Forward Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934) regarding PAID, Inc. (the "Company") and
its business, financial condition, results of operations and prospects. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates", "could", "may", "should", "will", "would", and similar expressions
or variations of such words are intended to identify forward-looking statements
in this report. Additionally, statements concerning future matters such as the
development of new services, technology enhancements, purchase of equipment,
credit arrangements, possible changes in legislation and other statements
regarding matters that are not historical are forward-looking statements.
Although forward-looking statements in this quarterly report reflect the good
faith judgment of the Company's management, such statements can only be based on
facts and factors currently known by the Company. Consequently, forward-looking
statements are inherently subject to risks, contingencies and uncertainties, and
actual results and outcomes may differ materially from results and outcomes
discussed in this report. Although the Company believes that its plans,
intentions and expectations reflected in these forward-looking statements are
reasonable, the Company can give no assurance that its plans, intentions or
expectations will be achieved. For a more complete discussion of these risk
factors, see Item 1A, "Risk Factors", in the Company's Form 10-K for the fiscal
year ended December 31, 2019 that was filed on March 30, 2020.
For example, the Company's ability to maintain positive cash flow and to become
profitable may be adversely affected as a result of a number of factors that
could thwart its efforts. These factors include the Company's inability to
successfully implement the Company's business and revenue model, higher costs
than anticipated, the Company's inability to sell its products and services to a
sufficient number of customers, the introduction of competing products or
services by others, the Company's failure to attract sufficient interest in, and
traffic to, its site, the Company's inability to complete development of its
products, the failure of the Company's operating systems, and the Company's
inability to increase its revenues as rapidly as anticipated. If the Company is
not profitable in the future, it will not be able to continue its business
operations.
Except as required by applicable laws, we do not intend to publish updates or
revisions of any forward-looking statements we make to reflect new information,
future events or otherwise. Readers are urged to review carefully and to
consider the various disclosures made by the Company in this Quarterly Report,
which attempts to advise interested parties of the risks and factors that may
affect our business, financial condition, results of operations and prospects.
Overview
AuctionInc Software. AuctionInc is a suite of online shipping and tax management
tools assisting businesses with e-commerce storefronts, shipping solutions, tax
calculation, inventory management, and auction processing. The application was
designed to focus on real-time carrier calculated shipping rates and tax
calculations. The product does have tools to assist with other aspects of the
fulfillment process, but the main purpose of the product is to provide accurate
shipping and tax calculations and packaging algorithms that provide customers
with the best possible shipping and tax solutions.
BeerRun Software. BeerRun Software is a brewery management and Alcohol and
Tobacco Tax and Trade Bureau tax reporting software. Small craft brewers can
utilize the product to manage brewery schedules, inventory, packaging, sales and
purchasing. Tax reporting can be processed with a single click and is fully
customizable by state or province. The software is designed to integrate with
QuickBooks accounting platforms by using our powerful sync engine. We currently
offer two versions of the software BeerRun and BeerRun Light which excludes some
of the enhanced features of BeerRun without disrupting the core functionality of
the software. Additional features include Brewpad and Kegmaster and can be added
on to the base product. Craft brewing continues to grow in the United States and
we feel that there is considerable potential to grow this portion of our
business.
ShipTime Canada Inc. ShipTime's platform provides its members with the ability
to quote, process, track and dispatch shipments while getting preferred rates on
packages and skidded (LTL) freight shipments throughout North America and around
the world. In addition to these features, ShipTime also provides what it refers
to as "Heroic Multilingual Customer Support." In this capacity, ShipTime acts as
an advocate on behalf of its clients in resolving matters concerning orders and
shipping. With an increasing focus and service offering for e-commerce
merchants, which include online shopping carts, inventory management, payment
services, client prospecting and retention software, ShipTime can help merchants
worldwide grow and scale their businesses. ShipTime generates monthly recurring
revenue through transactions and "software as a service" (SAAS) offerings. It
currently serves in excess of 50,000 members in North America and has plans to
expand its services into Europe and then worldwide.
PaidPaymentsprovides commerce solutions small - and medium-sized businesses by
enabling them to sell their goods and services, accept payment, and create
repeat sales though an online payment processing solution. The Company has
operated as a Payment Facilitator since 2019, which enables our merchants to get
the benefit of instant boarding and discounted rates. Our platform provides all
aspects required for payment processing, including merchant boarding,
underwriting, fraud monitoring, settlement, funding to the sub-merchant, and
monthly reporting and statements. Paid controls all of these necessary aspects
in the payment process and is then able to supply a one-step boarding process
for our partners and value-added resellers. This capability also provides cost
advantages, rapid response to market needs, simplified processes for boarding
business and a seamless interface for our merchant customers.
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Significant Accounting Policies
Our significant accounting policies are more fully described in Note 3 to our
consolidated financial statements for the years ended December 31, 2019 and 2018
included in our Form 10-K filed on March 30, 2020, as updated and amended in
Note 1 of the Notes to Condensed Consolidated Financial Statements included
herein. However, certain of our accounting policies, most notably with respect
to revenue recognition, are particularly important to the portrayal of our
financial position and results of operations and require the application of
significant judgment by our management; as a result, they are subject to an
inherent degree of uncertainty. In applying these policies, our management makes
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosures. Those estimates and judgments are
based upon our historical experience, the terms of existing contracts, our
observance of trends in the industry, information that we obtain from our
customers and outside sources, and on various other assumptions that we believe
to be reasonable and appropriate under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
Results of Operations
Comparison of the three months ended September 30, 2020 and 2019.
The following discussion compares the Company's results of operations for the
three months ended September 30, 2020 with those for the three months ended
September 30, 2019. The Company's condensed consolidated financial statements
and notes thereto included elsewhere in this quarterly report contain detailed
information that should be referred to in conjunction with the following
discussion.
Revenues
The following table compares total revenue for the periods indicated.
Three months Ended September 30,
2020 2019 % Change
Client services $1,878 $1,073 75%
Brewery management software 25,600 49,107 (48)%
Shipping coordination and label generation services 3,269,804 2,634,330 24%
Merchant processing services
105,713 - 100%
Shipping calculator services 6,321 41,923 (85)%
Total revenues $3,409,316 $2,726,433 25%
Revenues increased 25% in the third quarter primarily from the impact of the
COVID-19 virus on the growth of our shipping coordination and label generation
services and the addition of the merchant processing services new segment.
Client service revenues increased $805 or 75% to $1,878 in the third quarter of
2020 compared to $1,073 in 2019. This increase is a result of the increase in
movie posters auctions held during the third quarter.
Brewery management software revenues decreased $23,507 to $25,600 in 2020 from
$49,107 in 2019. The decrease in revenues is due to cancellations of several
clients and an increase in competition.
Shipping coordination and label generation service revenues increased $635,474
or 24% to $3,269,804 in the third quarter of 2020 compared to $2,634,330 in
2019. The increase is attributable to the shift in online shipping as a result
of the impact of the COVID-19 virus in addition to the change in pricing to
retain customers in a competitive environment.
Merchant processing service is a new segment for the Company and is available to
businesses that accept credit card processing online. This segment launched in
early 2020 and has contributed 3% of the total revenue for the third quarter of
2020.
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Shipping calculator services revenue decreased $35,602 or 85% to $6,321 in the
third quarter of 2020 compared to $41,923 in 2019. The decrease was primarily
due to the retirement of a large portion of the legacy software sold by this
segment of the business.
Gross Profit
Gross profit increased $107,549 or 14% in the third quarter of 2020 to $860,483
compared to $752,934 in 2019. Gross margin decreased to 25% for the third
quarter of 2020 compared to 28% in the third quarter of 2019. The decrease in
gross margin is a result of price reductions of our shipping label generation
services in order to remain competitive in the market in addition to a reduction
in merchant processing revenues which have a higher profit margin. The increase
in gross profit is due to a combination of the new merchant processing segment
of the business along with the impact of increased shipping label generation
services as a result of the growth of ecommerce shopping due to the COVID-19
virus.
Operating Expenses
Total operating expenses in the third quarter 2020 were $984,211 compared to
$1,063,937 in the third quarter of 2019, a decrease of $79,726 or 7%. The
decrease is primarily due to the reduction in personnel and the decreased travel
related expenses as a result of COVID-19.
Other Income, net
Net other income in the third quarter of 2020 was $6 compared to $892,637 in the
same period of 2019, a change of $892,631. This change is a result of a one-time
write off of the guarantee liability of $880,553 in the third quarter of 2019.
Net Income (Loss)
The Company realized a net loss in the third quarter of 2020 of ($123,722)
compared to a net income of $581,634 for the same period in 2019. The net (loss)
income available to common shareholders for the third quarter of 2020 and 2019
was ($0.02) and $0.33 per share, respectively.
Comparison of the nine months ended September 30, 2020 and 2019.
The following discussion compares the Company's results of operations for the
nine months ended September 30, 2020 with those for the nine months ended
September 30, 2019. The Company's condensed consolidated financial statements
and notes thereto included elsewhere in this quarterly report contain detailed
information that should be referred to in conjunction with the following
discussion.
Revenues
The following table compares total revenue for the periods indicated.
Nine months Ended September 30,
2020 2019 % Change
Client services $3,283 $17,191 (81)%
Brewery management software 93,413 156,394 (40)%
Shipping coordination and label generation services 8,805,688 7,439,478 18%
Merchant processing services
379,012 - 100%
Shipping calculator services 22,114 117,887 (81)%
Total revenues $9,303,510 $7,730,950 20%
Revenues increased 20% in the first three quarters primarily from the growth of
our shipping coordination and label generation services and the addition of the
new merchant processing services segment.
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Client service revenues decreased $13,908 or 81% to $3,283 in the first three
quarters of 2020 compared to $17,191 in 2019. This decrease is a result of the
reduction of movie posters auctions held during this period.
Brewery management software revenues decreased $62,981 to $93,413 in the first
three quarters of 2020 from $156,394 in the same period of 2019. The decrease in
revenues is due to cancellations of several clients and an increase in
competition.
Shipping coordination and label generation service revenues increased $1,366,210
or 18% to $8,805,688 in the three quarters of 2020 compared to $7,439,478 in
2019. The increase is attributable to the shift in online shipping as a result
of the impact of the COVID-19 virus.
Merchant processing service is a new segment for the Company launched in early
2020. This segment has contributed 4% of the total revenue for 2020. These
services also have a higher gross margin and gross profit and will continue to
be a source of growth for the Company.
Shipping calculator services revenue decreased $95,773 or 81% to $22,114 in the
first three quarters of 2020 compared to $117,887 in the same period of 2019.
The decrease was due to the retirement of a portion of the legacy software sold
by this segment of the business.
Gross Profit
Gross profit increased $165,331 or 8% in the first three quarters of 2020 to
$2,246,746 compared to $2,081,415 in 2019. Gross margin decreased to 24% for the
first three quarters of 2020 compared to 27% during the same period of 2019. The
growth in gross profit is a result of the increased revenue due to the shift of
online shipping as a result of the COVID-19 virus. The decrease in gross margin
is due to the decline in merchant processing, shipping calculator and brewery
management revenues which carry a higher gross margin than the other segments of
the business.
Operating Expenses
Total operating expenses in the first three quarters of 2020 were $2,391,002
compared to $2,630,394 in the same period of 2019, a decrease of $239,392 or 9%.
The decrease is primarily due to the declining need for consulting services in
addition to the reduced general and administrative expenses as a result of the
temporary office closure and travel ban as it relates to the COVID-19 virus.
Other Income, net
Net other income in the first three quarters of 2020 was $13,201 compared to
$896,340 in the same period of 2019, a change of $883,139. This is primarily
attributable to the one-time write off of the guarantee liability of $880,553.
Net Income (Loss)
The Company realized a net loss in the first three quarters of 2020 of
($131,555) compared to a net income of $346,401 for the same period in 2019. The
net (loss) income available to common shareholders for the three quarters of
2020 and 2019 was ($0.03) and $0.13 per share, respectively.
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Cash Flows from Operating Activities
A summarized reconciliation of the Company's net loss to cash and cash
equivalents provided by operating activities for the nine months ended September
30, 2020 and 2019 is as follows:
2020 2019
Net (loss) income $(131,555) $346,401
Depreciation and amortization 364,273 368,183
Amortization of operating lease right-of-use assets 20,957 16,020
Share-based compensation
311,129 361,698
Provision for bad debts 20,125 -
Unrealized loss (gain) on stock price guarantee - (3,688)
Other income from stock price guarantee - (880,553)
Gain on sale of property and equipment (739) -
Changes in assets and liabilities 251,769 (125,441)
Net cash provided by operating activities $835,959 $82,620
Working Capital and Liquidity
The Company had cash and cash equivalents of $1,317,374 at September 30, 2020,
compared to $475,881 at December 31, 2019. The Company had working capital of
$167,271 at September 30 2020, an improvement of $565,162 compared to a negative
working capital of $397,891 at December 31, 2019. The increase in working
capital is attributable to the 20% growth of the Company's revenues for 2020.
The increase in cash and cash equivalents is due to the additional growth of the
business along with the savings related to the decrease in consulting and travel
expense.
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.
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