Forward Looking Statements
This Annual Report on Form 10-K 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 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 Annual 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."
For example, the Company's ability to maintain a 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 sites, 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.
Overview
13 Critical Accounting Policies
Our significant accounting policies are more fully described in Note 3 to our consolidated financial statements. However, certain of our accounting policies 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. Our critical accounting policies include:
Revenue Recognition
The Company generates revenue principally from the sales related to the label generation services, shipping calculator services, brewery management software subscriptions, and client services.
The Company recognizes revenues in accordance with the FASB ASC Topic 606. Accordingly, the Company recognizes revenues when the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
For label generation service revenues the Company recognizes revenue when a
customer has successfully prepared a shipping label and had a pickup. 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. ShipTime, in
partnership with the
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 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 month following.
Foreign Currency
The currencies of ShipTime, the Company's international subsidiary, are in
Canadian dollars. Foreign currency denominated assets and liabilities are
translated into
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. 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 additional impairment of long-lived assets in the future.
14 Share- Based Compensation
The Board of Directors has on occasion voted to award stock options or preferred
shares to employees or directors. The price at which the option shares may be
purchased is based on the fair market value of the shares on the date of the
agreement. Each recipient's option agreement may differ; the vesting terms may
vary from fully vested immediately to one-third immediately, one-third vesting
in 18 months and the final one-third vesting in 36 months from the date of the
grant or one-third immediately, one-third vesting on
Leases
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.
We have an operating lease for our corporate offices in
We report operating leased assets, as well as operating lease current and noncurrent obligations on our balance sheets for the right to use the building in our business. Our finance leases represent furniture and office equipment; we report the furniture and equipment, as well as finance lease current and noncurrent obligations on our balance sheet.
Generally, interest rates are stated in our leases for equipment. When no interest rate is stated in a lease, however, we review the interest rates implicit in our recent finance leases to estimate our incremental borrowing rate. We determine the rate implicit in a lease by using the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.
Results of Operations
Comparison of the years ended
The following discussion compares the Company's results of operations for the
year ended
15 Revenues
The following table compares total revenue for the periods indicated.
Years ended December 31, 2019 2018 % Change Client services$19,395 $16,079 21% Shipping calculator services 148,035 176,159 (16)% Brewery management software 193,150 273,294 (29)% Merchant services 2,011 - 100%
Shipping coordination and label generation services 10,185,704 8,787,918 16% Total revenues
$10,548,295 $9,253,450 14%
Revenues increased 14% in 2019 primarily from the continued growth of the shipping coordination and label generation services.
Client services revenues increased
Shipping calculator service revenues decreased
Brewery management software revenues decreased
Shipping coordination and label generation service revenues increased
Gross Profit
Gross profit increased
Operating Expenses
Total operating expenses in 2019 were
Other Income/Expense, net
Net other income in 2019 was
Net Income (Loss)
The Company reported net income in 2019 of
Inflation
The Company believes that inflation has not had a material effect on its results of operations.
16 Operating Cash Flows
A summarized reconciliation of the Company's net loss to cash provided by
operating activities for the years ended
2019 2018 Net income (loss)$282,011 $(11,531,526) Loss on impairment of goodwill - 10,354,172 Depreciation and amortization 490,250 836,292
Amortization of operating lease right of use assets 22,850 - Share-based compensation
407,974 599,799 Other income from stock price guarantee (880,553) - Deferred income taxes (73,208) (84,075) Loss on disposal of property and equipment - 1,930 Unrealized loss on stock price guarantee (3,688) 3,527 Changes in current assets and liabilities (230,103) 137,100 Net cash provided by operating activities$15,533 $317,219
Working Capital and Liquidity
The Company had cash and cash equivalents of
The Company may need an infusion of additional capital to fund anticipated operating costs over the next 12 months. Management believes that the Company may have adequate cash resources to fund operations during the next 12 months. In addition, management continues to explore opportunities and has organized additional resources to monetize its patents. 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 continues to seek alternative sources of capital to support operations.
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