PAID INC
10-Ks and 10-Qs
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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
For the quarterly period ended March 31, 2020
COMMISSION FILE NUMBER 0-28720
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE
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73-1479833
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(I.R.S.
Employer Identification No.)
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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:
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Title of each
class
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Trading
Symbol
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Name of each
exchange on which registered
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None
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None
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None
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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, 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, smaller reporting
company or an emerging growth company. See the
definitions of “large accelerated filer”,
“accelerated filer”, “smaller reporting
company” and “emerging growth company” in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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☐
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Accelerated
Filer
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☐
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Non-accelerated
filer
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☒
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Smaller reporting company
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☒
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Emerging Growth Company
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☐
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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
May 15, 2020, the issuer had outstanding 6,184,634 shares of its
Common Stock.
PAID, INC.
FORM 10-Q
TABLE OF CONTENTS
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-i-
PART I – FINANCIAL INFORMATION
PAID, INC.
CONDENSED CONSOLIDATED
B
ALANCE
SHEETS
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March
31,
2020
(Unaudited)
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December
31,
2019
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ASSETS
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Current
assets:
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Cash and
cash equivalents
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$
500,882
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$
475,881
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Accounts
receivable, net
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150,593
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131,561
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Prepaid
expenses and other current assets
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87,602
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124,257
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Total
current assets
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739,077
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731,699
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Property and
equipment, net
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74,470
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89,707
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Other intangible
assets, net
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3,588,024
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4,048,572
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Operating lease
right-of-use assets
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104,369
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121,440
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Total
assets
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$
4,505,940
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$
4,991,418
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LIABILITIES AND
SHAREHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable
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$
872,397
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$
876,260
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Finance
leases - current portion
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8,159
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9,951
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Accrued
expenses
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234,664
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207,786
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Contract
liabilities
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6,180
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5,338
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Operating
lease obligations – current portion
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28,249
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30,255
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Total
current liabilities
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1,149,649
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1,129,590
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Long-term
liabilities:
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Finance
leases - net of current portion
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1,290
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2,797
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Operating
lease obligations – net of current portion
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78,194
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93,642
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Deferred tax
liability, net
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977,071
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1,070,189
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Total
liabilities
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2,206,204
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2,296,218
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Commitments and
contingencies
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Shareholders'
equity:
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Series A Preferred
stock, $0.001 par value, 5,000,000 shares authorized; 439,805 and
4,438,578 shares issued and outstanding at March 31, 2020 and
December 31, 2019, respectively; liquidation value of $1,332,609
and $13,808,610 at March 31, 2020 and December 31, 2019,
respectively
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440
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4,439
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Common stock,
$0.001 par value, 25,000,000 shares authorized; 5,775,079 shares
issued and 5,741,239 shares outstanding at March 31, 2020,
1,648,657 shares issued and 1,614,817 outstanding at December 31,
2019
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5,775
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1,649
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Additional paid-in
capital
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69,580,134
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69,242,412
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Accumulated other
comprehensive income
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277,713
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512,894
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Accumulated
deficit
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(67,506,479
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(67,008,347
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Common stock in
treasury, at cost, 33,840 shares at March 31, 2020 and December 31,
2019
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(57,847
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(57,847
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Total shareholders'
equity
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2,299,736
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2,695,200
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Total liabilities
and shareholders' equity
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$
4,505,940
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$
4,991,418
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See
accompanying notes to condensed consolidated financial
statements
-1-
PAID, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
O
PERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
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Three Months
Ended
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March
31,
2020
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March
31,
2019
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Net
revenues
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$
2,675,322
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$
2,289,020
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Cost of
revenues:
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Cost
of revenues
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2,024,176
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1,699,918
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Gross
profit
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651,146
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589,102
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Operating
expenses:
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Salaries and
related
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399,182
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328,848
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General and
administrative
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270,952
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291,909
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Stock-based
compensation
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(20,789
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58,840
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Amortization of
other acquired intangible assets
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114,543
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120,127
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Total operating
expenses
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763,888
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799,724
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Loss from
operations
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(112,742
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(210,622
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Other income
(expense):
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Other
income
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-
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5,550
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Unrealized loss on
stock price guarantee
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(6,414
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Total other
expense, net
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-
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(864
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Loss before
provision for income taxes
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(112,742
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(211,486
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Provision for
income taxes
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500
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500
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Net
loss
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(113,242
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(211,986
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Preferred
dividends
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(28,532
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(42,971
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Net loss available
to common shareholders
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$
(141,774
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$
(254,957
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Net loss per share
– basic and diluted
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$
(0.05
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$
(0.16
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Weighted average
number of common shares outstanding - basic and
diluted
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3,247,248
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1,614,817
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Condensed
consolidated statements of comprehensive loss:
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Net
loss
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$
(113,242
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$
(211,986
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Other comprehensive
income (loss):
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Foreign currency
translation adjustments
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(235,181
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73,145
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Comprehensive
loss
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$
(348,423
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$
(138,841
)
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See
accompanying notes to condensed consolidated financial
statements
-2-
PAID, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
C
ASH
FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
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2020
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2019
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Cash flows from
operating activities:
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Net
loss
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$
(113,242
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$
(211,986
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Adjustments
to reconcile net loss to net cash provided by operating
activities:
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Depreciation
and amortization
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122,404
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125,562
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Amortization
of operating lease right-of-use assets
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6,880
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3,748
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Share-based
compensation
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(20,789
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58,840
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Provision
for bad debt
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20,125
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-
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Unrealized
loss on stock price guarantee
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-
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6,414
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Changes in
assets and liabilities:
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Accounts
receivable
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(48,761
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(57,987
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Prepaid
expenses and other current assets
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27,395
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20,636
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Accounts
payable
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67,016
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96,122
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Accrued
expenses
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40,095
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40,690
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Contract
liabilities
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1,381
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(46,700
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Operating
lease obligations
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(7,061
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(3,574
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Net cash
provided by operating activities
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95,443
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31,765
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Cash flows from
investing activities:
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Purchase of
property and equipment
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-
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(5,424
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Net cash
used in investing activities
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-
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(5,424
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Cash flows from
financing activities:
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Payments on
finance leases
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(2,316
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(2,121
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Payments on
notes payable
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-
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(15,346
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Payments of
preferred dividends
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(26,252
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-
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Net cash
used in financing activities
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(28,568
)
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(17,467
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Effect of exchange
rate changes on cash and cash equivalents
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(41,874
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4,780
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Net change in cash
and cash equivalents
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25,001
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13,654
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Cash and cash
equivalents, beginning of period
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475,881
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632,331
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Cash and cash
equivalents, end of period
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$
500,882
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$
645,985
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SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
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Cash paid during
the year for:
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Income
taxes
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$
500
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$
500
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Interest
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$
281
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$
-
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SUPPLEMENTAL
DISCLOSURES OF NON-CASH ITEMS
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Issuance of
preferred share for settlement of dividends
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$
358,638
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$
-
|
See
accompanying notes to condensed consolidated financial
statements
-3-
PAID,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
E
QUITY
FOR
THE THREE MONTHS ENDED MARCH 31, 2019
(Unaudited)
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Additional
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Accumulated Other
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Preferred stock
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Common stock
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Paid-in
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Comprehensive
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Accumulated
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Treasury Stock
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Shares
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Amount
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Shares
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Amount
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Capital
|
income
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Deficit
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Shares
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Amount
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Total
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Balance,
January 1, 2019
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3,784,712
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3,785
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1,648,657
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$
1,649
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$
68,751,871
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$
344,182
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$
(67,127,122
)
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(33,840
)
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$
(57,847
)
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$
1,916,518
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Freign currency
translation adjustment
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-
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-
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-
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-
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-
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73,145
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-
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-
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73,145
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Share-based
compensation expense
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-
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-
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-
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-
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58,840
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-
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-
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-
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58,840
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Net
loss
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-
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-
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-
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-
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-
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-
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(211,986
)
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-
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-
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(211,986
)
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Balance, March 31,
2019
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3,784,712
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3,785
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1,648,657
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1,649
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68,810,711
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417,327
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(67,339,108
)
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(33,840
)
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(57,847
)
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1,836,517
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PAID,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR
THE THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)
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Additional
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Accumulated
Other
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Preferred
stock
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Common
stock
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Paid-in
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Comprehensive
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Accumulated
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Treasury
Stock
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Shares
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Amount
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Shares
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Amount
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Capital
|
income
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Deficit
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Shares
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Amount
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Total
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Balance,
January 1, 20120
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4,438,578
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$
4,439
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1,648,657
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$
1,649
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$
69,242,412
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$
512,894
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$
(67,008,347
)
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(33,840
)
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$
(57,847
)
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$
2,695,200
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Freign currency
translation adjustment
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-
|
-
|
-
|
-
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-
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(235,181
)
|
-
|
-
|
-
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(235,181
)
|
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Share-based
compensation expense
|
-
|
-
|
-
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-
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(20,789
)
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-
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-
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-
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-
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(20,789
)
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Preferred
dividends paid in shares
|
126,727
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127
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-
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-
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358,511
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-
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(358,638
)
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-
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-
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-
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Exchange of
Preferred to Common
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(4,125,500
)
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(4,126
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4,126,422
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4,126
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-
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-
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-
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-
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-
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-
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Preferred dividends
paid
|
-
|
-
|
-
|
-
|
-
|
-
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(26,252
)
|
-
|
-
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(26,252
)
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Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
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(113,242
)
|
-
|
-
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(113,242
)
|
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Balance, March 31,
2020
|
439,805
|
$
440
|
5,775,079
|
$
5,775
|
$
69,580,134
|
$
277,713
|
$
(67,506,479
)
|
(33,840
)
|
$
(57,847
)
|
$
2,299,736
|
See
accompanying notes to consolidated financial
statements
-4-
PAID, INC.
N
OTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)
March 31, 2020
Note 1. Organization and Significant Accounting
Policies
PAID,
Inc. (“PAID”, the “Company”,
“we”, “us”, or “our”) has
developed AuctionInc, which is a suite of online shipping and tax
management tools assisting businesses with e-commerce storefronts,
shipping solutions, tax calculation, inventory management, and
auction processing. The product has tools to assist with other
aspects of the fulfillment process, but the main purpose of the
product is to provide accurate shipping and tax calculations and
packaging algorithms that provide customers with the best possible
shipping and tax solutions.
BeerRun
Software (“BeerRun”) is a brewery management and
Alcohol and Tobacco Tax and Trade Bureau tax reporting software.
Small craft brewers can utilize the product to manage brewery
schedules, inventory, packaging, sales and purchasing. Tax
reporting can be processed with a single click and is fully
customizable by state or 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. Additional features include Brewpad
and Kegmaster and can be added on to the base product. Craft
brewing is on the rise in the United States and we feel that there
is a large potential to grow this portion of our
business.
ShipTime Canada
Inc. (“ShipTime”) has developed a SaaS-based
application, which focuses on the small and medium business
segments. This offering allows members to quote, process, generate
labels, dispatch and track courier and LTL shipments all from a
single interface. The application provides customers with a choice
of today’s leading couriers and freight carriers all with
discounted pricing allowing members to save on every shipment.
ShipTime can also be integrated into on-line shopping carts to
facilitate sales via e-commerce. We actively sell directly to small
and medium businesses and through long standing partnerships with
selected associations throughout Canada.
Paid Payments 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, 2019 that was filed on March 30, 2020.
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 2020.
Going Concern and Management's Plan
The
accompanying unaudited condensed consolidated financial statements
have been prepared on a going concern basis which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has generally incurred
losses, although it has taken significant steps to reduce them. For
the three months ended March 31, 2020, the Company reported a net
loss of $113,242. The Company has an accumulated deficit of
$67,506,479 and has a working capital deficit of $410,572 as of
March 31, 2020. These factors raise substantial doubt about the
Company’s ability to continue as a going
concern.
Management believes
that the continued growth of the new PAID platform of services in
addition to the continued profitability of ShipTime’s
services will return a valuable impact on the Company’s
success in the near future. The ongoing positive cash flows from
operations are a significant indicator of our successful transition
to the new shipping services. In addition to the existing services
provided, ShipTime will launch products in the United States that
are complementary to the current offerings.
Although there can
be no assurances, the Company believes that the above management
plan will be sufficient to meet the Company's working capital
requirements and will have a positive impact on the Company for
2020 and future years.
-5-
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, 2020 and December 31, 2019. 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 95% of its revenues from Canada and 5% from the U.S.
during the three months ended March 31, 2020, compared to 96% from
Canada and 4% from the U.S. during the three months ended March 31,
2019.
At
March 31, 2020, 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 months ended March 31, 2020 and 2019. 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.
-6-
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.
For
payment processing services the Company recognizes revenue based on
daily transactions by our partners and merchants. Customers process
credit card payments for sales and remit fees based on the number
of transactions and percent of the processed amounts. The merchant
bank deposits the funds to the customer net of fees. The remainder
of the fees withheld are disbursed to the Company on a daily basis
net of interchange and other transactional charges.
Revenue Disaggregation
The
Company operates in five reportable segments (see
below).
Performance Obligations
At
contract inception, an assessment of the goods and services
promised in the contracts with customers is performed and a
performance obligation is identified for each distinct promise to
transfer to the customer a good or service (or bundle of goods or
services). To identify the performance obligations, the Company
considers all of the goods or services promised in the contract
regardless of whether they are explicitly stated or are implied by
customary business practices. Revenue is recognized when the
performance obligation has been met, which is when the customer has
successfully prepared a shipping label and scheduled a pickup for
shipping coordination and label generation services. The Company
considers control to have transferred at that time because the
Company has a present right to payment at that time, the Company
has provided the shipping label, and the customer is able to direct
the use of, and obtain substantially all of the remaining benefits
from the shipping label.
For
arrangements under which the Company provides a subscription for
shipping calculator services and brewery management software, the
Company satisfies its performance obligations over the life of the
subscription, typically twelve months or less.
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 had 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.
Accordingly, the Company determined that its contracts with
customers do not include extended payment terms or a significant
financing component.
-7-
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 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
$150,593 and $131,561 as of March 31, 2020 and December 31, 2019,
respectively. Generally, the Company does not have material amounts
of contract assets since revenue is recognized as control of goods
is transferred or as services are performed.
Contract Liabilities (Deferred Revenue)
Contract
liabilities are recorded when cash payments are received in advance
of the Company’s performance (including rebates). Contract
liabilities were $6,180 and $5,338 at March 31, 2020 and
December 31, 2019, respectively. During the three months ended
March 31, 2020, the Company recognized revenues of $5,338 related
to contract liabilities outstanding at the beginning of the
year.
Earnings (Loss) Per Common Share
Basic
earnings (loss) per share represent income (loss) available to
common shareholders divided by the weighted-average number of
common shares outstanding during the period. Diluted earnings
(loss) per share reflects additional common shares that would have
been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income (loss) that would
result from the assumed issuance. The potential common shares that
may be issued by the Company relate to outstanding stock options
and 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, 2020 and 2019, there were
approximately 48,000 and 52,000, respectively, dilutive shares that
were excluded from the diluted earnings (loss) per share as their
effect would have been antidilutive for the periods then
ended.
The
Company computes its loss applicable to common shareholders by
adding/subtracting dividends on preferred stock, including
undeclared or unpaid dividends if cumulative, and any deemed
dividends or discounts on redeemed preferred stock from its
reported net loss and reports the same on the face of the condensed
consolidated statements of operations and comprehensive
loss.
-8-
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, 2020, the Company
operated in the following five reportable segments:
|
a.
|
Client
services
|
|
b.
|
Shipping
calculator services
|
|
c.
|
Brewery
management software
|
|
d.
|
Merchant
processing services; and
|
|
e.
|
Shipping
coordination and label generation services
|
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 interim Chief Executive
Officer/Chief Financial Officer.
The
following table compares total revenue for the periods
indicated.
|
|
Three Months
Ended
|
|
|
|
March
31,
2020
|
March
31,
2019
|
|
Client
services
|
$
99
|
$
3,042
|
|
Shipping calculator
services
|
8,322
|
34,729
|
|
Brewery management
software
|
37,106
|
56,069
|
|
Merchant processing
services
|
92,910
|
-
|
|
Shipping
coordination and label generation services
|
2,536,885
|
2,195,180
|
|
Total
revenues
|
$
2,675,322
|
$
2,289,020
|
The
following table compares total income (loss) from operations for
the periods indicated.
|
|
Three Months
Ended
|
|
|
|
March
31,
2020
|
March
31,
2019
|
|
Client
services
|
$
99
|
$
2,354
|
|
Shipping calculator
services
|
(98,657
)
|
(152,585
)
|
|
Brewery management
software
|
(4,882
)
|
20,607
|
|
Merchant processing
services
|
36,496
|
-
|
|
Shipping
coordination and label generation services
|
(45,798
)
|
(80,998
)
|
|
Total loss from
operations
|
$
(112,742
)
|
$
(210,622
)
|
-9-
Recent Accounting Pronouncements
In June
2016, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2016-13,
“Financial Instruments-Credit Losses: Measurement of Credit
Losses on Financial Instruments”, which requires the
measurement and recognition of expected credit losses for financial
assets held at amortized cost. ASU 2016-13 replaces the existing
incurred loss impairment model with a forward-looking expected
credit loss model which will result in earlier recognition of
credit losses. The Company’s adoption of ASU 2016-13 had no
impact on its financial position, results of operations, cash
flows, or disclosures.
In
August 2018, the FASB issued ASU 2018-13, “Changes to
Disclosure Requirements for Fair Value Measurements”, which
improved the effectiveness of disclosure requirements for recurring
and nonrecurring fair value measurements. The standard removes,
modifies, and adds certain disclosure requirements. The
Company’s adoption of ASU 2018-13 had no impact on its
financial position, results of operations, cash flows, or
disclosures.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic
740): “Simplifying the Accounting for Income Taxes” to
identify, evaluate, and improve areas of GAAP for which costs and
complexity can be reduced while maintaining or improving the
usefulness of the information provided to users of financial
statements. The amendments for ASU 2019-12 simplify the accounting
for income taxes by removing certain exceptions to the general
principles in Topic 740. The amendments also improve consistent
application of and simplify GAAP for other areas of Topic 740 by
clarifying and amending existing guidance. ASU 2019-12 is effective
for fiscal years beginning after December 15, 2020, and interim
periods within those fiscal years. Early adoption is permitted. An
entity that elects to early adopt must adopt all the amendments in
the same period. The Company is currently evaluating the impact of
ASU 2019-12 and does not expect the adoption of this guidance to
have a material impact on its consolidated financial position or
results of operations.
Note 2. Accrued Expenses
Accrued
expenses are comprised of the following:
|
|
March
31,
2020
(unaudited)
|
December
31,
2019
|
|
Payroll and related
costs
|
$
-
|
$
1,797
|
|
Professional and
consulting fees
|
949
|
960
|
|
Royalties
|
47,803
|
47,803
|
|
Accrued cost of
revenues
|
141,603
|
114,455
|
|
Sales
tax
|
31,902
|
31,902
|
|
Other
|
12,407
|
10,869
|
|
Total
|
$
234,664
|
$
207,786
|
Note 3. Acquisitions and 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.
-10-
At
March 31, 2020 and December 31, 2019, intangible assets consisted
of the following:
|
|
March
31,
2020
|
December
31,
2019
|
|
Patents
|
$
16,000
|
$
16,000
|
|
Software
|
83,750
|
83,750
|
|
Trade
name
|
754,219
|
826,098
|
|
Technology
|
481,677
|
527,583
|
|
Client list /
relationship
|
4,447,590
|
4,851,093
|
|
Accumulated
amortization
|
(2,195,212
)
|
(2,255,952
)
|
|
|
$
3,588,024
|
$
4,048,572
|
Amortization
expense of intangible assets for the three months ended March 31,
2020 and 2019 was $114,543 and $120,127, respectively.
Note 4. Commitments and Contingencies
Notes Payable
In
August 2018, the Company entered into a note payable with a
shareholder to repurchase common and preferred shares. The note was
an interest-free, six-month note for CAD $122,400 with payment
terms of six equal installments of CAD $20,400. This note was paid
in full in the first quarter of 2019.
Stock Price Guarantee
In
connection with one of the Company’s advance royalties with a
client, the Company guaranteed that shares of its common stock
issued as royalties would sell for at least $60.00 per share.
If the shares were not at the required $60.00 per share when they
were sold, the Company had the option of issuing additional shares
at their fair value or making cash payments for the difference
between the guaranteed price per share and the fair value of the
stock. The change in fair value of the guarantee was ($6,414)
for the three months ended March 31, 2019. The Company would have
disputed this obligation if demanded by the client; further,
pursuing any action by the client was required to be commenced
within six years of the time of the original issuance and the
Company believes the time for pursuing an action expired in 2019.
As a result of the expiration, the Company eliminated this
obligation from its consolidated balance sheet and recorded
$880,553 in other income during the year ended December 31,
2019.
Legal Matters
In the
normal course of business, the Company periodically becomes
involved in litigation. As of March 31, 2020, in the opinion of
management, the Company had no pending litigation that would have a
material adverse effect on the Company's consolidated financial
position, results of operations, or cash flows.
Indemnities and Guarantees
The
Company has made certain indemnities and guarantees, under which it
may be required to make payments to a guaranteed or indemnified
party, in relation to certain actions or transactions. The Company
indemnifies its directors, officers, employees and agents, as
permitted under the laws of the State of Delaware. In connection
with its facility leases, the Company has agreed to indemnify its
lessors for certain claims arising from the use of the facilities.
The duration of the guarantees and indemnities varies, and is
generally tied to the life of the agreements. These guarantees and
indemnities do not provide for any limitation of the maximum
potential future payments the Company could be obligated to make.
Historically, the Company has not been obligated nor incurred any
payments for these obligations and, therefore, no liabilities have
been recorded for these indemnities and guarantees in the
accompanying condensed consolidated balance sheets.
-11-
Note 5. Shareholders’ Equity
Preferred Stock
The
Company’s amended Certificate of Incorporation authorizes the
issuance of 20,000,000 shares of blank-check preferred stock at
$0.001 par value. The Board of Directors will be authorized to fix
the designations, rights, preferences, powers and limitations of
each series of the preferred stock.
The
Company filed a Certificate of Designations effective on December
30, 2016 which sets aside 5,000,000 shares of Preferred Stock as
Series A Preferred Stock. The Series A Preferred Stock holders have
no voting or conversion rights. The Series A Preferred Stock also
carries a coupon payment obligation of 1.5% of the liquidation
value per share ($3.03) per year in cash or additional Series A
Preferred Stock, calculated by taking the 30-day average closing
price for a share of common stock for the month immediately
preceding the coupon payment date which is made annually. For the
three month periods ended March 31, 2020 and 2019, the estimated
portion of the annual coupon is $28,532 and $42,971, respectively.
If purchased, redeemed, or otherwise acquired (other than
conversion), the preferred stock may be reissued. In April 2019,
the Company paid the annual coupon in cash for the year ended
December 31, 2017. The Company paid the 2018 and 2019 coupon
payments totaling $358,638 in 126,727 preferred shares and a cash
payment of $26,252 for the 2020 coupon payment through March of
2020. During 2019, the Board of Directors satisfied 2018 accrued
Executive Compensation by means of issuance of 653,866 preferred
shares valued at $83,221. During the three months ended March 31,
2020, all but 439,805 shares of Series A Preferred Stock were
exchanged for common stock (see below and Note 7). At March 31,
2020 and December 31, 2019, the liquidation value of the Series A
Preferred Stock was $1,323,609 and $13,808,610,
respectively.
Common Stock
In
February 2020, ShipTime amended its rights to exchange one share of
ShipTime stock from 45 PAID common shares and 311 PAID Series A
Preferred Stock to 356 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 shareholders
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 576,046 shares of Series A Preferred Stock
exchanged such shares for 576,045 shares of PAID common stock.
Furthermore, as a result 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. In total, the Company
has reserved for future issuance 2,391,608 shares of PAID common
stock with respect to the remaining 6,718 exchangeable shares to be
issued as a result of the ShipTime acquisition which are considered
issued and outstanding as of March 31, 2020 for financial reporting
purposes.
Share-based Incentive Plans
The
Company has a 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.
The Company granted 15,000 stock options to one employee during the
quarter ended March 31, 2019. The options have vesting period of
one-third immediately, one-third in 18 months, and one-third in 36
months from the date of the grant, they expire if not exercised
within ten years from grant date, and the exercise price is $2.92
per share. The Company granted 1,245 stock options to one employee
during the quarter ended June 30, 2019. The options have vesting
period of one-third immediately, one-third in 18 months, and
one-third in 36 months from the date of the grant, they expire if
not exercised within ten years from grant date, and the exercise
price is $3.50 per share. During the second quarter of 2019, the
Company recorded a reversal of unvested stock option expense for
the termination of a non-employee consultant’s 25,000 stock
options totaling $44,167 and $43,067 of stock compensation expense
related to the vesting of applicable options granted in 2019 and
prior years. The Company granted 119,775 stock options to three
directors and four employees during the third quarter. There were
77,275 stock options granted to the directors and one employee that
vested immediately, the remaining three employees received 42,500
stock options with a vesting period of one-third immediately,
one-third in 18 months, and one-third in 36 months from the date of
the grant. All stock options granted in the third quarter expire if
not exercised within ten years from grant date, and the exercise
price ranges from $2.96 to $3.00 per share.
For the
three month period ended March 31, 2020, the Company recorded
$14,291 of stock compensation expense related to the vesting of
applicable options granted in 2019 and prior years in addition to
the reversal of unvested stock option expense for the termination
of two employees totaling $35,080.
Note 6. Leases
We have
an operating lease for our corporate offices in Canada and finance
leases for furniture and equipment. Our leases have remaining lease
terms of seven months to forty-one months, and our primary
operating leases include options to extend the leases for four
years. Future renewal options that are not likely to be executed as
of the balance sheet date are excluded from right-of-use assets and
related lease liabilities.
We
report operating leased assets, as well as operating lease current
and noncurrent obligations on our balance sheets for the right to
use the building in our business. Our finance leases represent
furniture and office equipment; we report the furniture and
equipment, as well as finance lease current and noncurrent
obligations on our balance sheet.
Generally, interest
rates are stated in our leases for equipment. When no interest rate
is stated in a lease, however, we review the interest rates
implicit in our recent finance leases to estimate our incremental
borrowing rate. We determine the rate implicit in a lease by using
the most recent finance lease rate, or other method we think most
closely represents our incremental borrowing rate.
-12-
The
components of lease expense were as follows:
|
|
Three Months
Ended
March 31,
2020
|
Three Months
Ended
March 31,
2019
|
|
Operating lease
cost
|
$
9,707
|
$
5,653
|
|
|
|
|
|
Finance lease
cost:
|
|
|
|
Amortization of
leased assets
|
$
2,428
|
$
2,583
|
|
Interest on lease
liabilities
|
281
|
501
|
|
Total finance lease
cost
|
$
2,709
|
$
3,084
|
Supplemental
cash flow information related to leases was as
follows:
|
|
Three Months
Ended
March 31,
2020
|
Three Months
Ended
March 31,
2019
|
|
Cash paid for
amounts included in leases:
|
|
|
|
Operating cash
flows from operating leases
|
$
9,880
|
$
5,477
|
|
Operating cash
flows from finance leases
|
$
281
|
$
501
|
|
Financing cash
flows from finance leases
|
$
2,316
|
$
2,121
|
|
|
|
|
|
Right-of-use assets
obtained in exchange for lease obligations:
|
|
|
|
Operating
leases
|
$
-
|
$
-
|
|
Finance
leases
|
$
-
|
$
-
|
-13-
Supplemental
balance sheet information related to leases was as
follows:
|
|
March
31,
2020
|
December
31,
2019
|
|
Operating
leases:
|
|
|
|
Operating lease
right-of-use assets
|
$
104,369
|
$
121,440
|
|
Current portion of
operating lease obligations
|
$
28,249
|
$
30,255
|
|
Operating lease
obligations, net of current portion
|
78,194
|
93,642
|
|
Total operating
lease liabilities
|
$
106,443
|
$
123,897
|
|
|
|
|
|
Finance
leases:
|
|
|
|
Property and
equipment, at cost
|
$
48,555
|
$
53,183
|
|
Accumulated
depreciation
|
(36,416
|
) (37,227)
|
|
Property and
equipment, net
|
$
12,139
|
$
15,956
|
|
|
|
|
|
Current portion of
finance lease obligations
|
$
8,159
|
$
9,951
|
|
Finance lease
obligations, net of current portion
|
1,290
|
2,797
|
|
Total finance lease
liabilities
|
$
9,449
|
$
12,748
|
|
|
Three Months
Ended
March 31,
2020
|
December
31,
2019
|
|
Weighted Average
Remaining Lease Term
|
|
|
|
Operating
lease
|
3.4
years
|
3.6
years
|
|
Finance
leases
|
0.9
years
|
1.3
years
|
|
|
|
|
|
Weighted Average
Discount Rate
|
|
|
|
Operating
lease
|
9.0
%
|
9.0
%
|
|
Finance
leases
|
9.7
%
|
9.7
%
|
Upon
adoption of the new lease standard, discount rates used for
existing leases were established at January 1, 2019.
-14-
A
summary of future minimum payments under non-cancellable operating
lease commitment as of March 31, 2020 is as follows:
|
Years ending
December 31,
|
Total
|
|
2020 (remaining
months)
|
$
27,526
|
|
2021
|
36,702
|
|
2022
|
36,702
|
|
2023
|
23,974
|
|
Total lease
liabilities
|
$
124,904
|
|
Less
amount representing interest
|
(18,461
)
|
|
Total
|
106,443
|
|
Less
current portion
|
(28,249
)
|
|
|
$
78,194
|
The
following is a schedule of minimum future rentals on the
non-cancelable finance leases as of March 31, 2020:
|
Year ending
December 31,
|
Total
|
|
2020 (remaining
months)
|
$
7,791
|
|
2021
|
2,777
|
|
Total minimum
payments required:
|
10,568
|
|
Less amount
representing interest:
|
(1,119
)
|
|
Present value of
net minimum lease payments:
|
9,449
|
|
Less current
portion
|
(8,159
)
|
|
|
$
1,290
|
Note
7. Subsequent Events
In December 2019, a
novel strain of coronavirus disease (“COVID-19”) was
first reported in Wuhan, China. Less than four months later, on
March 11, 2020, the World Health Organization declared COVID-19 a
global pandemic. The extent of COVID-19’s effect on the
Company’s operational and financial performance will depend
on future developments, including the duration, spread and
intensity of the pandemic, all of which are uncertain and difficult
to predict considering the rapidly evolving landscape. The Company
is currently analyzing the potential impacts to all of its business
segments. At this time, it is not possible to determine the
magnitude of the overall impact of COVID-19 on the Company’s
business. However, it could have a material adverse effect on the
Company’s business, financial condition, liquidity, results
of operations, and cash flows.
In
April 2020, the Company received requests to exchange the remaining
439,805 shares of Series A Preferred Stock to PAID common stock. As
of May 15, 2020, there are no remaining shares of Series A
Preferred Stock outstanding.
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.
-15-
|
I
TEM 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, 2019 that was filed on March 30,
2020.
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 Canada Inc.
ShipTime’s
platform provides its members with the ability to quote, process,
track and dispatch shipments while getting preferred rates on
packages and skidded (LTL) freight shipments throughout North
America and around the world. In addition to these features,
ShipTime also provides what it refers to as “Heroic
Multilingual Customer Support.” In this capacity, ShipTime
acts as an advocate on behalf of its clients in resolving matters
concerning orders and shipping. With an increasing focus and
service offering for e-commerce merchants, which include online
shopping carts, inventory management, payment services, client
prospecting and retention software, ShipTime can help merchants
worldwide grow and scale their businesses. ShipTime generates
monthly recurring revenue through transactions and “software
as a service” (SAAS) offerings. It currently serves in excess
of 50,000 members in North America and has plans to expand its
services into Europe and then worldwide.
AuctionInc Software.
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
application was designed to focus on real-time carrier calculated
shipping rates and tax calculations. 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.
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 province. The software is
designed to integrate with QuickBooks accounting platforms by using
our powerful sync engine. We currently offer two versions of the
software BeerRun and BeerRun Light which excludes some of the
enhanced features of BeerRun without disrupting the core
functionality of the software. Additional features include Brewpad
and Kegmaster and can be added on to the base product. Craft
brewing continues to grow in the United States and we feel that
there is considerable potential to grow this portion of our
business.
Paid
Payments
provides commerce
solutions 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. Paid 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.
-16-
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, 2019 and 2018 included in our Form 10-K filed on March
30, 2020, 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, 2020 and
2019
.
The
following discussion compares the Company's results of operations
for the three months ended March 31, 2020 with those for the three
months ended March 31, 2019. 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,
|
||
|
|
2020
|
2019
|
%
Change
|
|
Client
services
|
$
99
|
$
3,042
|
(97
) %
|
|
Brewery management
software
|
37,106
|
56,069
|
(34
) %
|
|
Shipping
coordination and label generation services
|
2,536,885
|
2,195,180
|
16
%
|
|
Merchant processing
services
|
92,910
|
-
|
100
%
|
|
Shipping calculator
services
|
8,322
|
34,729
|
(76
) %
|
|
Total
revenues
|
$
2,675,322
|
$
2,289,020
|
17
%
|
Revenues increased
17% in the first quarter primarily from the growth of our shipping
coordination and label generation services and the addition of the
merchant processing services new segment.
Client
service revenues decreased $2,943 or 97% to $99 in the first
quarter of 2020 compared to $3,042 in 2019. This decrease is a
result of the absence of movie posters auctions during the first
quarter.
Brewery
management software revenues decreased $18,963 to $37,106 in 2020
from $56,069 in 2019. The decrease in revenues is due to
cancellations of several clients and an increase in
competition.
Shipping
coordination and label generation service revenues increased
$341,705 or 16% to $2,536,885 in the first quarter of 2020 compared
to $2,195,180 in 2019. The increase is attributable to the
increased marketing, new corporate partnerships and brand
recognition for this segment of our business.
Merchant processing
services is a new segment of the company returning $92,910 in
revenue for the first quarter of 2020.
Shipping calculator
services revenue decreased $26,407 or 76% to $8,322 in the first
quarter of 2020 compared to $34,729 in 2019. The decrease was
primarily due to the retirement of a portion of the legacy software
sold in this segment of the business.
-17-
Gross Profit
Gross
profit increased $62,044 or 11% in the first quarter of 2020 to
$651,146 compared to $589,102 in 2019. Gross margin decreased to
24% for the first quarter of 2020 compared to 26% in the first
quarter of 2019. The decrease in gross margin is a result of the
additional discounts available to our customers for shipping
coordination and label generation services.
Operating Expenses
Total
operating expenses in the first quarter 2020 were $763,888 compared
to $799,724 in the first quarter of 2019, a decrease of $35,836 or
4%. The decrease is primarily due to staffing changes made during
the first quarter of 2020.
Other Income/Expense, net
Net
other income (expense) in the first quarter of 2020 was $0 compared
to ($864) in the same period of 2019, a change of $864. This change
is partly due to the elimination of the guarantee liability in the
amount of $6,414 and the elimination of the rebate to airline
mileage exchange of $5,550.
Net Loss
The
Company realized a net loss in the first quarter of 2020 of
$113,242 compared to a net loss of $211,986 for the same period in
2019. The net loss available to common shareholders for the first
quarter of 2020 and 2019 represent ($0.05) and ($0.16) per share,
respectively.
Cash
Flows from Operating Activities
A
summarized reconciliation of the Company's net income (loss) to
cash and cash equivalents provided by operating activities for the
three months ended March 31, 2020 and 2019 is as
follows:
|
|
2020
|
2019
|
|
Net
loss
|
$
(113,242
)
|
$
(211,986
)
|
|
Depreciation and
amortization
|
122,404
|
125,562
|
|
Amortization of
operating lease right-of-use assets
|
6,880
|
3,748
|
|
Share-based
compensation
|
(20,789
)
|
58,840
|
|
Unrealized loss on
stock price guarantee
|
-
|
6,414
|
|
Provision for bad
debt
|
20,125
|
-
|
|
Changes in assets
and liabilities
|
80,065
|
49,187
|
|
Net cash provided
by operating activities
|
$
95,443
|
$
31,765
|
-18-
Working
Capital and Liquidity
The
Company had cash and cash equivalents of $500,882 at March 31,
2020, compared to $475,881 at December 31, 2019. The Company had a
negative working capital of $410,572 at March 31 2019, a change of
$12,681 compared to $397,891 at December 31, 2019. The increase in
cash and cash equivalents is due to the decrease in
personnel.
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.
I
TEM
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.
I
TEM
4.
CONTROLS AND
PROCEDURES
Evaluation
of Disclosure Controls and Procedures
The
Company's management, including the Interim 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 Interim Chief Executive
Officer/Chief Financial Officer has concluded that, as of March 31,
2020, 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, 2019.
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.
-19-
PART II - OTHER INFORMATION
In the
normal course of business, the Company periodically becomes
involved in litigation. As of March 31, 2020, in the
opinion of management, the Company had no material pending
litigation other than ordinary litigation incidental to the
business.
There
are no material changes for the risk factors previously disclosed
on Form 10-K for the year ended December 31, 2019.
ITEM 2.
U
NREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
There were no issuances of unregistered securities during the three
months ended March 31, 2020.
None.
ITEM 4.
M
INE
SAFETY DISCLOSURES
Not
Applicable.
ITEM 5.
O
THER
INFORMATION
None.
-20-
|
|
CEO and
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
XBRL Instance Document (filed herewith)
101.SCH
XBRL Taxonomy Extension Schema (filed herewith)
101.CAL
XBRL Taxonomy Extension Calculation Linkbase (filed
herewith)
101.DEF
XBRL Taxonomy Extension Definition Linkbase (filed
herewith)
101.LAB
XBRL Taxonomy Extension Label Linkbase (filed
herewith)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase (filed
herewith)
-21-
S
IGNATURES
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 15, 2020
|
|
W.
Austin Lewis, IV, Interim CEO, Chief Financial Officer
|
-22-
LIST OF EXHIBITS
|
Exhibit No.
|
|
Description
|
|
|
CEO and
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
|
|
XBRL Instance Document (filed herewith)
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema (filed herewith)
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase (filed
herewith)
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase (filed
herewith)
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase (filed
herewith)
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase (filed
herewith)
|
-23-
TABLE OF CONTENTS
Part I Financial InformationItem 1. Financial StatementsNote 1. Organization and Significant Accounting PoliciesNote 2. Accrued ExpensesNote 3. Acquisitions and Intangible AssetsNote 4. Commitments and ContingenciesNote 5. Shareholders EquityNote 6. LeasesNote 7. Subsequent EventsItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits