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.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
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, 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. Paid also offers BeerRun Software which 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.
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
As of December 31, 2022, the Company reported cash and cash equivalents of $1,787,248 and had working capital of $1,635,370. The Company has reported operating income of $58,993 and cash flows from operations of $801,412 for the year ended December 31, 2022 and has an accumulated deficit of $69,670,404 at December 31, 2022.
Management believes that the Company has adequate cash resources to fund operations during the next 12 months after the filing of this annual report on Form 10-K. However, there can be no assurance that anticipated growth in new business will occur, and that the Company will be successful in launching new products and services. Management continues to seek alternative sources of capital to support the growth of future operations.
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 2024 and will have a positive impact on the Company for the foreseeable future.
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 99% of its revenues from Canada and 1% from the U.S. during the years ended December 31, 2022 and 2021.
At December 31, 2022 and 2021, 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, 2022 and 2021, 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 periods. Significant estimates made by the Company’s management include, but are not limited to, the collectability of accounts and note receivable, the recoverability of long-lived assets, the valuation of deferred tax assets and liabilities, renewal periods and discount rates for leases and the 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.
At December 31, 2022 and 2021, the Company’s financial instruments include cash and cash equivalents, accounts receivable, note receivable, accounts payable, and accrued expenses. The carrying amount of cash and cash equivalents, accounts receivable, note 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 initial maturities of three months or less to be cash equivalents.
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, 2022, 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 accounts receivable 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, 2022 and 2021, the Company recorded an allowance for doubtful accounts of $36,845 and $0, respectively.
For the years ended December 31, 2022 and 2021, no revenues from any one individual customer accounted for more than 10% of the total revenues. As of December 31, 2022 and 2021, there was no customer that accounted for more than 10% of the accounts receivable balance.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of three to eight 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.
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, 2022 and 2021. 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, 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, 2022 and 2021, advertising expense totaled $247,549 and $184,075, 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, in 2021 the Board of Directors approved an amendment to ShipTime’s December 30, 2016 Warrant Agreement with an entity controlled by the Company’s 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 a 2021 signing bonus to the CEO/CFO (see Note 10). The Company recorded $82,180 for share-based bonus payments related to 2022 which were approved by the Board of Directors on March 21, 2023. The shares of common stock were issued to the CEO/CFO, one additional officer and one employee.
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%.
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, 2022 and 2021 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, 2022 and 2021, 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, 2022 and 2021 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 (see Note 11).
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
The Company is subject to taxation in the U.S., and Canada and various state jurisdictions.
Income (Loss) Per Common Share
Basic income (loss) per share represent income (loss) divided by the weighted-average number of common shares outstanding during the period. Diluted income (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 income (loss) per share in 2021 because they would reduce the reported loss per share and therefore have an anti-dilutive effect. For the year ended December 31, 2022 there were approximately 11,400 dilutive shares that were included in the diluted income (loss) per share.
The following is a reconciliation of the numerators and denominators of the basic and diluted income (loss) per share computations for the years ended December 31:
| | 2022 | | | 2021 | |
Numerator: | | | | | | | | |
Net income (loss) | | $ | 652,146 | | | $ | (696,760 | ) |
| | | | | | | | |
Denominator: | | | | | | | | |
Basic weighted-average shares outstanding | | | 7,770,298 | | | | 7,444,732 | |
Effect of dilutive securities | | | 11,391 | | | | - | |
Diluted weighted-average shares outstanding | | | 7,781,689 | | | | 7,444,732 | |
Net income (loss) per share – basic | | $ | 0.08 | | | $ | (0.09 | ) |
Net income (loss) per share – diluted | | $ | 0.08 | | | $ | (0.09 | ) |
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 six reportable segments are managed separately based on fundamental differences in their operations. At December 31, 2022, the Company operated in the following six reportable segments:
| b) | Shipping calculator services; |
| c) | Brewery management software; |
| d) | Merchant processing services; |
| e) | Shipping coordination and label generation services; and |
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 maker is the Chief Executive Officer/Chief Financial Officer.
The following table compares total revenues for the years indicated.
| | Years Ended | |
| | December 31, 2022 | | | December 31, 2021 | |
Client services | | $ | 806 | | | $ | 3,141 | |
Brewery management software | | | 38,575 | | | | 59,075 | |
Shipping calculator services | | | 7,964 | | | | 22,872 | |
Merchant processing services | | | 40,153 | | | | 54,003 | |
Shipping coordination and label generation services | | | 16,498,431 | | | | 14,750,625 | |
Total revenues, net | | $ | 16,585,929 | | | $ | 14,889,716 | |
The following table compares total income (loss) from operations for the years indicated.
| | Years Ended | |
| | December 31, 2022 | | | December 31, 2021 | |
Client services | | $ | 689 | | | $ | 2,529 | |
Brewery management software | | | (38,933 | ) | | | 20,747 | |
Shipping calculator services | | | 251 | | | | 12,383 | |
Merchant processing services | | | (4,434 | ) | | | 20,417 | |
Shipping coordination and label generation services | | | 273,363 | | | | 115,473 | |
Corporate operations | | | (171,943 | ) | | | (662,052 | ) |
Total income (loss) from operations | | $ | 58,993 | | | $ | (490,503 | ) |
During 2022 and 2021, the Company recorded depreciation and amortization expense of $325,940 and $511,698, respectively, which was solely related to the shipping coordination and label generations service segment of the Company. During 2022, the Company reclassified expenses of $537,602 related to transfer price adjustments from corporate operations segment to shipping coordination and label generations services segment for the year ended 2021 to conform to the 2022 presentation.
Reclassifications
Certain amounts were reclassified in the accompanying consolidated balance sheet as of December 31, 2021 in order to conform to the current period presentation.
Recent Accounting Pronouncements
There were no new accounting pronouncements issued by the FASB during the year that would apply to the Company and would 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.
Beginning in 2018, customers were offered airline miles as a reward for using the shipping coordination and label generation services. Our affiliated partner, Canadian Federation of Independent Businesses (“CFIB”) has allowed us to provide this benefit to their members. Miles are purchased from Air Canada and distributed to the members once monthly based on a calculation of one mile for each base and fuel dollar of their spend with the Company. Unused airline miles are recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets.
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.
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 six 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.
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 $169,074 and $215,109 at December 31, 2022 and 2021, 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 $13,020 and $11,154 at December 31, 2022 and 2021, respectively. During the years ended December 31, 2022 and 2021, the Company recognized revenues of $11,154 and $9,046, respectively, related to contract liabilities outstanding at the beginning of each year.
NOTE 5. NOTE RECEIVABLE
On October 13, 2022, the Company entered in a Securities Purchase Agreement (“SPA”) with respect to a secured $1,875,000 convertible note (“Convertible Note”) made by Embolx, Inc. (“Noteholder”), a California corporation. The Convertible Note was purchased at a 20% ($375,000) original issue discount and is subject to a 9-month maturity, after which, if unpaid will then carry a 20% interest rate. The Company has recognized $104,167 in other income related to accretion of the discount on the Convertible Note for the year ended December 31, 2022. The Company has the option to convert the Convertible Note into shares of common stock of the Noteholder. The Convertible Note is secured by essentially all assets of the Noteholder. Under the SPA, the Company has a right to purchase additional notes and receive warrants on the same terms for a total potential investment amount of $2,000,000 with an additional over-allotment option of $500,000 as defined in the SPA. As additional consideration, the Company received a 5-year warrant to purchase shares of common stock of the Noteholder. The shares are subject to certain piggyback registration rights under a Registration Rights Agreement. The warrant is offered at 50% of the original principal amount and will be valued at the price per share of common stock paid in the first liquidity event following October 19, 2022. The warrants expire five years from the original issue date.
NOTE 6. PROPERTY AND EQUIPMENT
At December 31, property and equipment consisted of the following:
| | 2022 | | | 2021 | |
Computer equipment and software | | $ | 139,769 | | | $ | 140,775 | |
Office furniture and equipment | | | 66,644 | | | | 70,814 | |
Website development costs | | | 396,997 | | | | 402,975 | |
| | | 603,410 | | | | 614,564 | |
Accumulated depreciation | | | (579,923 | ) | | | (574,071 | ) |
| | $ | 23,487 | | | $ | 40,493 | |
Depreciation expense of property and equipment for the years ended December 31, 2022 and 2021 amounted to $14,900 and $21,131, respectively.
NOTE 7. 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, 2022, intangible assets consisted of the following:
| | Patents | | | Trade Name | | | Technology & Software | | | Customer Relationships | | | Total | |
Gross carrying amount | | $ | 16,000 | | | $ | 789,212 | | | $ | 587,776 | | | $ | 4,644,033 | | | $ | 6,037,021 | |
Accumulated amortization | | | (16,000 | ) | | | (789,212 | ) | | | (587,776 | ) | | | (1,980,722 | ) | | | (3,373,710 | ) |
| | $ | - | | | $ | - | | | $ | - | | | $ | 2,663,311 | | | $ | 2,663,311 | |
At December 31, 2021, intangible assets consisted of the following:
| | Patents | | | Trade Name | | | Technology & Software | | | Customer Relationships | | | Total | |
Gross carrying amount | | $ | 16,000 | | | $ | 846,186 | | | $ | 624,162 | | | $ | 4,963,860 | | | $ | 6,450,208 | |
Accumulated amortization | | | (16,000 | ) | | | (843,240 | ) | | | (624,162 | ) | | | (1,791,608 | ) | | | (3,275,010 | ) |
| | $ | - | | | $ | 2,946 | | | $ | - | | | $ | 3,172,252 | | | $ | 3,175,198 | |
Amortization expense of intangible assets for the years ended December 31, 2022 and 2021 was $311,809 and $490,567, respectively.
Amortization of intangible assets for the next five years ending December 31 are as follows:
Year Ended December 31, | | | | |
2023 | | $ | 295,352 | |
2024 | | | 295,352 | |
2025 | | | 295,352 | |
2026 | | | 295,352 | |
2027 | | | 295,352 | |
Total 5-year amortization | | $ | 1,476,760 | |
NOTE 8. ACCRUED EXPENSES
At December 31, accrued expenses consist of the following:
| | 2022 | | | 2021 | |
Payroll and related costs | | $ | 195,803 | | | $ | 58,182 | |
Professional and consulting fees | | | 3,685 | | | | 26,070 | |
Royalties | | | 40,075 | | | | 47,803 | |
Accrued cost of revenues | | | 168,657 | | | | 212,020 | |
Sales tax | | | 22,228 | | | | 31,902 | |
Other | | | 410 | | | | 410 | |
Total | | $ | 430,858 | | | $ | 376,387 | |
NOTE 9. COMMITMENTS AND CONTINGENCIES
Legal Matters
In the normal course of business, the Company periodically becomes involved in litigation and disputes. During 2021, the Company was notified of a dispute related to its non-renewal of the employment agreement with Mr. Allan Pratt, the Company’s former President, CEO and Chairman. On or around January 2020, the Company had allowed Mr. Pratt’s employment agreement to not renew, but Mr. Pratt alleges in a court in Canada that the Company terminated him and that the Company owes him a severance payment. Around the same time that Mr. Pratt’s employment term expired, the Company’s Board of Directors voted to reduce the size of the Board from five to three members, and Mr. Pratt and Mr. Austin Lewis, then CFO, automatically rolled off from the Board of Directors. More than a year later, in 2021, Mr. Pratt filed a claim in Delaware courts to contest that decision. In July 2022, Mr. Pratt amended the complaint to dispute the proper authorization of a stock bonus that was awarded to the Company’s CEO in March 2021 (see Note 10). The Company has not recorded a reserve as the outcome of these matters cannot be determined.
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.
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. 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. As of December 31, 2022 and 2021, 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. In total, the Company has reserved for future issuance of 2,106,808 shares of PAID common stock with respect to the remaining 5,918 exchangeable shares to be issued as a result of the ShipTime acquisition which are considered issued and outstanding as of December 31, 2022 for financial reporting purposes.
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 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 was recorded in accrued common stock bonus in shareholders’ equity at December 31, 2020. Also, at March 29, 2021, the Company’s Board of Directors authorized the issuance of an additional 250,000 shares to the CEO/CFO as a one-time sign-on bonus resulting in a share-based compensation expense of $477,500, which was recognized ratably during 2021 as the bonus shares were subject to repurchase if the CEO/CFO terminated employment through January 1, 2022. All of these shares were issued on March 31, 2021. During the second quarter of 2021, the Company issued 18,099 shares valued at $2.21 per share for a total of $40,000 to two employees as bonus compensation which is included in share-based compensation in the condensed statements of operations and comprehensive income (loss) for the year ended December 31, 2021. During the second quarter of 2022, the Company issued 13,021 shares valued at $1.92 per share for a total share-based compensation expense of $25,000 to one employee as bonus compensation which is included in share-based compensation in the consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2022. The shares were issued pursuant to the exemption for registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder. On March 21, 2023, the Company’s Board of Directors authorized the issuance of 46,961 bonus shares of PAID common stock to the CEO/CFO, one additional officer and one employee for services rendered during 2022. This bonus was valued at $82,180 based on the closing price of the Company’s common stock at March 20, 2023 and is recorded in accrued common stock bonus in shareholders’ equity at December 31, 2022. These shares were issued in March 2023.
Share-Based Incentive Plans
During the years ended December 31, 2022 and 2021, 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. The Company has three additional stock option plans that include both incentive and non-qualified stock options to be granted to certain eligible employees, non-employee directors, or consultants of the Company. On November 10, 2020, the board voted to increase the 2018 Stock Option Plan from 450,000 options to 900,000 options.
During 2021, the Company granted 10,000 stock options to one employee. These options have a three-year vesting schedule with one-third vesting immediately, one-third vesting in 18 months and the final one-third vesting in 36 months. The options expire if not exercised in ten years from the grant date, and their exercise price is $1.91 per share.
On October 14, 2022, the Company received a notice of exercise of options to purchase 20,000 common shares of the Company’s stock. The options were exercised at $0.975 per share and the Company received proceeds of $19,500.
During 2022, options granted to purchase 12,000 shares of the Company’s common stock were cancelled due to the expiration of the ten-year term.
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 586,000 shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2022 is as follows:
| | Number of shares | | | Weighted average exercise price per share | |
Options outstanding at January 1, 2022 | | | 314,000 | | | $ | 3.17 | |
Granted | | | - | | | | - | |
Cancelled/Expired | | | - | | | | - | |
Exercised | | | - | | | | - | |
Options outstanding at December 31, 2022 | | | 314,000 | | | $ | 3.17 | |
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, 2022 is as follows:
| | Number of shares | | | Weighted average exercise price per share | |
Options outstanding at January 1, 2022 | | | 36,000 | | | $ | 0.98 | |
Granted | | | - | | | | - | |
Cancelled | | | (2,000 | ) | | | 0.98 | |
Exercised | | | (20,000 | ) | | | 0.98 | |
Options outstanding at December 31, 2022 | | | 14,000 | | | $ | 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 to $3.30 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, 2022 is as follows:
| | Number of shares | | | Weighted average exercise price per share | |
Options outstanding at January 1, 2022 | | | 43,000 | | | $ | 3.00 | |
Granted | | | - | | | | - | |
Cancelled | | | - | | | | - | |
Exercised | | | - | | | | - | |
Options outstanding at December 31, 2022 | | | 43,000 | | | $ | 3.00 | |
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, 2022 is as follows:
| | Number of shares | | | Weighted average exercise price per share | |
Options outstanding at January 1, 2022 | | | 10,000 | | | $ | 0.98 | |
Granted | | | - | | | | - | |
Cancelled/Expired | | | (10,000 | ) | | | 0.98 | |
Exercised | | | - | | | | - | |
Options outstanding at December 31, 2022 | | | - | | | $ | - | |
Fair value of issuances
The Company did not grant any options to purchase Company stock during the year ended December 31, 2022. The fair value of the Company’s 2021 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 (see below).
| | 2021 | |
Expected term (based upon historical experience) (in years) | | 5.5 | - | 5.8 | |
Expected volatility | | 117 | - | 159% | |
Expected dividends | | | None | | |
Risk free interest rate | | 0.73 | - | 1.24% | |
For the years ended December 31, 2022 and 2021, the Company recorded total share-based compensation expense related to the common stock bonuses, other stock issuances, and stock options of $172,488 and $603,533, respectively, which is recorded in share-based compensation expense in the accompanying consolidated statements of operations and comprehensive income (loss).
The Company has unrecognized share-based compensation expense of $57,958 for options outstanding as of December 31, 2022 which will be recognized over the weighted average period of approximately one year.
Information pertaining to options outstanding and exercisable at December 31, 2022 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 | | | | 19,500 | | | | 2.11 | | | | 19,500 | | | | 2.11 | |
$ | 1.91 | | | | 10,000 | | | | 8.25 | | | | 6,667 | | | | 8.25 | |
$ | 2.21 | | | | 7,000 | | | | 8.45 | | | | 4,666 | | | | 8.45 | |
$ | 2.68 | | | | 5,300 | | | | 8.87 | | | | 1,767 | | | | 8.87 | |
$ | 2.89 | | | | 105,000 | | | | 7.87 | | | | 78,333 | | | | 7.87 | |
$ | 2.92 | | | | 52,500 | | | | 6.13 | | | | 52,500 | | | | 6.13 | |
$ | 3.00 | | | | 52,500 | | | | 6.62 | | | | 52,500 | | | | 6.62 | |
$ | 3.30 | | | | 37,500 | | | | 4.75 | | | | 37,500 | | | | 4.75 | |
$ | 3.50 | | | | 3,000 | | | | 5.76 | | | | 3,000 | | | | 5.76 | |
$ | 4.10 | | | | 78,700 | | | | 5.23 | | | | 78,700 | | | | 5.23 | |
| | | | | 371,000 | | | | 6.28 | | | | 335,133 | | | | 6.10 | |
Summary of all stock option plans activity during the year ended December 31, 2022 is as follows:
| | Number of Shares | | | Weighted Average Price | | | Weighted Average Remaining Contractual Life (In Years) | | | Aggregate Intrinsic Value | |
Options outstanding at January 1, 2022 | | | 403,000 | | | $ | 2.90 | | | | | | | | | |
Granted | | | - | | | | - | | | | | | | | | |
Cancelled/Expired | | | (12,000 | ) | | | 0.98 | | | | | | | | | |
Exercised | | | (20,000 | ) | | | 0.98 | | | | | | | | | |
Options outstanding and expected to vest at December 31, 2022 | | | 371,000 | | | $ | 3.07 | | | | 6.28 | | | $ | 6,838 | |
Options exercisable at December 31, 2022 | | | 335,133 | | | $ | 3.10 | | | | 6.10 | | | $ | 6,338 | |
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 at December 31, 2022.
NOTE 11. INCOME TAXES
The Company’s income (loss) before income tax (benefit) provision includes the following components for the years ended December 31:
| | 2022 | | | 2021 | |
U.S. | | $ | (77,704 | ) | | $ | (1,143,578 | ) |
Foreign | | | 273,359 | | | | 653,075 | |
| | $ | 195,655 | | | $ | (490,503 | ) |
The Company is subject to taxation in the U.S., Canada, and Massachusetts. The (benefit) provision for income taxes for the years ended December 31 are summarized below:
| | 2022 | | | 2021 | |
Current: | | | | | | | | |
Federal | | $ | - | | | $ | - | |
State | | | 1,356 | | | | 456 | |
Foreign | | | (364,879 | ) | | | 336,568 | |
Total current | | | (363,523 | ) | | | 337,024 | |
| | | | | | | | |
Deferred: | | | | | | | | |
Federal | | | - | | | | - | |
State | | | - | | | | - | |
Foreign | | | (92,968 | ) | | | (130,767 | ) |
Total deferred | | | (92,968 | ) | | | (130,767 | ) |
Income tax (benefit) provision | | $ | (456,491 | ) | | $ | 206,257 | |
A reconciliation of income taxes computed by applying the statutory U.S. income tax rate to the Company’s income (loss) before income tax (benefit) provision to the income tax (benefit) provision is as follows for the years ended December 31:
| | 2022 | | | 2021 | |
U.S. federal statutory tax rate | | | 21.00 | % | | | 21.00 | % |
State tax benefit, net | | | 5.62 | % | | | (7.61 | )% |
Stock compensation | | | 18.56 | % | | | (4.15 | )% |
Officers compensation | | | - | % | | | (69.84 | )% |
Attributes expiration | | | 17.06 | % | | | (148.01 | )% |
Return to Provision | | | (257.75 | )% | | | 8.73 | % |
Other | | | 30.65 | % | | | (7.86 | )% |
NOL Adjustment | | | 295.28 | % | | | - | % |
Unrecognized tax benefit | | | 361.72 | % | | | - | % |
GILTI | | | 156.50 | % | | | - | % |
Interest and penalties | | | - | % | | | (14.27 | )% |
Valuation allowance | | | (882.41 | )% | | | 180.11 | % |
Effective income tax rate | | | (233.77 | )% | | | (41.90 | )% |
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 net deferred tax liabilities are as follows as of December 31:
| | 2022 | | | 2021 | |
Deferred taxes: | | | | | | | | |
NOLs | | $ | 7,495,858 | | | $ | 9,122,325 | |
Inventory and other reserves | | | 31,340 | | | | 24,128 | |
Stock based compensation expense | | | 196,700 | | | | 296,657 | |
Lease liability | | | 5,883 | | | | 16,125 | |
Accruals | | | 14,695 | | | | 7,597 | |
Other | | | 96 | | | | 96 | |
Total deferred tax assets | | | 7,744,572 | | | | 9,466,928 | |
Depreciation and amortization | | | (668,359 | ) | | | (784,611 | ) |
Right-of-use assets | | | (6,112 | ) | | | (16,054 | ) |
Valuation allowance | | | (7,778,053 | ) | | | (9,504,575 | ) |
Net deferred tax liabilities | | $ | (707,952 | ) | | $ | (838,312 | ) |
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 $1,727,000 and $884,000 in 2022 and 2021, respectively.
As of December 31, 2022, the Company had net operating loss carryforwards for federal income tax purposes of approximately $32,917,000. Of the total amount approximately $902,000 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 $32,015,000 expires beginning in the year 2023. As of December 31, 2022, the Company had net operating loss carryforwards for state income tax purposes of approximately $9,229,000 which expire beginning in the year 2031. As of December 31, 2022, the Company also had Canada net operating loss carryforwards of $1,670,000 which expire beginning in the year 2039.
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, 2022 and 2021.
The income tax provision at December 31, 2022 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 2019. Generally, the tax years remain open for examination by the federal and Massachusetts authorities under three-year statute of limitation. In addition, the Company's tax years starting 2003 and 2011 are subject to limited examination by the United States and Massachusetts authorities, respectively, due to the carry forward of unutilized net operating losses. ShipTime is subject to taxation in Canada and Ontario. The foreign subsidiary is generally subject to examination for four years following the later of: (1) the year in which the tax obligation originated or (2) the year the tax return is filed. ShipTime is not currently under examination by the local tax authority. The Company recognizes interest and penalties related with income taxes, as estimated or incurred, as a part of the income tax provision. As of December 31, 2022, and 2021 the Company accrued $16,064 and $70,060 of interest and penalties related to foreign income taxes.
The Tax Cuts and Jobs Act requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under Section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during the year but did not result in the capitalization of R&D costs. This rule is also in effect for its foreign subsidiary and the calculation of global intangible low-tax income (“GILTI”), of which approximately $900,000 of R&D costs related with internally developed software have been capitalized. The Company will amortize these costs for tax purposes over five years if the R&D was performed in the U.S. and over 15 years if the R&D was performed outside the U.S.
The evaluation of uncertainty in a tax position is a two-step process. The first step involves recognition. The Company determines whether it's more likely than not that a tax position will be sustained upon tax examination including any resolution of any related appeals or litigation, based on only the technical merits of the position. The technical merits of a tax position are derived from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the consolidated financial statements. The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the consolidated financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate resolution with a taxing authority. Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation.
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits at the beginning and end of the years ended December 31, 2022 and 2021:
| | 2022 | | | 2021 | |
Gross unrecognized tax benefits at the beginning of the year | | $ | - | | | $ | - | |
Increases related to current year positions | | | - | | | | - | |
Increases (decreases) related to prior year positions | | | 691,675 | | | | - | |
Expiration of unrecognized tax benefits | | | - | | | | - | |
Gross unrecognized tax benefits at the end of the year | | $ | 691,675 | | | $ | - | |
The amount of unrecognized tax benefits that would impact the Company’s effective tax rate, if recognized, is $707,738 (including estimated penalties and interest). The amount of the increase during 2022 is primarily related to transfer pricing policy changes applicable to prior years that were implemented during 2022. The Company does not believe its unrecognized tax benefits will change during the next twelve months.
NOTE 12. Leases
We have an operating lease for our corporate offices in Canada and finance leases for furniture and equipment, which expired in June 2021. Our leases have remaining lease terms of seven months to eight 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 lease 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.
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:
| | 2022 | | | 2021 | |
Operating lease cost | | $ | 39,324 | | | $ | 40,796 | |
| | | | | | | | |
Finance lease cost: | | | | | | | | |
Amortization of leased assets | | $ | - | | | $ | 5,557 | |
Interest on lease liabilities | | | - | | | | 86 | |
Total finance lease cost | | $ | - | | | $ | 5,643 | |
Supplemental cash flow information related to leases for the years ended December 31, was as follows:
| | 2022 | | | 2021 | |
Cash paid for amounts included in leases: | | | | | | | | |
Operating cash flows from operating leases | | $ | 38,355 | | | $ | 42,006 | |
Operating cash flows from finance leases | | $ | - | | | $ | 86 | |
Financing cash flows from finance leases | | $ | - | | | $ | 2,907 | |
| | | | | | | | |
Right-of-use assets obtained in exchange for lease obligations: | | | | | | | | |
Operating leases | | $ | - | | | $ | - | |
Finance leases | | $ | - | | | $ | - | |
Supplemental balance sheet information related to leases was as follows:
| | December 31, 2022 | | | December 31, 2021 | |
Operating leases: | | | | | | | | |
Operating lease right-of-use assets | | $ | 23,063 | | | $ | 61,040 | |
Current portion of operating lease obligations | | $ | 22,199 | | | $ | 36,123 | |
Operating lease obligations, net of current portion | | | - | | | | 25,187 | |
Total operating lease liabilities | | $ | 22,199 | | | $ | 61,310 | |
| | Year Ended December 31, 2022 | |
Weighted Average Remaining Lease Term | | | | |
Operating lease (in years) | | | 0.6 | |
| | | | |
Weighted Average Discount Rate | | | | |
Operating lease | | | 9.0 | % |
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, 2022 is as follows:
Years ending December 31, | | Total | |
2023 | | $ | 23,751 | |
Total lease liabilities | | | 23,751 | |
Less amount representing interest | | | (1,552 | ) |
Total | | | 22,199 | |
Less current portion | | | (22,199 | ) |
| | $ | - | |
NOTE 13. SUBSEQUENT EVENTS
On March 21, 2023, the Board of Directors approved the issuance of 250,000 shares of PAID common stock valued at $437,500 and is to be recorded as share-based compensation in 2023 as it relates to the renewal of the employment agreement of W. Austin Lewis IV, of which 125,000 of the shares are subject to repurchase at $0.01 per share if Mr. Lewis terminates employment prior to January 1, 2024, as defined in the employment agreement. The Board of Directors also approved the allocation of the 2022 bonus accrual to be paid out in cash and shares of which $82,180 has been recorded as share-based compensation expense for the year ended December 31, 2022. Option compensation for the board positions was increased to 10,000 common stock options per committee head from 5,000 common stock options per committee head and was approved by the Board of Directors. A total of 46,961 shares of common stock were issued to officers and one employee in March 2023. The Board of Directors has approved the terms of an employment agreement of the Company’s COO, David Scott. The employment agreement for $214,000 CAD annually includes the issuance of common stock valued at $25,000 USD which are subject to repurchase at $0.01 in the event that Mr. Scott terminates his employment agreement prior to April 1, 2024.
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.