UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  February 25, 2019
 
PAYMENT DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
       000-30152    
 
98-0190072
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)
 
12500 San Pedro, Suite 120, San Antonio, TX
 
78216
(Address of principal executive offices)
 
(Zip Code)
 
(210) 249-4100
(Registrant’s telephone number, including area code)
 
Not applicable.
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company  o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o


Item 7.01
Regulation FD Disclosure.

Attached is the investor presentation for a meeting with several investors on February 26, 2019. The presentation materials are furnished hereto as Exhibit 99.1.
This report contains forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements related to its future activities or future events or conditions. The words “continue,” “will,” “bring,” “believe,” “estimate,” “expect,” “intend,” “plan,” “expand,” “should,” “likely,” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performances and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including risks related to the realization of the anticipated opportunities from the Singular acquisition, management of our growth, the loss of key resellers, the relationships with the Automated Clearinghouse network, bank sponsors, third-party card processing providers and merchants, the loss of key personnel, growing competition in the electronic commerce market, the security of the Company’s software, hardware and information, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in its filings with the SEC, including those risks discussed in the Company’s Annual Report on Form 10-K and in other documents that we file from time to time with the SEC. Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date as of which such statement was made.

Item 9.01    Financial Statements and Exhibits.

99.1*

* The information filed as Exhibit 99.1 to this Current Report on Form 8-K is being furnished in accordance with Item 7.01 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities imposed by that Section. Such information shall not be incorporated by reference into any registration statement or other document or filing under the Securities Act of 1933, as amended, except as may be expressly set forth in a specific filing.
 

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


  PAYMENT DATA SYSTEMS, INC.
Date: February 25, 2019
By:     /s/ Louis A. Hoch
Name:     Louis A. Hoch
Title:
Chief Executive Officer and President

Investor Presentation 2/21/19 Payment Data Systems | paymentdata.com 1

 
Forward Looking Statements These slides and any accompanying oral presentation contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. These forward-looking statements are identified by the use of words such as “believe,” “expect,” “prepare,” “anticipate,” “target,” “launch,” and “create,” or similar expressions including statements about commercial operations, technology progress, growth and future financial performance of Payment Data Systems, Inc. and its subsidiaries (the “Company”). Forward-looking statements in this presentation are subject to certain risks and uncertainties inherent in the Company’s business that could cause actual results to vary, including such risks that the Company’s security applications may be insufficient; the Company’s ability to adapt to rapid technological change; adverse effects on the Company’s relationships with Automated Clearing House, bank sponsors and credit card associations; the Company’s ability to comply with federal or state regulations; the Company’s exposure to credit risks, data breaches, fraud or software failures, and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission including its annual report on Form 10-K for the year ended December 31, 2017. One or more of these factors have affected, and in the future could affect, the Company’s businesses and financial results and could cause actual results to differ materially from plans and projections. All forward-looking statements made in this release are based on information presently available to the Company’s management. The Company disclaims any obligation to update these forward-looking statements, except as required by law. This presentation contains statistics and other data that has been obtained from or compiled from information made available by third parties service providers. The Company has not independently verified such statistics or data. The information presented in this presentation is as of February 21, 2019 unless indicated otherwise.

 
Who we are Payments is our DNA We are FinTech experts providing innovative solutions and platforms by way of a leveraged distribution model in the fastest growing segment of the payments sector. ACH Processing Credit/Debit Card Processing PrePaid Card Issuance

 
Enormous Opportunity to Solve Pain Points “Payments remains one of the brightest spots in the financial services universe. Propelled by…continuing technological advances, payments businesses globally are on track to add $1 trillion in new revenue through 2027. That outlook presents enormous opportunities for retail and wholesale payments institutions. Capitalizing on those opportunities, however, requires that banks and payments providers address lingering customer pain points.”

 
Volume & Transactions Per Year $3500 16 $3,300 $3,400 $3000 $2,978 $2,916 14 $2,830 $2500 12 $2000 Transactions 10 Volume ($millions) $1500 8 (millions) 1 $1000 Over $3.4 Billion 6 dollars processed in $630 $500 2018 and over 13 4 million transactions $0 processed in 2018. Payment Data Systems | paymentdata.com1 2 2013 2014 2015 2016 2017 2018 Revenue Run Rate & CAGR 29.12 $25 30 $20 25 $15 20 CAGR Revenue Run Rate $10 15 (Percentage) ($ millions) ($ $5 10 $- 5 1 1 Reflects YTD results as of 2013 2014 2015 2016 2017 2018 9/30/18 Annualized

 
Intentionally Investing in Organic Growth PAYMENT FACILITATION ACH PROCESSING growth engine Enhancing the Our cash cow funds high- value of our growth initiatives, including Payment Facilitation platform and and Pre-paid. partnerships. PRE-PAID CARD ISSUANCE growth engine

 
ACH LINE OF BUSINESS ACH Services Record Processing Volume $3.4bn in volume annually Six Consecutive quarters of sequential ACH growth Multiple Originating Depository Financial Institutions Only Broad-Industry focused NACHA Certified sender More Funding Control Same Day Funding & Late Cutoff

 
PrePaid Card Services CUSTOM DIGITAL CONSUMER Custom Prepaid Incentive, Promotional Akimbo: Consumer Program & Disbursement Cards Card Program Launch your own A fully digital way to Allows consumer to next-generation send cards instantly by share money instantly prepaid card solution email or text, 90% with other card with your brand. cheaper than plastic holders, manage sub cards, first prepaid card cards compatible with integrated with ApplePay, ApplePay, SamsungPay SamsungPay and and GooglePay GooglePay

 
Innovative Digital Platform in Action

 
Yes, There’s a Prepaid Card for That Refunds, Rebates, Claims – Disperse funds prior to the liability associated with escheatment responsibilities. Per Diems, Corporate Expense Management, Contractor Payments Sales Incentives, Employee Appreciation, Rewards Programs Loan/Funds Disbursements, Insurance Payments, Unique Forms of Compensation (medical trials, etc.)

 
We address the pain points associated with accepting, processing & reporting payments inside software platforms. Reseller Sales Organization Payment Gateway Bank All merchants must sort through gateway options Talk to several sales people 4-6 Recruit & identify processor Week long Process Negotiate processing rates Software Complete an onerous paper application Clients: Merchants Establish Reserves & personal guarantees Software Navigate the arduous underwriting process Company Processor must connect to software provider The software provider must activate the merchant account, the final step of this unnecessarily laborious process.

 
How we do it Payment Platform 4-5 Merchant Data Days Software to enter payment Company revenue cycle API Integration Layer Payment Platform

 
Our Technology is the Key that opens the door to meaningful Payments Revenues From account creation to payment processing and funds disbursement, the entire process is streamlined behind the scenes, requiring no up front investment from software partners. Payment Data Systems

 
Path to Revenue -Illustration Traditional Approach– 1:1 PDS Leveraged Distribution – 1:Many Cash Impact to Payment Data Systems One Software $60,000,000 $100.00 One Software Company Company = 1,000 at net spread of .45% x 2.79% Merchants x 2.79% One Transaction = $2.79 Annually = $1,674,000 Annually = $270,000 10 Software $600,000,000 $60,000 Companies = 10 Software Companies One Merchant at net spread of .45% x 2.79% 10,000 x 2.79% Merchants Annually = $1,674 Annually = $16,740,000 Annually = $2,700,000

 
Fastest Growing Segment Stripe Valuation Doubles to $20 Adyen aims for a $1B IPO, Valuing the Billion With No IPO in Sight Payments Startup at up to $8.3B when it lists on June 13 We are participating in the fastest growing segment of the payments industry Global Payments to Acquire Heartland Payment Systems for $4.3B, Combining Payments Firm TSYS to Acquire Leading Payments Technology Companies TransFirst for $2.35B

 
How we Differentiate Tech Enabled Payments Platform Offering Extensive API Libraries with Sample Code Scale Through Leveraged Distribution Breadth of Products & Services Offered Through a Single Vendor Operating Environment Quick & Efficient Path to Revenue for Downstream Integration Partners

 
APPENDIX

 
Investor Highlights Share Price $3.02 02/21/2019 52-week $1.38 range $3.82 Debt $ 0 Shares outstanding 16.7*m Cash $ 4.5*m Market Cap m *Following the closing of a $2mm registered direct offering $50.4 on February 14, 2019

 
Balance Sheet Highlights as of 9/30/2018 USD Millions Cash $4.5* Restricted cash & Settlement funds $48.4 Total Assets $60.2 Short term/long term debt $0 Total Liabilities & Equity $60.2 *Following the closing of a $2mm registered direct offering on February 14, 2019 ~$41 million in unused tax NOL carry-forward

 
Income Statement Highlights USD Millions Annual 2017 YTD 2018 Revenues $14.6 $18.6 Cost of sales 10.8 14.5 Gross Profit $3.7 $4.05 SG&A 4.3 5.6 Depreciation & Amortization 1.3 1.4 Income tax benefit (expense) (0.3) 0 Net Loss $(3.0) $(2.9) Adjusted EBITDA $(0.6) $(0.6) See Non-GAAP Reconciliation in the Appendix

 
Non - GAAP 2/21/19