UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2004

                           Commission File No. 0-28720

                                   PAID, INC.
                 (Name of Small Business Issuer in its Charter)

   Delaware                              73-1479833
   (State or Other Jurisdiction          (I.R.S. Employer Identification No.)
   of Incorporation or Organization)

                4 Brussels Street, Worcester, Massachusetts 01610
               (Address of Principal Executive Offices)(Zip Code)

                                 (508) 791-6710
                (Issuer's Telephone Number, Including Area Code)

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Par Value
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 |_|

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

State Issuer's revenues for its most recent fiscal year: $1,852,545.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates on March 7, 2005 was approximately $53,318,629 based upon the
average over the counter sales price of $.34 per share on such date.

As of March 7, 2005, the issuer had outstanding 175,277,654 shares of its Common
Stock, par value of $0.001, its only class of voting securities.

                       DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into this Annual Report except those
Exhibits so incorporated as set forth in the Exhibit Index.

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                                TABLE OF CONTENTS

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                                     PART I

Item 1.     Description of Business.......................................................    2
Item 2.     Description of Property.......................................................   10
Item 3.     Legal Proceedings.............................................................   10
Item 4.     Submission of Matters to a Vote of Security Holders...........................   10

                                     PART II

Item 5.     Market for Common Equity, Related Stockholder Matters and Small Business
            Issuer Purchases of Equity Securities.........................................   10
Item 6.     Management's Discussion and Analysis or Plan of Operation.....................   11
Item 7.     Financial Statements..........................................................   15
Item 8.     Changes In and Disagreements With Accountants on
            Accounting and Financial Disclosure...........................................   15
Item 8A.    Controls and Procedures.......................................................   15
Item 8B.    Other Information.............................................................   15

                                    PART III

Item 9.     Directors and Executive Officers of the Registrant ...........................   16
Item 10.    Executive Compensation........................................................   17
Item 11.    Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Matters...............................................   18
Item 12.    Certain Relationships and Related Transactions................................   19
Item 13.    Exhibits, List and Reports on Form 8-K........................................   19
Item 14.    Principal Accountant Fees and Services........................................   21

Signatures  ..............................................................................   22
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                           FORWARD LOOKING STATEMENTS

      This Annual Report on Form 10-KSB (including without limitation the Risk
Factors included as Exhibit 99) may contain forward looking statements. We
caution you to be aware of the speculative nature of "forward-looking
statements". Statements that are not historical in nature, including the words
"anticipate," "estimate," "should," "expect," "believe," "intend," and similar
expressions, are intended to identify forward-looking statements. Although these
statements reflect our good faith belief based on current expectations,
estimates and projections about (among other things) the industry and the
markets in which we operate, they are not guarantees of future performance.

      Whether actual results will conform to our expectations and predictions is
subject to a number of known and unknown risks and uncertainties, including the
risks and uncertainties discussed in this Annual Report; general economic,
market, or business conditions; the opportunities that may be presented to and
pursued by us; competitive actions by other companies; changes in laws or
regulations; and other circumstances, many of which are beyond our control.
Consequently, all of the forward-looking statements made in this Annual Report
are qualified by these cautionary statements and there can be no assurance that
the actual results anticipated by us will be realized or, even if substantially
realized, that they will have the expected consequences to, or effects on, us or
our business or operations. Except as required by applicable laws, we do not
intend to publish updates or revisions of any forward-looking statements we make
to reflect new information, future events or otherwise. Readers are urged to
carefully review and consider the various disclosures made by Paid, Inc. in this
Annual Report, which attempts to advise interested parties of the risks and
factors that may affect our business, financial condition, results of operations
and prospects.

                                     PART I.

      Paid, Inc. (the "Company") was incorporated in Delaware as Rose
International Ltd. on August 9, 1995. The Company's main web address is located
at www.paid.com, which offers updated information on various aspects of our
operations, as well as access to our three primary collectibles sites:
www.rotmanauction.com, www.collectingexchange.com, and
www.collectingchannel.com. The Company has one subsidiary, Rotman Collectibles,
Inc. Information contained in the Company's websites shall not be deemed to be a
part of this Annual Report. The Company's principal executive offices are
located at 4 Brussels Street, Worcester, Massachusetts 01610, and the Company's
telephone number is (508) 791-6710.

      Item 1. Description of Business.

                                    BUSINESS

Our Business

      The Company's primary focus is to provide businesses and clients with
marketing, management, merchandising, auction management, website hosting, and
authentication and consignment services for the collectibles, sports, and
entertainment industries. We provide business management tools for online
retailers, through AuctionInc, which is home to our patent pending shipping
calculator and automated auction checkout and order processing system. This
system provides the fundamental structure for our celebrity web hosting and
development services, and for individuals seeking a professional and interactive
presence on the Internet. Rotman Auction provides the merchandise and
fulfillment services for these websites, using 20 years of experience to
maintain the best customer service and integrity for these celebrities. Rotman
Auction also offers merchandise for sale through eBay auctions and live and
private autograph signings.


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      We have a large customer base dedicated to the collectibles industry from
our collectibles portals. Rotman Auction and AuctionInc took advantage of this
customer base and expanded and grew its operation to include and provide
additional services for these customers. Our collectibles community provides
access to Maloney's Antiques & Collectibles Resource Directory and our Ask the
Appraiser(TM) online appraisal service. The collectibles industry includes every
person that collects items that have either economic or sentimental value, such
as antiques, sports and entertainment memorabilia, stamps, coins, figurines,
dolls, collector plates, plush and die cast toys, cottage/village reproductions
and other decorative or limited edition items that are intended for collecting
and other memorabilia.

      In 2004 we added the services of the newly acquired K Sports brand which
specializes in athlete agent services and marketing and promoting these
celebrities. K Sports delivers personalized attention to each client for
services that include contract negotiations, endorsements, public relations, or
charitable organizations. The merger of K Sports' experience and clientele with
Paid's expertise in merchandising, website hosting, and auction management
developed services for fan clubs and tour and travel packages is intended to
create a business that is unrivaled in the sports and entertainment industry.

      For the year ended December 31, 2004, substantially all of our revenues
are derived from our auction services, conducted through our Rotman Auction
brand. Rotman Auction is an auction house that has provided a full range of
services to sellers and buyers, including live online bidding of premier
collectibles, authentication of merchandise, digital photography, fulfillment of
orders and the purchase and sale of authentic memorabilia. Most of the auctions
take place through eBay.com, a person-to-person auction service. Our auctions
consist of sports and non-sports cards, collectibles, Americana, autographed
items, and movie memorabilia, among other types of collectibles from the 1800s
to the present day. Rotman Auction also maintains a substantial inventory of
memorabilia with popular and historical significance which allows customers to
directly purchase the memorabilia without the competition from bidders in an
auction format. Most of these sales are consummated through our website located
at www.rotmanauction.com. We acquire inventory in the ordinary course of our
business from a number of companies and individuals. We also may acquire
inventory through acquisition of companies that own collectibles, or through the
acquisition of substantially all the assets of a company that holds
collectibles. Merchandise is also auctioned by Rotman Auction under
consignment-type arrangements with the public where we receive a consignment fee
that is paid to us from the final sale of the merchandise. For periods through
2003, our Rotman Auction operations generated approximately 97% of our revenues.

      We engage in autograph signing activities under the "Rotman Auction" name,
at public and private autograph signing events. We contract and pay the
celebrities for their services and supplying products for the event. We hosted
celebrities such as Adam Viniateri, Bronson Arroyo, Troy Brown, Johnny Damon,
Deion Branch, Jim Rice, Ty Law, Terry O'Reilly, Pete Rose, Ray Bourque, Paul
Pierce, Trot Nixon, Brian Daubach, Sergei Samsonov, Corey Dillon, Byron Dafoe,
Derek Lowe, Tedy Bruschi, Shea Hillenbrand and Alfonso Soriano. Our autograph
signing events include the creation, development and maintenance of celebrity
websites. We provide a comprehensive content managed websites that include
message boards, shopping, articles, statistics, biographical information and
event schedules. We currently host such celebrities' websites as David Givens,
Jerry Rice, Matt Light, Deuce McAllister, and Chris Chambers. Revenues are
generated from sales of product produced by the celebrity. Full and part-time
employees, as well as interns update the news and information on these sites. We
receive payment in the form of autographs for maintaining and hosting the
website. We also provide management services for order fulfillment and product
distribution for the celebrities.

      To assist with the inventory management and order processing Rotman
Auction uses the AuctionInc platform for reducing order processing, increasing
sales and improving customer service. The AuctionInc system was originally
designed to just assist and improve Rotman Auction's business, but management
realized that there was a need for an order management system for individuals
and businesses that sell on the Internet, specifically at auction. In 2000 the
technology team focused its


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attention on the core fundamental piece of the system called the Shipping
Calculator. The Company realized the potential importance of the calculator and
filed for a patent before launching it to the public in April of 2001. The
product is modular based and continues to develop new tools and products for its
customers.

      AuctionInc Software. AuctionInc is a suite of online management tools
assisting businesses with e-commerce storefronts, order processing, customer
service, shipping solutions, inventory management, and auction processing. The
application was designed originally to reduce overhead costs for Rotman Auction,
but based on its marketability the Company began to offer the application to
other sellers in 2003. A seller's use of the application reduces overhead and
labor costs, and through its customer-friendly setup improves customer relations
and increases sales.

      AIship is a shipping calculator that automatically estimates the shipping,
sales tax, and insurance on auction listings. This module automatically
calculates shipping costs, carrier insurance fees, optional shipping services,
and offers an adjustable shipping fee markup, and co-branded shipping calculator
page. It pre-configures shipping rates with handling costs, and provides a
multiple auctions tab to calculate shipping on numerous auctions. The Company
receives a transaction fee for each auction listing that uses AIship.

      AIseller is an auction management tool used to streamline a seller's order
processing for improved customer service and higher sales. This module is
designed for sellers who are selling more than 50 items per month at online
auctions. It offers summary and detail order and sales reporting, auction/sales
tracking, automated personalized e-mail notifications, auction re-listing
reports, a complete integrated order management system, a customer checkout
system, as well as automatic shipping rates and sales taxes calculations for
consolidating multiple auctions. The Company receives a transaction fee for each
listing at auction that uses AIseller.

      The Company unveiled three new products during the fourth quarter of 2004,
Paid Shopcart, Paid Shipcalc and Paid Global, each of which utilize
AuctionInc.'s core business application of shipping rate engine. Paid's new
eCommerce product suite will answer the question that small to medium etailers
have been asking--How do I provide accurate shipping calculations to my
customers? Accurate shipping calculations have historically increased the
average order size and sales, due to a reduction in cart abandonment. Our
products not only provide accurate shipping calculations but allow sellers to
include insurance fees, flexible handling charges and advanced packaging
algorithms. The Company receives an annual subscription fee based on each
product subscribed for by the customer.

      Sellers may access the Company to purchase any and all of our tools or
applications for a flat fee and/or per-transaction fee depending on the module
chosen. The Company expects to add more features and modules to the suite to
enable it to grow with sellers and continue to provide them superior online
selling tools.

      Paid, Inc. provides web hosting and development for various clients that
pay monthly hosting fees and maintenance fees for updates. This service also
uses the core AuctionInc platform for maintaining web portals and storefronts
systems. The Company also maintains several corporate websites which it hopes to
continue to expand and grow. Through improved customer awareness and a larger
customer base we hope these websites will continue to grow and offer a revenue
source to the Company. These websites provide minimal revenue to the Company,
but offer awareness and advertising opportunities for the Company's other
products.

      The Collecting Channel features extensive coverage of all aspects of
collecting from its twelve micro-channels devoted to Antiques, Automotive,
Books/Movies/Music, Jewelry/Gems, Stamps/Coins, Collectibles, Glass/Pottery,
Dolls/Figures, Photo/Electronics, Toys/Beanie Babies, Sports and Miscellaneous.
By combining information from the Collecting Exchange with the Collecting
Channel


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portal, we have created a comprehensive collectibles site, offering services
such as web searching, broadcast services, appraisal and valuation information,
auction site sign-ins, price guides, shopping and classified ads. The
CollectingChannel has approximately 15,000 articles, 6,000 minutes of video, and
150,000 items in the realized pricing database archived in various collecting
databases.

      Appraisal Services. As part of the services we make available on our site,
we also offer a completely interactive and dynamic appraisal service called Ask
the AppraiserTM. The appraisal area permits visitors to send us an image in
order to obtain an online appraisal of their item for a fee of $19.95 per
appraisal. This service enables visitors to make informed decisions regarding
their purchases, and helps sellers define the prices for their goods.

      Research Center. Our research center located on the CollectingChannel.com
enables users to obtain historical pricing information, view actual images,
access experts on authentication and visit websites regarding the collectibles
articles they are researching. The site allows a visitor to validate that a
particular collectible item exists, and provides access to services that can
authenticate that the item is genuine. As a means of preventing the purchases of
fraudulently sold items, we have designed the research center to provide
visitors with the research tools to complete transactions based on the most
accurate, verified material available. Further, to the extent that the user
desires to validate the authenticity of a particular item, we offer the Ask the
AppraiserTM service. Authenticity can also be determined by searching dealer
sites for similar items or communicating directly with dealers regarding the
origin, price, and history of an item. Finally, by enabling the user to verify
prices of an item or other similar items, the user is able to obtain information
necessary to strike a realistic bargain.

      Other Amenities. The CollectingChannel.com website also includes other
amenities such as chat rooms, message boards, a classified posting area, and an
information area regarding auctions. The My Collecting(TM) area of the website
enables users to create and customize their own collecting pages, with
personalized news, video, chat capability, wish lists and access to an extensive
database of reference materials. The website also includes MaloneysOnline, a
clearinghouse for hard to find information that contains the searchable Internet
version of the book Maloney's Antiques & Collectibles Resource Directory. In
2003 the Company for the first time offered advertising in Maloney's Antiques &
Collectibles Resource Directory.

      Tartans.com is a Scottish community and portal that is home to thousands
of registered users looking for information on Scotland, their heritage, and a
community based area to discuss chat about their concerns. The website was moved
onto the same consistent framework as all of our other websites and we have
reduced maintenance time and labor costs associated with the website.

      In the past year we have made significant improvements to our websites by
optimizing our own proprietary software to permit the search engine to obtain
faster results with greater accuracy. We provide video archives from the
"Treasures in Your Home" television show, which aired between 1999 and 2001.

Industry Background

Growth of the Internet and the Web

      The Internet enables millions of people worldwide to share information,
communicate and conduct business electronically. The growth in the number of Web
users is being driven by the increasing importance of the Internet as a
communications medium, an information resource, and a sales and distribution
channel. The Internet has also evolved into a unique marketing channel. Unlike
the traditional marketing channels, Internet retailers do not have many of the
overhead costs borne by traditional retailers. The Internet offers the
opportunity to create a large, geographically dispersed customer base more
quickly than traditional retailers. The Internet also offers customers a broader
selection of goods to purchase, provides sellers the opportunity to sell their
goods more efficiently to a broader base of buyers and allows business
transactions to occur at all hours.


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State of the Collectibles and Online Auction Industries

      The online auction industry continues to be a strong and permanent player
in e-commerce. Online auctions resolve the weaknesses of traditional auctions
(i.e. limited geographical coverage, a dearth of product variety, high
transaction costs and information inefficiency). The Internet overcomes these
issues because it can handle large quantities of data and support an infinite
number of products and services. It also allows buyers and sellers to trade on a
global basis.

Business Strategy

      We believe that the online auction market will continue to grow as a
result of increased merchandise being offered in a variety of different
categories, nostalgia for memorabilia, and investor confidence that collectibles
will appreciate in value. It is our view that this growth in the e-commerce
market is dependent upon the availability of reliable authentication and grading
services, authoritative information necessary to value home goods, furnishings,
merchandise, collectibles and trading forums or venues that enable buyers and
sellers to maximize the value of their goods. We have therefore designed our
portals to accommodate these concerns for collectors and auction participants.
However, in order for collectors to have sellers to buy from, we have introduced
the AuctionInc software suite of online tools to assist sellers. The success and
growth of these directives is based on the accomplishments and progress
experienced by Rotman Auction.

      Our goal is to provide the tools needed to assist sellers to streamline
their business operations and offer the best resources for merchants to make
informed decisions by implementing the following business strategy:

      o     Continue auction sales on eBay for the Rotman Auction brand which
            provides higher profit margins by reducing the costs of producing
            and mailing catalogs and advertising for our own auctions. Items we
            sell through eBay have a much quicker turnaround time than those
            sold through our catalog auctions, and because the eBay sales are
            highly automated, the sales require less personnel to complete the
            sale;

      o     Increase the number of autograph signing events per calendar quarter
            while also increasing the quality of the celebrities and the number
            of celebrity website produced during this year;

      o     Sell and generate revenue from the AuctionInc software suite through
            both print and online advertising and promotions;

      o     Increase the volume of our online appraisals through high profile
            partnerships and more effective and efficient advertising and
            promotions;

      o     Sell banner advertising on the CollectingChannel.com by charging a
            fee for every thousand clicks per banner, with the fee varying
            depending on the placement of the banner (i.e., a banner on our
            site's homepage would cost more per 1000 hits than a banner placed
            throughout the site);

      o     Increase our web hosting services, charging a one time set up fee
            plus monthly maintenance fees, and an hourly fee for any design or
            feature enhancements we make;

      o     Impose annual fees for dealers and stores listing products on our
            shopping area;

      o     As the number of visitors to our site increases, impose
            monthly/annual membership fees.

      We expect the above plan will enable us to increase our Rotman Auction
brand while providing more resources for a sales and marketing campaign on both
the Collecting Channel site and AuctionInc.

      The business strategy described above is intended to enhance our
opportunities in the online ecommerce market. However, there are a number of
factors that may impact our plans and inhibit our


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success. See "Risk Factors" included as Exhibit 99. Therefore, we have no
guarantees and can provide no assurances, that our plans will be successful.

Marketing and Sales

      The success of the Collecting Channel is contingent upon the visibility it
will receive on the Internet and the revenues generated by advertising and
services. Successful branding of our corporate identity and services is the key
to our success. We changed our name to Paid, Inc. and are considering whether a
single website would result in a more recognizable corporate entity.

      Our marketing has been designed to position the Company as the premier
collectibles site on the Internet. We target both traditional collectors as well
as the new generation of collectors (as previously described in "Industry
Background"). We target dealers, licensors, licensees, distributors and others
to host collectible pavilions and other e-commerce sites and storefronts.

      Marketing internet companies is a relatively new phenomenon. Whereas
earlier internet advertising was mostly accomplished through banner advertising,
the industry is now marketing websites through a combination of online
advertising, more traditional media, and direct mail advertisement. We have
adopted this approach in our marketing.

      Our advertising to date has been minimal, and limited to very selective
trade magazines. We believe that by advertising in a broader range of these
magazines we would be able to increase our exposure substantially. We will also
need to expand our advertising arrangements with auction sites and other
companies in the sports, home furnishings, and collectibles. These website
advertising arrangements will include mutual linking arrangements, such as other
companies linking to our site and our site linking to the sites of those
companies.

      The Company will focus on marketing AuctionInc throughout 2005. In the
past years, representatives of the Company attended trade shows, events and
conferences to analyze the potential for AuctionInc and to narrow the Company's
marketing base. Based on experience with existing partnerships that promote
AuctionInc, the Company believes that creating partnerships is an effective
marketing tool to promote and encourage new registrations. The Company will
continue to seek new partnerships. The Company also intends to promote the
AuctionInc product line in trade publications to reach small and midsize
companies.

      Although we believe that this marketing strategy will attract more users
to our site, we have no commitments that our marketing will be successful or our
sales will increase. There are a number of factors that may impact our plans and
inhibit our success. See "Risk Factors" described in Exhibit 99. Therefore, we
have no guarantees and can provide no assurances that our plans will be
successful.

Revenue Sources

      In 2004, 87% of our revenues were derived from our Rotman Auction
operations. We also generate revenue from fan club memberships and related
merchandise sales, sports marketing services, and advertising and web hosting
fees.

      It is anticipated that referral links may also become a source of
advertising income for the Company. Sellers of merchandise will pay us for
listing their storefronts on www.collectingchannel.com. When a site visitor
requests a search for a collectible item, we will provide the visitor with a
direct link to the seller's pavilion area or website, thus driving the sale.
This referral link is the manner in which the seller can obtain visibility for
their collectible item. In addition to pavilions and referral links, advertising
revenues may also come from targeted banner advertising and general banner
advertising.

      In terms of services, we currently provide web hosting and online
appraisal services. To date, we have generated minimal revenues from these
services, but we expect that as the awareness of the


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AuctionInc product line increases, we will be able to increase our advertising
and marketing efforts, which we expect will generate revenue and may attract
more visitors that will utilize these services on our site. As discussed in
"Business Strategy," we also may derive revenues in the future from membership
fees charged for accessing certain aspects of the Collecting Channel and fees
from stores listing merchandise in our shopping area. In addition to web
hosting, we expect to increase revenues through the development and design of
third party websites. We have an interactive services agreement with AOL Canada
pursuant to which we handle the content and maintenance of the website
www.tartans.com (AOL keyword: clans) and we try to capitalize on that agreement
by promoting our products and services on www.tartans.com by selling advertising
space and company-owned product.

      We also have an agreement with Krause Publications, pursuant to which
Krause Publications prints Maloney's Antiques & Collectibles Resource Directory
and we receive a percentage of the sales revenues from the book sales. We own
"www.MaloneysOnline.com," a clearinghouse for hard to find information that
contains the searchable Internet version of the resource directory.

      Although we expect that this revenue model will generate increased
revenue, if we are not successful in implementing this model, if the
collectibles community is not accepting of the services we provide, if costs are
higher than anticipated, or if revenues do not increase as rapidly as
anticipated, we may not be able to continue positive cash flow. There are a
number of factors that may impact our plans and inhibit our success. See "Risk
Factors" included as Exhibit 99. Therefore, we have no guarantees and can
provide no assurances, that our plans will be successful.

Competition

      The electronic commerce market is relatively new, rapidly evolving and
intensely competitive. Furthermore, we expect competition to intensify in the
future. Barriers to entry are relatively low, and current and new competitors
can launch new sites at relatively low cost using commercially available
software. Our Rotman Auction operation competes with a variety of other
companies depending on the type of merchandise and sales format offered to
customers. These competitors include: (i) various Internet collectible
companies, Collectors Universe, Shop at Home and Tri-Star Productions; (ii) a
number of indirect competitors that specialize in electronic commerce or derive
a substantial portion of their revenue from electronic commerce, including
Internet Shopping Network and AOL, Shopping.com; and (iii) a variety of other
companies that offer merchandise similar to that of our Company but through
physical auctions.

      In addition, several large companies sell specialty consumer products,
including collectibles through interactive electronic media, including
broadcast, cable and satellite television and, increasingly, the Internet. These
companies include QVC, Home Shopping Network and Shop At Home. They generally
have substantial financial resources and, while their current collectible
offerings tend to be less focused than our collectible offerings, there can be
no guarantee that they will not become significant competitors in the future.

      Because our collectibles portal structure is not a buyer or seller of
collectibles, it is not in direct competition with existing collectible or
online auction sites. The portal will not compete with either the giants or the
small players in the collectibles auction and e-commerce industries; rather, we
will work in collaboration with these companies. Further, because the research
capacity of the new website will be able to validate the authenticity of
collectible items by providing visitors with the research tools to complete
transactions based on the most accurate, verified material available, we believe
other sites will value its services. We will, however, compete for banner
advertisements with other portals that offer shopping search engines.

      There can be no assurance that we can maintain our competitive position
against potential competitors, especially those with greater financial,
marketing, customer support, technical and other


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resources than us. Increased competition is likely to result in reduced
operating margins, loss of market share and a diminished brand franchise, any
one of which could materially adversely affect the our business, results of
operations and financial condition.

Intellectual Property

      Our web hosting, AuctionInc software suite, and research center software
programs are proprietary. We have filed one application for a patent related to
AIShip. We do not have any patents for our designs or innovations and we may not
be able to obtain copyright, patent or other protection for our proprietary
technologies or for the processes developed by our employees. Legal standards
relating to intellectual property rights in computer software are still
developing and this area of the law is evolving with new technologies. Our
intellectual property rights do not guarantee any competitive advantage and may
not sufficiently protect us against competitors with similar technology. To
protect our interest in our intellectual property, we restrict access by others
to our proprietary software. In addition, we own the "Collecting Channel" mark
and we have filed an application for the mark "Paid".

      We believe that our products and other proprietary rights do not infringe
on the proprietary rights of third parties. However, there can be no assurance
that third parties will not assert infringement claims against us in the future
with respect to current or future products or other works of ours. This
assertion may require us to enter into royalty arrangements or result in costly
litigation.

      We are also dependent upon existing technology related to our operations
that we license from third parties. When we acquired the assets of the
Collecting Channel we were granted two perpetual licenses for the proprietary
software eCMS and we acquired the source codes for the software. eCMS is the
content management system primarily used by www.collectingchannel.com. We rely
on encryption and authentication technology licensed from VeriSign through an
online user agreement to provide the security and authentication necessary to
effect secure transmission of confidential information.

      We cannot make any assurances that these third-party technology licenses
will continue to be available to the Company on commercially reasonable terms.
Our inability to maintain or obtain upgrades to any of these technology licenses
could result in delays in completing our proprietary software enhancements and
new developments until equivalent technology could be identified, licensed or
developed and integrated. Any of these delays would materially adversely affect
our business, results of operations and financial condition.

      We also utilize free open-source technology in certain areas. Unlike
proprietary software, open-source software has publicly available source code
and can be copied, modified and distributed with minimal restrictions. Our
principal web servers' software is Apache, a free web server software. We are
using PHPShop for our e-commerce to provide highly customizable storefronts. In
addition to PHPShop we develop a substantial portion of our websites with the
language PHP.

Research and Development

      Over the past 2 years the Company has not made additional investments in
research and development.

Employees

      We currently employ 28 personnel, 23 of whom are employed full time. We
believe that our future success will depend in part on our continued ability to
attract, hire and retain qualified personnel.

Government Regulation

      We are not currently subject to direct federal, state or local regulation,
and laws or regulations applicable to access or commerce on the Internet, other
than regulations applicable to businesses generally. However, due to the
increasing popularity and use of the Internet and other online services, it


                                       9
<PAGE>

is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
freedom of expression, pricing, content and quality of products and services,
taxation, advertising, intellectual property rights and information security.

      Item 2. Description of Property.

      Our corporate headquarters are located at 4 Brussels Street, Worcester,
Massachusetts 01610. Currently, we are tenants-at-will, but we are not required
to pay rent on the Brussels Street, Worcester location. The condition of our
corporate headquarters is excellent. We do not invest in real estate or
interests in real estate, real estate mortgages, or securities of or interests
in persons primarily engaged in real estate activities, and we have no policies
related to such investments.

      Item 3. Legal Proceedings.

None.

      Item 4. Submission of Matters to a Vote of Security Holders.

None.

                                    PART II.

      Item 5. Market for Common Equity, Related Stockholder Matters, and Small
              Business Issuer Purchases of Equity Securities.

      Our common stock, par value $.001 per share, is presently traded on the
Over-the-Counter Bulletin Board ("OTCBB") under the symbol, "PAYD".

      The following table sets forth the high and low bid prices for our common
stock as reported by OTCBB for the eight quarters ended December 31, 2004. The
quotations from the OTCBB reflect inter-dealer prices without retail mark-up,
mark-down, or commission and may not represent actual transactions.

      2004                                           High      Low
                                                     ----      ---
      Quarter ended March 31, 2004                   $ .80     $ .175
      Quarter ended June 30, 2004                    $ .47     $ .275
      Quarter ended September 30, 2004               $ .39     $ .221
      Quarter ended December 31, 2004                $ .34     $ .05

      2003                                           High      Low
                                                     ----      ---
      Quarter ended March 31, 2003                   $ .066    $ .035
      Quarter ended June 30, 2003                    $ .24     $ .035
      Quarter ended September 30, 2003               $ .255    $ .095
      Quarter ended December 31, 2003                $ .23     $ .115

      As of March 7, 2005, there were approximately 2,936 holders of record of
our common stock.

      In 2003 the Company amended its bylaws to require that stock certificates
include the name of the beneficial owner, who is the ultimate owner of the
stock. Because of this requirement, all trades of our common stock were settled
and cleared through physical delivery of stock certificates to our transfer
agent rather than through Depository Trust Company. During the fourth quarter of
2004, the Company


                                       10
<PAGE>

amended its bylaws to no longer require that stock certificates include the name
of the beneficial owner, and the Company's shares were promptly available for
settlement and clearance through DTC.

      We have not previously paid cash dividends on our common stock, and intend
to utilize current resources to operate the business; thus, it is not
anticipated that cash dividends will be paid on our common stock in the
foreseeable future.

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                         Number of Securities
                                                                                         Remaining Available For
                                         Number of Securities                            Future Issuance Under
                                         To be Issued Upon       Weighted-Average        Equity Compensation
                                         Exercise of             Exercise Price of       Plans (Excluding
                                         Outstanding Options,    Outstanding Options,    Securities Reflected in
                                         Warrants and Rights     Warrants and Rights     Column (a))

                                         (a)                     (b)                     (c)
-----------------------------------------------------------------------------------------------------------------
<S>                                      <C>                     <C>                     <C>
Equity Compensation Plans Approved
by Security Holders                      25,000,000              $.041                   5,000,000
-----------------------------------------------------------------------------------------------------------------
Equity Compensation Plans Not
Approved by Security Holders             701,418                 $.143                   1,539,606
-----------------------------------------------------------------------------------------------------------------
Total                                    25,701,418              $.044                   6,539,606
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Refer to Note 7, Notes to Consolidated Financial Statements for the Years ended
December 31, 2004 and 2003, incorporated by reference in Part II, Item 7, of
this Annual Report, for a detailed discussion of the stock options and warrants
that are outstanding.

      Item 6. Management's Discussion and Analysis or Plan of Operation.

Overview

      Our innovative products and services are utilized in online auction
management, e-commerce and web site development. AuctionInc. provides auction
management tools and services to sellers and buyers. The technology is based on
our patent-pending process that streamlines back-office and shipping processes
for online auctions and e-commerce. Our new celebrity services offer famous
people official web sites and fan-club services including e-commerce
storefronts, articles, polls, message boards, contests, biographies and custom
features to attract tens of thousands of visitors daily. Our autograph signing
events, working in conjunction with our new sports agent marketing services,
have created more services and opportunities for our sports clientele Our
primary business, based on our revenues, is the purchase and sale of
collectibles and memorabilia through our Rotman Auction brand. Rotman Auction is
an eBay Platinum Powerseller that sells thousands of items each week on eBay and
provides consignment services, authentication and public and private autograph
events. We also build and maintain large database-driven portals across a broad
array of industries, including CollectingChannel.com, which is home to our
online appraisal service, Ask the Appraiser.

Critical Accounting Policies

      Our significant accounting policies are more fully described in Note 3 to
our financial statements. 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,


                                       11
<PAGE>

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.

      Property and Equipment and Intangible Assets: Property and equipment and
intangible assets are stated at cost. Depreciation and amortization are computed
over estimated useful lives that are reviewed periodically. In connection with
this review we consider changes in the economic environment, technological
advances, and management's assessment of future revenue potential and a review
of the estimated useful lives of the various assets.

Results of Operations

      The following discussion compares the Company's results of operations for
the year ended December 31, 2004 with those for the year ended December 31,
2003. The Company's financial statements and notes thereto included elsewhere in
this annual report contain detailed information that should be referred to in
conjunction with the following discussion.

      Revenue. For the year ended December 31, 2004, revenue was $1,853,000, 87%
of which is attributable to sales of the Company's own product and fees from
buyers and sellers through the Rotman Auction operations. Gross sales of the
Company's own product were $1,613,500. Fan club membership and related
merchandise sales revenues were $126,500, 7% of gross revenues, Sports marketing
revenues were $90,200, 5% of gross revenues, and advertising and web hosting
fees were $17,500 or 1% of gross revenues during the year ended December 31,
2004. Substantially all of fan club membership and sports marketing revenues
were generated during the fourth quarter of 2004. Management anticipates
continued increases in revenues from these sources during 2005.

      The Company's 2004 revenues represent an increase of approximately
$349,100, or 23%, from the year ended December 31, 2003, in which revenue was
$1,503,500. For the year ended December 31, 2003, sales of the Company's product
were $1,450,200, or 96% of gross sales, and advertising and web hosting fees
were $38,800, or 3% of gross revenues.

      The reason for the increase in revenues was higher sales of Company owned
product of approximately $163,300 from the same period in 2003. Gross profit
from Company owned product sales for the year ended December 31, 2004 was
approximately $618,700, $63,400 more than in 2003. Since gross margin
percentages on Company owned product were the same in both years, and sales of
Company owned product were $163,300 higher in the year ended December 31, 2004,
the Company produced $63,400 higher gross margin dollars in 2004. The increase
in sales and gross profit margin is attributable to sales of higher dollar value
items during 2004 and an increase in our average invoice amount. In addition,
during the fourth quarter of 2004 the Company acquired the operating assets of K
Sports & Entertainment LLC ("K Sports"), a sports marketing business and entered
into a contract to host and manage the fan club website for a major performing
artist. Revenues from these two sources accounted for $216,500 of revenues in
2004.


                                       12
<PAGE>

      Operating Expenses. Total operating expenses for the year ended December
31, 2004 were $4,272,100, compared to $3,914,000 for the corresponding period in
2003, an increase of $358,000. Sales, general and administrative ("SG&A")
expenses for the year ended December 31, 2004 were $3,492,300, compared to
$3,294,100 for the year ended December 31, 2003. The increase of $198,200 in
SG&A costs includes decreases in depreciation and amortization of $208,600 due
to certain assets becoming fully depreciated during 2004, and professional fees
of $23,800, offset by increases in payroll and related costs of $324,900
principally attributable to additional personnel related to the K Sports and fan
club services, and other costs of $108,100 due to business development costs and
related travel. Costs associated with planning, maintaining and operating our
web sites for the year ended December 31, 2004 increased $159,800 from 2003.
This increase is due primarily to an increase in personnel costs of $253,200 due
to ramp up costs related to fan club memberships and increases in compensation
to our technology staff, offset by a decrease in depreciation and amortization
of $47,900 as certain website development costs became fully depreciated. In
addition, during 2004 the company capitalized approximately $64,700 of website
development costs.

      Interest Expense. For the year ended December 31, 2004, the Company
incurred interest charges of approximately $497,300 principally associated with
one convertible note, compared to interest charges of $409,500 for the
corresponding period in 2003. The increase of $87,900 is attributable to higher
balances of interest-bearing debt in 2004 as well as greater amortization of
beneficial conversion features.

      Net Loss. The Company realized a net loss for the year ended December 31,
2004 of approximately $4,079,700, or $.02 per share, as compared to a loss of
$3,714,900, or $.03 per share for the year ended December 31, 2003.

      Inflation. The Company believes that inflation has not had a material
effect on its results of operations.

Assets

      At December 31, 2004, total assets of the Company were $1,764,900,
compared to $2,702,400 at December 31, 2003. The decrease was primarily due to
depreciation and amortization totaling $1,077,900.

Operating Cash Flows

      A summarized reconciliation of the Company's net losses to cash used in
operating activities for the years ended December 31, 2004 compared to December
31, 2003, is as follows:

                                                           2004            2003
                                                           ----            ----

Net loss                                            $(4,079,700)    $(3,714,900)
Depreciation and amortization                         1,077,900       1,384,400
Amortization of beneficial conversion
Discount and debt discount                              291,500         245,500
Common stock issued in payment  of services           1,401,500       1,037,700
Common stock issued in payment  of interest             315,200              --
Changes in current assets and liabilities               264,900         518,600
                                                    -----------     -----------

Net cash used in operating activities               $  (728,700)    $  (528,700)
                                                    ===========     ===========


                                       13
<PAGE>

Working Capital and Liquidity

      The Company had cash and cash equivalents of $43,500 at December 31, 2004,
compared to $104,400 at December 31, 2003. The Company had a $542,800 deficit in
working capital at December 31, 2004, compared to a working capital deficit of
$124,000 at December 31, 2003. At December 31, 2004 current liabilities were
$1,446,000 compared to $1,013,700 at December 31, 2003. Current liabilities
increased at December 31, 2004 compared to December 31, 2003 primarily due to
higher payroll, professional and consulting, consignment and K-Sports and fan
club accruals, offset by lower interest accruals and accounts payable. The
Company was also obligated under $145,000 more short term interest bearing debt
in 2004. As discussed in greater detail in Note 9 to the Financial Statements,
included in Part I of this annual report and incorporated by reference herein,
the Company has two outstanding convertible notes held by Augustine Fund, L.P.
The Series A Note, in the original principal amount of $3,000,000, has been
reduced to $251,900 as of December 31, 2004 through the conversion of principal
into common stock. During the first quarter of 2005 the balance of this note was
settled through further conversions to common stock. The Series B Note has a
principal amount outstanding as of December 31, 2004 of $2,250,000.

      The Company's independent auditors have issued a going concern opinion on
the Company's consolidated financial statements for the year ended December 31,
2004. The Company needs an infusion of $600,000 to $800,000 of additional
capital to fund anticipated operating costs over the next 12 months. Management
anticipates growth in revenues and gross profits from its celebrity services
products and websites; including memberships, fan experiences, ticketing,
appearances, and merchandise sales. In addition, the Company hosts a suite of
management tools and enhanced shipping calculator solutions for small ecommerce
enterprises. These services, coupled with sales of movie posters, both from
inventory and on consignment, and web hosting are expected to increase revenues
and result in higher gross profit. Subject to the discussion below, Management
believes that the Company has sufficient cash commitments to fund operations
during the next 12 months. These commitments include call options for
approximately 395,000 shares of common stock, which were assigned during the
first quarter of 2005 in exchange for $100,000 of cash. Finally, Management
believes that it has identified several potential funding sources for additional
financing.

      Management believes that these plans should result in obtaining sufficient
operating cash through the next 12 months. However, there can be no assurance
that the above mentioned potential financing can be completed on terms
reasonably acceptable to the Company.

Forward Looking Statements

      This Annual Report on Form 10-KSB 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 annual 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


                                       14
<PAGE>

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, 2004.

      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, the
collectibles community not accepting the services the Company offers, 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.

      Item 7. Financial Statements.

      The consolidated financial statements and supplementary data required by
this item appear on Page F-1 immediately following the signature page and
certifications, and are incorporated by reference herein.

      Item 8. Changes In and Disagreements with Accountants on Accounting and
              Financial Disclosure.

      None.

      Item 8A. 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 their 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 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 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.

      Item 8B. Other Information

      None.


                                       15
<PAGE>

                                    Part III.

      Item 9. Directors and Executive Officers of the Registrant.

Directors and Executive Officers

      The following table sets forth certain information regarding the directors
and executive officers of Paid, Inc.:

      Name                  Age    Position
      Gregory Rotman*       38     Director, Chief Executive Officer & President

      Richard Rotman*       34     Director, Chief Financial Officer, Vice
                                   President, Treasurer & Secretary

      Andrew Pilaro         35     Director

----------
*     Gregory Rotman and Richard Rotman are brothers.

      Each of the directors was elected as of September 19, 2000, for a term
expiring at the 2001 Annual Meeting of Stockholders and until their successors
are elected and qualified. The Company has not held an annual meeting or elected
directors since September 19, 2000. Under the Delaware General Corporation Law,
each director holds office until such director's successor is elected and
qualified or until such director's earlier resignation or removal. The following
is a description of the current occupation and business experience for at least
five years for each director and executive officer.

      Gregory Rotman has served as a Director and the Chief Executive Officer
and President of Paid, Inc. since February 1999. From 1995 to 1998, he served as
a Partner of Teamworks, Inc., LLC , which was responsible for the design,
financing and build-out of MCI National Sports Gallery.

      Richard Rotman has served as a Director and the Chief Financial Officer,
Vice President, Treasurer and Secretary of Paid, Inc. since February 1999. Prior
to joining Paid, Inc., he was involved in the management and day-to-day
operations of Rotman Auction, which he formed in February 1997. From 1995 until
February 1997, Mr. Rotman worked for the family business, Rotman Collectibles,
where he began in sales and distribution in the new product division. As the
industry was changing, Rotman Collectibles began focusing on auctions as a more
permanent division and during 1996, he began to create a presence on the
Internet. Mr. Rotman's primary expertise is in management and daily operations.
From 1994 to 1995, Mr. Rotman served as the director of an art gallery in
Jackson, Wyoming, selling original artwork to high-end clientele.

      Andrew Pilaro has served as a Director of Paid, Inc. since September 2000.
Since August, 1996, he has served as the Assistant to the Chairman of CAP
Advisors Limited, an investment management company, with responsibility for
asset management. From August, 1995 to August, 1996, Mr. Pilaro was a clerk at
Fowler, Rosenau & Geary, L.P., a stock specialist firm.

      The Securities and Exchange Commission has adopted rules to implement
certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public
company audit committees. One of the rules requires a company to disclose
whether it has an "audit committee financial expert" serving on its audit
committee. Based on its review of the criteria of an audit committee financial
expert under the rule adopted by the SEC, the Board of Directors does not
believe that any member of the Board of Directors' Audit Committee would be
described as an audit committee financial expert. At this time, the Board of
Directors believes it would be desirable for the Audit Committee to have an
audit committee financial expert serving on the committee. While from time to
time informal discussions as to potential candidates have occurred, no formal
search process has commenced.


                                       16
<PAGE>

      The Company has adopted a Code of Ethics that applies to all of its
directors, officers, and employees, including its principal executive officer,
principal financial officer, principal accounting officer, or controller, or
persons performing similar functions. A written copy of the Company's Code of
Ethics will be provided to stockholders, free of charge, upon request to:
Richard Rotman, CFO, Paid, Inc., 4 Brussels Street, Worcester, Massachusetts
01610 or (508) 791-6710.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's outstanding Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock. These persons are required by SEC regulation to furnish the
Company with copies of all such reports they file. To the Company's knowledge,
based solely on a review of the copies of such reports furnished to the Company
and representations that no other reports were required, all Section 16(a)
filing requirements applicable to its officers and directors and to Gregory
Rotman and Richard Rotman, who are beneficial owners of more than 10% of the
Company's stock, have been complied with for the period which this Form 10-KSB
relates.

      Item 10. Executive Compensation

      The following table sets forth the compensation of the Company's chief
executive officer, the chief financial officer, and each officer whose total
cash compensation exceeded $100,000, for the last three fiscal years ended
December 31, 2004, 2003, and 2002.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                 Annual Compensation   Long-Term Compensation
                                                                       ----------------------
                                                                               Awards
---------------------------------------------------------------------------------------------
                                                                       Securities Underlying
Name and                              Fiscal                                  Options
Principal Position(1)                Year (1)         Salary (2)                (#)
---------------------------------------------------------------------------------------------
<S>                                    <C>             <C>                   <C>
Gregory Rotman                         2004            $92,154                   0

President and Chief Executive          2003            $ 72,000                  0
Officer
                                       2002            $ 83,464              10,000,000

---------------------------------------------------------------------------------------------
Richard Rotman                         2004            $93,491                   0

Chief Financial Officer and Vice       2003            $ 90,532                  0
President and Secretary
                                       2002            $ 83,464              10,000,000

---------------------------------------------------------------------------------------------
</TABLE>

      (1) On October 11, 2002, both Gregory Rotman and Richard Rotman were
granted options to purchase 10,000,000 shares of common stock at an exercise
price of $.041, under the Company's 2002 Stock Option Plan, pursuant to the
following vesting schedule: options to purchase 4,000,000 shares of common stock
vested on


                                       17
<PAGE>

April 11, 2003; options to purchase 3,000,000 shares of common stock vested on
October 11, 2003, and options to purchase 3,000,000 shares vested on October 11,
2004.

      (2) For 2004, 2003, and 2002, the Company paid the amount shown as
compensation , but has accrued the difference between these amounts per annum
for both Gregory Rotman and Richard Roman of $100,000.

      No options were granted to the named executive officers during the last
fiscal year.

      The following table sets forth certain information related to the number
of options exercised and the number and value of exercisable and unexercisable
options of the named executive officers as of December 31, 2004:

    AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
                                     VALUES

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                                      Number of
                                                                     Securities          Value of
                                                                     Underlying         Unexercised
                                                                     Unexercised       In-The-Money
                                                                   Options/SARs at    Options/SARs at
                                          Shares         Value       FY-End (#)         FY-End ($)
                                       Acquired on     Realized     Exercisable/       Exercisable/
                    Name               Exercise (#)       ($)       Unexercisable      Unexercisable
-----------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>       <C>                <C>
Gregory Rotman, President and CEO           0             $0        10,000,000/0       $2,340,000/$0
-----------------------------------------------------------------------------------------------------
Richard Rotman, Vice President, CFO         0             $0        10,000,000/0       $2,340,000/$0
and Secretary
-----------------------------------------------------------------------------------------------------
</TABLE>

      (1) Based on closing price of $.275 on December 31, 2004 as reported by
the OTC Bulletin Board.

      None of the Company's directors receives any compensation from the Company
for serving as directors. However, on October 11, 2002, Andrew Pilaro received
options to purchase 2,000,000 shares of common stock at an exercise price of
$.041, pursuant to the 2002 Stock Option Plan, subject to the following vesting
schedule: options to purchase 800,000 shares of common stock vested immediately;
options to purchase an additional 600,000 shares of common stock vested on
October 11, 2003, and options to purchase 600,000 shares of common stock vested
on October 11, 2004. Based on a closing price of the Company's common stock as
report on the OTC Bulletin Board of $.25 as of December 31, 2004, Mr. Pilaro's
exercisable options have a value of $468,000.

      Item 11. Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters.

      To the knowledge of the management of the Company the following table sets
forth the beneficial ownership of our common stock as of March 7, 2005 of each
of our directors and executives officers, and all of our directors and executive
officers as a group. The address of each person named below is the address of
the Company.

Name and Address of             Number of Shares             % of
Beneficial Owner               Beneficially Owned           Class
----------------               ------------------           -----
Gregory Rotman                    18,309,005(1)              9.9%
Richard Rotman                    20,080,451(1)             10.8%
Andrew Pilaro                      2,068,700(2)              1.2%

All directors and                 40,458,156                21.6%
officers as a group
(3 individuals)


                                       18
<PAGE>

----------
(1)   Includes options to purchase 10,000,000 shares of the Company's common
      stock at an exercise price of $.041, 4,000,000 of which vested on April 1,
      2003, 3,000,000 of which vested on October 11, 2003, and 3,000,000 of
      which vested on October 11, 2004.

(2)   Includes 17,200 shares held indirectly as custodian for Mr. Pilaro's minor
      sons and options to purchase 2,000,000 shares of the Company's common
      stock at an exercise price of $.041, 800,000 of which vested on October
      11, 2002, 600,000 of which vested on October 11, 2003, and 600,000 of
      which vested on October 11, 2004.

      To the knowledge of the Company's management, as of March 7, 2005, there
are no persons and/or companies who or which beneficially own, directly or
indirectly, shares carrying more than 5% of the voting rights attached to all
outstanding shares of the Company, other than Gregory Rotman and Richard Rotman,
as set forth above.

      The information regarding the Company's Equity Compensation Plan
Information is incorporated herein by reference in Part II, Item 5 of this
Annual Report on Form 10-KSB.

      Item 12. Certain Relationships and Related Transactions.

      In December 2001, the Company engaged Steven Rotman to provide consulting
services to the Company. Steven Rotman is the father of Gregory Rotman and
Richard Rotman. At December 31, 2002, the Company owed Steven Rotman $43,074 in
consulting fees for these services. During 2003, the Company incurred an
additional $160,000 in consulting fees for these services, of which $111,416 was
paid in the form of options to purchase 2,914,958 shares of common stock of the
Company, pursuant to the Company's 2001 Non-Qualified Stock Option Plan, all of
which were exercised. During 2004, the Company incurred another $160,000 in
compensation to Steven Rotman, none of which was paid, for a total accrued but
unpaid amount equal to $251,659 at December 31, 2002. Under the 2001
Non-Qualified Stock Option Plan employees and consultants may elect to receive
their gross compensation in the form of options 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. Management believes that the terms
of the engagement with Steven Rotman are fair and reasonable to the Company and
no less favorable than could have been obtained by an unaffiliated third party.

      In 2002, the Company obtained private financing from Mr. Steven Rotman in
the aggregate amount of $115,000 pursuant to 8% promissory notes, and borrowed
an additional $15,000 in 2003, all of which is outstanding. Management believes
that the terms of the financing with Steven Rotman are fair and reasonable to
the Company and no less favorable than could have been obtained by an
unaffiliated third party.

      In 2003, the Company acquired approximately $63,000 of memorabilia for
sale from Mr. Steven Rotman. In 2004, the Company acquired approximately
$110,000 of memorabilia for sale from Mr. Steven Rotman.

      Item 13. Exhibits, List and Reports on Form 8-K.

(a)   Exhibits.

Exhibits are numbered in accordance with Item 601 of Regulation S-B.

      Exhibit     Description of Exhibits
      -------     -----------------------
      No.
      ---

      3.1         Certificate of Incorporation, as amended (incorporated by
                  reference to Exhibit 3.1 to Form 8-K, filed on November 25,
                  2003)

      3.2         Amended and Restated Bylaws (incorporated by reference to
                  Exhibit 3.2 to Form 8-K, filed on December 8, 2004)

      4.1         Specimen of certificate for Common Stock (incorporated by
                  reference to Exhibit 4.1 to Form SB-2/A filed on December 1,
                  2000)


                                       19
<PAGE>

      4.2         Convertible Note dated March 23, 2000 issued to Augustine
                  Fund, LP pursuant to Securities Purchase Agreement
                  (incorporated by reference to Exhibit 10.3 to Form 10-KSB
                  filed on April 14, 2000)

      4.3         Convertible Note, dated November 7, 2001, issued to Leslie
                  Rotman pursuant to Agreement and Plan of Merger (incorporated
                  by reference from Exhibit 4.1 to Form 8-K filed on November
                  21, 2001)

      4.4         Convertible Note, dated November 7, 2001, issued to Augustine
                  Fund, L.P., pursuant to Loan Agreement (incorporated by
                  reference from Exhibit 4.2 to Form 8-K filed on November 21,
                  2001)

      4.5         Modification Agreement dated September 19, 2000 between the
                  Registrant and Augustine Fund, L.P. (incorporated by reference
                  to Exhibit 4.7 to Form S-3 filed on October 25, 2000).

      4.6         Amended Modification Agreement dated July 15, 2001, between
                  the Company and Augustine Fund, L.P. (incorporated by
                  reference from Exhibit 4.1 to Form SB-2/A filed on August 8,
                  2001)

      4.7         Second Amended Modification Agreement dated August 30, 2001
                  between the Company and Augustine Fund, L.P. (incorporated by
                  reference from Exhibit 4.11 to Form SB-2 filed on August 31,
                  2001)

      4.8         Third Amended Modification Agreement dated May 21, 2002
                  between the Company and Augustine Fund, L.P. (incorporated by
                  reference from Exhibit 4.1 to Form 10-QSB/A filed on November
                  21, 2001)

      4.9         Modification Agreement dated May 21, 2002 between the Company
                  and Augustine Fund, L.P. (incorporated by reference from
                  Exhibit 4.2 to Form 10-QSB/A filed on November 21, 2001)

      4.10        Second Modification Agreement dated October 31, 2003 between
                  the Company and Augustine Fund, L.P.

      4.11        Warrant issued by the Registrant to Delano Group Securities,
                  LLC (incorporated by reference to Exhibit 10.7 to Form 10-KSB
                  filed on April 14, 2000).

      4.12        Warrant dated March 23, 2000 issued to Augustine Fund, LP
                  pursuant to Securities Purchase Agreement (incorporated by
                  reference to Exhibit 10.4 to Form 10-KSB filed on April 14,
                  2000)

      10.1        1999 Stock Option Plan (incorporated by reference to Exhibit
                  10.2 to Form SB-2/A filed on December 1, 2000)

      10.2        1999 Omnibus Share Plan (incorporated by reference to Exhibit
                  10.3 to Form SB-2/A filed on December 1, 2000)

      10.3        2001 Non-Qualified Stock Option Plan, as amended (incorporated
                  by reference from Exhibit 99.1 to Form S-8 filed on September
                  5, 2003)

      10.4        2002 Stock Option Plan (incorporated by reference from Exhibit
                  10.17 to Form 10-KSB filed on September 5, 2003)

      10.5        Securities Purchase Agreement dated March 23, 2000 between the
                  Registrant and Augustine Fund, LP. (incorporated by reference
                  to Exhibit 10.2 to Form 10-KSB filed on April 14, 2000)

      10.6        Loan Agreement, dated November 7, 2001, by and between
                  Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 10.1 to Form 8-K filed on November 21,
                  2001)

      10.7        Loan Agreement dated May 21, 2002 between the Company and
                  Augustine Fund, L.P. (incorporated by reference from Exhibit
                  4.4 to Form 8-K filed on November 21, 2001)

      10.8        Agreement and Plan of Merger between the Company, Rotman
                  Collectibles, Inc. and Leslie Rotman dated October 23, 2001
                  (incorporated by reference from Exhibit 2.1 to Form 8-K filed
                  on November 21, 2001)

      10.9        Registration Rights Agreement dated March 23, 2000 between the
                  Company and Augustine Fund, L.P. (incorporated by reference to
                  Exhibit 10.5 to Form 10-KSB filed on April 14, 2000)

      10.10       Registration Rights Agreement, dated November 7, 2001, by and
                  between Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 4.4 to Form 8-K filed on November 21,
                  2001)

      10.11       Registration Rights Agreement, dated November 7, 2001, by and
                  between Leslie Rotman and the Company (incorporated by
                  reference from Exhibit 4.3 to Form 8-K filed on November 21,
                  2001)


                                       20
<PAGE>

      10.12       Escrow Agreement dated March 23, 2000 among the Registrant,
                  Augustine Fund, LP and H. Glenn Bagwell, Jr. pursuant to
                  Securities Purchase Agreement (incorporated by reference to
                  Exhibit 10.6 to Form 10-KSB filed on April 14, 2000)

      10.13       Software License Agreements dated November 8, 2000 between the
                  Registrant and CSEI (incorporated by reference to Exhibit 10.1
                  to Form 8-K filed on November 22, 2000)

      21          Subsidiaries of the Registrant (included in Item I)*

      23          Consent of Carlin, Charron & Rosen, LLP*

      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*

      99          Risk Factors*

----------
*     filed herewith

(b)   Reports on Form 8-K.

      The Company filed a report on Form 8-K with the Securities and Exchange
Commission as of December 7, 2004, pursuant to Items 5.03 and 9.01, announcing
that the Company amended and restated its bylaws to eliminate a requirement that
stock certificates include the name of any beneficial owner.

      Item 14. Principal Accountant Fees and Services.

      Audit Fees. The aggregate fees billed by Carlin, Charron & Rosen, LLP for
the audit of the Company's annual consolidated financial statements for the
fiscal year ended December 31, 2004 and 2003, and the reviews of the
consolidated financial statements included in the Corporation's Forms 10-QSB for
fiscal years 2004 and 2003, were $50,000 and $48,000, respectively.

      Audit Related Fees. There were no fees billed to the Company by Carlin,
Charron & Rosen, LLP in either of the past two fiscal years for assurance and
related services that are reasonably related to the performance of the audit or
review of the Company's financial statements.

      Tax Fees. There were no fees billed to the Company by Carlin, Charron &
Rosen, LLP in either of the past two fiscal years for professional services for
tax compliance, tax advice, and tax planning.

      All Other Fees. There were no fees billed to the Company by Carlin,
Charron & Rosen, LLP for any other services for the past two fiscal years.

      The Audit Committee approves all audit and audit-related fees. The Audit
Committee is required to pre-approve all non-audit services to be performed by
the auditor. The percentage of hours expended on the principal accountant's
engagement to audit the Company's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was 0%.


                                       21
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                 PAID, INC.


                                 By:      /s/ Gregory Rotman
                                     ---------------------------------------
                                 Gregory Rotman, President
                                 Date:  March 29, 2005

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


                                 /s/ Gregory Rotman
                                 -------------------------------------------
                                 Gregory Rotman, President and Director
                                 Date:  March 29, 2005


                                 /s/ Richard Rotman
                                 -------------------------------------------
                                 Richard Rotman, Vice President, Treasurer,
                                 Secretary and Director
                                 Date:  March 29, 2005


                                 /s/ Andrew Pilaro
                                 -------------------------------------------
                                 Andrew Pilaro, Director
                                 Date: March 29, 2005


                                       22
<PAGE>

                            PAID, INC. AND SUBSIDIARY

                           DECEMBER 31, 2004 AND 2003

                        CONSOLIDATED FINANCIAL STATEMENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting
      Firm (Carlin, Charron & Rosen LLP)..............................F-2

Consolidated Balance Sheets at December 31, 2004 and 2003.............F-3

Consolidated Statements of Operations

Years ended December 31, 2004 and 2003................................F-4

Consolidated Statements of Shareholders' Equity (Deficit)

Years ended December 31, 2004 and 2003................................F-5

Consolidated Statements of Cash Flows

Years ended December 31, 2004 and 2003................................F-6

Notes to Consolidated Financial Statements

Years ended December 31, 2004 and 2003................................F-7 - F-16


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Paid, Inc.

We have audited the accompanying consolidated balance sheets of Paid, Inc. and
subsidiary (the Company) as of December 31, 2004 and 2003, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Paid, Inc. and
subsidiary as of December 31, 2004 and 2003, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred recurring losses,
has had negative cash flows from operations, and has a shareholders' deficit at
December 31, 2004. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.


/s/ Carlin, Charron & Rosen, LLP

Westborough, Massachusetts
March 16, 2005


                                      F-2
<PAGE>

                            PAID, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31,

<TABLE>
<CAPTION>
                          ASSETS                                  2004            2003
                                                                  ----            ----
<S>                                                           <C>             <C>
Current assets:
    Cash and cash equivalents                                 $     43,558    $    104,397
    Accounts receivable                                             45,739           3,529
    Inventories, net                                               624,082         702,078
    Prepaid expenses                                               125,180          57,364
    Due from employees                                              55,656          19,508
    Other current assets                                             9,073           2,823
                                                              ------------    ------------
       Total current assets                                        903,288         889,699

Property and equipment, net                                        172,706         397,950
Other intangible assets, net                                       688,872       1,414,737
                                                              ------------    ------------
Total assets                                                  $  1,764,866    $  2,702,386
                                                              ============    ============

          LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
    Notes payable                                             $    290,000    $    145,000
    Accounts payable                                               164,829         204,698
    Accrued expenses                                               991,196         663,993
                                                              ------------    ------------
       Total current liabilities                                 1,446,025       1,013,691
                                                              ------------    ------------
Convertible debt                                                 2,398,021       3,001,573
                                                              ------------    ------------

Shareholders' deficit:
    Common stock, $.001 par value, 350,000,000 shares
     authorized; 173,320,731 and 159,100,228 shares issued
     and outstanding at December 31,
     2004 and 2003, respectively                                   173,321         159,100
    Additional paid-in capital                                  21,166,334      17,832,123
    Accumulated deficit                                        (23,383,835)    (19,304,101)
    Unearned compensation                                          (35,000)             --
                                                              ------------    ------------
       Total shareholders' deficit                              (2,079,180)     (1,312,878)
                                                              ------------    ------------
Total liabilities and shareholders' deficit                   $  1,764,866    $  2,702,386
                                                              ============    ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-3
<PAGE>

                            PAID, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                           2004             2003
                                                           ----             ----
<S>                                                   <C>              <C>
Revenues                                              $   1,852,545    $   1,503,460

Cost of revenues                                          1,162,953          894,932
                                                      -------------    -------------
Gross profit                                                689,592          608,528
                                                      -------------    -------------

Operating expenses:
     Selling, general, and administrative expenses        3,492,264        3,294,051
     Web site development costs                             779,811          619,994
                                                      -------------    -------------
         Total operating expenses                         4,272,075        3,914,045
                                                      -------------    -------------
Loss from operations                                     (3,582,483)      (3,305,517)
                                                      -------------    -------------
Other income (expense):
     Interest expense                                      (497,320)        (409,469)
     Other income                                                69              113
                                                      -------------    -------------
         Total other expense, net                          (497,251)        (409,356)
                                                      -------------    -------------
Loss before income taxes                                 (4,079,734)      (3,714,873)

Provision for income taxes                                       --               --
                                                      -------------    -------------
Net loss                                              $  (4,079,734)   $  (3,714,873)
                                                      =============    =============
Loss per share (basic and diluted)                    $       (0.02)   $       (0.03)
                                                      =============    =============
     Weighted average shares                            163,762,845      143,882,625
                                                      =============    =============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>

                            PAID, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                    Common stock           Additional
                                             --------------------------     Paid-in     Accumulated       Unearned
                                                Shares         Amount       Capital       deficit       Compensation      Total
                                             ------------   -----------   -----------   ------------    ------------   -----------
<S>                                           <C>           <C>           <C>           <C>             <C>            <C>
Balance, December 31, 2002                    128,309,528   $   128,310   $15,231,677   $(15,589,228)   $   (44,619)   $  (273,860)

Amortization of stock-based
  compensation                                                                                               44,619         44,619

Issuance of common stock pursuant to
 exercise of stock options granted to
 employees for services                         1,501,608         1,501        96,600             --             --         98,101

Common stock issued in payment of
 professional and consulting fees              14,640,215        14,640       924,924             --             --        939,564

Conversions of notes payable                   14,648,877        14,649     1,367,621             --             --      1,382,270

Beneficial conversion discount                         --            --       211,301             --             --        211,301

Net loss                                               --            --            --     (3,714,873)            --     (3,714,873)
                                             ------------   -----------   -----------   ------------    -----------    -----------

Balance, December 31, 2003                    159,100,228       159,100    17,832,123    (19,304,101)            --     (1,312,878)

Compensatory stock options granted                     --            --       195,000             --        (45,000)       150,000

Amortization of stock-based
 compensation                                          --            --            --             --         10,000         10,000

Issuance of common stock pursuant to
 exercise of stock options granted
 to employees for services                        800,679           801       192,714             --             --        193,515

Common stock issued in payment of
 professional and consulting fees               4,240,573         4,241     1,043,743             --             --      1,047,984

Common stock issued in payment of interest
 on convertible debt
                                                3,924,905         3,925       311,300             --             --        315,225

Common stock issued in connection with
 acquisition of assets of
 K-sports & Entertainment, LLC                    195,313           195        62,305                                       62,500

Conversions of notes payable                    4,882,783         4,883       931,705             --             --        936,588

Proceeds from assignment of call options               --            --       573,060                                      573,060

Exercise of stock options                         176,250           176            --             --             --            176

Beneficial conversion discount                         --            --        24,384             --             --         24,384

Net loss                                               --            --            --     (4,079,734)            --     (4,079,734)
                                             ------------   -----------   -----------   ------------    -----------    -----------

Balance, December 31, 2004                    173,320,731   $   173,321   $21,166,334   $(23,383,835)   $   (35,000)   $(2,079,180)
                                             ============   ===========   ===========   ============    ===========    ===========
</TABLE>


                                      F-5
<PAGE>

                                 PAID, INC. AND SUBSIDIARY
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                                            2004           2003
                                                                            ----           ----
<S>                                                                     <C>            <C>
Operating activities:
    Net loss                                                            $(4,079,734)   $(3,714,873)
    Adjustments to reconcile net loss to net
     cash used in operating activities:
        Depreciation and amortization                                     1,077,889      1,384,351
        Bad debt expense                                                         --          6,979
        Amortization of unearned compensation                                10,000         44,619
        Beneficial conversion feature                                       291,494        245,467
        Common stock issued in payment of interest                          315,225             --
        Common stock issued in payment of professional
               and consulting fees                                        1,047,984        939,564
        Issuance of common stock pursuant to exercise of
          stock options granted to employees for services                   193,515         98,101
        Compensatory stock options granted                                  150,000             --
        Changes in assets and liabilities:
          Accounts receivable                                                72,340         (3,013)
          Inventories                                                        77,996        264,671
          Prepaid expense and other current assets                         (110,214)        25,262
          Accounts payable                                                  (39,869)       (55,848)
          Accrued expenses                                                  264,703        235,988
                                                                        -----------    -----------
             Net cash used in operating activities                         (728,671)      (528,732)
                                                                        -----------    -----------
Investing activities:
    Property and equipment additions                                        (66,330)        (9,454)
    Cash paid for assets of K Sports & Entertainment, LLC                   (50,000)            --
                                                                        -----------    -----------
             Net cash used in investing activities                         (116,330)        (9,454)
                                                                        -----------    -----------

Financing activities:
    Net proceeds from notes payable                                         145,000         30,000
    Proceeds from convertible debt                                           65,926        571,300
    Proceeds from assignment of call options                                573,060             --
    Proceeds from exercise of stock options                                     176             --
                                                                        -----------    -----------
             Net cash provided by financing activities                      784,162        601,300
                                                                        -----------    -----------
Net increase in cash and equivalents                                        (60,839)        63,114

Cash and equivalents, beginning                                             104,397         41,283
                                                                        -----------    -----------
Cash and equivalents, ending                                            $    43,558    $   104,397
                                                                        ===========    ===========

                    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for:
    Income taxes                                                        $        --    $        --
                                                                        ===========    ===========
    Interest                                                            $     1,125    $     6,750
                                                                        ===========    ===========
</TABLE>

                See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>

                            PAID, INC. AND SUBSIDIARY

                           DECEMBER 31, 2004 AND 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization

Paid, Inc. and subsidiary (the "Company") operates and maintains an internet
portal dedicated to collectibles in a variety of categories. The Company
conducts online auctions of its own merchandise and items posted under
consignment arrangements by third party sellers.

On October 7, 2004 the Company acquired operating assets of K Sports &
Entertainment LLC ("K Sports") comprised of accounts receivable totaling
$114,550, property and equipment valued at $5,550 and intangible assets
comprised of contract rights, valued at $54,900. The purchase price, totaling
$175,000, was paid with 195,313 unregistered shares of company stock, valued at
$62,500, $50,000 in cash, and a commitment to issue an additional 195,312
unregistered shares of company stock, valued at $62,500 on October 7, 2005. K
Sports operated as a sports agency business and is expected to supplement and
enhance the Company's celebrity services offerings.

Note 2. Management's Plans

The Company has continued to incur significant losses. For the years ended
December 31, 2004 and 2003 the Company reported losses of approximately
$4,1900,000 and $3,700,000, respectively.

To date the Company has met its cash needs from the proceeds of convertible
debt, the related warrants, and the assignment of call options discussed in Note
7.

Management anticipates growth in revenues and gross profits from its celebrity
services products and websites; including memberships, fan experiences,
ticketing, appearances, and merchandise sales. In addition, the Company hosts a
suite of management tools, and enhanced shipping calculator solutions for small
ecommerce enterprises. These services, coupled with sales of movie posters, both
from inventory and on consignment, and web hosting services are expected to
increase revenues and result in higher gross profit.

A 2002 Settlement Agreement provided the Company with call options for
approximately 2.3 million shares of common stock. As of December 31, 2004 the
Company still holds call options for 394,535 shares of common stock. Assignment
of these call options during January 2005 generated approximately $100,000.

Management believes that it has identified several potential sources for
additional financing. Based upon current cash positions, the Company needs an
infusion of $600,000 to 800,000 of additional capital to fund anticipated
operating costs over the next 12 months.

Although there can be no assurances, the Company believes that the above
anticipated additional revenues, and additional financing will be sufficient to
meet the Company's working capital requirements through the end of 2005.

Note 3. Summary Of Significant Accounting Policies

Principles of consolidation

      The accompanying consolidated financial statements include the accounts of
Paid, Inc. and its wholly-owned subsidiary, Rotman Collectibles, Inc. All
inter-company balances and transactions have been eliminated.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.


                                      F-7
<PAGE>

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 December 31, 2004
and 2003 the Company has provided for reserves totaling $300,000 and $270,000,
respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the
straight line and double declining balance method over the estimated useful
lives of 3 to 5 years.

Intangible Assets

Intangible assets are being amortized on a straight-line basis over estimated
useful lives of two to five years.

The Company accounts for intangible assets in accordance with Financial
Accounting Standards Board Statement No. 142 "Goodwill and Other Intangible
Assets" (SFAS No. 142). SFAS No. 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business combination and
the accounting for goodwill and other intangible assets subsequent to
acquisition. SFAS No. 142 provides that intangible assets with finite lives be
amortized and that goodwill and intangible assets with indefinite lives not be
amortized, but rather be tested at least annually for impairment.

Revenue Recognition

The Company generates revenue on sales of its purchased inventories, from fees
and commissions on sales of merchandise under consignment type arrangements,
from web hosting services, from fan club membership fees, from appraisal
services and from advertising and promotional services.

For sales of merchandise owned and warehoused by the Company, the Company is
responsible for conducting the auction, 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.

For sales of merchandise under consignment-type arrangements, the Company takes
physical possession of the merchandise, but is not obligated to, and does not
take title or ownership of merchandise. When an auction is completed, consigned
merchandise that has been sold is shipped upon receipt of payment. The Company
recognizes the net commission and service revenues relating to the consigned
merchandise upon receipt of the gross sales proceeds and shipment of the
merchandise. The Company then releases the net sales proceeds to the Consignor,
discharging all obligations of the Company with respect to the transaction.

The Company provides web hosting services under two types of arrangements.
Revenue is recognized on a monthly basis as the services are provided for those
where payment is to be received in cash. Professional athletes' web sites are
hosted under arrangements that are settled by the athlete providing a certain
number of autographs on merchandise to be sold by the Company. Revenue related
to player websites is recognized upon sale of the autographed merchandise.

Appraisal revenues are recognized when the appraisal is delivered to the
customer.

Advertising revenues are recognized at the time the advertisement is initially
displayed on the company's web site. Sponsorship revenues are recognized at the
time that the related event is conducted.

Fan club membership fees are recognized when the member joins and all direct
costs associated with the membership have been incurred.


                                      F-8
<PAGE>

Advertising Costs

Advertising costs totaling approximately $99,500 in 2004 and $96,200 in 2003,
are charged to expense when incurred.

Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses - The carrying amount of these financial instruments approximates fair
value because of the short-term nature of these instruments.

Notes payable - The carrying amount of these financial instruments approximates
fair value as the interest rate approximates market rates.

Convertible debt - The carrying amount of these financial instruments

approximates fair value as the interest rates approximate market rates.

Concentrations of Credit Risk

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents and accounts receivable.

Cash and cash equivalents - The Company places its cash and cash equivalents
with high credit quality institutions. The Company had no cash deposits in
excess of federal depository insurance limits at December 31, 2004 and 2003.

Accounts receivable - The Company maintains receivable balances with certain of
its customers and typically does not require collateral. The Company reviews a
customer's credit history before extending credit and establishes an allowance
for doubtful accounts based upon periodic reviews of the credit risk of specific
customers and other information, if necessary. Based on experience to date,
potential credit losses are considered minimal.

Income Taxes

Deferred tax asset and liabilities are recorded for temporary differences
between the financial statement and tax bases of assets and liabilities using
the enacted income tax rates expected to be in effect when the taxes are
actually paid or recovered. A deferred tax asset is also recorded for net
operating loss, capital loss and tax credit carry forwards to the extent their
realization is more likely than not. The deferred tax expense for the period
represents the change in the deferred tax asset or liability from the beginning
to the end of the period.

Use of Estimates

In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the amounts reported as assets and liabilities as of the
date of the balance sheets and reported amounts of revenue and expenses during
the reporting periods. Material estimates that are particularly susceptible to
significant change in the near term relate to inventories, intangible assets and
deferred tax asset valuation. Although these estimates are based on management's
knowledge of current events and actions, they may ultimately differ from actual
results.

Stock Compensation Plans

The Company accounts for stock based employee compensation in accordance with
Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for
Stock Based Compensation - Transition and Disclosure". SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation" to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation and requires prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results.

Although SFAS Nos. 123 and 148 encourage all entities to adopt a fair value
based method of accounting for employee stock compensation plans, they also
allow an entity to continue to measure compensation cost for


                                      F-9
<PAGE>

those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued under the
Company's stock option plan typically have no intrinsic value at the grant date,
and under Opinion No. 25 no compensation cost is recognized for them. The
Company has elected to continue with the accounting methodology in Opinion No.
25 and has provided pro forma disclosures, in accordance with SFAS No. 148, of
net income and earnings per share as if the fair value based method of
accounting had been applied (refer to Note 7).

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 convertible
debt and outstanding stock options and warrants. The number of common shares
that would be issued upon conversion of the convertible debt would have been
12,447,224 as of December 31, 2004 and 24,981,882 as of December 31, 2003. 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 26,101,418 shares and
25,642,250 shares at December 31, 2004 and 2003, respectively, have been
excluded from the computation of diluted earnings per share, as have the common
shares that would be issued upon conversion of the convertible debt, because
they were antidilutive. Diluted earnings per share have not been presented as a
result of the Company's net loss for each year.

Asset Impairment

In accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets", long lived assets to be held and used by the Company are
reviewed to determine whether any events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. For long-lived
assets to be held and used, the Company bases its evaluation on such indicators
as the economic benefits of the assets, any historical or future profitability
measurements, a review of estimated useful lives, as well as other external
market conditions or factors that may be present. If such impairment indicators
are present or other factors exist that indicate that the carrying amount of the
asset may not be recoverable, the Company determines whether an impairment has
occurred through the use of an undiscounted cash flow analysis of assets at the
lowest level for which identifiable cash flow exist. If impairment has occurred,
the Company recognizes a loss for the difference between the carrying amount and
the estimated value of the asset. The fair value of the asset is measured using
an estimate of discounted cash flow analysis. Web site and Software Development
Costs

The Company accounts for website development costs in accordance with the
provisions of EITF 00-2, "Accounting for Web Site Development Costs" ("EITF
00-2"), 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." During 2004 the
Company capitalized approximately $65,000 of website development costs.

Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs," an amendment
of ARB No. 43, Chapter 4, "Inventory Pricing". This statement clarifies that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and requires
the allocation of fixed production overheads to the costs of conversion be based
on the normal capacity of the production facilities. The provisions of SFAS No.
151 are effective for inventory costs incurred during fiscal


                                      F-10
<PAGE>

years beginning after June 15, 2005. The Company does not produce products and
therefore, does not expect adoption of this standard to have a material impact
on its financial position, results of operations and cash flow.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment," a
revision of SFAS No. 123, "Accounting for Stock-Based Compensation" and
superseding APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS
No. 123R requires the Company to expense grants made under stock option and
employee stock purchase plans. The cost will be recognized over the vesting
period of the plans. SFAS No. 123R is effective for the first interim or annual
period beginning after June 15, 2005. The Company is evaluating the alternatives
under the standard, which it is required to adopt in the third quarter of 2005.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets", an amendment of APB Opinion No. 29. SFAS No. 153 amends the guidance in
APB Opinion No. 29, "Accounting for Nonmonetary Transactions", which is based on
the principle that exchanges of nonmonetary assets should be measured based on
the fair value of the assets exchanged, with certain exceptions. SFAS No. 153
amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. The provisions of
SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The Company is evaluating the impact of
this statement on the Company's financial position, results of operations and
cash flow.

Note 4. Property and Equipment

At December 31 property and equipment consisted of the following:

                                                          2004             2003
                                                   -----------      -----------
Computer equipment and software                    $   871,467      $   864,283
Office furniture                                        61,927           61,927
Video and article archives                             418,983          418,983
Video equipment                                        158,513          158,513
web site development cost                              709,000          644,305
Purchased software                                      70,000           70,000
                                                   -----------      -----------
                                                     2,289,890        2,218,011
Accumulated depreciation                            (2,117,184)      (1,820,061)
                                                   -----------      -----------
                                                   $   172,706      $   397,950
                                                   ===========      ===========

Depreciation expense of property and equipment for the years ended December 31,
2004 and 2003 amounted to approximately $297,100 and $519,300, respectively.

The Company uses office and warehouse facilities as a tenant at will in a
building leased by a related party. No rent has been charged during the years
ended December 31, 2004 and 2003.

Note 5. Intangible Assets

At December 31 intangible assets are comprised of the following:

                                                         2004              2003
                                                  -----------       -----------
Software licenses                                 $ 2,882,660       $ 2,882,660
Patent pending                                         16,000            16,000
Domain names                                           77,025            77,025
Acquired web sites                                    762,301           762,301
Customer and user lists                               327,157           327,157
Assigned contracts                                     54,900                 0
Other                                                  30,763            30,763
                                                  -----------       -----------
                                                    4,150,806         4,095,906
Accumulated amortization                           (3,461,934)       (2,681,169)
                                                  -----------       -----------
                                                  $   688,872       $ 1,414,737
                                                  ===========       ===========


                                      F-11
<PAGE>

Amortization expense for intangible assets for the years ended December 31, 2004
and 2003 amounted to approximately $780,800 and $865,100, respectively.

Estimated amortization expense for each of the next five years is approximately
$656,000 in 2005 $21,000 in 2006 and $1,000 in each year 2006 to 2008.

Note 6. Accrued Expenses

At December 31 accrued expense are comprised of the following:

                                                              2004          2003
                                                         ---------     ---------
Interest                                                 $ 129,635     $ 247,513
Payroll                                                    141,818       124,906
Professional & Consulting fees                             378,210       171,659
Consignments                                               173,626        62,775
Due to K Sports                                             62,500            --
Commissions                                                 40,000            --
Other                                                       65,407        57,140
                                                         ---------     ---------
                                                         $ 991,196     $ 663,993
                                                         =========     =========

Note 7. Common Stock

Call Option Agreements

In connection with the settlement agreement with CSEI, the Company was granted
call options for 2,283,565 unregistered common shares held by CSEI at an
exercise price of $.001 per share. The call options expired on January 31, 2005.

During 2004 the Company assigned options to purchase 1,889,000 shares of stock
from CSEI to certain individuals in exchange for $573,060, which was added to
the paid in capital of the Company. During January 2005 the remaining 394,565
options were assigned in exchange for approximately $100,000.

Stock Options

In June 1999, the Company's Board of Directors adopted the 1999 Stock Option
Plan (the "1999 Plan") that provides for the issuance of options to directors,
officers, employees and consultants of the Company to purchase up to 1,000,000
shares of the Company's common stock. Options granted under the plan may be
either incentive stock options ("ISO") or nonqualified stock options ("NSO").
The 1999 Plan provides that each option be granted at a price determined by the
Board of Directors on the date such option is granted and have a maximum option
term of ten years. The options granted become exercisable during a period of
time as specified by the Board of Directors at the date such option is granted.

In July 1999, the Company granted an option to an employee to purchase 471,000
shares of unrestricted common stock at $.001 per share. The option vested over a
four-year period. The Company recorded unearned compensation of $757,848, based
on the difference between the fair market value of the common stock at the grant
date and the exercise price. The unearned compensation was amortized over the
vesting period of the option. Amortization expense related to unearned
compensation amounted to $44,619 during the year ended December 31, 2003. During
2004 options for the remaining 176,250 shares of common stock were exercised. In
1999, the Company also granted options to purchase 126,000 shares of
unrestricted common stock at the stock's fair value on the dates of
grant(between $.8125 and $1.625 per share).


                                      F-12
<PAGE>

In October 2002, the Company's Board of Directors adopted the 2002 Stock Option
Plan (the "2002 Plan") that provides for the issuance of options to directors,
officers, employees and consultants of the Company to purchase up to 30,000,000
shares of the Company's common stock. Options granted under the plan may be
either incentive stock options ("ISO") or nonqualified stock options ("NSO").
The 2002 Plan provides that each option be granted at a price determined by the
Board of Directors on the date such option is granted and have a maximum option
term of ten years. The options granted become exercisable during a period of
time as specified by the Board of Directors at the date such option is granted.
In 2002 the Company granted options to purchase a total of 25,000,000 restricted
shares of common stock to its President, Chief Financial Officer, Chief
Technology Officer and a Director at the stock's fair value on the date of
grant, $0.041.

In October 2004, the Company granted options to an employee and a consultant to
purchase 635,418 shares of unrestricted common stock at $.001 per share. 468,750
of these options, valued at $150,000, were immediately vested while 166,668 vest
over a nine-month period. The Company recorded unearned compensation of $45,000,
based on the difference between the fair value of the common stock at the grant
date and the exercise price of the options that did not immediately vest. The
unearned compensation is being amortized over the option's vesting period with
$10,000 being charged to expense during 2004.

There were no other options granted or cancelled/expired under any plans during
2003 or 2004. At December 31, 2004 there were 25,534,750 exercisable under these
plans at a weighted average exercise price of $.044.

Information pertaining to options outstanding at December 31, 2004 is as
follows:

<TABLE>
<CAPTION>
                Options Outstanding                                      Options Exercisable
                -------------------                                      -------------------
                                    Weighted Average
   Range of            Number           Remaining        Weighted Average      Number        Weighted Average
Exercise Prices     Outstanding     Contractual Life      Exercise Price     Exercisable      Exercise Price
---------------     -----------     ----------------      --------------     -----------      --------------
<S>                  <C>                  <C>                  <C>           <C>                   <C>
     .81                  9,000            4                    .81               9,000             .81
    1.62                 57,000            4                   1.62              57,000            1.62
     .001               635,418           10                    .001            468,750             .001
     .04             25,000,000            8                    .04          25,000,000             .04
                     ----------                                              ----------

Outstanding at
end of year          25,701,418                                 .04          25,534,750             .04
                     ==========                                              ==========
</TABLE>

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.

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
60,000,000 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.

During the year ended December 31, 2004 the Company granted options for
5,676,670 shares at various dates aggregating $1,436,499 under this plan. During
the year ended December 31, 2003 the Company granted options for 16,141,823
shares at various dates aggregating $1,037,665 under this plan, including
options for


                                      F-13
<PAGE>

2,914,958 shares representing $111,416 of consulting fees to Steven Rotman. All
options except 635,418 shares granted during the period were exercised.

The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plans. Accordingly,
compensation cost has been recognized only to the extent described above. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under the plan consistent with the
method prescribed by FASB Statement No. 123, the Company's net income and
earnings per share would have been adjusted to the pro forma amounts indicated
below:

                                                            Years Ended
                                                            December 31,
                                                            ------------
                                                        2004            2003
                                                        ----            ----
Net loss
As reported                                         $(4,079,734)    $(3,714,873)
Stock based compensation cost, as
reported (net of tax)                                   160,000          44,619
Stock based compensation cost that would
have been included in the determination
of net income had the fair value method
been applied (net of tax)                              (424,450)       (772,554)
                                                    -----------     -----------
Pro forma                                           $(4,344,184)    $(4,442,808)
                                                    ===========     ===========

Basic loss per share as reported                    $      (.02)    $      (.03)

Stock based compensation cost, as
reported (net of tax)                                        --              --
Stock based compensation cost that would
have been included in the determination
of net income had the fair value method
been applied (net of tax)
                                                           (.01)             --
                                                    -----------     -----------
Pro forma                                           $      (.03)    $      (.03)
                                                    ===========     ===========

Note 8. Income Taxes

There was no provision for income taxes for the years ended December 31, 2004
and 2003 due to the Company's net operating loss and its valuation reserve
against deferred income taxes.

The difference between the provision for income taxes from 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 temporary differences and carry forwards that give rise to
deferred taxes are as follows:


                                      F-14
<PAGE>

                                                          2004             2003
                                                          ----             ----

Federal net operating loss carry
   forwards                                        $ 6,357,000      $ 5,143,000
State net operating loss carry
   forwards                                          1,776,000        1,437,000
                                                   -----------      -----------
                                                     8,133,000        6,580,000
Valuation reserve                                   (8,133,000)      (6,580,000)
                                                   -----------      -----------

Net deferred tax asset                             $        --      $        --
                                                   ===========      ===========

The valuation reserve applicable to net deferred tax asset for the years ended
December 31, 2004 and 2003 is due to the likelihood of the deferred tax not to
be utilized.

At December 31, 2004, the Company has federal and state net operating loss carry
forwards of approximately $18,700,000 available to offset future taxable income.
The state carry-forwards will expire intermittently through 2009, while the
federal carry forwards will expire intermittently through 2024.

Note 9. Convertible Debt Financing

As of December 31, 2004 the Company has outstanding $2,398,021, of convertible
debt, which is presented net of unamortized beneficial conversion discounts of
$103,871.

On March 23, 2000, the Company entered into a Securities Purchase Agreement (the
"Agreement"), whereby the Company sold an 8% convertible note in the amount of
$3,000,000 (the "Series A Note"), due in shares of common stock on March 31,
2002 to Augustine Fund, L.P. (the "Buyer"). The Series A Note, as most recently
modified on May 21, 2002, is convertible into common stock at a conversion price
equal to the lesser of: (1) $.375 per share, or (2) seventy-three percent (73%)
of the average of the closing bid price for the common stock for the five (5)
trading days immediately preceding the conversion date. In connection with the
agreement, the Company also issued warrants to the Buyer and Delano Group
Securities to purchase 300,000 and 100,000 shares of common stock, respectively.
The purchase price per share of common stock is equal to $2.70, one hundred and
twenty percent (120%) of the lowest of the closing bid prices for the common
stock during the five (5) trading days prior to the closing date. The warrants
will expire on March 31, 2005. The May 21, 2002 modification agreement extended
the maturity date of the note until September 30, 2002, provided for additional
ninety-day extensions, the most recent of which was exercised on December 31,
2004, beyond that date until March 31, 2005, waived interest for periods after
March 31, 2002, and released the Company from all requirements to register any
common shares issuable under the note or to keep any existing registration
statements effective. As of December 31, 2004 the outstanding balance of this
note was $251,892, since during 2004, 2003, and 2002 $936,588, $1,382,270 and
$429,250, respectively, had been converted into 4,882,783, 14,648,877 and
5,782,436 shares of the Company's common stock, respectively, at conversion
prices ranging from $.028 to $.375 per share. Any amounts outstanding at March
31, 2005 automatically convert to shares of Company stock.

On November 7, 2001, the Company entered into a Loan Agreement, whereby it
issued an 8% convertible note in the amount of $1,000,000, due November 7, 2003
(the "Series B Note") to Buyer. This note was modified most recently on October
31, 2003 to, among other things, allow the Company to borrow up to $2,250,000.
The Series B Note, as modified, is convertible into common stock at a conversion
price equal to the lesser of: (1) $.25 per share, or (2) seventy-three percent
(73%) of the average of the closing bid price for the common stock for the five
(5) trading days immediately preceding the conversion date. Based upon advances
through December 31, 2004 totaling $2,250,000, had the Buyer converted the
series B Note at issuance, Buyer would have received $3,082,193 in aggregate
value of the company's common stock upon conversion of the convertible note. As
a result, in accordance with EITF 00-27, the intrinsic value of the beneficial
conversion feature of $832,193 is being charged to interest expense over the
term of the related note. The beneficial


                                      F-15
<PAGE>

conversion feature that was charged to interest expense totaled $291,494 and
$245,467 in 2004 and 2003, respectively. The total beneficial conversion
discount related to this note has been recorded as an increase in additional
paid in capital and the unamortized portion as a reduction in the related note.
In addition, the Company entered into a Registration Rights Agreement whereby
the Company agreed to file a Registration Statement with the Securities and
Exchange Commission (SEC) within sixty (60) days of a request from the Buyer
(Filing Date), covering the common stock to be issued upon conversion of the
Series B Note. If this Registration Statement is not declared effective by the
SEC within sixty (60) days of the filing date the conversion percentage shall
decrease by two percent (2%) for each month that the Registration Statement is
not declared effective. A modification extended the maturity date of the Series
B Note to November 7, 2004, provided the opportunity to extend the maturity date
to November 7, 2005, required that principal and interest be payable in shares
of common stock, or cash, at the discretion of the Company, and provided that
any fees or expenses related to any registration of the common stock will be
borne equally by the Company and the Buyer. On November 7, 2004 the maturity of
this note was extended for one year.

Note 10. Notes Payable

At December 31, 2004 the Company was obligated on short-term notes payable
totaling $290,000, of which $130,000 was to a related party. The related party
notes bear interest at 8%, while the remainder bear interest at 18%. In
addition, with respect to the third party debt, the Company issued 125,000
unregistered shares of stock valued at $17,500 as an origination fee. The
related party debt is due on demand while the remainder is due on March 1, 2005.
Interest expense charged to operations in connection with the related party
notes totaled $10,967 in 2004.

At December 31, 2003, the Company was obligated on short-term notes payable
totaling $145,000, of which $130,000 was to a related party. The related party
notes bear interest at 8%, while the remainder bears interest at 12% to 18%. All
of this short-term debt was due on demand. Interest expense charged to
operations in connection with the related party notes totaled $10,446 in 2003.

Note 11. Related party transactions

During the years ended December 31, 2004 and 2003 the Company acquired
approximately $110,000 and $63,000 of memorabilia for sale from Steven Rotman,
the father of Richard and Greg Rotman.

Note 12. Issuance of Common Stock

During 2004 the Company issued 3,924,905 shares of common stock in connection
with the payment of approximately $315,225 of interest due on its convertible
debt.

In addition, during 2004 and 2003 the Company issued 4,240,573 and 14,640,215
shares of common stock respectively, in connection with the payment of
approximately $1,048,000 and $939,600 of legal and consulting fees.


                                      F-16
<PAGE>

                                  EXHIBIT INDEX

    Exhibit                         Description of Exhibits
    -------                         -----------------------
      No.
      ---

      3.1         Certificate of Incorporation, as amended (incorporated by
                  reference to Exhibit 3.1 to Form 8-K, filed on November 25,
                  2003)

      3.2         Amended and Restated Bylaws (incorporated by reference to
                  Exhibit 3.2 to Form 8-K, filed on December 8, 2004)

      4.1         Specimen of certificate for Common Stock (incorporated by
                  reference to Exhibit 4.1 to Form SB-2/A filed on December 1,
                  2000)

      4.2         Convertible Note dated March 23, 2000 issued to Augustine
                  Fund, LP pursuant to Securities Purchase Agreement
                  (incorporated by reference to Exhibit 10.3 to Form 10-KSB
                  filed on April 14, 2000)

      4.3         Convertible Note, dated November 7, 2001, issued to Leslie
                  Rotman pursuant to Agreement and Plan of Merger (incorporated
                  by reference from Exhibit 4.1 to Form 8-K filed on November
                  21, 2001)

      4.4         Convertible Note, dated November 7, 2001, issued to Augustine
                  Fund, L.P., pursuant to Loan Agreement (incorporated by
                  reference from Exhibit 4.2 to Form 8-K filed on November 21,
                  2001)

      4.5         Modification Agreement dated September 19, 2000 between the
                  Registrant and Augustine Fund, L.P. (incorporated by reference
                  to Exhibit 4.7 to Form S-3 filed on October 25, 2000).

      4.6         Amended Modification Agreement dated July 15, 2001, between
                  the Company and Augustine Fund, L.P. (incorporated by
                  reference from Exhibit 4.1 to Form SB-2/A filed on August 8,
                  2001)

      4.7         Second Amended Modification Agreement dated August 30, 2001
                  between the Company and Augustine Fund, L.P. (incorporated by
                  reference from Exhibit 4.11 to Form SB-2 filed on August 31,
                  2001)

      4.8         Third Amended Modification Agreement dated May 21, 2002
                  between the Company and Augustine Fund, L.P. (incorporated by
                  reference from Exhibit 4.1 to Form 10-QSB/A filed on November
                  21, 2001)

      4.9         Modification Agreement dated May 21, 2002 between the Company
                  and Augustine Fund, L.P. (incorporated by reference from
                  Exhibit 4.2 to Form 10-QSB/A filed on November 21, 2001)

      4.10        Second Modification Agreement dated October 31, 2003 between
                  the Company and Augustine Fund, L.P.

      4.11        Warrant issued by the Registrant to Delano Group Securities,
                  LLC (incorporated by reference to Exhibit 10.7 to Form 10-KSB
                  filed on April 14, 2000).

      4.12        Warrant dated March 23, 2000 issued to Augustine Fund, LP
                  pursuant to Securities Purchase Agreement (incorporated by
                  reference to Exhibit 10.4 to Form 10-KSB filed on April 14,
                  2000)

      10.1        1999 Stock Option Plan (incorporated by reference to Exhibit
                  10.2 to Form SB-2/A filed on December 1, 2000)

      10.2        1999 Omnibus Share Plan (incorporated by reference to Exhibit
                  10.3 to Form SB-2/A filed on December 1, 2000)

      10.3        2001 Non-Qualified Stock Option Plan, as amended (incorporated
                  by reference from Exhibit 99.1 to Form S-8 filed on September
                  5, 2003)

      10.4        2002 Stock Option Plan (incorporated by reference from Exhibit
                  10.17 to Form 10-KSB filed on September 5, 2003)

      10.5        Securities Purchase Agreement dated March 23, 2000 between the
                  Registrant and Augustine Fund, LP. (incorporated by reference
                  to Exhibit 10.2 to Form 10-KSB filed on April 14, 2000)

      10.6        Loan Agreement, dated November 7, 2001, by and between
                  Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 10.1 to Form 8-K filed on November 21,
                  2001)

      10.7        Loan Agreement dated May 21, 2002 between the Company and
                  Augustine Fund, L.P. (incorporated by reference from Exhibit
                  4.4 to Form 8-K filed on November 21, 2001)

      10.8        Agreement and Plan of Merger between the Company, Rotman
                  Collectibles, Inc. and Leslie Rotman dated October 23, 2001
                  (incorporated by reference from Exhibit 2.1 to Form 8-K filed
                  on November 21, 2001)

      10.9        Registration Rights Agreement dated March 23, 2000 between the
                  Company and Augustine Fund, L.P. (incorporated by reference to
                  Exhibit 10.5 to Form 10-KSB filed on April 14, 2000)


                                      F-17
<PAGE>

      10.10       Registration Rights Agreement, dated November 7, 2001, by and
                  between Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 4.4 to Form 8-K filed on November 21,
                  2001)

      10.11       Registration Rights Agreement, dated November 7, 2001, by and
                  between Leslie Rotman and the Company (incorporated by
                  reference from Exhibit 4.3 to Form 8-K filed on November 21,
                  2001)

      10.12       Escrow Agreement dated March 23, 2000 among the Registrant,
                  Augustine Fund, LP and H. Glenn Bagwell, Jr. pursuant to
                  Securities Purchase Agreement (incorporated by reference to
                  Exhibit 10.6 to Form 10-KSB filed on April 14, 2000)

      10.13       Software License Agreements dated November 8, 2000 between the
                  Registrant and CSEI (incorporated by reference to Exhibit 10.1
                  to Form 8-K filed on November 22, 2000)

      21          Subsidiaries of the Registrant (included in Item I)*

      23          Consent of Carlin, Charron & Rosen, LLP*

      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*

      99          Risk Factors*

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*     filed herewith


                                      F-18