UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
COMMISSION FILE NUMBER 0-28720
PAID, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 73-1479833 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) |
4 Brussels Street, Worcester, Massachusetts 01610
(Address of Principal Executive Offices) (Zip Code)
(508) 791-6710
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated Filer [X]
Non-accelerated filer [ ] Smaller reporting company [ ]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as
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defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 6, 2008, the issuer had outstanding 237,379,330 shares of its
Common Stock, par value $.001 per share.
Paid, Inc. and Subsidiary Form 10-Q For the Three Months ended March 31, 2008
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2008 (unaudited) and December 31, 2007 ................ 3
Consolidated Statements of Operations
Three months ended March 31, 2008 and
2007 (unaudited) ................................................ 4
Consolidated Statements of Cash Flows
Three months ended March 31, 2008 and
2007 (unaudited) ................................................ 5
Consolidated Statements of Changes in Shareholders' Equity
Three months ended March 31, 2008
(unaudited) ..................................................... 6
Notes to Consolidated Financial Statements
Three months ended March 31, 2008 and 2007 ...................... 7-16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......... 20
Item 4. Controls and Procedures ............................................ 20
Part II - Other Information
Item 1. Legal Proceedings .................................................... 20
Item 1A. Risk Factors ......................................................... 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds .......... 20
Item 3. Defaults Upon Senior Securities ...................................... 21
Item 4. Submission of Matters to a Vote of Security Holders .................. 21
Item 5. Other Information .................................................... 21
Item 6. Exhibits ............................................................. 21
Signatures .................................................................... 22
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PAID, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2008 2007
------------- -------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 87,361 $ 264,811
Inventories, net 1,215,995 1,195,689
Prepaid expenses and other current assets 214,736 185,553
Due from employees 39,538 39,362
------------- -------------
Total current assets 1,557,630 1,685,415
Property and equipment, net 59,444 74,338
Intangible asset, net 10,593 10,828
------------- -------------
Total assets $ 1,627,667 $ 1,770,581
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 50,000 $ --
Accounts payable 439,415 272,476
Accrued expenses 361,194 380,276
Deferred revenues 112,433 109,500
------------- -------------
Total current liabilities 963,042 762,252
------------- -------------
Commitments and contingencies
Shareholders' equity:
Common stock, $.001 par value, 350,000,000 shares
authorized; 236,109,175 and 234,636,742 shares
issued and outstanding at March 31, 2008 and
December 31, 2007, respectively 236,109 234,637
Additional paid-in capital 32,599,852 32,083,880
Accumulated deficit (32,171,336) (31,310,188)
------------- -------------
Total shareholders' equity 664,625 1,008,329
------------- -------------
Total liabilities and shareholders' equity $ 1,627,667 $ 1,770,581
============= =============
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See accompanying notes to consolidated financial statements
PAID, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
(Unaudited)
2008 2007
------------- -------------
Revenues $ 253,972 $ 468,421
Cost of revenues 86,789 187,395
------------- -------------
Gross profit 167,183 281,026
------------- -------------
Operating expenses:
Selling, general, and administrative expenses 940,683 1,100,112
Web site development costs 88,228 98,295
------------- -------------
Total operating expenses 1,028,911 1,198,407
------------- -------------
Loss from operations (861,728) (917,381)
------------- -------------
Other income (expense):
Interest expense -- (2,263)
Other income 580 2,394
------------- -------------
Total other income, net 580 131
------------- -------------
Loss before income taxes (861,148) (917,250)
Provision for income taxes -- --
------------- -------------
Net loss $ (861,148) $ (917,250)
============= =============
Loss per share (basic and diluted) $ -- $ --
============= =============
Weighted average shares (basic and diluted) 235,012,192 222,498,093
============= =============
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See accompanying notes to consolidated financial statements
PAID, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
2008 2007
---------- ----------
Operating activities:
Net loss $ (861,148) $ (917,250)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 23,359 32,787
Share based compensation 113,000 --
Intrinsic value of stock options awarded to
professionals and consultants in payment
of fees for services provided 278,391 405,926
Intrinsic value of stock options awarded to
employees in payment of compensation 2,308 85,038
Changes in assets and liabilities:
Accounts receivable -- (15,340)
Inventories, net (20,306) (1,269)
Deferred expenses (5,814)
Prepaid expense and other current assets (29,359) (196,691)
Accounts payable 166,939 (92,728)
Accrued expenses (19,082) (232,359)
Deferred revenue 2,933 561,051
---------- ----------
Net cash used in operating activities (342,965) (376,649)
---------- ----------
Investing activities:
Property and equipment additions (8,230) (2,532)
---------- ----------
Financing activities:
Net proceeds (repayments) of notes and loans payable 50,000 (18,000)
Proceeds from assignment of call options 103,245 15,538
Proceeds from exercise of stock options 20,500 --
Proceeds from sale of common stock -- 763,400
---------- ----------
Net cash provided by financing activities 173,745 760,938
---------- ----------
Net (decrease) increase in cash and cash equivalents (177,450) 381,757
Cash and cash equivalents, beginning 264,811 138,326
---------- ----------
Cash and cash equivalents, ending $ 87,361 $ 520,083
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ -- $ --
========== ==========
Interest $ -- $ 663
========== ==========
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See accompanying notes to consolidated financial statements
PAID, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(Unaudited)
Common stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
------------ --------- ------------ ------------- -----------
Balance, December 31, 2007 234,636,742 $ 234,637 $ 32,083,880 $ (31,310,188) $ 1,008,329
Issuance of common stock pursuant to exercise of stock
options granted to employees for services 5,783 6 2,302 -- 2,308
Issuance of common stock pursuant to exercise of stock
options granted to professionals and consultants 966,650 966 277,425 -- 278,391
Proceeds from assignment of call options -- -- 103,245 -- 103,245
Options exercised 500,000 500 20,000 -- 20,500
Share based compensation related to issuance of incentive
stock options -- -- 113,000 -- 113,000
Net loss -- -- -- (861,148) (861,148)
------------ --------- ------------ ------------- -----------
Balance, March 31, 2008 236,109,175 $ 236,109 $ 32,599,852 $ (32,171,336) $ 664,625
======================================================================
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See accompanying notes to consolidated financial statements
PAID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
Note 1. Organization and Significant Accounting Policies
Paid, Inc. and subsidiary (the "Company") provides businesses and clients with marketing, management, merchandising, auction management, website hosting, and authentication and consignment services for the entertainment, sports and collectible industries. The Company offers celebrities, musical artists and athletes official web sites and fan-club services including e-commerce, VIP ticketing, fan club management, fan experiences, storefronts, articles, polls, message boards, contests, biographies and custom features. The Company also sells merchandise for celebrities, through official fan websites, on tour or at retail.
General
The Company has prepared the consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Company's audited financial statements included in the Annual Report on Form 10-KSB for the year ended December 31, 2007.
In the opinion of management, the Company has prepared the accompanying consolidated financial statements on the same basis as its audited financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2008.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of Paid, Inc. and its wholly-owned subsidiary, Rotman Collectibles, Inc. On December 27, 2007 Rotman Collectibles was merged into Paid, Inc. All inter-company balances and transactions have been eliminated.
Inventories
Inventories consist of collectible merchandise for sale and are stated at the lower of average cost or market on a first-in, first-out (FIFO) method. When a purchase contains multiple copies of the same item, they are stated at average cost.
On a periodic basis management reviews inventories on hand to ascertain if any is slow moving or obsolete. In connection with this review, at both March 31, 2008 and December 31, 2007 the Company provided for reserves totaling $325,000.
Website Development Costs
The Company accounts for website development costs in accordance with the provisions of EITF 00-2, "Accounting for Web Site Development Costs", which requires that costs incurred in planning, maintaining, and operating stages that do not add functionality to the site be charged to operations as incurred. External costs incurred in the site application and infrastructure development stage and graphic development are capitalized. Such capitalized costs are included in "Property and equipment."
Revenue Recognition
The Company generates revenue from sales of fan experiences, from fan club membership fees, from sales of its purchased inventories, and from web hosting services.
Fan experiences sales include tickets and related experiences at concerts and other events conducted by performing artists. Revenues associated with these fan experiences are generally reported gross, rather than net, following the criteria of EITF 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent", and are deferred until the related event has been concluded, at which time the revenues and related direct costs are recognized.
Fan club membership fees are recognized ratably over the term of the related membership, generally one year.
For sales of merchandise owned and warehoused by the Company, the Company is responsible for conducting the sale, billing the customer, shipping the merchandise to the customer, processing customer returns and collecting accounts receivable. The Company recognizes revenue upon verification of the credit card transaction and shipment of the merchandise, discharging all obligations of the Company with respect to the transaction.
The Company provides web hosting services in conjunction with two types of arrangements - cash and receipt of publicly recognized autographs on merchandise. Revenue is recognized on a monthly basis as the services are provided under both arrangements. The amounts of revenues related to arrangements settled in other than cash are determined based upon management's estimate of the fair value of the service provided or the fair value of the autographs received, depending upon which measure is most reliable.
Advertising costs
Advertising costs totaling approximately $15,300 in 2008 and $18,700 in 2007, are charged to expense when incurred.
Shipping and Handling fees and costs
All amounts billed to customers in sales transactions related to shipping and handling represent revenues earned and are reported as revenues. Costs incurred by the Company for shipping and handling totaling $20,300 and $30,300 in 2008 and 2007, respectively, are reported as a component of selling, general and administrative expenses.
Segment reporting
The Company has determined that it has only one discreet operating segment consisting of activities surrounding the sale of fan experiences, fan club memberships, and merchandise associated with its relationships with performing artists and publicly recognized people.
Concentrations
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and cash equivalents with high credit quality institutions.
Approximately 74% and 67% of the Company's revenues for the three months ended March 31, 2008 and 2007, respectively, were generated from fan experiences and sales of merchandise related to one performing artist, Aerosmith.
Share Based Compensation
The Company accounts for share-based compensation in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) 123(R), Share-Based Payment. Under the provisions of SFAS 123(R), share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant).
The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company's stock over the option's expected term, the risk-free interest rate over the option's expected term, and the Company's expected annual dividend yield. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company's stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.
Earnings Per Common Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and warrants. The number of common shares that would be included in the calculation of outstanding options and warrants is determined using the treasury stock method. The assumed conversion of outstanding dilutive stock options and warrants would increase the shares outstanding but would not require an adjustment of income as a result of the conversion. Stock options and warrants applicable to 30,636,054 shares and 27,280,198 shares at March 31, 2008 and 2007, respectively, have been excluded from the computation of diluted earnings per share because they were antidilutive. Diluted earnings per share have not been presented as a result of the Company's net loss for each year.
Fair value Measurements
On January 1, 2008 the Company adopted the provisions of SFAS No. 157, "Fair Value Measurements," ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with Generally Accepted Accounting Principles, and expands disclosures about fair value measurements. The Statement codifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Adoption of SFAS 157 had no material impact on the Company's financial statements for the three months ended March 31, 2008.
On January 1, 2008 the Company adopted the provisions of SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," ("SFAS 159"). SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159 further establishes certain
additional disclosure requirements. Adoption of SFAS 159 had no material impact on the company's financial statements for the three months ended March 31, 2008.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations", which replaces SFAS No. 141. SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for calendar year companies on January 1, 2009. The adoption of SFAS 141(R) will have an impact on accounting for business combinations once adopted, but the effect is dependent upon acquisitions at that time.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51", which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. SFAS 160 is effective for calendar year companies on January 1, 2009. The Company has not determined the effect that the application of SFAS 160 will have on its consolidated financial statements.
In December 2007, the SEC issued Staff Accounting Bulletin 110. SAB 110 expresses the views of the staff regarding the use of a "simplified" method, as discussed in SAB No. 107 ("SAB 107"), in developing an estimate of expected term of "plain vanilla" share options in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004). SAB 110 is not expected to have a significant impact on the entity consolidated financial statements.
Note 2. Patent
During January 2008, the United States Patent and Trademark Office issued the Company's patent #7324968 providing the Company with the rights granted to patent holders, including the ability to seek licenses for patent use and to protect the patent from infringement. The Company's patent is for the real-time calculation of shipping costs for items purchased online using a zip code as a destination location indicator. It includes shipping charge calculations across multiple carriers and accounts for additional characteristics of the item being shipped, such as weight, special packaging or handling, and insurance costs.
Note 3. Accrued Expenses
Accrued expenses are comprised of the following:
March 31, December 31,
2008 2007
--------- ------------
Interest $ 3,879 $ 3,879
Payroll and related costs 175,205 169,969
Professional and consulting fees 116,425 164,145
Commissions 50,066 13,965
Other 15,619 28,318
--------- ------------
$ 361,194 $ 380,276
========= ============
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Note 4. Common Stock
Call Option Agreements
In connection with a May 9, 2005 settlement with Leslie Rotman regarding the value paid and the value received in a 2001 transaction the Company received a call option for 2,000,000 shares of the Company's common stock at $.001 per share. Leslie Rotman is the mother, of Gregory Rotman, President of the Company, and Richard Rotman, CFO/Vice President/Secretary of the Company. The option is assignable by the Company and, as most recently amended, expires on May 9, 2009.
As of March 31, 2008 the Company had assigned options to purchase a total of 1,485,000 shares of stock from Leslie Rotman to certain individuals in exchange for $547,515. The Company assigned 260,000 and 50,000 during the three months ended March 31, 2008 and 2007 in exchange for $103,245 and $15,538, respectively. The proceeds from the assignments of these options were added to the paid in capital of the Company. At March 31, 2008, 515,000 call options remain outstanding.
Warrants
During the year ended December 31, 2005, the Company entered into an Agreement and sold a warrant to purchase common stock ("Warrant") to an investor. The investor paid the Company $50,000 as a deposit ("Deposit") for the right to acquire up to 2,000,000 shares of unregistered common stock at any time within one year of the Agreement at $.15 per share. During 2006 the expiration date of the Warrant was extended pending receipt of an additional $50,000 payment which was received during 2007. If exercised, $100,000 will be applied as partial payment of the exercise price. If the Warrants are not exercised by June 1, 2008 the deposits will be forfeited. The deposits have been recorded in Additional Paid in Capital.
Share-based Incentive Plans
At March 31, 2008, the Company had a number of 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.
The 1999 Plan ("1999 Plan") provides for the award of non-qualified options for up to 1,000,000 shares. The maximum number of shares currently reserved for issuance is 492,000 shares. The options granted have ten-year contractual terms and vested either immediately or annually over a five-year term. There were no options granted under this plan during 2008 and 2007 and at both March 31, 2008 and December 31, 2007 there were 37,000 options outstanding with a weighted average exercise price of $1.625.
The 2002 Plan ("2002 Plan") provides for the award of qualified and non-qualified options for up to 30,000,000 shares. As of March 31, 2008 there are no shares currently reserved for issuance. The options granted have ten-year contractual terms and vested either immediately or annually over a five-year term. Information with respect to stock options granted under the above plans is as follows:
Weighted
average exercise
Number of shares price per share
---------------- ----------------
Options outstanding at December 31, 2007 24,000,000 $ .041
Granted 5,000,000 $ .415
Exercised (500,000) .041
----------
Options outstanding at March 31, 2008 28,500,000 $ .106
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The total intrinsic value of options exercised under the 2002 Plan during the three months ended March 31, 2008 was $113,000.
The grant date fair value of the Company's 2008 option grants was $1,815,000 estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
2008
-------
Expected term (based upon historical experience) 6 years
Expected volatility 120.38%
Expected dividends None
Risk free interest rate 3.75%
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The incremental fair value calculated using the above assumptions over the intrinsic value was determined to be $1,815,000 which is being amortized over the four year vesting period of the grant resulting in $113,000 being charged to operations during the three months ended March 31, 2008.
On February 1, 2001 the Company adopted the 2001 Non-Qualified Stock Option Plan (the "2001 Plan") and has filed Registration Statements on Form S-8 to register 90,000,000 shares of its common stock. Under the 2001 Plan, employees and consultants may elect to receive their gross compensation in the form of options, exercisable at $.001 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. Information with respect to stock options granted under the above plans is as follows:
Weighted
average exercise
Number of shares price per share
---------------- ----------------
Options outstanding at December 31, 2007 99,054 $ .001
Granted 972,433 .001
Exercised (972,433) .001
--------
Options outstanding at March 31, 2008 99,054 $ .001
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A summary of the awards under this plan during the three months ended March 31, 2008 and 2007 is as follows:
Number of Intrinsic
Shares Value
--------- ---------
2008
----
Employee payroll 5,783 $ 2,308
Consulting and professional fees 966,650 278,393
--------- ---------
Total 972,433 $ 280,701
========= =========
2007
----
Employee payroll 276,985 $ 85,038
Consulting and professional fees 2,480,209 405,927
--------- ---------
Total 2,757,194 $ 490,965
========= =========
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At March 31, 2008 the maximum number of shares reserved for issuance was 6,394,373 shares. The options granted have ten-year contractual terms and vest immediately.
The fair value of the Company's 2008 and 2007 option grants was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
2008 2007
------- -------
Expected term (based upon historical experience) <1 week <1 week
Expected volatility 117.91% 118.48%
Expected dividends None None
Risk free interest rate 3.75% 4%
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The incremental fair value calculated using the above assumptions over the intrinsic value was determined to be immaterial and no related additional share based compensation has been recorded.
During July 1999, the Company's Board of Directors adopted, subject to stockholders' approval, the 1999 Omnibus Share Plan (the "Omnibus Plan") that provides for both incentive and non-qualified stock options, stock appreciation rights and other awards to directors, officers, and employees of the Company to purchase or receive up to 1,000,000 shares of the Company's stock. A committee of the Board of Directors ("Committee") establishes the option price at the time each option is granted, which price may, in the discretion of the Committee, be less than 100% of the fair market value of the shares on the date of the grant. Any options granted will have a maximum term of ten years and will be exercisable during a period as specified by the Committee. No options have ever been granted under the Omnibus Plan.
All but 5,000,000 options outstanding at March 31, 2008 are fully vested and exercisable. Information pertaining to options outstanding at March 31, 2008 is as follows:
Options Outstanding
Weighted Average Aggregate
Number of Remaining Intrinsic
Exercise Prices shares Contractual Life Value
--------------- ---------- ---------------- -----------
$ 1.62 37,000 1.75 --
.001 99,054 7.75 $ 29,617
.041 23,500,000 5.75 6,086,000
.415 5,000,000 9.75
----------
27,636,054
==========
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The total intrinsic value of options exercised during the three months ended March 31, 2008 under all plans was $397,701 in exchange for $20,500 of cash.
Note 5. Income Taxes
On January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 "Accounting for the Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN No. 48"). FIN No. 48 requires that the impact of tax positions be recognized in the financial statements if they are more likely than not of being sustained based upon the technical merits of the position. The Company has a valuation allowance against the full amount of its net deferred taxes. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all, of its deferred tax assets will not be realized.
The implementation of FIN No. 48 had no impact on the Company's financial statements due to the valuation allowances that have historically been provided against all deferred tax assets.
The Company has not been audited by the Internal Revenue Service ("IRS") or any states in connection with income taxes. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The periods from 2004-2007 remain open to examination by the IRS and state jurisdictions. The Company believes it is not subject to any tax risk beyond the preceding discussion. The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FIN No. 48, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any significant interest expense recognized during the three months ended March 31, 2008.
There was no provision for income taxes for the three months ended March 31, 2008 and 2007 due to the Company's net operating loss and its valuation reserve against deferred income taxes.
The difference between the provision for income taxes using amounts computed by applying the statutory federal income tax rate of 34% and the Company's effective tax rate is due primarily to the net operating loss incurred by the Company and the valuation reserve against the Company's deferred tax asset.
The tax effects of significant temporary differences and carry forwards that give rise to deferred taxes are as follows:
March 31, December 31,
2008 2007
----------- ------------
Federal net operating loss carry forwards $ 8,469,000 $ 8,206,000
State net operating loss carry forwards 1,359,000 1,273,000
----------- ------------
9,828,000 9,479,000
Valuation reserve (9,828,000) (9,479,000)
----------- ------------
Net deferred tax asset $ -- $ --
=========== ============
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The valuation reserve applicable to net deferred tax asset as of March 31, 2008 and December 31, 2007 is due to the likelihood of the deferred tax not to be utilized.
At March 31, 2008, the Company has federal and state net operating loss carry forwards of approximately $26,000,000 and $14,000,000, respectively, available to offset future taxable income. The state carry-forwards will expire intermittently through 2014, while the federal carry forwards will expire intermittently through 2029.
Note 6. Related party transactions
Steven Rotman is the father, and Leslie Rotman is the mother, of Gregory Rotman, President of the Company, and Richard Rotman, CFO/Vice President/Secretary of the Company. The Company entered into a number of transactions over the past two years with both Steven Rotman and Leslie Rotman. Management believes that these transactions are fair and reasonable to the Company and no less favorable than could have been obtained by an unaffiliated third party.
In December 2001, the Company engaged Steven Rotman to provide consulting services to the Company. During the three months ended March 31, 2007, the Company incurred $72,000 of consulting fees paid to Steven Rotman, who elected to receive this compensation in the form of options under the 2001 Plan.
As of December 31, 2006, the Company owed Steven Rotman $80,000 in principal, and $40,322 in interest at 8%. Interest expense charged to operations during the three months ended March 31, 2008 related to this obligation was $1,600. Late in 2007 the Company repaid the $80,000 of principal plus $46,598 of then outstanding interest through the issuance of 527,488 restricted shares of the Company's common stock.
The Company leases facilities, as a tenant at will, from a company in which Steven Rotman is a shareholder. During the three months ended March 31, 2008 and 2007 the Company charged $7,800 to operations under this arrangement.
Note 7. Commitments and contingencies
Lease commitment
The Company leases office facilities in Boston Massachusetts under a five year lease that began in May 2006 requiring monthly payments of approximately $5,800, plus increases in real estate taxes and operating expenses, through April 2011.
Legal matters
In the normal course of business, the Company periodically becomes involved in litigation. As of March 31, 2008, in the opinion of management, the Company had no pending litigation that would have a material adverse effect on the Company's financial position, results of operations, or cash flows. In Parshall v. Paid, Inc., Paul L. Parshall filed a lawsuit against the Company in the Court of Common Pleas of Franklin County, Ohio on October 3, 2006. Mr. Parshall claims to be the owner of 423,415 shares represented by Stock Certificate Number 01123.
According to the Company's transfer agent, the Company's stock records show that Stock Certificate Number 01123 was cancelled on May 15, 1997. Mr. Parshall was affiliated with a previous transfer agent of the Company. The Company filed a motion to dismiss based on lack of personal jurisdiction through its Ohio counsel. The Court of Common Pleas granted the Company's motion to dismiss on November 7, 2007. The order to dismiss is now on appeal before the Ohio Court of Appeals, Tenth Appellate District, Franklin County, Ohio. Mr. Parshall requests damages equal to the market value of the shares and for any loss for not recognizing the shares. The Company disputes Mr. Parshall's claims.
Note 8. Subsequent event
On April 29, 2008 the Company entered into an unsecured $2,500,000 Promissory Note with Lewis Asset Management ("Lender") that is due on April 29, 2009. Amounts outstanding will bear interest at 15%, and for each $100,000 advanced, Lender will receive a warrant for 100,000 shares of the Company's common stock. The warrants are exercisable at $.25 per share and will expire three years from the date of issue. The $50,000 balance of short term debt on the accompanying balance sheet was advanced by Lender and it was included in the Promissory Note.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding the Company and its business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements in this report. Additionally, statements concerning future matters such as the development of new services, technology enhancements, purchase of equipment, credit arrangements, possible changes in legislation and other statements regarding matters that are not historical are forward-looking statements.
Although forward-looking statements in this Quarterly Report reflect the good faith judgment of the Company's management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks, contingencies and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in this report. Although the Company believes that its plans, intentions and expectations reflected in these forward-looking statements are reasonable, the Company can give no assurance that its plans, intentions or expectations will be achieved. For a more complete discussion of these risk factors, see Exhibit 99, "Risk Factors", in the Company's Form 10-KSB for the fiscal year ended December 31, 2007.
For example, the Company's ability to achieve positive cash flow and to become profitable may be adversely affected as a result of a number of factors that could thwart its efforts. These factors include the Company's inability to successfully implement the Company's business and revenue model, tour or event cancellations, higher costs than anticipated, the Company's inability to sell its products and services to a
sufficient number of customers, the introduction of competing products by others, the Company's failure to attract sufficient interest in and traffic to its sites, the Company's inability to complete development of its sites, the failure of the Company's operating systems, and the Company's inability to increase its revenues as rapidly as anticipated. If the Company is not profitable in the future, it will not be able to continue its business operations.
Overview
Our primary focus is to provide businesses and clients with marketing, management, merchandising, auction management, website hosting, and authentication services for the entertainment, sports and collectible industries. We offer entertainers and athletes official web sites and fan club services including e-commerce, VIP ticketing, fan club management, fan experiences, storefronts, articles, polls, message boards, contests, biographies and custom features. We also sell merchandise for celebrities, through official fan websites, on tour or at retail. Our celebrity services proprietary content management system provides an opportunity for our clients to offer more information, merchandise and experiences to their customers and communities. We provide business management tools for online retailers, through AuctionInc, which is home to our patented shipping calculator and automated auction checkout and order processing system.
Critical Accounting Policies
Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in our Form 10-KSB filed on March 31, 2008. However, certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Those estimates and judgments are based upon our historical experience, the terms of existing contracts, our observance of trends in the industry, information that we obtain from our customers and outside sources, and on various other assumptions that we believe to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies include:
Inventories: Inventories are stated at the lower of average cost or market on a first-in, first-out method. On a periodic basis we review inventories on hand to ascertain if any is slow moving or obsolete. In connection with this review, we establish reserves based upon management's experience and assessment of current product demand. The Company's inventories are comprised of merchandise and collectibles that relates to performing artists and athletes and valuation of it is more subjective than with more standard inventories. General economic conditions, tour schedules of performing artists, and the reputation of the performing artists/athletes, might make sale or disposition of these inventories more or less difficult. Any increases in the reserves would cause a decline in profitability, since such increases are recorded as charges against operations.
Revenue recognition: Certain components of revenues are recognized based upon an estimate of value, since they are received in non-monetary transactions. Management estimates the amount of revenue based upon its historical experience in comparable cash transactions or its estimation of the value received, whichever is more reliable in the circumstances. Variations in the reliability of these judgments may result in enhancement or impairment of gross margins and results of operations in future periods.
Results of Operations
The following discussion compares the Company's results of operations for the three months ended March 31, 2008 with those for the three months ended March 31, 2007. The Company's financial statements and notes thereto included elsewhere in this quarterly report contain detailed information that should be referred to in conjunction with the following discussion.
Revenues. For the three months ended March 31, 2008, revenues were $254,000, 90% of which was attributable to sales of fan club memberships, merchandise, and fan experiences related to tours of performing artists. Sales of the Company's own product and fees from buyers and sellers represented 10% of revenues. Gross sales of the Company's own product were $24,900. Fan experience, fan club membership and related merchandise sales revenues were $228,000. Management anticipates increases from fan club memberships, merchandise, and fan experiences from tours, products and services related to several other performing artists during 2008. Performing artists typically do not announce tour plans until two to four months in advance of the first show. Several performing artists represented by the Company have announced tours that are scheduled to begin during the second and third quarter of 2008. Some of these tours are expected to continue into the fourth quarter of 2008.
The Company's revenues for the three months ended March 31, 2008 represent a decrease of approximately $214,400 from the same period in 2007 when revenues were $468,400. For the three months ended March 31, 2007, sales of the Company's product were $117,500 or 25% of gross sales, fan club membership and related merchandise sales revenues were $315,200, 67% of gross revenues, and sports marketing revenues were $35,800, or 8% of gross revenues.
The main reasons for the decrease in revenues was an $87,200 decrease related to the tours of performing artists, lower revenues related to sports marketing services of $35,800, and lower sales of Company owned product of approximately $92,700 from the same period in 2007. Revenues related tours of performing artists are dependent upon tour schedules, the popularity of the artist(s) on tour, and whether the tour(s) are domestic or international. There were no artists touring during the three months ended March 31, 2008 and 2007. Gross Profit from celebrity services for the three months ended March 31, 2008 and 2007 was approximately $122,400 and $141,600 respectively. As a result of the lower sales of Company owned product, gross profit from Company owned product sales for the three months ended March 31, 2008 was approximately $14,700, $100,000 less than in 2007.
Operating Expenses. Total operating expenses for the three months ended March 31, 2008 were $1,028,900 compared to $1,198,400 in 2007, a decrease of $169,500.
Sales, general and administrative ("SG&A") expenses for the three months ended March 31, 2008 were $940,700, compared to $1,100,100 for the three months ended March 31, 2007. The decrease of $159,400 in SG&A costs includes decreases in payroll and related costs of $65,000, credit card commissions of $14,000, travel of $55,900, tour expenses of $7,000, shipping and postage of $12,200, and professional fees of $137,000, offset by an increase in share based compensation of $113,000. The credit card commissions and postage and shipping decreases are principally attributable to lower levels of tours, both current and those to begin after the end of the quarter, of performing artists.
Costs associated with planning, maintaining and operating our web sites for the three months ended March 31, 2008 decreased by $10,100 from 2007. This decrease is due primarily to decreases in computer costs of $9,500 and depreciation of $9,000, offset by an increase in consulting costs of $9,200.
Net Loss. The Company realized a net loss for the three months ended March 31, 2008 of $861,100 compared to a net loss of $917,200 for the three months ended March 31, 2007. Losses for both years represent less than $.01 per share.
Inflation. The Company believes that inflation has not had a material effect on its results of operations.
Assets
At March 31, 2008, total assets of the Company were $1,628,000 compared to $1,771,000 at December 31, 2007.
Operating Cash Flows
A summarized reconciliation of the Company's net losses to cash provided by (used in) operating activities for the three months ended March 31, 2008 compared to March 31, 2007, is as follows:
2008 2007
----------- -----------
Net loss $ (861,100) $ (917,200)
Depreciation and amortization 23,000 33,000
Option compensation 113,000 --
Intrinsic value of stock options awarded in payment of services 281,000 491,000
Net current assets and liabilities associated with advance
ticketing -- 364,000
Changes in current assets and liabilities 101,100 (347,400)
----------- -----------
Net cash provided by (used in) operating activities ($ 343,000) ($ 376,600)
=========== ===========
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Working Capital and Liquidity
The Company had cash and cash equivalents of $87,000 at March 31, 2008, compared to $265,000 at December 31, 2007. The Company had $595,000 of working capital at March 31, 2008 compared to $923,000 at December 31, 2007. At March 31, 2008 current liabilities were $963,000 compared to $762,000 at December 31, 2007. Current liabilities increased at March 31, 2008 compared to December 31, 2007 primarily due to new short term debt and higher levels of accounts payable.
The Company's independent registered public accounting firm has issued a going concern opinion on the Company's consolidated financial statements for the year ended December 31, 2007. The Company may need an infusion of additional capital to fund anticipated operating costs over the next 12 months. Management anticipates growth in revenues and gross profits for the remainder of 2008 from its celebrity services products and websites, and similar services to other entities; including memberships, fan experiences and ticketing, appearances, website development and hosting, and merchandise sales from both existing and new clients. In addition, our suite of management tools and patented shipping calculator solutions for small ecommerce enterprises, and web hosting are expected to increase revenues and result in higher total gross profit. Subject to the discussion below, management believes that the Company has sufficient cash resources to fund operations during the next 12 months. These resources include call options, expiring on May 9, 2009, for approximately 515,000 shares of common stock, which, once assigned by the Company, can generate between $85,000 and $275,000 (based solely upon the 52 week high and low closing prices of the Company's common stock) of cash. In addition, in April 2008 the Company entered into a financing agreement for up to $2,500,000 of additional financing and management is exploring opportunities to monetize its recently issued patent. However, there can be no assurance that all of the financing will be received, that assignment of the call options can be concluded on reasonably acceptable terms, or that the Company will be successful in monetizing its patent. Finally, management is seeking alternative sources of capital to support operations.
No discussion is required pursuant to Form 10-Q Instruction to paragraph 305(c).
Evaluation of Disclosure Controls and Procedures
The Company's management, including the President of the Company and the Chief Financial Officer of the Company, has evaluated the effectiveness of the Company's "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon this evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective, except with respect to material weaknesses in internal control over financial reporting described below, for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time period specified by the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to the Company's management, including its principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure. There were no significant changes in the Company's internal controls during the last fiscal quarter and as of the end of the period covered by this annual report or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Management, with the participation of our principal executive officer and principal financial officer, is required to evaluate the effectiveness of our internal controls based on criteria established under the COSO framework, an integrated framework for evaluation of internal controls issued to identify the risks and control objectives related to the evaluation of the control environment by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that our internal controls over financial reporting were not effective as of March 31, 2008 due to our inability to perform sufficient testing of internal controls on financial reporting. A factor for our internal control deficiencies is the small size of the Company and the lack of a financial expert on the Audit Committee of the Board of Directors and other corporate governance controls. As defined by the Public Company Accounting Oversight Board Auditing Standard No. 2, a material weakness is a significant control deficiency or a combination of significant control deficiencies that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management continues to monitor and assess the controls to ensure compliance. Please refer to Item8A(T) of the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 for a further description of this material weakness in internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
There have been no material developments with respect to any previously reported legal proceedings.
There are no material changes for the risk factors previously disclosed on Form 10-KSB for the year ended December 31, 2007.
None.
None.
None.
None.
4.1 Form of Warrant to Lewis Asset Management with respect to Promissory Note dated April 29, 2008
10.1 Amendment No. 3 to Settlement Agreement and Mutual Release
10.2 Promissory Note dated April 29, 2008 for up to $2,500,000 to Lewis Asset Management
31.1 CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002
31.2 CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002
32 CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002
SIGNATURES
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 thereunto duly authorized.
PAID, INC.
Registrant
Date: May 12, 2008 /s/ Gregory Rotman
------------ ---------------------------------------------
Gregory Rotman, President
Date: May 12, 2008 /s/ Richard Rotman
------------ ---------------------------------------------
Richard Rotman, Chief Financial Officer, Vice
President and Secretary
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LIST OF EXHIBITS
4.1 Form of Warrant to Lewis Asset Management with respect to Promissory Note dated April 29, 2008
10.1 Amendment No. 3 to Settlement Agreement and Mutual Release
10.2 Promissory Note dated April 29, 2008 for up to $2,500,000 to Lewis Asset Management
31.1 CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002
31.2 CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002
32 CEO and CFO Certification required under Section 906 of Sarbanes-Oxley Act of 2002
EXHIBIT 4.1
Form of Warrant
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE LAWS.
PAID, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. 2008--__ Number of Shares: ____
Date of Issuance: April 29, 2008
Paid, Inc., a Delaware corporation (the "Company"), hereby certifies that, for value received, _____________________, and permitted assigns, the registered holder hereof ("Holder"), is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time after the date hereof, but not after 5:00 P.M. Boston time on the Expiration Date (as defined herein) ______ fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (each a "Warrant Share" and collectively the "Warrant Shares") at a purchase price per share equal to $.25 (the "Warrant Exercise Price") in lawful money of the United States. The number of Warrant Shares purchasable hereunder and the Warrant Exercise Price are subject to adjustment as provided in Section 9 below.
Section 1.
(a) Definitions. The following words and terms used in this Warrant shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.
"Expiration Date" means the date which is three (3) years from the date of this Warrant or, if such date falls on a Saturday, Sunday or other day on which banks are required or authorized to be closed in the State of Delaware (a "Holiday"), the next preceding date that is not a Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
"Transfer" shall include any disposition of this Warrant or any Warrant Shares, or of any interest in either thereof which would constitute a sale thereof within the meaning of the Securities Act of 1933, as amended, or applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued in exchange, transfer or replacement of any thereof.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company's successors; and (B) to any applicable law defined or referred to herein, shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, unless the otherwise specified in a particular instance, the words "herein," "hereof," and "hereunder," and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa.
(a) Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder, as a whole or in part, at any time prior to 5:00 P.M. Boston Time on the Expiration Date. The rights represented by this Warrant may be exercised by the Holder, as a whole or from time to time in part (except that this Warrant shall not be exercisable as to a fractional share) by (i) delivery of a written notice, in the form attached as Exhibit I hereto (an "Exercise Form"), of the Holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which the Warrant is being exercised (plus any applicable issue or transfer taxes) in immediately available funds (either by wire transfer or a certified or cashier's check drawn on a United States bank), for the number of Warrant Shares as to which this Warrant shall have been exercised, and (iii) the surrender of this Warrant, properly endorsed, at the principal office of the Company (or at such other agency or office of the Company as the Company may designate by notice to the Holder).
The Warrant Shares so purchased shall be deemed to be issued to the Holder or Holder's designees, as the record owner of such Warrant Shares, as of the date on which this Warrant shall have been surrendered, the completed Exercise Form shall have been delivered, and payment shall have been made for such Warrant Shares as set forth above.
In the event of any exercise of the rights represented by this Warrant in compliance with this Section 2(a), a certificate or certificates for the Warrant Shares so purchased, registered in the name of, or as directed by, the Holder, shall be delivered to, or as directed by, the Holder within three (3) business days after such rights shall have been so exercised.
(b) Unless this Warrant shall have expired or shall have been fully exercised, the Company shall issue a new Warrant identical in all respects to the Warrant exercised except (i) it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under the Warrant exercised, less the number of Warrant Shares with respect to which such Warrant is exercised, and (ii) the holder thereof shall be deemed to have become the holder of record of such Warrant Shares immediately prior to the close of business on the date on which the Warrant is surrendered and payment of the amount due in respect of such exercise and any applicable taxes is made, irrespective of the date of delivery of such share certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are properly closed, such person shall be deemed to have become the holder of such Warrant Shares at the opening of business on the next succeeding date on which the stock transfer books are open.
(c) In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of Warrant Shares as are not disputed in accordance with this Section. The Company shall submit the disputed calculations to the Company's independent accounting firm within five (5) business days of receipt of the Exercise Form. The accountant shall audit the calculations and notify the Company and the Holder of the results no later than ten (10) business days from the date it receives the disputed calculations. The accountant's calculation shall be deemed conclusive absent manifest error. The Company shall then issue the appropriate number of shares of Common Stock in accordance with this Section.
Section 3. Covenants as to Common Stock. The Company covenants and agrees that all Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance and upon payment by the holder of the Warrant Exercise Price, be validly issued, fully paid and nonassessable. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights then represented by this Warrant and that the par value of said shares will at all times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or taxes attributable to the initial issuance of the Warrant Shares or any permitted transfer involved in the issue or delivery of any certificates for Warrant Shares in a name other than that of the registered holder hereof or upon any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such, of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the holder of this Warrant of the Warrant Shares which he or she is then entitled to receive upon the due exercise of this Warrant. Notwithstanding the foregoing, the Company will provide the holder of this Warrant with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this Warrant and no right or option granted or conferred hereunder shall in any way limit, affect or abridge the exercise by the Company of any of its corporate rights or powers to recapitalize, amend its Certificate of Incorporation, reorganize, consolidate or merge with or into another corporation, or to transfer all or any part of its property or assets, or the exercise of any other of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the acceptance hereof, represents that it is acquiring this Warrant and the Warrant Shares for its own account for investment and not with a view to, or for sale in connection with, any distribution hereof or of any of the shares of Common Stock or other securities issuable upon the exercise thereof, and not with any present intention of distributing any of the same. Upon exercise of this Warrant, the holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Warrant Shares so purchased are being acquired solely for the holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. If such holder cannot make such representations because they would be factually incorrect, it shall be a condition to such holder's exercise of the Warrant that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the issuance of its securities upon exercise of the Warrant shall not violate any United States or state securities laws. The holder of this Warrant, by the acceptance hereof,
represents that it is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends. The holder of this Warrant understands that (i) this Warrant and the Warrant Shares have not been and are not being registered under the Securities Act or any state securities laws (other than as herein), and may not be offered for sale, sold, assigned or transferred unless (a) subsequently registered thereunder, or (b) pursuant to an exemption from such registration; (ii) any sale of such securities made in reliance on Rule 144 promulgated under the Securities Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder; and (iii) neither the Company nor any other person is under any obligation to register such securities (other than as described herein) under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. The Warrant Shares receivable upon exercise of this Warrant shall contain (or not) such restrictive legend(s) as may be required by applicable law.
(a) Reclassification and Reorganization. In case of any reclassification, capital reorganization or other change of outstanding shares of the Common Stock, or in case of any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock), the Company shall cause effective provision to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Warrant immediately prior to such reclassification, capital reorganization or other change, consolidation or merger. Any such provision shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 9. The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and other changes of outstanding shares of Common Stock and to successive consolidations or mergers. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect a stock dividend, a stock split, a stock combination, or a reverse stock split of the Common Stock, the number of Warrant Shares purchasable hereunder and the Warrant Exercise Price shall be proportionately adjusted in the manner determined by the Company's Board of Directors acting in good faith. The number of shares, as so adjusted, shall be rounded down to the nearest whole number and the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen or destroyed, the Company shall, on receipt of an indemnification undertaking reasonably satisfactory to the Company, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen or destroyed. In the event the holder hereof asserts such loss, theft or destruction of this Warrant, the Company may require such holder to post a bond issued by a surety reasonably satisfactory to the Company with respect to the issuance of such new Warrant.
Section 11. Notice. Any notices required or permitted to be given under the terms of this Warrant shall be sent by mail or delivered personally or by courier and shall be effective five days after
being placed in the mail, if mailed, certified or registered, return receipt requested, or upon receipt, if delivered personally or by courier or by facsimile, in each case properly addressed to the party to receive the same. The Company's address is 4 Brussels Street, Worcester, MA 01610. The Holder's notice address shall be as set forth on the signature line below. Each party shall provide notice to the other party of any change in address.
Section 12. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party or holder hereof against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be governed by and interpreted under the laws of the State of Delaware. Headings are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Holder and its successors and assigns. The Holder may not assign this Warrant except in accordance with applicable federal and state securities laws. The Holder shall immediately notify the Company with respect to any permitted assignment of this Warrant.
Section 13. Date. This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Section 8 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant.
PAID, INC.
EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
PAID, INC.
The undersigned hereby exercises the right to purchase the number of Warrant Shares covered by the Warrant attached hereto as specified below according to the conditions thereof and herewith makes payment of U.S. $_____________, the aggregate Warrant Exercise Price of such Warrant Shares in full pursuant to the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained upon exercise of the Warrant, except under circumstances that will not result in a violation of the 1933 Act or applicable state securities laws.
(ii) The undersigned requests that the stock certificates for the Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the terms of the Warrant in the name of the Holder (or such other person(s) indicated below) and delivered to the undersigned (or designee(s)) at the address or addresses set forth below.
Dated:_____________, 20___.
HOLDER: _____________________
By: ________________________________________ Name: _____________________________________ Title: ___________________________________
Address: _____________________________
Number of Warrant Shares
Being Purchased: ________________________
EXHIBIT 10.1
AMENDMENT NO. 3 TO SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This AMENDMENT NO. 3 TO THE SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the "Amendment") is made this 2nd day of May, 2008, by and between Paid, Inc., a Delaware corporation ("Paid") and Leslie Rotman ("Seller").
RECITALS
A. Paid and Seller are parties to a Settlement Agreement dated May 9, 2005, as amended (the "Settlement Agreement"), whereby Paid, directly or through a designee, received the right to purchase from Seller 2,000,000 shares of Common Stock (as adjusted for any stock split, reverse stock split, stock dividend, reclassification, recapitalization, share exchange, reorganization, or other similar event or transaction) at a purchase price per share of the share's par value, $.001, subject only to such other terms agreeable to Paid, which right is expected to terminate on May 9, 2008.
B. Paid and Seller desire to further amend the Settlement Agreement to extend the option termination date for one year.
AGREEMENT
For good and valuable consideration of One Dollar ($1.00), the receipt and sufficiency of which is hereby acknowledged, and in consideration of the mutual promises set forth below, Paid and Seller hereby agree as follows:
1. Recitals; Definitions. The recitals set forth above are true and correct in every respect and are incorporated herein by reference. Any capitalized terms contained herein not defined herein shall have the meaning assigned to such term in the Settlement Agreement.
2. Call Option. The termination date for the option rights granted to Paid by Seller pursuant to Section 1.2 of the Settlement Agreement is hereby extended until May 9, 2009.
3. General. This Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one Amendment. This Amendment shall be binding upon each party's respective successors and assigns. All words used herein shall be deemed to refer to the singular, plural, masculine, feminine or neuter as the identity of the person or entity or the context may require. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.
/s/ Leslie Rotman ------------------------------- Leslie Rotman |
Paid, Inc.
/s/ Gregory Rotman
By:
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Name: Gregory Rotman
Title: President
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EXHIBIT 10.2
PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$2,500,000 April 29, 2008
FOR VALUE RECEIVED, PAID, INC., a Delaware corporation (the "Company"), promises to pay to the order of Lewis Asset Management, or its registered assigns ("Holder"), on or before the first event of the following:
1. 24 months from the date of this Note ("Maturity Date"); or
2. Any time during the 24 months prior to the Maturity Date;
in lawful money of the United States, in immediately available funds, the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000) (or such lesser amount actually extended by Holder to Company) plus the full amount of the interest owed hereunder, with interest on the unpaid balance at a rate of Fifteen Percent (15%). As further consideration for the Note, the Company will issue the Warrant in the form attached hereto to Holder equal to a right to purchase one hundred thousand shares for every $100,000 loaned at an exercise price of $.25 per share. This Note does not conflict with any other Company commitments to other lenders and shall be unsecured. The Company agrees to secure this $2,500,000 Revolving Credit Facility with (.5%) one half of 1% of the patent portfolio asset owned 100% by Paid, Inc. The unpaid principal of this Note from time to time outstanding shall bear interest, payable monthly in arrears, computed on the basis of the actual number of days elapsed over a year assumed to have 360 days
1. Events of Default. The occurrence of any of the following shall constitute an Event of Default:
(a) Failure to Pay Principal or Interest when Due. The Company shall fail to pay (or shall state in writing an intention not to pay or its inability to pay) any principal or interest payment when due hereunder;
(b) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(a)(i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted pursuant to any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
pursuant to any bankruptcy, insolvency, or similar law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in any involuntary case or other
proceeding commenced against it, or (vii) take any action for the purpose of
effecting any of the foregoing; or (b) become a debtor in any involuntary
bankruptcy or insolvency proceedings if such proceedings for the appointment of
a receiver, trustee, liquidator or custodian of the Company or of all or a
substantial part of the property thereof, or an involuntary case or other
proceedings seeking liquidation, reorganization or other relief with respect to
the Company or the debts thereof pursuant to any bankruptcy, insolvency or other
similar law now or
hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement.
2. Rights of Holder Upon Default. Upon the occurrence or existence of any Event of Default, all outstanding obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived.
3. Assignment by the Company. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned by the Company, without the prior written consent of Holder.
4. Prepayment. The Company shall have the right to prepay at any time, in whole or in part, the unpaid principal and interest due on this Note, with no prepayment penalty or premium.
5. Failure to Act and Waiver. No failure or delay by Holder hereof to require the performance of any term or terms of this Note or not to exercise any right or any remedy shall constitute a waiver of any such term or of any right or of any default, nor shall such delay or failure preclude Holder hereof from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any amount payable under this Note, Holder shall not be deemed to waive the right either to require payment when due of all other amounts payable, or to later declare a default for failure to effect such payment of any such other amount. The failure of the Holder of this Note to give notice of any failure or breach of the Company under this Note shall not constitute a waiver of any right or remedy in respect of such continuing failure or breach or any subsequent failure or breach. Except as otherwise expressly provided herein, the Company waives demand, presentment for payment, notice of intent to accelerate, notice of acceleration, notice of nonpayment or dishonor, grace, protest, notice of protest, all other notices, and any and all diligence or delay in collection or the filing of suit hereon.
6. Collection. In the event this Note is collected by legal proceeding or through a bankruptcy court, or is placed in the hands of an attorney for collection after default (whether or not suit is filed), the Company shall pay all reasonable costs of collection, including reasonable attorneys' fees and expenses.
7. Fees and Expenses. The Company shall pay to Holder, by wire transfer of immediately available funds to an account designated by Holder, all of Holder's reasonable agreed upon out-of-pocket fees and expenses incurred in connection with the transactions contemplated hereby (including without limitation attorneys' fees of Holder's counsel).
8. Miscellaneous.
(a) This Note shall bind and inure to the benefit of the parties and their respective permitted successors and assigns.
(b) Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remainder of this Agreement or the validity or enforceability of such provision in any other jurisdiction.
(c) The Company hereby consents to the jurisdiction of the courts of the Commonwealth of Massachusetts in any action or proceeding which may be brought against it under or in connection with this Agreement or any transaction contemplated hereby or to enforce any agreement contained herein and, in the event any such action or proceeding shall be brought against it, the Company agrees not to raise any objection to such jurisdiction or to the laying of venue in Boston, MA.
(d) This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without
regard to the conflicts of law provisions of the Commonwealth of Massachusetts or of any other state.
9. Wire Transfer Information. The Company shall provide its wire transfer information to Holder upon any disbursement request. Upon receipt of such request, Holder shall wire funds in installments of no less than $250,000 within fifteen (15) days of such written request. The initial $450,000 in funds shall be loaned to the Company immediately as of the date hereof as a fixed loan. The remaining $2,050,000 shall serve as a revolving line of credit, whereby, in the event that the Company draws on such amount and repays such amount in accordance with the terms of this Note, the Company shall have the right to redraw upon such amount so long as the principal amount outstanding does not exceed $2,500,000.
[Remainder of Page Intentionally Blank]
Signature Page to Promissory Note
IN WITNESS WHEREOF, the Company has duly executed this Note as of the day and year first above written.
Paid Inc.
/s/ Gregory Rotman -------------------------------------- By: Gregory Rotman Name: Gregory Rotman Title: CEO Date: April 29, 2008 |
AGREED AND CONFIRMED:
Lewis Asset Management
/s/ W. Austin Lewis
By:
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General Partner, duly authorized
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EXHIBIT 31.1
CERTIFICATION
I, Gregory Rotman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Paid, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 1a-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Gregory Rotman
Date: May 12, 2008 ------------------------------
Gregory Rotman, President
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EXHIBIT 31.2
CERTIFICATION
I, Richard Rotman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Paid, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 1a-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Richard Rotman
Date: May 12, 2008 -------------------------------
Richard Rotman, Chief Financial Officer
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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quartlerly Report of Paid, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in their respective capacities as capacity as President and CEO of the Company and as CFO of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Gregory Rotman ---------------------------- Gregory Rotman President and CEO May 12, 2008 /s/ Richard Rotman ---------------------------- Richard Rotman Chief Financial Officer May 12, 2008 |