Form 10-Q PAID INC For: Mar 31
Tweet
Share
E-mail
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
For the quarterly period ended
COMMISSION FILE NUMBER
(Exact Name of Registrant as Specified in its Charter)
| | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(
(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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.
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).
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 | ☐ | | ☑ | 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
As of May 15, 2022, the issuer had outstanding
FORM 10-Q
TABLE OF CONTENTS
| Item 1. |
|||
| Condensed Consolidated Balance Sheets March 31, 2022 (unaudited) and December 31, 2021 (audited) |
|||
| Unaudited Condensed Consolidated Statements of Cash Flows Three months ended March 31, 2022 and 2021 |
|||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
|||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
||
| Item 3. |
|||
| Item 4. |
|||
| Item 1. |
|||
| Item 1A. |
|||
| Item 2. |
|||
| Item 3. |
|||
| Item 4. |
|||
| Item 5. |
|||
| Item 6. |
|||
|
|
|||
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAID, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2022 | December 31, | |||||||
| (Unaudited) | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Operating lease obligations – current portion | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Operating lease obligations – net of current portion | ||||||||
| Deferred tax liability, net | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| Series A Preferred stock, $ par value, shares authorized; shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | ||||||||
| Common stock, $ par value, shares authorized; shares issued and shares outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Common stock in treasury, at cost, shares at March 31, 2022 and December 31, 2021 | ( | ) | ( | ) | ||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| Three Months Ended |
||||||||
| March 31, 2022 |
March 31, 2021 |
|||||||
| Revenues, net |
$ | $ | ||||||
| Cost of revenues |
||||||||
| Gross profit |
||||||||
| Operating expenses: |
||||||||
| Salaries and related |
||||||||
| General and administrative |
||||||||
| Share-based compensation |
||||||||
| Amortization of other intangible assets |
||||||||
| Total operating expenses |
||||||||
| Loss from operations |
( |
) | ( |
) | ||||
| Provision for income taxes |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Net loss per share – basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| Weighted average number of common shares outstanding – basic and diluted |
||||||||
| Condensed consolidated statements of comprehensive loss |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Other comprehensive income: |
||||||||
| Foreign currency translation adjustments |
||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
See accompanying notes to condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
| 2022 |
2021 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Amortization of operating lease right-of-use assets |
||||||||
| Share-based compensation |
||||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Prepaid expenses and other current assets |
||||||||
| Accounts payable |
( |
) | ( |
) | ||||
| Accrued expenses |
||||||||
| Contract liabilities |
||||||||
| Operating lease obligations |
( |
) | ( |
) | ||||
| Net cash provided by operating activities |
||||||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
( |
) | ||||||
| Net cash used in investing activities |
( |
) | ||||||
| Cash flows from financing activities: |
||||||||
| Payments on finance leases |
( |
) | ||||||
| Net cash used in financing activities |
( |
) | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
||||||||
| Net change in cash and cash equivalents |
||||||||
| Cash and cash equivalents, beginning of period |
||||||||
| Cash and cash equivalents, end of period |
$ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||
| Cash paid during the period for: |
||||||||
| Income taxes |
$ | $ | ||||||
| Interest |
$ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS |
||||||||
| Issuance of common shares in settlement of accrued expenses |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 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 |
$ | $ | $ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
| Foreign currency translation adjustment |
- | - | ||||||||||||||||||||||||||||||||||
| Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for accrued bonus and compensation |
( |
) | ||||||||||||||||||||||||||||||||||
| Net loss |
- | ( |
) | - | ( |
) | ||||||||||||||||||||||||||||||
| Balance, March 31, 2021 |
$ | $ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||
PAID, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(Unaudited)
| Common Stock |
Additional Paid-in |
Accumulated Other Comprehensive |
Accumulated |
Treasury Stock |
|
|||||||||||||||||||||||||||
| Shares |
Amount |
Capital | Income | Deficit | Shares |
Amount |
Total | |||||||||||||||||||||||||
| Balance, January 1, 2022 |
$ | $ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||
| Foreign currency translation adjustment |
- | - | ||||||||||||||||||||||||||||||
| Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||
| Net loss |
- | ( |
) | - | ( |
) | ||||||||||||||||||||||||||
| Balance, March 31, 2022 |
$ | $ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2022
Note 1. Organization and Significant Accounting Policies
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.
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 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.
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, 2021 that was filed on March 31, 2022.
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 2022.
Liquidity and Management’s Plans
At March 31, 2022 the Company reported cash and cash equivalents of $
Management believes that the Company has adequate cash resources to fund operations during the next 12 months after the filing of this quarterly report of 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 May 2023 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 March 31, 2022 and December 31, 2021. 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
At March 31, 2022, the Company maintained
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 months ended March 31, 2022 and 2021. 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
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 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 $
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 $
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 have been excluded from the computation of diluted earnings (loss) per share because they would reduce the reported loss per share and therefore have an anti-dilutive effect.
For the three months ended March 31, 2022 and 2021, there were approximately
The Company computes its income (loss) available to common shareholders by 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 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 months ended March 31, 2022 and 2021.
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||
| Numerator: | ||||||||
| Net loss available to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Basic weighted-average shares outstanding | ||||||||
| Effect of dilutive securities | ||||||||
| Diluted weighted-average shares outstanding | ||||||||
| Basic loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted loss per common share | $ | ( | ) | $ | ( | ) | ||
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 March 31, 2022, 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 |
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 | ||||||||
| March 31, 2022 | March 31, 2021 | |||||||
| Client services | $ | $ | ||||||
| Shipping calculator services | ||||||||
| Brewery management software | ||||||||
| Merchant processing services | ||||||||
| Shipping coordination and label generation services | ||||||||
| Total revenues | $ | $ | ||||||
The following table compares total loss from operations for the periods indicated.
| Three Months Ended | ||||||||
| March 31, 2022 | March 31, 2021 | |||||||
| Client services | $ | $ | ||||||
| Shipping calculator services | ||||||||
| Brewery management software | ( | ) | ||||||
| Merchant processing services | ||||||||
| Shipping coordination and label generation services | ( | ) | ||||||
| Corporate operations | ( | ) | ( | ) | ||||
| Total loss from operations | $ | ( | ) | $ | ( | ) | ||
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
There were no new accounting pronouncements issued by the FASB during the period that would apply to the Company and would have a material impact on its financial position or results of operations.
Note 2. Accrued Expenses
Accrued expenses are comprised of the following:
| March 31, 2022 (unaudited) |
December 31, 2021 | |||||||
| Payroll and related costs |
$ | $ | ||||||
| Professional and consulting |
||||||||
| Royalties |
||||||||
| Accrued cost of revenues |
||||||||
| Sales tax |
||||||||
| Other |
||||||||
| Total |
$ | $ | ||||||
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 March 31, 2022, intangible assets consisted of the following:
| Patents |
Trade Name |
Technology & Software |
Customer Relationships |
Total |
||||||||||||||||
| Gross carrying amount |
$ | $ | $ | $ | $ | |||||||||||||||
| Accumulated amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
At December 31, 2021, intangible assets consisted of the following:
| Patents |
Trade Name |
Technology & Software |
Customer Relationships |
Total |
||||||||||||||||
| Gross carrying amount |
$ | $ | $ | $ | $ | |||||||||||||||
| Accumulated amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
Amortization expense of intangible assets for the three months ended March 31, 2022 and 2021 was $
Note 4. 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.
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 5. Shareholders’ Equity
Preferred Stock
The Company’s amended Certificate of Incorporation authorizes the issuance of
The Company filed a Certificate of Designations effective on December 30, 2016, which sets aside
Common Stock
In February 2020, ShipTime Canada amended its rights to exchange
On March 29, 2021, the Company's Board of Directors authorized the issuance of
Share-based Incentive Plans
On March 23, 2018, the Board of Directors voted to approve the 2018 Stock Option Plan which reserves
For the three-month periods ended March 31, 2022, and 2021, the Company recorded $
Note 6. Leases
We have an operating lease for our corporate offices in Canada and finance leases for furniture and equipment which expired in June 2021. Our leases have remaining lease terms of months to months, and our primary operating leases include options to extend the leases for 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.
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 March 31, 2022 | Three Months Ended March 31, 2021 | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Amortization of leased assets | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total finance lease cost | $ | $ | ||||||
Supplemental cash flow information related to leases was as follows:
| Three Months Ended | Three Months Ended | |||||||
| Cash paid for amounts included in leases: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Operating cash flows from finance leases | $ | $ | ||||||
| Financing cash flows from finance leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
| Finance leases | $ | $ | ||||||
Supplemental balance sheet information related to leases was as follows:
| March 31, 2022 | December 31, 2021 | |||||||
| Operating leases: | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Current portion of operating lease obligations | $ | $ | ||||||
| Operating lease obligations, net of current portion | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Finance leases: | ||||||||
| Property and equipment, at cost | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
| Current portion of finance lease obligations | $ | $ | ||||||
| Finance lease obligations, net of current portion | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| March 31, 2022 | December 31, 2021 | |||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating lease (in years) | ||||||||
| Finance leases | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating lease | % | % | ||||||
| Finance leases | % | % | ||||||
A summary of future minimum payments under non-cancellable operating lease commitment as of March 31, 2022 is as follows:
| Years ending December 31, | Total | |||
| 2022 (remaining portion) | ||||
| 2023 | ||||
| Total lease liabilities | $ | |||
| Less amount representing interest | ( | ) | ||
| Total | ||||
| Less current portion | ( | ) | ||
| $ | ||||
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, 2021 that was filed on March 31, 2022.
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 2022 will be 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.
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, 2021 and 2020 included in our Form 10-K filed on March 31, 2022, 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 March 31, 2022 and 2021.
The following discussion compares the Company's results of operations for the three months ended March 31, 2022 with those for the three months ended March 31, 2021. 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 March 31, |
||||||||||||
| 2022 |
2021 |
% Change |
||||||||||
| Client services |
$ | 280 | $ | 1,283 | (78 | )% |
||||||
| Brewery management software |
9,375 | 19,200 | (51 | )% |
||||||||
| Shipping coordination and label generation services |
3,582,449 | 3,473,902 | 3 | % |
||||||||
| Merchant processing services |
12,053 | 12,525 | (4 | )% |
||||||||
| Shipping calculator services |
5,544 | 5,863 | (5 | )% |
||||||||
| Total revenues |
$ | 3,609,701 | $ | 3,512,773 | 3 | % |
||||||
Revenues increased 3% in the first quarter primarily from the annual increase in carrier rates along with the ongoing increases to the fuel surcharges for revenues related to our shipping coordination and label generation services.
Client services revenues decreased $1,003 or 78% to $280 in the first quarter of 2022 compared to $1,283 in 2021. This decrease is a result of the limited number of movie posters available for auction during the quarter.
Brewery management software revenues decreased $9,825 to $9,375 in 2022 from $19,200 in 2021. The decrease in revenues is due to cancellations of several clients and limited marketing of the software to new clients.
Shipping coordination and label generation services revenues increased $108,547 or 3% to $3,582,449 in the first quarter of 2022 compared to $3,473,902 in 2021. The increase is attributable to the annual increases imposed by the carriers in addition to the impact of the rising fuel surcharges.
Merchant processing services is available to businesses that accept credit card processing online. This segment has had difficulties with the launch and has reduced the offering which resulted in a decline of 4% from $12,525 to $12,053 in the first quarter of 2022. 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 $319 or 5% to $5,544 in the first quarter of 2022 compared to $5,863 in 2021. The decrease was primarily due to the reduction in volume for the remaining customer using this platform.
Gross Profit
Gross profit decreased $80,523 or 9% in the first quarter of 2022 to $798,492 compared to $879,015 in 2021. Gross margin decreased to 22% for the first quarter of 2022 compared to 25% in the first quarter of 2021. The decrease in gross margin and 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 quarter 2022 were $858,046 compared to $1,058,348 in the first quarter of 2021, a decrease of $200,302 or 19%. The decrease is due to lower share-based compensation of $18,096 recorded in the first quarter of 2022, compared to $263,613 recorded in the first quarter of 2021.
Net Income (Loss)
The Company recorded a net loss in the first quarter of 2022 of ($60,454) compared to a net loss of ($179,733) for the same period in 2021. The net loss per share available to common shareholders for the first quarter of 2022 and 2021 was ($0.01) 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 three months ended March 31, 2022 and 2021 is as follows:
| 2022 |
2021 |
|||||||
| Net loss |
$ | (60,454 | ) | $ | (179,733 | ) | ||
| Depreciation and amortization |
85,909 | 127,980 | ||||||
| Amortization of operating lease right-of-use assets |
8,761 | 7,993 | ||||||
| Share-based compensation |
18,096 | 263,613 | ||||||
| Changes in assets and liabilities |
(51,530 | ) | 141,861 | |||||
| Net cash provided by operating activities |
$ | 782 | $ | 361,714 | ||||
Working Capital and Liquidity
The Company had cash and cash equivalents of $2,876,293 at March 31, 2022, compared to $2,839,687 at December 31, 2021. The Company had net working capital of $545,151 at March 31, 2022, an improvement of $49,705 compared to $495,446 at December 31, 2021. The increase in net working capital is attributable to the increase in cash and cash equivalents. This is due to the additional growth of the business along with ongoing cost savings measures.
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 March 31, 2022, 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, 2021.
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.
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 CEO, in which Mr. Pratt appears to be treating it as a termination which would trigger a two-year severance payment. Around the same time that Mr. Pratt’s employment term expired, the Company’s Board of Directors voted to reduce the board from five to three, and Mr. Pratt and Mr. Austin Lewis, 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. As of March 31, 2022, 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
The COVID-19 pandemic has created economic and financial disruptions that could adversely affect our business, financial condition, liquidity, capital, and results of operations. Even as efforts to contain the pandemic, including vaccinations, have made progress and some restrictions have relaxed, new variants of the virus are causing additional outbreaks. The impact of additional variants that may emerge, cannot be predicted at this time, and could depend on numerous factors, including the availability of vaccines in different parts of the world, vaccination rates among the population, the effectiveness of COVID-19 vaccines against other variants, and the response by governmental bodies to reinstate restrictive measures. 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
There were no issuances of unregistered securities during the three months ended March 31, 2022.
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 |
|
| CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 |
||
| CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 |
||
| 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 |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
|
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) |
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: May 16, 2022 |
W. Austin Lewis, IV, CEO, CFO |
||
LIST OF EXHIBITS
| Exhibit No. | Description | |
| 10.1 |
Amendment to 2018 Non-Qualified Stock Option Plan |
|
| CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 |
||
| CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 |
||
| 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 |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
|
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) |
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- NV Gold Announces Secured Loan Terms
- Riding the Trend: Baros Maldives' Immersive Water Therapy
- Ridgeline Minerals Announces Upsized Non-Brokered Private Placement to $2.2M
Create E-mail Alert Related Categories
SEC FilingsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
