Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. PAID INC (1017655) 10-Q published on May 14, 2021 at 4:19 pm
Reporting Period: Mar 30, 2021
In December 2019, the FASB issued ASU No. 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 No. 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. The Company’s adoption of ASU No. 2019-12 in January 2021 had no impact on its consolidated financial position, results of operations, cash flows or disclosures.
During 2020, the Company issued 274,120 shares of PAID common stock as a result of the exercise of an investor warrant for 770 ShipTime exchangeable shares. The Company received gross proceeds of $35,636 in connection with the warrant exercise. On March 29, 2021, the Company's Board of Directors authorized the issuance of 1,050,000 bonus shares of PAID common stock to the interim CEO/CFO for services rendered during 2019 and 2020. This bonus was valued at $2,005,500 based on the closing price of the Company's common stock at March 29, 2021 and is recorded in accrued common stock bonus in shareholders’ equity at December 31, 2020. These shares were issued on March 31, 2021. On March 29, 2021, the Board of Directors approved the issuance of 250,000 shares of PAID common stock valued at $1.91 per share to W. Austin Lewis IV as it relates to his 2021 employment agreement, of which 125,000 of the shares are subject to repurchase at the award value of $1.91 per share if Mr. Lewis terminates employment prior to January 1, 2022, as defined in the employment agreement. These shares were issued on March 31, 2021. The value of the shares that are subject to repurchase will be recognized ratably as share-based compensation expense over the next nine months. Unrecognized compensation expense related to these shares is $238,750.
On March 23, 2018, the Board of Directors voted to approve the 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. On November 10, 2020, the board voted to increase the 2018 Stock Option Plan from 450,000 options to 900,000 options. For the year ended December 31, 2020, the Company granted 105,000 stock options to employees, consultants and directors. The 2020 options have vesting periods of immediately and over a three-year period, they expire if not exercised within ten years from grant date, and the exercise price is $2.885 per share. During 2020, as a result of the termination of several employees, the Company recorded 61,948 expired options and an additional 20,459 that were cancelled. During 2021, the Company issued 10,000 stock options to one employee. These options have a three-year vesting schedule with one-third vesting immediately, one-third vesting in 18 months and the final one-third vesting in 36 months, they expire if not exercised in ten years from the grant date, and their exercise price is $1.91 per share.
Merchant processing services is available to businesses that accept credit card processing online. This segment has had difficulties with the launch and has declined 87% from $92,910 to $12,525 in the first quarter of 2021. The Company is reevaluating the launch and preparing to combine these services with other Paid products for a re-release.
Gross profit increased $227,869 or 35% in the first quarter of 2021 to $879,015 compared to $651,146 in 2020. Gross margin increased to 25% for the first quarter of 2021 compared to 24% in the first quarter of 2020. The increase in gross margin is a result of ongoing pricing evaluations of our shipping label generation services to remain competitive in the market. 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.