Organization and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

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, 2019 that was filed on March 30, 2020.

In the opinion of management, the Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as its audited consolidated financial statements, and these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2020.

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 generally incurred losses, although it has taken significant steps to reduce them. For the six months ended June 30, 2020, the Company reported a net income of $32,167. The Company has an accumulated deficit of $67,361,070 and has a working capital deficit of $154,929 as of June 30, 2020. These factors raise doubt about the Company’s ability to continue as a going concern.

Management believes that the continued growth of the new PAID platform of services in addition to the continued profitability of ShipTime’s services will return a valuable impact on the Company’s success in the near future. The ongoing positive cash flows and net income from operations are 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 2020 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 currency of ShipTime, the Company’s international subsidiary, is in Canadian dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at June 30, 2020 and December 31, 2019. 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 93% and 94% of its revenues from Canada and 7% and 6% from the U.S. during the three and six months ended June 30, 2020, respectively, compared to 96% from Canada and 4% from the U.S. during the three and six months ended June 30, 2019.

At June 30, 2020, 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 and six months ended June 30, 2020 and 2019. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

Revenue Recognition

The Company generates revenue principally from fees for coordinating shipping services, sales of shipping calculator subscriptions, brewery management software subscriptions, merchant processing services and client services.

Nature of Goods and Services

For label generation service revenues, the Company recognizes revenue when a customer has successfully prepared a shipping label and scheduled a pickup. Customers with pickups after the end of the reporting period are recorded as contract liabilities on the condensed consolidated balance sheets. The service is offered to consumers via an online registration and allows users to create a shipping label using a credit card on their account (all customers must have a valid credit card on file to process shipments on the ShipTime platform).

For shipping calculator revenues and brewery management software revenues, the Company recognizes subscription revenue on a monthly basis. Shipping calculator customers’ renewal dates are based on their date of installation and registration of the shipping calculator line of products. The timing of the revenue recognition and cash collection may vary within a given quarter and the deposits for future services are recorded as contract liabilities on the condensed consolidated balance sheets. Brewery management software subscribers are billed monthly at the first of the month. All payments are made via credit card for the following month.

For payment processing services, the Company recognizes revenue based on daily transactions by our partners and merchants. Customers process credit card payments for sales and remit fees based on the number of transactions and percent of the processed amounts. The merchant bank deposits the funds to the customer net of fees. The remainder of the fees withheld is disbursed to the Company on a daily basis, net of interchange and other transactional charges.

Revenue Disaggregation

The Company operates in five reportable segments (see below).

Performance Obligations

At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when the performance obligation has been met, which is when the customer has successfully prepared a shipping label and scheduled a pickup for shipping coordination and label generation services. The Company considers control to have transferred at that time because the Company has a present right to payment at that time, the Company has provided the shipping label, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the shipping label.

For arrangements under which the Company provides a subscription for shipping calculator services and brewery management software, the Company satisfies its performance obligations over the life of the subscription, typically twelve months or less.

Customers of PaidPayments receive a merchant identification number which allows them to process credit card transactions. Once the transaction is approved, the funds are disbursed in an overnight feed and the Company has met its performance obligation.

The Company has no shipping and handling activities related to contracts with customers.

Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to government authorities.

Significant Payment Terms

Pursuant to the Company’s contracts with its customers, amounts are collected up front primarily through credit/debit card transactions. Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.

Variable Consideration

In some cases, the nature of the Company’s contracts may give rise to variable consideration, including rebates and cancellations or other similar items that generally decrease the transaction price.

Variable consideration is estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available.

Revenues are recorded net of variable consideration, such as rebates 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 $183,934 and $131,561 as of June 30, 2020 and December 31, 2019, 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 $6,890 and $5,338 at June 30, 2020 and December 31, 2019, respectively. During the three and six months ended June 30, 2020, the Company recognized revenues of $0 and $5,338, respectively 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 June 30, 2020 and 2019 and the six months ended June 30, 2020 and 2019, there were approximately 0 and 50,000, and 0 and 51,000, 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 income (loss) applicable to common shareholders by adding/subtracting dividends on preferred stock, including undeclared or unpaid dividends if cumulative, and any deemed dividends or discounts on redeemed preferred stock from its reported net income (loss) and reports the same on the face of the condensed consolidated statements of operations and comprehensive income (loss).

The following is a reconciliation of  the numerators and denominators of the basic earnings (loss) per common share and diluted earnings (loss) per common share computation for the three and six months ended June 30, 2020 and 2019.

	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019
Numerator:
Net income (loss) available to common shareholders		145,409		(71,168	)
Denominator:
Basic weighted-average shares outstanding		5,977,878		1,614,817
Effect of diluted securities		45,303		—
Diluted weighted-average shares outstanding		6,023,181		1,614,817
Basic earnings (loss) per common share		0.02		(0.04	)
Diluted earnings (loss) per common share		0.02		(0.04	)

	Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
Numerator:
Net income (loss) available to common shareholders		3,635		(326,125	)
Denominator:
Basic weighted-average shares outstanding		4,612,563		1,614,817
Effect of diluted securities		46,475		—
Diluted weighted-average shares outstanding		4,659,038		1,614,817
Basic earnings (loss) per common share		—		(0.20	)
Diluted earnings (loss) per common share		—		(0.20	)

Segment Reporting

The Company reports information about segments of its business in its annual consolidated financial statements and reports selected segment information in its quarterly reports issued to shareholders. The Company also reports on its entity-wide disclosures about the products and services it provides and reports revenues and its major customers. The Company’s five reportable segments are managed separately based on fundamental differences in their operations. At June 30, 2020, the Company operated in the following five reportable segments:

a.	Client services;
b.	Shipping calculator services;
c.	Brewery management software;
d.	Merchant processing services; and
e.	Shipping coordination and label generation services

The Company evaluates performance and allocates resources based upon operating income. The accounting policies of the reportable segments are the same as those described in this summary of significant accounting policies. The Company’s chief operating decision maker is the interim Chief Executive Officer/Chief Financial Officer.

The following table compares total revenue for the periods indicated.

	Three Months Ended				Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Client services	$	1,306	$	13,076	$	1,405	$	16,118
Shipping calculator services		7,471		41,235		15,793		75,964
Brewery management software		30,707		51,218		67,813		107,287
Merchant processing services		180,389		—		273,299		—
Shipping coordination and label generation services		2,998,999		2,609,968		5,535,884		4,805,148
Total revenues	$	3,218,872	$	2,715,497	$	5,894,194	$	5,004,517

The following table compares total income (loss) from operations for the periods indicated.

	Three Months Ended						Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Client services	$	1,001		$	9,836		$	1,100		$	12,190
Shipping calculator services		(99,026	)		(49,283	)		(197,683	)		(201,868	)
Brewery management software		22,897			13,191			18,015			33,798
Merchant processing services		12,433			-			48,929			-
Shipping coordination and label generation services		194,909			(1,098	)		149,111			(82,096	)
Total income (loss) from operations$		132,214		$	(27,354	)	$	19,472		$	(237,976	)

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. The Company’s adoption of ASU 2016-13 had no impact on its financial position, results of operations, cash flows, or disclosures.

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The Company’s adoption of ASU 2018-13 had no impact on its financial position, results of operations, cash flows, or disclosures.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” to identify, evaluate, and improve areas of GAAP for which costs and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments for ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. An entity that elects to early adopt must adopt all the amendments in the same period. The Company is currently evaluating the impact of ASU 2019-12 and does not expect the adoption of this guidance to have a material impact on its consolidated financial position or results of operations.