8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  December 23, 2016

PAID, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-28720	73-1479833
(State or Other Jurisdiction of Incorporation	(Commission File Number)	(IRS Employer Identification No.)

200 Friberg Parkway Suite 4004 Westborough, Massachusetts	01581
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:(617) 861-6050

 (Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

On December 23, 2016, PAID, Inc (the “Company”) filed a Current Report on Form 8-K (the “Initial Form 8-K”) reporting on the closing on December 30, 2016 of the Company’s acquisition of all of the outstanding stock of emergeIT, Inc. (“emergeIt”) from its owners (the “Sellers”). This Form 8-K/A amends and supplements the Initial Form 8-K and is being filed to provide the historical financial information and the pro forma financial information required pursuant to Item 9.01 on Form 8-K.

Item 9.01. Financial Statements and Exhibits

(a)

Financials statements of emergeIT Inc.

The following audited financial statements of emergeIT are attached as Exhibit 99.1

●

Balance Sheets as of December 31, 2015 and March 31, 2015

●

Income Statement for the nine months ended December 31, 2015 and the year ended March 31, 2015

●

Statements of Cash Flows for the nine months ended December 31, 2015 and the year ended March 31, 2015

●

Statements of Shareholders’ Deficiency for the nine months ended December 31, 2015 and the year ended March 31, 2015

●

Notes to the Financial Statements

The following unaudited financial statements of emergeIT are attached as Exhibit 99.2

●

Balance Sheets as of September 30, 2016 and December 31, 2015

●

Income Statements for the nine months ended September 30, 2016 and September 30, 2015

●

Statements of Cash Flows for the nine months ended September 30, 2016 and September 30, 2015

●

Notes to the Unaudited Financial Statements

(b)

Pro Forma Financial Information

The following unaudited pro forma financial information is attached as Exhibit 99.3

●

Unaudited Pro Forma Condensed Combined Balance Sheets as of September 30, 2016

●

Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 2016 and the year ended December 31, 2015

●

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

(d)

Exhibits

10.1	Amalgamation Agreement dated September 1, 2016 by and among PAID, Inc., emergeIT, Inc., 2534845 Ontario Inc. and 2534841 Ontario Inc. *
99.1	Audited Financial Statements listed in Item 9.01(a)
99.2	Unaudited Interim Financial Statements listen in Item 9.01(a)
99.3	Unaudited Pro Forma Financial Information listed in Item 9.01(b)

 *Previously filed on a Current Report on Form 8-K filed with the SEC on September 1, 2016

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PAID, INC.
Date: March 17, 2017	By:	/s/ Allan Pratt
		Allan Pratt, CEO

By:	/s/ W. Austin Lewis, IV
	W. Austin Lewis, IV, CFO

EXHIBIT INDEX

Exhibit	Description
10.1	Amalgamation Agreement dated September 1, 2016 by and among PAID, Inc., emergeIT, Inc., 2534845 Ontario Inc. and 2534841 Ontario Inc. *
99.1	Audited Financial Statements listed in Item 9.01(a)
99.2	Unaudited Interim Financial Statements listen in Item 9.01(a)
99.3	Unaudited Pro Forma Financial Information listed in Item 9.01(b)

*Previously filed on a Current Report on Form 8-K filed with the SEC on September 1, 2016.

EX-99.1

EXHIBIT 99.1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

emergeIT Inc.

We have audited the accompanying balance sheets of emergeIT Inc. as of December 31, 2015 and March 31, 2015, and the related statements of income and comprehensive loss, cash flows, and shareholders’ deficiency for the nine-month period ended December 31, 2015, and the year ended March 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of emergeIT Inc. at December 31, 2015, and March 31, 2015, and the results of its operations and its cash flows for the nine-month period ended December 31, 2015, and the year ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements, the Company has sustained continued losses from operations and net losses and has an accumulated deficit at December 31, 2015 with no foreseeable source of income, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

(signed) BDO Canada LLP

Chartered Professional Accountants, Licensed Public Accountants

Markham, Ontario

July 25, 2016

-1-

emergeIT Inc.

Balance Sheets

Assets	December 31,2015	March 31, 2015
Current
Cash	$50,870	$-
Accounts receivable (Note 4)	19,564	42,457
Due from related party (Note 5)	9,650	15,000
Prepaid expenses and other assets	10,000	-
Funds held in trust	212,735	170,064
	302,819	227,521
Capital assets (Note 6)	10,418	13,355
Development costs (Note 7)	126,023	217,857
	$439,260	$458,733
Liabilities and Shareholders' Deficiency
Current
Bank indebtedness	$-	$34,292
Accounts payable and accrued liabilities	637,922	1,135,427
Due to related parties (Note 8)	497,298	484,053
Convertible promissory note (Note 9)	174,628	-
Deferred revenue	296,894	260,868
Deposits	-	159,999
	1,606,742	2,074,639
Shareholders' deficiency
Common shares (Note 10)	561,165	401,166
Warrants (Note 9)	269,880	-
Additional paid in capital	345,320	200,000
Deficit	(2,343,847)	(2,217,072)
	(1,167,482)	(1,615,906)
	$439,260	$458,733

The accompanying notes are an integral part of these financial statements.

 

-2-

emergeIT Inc.

Statements of Operations and Comprehensive Loss

	April 1, 2015 to December 31, 2015	April 1, 2014 to March 31, 2015
Revenue	$4,089,880	$4,606,466
Cost of sales	3,170,134	3,751,247
Gross Profit	919,746	855,219
Expenses
Advertising and promotion	155,121	300,025
Amortization	94,770	133,773
Foreign exchange loss	19,248	8,261
Interest and bank charges	221,356	47,582
Occupancy costs	11,700	13,600
Software Development Fees	82,850	129,235
Office and general	26,515	58,080
Professional fees	239,029	291,627
Salaries and benefits	163,746	221,253
Telephone	11,054	18,830
Travel	21,132	30,366
	1,046,521	1,252,632
Net loss	(126,775)	(397,413)
Deficit, beginning of the period	(2,217,072)	(1,819,659)
Deficit, end of the period	$(2,343,847)	$(2,217,072)

The accompanying notes are an integral part of these financial statements.

 

-3-

emergeIT Inc.

Statements of Cash Flows

	April 1, 2015 to December 31, 2015	April 1, 2014 to March 31, 2015
Cash provided by (used in) Operating activities
Net loss for the period	$(126,775)	$(397,413)
Items not involving cash
Amortization	94,770	133,773
Interest accretion on convertible debt	174,628	-
Changes in non-cash working capital balances
Accounts receivable	(19,778)	(73,564)
Prepaid expenses and other assets	(10,000)	6,064
Accounts payable and accrued liabilities	(497,504)	228,575
Deferred revenue	36,026	56,851
Deposits	(159,999)	-
	(508,632)	(45,714)
Investing activities
Purchase of capital assets	-	(4,068)
Increase in development costs	-	(65,425)
Due from related party	5,350	1,629
	5,350	(67,864)
Financing activities
Due to related parties	13,245	41,842
Issuance of convertible debt and warrants	415,200	-
Issuance of common shares	159,999	-
	588,444	41,842
Increase (decrease) in cash during the period	85,162	(71,736)
Cash (bank indebtedness), beginning of period	(34,292)	37,444
Cash (bank indebtedness), end of period	$50,870	$(34,292)

The accompanying notes are an integral part of these financial statements.

 

-4-

emergeIT Inc.

Statements of Shareholders' Deficiency

For the year periods ended December 31, 2015 and March 31,2015

	Common Shares	Warrants	Additional  Paid In Capital	Deficit	Shareholders' Deficiency
As at March 31,2014	$401,166	$-	$200,000	$(1,819,659)	$(1,218,493)
Net loss for the year	-	-	-	(397,413)	(397,413)
As at March 31,2015	401,166	-	200,000	(2,217,072)	(1,615,906)
Issuance of common shares	159,999	-	-	-	159,999
Issuance of convertible debt and warrants (Note 9)	-	269,880	145,320	-	415,200
Net loss for the period	-	-	-	(126,775)	(126,775)
As at December 31, 2015	$561,165	$269,880	$345,320	$(2,343,847)	$(1,167,482)

The accompanying notes are an integral part of these financial statements.

-5-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

1. Summary of Significant Accounting Policies

a. Nature of Busines

emergeIT Inc. (the "Company") was incorporated under the Ontario Business Corporations Act on April 15, 2008, and is primarily involved in the creation of software solutions related to the cost effective management of shipping activities.

b. Basis of Accounting

The Company has prepared its financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP").

c. Revenue Recognition

Revenue consists primarily of fees for shipping services provided to customers. Revenue is recognized when goods are delivered, services are rendered and when collection is reasonably assured. When the risks and rewards of ownership have not transferred or if all significant acts have not been completed, fees received in advance are included in deferred revenue.

d. Capital Assets

Capital assets are stated at cost less accumulated amortization. Amortization is based on the estimated useful life of the asset as follows:

Equipment                                 

30% declining balance

Furniture                                 

  20% declining balance

e. Development Costs:

The Company capitalizes certain development costs incurred in connection with its internal-use software. These capitalized costs are primarily related to its proprietary commerce solutions that is hosted by the Company and accessed by its customers. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, direct internal and external costs are capitalized until the software is substantially complete and ready for its intended use. Maintenance and training costs are expensed as incurred. Internal-use software development costs are amortized on a straight-line basis over its estimated useful life of 4 years. 

-6-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

1. Summary of Significant Accounting Policies (continued)

f.  Impairment of Long-lived Assets

The Company accounts for the impairment of long-lived assets in accordance with Accounting Standards Codification ("ASC") 360¬10, "Accounting for the Impairment of Long-Lived Assets." This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the assets' carrying amounts may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or groups of assets is less than the carrying values.

If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value and estimated net realizable value. During the periods ended December 31, 2015 and March 31, 2015, there was no impairment of long-lived assets

g. Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax bases of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. A valuation allowance is established for deferred tax assets for which realization is uncertain.

In accordance with ASC 718, “Stock Compensation,” and ASC 505, “Equity,” the Company has made a policy decision related to intra-period tax allocation, to account for utilization of windfall tax benefits based on provisions in the tax law that identify the sequence in which amounts of tax benefits are used for tax purposes (i.e., tax law ordering).

Uncertain tax positions are accounted for in accordance with ASC 740, “Income Taxes,” which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740 applies to income taxes and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. The Company reviews its nexus in various tax jurisdictions and the Company’s tax positions related to all open tax years for events that could change the status of its ASC 740 liability, if any, or require an additional liability to be recorded. Such events may be the resolution of issues raised by a taxing authority, expiration of the statute of limitations for a prior open tax year or new transactions for which a tax position may be deemed to be uncertain. Those positions, for which management’s assessment is that there is more than a 50 percent probability of sustaining the position upon challenge by a taxing authority based upon its technical merits, are subjected to the measurement criteria of ASC 740. The Company records the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. Any ASC 740 liabilities for which the Company expects to make cash payments within the next twelve months are classified as “short term.”

-7-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

1. Summary of Significant Accounting Policies (continued)

h. Investment Tax Credits

Investment tax credits, which are earned as a result of incurring qualifying research and development expenditures, are accounted for using the cost reduction method. Under this method, investment tax credits are treated as a reduction of the relevant asset account or expenses in the period that the credits become available and there is reasonable assurance that they will be realized.

i. Financial Instruments 

Financial instruments are recorded at fair value when acquired or issued and subsequently measured at cost or amortized cost less impairment, if applicable. Financial assets are tested for impairment when changes in circumstances indicate the asset could be impaired. Transaction costs on the acquisition, sale or issue of financial instruments are charged to the financial instrument for those measured at amortized cost.

j. Stock Option Plan

The Company applies the provisions of (ASC) ASC 718, “Stock Compensation,” which requires companies to measure all employee stock-based compensation awards using a fair value method and record such expense in their financial statements. The Company recognizes stock-based compensation ratably on a straight-line basis over the shorter of the vesting or requisite service periods. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, and exercise price.   

The fair value of stock options issued to directors, officers, employees and consultants is determined upon the date of grant and recognized as compensation expense over the vesting period for directors, officers or employees and over the period of service for consultants with a corresponding credit to additional paid in capital.

When options are exercised, the corresponding paid-in capital and the proceeds received by the Company are credited to share capital. If stock options are repurchased from directors, officers or employees, the excess of the consideration paid over the carrying amount of the stock or stock options repurchased is charged to contributed surplus and/or deficit.

-8-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

1. Summary of Significant Accounting Policies (continued)

 

k. Government Assistance

The Company received government assistance based on certain eligibility criteria for project support. Government assistance was accounted for using the cost reduction method. Under the cost reduction method, government assistance relating to eligible expenditures is accounted for as a reduction of expenses in the year during which the expenditures are incurred, provided there is reasonable assurance of realization.

l. Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for the reporting period. The financial statement items requiring the use of management estimates are the investment tax credits receivable, income taxes, the asset lives used in computing amortization, capitalization of development costs, recoverability of deferred income tax assets, future customer rebates, and the fair value of warrants and stock options. Actual results could differ from those estimates.

m. Comprehensive Income

(ASC) ASC 220, “Comprehensive Income,” establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements.

n. Subsequent Events

We have evaluated subsequent events and are not aware of any significant events that occurred subsequent to the balance sheet date prior to July 25, 2016 that would have a material impact on our consolidated financial statements.

-9-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

2.Going Concern

At December 31, 2015, the Company has negative working capital of $1,303,923 and an accumulated deficit of $2,343,847. As a result, there are material uncertainties that raise substantial doubt as to whether the entity will have the ability to continue as a going concern. The Company requires continued support from shareholders and creditors and continues to seek opportunities to obtain financing. However, there is no certainty that these and other strategies will be sufficient to permit the Company to continue as a going concern in the foreseeable future.

The financial statements have been prepared on a going concern basis in accordance with accounting standards in the United States, which assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. These financial statements do not reflect adjustments that might be necessary and material, including the carrying value of assets and liabilities, the reported revenue and expenses and the balance sheet classifications used if the going concern assumption were not appropriate.

3.Recent accounting pronouncements

In May 2014, the FASB issued amended guidance on revenue recognition which will be effective for us beginning January 1, 2019 and can be applied retrospectively or as a cumulative effect adjustment as of the date of adoption. Early adoption is not permitted. The amended guidance requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We are currently assessing the impact the adoption of the amended guidance will have on our Financial Statements.

In August 2014, the FASB issued amended guidance which defines management's responsibility to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and to provide related disclosures. Currently, this evaluation is only an auditor requirement. Specifically, the amendments (1) provide a definition of the term “substantial doubt,” (2) require an evaluation every reporting period, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of the consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that financial statements are issued. This amended guidance will be effective for us beginning January 1, 2016. We are currently assessing the impact the adoption of the amended guidance will have on our Financial Statements.

-10-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

4.    Accounts Receivable

The balance of allowance for doubtful accounts at December 31, 2015 is $ nil (March 31, 2015 - $nil).

5.     Due from related party

The balance is due from a shareholder, non-interest bearing and due on demand.

6.     Capital assets

	December 31, 2015		March 31, 2015
	Cost	Accumulated Amortization	Cost	Accumulated Amortization
Equipment	$23,227	$13,583	$23,227	$10,783
Furniture	2,440	1,666	2,440	1,529
	$25,667	$15,249	$25,667	$12,312
Net book value		$10,418		$13,355

7. Development Costs

	December 31, 2015		March 31, 2015
	Cost	Accumulated Amortization	Cost	Accumulated Amortization
	$516,332	$390,309	$516,332	$298,475
Net book value		$126,023		$217,857

-11-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

8.    Due to related parties

At December 31, 2015 and March 31, 2015, the balances due to related parties consist of the following:

	December 31, 2015	March 31, 2015
Promissory note to shareholder John Smith	$201,495	$188,566
The note bears interest at 12% with Repayment by December 2017 *
Promissory note to Helen Kurluk	100,000	100,000
The note bears interest at 6% with no fixed terms of repayment
Due to shareholder Lakeside Logistics	113,887	73,887
Amount is non-interest bearing (Paid in full in January 2016)
Due to shareholder Allan Pratt	40,000	48,500
Amount is non-interest bearing (Paid in full in June 2016)
Due to Pratt Family Trust	17	17
Amount is non-interest bearing and due on demand
Due to Jeanne Pratt	21,900	53,084
Amount is non-interest bearing and due on demand
Promissory note to shareholder Anne Bothe	19,999	19,999
The note bears interest at 6% (Paid in full in May 2016)
Total	$497,298	$484,053

*The loan from Shareholder John Smith of $143,000 is scheduled to be paid in full by December 2017. An interest of 12% was applied to the loan from inception to June 2016 then the interest was reduced to 8% from July 2016 to December 2017. One lump sum payment of $30,000 will be paid in July 2016 then an equal installment of $11,600 every month going forward to December 2017.

-12-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

9.    Convertible Promissory Note

In October 2015, the Company issued two convertible promissory notes for proceeds of $415,200. The notes bear interest at 12% with a maturity date of March 31, 2016. The notes are convertible into Common Stock at a 10% discount to the price of shares issued in a reverse merger transaction, a qualified financing or a deemed valuation at maturity. In addition, upon conversion or maturity, the note holders will receive warrants with a five year life for $415,200 of common stock with an exercise price at a 10% discount to the price of shares issued in a reverse merger transaction, a qualified financing or a deemed valuation at maturity.

The relative fair value of the warrants was determined to be $269,880 using the Black-Scholes option pricing model and the following assumptions: volatility – 80%; estimated life – 5 years; dividend yield 0%; discount rate – 1.5%.

The notes also have a beneficial conversion feature. A beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments to the fair value of the common shares at the commitment date to be received upon conversion. This amount was determined to be $145,320 and is amortized over the period from the date of issuance to the maturity date of the note.

As a result, the notes were initially valued at $0 net of debt discount of $415,200. $174,628 of debt discount and $10,613 of interest was recognized in the period ending December 31, 2015.

10.    Share Capital and Stock-Based Compensation

Share Capital

Authorized

Unlimited Class A Common shares

Unlimited Class B Common shares

Unlimited Class A Special shares

Unlimited Class B Special shares

Unlimited Class C Special shares

	December 31, 2015	March 31, 2015
Issued
7,000 Class A Common shares	$160,057	$160,057
3,180 Class B Common shares (March 31, 2015 – 3,000)	401,108	241,109
	$561,165	$401,166

Stock-Based Compensation

In 2011 and 2013, the Company provided two employees with the right to acquire 1,138 common shares. The rights have fully vested and are exercisable upon certain triggering events or at the discretion of the Board of Directors. The fair value of these rights were determined to be $nil.

-13-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

11.    Financial Instruments

Fair value

The Company accounts for certain financial assets and liabilities at fair value following the provisions of ASC 820. This Topic applies to certain assets and liabilities that are being measured and reported on a fair value basis. The Topic defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. This Topic enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 

quoted market prices in active markets for identical assets or liabilities

Level 2 

observable market based inputs or unobservable inputs that are corroborated by market data

Level 3 

unobservable inputs that are not corroborated by market data

The fair values of cash, accounts receivable, accounts payable and accrued liabilities, and due from and to related parties approximate their carrying values due to the short term nature of these financial instruments.

Credit risk

The Company is exposed to credit risk on the accounts receivable from its customers. The risk is reduced by credit policies that include regular monitoring of the debtor’s payment history and performance. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and other information on the state of the economy.

The Company’s cash is also subject to credit risk. The Company limits its exposure to credit risk by maintaining cash with major financial institutions.

Currency risk

The Company earns revenue and incurs expenses denominated in U.S. dollars and Canadian dollars, and is exposed to foreign exchange risk from fluctuations in these foreign currency rates on monetary working capital balances.

Liquidity risk

Liquidity risk is the risk that the Company encounters difficulty in meeting its obligations associated with financial liabilities. Liquidity risk includes the risk that, as a result of operational liquidity requirements, the Company will not have sufficient funds to settle a transaction on the due date; will be forced to sell financial assets at a value which is less than what they are worth; or may unable to settle or recover financial assets. Liquidity risk arises from bank indebtedness, accounts payable and accrued liabilities, due to related parties, convertible promissory note and commitments.

The Company continues to focus on maintaining adequate liquidity to meet operating working capital requirements and capital expenditures.

-14-

emergeIT Inc.

Notes to Financial Statements

For the periods ended December 31, 2015 and March 31, 2015

12.    Income Taxes

The tax effect of significant components of the Company’s deferred income tax assets and liabilities is as follows:

	December 31, 2015	March 31, 2015
Temporary differences	$22,700	$40,000
Loss carryforwards and other deductions	396,900	378,500
Deferred income tax asset before allowance	419,600	418,500
Valuation allowance	(419,600)	(418,500)
Deferred income tax asset	$-	$-

For income tax purposes, the Company has non-capital losses which can be applied to reduce future years’ taxable income totaling approximately $1,423,500 (March 31, 2015 - $1,344,500). These losses expire between 2030 to 2035. The Company also has a Scientific Research and Experimental Development Expenditure pool balance of approximately $74,000 (March 31, 2015 - $83,700) which may be used to reduce future year’s taxable income. The expenditure pool can be carried forward indefinitely.

A valuation allowance of 100% has been established in respect of the net deferred income tax assets due to the uncertainty of the Company’s utilization of such deferred tax assets.

The income tax provision at December 31, 2015 and March 31, 2015 reflects a full accounting of tax filings under ASC Subtopic 740-10. The Company is not currently under any Canadian Revenue Agency, provincial, local or foreign jurisdiction tax examinations. The Company recognizes interest and penalties, as estimated or incurred, as general and administrative expense.

There have been no unrecognized tax benefits as a result of tax positions taken in the current or prior years, and accordingly there are no unrecognized tax benefits that would affect the effective tax rate, nor are there are any situations where it is reasonably possible that the unrecognized tax benefit will change significantly within twelve months of the reporting date. As of December 31, 2015, the Company has no unrecognized tax exposure (March 31, 2015 - none).

The Company is subject to taxation in Canada and Ontario. As of December 31, 2015, the Company’s tax years for 2011 through 2014 are subject to examination by tax authorities.

13.    Commitment

The Company has an agreement with a partner to pay $10,000 per quarter until August 31, 2018 in relation to the promotion of the Company’s services to their members.

-15-

EX-99.2

EXHIBIT 99.2

emergeIT Inc.

Balance Sheets

	September 30, 2016  (unaudited)	December 31, 2015
Assets
Current
Cash	$356,489	$50,870
Accounts receivable (Note 4)	54,335	19,564
Due from related party (Note 5)	956	9,650
Prepaid expenses and other assets	25,745	10,000
Funds held in trust	212,735	212,735
	650,260	302,819
Capital assets (Note 6)	78,960	10,418
Development costs (Note 7)	42,414	126,023
	$771,633	$439,260
Liabilities and Shareholders' Deficiency
Accounts payable and accrued liabilities	$704,610	$637,922
Due to related parties (Note 8)	259,752	497,298
Convertible promissory note (Note 9)	557,301	174,628
Deferred revenue	306,096	296,894
Deposits	-	-
	1,827,759	1,606,742
Shareholders' deficiency
Common shares (Note 10)	561,165	561,165
Warrants (Note 9)	269,880	269,880
Additional paid in capital	345,320	345,320
Deficit	(2,232,491)	(2,343,847)
	(1,056,126)	(1,167,482)
	$771,633	$439,260

-1-

emergeIT Inc.

 Unaudited Statements of Operations and Comprehensive Loss

	Jan 1, 2016 to September 30, 2016	Jan 1, 2015 to September 30, 2015
Revenue	$5,498,349	$3,823,074
Cost of sales	3,905,804	3,010,289
Gross Profit	1,592,545	812,785
Expenses
Advertising and promotion	142,839	230,505
Amortization	29,361	132,184
Foreign exchange loss	-	3,558
Interest and bank charges	289,047	41,859
Occupancy costs	22,149	11,500
Software Development Fees	94,149	15,723
Office and general	46,444	26,658
Professional fees	651,061	178,464
Salaries and benefits	167,245	160,366
Telephone	11,089	11,528
Travel	27,805	19,036
	1,481,189	831,381
Other income (loss)	-	(26,655)
	111,356	(45,251)
Deficit, beginning of the period	(2,343,847)	(2,089,772)
Deficit, end of the period	$(2,232,491)	$(2,135,023)

-2-

emergeIT Inc.

Unaudited Statements of Cash Flows

	Jan 1, 2016 to September 30, 2016	Jan 1, 2015 to September 30, 2015
Cash provided by (used in) Operating activities
Net income (loss) for the period	$111,356	$(45,251)
Items not involving cash
Amortization	6,403	3,863
Interest accretion on convertible debt
Changes in non-cash working capital balances
Accounts receivable	(34,771)	(41,345)
Prepaid expenses and other current assets	(6,095)	(170,064)
Accounts payable and accrued liabilities	66,688	(187,040)
Deferred revenue	9,202	174,511
Deposits and other assets	(956)	68,729
Intangible Assets, net	83,609	93,934
	235,436	(102,663)
Investing activities
Property and Equipment additions	(74,944)	-
	(74,944)
Financing activities
Due to related parties	(237,546)	86,029
Issuance of convertible debt and warrants	382,673	-
	145,127	86,029
Increase (decrease) in cash during the period	305,619	(16,634)
Cash(bank indebtedness), beginning of period	50,870	(28,853)
Cash (bank indebtedness), end of period	$356,489	$(45,487)

-3-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

1. Summary of Significant Accounting Policies

a. Nature of Business

emergeIT Inc. (the "Company") was incorporated under the Ontario Business Corporations Act on April 15, 2008, and is primarily involved in the creation of software solutions related to the cost effective management of shipping activities.

b. Basis of Accounting

The Company has prepared its financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP").

c. Revenue Recognition

Revenue consists primarily of fees for shipping services provided to customers.

Revenue is recognized when goods are delivered, services are rendered and when collection is reasonably assured. When the risks and rewards of ownership have not transferred or if all significant acts have not been completed, fees received in advance are included in deferred revenue.

d. Capital Assets

Capital assets are stated at cost less accumulated amortization. Amortization is based on the estimated useful life of the asset as follows:

Equipment

30% declining balance

Furniture

20% declining balance

e. Development Costs

The Company capitalizes certain development costs incurred in connection with its internal-use software. These capitalized costs are primarily related to its proprietary commerce solutions that is hosted by the Company and accessed by its customers. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, direct internal and external costs are capitalized until the software is substantially complete and ready for its intended use. Maintenance and training costs are expensed as incurred. Internal-use software development costs are amortized on a straight-line basis over its estimated useful life of 4 years.

-4-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

1. Summary of Significant Accounting Policies (continued)

f. Impairment of Long-Lived Assets

The Company accounts for the impairment of long-lived assets in accordance with Accounting Standards Codification ("ASC") 360¬10, "Accounting for the Impairment of Long-Lived Assets." This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the assets' carrying amounts may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or groups of assets is less than the carrying values.

If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value and estimated net realizable value. During the period ended September 30, 2016, there was no impairment of long-lived assets.

 

-5-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

1. Summary of Significant Accounting Policies (continued)

g. Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax bases of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. A valuation allowance is established for deferred tax assets for which realization is uncertain.

In accordance with ASC 718, “Stock Compensation,” and ASC 505, “Equity,” the Company has made a policy decision related to intra-period tax allocation, to account for utilization of windfall tax benefits based on provisions in the tax law that identify the sequence in which amounts of tax benefits are used for tax purposes (i.e., tax law ordering).

Uncertain tax positions are accounted for in accordance with ASC 740, “Income Taxes,” which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740 applies to income taxes and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. The Company reviews its nexus in various tax jurisdictions and the Company’s tax positions related to all open tax years for events that could change the status of its ASC 740 liability, if any, or require an additional liability to be recorded. Such events may be the resolution of issues raised by a taxing authority, expiration of the statute of limitations for a prior open tax year or new transactions for which a tax position may be deemed to be uncertain. Those positions, for which management’s assessment is that there is more than a 50 percent probability of sustaining the position upon challenge by a taxing authority based upon its technical merits, are subjected to the measurement criteria of ASC 740. The Company records the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. Any ASC 740 liabilities for which the Company expects to make cash payments within the next twelve months are classified as “short term.”

 

-6-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

1. Summary of Significant Accounting Policies (continued)

 

h. Investment Tax Credits

Investment tax credits, which are earned as a result of incurring qualifying research and development expenditures, are accounted for using the cost reduction method. Under this method, investment tax credits are treated as a reduction of the relevant asset account or expenses in the period that the credits become available and there is reasonable assurance that they will be realized

i. Financial Instruments

Financial instruments are recorded at fair value when acquired or issued and subsequently measured at cost or amortized cost less impairment, if applicable. Financial assets are tested for impairment when changes in circumstances indicate the asset could be impaired. Transaction costs on the acquisition, sale or issue of financial instruments are charged to the financial instrument for those measured at amortized cost.

j. Stock Option Plan

The Company applies the provisions of (ASC) ASC 718, “Stock Compensation,” which requires companies to measure all employee stock-based compensation awards using a fair value method and record such expense in their financial statements. The Company recognizes stock-based compensation ratably on a straight-line basis over the shorter of the vesting or requisite service periods. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, and exercise price.

The fair value of stock options issued to directors, officers, employees and consultants is determined upon the date of grant and recognized as compensation expense over the vesting period for directors, officers or employees and over the period of service for consultants with a corresponding credit to additional paid in capital.

When options are exercised, the corresponding paid-in capital and the proceeds received by the Company are credited to share capital. If stock options are repurchased from directors, officers or employees, the excess of the consideration paid over the carrying amount of the stock or stock options repurchased is charged to contributed surplus and/or deficit.

 

-7-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

1. Summary of Significant Accounting Policies (continued)

k. Government Assistance

The Company received government assistance based on certain eligibility criteria for project support. Government assistance was accounted for using the cost reduction method. Under the cost reduction method, government assistance relating to eligible expenditures is accounted for as a reduction of expenses in the year during which the expenditures are incurred, provided there is reasonable assurance of realization.

l. Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for the reporting period. The financial statement items requiring the use of management estimates are the investment tax credits receivable, income taxes, the asset lives used in computing amortization, capitalization of development costs, recoverability of deferred income tax assets, future customer rebates, and the fair value of warrants and stock options. Actual results could differ from those estimates.

m. Comprehensive Income

(ASC) ASC 220, “Comprehensive Income,” establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements.

n. Subsequent Events

On December 30, 2016 emergeIT and PAID effectuated the merger as described in the 8-K filing dated December 23, 2016

 

-8-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

2. Going Concern

At September 30, 2016, the Company has negative working capital of $871,403 and an accumulated deficit of $2,232,491. As a result, there are material uncertainties that raise substantial doubt as to whether the entity will have the ability to continue as a going concern. The Company requires continued support from shareholders and creditors and continues to seek opportunities to obtain financing. However, there is no certainty that these and other strategies will be sufficient to permit the Company to continue as a going concern in the foreseeable future.

The financial statements have been prepared on a going concern basis in accordance with accounting standards in the United States, which assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. These financial statements do not reflect adjustments that might be necessary and material, including the carrying value of assets and liabilities, the reported revenue and expenses and the balance sheet classifications used if the going concern assumption were not appropriate.

3. Recent accounting pronouncements

In May 2014, the FASB issued amended guidance on revenue recognition which will be effective for us beginning January 1, 2019 and can be applied retrospectively or as a cumulative effect adjustment as of the date of adoption. Early adoption is not permitted. The amended guidance requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We are currently assessing the impact the adoption of the amended guidance will have on our Financial Statements.

In August 2014, the FASB issued amended guidance which defines management's responsibility to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and to provide related disclosures. Currently, this evaluation is only an auditor requirement. Specifically, the amendments (1) provide a definition of the term “substantial doubt,” (2) require an evaluation every reporting period, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of the consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that financial statements are issued. This amended guidance will be effective for us beginning January 1, 2016. We are currently assessing the impact the adoption of the amended guidance will have on our Financial Statements.

-9-

emergeIT Inc.

Notes to Unaudited Financial Statements

 For the period ended September 30, 2016 and 2015

4. Accounts Receivable

The balance of allowance for doubtful accounts at September 30, 2016 is $nil.

5. Due from related party

The balance is due from a shareholder, non-interest bearing and due on demand. However the balance due to the same shareholder exceeds this balance and a future offset has been proposed.

6. Capital assets

	September 30, 2016
	Cost	Accumulated Amortization
Equipment	$29,226	$16,427
Furniture	71,385	5,224
	$100,611	$21,651
Net book value		$78,960

7. Development Costs

	September 30, 2016
	Cost	Accumulated Amortization
	$455,681	$413,267
Net book value		$42,414

-10-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

8. Due to related parties

At September 30, 2016, the balances due to related parties consist of the following:

	September 30, 2016
Promissory note to shareholder John Smith	$159,735
The note bears interest at 12% with Repayment by December 2017 *
Promissory note to Helen Kurluk	100,000
The note bears interest at 6% with no fixed terms of repayment
Due to Pratt Family Trust	17
Amount is non-interest bearing and due on demand
Total	$259,752

*The loan from Shareholder John Smith of $143,000 is scheduled to be paid in full by December 2017. An interest of 12% was applied to the loan from inception to September 2016 then the interest was reduced to 8% from July 2016 to December 2017. One lump sum payment of $30,000 was paid in July 2016 then an equal installment of $11,600 every month going forward to December 2017.

-11-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

9. Convertible Promissory Note

In October 2015, the Company issued two convertible promissory notes for proceeds of $557,301. The notes bear interest at 12% with a maturity date of December 30, 2016. The notes are convertible into Common Stock at a 10% discount to the price of shares issued in a reverse merger transaction, a qualified financing or a deemed valuation at maturity. In addition, upon conversion or maturity, the note holders will receive warrants with a five year life for $557,301

of common stock with an exercise price at a 10% discount to the price of shares issued in a reverse merger transaction, a qualified financing or a deemed valuation at maturity.

The relative fair value of the warrants was determined to be $269,880 using the Black-Scholes option pricing model and the following assumptions: volatility – 80%; estimated life – 5 years; dividend yield 0%; discount rate – 1.5%.

The notes also have a beneficial conversion feature. A beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments to the fair value of the common shares at the commitment date to be received upon conversion. This amount was determined to be $145,320 and is amortized over the period from the date of issuance to the maturity date of the note.

As a result, the notes were initially valued at $0 net of debt discount of $557,301.

$337,559 of debt discount and $28,006 of interest was recognized in the period ending September 30, 2016.

10. Share Capital and Stock-Based Compensation

       Share Capital

Authorized

Unlimited Class A Common shares

Unlimited Class B Common shares

Unlimited Class A Special shares

Unlimited Class B Special shares

Unlimited Class C Special shares

	September 30, 2016
Issued
7,000 Class A Common shares	$160,057
3,137 Class B Common shares (March 31, 2015 – 3,000)	401,108
	$561,165

Stock-Based Compensation

In 2011 and 2013, the Company provided two contractors with the right to acquire 1,138 common shares. The rights have fully vested and are exercisable upon certain triggering events or at the discretion of the Board of Directors. The fair value of these rights were determined to be $nil.

-12-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

11. Financial Instruments

Fair value

The Company accounts for certain financial assets and liabilities at fair value following the provisions of ASC 820. This Topic applies to certain assets and liabilities that are being measured and reported on a fair value basis. The Topic defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. This Topic enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 

quoted market prices in active markets for identical assets or liabilities

Level 2 

observable market based inputs or unobservable inputs that are corroborated by market data

Level 3 

unobservable inputs that are not corroborated by market data

The fair values of cash, accounts receivable, accounts payable and accrued liabilities, and due from and to related parties approximate their carrying values due to the short term nature of these financial instruments.

Credit risk

The Company is exposed to credit risk on the accounts receivable from its customers. The risk is reduced by credit policies that include regular monitoring of the debtor’s payment history and performance. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and other information on the state of the economy.

The Company’s cash is also subject to credit risk. The Company limits its exposure to credit risk by maintaining cash with major financial institutions.

Currency risk

The Company earns revenue and incurs expenses denominated in U.S. dollars and Canadian dollars, and is exposed to foreign exchange risk from fluctuations in these foreign currency rates on monetary working capital balances.

Liquidity risk

Liquidity risk is the risk that the Company encounters difficulty in meeting its obligations associated with financial liabilities. Liquidity risk includes the risk that, as a result of operational liquidity requirements, the Company will not have sufficient funds to settle a transaction on the due date; will be forced to sell financial assets at a value which is less than what they are worth; or may unable to settle or recover financial assets. Liquidity risk arises from bank indebtedness, accounts payable and accrued liabilities, due to related parties, convertible promissory note and commitments.

The Company continues to focus on maintaining adequate liquidity to meet operating working capital requirements and capital expenditures.

-13-

emergeIT Inc.

Notes to Unaudited Financial Statements

For the period ended September 30, 2016 and 2015

12. Income Taxes

The tax effect of significant components of the Company’s deferred income tax assets and liabilities is as follows:

	September 30, 2016
Temporary differences	$40,000
Loss carryforwards and other deductions	378,500
Deferred income tax asset before allowance	418,500
Valuation allowance	(418,500)
Deferred income tax asset	$-

For income tax purposes, the Company has non-capital losses which can be applied to reduce future years’ taxable income totaling approximately $1,423,500 (March 31, 2015 - $1,344,500). These losses expire between 2030 and 2035. The Company also has a Scientific Research and Experimental Development Expenditure pool balance of approximately $74,000 (March 31, 2015 - $83,700) which may be used to reduce future year’s taxable income. The expenditure pool can be carried forward indefinitely.

A valuation allowance of 100% has been established in respect of the net deferred income tax assets due to the uncertainty of the Company’s utilization of such deferred tax assets.

The income tax provision at December 31, 2015 and March 31, 2015 reflects a full accounting of tax filings under ASC Subtopic 740-10. The Company is not currently under any Canadian Revenue Agency, provincial, local or foreign jurisdiction tax examinations. The Company recognizes interest and penalties, as estimated or incurred, as general and administrative expense.

There have been no unrecognized tax benefits as a result of tax positions taken in the current or prior years, and accordingly there are no unrecognized tax benefits that would affect the effective tax rate, nor are there are any situations where it is reasonably possible that the unrecognized tax benefit will change significantly within twelve months of the reporting date. As of December 31, 2015, the Company has no unrecognized tax exposure (March 31, 2015 - none).

The Company is subject to taxation in Canada and Ontario. As of December 31, 2015, the Company’s tax years for 2011 through 2014 are subject to examination by tax authorities.

13. Commitment

The Company has an agreement with a partner to pay $10,000 per quarter until August 31, 2018 in relation to the promotion of the Company’s services to their members.

-14-

EX-99.3

EXHIBIT 99.3

UNAUDITED PROFORMA FINANCIAL INFORMATION

The Board of Directors of the Company has effectuated an Amalgamation Agreement with emergeIT Inc, an Ontario corporation (“emergeIT”), whereby emergeIT merged with a newly formed Canadian subsidiary of the Company.

The former owners of emergeIT hold rights to approximately 79% of all the issued and outstanding shares of capital stock of the Company.

The total estimated fair value of consideration transferred for the merger is $13,200,000 consisting of $12,394,719 in capital stock in addition to the assumption of $805,281 in shareholder deficit.

The following unaudited pro forma condensed combined balance sheet as of September 30, 2016 includes the historical balance sheet of the Company as of September 30, 2016 and the historical balance sheet of emergeIT as of September 30, 2016. The following unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2016 and the year ended December 31, 2015 includes the historical statement of operations of the Company and historical statement of operations of emergeIT for the nine months ended September 30, 2016 and the historical statement of operations for the Company and the historical statement of operations of emergeIT for the year ended December 31, 2015, after giving effect to the acquisition as if it had been consummated at the beginning of the period presented.

The pro forma statements of operations do not reflect any future operating efficiencies and cost savings resulting from the transaction. Unaudited pro forma condensed combined financial information is presented for information purposes only and is not necessarily indicative of the results that actually would have been realized had the acquisition been completed on the date indicated or which may be expected to occur in the future.

The unaudited pro forma condensed combined financial information should be read in conjunction with the audited historical financial statements and related notes of the Company which are attached as appendices to this Form 8-K/A.

-1-

PAID INC. AND EMERGEIT INC.

 PRO FORMA CONDENSED COMBINED BALANCE SHEETS

 AS OF SEPTEMBER 30, 2016

 UNAUDITED

	emerge IT	PAID	Pro Forma Adjustments	Combined
ASSETS
Current assets:
Cash and cash equivalents	$271,818	$121,013	$-	$392,831
Accounts receivable, net	41,430	22,850	-	64,280
Due from related party	729	-	-	729
Prepaid expenses and other current assets	19,630	14,192	-	33,822
Funds held in trust	162,207	-	-	162,207
Total current assets	495,814	158,055	-	653,869
Property and equipment, net	60,206	6,735	-	99,281
Intangible asset, net	32,340	201,797	6,795,978(a)	7,030,115
Goodwill	-	-	6,404,022(b)	6,404,022
Total assets	$588,359	$366,587	$13,200,000	$14,154,946
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities	$537,255	$1,086,907	$-	$1,624,702
Notes payable	-	-	-	-
Due to related parties	198,057	-	-	198,057
Promissory note	424,934	-	-	424,934
Deferred revenues - current	-	7,027	-	7,027
Total current liabilities	1,160,246	1,093,934	-	2,254,720
Long-term liabilities
Deferred revenues	233,394	-	-	233,394
Total liabilities	1,393,640	1,093,934	-	2,488,114
Total shareholders' equity (deficit)	(805,281)	(727,347)	13,200,000(c)	11,667,372
Total liabilities and shareholders' equity (deficit)	$588,359	$366,587	$13,200,000	$14,154,946

-2-

PAID INC. AND EMERGEIT INC.

 PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016

 UNAUDITED

	emerge IT	PAID	Pro Forma Adjustments	Combined
Revenues	$4,166,649	$391,009	$-	$4,557,658
Cost of sales	2,959,818	18,231	-	2,978,049
Gross profit	1,206,831	372,778	-	1,579,609
Operating expenses	905,385	779,174	614,155(d)	2,298,714
Income (loss) from operations	301,446	(406,396)	614,155	(719,105)
Other income (expense)
Interest expense	(217,060)	(679)	-	(217,739)
Other income	-	62,333	-	62,333
Unrealized gain on stock price guarantee	-	28,541	-	28,541
Total other income (expense), net	(217,060)	90,195	-	(126,865)
Income (loss) before provision for income taxes	84,386	(316,201)	-	(845,971)
Provision for income taxes	-	807	-	807
Net income (loss)	$84,386	$(317,008)	$(614,155)	$(846,778)
Loss per share - basic and diluted		$(0.03)
Weighted average number of shares - basic and diluted		10,552,696

-3-

PAID INC. & EMERGEIT INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
UNAUDITED
	Emerge IT	PAID	Adjustments	Combined
Revenues	$4,099,768	$272,920	$-	$4,372,688
Cost of sales	3,194,077	39,504	-	3,233,581
Gross profit	905,691	233,416	-	1,139,107
Operating expenses	893,130	1,067,216	818,874(e)	2,779,220
Income (loss) from operations	12,561	(833,800)	818,874	(1,640,122)
Other income (expense)
Interest expense	(190,637)	(946)	-	(191,583)
Other income	-	987	-	987
Write down of other receivables	-	(115,913)		(115,913)
Unrealized gain on stock price guarantee	-	(358,850)	-	(358,850)
Total other expense, net	(190,637)	(474,722)	-	(665,359)
Loss before provision for income taxes	(178,076)	(1,308,522)	-	(2,305,471)
Provision for income taxes	-	975	-	975
Net loss	$(178,076)	$(1,309,497)	$(818,874)	$(2,306,446)
Loss per share - basic and diluted		$(0.18)
Weighted average number of shares - basic and diluted		7,192,919

-4-

PAID, INC. AND EMERGEIT, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The unaudited pro forma condensed combined balance sheet as of September 30, 2016 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2016 and year ended December 31, 2015, are based on PAID, Inc.’s (the “Company”) historical financial statements as of and for the nine months ended September 30, 2016, and the historical financial statements of emergeIT, Inc. (“emergeIT”) as of and for the nine months ended September 30, 2016 and the historical statement of operations of the Company for the year ended December 31, 2015 and the historical statement of operations of emergeIT for the year ended December 31, 2015, after giving effect to the merger of its subsidiary with emergeIT and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The Company is required to recognize the assets acquired and, liabilities assumed, measured at their fair values as of the acquisition date. Significant assumptions and estimates have been made in determining the purchase price and the allocation of the purchase price in the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change as the Company finalizes the valuations of the net tangible assets and, intangible assets. These changes could result in material variances between its future financial results and the amounts presented in these unaudited condensed combined financial statements, including variances in fair values recorded, as well as expenses and cash flows associated with these items.

Accounting Periods Presented

The unaudited pro forma condensed combined balance sheet and statements of operations as of and for the nine months ended September 30, 2016, and for the year ended December 31, 2015 is presented as if the emergeIT merger occurred at the beginning of the periods presented.

NOTE 2. PURCHASE PRICE ALLOCATION

The Board of Directors of the Company entered into an Amalgamation Agreement with emergeIT Inc, an Ontario corporation (“emergeIT”), whereby emergeIT merged with a newly formed Canadian subsidiary of the Company.

The Company engaged an outside independent third party valuation firm to assist in establishing a value for the emergeIT. The methodology used for this valuation is consistent with the June 2016 valuation conducted by the Company.

In preparing its report, the third-party valuation firm used various financial and other information provided to the valuation firm by the Company’s and emergeIT’s management or obtained from other private and public sources including financial projections prepared by emergeIT management, and relied on the accuracy and completeness of this information. There is no assurance that the valuation firm, or any other financial adviser that the Company might choose, will utilize the same process of methodologies in connection with future valuations of emergeIT, or that such advisor(s) will reach conclusions that are consistent with those presented.

The estimated fair value of consideration transferred, assets acquired and liabilities assumed for emergeIT are presented below and represent the Company’s best estimates.

Preliminary Fair Value of Consideration Transferred

The former owners of emergeIT hold rights to approximately 79% of all the issued and outstanding shares of capital stock of the Company.

Preliminary Allocation of Consideration Transferred

The identifiable assets acquired and liabilities assumed were recognized and measured as of September 30, 2016. The excess of the fair value of consideration transferred over estimated fair value of the net tangible assets and intangible assets acquired was recorded as goodwill.

-5-

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at September 30, 2016.

Cash and cash equivalents	$271,818
Accounts receivable	41,430
Prepaid expenses and other assets	182,566
Property and equipment	92,546
Intangible assets	6,795,978
	7,448,395
Accounts payable and accrued liabilities	1,160,246
Other liabilities	233,394
Total liabilities assumed	1,393,640
Goodwill	6,404,022
Net assets acquired	$12,394,719

Intangible Assets

In determining the estimated fair value of the intangible assets, the Company considered, among other factors, the best use of the acquired assets, analyses of historical financial performance and estimates of future performance of emergeIT sales. The fair values of the identified intangible assets related to the customer relationships, trade name, and technology. Customer relationships were calculated using the income approach. Trade name and technology were calculated using the cost approach. The following table sets forth the components of identified intangible assets associated with the proposed merger and their estimated useful lives.

	Fair Value	Useful Life
Customer relationships	$5,173,135	15 years
Trade Name	1,124,745	5 years
Technology	498,098	2 years
	$6,795,978

The Company determined the useful lives of intangible assets based on the expected future cash flows associated with the respective asset. Trade names represent the fair value of the brand and name recognition associated with the marketing of emergeIT's services. Customer relationships represent the expected benefit from future revenues which were reasonably anticipated to continue given the history and performance of emergeIT. Technology acquired would complement the current offering by the Company and the future development of products as a result of the proposed merger may result in significant growth.

Goodwill

Of the total estimated purchase price, approximately $6,404,022 was allocated to goodwill. Goodwill represents the excess of the purchase price of the proposed merger over the fair value of the underlying net tangible and intangible assets. Goodwill resulting from the proposed merger will be tested for impairment at least annually and more frequently if certain indicators are present. In the event the Company determines that the value of goodwill has become impaired, it will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made. None of the goodwill is expected to be deductible for income tax purposes.

-6-

NOTE 3. PRO FORMA BOOK VALUE PER-SHARE DATA

Equivalent Pro Forma Book Value

The following table represents the pro forma calculations of the historical, pro forma and equivalent pro forma book value per share as of September 30, 2016 and December 31, 2015. The Company issued 449 shares of its common stock for one outstanding emergeIT common share. The adjustments reflected below represent the issuance of 5,500,000 common and 38,500,000 preferred shares of the Company’s stock.

The historical and pro forma balance sheets as of September 30, 2016 and December 31, 2015 of the Company and emergeIT are as follows:

	As of September 30, 2016	As of September 30, 2016		As of S eptember 30, 2016
	PAID	Emerge IT	Adjustments	Combined
Shareholders’ equity (deficit)	$(727,347)	$(805,281)	$13,200,000	$11,667,372
Common shares outstanding	10,989,608	12,252	5,500,000	16,489,608
Net book value per common share
Historical	$(0.07)	$(65.73)
Pro forma	0.71
Equivalent pro forma		317.63

	As of December 31, 2015	As of December 31, 2015		As of December 31, 2015
	PAID	Emerge IT	Adjustments	Combined
Shareholders’ equity (deficit)	$(632,153)	$(844,167)	$13,200,000	$11,723,680
Common shares outstanding	8,932,466	12,252	5,500,000	14,432,466
Net book value per common share
Historical	$(0.07)	$(68.60)
Pro forma	0.81
Equivalent pro forma		364.66

NOTE 4. PRO FORMA AND RECLASSIFICATION ADJUSTMENTS

Pro forma adjustments are made to reflect the estimated purchase price, to adjust amounts related to emergeIT’s net tangible assets and intangible assets to a preliminary estimate of the fair values of those assets and to reflect the amortization expense related to the estimated amortizable intangible assets. Additionally, the Company reclassified certain of emergeIT’s balances to conform to the Company’s financial statement presentation.

-7-

The following describes the pro forma adjustments related to the emergeIT made in the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2016, and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2016 and the year ended December 31, 2015, giving effect to the merger as if it had been consummated at the beginning of the periods presented.

(a)	To reflect the fair value of identifiable intangible assets acquired.
(b)	To reflect the fair value of the goodwill based on the net assets acquired.
(c)	To reflect the estimated fair value of the issuance of the Company's common and preferred stock (combined value of $12,394,719) less the elimination of emergeIT's shareholders' deficit ($805,281).
(d)	To reflect estimated amortization expense of identifiable intangible assets of $614,155, for the nine months ended September 30, 2016, as if the proposed merger had occurred at the beginning of the period presented.
(e)	To reflect estimated amortization expense of identifiable intangible assets of $818,874, for the year ended December 31, 2015, as if the acquisition had occurred at the beginning of the period presented.

-8-