What changed in this filing

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Item 9A. Controls and Procedures

2021-03-31 compared with 2020-03-30 · 770 added, 785 removed, 1840 unchanged (46% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Company's management, including the Chief Executive Officer /Chief

Financial Officer of the Company, as its principal financial

Company's management, including the interim Chief Executive Officer

/Chief Financial Officer of the Company, as its principal financial

officer has evaluated the effectiveness of the Company's

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Act of 1934, as amended (the “Exchange Act”). 

Based upon this evaluation, the Chief Executive Officer/Chief

Financial Officer has concluded that, as of December 31, 2019, the

Company's disclosure controls and procedures were not effective,

due to material weaknesses in internal control over financial

reporting, for the purpose of ensuring that the information

required to be disclosed in the reports that the Company files or

submits under the Exchange Act with the Securities and Exchange

Commission is recorded, processed, summarized and reported within

the time period specified by the Securities and Exchange

Commission's rules and forms, and is accumulated and communicated

to the Company's management, including its principal

Based upon this evaluation, the interim Chief Executive

Officer/Chief Financial Officer has concluded that, as of December

31, 2020, the Company's disclosure controls and procedures were not

effective, due to material weaknesses in internal control over

financial reporting, for the purpose of ensuring that the

information required to be disclosed in the reports that the

Company files or submits under the Exchange Act with the Securities

and Exchange Commission is recorded, processed, summarized and

reported within the time period specified by the Securities and

Exchange Commission's rules and forms, and is accumulated and

communicated to the Company's management, including its principal

executive/financial officer, as appropriate, to allow timely

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described in our accompanying Management's Annual Report on Internal Control

over Financial Reporting , we have identified six remaining

over Financial Reporting , we have identified four remaining

material weaknesses in internal control over financial reporting.

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continued to implement new procedures and controls in 2020 and have

taken significant steps to remediate the material weaknesses at the

entity and activity levels, and to review further our procedures

and controls in 2020.

In addition, we expect to make additional

changes to our infrastructure, personnel and related processes that

we believe are also reasonably likely to strengthen and materially

affect our internal control over financial reporting.

taken steps to remediate the material weaknesses at the entity and

activity levels, and to review further our procedures and controls

In addition, we expect to make additional changes to our

infrastructure, personnel and related processes that we believe are

also reasonably likely to strengthen and materially affect our

internal control over financial reporting.

to the complete remediation of these material weaknesses, there

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over financial reporting is a process designed by, or under the

supervision of, our Chief Executive Officer/Chief Financial Officer

and effected by our Board of Directors, management and other

personnel, to provide reasonable assurance regarding the

supervision of, our interim Chief Executive Officer/Chief Financial

Officer and effected by our Board of Directors, management and

other personnel, to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial

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communication of information

monitoring of activities  

Level Controls

monitoring of activities

Activity Level

procedures and control documentation

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Steps taken towards Remediation for an Ineffective Control

Company has strengthened its hiring and employment practices by

completing in-depth screenings of new personnel, and has initiated

formal employee review procedures.

has direct oversight and responsibility for independent contractors

and consultants.

All independent contractors and consultants are

required to follow strict corporate policies relating to

confidential information, and non-disclosure of corporate and

Management sets project goals and objectives for each

independent contractor and consultant and measures the performance

of each on a regular basis.

and the Board formally meet to discuss our filings and the

discussions are being documented for future reference.

Company has included in its hiring process supplemental

documentation regarding the internal control, insider trading and

other Corporate matters

Company meets monthly in a town hall style with the opportunity to

convey best practices for public companies.

and the Board formally meet to discuss our filings.

discussions, our auditors, and legal counsel may present to the

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access to management.

Board of Directors has been increased from 3 to 5 members to create

awareness and assist with decisions presented to the

Board of Directors has appointed a Compensation Committee Chairman

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systems and financial applications are appropriately

our information systems user profiles to improve access

staff has implemented a documenting and sharing process for

software development

our information systems user profiles and passwords to improve

access controls.

improvements to our information systems to further address control

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Company meets regularly throughout the year to review operating

results, policies and procedures, and employee reviews and

results, policies and procedures, and staff reviews and

management personnel are required to review their procedures and

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disbursements.

accounts payable approvals and payments have been reviewed with all

department heads.

for accounts payable approvals and payments have been reviewed with

all department heads.

Steps taken towards Remediation of Financial Closing:

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operating reports and analysis of results.

CEO/CFO receives monthly financial updates on each segment of the

interim CEO/CFO receives monthly financial updates on each segment

of the Company.

Company has made significant improvements to the activity level

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segregation of duties.

The CEO/CFO has worked with the Controller

and management to identify areas of improvement and together they

created appropriate written procedures for approvals and spending

limits for individuals within the Company.

Departmental budgets

have been established and all transactions are reviewed monthly.

The Company has also implemented dual approval and review of all

cash disbursements and financial transactions.

While we believe

they are effective at mitigating risk of material error, we have

not yet concluded that they are operating effectively.

several areas of improvement in our segregation of duties,

financial closing, and information technology controls that have

positively impacted our internal control over financial reporting

for the fiscal year ended 2019.

Other Information

The Interim CEO/CFO has worked with the SVP

Finance and management to identify areas of improvement and

together they created appropriate written procedures for approvals

and spending limits for individuals within the Company.

Departmental budgets have been established and all transactions are

reviewed monthly.

The Company has also implemented dual approval

and review of all cash disbursements and financial transactions.

While we believe they are effective at mitigating risk of material

error, we have not yet concluded that they are operating

There were several areas of improvement in our

segregation of duties, financial closing, and information

technology controls that have positively impacted our internal

control over financial reporting for the fiscal year ended

Directors, Executive Officers and Corporate

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are elected and qualified .

Austin Lewis was appointed on July

In December 2016, Terry Fokas resigned from the Board of

Directors to be replaced by Allan Pratt.

On December 30, 2016 the

Company amended its Bylaws to expand the existing Board of

Directors from three positions to five positions.

Two additional

members were added to the board, David Ogden and Laurie Bradley.

Under Delaware law, unless otherwise provided in the certificate of

incorporation or bylaws, directors are elected for one year terms

at the annual meeting of shareholders.

The Amended Bylaws would

provide for the Board to be divided into three classes of directors

serving staggered three-year terms.

 As a result,

approximately one-third of the Board will be elected each year.

 Initially, five directors will serve between one to three

 The directors placed in a Class I position will

serve for approximately one year.

On March 27, 2021, the

Company amended its Bylaws to reduce the existing Board of

Directors from five positions to three positions.

At that time, W.

Austin Lewis, IV and Allan Pratt automatically rolled off from the

Board of Directors.

Under Delaware law, unless otherwise provided

in the certificate of incorporation or bylaws, directors are

elected for one-year terms at the annual meeting of shareholders.

The Amended Bylaws would provide for the Board to be divided into

three classes of directors serving staggered three-year terms.

 As a result, approximately one-third of the Board will be

elected each year.

 Initially, three directors will serve

between one-to-three-year terms.

 The directors placed in a

Class II position will serve for approximately two years.

directors placed in a Class III position will serve approximately

After this transitional arrangement, the Directors

will serve for three year terms, with one class being elected each

Andrew Pilaro has served as a Director

of PAID since September 2000.

Since 2005, he has served as

Chairman of CAP Advisors Limited, an investment management company,

with responsibility for asset management.

Pilaro was asked to

serve as a director because he provides investment management

skills and general business background.

Austin Lewis, IV currently serves as

CFO, interim CEO and Director of PAID as well as served as a member

of the Audit Committees and Compensation Committees for MAM

Software, Inc.

Class I position will serve for approximately one year.

directors placed in a Class II position will serve for

approximately two years.

The directors placed in a Class III

position will serve approximately three years.

transitional arrangement, the Directors will serve for three-year

terms, with one class being elected each year.

Andrew Pilaro  has served as a

Director of PAID since September 2000.

He is President of CAP

Properties Limited, a family office which is an investment

management company, with a primary responsibility for asset

Pilaro was asked to serve as a director because he

provides investment management skills and a general business

Austin Lewis, IV  currently serves as

CFO, interim CEO of PAID and previously served as the Chairman of

the Audit Committee for MAM Software, Inc.

(MAMS). 

Since 2004, Mr.

Lewis has served as

Chief Executive Officer of Lewis Asset Management Corporation, an

investment management company he founded, where he is also the

Portfolio and Chief Investment Officer of the Lewis Opportunity

Lewis has served as Chief Executive Officer of Lewis

Asset Management Corporation, an investment management company he

founded, where he is also the General Partner of the Lewis

Opportunity Fund.

Prior to founding Lewis Asset Management, Mr.

variety of positions with investment firms, including Puglisi &

Co., Thompson Davis & Co., and Branch Cabell & Company.

Lewis holds a Bachelor of Science in Finance and a Bachelor of

Science in Financial Economics from James Madison University. 

Lewis was asked to serve as a director because he had a

thorough knowledge of the Company’s strengths and weaknesses

and has a strong background in being able to make companies run

efficiently and successfully.

Allan Pratt is a Director and former CEO

of the Company.

Pratt formed emergeIT in 2008 and was its

co-founder, CEO and President.

emergeIT, also known as ShipTime, is

a world leader in web delivered solutions in the transportation

industry representing major channel partners such as Costco with

over 50,000 members and growing.

In 1985, Pratt began the creation

of an operational and sales network in the U.S.

to provide a next

day service to Canada from 50 U.S.

cities into a Canadian regional

carrier’s primary footprint.

The business continued to grow

and evolve until the acquisition by FedEx in 1988.

Sales Manager at FedEx and Vice President of Canada’s largest

freight forwarder and LTL provider, Mr.

Pratt developed teams of

vertical market specialists providing cycle time reduction and

information technology solutions.

In the automotive and

telecommunications industry, Mr.

Pratt was instrumental in

developing and implementing new supply chain models which led to an

overall decrease in North American distribution centers, improved

order fulfillment, cycle times and overall cost reductions, while

increasing customer satisfaction levels.

Pratt has been

selected for his strong management and leadership

David Ogden is President of Soho

Management Consulting since November 2013.

He was also Senior Vice

President of International Operations of Delhivery.com from October

2015 to October 2016.

Further, he was Senior Vice President for

Operations & Logistics to Global Access from March 2015 to

August 2015, and owners of Soho Print, a digital print and

promotions firm, from 2003 through 2013.

Ogden also held

positions with Helios-SinoGulf Property Development, Egypt Express,

and FedEx Logistics.

Ogden has been selected as Director for

his expertise in shipping and delivery in commerce.

Laurie Bradley is the President of ASG

Renaissance and is responsible for corporate strategy and business

development including the delivery of human capital solutions and

development of partnership relationship. 

launched Blue Force Services a subsidiary of ASG focusing the

Company’s defense and security services, training programs,

technical documentation services and program management to both

commercial and defense clients.

Bradley launched the

Mosaic Advantage, a network of minority, women, and veteran owned

businesses providing them with access to larger business

Lewis held a variety of positions with investment firms, including

Puglisi & Co., Thompson Davis & Co., and Branch Cabell

Lewis holds a Bachelor of Science in Finance and

a Bachelor of Science in Financial Economics from James Madison

University. 

Lewis was asked to serve as the interim CEO

because he had a thorough knowledge of the Company’s

strengths and weaknesses and has a strong background in being able

to make companies run efficiently and

successfully.

Ogden  is the CEO of

Soho Management Consulting, a global investment consulting firm.

David held many senior positions with FedEx, including

Managing Director of Sales for FedEx Middle East and Africa

region based in Dubai, and instrumental in India's launch

as a direct served FedEx location.

He was Managing Director of

FedEx Logistics in the Middle East and Africa and was

responsible for the region's first FedEx Logistics

subsidiary's start-up.

After FedEx, he moved to Egypt, where

he created a group of companies representing best-of-class

business support services under a group holding company.

Egypt, he moved to Abu Dhabi to work for an

alternative investment company developing warehousing and

logistics parks in the United Arab Emirates.

He has recently been

working with ecommerce ventures from around the

Laurie Bradley i s the Chief Executive Officer of

Flexible Support Group providing funding, accounting, and payroll

services to small and mid-size businesses across North America.

Bradley also retains ownership in ASG Renaissance and

serves as its President.

ASG sold it staffing and contracting

business in 2016 and now operates with a focus on executive search,

and consulting services that delivers training to assist clients

with their diversity and inclusion initiatives.

The ASG consulting

practice also leverages the 2007 Mosaic Advantage initiative

which aggregated a network of minority, women, and veteran

owned businesses providing them with access to larger business

opportunities, coaching, mentoring and financial services. 

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Cornell University.

Scott  currently serves as

Prior, he served as the Director of Technology joining

the Company in 2017.

Scott leads the Development and IT

teams from requirements through to implementation while

supporting Sales, Marketing & Customer Success.

completed courses in Computer Science at both Mohawk College and

McMaster University.

Company has not made any material changes to the procedures by

which security holders may recommend nominees to the Board of

The Board does not have a separate nominating committee

or compensation committee.

The Board does not have a separate nominating

Audit Committee

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Form 10-K relates.

Executive Compensation

10, 2017, the Board of Directors appointed Laurie Bradley as the

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compensation programs and practices of the Company.

On March 29, 2021, the Company entered into an Employment Agreement

and an Executive Non-Competition Agreement with W.

Austin Lewis,

IV, as CEO of the Company, with an effective date of January 4,

The Employment Agreement is for a two-year term from the

effective date with automatic one-year renewals subject to 12

months’

notice of termination by the Company.

receive an annualized salary of $300,000 and may qualify for a

Lewis also received 250,000 shares of Company common

stock as a signing bonus, of which 125,000 shares may be

repurchased at $1.91 per share in the event that Mr.

terminates his employment prior to January 1, 2022. 

addition, other than termination “for cause”, Mr.

qualifies for a one-year severance of his then current salary.

separate agreement dated March 29, 2021, Mr.

Lewis is also bound by

a non-competition restriction for a period of 12 months following

termination. 

Compensation to the Named Executive Officers

following table sets forth the compensation of the Company's chief

executive officer, the chief financial officer, and each officer

whose total cash compensation exceeded $100,000, for the last two

fiscal years ended December 31, 2019 and 2018.

executive officer, chief financial officer and the chief operating

officer, and each officer whose total cash compensation exceeded

$100,000, for the last two fiscal years ended December 31, 2020 and

Compensation Table  

Principal Position

Option Awards ($)  

Austin Lewis, IV

(1),(2) (CFO)

(1),(2),(7) (CFO, Interim CEO)

$ 283,294  

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$ 180,000  

Allan Pratt (3),

$ 185,000  

David Scott (5),

$ 104,475  

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$ 82,896  

$ 85,050  

$ 167,946  

Lewis’s

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completed his contractual obligation as Chief Executive

promoted to Chief Operating Officer on May 1, 2020.

Scott received

15,000 non-qualified options on February 13, 2019, 15,000 on August

On November 10, 2020 he was awarded an additional 40,000

non-qualified options.

of 1,050,000 shares for 2019 and 2020 was approved by the Board of

Directors on March 29, 2021 and was valued at $1.91 per share based

on the close price of the Company's common stock at March 29,

following tables set forth certain information related to

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Option Awards  

Securities Underlying Unexercised Options (#) Exercisable

Securities Underlying Unexercised Options (#)

Number of Securities Underlying Unexercised

Options (#) Exercisable  

of Securities Underlying Unexercised Options (#)

Unexercisable

Equity Incentive

Number of Securities Underlying Unexercised Unearned

Option Exercise

Equity Incentive Plan Awards:

Securities Underlying Unexercised Unearned Options

Exercise Price ($)

Expiration Date

10,000  

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$ 0.975  

$ 4.10  

$ 3.50  

15,000  

$ 2.92  

15,000  

$ 3.00  

40,000  

26,667  

$ 2.885  

the Company's executive officers who serve as directors receive

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employees and three board members.

The grant price was lowered to

$0.975 which reflects the market value of the stock.

2019, the Company compensated a number of non-executive employees

and non-employee directors through stock option grants under the

Company’s 2018 Non-Qualified Stock Option Plan.

granted 136,020 stock options to employees and consultants during

the year ended December 31, 2019.

The options have vesting periods

of immediately and over a two-year period, they expire if not

exercised within ten years from grant date, and the exercise price

ranges from $2.92 to $3.00 per share.

As a result of the issuance,

the Company recorded share-based compensation expense of $407,974

during the year ended December 31, 2019.

The exercise price was lowered

to $0.975 which reflects the market value of the

2020, a number of non-executive employees and non-employee

directors received compensation though cash and through stock

option grants under the Company’s 2018 Non-Qualified Stock

The Company granted 105,000 stock options to employees

and consultants during the year ended December 31, 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 was $2.885 per share.

As a result of

the issuance and the expense recorded on previously issued stock

options, in addition to an accrued common stock bonus, the Company

recorded share-based compensation expense of $2,133,808 during the

year ended December 31, 2020.

following table provides compensation information for the one-year

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Compensation in 2020

Fees earned or

Option Awards

earned or paid in cash

$ 2,500  

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$ 28,200  

Employment Agreement

Allan Pratt was unanimously appointed the Company’s President

and Chief Executive Officer.

Effective December 30, 2016, Mr.

entered into a 3-year employment agreement .

The Employee shall have such

duties and authority as are normally associated with the senior

officer of a corporation and any other duties reasonably assigned

to the Employee by the Board of Directors of the Company.

Compensation was set at $185,000 with options for bonus and equity

In the event that the Mr.

Pratt’s employment is

terminated by the Company during the initial term without cause or

terminated by Mr.

Pratt “for good reason”, the Company

is required to pay a lump sum severance payment equal to three

times his compensation set forth as base salary and bonus until

Employee’s second anniversary, and thereafter during the

Initial Term for a lump sum severance payment equal to three times

his base salary only.

On February 29, 2020, Mr.

Pratt completed his

contractual obligation as Chief Executive Officer.

Security Ownership of Certain Beneficial Owners and

Management and Related Stockholder Matters

$ 1,000  

$ 12,850  

$ 13,850  

Security O w nership of

Certain Beneficial Owners and Management and Related Stockholder

knowledge of the management of the Company the following table sets

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Company’s issued and outstanding shares.

Amount and Nature

of Beneficial Ownership

Amount and Nature of

Beneficial Ownership

Percent of Class

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2,222,273 (4)

64,717 (6), (4)

914,973  

All directors

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are options to purchase 30,000 shares of the Company’s common

stock, 34,425 warrants and 227,633 shares held for which W.

Lewis, IV is the General Partner.

Includes options to

purchase 56,000 shares of the Company's common stock.

stock, and 1,402,058 shares held for which W.

Austin Lewis, IV is

the General Partner.

options to purchase 66,000 shares of the Company's common

are calculated on the basis of the amount of outstanding securities

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has the right to acquire within 60 days.

Included in this

amount are shares authorized and reserved for future issuance from

exchangeable shares.

Includes options to

purchase 30,000 shares of the Company's common stock.

Includes options to

purchase 37,500 shares of the Company's common stock.

in this amount are shares authorized and reserved for future

issuance from exchangeable shares.

options to purchase 35,000 shares of the Company's common

options to purchase 47,500 shares of the Company's common

knowledge of the management of the Company, based solely on our

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Item 5 of this Annual Report on Form 10-K.

Certain Relationships and Related Transactions, and

Director Independence

Certa i n Relationships and

Related Transactions, and Director Independence

Company did not engage in any transaction in 2019 or 2020, and does

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is the sole member of the audit committee.

board of directors currently consists of five members.

directors determined that the three directors, Andrew Pilaro,

board of directors currently consists of three members.

of directors determined that the three directors, Andrew Pilaro,

Laurie Bradley and David Ogden, are independent under the standards

of the “Nasdaq Global Market" pursuant to Nasdaq Listing Rule

Principal Accountant Fees and Services

Principal Accounta n t Fees

Corbin & Company LLP (“KMJ”) is our independent

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billed for tax compliance, tax advice and tax planning

10,638  

Total All Fees

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list of the financial information included herein, see “Index

to Audited Financial Statements”

on page 32 of this Annual

Report on Form 10-K.

to Audited Consolidated Financial Statements”

on page 32 of

this Annual Report on Form 10-K.

Financial Statements Schedules

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exhibits hereto and is incorporated herein by

Form 10-K Summary

Pursuant to the

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its behalf by the undersigned, thereunto duly

By:  

Interim Chief

Executive Officer, Chief Financial Officer

March 31, 2021

Austin Lewis, IV, Interim Chief Executive Officer, Chief Financial

 Pursuant

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the registrant and in the capacities and on the dates

Austin Lewis, IV

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

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principles generally accepted in the United States of

Change in Accounting Principle

discussed in Note 3 to the consolidated financial statements, the

Company changed the manner in which it accounts for leases in

Going Concern

accompanying consolidated financial statements have been prepared

assuming that the Company will continue as a going concern.

discussed in Note 2 to the consolidated financial statements, the

Company has suffered recurring losses from operations and has a

working capital deficit of $397,891 and an accumulated deficit of

$67,008,347 as of December 31, 2019, which raises substantial doubt

about its ability to continue as a going concern.

Management’s plans in regard to these matters are also

described in Note 2.

The consolidated financial statements do not

include any adjustments that might result from the outcome of this

Basis for Opinion

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audits provide a reasonable basis for our opinion.

Critical Audit Matters

critical audit matters communicated below are matters arising from

the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee

(1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

Liquidity Assessment

Critical Audit Matter Description

Management has prepared the Company’s consolidated financial

statements on a 

going concern  basis, which contemplates the continuity of

operations, and the realization of assets and the satisfaction of

liabilities in the normal course of business.

As discussed in Note

2, the Company incurred an operating loss for the year ended

December 31, 2020, but had positive working capital as of December

31, 2020 and net cash provided by operating activities for the year

ended December 31, 2020.

Management assesses whether the Company

has sufficient liquidity to fund its costs for the next twelve

months from the financial statement issuance date in order to

determine if there is substantial doubt about the Company’s

ability to continue as a 

going concern .

preparation of this liquidity assessment, management applies

judgment to estimate the projected cash flows of the Company, which

are based on known or planned cash requirements for operating costs

as well as planned costs for project

development. 

The principal consideration for our determination that performing

procedures relating to the liquidity assessment is a critical audit

matter is the significant judgments made by management when

assessing whether the Company has sufficient liquidity.

determined there is significant estimation and execution

uncertainty regarding the Company’s future cash flows and the

risk of bias in management’s judgments and assumptions in

estimating these cash flows.

How the Critical Audit Matter Was Addressed in the

Our audit procedures related to the Company’s assertion as to

its ability to continue as a 

going concern  included the following, among

gained an understanding of the Company’s process relating to

the preparation of projected information and considerations of the

Company’s obligations.

tested the reasonableness of the projected operating expenses, and

uses and sources of cash used in management’s assessment of

whether the Company has sufficient liquidity to fund operations for

at least one year from the financial statement issuance date.

testing included inquiries with management, comparison of prior

period projections to actual results, and consideration of positive

and negative evidence impacting management’s

evaluated the reasonableness of management’s assumptions

related to the likelihood that the Company would be able to reduce

operating expenditures if required.

Corbin & Company LLP

served as the Company’s auditor since 2013.

Mesa, California

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31,

cash equivalents

Cash and cash

$ 1,644,210  

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131,561  

expenses and other current assets

Prepaid expenses

and other current assets

184,366  

124,257  

current assets

Total current

2,000,361  

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89,707  

Other intangible

Intangible assets,

3,633,420  

5 unchanged sentences

$ 5,787,086  

$ 4,991,418  

LIABILITIES AND

2 unchanged sentences

$ 876,260  

14,954  

leases - current portion

207,786  

Finance leases -

current portion

276,254  

207,786  

  Operating

lease obligations –

Operating lease

obligations –

current portion

33,118  

current liabilities

30,255  

Total current

1,781,746  

leases - net of current portion

1,129,590  

  Operating

lease obligations –

Finance leases -

net of current portion

Operating lease

obligations –

net of current portion

61,794  

93,642  

liability, net

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stock, $0.001 par value, 5,000,000 shares authorized;

4,438,578 and

4,438,578 shares issued and outstanding at December 31, 2020 and

2019, respectively;

liquidation value of $13,808,610 and

$11,800,316 at December 31, 2019 and 2018,

liquidation value of $0 and $13,808,610 at

December 31, 2020 and 2019, respectively

Common stock,

1 unchanged sentence

6,489,004 shares

issued and 1,614,817 outstanding at December 31, 2019 and

issued and 6,455,164 shares outstanding at December 31, 2020,

1,648,657 shares issued and 1,614,817 outstanding at December 31,

Accrued common

2,005,500  

Additional paid-in

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7,801,554  

Amortization of

acquired technology

3,111,289  

Total cost of

2,746,741  

1 unchanged sentence

1,452,134  

2,191,267  

1,452,134  

970,193  

administrative

1 unchanged sentence

1,135,230  

Loss on impairment

10,354,172  

Amortization of

other intangible assets

intangible assets

458,915  

5 unchanged sentences

3,458,774  

(11,655,393 )

Interest expense,

Other income,

1 unchanged sentence

988,152  

Unrealized gain

(loss) on stock price guarantee

Unrealized gain on

stock price guarantee

Total other income,

2 unchanged sentences

Income (loss)

before income tax benefit

before income tax provision (benefit)

279,807  

(11,594,822 )

provision (benefit)

122,207  

(11,531,526 )

Preferred share

redemption discount

282,011  

1 unchanged sentence

available to common shareholders

$ 90,006  

$ (2,261,085 )

$ 90,006  

Net income (loss)

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statements of comprehensive income (loss):

$ 282,011  

$ (2,232,553 )

$ 282,011  

Other comprehensive

3 unchanged sentences

57,867  

168,712  

Comprehensive

income (loss)

$ 450,723  

$ (2,174,686 )

$ 450,723  

accompanying notes to consolidated financial

1 unchanged sentence

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Additional Paid

Accumulated Other

Comprehensive

Amount  

Comprehensive

Amount  

 Stock Bonus

Capital  

Income  

Deficit  

Amount  

Balance, January 1,

7 unchanged sentences

$ 1,916,518  

Repurchase of

common and preferred shares

250,170  

Foreign currency

translation adjustment

168,712  

Preferred dividends

compensation expense

1 unchanged sentence

407,974  

Preferred shares

issued as compensation

653,866  

(11,531,526 )

82,567  

83,221  

282,011  

Balance December

9 unchanged sentences

57,867  

Preferred dividends

compensation expense

1 unchanged sentence

128,308  

Preferred shares

issued as compensation

2,133,808  

Preferred dividends

paid in shares

126,727  

358,511  

Preferred to Common

4,566,227  

Preferred dividends

318,893  

Balance December

318,893  

2 unchanged sentences

35,636  

Balance December

6,489,004  

$ 6,489  

$ 2,005,500 

$ 70,083,486  

$ 570,761  

$ (69,625,790 )

5 unchanged sentences

operating activities:

$ 282,011  

income (loss)

$ (2,232,553 )

$ 282,011  

to reconcile net income (loss) to net cash provided by operating

5 unchanged sentences

28,545  

impairment of goodwill

22,850  

       Provision

for bad debts

20,125  

of property and equipment

2,452,701  

407,974  

(gain) loss on stock price guarantee

disposal of property and equipment

from stock price guarantee

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property and equipment

used in investing activities

provided by (used in) investing activities

Cash flows from

2 unchanged sentences

notes payable

related party notes payable

from warrant exercise

35,636  

preferred dividends

3 unchanged sentences

67,024  

31,526  

Net change in cash

and cash equivalents

1,168,329  

Cash and cash

10 unchanged sentences

$ 1,687  

$ 1,673  

DISCLOSURES OF NON-CASH ITEMS

of preferred and common shares with notes payable

  Issuance

of preferred shares for settlement of dividends

$ 358,638  

9 unchanged sentences

(“PAID”, the “Company”,

“we”, “us”, “our”) has

“we”, “us”, or “our”) has

developed AuctionInc, which is a suite of online shipping and tax

12 unchanged sentences

reporting can be processed with a single click and is fully

customizable by state or providence.

customizable by state or province.

The software is designed to

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(“ShipTime”) has developed a SaaS-based

application, which focuses on the small - and medium-sized business

application, which focuses on the small and medium business

This offering allows members to quote, process, generate

5 unchanged sentences

ShipTime can also be integrated into on-line shopping carts to

facilitate sales via ecommerce.

facilitate sales via e-commerce.

We actively sell directly to small

- and medium-sized businesses and through long-standing

partnerships with selected associations throughout

Canada. 

GOING CONCERN AND MANAGEMENT’S PLANS

accompanying consolidated financial statements have been prepared

on a going concern basis which contemplates the realization of

assets and the satisfaction of liabilities in the normal course of

The Company has continued to incur operating losses.

the year ended December 31, 2019, the Company reported an operating

loss of $712,033.

The Company has an accumulated deficit of

$67,008,347 and a working capital deficit of $397,891 at December

These factors raise substantial doubt about the

Company’s ability to continue as a going

and medium businesses and through long standing partnerships with

selected associations throughout Canada. 

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.

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.

LIQUIDITY AND MANAGEMENT’S PLANS

year ended December 31, 2020, the Company reported cash and cash

equivalents of $1,644,210 and cash flow from operations of

$1,100,809 with working capital of $218,615.

The Company has

reported an operating loss of $2,131,474 for the year ended

December 31, 2020 and has an accumulated deficit of $69,625,790 at

December 31, 2020.

Management believes

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services will return a valuable impact on the Company’s

success in the near future.

success in the future.

The ongoing positive cash flows from

operations is a significant indicator of our successful transition

to the new shipping services.

In addition to the existing services

provided, ShipTime will launch products in the United States that

are complementary to the current offerings.

to the new shipping and eCommerce services.

In addition to the

existing services provided, ShipTime will launch products in the

United States that are complementary to the current offerings.

Company also continues to seek alternate sources of capital to

support future operations.

Although there can

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plan will be sufficient to meet the Company's working capital

requirements through the end of 2020 and will have a positive

impact on the Company for 2020 and future years.

requirements through the end of March 2022 and will have a positive

impact on the Company for the foreseeable future.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

72 unchanged sentences

instruments include cash and cash equivalents, accounts receivable,

accounts payable, notes payable and accrued expenses.

amount of cash and cash equivalents, accounts receivable, accounts

payable, notes payable and accrued expenses approximates fair value

due to the short-term maturities of these instruments.

accounts payable, and accrued expenses.

The carrying amount of cash

and cash equivalents, accounts receivable, accounts payable, and

accrued expenses approximates fair value due to the short-term

maturities of these instruments.

and Cash Equivalents

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individual customer accounted for more than 10% of the total

As of December 31, 2019, there was one customer that

accounted for 39% of the accounts receivable balance.

accounted for more than 10% of the total accounts receivable

balance at December 31, 2018.

As of December 31, 2020, there was no customer that

accounted for more than 10% of the accounts receivable balance, As

of December 31, 2019, there was one customer that accounted for 39%

of the accounts receivable balance.

Advanced royalties

8 unchanged sentences

guaranteed price per share and the fair value of the stock. 

The change in fair value was recorded at ($3,688) and $3,527 for

the year ended December 31, 2019 and 2018, respectively.

December 31, 2018 the stock price guarantee was $884,241.

Company would have disputed this obligation if demanded by the

further, pursuing any action by the client was required to

be filed within six years of the time of the original issuance and

the Company believes the time for pursuing an action has expired.

As a result of the expiration the Company eliminated this

obligation from its consolidated balance sheet and recorded

$880,553 in other income during the year ended December 31,

The change in fair value was ($3,688) for the year ended December

The Company would have disputed this obligation if

demanded by the client;

further, pursuing any action by the client

was required to be filed within six years of the time of the

original issuance and during the year ended December 31, 2019, the

Company believed the time for pursuing an action expired.

result of the expiration the Company eliminated this obligation

from its consolidated balance sheet and recorded $880,553 in other

income during the year ended December 31, 2019.

and Equipment

6 unchanged sentences

under capital leases is amortized on a straight-line basis over the

estimated useful lives of the asset or the term of the lease,

estimated useful life of the asset or the term of the lease,

whichever is shorter.

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Intangible assets

intangible assets consist of patents, client lists, trade names,

customer relationships, brewery and distillery management software

and shipping label generation technology which are being amortized

on a straight-line basis over their estimated useful lives.

Currently the intangible assets are being amortized between two and

Assets and Goodwill

Company reviews the carrying values of its long-lived assets and

goodwill for possible impairment whenever events or changes in

circumstances indicate that the carrying amount may not be

If the expected future cash flows 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.

During the year ended December

31, 2018, the Company recorded impairment of goodwill in the amount

of $10,354,172.

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.

consist of patents, client lists, trade names, customer

relationships, brewery and distillery management software and

shipping label generation technology which are being amortized on a

straight-line basis over their estimated useful lives.

the intangible assets are being amortized between two and 17

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.

expected future cash flows 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.

No impairment charges were recognized during

the years ended December 31, 2020 and 2019.

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 impairment of long-lived assets in the

Company generates revenues principally from fees for coordinating

shipping services, sales of shipping calculator subscriptions,

brewery management software subscriptions, and client services (see

brewery management software subscriptions, merchant processing

services and client services (see Note 4).

revenues includes carrier services, web hosting, data storage, and

commissions, carrier insurance costs and amortization of acquired

commissions, carrier insurance costs and merchant processing

interchange fees.

Operating expenses

include indirect expenses, including credit card processing fees,

marketing, payroll, travel, facility costs, amortization of other

intangibles and other general and administrative

marketing, payroll, travel, facility costs, amortization of

intangible assets and other general and administrative

Advertising costs

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that the Company accounts for using the fair value method.

addition, during 2018 the Board of Directors approved the issuance

of preferred shares for executive compensation which was issued in

addition, the Board of Directors approved an amendment to ShipTime’s December

30, 2016 Warrant Agreement with an entity controlled by the

Company’s Interim CEO/CFO to

reprice the outstanding warrants.

The modification of the warrant

resulted in a charge to the Company’s share-based

compensation expense .

In addition, during 2021, the

Company's board of directors granted shares of common stock valued

at the closing price on the date of the grant, for 2019 and 2020

bonuses and 2021 signing bonus to the Interim CEO/CFO (See Note 10

and Note 13).

fair value of each option award is estimated on the date of grant

49 unchanged sentences

Company’s income tax provision includes state minimum

The Company recognizes any uncertain income tax positions on income

tax returns at the largest amount that is more-likely-than-not to

be sustained upon audit by the relevant taxing authority.

uncertain income tax position will not be recognized if it has less

than a 50% likelihood of being sustained.

There are no unrecognized

tax benefits included in the consolidated balance sheet that would,

if recognized, affect the effective tax rate.

Company recognizes any uncertain income tax positions on income tax

returns at the largest amount that is more-likely-than-not to be

sustained upon audit by the relevant taxing authority.

income tax position will not be recognized if it has less than a

50% likelihood of being sustained.

There are no unrecognized tax

benefits included in the consolidated balance sheet that would, if

recognized, affect the effective tax rate.

Company’s policy is to recognize interest and/or penalties

17 unchanged sentences

result from the assumed issuance.

The potential common shares in

2018 totaling 58,852 that may be issued by the Company relate to

outstanding stock options and have been excluded from the

computation of diluted loss per share because they would reduce the

reported loss per share and therefore have an anti-dilutive

The potential common shares that

may be issued by the Company relate to outstanding stock options

and have been excluded from the computation of diluted earnings

(loss) per share because they would reduce the reported loss per

share and therefore have an anti-dilutive effect.

year ended December 31, 2020, there were no dilutive shares that

were included in the diluted earnings (loss) per share as their

effect would have been anti-dilutive for the year then

Company computes its income (loss) available to common shareholders

7 unchanged sentences

ended December 31:

$ (2,261,085 )

$ 90,006  

Net income (loss)

available to common shareholders

$ 90,006  

$ (11,447,989 )

weighted-average shares outstanding

3 unchanged sentences

54,361  

58,852  

weighted-average diluted shares

weighted-average shares outstanding

5,469,908  

1,669,178  

Earnings per share

attributed to common stockholders –

Net income (loss)

per share attributed to common stockholders –

$ 0.06  

Earnings per share

attributed to common stockholders - diluted

Net income (loss)

per share attributed to common stockholders - diluted

$ 0.05  

15 unchanged sentences

coordination and label generation services;

Company evaluates performance and allocates resources based upon

Company evaluates performance and allocates resources based on

operating income.

3 unchanged sentences

The Company’s chief

operating decision makers are the Chief Executive Officer and Chief

Financial Officer.

operating decision makers are the interim Chief Executive Officer

and Chief Financial Officer.

following table compares total revenues for the years

8 unchanged sentences

Merchant processing

425,839  

coordination and label generation services

12 unchanged sentences

Shipping calculator

108,512  

Merchant processing

104,958  

coordination and label generation services

(10,861,979 )

679,130  

Total loss from

$ (2,131,474 )

2020, the Company recorded depreciation and amortization of

$488,745 which was solely related to the shipping coordination and

label generations service segment of the Company.

Accounting Pronouncements

 In February

2016, the Financial Accounting Standards Board (“FASB”)

issued Accounting Standards Update (“ASU”) 2016-02,

“Leases”, which requires the lease rights and

obligations arising from lease contracts, including existing and

new arrangements, to be recognized as assets and liabilities on the

balance sheet.

ASU 2016-02 is effective for reporting periods

beginning after December 15, 2018 with early adoption

Company adopted the new lease standard (ASC 842) on January 1,

We used the modified retrospective approach, which allowed us

to make our transition adjustments at January 1, 2019.

currently have two finance leases for office furniture and

We maintain a lease inventory for those leased assets,

which are currently reported on our consolidated balance sheets and

we continue to report them on our consolidated balance sheet under

the new standard.

We reported one material operating lease on our

consolidated balance sheet beginning January 1, 2019, resulting in

recording operating lease right-of-use assets and operating lease

obligations of approximately $84,000.

We determined that no

adjustment to equity was necessary related to implementation of the

new lease standard.

Company elected certain practical expedients and as permitted did

not reassess whether existing contracts are or contain leases, the

lease classification and initial direct costs for any existing

As part of practical expedients selected the Company also

used hindsight in determining lease terms.

The Company has lease

agreements with lease and non-lease components, which are accounted

for as a single lease component.

Leases with an initial term of

twelve months or less are not recorded on the balance sheet as we

recognize lease expense for these leases on a straight-line basis

over the lease term.

January 2016, the FASB issued ASU 2016-01, “Financial

Recognition and Measurement of Financial Assets and

Financial Liabilities”, which addresses certain aspects of

recognition, measurement, presentation and disclosure of financial

The Company adopted the standard on January 1, 2019

with no net effect on its consolidated financial

2016, the FASB issued ASU 2016-13, “Financial

7 unchanged sentences

which will result in earlier recognition of credit losses.

Company will adopt the new standard effective January 1, 2020 and

does not expect the adoption of this guidance to have a material

impact on its consolidated financial statements.

Company’s adoption of ASU 2016-13 on January 1, 2020 had no

impact on its consolidated financial position, results of

operations, cash flows or disclosures.

August 2018, the FASB issued ASU 2018-13, “Changes to

4 unchanged sentences

modifies, and adds certain disclosure requirements.

will adopt the new standard effective January 1, 2020 and does not

expect the adoption of this guidance to have a material impact on

its consolidated financial statements.

Company’s adoption of ASU 2018-13 on January 1, 2020 had no

impact on its consolidated financial position, results of

operations, cash flows or disclosures.

December 2019, the FASB issued ASU No.

53 unchanged sentences

Beginning in 2018,

customers are offered airline miles as a reward in lieu of a cash

customers were offered airline miles as a reward in lieu of a cash

As a result, the CFIB allowed the Company to release the

5 unchanged sentences

miles per $1 of rebates.

For the years ended December 31, 2019 and

2018, the Company recognized $8,066 and $67,532, respectively, of

other income related to the conversion of airline miles as the cost

was less than the value of the cash rebated exchanged.

2019, the Company recognized $95,500 of other income related to the

expiration of the cash rebates.

Unused airline miles are recorded

in prepaid expenses and other current assets in the accompanying

consolidated balance sheets.

During the second quarter of 2019 the

prepaid miles purchased to be awarded to customers were scheduled

Aeroplan granted permission for a one-time transfer of

the balance of the prepaid miles to the Company’s Aeroplan

As a result, the Company recorded an expense in the amount

For the year ended December 31, 2019, the

Company recognized $8,066 of other income related to the conversion

of airline miles as the cost was less than the value of the cash

rebated exchanged.

In December 2019, the Company recognized $95,500

of other income related to the expiration of the cash rebates.

Unused airline miles are recorded in prepaid expenses and other

current assets in the accompanying consolidated balance sheets.

During the second quarter of 2019 the prepaid miles purchased to be

awarded to customers were scheduled to expire.

Aeroplan granted

permission for a one-time transfer of the balance of the prepaid

miles to the Company’s Aeroplan account.

As a result, the

Company recorded an expense in the amount of $32,102 for the year

ended December 31, 2019.

shipping calculator revenues and brewery management software

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All payments are made via credit card for the month

processing revenue consists of fees a seller pays us to process

their payment transactions and is recognized upon authorization of

a transaction.

Revenue is recognized net of estimated refunds,

which are reversals of transactions initiated by sellers.

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.

Revenue Disaggregation

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subscription, typically twelve months or less.

 Merchant

processing customers receive a merchant identification number which

allows them to process credit card transactions.

transaction is approved, the funds are distributed in an overnight

feed and the Company has met its performance

Company has no shipping and handling activities related to

23 unchanged sentences

information (historical, current and forecasted) that is reasonably

recorded net of variable consideration, such as rebates and

cancellations.

recorded net of variable consideration, such as rebates, refunds

and cancellations.

Company’s products and services are provided on an “as

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In addition, the

Company has various other intangibles from past business

combinations.

December 31, other intangible assets consisted of the

In addition, the Company has various intangible assets from past

business combinations.

December 31 2020, intangible assets consisted of the

 Patents

Relationships

Gross carrying

$ 16,000  

6 unchanged sentences

$ 3,633,420  

Client list /

At December 31, 2019, intangible assets consisted of the

 Patents

Relationships

Gross carrying

$ 16,000  

2 unchanged sentences

$ 4,851,093  

expense of other intangible assets for the years ended December 31,

$ 6,304,524  

$ 333,315  

$ 3,715,257  

$ 4,048,572  

expense of intangible assets for the years ended December 31, 2020

and 2019 was $458,915 and $463,436, respectively.

Amortization of

other intangible assets for the next five years ending December 31

are as follows:

intangible assets for the next five years ending December 31 are as

Year Ended December

5 unchanged sentences

$ 1,739,352  

Goodwill represents

the excess of the purchase price of the acquired business over the

estimated fair value of the underlying net tangible and intangible

assets acquired.

During the year ended 2018, the Company determined

that the entire balance of goodwill was impaired and recorded a

loss on the impairment of $10,354,172.

ACCRUED EXPENSES

7 unchanged sentences

47,803  

guarantee (see Note 3)

884,241  

Accrued cost of

6 unchanged sentences

$ 207,786  

$ 1,268,633  

OTHER LIABILITIES

2017, the Company entered into two notes payable with a shareholder

to repurchase common and preferred shares.

The first note was for a

period of one year for CAD $120,000 with payment terms of twelve

equal installments of CAD $10,328 at an interest rate of 6%.

second note was an interest-free, seven-month note for CAD $70,992

with payment terms of one payment of CAD $10,000 followed by six

equal installments of CAD $10,165.

Both of these notes were paid in

full in 2018.

January 2018, the Company entered into a note payable with a

August 2018, the Company entered into a note payable with a

shareholder to repurchase common and preferred shares.

an interest-free, eight-month note for CAD $66,708 with payment

terms of one payment of CAD $10,000 followed by eight equal

installments of CAD $8,101.

This note was paid in full in the third

quarter of 2018.

In April 2018, the Company entered into a note

payable with a shareholder to repurchase common and preferred

The note was an interest-free, fifteen-month note for CAD

The Company made payments on this note in the amount of

The balance of CAD $40,774 on this note was offset in

the third quarter of 2018 against a note receivable to the same

party (see below).

In August 2018, the Company entered into a note

payable with a shareholder to repurchase common and preferred

The note is an interest-free, six-month note for CAD

$122,400 with payment terms of six equal installments of CAD

The balance of the note payable as of December 31, 2018

This note was paid in full in the first quarter of

April 2018, the Company entered into an agreement with a third

party to develop software to assist with the growth of the

e-commerce platform.

The agreement contained a loan to a third

party in the amount of $144,000 to be loaned by the Company in

eighteen installments of which CAD $40,744 was actually loaned

the third quarter of 2018, the Company cancelled the agreement and

called the CAD $40,774 note with the third party developer.

result, the balance of the note receivable was offset against the

CAD $72,500 note payable for the repurchase of common and preferred

shares issued to the same party (see above), and no balance on the

note receivable is due.

RELATED PARTY NOTES PAYABLE

2017, the Company agreed to make monthly payments of CAD $5,000 to

related parties for seven months followed by monthly payments of

CAD $15,000 with one final payment in March 2018 at which point the

note was paid in full.

an interest-free, six-month note for CAD $122,400 with payment

terms of six equal installments of CAD $20,400.

This note was paid

in full in the first quarter of 2019.

COMMITMENTS AND CONTINGENCIES

normal course of business, the Company periodically becomes

involved in litigation.

As of December 31, 2019, in the opinion of

management, the Company had no pending litigation that would have a

material adverse effect on the Company's consolidated financial

position, results of operations, or cash flows.

In the normal course

of business, the Company periodically becomes involved in

litigation and disputes.

During 2020, the Company was notified of a

dispute related to its non-renewal of the employment agreement with

Allan Pratt, the Company's former CEO, in which Mr.

appears to be treating it as a termination which would trigger a

two-year severance payment.

As of December 31,

2020, in the opinion of management, the Company had no pending

litigation and disputes that would have a material adverse effect

on the Company's consolidated financial position, results of

operations, or cash flows.

and Guarantees

20 unchanged sentences

 Preferred Stock

8 unchanged sentences

each series of the preferred stock.

Company filed a Certificate of Designations effective on December

30, 2016 which sets aside 5,000,000 shares of Preferred Stock as

Series A Preferred Stock.

The Series A Preferred Stock holders have

no voting rights and have an aggregate liquidation value of

$13,808,610 at December 31, 2019.

The Series A Preferred Stock also

carries a coupon payment obligation of 1.5% of the liquidation

value per share ($3.03) per year in cash or additional Series A

Preferred Stock, calculated by taking the 30-day average closing

price for a share of common stock for the month immediately

preceding the coupon payment date which is made annually.

years ended December 31, 2019 and 2018, the annual coupon is

$192,005 and $166,633, respectively, which has been added to the

liquidation value of the preferred stock.

The Series A Preferred

Stock have no voting or conversion rights.

If purchased, redeemed,

or otherwise acquired (other than conversion), the preferred stock

may be reissued.

In April 2019, the Company paid the annual coupon

for the year ended December 31, 2017.

The Company paid the 2018 and

2019 coupon payments totaling $358,638 in 126,727 preferred shares

in March of 2020.

2019, the Board of Directors satisfied 2018 accrued Executive

Compensation by means of issuance of 653,866 preferred shares

valued at $83,221.

The Company filed a

Certificate of Designations effective on December 30, 2016 which

sets aside 5,000,000 shares of Preferred Stock as Series A

Preferred Stock.

The Series A Preferred Stock carries a coupon

payment obligation of 1.5% of the liquidation value per share

($3.03) per year in cash or additional Series A Preferred Stock,

calculated by taking the 30-day average closing price for a share

of common stock for the month immediately preceding the coupon

payment date which is made annually.

For the years ended December

31, 2020 and 2019, the annual coupon is $28,532 and $192,005,

respectively.

The Series A Preferred Stock has no voting or

conversion rights.

If purchased, redeemed, or otherwise acquired

(other than conversion), the preferred stock may be reissued.

April 2019, the Company paid the annual coupon for the year ended

December 31, 2017.

The Company paid the 2018 and 2019 coupon

payments totaling $358,638 by issuing 126,727 preferred shares and

a cash payment of $26,252 for the 2020 coupon payment through March

During 2019, the Board of Directors satisfied 2018 accrued

executive compensation by means of issuance of 653,866 preferred

shares valued at $83,221.

In 2020, all 4,565,305 shares of Series A

Preferred Stock were exchanged for common stock (see below).

December 31, 2020, there are no outstanding shares of Series A

Preferred Stock.

Company has authorized and reserved for future issuance 512,380

shares of common stock and 3,565,926 shares of preferred stock with

respect to the remaining exchangeable shares to be issued as a

result of the ShipTime acquisition.

February 2020, ShipTime Canada amended its rights to exchange one

6 unchanged sentences

PAID common shares.

The conversion was offered on a one-to-one

Twelve shareholders elected to convert 1,908,160 ShipTime

exchangeable preferred rights into Paid common stock and 53,543

Paid preferred book entry shares into Paid common stock.

separate agreements, three additional shareholders elected to

convert 510,314 Paid book entry Series A Preferred Stock into

510,314 shares of Paid common stock.

After the conversion, the

Company had 424,255 shares of Series A Preferred Stock outstanding

and 5,756,789 shares of common stock outstanding.

The Company has

reserved for future issuance 4,654,352 shares of common stock with

respect to the remaining exchangeable shares to be issued as a

result of the ShipTime acquisition.

January 2018, the Company entered into an agreement to repurchase

109 exchangeable shares of ShipTime common stock.

The total shares

exchanged in this transaction were 4,905 common shares and 33,899

preferred shares of the Company.

The allocated discount on the

repurchase of the preferred stock was $1.87 per share and has been

recorded in accumulated deficit, and reduced the net loss available

to common shareholders in accordance with ASC 260-10-S99-2.

repurchase of the common shares was recorded at an allocated cost

of $1.59 per share.

In April 2018, the Company entered in a second

agreement with a shareholder to purchase 120 exchangeable shares of

ShipTime common stock.

The total shares exchanged in this

transaction were 5,400 common shares and 37,320 preferred shares of

The discount on the repurchase of preferred stock was

$1.90 per share and has been recorded in accumulated deficit, and

reduced the net loss available to common shareholders.

repurchase of the common shares was recorded at an allocated cost

of $1.58 per share.

In August 2018, the Company entered in an

additional agreement with a shareholder to purchase 200

exchangeable shares of ShipTime common stock.

The total shares

exchanged in this transaction were 9,000 common shares and 62,200

preferred shares of the Company.

The discount on the repurchase of

preferred stock was $1.87 per share and has been recorded in

accumulated deficit, and was added to the net loss available to

common shareholders.

The repurchase of the common shares was

recorded at an allocated cost of $1.58 per share.

There were no

share repurchase agreements in 2019.

As a result, certain ShipTime exchangeable

shareholders exercised their rights to receive 1,461,078 shares of

PAID Series A Preferred Stock for 1,461,078 shares of PAID common

At the same time, the Company made available to its Series A

Preferred Stock shareholder the option to exchange existing Series

A preferred shares for PAID common shares.

The exchange was offered

on a one-to-one basis.

Shareholders holding 1,015,851 shares of

Series A Preferred Stock exchanged such shares for 1,015,851 shares

of PAID common stock.

Furthermore, because of the amended exchange

rights, the Company reflected an additional exchange of PAID Series

A Preferred Stock shares totaling 2,089,298 to PAID common shares,

representing the additional amount of PAID common shares that will

be issued to the ShipTime shareholders upon the exchange.

2020, two shareholders sold 500 ShipTime exchangeable shares which

were subsequently exchanged for 178,000 common shares.

the Company has reserved for future issuance of 2,213,608 shares of

PAID common stock with respect to the remaining 6,218 exchangeable

shares to be issued as a result of the ShipTime acquisition which

are considered issued and outstanding as of December 31, 2020 for

financial reporting purposes.

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.

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.

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,

These shares were issued in March 2021.

Incentive Plans

the years ended December 31, 2019 and 2018, the Company had three

the years ended December 31, 2020 and 2019, the Company had four

stock option plans that include both incentive and non-qualified

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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.

The Company granted 215,177 stock options to employees and

consultants during the year ended December 31, 2018.

ended December 31, 2019, the Company granted 136,020 stock options

to employees, consultants and directors.

The 2019 options have

vesting periods of immediately and over a two-year period, they

expire if not exercised within ten years from grant date, and the

exercise price ranges from $2.92 to $3.00 per share.

as a result of the resignation of one employee the Company recorded

12,500 expired options and an additional 12,500 that were

On November 10, 2020 the board

voted to increase the 2018 Stock Option Plan from 450,000 options

to 900,000 options.

The Company granted 136,020 stock options to

employees and consultants during the year ended December 31, 2019.

For the year ended December 31, 2020, the Company granted 105,000

stock options to employees, consultants and directors.

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

March 23, 2018, the Company adopted the 2018 Non-Qualified Stock

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105,000  

Cancelled/Expired

Options outstanding

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(based upon historical experience)

143 - 159%  

Risk free interest

2.05 –

years ended December 31, 2020 and 2019, the Company recorded total

share-based compensation expense of $407,974 and $599,799,

respectively, which is recorded in general and administrative

expenses in the accompanying consolidated statements of operations

and comprehensive income (loss).

share-based compensation expense related to accrued common stock

bonus and stock options of $2,133,808 and $407,974, respectively,

which is recorded in share-based compensation expenses in the

accompanying consolidated statements of operations and

comprehensive income (loss).

Company has unrecognized share-based compensation expense of

$178,349 for options outstanding as of December 31, 2020 which will

be recognized in fiscal years 2020, 2021 and 2022.

be recognized over the weighted average period of approximately

pertaining to options outstanding and exercisable at December 31,

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327,124  

of all stock option plans during the year ended December 31, 2019

of all stock option plans activity during the year ended December

31, 2020 is as follows:

Weighted Average

Remaining Contractual Life (In Years)

Intrinsic Value  

Options outstanding

at January 1, 2019

Average Price

Average Remaining Contractual Life (In Years)

Intrinsic Value

outstanding at January 1, 2020

381,197  

$ 4.03  

Options outstanding

and expected to vest at December 31, 2019

105,000  

Cancelled/Expired

outstanding and expected to vest at December 31, 2020

403,790  

$ 3.81  

Options exercisable

at December 31, 2019

$ 57,488  

exercisable at December 31, 2020

327,124  

$ 4.02  

$ 57,488  

aggregate intrinsic value of options is calculated as the

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non-employees for services rendered or to be rendered in the

summary of the warrant activity during the year ended December 31,

2019 is as follows:

Number of Shares

Warrants Outstanding

Weighted Average

Exercise Price

outstanding - January 1, 2019

34,425  

$ 0.87  

outstanding and exercisable - December 31, 2019

34,425  

$ 0.87  

Weighted average

remaining contractual life of the outstanding warrants in

On August 14, 2020, the Board of Directors approved an

amendment to ShipTime’s December 30, 2016 Warrant Agreement

with an entity controlled by the Company’s Interim CEO/CFO to

reprice the outstanding warrants.

The modification of the warrant

resulted in a charge to the Company’s share-based

compensation expense of $318,893. 

As of December 31, 2020,

there were no outstanding warrants.

Company’s income (loss) before taxes includes the following

components for the years ended December 31:

$ 277,014  

$ (2,537,388 )

$ 277,014  

427,042  

$ (2,110,346 )

$ 279,807  

Company is subject to taxation in the U.S., Canada, and

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provision (benefit)

$ 122,207  

reconciliation of income taxes computed by applying the statutory

income tax rate to the Company’s income (loss) before

income tax benefit to the income benefit is as follows for the

years ended December 31:

income tax provision (benefit) to the income tax provision

(benefit) is as follows for the years ended December

statutory tax rate

State tax benefit,

Impairment of

Effective income

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24,128  

Change in value of

compensation expense

853,239  

Nonqualified stock

option expense

380,544  

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$ (1,070,189 )

$ (1,088,306 )

Realization of

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The reduction in the valuation allowance is

approximately $432,000 in 2019.

approximately $206,000 and $432,000 in 2020 and 2019,

respectively.

December 31, 2020, the Company had net operating loss carryforwards

for federal income tax purposes of approximately $41,093,000.

the total amount approximately $99,000 were generated after January

1, 2018, and therefore will not expire but can only be used to

offset 80 percent of future taxable income.

The remaining amount of

approximately $44,423,000 expire beginning in the year 2020.

December 31, 2019, the Company had net operating loss carryforwards

for state income tax purposes of approximately $12,228,000 which

expire beginning in the year 2030.

the total amount approximately $494,000 were generated after

January 1, 2018, and therefore will not expire but can only be used

to offset 80 percent of future taxable income.

The remaining amount

of approximately $40,599,000 expire beginning in the year 2021.

of December 31, 2020, the Company had net operating loss

carryforwards for state income tax purposes of approximately

$12,559,000 which expire beginning in the year 2030.

Utilization of the

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incurred, as general and administrative expense.

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security

Act (CARES Act) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, permits NOL carryovers and

carrybacks to offset 100% of taxable income for taxable years

beginning before 2021.

In addition, the CARES Act allows NOLs

incurred in 2018, 2019, and 2020 to be carried back to each of the

five preceding taxable years to generate a refund of previously

paid income taxes.

Due to the Company's history of net operating

losses, the CARES Act is not expected to have a material impact on

the Company's financial statements.

December 27, 2020, the United States enacted the Consolidated

Appropriations Act of 2021 (“CAA”).

The CAA includes

provisions extending certain CARES Act provisions and adds

coronavirus relief, tax and health extenders.

The Company will

continue to evaluate the impact of the CAA and its impact on our

financial statements in 2021 and beyond.

an operating lease for our corporate offices in Canada and finance

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Our leases have remaining lease

terms of twelve months to forty-six months, and our primary

operating leases include options to extend the leases for four

Future renewal options that are not likely to be executed as

of the balance sheet date are excluded from right-of-use assets and

terms of six months to thirty-two months, and our primary operating

leases include options to extend the leases for four years.

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.

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.

and noncurrent obligations on our consolidated 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 consolidated balance sheets.

Generally, interest

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closely represents our incremental borrowing rate.

components of lease expense were as follows:

Year Ended December 31,

components of lease expense for the years ended December 31, were

Operating lease

$ 38,163  

$ 31,009  

Finance lease

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$ 10,813  

$ 10,636  

Interest on lease

1 unchanged sentence

$ 11,645  

cash flow information related to leases was as

December 31, 2019

$ 12,305  

cash flow information related to leases for the years ended

December 31, was as follows:

Cash paid for

amounts included in leases: 

Operating cash

flows from operating leases 

$ 39,583  

$ 30,960  

Operating cash

flows from finance leases 

$ 1,669  

Financing cash

flows from finance leases 

$ 9,627  

$ 8,821  

Right-of-use assets

obtained in exchange for lease obligations: 

$ 55,600  

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$ 2,844  

December 31, 2019

Ended December 31, 2020

Weighted Average

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107,012  

144,008  

   Less

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non-cancelable finance leases as of December 31, 2020:

Year ending December 31,

$ 2,919  

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payments required:

13,317  

representing interest:

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net minimum lease payments:

12,748  

$ 2,797  

Disclosures related to periods prior to adoption of ASC

future lease payments under lease obligations as of December 31,

2018 are as follows:

Year Ended December 31,

$ 10,222  

$ 29,779  

10,222  

38,202  

25,477  

minimum lease payments

23,180  

$ 169,862  

representing interest

Present value of

net minimum lease payment

20,696  

portion  

$ 12,116  

SUBSEQUENT EVENTS

In December 2019, a novel strain of coronavirus disease

(“COVID-19”) was first reported in Wuhan, China.

than four months later, on March 11, 2020, the World Health

Organization declared COVID-19 a global pandemic.

The extent of

COVID-19’s effect on the Company’s operational and

financial performance will depend on future developments, including

the duration, spread and intensity of the pandemic, all of which

are uncertain and difficult to predict considering the rapidly

evolving landscape.

The Company is currently analyzing the

potential impacts to all of its business segments.

At this time, it

is not possible to determine the magnitude of the overall impact of

COVID-19 on the Company’s business.

However, it could have a

material adverse effect on the Company’s business, financial

condition, liquidity, results of operations, and cash

The Company has evaluated subsequent events through the filing of

this Annual Report on Form 10-K, and determined that there have

been no events that have occurred that would require adjustment to

or additional disclosure in the consolidated financial statements,

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.

Total shares issued

of PAID common stock to Mr.

Lewis on March 29, 2021 were 1,300,000

(see Note 10).

Company has evaluated subsequent events through the filing of this

Annual Report on Form 10-K, and determined that there have been no

events that have occurred that would require adjustment to or

additional disclosure in the consolidated financial statements,

except as disclosed herein.

EXHIBIT INDEX

Description of Exhibits

of Incorporation, as amended (incorporated by reference to Exhibit

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Form 10-Q filed on May 12, 2009)

Non-Qualified Stock Option Plan, as amended (incorporated by

reference from Exhibit 99.1 to Form S-8 filed on September 5,

Non-Qualified Stock Option Plan (incorporated by reference from

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Exhibit 10.35 to Form 10-K filed on April 1, 2019 )

Note dated April 29, 2009 for up to $2,500,000 to Lewis Asset

Management (incorporated by reference to Exhibit 10.2 to Form 10-Q

filed on May 12, 2009)

agreement, dated December 7, 2011 between Forty Washington, LLC and

(incorporated

by reference to Exhibit 10.1 to Form 8-K/A filed on December 13,

2012 Non-Qualified Stock Option Plan (incorporated by

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Form 10-Q filed on October 18, 2012)

dated January 31, 2013 between Paid, Inc., and MCN Interactive, LLC

d/b/a Music City Networks (incorporated by reference to Exhibit

10.1 to Form 8-K filed on February 5, 2013)

amendment to lease agreement dated November 12, 2013 between Forty

Washington LLC and PAID, Inc.

(incorporated by reference to Exhibit

10.1 to Form 10-Q filed on November 14, 2013)

Agreement dated September 1, 2016 by and among PAID, Inc.,

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filed on December 23, 2016)

10.15 + 

Agreement for Allan Pratt (incorporated by reference to Exhibit

10.6 to Form 8-K filed on December 23, 2016)

Agreement for W.

Austin Lewis IV

Agreement for W.

Austin Lewis IV

Certification required under Section 302 of Sarbanes-Oxley Act of

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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 9A. Controls and Procedures