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, 2003

                           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: $1,503,460.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates on March 10, 2004 was approximately $60,981,484 based upon the
average over the counter sales price of $.43 per share on such date.

As of March 10, 2004, the issuer had outstanding 160,350,560 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.........................................    1
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............   11
Item 6.    Management's Discussion and Analysis or Plan of Operation.......   12
Item 7.    Financial Statements............................................   16
Item 8.    Changes In and Disagreements With Accountants on
           Accounting and Financial Disclosure.............................   16
Item 8A.   Controls and Procedures.........................................   16

                                    PART III

Item 9.    Directors and Executive Officers of the Registrant .............   17
Item 10.   Executive Compensation..........................................   19
Item 11.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters.................................   20
Item 12.   Certain Relationships and Related Transactions..................   21
Item 13.   Exhibits, List and Reports on Form 8-K..........................   22
Item 14.   Principal Accountant Fees and Services..........................   24

Signatures ................................................................   25

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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 business focus is to provide services related to the auction
industry, including management, website hosting, consignment and merchandising
services. 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 management 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.

      For the year ended December 31, 2003, 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 various 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. Historically, our
Rotman Auction operations generated approximately 97% of our revenues.

      In 2001, we began to increase our autograph signing activities under the
"Rotman Auction" name. The autograph signings occur 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, Antoine Walker, Troy Brown, Johnny Damon, Lawyer Milloy, Jim Rice, Ty
Law, Terry O'Reilly, Pete Rose, Ray Bourque, Paul Pierce, Trot Nixon, Brian
Daubach, Sergei Samsonov, Joe Thornton, Byron Dafoe, Derek Lowe, Carl Everett,
Shea Hillenbrand and Alfonso Soriano. Starting in 2002 we began evolving the
autograph signing events to 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 Antoine
Walker, Lyndon Byers, Matt Light, Shea Hillenbrand, and Chris Chambers. Revenues
are generated from sales of product produced by the celebrity.

      During 2003 the celebrity websites continued to grow and foster new
relationships and opportunities that started being realized in the 4th quarter.
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 business 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. The Company receives a transaction fee for each auction
listing that uses AIship as described below.

      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.

      Aishop will integrate a storefront system into the AI suite so that you
will be able to get a plethora of features with limited time and configuration.
It will work directly with the other modules, and each component can be added at
any time by choosing that option. This module will offer a complete list of
storefront and inventory management tools to make selling online easier. This
component will include intelligent e-mail notifications (bulk and individual),
flexible order processing, inventory management, inventory bulk import/export,
multi-level categorization, customer management, automated personalized e-mail
notifications, shipping manifest integration, delivery tracking, an intelligent
search feature, and a secure site using SSL. The Company does not expect that
AIshop will be ready for use or will generate revenue prior to 2005.

      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 their
increasing the 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.


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      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 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 Appraiser(TM) through eBay.com's partner referral system. 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
Appraiser(TM) 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. This site was
redesigned in February of 2003 and has seen an increase in traffic and
membership during the past year. 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.


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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.

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;


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      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 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 2004. In 2002
and 2003, 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


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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

      Currently, 97% of our revenues is derived from our Rotman Auction
operations. We also generate revenue from web hosting, advertising, and
sponsorship of websites. Of these revenues, approximately 97% are attributable
to sales of our purchased inventory, almost 3% from web hosting, advertising and
sponsorship of websites. In 2003, we began to receive revenue from sales of
AuctionInc. We anticipate that future sources of revenue will include
advertising and service revenue.

      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 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.


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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 a 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.

      Since the launch of the collectingexchange.com website in January of 2000
we have been building a micro-portal, which is a portal specific to a particular
subject. As a micro-portal we are specific to the collecting industry. By
acquiring the assets of CSEI and Discribe, we believe we have created an
extremely comprehensive and informative website for collecting on the Internet
and have eliminated a strong source of competition as a search engine. However,
our Rotman Auction operations will continue to face the competition discussed
above. As our model evolves and revenues increase from our other services
provided on the Collecting Channel, we intend to decrease our reliance on Rotman
Auction for revenues. Additionally, we have reduced the number of auctions
hosted by Rotman Auction, limiting them to significant dates or events, and sell
more inventory on other auction sites so we are not directly competing with
those companies in the industry that are utilizing our Collecting Channel
services.

      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 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.


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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 spent any amount in research and
development.

Employees

      We currently employ 20 personnel, 17 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.


                                       9
<PAGE>

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 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.

      On October 31, 2003, stockholders representing a majority of the issued
and outstanding shares of common stock of the Company approved by written
consent a proposal to amend the Company's Certificate of Incorporation to change
the name of the Company to Paid, Inc., with the voting results as follows:

                                                     Broker Non-Votes/
                      For           Against          Abstain/Withheld
                      ---           -------          ----------------

                  87,487,646        238,235               8,000

      Also on October 31, 2003, stockholders representing a majority of the
issued and outstanding shares of common stock of the Company approved by written
consent a proposal to amend the Company's Certificate of Incorporation to effect
a reverse stock split of all of the outstanding shares of capital stock of the
Company at a ratio of one-for-six, to be effective at any time prior to 12
months after the date of stockholder approval, in the discretion of the Board of
Directors, with the voting results as follows:


                                       10
<PAGE>

                                                       Broker Non-Votes/
                      For           Against            Abstain/Withheld
                      ---           -------            ----------------

                  80,013,537        7,177,344               543,000

         Also on October 31, 2003, stockholders representing a majority of the
issued and outstanding shares of common stock of the Company approved by written
consent the Company's 2002 Stock Option Plan, with the voting results as
follows:

                                                       Broker Non-Votes/
                      For            Against           Abstain/Withheld
                      ---            -------           ----------------

                  81,171,778        5,573,592                988,511

                                     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, 2003. The
quotations from the OTCBB reflect inter-dealer prices without retail mark-up,
mark-down, or commission and may not represent actual transactions.

      2003                                       High             Low
                                                 ----             ---
      Quarter ended March 31, 2003              $  .065          $  .040
      Quarter ended June 30, 2003               $  .225          $  .037
      Quarter ended September 30, 2003          $  .23           $  .108
      Quarter ended December 31, 2003           $  .22           $  .12

      2002                                       High             Low
                                                 -----            ----
      Quarter ended March 31, 2002              $  .550          $  .040
      Quarter ended June 30, 2002               $  .300          $  .077
      Quarter ended September 30, 2002          $  .105          $  .050
      Quarter ended December 31, 2002           $  .090          $  .041

      As of March 10, 2004, there were approximately 4,829 holders of record of
our common stock.


                                       11
<PAGE>

      In 2003 we amended our 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, the Depository Trust Company has been unable to
facilitate the settling and clearing of trades of our stock, and brokers have
been required to exit our stock from the DTC system. We expect that all trades
of our common stock will be settled and cleared through physical delivery of
stock certificates to our transfer agent rather than through DTC. The settling
and clearing of trades through physical delivery rather than electronically
could result in a decrease in the stock's liquidity or a delay in the settling
and clearing of trades. Because the trading industry typically relies on DTC for
settling and clearing trades, you may be delayed in purchasing or selling our
stock or face other delays and complications.

      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             242,250                $.42                     4,358,099
--------------------------------------------------------------------------------------------------------------

Total                                        25,242,250               $.066                    9,358,099
--------------------------------------------------------------------------------------------------------------
</TABLE>

Refer to Note 6, Notes to Consolidated Financial Statements for the Years ended
2003 and 2002, 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 of Financial Condition or Plan of
        Operation.

Overview

      Our primary business, based on our revenues, is the purchase and sale of
collectibles and memorabilia. We operate an online auction site that provides a
full range of services to sellers and buyers, and maintain multiple collectibles
portals, offering integrated information and services to the collectibles
community. The collectibles industry includes every person that collects items
having 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. A
portal is an Internet web site that enables visitors to search for, and visit,
other related sites, access related services, and obtain relevant data. Over the
past two years, our focus has been portal development in our own industry of
collectibles. To that end, we developed our web site www.CollectingChannel.com,
and we acquired a large collection of entertainment memorabilia. We plan to turn
our multiple sites into one integrated site in 2004. We also plan to build other
portals, some that will charge fees to access their services, and others to
leverage company-owned technology and web sites. In 2003, we began to offer
"AuctionInc" software, a suite of online management


                                       12
<PAGE>

tools developed by us during 2001 and 2002, to other online sellers, and we
expanded our online appraisal services and autograph signing events.

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, 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 our experience and management's
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.

Results of Operations

      The following discussion compares the Company's results of operations for
the year ended December 31, 2003, with those for the year ended December 31,
2002. 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.

      Revenues. For the year ended December 31, 2003 revenues were approximately
$1,503,500, 97% of which is attributable to sales of our own product and fees
from buyers and sellers through the Rotman Auction operations. Gross sales of
our own product were approximately $1,450,200; gross sales of items on
consignment totaled approximately $96,100. Web hosting, advertising, and
sponsorship revenues were approximately $38,900, representing 2.5% of our
revenues.

      Our 2003 revenues reflect an increase of approximately $227,600 or 18%
from the year ended December 31, 2002, in which revenues were $1,276,000. For
the year ended December 31, 2002, sales of our own product were approximately
$1,238,000; gross sales of items on consignment totaled approximately $5,300.
For that year, sales of our own product represented 97% of total sales. Web
hosting, advertising, or sponsorship revenues for the year ended December 31,
2002 were $37,100, representing 2.9% of our revenues. The primary reasons for
the increase in revenues were an increase in average price per unit of sales of
Company owned product as well as an increase in the number of units sold.


                                       13
<PAGE>

      Gross profit from Company-owned product sales for the year ended December
31, 2003 was $555,200, which represents an increase of $64,900 from the year
ended December 31, 2002, which had a gross profit from Company-owned product
sales of approximately $490,300. The Company generated commissions on
consignment sales of $14,400 for the year ended December 31, 2003, compared to
$800 in commissions on consignment sales for the year ended December 31, 2002.
The Company earned $21,200 in web hosting, advertising, and sponsorship revenues
for the year ended December 31, 2003, compared to $31,400 in 2002. Revenues from
the sale of the Maloney's Antiques & Collectibles Resource Directory were
$17,700 for the year ended December 31, 2003 compared to $5,700 for the year
ended December 31, 2002.

      The Company's total gross profit was $608,500 for the year ended December
31, 2003, compared to $528,200 for the year ended December 31, 2002, an increase
of $80,300, or 15%. The increase in gross profit is a result of higher quality
product and more selective purchasing, additional consignment commissions, and
more sales of Maloney's Antiques & Collectibles Resource Directory, offset by a
decrease in revenues generated from web hosting, advertising, and sponsorships.
The decrease in web hosting, advertising and sponsorships revenues is due
primarily to a focus on developing the AuctionInc Suite, the related patent
application, and planned build-out of celebrity websites. The Company's revenues
continued to be derived primarily from Rotman Auction.

      Operating Expenses. Total operating expenses for the year ended December
31, 2003 were approximately $3,914,000, compared to $3,664,500 for the
corresponding period in 2002.

      Sales, general and administrative ("SG&A") expenses for the year ended
December 31, 2003 were approximately $3,294,100, compared to $2,735,000 for the
year ended December 31, 2002. Depreciation and amortization decreased by $33,600
principally due older assets becoming fully depreciated in 2002. Professional
and consulting fees increased by $487,500, primarily attributable to the
Company's settlement of certain balances due professionals at discounts during
2002 and outsourcing of services in 2003. Marketing and advertising costs,
primarily attributable to print and online marketing and advertising programs
designed to create brand awareness for the Company's online sites, increased by
approximately $21,500. Other SG&A expenses increased by $100,500.

      Costs associated with planning, maintaining and operating the Company's
websites for the year ended December 31, 2003 decreased approximately $309,500
from the year ended December 31, 2002. This decrease is due primarily to
decreases in payroll of $549,800, computer expenses of $31,400, and depreciation
of $25,900 offset by $288,200 fewer costs capitalized as website development
costs.

      Interest expense. For the year ended December 31, 2003, the Company
incurred $409,500 in interest costs principally associated with convertible
notes, including $245,500 of amortization of beneficial conversion discounts.
For the year ended December 31, 2002 the Company incurred $417,600 in interest
expense, including $164,000 of amortization of beneficial conversion discounts,
and $47,800 of amortization of warrants. See "Working Capital and Liquidity"
below.

      Net Loss. The Company realized a loss for the year ended December 30, 2003
of $3,714,900, or ($.03) per share, compared to $3,531,400, or ($.03) per share
for the year ended December 31, 2002.

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


                                       14
<PAGE>

      Assets. At December 31, 2003, total assets of the Company were $2,702,400,
compared to $4,308,100 at December 31, 2002. The decrease was primarily due to
depreciation and amortization totaling $1,384,400.

Operating Cash Flows

      A summarized reconciliation of the Company's net losses to cash used in
operating activities for the years ended December 31, 2003 compared to December
31, 2002, is as follows:

                                                      2003              2002
                                                   -----------      -----------
Net loss                                           $(3,714,900)     $(3,531,400)
Depreciation and amortization                        1,384,400        1,423,800
Amortization of beneficial conversion
Discount and debt discount                             245,500          164,000

Common stock issued in payment services              1,037,700        1,350,600
Common stock issued in payment of interest                  --          260,600
Changes in current assets and liabilities              518,600         (102,700)
                                                   -----------      -----------

Net cash used in operating activities              $  (528,700)     $  (435,100)
                                                   ===========      ===========

Working Capital and Liquidity

      The Company had cash and cash equivalents of $104,400 at December 31,
2003, compared to $41,300 at December 31, 2002. The Company had a deficit in
working capital of $124,000 at December 31, 2003, compared to positive working
capital of $316,900 at December 31, 2002. At December 31, 2003 current
liabilities were $1,013,700 compared to $803,600 at December 31, 2002. During
the year ended December 31, 2003 current liabilities increased primarily due to
accrued interest and an increase in short term borrowings, offset by a reduction
in accounts payable.

      As discussed in Note 8 of the Financial Statements, the Company has
outstanding convertible notes held by Augustine Fund, L.P. ("Augustine Fund").
The Series A Note, in the original principal amount of $3,000,000, has been
reduced to $1,188,500 through the conversion of common stock. During the fourth
quarter of 2003 the Company negotiated an increase of $250,000 available under
the Series B note and as of December 31, 2003 had drawn all but $66,000 that is
available under this facility.

      The Company's independent auditors have issued a going concern opinion on
the Company's consolidated financial statements for the year ended December 31,
2003. The Company needs an infusion of $600,000 of additional capital to fund
anticipated operating costs over the next 12 months. However, management
anticipates continued growth in gross profit, that its suite of management
tools, called "AuctionInc", sales of movie posters, both from inventory and on
consignment, and celebrity web hosting will continue 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 2.3 million shares of common stock, which, once assigned by the
Company, can generate between $80,000 and $1,600,000 (based solely upon the 52
week high and low closing prices of the Company's common stock) of cash as well
as the additional Augustine Fund financing discussed above.


                                       15
<PAGE>

      Management believes that these plans should result in obtaining sufficient
operating cash through the next 12 months. However, there can be no assurance
that an assignment of the call options can be concluded on reasonably acceptable
terms. If this assignment is not completed, management may need to seek
alternative sources of capital to support operations.

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
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, 2003.

      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, 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.


                                       16
<PAGE>

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.

                                    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.:

<TABLE>
<CAPTION>
      Name               Age       Position
      ----               ---       --------
<S>                      <C>       <C>
      Gregory Rotman*    37        Director, Chief Executive Officer
                                   & President

      Richard Rotman*    33        Director, Chief Financial Officer, Vice President,
                                   Treasurer & Secretary

      Andrew Pilaro      34        Director
</TABLE>

----------
*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 did not hold an annual meeting in 2001,
2002 or 2003. 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 the last five years for each director and executive officer.


                                       17
<PAGE>

      Gregory P. 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 S. 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.

      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.


                                       18
<PAGE>

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, 2003, 2002, and 2001.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
    -------------------------------------------------------------------------------------------
                                                                                    Long-Term
                                                    Annual Compensation           Compensation
                                                                                 --------------
                                                                                      Awards
    -------------------------------------------------------------------------------------------
                                                                                   Securities
                                                                                   Underlying
    Name and                              Fiscal                                     Options
    Principal Position(1)                Year (1)          Salary                      (#)
    -------------------------------------------------------------------------------------------
<S>                                        <C>            <C>                     <C>
    Gregory Rotman                         2003           $ 72,000                         0
    President and Chief Executive          2002           $ 83,464                10,000,000
    Officer                                2001           $ 74,704                         0
    -------------------------------------------------------------------------------------------
    Richard Rotman                         2003           $ 90,532                         0
    Chief Financial Officer and Vice       2002           $ 83,464                10,000,000
    President and Secretary                2001           $ 75,667                         0
    -------------------------------------------------------------------------------------------
</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
vest on April 11, 2003; options to purchase 3,000,000 shares of common stock
vest on October 11, 2003, and options to purchase 3,000,000 shares vest on
October 11, 2004, subject to termination, change in control and other
restrictions.

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


                                       19
<PAGE>

      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, 2003:

   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             7,000,000/         $1,008,000/
                                                                                 3,000,000          $  432,000
    -------------------------------------------------------------------------------------------------------------
    Richard Rotman, Vice President, CFO and          0            $0            7,000,000/          $1,008,000/
    Secretary                                                                   3,000,000           $  432,000
    -------------------------------------------------------------------------------------------------------------
</TABLE>

      (1) Based on closing price of $.185 on December 31, 2003 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 will
vest on October 11, 2004. Based on a closing price of the Company's common stock
as report on the OTC Bulletin Board of $.185 as of December 31, 2003, Mr.
Pilaro's exercisable options have a value of $201,500, and Mr. Pilaro's
unexercisable options have a value of $86,400.

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 10, 2004 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                         15,309,005(1)              8.71%
      Richard Rotman                         17,155,451(1)              9.76%
      Andrew Pilaro                           1,468,700(2)               .83%

      All directors and                      33,933,156                19.30%
      officers as a group
      (3 individuals)


                                       20
<PAGE>

----------

      (1) Includes options to purchase 7,000,000 shares of the Company's common
stock at an exercise price of $.041, 4,000,000 of which vested on April 1, 2003
, and 3,000,000 of which vested on October 11, 2003. Options to purchase an
additional 3,000,000 shares at an exercise price of $.041 are not included in
the total, and shall vest on October 11, 2004.

      (2) Includes 17,200 shares held indirectly as custodian for Mr. Pilaro's
minor sons and options to purchase 1,400,000 shares of the Company's common
stock at an exercise price of $.041, 800,000 of which vested on October 11,
2002,and 600,000 of which vested on October 11, 2003. Options to purchase an
additional 600,000 shares at an exercise price of $.041 are not included in the
total, and shall vest on October 11, 2004.

      To the knowledge of the Company's management, as of March 10, 2004, 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.

      On October 23, 2001, the Company entered into an agreement to acquire
Rotman Collectibles, Inc., through the merger of Rotman Collectibles into a
Company subsidiary. Rotman Collectibles was in the business of buying and
selling movie posters dated generally from the early 1940s through the early
1970s. On November 7, 2001, as payment for the business of Rotman Collectibles,
the Company issued a $1,000,000 convertible note to Leslie Rotman, the sole
stockholder of Rotman Collectibles. The note was secured by the Company's
assets, until it was converted in January 2002 into 23,916,378 shares of the
Company's common stock. The purchase price was based upon an independent
appraisal of the assets of Rotman Collectibles, consisting exclusively of the
movie posters. The Company did not assume any substantial known liabilities of
Rotman Collectibles. Pursuant to the independent appraisal, the assets have a
retail appraised value substantially higher than the principal amount of the
note. The sole stockholder, director and officer of Rotman Collectibles was
Leslie Rotman, who is the mother of Gregory Rotman and Richard Rotman.
Management believes that the terms of the transaction with Leslie Rotman and
Rotman Collectibles are fair and reasonable to the Company and no less favorable
than could have been obtained by an unaffiliated third party.

      In December 2001, the Company engaged Steven Rotman to provide consulting
services to the Company. Steven Rotman is the father of Gregory Rotman and
Richard Rotman. As compensation for Steven Rotman's consulting services, Steven
Rotman receives options to purchase shares of common stock of the Company under
the Company's 2001 Non-Qualified Stock Option Plan. 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. During the year ended December 31, 2003
the Company granted options for 16,141,823 shares at various dates aggregating
$1,037,666 under this plan, including options for 1,619,413 shares representing
$62,185 of consulting fees to Steven Rotman. During the year ended December 31,
2002 the Company granted options for 15,577,914 shares at various dates
aggregating $1,350,582 under this plan, including options for 2,914,958 shares
representing $111,415 of consulting fees to Steven Rotman. All options granted
during the period were exercised. 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.


                                       21
<PAGE>

      In 2002, the Company obtained private financing from Mr. Steven Rotman in
the aggregate amount of $115,000 pursuant to 8% promissory notes. 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.

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

      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 November 25, 2003)

      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).


                                       22
<PAGE>

      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)

      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


                                       23
<PAGE>

            (b)   Reports on Form 8-K.

      The Company filed a report on Form 8-K with the Securities and Exchange
Commission as of November 25, 2003, pursuant to Items 5 and 7, announcing that
(1) the Company would amend its Certificate of Incorporation to change its name
to Paid, Inc. as of December 8, 2003, and that all certificates must be
exchanged for new certificates, with a new CUSIP number and stock symbol; and
(2) the Company amended its bylaws to require 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, 2003 and 2002, and the reviews of the
consolidated financial statements included in the Corporation's Forms 10-QSB for
fiscal years 2003 and 2002, were $48,000 and $45,600, 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%.


                                       24
<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 26, 2004

      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 26, 2004


                                      /s/ Richard Rotman
                                      ------------------------------------------
                                      Richard Rotman, Vice President, Treasurer,
                                      Secretary and Director

                                      Date: March 26, 2004


                                      /a/ Andrew Pilaro
                                      ------------------------------------------
                                      Andrew Pilaro, Director

                                      Date: March 26, 2004


                                       25
<PAGE>

                            PAID, INC. AND SUBSIDIARY
                           DECEMBER 31, 2003 AND 2002
                        CONSOLIDATED FINANCIAL STATEMENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report (Carlin, Charron & Rosen LLP)........           F-2

Consolidated Balance Sheets at December 31, 2003 and 2002.........           F-3

Consolidated Statements of Operations
Years ended December 31, 2003 and 2002............................           F-4

Consolidated Statements of Shareholders' Equity  (Deficit)
Years ended December 31, 2003 and 2002............................           F-5

Consolidated Statements of Cash Flows
Years ended December 31, 2003 and 2002............................           F-6

Notes to Consolidated Financial Statements
Years ended December 31, 2003 and 2002............................    F-7 - F-17


                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders of Paid, Inc.

We have audited the accompanying consolidated balance sheets of Paid, Inc.
(formerly Sales Online Direct, Inc.) and subsidiary (the Company) as of December
31, 2003 and 2002, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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, 2003 and 2002, 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, 2003. 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

Worcester, Massachusetts
February 20, 2004

                                      F-2
<PAGE>

                            PAID, INC. AND SUBSIDARY
                           CONSOLIDATED BALANCE SHEET
                                    DECEMBER 31,

<TABLE>
<CAPTION>
                              ASSETS                                2003               2002
                                                                    ----               ----
<S>                                                             <C>                <C>
Current Assets:
   Cash and cash equivalents                                    $    104,397       $     41,283
   Accounts receivables                                                3,529              7,495
   Inventories, net                                                  702,078            966,749
   Prepaid expenses                                                   57,364             86,544
   Other current assets                                               22,331             18,413
                                                                ------------       ------------

      Total current assets                                           889,699          1,120,484

Property and equipment, net                                          397,950            907,785
Intangible assets, net                                             1,414,737          2,279,799
                                                                ------------       ------------

Total assets                                                    $  2,702,386       $  4,308,068
                                                                ============       ============

                  LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Notes payable                                                $    145,000       $    115,000
   Accounts payable                                                  204,698            260,546
   Accrued expenses                                                  663,993            428,005
                                                                ------------       ------------

      Total current liabilities                                    1,013,691            803,551
                                                                ------------       ------------

Convertible debt                                                   3,001,573          3,778,377
                                                                ------------       ------------

Shareholders' deficit:
   Common stock, $.001 par value, 350,000,000 shares
    authorized; 159,100,218 and 128,309,528 shares issued
    and outstanding at December 31,
    2003 and 2002, respectively                                      159,100            128,310
   Additional paid-in capital                                     17,832,123         15,231,677
   Accumulated deficit                                           (19,304,101)       (15,589,228)
   Unearned compensation                                                  --            (44,619)
                                                                ------------       ------------

      Total shareholders' deficit                                 (1,312,878)          (273,860)
                                                                ------------       ------------

Total liabilities and shareholders' deficit                     $  2,702,386       $  4,308,068
                                                                ============       ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                         2003               2002
                                                         ----               ----
<S>                                                  <C>                 <C>
Revenues                                             $   1,503,460       $   1,275,888

Cost of revenues                                           894,932             747,727
                                                     -------------       -------------

Gross profit                                               608,528             528,161
                                                     -------------       -------------
Operating expenses:
  Selling, general, and administrative expenses          3,294,051           2,734,980
  Web site development costs                               619,994             929,499
                                                     -------------       -------------

    Total operating expenses                             3,914,045           3,664,479
                                                     -------------       -------------

Loss from operations                                    (3,305,517)         (3,136,318)
                                                     -------------       -------------

Other income (expense):
  Interest expense                                        (409,469)           (417,634)
  Other income                                                 113              23,313
  Loss on sale of marketable securities                         --                (726)
                                                     -------------       -------------

    Total other expense, net                              (409,356)           (395,047)
                                                     -------------       -------------

Loss before income taxes                                (3,714,873)         (3,531,365)

Provision for income taxes                                      --                  --
                                                     -------------       -------------

Net loss                                             $  (3,714,873)      $  (3,531,365)
                                                     =============       =============

Loss per share (basic and diluted)                   $       (0.03)      $       (0.03)
                                                     =============       =============

  Weighted average shares                              143,882,625         116,127,347
                                                     =============       =============
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>

                            PAID, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                         Common Stock        Additional
                                                    ----------------------     Paid-in      Accumulated    Unearned
                                                        Share      Amount      Capital        deficit    Compensation       Total
                                                    -----------   --------   -----------   ------------  ------------   -----------
<S>                                                  <C>          <C>        <C>           <C>             <C>          <C>
Balance, December 31, 2001                           79,683,494   $ 79,683   $12,010,313   $(12,057,863)   $(234,383)   $  (202,250)

Amortization of stock-based
  compensation                                               --         --            --             --      189,764        189,764

Common stock issued pursuant to exercise of stock
  options granted to employees for services           6,401,518      6,402       484,700             --           --        491,102

Common stock issued in payment of
  professional and consulting fees                    9,176,396      9,176       850,304             --           --        859,480

Common stock issued in payment of interest
  on convertible debt                                 3,054,556      3,055       257,511             --           --        260,566

Conversions of notes payable                         29,698,814     29,699     1,399,551             --           --      1,429,250

Exercise of stock options                               294,750        295         2,653             --           --          2,948

Beneficial conversion discount                               --         --       226,645             --           --        226,645

Net loss                                                     --         --            --     (3,531,365)          --     (3,531,365)
                                                    -----------   --------   -----------   ------------    ---------    -----------

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

Common stock issued 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
  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)
                                                    ===========   ========   ===========   ============    =========    ===========
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
<S>                                                           <C>               <C>
Operating activities:
  Net loss                                                    $(3,714,873)      $(3,531,365)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation and amortization                             1,384,351         1,423,819
      Bad debt expense                                              6,979                --
      Amortization of unearned compensation                        44,619           189,764
      Amortization of debt discount                                    --            47,804
      Beneficial conversion feature                               245,467           164,000
      Common stock issued in payment of interest                       --           260,566
      Common stock issued in payment of professional
         and consulting fees                                      939,564           859,480
      Common stock issued pursuant to exercise of
         stock options granted to employees for services           98,101           491,102
      Net loss on marketable securities                                --               726
      Changes in assets and liabilities:
         Accounts receivable                                       (3,013)            7,800
         Inventories                                              264,671           194,061
         Prepaid expenses and other current assets                 25,262            10,195
                                                              -----------       -----------
         Accounts payable                                         (55,848)          (98,672)
         Accrued expenses                                         235,988          (454,428)

            Net cash used in operating activities                (528,732)         (435,148)
                                                              -----------       -----------

Investing activities:
  Property and equipment additions                                 (9,454)         (350,081)
  Acquisition of intangible assets                                     --           (16,000)
  Proceeds from sale of marketable securities                          --               512
  Purchase of securities                                               --            (1,117)
                                                              -----------       -----------

            Net cash used in investing activities                  (9,454)         (366,686)
                                                              -----------       -----------

Financing activities:
  Net proceeds from notes payable                                  30,000           115,000
  Proceeds from convertible debt                                  571,300           677,500
  Proceeds from exercise of stock options                              --             2,948
                                                              -----------       -----------

            Net cash provided by financing activities             601,300           795,448
                                                              -----------       -----------

Net increase (decrease) in cash and cash equivalents               63,114            (6,386)

Cash and cash equivalents, beginning                               41,283            47,669
                                                              -----------       -----------

Cash and cash equivalents, ending                             $   104,397       $    41,283
                                                              ===========       ===========

               SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for:

  Income taxes                                                $        --       $        --
                                                              ===========       ===========

  Interest                                                    $     6,750       $     2,112
                                                              ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>

                            PAID, INC. AND SUBSIDIARY
                           DECEMBER 31, 2003 AND 2002
                   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 person-to-person online auctions of its own merchandise and items
posted under consignment arrangements by third party sellers. During 2003, the
Company changed its name from Sales Online Direct, Inc. to Paid, Inc.

On November 8, 2000, the Company acquired certain assets of ChannelSpace
Entertainment, Inc., a Virginia corporation ("CSEI") and Discribe, Ltd.,
("Discribe") a Canadian corporation wholly owned by CSEI. CSEI and Discribe are
converged Internet content providers and producers of affinity portals,
including the CollectingChannel.com and the CelticChannel.com websites. The
consideration paid by the Company for the acquired assets was 7,530,000
unregistered shares of the Company's common stock valued at $4,648,996 and
$300,000 worth of the Company's common stock to be registered (711,136 shares).

On February 1, 2002 the Company entered into a Settlement Agreement and Mutual
Release regarding a variety of claims by both parties to the above transaction.
The settlement discharged the Company from the requirement to issue, and
register, the above mentioned 711,136 shares of common stock and granted to the
Company a call option for 2,283,565 shares of unregistered common stock held by
CSEI as discussed in Note 6. The assets acquired - consisting principally of
software licenses, a video library, a library of articles, a user list, Domain
names, furniture, and fixtures and equipment - had an estimated fair value of
approximately $4,974,000. The fair values of the individual assets acquired, and
the consideration paid, have been determined by independent appraisal. The
excess of the fair value of the assets acquired over the purchase price,
approximately $325,000, has been allocated pro-rata as a reduction of the fair
values of the intangible assets acquired.

Note 2. Management's Plans

The Company has continued to incur significant losses. For the years ended
December 31, 2003 and 2002 the Company reported losses of approximately
$3,700,000 and $3,500,000, 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
Notes 6 and 8.

Management anticipates continued growth in gross profit, that its suite of
management tools, called "AuctionInc", sales of movie posters, both from
inventory and on consignment, and celebrity web hosting will continue to
increase revenues and result in higher gross profit.

The Settlement Agreement and Mutual Releases related to the CSEI assets
discussed in Note 1 provided the Company with call options for approximately 2.3
million shares of common stock. Management believes that the assignment of these
call options can generate between $80,000 and $1,600,000 (based solely upon the
52 week high and low closing prices of the Company's common stock). In addition,
Augustine Fund is required to provide financing, at the Company's request, of an
additional $66,000.

While management believes that these plans will result in obtaining sufficient
operating cash, there can be no assurance that an assignment of the call options
can be concluded on reasonably acceptable terms.


                                      F-7
<PAGE>

If these assignments are not so completed management will seek alternative
sources of capital to support operations. Based upon current cash positions, the
Company needs an infusion of $600,000 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, additional financing, and anticipated option
assignments will be sufficient to meet the Company's working capital
requirements through the end of 2004.

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.

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.

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, 2003
and 2002 the Company has provided for reserves totaling $270,000 and $180,000,
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 an estimated
useful life of five years.

The Company adopted Financial Accounting Standards Board Statement No. 142
"Goodwill and Other Intangible Assets" (SFAS No. 142), effective January 1,
2002. 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. The adoption of SFAS No. 142 in 2002
had no significant impact on the Company.

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 appraisal services and from advertising and
promotional services.


                                      F-8
<PAGE>

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.

Advertising Costs

Advertising costs totaling approximately $96,200 in 2003 and $88,700 in 2002,
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
approximate 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, 2003 and 2002.


                                      F-9
<PAGE>

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 of 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

In December 2002, the FASB issued 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. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require 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. SFAS No. 148
is effective for fiscal years ending after December 15, 2002. The adoption of
SFAS No. 148 in 2002 had no significant impact on the Company.

SFAS Nos. 123 and 148 encourage all entities to adopt a fair value based method
of accounting for employee stock compensation plans, whereby compensation cost
is measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. However, they also
allow an entity to continue to measure compensation cost for 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 6).


                                      F-10
<PAGE>

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
24,981,882 as of December 31, 2003 and 107,269,846 as of December 31, 2002. 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 25,642,250 shares at
both December 31, 2003 and 2002 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

The Company adopted Financial Accounting Standards Board Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144)
effective January 1, 2002. In accordance with SFAS No. 144 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 economic benefits of the assets, any historical or future
profitability measurements, 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.

The adoption of SFAS No. 144 in 2002 had no significant impact on the Company.

Website 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. During
the year ended December 31, 2003 the Company did not capitalize any website
development costs while during 2002, the Company capitalized approximately
$322,000. Such capitalized costs are included in "Property and equipment."

Recent Accounting Pronouncements

The Financial Accounting Standards Board issued Statements of Financial
Accounting Standards (SFAS) Nos. 149 "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" and 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". The FASB also
issued Interpretations 45 "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others" and 46
"Consolidations of


                                      F-11
<PAGE>

Variable Interest Entities". The Company does not expect implementation of these
standards to have a material impact on the Company's financial statements.

Note 4. Property and Equipment

At December 31, 2003 and 2002 property and equipment consisted of the following:

                                                    2003                2002
                                                -----------         -----------
Computer equipment and software                 $   864,283         $   854,829
Office furniture                                     61,927              61,927
Video and article archives                          418,983             418,983
Video equipment                                     158,513             158,513
Web site development cost                           644,305             644,305
Purchased software                                   70,000              70,000
                                                -----------         -----------
                                                $ 2,218,011           2,208,557
Accumulated depreciation                         (1,820,061)         (1,300,772)
                                                -----------         -----------
                                                $   397,950         $   907,785
                                                ===========         ===========

Depreciation expense of property and equipment for the years ended December 31,
2003 and 2002 amounted to approximately $519,300 and $579,200, 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, 2003 and 2002.

Note 5. Intangible Assets

At December 31, 2003 and 2002 intangible assets are comprised of the following:

                                                  2003                   2002
                                              -----------           -----------
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
Other                                              30,763                30,763
                                              -----------           -----------
                                                4,095,906             4,095,906
Accumulated amortization                       (2,681,169)           (1,816,107)
                                              -----------           -----------
                                              $ 1,414,737           $ 2,279,799
                                              ===========           ===========

Amortization expense for intangible assets for the years ended December 31, 2003
and 2002 amounted to approximately $865,100 and $814,600, respectively.
Estimated amortization expense for each of the next five years is approximately
$774,000 in 2004, $638,000 in 2005 and $1,000 in each year 2006 to 2008.


                                      F-12
<PAGE>

Note 6. Common Stock

Call Option Agreements

In connection with the Settlement Agreement and Mutual Release with CSEI
discussed in note 1, 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 expire on January 31, 2005.

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 common stock at $.01 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 and $189,764 during the years ended December 31, 2003 and
2002. In 1999, the Company also granted options to purchase 126,000 shares of
common stock at the stock's fair value on the dates of grant.

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.
During 2002, the Company granted options to purchase a total of 25,000,000
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.

There were no options granted, exercised, or cancelled/expired under any plans
during 2003. At December 31, 2003 there were 18,642,250 exercisable under these
plans at a weighted average exercise price of $.05.


                                      F-13
<PAGE>

Information pertaining to options outstanding at December 31, 2003 is as
follows:

<TABLE>
<CAPTION>
                                                                                       Options
                                      Options Outstanding                            Exercisable
                                      -------------------                            -----------

                                        Weighted Average          Weighted                                 Weighted
Range of Exercise         Number     Remaining Contractual    Average Exercise           Number        Average Exercise
     Prices            Outstanding            Life                  Price             Exercisable            Price
-----------------      -----------   ---------------------    ----------------        -----------      ----------------
<S>                     <C>                 <C>                     <C>               <C>                    <C>
    $  .01                 176,250          5 years                 $ .01                176,250             $ .01
       .81                   9,000             5                      .81                  9,000               .81
      1.62                  57,000             5                     1.62                 57,000              1.62
       .04              25,000,000             9                      .04             18,400,000               .04
                        ----------                                                    ----------
Outstanding at          25,242,250                                                    18,642,250
end of year             ==========                                  $ .04             ===========            $ .05
</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.
The options granted will have a maximum term of ten years and shall be
exercisable during a period as specified by the Committee. There were no
incentive options granted under the Omnibus Plan during 2003 or 2002.

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
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, 2003 the Company granted options for
16,141,823 shares at various dates aggregating $1,037,665 under this plan,
including options for 2,914,958 shares representing $111,416 of consulting fees
to Steven Rotman, the father of Gregory and Richard Rotman. During the year
ended December 31, 2002 the Company granted options for 15,577,914 shares at
various dates aggregating $1,350,582 under this plan, including options for
1,011,821 shares representing $116,910 of consulting fees to Steven Rotman, the
father of Gregory and Richard Rotman. All options 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:


                                      F-14
<PAGE>

                                                     Years Ended December 31,
                                                  -----------------------------
                                                     2003               2002
                                                  -----------       -----------
Net loss, as reported                             $(3,714,873)      $(3,531,365)

Add: Stock based compensation cost, as
reported (net of tax)                                  44,619           189,764

Less: Stock based compensation cost
that would have been included
in the determination of net
net income had the fair value
method been applied (net of tax)                     (772,554)         (280,528)
                                                  -----------       -----------
Pro forma net loss, as adjusted                   $(4,442,808)      $(3,622,129)
                                                  ===========       ===========
Loss per share (basic and diluted), as
reported                                          $      (.03)      $      (.03)

Add: Stock based compensation cost,
as reported (net of tax)                                   --                --

Less: 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)                     --                --
                                                  -----------       -----------

Pro forma loss per share (basic and               $      (.03)      $      (.03)
diluted), as adjusted                             ===========       ===========

Note 7. Income Taxes

There was no provision for income taxes for the years ended December 31, 2003
and 2002 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:

                                                  2003                  2002
                                              -----------           -----------
Federal net operating loss
        carry forwards                        $ 5,143,000           $ 4,029,000

State net operating loss
        carry forwards                          1,437,000             1,126,000
                                              -----------           -----------
                                              $ 6,580,000             5,155,000
Valuation reserve                              (6,580,000)           (5,155,000)
                                              -----------           -----------
Net deferred tax asset                        $        --           $        --
                                              ===========           ===========


                                      F-15
<PAGE>

The valuation reserve applicable to net deferred tax asset for the years ended
December 31, 2003 and 2002 is due to the likelihood of the deferred tax not
expected to be utilized.

At December 31, 2003, the Company has federal and state net operating loss carry
forwards of approximately $15,000,000 available to offset future taxable income.
The state carry-forwards will expire intermittently through 2008, while the
federal carry forwards will expire intermittently through 2023.

Note 8. Convertible Debt Financing

As of December 31, 2003 the Company has outstanding $3,372,554, of convertible
debt, which is presented net of unamortized beneficial conversion discounts of
$370,981.

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,
2003, 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, 2003 the outstanding balance of this
note was $1,188,480, since during 2003 and 2002 $1,382,270 and $429,250,
respectively, had been converted into 14,648,877 and 5,782,436 shares of the
Company's common stock, respectively, at conversion prices ranging from $.028 to
$.236 per share.

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, 2003 totaling $2,184,074, had the Buyer converted the
series B Note at issuance, Buyer would have received $2,991,883 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 $807,809 is being charged to interest expense over the
term of the related note. The beneficial conversion feature that was charged to
interest expense totaled $245,467 and $164,000 in 2003 and 2002, 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


                                      F-16
<PAGE>

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, 2001, the Company entered into a second Loan Agreement whereby it
issued a 6% convertible note, due November 7, 2003 (the "Rotman Note"), to
Leslie Rotman, pursuant to an Agreement and Plan of Merger dated October 23,
2001. The Rotman Note was converted into 23,916,378 shares of common stock at
conversion prices ranging from $.0298 to $.05152 per share in early January
2002.

Note 9. Notes Payable

At December 31, 2003 and December 31, 2002, the Company was obligated on
short-term notes payable totaling $145,000 and $115,000, respectively, of which
$130,000 and $115,000, respectively, was to a related party. The related party
notes bear interest at 8%, while the remainder bear interest at 18%. All of the
short-term debt is due on demand. Interest expense charged to operations in
connection with the related party notes totaled $10,446 and $3,928 in 2003 and
2002, respectively.

Note 10. Issuance of Common Stock

During 2002 the Company issued 3,054,556 shares of common stock in connection
with the payment of approximately $260,600 of interest due on its convertible
debt.

In addition, during 2003 and 2002 the Company issued 14,640,215 and 9,176,396
shares of common stock respectively, in connection with the payment of
approximately $939,600 and $859,500 of legal and consulting fees.


                                      F-17
<PAGE>

                                  EXHIBIT INDEX

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

   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 November 25, 2003)

   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)

<PAGE>

   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)

   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