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DELAWARE
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73-1479833
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(I.R.S.
Employer Identification No.)
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Large accelerated filer
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☐
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Accelerated
Filer
|
☐
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Non-accelerated
filer
|
☐
|
Smaller reporting company
Emerging
Growth Company
|
☒
☐
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Title
of each class
|
Trading
Symbol
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Name of
each exchange on which registered
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None
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None
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None
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1
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2
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3
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4
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5-15
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16
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19
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19
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20
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20
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20
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20
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20
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20
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20
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March 31,
2019
(Unaudited)
|
December
31,
2018
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$645,985
|
$632,331
|
Accounts
receivable, net
|
147,009
|
87,718
|
Prepaid expenses
and other current assets
|
91,654
|
110,028
|
Total current
assets
|
884,648
|
830,077
|
|
|
|
Property and
equipment, net
|
93,065
|
90,843
|
Other intangible
assets, net
|
4,278,083
|
4,290,773
|
Operating lease
right-of-use assets
|
81,773
|
-
|
Total
assets
|
$5,337,569
|
$5,211,693
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$869,090
|
$758,365
|
Notes
payable
|
-
|
14,954
|
Finance leases -
current portion
|
9,776
|
8,580
|
Accrued
expenses
|
1,317,860
|
1,268,633
|
Contract
liabilities
|
100,784
|
144,221
|
Operating lease
obligations – current portion
|
15,665
|
-
|
Total current
liabilities
|
2,313,175
|
2,194,753
|
Long term
liabilities:
|
|
|
Finance leases -
net of current portion
|
9,263
|
12,116
|
Operating lease
obligations – net of current portion
|
66,282
|
-
|
Deferred tax
liability, net
|
1,112,332
|
1,088,306
|
Total
liabilities
|
3,501,052
|
3,295,175
|
Commitments and
contingencies
|
|
|
Shareholders'
equity:
|
|
|
Series A Preferred
stock, $0.001 par value, 5,000,000 shares authorized; 3,784,712
shares issued and outstanding at March 31, 2019 and December 31,
2018; liquidation value of $11,843,287 and $11,800,316 at March 31,
2019 and December 31, 2018, respectively
|
3,785
|
3,785
|
Common stock,
$0.001 par value, 25,000,000 shares authorized; 1,648,657 shares
issued and 1,614,817 shares outstanding at March 31, 2019 and
December 31, 2018
|
1,649
|
1,649
|
Additional paid-in
capital
|
68,810,711
|
68,751,871
|
Accumulated other
comprehensive income
|
417,327
|
344,182
|
Accumulated
deficit
|
(67,339,108)
|
(67,127,122)
|
Common stock in
treasury, at cost; 33,840 shares at March 31, 2019 and December 31,
2018
|
(57,847)
|
(57,847)
|
Total shareholders'
equity
|
1,836,517
|
1,916,518
|
|
|
|
Total liabilities
and shareholders' equity
|
$5,337,569
|
$5,211,693
|
|
Three Months
Ended
|
|
|
March 31,
2019
|
March 31,
2018
|
Net
revenues
|
$2,289,020
|
$1,997,936
|
Cost of
revenues:
|
|
|
Cost
of revenues
|
1,699,918
|
1,406,847
|
Amortization
of acquired technology
|
-
|
74,622
|
Total
cost of revenues
|
1,699,918
|
1,481,469
|
Gross
profit
|
589,102
|
516,467
|
|
|
|
Operating
expenses:
|
|
|
Salaries and
related
|
328,848
|
203,277
|
General and
administrative
|
291,909
|
333,250
|
Stock-based
compensation
|
58,840
|
356,354
|
Amortization of
other acquired intangible assets
|
120,127
|
139,690
|
Total operating
expenses
|
799,724
|
1,032,571
|
Loss from
operations
|
(210,622)
|
(516,104)
|
|
|
|
Other income
(expense):
|
|
|
Interest expense,
net
|
-
|
(964)
|
Other
income
|
5,550
|
-
|
Unrealized (loss)
gain on stock price guarantee
|
(6,414)
|
8,498
|
Total other
(expense) income, net
|
(864)
|
7,534
|
|
|
|
Loss before
provision for income taxes
|
(211,486)
|
(508,570)
|
Provision for
income taxes
|
500
|
800
|
Net
loss
|
(211,986)
|
(509,370)
|
Preferred share
redemption discount
|
-
|
63,244
|
Preferred
dividends
|
(42,971)
|
(41,903)
|
Net loss available
to common shareholders
|
$(254,957)
|
$(488,029)
|
|
|
|
Net loss per share
– basic and diluted
|
$(0.16)
|
$(0.30)
|
Weighted average
number of common shares outstanding - basic and
diluted
|
1,614,817
|
1,630,580
|
Condensed
consolidated statements of comprehensive loss
|
|
|
Net
loss
|
$(211,986)
|
$(509,370)
|
Other comprehensive
income (loss):
|
|
|
Foreign currency
translation adjustments
|
73,145
|
(372,157)
|
Comprehensive
loss
|
$(138,841)
|
$(881,527)
|
|
2019
|
2018
|
Cash flows from
operating activities:
|
|
|
Net
loss
|
$(211,986)
|
$(509,370)
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
Depreciation
and amortization
|
125,562
|
220,288
|
Amortization
of operating lease right-of-use assets
|
3,748
|
-
|
Share-based
compensation
|
58,840
|
356,354
|
Unrealized
loss (gain) on stock price guarantee
|
6,414
|
(8,498)
|
Changes in
assets and liabilities:
|
|
|
Accounts
receivable
|
(57,987)
|
6,772
|
Prepaid
expenses and other current assets
|
20,636
|
(19,260)
|
Accounts
payable
|
96,122
|
11,894
|
Accrued
expenses
|
40,690
|
(3,188)
|
Contract
liabilities
|
(46,700)
|
(9,566)
|
Operating
lease obligations
|
(3,574)
|
-
|
Net cash
provided by operating activities
|
31,765
|
45,426
|
|
|
|
Cash flows from
investing activities:
|
|
|
Purchase of
property and equipment
|
(5,424)
|
(18,756)
|
Net cash
used in investing activities
|
(5,424)
|
(18,756)
|
|
|
|
Cash flows from
financing activities:
|
|
|
Payments on
finance leases
|
(2,121)
|
(2,024)
|
Payments on
notes payable
|
(15,346)
|
(76,565)
|
Payments on
related party note payable
|
-
|
(29,965)
|
Net cash
used in financing activities
|
(17,467)
|
(108,554)
|
Effect of exchange
rate changes on cash, cash equivalents and funds in
trust
|
4,780
|
(17,747)
|
|
|
|
Net change in cash,
cash equivalents and funds in trust
|
13,654
|
(99,631)
|
|
|
|
Cash, cash
equivalents and funds in trust, beginning of period
|
632,331
|
738,690
|
|
|
|
Cash, cash
equivalents and funds in trust, end of period
|
$645,985
|
$639,059
|
Reconciliation of
cash, cash equivalents and funds held in trust at end of
period:
|
|
|
Cash
and cash equivalents
|
$645,985
|
$449,482
|
Funds
held in trust
|
-
|
189,577
|
Cash, cash
equivalents and funds held in trust at end of period
|
$645,985
|
$639,059
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
Cash paid during
the period for:
|
|
|
Income
taxes
|
$500
|
$800
|
Interest
|
$-
|
$964
|
SUPPLEMENTAL
DISCLOSURES OF NON-CASH ITEMS
|
|
|
Repurchase
of preferred and common stock with note payable
|
$-
|
$51,744
|
|
|
|
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
Accumulated Other
Comprehensive
|
Accumulated
|
Treasury
Stock
|
|
|||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income
|
Deficit
|
Shares
|
Amount
|
Total
|
Balance, January 1,
2018
|
3,724,547
|
$3,725
|
$1,648,657
|
$1,649
|
$68,574,974
|
$975,877
|
$(55,845,766)
|
$(14,535)
|
$(26,529)
|
$13,683,930
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of
common and preferred shares
|
(33,899)
|
(34)
|
-
|
-
|
(107,184)
|
-
|
63,244
|
(4,905)
|
(7,986)
|
(51,960)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
(372,157)
|
-
|
-
|
-
|
(372,157)
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
-
|
-
|
-
|
-
|
356,354
|
-
|
-
|
-
|
-
|
356,354
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(509,370)
|
-
|
-
|
(509,370)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31,
2018
|
$3,690,648
|
$3,691
|
$1,648,657
|
$1,649
|
$
68,824,144 |
$603,720
|
$(56,291,892)
|
$(19,440)
|
$(34,515)
|
$13,106,797
|
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid in
|
Accumulated
Other Comprehensive
|
Accumulated
|
Treasury
Stock
|
|
|||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income
|
Deficit
|
Shares
|
Amount
|
Total
|
Balance,
January 1, 2019
|
$3,784,712
|
$3,785
|
$1,648,657
|
$1,649
|
$68,751,871
|
$344,182
|
$(67,127,122)
|
$(33,840)
|
$(57,847)
|
$1,916,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
$73,145
|
-
|
-
|
-
|
73,145
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
-
|
-
|
-
|
-
|
58,840
|
-
|
-
|
-
|
-
|
58,840
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(211,986)
|
-
|
-
|
(211,986)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2019
|
$3,784,712
|
$3,785
|
$1,648,657
|
$1,649
|
$68,810,711
|
$417,327 $
|
$(67,339,108)
|
$(33,840)
|
$(57,847)
|
1,836,517
|
a.
|
Client
services
|
b.
|
Shipping
calculator services
|
c.
|
Brewery
management software
|
d.
|
Shipping
coordination and label generation services
|
|
Three Months
Ended
|
|
|
March 31,
2019
|
March 31,
2018
|
Client
services
|
$3,042
|
$5,383
|
Shipping calculator
services
|
34,729
|
48,126
|
Brewery management
software
|
56,069
|
72,063
|
Shipping
coordination and label generation services
|
2,195,180
|
1,872,364
|
Total
revenues
|
$2,289,020
|
$1,997,936
|
|
Three Months
Ended
|
|
|
March 31,
2019
|
March 31,
2018
|
Client
services$
|
$2,354
|
$4,188
|
Shipping calculator
services
|
(152,585)
|
(435,259)
|
Brewery management
software
|
20,607
|
(229)
|
Shipping
coordination and label generation services
|
(80,998)
|
(84,805)
|
Total loss from
operations
|
$(210,622)
|
$(516,104)
|
|
March 31,
2019
(unaudited)
|
December
31,
2018
|
Payroll and related
costs
|
$172,461
|
$169,691
|
Professional and
consulting fees
|
12,585
|
2,100
|
Royalties
|
51,838
|
51,838
|
Stock price
guarantee
|
890,654
|
884,241
|
Other
|
190,322
|
160,763
|
Total
|
$1,317,860
|
$1,268,633
|
|
March 31,
2019
|
December 31,
2018
|
Patents
|
$16,000
|
$16,000
|
Software
|
83,750
|
83,750
|
Trade
Name
|
802,368
|
785,038
|
Technology
|
512,428
|
501,360
|
Client list /
relationship
|
4,717,886
|
4,620,599
|
Accumulated
amortization
|
(1,854,349)
|
(1,715,974)
|
|
$4,278,083
|
$4,290,773
|
|
Three Months
Ended
March 31,
2019
|
Operating lease
cost
|
$5,653
|
|
|
Finance lease
cost:
|
|
Amortization of
leased assets
|
$2,583
|
Interest on lease
liabilities
|
501
|
Total finance lease
cost
|
$3,084
|
|
Three Months
Ended
March 31,
2019
|
Cash paid for
amounts included in leases:
|
|
Operating cash
flows from operating leases
|
$5,477
|
Operating cash
flows from finance leases
|
$501
|
Financing cash
flows from finance leases
|
$2,121
|
|
|
Right-of-use assets
obtained in exchange for lease obligations:
|
|
Operating
leases
|
$-
|
Finance
leases
|
$-
|
|
March 31,
2019
|
Operating
leases:
|
|
Operating lease
right-of-use assets
|
$81,773
|
Current portion of
operating lease obligations
|
$15,665
|
Operating lease
obligations, net of current portion
|
66,282
|
Total operating
lease liabilities
|
$81,947
|
|
|
Finance
leases:
|
|
Property and
equipment, at cost
|
$51,655
|
Accumulated
depreciation
|
(28,410)
|
Property and
equipment, net
|
$23,245
|
|
|
Current portion of
finance lease obligations
|
$9,776
|
Finance lease
obligations, net of current portion
|
9,263
|
Total finance lease
liabilities
|
$19,039
|
|
Three Months Ended
March 31, 2019
|
Weighted Average
Remaining Lease Term
|
|
Operating
lease
|
4.4
years
|
Finance
leases
|
2.0
years
|
|
|
Weighted Average
Discount Rate
|
|
Operating
lease
|
9.0%
|
Finance
leases
|
9.8%
|
Years ending
December 31,
|
Total
|
2019 (remaining
months)
|
$16,759
|
2020
|
22,608
|
2021
|
22,608
|
2022
|
22,608
|
2023
|
15,072
|
Total lease
liabilities
|
$99,654
|
Less
amount representing interest
|
(17,707)
|
Total
|
81,947
|
Less
current portion
|
(15,665)
|
|
$66,282
|
Year ending
December 31,
|
Total
|
2019 (remaining
months)
|
$7,835
|
2020
|
10,444
|
2021
|
2,793
|
Total minimum
payments required:
|
21,072
|
Less amount
representing interest:
|
(2,033)
|
Present value of
net minimum lease payments:
|
19,039
|
Less current
portion
|
(9,776)
|
|
$9,263
|
Year Ended December
31,
|
Capital
|
Operating
|
2019
|
$10,222
|
$29,779
|
2020
|
10,222
|
38,202
|
2021
|
2,736
|
38,202
|
2022
|
-
|
38,202
|
2023
|
-
|
25,477
|
Total future
minimum lease payments
|
23,180
|
$169,862
|
Less amount
representing interest
|
(2,484)
|
|
Present value of
net minimum lease payment
|
20,696
|
|
Less current
portion
|
(8,580)
|
|
|
$12,116
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
Three
months Ended March 31,
|
||
|
2019
|
2018
|
%
Change
|
Client
services
|
$3,042
|
$5,383
|
(43)%
|
Brewery
management software
|
56,069
|
72,063
|
(22)%
|
Shipping
coordination and label generation services
|
2,195,180
|
1,872,364
|
17%
|
Shipping
calculator services
|
34,729
|
48,126
|
(28)%
|
Total
revenues
|
$2,289,020
|
1,997,936
|
15%
|
|
2019
|
2018
|
Net
loss
|
$(211,986)
|
$(509,370)
|
Depreciation and
amortization
|
125,562
|
220,288
|
Amortization of
operating lease right-of-use assets
|
3,748
|
-
|
Share-based
compensation
|
58,840
|
356,354
|
Unrealized loss
(gain) on stock price guarantee
|
6,414
|
(8,498)
|
Changes in current
assets and liabilities
|
49,187
|
(13,348)
|
Net cash provided
by operating activities
|
$31,765
|
45,426
|
|
CEO Certification
required under Section 302 of Sarbanes-Oxley Act of
2002
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CFO Certification
required under Section 302 of Sarbanes-Oxley Act of
2002
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CEO and CFO
Certification required under Section 906 of Sarbanes-Oxley Act of
2002
|
|
|
|
|
101.INS
|
|
XBRL Instance
Document (filed herewith)
|
101.SCH
|
|
XBRL Taxonomy
Extension Schema (filed herewith)
|
101.CAL
|
|
XBRL Taxonomy
Extension Calculation Linkbase (filed herewith)
|
101.DEF
|
|
XBRL Taxonomy
Extension Definition Linkbase (filed herewith)
|
101.LAB
|
|
XBRL Taxonomy
Extension Label Linkbase (filed
herewith)
|
101.PRE
|
|
XBRL Taxonomy
Extension Presentation Linkbase (filed herewith)
|
|
|
PAID,
INC.
|
|
|
|
|
|
|
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|
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|
By:
|
/s/ Allan
Pratt
|
|
|
|
Allan
Pratt, Chief Executive Officer
|
|
|
By:
|
/s/ W. Austin
Lewis IV
|
|
Date:
May 15, 2019
|
|
W.
Austin Lewis, IV, Chief Financial Officer
|
|
CEO Certification
required under Section 302 of Sarbanes-Oxley Act of
2002
|
|
|
CFO Certification
required under Section 302 of Sarbanes-Oxley Act of
2002
|
|
|
CEO and CFO
Certification required under Section 906 of Sarbanes-Oxley Act of
2002
|
|
|
|
|
101.INS
|
|
XBRL Instance
Document (filed herewith)
|
101.SCH
|
|
XBRL Taxonomy
Extension Schema (filed herewith)
|
101.CAL
|
|
XBRL Taxonomy
Extension Calculation Linkbase (filed herewith)
|
101.DEF
|
|
XBRL Taxonomy
Extension Definition Linkbase (filed herewith)
|
101.LAB
|
|
XBRL Taxonomy
Extension Label Linkbase (filed
herewith)
|
101.PRE
|
|
XBRL Taxonomy
Extension Presentation Linkbase (filed herewith)
|
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 15, 2019 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | PAID INC | |
Entity Central Index Key | 0001017655 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Trading Symbol | PAYD | |
Entity Common Stock, Shares Outstanding | 1,614,817 |
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Shareholders' equity: | ||
Preferred Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 3,784,712 | 3,784,712 |
Preferred stock, shares outstanding | 3,784,712 | 3,784,712 |
Liquidation value | $ 11,843,287 | $ 11,800,316 |
Common stock, par value (in dollars per share) | $ .001 | $ .001 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 1,648,657 | 1,614,817 |
Common stock, shares outstanding | 1,648,657 | 1,614,817 |
Treasury stock | 33,840 | 33,840 |
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-In Capital |
Accumulated Income |
Accumulated Deficit |
Treasury Stock |
Total |
---|---|---|---|---|---|---|---|
Beginning Balance, Amount at Dec. 31, 2017 | $ 3,725 | $ 1,649 | $ 68,574,974 | $ 975,877 | $ (55,845,766) | $ (26,529) | $ 13,683,930 |
Beginning Balance, Shares at Dec. 31, 2017 | 3,724,547 | 1,648,657 | (14,535) | ||||
Repurchase of common and preferred shares, shares | (33,899) | (4,905) | |||||
Repurchase of common and preferred shares, amount | $ (34) | (107,184) | 63,244 | $ (7,986) | (51,960) | ||
Share-based compensation expense | 356,354 | 356,354 | |||||
Foreign currency translation adjustment | (372,157) | (372,157) | |||||
Net loss | (509,370) | ||||||
Ending Balance, Amount at Mar. 31, 2018 | $ 3,691 | $ 1,649 | 68,824,144 | 603,720 | (56,291,892) | $ (34,515) | 13,106,797 |
Ending Balance, Shares at Mar. 31, 2018 | 3,690,648 | 1,648,657 | (19,440) | ||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 3,785 | $ 1,649 | 68,751,871 | 344,182 | (67,127,122) | $ (57,847) | 1,916,518 |
Beginning Balance, Shares at Dec. 31, 2018 | 3,784,712 | 1,648,657 | (33,840) | ||||
Share-based compensation expense | 58,840 | 58,840 | |||||
Foreign currency translation adjustment | 73,145 | 73,145 | |||||
Net loss | (211,986) | (211,986) | |||||
Ending Balance, Amount at Mar. 31, 2019 | $ 3,785 | $ 1,649 | $ 68,810,711 | $ 417,327 | $ (67,339,108) | $ (57,847) | $ 1,836,517 |
Ending Balance, Shares at Mar. 31, 2019 | 3,784,712 | 1,648,657 | (33,840) |
Organization and Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 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. The light version 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. During 2018, the software was upgraded to create a better user experience.
ShipTime Canada Inc. 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.
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, 2018 that was filed on April 1, 2019.
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 three months ended March 31,2019 are not necessarily indicative of the results expected for the full year 2019.
Going Concern and Management's Plan
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has continued to incur losses, although it has taken significant steps to reduce them. For the three months ended March 31, 2019, the Company reported a net loss of $211,986. The Company has an accumulated deficit of $67,339,108 and has a working capital deficit of $(1,428,527) as of March 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management feels that the addition of the new PAID platform of services in addition to the continued growth of ShipTime’s services will return a valuable impact on the Company’s success in the near future. The ongoing positive cash flow from operations is a significant indicator of our successful transition to the new shipping services. In addition to the existing services provided, ShipTime will launch products in the United States that are complementary to the current offerings.
Although there can be no assurances, the Company believes that the above management plan will be sufficient to meet the Company's working capital requirements and will have a positive impact on the Company for 2019 and future years.
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 currencies of ShipTime, the Company’s international subsidiary, are in Canadian dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at March 31, 2019 and December 31, 2018. 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 96% of its revenues from Canada and 4% from the U.S. during the three months ended March 31, 2019, compared to 94% from Canada and 6% from the U.S. during the three months ended March 31, 2018.
At March 31, 2019, 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, 2019 and 2018. 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, 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). ShipTime, in partnership with the Canadian Federation of Independent Businesses (“CFIB”), offered a cash rebate to its customers. Revenues were recognized net of the cash rebates, which were held in “funds held in trust” account in the accompanying condensed consolidated balance sheets. The cash rebates are available for twelve months for future use. Rebate revenue is recognized when the rebate is used.
Beginning in 2018, customers are offered airline miles as a reward in lieu of a cash rebate. As a result, the CFIB allowed the Company to release the funds held in trust for unused customer rebates back to cash and cash equivalents. As the Company transitioned from cash rebates to airline mile rewards, customers were allowed to convert their existing cash rebate balances to airline miles at the rate of 10 miles per $1 of rebates. For the quarter ended March 31, 2019, the Company recognized $5,550 of other income related to these conversions as the cost of the exchanged airline miles was less than the value of the cash rebates exchanged. Unused airline miles are recorded in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.
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 month following.
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). 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.
The Company has no shipping and handling activities related to contracts with customers.
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 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 $147,009 and $87,718 as of March 31, 2019 and December 31, 2018, 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 $100,784 and $144,221 at March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019, the Company recognized revenues of $43,437 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, 2019 and 2018, there were approximately 52,000 and 62,000, respectively, dilutive shares that were excluded from the diluted earnings (loss) per share as their effect would have been antidilutive for the periods then ended.
The Company computes its 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 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 four reportable segments are managed separately based on fundamental differences in their operations. At March 31, 2019, the Company operated in the following four reportable segments:
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 makers are the Chief Executive Officer and Chief Financial Officer.
The following table compares total revenues for the periods indicated.
The following table compares total loss from operations for the periods indicated.
Reclassifications
Certain amounts were reclassified in the accompanying condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2018 in order to conform to the current period presentation.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases”, which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 with early adoption permitted.
The Company adopted the new lease standard (ASC 842) on January 1, 2019. We used the modified retrospective approach, which allowed us to make our transition adjustments at January 1, 2019.
We currently have a two finance leases for office furniture and equipment. We maintain a lease inventory for those leased assets; which are currently reported on our consolidated balance sheets and we continue to report them on our consolidated balance sheet under the new standard. We have reported one material operating lease on our consolidated balance sheets beginning January 1, 2019, which resulted in recording operating lease right-of-use assets and operating lease obligations of approximately $86,000. We determined that no adjustment to equity was necessary related to implementation of the new lease standard.
The Company elected certain practical expedients and as permitted did not reassess whether existing contracts are or contain leases, the lease classification and initial direct costs for any existing leases. As part of practical expedients selected the Company also used hindsight in determining lease terms. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. Leases with an initial term of twelve months or less are not recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term.
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Accrued Expenses |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | Accrued expenses are comprised of the following:
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Acquisition and Intangible Assets |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and 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 March 31, 2019 and December 31, 2018, intangible assets consisted of the following:
Amortization expense of intangible assets for the three months ended March 31, 2019 and 2018 was $120,127 and $214,312, respectively.
Goodwill
Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the underlying net tangible and intangible assets acquired. During the year ended 2018, the Company determined that the value of goodwill was impaired and recorded a full loss on the impairment of $10,354,172.
|
Commitments and Contingencies |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Notes Payable
In 2017, the Company entered into two notes payable with a shareholder to repurchase common and preferred shares. The first note was for a period of one year for CAD $120,000 with payment terms of twelve equal installments of CAD $10,328 at an interest rate of 6%. The second note was an interest-free seven-month note for CAD $70,992 with payment terms of one payment of CAD $10,000 followed by six equal installments of CAD $10,165. Both of these notes were paid in full in 2018.
In January 2018, the Company entered into a note payable with a shareholder to repurchase common and preferred shares. The note was an interest-free, eight-month note for CAD $66,708 with payment terms of one payment of CAD $10,000 followed by eight equal installments of CAD $8,101. This note was paid in full in the third quarter of 2018. In April 2018, the Company entered into a note payable with a shareholder to repurchase common and preferred shares. The note was an interest-free, fifteen-month note for CAD $72,500. The Company made payments on this note in the amount of CAD $31,726. The balance of CAD $40,774 on this note was offset in the third quarter of 2018 against a note receivable to the same party (see below). In August 2018, the Company entered into a note payable with a shareholder to repurchase common and preferred shares. The note is an interest-free, six-month note for CAD $122,400 with payment terms of six equal installments of CAD $20,400. This note was paid in full in the first quarter of 2019.
Related Party Note Payable
In June 2017, the Company agreed to make monthly payments of $5,000 CAD to related parties for seven months followed by monthly payments of $15,000 CAD with one final payment in March 2018 at which point the note was paid in full.
Notes Receivable
In April 2018, the Company entered into an agreement with a third party to develop software to assist with the growth of the e-commerce platform. The agreement contained a loan to a third party in the amount of $144,000 to be loaned by the Company in eighteen installments of which CAD $40,744 was actually loaned during 2018.
During the third quarter of 2018, the Company cancelled the agreement and called the CAD $40,774 note with the third party developer. As a result, the balance of the note receivable was offset against the CAD $72,500 note payable for the repurchase of common and preferred shares issued to the same party (see above), and no balance on the note receivable was due.
Stock Price Guarantee
In connection with the Company’s advance royalties with a client, the Company guaranteed that shares of common stock would sell for at least $60.00 per share as adjusted for the reverse stock split. If the shares are not at the required $60.00 per share when they are sold, the Company has the option of issuing additional shares at their fair value or making cash payments for the difference between the guaranteed price per share and the fair value of the stock. As of March 31, 2019 and December 31, 2018, the maximum value of the stock price guarantee was $890,654 and $884,241, respectively, as the Company’s stock price was below $60.00 per share at March 31, 2019 and December 31, 2018, although some or all of the stock may already be sold and no longer subject to a guaranty and any required payment would be disputed by the Company. For the three months ended March 31, 2019 and 2018, the Company recorded an unrealized gain (loss) on stock price guarantee of ($6,414) and $8,498, respectively.
Legal Matters
In the normal course of business, the Company periodically becomes involved in litigation. As of March 31, 2019, in the opinion of management, the Company had no pending litigation that would have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.
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 leases, the Company has agreed to indemnify its lessors 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 agreements. 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.
|
Shareholder's Equity |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Equity [Abstract] | |
Shareholder's Equity | Preferred Stock
On December 19, 2016, the Company filed an amendment to its Certificate of Incorporation to authorize the issuance of 20,000,000 shares of blank-check preferred stock at $0.001 par value, of which 3,825,000 shares have been reserved for future issuance. 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 holders have no voting rights and have an aggregate liquidation value of $11,843,287 at March 31, 2019. The Series A Preferred Stock also 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 an equal number of shares of common stock for the month immediately preceding the coupon payment date, which is made annually. For the three month period ended March 31, 2019 and March 31, 2018, the estimated portion of the annual coupon is $42,971 and $41,903, respectively, which has been added to the liquidation value of the preferred stock. The Series A Preferred Stock have no voting or conversion rights. If purchased, redeemed, or otherwise acquired (other than conversion), the preferred stock may be reissued.
Common Stock
The Company has authorized and reserved for future issuance 480,880 shares of common stock and 3,347,304 shares of preferred stock with respect to the remaining exchangeable shares to be issued as a result of the ShipTime acquisition by the Company in 2016.
Share Repurchase
In January 2018, the Company entered into an agreement to repurchase 109 exchangeable shares of ShipTime common stock. The total shares exchanged in this transaction were 4,905 common shares and 33,899 preferred shares of the Company. The allocated discount on the repurchase of the preferred stock was $1.87 per share and has been recorded in accumulated deficit, and was added to the net loss available to common shareholders. The repurchase of the common shares was recorded at an allocated cost of $1.59 per share. In April 2018, the Company entered in a second agreement with a shareholder to purchase 120 exchangeable shares of ShipTime common stock. The total shares exchanged in this transaction were 5,400 common shares and 37,320 preferred shares of the Company. The discount on the repurchase of preferred stock was $1.90 per share and has been recorded in accumulated deficit, and was added to the net loss available to common shareholders. The repurchase of the common shares was recorded at an allocated cost of $1.58 per share. In August 2018, the Company entered in an additional agreement with a shareholder to purchase 200 exchangeable shares of ShipTime common stock. The total shares exchanged in this transaction were 9,000 common shares and 62,200 preferred shares of the Company. The discount on the repurchase of preferred stock was $1.87 per share and has been recorded in accumulated deficit, and was added to the net loss available to common shareholders. The repurchase of the common shares was recorded at an allocated cost of $1.58 per share.
Share-based Incentive Plans
The Company has a 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. The Company granted 15,000 stock options to one employee during the quarter ended March 31, 2019. The options have vesting period of one-third immediately, one-third in 18 months, and one-third in 36 months from the date of the grant, they expire if not exercised within ten years from grant date, and the exercise price is $2.92 per share. For the quarter ended March 31, 2019, the Company recorded $58,840 of stock compensation expense related to the vesting of applicable options granted in 2019 and prior years.
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | We have an operating lease for our corporate offices in Canada and finance leases for furniture and equipment. Our leases have remaining lease terms of twenty-one months to fifty months, and our primary operating leases include options to extend the leases for four years. Future renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.
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.
The components of lease expense were as follows
Supplemental cash flow information related to leases was as follows:
Supplemental balance sheet information related to leases was as follows:
Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019
A summary of future minimum payments under non-cancellable operating lease commitment as of March 31, 2019 is as follows:
The following is a schedule of minimum future rentals on the non-cancelable finance leases as of March 31, 2019
Disclosures related to periods prior to adoption of ASC 842
Minimum future lease payments under lease obligations as of December 31, 2018 are as follows:
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
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.
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Organization and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2018 that was filed on April 1, 2019.
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 three months ended March 31,2019 are not necessarily indicative of the results expected for the full year 2019. |
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Going Concern And Management Plan | The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has continued to incur losses, although it has taken significant steps to reduce them. For the three months ended March 31, 2019, the Company reported a net loss of $211,986. The Company has an accumulated deficit of $67,339,108 and has a working capital deficit of $(1,428,527) as of March 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management feels that the addition of the new PAID platform of services in addition to the continued growth of ShipTime’s services will return a valuable impact on the Company’s success in the near future. The ongoing positive cash flow from operations is a significant indicator of our successful transition to the new shipping services. In addition to the existing services provided, ShipTime will launch products in the United States that are complementary to the current offerings.
Although there can be no assurances, the Company believes that the above management plan will be sufficient to meet the Company's working capital requirements and will have a positive impact on the Company for 2019 and future years. |
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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.
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Foreign Currency | The currencies of ShipTime, the Company’s international subsidiary, are in Canadian dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at March 31, 2019 and December 31, 2018. 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.
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Geographic Concentrations | The Company conducts business in the U.S. and Canada. For customers headquartered in their respective countries, the Company derived approximately 96% of its revenues from Canada and 4% from the U.S. during the three months ended March 31, 2019, compared to 94% from Canada and 6% from the U.S. during the three months ended March 31, 2018.
At March 31, 2019, the Company maintained 100% of its property and equipment net of accumulated depreciation in Canada.
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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.
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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, 2019 and 2018. 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.
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Revenue Recognition | The Company generates revenue principally from fees for coordinating shipping services, sales of shipping calculator subscriptions, brewery management software subscriptions, 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). ShipTime, in partnership with the Canadian Federation of Independent Businesses (“CFIB”), offered a cash rebate to its customers. Revenues were recognized net of the cash rebates, which were held in “funds held in trust” account in the accompanying condensed consolidated balance sheets. The cash rebates are available for twelve months for future use. Rebate revenue is recognized when the rebate is used.
Beginning in 2018, customers are offered airline miles as a reward in lieu of a cash rebate. As a result, the CFIB allowed the Company to release the funds held in trust for unused customer rebates back to cash and cash equivalents. As the Company transitioned from cash rebates to airline mile rewards, customers were allowed to convert their existing cash rebate balances to airline miles at the rate of 10 miles per $1 of rebates. For the quarter ended March 31, 2019, the Company recognized $5,550 of other income related to these conversions as the cost of the exchanged airline miles was less than the value of the cash rebates exchanged. Unused airline miles are recorded in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.
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 month following.
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). 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.
The Company has no shipping and handling activities related to contracts with customers.
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 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 $147,009 and $87,718 as of March 31, 2019 and December 31, 2018, 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 $100,784 and $144,221 at March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019, the Company recognized revenues of $43,437 related to contract liabilities outstanding at the beginning of the year.
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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, 2019 and 2018, there were approximately 52,000 and 62,000, respectively, dilutive shares that were excluded from the diluted earnings (loss) per share as their effect would have been antidilutive for the periods then ended.
The Company computes its 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 loss and reports the same on the face of the condensed consolidated statements of operations and comprehensive loss.
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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 March 31, 2019, the Company operated in the following four reportable segments:
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 makers are the Chief Executive Officer and Chief Financial Officer.
The following table compares total revenues for the periods indicated.
The following table compares total loss from operations for the periods indicated.
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Reclassification | Certain amounts were reclassified in the accompanying condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2018 in order to conform to the current period presentation.
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Recent Accounting Pronouncements | In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases”, which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 with early adoption permitted.
The Company adopted the new lease standard (ASC 842) on January 1, 2019. We used the modified retrospective approach, which allowed us to make our transition adjustments at January 1, 2019.
We currently have a two finance leases for office furniture and equipment. We maintain a lease inventory for those leased assets; which are currently reported on our consolidated balance sheets and we continue to report them on our consolidated balance sheet under the new standard. We have reported one material operating lease on our consolidated balance sheets beginning January 1, 2019, which resulted in recording operating lease right-of-use assets and operating lease obligations of approximately $86,000. We determined that no adjustment to equity was necessary related to implementation of the new lease standard.
The Company elected certain practical expedients and as permitted did not reassess whether existing contracts are or contain leases, the lease classification and initial direct costs for any existing leases. As part of practical expedients selected the Company also used hindsight in determining lease terms. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. Leases with an initial term of twelve months or less are not recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term.
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Organization and Significant Accounting Policies (Tables) |
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Condensed Income Statement | The following table compares total revenues for the periods indicated.
The following table compares total loss from operations for the periods indicated.
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Accrued Expenses (Tables) |
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Schedule of Accrued Expenses |
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Acquisitions and Intangible Assets (Tables) |
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Schedule of intangible assets |
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Leases (Tables) |
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Lease cost |
The components of lease expense were as follows
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Supplemental cash flow information related to leases |
Supplemental cash flow information related to leases was as follows:
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Supplemental balance sheet information related to leases |
Supplemental balance sheet information related to leases was as follows:
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Minimum future rentals |
A summary of future minimum payments under non-cancellable operating lease commitment as of March 31, 2019 is as follows:
The following is a schedule of minimum future rentals on the non-cancelable finance leases as of March 31, 2019
Disclosures related to periods prior to adoption of ASC 842
Minimum future lease payments under lease obligations as of December 31, 2018 are as follows:
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Organization and Significant Accounting Policies (Details) - USD ($) |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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Accounting Policies [Line Items] | ||
Total revenue | $ 2,289,020 | $ 1,997,936 |
Total loss from operations | (210,622) | (516,104) |
Client Services [Member] | ||
Accounting Policies [Line Items] | ||
Total revenue | 3,042 | 5,383 |
Total loss from operations | 2,354 | 4,188 |
Shipping Calculator services [Member] | ||
Accounting Policies [Line Items] | ||
Total revenue | 34,729 | 48,126 |
Total loss from operations | (152,585) | (435,259) |
Brewery Management Software [Member] | ||
Accounting Policies [Line Items] | ||
Total revenue | 56,069 | 72,063 |
Total loss from operations | 20,607 | (229) |
Shipping coordination and label generation services [Member] | ||
Accounting Policies [Line Items] | ||
Total revenue | 2,195,180 | 1,872,364 |
Total loss from operations | $ (80,998) | $ (84,805) |
Organization and Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Organization And Significant Accounting Policies Details Narrative | |||
Net loss | $ (211,986) | $ (509,370) | |
Accumulated deficit | (67,339,108) | $ (67,127,122) | |
Cash used in operations | 13,654 | $ (99,631) | |
Contract assets | 147,009 | ||
Contract Liabilities | $ 100,784 | $ 144,221 |
Accrued Expenses (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Payables and Accruals [Abstract] | ||
Payroll and related costs | $ 172,461 | $ 169,691 |
Professional and consulting fees | 12,585 | 2,100 |
Royalties | 51,838 | 51,838 |
Stock price guarantee | 890,654 | 884,241 |
Other | 190,322 | 160,763 |
Total | $ 1,317,860 | $ 1,268,633 |
Acquisitions and Intangible Assets (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Intangible Assets Details | ||
Patents | $ 16,000 | $ 16,000 |
Software | 83,750 | 83,750 |
Trade Name | 802,368 | 785,038 |
Technology | 512,428 | 501,360 |
Client list / relationship | 4,717,886 | 4,620,599 |
Accumulated amortization | (1,854,349) | (1,715,974) |
Intangible asset, net | $ 4,278,083 | $ 4,290,773 |
Acquisitions and Intangible Assets (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Intangible Assets Details Narrative | ||
Amortization of Intangible Assets | $ 120,127 | $ 214,312 |
Commitments and Contingencies (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Note Payable | $ 0 | $ 14,954 | |
Stock price guarantee | 890,654 | $ 884,241 | |
Unrealized loss on stock price guarantee | $ (6,414) | $ 8,498 |
Shareholder's Equity (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Shareholders Deficit Details Narrative | ||
Share-based compensation expense | $ 58,840 | $ 356,354 |
Authorized and reserved stock for future issuance | 480,880 | |
Authorized and reserved preferred stock for future issuance | 3,347,304 |
Leases (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases Deails Abstract | |
Operating lease cost | $ 5,653 |
Finance lease cost: | |
Amortization of leased assets | 2,583 |
Interest on lease liabilities | 501 |
Total finance lease cost | $ 3,084 |
Leases (Details 1) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Cash paid for amounts included in leases: | |
Operating cash flows from operating leases | $ (5,477) |
Operating cash flows from finance leases | 501 |
Financing cash flows from finance leases | (2,121) |
Right-of-use assets obtained in exchange for lease obligations: | |
Operating leases | 0 |
Finance leases | $ 0 |
Leases (Details 2) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating leases | ||
Operating lease right-of-use assets | $ 81,773 | $ 0 |
Current portion of operating lease obligations | 15,665 | 0 |
Operating lease oligations, net of current portion | 66,282 | 0 |
Finance leases | ||
Property and equipment, at cost | 51,655 | |
Accumulated depreciation | (28,410) | |
Property and equipment, net | 23,245 | |
Current portion of finance lease obligations | 9,776 | 8,580 |
Finance lease obligations, net of current portion | 9,263 | 12,116 |
Total finance lease liabilities | $ 19,039 | $ 20,696 |
Leases (Details 3) |
Mar. 31, 2019 |
---|---|
Leases Details 2Abstract | |
Weighted average remaining lease term operating leases | 4 years 4 months 24 days |
Weighted average remaining lease term finance leases | 2 years |
Weighted average discount rate operating leases | 9.00% |
Weighted average discount rate finance leases | 9.80% |
Leases (Details 4) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating lease future minimum payments | ||
2019 | $ 22,418 | $ 29,779 |
2020 | 22,607 | 38,202 |
2021 | 22,607 | 38,202 |
2022 | 22,607 | 38,202 |
2023 | 9,420 | 25,477 |
Total lease liabilities | 99,656 | 169,862 |
Finance lease future minimum payments | ||
2019 (remaining months) | 7,835 | 10,222 |
2020 | 10,444 | 10,222 |
2021 | 2,793 | 2,736 |
Total minimum payments required: | 21,072 | 23,180 |
Less amount representing interest: | (2,033) | (2,484) |
Present value of net minimum lease payments: | 19,039 | 20,696 |
Less current portion | 9,776 | 8,580 |
Finance lease liabilities, noncurrent | $ 9,263 | $ 12,116 |
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