PAID INC 10-K

Item 9A. Controls and Procedures   Evaluation of Disclosure Controls and Procedures   The 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 “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  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 decisions regarding required disclosure.       -17- Table of Contents     As described in our accompanying Management's Annual Report on Internal Control over Financial Reporting , we have identified four remaining material weaknesses in internal control over financial reporting. Because of these remaining material weaknesses, we concluded that, as of December 31, 2020, our internal control over financial reporting was not effective based on the criteria outlined in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).   We continued to implement new procedures and controls in 2020 and have taken steps to remediate the material weaknesses at the entity and activity levels, and to review further our procedures and controls in 2021. 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.   Prior to the complete remediation of these material weaknesses, there remains risk that the processes and procedures on which we currently rely will fail to be sufficiently effective, which could result in material misstatement of our financial position or results of operations and require a restatement. Moreover, because of the inherent limitations in all control systems, no evaluation of controls even where we conclude the controls are operating effectively can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our control systems, as we develop them, may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected and could be material to our financial statements.   The certifications of our principal executive officer/principal financial officer required in accordance with Rule 13a-14(a) under the Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this Annual Report on Form 10-K. The disclosures set forth in this Item 9A contain information concerning (i) the evaluation of our disclosure controls and procedures, and changes in internal control over financial reporting, referred to in paragraph 4 of the certifications, and (ii) material weaknesses in the design or operation of our internal control over financial reporting, referred to in paragraph 5 of the certifications. Those certifications should be read in conjunction with this Item 9A for a more complete understanding of the matters covered by the certifications.   Management's Annual Report on Internal Control over Financial Reporting   Management is responsible for establishing and maintaining effective internal control over financial reporting of the Company. Internal control over financial reporting is a process designed by, or under 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 statements for external purposes in accordance with generally accepted accounting principles.   Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.   A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.       -18- Table of Contents     Management, with the participation of our principal executive officer/principal financial officer, is required to evaluate the effectiveness of our internal controls over financial reporting as of December 31, 2020 based on criteria established under the COSO integrated framework of internal controls. The COSO framework identifies five components of internal control and provides a basis for evaluating the effectiveness of internal controls. Management has concluded that our internal controls over financial reporting were not effective as of December 31, 2020 due to the following:   1. Entity Level Controls   -  Ineffective control environment, including lack of corporate governance -  Ineffective communication of information -  Ineffective monitoring of activities   2. Activity Level Controls   -  Lack of procedures and control documentation     1. Inadequate Entity Level Controls   Ineffective Control Environment, Including Lack of Corporate Governance   The Control Environment is the tone of an organization and how the tone influences the control consciousness of its people. Control Environment factors include, the integrity, ethical values, and competence of the entity’s people; management’s philosophy and operating style; the way management assigns authority and responsibility; the way management organizes and develops its people; and the attention and direction provided by the audit committee and board of directors. The Control Environment includes the Company’s Corporate Governance which is made up of a set of practices, policies, laws, and principals, designed to provide guidance and structure to directors, managers, and employees with a clear view of corporate goals and business objectives. These processes and procedures need to be clearly defined, presented and administered to each participant in the organization, and should document the distribution of rights and responsibilities among employees, management, clients and customers.     Steps taken towards Remediation for an Ineffective Control Environment:   ● The Company has included in its hiring process supplemental documentation regarding the internal control, insider trading and other Corporate matters ● The Company meets monthly in a town hall style with the opportunity to convey best practices for public companies. ● Management and the Board formally meet to discuss our filings. During these discussions, our auditors, and legal counsel may present to the Company various information which may be of material importance to our financial reporting and internal controls. ● The Company has made improvements by designing and drafting a corporate governance policy which has been approved by the Board of Directors, which documents the role of the Board and management, functions of the Board, role of the Audit Committee, agenda items for Board meetings, recoupment of unearned compensation, indemnification, reporting of concerns and complaints, and director access to management. ● The Board of Directors has appointed a Compensation Committee Chairman to oversee matters relating to employment, personnel and independent contractors.   Ineffective Communication of Information   Information and communication systems support the identification, capture, and, exchange of information in a form and time frame that enable people to carry out their responsibilities. This component includes information technology controls which are specific activities performed by persons of systems designed to ensure that the business objective can be met, protect the business from fraud and collusion, and keep the corporate assets protected and safe.       -19- Table of Contents     Steps taken towards Remediation of Ineffective Communication of Information:   ● Enhanced the documentation and procedures of our information technology to control assurance that changes to financial applications are properly authorized and tested and that access to our information systems and financial applications are appropriately restricted. ● Technology staff has implemented a documenting and sharing process for software development ● Updated our information systems user profiles and passwords to improve access controls. ● Implemented improvements to our information systems to further address control deficiencies. ● Updated secure backup procedures with best practice methodologies for protecting our financial data and, in case of a problem. ● Enhanced the documentation of certain core proprietary technologies so that there is more redundancy and protection of corporate assets.   Ineffective Monitoring of Activities   Monitoring is a process that assesses the quality of internal control performance over time.   Steps taken towards Remediation of Ineffective Monitoring of Activities:   ● The Company has reorganized the organizational reporting structure to enable greater oversight and control of operations which has increased the level of awareness and accountability. ● The Company meets regularly throughout the year to review operating results, policies and procedures, and staff reviews and practices. ● New management personnel are required to review their procedures and policies to make sure they are effective. The Company is evaluating the procedure and polices that have material weakness and developing corrective action plans to strengthen our internal controls. ● The Company has made changes to its policies and procedures with regard to its financial reporting systems. Upgrades to software systems have been made which has resulted in the automation of accounting transactions and has enhanced our financial reporting and timeliness of operating results. Management and staff are more integrated into the review process. ● Finance staff is required to review expenses for proper approval and accounting treatment. Managers and staff are required to have expenditures pre-approved by their supervisor. All significant expenditures require multiple approvals including Company officers.    The Company believes significant improvements have been made to remediate its material weakness in the internal controls over financial reporting at the entity level, but does not have the appropriate documentation to support its efforts. The Company also believes that further work is still required to develop appropriate controls in some aspects of entity level control to provide reasonable assurance that controls are designed in the most effective and efficient manner possible. While we believe these changes will be effective at mitigating risk of material error, there continues to be additional work required for us to conclude that all three of these control areas are operating effectively. As noted in the Management's Report on Internal Control over Financial Reporting, we consider each of these control areas within the entity level control to constitute a material weakness.   The Company has taken significant steps to reduce risks associated with information technology controls and documentation. Our information technology department has worked toward cross training and redundancies to assure that no one single person has the ability to make changes to the core operating systems of our products. Additionally, we have contacted with our third party hosting provider to gain the ability to increase bandwidth in cases of larger than normal traffic to our websites and servers. The critical employees have continued network access with additional access to two independent internet providers.   In addition to the ongoing increase of documentation of the policies and procedures the Company has added increased internal controls with regard to the segregation of duties. As the Company grows and adds additional management level personnel it is increasingly easier to segregate duties. We have also added internal spending and approval limits to monitor activities.       -20- Table of Contents     2.              Inadequate Activity Level Controls   Lack of Procedures and Control Documentation   The Company lacks specific documentation relating to certain accounts, and financial closing, which in effect make these internal controls ineffective. The lack of documentation in internal controls relating to these accounts may affect the financial statements and will directly affect the nature and timing of other auditing procedures for certain activities.   Steps taken towards Remediation of Revenue Recognition:   ● The Company upgraded its transactional processing systems which resulted in the automation of several manual accounting tasks. This automation eliminated the risk of human error for these manual tasks and created a more concise audit trail in the revenue recognition process. ● All sales are reconciled across the Company's multiple revenue and accounting systems comparing for any discrepancies. ● The Company continues to document new processes and procedures to assure employees are following proper protocols with regard to activity that has an effect on the financial transactions of the Company.   Steps taken towards Remediation of Expenditures and Accounts Payable:   ● Expenses are reviewed as incurred for proper accounting treatment and approval, department heads are responsible for budgeting and reviewing all expenses for their department.. ● The Vendor Master File is reviewed for updates and changes and any changes are analyzed and monitored for their activity and frequency. ● Management evaluates all new client relationships for savings opportunities and value. ● The Chief Financial Officer is required to review and approve all cash disbursements. ● Policies for accounts payable approvals and payments have been reviewed with all department heads.   Steps taken towards Remediation of Financial Closing:   ● The Company closes its books and reconciles all accounts monthly, and provides management with a comprehensive set of financial and operating reports and analysis of results. ● The interim CEO/CFO receives monthly financial updates on each segment of the Company.   The Company has made significant improvements to the activity level controls specifically with regard to the deficiencies with the financial close. In addition, further work is required to develop appropriate controls in the other aspects of activity level control to provide reasonable assurance that controls are designed in the most effective and efficient manner possible. Therefore, while we believe these changes are effective at mitigating risk of material error, there continues to be additional work required for us to conclude that both of these control areas are operating effectively. Therefore, as noted in the Management's Report on Internal Control over Financial Reporting, we consider each of these control areas within the activity level control to constitute a material weakness.   A factor for our internal control deficiencies is the small size of the Company and the lack of a financial expert on the Audit Committee of the Board of Directors and other corporate governance controls.  As defined by the Public Company Accounting Oversight Board Auditing Standard No. 5, a material weakness is a significant control deficiency or a combination of significant control deficiencies that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  Management continues to monitor and assess the controls to ensure compliance.    As a smaller reporting company, our independent registered public accounting firm is not required to issue a report on the Company's internal control over financial reporting as of December 31, 2020.   Changes in Internal Control Over Financial Reporting   As discussed in the Managements' Annual Report on Internal Control over Financial Reporting, the Company made continuous improvements to the entity and activity controls and expects to take further steps in 2021 to remediate the outlined deficiencies. The Company has implemented a substantial amount of policies and procedures with regard to financial reporting, specifically in terms of segregation of duties. 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 effectively. 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 2020.   Item 9B. O t her Information   Not applicable.        -21- Table of Contents     PA R T III   Item 10. Directors, Executive Officers and Corporate Governance   Directors and Executive Officers   The following table sets forth certain information regarding the directors and executive officers of PAID:   Name   Age    Position W. Austin Lewis, IV   45   Interim CEO, CFO David Scott   26   COO Andrew Pilaro   51   Director Laurie Bradley   66   Director David Ogden   57   Director   Andrew Pilaro was elected as of September 19, 2000, for a term expiring at the 2001 Annual Meeting of Stockholders and until their successors are elected and qualified . 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 I position will serve for approximately one year.  The 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. After this 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 management. Mr. Pilaro was asked to serve as a director because he provides investment management skills and a general business background.                 W. 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 General Partner of the Lewis Opportunity Fund. Prior to founding Lewis Asset Management, Mr. Lewis held a variety of positions with investment firms, including Puglisi & Co., Thompson Davis & Co., and Branch Cabell & Company. Mr. Lewis holds a Bachelor of Science in Finance and a Bachelor of Science in Financial Economics from James Madison University.  Mr. 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.     David 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. After 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 world .   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. Ms. 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.  Ms. Bradley has worked in both the public and private sectors specializing in talent management, executive leadership, and advisory services. Ms. Bradley holds a Bachelor of Arts degree from McMaster University and a certificate in Business Strategy from Cornell University.   David Scott  currently serves as COO of PAID. Prior, he served as the Director of Technology joining the Company in 2017. Mr. Scott leads the Development and IT teams from requirements through to implementation while supporting Sales, Marketing & Customer Success. Mr. Scott has completed courses in Computer Science at both Mohawk College and McMaster University.   The Company has not made any material changes to the procedures by which security holders may recommend nominees to the Board of Directors. The Board does not have a separate nominating committee.       -22- Table of Contents     Audit Committee   The Securities and Exchange Commission has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules requires a company to disclose whether it has an “audit committee financial expert” serving on its audit committee. Based on its review of the criteria of an audit committee financial expert under the rule adopted by the SEC, the Board of Directors does not believe that any member of the Board of Directors' Audit Committee would be described as an audit committee financial expert. At this time, the Board of Directors believes it would be desirable for the Audit Committee to have an audit committee financial expert serving on the committee. While from time to time informal discussions as to potential candidates have occurred, no formal search process has commenced. Andrew Pilaro, one of the Company’s independent directors, is the sole member of the audit committee. The audit committee does not have a charter.   Audit Committee Report   The Audit Committee reviewed and discussed our audited consolidated financial statements for the year ended December 31, 2020 with our management.  The Audit Committee also reviewed and discussed our audited consolidated financial statements and the matters required to be discussed, by the Public Company Accounting Oversight Board (“PCAOB”), including material weaknesses and other internal control deficiencies with KMJ Corbin & Company LLP, our independent registered public accounting firm. The Audit Committee received from KMJ Corbin & Company LLP the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent accountant's communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant's independence.   Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board of Directors that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2020.     The Audit Committee   Andrew Pilaro   Code of Ethics   The Company has adopted a Code of Ethics that applies to all of its directors, officers, and employees, including its principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions. A written copy of the Company's Code of Ethics will be provided to anyone, free of charge, upon request to: W. Austin Lewis, CFO, PAID, Inc., 225 Cedar Hill Street, Marlborough, Massachusetts 01752.   Any waiver of the code of business conduct and ethics for directors or executive officers, or any amendment to the code that applies to directors or executive officers, may only be made by the board of directors. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above. To date, no such waivers have been requested or granted.   Section 16(a) Beneficial Ownership Reporting Compliance   Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10% of the Company's outstanding Common Stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock. These persons are required by SEC regulation to furnish the Company with copies of all such reports they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and representations that no other reports were required, all Section 16(a) filing requirements applicable to its officers and directors and beneficial owners of more than 10% of the Company's stock, have been complied with for the period which this Form 10-K relates.   Item 11. E x ecutive Compensation   On May 10, 2017, the Board of Directors appointed Laurie Bradley as the Chairman of the Compensation Committee. Ms. Bradley along with the remaining Board of Directors will be responsible for carrying out the Boards responsibilities relating to executive compensation, employment agreements, executive succession and equity based 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, 2021. 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. Mr. Lewis shall receive an annualized salary of $300,000 and may qualify for a bonus. Mr. 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. Lewis terminates his employment prior to January 1, 2022.  In addition, other than termination “for cause”, Mr. Lewis qualifies for a one-year severance of his then current salary. By separate agreement dated March 29, 2021, Mr. Lewis is also bound by a non-competition restriction for a period of 12 months following termination.      -23- Table of Contents     Compensation to the Named Executive Officers   The following table sets forth the compensation of the Company's chief executive officer, chief financial officer and the chief operating officer, and each officer whose total cash compensation exceeded $100,000, for the last two fiscal years ended December 31, 2020 and 2019.       Summary Compensation Table                                 Name and Principal Position Year     Salary       Bonus       Option Awards ($)     Total   W. Austin Lewis, IV (1),(2),(7) (CFO, Interim CEO) 2020   $ 283,294     $ 2,005,500     $ -     $ 2,288,794     2019   $ 180,000     $ -     $ -     $ 180,000   Allan Pratt (3), (4) 2019   $ 185,000     $ -     $ -     $ 185,000   David Scott (5), (6) (COO) 2020   $ 104,475     $ -     $ 109,200     $ 215,675     2019   $ 82,896     $ -     $ 85,050     $ 167,946     1. Mr. Lewis’s start date was July 31, 2012. 2. Mr. Lewis’s salary was approved by the Board of Directors at $300,000. 3. Mr. Pratt’s start date was December 30, 2016. 4. Mr. Pratt’s salary and employment agreement were approved by the Board of Directors on December 19. 2016. On February 29, 2020, Mr. Pratt completed his contractual obligation as Chief Executive Officer.   5. Mr. Scott was promoted to Chief Operating Officer on May 1, 2020. 6. Mr. Scott received 15,000 non-qualified options on February 13, 2019, 15,000 on August 13, 2019. On November 10, 2020 he was awarded an additional 40,000 non-qualified options. 7. Mr. Lewis' bonus of 1,050,000 shares for 2019 and 2020 was approved by the Board of Directors on March 29, 2021 and was valued at $1.91 per share based on the close price of the Company's common stock at March 29, 2021.   The following tables set forth certain information related to outstanding equity awards as of December 31, 2020 for our executive officers.         Option Awards     Name     Number of Securities Underlying Unexercised Options (#) Exercisable       Number of Securities Underlying Unexercised Options (#) Unexercisable     Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)       Option Exercise Price ($)   Option Expiration Date W. Austin Lewis IV      10,000       -       -     $ 0.975   08/08/2022 CFO, (PFO), (PEO)     10,000       -       -     $ 0.975   10/15/2022     2,000       -       -     $ 0.975   12/06/2022     2,000       -       -     $ 0.975   05/21/2023     4,000       -       -     $ 0.975   11/18/2024     2,000       -       -     $ 0.975   04/01/2026 David Scott     7,000       -       -     $ 4.10   03/23/2028     3,000               -     $ 3.50   10/01/2028     15,000       5,000       -     $ 2.92   02/13/2029     15,000       5,000       -     $ 3.00   08/13/2029     40,000       26,667       -     $ 2.885   11/10/2030   None of the Company's executive officers who serve as directors receive separate compensation from the Company for serving as directors.       -24- Table of Contents     On August 26, 2016 the Board of Directors approved to vote to reprice 53,500 stock options and fully vest any unvested options for two employees and three board members. The exercise price was lowered to $0.975 which reflects the market value of the stock.   In 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 Option Plan. The Company granted 105,000 stock options to employees and consultants during the year ended December 31, 2020. The 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 $2,133,808 during the year ended December 31, 2020.   The following table provides compensation information for the one-year period ended December 31, 2020 for the only non-employee members of our Board of Directors.       Director Compensation in 2020   Name   Fees earned or paid in cash     Option Awards ($)     Total   Andrew Pilaro   $ 2,500     $ 25,700     $ 28,200   Laurie Bradley   $ 2,500     $ 25,700     $ 28,200   David Ogden   $ 1,000     $ 12,850     $ 13,850     Item 12. Security O w nership of Certain Beneficial Owners and Management and Related Stockholder Matters   To the knowledge of the management of the Company the following table sets forth the beneficial ownership of our common stock as of March 31, 2021 of each of our directors and executive officers, and all of our directors and executive officers as a group, and other beneficial owners holding more than five percent of the Company’s issued and outstanding shares.       Amount and Nature of Beneficial Ownership     Percent of Class (3)   W. Austin Lewis, IV     3,006,178 (1)     37 % Allan Pratt     2,222,273 (4)     27 % John Smith     914,973       11 % David Ogden     35,000 (5)     1 % Laurie Bradley     74,217 (6)     1 % Andrew Pilaro     68,337 (2)     1 % All directors beneficial owners     6,320,978       78 %   (1) Included are options to purchase 30,000 shares of the Company’s common stock, and 1,402,058 shares held for which W. Austin Lewis, IV is the General Partner. (2) Includes options to purchase 66,000 shares of the Company's common stock. (3) Percentages are calculated on the basis of the amount of outstanding securities plus for such person or group, any securities that person or group has the right to acquire within 60 days. (4) Included in this amount are shares authorized and reserved for future issuance from exchangeable shares. (5) Includes options to purchase 35,000 shares of the Company's common stock. (6) Includes options to purchase 47,500 shares of the Company's common stock.   To the knowledge of the management of the Company, based solely on our review of SEC filings, four shareholders are the beneficial owner of more than five percent of the Company’s common stock.   The information regarding the Company's “Equity Compensation Plan Information” is incorporated herein by reference in Part II, Item 5 of this Annual Report on Form 10-K.       -25- Table of Contents     Item 13. Certa i n Relationships and Related Transactions, and Director Independence   The Company did not engage in any transaction in 2019 or 2020, and does not currently propose any transaction, in which the Company was a participant whereas the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest.   Review, Approval or Ratification of Transactions with Related Parties   It is our unwritten policy, which policy is not otherwise evidenced, for any related party transaction that involves more than a de minimis obligation, expense or payment or stock option or equity grants, to obtain approval by our entire board of directors prior to our entering into any such transaction. In conformity with our various policies on related party transactions, any transactions discussed in this Item 13 has been reviewed and approved by our board of directors.   Director Independence   The Company has a majority of independent directors with Laurie Bradley as the sole member of the compensation committee and Andrew Pilaro is the sole member of the audit committee.     Our board of directors currently consists of three members. Our board 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 5605.   Item 14. Principal Accounta n t Fees and Services              KMJ Corbin & Company LLP (“KMJ”) is our independent registered public accounting firm for the years ended December 31, 2020 and 2019.   The following is a summary of the fees billed to the Company by KMJ for professional services rendered for the years ended December 31, 2020 and 2019. These fees are for work performed in the years indicated and, in some instances, we have estimated the fees for services rendered but not yet billed.       2020     2019   Audit Fees:             Consists of fees billed for professional services rendered for the audit of the Company’s annual financial statements and the review of the interim financial statements included in the Company’s Quarterly Reports (together, the “Financial Statements” ) and for services normally provided in connection with statutory and regulatory filings or engagements   $ 54,600     $ 55,550   Tax Fees                 Consists of fees billed for tax compliance, tax advice and tax planning     5,250       8,350   Total All Fees   $ 59,850     $ 63,900     The Audit Committee approves all audit and audit-related fees. The Audit Committee is required to pre-approve all non-audit services to be performed by the auditor. The percentage of hours expended on the principal accountant's engagement to audit the Company's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%.       -26- Table of Contents     P ART IV   Item 15. Exhibits and Financial Statement Schedules   (a)(1) Financial Statements   For a list of the financial information included herein, see “Index to Audited Consolidated Financial Statements” on page 32 of this Annual Report on Form 10-K.   (a)(2) Financial Statements Schedules   All schedules are omitted because they are not applicable or the required information is included in the financial statements or notes thereto.   (a)(3) Exhibits   The list of exhibits filed as a part of this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding the exhibits hereto and is incorporated herein by reference.   Item 16. F o rm 10-K Summary    None.       -27- Table of Contents     SIGN A TURES     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.       PAID, INC.           By: /s/    Date: March 31, 2021   W. Austin Lewis, IV, Interim Chief Executive Officer, Chief Financial Officer    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.    Signature   Title   Date           /s/         Andrew Pilaro   Director   March 31, 2021           /s/         Laurie Bradley   Director   March 31, 2021       -28- Table of Contents       PAID, INC. INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019   Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets as of December 31, 2020 and 2019 F-2 Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years ended December 31, 2020 and 2019 F-3     Consolidated Statements of Changes in Shareholders' Equity for the Years ended December 31, 2020 and 2019 F-4 Consolidated Statements of Cash Flows for the Years ended December 31, 2020 and 2019 F-5 Notes to Consolidated Financial Statements F-6           -29- Table of Contents     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   To the Board of Directors and Shareholders of PAID, Inc.   Opinion on the Consolidated Financial Statements   We have audited the accompanying consolidated balance sheets of PAID, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The 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 and that: (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 . In the 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. We 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 Audit   Our audit procedures related to the Company’s assertion as to its ability to continue as a  going concern  included the following, among others:   ● We gained an understanding of the Company’s process relating to the preparation of projected information and considerations of the Company’s obligations. ● We 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. This testing included inquiries with management, comparison of prior period projections to actual results, and consideration of positive and negative evidence impacting management’s projections. ● We evaluated the reasonableness of management’s assumptions related to the likelihood that the Company would be able to reduce operating expenditures if required.   KMJ Corbin & Company LLP   We have served as the Company’s auditor since 2013.   Irvine, California March 31, 2021     F-1 Table of Contents     PAID, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,       2020     2019   ASSETS             Current assets:             Cash and cash equivalents   $ 1,644,210     $ 475,881   Accounts receivable, net     171,785       131,561   Prepaid expenses and other current assets     184,366       124,257   Total current assets     2,000,361       731,699   Property and equipment, net     59,848       89,707   Intangible assets, net     3,633,420       4,048,572   Operating lease right-of-use assets     93,457       121,440   Total assets   $ 5,787,086     $ 4,991,418                     LIABILITIES AND SHAREHOLDERS' EQUITY                 Current liabilities:                 Accounts payable   $ 1,460,484     $ 876,260   Finance leases - current portion     2,844       9,951   Accrued expenses     276,254       207,786   Contract liabilities     9,046       5,338   Operating lease obligations – current portion     33,118       30,255   Total current liabilities     1,781,746       1,129,590   Long-term liabilities:                 Finance leases - net of current portion     -       2,797   Operating lease obligations – net of current portion     61,794       93,642   Deferred tax liability, net     960,947       1,070,189   Total liabilities     2,804,487       2,296,218   Commitments and contingencies                 Shareholders' equity:                 Series A Preferred stock, $0.001 par value, 5,000,000 shares authorized; none and 4,438,578 shares issued and outstanding at December 31, 2020 and 2019, respectively; liquidation value of $0 and $13,808,610 at December 31, 2020 and 2019, respectively     -       4,439   Common stock, $0.001 par value, 25,000,000 shares authorized; 6,489,004 shares issued and 6,455,164 shares outstanding at December 31, 2020, 1,648,657 shares issued and 1,614,817 outstanding at December 31, 2019     6,489       1,649   Accrued common stock bonus     2,005,500       -   Additional paid-in capital     70,083,486       69,242,412   Accumulated other comprehensive income     570,761       512,894   Accumulated deficit     (69,625,790 )     (67,008,347 ) Common stock in treasury, at cost, 33,840 shares at December 31, 2020 and 2019     (57,847 )     (57,847 ) Total shareholders' equity     2,982,599       2,695,200                     Total liabilities and shareholders' equity   $ 5,787,086     $ 4,991,418     See accompanying notes to consolidated financial statements       F-2 Table of Contents     PAID, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31,     2020     2019                 Revenues, net   $ 12,920,789     $ 10,548,295   Cost of revenues     9,809,500       7,801,554   Gross profit     3,111,289       2,746,741   Operating expenses:         Salaries and related     1,530,151       1,452,134   General and administrative     800,996       1,135,230   Amortization of intangible assets     458,915       463,436   Share-based compensation     2,452,701       407,974   Total operating expenses     5,242,763       3,458,774   Loss from operations     (2,131,474 )     (712,033 )                   Other income (expense):                 Other income, net     21,128       988,152   Unrealized gain on stock price guarantee     -       3,688   Total other income, net     21,128       991,840   Income (loss) before income tax provision (benefit)     (2,110,346 )     279,807   Income tax provision (benefit)     122,207       (2,204 ) Net income (loss)     (2,232,553 )     282,011   Preferred dividends     (28,532 )     (192,005 ) Net income (loss) available to common shareholders   $ (2,261,085 )   $ 90,006                     Net income (loss) per share – basic   $ (0.41 )   $ 0.06   Net income (loss) per share – diluted   $ (0.41 )   $ 0.05                     Weighted average number of common shares outstanding – basic     5,469,908       1,614,817   Weighted average number of common shares outstanding – diluted     5,469,908       1,669,178                     Consolidated statements of comprehensive income (loss):                 Net income (loss)   $ (2,232,553 )   $ 282,011   Other comprehensive income (loss):                 Foreign currency translation adjustments     57,867       168,712   Comprehensive income (loss)   $ (2,174,686 )   $ 450,723     See accompanying notes to consolidated financial statements     F-3 Table of Contents       PAID, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019       Preferred Stock     Common Stock       Additional Paid in     Accumulated Other Comprehensive     Accumulated     Treasury Stock                 Shares           Amount           Shares           Amount        Stock Bonus         Capital           Income           Deficit           Shares           Amount           Total     Balance, January 1, 2019     3,784,712     $ 3,785       1,648,657     $ 1,649      $ -     $ 68,751,871     $ 344,182     $ (67,127,122 )     (33,840 )   $ (57,847 )   $ 1,916,518   Foreign currency translation adjustment     -       -       -       -       -       -       168,712       -       -       -       168,712   Preferred dividends paid     -       -       -       -       -       -       -       (163,236 )     -       -       (163,236 ) Share-based compensation expense     -       -       -       -       -       407,974       -       -       -       -       407,974   Preferred shares issued as compensation     653,866       654       -       -       -       82,567       -       -       -       -       83,221   Net income     -       -       -       -       -       -       -       282,011       -       -       282,011   Balance December 31, 2019     4,438,578       4,439       1,648,657       1,649       -       69,242,412       512,894       (67,008,347 )     (33,840 )     (57,847 )     2,695,200   Foreign currency translation adjustment     -       -       -       -       -       -       57,867       -       -       -       57,867   Share-based compensation expense     -       -       -       -       2,005,500       128,308       -       -       -       -       2,133,808   Preferred dividends paid in shares     126,727       127       -       -       -       358,511       -       (358,638 )     -       -       -   Exchange of Preferred to Common     (4,565,305 )     (4,566 )     4,566,227       4,566       -       -       -       -       -       -       -   Preferred dividends paid     -       -       -       -       -       -       -       (26,252 )     -       -       (26,252 ) Warrant reprice     -       -       -       -       -       318,893       -       -       -       -       318,893   Warrant exercise     -       -       274,120       274       -       35,362       -       -       -       -       35,636   Net loss     -       -       -       -       -       -       -       (2,232,553 )     -       -       (2,232,553 ) Balance December 31, 2020     -     $ -       6,489,004     $ 6,489      $ 2,005,500      $ 70,083,486     $ 570,761     $ (69,625,790 )     (33,840 )   $ (57,847 )   $ 2,982,599     See accompanying notes to consolidated financial statements         F-4 Table of Contents       PAID, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,       2020     2019   Cash flows from operating activities:               Net income (loss)   $ (2,232,553 )   $ 282,011     Adjustments to reconcile net income (loss) to net cash provided by operating activities:                   Depreciation and amortization     488,745       490,250          Amortization of operating lease right-of-use assets     28,545       22,850          Provision for bad debts     20,125       -     Gain on sale of property and equipment     (739 )     -     Share-based compensation     2,452,701       407,974     Unrealized (gain) loss on stock price guarantee     -       (3,688 )   Other income from stock price guarantee     -       (880,553 )   Deferred income taxes     (120,835 )     (73,208 )   Changes in assets and liabilities:                   Accounts receivable     (60,044 )     (39,574 )   Prepaid expenses and other current assets     (59,362 )     (8,589 )   Accounts payable     546,859       164,652     Accrued expenses     63,460       (183,229 )   Contract liabilities     3,444       (142,914 )        Operating lease obligations     (29,537 )     (20,449 )   Net cash provided by operating activities     1,100,809       15,533   Cash flows from investing activities:                   Proceeds from sale of property and equipment     739       -     Purchase of property and equipment     -       (16,106 )   Net cash provided by (used in) investing activities     739       (16,106 ) Cash flows from financing activities:                   Payments on finance leases     (9,627 )     (8,821 )   Payments on notes payable     -       (15,346 )   Proceeds from warrant exercise     35,636       -     Payments of preferred dividends     (26,252 )     (163,236 )   Net cash used in financing activities     (243 )     (187,403 ) Effect of exchange rate changes on cash and cash equivalents     67,024       31,526                     Net change in cash and cash equivalents     1,168,329       (156,450 )                   Cash and cash equivalents, beginning of year     475,881       632,331                     Cash and cash equivalents, end of year   $ 1,644,210     $ 475,881                     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                 Cash paid during the year for:                   Income taxes   $ 500     $ 960     Interest   $ 664     $ 1,687   SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS                   Issuance of preferred shares for settlement of dividends   $ 358,638     $ -     Issuance of preferred shares for settlement of accrued expenses   $ -     $ 83,221     Operating lease liabilities from obtaining operating lease right-of-use assets   $ -     $ 55,600       See accompanying notes to consolidated financial statements     F-5 Table of Contents       PAID, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 1. ORGANIZATION   PAID, Inc. (“PAID”, the “Company”, “we”, “us”, or “our”) has developed AuctionInc, which is a suite of online shipping and tax management tools assisting businesses with e-commerce storefronts, shipping solutions, tax calculation, inventory management, and auction processing. The product has tools to assist with other aspects of the fulfillment process, but the main purpose of the product is to provide accurate shipping and tax calculations and packaging algorithms that provide customers with the best possible shipping and tax solutions.   BeerRun Software (“BeerRun”) is a brewery management and Alcohol and Tobacco Tax and Trade Bureau tax reporting software. Small craft brewers can utilize the product to manage brewery schedules, inventory, packaging, sales and purchasing. Tax reporting can be processed with a single click and is fully customizable by state or province. The software is designed to integrate with QuickBooks accounting platforms by using our powerful sync engine. We currently offer two versions of the software BeerRun and BeerRun Light which excludes some of the enhanced features of BeerRun without disrupting the core functionality of the software. Additional features include Brewpad and Kegmaster and can be added on to the base product. Craft brewing is on the rise in the United States, and we feel that there is a large potential to grow this portion of our business.   ShipTime Canada Inc. (“ShipTime”) has developed a SaaS-based application, which focuses on the small and medium business segments. This offering allows members to quote, process, generate labels, dispatch and track courier and LTL shipments all from a single interface. The application provides customers with a choice of today’s leading couriers and freight carriers all with discounted pricing allowing members to save on every shipment. ShipTime can also be integrated into on-line shopping carts to facilitate sales via e-commerce. We actively sell directly to small 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. Our platform provides all aspects required for payment processing, including merchant boarding, underwriting, fraud monitoring, settlement, funding to the sub-merchant, and monthly reporting and statements. The Company controls all of these necessary aspects in the payment process and is then able to supply a one-step boarding process for our partners and value-added resellers. This capability also provides cost advantages, rapid response to market needs, simplified processes for boarding business and a seamless interface for our merchant customers.   NOTE 2. LIQUIDITY AND MANAGEMENT’S PLANS   For the 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 that the continued growth of the new PAID platform of services in addition to the continued profitability of ShipTime’s services will return a valuable impact on the Company’s success in the future. The ongoing positive cash flows from operations is a significant indicator of our successful transition 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. The Company also continues to seek alternate sources of capital to support future operations.   Although there can be no assurances, the Company believes that the above management plan will be sufficient to meet the Company's working capital requirements through the end of March 2022 and will have a positive impact on the Company for the foreseeable future.       F-6 Table of Contents     NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation   The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).   Principles of Consolidation   The consolidated financial statements include the accounts of PAID, Inc. and its wholly owned subsidiaries, PAID Run, LLC and ShipTime Canada. All intercompany accounts and transactions have been eliminated.   Foreign Currency     The currency of ShipTime, the Company’s international subsidiary, is in Canadian dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at each balance sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a separate component of shareholders’ equity in accumulated other comprehensive income.   Geographic Concentrations   The Company conducts business in the U.S. and Canada. For customers headquartered in their respective countries, the Company derived approximately 96% of its revenues from Canada and 4% from the U.S. during the year ended December 31, 2020, compared to 97% of its revenues from Canada and 3% from the U.S. during the year ended December 31, 2019.   At December 31, 2020 and 2019, the Company maintained 100% of its net property and equipment in Canada.   Comprehensive Income (Loss)   Comprehensive income (loss) includes all changes in equity (net assets) during a period from non-owner sources. For the years ended December 31, 2020 and 2019, the components of comprehensive income (loss) consist solely of foreign currency translation gains (losses).   Use of Estimates   The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by the Company’s management include, but are not limited to, the collectability of accounts receivable, the recoverability of long-lived assets, the valuation of deferred tax assets and liabilities, renewal periods and discount rates for leases and valuation of share-based transactions. Actual results could materially differ from those estimates.   Fair Value Measurements   The Company measures the fair value of certain of its financial assets on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:   Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;   Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and   Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.       F-7 Table of Contents     At December 31, 2020 and 2019, the Company’s financial instruments include cash and cash equivalents, accounts receivable, 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.   Cash and Cash Equivalents   The Company considers all highly liquid temporary cash investments with an initial maturity of three months or less to be cash equivalents. Management believes that the carrying amounts of cash equivalents approximate their fair value because of the short maturity period.   Concentration of Risk   The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to USD $250,000 and the Canadian Depositors Insurance Corporation (“CDIC”) up to CAD $100,000. At December 31, 2020, the Company had amounts that exceeded the CDIC insurance limits but none that were in excess of the FDIC insurance limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to these deposits.   The Company extends credit based on an evaluation of the customer's financial condition, generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. As of December 31, 2020, and 2019, the Company recorded a provision for doubtful accounts of $20,125 and $0, respectively.   For the years ended December 31, 2020 and 2019, no revenues from any one individual customer accounted for more than 10% of the total revenues. 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   Advanced royalties represented amounts the Company had advanced to certain customers and were recoverable against future royalties earned by the customers. In connection with one of the Company’s advance royalties with a client, the Company guaranteed that shares of common stock would sell for at least $60.00 per share.  If the shares are not at the required $60.00 per share when they are sold, the Company has the option of issuing additional shares at their fair value or making cash payments for the difference between the guaranteed price per share and the fair value of the stock.  The change in fair value was ($3,688) for the year ended December 31, 2019. 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. 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, 2019.   Property and Equipment   Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 3 to 8 years. Any leasehold improvements are depreciated at the lesser of the useful life of the asset or the lease term. Equipment purchased under capital leases is amortized on a straight-line basis over the estimated useful life of the asset or the term of the lease, whichever is shorter. Expenditures for repairs and maintenance are charged to expense as incurred.   Right of Use Assets   A right-of-use asset represents a lessee’s right to use a leased asset for the term of the lease. Our right-of-use assets generally consist of an operating lease for a building.   Right-of-use assets are measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial direct costs, such as commissions paid to obtain a lease.   Right-of-use assets are subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and any initial direct costs not yet expensed.         F-8 Table of Contents     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 17 years.   Long-Lived Assets   The 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. 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. 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 future.    Revenue Recognition   The Company generates revenues principally from fees for coordinating shipping services, sales of shipping calculator subscriptions, brewery management software subscriptions, merchant processing services and client services (see Note 4).   Cost of Revenues   Cost of revenues includes carrier services, web hosting, data storage, and commissions, carrier insurance costs and merchant processing interchange fees.   Operating Expenses   Operating expenses include indirect expenses, including credit card processing fees, marketing, payroll, travel, facility costs, amortization of intangible assets and other general and administrative expenses.   Advertising   Advertising costs are charged to expense as incurred. For the years ended December 31, 2020 and 2019, advertising expense totaled $104,121 and $165,941, respectively, and are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).   Share-Based Compensation   The Company grants options to purchase the Company’s common stock to employees, directors and consultants under stock option plans. The benefits provided under these plans are share-based payments that the Company accounts for using the fair value method. 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).   The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option pricing model (“Black-Scholes-Merton model”) that uses assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, expected stock price volatility, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Expected volatilities are based on the historical volatility of the Company’s common stock. The expected terms of options granted are based on analyses of historical employee termination rates and option exercises. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant. Since the Company does not expect to pay dividends on common stock in the foreseeable future, it estimated the dividend yield to be 0%.          F-9 Table of Contents     Share-based compensation expense recognized during a period is based on the value of the portion of share-based payment awards that is ultimately expected to vest and is amortized under the straight-line attribution method. As share-based compensation expense recognized in the accompanying consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2020 and 2019 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The fair value method requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on historical experience. Changes to the estimated forfeiture rate are accounted for as a cumulative effect of change in the period the change occurred.   Since the Company has a net operating loss carry-forward as of December 31, 2020 and 2019, no excess tax benefits for tax deductions related to share-based awards were recognized from any stock options exercised in the years ended December 31, 2020 and 2019 that would have resulted in a reclassification from cash flows from operating activities to cash flows from financing activities.   Income Taxes   The Company accounts for income taxes and the related accounts under the liability method. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s income tax provision includes state minimum taxes.   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. An 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.   The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had $0 accrued for interest and penalties on the Company’s consolidated balance sheets at December 31, 2020 and 2019.   The Company is subject to taxation in the U.S. and various state jurisdictions. The Company does not foresee material changes to its gross uncertain income tax position liability within the next twelve months.   Earnings (Loss) Per Common Share   Basic earnings (loss) per share represent income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. 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.   For the 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 ended.   The Company computes its income (loss) available to common shareholders by subtracting dividends on preferred stock, including undeclared or unpaid dividends if cumulative, and any deemed dividends or discounts on redeemed preferred stock from its reported net income (loss) and reports the same on the face of the consolidated statements of operations and comprehensive income (loss).       F-10 Table of Contents     The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years ended December 31:       2020     2019   Numerator:   $ (2,261,085 )   $ 90,006   Net income (loss) available to common shareholders                 Denominator:                 Basic weighted-average shares outstanding     5,469,908       1,614,817   Effect of dilutive securities     -       54,361   Diluted weighted-average shares outstanding     5,469,908       1,669,178   Net income (loss) per share attributed to common stockholders – basic   $ (0.41 )   $ 0.06   Net income (loss) per share attributed to common stockholders - diluted   $ (0.41 )   $ 0.05     Segment Reporting   The Company reports information about segments of its business in its annual consolidated financial statements and reports selected segment information in its quarterly reports issued to shareholders. The Company also reports on its entity-wide disclosures about the products and services it provides and reports revenues and its major customers. The Company’s five reportable segments are managed separately based on fundamental differences in their operations. At December 31, 2020, the Company operated in the following five reportable segments:   a) Client services; b) Shipping calculator services; c) Brewery management software; d) Merchant processing services; e) Shipping coordination and label generation services; and f) Corporate operations.   The Company evaluates performance and allocates resources based on operating income. The accounting policies of the reportable segments are the same as those described in this summary of significant accounting policies. The Company’s chief operating decision makers are the interim Chief Executive Officer and Chief Financial Officer.   The following table compares total revenues for the years indicated.       Years Ended       December 31, 2020     December 31, 2019   Client services   $ 3,541     $ 19,395   Brewery management software     114,881       193,150   Shipping calculator services     27,845       148,035   Merchant processing services     425,839       2,011   Shipping coordination and label generation services     12,348,683       10,185,704   Total revenues, net   $ 12,920,789     $ 10,548,295     The following table compares total income (loss) from operations for the years indicated.       Years Ended       December 31, 2020     December 31, 2019   Client services   $ 2,775     $ 14,739   Brewery management software     49,601       51,612   Shipping calculator services     6,274       108,512   Merchant processing services     104,958       (673 ) Shipping coordination and label generation services     679,130       (100,771 ) Corporate operations     (2,974,212 )     (785,452 ) Total loss from operations   $ (2,131,474 )   $ (712,033 )   During 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.       F-11 Table of Contents     Recent Accounting Pronouncements     In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. The 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.   In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The 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.   In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes” to identify, evaluate, and improve areas of GAAP for which costs and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments for ASU No. 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. An entity that elects to early adopt must adopt all the amendments in the same period. The Company is currently evaluating the impact of ASU No. 2019-12 and does not expect the adoption of this guidance to have a material impact on its consolidated financial position or results of operations.   NOTE 4. REVENUE FROM CONTRACTS WITH CUSTOMERS   In accordance with current accounting guidance, the Company recognizes revenue by taking into consideration the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.  Due to the nature of the Company’s product offerings and contracts associated with those products, the Company’s deliverables do not fluctuate and its revenue recognition is consistent.   Nature of Goods and Services   For label generation service revenues the Company recognizes revenue when a customer has successfully prepared a shipping label and had a pickup. The service is offered to consumers via an online registration and allows users to create a shipping label using a credit card on their account. ShipTime, in partnership with the Canadian Federation of Independent Businesses (“CFIB”), offered a cash rebate to its customers. Revenues were recognized net of the cash rebates, which were held in “funds held in trust” account in the accompanying consolidated balance sheets. The cash rebates were available for twelve months for future use. Rebate revenue was recognized when the rebate was used.   Beginning in 2018, customers were offered airline miles as a reward in lieu of a cash rebate. As a result, the CFIB allowed the Company to release the funds held in trust for unused customer rebates back to cash and cash equivalents. As the Company transitioned from cash rebates to airline mile rewards, customers were allowed to convert their existing cash rebate balances to airline miles at the rate of 10 miles per $1 of rebates. 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.   For shipping calculator revenues and brewery management software revenues, the Company recognizes subscription revenue on a monthly basis. Shipping calculator customers’ renewal dates are based on their date of installation and registration of the shipping calculator line of products. The timing of the revenue recognition and cash collection may vary within a given quarter and the deposits for future services are recorded as contract liabilities on the consolidated balance sheets. Brewery management software subscribers are billed monthly at the first of the month. All payments are made via credit card for the month following.       F-12 Table of Contents     Merchant 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. We act as 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   The Company operates in five reportable segments (see Note 3).   Performance Obligations   At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when the performance obligation has been met, which is when the customer has successfully prepared a shipping label and had a pickup for shipping coordination and label generation services. The Company considers control to have transferred at that time because the Company has a present right to payment at that time, the Company has provided the shipping label, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the shipping label.   For arrangements under which the Company provides a subscription for shipping calculator services and brewery management software, the Company satisfies its performance obligations over the life of the subscription, typically twelve months or less.    Merchant processing customers receive a merchant identification number which allows them to process credit card transactions. Once the transaction is approved, the funds are distributed in an overnight feed and the Company has met its performance obligation.   The Company has no shipping and handling activities related to contracts with customers.   Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to government authorities.   Significant Payment Terms   Pursuant to the Company’s contracts with its customers, amounts are collected up front primarily through credit/debit card transactions. Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.   Variable Consideration   In some cases, the nature of the Company’s contracts may give rise to variable consideration, including rebates and cancellations or other similar items that generally decrease the transaction price.   Variable consideration is estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available.   Revenues are recorded net of variable consideration, such as rebates, refunds and cancellations.      Warranties   The Company’s products and services are provided on an “as is” basis and no warranties are included in the contracts with customers. Also, the Company does not offer separately priced extended warranty or product maintenance contracts.       F-13 Table of Contents     Contract Assets   Typically, the Company has already collected revenue from the customer at the time it has satisfied its performance obligation. Accordingly, the Company has only a small balance of accounts receivable, totaling $171,785 and $131,561 at December 31, 2020 and 2019, respectively. Generally, the Company does not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed.   Contract Liabilities (Deferred Revenue)   Contract liabilities are recorded when cash payments are received in advance of the Company’s performance (including rebates). Contract liabilities were $9,046 and $5,338 at December 31, 2020 and 2019, respectively. During the years ended December 31, 2020 and 2019, the Company recognized revenues of $5,338 and $40,152, respectively, related to contract liabilities outstanding at the beginning of each year.   NOTE 5. PROPERTY AND EQUIPMENT   At December 31, property and equipment consisted of the following:       2020     2019   Computer equipment and software   $ 139,551     $ 139,328   Office furniture and equipment     70,348       69,343   Website development costs     402,306       400,866         612,205       609,537   Accumulated depreciation     (552,357 )     (519,830 )     $ 59,848     $ 89,707     Depreciation expense of property and equipment for the years ended December 31, 2020 and 2019 amounted to $29,830 and $26,814, respectively.   NOTE 6. INTANGIBLE ASSETS   The Company holds several patents for the real-time calculation of shipping costs for items purchased through online auctions using a zip code as a destination location indicator. It includes shipping charge calculations across multiple carriers and accounts for additional characteristics of the item being shipped, such as weight, special packaging or handling, and insurance costs. These patents help facilitate rapid and accurate estimation of shipping costs across multiple shipping carriers and also include real-time calculation of shipping.                 In addition, the Company has various intangible assets from past business combinations.   At December 31 2020, intangible assets consisted of the following:          Patents       Trade Name       Technology & Software     Customer Relationships       Total   Gross carrying amount   $ 16,000     $ 839,816     $ 620,094     $ 4,928,102     $ 6,404,012   Accumulated amortization     (16,000 )     (668,929 )     (620,094 )     (1,465,569 )     (2,770,592 )     $ -     $ 170,887     $ -     $ 3,462,533     $ 3,633,420                     At December 31, 2019, intangible assets consisted of the following:          Patents       Trade Name       Technology & Software     Customer Relationships       Total   Gross carrying amount   $ 16,000     $ 826,098     $ 611,333     $ 4,851,093     $ 6,304,524   Accumulated amortization     (16,000 )     (492,783 )     (611,333 )     (1,135,836 )     (2,255,952 )     $ -     $ 333,315     $ -     $ 3,715,257     $ 4,048,572         F-14 Table of Contents     Amortization expense of intangible assets for the years ended December 31, 2020 and 2019 was $458,915 and $463,436, respectively.   Amortization of intangible assets for the next five years ending December 31 are as follows:   Year Ended December 31,       2021     482,236   2022     314,279   2023     314,279   2024     314,279   2025     314,279   Total 5 year amortization   $ 1,739,352     NOTE 7. ACCRUED EXPENSES   At December 31, accrued expenses consist of the following:       2020     2019   Payroll and related costs   $ 25,319     $ 1,797   Professional and consulting fees     -       960   Royalties     47,803       47,803   Accrued cost of revenues     170,928       114,455   Sales tax     31,902       31,902   Other     302       10,869    Total   $ 276,254     $ 207,786     NOTE 8. NOTE PAYABLE   In August 2018, the Company entered into a note payable with a shareholder to repurchase common and preferred shares. The note was 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.   NOTE 9. COMMITMENTS AND CONTINGENCIES   Legal Matters                 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 Mr. Allan Pratt, the Company's former CEO, in which Mr. Pratt 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.   Indemnities and Guarantees   The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility lease, the Company has agreed to indemnify its lessor for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.         F-15 Table of Contents     NOTE 10. SHAREHOLDERS’ EQUITY                   Preferred Stock                   The Company’s amended Certificate of Incorporation authorizes the issuance of 20,000,000 shares of blank-check preferred stock at $0.001 par value. The Board of Directors will be authorized to fix the designations, rights, preferences, powers and limitations of each series of the preferred stock.     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. 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 by issuing 126,727 preferred shares and a cash payment of $26,252 for the 2020 coupon payment through March 2020. 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). As of December 31, 2020, there are no outstanding shares of Series A Preferred Stock.                  Common Stock   In February 2020, ShipTime Canada amended its rights to exchange one share of ShipTime Canada stock from 45 PAID common shares and 311 PAID preferred shares to 356 PAID common shares. The Company made available to its ShipTime Canada exchangeable preferred shareholders the one-time option to convert existing book entry preferred shares and exchangeable rights to preferred shares into PAID common shares. 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 stock. 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. During 2020, two shareholders sold 500 ShipTime exchangeable shares which were subsequently exchanged for 178,000 common shares. In total, 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.   During 2020, the Company issued 274,120 shares of PAID common stock as a result of the exercise of an investor warrant for 770 ShipTime exchangeable shares. The Company received gross proceeds of $35,636 in connection with the warrant exercise. On March 29, 2021, the Company's Board of Directors authorized the issuance of 1,050,000 bonus shares of PAID common stock to the interim CEO/CFO for services rendered during 2019 and 2020. This bonus was valued at $2,005,500 based on the closing price of the Company's common stock at March 29, 2021 and is recorded in accrued common stock bonus in shareholders’ equity at December 31, 2020. These shares were issued in March 2021.   Share-Based Incentive Plans   During the years ended December 31, 2020 and 2019, the Company had four stock option plans that include both incentive and non-qualified options to be granted to certain eligible employees, non-employee directors, or consultants of the Company.   On March 23, 2018, the Board of Directors voted to approve the 2018 Stock Option Plan which reserves 450,000 non-qualified stock options to be granted to employees. 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. The 2020 options have vesting periods of immediately and over a three-year period, they expire if not exercised within ten years from grant date, and the exercise price is $2.885 per share. During 2020, as a result of the termination of several employees, the Company recorded 61,948 expired options and an additional 20,459 that were cancelled.       F-16 Table of Contents     Active Plans:   2018 Plan   On March 23, 2018, the Company adopted the 2018 Non-Qualified Stock Option Plan (the "2018 Plan"). The purpose of the 2018 Plan is to provide long-term incentives and rewards to those employees of the Company, and any other individuals, whether directors, consultants or advisors who are in a position to contribute to the long-term success and growth of the Company. The options granted have a 10-year contractual term and have a vesting period that ranges from one hundred percent on the date of grant to fully vest over a two-year period. There are currently 591,210 shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2020 is as follows:     Number of shares     Weighted average exercise price per share   Options outstanding at January 1, 2020     286,197     $ 3.50   Granted     105,000       2.89   Cancelled/Expired     (82,407 )     3.68   Exercised     -       -   Options outstanding at December 31, 2020     308,790     $ 3.24     2012 Plan   On October 15, 2012, the Company adopted the 2012 Non-Qualified Stock Option Plan (the "2012 Plan"). The purpose of the 2012 Plan is to provide long-term incentives and rewards to those employees of the Company, and any other individuals, whether directors, consultants or advisors who are in a position to contribute to the long-term success and growth of the Company. The options granted have a 10-year contractual term and vest one hundred percent on the date of grant. There are no shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2020 is as follows:     Number of shares     Weighted average exercise price per share   Options outstanding at January 1, 2020     36,000     $ 0.98   Granted     -       -   Cancelled     -       -   Exercised     -       -   Options outstanding at December 31, 2020     36,000     $ 0.98     2011 Plan   On February 1, 2011, the Company adopted the 2011 Non-Qualified Stock Option Plan (the "2011 Plan"). Under the 2011 Plan, employees and consultants may elect to receive their gross compensation in the form of options, exercisable at $0.98 per share, to acquire the number of shares of the Company's common stock equal to their gross compensation divided by the fair value of the stock on the date of grant. The options granted have a 10-year contractual term and have vesting periods that range from one hundred percent on the date of grant to one-third immediately, one-third vesting in 18 months and the final one-third vesting in 36 months from the date of the grant. There are no shares reserved for issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2020 is as follows:     Number of shares     Weighted average exercise price per share   Options outstanding at January 1, 2020     43,000     $ 3.00   Granted     -       -   Cancelled     -       -   Exercised     -       -   Options outstanding at December 31, 2020     43,000     $ 3.00          F-17 Table of Contents       2002 Plan   The 2002 Stock Option Plan (“2002 Plan”) provides for the award of qualified and non-qualified options for up to 60,000 shares. The options granted have a ten-year contractual term and have a vesting schedule of either immediately, two years, or four years from the date of grant. There are no shares reserved for issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2020 is as follows:       Number of shares     Weighted average exercise price per share   Options outstanding at January 1, 2020     16,000     $ 23.33   Granted     -       -   Cancelled     -       -   Exercised     -       -   Options outstanding at December 31, 2020     16,000     $ 23.33                   Fair value of issuances   The fair value of the Company's option grants under the 2018, 2012, 2011, and 2002 Plans was estimated at the date of grant using the Black-Scholes-Merton model with the following weighted average assumptions:       2020     2019   Expected term (based upon historical experience)   5.0-5.8 years     5.0 years   Expected volatility     143 - 159%       178-180% Expected dividends   None     None   Risk free interest rate     0.46%       2.05 – 2.4%     For the years ended December 31, 2020 and 2019, the Company recorded total 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).   The Company has unrecognized share-based compensation expense of $178,349 for options outstanding as of December 31, 2020 which will be recognized over the weighted average period of approximately three years.   Information pertaining to options outstanding and exercisable at December 31, 2020 is as follows:     Options Outstanding     Options Exercisable     Exercise Prices     Number of shares      Weighted Average Remaining contractual Life (In Years)     Number of shares     Weighted Average Remaining contractual Life (In Years)     $ 0.98       52,500       2.93       52,500       2.93     $ 2.89       105,000       9.87       51,667       9.87     $ 2.92       52,500       8.13       47,500       8.13     $ 3.00       65,000       8.62       46,667       8.62     $ 3.30       37,500       6.75       37,500       6.75     $ 3.50       7,590       7.76       7,590       7.76     $ 4.10       78,700       7.23       78,700       7.23     $ 72.50       5,000       0.86       5,000       0.86               403,790       7.58       327,124       7.14         F-18 Table of Contents     Summary of all stock option plans activity during the year ended December 31, 2020 is as follows:       Number of Shares     Weighted Average Price     Weighted Average Remaining Contractual Life (In Years)     Aggregate Intrinsic Value   Options outstanding at January 1, 2020     381,197     $ 4.03               Granted     105,000       2.89               Cancelled/Expired     (82,407 )     3.68               Exercised     -       -               Options outstanding and expected to vest at December 31, 2020     403,790     $ 3.81       7.58     $ 57,488   Options exercisable at December 31, 2020     327,124     $ 4.02       7.14     $ 57,488     The aggregate intrinsic value of options is calculated as the difference between the exercise price of options and the fair value of the Company’s common stock.     Warrants   From time to time, the Company issues warrants to purchase shares of the Company’s common stock to investors, note holders and to non-employees for services rendered or to be rendered in the future. 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.   NOTE 11. INCOME TAXES   The Company’s income (loss) before taxes includes the following components for the years ended December 31:       2020     2019   U.S.   $ (2,537,388 )   $ 277,014   Foreign     427,042       2,793       $ (2,110,346 )   $ 279,807     The Company is subject to taxation in the U.S., Canada, and Massachusetts. The provision (benefit) for income taxes for the years ended December 31 are summarized below:       2020     2019   Current:             Federal   $ -     $ -   State     500       456   Foreign     250,711       62,135   Total current     251,211       62,591                     Deferred:                 Federal     -       -   State     -       -   Foreign     (129,004 )     (64,795 ) Total deferred     (129,004 )     (64,795 ) Income tax provision (benefit)   $ 122,207     $ (2,204 )       F-19 Table of Contents     A reconciliation of income taxes computed by applying the statutory U.S. income tax rate to the Company’s income (loss) before income tax provision (benefit) to the income tax provision (benefit) is as follows for the years ended December 31:       2020     2019   U.S. federal statutory tax rate     21.00 %     21.00 % State tax benefit, net     7.52 %     7.62 % Stock compensation     (5.16 )%     8.79 % Attributes expiration     (38.04 )%     114.46 % Other     (0.85 )%     1.82 % Valuation allowance     9.75 %     (154.66 )% Effective income tax rate     (5.78 )%     (0.97 )%    Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows as of December 31:       2020     2019   Deferred taxes:             NOLs   $ 9,456,605     $ 10,155,715   Inventory and other reserves     24,128       -   Stock based compensation expense     853,239       380,544   Lease liability     25,151       32,576   Accruals     1,892       -   Other     96       96   Total deferred tax assets     10,361,111       10,568,931   Depreciation and amortization     (908,380 )     (1,012,528 ) Right-of-use assets     (24,767 )     (31,929 ) Valuation allowance     (10,388,911 )     (10,594,663 ) Net deferred tax liabilities   $ (960,947 )   $ (1,070,189 )   Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The reduction in the valuation allowance is approximately $206,000 and $432,000 in 2020 and 2019, respectively.   As of December 31, 2020, the Company had net operating loss carryforwards for federal income tax purposes of approximately $41,093,000. Of 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. As 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 net operating losses may be subject to substantial annual limitation due to federal and state ownership change limitation provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating losses and credits before their utilization. The Company has not performed an analysis to determine the limitation of the net operating loss carryforwards.   A valuation allowance of 100% has been established in respect of the deferred income tax assets due to the uncertainty of the Company’s utilization of such deferred tax assets for the U.S. federal and state on each of the Company’s consolidated balance sheets at December 31, 2020 and 2019.   The income tax provision at December 31, 2020 reflects a full accounting of tax filings under ASC Subtopic 740-10. Paid, Inc. is subject to U.S. federal and Massachusetts state tax. With limited exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2017. Generally, the tax years remain open for examination by the Federal authority under three-year statute of limitation; however, states generally keep their statute open for four years. In addition, the Company's tax years from inception are subject to limited examination by the United States and Massachusetts authorities due to the carry forward of unutilized net operating losses. ShipTime is subject to taxation in Canada and Ontario. The Company recognizes interest and penalties, as estimated or incurred, as general and administrative expense.       F-20 Table of Contents     On 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.   On 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.   NOTE 12. Leases   We have an operating lease for our corporate offices in Canada and finance leases for furniture and equipment. Our leases have remaining lease terms of six months to thirty-two months, and our primary operating leases include options to extend the leases for four years. Future 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.   We report operating leased assets, as well as operating lease current 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 rates are stated in our leases for equipment. When no interest rate is stated in a lease, however, we review the interest rates implicit in our recent finance leases to estimate our incremental borrowing rate. We determine the rate implicit in a lease by using the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.   The components of lease expense for the years ended December 31, were as follows:         2020     2019   Operating lease cost   $ 38,163     $ 31,009                     Finance lease cost:                 Amortization of leased assets   $ 10,813     $ 10,636   Interest on lease liabilities     832       1,669   Total finance lease cost   $ 11,645     $ 12,305     Supplemental cash flow information related to leases for the years ended December 31, was as follows:       2020     2019   Cash paid for amounts included in leases:             Operating cash flows from operating leases   $ 39,583     $ 30,960   Operating cash flows from finance leases   $ 832     $ 1,669   Financing cash flows from finance leases   $ 9,627     $ 8,821                     Right-of-use assets obtained in exchange for lease obligations:                 Operating leases   $ -     $ 55,600   Finance leases   $ -     $ -           F-21 Table of Contents     Supplemental balance sheet information related to leases was as follows:        December 31, 2020   Operating leases:        Operating lease right-of-use assets    $ 93,457   Current portion of operating lease obligations    $ 33,118   Operating lease obligations, net of current portion     61,794   Total operating lease liabilities   $ 94,912             Finance leases:         Property and equipment, at cost   $ 54,066   Accumulated depreciation     (48,659 ) Property and equipment, net   $ 5,407             Current portion of finance lease obligations   $ 2,844   Finance lease obligations, net of current portion     -   Total finance lease liabilities   $ 2,844         Year Ended December 31, 2020   Weighted Average Remaining Lease Term       Operating lease   2.6 years   Finance leases   0.3 years           Weighted Average Discount Rate       Operating lease     9.0%   Finance leases     9.7%     Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.   A summary of future minimum payments under non-cancellable operating lease commitment as of December 31, 2020 is as follows:   Years ending December 31,   Total   2021   $ 40,869   2022     40,869   2023     25,274   Total lease liabilities     107,012      Less amount representing interest     (12,100 ) Total     94,912     Less current portion     (33,118 )     $ 61,794     The following is a schedule of minimum future rentals on the non-cancelable finance leases as of December 31, 2020:   Year ending December 31,   Total   2021   $ 2,919   Total minimum payments required:     2,919   Less amount representing interest:     (75 ) Present value of net minimum lease payments:     2,844   Less current portion     (2,844 )     $ -     NOTE 13. SUBSEQUENT EVENTS   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).   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, except as disclosed herein.     F-22 Table of Contents       EXH I BIT INDEX   No.   Description of Exhibits 3.1   Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to Form 8-K, filed on November 25, 2003) 3.2   Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K, filed on December 8, 2004) 3.3   Certificates of Amendment of Certificate of Incorporation of the Company effective December 30, 2016 (incorporated by reference to Exhibit 3.1 to Form 8-K filed on December 23, 2016) 3.4   Amendment No. 1 to Bylaws effective December 30, 2016 (incorporated by reference to Exhibit 3.2 to Form 8-K filed on December 23, 2016) 4.1   Specimen of certificate for Common Stock (incorporated by reference to Exhibit 4.1 to Form SB-2/A filed on December 1, 2000) 4.2   Agreement dated November 21, 2008, by and between the Company and Lewis Asset Management Equity Fund, LLP with respect to the purchase of 2,500,000 shares at $.20 per share (incorporated by reference to Exhibit 4.2 to Form 10-KSB filed on March 31, 2009) 4.3   Form of Warrant to Lewis Asset Management with respect to Promissory Note dated April 29, 2009 (incorporated by reference to Exhibit 4.2 to Form 10-Q filed on May 12, 2009) 10.1+   2002 Non-Qualified Stock Option Plan (incorporated by reference from Exhibit 10.17 to Form 10-KSB filed on March 31, 2003) 10.2+   2011 Non-Qualified Stock Option Plan (incorporated by reference from Exhibit 99.1 to Form S-8 filed on February 2, 2011) 10.3   2018 Non-Qualified Stock Option Plan (incorporated by reference from Exhibit 10.35 to Form 10-K filed on April 1, 2019 ) 10.4+   PAID, Inc. 2012 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on October 18, 2012) 10.5+   Agreement for Non-Qualified Stock Option under the PAID, Inc. 2012 Non-Qualified Stock Option Plan awarded to W. Austin Lewis, IV, dated October 15, 2012 (incorporated by reference to Exhibit 10.2 to Form 10-Q filed on October 18, 2012) 10.6+   Agreement for Non-Qualified Stock Option under the PAID, Inc. 2011 Non-Qualified Stock Option Plan awarded to W. Austin Lewis, IV, dated August 8, 2012 (incorporated by reference to Exhibit 10.3 to Form 10-Q filed on October 18, 2012) 10.7    Amalgamation Agreement dated September 1, 2016 by and among PAID, Inc., emergeIT, Inc., 2534845 Ontario Inc. and 2534841 Ontario Inc. (incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 23, 2016) 10.8    Exchange and Call Rights Agreement (incorporated by reference to Exhibit 10.2 to Form 8-K filed on December 23, 2016) 10.9    Support Agreement (incorporated by reference to Exhibit 10.4 to Form 8-K filed on December 23, 2016) 10.10+    Employment Agreement for Allan Pratt (incorporated by reference to Exhibit 10.6 to Form 8-K filed on December 23, 2016) 10.11   Employment Agreement for W. Austin Lewis IV 10.12   Non-Compete Agreement for W. Austin Lewis IV 31.1*   CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 31.2*   CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002 32.0*   CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002 EX-101.INS   XBRL Instance Document EX-101.SCH   XBRL Taxonomy Extension Schema EX-101.CAL   XBRL Taxonomy Extension Calculation Linkbase EX-101.DEF   XBRL Taxonomy Extension Definition Linkbase EX-101.LAB   XBRL Taxonomy Extension Label Linkbase EX-101.PRE   XBRL Taxonomy Extension Presentation Linkbase   *filed herewith   +Indicates a management contract or any compensatory plan, contract or arrangement         F-23