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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-31 · 54 added, 77 removed, 75 unchanged (64% of the section changed)

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Although the Company believes that its plans, intentions and expectations reflected in these forward-looking statements are reasonable, the Company can give no assurance that its plans, intentions or expectations will be achieved.

For a more complete discussion of these risk factors, see Item 1A, "Risk Factors.”

For example, the Company's ability to maintain a positive cash flow and to become profitable may be adversely affected as a result of a number of factors that could thwart its efforts.

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has developed a SaaS based application, which focuses on the small to medium business segment.

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.

This offering allows members to quote, process, generate labels, insure, 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 businesses and through long standing partnerships with selected associations throughout Canada. 

Our focus in 2024 will be to continue to grow this portion of our business.

(the “Company”) 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 does have tools to assist with other aspects of the fulfillment process, but the main purpose of the product is to provide accurate shipping and tax calculations and packaging algorithms that provide customers with the best possible shipping and tax solutions.

BeerRun Software 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 providence.

The software is designed to integrate with QuickBooks accounting platforms by using our powerful sync engine.

We currently offer two versions of the software BeerRun and BeerRun Light which excludes some of the enhanced features of BeerRun without disrupting the core functionality of the software.

(the “Company”) has developed a full line of SaaS-based business services including PaidPayments, PaidCart, PaidShipping and PaidWeb.

These solutions are developed to provide businesses with a streamlined experience for website creation, online sales, payment collection and shipping all in one platform.

PaidPayments provides commerce solutions to small - and medium-sized businesses by enabling them to sell their goods and services, accept payment, and create repeat sales though an online payment processing solution.

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Revenue Recognition

The Company generates revenue principally from the sales related to the label generation services, shipping calculator services, brewery management software subscriptions, merchant processing services, and client services.

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

The Company recognizes revenues in accordance with the FASB ASC Topic 606.

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For label generation service revenues, the Company recognizes revenue when a customer has successfully prepared a shipping label and had a pickup.

The service is offered to consumers via an online registration and allows users to create a shipping label using a credit card on their account (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 and other subscription-based 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.

Customers with pickups after the end of the reporting period are recorded as contract liabilities on the condensed consolidated balance sheets.

For shipping calculator revenues and brewery management software and other subscription-based revenues, the Company recognizes subscription revenue on a monthly basis.

Shipping calculator customers’ renewal dates are based on their date of installation and registration of the shipping calculator line of products.

The timing of the revenue recognition and cash collection may vary within a given quarter and the deposits for future services are recorded as contract liabilities on the consolidated balance sheets.

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All payments are made via credit card for the month following.

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.

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 December 31, 2022.

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 component of shareholders’

equity in accumulated other comprehensive income.

Merchant processing revenue consists of fees a seller pays to process payment transactions and is recognized upon authorization of a transaction.

Revenue is recognized net of estimated funds, which are reversals of transactions initiated by sellers.

We act as the merchant of record for our sellers, which puts us in their shoes with respect to card networks and puts the risk for refunds and chargebacks on us.

The gross transaction fees collected from sellers is recognized as revenue as we are the primary obligor to the seller and are responsible for processing the payment, have latitude in establishing pricing with respect to the sellers and other terms of service, have sole discretion in selecting the third party to perform the settlement, and assume the credit risk for the transaction processed.

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.

The Company reviews the carrying value of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset.

There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in additional impairment of long-lived assets in the future.

Share- Based Compensation

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The price at which the option shares may be purchased is based on the fair market value of the shares on the date of the agreement.

Each recipient’s option agreement may differ;

the vesting terms may vary from fully vested immediately to one-third immediately, one-third vesting in 18 months and the final one-third vesting in 36 months from the date of the grant.

Historically the options granted have had a 10-year term.

If the recipient’s employment or relationship with the Company is terminated the options recipient may be allowed up to three months to exercise their options.

Option compensation is calculated by using the Black-Scholes-Merton option pricing model to estimate the fair value of these share-based awards.

A right-of-use asset represents a lessee’s right to use a leased asset for the term of the lease.

Our right-of-use assets generally consist of an operating lease for a building.

Right-of-use assets are measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial direct costs, such as commissions paid to obtain a lease.

Right-of-use assets are subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and any initial direct costs not yet expensed.

We have an operating lease for our corporate offices in Canada and finance leases for furniture and equipment, which expired in June 2021.

Our leases have remaining lease terms of seven months to eight 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.

Note Receivable

The Company has one note receivable outstanding that accrues annual interest and penalties for non-payment.

The note is backed by the assets of the debtor and management continues to evaluate the collectability of the note.

The Company has recognized significant gains on the interest and penalties, however, as of the year ended 2023, the note is in default.

If the Company determines the note is uncollectible, it could result in a significant loss and subsequent litigation for the Company.

Results of Operations

Comparison of the years ended December 31, 2023 and 2022

The following discussion compares the Company's results of operations for the year ended December 31, 2022 with those for the year ended December 31, 2021.

The following discussion compares the Company's results of operations for the year ended December 31, 2023 with those for the year ended December 31, 2022.

The Company's consolidated financial statements and notes thereto included elsewhere in this Annual Report contain detailed information that should be referred to in conjunction with the following discussion.

The following table compares total revenue for the periods indicated. 

Years ended December 31,

Client services

Shipping calculator services

Brewery management software

Merchant processing services

Shipping coordination and label generation services

Merchant processing services

Total revenues

Revenues increased $1,696,213 or 11% in 2022 from the continued growth of the shipping coordination and label generation services.

Client services revenues decreased $2,335 or 74% to $806 compared to $3,141 in 2021.

The decrease was attributable to depletion of our movie poster inventory available for auction.

Shipping calculator services revenues decreased $14,908 or 65% to $7,964 compared to $22,872 in 2021.

The decrease was attributed to the retirement of the shipping calculator platform.

The Company has launched a new platform where the new clients will be migrated to.

Brewery management software revenues decreased $20,500 or 35% to $38,575 in 2022 compared to $59,075 in 2021.

The decrease is attributable to the limited marketing to new clients and churn of existing clients.

Merchant processing services had difficulties with the launch and had declined 26% from $54,003 to $40,153 in 2022.

The Company has partnered with a secondary merchant processor and is relaunching the program.

Merchant processing services will be offered in combination with other Paid products.

Shipping coordination and label generation services revenues increased $1,747,806 or 12% to $16,498,431 in 2022 compared to $14,750,625 in 2021.

The increase is attributable to the increase in marketing efforts offset by the impact of the increase in the cost of fuel as it significantly impacts the shipping industry.

Revenues decreased $21,100 or 0.1% in 2023 from the result of a minor change in the pricing model to be more competitive.

This change has had a minimal impact on the pricing but has shifted business to a more profitable carrier.

Client services revenues which include brewery management software and shipping calculator services decreased $13,407 or 28% to $33,938 compared to $47,345 in 2022.

The decrease was attributable to the cancellation of several clients using our brewery management software and the limited marketing of this segment of the business.

Shipping coordination and label generation services revenues decreased $32,707 or 0.2% to $16,465,724 in 2023 compared to $16,498,431 in 2022.

The decrease is attributable to the change in our pricing structure to remain competitive in addition to the reduced cost of fuel as it significantly impacts the shipping industry.

Merchant processing services has launched its United States shipping portal which resulted in an increase of $25,014 or 62% to $65,167 in 2023 compared to $40,153 in 2022.

The Company continues to increase the product offerings in this segment of the business.

Gross profit increased $96,667 or 3% to $3,785,648 in 2023 compared to $3,688,981 in 2022.

Gross margin decreased one percentage point to 22% in 2022 from 23% in 2021.

The decrease in gross margin was partially due to the decrease in pricing to remain competitive in the shipping coordination and label generation industry.

Gross margin increased one percentage point to 23% in 2023 from 22% in 2022.

The increase in gross margin was due to ongoing efforts to reduce the cost of goods sold in addition to a pricing restructure to more profitable carriers.

Operating Expenses

Total operating expenses in 2022 were $3,629,988 compared to $3,943,984 in 2021, a decrease of $313,996 or 8%.

The decrease is mainly due to the decrease in share-based compensation for 2022 compared to 2021.

Total operating expenses in 2023 were $4,373,471 compared to $3,629,988 in 2022, an increase of $743,483 or 20%.

The increase is mainly due to the additional share-based compensation for 2023 compared to 2022.

Other Income/Expense, net

Net other income in 2022 was $136,662 compared to $0 in 2021.

The 2022 amount is made up of a gain on the  rite-off of stale accounts payable in addition to the $104,167 accretion of the discount on the Embolx, Inc.

note receivable.

Net other income in 2023 was $849,258 compared to $136,662 in 2022, an increase of $712,596 or 521%.

The 2023 amount is made up of other income of $849,258 on the Embolx, Inc.

note receivable vs other income of $104,167 recorded in 2022.

Note receivable interest income of $203,425 which is included in Other Income has been recognized in 2023.

(Benefit) Provision for Income Taxes

Total income tax (benefit) provision for 2022 was $(456,491) compared to $206,257 in 2021. 

The change of $662,748 is a result of the net effect of the adjustment for 2017 to 2022 transfer price adjustments and the reserve for long term tax liabilities. 

Net Income (Loss)

The Company reported a net income in 2022 of $652,146 compared to a net loss of $(696,760) for the same period in 2021.

The basic income per common share in 2022 is $0.08 while the basic net loss per common share in 2021 is $(0.09).

Total income tax (benefit) provision for 2023 was $(91,779) compared to $(456,491) in 2022.

The change of $364,712 is a result of the net effect of the adjustment for 2017 to 2023 transfer price adjustments and the reserve for long term tax liabilities.

The Company reported a net income in 2023 of $353,214 compared to $652,146 for the same period in 2022.

The basic income per common share in 2023 is $0.04 compared to $0.08 per common share in 2022.

The Company believes that inflation has not had a material effect on its results of operations.

A summarized reconciliation of the Company's cash flows for the years ended December 31, 2023 and 2022 is as follows:

Net income (loss)

Provision for bad debts

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Accretion of discount on note receivable

Interest and default income accrued on note receivable

Amortization of operating lease right-of-use assets

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Net cash used in investing activities

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate on cash and cash equivalents

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The Company had cash and cash equivalents of $2,052,421 on December 31, 2023 compared to $1,787,248 on December 31, 2022.

The Company had working capital of $1,635,370 as of December 31, 2022 compared to $495,446 as of December 31, 2021, an improvement of $1,139,924.

The improvement in working capital is primarily attributed to the transfer price adjustments and the effect of the decrease in income taxes payable and the cash on hand at year end. 

The Company had working capital of $2,912,950 on December 31, 2023 compared to $1,635,370 as of December 31, 2022, an improvement of $1,277,580.

The improvement in working capital is primarily attributed to the recognition of the interest and penalties due on the note receivable.

Management believes that the Company has adequate cash resources to fund operations during the next 12 months.

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As a smaller reporting company, the Company is not required to provide the information for this Item 6A.

Financial Statements and Supplementary Data

The financial statements listed in Item 15(a) are incorporated herein by reference and are filed as a part of this report and follow the signature pages to this Annual Report on Form 10-K on page 35.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis