COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Lease Commitment

In November 2013, the Company moved its offices located at 40 Washington Street, Westborough, MA and entered into a lease for premises located at 200 Friberg Parkway, Westborough, MA.  The Company resides at 200 Friberg Parkway with a lease that is for a three-year term ending in November 2016.  The original lease at 40 Washington Street was prepaid with 6,082,985 shares of common stock having a closing price of $0.21 per share on August 22, 2011.  The payment was for rent over five years, projected taxes and operating expenses, and a security deposit.  As a result of the termination of the 40 Washington Street lease, the Company forfeited its security deposit of $83,134, which was previously paid with shares of common stock of the Company, paid a termination fee of $166,865, recorded an other receivable, net due from the landlord, Carruth Capital, in the amount of $0 and $120,338 in the accompanying consolidated balance sheets as of December 31, 2015 and 2014, respectively.  Shares that were held for sale at Carruth Capital, which were recorded as a receivable in 2014, have been liquidated in 2015.

The approximate future minimum rent under the current operating lease is:

2016 $ 13,000

Stock Price Guarantee

In connection with the Company’s advance royalties with a client, the Company guaranteed that shares of common stock would sell for at least $6.00 per share.  If the shares are not at the required $6.00 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.  As of December 31, 2015 and 2014, the stock price guarantee was $913,582 and $554,732, respectively, although any required payment would be disputed by the Company.

MCN Settlement

In 2013, the Company entered into a transfer of services agreement (“Agreement”) with MCN Interactive, LLC (“MCN”). In accordance with the agreement, MCN provided client based services directly to the Company’s clients in exchange for a profit participation as defined in the Agreement. In March 2016, the Company entered into separate settlement agreements (“Settlement Agreements”) with MCN and Future Shirts, LLC (“FS”) with an effective date in September 30, 2015, in which the Company and MCN and FS agreed to release each other from all claims, liabilities, obligations, demands, damages, actions or rights of action arising under or in connection with the Agreement whether arising before, on, or after the effective date. As a result of the Settlement Agreements, the Company reduced its assets and liabilities by approximately $69,000 as no amounts will be recovered by the Company or will be paid to MCN or FS that arose from the Partnership Agreement.

Legal Matters

In the normal course of business, the Company periodically becomes involved in litigation. As of December 31, 2015, in the opinion of management, the Company had no pending litigation that would have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

The Company commenced on December 20, 2013 patent infringement litigation against eBay, Inc. (Paid, Inc. v. eBay, Inc.; CV No. 4:13-cv-40151-TSH) in the United States District Court for the District of Massachusetts Central Division.  On September 30, 2014, PAID and eBay filed a joint motion to stay the district court litigation pending completion of eBay’s petitions for covered business method review that were filed with the Patent and Trial and Appeal Board (“PTAB”). On September 30, 2014 the PTAB announced that it had granted petitions filed by eBay for covered business method review of PAID’s United States Patent Nos. 8,635,150, 8,521,642, 8,352,357, and 7,930,237, entitled “Method and System for Improved Online Auction” (collectively, the “Online Auction Patents”).  On June 9, 2015, the Company and eBay, Inc. presented oral arguments to the Patent Trials Appeals Board.  On September 16, 2015, the PTAB entered a final ruling that the claims of the Online Auction Patents lacked patent eligible subject matter.  Pursuant to a settlement with eBay (discussed below), the Company has decided not to appeal the PTAB’s final ruling. Consequently, the claims of the Online Auction Patents are not valid.  The PTAB’s final ruling does not affect the validity of PAID’s United States Patent No. 7,324,968 or PAID’S United State Patent Pending both entitled “Method and System for Improved Online Auction” (collectively, the “Non-Asserted Intellectual Property”) which were not subject to the petitions for covered business method review filed by eBay.  This litigation has been settled pursuant to a Confidential Settlement and License Agreement dated March 11, 2016.  Under the agreement, the Company received $53,500 after costs as full and final payment for such settlement of the lawsuit and non-exclusive licensing of the Company’s patents. 

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 leases, the Company has agreed to indemnify its lessors 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.