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PAID INC - Quarter Report: 2023 September (Form 10-Q)

payd20230930_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 quarterly period ended September 30, 2023

COMMISSION FILE NUMBER 0-28720

payd20230930_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 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 14, 2023, the issuer had outstanding 8,010,837 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 as of September 30, 2023 (unaudited) and December 31, 2022

3

       
    Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 4
       
   

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

5

       
   

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2023 and 2022

6-7

       
   

Notes to Condensed Consolidated Financial Statements (Unaudited)

8-17

       
 

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

18

       
 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

22

       
 

Item 4.

Controls and Procedures

22

       

Part II  Other Information

 
       
 

Item 1.

Legal Proceedings

22

       
 

Item 1A.

Risk Factors

23

       
 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

       
 

Item 3.

Defaults Upon Senior Securities

23

       
 

Item 4.

Mine Safety Disclosures

23

       
 

Item 5.

Other Information

23

       
 

Item 6.

Exhibits

23

       
 

Signatures

24

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

 

PAID, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

September 30,

2023

   

December 31,

 
   

(Unaudited)

   

2022

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 1,735,972     $ 1,787,248  

Accounts receivable, net

    240,050       169,074  

Note receivable, net of discount

    1,875,000       1,604,167  

Prepaid expenses and other current assets

    133,091       151,374  

Total current assets

    3,984,113       3,711,863  
                 

Property and equipment, net

    13,616       23,487  

Intangible assets, net

    2,438,024       2,663,311  

Operating lease right-of-use assets, net

    18,794       23,063  

Total assets

  $ 6,454,547     $ 6,421,724  
                 

LIABILITIES AND SHAREHOLDERS' EQUITY

               

Current liabilities:

               

Accounts payable

  $ 1,373,827     $ 1,610,416  

Accrued expenses

    448,616       430,858  

Contract liabilities

    13,796       13,020  

Operating lease obligations – current portion

    18,794       22,199  

Total current liabilities

    1,855,033       2,076,493  

Long-term liabilities:

               

Deferred tax liability, net

    706,448       707,952  

Uncertain tax position liability

    265,167       265,167  

Total liabilities

    2,826,648       3,049,612  

Commitments and contingencies

           

Shareholders' equity:

               

Series A Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding

    -       -  

Common stock, $0.001 par value, 25,000,000 shares authorized; 8,154,474 shares issued and 8,010,837 shares outstanding at September 30, 2023 and 7,840,124 shares issued and 7,696,487 shares outstanding at December 31, 2022

    8,154       7,840  

Accrued common stock bonus

    -       82,180  

Additional paid-in capital

    73,442,268       72,800,976  

Accumulated other comprehensive income

    295,258       316,360  

Accumulated deficit

    (69,952,941 )     (69,670,404 )

Common stock in treasury, at cost, 143,637 shares at September 30, 2023 and December 31, 2022

    (164,840 )     (164,840 )

Total shareholders' equity

    3,627,899       3,372,112  
                 

Total liabilities and shareholders' equity

  $ 6,454,547     $ 6,421,724  

 

See accompanying notes to condensed consolidated financial statements

 

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30, 2023

   

September 30, 2022

   

September 30, 2023

   

September 30, 2022

 

Revenues, net

  $ 4,107,771     $ 4,145,269     $ 12,044,427     $ 12,290,635  

Cost of revenues

    3,163,499       3,228,014       9,302,913       9,553,111  

Gross profit

    944,272       917,255       2,741,514       2,737,524  
                                 

Operating expenses:

                               

Salaries and related

    492,381       545,598       1,489,211       1,446,903  

General and administrative

    373,591       307,126       1,025,545       906,032  

Share-based compensation

    69,238       15,733       556,014       75,745  

Amortization of other intangible assets

    74,678       77,487       223,258       237,998  

Total operating expenses

    1,009,888       945,944       3,294,028       2,666,678  

Income (loss) from operations

    (65,616 )     (28,689 )     (552,514 )     70,846  

Other income (expense):

                               

Other income

    20,833       -       270,833       -  

Income (loss) before income tax provision

    (44,783 )     (28,689 )     (281,681 )     70,846  

Income tax provision

    -       77,272       856       157,261  

Net loss

  $ (44,783 )   $ (105,961 )   $ (282,537 )   $ (86,415 )
                                 

Net loss per share – basic and diluted

  $ (0.01 )   $ (0.01 )   $ (0.04 )   $ (0.01 )

Weighted average number of common shares outstanding – basic and diluted

    8,010,837       7,786,284       7,915,069       7,778,319  

Condensed consolidated statements of comprehensive loss:

                               

Net loss

  $ (44,783 )   $ (105,961 )   $ (282,537 )   $ (86,415 )

Other comprehensive loss:

                               

Foreign currency translation adjustments

    (52,578 )     (197,700 )     (21,102 )     (252,688 )

Comprehensive loss

  $ (97,361 )   $ (303,661 )   $ (303,639 )   $ (339,103 )

 

See accompanying notes to condensed consolidated financial statements

 

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

 

   

2023

   

2022

 

Cash flows from operating activities:

               

Net loss

  $ (282,537

)

  $ (86,415 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

               

Depreciation and amortization

    233,185       248,676  

Amortization of operating lease right-of-use assets

    24,893       26,558  

Accretion of discount on note receivable

    (270,833 )     -  

Share-based compensation

    556,014       75,745  

Provision for bad debt

    -       13,500  

Changes in assets and liabilities:

               

Accounts receivable

    (71,969 )     (120,506 )

Prepaid expenses and other current assets

    17,970       41,613  

Accounts payable

    (236,294 )     64,190  

Accrued expenses

    18,049       219,258  

Contract liabilities

    803       1,814  

Operating lease obligations

    (24,023 )     (27,443 )

Net cash (used in) provided by operating activities

    (34,742 )     456,990  
                 

Cash flows from financing activities

               

Proceeds from option exercises

    3,412       -  

Net cash provided by financing activities

    3,412       -  
                 

Effect of exchange rate changes on cash and cash equivalents

    (19,946 )     (265,312 )
                 

Net change in cash and cash equivalents

    (51,276 )     191,678  
                 

Cash and cash equivalents, beginning of period

    1,787,248       2,839,687  

Cash and cash equivalents, end of period

  $ 1,735,972     $ 3,031,365  
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

               

Cash paid during the period for:

               

Income taxes

  $ 856     $ 1,356  

Interest

  $ -     $ -  

SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS

               

Issuance of common shares in settlement of accrued common stock bonus

  $ 82,180     $ -  

Adjustment to operating lease right-of-use assets and operating lease obligations due to lease amendment

  $ 20,620       -  

 

See accompanying notes to condensed consolidated financial statements

 

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

 

                

Accumulated

Other

                     
   

Common Stock

   

Additional Paid-in

    Comprehensive             Treasury Stock        
    Shares     Amount    

Capital

   

Income

    Accumulated Deficit     Shares     Amount       Total  

Balance, January 1, 2022

    7,807,103     $ 7,807     $ 72,691,201     $ 590,067     $ (70,322,550 )     (33,840 )   $ (57,847 )   $ 2,908,678  

Foreign currency translation adjustment

    -       -       -       38,300       -       -       -       38,300  

Share-based compensation expense

    -       -       18,096       -       -       -       -       18,096  

Net loss

    -       -       -       -       (60,454 )     -       -       (60,454 )

Balance, March 31, 2022

    7,807,103       7,807       72,709,297       628,367       (70,383,004 )     (33,840 )     (57,847 )     2,904,620  

Foreign currency translation adjustment

    -       -       -       (93,288 )     -       -       -       (93,288 )

Share-based compensation expense

    -       -       16,916       -       -       -       -       16,916  

Issuance of common stock for compensation

    13,021       13       24,987       -       -       -       -       25,000  

Net income

    -       -       -       -       80,000       -       -       80,000  

Balance, June 30, 2022

    7,820,124       7,820       72,751,200       535,079       (70,303,004 )     (33,840 )     (57,847 )     2,933,248  

Foreign currency translation adjustment

    -       -       -       (197,700 )     -       -       -       (197,700 )

Share-based compensation expense

    -       -       15,733       -       -       -       -       15,733  

Net loss

    -       -       -       -       (105,961 )     -       -       (105,961 )

Balance, September 30, 2022

    7,820,124     $ 7,820     $ 72,766,933     $ 337,379     $ (70,408,965 )     (33,840 )   $ (57,847 )   $ 2,645,320  

 

 

 

PAID, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

(Unaudited)

 

   

 

   

Accrued

Common

   

 

   

Accumulated Other

           

 

         
   

Common Stock

   

Stock

    Additional     Comprehensive     Accumulated    

Treasury Stock

         
    Shares     Amount    

Bonus

    Paid-in Capital    

Income

   

Deficit

    Shares     Amount     Total  

Balance, January 1, 2023

    7,840,124     $ 7,840     $ 82,180     $ 72,800,976     $ 316,360     $ (69,670,404 )     (143,637 )   $ (164,840 )   $ 3,372,112  

Foreign currency translation adjustment

    -       -       -       -       (2,296 )     -       -       -       (2,296 )

Issuance of common stock for accrued bonus

    46,961       47       (82,180 )     82,133       -       -       -       -       -  

Issuance of common stock for signing bonus

    250,000       250       -       273,188       -       -       -       -       273,438  

Share-based compensation expense

    -       -       -       119,100       -       -       -       -       119,100  

Net loss

    -       -       -       -       -       (294,928 )     -       -       (294,928 )

Balance, March 31, 2023

    8,137,085       8,137       -       73,275,397       314,064       (69,965,332 )     (143,637 )     (164,840 )     3,467,426  

Foreign currency translation adjustment

    -       -       -       -       33,772       -       -       -       33,772  

Option exercise

    3,500       3       -       3,409       -       -       -       -       3,412  

Issuance of common stock for bonus

    13,889       14       -       24,986       -       -       -       -       25,000  

Share-based compensation expense

    -       -       -       69,238       -       -       -       -       69,238  

Net income

    -       -       -       -       -       57,174       -       -       57,174  

Balance, June 30, 2023

    8,154,474       8,154       -       73,373,030       347,836       (69,908,158 )     (143,637 )     (164,840 )     3,656,022  

Foreign currency translation adjustment

    -       -       -       -       (52,578 )     -       -       -       (52,578 )

Share-based compensation expense

    -       -       -       69,238       -       -       -       -       69,238  

Net loss

    -       -       -       -       -       (44,783 )     -       -       (44,783 )

Balance, September 30, 2023

    8,154,474     $ 8,154     $ -     $ 73,442,268     $ 295,258     $ (69,952,941 )     (143,637 )   $ (164,840 )   $ 3,627,899  

 

See accompanying notes to condensed consolidated financial statements

 

 

PAID, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2023

 

 

Note 1. Organization and Significant Accounting Policies

 

PAID, Inc. (“PAID”, the “Company”, “we”, “us”, or “our”) has developed a full line of SaaS-based business services including PaidPayments, PaidCart, PaidShipping and PaidWeb. These solutions are developed to provide businesses with a streamlined experience for website creation, online sales, payment collection and shipping all in one platform.

 

PaidWeb offers a robust platform enabling small and medium businesses to launch websites via our catalog of templates. Our platform includes a wide array of features such as mobile editing, search engine optimization, collaboration tools, pre-designed templates, and can be integrated with multiple platforms. PaidCart serves as a comprehensive solution for small and medium businesses looking to expand their online sales through multiple channels. It provides a centralized system to manage sales across various platforms, with additional functionalities for currency and language management, promotional sales, and abandoned cart recovery. PaidPayments and PaidShipping seamlessly interface with PaidCart to facilitate the checkout and shipping processes. Operating as a Payment Facilitator since 2019, PaidPayments provides businesses with a secure and efficient way to conduct online transactions including a virtual terminal, invoicing capability, subscriptions processing, checkout pages, and a point-of-sale system with support for USD, CAD, and EUR currencies. PaidShipping delivers a solution to quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. We offer savings through partnerships with leading carriers. It includes a multi-courier comparison tool, integrations with eCommerce platforms and branded tracking.

 

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. 

 

AuctionInc, which is a suite of online shipping and tax management tools assisting businesses with e-commerce storefronts, shipping solutions, tax calculation, 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. Paid also offers BeerRun Software which 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.

 

General Presentation and Basis of Condensed 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, 2022 that was filed on March 31, 2023.

 

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 2023.

 

 

Liquidity and Managements Plans

 

At September 30, 2023, the Company reported cash and cash equivalents of $1,735,972 and net working capital of $2,129,080 and reported cash flows used in operations of $34,742 for the nine months ended September 30, 2023. The Company has reported an operating loss of $552,514 for the nine months ended September 30, 2023 and has an accumulated deficit of $69,952,941 at September 30, 2023.

 

Management believes that the Company has adequate cash resources to fund operations during the next 12 months after the filing of this quarterly report on Form 10-Q. In addition, management continues to explore opportunities and has organized additional resources to monetize its patents. However, there can be no assurance that anticipated growth in new business will occur, and that the Company will be successful in launching new products and services. Management continues to seek alternative sources of capital to support the growth of 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 2024 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.

 

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, 2023 and December 31, 2022. 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, 2023 and 2022.

 

At September 30, 2023, 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.

 

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 flow 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, 2023 and 2022. 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.

 

The Company recognizes revenue by taking into consideration the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Due to the nature of the Company’s product offerings and contracts associated with those products, the Company’s deliverables do not fluctuate, and its revenue recognition is consistent.

 

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 four 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.

 

 

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 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 $240,050 and $169,074 as of September 30, 2023 and December 31, 2022, respectively. The Company has no customers that made up 10% of the accounts receivable balance at September 30, 2023. 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 $13,796 and $13,020 at September 30, 2023 and December 31, 2022, respectively. During the nine months ended September 30, 2023, the Company recognized revenues of $13,020 related to contract liabilities outstanding at the beginning of the period.

 

Income (Loss) Per Common Share

 

Basic earnings (loss) per share represent income (loss) divided by the weighted-average number of common shares outstanding during the period. Diluted income (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 have been excluded from the computation of diluted income (loss) per share if they would reduce the reported loss per share and therefore have an anti-dilutive effect.

 

 

For the three months ended September 30, 2023 and 2022 and the nine months ended September 30, 2023, and 2022, there were approximately 6,200 and 22,000 and 6,300 and 24,000, respectively, of potentially dilutive shares excluded from the diluted loss per share calculation, as their effect would be anti-dilutive.

 

The following is a reconciliation of the numerators and denominators of the basic and diluted income (loss) per common share computations for the three and nine months ended September 30, 2023 and 2022.

 

   

Three Months Ended

September 30, 2023

   

Three Months Ended

September 30, 2022

 

Numerator:

               

Net loss

  $ (44,783 )   $ (105,961 )

Denominator:

               

Basic weighted-average shares outstanding

    8,010,837       7,786,284  

Effect of dilutive securities

    -       -  

Diluted weighted-average shares outstanding

    8,010,837       7,786,284  

Basic and diluted loss per share

  $ (0.01 )   $ (0.01 )

 

   

Nine Months Ended

September 30, 2023

   

Nine Months Ended

September 30, 2022

 

Numerator:

               

Net loss

  $ (282,537 )   $ (86,415 )

Denominator:

               

Basic weighted-average shares outstanding

    7,915,069       7,778,319  

Effect of dilutive securities

    -       -  

Diluted weighted-average shares outstanding

    7,915,069       7,778,319  

Basic and diluted loss per share

  $ (0.04 )   $ (0.01 )

 

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 four reportable segments are managed separately based on fundamental differences in their operations. At September 30, 2023, the Company operated in the following four reportable segments:

 

a.

Client services;

b.

Merchant processing services;

c.

Shipping coordination and label generation services; and

d.

Corporate operations

 

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,

2023

   

September 30,

2022

   

September 30,

2023

   

September 30,

2022

 

Client services

  $ 8,048     $ 11,781     $ 25,532     $ 36,800  

Merchant processing services

    12,789       11,782       53,007       28,280  

Shipping coordination and label generation services

    4,086,934       4,121,706       11,965,888       12,225,555  

Total revenues

  $ 4,107,771     $ 4,145,269     $ 12,044,427     $ 12,290,635  

 

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

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30, 2023

   

September 30, 2022

   

September 30, 2023

   

September 30, 2022

 

Client services

  $ 2,930     $ (7,782 )   $ 9,033     $ (28,714 )

Merchant processing services

    4,233       (7,931 )     14,929       (7,952 )

Shipping coordination and label generation services

    (58,263 )     37,473       (410,998 )     218,616  

Corporate operations

    (14,516 )     (50,449 )     (165,478 )     (111,104 )

Total income (loss) from operations

  $ (65,616 )   $ (28,689 )   $ (552,514 )   $ 70,846  

 

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 of disclosure in the notes thereto, other than disclosed herein.

 

Reclassification

 

Certain prior year amounts have been reclassified for consistency with the current year presentation.  These reclassifications had no effect on the reported results of operations.  An adjustment has been made to the segment reporting for the period ending September 30, 2023 and 2022, to consolidate revenue reporting for smaller segments of the Company.

 

Recent Accounting Pronouncements

 

In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments, (“ASU 2016-13”), supplemented by subsequent accounting standards updates. The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13, as amended, is effective for fiscal years beginning after December 15, 2022. We adopted ASU 2016-13 on January 1, 2023. As of September 30, 2023, the Company has $240,050 of accounts receivable and notes receivable of $1,875,000. Based on the nature of our accounts receivable and the process of granting credit and collecting debt, we have determined that there are no expected credit losses for our accounts receivable. The Company has one note receivable and is a senior secure lender with an absolute obligation. Consideration has been taken into the contractual obligation, the valuation of the assets and the senior position of the repayment. We have determined that there are no expected credit losses for our note receivable. The adoption of this standard did not have a material impact on our consolidated financial statements or disclosures. Specifically, our estimate of expected credit losses as of September 30, 2023, using our expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

 

 

 

Note 2. Note Receivable

 

On October 13, 2022, the Company entered in a Securities Purchase Agreement (“SPA”) with respect to a secured $1,875,000 convertible note (“Convertible Note”) made by Embolx, Inc. (“Noteholder”), a California corporation. The Convertible Note was purchased at a 20% ($375,000) original issue discount and was subject to a 9-month maturity, after which, if unpaid will then carry a 20% interest rate. Management is negotiating an amendment to the note which includes consideration for current interest. The Company has recognized $270,833 in other income related to accretion of the discount on the Convertible Note for the nine months ended September 30, 2023. The Company has the option to convert the Convertible Note into shares of common stock of the Noteholder. The Convertible Note is secured by essentially all assets of the Noteholder, which include 11 patents for its FDA approved products. Under the SPA, the Company has a right to purchase additional notes and receive warrants on the same terms for a total potential investment amount of $2,000,000 with an additional over-allotment option of $500,000 as defined in the SPA. As additional consideration, the Company received a 5-year warrant to purchase shares of common stock of the Noteholder. The shares are subject to certain piggyback registration rights under a Registration Rights Agreement. The warrant is offered at 50% of the original principal amount and will be valued at the price per share of common stock paid in the first liquidity event following October 19, 2022. The warrants expire five years from the original issue date. As of July 19, 2023 the note was in default and will carry an additional 20% interest. As of November 14, 2023, the Company is negotiating a new amendment to the note receivable and has not recorded any additional interest income after the date of maturity as the Company has not yet determined if it will charge additional interest to Embolx. In addition, the Company does not believe there is any impairment to the note receivable due to its secured position on the assets of Embolx and its expectation that the amounts will be recoverable if and when Embolx consummates a financing or merger transaction.

 

 

Note 3. Accrued Expenses

 

Accrued expenses are comprised of the following:

 

   

September 30, 2023

(unaudited)

   

December 31, 2022

 

Payroll and related costs

  $ 173,804     $ 195,803  

Professional and consulting

    736       3,685  

Royalties

    40,075       40,075  

Accrued cost of revenues

    211,363       168,657  

Sales tax

    22,228       22,228  

Other

    410       410  

Total

  $ 448,616     $ 430,858  

 

 

Note 4. 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, 2023, intangible assets consisted of the following:

 

   

Patents

   

Trade Name

   

Technology &

Software

   

Customer

Relationships

   

Total

 

Gross carrying amount

  $ 16,000     $ 787,992     $ 586,997     $ 4,637,188     $ 6,028,177  

Accumulated amortization

    (16,000 )     (787,992 )     (586,997 )     (2,199,164 )     (3,590,153 )
    $ -     $ -     $ -     $ 2,438,024     $ 2,438,024  

 

At December 31, 2022, intangible assets consisted of the following:

 

   

Patents

   

Trade Name

   

Technology &

Software

   

Customer

Relationships

   

Total

 

Gross carrying amount

  $ 16,000     $ 789,212     $ 587,776     $ 4,644,033     $ 6,037,021  

Accumulated amortization

    (16,000 )     (789,212 )     (587,776 )     (1,980,722 )     (3,373,710 )
    $ -     $ -     $ -     $ 2,663,311     $ 2,663,311  

 

Amortization expense of intangible assets for the three months ended September 30, 2023 and 2022 was $74,678 and $77,487, respectively, and for the nine months ended September 30, 2023 and 2022 was $223,258 and $237,998, respectively.

 

 

 

Note 5. Commitments and Contingencies

 

Legal Matters

 

In the normal course of business, the Company periodically becomes involved in litigation and disputes. During 2021, the Company was notified of a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company's former President, CEO and Chairman. In February 2020, the Company did not renew Mr. Pratt’s employment agreement, but Mr. Pratt alleges in a court in Canada that the Company terminated him and that the Company owes him a severance payment. Around the same time that Mr. Pratt’s employment term expired, the Company’s Board of Directors voted to reduce the size of the Board from five to three, and Mr. Pratt and Mr. Austin Lewis, then CFO, automatically rolled off from the Board of Directors. More than a year later, in 2021, Mr. Pratt filed a claim in Delaware courts to contest that decision which has been dismissed by the courts in November 2023. In July 2022, Mr. Pratt amended the complaint to dispute the proper authorization of a stock bonus that was awarded to the Company’s CEO in March 2021. The Company has not recorded a reserve as the outcome of these matters cannot be determined.

 

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 lease, the Company has agreed to indemnify its lessor 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 agreement. 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.

 

 

Note 6. 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. 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. As of September 30, 2023 and December 31, 2022, 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 2,106,808 shares of PAID common stock with respect to the remaining 5,918 exchangeable shares to be issued as a result of the ShipTime acquisition which are considered issued and outstanding as of September 30, 2023 for financial reporting purposes.

 

 

On March 21, 2023, the Company’s Board of Directors authorized the issuance of 46,961 bonus shares of PAID common stock to the CEO/CFO, one additional officer and one employee for services rendered during 2022. This bonus was valued at $82,180 based on the closing price of the Company’s common stock at March 20, 2023 and was issued in March 2023. This bonus was recorded in accrued common stock bonus in shareholders’ equity as of December 31, 2022. The Board of Directors also authorized the issuance of an additional 250,000 shares to the CEO/CFO as a renewal bonus valued at $437,500. $218,750 of share-based compensation expense was recognized immediately as 125,000 of the bonus shares are immediately vested. The remaining $218,750 of share-based compensation expense will be recognized ratably during 2023 as 125,000 of the bonus shares are subject to repurchase if the CEO/CFO were to terminate employment during the period ended January 1, 2024. The Company recorded $54,688 and $382,814, respectively, of share-based compensation expense for the three-month and nine-month periods ended September 30, 2023 in connection with these additional shares.

 

On March 21, 2023, the Company’s Board of Directors approved the terms of the employment agreement for David Scott, the Company’s COO. Per the terms of the agreement, the Company issued 13,889 shares of PAID common stock to the COO. This compensation was valued at $25,000 based on the closing price of the Company’s common stock at March 31, 2023 and the shares were issued on April 10, 2023. The Company recorded $25,000 of share-based compensation expense for the three-month period ended June 30, 2023 in connection with the additional compensation. During the second quarter of 2022, the Company issued 13,021 shares valued at $1.92 per share for a total share-based compensation expense of $25,000 to one employee as bonus compensation which is included in share-based compensation in the condensed consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2022. The shares were issued pursuant to the exemption for registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder.

 

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 three-month and nine-month periods ended September 30, 2023, the Company recorded $14,550 and $148,200, respectively, of share-based compensation expense related to the vesting of applicable options granted in 2023 and prior years. For the three- and nine-month periods ended September 30, 2022, the Company recorded $15,733 and $50,745, respectively of share-based compensation expense related to the vesting of applicable options granted in 2022 and prior years.

 

On May 12, 2023, the Company received a notice of exercise of options to purchase 3,500 common shares of the Company’s stock from one board member and one employee. The options were exercised at $0.975 per share and the Company received proceeds of $3,412.

 

 

Note 7. Leases

 

We have operating leases for our corporate offices in Canada. Our leases have remaining lease terms of eleven months. Future renewal options that are not likely to be executed as of the balance sheet date and 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.

 

 

The components of lease expense were as follows:

 

   

Three Months Ended

September 30, 2023

   

Three Months Ended

September 30, 2022

 

Operating lease cost

  $ 4,503     $ 9,791  

 

 

   

Nine Months Ended

September 30, 2023

   

Nine Months Ended

September 30, 2022

 

Operating lease cost

  $ 23,462     $ 29,899  

 

Supplemental cash flow information related to leases was as follows:

 

   

Nine Months Ended
September 30, 2023

   

Nine Months Ended
September 30, 2022

 

Cash paid for amounts included in leases:

               

Operating cash flows from operating leases

  $ 24,857     $ 30,786  

 

Supplemental balance sheet information related to leases was as follows:

 

   

September 30, 2023

   

December 31, 2022

 

Operating leases:

               

Operating lease right-of-use assets

  $ 18,794       23,063  

Current portion of operating lease obligations

  $ 18,794       22,199  

Operating lease obligations, net of current portion

    -       -  

Total operating lease liabilities

  $ 18,794       22,199  

 

   

September 30, 2023

   

December 31, 2022

 

Weighted Average Remaining Lease Term

               

Operating lease (in years)

    0.9       0.6  
                 

Weighted Average Discount Rate

               

Operating lease

    9.0 %     9.0 %

 

A summary of future minimum payments under non-cancellable operating lease commitment as of September 30, 2023 is as follows:

 

 

Years ending December 31,

 

Total

 

2023 (remainder of year)

    5,359  

2024

    14,291  

Total lease liabilities

  $ 19,650  

Less amount representing interest

    (856 )

Total

    18,794  

Less current portion

    (18,794 )
    $ -  

 

 

 

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, 2022 that was filed on March 31, 2023.

 

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 2023 will be to significantly grow this portion of our business.

 

PAID, Inc. (“PAID”, the “Company”, “we”, “us”, or “our”) has developed a full line of SaaS-based business services designed to simplify the online selling experience.

 

PaidPayments, PaidCart, PaidShipping and PaidWeb are solutions developed to provide businesses with a streamlined experience for website creation, online sales, payment collection and shipping all in one platform. PaidWeb offers a robust platform enabling small and medium businesses to launch websites via our catalog of templates. Our platform includes a wide array of features such as mobile editing, search engine optimization, collaboration tools, pre-designed templates, and can be integrated with multiple platforms. PaidCart serves as a comprehensive solution for small and medium businesses looking to expand their online sales through multiple channels. It provides a centralized system to manage sales across various platforms, with additional functionalities for currency and language management, promotional sales, and abandoned cart recovery. PaidPayments and PaidShipping seamlessly interface with PaidCart to facilitate the checkout and shipping processes. Operating as a Payment Facilitator since 2019, PaidPayments provides businesses with a secure and efficient way to conduct online transactions including a virtual terminal, invoicing capability, subscriptions processing, checkout pages, and a point-of-sale system with support for USD, CAD, and EUR currencies. PaidShipping delivers a solution to quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. We offer savings through partnerships with leading carriers. It includes a multi-courier comparison tool, integrations with eCommerce platforms and branded tracking.

 

 

AuctionInc 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.

 

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, 2022 and 2021 included in our Form 10-K filed on March 31, 2023, 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, 2023 and 2022

 

The following discussion compares the Company's results of operations for the three months ended September 30, 2023 with those for the three months ended September 30, 2022. 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,

 
   

2023

   

2022

   

% Change

 

Client services

  $ 8,048     $ 11,781       (32 )%

Shipping coordination and label generation services

    4,086,934       4,121,706       (1 )%

Merchant processing services

    12,789       11,782       9

%

Total revenues

  $ 4,107,771     $ 4,145,269       (1 )%

 

Revenues decreased 1% in the third quarter as a result of a minor change in the pricing model to be more competitive. This change has had a minimal impact on the pricing but has shifted business to a more profitable carrier.

 

 

Client services revenues which include brewery management software and shipping calculator services decreased $3,733 or 32% to $8,048 in the third quarter of 2023 compared to $11,781 in 2022. This decrease is a result of minimal activity in this segment of the business. The decrease in revenues is primarily due to the cancellation of several clients and the limited marketing of this segment of the business.

 

Shipping coordination and label generation services revenues decreased $34,772 or 1% to $4,086,934 in the third quarter of 2023 compared to $4,121,706 in 2022. The decrease is attributable to the change in our pricing structure to remain competitive. As a result of this change, we experienced a 3% increase in shipping volume for the third quarter of 2022 compared to the same period for 2023.

 

Merchant processing services are available to businesses that process ecommerce online transactions. These include shipping, payments and web hosting services. This segment has launched its United States shipping portal which resulted in an increase of 9% from $11,782 to $12,789 in the third quarter of 2023. The Company is preparing to market this segment of the business in the upcoming months.

 

Gross Profit

 

Gross profit increased $27,017 or 3% in the third quarter of 2023 to $944,272 compared to $917,255 in 2022. Gross margin improved 1% to 23% in the third quarter of 2023 compared to 22% for the same period in 2022.

 

Operating Expenses

 

Total operating expenses in the third quarter 2023 were $1,009,888 compared to $945,944 in the third quarter of 2022, an increase of $63,944 or 7%. The increase is due to the additional technical consulting and technology-related fees in preparation for peak season and the launch of new carriers, products and services.

 

Net Loss

 

The Company recorded a net loss in the third quarter of 2023 of $44,783 compared to a net loss of $105,961 for the same period in 2022. The net loss per share for the third quarter of 2023 and 2022 was $0.01 per share.

 

Comparison of the nine months ended September 30, 2023 and 2022

 

The following discussion compares the Company's results of operations for the nine months ended September 30, 2023, with those for the nine months ended September 30, 2022. 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.

 

   

Nine months ended September 30,

 
   

2023

   

2022

   

% Change

 

Client services

  $ 25,532     $ 36,800       (31 )%

Shipping coordination and label generation services

    11,965,888       12,225,555       (2 )%

Merchant processing services

    53,007       28,280       87

%

                         

Total revenues

  $ 12,044,427     $ 12,290,635       (2 )%

 

 

 

Revenues decreased 2% in the first three quarters primarily from the combination of the annual increase and the increases to the fuel surcharges for revenues related to our shipping coordination and label generation services.

 

Client services revenues which include brewery management software and shipping calculator services decreased $11,268 or 31% to $25,532 in the first three quarters of 2023 compared to $36,800 in 2022.  This decrease is a result of the cancellation of several brewery management clients in addition to the cancelation of the remaining customer on the shipping calculator platform.

 

Shipping coordination and label generation services revenues decreased $259,667 or 2% to $11,965,888 in the first three quarters of 2023 compared to $12,225,555 in 2022. The decrease is attributable to the seasonal increase offset by the impact of the declining fuel surcharges compared to the same period in 2022.

 

Merchant processing services has launched its United States shipping portal which resulted in an increase of $24,727 or 87% to $53,007 in the first three quarters of 2023 compared to $28,280 in 2022. The Company continues to increase the product offerings in this segment of the business.

 

Gross Profit

 

Gross profit increased $3,990, less than 1% in the first three quarters of 2023 to $2,741,514 compared to $2,737,524 in 2022. Gross margin increased from 22% in 2022 to 23% in 2023. The increase in gross margin and increase in gross profit are a result of ongoing pricing evaluations of our shipping label generation services to remain competitive in the market.

 

Operating Expenses

 

Total operating expenses in the first three quarters of 2023 were $3,294,028 compared to $2,666,678 for the same period of 2022, an increase of $627,350 or 24%. The increase is primarily due to the share-based compensation of $556,014 recorded in 2023 compared to $75,745 for the same period of 2022.

 

Net Income (Loss)

 

The Company recorded a net loss in the three quarters of 2023 of $282,537 compared to a net loss of $86,415 for the same period in 2022. The net loss per share available to common shareholders for the first three quarters of 2023 and 2022 was ($0.04) and ($0.01) per share, respectively.

 

Cash Flows from Operating Activities

 

A summarized reconciliation of the Company's net loss to cash and cash equivalents (used in) provided by operating activities for the nine months ended September 30, 2023 and 2022 is as follows:

 

   

2023

   

2022

 

Net loss

  $ (282,537 )   $ (86,415 )

Depreciation and amortization

    233,185       248,676  

Amortization of operating lease right-of-use assets

    24,893       26,558  

Share-based compensation

    556,014       75,745  

Provision for bad debt

    -       13,500  

Accretion of discount on note receivable

    (270,833 )     -  

Changes in assets and liabilities

    (295,464 )     178,926  

Net cash (used in) provided by operating activities

  $ (34,742 )   $ 456,990  

 

 

Working Capital and Liquidity

 

The Company had cash and cash equivalents of $1,735,972 at September 30, 2023, compared to $1,787,248 at December 31, 2022. The Company had net working capital of $2,129,080 at September 30, 2023, an improvement of $493,710 compared to $1,635,370 at December 31, 2022. The increase in net working capital is attributable to the decrease in accounts payable along with the accretion of discount recognized on the note receivable.

 

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, 2023, 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, 2022.

 

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.

 

 

PART II - OTHER INFORMATION

 

ITEM 1.     LEGAL PROCEEDINGS

 

In the normal course of business, the Company periodically becomes involved in litigation and disputes. During 2021, the Company was notified of a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company’s former President, CEO and Chairman. On or around January 2020, the Company had allowed Mr. Pratt’s employment agreement to not renew, but Mr. Pratt alleges in a court in Canada that the Company terminated him and that the Company owes him a severance payment. Around the same time that Mr. Pratt’s employment term expired, the Company’s Board of Directors voted to reduce the size of the Board from five to three members, and Mr. Pratt and Mr. Austin Lewis, then CFO, automatically rolled off from the Board of Directors. More than a year later, in 2021, Mr. Pratt filed a claim in Delaware courts to contest that decision which has been dismissed. In July 2022, Mr. Pratt amended the complaint to dispute the proper authorization of a stock bonus that was awarded to the Company’s CEO in March 2021.  The Company has not recorded a reserve as the outcome of these matters cannot be determined.

 

 

ITEM 1A.

RISK FACTORS

 

There are no material changes for the risk factors previously disclosed on Form 10-K for the year ended December 31, 2022.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

There were no issuances of unregistered securities during the three months ended September 30, 2023.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not Applicable.

 

 

ITEM 5.

OTHER INFORMATION

 

Not Applicable

 

 

ITEM 6.

EXHIBITS

 

10.1

Amendment to 2018 Non-Qualified Stock Option Plan (incorporated by reference)

31.1

CEO and 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 (filed herewith)

101.SCH

Inline XBRL Taxonomy Extension Schema (filed herewith)

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

104

Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)

 

 

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 14, 2023

 

W. Austin Lewis, IV, CEO, CFO

 

 

 

 

LIST OF EXHIBITS

 

10.1

Amendment to 2018 Non-Qualified Stock Option Plan

31.1

CEO and 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 (filed herewith)

101.SCH

Inline XBRL Taxonomy Extension Schema (filed herewith)

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

104

Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)

 

24