PAID INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements This Quarterly Report on Form 10-Q contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding PAID, Inc. (the “Company”) and its business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”, “could”, “may”, “should”, “will”, “would”, and similar expressions or variations of such words are intended to identify forward-looking statements in this report. Additionally, statements concerning future matters such as the development of new services, technology enhancements, purchase of equipment, credit arrangements, possible changes in legislation and other statements regarding matters that are not historical are forward-looking statements. Although forward-looking statements in this quarterly report reflect the good faith judgment of the Company’s management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks, contingencies and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in this report. Although the Company believes that its plans, intentions and expectations reflected in these forward-looking statements are reasonable, the Company can give no assurance that its plans, intentions or expectations will be achieved. For a more complete discussion of these risk factors, see Item 1A, “Risk Factors”, in the Company’s Form 10-K for the fiscal year ended December 31, 2020 that was filed on March 31, 2021. For example, the Company’s ability to maintain positive cash flow and to become profitable may be adversely affected as a result of a number of factors that could thwart its efforts. These factors include the Company’s inability to successfully implement the Company’s business and revenue model, higher costs than anticipated, the Company’s inability to sell its products and services to a sufficient number of customers, the introduction of competing products or services by others, the Company’s failure to attract sufficient interest in, and traffic to, its site, the Company’s inability to complete development of its products, the failure of the Company’s operating systems, and the Company’s inability to increase its revenues as rapidly as anticipated. If the Company is not profitable in the future, it will not be able to continue its business operations. Except as required by applicable laws, we do not intend to publish updates or revisions of any forward-looking statements we make to reflect new information, future events or otherwise. Readers are urged to review carefully and to consider the various disclosures made by the Company in this Quarterly Report, which attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Overview ShipTime Inc. 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. 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 2021 is to significantly grow this portion of our business. PAID, Inc. (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. 17 Table of Contents 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. The Company has operated as a Payment Facilitator since 2019, which enables our merchants to get the benefit of instant boarding and discounted rates. Our platform provides all aspects required for payment processing, including merchant boarding, underwriting, fraud monitoring, settlement, funding to the sub-merchant, and monthly reporting and statements. The Company controls all of these necessary aspects in the payment process and is then able to supply a one-step boarding process for our partners and value-added resellers. This capability also provides cost advantages, rapid response to market needs, simplified processes for boarding business and a seamless interface for our merchant customers. Significant Accounting Policies Our significant accounting policies are more fully described in Note 3 to our consolidated financial statements for the years ended December 31, 2020 and 2019 included in our Form 10-K filed on March 31, 2021, as updated and amended in Note 1 of the Notes to Condensed Consolidated Financial Statements included herein. However, certain of our accounting policies, most notably with respect to revenue recognition, are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Those estimates and judgments are based upon our historical experience, the terms of existing contracts, our observance of trends in the industry, information that we obtain from our customers and outside sources, and on various other assumptions that we believe to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Results of Operations Comparison of the three months ended June 30, 2021 and 2020 . The following discussion compares the Company’s results of operations for the three months ended June 30, 2021 with those for the three months ended June 30, 2020. The Company’s condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report contain detailed information that should be referred to in conjunction with the following discussion. Revenues The following table compares total revenue for the periods indicated. Three months Ended June 30, 2021 2020 % Change Client services $ 226 $ 1,306 (83 )% Brewery management software 16,025 30,707 (48 )% Shipping coordination and label generation services 3,979,250 2,998,999 33 % Merchant processing services 14,453 180,389 (92 )% Shipping calculator services 5,856 7,471 (22 )% Total revenues $ 4,015,810 $ 3,218,872 25 % Revenues increased 25% in the second quarter primarily from the impact of new marketing services in combination with continuous impact from the COVID-19 virus on the growth of our shipping coordination and label generation services. Client services revenues decreased $1,080 or 83% to $226 in the second quarter of 2021 compared to $1,306 in 2020. This reduction is a result of the decrease in movie posters auctions held during the quarter. 18 Table of Contents Brewery management software revenues decreased $14,682 to $16,025 in 2021 from $30,707 in 2020. The decrease in revenues is due to cancellations of several small clients and limited marketing of the software to new clients. Shipping coordination and label generation services revenues increased $980,251 or 33% to $3,979,250 in the second quarter of 2021 compared to $2,998,999 in 2020. The increase is attributable to the shift in online shipping as a result of the impact of the COVID-19 virus in addition to the change in pricing to retain customers in a competitive environment. Merchant processing services is available to businesses that accept credit card processing online. This segment has had difficulties with the launch and has declined 92% from $180,389 to $14,453 in the second quarter of 2021. The Company is reevaluating the launch and preparing to combine these services with other PAID products for a re-release. Shipping calculator services revenue decreased $1,615 or 22% to $5,856 in the second quarter of 2021 compared to $7,471 in 2020. The decrease was primarily due to the reduction in volume for the remaining customer using this platform. Gross Profit Gross profit increased $197,932 or 27% in the second quarter of 2021 to $933,049 compared to $735,117 in 2020. Gross margin remained at 23% for the second quarter of 2021 compared to the second quarter of 2020. The increase in gross profit is due to additional marketing programs released in 2021 along with the impact of increased shipping label generation services as a result of the growth of e-commerce shopping due to the COVID-19 virus. Operating Expenses Total operating expenses in the second quarter 2021 were $962,857 compared to $642,903 in the second quarter of 2020, an increase of $319,954 or 50%. The increase is due to additional staffing added in 2021 along with the share-based compensation recorded in the second quarter. Other Income/Expense, net Net other income in the second quarter of 2021 was $0 compared to $13,195 in the same period of 2020. This is attributable to the recovery of a bad debt that was previously written off. Net Income (Loss) The Company recorded a net loss in the second quarter of 2021 of $30,364 compared to a net income of $105,409 for the same period in 2020. The basic net income (loss) per share available to common shareholders for the second quarter of 2021 and 2020 was $(0.00) and $0.02 per share, respectively. Comparison of the six months ended June 30, 2021 and 2020 . The following discussion compares the Company’s results of operations for the six months ended June 30, 2021 with those for the six months ended June 30, 2020. The Company’s condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report contain detailed information that should be referred to in conjunction with the following discussion. 19 Table of Contents Revenues The following table compares total revenue for the periods indicated. Six months Ended June 30, 2021 2020 % Change Client services $ 1,509 $ 1,405 7 % Brewery management software 35,225 67,813 (48 )% Shipping coordination and label generation services 7,453,152 5,535,884 35 % Merchant processing services 26,978 273,299 (90 )% Shipping calculator services 11,719 15,793 (26 )% Total revenues $ 7,528,583 $ 5,894,194 28 % Revenues increased 28% in the first two quarters primarily from the growth of our shipping coordination and label generation services. Client services revenues increased $104 or 7% to $1,509 in the first two quarters of 2021 compared to $1,405 in 2020. This increase is a result of the small fluctuation in movie posters auctions held during this period. Brewery management software revenues decreased $32,588 to $35,225 in the first two quarters of 2021 from $67,813 in the same period of 2020. The decrease in revenues is due to cancellations and the business closing of several of clients due to the impacts of COVID-19. Shipping coordination and label generation services revenues increased $1,917,268 or 35% to $7,453,152 in the first two quarters of 2021 compared to $5,535,884 in 2020. The increase is attributable to the shift in online shipping as a result of the impact of the COVID-19 virus in addition to new marketing efforts and pricing changes to retain customers. Merchant processing services has had difficulties with the launch and has declined 90% from $273,299 to $26,978 in the first two quarters of 2021. The Company is reevaluating the launch and preparing to combine these services with other Paid products for a re-release. Shipping calculator services revenues decreased $4,074 or 26% to $11,719 in the first two quarters of 2021 compared to $15,793 in the same period of 2020. The decrease was due to a reduction in the use of our platform for this segment of the business. Gross Profit Gross profit increased $425,801 or 31% in the first two quarters of 2021 to $1,812,064 compared to $1,386,263 in 2020. Gross margin remained at 24% for the first two quarters of 2021 compared to the same period of 2021. The growth in gross profit is a result of the increased revenue due to the shift of online shipping as a result of the COVID-19 virus. Operating Expenses Total operating expenses in the first two quarters of 2021 were $2,021,205 compared to $1,406,791 in the same period of 2020, an increase of $614,414 or 44%. The increase is primarily due to additional staffing and share-based compensation recorded in the first two quarters of 2021. Other Income/Expense, net Net other income in the first two quarters of 2021 was $0 compared to $13,195 in the same period of 2020. This is primarily attributable to the recovery of a bad debt that was previously written off. Net Income (Loss) The Company realized a net loss in the first two quarters of 2021 of ($210,097) compared to a net loss of ($7,833) for the same period in 2020. The net loss available to common shareholders for the two quarters of 2021 and 2020 was ($0.03) and ($0.01) per share, respectively. 20 Table of Contents Cash Flows from Operating Activities A summarized reconciliation of the Company’s net loss to cash and cash equivalents provided by operating activities for the six months ended June 30, 2021 and 2020 is as follows: 2021 2020 Net loss $ (210,097 ) $ (7,833 ) Depreciation and amortization 259,919 240,939 Amortization of operating lease right-of-use assets 16,423 13,702 Share-based compensation 407,814 (18,011 ) Provision for bad debt - 20,125 Gain on sale of property and equipment - (733 ) Changes in assets and liabilities 303,273 253,036 Net cash provided by operating activities $ 777,332 $ 501,225 Working Capital and Liquidity The Company had cash and cash equivalents of $2,466,524 at June 30, 2021, compared to $1,644,210 at December 31, 2020. The Company had net working capital of $683,253 at June 30, 2021, an improvement of $464,638 compared to $218,615 at December 31, 2020. The increase in net working capital is attributable to the 28% growth of the Company’s revenues for 2021. The increase in cash and cash equivalents is due to the additional growth of the business along with the savings related to the decrease in consulting and travel expenses. The Company may need an infusion of additional capital to fund anticipated operating costs over the next 12 months, however, management believes that the Company has adequate cash resources to fund operations. There can be no assurance that anticipated growth will occur, and that the Company will be successful in launching new products and services. If necessary, management will seek alternative sources of capital to support operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, the Company is not required to provide the information for this Item 3.