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. 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, 2025 and 2024, 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 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 reported 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. The Company has had the option to force an exchange since December 2021. In total, the Company has reserved for future issuance of 2,106,880 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, 2025 for financial reporting purposes.

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 was issued in March 2023 and recorded in accrued common stock bonus in shareholders’ equity as of December 31, 2022. The Board of Directors also authorized the issuance of an additional 250,000 shares to the CEO/CFO as a renewal bonus valued at $437,500. $218,750 of share-based compensation expense was recognized immediately as 125,000 of the bonus shares are immediately vested. The remaining $218,750 of share-based compensation expense was recognized ratably during 2023 as 125,000 of the bonus shares are subject to repurchase if the CEO/CFO were to terminate employment during the period ended January 1, 2024. The Company recorded $437,500 of share-based compensation expense for the year ended December 31, 2023 in connection with these additional shares.

On February 22, 2024 the Board authorized the issuance of 54,559 bonus shares of PAID common stock to the CEO/CFO, one additional officer and one employee for services rendered during 2023. This bonus was valued at $84,576 based on the closing price of the Company’s common stock at February 21, 2024 and was issued in February 2024. This bonus was recorded in accrued common stock bonus in shareholders’ equity as of December 31, 2023. On March 7, 2025 the Board authorized the issuance of 62,502 bonus shares of PAID common stock to the CEO/CFO, one additional officer and two employees for services rendered during 2024. This bonus was valued at $189,380 based on the closing price of the Company’s common stock at March 6, 2025 and was issued in March 2025. This bonus was recorded in accrued common stock bonus in shareholders’ equity as of December 31, 2024. See Note 14 for discussion of 2026 issuances.

Share-Based Incentive Plans

During the years ended December 31, 2025 and 2024, the Company had three 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.

On November 15, 2024, the Company received a notice of exercise of options to purchase 4,500 common shares of the Company’s stock. The options were exercised at $0.975 per share and the Company received proceeds of $4,387.50. On February 24,2025, the Company received a notice of exercise of options to purchase 1,433 common shares of the Company’s stock from one employee. The options were exercised at $2.90 per share and the Company received proceeds of $2,212.

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 the grant to fully vest over a two-year period. There are currently 317,025 shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2025 is as follows:

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, 2025 is as follows:

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, 2025 is as follows:

Fair value of issuances

The Company granted 95,548 options to purchase Company stock during the year ended December 31, 2025. The fair value of the Company’s 2025 option grants under the 2018, 2012, and 2011 Plans was estimated at the date of grant using the Black-Scholes-Merton model with the following weighted average assumptions (see below).

For the years ended December 31, 2025 and 2024, the Company recorded total share-based compensation expense related to the common stock bonuses, other stock issuances, and stock options of $743,746 and $235,575, respectively, which is recorded in share-based compensation expense in the accompanying consolidated statements of income and comprehensive income.

The Company has an unrecognized share-based compensation expense of $8,946 for options outstanding as of December 31, 2025 which will be recognized over the weighted average period of approximately 1.16 years.

Summary of all stock option plans activity during the year ended December 31, 2025 is as follows:

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, 2025.  The aggregate intrinsic value of the options exercised during the years ended December 31, 2025 and 2024 was $12,309 and $8,708, respectively.