - %  9.7

%

 

A summary of future minimum payments under non-cancellable operating lease commitment as of September 30, 2021 is as follows:

 

Years ending December 31,

 

Total

 

2021 (remaining months)

 $10,270 

2022

  41,081 

2023

  25,405 

Total lease liabilities

 $76,756 

Less amount representing interest

  (6,744)

Total

  70,012 

Less current portion

  (36,169)
  $33,843 

 

- 15-

 
 

 

 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding PAID, Inc. (the “Company”) and its business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates", "could", "may", "should", "will", "would", and similar expressions or variations of such words are intended to identify forward-looking statements in this report. Additionally, statements concerning future matters such as the development of new services, technology enhancements, purchase of equipment, credit arrangements, possible changes in legislation and other statements regarding matters that are not historical are forward-looking statements.

 

Although forward-looking statements in this quarterly report reflect the good faith judgment of the Company's management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks, contingencies and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in this report. Although the Company believes that its plans, intentions and expectations reflected in these forward-looking statements are reasonable, the Company can give no assurance that its plans, intentions or expectations will be achieved. For a more complete discussion of these risk factors, see Item 1A, "Risk Factors", in the Company's Form 10-K for the fiscal year ended December 31, 2020 that was filed on March 31, 2021.

 

For example, the Company's ability to maintain positive cash flow and to become profitable may be adversely affected as a result of a number of factors that could thwart its efforts. These factors include the Company's inability to successfully implement the Company's business and revenue model, higher costs than anticipated, the Company's inability to sell its products and services to a sufficient number of customers, the introduction of competing products or services by others, the Company's failure to attract sufficient interest in, and traffic to, its site, the Company's inability to complete development of its products, the failure of the Company's operating systems, and the Company's inability to increase its revenues as rapidly as anticipated. If the Company is not profitable in the future, it will not be able to continue its business operations.

 

Except as required by applicable laws, we do not intend to publish updates or revisions of any forward-looking statements we make to reflect new information, future events or otherwise. Readers are urged to review carefully and to consider the various disclosures made by the Company in this Quarterly Report, which attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

Overview

 

ShipTime Inc. has developed a SaaS-based application, which focuses on the small to medium business segment. This offering allows members to quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. The application provides customers with a choice of today’s leading couriers and freight carriers all with discounted pricing allowing members to save on every shipment. ShipTime can also be integrated into on-line shopping carts to facilitate sales via e-commerce. We actively sell directly to small businesses and through long standing partnerships with selected associations throughout Canada. Our focus in 2021 is to significantly grow this portion of our business.

 

PAID, Inc. (the “Company”) has developed AuctionInc, which is a suite of online shipping and tax management tools assisting businesses with e-commerce storefronts, shipping solutions, tax calculation, inventory management, and auction processing. The product does have tools to assist with other aspects of the fulfillment process, but the main purpose of the product is to provide accurate shipping and tax calculations and packaging algorithms that provide customers with the best possible shipping and tax solutions.

 

BeerRun Software is a brewery management and Alcohol and Tobacco Tax and Trade Bureau tax reporting software. Small craft brewers can utilize the product to manage brewery schedules, inventory, packaging, sales and purchasing. Tax reporting can be processed with a single click and is fully customizable by state or providence. The software is designed to integrate with QuickBooks accounting platforms by using our powerful sync engine. We currently offer two versions of the software BeerRun and BeerRun Light which excludes some of the enhanced features of BeerRun without disrupting the core functionality of the software.

 

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PaidPayments provides commerce solutions to small - and medium-sized businesses by enabling them to sell their goods and services, accept payment, and create repeat sales though an online payment processing solution. The Company has operated as a Payment Facilitator since 2019, which enables our merchants to get the benefit of instant boarding and discounted rates. Our platform provides all aspects required for payment processing, including merchant boarding, underwriting, fraud monitoring, settlement, funding to the sub-merchant, and monthly reporting and statements. The Company controls all of these necessary aspects in the payment process and is then able to supply a one-step boarding process for our partners and value-added resellers. This capability also provides cost advantages, rapid response to market needs, simplified processes for boarding business and a seamless interface for our merchant customers.

 

Significant Accounting Policies

 

Our significant accounting policies are more fully described in Note 3 to our consolidated financial statements for the years ended December 31, 2020 and 2019 included in our Form 10-K filed on March 31, 2021, as updated and amended in Note 1 of the Notes to Condensed Consolidated Financial Statements included herein. However, certain of our accounting policies, most notably with respect to revenue recognition, are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Those estimates and judgments are based upon our historical experience, the terms of existing contracts, our observance of trends in the industry, information that we obtain from our customers and outside sources, and on various other assumptions that we believe to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Results of Operations

 

Comparison of the three months ended September 30, 2021 and 2020.

 

The following discussion compares the Company's results of operations for the three months ended September 30, 2021 with those for the three months ended September 30, 2020. The Company's condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report contain detailed information that should be referred to in conjunction with the following discussion.

 

Revenues

 

The following table compares total revenue for the periods indicated.

 

   

Three months Ended September 30,

 
   

2021

   

2020

   

% Change

 

Client services

  $ 1,548     $ 1,878       (18

)%

Brewery management software

    12,825       25,600       (50

 

)%

Shipping coordination and label generation services

    3,446,343       3,269,804       5 %

Merchant processing services

    13,828       105,713       (87

 

)%

Shipping calculator services

    5,565       6,321       (12 )%

Total revenues

  $ 3,480,109     $ 3,409,316       2  %

 

Revenues increased 2% in the third quarter primarily from the sustained volume due to the impact from the COVID-19 virus on our shipping coordination and label generation services.

 

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Client services revenues decreased $330 or 18% to $1,548 in the third quarter of 2021 compared to $1,878 in 2020. This reduction is a result of the decrease in movie posters auctions held during the quarter.

 

Brewery management software revenues decreased $12,775 to $12,825 in 2021 from $25,600 in 2020. The decrease in revenues is due to the closure of several breweries due to COVID-19, the cancellations of several clients and limited marketing of the software to new clients.

 

Shipping coordination and label generation services revenues increased $176,539 or 5% to $3,446,343 in the third quarter of 2021 compared to $3,269,804 in 2020. The increase is attributable to the shift in online shipping as a result of the impact of the COVID-19 virus in addition to the change in pricing to retain customers in a competitive environment.

 

Merchant processing services is available to businesses that accept credit card processing online. This segment has had difficulties with the launch and has declined 87% from $105,713 to $13,828 in the third quarter of 2021. The Company is reevaluating the launch and preparing to combine these services with other PAID products for a re-release.

 

Shipping calculator services revenue decreased $756 or 12% to $5,565 in the third quarter of 2021 compared to $6,321 in 2020.  The decrease was primarily due to the reduction in volume for the remaining customer using this platform.

 

Gross Profit

 

Gross profit decreased $83,534 or 10% in the third quarter of 2021 to $776,949 compared to $860,483 in 2020. Gross margin decreased 3% to 22% for the third quarter of 2021 compared to 25% from the third quarter of 2020. The decrease in gross profit is due to the price reduction on the shipping label generation services for one of the large affiliations.

 

Operating Expenses

 

Total operating expenses in the third quarter 2021 were $921,497 compared to $984,211 in the third quarter of 2020, a decrease of $62,714 or 6%. The decrease is due to reduction in payroll in addition to the savings in administrative costs due to the COVID -19 office closure.

 

Other Income/Expense, net

 

Net other income in the third quarter of 2021 was $0 compared to $6 in the same period of 2020. This is attributable to foreign currency translation of other income.

 

Net Loss

 

The Company recorded a net loss in the third quarter of 2021 of $144,548 compared to a net loss of $123,722 for the same period in 2020. The basic net loss per share available to common shareholders for the third quarter of 2021 and 2020 was $(0.02) and $(0.02) per share, respectively.

 

Comparison of the nine months ended September 30, 2021 and 2020.

 

The following discussion compares the Company's results of operations for the nine months ended September 30, 2021 with those for the nine months ended September 30, 2020. The Company's condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report contain detailed information that should be referred to in conjunction with the following discussion.

 

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Revenues

 

The following table compares total revenue for the periods indicated.

 

   

Nine months Ended September 30,

 
   

2021

   

2020

   

% Change

 

Client services

  $ 3,057     $ 3,283       (7 )%

Brewery management software

    48,050       93,413       (49

)%

Shipping coordination and label generation services

    10,899,495       8,805,688       24

%

Merchant processing services

    48,806       379,012       (89

)%

Shipping calculator services

    17,284       22,114       (22 )%

Total revenues

  $ 11,008,692     $ 9,303,510       18 %

 

Revenues increased 18% in the first three quarters primarily from the growth of our shipping coordination and label generation services.

 

Client services revenues decreased $226 or 7% to $3,057 in the first three quarters of 2021 compared to $3,283 in 2020. This decrease is a result of the small fluctuation in movie posters auctions held during this period.

 

Brewery management software revenues decreased $45,363 to $48,050 in the first three quarters of 2021 from $93,413 in the same period of 2020. The decrease in revenues is due to cancellations and the business closing of several of clients due to the impacts of COVID-19.

 

Shipping coordination and label generation services revenues increased $2,093,807 or 24% to $10,899,495 in the first three quarters of 2021 compared to $8,805,688 in 2020. The increase is attributable to the shift in online shipping as a result of the impact of the COVID-19 virus in addition to new marketing efforts and pricing changes to retain customers.

 

Merchant processing services has had difficulties with the launch and has declined 89% from $379,012 to $40,806 in the first three quarters of 2021. The Company is reevaluating the launch and preparing to combine these services with other Paid products for a re-release.

 

Shipping calculator services revenues decreased $4,830 or 22% to $17,284 in the first three quarters of 2021 compared to $22,114 in the same period of 2020.  The decrease was due to a reduction in the use of our platform for this segment of the business.

 

Gross Profit

 

Gross profit increased $342,267 or 15% in the first three quarters of 2021 to $2,589,013 compared to $2,246,746 in 2020. Gross margin remained at 24% for the first three quarters of 2021 compared to the same period of 2020. The growth in gross profit is a result of the increased revenue due to the shift of online shipping as a result of the COVID-19 virus.

 

Operating Expenses

 

Total operating expenses in the first three quarters of 2021 were $2,942,702 compared to $2,391,002 in the same period of 2020, an increase of $551,700 or 23%. The increase is primarily due to additional staffing and share-based compensation recorded in the first three quarters of 2021.

 

Other Income/Expense, net

 

Net other income in the first three quarters of 2021 was $0 compared to $13,201 in the same period of 2020. This is primarily attributable to the recovery of a bad debt that was previously written off.

 

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Net Income (Loss)

 

The Company realized a net loss in the first three quarters of 2021 of ($354,645) compared to a net loss of ($131,555) for the same period in 2020. The net loss available to common shareholders for the three quarters of 2021 and 2020 was ($0.05) and ($0.03) per share, respectively.

 

Cash Flows from Operating Activities

 

A summarized reconciliation of the Company's net loss to cash and cash equivalents provided by operating activities for the nine months ended September 30, 2021 and 2020 is as follows:

 

   

2021

   

2020

 

Net loss

  $ (354,645 )   $ (131,555 )

Depreciation and amortization

    385,848       364,273  

Amortization of operating lease right-of-use assets

    24,840       20,957  

Share-based compensation

    502,427       311,129  

Provision for bad debt

    -       20,125  

Gain on sale of property and equipment

    -       (739 )

Changes in assets and liabilities

    287,325       251,769  

Net cash provided by operating activities

  $ 845,795     $ 835,959  

 

Working Capital and Liquidity

 

The Company had cash and cash equivalents of $2,480,524 at September 30, 2021, compared to $1,644,210 at December 31, 2020. The Company had net working capital of $739,063 at September 30, 2021, an improvement of $520,448 compared to $218,615 at December 31, 2020. The increase in net working capital is attributable to the 18% growth of the Company’s revenues for 2021. The increase in cash and cash equivalents is due to the additional growth of the business along with the savings related to the decrease in consulting and travel expenses.

 

The Company may need an infusion of additional capital to fund anticipated operating costs over the next 12 months, however, management believes that the Company has adequate cash resources to fund operations. There can be no assurance that anticipated growth will occur, and that the Company will be successful in launching new products and services. If necessary, management will seek alternative sources of capital to support operations.

 

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, the Company is not required to provide the information for this Item 3.

 

ITEM 4.    CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The Company's management, including the Chief Executive Officer/Chief Financial Officer of the Company, as its principal financial officer has evaluated the effectiveness of the Company's “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based upon this evaluation, the Chief Executive Officer/Chief Financial Officer has concluded that, as of September 30, 2021, the Company's disclosure controls and procedures were not effective, due to material weaknesses in internal control over financial reporting, for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time period specified by the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to the Company's management, including its principal executive/financial officer as appropriate to allow timely decisions regarding required disclosure.

 

The Company has identified numerous material weaknesses in internal control over financial reporting as described in the Company's Form 10-K for the year ended December 31, 2020.

 

Changes in Internal Control over Financial Reporting

 

The Company continues to evaluate the internal controls over financial reporting and is working toward implementation of corporate governance and operational process documentation.

 

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PART II - OTHER INFORMATION

 

ITEM 1.     LEGAL PROCEEDINGS

 

In the normal course of business, the Company periodically becomes involved in litigation and disputes. During 2020, the Company was notified of a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company's former CEO, in which Mr. Pratt appears to be treating it as a termination which would trigger a two-year severance payment. By further action filed in the Court of Chancery of the State of Delaware on July 6, 2021, Mr. Pratt is seeking to be reinstated as a director by challenging the Board’s approval process in reducing the board size from five to three, which was effective as of the time in which Mr. Pratt’s and Mr. Austin Lewis’ terms expired in April 2020. As of September 30, 2021, in the opinion of management, the Company had no pending litigation and disputes that would have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

 

ITEM 1A.     RISK FACTORS

 

In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The Company has reviewed the impact of COVID-19 during the last three months and has reported a positive effect on Company’s, financial condition, liquidity, results of operations, and cash flows.  At this time, it is not possible to determine the length of time the Company will benefit from the overall impact of COVID-19. However, it could have a material effect on the growth of the Company in the future. The Company continues to monitor the health and wellbeing of its employees across the US and Canada.

 

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On March 31, 2021, the Company issued 1,300,000 shares of common stock at $1.91 per share under the terms of an Employment Agreement. On June 10, 2021, the Company issued 18,099 shares of common stock at $2.21 per share for bonus compensation. The common stock was issued in reliance upon the exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.

 

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.     MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5.     OTHER INFORMATION

 

Not Applicable

 

ITEM 6.     EXHIBITS

 

31.1

 

CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002

31.2

 

CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002

32

 

CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002

101.INS   Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

   

PAID, INC.

     
       
   

By:

/s/ W. Austin Lewis IV

 

Date: November 15, 2021

 

W. Austin Lewis, IV, CEO, CFO

 

 

 

 

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LIST OF EXHIBITS

 

 

31.1

 

CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002

31.2

 

CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002

32

 

CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002

101.INS   Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)

 

 

 

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