10-Q: PAID, Inc. Q3 2025: Revenue Up, Net Loss Persists

PAID, Inc. reported a 24% increase in Q3 2025 revenue driven by shipping services, but recorded a significant net loss for the nine months ended September 30, 2025, alongside ongoing internal control weaknesses.

Summary

• Total net revenues for the three months ended September 30, 2025, increased by 24% to $5,508,629, up from $4,445,910 in the prior year period.
• For the nine months ended September 30, 2025, total net revenues increased by 16% to $15,314,444, compared to $13,209,958 in the same period of 2024.
• The Company reported a net income of $32,156 for the three months ended September 30, 2025, a significant improvement from a net loss of $(133,679) in Q3 2024.
• However, for the nine months ended September 30, 2025, a net loss of $(513,965) was recorded, contrasting sharply with a net income of $936,335 for the same period in 2024.
• Shipping coordination and label generation services revenue increased by 24% in Q3 2025 and 16% year-to-date, primarily due to shifts from Canada Post to alternate carriers and strategic sales initiatives.
• Client services and eCommerce services revenues decreased by 100% and 73% respectively in Q3 2025, and 74% and 39% year-to-date, due to the retirement of brewery management software and loss of a client in PaidPayments.
• Gross profit increased by 18% in Q3 2025 to $1,277,525 and by 9% year-to-date to $3,499,254, but gross margin decreased by 1 percentage point to 23% for both periods.
• Total operating expenses increased by 2% in Q3 2025 and 16% year-to-date, largely driven by a significant increase in share-based compensation expense ($624,064 for nine months ended Sep 30, 2025, vs. $44,928 in 2024).
• Cash and cash equivalents decreased to $1,149,384 at September 30, 2025, from $1,284,965 at December 31, 2024.
• The Company continues to operate with a working capital deficit of $434,040 as of September 30, 2025, though this is an improvement from $629,467 at December 31, 2024.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025, due to material weaknesses in internal control over financial reporting.
• The Embolx note receivable of $5,967,100 was extended to August 31, 2026, and interest/default penalties related to it have been deferred in 2025, significantly impacting other income compared to 2024.

Sentiment

Score: 3

Explanation: While revenue growth in the core shipping segment is positive, the significant year-over-year decline to a net loss, coupled with material weaknesses in internal controls, a large defaulted note receivable with uncertain repayment, and substantial share-based compensation, indicates significant operational and financial challenges. The overall sentiment is cautious to negative due to these underlying issues.

Positives

• Total net revenues increased by 24% in Q3 2025 and 16% for the nine months ended September 30, 2025, demonstrating growth in the core shipping coordination segment.
• The Company achieved a net income of $32,156 in Q3 2025, reversing a net loss of $(133,679) from the prior year's third quarter.
• Net cash used in operating activities decreased to $(79,014) for the nine months ended September 30, 2025, from $(142,736) in the prior year, indicating improved operational cash burn.
• The working capital deficit improved to $434,040 at September 30, 2025, from $629,467 at December 31, 2024.
• Management believes the Company has adequate cash resources to fund operations for the next 12 months (until November 2026).

Negatives

• The Company reported a net loss of $(513,965) for the nine months ended September 30, 2025, a significant decline from a net income of $936,335 in the same period of 2024.
• Gross margin decreased by 1 percentage point to 23% for both the three and nine months ended September 30, 2025.
• Total operating expenses increased by 16% for the nine months ended September 30, 2025, primarily due to a substantial increase in share-based compensation expense ($624,064 vs. $44,928 in 2024).
• Other income decreased by 97% for the nine months ended September 30, 2025, to $34,097 from $1,208,885 in 2024, largely due to the deferral of interest and penalties on the Embolx note receivable.
• Client services and eCommerce services segments experienced significant revenue declines, with client services revenue falling 100% in Q3 2025 and eCommerce services down 73% in Q3 2025.
• The Company's disclosure controls and procedures were deemed not effective due to material weaknesses in internal control over financial reporting.
• The Embolx note receivable, valued at $5,967,100, remains in default and its repayment date is uncertain, despite an extension to August 31, 2026.

Risks

• Inability to maintain positive cash flow and achieve profitability.
• Failure to successfully implement the Company's business and revenue model.
• Higher costs than anticipated, impacting financial performance.
• Inability to sell products and services to a sufficient number of customers.
• Introduction of competing products or services by competitors.
• Failure to attract sufficient interest in, and traffic to, its platform.
• Inability to complete development of its products and services.
• Failure of the Company's operating systems.
• Inability to increase revenues as rapidly as anticipated.
• Material weaknesses in internal control over financial reporting, which could lead to misstatements or fraud.
• Uncertainty regarding the repayment of the Embolx note receivable, which is currently in default.
• Potential adverse outcomes from ongoing legal proceedings with the former President, CEO, and Chairman, Mr. Allan Pratt, regarding alleged termination and stock bonus authorization.

Future Outlook

Management believes the Company has adequate cash resources to fund operations during the next 12 months after the filing of this quarterly report (until November 2026). The repayment of the Embolx note receivable, though uncertain in date, is expected to alleviate liquidity concerns. The Company plans to significantly reduce business costs to eliminate net losses and achieve positive cash flow from operations. Management continues to explore opportunities, organize additional resources to grow the Paid platform, and may seek alternative sources of capital to support future growth.

Management Comments

• Management believes that the Company has adequate cash resources to fund operations during the next 12 months after the filing of this quarterly report on Form 10-Q.
• The repayment of the Embolx note receivable will alleviate the concern however the repayment date is uncertain.
• The costs of doing business can be significantly reduced in hopes of eliminating the net loss and providing positive cash flow from operations.
• Management continues to explore opportunities and has organized additional resources to grow the Paid platform.
• Management may seek alternative sources of capital to support the growth of future operations.
• Although there can be no assurances, the Company believes that the above management plans will be sufficient to meet the Company's working capital requirements through the end of November 2026 and will have a positive impact on the Company for the foreseeable future.

Industry Context

The growth in shipping coordination and label generation services, driven by shifts from Canada Post to alternative carriers, suggests a dynamic and competitive logistics market, particularly for small and medium businesses seeking cost savings and reliability. The decline in client services (brewery management software) and eCommerce services (PaidPayments) indicates challenges in diversifying revenue streams or retaining clients in those specific niches, possibly due to increased competition or evolving market demands for specialized SaaS solutions. The overall trend points to a focus on the core shipping platform, which appears to be capitalizing on market disruptions.

Comparison to Industry Standards

• The 23% gross margin is relatively low for a SaaS-based business, which typically enjoys higher margins (often 70-80%+) due to lower cost of goods sold. This suggests a significant portion of revenue is pass-through or involves substantial direct costs, such as carrier fees in shipping coordination, rather than pure software subscription revenue.
• The continued net loss for the nine-month period, despite revenue growth, indicates challenges in achieving operational leverage, which is a common goal for scaling SaaS companies. Efficient, profitable growth is a key benchmark for industry leaders.
• The material weaknesses in internal control over financial reporting are a significant concern, contrasting with industry best practices for public companies that prioritize robust financial controls to ensure accuracy and investor confidence.
• The reliance on a single, large, defaulted note receivable (Embolx) for potential future liquidity is atypical and introduces substantial risk compared to companies with diversified, stable investment portfolios or strong organic cash generation.
• The significant increase in share-based compensation expense (over 13x year-over-year) suggests a heavy reliance on equity incentives, which can dilute existing shareholders if not tied to clear performance metrics and value creation, a practice often scrutinized against industry standards for executive compensation.

Management Changes

Corporate Governance

Legal Proceedings

• A dispute with Mr. Allan Pratt, former President, CEO, and Chairman, regarding the non-renewal of his employment agreement, which he alleges was a termination triggering a two-year severance payment. The trial for this Canadian dispute is set for May 2026.
• Mr. Pratt also filed a claim in Delaware courts disputing the proper authorization of a stock bonus awarded to the current CEO in March 2021. The trial was held on December 5-6, 2024, and post-trial arguments were heard on June 10, 2025, with results pending. The claim contesting the reduction of the board size was dismissed on November 9, 2023.

Stakeholder Impact

• **Shareholders:** Potential dilution from significant share-based compensation, uncertainty regarding the Embolx note repayment, and ongoing legal disputes could negatively impact share value. Material weaknesses in internal controls pose a risk to financial transparency and investor confidence.
• **Employees:** Continued share-based compensation for management and key personnel could be a positive for retention, but overall financial losses and cost reduction plans might create uncertainty.
• **Customers:** Growth in shipping coordination services suggests positive customer adoption in that segment, but the discontinuation of client services and loss of an eCommerce client indicate potential service disruptions or competitive pressures in other areas.
• **Creditors:** The Embolx note, being in default and extended, highlights credit risk, although the Company believes it is secured. The working capital deficit also indicates ongoing liquidity management challenges.

Next Steps

• Management plans to significantly reduce the costs of doing business to eliminate net losses and achieve positive cash flow from operations.
• Continue exploring opportunities and organizing additional resources to grow the Paid platform.
• Potentially seek alternative sources of capital to support the growth of future operations.
• Address and remediate the identified material weaknesses in internal control over financial reporting.
• Await the outcome of the Canadian legal dispute with Mr. Allan Pratt, with the trial set for May 2026.
• Await the results of the post-trial arguments heard on June 10, 2025, in the Delaware court regarding Mr. Pratt's stock bonus claim.
• Monitor the repayment of the Embolx note receivable, which is expected to happen in 2026, possibly through a financial or merger transaction.

Key Dates

Recommendation

Despite revenue growth in the shipping segment, the Company reported a significant net loss for the nine-month period, a substantial increase in share-based compensation, and a sharp decline in other income due to deferred Embolx note payments. Critically, the disclosure controls and procedures are deemed ineffective due to material weaknesses in internal control over financial reporting, which is a major red flag for investors. The Embolx note remains in default with uncertain repayment, and ongoing legal disputes add further risk. These factors collectively point to significant operational, financial, and governance challenges, making the stock a high-risk investment with a negative outlook.

Keywords

SaaS, shipping coordination, eCommerce, payment processing, ShipTime, SEC filing, 10-Q, financial results, revenue growth, net loss, internal controls, notes receivable, share-based compensation, corporate governance, legal dispute