| Organization and Significant Accounting Policies | PAID, Inc. (“PAID”,
the “Company”, “we”, “us”, or “our”) has developed AuctionInc, which is a suite
of online shipping and tax management tools assisting businesses with e-commerce storefronts, shipping solutions, tax calculation,
inventory management, and auction processing. The product has tools to assist with other aspects of the fulfillment process, but
the main purpose of the product is to provide accurate shipping and tax calculations and packaging algorithms that provide customers
with the best possible shipping and tax solutions. BeerRun Software (“BeerRun”)
is a brewery management and Alcohol and Tobacco Tax and Trade Bureau tax reporting software. Small craft brewers can utilize the
product to manage brewery schedules, inventory, packaging, sales and purchasing. Tax reporting can be processed with a single click
and is fully customizable by state or province. The software is designed to integrate with QuickBooks accounting platforms by using
our powerful sync engine. We currently offer two versions of the software BeerRun and BeerRun Light which excludes some of the
enhanced features of BeerRun without disrupting the core functionality of the software. Additional features include Brewpad and
Kegmaster and can be added on to the base product. Craft brewing is on the rise in the United States, and we feel that there is
a large potential to grow this portion of our business. ShipTime Canada Inc. (“ShipTime”)
has developed a SaaS-based application, which focuses on the small and medium business segments. This offering allows members to
quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. The application provides
customers with a choice of today’s leading couriers and freight carriers all with discounted pricing allowing members to
save on every shipment. ShipTime can also be integrated into on-line shopping carts to facilitate sales via e-commerce. We actively
sell directly to small and medium businesses and through long standing partnerships with selected associations throughout Canada. PaidPayments
provides commerce solutions to small - and medium-sized businesses by enabling them to sell their goods and services, accept payment,
and create repeat sales though an online payment processing solution. The Company has operated as a Payment Facilitator since 2019,
which enables our merchants to get the benefit of instant boarding and discounted rates. Our platform provides all aspects required
for payment processing, including merchant boarding, underwriting, fraud monitoring, settlement, funding to the sub-merchant, and
monthly reporting and statements. The Company controls all of these necessary aspects in the payment process and is then able to
supply a one-step boarding process for our partners and value-added resellers. This capability also provides cost advantages, rapid
response to market needs, simplified processes for boarding business and a seamless interface for our merchant customers. General Presentation and Basis of Consolidated
Financial Statements The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”), and with the rules and regulations of the Securities and Exchange Commission ("SEC")
regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for
complete financial statements and should be read in conjunction with the Company's audited consolidated financial statements and
notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020 that was filed on March 31, 2021. In the opinion of management,
the Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as its audited
consolidated financial statements, and these unaudited condensed consolidated financial statements include all adjustments, consisting
of normal recurring adjustments necessary for a fair presentation of the results of the interim periods presented. The operating
results for the interim periods presented are not necessarily indicative of the results expected for the full year 2021. Liquidity and Management’s
Plans For the three months ended
March 31, 2021, the Company reported cash and cash equivalents of $2,026,002 and cash flows from operations of $361,714 and net
working capital of $430,246. The Company has reported an operating loss of $179,333 for the period ended March 31, 2021 and has an
accumulated deficit of $69,805,523 at March 31, 2021. Management believes that the growth of the PAID platform of services in
addition to the continued profitability of ShipTime’s services will return a valuable impact on the Company’s success in
the future. The ongoing positive cash flows from operations is a significant indicator of our successful transition to the new
shipping and eCommerce services. In addition to the existing services provided, ShipTime will launch products in the United States
that are complementary to the current offerings. The Company also continues to seek alternate sources of capital to support future
operations. Although there can be no
assurances, the Company believes that the above management plans will be sufficient to meet the Company's working capital requirements
through the end of May 2022 and will have a positive impact on the Company for the foreseeable future. Principles of Consolidation The condensed consolidated
financial statements include the accounts of PAID, Inc. and its wholly owned subsidiaries, PAID Run, LLC and ShipTime Canada, Inc.
All intercompany accounts and transactions have been eliminated. 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, 2021 and December 31, 2020. Results of operations and cash flows
are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation
of assets and liabilities is included as a separate component of shareholders’ equity in accumulated other comprehensive
income. Geographic Concentrations The Company conducts business
in the U.S. and Canada. For customers headquartered in their respective countries, the Company derived approximately 99% of its
revenues from Canada and 1% from the U.S. during the three months ended March 31, 2021 compared to 95% from Canada and 5% from
the U.S. during the three months ended March 31, 2020. At March 31, 2021, the Company
maintained 100% of its property and equipment net of accumulated depreciation in Canada. Right of Use Assets A right-of-use asset represents
a lessee’s right to use a leased asset for the term of the lease. Our right-of-use assets generally consist of an operating
lease for a building. Right-of-use assets are
measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial
direct costs, such as commissions paid to obtain a lease. Right-of-use assets are
subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and
any initial direct costs not yet expensed. 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, 2021. There can be no assurance, however,
that market conditions will not change or demand for the Company’s services will continue, which could result in impairment
of long-lived assets in the future. Revenue Recognition The Company generates revenue
principally from fees for coordinating shipping services, sales of shipping calculator subscriptions, brewery management software
subscriptions, merchant processing services and client services. Nature of Goods and Services For label generation service
revenues, the Company recognizes revenue when a customer has successfully prepared a shipping label and scheduled a pickup. Customers
with pickups after the end of the reporting period are recorded as contract liabilities on the condensed consolidated balance sheets.
The service is offered to consumers via an online registration and allows users to create a shipping label using a credit card
on their account (all customers must have a valid credit card on file to process shipments on the ShipTime platform). For shipping calculator
revenues and brewery management software revenues, the Company recognizes subscription revenue on a monthly basis. Shipping
calculator customers’ renewal dates are based on their date of installation and registration of the shipping calculator line
of products. The timing of the revenue recognition and cash collection may vary within a given quarter and the deposits for future
services are recorded as contract liabilities on the condensed consolidated balance sheets. Brewery management software subscribers
are billed monthly at the first of the month. All payments are made via credit card for the following month. Merchant processing revenue
consists of fees a seller pays us to process their payment transactions and is recognized upon authorization of a transaction.
Revenue is recognized net of estimated refunds, which are reversals of transactions initiated by sellers. We act as the merchant
of record for our sellers, which puts us in their shoes with respect to card networks and puts the risk for refunds and chargebacks
on us. The gross transaction fees collected from sellers is recognized as revenue as we are the primary obligor to the seller and
are responsible for processing the payment, have latitude in establishing pricing with respect to the sellers and other terms of
service, have sole discretion in selecting the third party to perform the settlement, and assume the credit risk for the transaction
processed. Revenue Disaggregation The Company operates in
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 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. Accordingly, the
Company determined that its contracts with customers do not include extended payment terms or a significant financing component. Variable Consideration In some cases, the nature
of the Company’s contracts may give rise to variable consideration, including rebates and cancellations or other similar
items that generally decrease the transaction price. Variable consideration is
estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the
extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated
with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated
amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical,
current and forecasted) that is reasonably available. Revenues are recorded net
of variable consideration, such as rebates, refunds, and cancellations. Warranties The Company’s products
and services are provided on an “as is” basis and no warranties are included in the contracts with customers. Also,
the Company does not offer separately priced extended warranty or product maintenance contracts. Contract Assets Typically, the Company has
already collected revenue from the customer at the time it has satisfied its performance obligation. Accordingly, the Company has
only a small balance of accounts receivable, totaling $244,393 and $171,785 as of March 31, 2021 and December 31, 2020, respectively.
Generally, the Company does not have material amounts of contract assets since revenue is recognized as control of goods is transferred
or as services are performed. Contract Liabilities (Deferred Revenue) Contract liabilities are
recorded when cash payments are received in advance of the Company’s performance (including rebates). Contract liabilities
were $10,258 and $9,046 at March 31, 2021 and December 31, 2020, respectively. During the three months ended March 31, 2021, the
Company recognized revenues of $9,046, related to contract liabilities outstanding at the beginning of the year. Earnings (Loss) Per Common Share Basic earnings (loss) per
share represent income (loss) available to common shareholders divided by the weighted-average number of common shares outstanding
during the period. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance.
The potential common shares that may be issued by the Company relate to outstanding stock options and 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, 2021 and 2020, there were approximately 36,000 and 48,000, respectively, of potentially dilutive shares excluded from
the diluted loss per share calculation, as their effect would be anti-dilutive. The Company computes its
income (loss) applicable to common shareholders by adding/subtracting dividends on preferred stock, including undeclared or unpaid
dividends if cumulative, and any deemed dividends or discounts on redeemed preferred stock from its reported net income (loss)
and reports the same on the face of the condensed consolidated statements of operations and comprehensive loss. 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, 2021, the Company operated in the following five reportable segments:
a. Client services;
b. Shipping calculator services;
c. Brewery management software;
d. Merchant processing services;
e. Shipping coordination and label generation services; and
f. Corporate operations The Company evaluates performance
and allocates resources based upon operating income. The accounting policies of the reportable segments are the same as those described
in this summary of significant accounting policies. The Company’s chief operating decision maker is the Chief Executive Officer/Chief
Financial Officer. The following table compares total revenue for
the periods indicated.
Three Months Ended
March 31, 2021 March 31, 2020
Client services $ 1,283 $ 99
Shipping calculator services 5,863 8,322
Brewery management software 19,200 37,106
Merchant processing services 12,525 92,910
Shipping coordination and label generation services 3,473,902 2,536,885
Total revenues $ 3,512,773 $ 2,675,322 The following table compares total loss from
operations for the periods indicated.
Three Months Ended
March 31, 2021 March 31, 2020
Client services $ 969 $ 99
Shipping calculator services 2,011 4,751
Brewery management software 11,632 (4,882 )
Merchant processing services 4,622 36,496
Shipping coordination and label generation services (81,827 ) (45,798 )
Corporate operations (116,740 ) (103,408 )
Total loss from operations $ (179,333 ) $ (112,742 ) Subsequent Events The Company has evaluated
subsequent events through the filing date of this Form 10-Q, and has determined that no subsequent events have occurred that would
require recognition in the condensed consolidated financial statements or disclosure in the notes thereto, other than as disclosed
herein. Recent Accounting Pronouncements In December 2019,
the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes” to identify,
evaluate, and improve areas of GAAP for which costs and complexity can be reduced while maintaining or improving the usefulness
of the information provided to users of financial statements. The amendments for ASU No. 2019-12 simplify the accounting for income
taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application
of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company’s adoption of
ASU No. 2019-12 in January 2021 had no impact on its consolidated financial position, results of operations, cash flows or disclosures. |
