UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
COMMISSION FILE NUMBER 0-28720
(Exact Name of Registrant as Specified in its Charter)
Delaware | 73-1479833 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
225 Cedar Hill Street, Marlborough, Massachusetts 01752
(Address of Principal Executive Offices) (Zip Code)
(617) 861-6050
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
None | None | None |
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated Filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ | Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of November 14, 2024, the issuer had outstanding 8,061,400 shares of its Common Stock.
PAID, INC.
FORM 10-Q
TABLE OF CONTENTS
Part I – Financial Information | ||
Item 1. | Financial Statements | |
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 | 3 | |
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023 | 4 | |
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 | 5 | |
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2024 and 2023 | 6 | |
Notes to Unaudited Condensed Consolidated Financial Statements | 8-16 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 20 |
Item 4. | Controls and Procedures | 20 |
Part II – Other Information | ||
Item 1. | Legal Proceedings | 20 |
Item 1A. | Risk Factors | 21 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
Item 3. | Defaults Upon Senior Securities | 21 |
Item 4. | Mine Safety Disclosures | 21 |
Item 5. | Other Information | 21 |
Item 6. | Exhibits | 21 |
Signatures | 22 | |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAID, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, | December 31, | |||||||
2024 | 2023 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,089,520 | $ | 2,052,421 | ||||
Accounts receivable, net | 209,976 | 205,647 | ||||||
Note receivable, net of discount | 4,193,607 | 2,453,425 | ||||||
Prepaid expenses and other current assets | 330,054 | 134,110 | ||||||
Total current assets | 5,823,157 | 4,845,603 | ||||||
Property and equipment, net | 7,631 | 10,678 | ||||||
Intangible assets, net | 2,155,579 | 2,422,590 | ||||||
Operating lease right-of-use assets, net | 130,481 | 14,161 | ||||||
Note receivable, long term | 261,918 | - | ||||||
Total assets | $ | 8,378,766 | $ | 7,293,032 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,220,768 | $ | 1,482,498 | ||||
Accrued expenses | 507,235 | 420,611 | ||||||
Contract liabilities | 260,546 | 15,382 | ||||||
Operating lease obligations | 31,428 | 14,162 | ||||||
Total current liabilities | 2,019,977 | 1,932,653 | ||||||
Long-term liabilities: | ||||||||
Deferred tax liability, net | 605,995 | 622,568 | ||||||
Uncertain tax position liability | 278,704 | 278,704 | ||||||
Operating lease obligation – net of current portion | 99,078 | - | ||||||
Total liabilities | 3,003,754 | 2,833,925 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
Series A Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||
Common stock, $0.001 par value, 25,000,000 shares authorized; 8,209,033 shares issued and 8,061,400 shares outstanding at September 30, 2024 and 8,154,474 shares issued and 8,010,837 shares outstanding at December 31, 2023 | 8,209 | 8,154 | ||||||
Accrued common stock bonus | - | 84,576 | ||||||
Additional paid-in capital | 73,634,888 | 73,505,439 | ||||||
Accumulated other comprehensive income | 281,606 | 342,968 | ||||||
Accumulated deficit | (68,380,855 | ) | (69,317,190 | ) | ||||
Common stock in treasury, at cost, 147,633 shares at September 30, 2024 and 143,637 shares at December 31, 2023 | (168,836 | ) | (164,840 | ) | ||||
Total shareholders' equity | 5,375,012 | 4,459,107 | ||||||
Total liabilities and shareholders' equity | $ | 8,378,766 | $ | 7,293,032 | ||||
See accompanying notes to condensed consolidated financial statements
PAID, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
Revenues, net | $ | 4,445,910 | $ | 4,107,771 | $ | 13,209,958 | $ | 12,044,427 | ||||||||
Cost of revenues | 3,362,076 | 3,163,499 | 10,000,198 | 9,302,913 | ||||||||||||
Gross profit | 1,083,834 | 944,272 | 3,209,760 | 2,741,514 | ||||||||||||
Operating expenses: | ||||||||||||||||
Salaries and related | 643,979 | 492,381 | 1,840,080 | 1,489,211 | ||||||||||||
General and administrative | 512,926 | 373,591 | 1,366,947 | 1,025,545 | ||||||||||||
Share-based compensation | 3,266 | 69,238 | 44,928 | 556,014 | ||||||||||||
Amortization of other intangible assets | 73,443 | 74,678 | 220,939 | 223,258 | ||||||||||||
Total operating expenses | 1,233,614 | 1,009,888 | 3,472,894 | 3,294,028 | ||||||||||||
Income (loss) from operations | (149,780 | ) | (65,616 | ) | (263,134 | ) | (552,514 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income | 17,221 | - | 159,003 | - | ||||||||||||
Other income | - | 20,833 | 1,049,882 | 270,833 | ||||||||||||
Income (loss) before income tax provision | (132,559 | ) | (44,783 | ) | 945,751 | (281,681 | ) | |||||||||
Income tax provision | 1,120 | - | 9,416 | 856 | ||||||||||||
Net income (loss) | $ | (133,679 | ) | $ | (44,783 | ) | $ | 936,335 | $ | (282,537 | ) | |||||
Net income (loss) per share – basic | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.12 | $ | (0.04 | ) | |||||
Weighted average number of common shares outstanding - basic | 8,061,400 | 8,010,837 | 8,051,294 | 7,915,069 | ||||||||||||
Net income (loss) per share – diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.12 | $ | (0.04 | ) | |||||
Weighted average number of common shares outstanding - diluted | 8,061,400 | 8,010,837 | 8,059,044 | 7,915,069 | ||||||||||||
Condensed consolidated statements of comprehensive income (loss): | ||||||||||||||||
Net income (loss) | $ | (133,679 | ) | $ | (44,783 | ) | $ | 936,335 | $ | (282,537 | ) | |||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustments | 4,214 | (52,578 | ) | (61,361 | ) | (21,102 | ) | |||||||||
Comprehensive income (loss) | $ | (129,465 | ) | $ | (97,361 | ) | $ | 874,974 | $ | (303,639 | ) | |||||
See accompanying notes to condensed consolidated financial statements
PAID, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(Unaudited)
2024 | 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 936,335 | $ | (282,537 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and amortization | 230,342 | 233,185 | ||||||
Amortization of operating lease right-of-use assets | 16,358 | 24,893 | ||||||
Accretion of discount on note receivable | (1,048,402 | ) | (270,833 | ) | ||||
Share-based compensation | 44,928 | 556,014 | ||||||
Interest income accrued on note receivable | (155,198 | ) | - | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (7,901 | ) | (71,969 | ) | ||||
Prepaid expenses and other current assets | (196,251 | ) | 17,970 | |||||
Accounts payable | (284,122 | ) | (236,294 | ) | ||||
Accrued expenses | 93,738 | 18,049 | ) | |||||
Contract liabilities | 243,772 | 803 | ||||||
Operating lease obligations | (16,335 | ) | (24,023 | ) | ||||
Net used in operating activities | (142,736 | ) | (34,742 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of property and equipment | (6,572 | ) | - | |||||
Issuance of notes receivable | (748,500 | ) | - | |||||
Net cash used in investing activities | (755,072 | ) | - | |||||
Cash flows from financing activities | ||||||||
Repurchase of common stock | (3,996 | ) | - | |||||
Proceeds from option exercises | - | 3,412 | ||||||
Net cash used in financing activities | (3,996 | ) | 3,412 | |||||
Effect of exchange rate changes on cash and cash equivalents | (61,097 | ) | (19,946 | ) | ||||
Net change in cash and cash equivalents | (962,901 | ) | (51,276 | ) | ||||
Cash and cash equivalents, beginning of period | 2,052,421 | 1,787,248 | ||||||
Cash and cash equivalents, end of period | $ | 1,089,520 | $ | 1,735,972 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | 9,416 | $ | 856 | ||||
Interest | $ | - | $ | - | ||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS | ||||||||
Increase in note receivable for reimbursable expenses | $ | 250,000 | $ | - | ||||
Increase in note receivable for discount | 847,193 | - | ||||||
Issuance of common shares in settlement of accrued common stock bonus | $ | 84,567 | $ | 82,180 | ||||
| Operating lease liabilities from obtaining lease right-of-use assets | $ | 130,506 | $ | 20,620 | ||||
See accompanying notes to condensed consolidated financial statements
PAID, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 (Unaudited) |
Common Stock | Accrued Common | Accumulated Other | Treasury Stock | |||||||||||||||||||||||||||||||||
Shares | Amount | Stock Bonus | Additional Paid-in Capital | Comprehensive Income | Accumulated Deficit | Shares | Amount | Total | ||||||||||||||||||||||||||||
Balance, January 1, 2023 | 7,840,124 | $ | 7,840 | $ | 82,180 | $ | 72,800,976 | $ | 316,360 | $ | (69,670,404 | ) | (143,637 | ) | $ | (164,840 | ) | $ | 3,372,112 | |||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | (2,296 | ) | - | - | - | (2,296 | ) | |||||||||||||||||||||||||
Issuance of common stock in settlement of accrued common stock bonus | 46,961 | 47 | (82,180 | ) | 82,133 | - | - | - | - | - | ||||||||||||||||||||||||||
Issuance of common stock for signing bonus | 250,000 | 250 | - | 273,188 | - | - | - | - | 273,438 | |||||||||||||||||||||||||||
Share-based compensation expense | - | - | - | 119,100 | - | - | - | - | 119,100 | |||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (294,928 | ) | - | - | (294,928 | ) | |||||||||||||||||||||||||
Balance, March 31, 2023 | 8,137,085 | $ | 8,137 | $ | - | $ | 73,275,397 | $ | 314,064 | $ | (69,965,332 | ) | (143,637 | ) | $ | (164,840 | ) | $ | 3,467,426 | |||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | 33,772 | - | - | - | 33,772 | |||||||||||||||||||||||||||
Option exercise | 3,500 | 3 | - | 3,409 | - | - | - | - | 3,412 | |||||||||||||||||||||||||||
Issuance of common stock for bonus | 13,889 | 14 | - | 24,986 | - | - | - | - | 25,000 | |||||||||||||||||||||||||||
Share-based compensation expense | - | - | - | 69,238 | - | - | - | - | 69,238 | |||||||||||||||||||||||||||
Net income | - | - | - | - | - | 57,174 | - | - | 57,174 | |||||||||||||||||||||||||||
Balance, June 30, 2023 | 8,154,474 | $ | 8,154 | $ | - | $ | 73,373,030 | $ | 347,836 | $ | (69,908,158 | ) | (143,637 | ) | $ | (164,840 | ) | $ | 3,656,022 | |||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | (52,578 | ) | - | - | - | (52,578 | ) | |||||||||||||||||||||||||
Share-based compensation expense | - | - | - | 69,238 | - | - | - | - | 69,238 | |||||||||||||||||||||||||||
Net income | - | - | - | - | - | (44,783 | ) | - | - | (44,783 | ) | |||||||||||||||||||||||||
Balance, September 30, 2023 | 8,154,474 | $ | 8,154 | $ | - | $ | 73,442,268 | $ | 295,258 | $ | (69,952,941 | ) | (143,637 | ) | $ | (164,840 | ) | $ | 3,627,899 | |||||||||||||||||
PAID, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 (Unaudited) |
Common Stock | Accrued Common | Accumulated Other | Treasury Stock | |||||||||||||||||||||||||||||||||
Shares | Amount | Stock Bonus | Additional Paid-in Capital | Comprehensive Income | Accumulated Deficit | Shares | Amount | Total | ||||||||||||||||||||||||||||
Balance, January 1, 2024 | 8,154,474 | $ | 8,154 | $ | 84,576 | $ | 73,505,439 | $ | 342,968 | $ | (69,317,190 | ) | (143,637 | ) | $ | (164,840 | ) | $ | 4,459,107 | |||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | (45,425 | ) | - | - | - | (45,425 | ) | |||||||||||||||||||||||||
Issuance of common stock in settlement of accrued common stock bonus | 54,559 | 55 | (84,576 | ) | 84,521 | - | - | - | - | - | ||||||||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | - | - | (3,996 | ) | (3,996 | ) | (3,996 | ) | ||||||||||||||||||||||||
Share-based compensation expense | - | - | - | 38,984 | - | - | - | - | 38,984 | |||||||||||||||||||||||||||
Net income | - | - | - | - | - | 299,562 | - | - | 299,562 | |||||||||||||||||||||||||||
Balance, March 31, 2024 | 8,209,033 | $ | 8,209 | $ | - | $ | 73,628,944 | $ | 297,543 | $ | (69,017,628 | ) | (147,633 | ) | $ | (168,836 | ) | $ | 4,748,232 | |||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | (20,151 | ) | - | - | - | (20,151 | ) | |||||||||||||||||||||||||
Share-based compensation expense | - | - | - | 2,678 | - | - | - | - | 2,678 | |||||||||||||||||||||||||||
Net income | - | - | - | - | - | 770,452 | - | - | 770,452 | |||||||||||||||||||||||||||
Balance, June 30, 2024 | 8,209,033 | $ | 8,209 | $ | - | $ | 73,631,622 | $ | 277,392 | $ | (68,247,176 | ) | (147,633 | ) | $ | (168,836 | ) | $ | 5,501,211 | |||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | 4,214 | - | - | - | 4,214 | |||||||||||||||||||||||||||
Share-based compensation expense | - | - | - | 3,266 | - | - | - | - | 3,266 | |||||||||||||||||||||||||||
Net income | - | - | - | - | - | (133,679 | ) | - | - | (133,679 | ) | |||||||||||||||||||||||||
Balance, September 30, 2024 | 8,209,033 | $ | 8,209 | $ | - | $ | 73,634,888 | $ | 281,606 | $ | (68,380,855 | ) | (147,633 | ) | $ | (168,836 | ) | $ | 5,375,012 | |||||||||||||||||
See accompanying notes to condensed consolidated financial statements
PAID, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
September 30, 2024
(Unaudited)
Note 1. Organization and Significant Accounting Policies
PAID, Inc. (“PAID”, the “Company”, “we”, “us”, or “our”) has developed a full line of SaaS-based business services including PaidPayments, PaidCart, PaidShipping and PaidWeb. These solutions are developed to provide businesses with a streamlined experience for website creation, online sales, payment collection and shipping all in one platform.
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. Backed by Heroic Support™, ShipTime offers live support via phone, chat and email to enhance the customer experience. The software 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 offers a robust platform enabling small and medium businesses to launch websites via our catalog of templates. Our platform includes a wide array of features such as mobile editing, search engine optimization, collaboration tools, pre-designed templates, and can be integrated with multiple platforms. PaidCart serves as a comprehensive solution for small and medium businesses looking to expand their online sales through multiple channels. It provides a centralized system to manage sales across various platforms, with additional functionalities for currency and language management, promotional sales, and abandoned cart recovery. PaidPayments and PaidShipping seamlessly interface with PaidCart to facilitate the checkout and shipping processes. Operating as a Payment Facilitator since 2019, PaidPayments provides businesses with a secure and efficient way to conduct online transactions including a virtual terminal, invoicing capability, subscriptions processing, checkout pages, and a point-of-sale system with support for USD, CAD, and EUR currencies. PaidShipping delivers a solution to quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. We offer savings through partnerships with leading carriers. It includes a multi-courier comparison tool, integrations with eCommerce platforms and branded tracking.
General Presentation and Basis of Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and with the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 that was filed on April 1, 2024.
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 2024.
Liquidity and Management’s Plans
At September 30, 2024, the Company reported cash and cash equivalents of $1,089,520 and net working capital of $3,803,180 and reported cash flows used from operations of $142,736 for the nine months ended September 30, 2024. The Company has reported a net income of $936,335 for the nine months ended September 30, 2024 and has an accumulated deficit of $68,380,855 at September 30, 2024.
Management believes that the Company has adequate cash resources to fund operations during the next 12 months after the filing of this quarterly report on Form 10-Q. In addition, management continues to explore opportunities and has organized additional resources to grow the Paid platform. 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 may seek alternative sources of capital to support the growth of future operations.
Although there can be no assurances, the Company believes that the above management plans will be sufficient to meet the Company’s working capital requirements through the end of November 2025 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 subsidiary ShipTime Canada, Inc. All intercompany accounts and transactions have been eliminated.
Foreign Currency
The currency of ShipTime, the Company’s international subsidiary, is in Canadian dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at September 30, 2024 and December 31, 2023. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a separate component of shareholders’ equity in accumulated other comprehensive income.
Geographic Concentrations
The Company conducts business in the U.S. and Canada. For customers headquartered in their respective countries, the Company derived approximately 99% of its revenues from Canada and 1% from the U.S. during the nine months ended September 30, 2024 and 2023.
At September 30, 2024, 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 nine months ended September 30, 2024 and 2023. 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, merchant processing services and client services.
The Company recognizes revenue by taking into consideration the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Due to the nature of the Company’s service and product offerings and contracts associated with these, the Company’s deliverables do not fluctuate, and its revenue recognition is consistent. The Company evaluates whether amounts billed to customers should be reported as revenues on a gross or net basis. Generally, revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the services, when it assumes the risk of loss, when it has discretion in setting the prices for the services to the customers, and when the Company has the ability to direct the use of the services provided by the third party. We generally are responsible for the fulfilment of a customer order despite the fact we do not directly provide the delivery services; we can redirect delivery to other shipping companies in our network. We control the price for which the customer pays, and generally collect the gross shipping fees and remit the contractual rate to this shipping company. Our risk of loss relates to credit-card chargebacks, certain self-insured shipping losses and other miscellaneous charges that we cannot pass through to the shipping company.
Nature of Goods and Services
For label generation service revenues, the Company recognizes revenue when a customer has successfully prepared a shipping label and their shipment is delivered. Customers with pickups and shipments in transit 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 brewery management software revenues, the Company recognizes subscription revenue on a monthly basis. Brewery management software subscribers are billed monthly at the first of the month. All payments are made via credit card for the following month.
Merchant processing revenue consists of fees a seller pays us to process their payment transactions and is recognized upon authorization of a transaction. Revenue is recognized net of estimated refunds, which are reversals of transactions initiated by sellers. We act as the merchant of record for our sellers, which puts us in their shoes with respect to card networks and puts the risk for refunds and chargebacks on us. The gross transaction fees collected from sellers is recognized as revenue as we are the primary obligor to the seller and are responsible for processing the payment, have latitude in establishing pricing with respect to the sellers and other terms of service, have sole discretion in selecting the third party to perform the settlement, and assume the credit risk for the transaction processed.
Revenue Disaggregation
The Company operates in four reportable segments (see below).
Performance Obligations
At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). The Company fulfills nearly all of its performance obligations within a one-to-two-week period and contracts with customers have an original expected duration of less than one month. The Company generally has an unconditional right to consideration when the services are initiated or soon thereafter. The amount due from the customer is either collected up front or recorded as accounts receivable. The amounts related to services that are not yet completed at the reporting date are presented as contract liabilities. The Company measures the performance of its obligations as services are completed over the life of a shipment, including services at origin, freight and destination. This method of measurement of progress depicts the pattern of the Company's actual performance under the contracts with the customer.
For arrangements under which the Company provides a subscription for brewery management software, the Company satisfies its performance obligations over the life of the subscription, typically twelve months or less.
Merchant processing customers receive a merchant identification number which allows them to process credit card transactions. Once the transaction is approved, the funds are distributed in an overnight feed and the Company has met its performance obligation.
The Company has no shipping and handling activities related to contracts with customers.
Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to government authorities.
Significant Payment Terms
Pursuant to the Company’s contracts with its customers, amounts are collected up front primarily through credit/debit card transactions. The Company has offered its customers consolidated payments which are billed weekly and are paid with a credit card on file. Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.
Measurement of Credit Losses
The Company has accounts receivable and note receivable and monitors the granting of credit and collecting debt on an ongoing basis. The Company maintains an allowance for doubtful accounts based on historical loss patterns, the number of days that billings are past due, and an evaluation of potential risk of loss associated with delinquent accounts. The Company has two notes receivable and is a senior secure lender with an absolute obligation for one of the notes. The primary note was evaluated for credit losses as of September 30, 2024 by considering the contractual obligation, the valuation of the assets and the senior position of the repayment.
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 $209,976 and $205,647 as of September 30, 2024 and December 31, 2023, respectively. The Company has no customers that made up 10% of the accounts receivable balance at September 30, 2024 and one customer that made up 10% of the accounts receivable balance as of December 31, 2023. Generally, the Company does not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed.
Contract Liabilities (Deferred Revenue)
Contract liabilities are recorded when cash payments are received in advance of the Company’s performance. Contract liabilities were $260,546 and $15,382 at September 30, 2024 and December 31, 2023, respectively. During the nine months ended September 30, 2024, the Company recognized revenues of $15,382 related to contract liabilities outstanding at the beginning of the period.
Income (Loss) Per Common Share
Basic earnings (loss) per share represent income (loss) divided by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. The potential common shares that may be issued by the Company relate to outstanding stock options and have been excluded from the computation of diluted income (loss) per share if they would reduce the reported loss per share and therefore have an anti-dilutive effect.
For the nine months ended September 30, 2023, there were approximately 7,800 of potentially dilutive shares excluded from the diluted loss per share calculation, as their effect would be anti-dilutive.
The following is a reconciliation of the numerators and denominators of the basic and diluted income (loss) per common share computations for the three months ended September 30, 2024 and 2023.
Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | |||||||
Numerator: | ||||||||
Net loss | $ | (133,679 | ) | $ | (44,783 | ) | ||
Denominator: | ||||||||
Basic weighted-average shares outstanding | 8,061,400 | 8,010,837 | ||||||
Basic income (loss) per share | $ | (0.02 | ) | $ | (0.01 | ) | ||
Effect of dilutive securities | - | - | ||||||
Diluted weighted-average shares outstanding | 8,061,400 | 8,010,837 | ||||||
Diluted income (loss) per share | $ | (0.02 | ) | $ | (0.01 | ) | ||
Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | 936,335 | $ | (282,537 | ) | |||
Denominator: | ||||||||
Basic weighted-average shares outstanding | 8,051,294 | 7,915,069 | ||||||
Effect of dilutive securities | 7,750 | - | ||||||
Diluted weighted-average shares outstanding | 8,059,044 | 7,915,069 | ||||||
Basic income (loss) per share | $ | 0.12 | $ | (0.04 | ) | |||
Diluted income (loss) per share | $ | 0.12 | $ | (0.04 | ) | |||
Segment Reporting
The Company reports information about segments of its business in its annual consolidated financial statements and reports selected segment information in its quarterly reports issued to shareholders. The Company also reports on its entity-wide disclosures about the products and services it provides and reports revenues and its major customers. The Company’s four reportable segments are managed separately based on fundamental differences in their operations. At September 30, 2024, the Company operated in the following four reportable segments:
a. | Client services; |
b. | Merchant processing services; |
c. | Shipping coordination and label generation services; and |
d. | Corporate operations |
The Company evaluates performance and allocates resources based upon operating income. The accounting policies of the reportable segments are the same as those described in this summary of significant accounting policies. The Company’s chief operating decision maker is the Chief Executive Officer/Chief Financial Officer.
The following table compares total net revenue for the periods indicated.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
Client services | $ | 2,495 | $ | 8,048 | $ | 15,020 | $ | 25,532 | ||||||||
Merchant processing services | 17,910 | 12,789 | 50,314 | 53,007 | ||||||||||||
Shipping coordination and label generation services | 4,425,505 | 4,086,934 | 13,144,624 | 11,965,888 | ||||||||||||
Total revenues | $ | 4,445,910 | $ | 4,107,771 | $ | 13,209,958 | $ | 12,044,427 | ||||||||
The following table compares total loss from operations for the periods indicated.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
Client services | $ | (691 | ) | $ | 2,930 | $ | 4,668 | $ | 9,033 | |||||||
Merchant processing services | (95,967 | ) | 4,233 | (166,984 | ) | 14,929 | ||||||||||
Shipping coordination and label generation services | (21,496 | ) | (58,263 | ) | 14,382 | (410,998 | ) | |||||||||
Corporate operations | (31,626 | ) | (14,516 | ) | (115,200 | ) | (165,478 | ) | ||||||||
Total loss from operations | $ | (149,780 | ) | $ | (65,616 | ) | $ | (263,134 | ) | $ | (552,514 | ) | ||||
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.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the segment reporting for the period ended September 30, 2023, to consolidate revenue reporting for smaller segments of the Company.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the disclosure requirements related to the new standard.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which provides guidance to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about reportable segment’s expenses. The new guidance must be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and retrospective application is required for all periods presented. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
Note 2. Notes Receivable
On October 13, 2022, the Company entered in a Securities Purchase Agreement (“SPA”) with respect to a secured $1,875,000 convertible note (“Convertible Note”) made by Embolx, Inc. (“Noteholder”). The Convertible Note was purchased at a 20% ($375,000) original issue discount and is subject to a 9-month maturity, after which, if unpaid will then carry a 20% interest rate. The Company recognized $270,833 in other income related to accretion of the discount on the Convertible Note for the year ended December 31, 2023 in addition to a $375,000, 20% non-payment penalty and interest due on the note of $203,425. The Company has the option to convert the Convertible Note into shares of common stock of Embolx. The Convertible Note is secured by substantially all assets of the Noteholder. Under the SPA, the Company has a right to purchase additional notes and receive warrants on the same terms for a total potential investment amount of $2,000,000 with an additional over-allotment option of $500,000 as defined in the SPA. As additional consideration, the Company received a 5-year warrant to purchase shares of common stock of the Embolx. The shares are subject to certain piggyback registration rights under a Registration Rights Agreement. The warrant was offered at 50% of the original principal amount and will be valued at the price per share of common stock paid in the first liquidity event following October 19, 2022. The warrants were to expire five years from the original issue date. As of July 19, 2023, the note was in default and carried an additional 20% penalty and 20% interest resulting in $578,425 of other income which was recognized in the Company’s consolidated financial statements for the year ended December 31, 2023. In March 2024, the Company amended and replaced the note and terminated the warrants. The terms on the amended note receivable include an additional investment of $500,000 with a 25% original issue discount and is due on June 19, 2024. The Company was granted a $50,000 increase to the debt owed by Embolx which was applied toward legal expenses incurred during the first quarter relating to the preparation of the note documentation. For the nine months ended September 30, 2024, the Company has recognized $141,782 in other income related to the interest earned and $1,048,402 in other income related to the accretion of the discount on the Convertible Note compared to $270,833 of other income recorded as of September 30, 2023.
The note receivable is currently in default effective June 19, 2024 in the amount of $4,193,607 and the Company has elected to defer interest of $426,025 and default penalties of $838,721. On July 29, 2024, the Board of Directors approved an extension with Embolx which is currently being modified. The extension includes a forbearance agreement with Embolx which extends the note receivable until June 1, 2025.
The Company does not believe there is any impairment to the note receivable due to its secured position on the assets of Embolx and its expectation that the amounts will be recoverable if and when Embolx consummates a financial or merger transaction which is expected to happen in 2025.
The Company entered into a $50,000 short term note with 5String Solutions LLC on April 4, 2024. The terms on the note include a 12% annual interest rate from the inception of the note which was due on May 15, 2024. The note has been amended as of July 3, 2024 and the initial investment shall be deducted from the future advance and the note shall be deemed paid in full. The new note includes an additional $198,500 investment carrying a 12% interest rate. The short term note of $50,000 plus $1,500 interest calculated from April 4, 2024 to July 3, 2024, along with a $198,500 additional investment results in a $250,000 long term note due on or before April 30, 2027. On April 30, 2027 the Company has the option to convert the balance of the $400,000 note receivable into 55% ownership of 5String Solutions. In the event that the Company elects to convert the noted they subsequently have the option to purchase the remaining 45% ownership of 5String Solutions at a rate of 5-times EBITDA reported on December 31, 2026.
Interest of $11,918 has been recorded based on the outstanding balance of the $250,000 note for the period of July 3, 2024 to September 30, 2024.
Note 3. Accrued Expenses
Accrued expenses are comprised of the following:
September 30, 2024 (unaudited) | December 31, 2023 | |||||||
Payroll and related costs | $ | 288,338 | $ | 238,161 | ||||
Royalties | 40,075 | 40,075 | ||||||
Accrued cost of revenues | 156,184 | 119,737 | ||||||
Sales tax | 22,228 | 22,228 | ||||||
Other | 410 | 410 | ||||||
Total | $ | 507,235 | $ | 420,611 | ||||
Note 4. Intangible Assets
The Company holds several patents for the real-time calculation of shipping costs for items purchased through online auctions using a zip code as a destination location indicator. It includes shipping charge calculations across multiple carriers and accounts for additional characteristics of the item being shipped, such as weight, special packaging or handling, and insurance costs. These patents help facilitate rapid and accurate estimation of shipping costs across multiple shipping carriers and also include real-time calculation of shipping.
In addition, the Company has various other intangibles from past business combinations.
At September 30, 2024, intangible assets consisted of the following:
Patents | Trade Name | Technology & Software | Customer Relationships | Total | ||||||||||||||||
Gross carrying amount | $ | 16,000 | $ | 792,570 | $ | 589,921 | $ | 4,662,886 | $ | 6,061,377 | ||||||||||
Accumulated amortization | (16,000 | ) | (792,570 | ) | (589,921 | ) | (2,507,307 | ) | (3,905,798 | ) | ||||||||||
| $ | - | $ | - | $ | - | $ | 2,155,579 | $ | 2,155,579 | |||||||||||
At December 31, 2023, intangible assets consisted of the following:
Patents | Trade Name | Technology & Software | Customer Relationships | Total | ||||||||||||||||
Gross carrying amount | $ | 16,000 | $ | 807,420 | $ | 599,404 | $ | 4,746,242 | $ | 6,169,066 | ||||||||||
Accumulated amortization | (16,000 | ) | (807,420 | ) | (599,404 | ) | (2,323,652 | ) | (3,746,476 | ) | ||||||||||
| $ | - | $ | - | $ | - | $ | 2,422,590 | $ | 2,422,590 | |||||||||||
Amortization expense of intangible assets for the three months ended September 30, 2024 and 2023 was $73,443 and $74,678, respectively.
Note 5. Commitments and Contingencies
Legal Matters
In the normal course of business, the Company periodically becomes involved in litigation and disputes. During 2021, the Company was notified of a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company’s former President, CEO and Chairman. On or around January 2020, the Company had allowed Mr. Pratt’s employment agreement to not renew, but Mr. Pratt alleges in a court in Canada that the Company terminated him and that the Company owes him a severance payment. Around the same time that Mr. Pratt’s employment term expired, the Company’s Board of Directors voted to reduce the size of the Board from five to three members, and Mr. Pratt and Mr. Austin Lewis, then CFO, automatically rolled off from the Board of Directors. More than a year later, in 2021, Mr. Pratt filed a claim in Delaware courts to contest that decision. In July 2022, Mr. Pratt amended the complaint to dispute the proper authorization of a stock bonus that was awarded to the Company’s CEO in March 2021. On November 9, 2023 the courts dismissed the claim contesting the reduction of the board size. The Company has not recorded a reserve as the outcome of these matters cannot be determined. On December 5, 2024 a trial is scheduled to begin on the claims made in the Delaware courts.
Indemnities and Guarantees
The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility lease, the Company has agreed to indemnify its lessor for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying condensed consolidated balance sheets.
Note 6. Shareholders’ Equity
Preferred Stock
The Company’s amended Certificate of Incorporation authorizes the issuance of 20,000,000 shares of blank-check preferred stock at $0.001 par value. The Board of Directors will be authorized to fix the designations, rights, preferences, powers and limitations of each series of the preferred stock.
The Company filed a Certificate of Designations effective on December 30, 2016, which sets aside 5,000,000 shares of Preferred Stock as Series A Preferred Stock. The Series A Preferred Stock carries a coupon payment obligation of 1.5% of the liquidation value per share ($3.03) per year in cash or additional Series A Preferred Stock, calculated by taking the 30-day average closing price for a share of common stock for the month immediately preceding the coupon payment date which is made annually. The Series A Preferred Stock has no voting or conversion rights. If purchased, redeemed, or otherwise acquired (other than conversion), the preferred stock may be reissued. As of September 30, 2024 and December 31, 2023, there are no outstanding shares of Series A Preferred Stock.
Common Stock
In February 2020, ShipTime Canada amended its rights to exchange one share of ShipTime Canada stock from 45 PAID common shares and 311 PAID preferred shares to 356 PAID common shares. The Company made available to its ShipTime Canada exchangeable preferred shareholders the one-time option to convert existing book entry preferred shares and exchangeable rights to preferred shares into PAID common shares. As a result, certain ShipTime exchangeable shareholders exercised their rights to receive 1,461,078 shares of PAID Series A Preferred Stock for 1,461,078 shares of PAID common stock. At the same time, the Company made available to its Series A Preferred Stock shareholder the option to exchange existing Series A preferred shares for PAID common shares. The exchange was offered on a one-to-one basis. Shareholders holding 1,015,851 shares of Series A Preferred Stock exchanged such shares for 1,015,851 shares of PAID common stock. Furthermore, because of the amended exchange rights, the Company reflected an additional exchange of PAID Series A Preferred Stock shares totaling 2,089,298 to PAID common shares, representing the additional amount of PAID common shares that will be issued to the ShipTime shareholders upon the exchange. In total, the Company has reserved for future issuance of 2,106,808 shares of PAID common stock with respect to the remaining 5,918 exchangeable shares to be issued as a result of the ShipTime acquisition which are considered issued and outstanding as of September 30, 2024 for financial reporting purposes.
On February 22, 2024, the Company’s Board of Directors authorized the issuance of 54,559 bonus shares of PAID common stock to the CEO/CFO, one additional officer and one employee for services rendered during 2023. This bonus was valued at $84,576 and was based on the closing price of the Company’s common stock at February 21, 2024 and was issued in February 2024. This bonus was recorded in accrued common stock bonus in shareholders’ equity of December 31, 2023.
On March 21, 2023, the Company’s Board of Directors authorized the issuance of 46,961 bonus shares of PAID common stock to the CEO/CFO, one additional officer and one employee for services rendered during 2022. This bonus was valued at $82,180 based on the closing price of the Company’s common stock at March 20, 2023 and was issued in March 2023. This bonus was recorded in accrued common stock bonus in shareholders’ equity as of December 31, 2022. The Board of Directors also authorized the issuance of an additional 250,000 shares to the CEO/CFO as a renewal bonus valued at $437,500. $218,750 of share-based compensation expense was recognized immediately as 125,000 of the bonus shares were immediately vested. The remaining $218,750 of share-based compensation expense was recognized ratably during 2023 as 125,000 of the bonus shares were subject to repurchase if the CEO/CFO were to terminate employment during the period ended January 1, 2024. The Company recorded $273,438 of share-based compensation expense for the three-month period ended September 30, 2023 in connection with these additional shares.
On March 21, 2023, the Company’s Board of Directors approved the terms of the employment agreement for David Scott, the Company’s COO. Per the terms of the agreement, the Company issued 13,889 shares of PAID common stock to the COO. This compensation was valued at $25,000 based on the closing price of the Company’s common stock at September 30, 2023 and the shares were issued on April 10, 2023. The Company recorded $25,000 of share-based compensation expense in connection with the additional compensation.
Share Repurchase
In February 2024, the Company entered into an agreement to repurchase 3,996 shares of PAID common stock for a total amount of $3,996.
Share-based Incentive Plans
On March 23, 2018, the Board of Directors voted to approve the 2018 Stock Option Plan which reserves 450,000 non-qualified stock options to be granted to employees. The Company has three additional stock option plans that include both incentive and non-qualified stock options to be granted to certain eligible employees, non-employee directors, or consultants of the Company. On November 10, 2020, the board voted to increase the 2018 Stock Option Plan from 450,000 options to 900,000 options.
On February 22, 2024, the Board of Directors voted to approve the issuance of options to purchase 45,360 shares of common stock to three board members and five employees. The options have an exercise price of $1.55 per share and have vesting periods of 0-3 years and they expire if not exercised within ten years from grant date.
For the three-month and nine-month periods ended September 30, 2024, the Company recorded $3,266 and $44,928, respectively, of share-based compensation expense related to the vesting of applicable options granted in 2024 and prior years. For the three and nine-month periods ended September 30, 2023, the Company recorded $14,550 and $148,200, respectively, of share-based compensation expense related to the vesting of applicable options granted in 2023 and prior years.
Note 7. Leases
On July 2, 2024, the Company has entered into an operating lease for our corporate office located at 700 Dorval Drive in Oakville Ontario. The lease commences September 1, 2024 with a expiration date of August 31, 2028. Our lease has a remaining lease term of forty-seven months. Future renewal options that are not likely to be executed as of the balance sheet date and are excluded from right-of-use assets and related lease liabilities.
We report operating lease assets, as well as operating lease current and noncurrent obligations on our condensed consolidated balance sheets for the right to use the building in our business.
The components of lease expense were as follows:
Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | |||||||
Operating lease cost | $ | 6,494 | $ | 4,503 | ||||
Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||
Operating lease cost | $ | 17,199 | $ | 23,462 | ||||
Supplemental cash flow information related to leases was as follows:
Nine Months Ended | Nine Months Ended | |||||||
Cash paid for amounts included in leases: | ||||||||
Operating cash flows from operating leases | $ | 15,820 | $ | 24,847 | ||||
Supplemental balance sheet information related to leases was as follows:
September 30, 2024 | December 31, 2023 | |||||||
Operating leases: | ||||||||
Operating lease right-of-use assets | $ | 130,481 | $ | 14,161 | ||||
Current portion of operating lease obligations | $ | 31,428 | $ | 14,162 | ||||
Operating lease obligations, net of current portion | $ | 99,078 | $ | - | ||||
Total operating lease liabilities | $ | 130,506 | $ | 14,162 | ||||
September 30, 2024 | December 31, 2023 | |||||||
Weighted Average Remaining Lease Term Operating lease (in years) | 3.25 | 0.7 | ||||||
Weighted Average Discount Rate Operating lease | 3.37 | % | 3.37 | % | ||||
A summary of future minimum payments under non-cancellable operating lease commitment as of September 30, 2024 is as follows:
Years ending December 31, | Total | |||
2024 (remainder of year) | $ | 8,830 | ||
2025 | 35,320 | |||
2026 | 35,473 | |||
2027 | 35,933 | |||
2028 | 23,955 | |||
| Total lease liabilities | $ | 139,511 | ||
Less amount representing interest | (9,005 | ) | ||
Total | 130,506 | |||
Less current portion | (31,428 | ) | ||
| Long term portion | $ | 99,078 | ||
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,"FnoteF "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, 2023 that was filed on April 1, 2024.
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, insure, 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 2024 will be to continue to grow this portion of our business.
PAID, Inc. (the “Company”) has developed a full line of SaaS-based business services including PaidPayments, PaidCart, PaidShipping and PaidWeb. These solutions are developed to provide businesses with a streamlined experience for website creation, online sales, payment collection and shipping all in one platform.
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, 2023 and 2022 included in our Form 10-K filed on April 1, 2024, as updated and amended in Note 1 of the Notes to Condensed Consolidated Financial Statements included herein. However, certain of our accounting policies, most notably with respect to revenue recognition, are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Those estimates and judgments are based upon our historical experience, the terms of existing contracts, our observance of trends in the industry, information that we obtain from our customers and outside sources, and on various other assumptions that we believe to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Results of Operations
Comparison of the three months ended September 30, 2024 and 2023.
The following discussion compares the Company's results of operations for the three months ended September 30, 2024 with those for the three months ended September 30, 2023. 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 net revenue for the periods indicated.
Three months Ended September 30, | ||||||||||||
2024 | 2023 | % Change | ||||||||||
Client services | $ | 2,495 | $ | 8,048 | (69 | )% | ||||||
Shipping coordination and label generation services | 4,425,505 | 4,086,934 | 8 | % | ||||||||
Merchant processing services | 17,910 | 12,789 | 40 | % | ||||||||
Total net revenues | $ | 4,445,910 | $ | 4,107,771 | 8 | % | ||||||
Revenues increased 8% in the third quarter as a result of the shipping coordination and label generation segment of the business. Marketing efforts, pricing strategies and additional personnel have contributed to the shipping volume increase of 11% in 2024.
Client services revenues which include brewery management software and shipping calculator services decreased $5,554 or 69% to $2,495 in the third quarter of 2024 compared to $8,048 in 2023. The decrease in revenues is primarily due to the cancellation of several brewery management software clients and the limited marketing of this segment of the business.
Shipping coordination and label generation services revenues increased $338,571 or 8% to $4,425,505 in the third quarter of 2024 compared to $4,086,934 in 2023. The increase is attributable to the increase of the volume of labels generated, this is a result of the additional marketing and sales efforts in the third quarter of 2024.
Merchant processing services are available to businesses that process ecommerce online transactions. These include shipping, payments and web hosting services. The Company has recognized revenues of $17,910 and increase of $5,121 or 40% compared to $12,789 for the same period in 2023. The Company has started to market this segment of the business in 2024.
Gross Profit
Gross profit increased $139,562 or 15% in the third quarter of 2024 to $1,083,834 compared to $944,272 in 2023. Gross margin improved 1% to 24% in the third quarter of 2024 compared to 23% for the same period in 2023.
Operating Expenses
Total operating expenses in the third quarter 2024 were $1,233,614 compared to $1,009,888 in the third quarter of 2023, an increase of $223,601 or 22%. The increase is due to increased legal expenses and the addition of several new employees and consultants in combination with the additional marketing expenses in 2024 compared to those in 2023.
Other Income/Expense, net
Net other income in 2024 was $17,221 compared to $20,833 in 2023, a decrease of $3,612 or 17%. The third quarter 2024 other income made up of gains on an interest-bearing savings account along with interest earned on notes receivable.
Net Income (Loss)
The Company recorded a net loss in the third quarter of 2024 of $133,679 compared to a net loss of $44,783 for the same period in 2023. The net loss per share for the third quarter of 2024 was ($0.02) and the net loss for 2023 was ($0.01) per share.
Comparison of the nine months ended September 30, 2024 and 2023
The following discussion compares the Company's results of operations for the nine months ended September 30, 2024, with those for the nine months ended September 30, 2023. The Company’s condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report contain detailed information that should be referred to in conjunction with the following discussion.
Revenues
The following table compares total revenue for the periods indicated.
Nine months ended September 30, | ||||||||||||
2024 | 2023 | % Change | ||||||||||
Client services | $ | 15,020 | $ | 25,532 | (41 | )% | ||||||
Shipping coordination and label generation services | 13,144,624 | 11,965,888 | 10 | % | ||||||||
Merchant processing services | 50,314 | 53,007 | (5 | )% | ||||||||
Total revenues | $ | 13,209,958 | $ | 12,044,427 | 10 | % | ||||||
Revenues increased 10% in the first three quarters primarily from the marketing efforts and the increase in volume to our shipping coordination and label generation services.
Client services revenues decreased $10,512 or 41% to $15,020 in the first three quarters of 2024 compared to $25,532 in 2023. This decrease is a result of the declining number of brewery management subscription clients active during the quarters.
Shipping coordination and label generation services revenues increased $1,178,736 or 10% to $13,144,624 in the first three quarters of 2024 compared to $11,965,888 in 2023. The increase is attributable to increases in volume as a result of the additional sales and marketing efforts for the same period in 2023.
Merchant processing services is available to businesses that accept credit card processing online. This segment has had limited marketing in the first three quarters and has shown a decrease of $2,693 or 5% from $53,007 in 2023 to $50,314 for the same period of 2024. The Company continues to increase the product offerings in this segment of the business.
Gross Profit
Gross profit increased $468,245 or 17% in the first three quarters of 2024 to $3,209,760 compared to $2,741,514 in 2023. Gross margin increased from 23% in 2023 to 24% in 2024. The increase in gross margin and increase in gross profit are a result of ongoing pricing evaluations of our shipping label generation services to remain competitive in the market.
Operating Expenses
Total operating expenses in the first three quarters of 2024 were $3,472,894 compared to $3,294,028 for the same period of 2023, an increase of $178,866 or 5%. The increase is primarily due to the new personnel and consultants along with increased legal fees offset by the decrease in share-based compensation for same period of 2023.
Net Income (Loss)
The Company recorded a net income in the three quarters of 2024 of $936,335 compared to a net loss of $282,537 for the same period in 2023. The increase of $1,218,872 in net income is primarily a result of Other Income recorded in the amounts of $1,048,402 for the discount and $141,780 in interest due on the note receivable. The net income (loss) per share available to common shareholders for the first three quarters of 2024 and 2023 was $0.12 and $(0.04) per share, respectively.
Cash Flows from Operating Activities
A summarized reconciliation of the Company's net income (loss) to cash and cash equivalents used in operating activities for the nine months ended September 30, 2024 and 2023 is as follows:
2024 | 2023 | |||||||
Net income (loss) | $ | 936,335 | $ | (282,537 | ) | |||
Depreciation and amortization | 230,342 | 233,185 | ||||||
Amortization of operating lease right-of-use assets | 16,358 | 24,893 | ||||||
Share-based compensation | 44,928 | 556,014 | ||||||
Accretion of discount on note receivable | (1,048,402 | ) | (270,833 | ) | ||||
Interest and penalty income accrued on note receivable | (155,198 | ) | - | |||||
Changes in assets and liabilities | (167,099 | ) | (295,464 | ) | ||||
Net cash used in operating activities | $ | (142,736 | ) | $ | (34,742 | ) | ||
Working Capital and Liquidity
The Company had cash and cash equivalents of $1,089,520 at September 30, 2024, compared to $2,052,421 at December 31, 2023. The Company had net working capital of $3,803,179 at September 30, 2024, an improvement of $890,229 compared to $2,912,950 at December 31, 2023. The increase in net working capital is attributable to the accretion of discount and the interest and penalties accrued on the note receivable.
The Company may need an infusion of additional capital to fund anticipated operating costs over the next 12 months, however, management believes that the Company has adequate cash resources to fund operations. There can be no assurance that anticipated growth will occur, and that the Company will be successful in launching new products and services. If necessary, management will seek alternative sources of capital to support operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide the information for this Item 3.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's management, including the Chief Executive Officer/Chief Financial Officer of the Company, as its principal financial officer has evaluated the effectiveness of the Company's “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, the Chief Executive Officer/Chief Financial Officer has concluded that, as of September 30, 2024, 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, 2023.
Changes in Internal Control over Financial Reporting
The Company continues to evaluate the internal controls over financial reporting and is working toward implementation of corporate governance and operational process documentation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we may be a party to various legal proceedings arising in the ordinary course of our business. Our management is not aware of any litigation outstanding, threatened or pending as of the date hereof by or against us or our properties which we believe would be material to our financial condition or results of operations, except with respect to a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company's former President and 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. In July 2022, Mr. Pratt amended the complaint to dispute the proper authorization of a stock bonus that was awarded to the Company’s CEO in March 2021. On November 9, 2023 the Delaware courts dismissed Mr. Pratt’s claim relating to the board reduction from five to three. On December 5, 2024 the trial is scheduled to begin on the claims made in the Delaware courts.
ITEM 1A. | RISK FACTORS |
There are no material changes for the risk factors previously disclosed on Form 10-K for the year ended December 31, 2023.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
There were no issuances of unregistered securities for the three months ended September 30, 2024.
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 | |
31.1 | CEO and CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 |
32 | CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002 |
101.INS | Inline XBRL Instance Document (filed herewith) |
101.SCH | Inline XBRL Taxonomy Extension Schema (filed herewith) |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PAID, INC. | ||
By: | /s/ W. Austin Lewis IV | |
Date: November 14, 2024 | W. Austin Lewis, IV, CEO, CFO | |
LIST OF EXHIBITS
10.1 | Amendment to 2018 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on November 13, 2020) |
31.1 | CEO and CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 |
32 | CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002 |
101.INS | Inline XBRL Instance Document (filed herewith) |
101.SCH | Inline XBRL Taxonomy Extension Schema (filed herewith) |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) |
