PAID INC 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements This Annual Report on Form 10-K 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 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. 12 Although forward-looking statements in this Annual 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 the 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.” 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. 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 sites, 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. 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, purchase insurance, 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 2026 will be to continue to grow this portion of our business. PAID, Inc. (the “Company”) has developed a full line of SaaS-based business services including PaidPayments, PaidCart, PaidShipping and PaidWeb. These eCommerce services provide commerce solutions to small - and medium-sized businesses by enabling them to use one platform to market their products, sell their goods and services, accept payment, and create repeat sales through an online payment processing solution. This capability also provides cost advantages, rapid response to market needs, simplified processes for boarding business and a seamless interface for our merchant customers. Critical Accounting Policies Our significant accounting policies are more fully described in Note 3 to our consolidated financial statements. However, certain of our accounting policies 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. Our critical accounting policies include: Note Receivable The Company has two notes receivable outstanding that accrue annual interest and penalties for non-payment. The notes are backed by the assets of the debtor and management continues to evaluate the collectability of the notes. The Company has recognized significant gains on interest and penalties. If the Company determines this 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, 2025 and 2024 The following discussion compares the Company's results of operations for the year ended December 31, 2025 with those for the year ended December 31, 2024. 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. 13 Revenues The following table compares total revenue for the periods indicated. Years ended December 31, 2025 2024 % Change Client services $ 3,863 $ 17,815 (78 )% Shipping coordination and label generation services 20,677,832 18,499,613 12 % eCommerce services 26,540 68,097 (61 )% Total revenues $ 20,708,235 $ 18,585,525 11 % Revenues increased $2,122,710 or 11% in 2025 primarily from a result of the fourth quarter increase in shipping coordination and label generation services due to the impacts of the Canada Post carrier strike. This event has had a significant impact on the entire Canadian transportation industry. Client services revenues, which include brewery management software and shipping calculator services decreased $13,951 or 78% to $3,863 compared to $17,815 in 2024. The decrease was attributable to the retirement of the brewery management software business. Shipping coordination and label generation services revenues increased $2,178,219 or 12% to $20,677,832 in 2025 compared to $18,499,613 in 2024. The increase is largely attributable to impacts of the Canada Post strike and the additional marketing for this segment of the business. eCommerce services made up of PaidPayments and PaidWeb in the United States returned a decrease of $41,557 or 61% to $26,540 in 2025 compared to $68,097 in 2024. The Company is shifting the focus on single Paid products to a full platform of product offerings; the decrease is attributable to customers using PaidPayments products. Gross Profit Gross profit increased $573,378 or 14% to $4,644,795 in 2025 compared to $4,071,417 in 2024. Gross margin decreased to 22% for the year ended 2025 compared to 23% for 2024. The increase in gross profit was due to growth of the shipping coordination and label generation service revenues. Operating Expenses Total operating expenses in 2025 were $5,299,572 compared to $4,564,799 in 2024, an increase of $734,773 or 16%. The increase is mainly due to the share-based compensation for the renewal of one employee contract in addition to the hiring of two new executive level employees in 2025. Other Income/Expense, net Net other income in 2025 was $50,520 in 2025 compared to $1,215,925 in 2024, a decrease of 1,165,405 or 96%. The 2024 other income is made of a gain of $1,192,182 on the Embolx, Inc. note receivable whereas the Company has elected to refrain from recording any revenues from the Embolx note until the end of the current agreement. (Benefit) Provision for Income Taxes Total income tax (benefit) provision for 2025 was $(236,014) compared to $(41,049) in 2024. The change of $194,965 is a result of the net effect of the adjustment for long term tax liabilities. Net Income The Company reported a net loss in 2025 of $(368,243) compared to net income of $763,592 for the same period in 2024. The basic income per common share in 2025 is ($0.04) compared to $0.09 per common share in 2024. Inflation The Company believes that inflation has not had a material effect on its results of operations. 14 Cash Flows A summarized reconciliation of the Company's cash flows for the years ended December 31, 2025 and 2024 is as follows: 2025 2024 Net income (loss) $ (368,243 ) $ 763,592 Depreciation and amortization 289,737 304,797 Accretion of discount on note receivable - (1,048,402 ) Interest and default income accrued on note receivable (36,123 ) (156,410 ) Amortization of operating lease right-of-use assets 30,656 13,710 Bad debt 40,072 - Deferred income taxes (236,014 ) (41,504 ) Share-based compensation 868,455 235,575 Changes in current assets and liabilities (641,711 ) 376,285 Net cash provided by (used in) operating activities $ (53,171 ) $ 447,643 Net cash used in investing activities $ (152,469 ) $ (756,526 ) Net cash provided by financing activities $ 2,212 $ 392 Effect of exchange rate on cash and cash equivalents $ 26,521 $ (138,537 ) Net change in cash and cash equivalents $ (176,907 ) $ (447,028 ) Working Capital and Liquidity The Company had cash and cash equivalents of $1,108,059 on December 31, 2025 compared to $1,284,965 on December 31, 2024. The Company had working capital of ($304,212) on December 31, 2025 compared to ($629,467) on December 31, 2024, An increase of $325,255. The increase in working capital is attributed to the increase in notes receivable and the decrease in accounts payable for the year ended 2025. Management believes that the Company has adequate cash resources to fund operations during the next 12 months. In addition, management continues to explore opportunities and partnerships to grow the Paid platform of services. However, there can be no assurance that the anticipated growth in new business will occur, and that the Company will be successful in launching new products and services. Management continues to seek alternative sources of capital to support the growth of future operations. Item 7A. Quantitative and Qualitative Disclosure about Market Risk As a smaller reporting company, the Company is not required to provide the information for this Item 6A. Item 8. 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 33. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.