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.
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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.
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 June 30, 2020 and 2019.
The following discussion compares the Company's results of operations for the
three months ended June 30, 2020 with those for the three months ended June 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 June 30,
2020 2019 % Change
Client services $1,306 $13,076 (90)%
Brewery management software 30,707 51,218 (40)%
Shipping coordination and label generation services 2,998,999 2,609,968 15%
Merchant processing services
180,389 - 100%
Shipping calculator services 7,471 41,235 (82)%
Total revenues $3,218,872 $2,715,497 19%
Revenues increased 19% in the second quarter primarily from the growth of our
shipping coordination and label generation services and the addition of the
merchant processing services new segment.
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Client service revenues decreased $11,770 or 90% to $1,306 in the second quarter
of 2020 compared to $13,076 in 2019. This decrease is a result of the absence of
movie posters auctions held during the second quarter.
Brewery management software revenues decreased $20,511 to $30,707 in 2020 from
$51,218 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 $389,031
or 15% to $2,998,999 in the second quarter of 2020 compared to $2,609,968 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.
Shipping calculator services revenue decreased $33,764 or 82% to $7,471 in the
second quarter of 2020 compared to $41,235 in 2019. The decrease was primarily
due to the retirement of a portion of the legacy software sold by this segment
of the business.
Gross Profit
Gross profit decreased $4,262 or 1% in the second quarter of 2020 to $735,117
compared to $739,379 in 2019. Gross margin decreased to 23% for the second
quarter of 2020 compared to 27% in the second quarter of 2019. The decrease in
both gross margin and gross profit is a result of price reductions of our
shipping label generation services in order to remain competitive in the market.
Operating Expenses
Total operating expenses in the second quarter 2020 were $642,903 compared to
$766,733 in the second quarter of 2019, a decrease of $123,830 or 16%. The
decrease is primarily due to the reduction in personnel and the decreased travel
related expenses as a result of COVID-19.
Other Income/Expense, net
Net other income in the second quarter of 2020 was $13,195 compared to $4,567 in
the same period of 2019, a change of $8,628. This change is primarily a result
of a one-time recoupment of bad debt that had been previously written off.
Net Income (Loss)
The Company realized a net income in the second quarter of 2020 of $105,409
compared to a net loss of ($23,247) for the same period in 2019. The net income
(loss) available to common shareholders for the second quarter of 2020 and 2019
was $0.02 and ($0.04) per share, respectively.
Comparison of the six months ended June 30, 2020 and 2019.
The following discussion compares the Company's results of operations for the
six months ended June 30, 2020 with those for the six months ended June 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.
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Revenues
The following table compares total revenue for the periods indicated.
Six months Ended June 30,
2020 2019 % Change
Client services $1,405 $16,118 (91)%
Brewery management software 67,813 107,287 (37)%
Shipping coordination and label generation services 5,535,884 4,805,148 15%
Merchant processing services
273,299 - 100%
Shipping calculator services 15,793 75,964 (79)%
Total revenues $5,894,194 $5,004,517 18%
Revenues increased 18% in the first two quarters primarily from the growth of
our shipping coordination and label generation services and the addition of the
merchant processing services new segment.
Client service revenues decreased $14,713 or 91% to $1,405 in the first two
quarters of 2020 compared to $16,118 in 2019. This decrease is a result of the
absence of movie posters auctions held during this period.
Brewery management software revenues decreased $39,474 to $67,813 in the first
two quarters of 2020 from $107,287 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 $730,736
or 15% to $5,535,884 in the second two quarters of 2020 compared to $4,805,148
in 2019. The increase is attributable to the shift in online shipping as a
result of the impact of the COVID-19 virus.
Shipping calculator services revenue decreased $60,171 or 79% to $15,793 in the
first two quarters of 2020 compared to $75,964 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 $57,782 or 4% in the first two quarters of 2020 to
$1,386,263 compared to $1,328,481 in 2019. Gross margin decreased to 24% for the
first two quarters of 2020 compared to 27% during the same period of 2020. 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.
Operating Expenses
Total operating expenses in the first two quarters of 2020 were $1,406,791
compared to $1,566,457 in the same period of 2019, a decrease of $159,666 or
10%. 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.
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Other Income/Expense, net
Net other income in the first two quarters of 2020 was $13,195 compared to
$3,703 in the same period of 2019, a change of $9,492. This is primarily
attributable to the stock price guarantee in addition to the recoupment of a bad
debt that was previously written off.
Net Income (Loss)
The Company realized a net loss in the first two quarters of 2020 of ($7,833)
compared to a net loss of ($235,233) for the same period in 2019. The net income
(loss) available to common shareholders for the second two quarters of 2020 and
2019 was ($0.01) and ($0.20) per share, respectively.
Cash Flows from Operating Activities
A summarized reconciliation of the Company's net loss to cash and cash
equivalents provided by operating activities for the six months ended June 30,
2020 and 2019 is as follows:
2020 2019
Net loss $(7,833) $(235,233)
Depreciation and amortization 240,939 246,207
Amortization of operating lease right-of-use assets 13,702 7,553
Share-based compensation
(18,011) 57,740
Provision for bad debts 20,125 -
Unrealized loss (gain) on stock price guarantee - 4,329
Gain on sale of property and equipment
(733) -
Changes in assets and liabilities 253,036 61,725
Net cash provided by operating activities $501,225 $142,321
Working Capital and Liquidity
The Company had cash and cash equivalents of $930,460 at June 30, 2020, compared
to $475,881 at December 31, 2019. The Company had a negative working capital of
$194,929 at June 30 2020, an improvement of $202,962 compared to $397,891 at
December 31, 2019. The decrease in working capital deficit is attributable to
the 18% 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 decreased consulting and travel.
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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