Note 10 - Shareholders' Equity

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Shareholders' Equity and Share-Based Payments [Text Block]

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.