Proposal No. 1 – Election of Director
Election of one Class II director nominee. The Board believes that the nominee’s knowledge, skills, and abilities would positively contribute to the function of the Board as a whole. Accordingly, your proxy holder will vote your shares
FOR
the election of the Board’s nominee named below unless you instruct otherwise.
Directors and Nominees
As established by our Bylaws, our Directors are divided into three classes serving staggered three-year terms. Our Board currently consists of five directors:
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Name
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Position with our Company
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Director Since
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Term Expires
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Class I
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Louis A. Hoch
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President, CEO, and Class I Director
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1998
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2021
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Blaise C. Bender
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Class I Director
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2019
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2021
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Class II
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Michael R. Long
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Chairman of the Board, and Class II Director
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1998
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2022
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Class III
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Miguel A. Chapa
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Class III Director
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2015
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2020
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Bradley Rollins
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Class III Director
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2017
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2020
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With regard to the election of directors, votes may be cast “FOR” or “WITHHOLD.” Provided that a quorum is present, the affirmative vote by the holders of a plurality of the shares of common stock present and voting at the 2019 Annual Meeting is required to elect the nominee for director.
What am I voting on?
Shareholders are being asked to elect one Class II director nominee for a three-year term. The following sections include information about all Directors, including Michael R. Long, this year’s nominee.
Required Vote
The affirmative vote of a plurality of the shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting, in person or by proxy, is required for the election of the nominee. Thus, assuming a quorum is present at the 2019 Annual Meeting, the nominee who receives the most affirmative votes will be elected as Class II director. Abstentions and broker “non-votes” will have no effect on the voting outcome with respect to the election of directors.
Voting Recommendation
The Board of Directors recommends a vote
FOR
the election of Class II Director, Michael R. Long.
Director Biographies and Qualifications
The biographies of our directors and certain information regarding each director’s experience, attributes, skills and/or qualifications that led to the conclusion that the director should be serving as a Director of Payment Data Systems, Inc. are stated below.
Class I Directors with a Three-Year Term Ending with the 2021 Annual Meeting of Shareholders
Louis A. Hoch, age 53 – President, Chief Executive and Operating Officer and Vice Chairman of the Board
Mr. Hoch has served as our Chief Executive Officer since August 4, 2016, and as our President, Chief Operating Officer, and a director of our Company since July 1998. He also serves as Vice Chairman of our Board of Directors and as Chief Executive Officer of our wholly-owned subsidiary FiCentive, Inc. Mr. Hoch is a valuable member of our Board as he has over twenty-five years of management
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experience, twenty years of which were at a senior executive level, and he is an expert in payment processing, large systems development, call center operations and service bureau operations. He holds inventor status on U.S. Patent No. 7,021,530 (“System and method for managing and processing stored-value cards and bill payment therefrom”). Mr. Hoch has held various key management positions with U.S. Long Distance, Billing Concepts, Inc. and Andersen Consulting. Mr. Hoch holds a BBA in Computer Information Systems and an MBA in International Business Management, both from Our Lady of the Lake University Business School. He holds the industry certification CCP, or Certified Payments Professional.
Blaise C. Bender, age 62 – Director
Blaise C. Bender is currently President and Managing Shareholder of Blaise C. Bender, P.C., a law firm that concentrates on business and non-profit development, mergers and acquisitions, contractual and transactional analysis, business and individual tax planning, representation on tax issues and controversies impacting individuals and businesses, corporate legal counsel assistance, real estate, strategic planning, health care analysis and estate and trust assessment. Mr. Bender is also currently a board member of Credit Human, FCU and an adjunct faculty member at Trinity University teaching in their Masters of Accounting program. Mr. Bender is a member of the state bar of Texas and is a licensed CPA. Earlier in his career, Mr. Bender was a full-time college professor for over twenty years. He has also worked for public accounting firms, such as Arthur Anderson & Co., Deloitte Touche and Ernest and Young. He received his B.B.A in Accounting and a Masters of Science in Finance from Texas A&M University. Mr. Bender also received an MPA in Taxation from UTSA and a Juris Doctor in Law from St. Mary’s University.
Class II Director with a Three-Year Term Ending with the 2019 Annual Meeting of Shareholders
Michael R. Long, age 74 – Chairman of the Board and Co-Founder
Mr. Long has served as our Chairman of our Board of Directors since July 1998. He has also held the position of our Chief Executive Officer from July 1998 to August 2016 and our Chief Financial Officer from September 2003 to March 2015, in addition to his other positions with us. Mr. Long has more than thirty years of senior executive management and systems development experience in six publicly traded companies, as well as experience operating a systems consulting business. Before assuming the highest position with our Company, Mr. Long was Vice President of Information Technology at Billing Concepts, Inc., the largest third-party billing clearinghouse for the telecommunications industry. Mr. Long’s career experience also includes financial services industry business development for Andersen Consulting and several executive positions in publicly traded telecommunications and financial services companies. Mr. Long is a valuable member of our Board due to his depth of operating, strategic, systems development, transactional, and senior management experience in our industry. Additionally, Mr. Long has held positions of increasing responsibility at our Company and holds intimate knowledge of our Company due to his longevity in the industry and with us. Currently, Mr. Long is also a director of Face Key, Inc.
Class III Directors with a Three-Year Term Ending with the 2020 Annual Meeting of Shareholders
Miguel A. Chapa, age 48 – Director
During the past 17 years, Mr. Chapa focused primarily on building a highly successful entrepreneurial career. His skills of business planning, financial analysis, strategic planning, management, negotiations and leadership has led him to build successful companies in the retail customer service industry, such as restaurants and entertainment venues. Mr. Chapa has served as the Chief Executive Officer of Rio Ventures Ltd., and Rio Club LLC since January 2012 and EFJM, Inc. since January 2014. Previously, he was the Chief Executive Officer for 6400 Beverage, LLC and Bar Rio Management of Houston, LLC from March 2005 to October 2009 and Casa Grande Holdings, LLC from June 2010 to December 2011. Mr. Chapa completed his education with a Bachelor of Arts in Finance in 1998 from the Monterrey Institute of Technology and Higher Education.
Bradley Rollins, age 47 – Director
Bradley Rollins is currently the President and CEO of Dahill Office Technology Corporation, a Xerox company, one of Texas’s largest office technology organizations specializing in complete office automation. Mr. Rollins began his career at Dahill by joining the company’s sales organization in 2000. Quickly advancing through several specialist and management positions, he assumed the role of President and CEO in January 2009. Earlier in his career, Mr. Rollins was a regional sales director for Tri-State Financial Group, a financial planning firm, for over eight years. Active in community development, Mr. Rollins is currently a board member of the United Way of San Antonio and serves as a regional fundraiser for the MS Society. From January 2014 to January 2015, Mr. Rollins served as a board member for the San Antonio Regional Development Foundation. From January 2013 to January 2014, he was the Chairman of the North San Antonio Chamber of Commerce, where he had been a member since 2008. Mr. Rollins obtained a business management and mathematics degree from Western Kentucky University.
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Board Meetings and Annual Meeting Attendance
Our Board of Directors held nine meetings during 2018, and in addition, took action from time to time by unanimous written consent. Each director attended at least 75% of the aggregate number of meetings of the Board of Directors held during the period for which such Director served on our Board of Directors and of the Committees on which such director served.
We do not have a policy that requires the attendance of directors at our Annual Meetings of Shareholders. Messrs. Hoch, Long, and Rollins attended the 2018 Annual Meeting.
Committees of the Board of Directors
On May 19, 2015, our Board established our new committee structure by appointing an Audit Committee, a Compensation Committee, and a Nominations and Corporate Governance Committee. The Board of Directors has determined that each director who serves on these committees is “independent,” as that term is defined by the Nasdaq Listing Rules and rules of the SEC. The Board of Directors has adopted written charters for its Audit Committee, its Compensation Committee and its Nominations and Corporate Governance Committee. Copies of these charters are available on our website at www.paymentdata.com/invest. In addition to the number of meetings referenced below, the Committees also took actions by unanimous written consent.
Information about each of our committees is stated below:
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Name of Committee Member
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Audit
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Compensation
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Nominations and Corporate Governance
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Blaise Bender
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Miguel Chapa
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Bradley Rollins
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Committee Chair
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Committee member
Audit Committee
Effective November 11, 2016, our Board appointed Mr. Huffman as chair of our Audit Committee who served until April 1, 2019. Effective April 1, 2019, our Board appointed Mr. Blaise Bender to serve as chair of our Audit Committee. Mr. Huffman and Mr. Bender meet the standard of “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of Regulation S-K. Mr. Chapa serves as a member of our Audit Committee since May 19, 2015 and Mr. Rollins serves as member to the Audit Committee since May 5, 2017. Messrs. Huffman, Bender, Chapa, and Rollins meet the independence standards for independent directors under the rules of the Nasdaq Stock Market published in the Nasdaq Listing Rules. The Audit Committee has a written charter. The Audit Committee met six times in 2018.
The Audit Committee’s purpose is to assist the Board of Directors in its general oversight of our financial reporting, internal control and audit functions. Management is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles and internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. Akin, Doherty, Klein & Feuge, P.C., our independent accounting firm, is responsible for performing an independent audit of the consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board.
The Audit Committee is not made up of professional accountants or auditors, and its function is not intended to duplicate or to certify the activities of management and the independent auditor, nor can the Audit Committee certify that the independent auditor is “independent” under applicable rules. The Audit Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors, and the experience of the Audit Committee’s members in business, financial and accounting matters.
Among other matters, the Audit Committee monitors the activities and performance of our external auditors, including the audit scope, external audit fees, auditor independence matters and the extent to which the independent auditor may be retained to perform non-audit services. The Audit Committee and the Board of Directors have ultimate authority and responsibility to select, evaluate and, when appropriate, replace our independent auditor. The Audit Committee also reviews the results of the internal and external audit work with regard to the adequacy and appropriateness of our financial, accounting and internal controls. Management and independent auditor presentations to and discussions with the Audit Committee also cover various topics and events that may have significant financial impact or are the subject of discussions between management and the independent auditor. In addition, the Audit Committee generally oversees our internal compliance programs.
In overseeing the preparation of our financial statements, the Audit Committee has had access to our management to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with U.S. generally accepted accounting principles. For the year ended December
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31, 2018, the Audit Committee received the independent auditor’s letter and written disclosures required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
Compensation Committee
Mr. Huffman served as chair of our Compensation Committee from January 6, 2017 to April 1, 2019. Effective April 1, 2019, our Board appointed Mr. Bender as chair of the Compensation Committee. Mr. Chapa serves as a member of our Compensation Committee since May 19, 2015. On May 5, 2017, our Board appointed Mr. Rollins as a member to the Compensation Committee. Messrs. Huffman, Bender, Chapa, and Rollins meet the independence standards for independent directors under the rules of the Nasdaq Stock Market published in the Nasdaq Marketplace Rules. The Compensation Committee has a written charter. The Compensation Committee met two times in 2018.
The Compensation Committee’s primary function is to assist the Board of Directors in meeting its responsibilities in regards to oversight and determination of executive compensation and to review and make recommendations with respect to major compensation plans, policies and programs of our Company. Other specific duties and responsibilities of the Compensation Committee are to review and approve goals and objectives relevant to the recommendations for approval by the independent members of the Board of Directors regarding compensation of our Chief Executive Officer and other executive officers, establish and approve compensation levels for our Chief Executive Officer and other executive officers, and to administer our stock plans and other equity-based compensation plans.
Nominations and Corporate Governance Committee
Mr. Huffman served as chair of our Nominations and Corporate Governance Committee, or the Governance Committee, from January 6, 2017 to April 1, 2019. Effective April 1, 2019, our Board appointed Mr. Bender as chair of the Governance Committee. Mr. Chapa serves as a member of our Governance Committee since May 19, 2015. On May 5, 2017, our Board appointed Mr. Rollins as a member to the Governance Committee. Messrs. Huffman, Bender, Chapa and Rollins meet the independence standards for independent directors under the rules of the Nasdaq Stock Market published in the Nasdaq Listing Rules. The Governance Committee has a written charter. The Governance Committee met one time in 2018.
The Governance Committee’s primary function is to identify qualified individuals to become members of the Board of Directors, determine the composition of the Board and its Committees, and to monitor a process to assess Board effectiveness. Other specific duties and responsibilities of the Governance Committee are to recommend nominees to fill vacancies on the Board of Directors, review and make recommendations to the Board of Directors with respect to director candidates proposed by shareholders, and review, on an annual basis, the functioning and effectiveness of the Board and its Committees.
Director Independence, Related Person Transactions and Other Legal Information
Independent Directors
Standard for Independence
— We determine independence using the definitions set forth in the Nasdaq Listing Rules and the rules under the Securities Exchange Act of 1934. These definitions define independence based on whether the director or a family member of the director has been employed by the Company in the past three years, how much compensation the director or family member of a director received, how much stock the director or family member of the director owns in the Company and whether the director or family member of the director is associated with the Company’s independent auditor.
The Board has determined that Messrs. Huffman, Bender, Chapa, and Rollins are independent as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules.
Related Person Transactions
It is our policy that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with the interests of our Company. Our Audit Committee reviews all related party transactions for potential conflict of interest situations on an ongoing basis and all such transactions relating to executive officers and directors must be approved by the Audit Committee. In carrying out this responsibility, the Audit Committee has determined that we have the following related party transactions.
Directors and Officers
On January 6, 2019, we repurchased 11,860 shares of common stock at the closing price on January 6, 2019 of $1.84 per share from Tom Jewell, our Chief Financial Officer to cover taxes due.
On January 8, 2018 and January 9, 2018, we repurchased 397,845 shares for $956,128 in a private transaction at the closing price on January 8 and 9, 2018 from directors, officers and employees to cover the respective officer or employee's share of taxes for shares that vested on that day, as approved by our Audit Committee and Board of Directors on the same day, with the respective directors recusing themselves. In particular we repurchased the following shares from our Named Executive Officers and directors:
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Michael R. Long (Chairman of the Board): 158,476 shares valued at $2.40 per share or total of $380,342;
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Louis A. Hoch (Chief Executive Officer): 158,476 shares valued at $2.40 per share or total of $380,342; and
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Tom Jewell (Chief Financial Officer): 13,060 shares valued at $2.50 per share of total of $32,650.
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On April 11, 2017, we repurchased 2,000 shares for a total of $3,700 from our director Miguel Chapa at the closing price of $1.85 per share on April 11, 2017 to cover taxes.
On March 17, 2017, we repurchased 17,414 shares or total of $22,638 from our former Chief Financial Officer Habib Yunus at the closing price of $1.30 per share on March 17, 2017 to cover taxes.
Louis Hoch
During the years ended December 31, 2018 and 2017, we purchased $9,476 and $1,826, respectively, of corporate imprinted sportswear, promotional items and caps from Angry Pug Sportswear. Louis Hoch, our President and Chief Executive Officer, is a 50% owner of Angry Pug Sportswear.
Miguel Chapa and Louis Hoch
During the years ended December 31, 2018 and 2017, we received $26,709 and $29,555, respectively, in revenue from Lush Rooftop. Miguel Chapa, a member of our Board of Directors, is an owner in Lush Rooftop. Louis Hoch, our President and Chief Executive Officer, is also a minority owner in Lush Rooftop.
During the year ended December 31, 2018, we received $4,525 in revenue from BLVD. Miguel Chapa, a member of our Board of Directors, is an owner in BLVD. Louis Hoch, our President and Chief Executive Officer, is also an owner in BLVD.
Arrangements or Understandings between our Executive Officers or Directors and Others
There are no arrangements or understandings between our executive officers or directors and any other person pursuant to which he was or is to be selected as a director or officer.
Other Involvement in Certain Legal Proceedings
None of our directors have been involved in any bankruptcy or criminal proceedings, nor have there been any judgments or injunctions brought against any of our directors during the last ten years that we consider material to the evaluation of the ability and integrity of any director.
Information about Corporate Governance
Board Leadership Structure
Mr. Long has served as our Chairman of our Board of Directors since July 1998. He has also held the position of our Chief Executive Officer until August 4, 2016, and as our Chief Financial Officer from September 2003 to March 2015. Since August 4, 2016, Mr. Hoch has been our Chief Executive Officer. Mr. Hoch manages the day-to-day affairs of our Company and leads the Board meetings. Mr. Hoch has also served as our President, Chief Operating Officer, and a director of our Company since July 1998, and also serves as Vice Chairman of our Board of Directors. Mr. Miguel Chapa served on our Board of Directors since April 24, 2015. Mr. Steve Huffman served as our independent director from November 11, 2016 to April 1, 2019. Our Board appointed Mr. Rollins as independent director on May 5, 2017. Effective April 1, 2019, our Board appointed Mr. Blaise Bender as independent director. Our Board believes that having a majority of independent directors serves our Company well.
The Board believes that its structure should be informed by the needs and circumstances of our Company, the Board, and our shareholders. With this in mind, the Board believes that its structure is currently serving our Company well, and intends to maintain this where appropriate and practicable in the future.
Risk Oversight Management
The Board of Directors takes an active role, as a whole and at the committee level, in overseeing management regarding our Company’s risks. Our management keeps the Board of Directors apprised of significant risks facing our Company and the approach being taken to understand, manage and mitigate such risks. Specifically, strategic risks are overseen by the full Board of Directors; financial risks are overseen by the Audit Committee; risks relating to compensation plans and arrangements are overseen by the Compensation Committee; risks associated with director independence and potential conflicts of interest are overseen by the Audit Committee. Additional review or reporting on enterprise risks is conducted as needed or as requested by the full Board of Directors or the appropriate committee.
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Director Nominations
The Board of Directors nominates directors for election at each annual meeting of shareholders and appoints new directors to fill vacancies when they arise. The Nominations and Corporate Governance Committee has the responsibility to identify, evaluate, recruit and recommend qualified candidates to the Board of Directors for nomination or election.
One of the Board of Directors’ objectives in evaluating director nominations is to ensure that its membership is composed of experienced and dedicated individuals with a diversity of backgrounds, perspectives and skills. The Nominations and Corporate Governance Committee selects nominees for director based on the nominee's character, judgment, diversity of experience, business acumen, and ability to act on behalf of all shareholders. We do not have a formal diversity policy; however, the Governance Committee endeavors to have a Board representing diverse viewpoints as well as diverse expertise at policy-making levels in many areas, including business, accounting and finance, manufacturing, marketing and sales, education, legal, government affairs, regulatory affairs, research and development, business development, technology and in other areas that are relevant to our activities.
The Governance Committee believes that nominees for director should have experience, such as those mentioned above, that may be useful to our Company and the Board of Directors, high personal and professional ethics and the willingness and ability to devote sufficient time to carry out effectively their duties as directors. The Governance Committee believes it's appropriate for at least one, and, preferably, multiple, members of the Board of Directors to meet the criteria for an “audit committee financial expert” as defined by rules of the SEC, and for a majority of the members of the Board of Directors to meet the definition of “independent director” as defined by the Nasdaq Listing Rules. The Governance Committee also believes it's appropriate for key members of our management to participate as members of the Board of Directors. Prior to each annual meeting of shareholders, the Governance Committee identifies nominees first by evaluating the current directors whose term will expire at the annual meeting and who are willing to continue in service. These candidates are evaluated based on the criteria described above, including as demonstrated by the candidate’s prior service as a director, and the needs of the Board of Directors with respect to the particular talents and experience of its directors. In the event that a director does not wish to continue in service, the Governance Committee determines not to re-nominate the director, a vacancy is created on the Board of Directors as a result of a resignation, an increase in the size of the Board or other event, the Committee will consider various candidates for Board membership, including those suggested by the Committee members, by other Board members, by any executive search firm engaged by the Committee or by shareholders. The Governance Committee recommended the nominees for election included in this Proxy Statement.
We consider recommendations for director candidates from our directors, officers, employees, shareholders, customers, and vendors. Shareholders wishing to nominate individuals to serve as directors may submit such nominations, along with a nominee’s qualifications, to our Board of Directors at Payment Data Systems, Inc., 3611 Paesanos Parkway, Suite 300, San Antonio, Texas, 78231, and the Board of Directors will consider such nominee.
Shareholder Communications with the Board of Directors
If you wish to communicate with the Board of Directors, you may send your communication in writing to: Secretary, Payment Data Systems, Inc., 3611 Paesanos Parkway, Suite 300, San Antonio, Texas, 78231. Please include your name and address in the written communication and indicate whether you are a shareholder of Payment Data. The Secretary will review any communication received from a shareholder, and all material communications from shareholders will be forwarded to the appropriate director or directors or Committee of the Board of Directors based on the subject matter.
Director Compensation
The following table sets forth information concerning the compensation provided to each person who served as a non-employee member of our Board of Directors during the year ended December 31, 2018. Compensation provided to Directors who are also employees is listed in the Summary Compensation Table for the years ended December 31, 2018 and 2017 in the section addressing Executive Compensation.
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Name
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Fees earned or paid in cash
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All other compensation
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Total
($)
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Michael R. Long (1)
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255,000
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14,667 (2)
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269,667
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Miguel A. Chapa (3)
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4,000
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4,000
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Steve Huffman (4)
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19,000
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19,000
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Bradley Rollins (5)
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4,000
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4,000
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(1)
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Michael Long is our Co-Founder and served as our Chief Executive Officer until August 4, 2016. He has served as our Chairman of the Board since July 1998. Mr. Long elected to receive a base salary of $255,000 per year in lieu of the base salary of $375,000 that would have been due to him for 2018 under the employment agreement effective February 27, 2007, as amended. No deferred compensation is owed to Mr. Long for 2018.
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(2)
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Mr. Long's other compensation consisted of 401(k) contributions and life insurance benefits.
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(3)
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Mr. Chapa received $4,000 in meeting fees. As of December 31, 2018, there were 22,223 shares of restricted stock outstanding for Mr. Chapa. Of these 22,223 shares, 11,111 shares vest on November 22, 2019 and 11,112 shares vest on November 22, 2020.
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(4)
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Mr. Huffman received $19,000 in meeting fees. As of December 31, 2018, there were 22,222 restricted stock units convertible into 22,222 shares of common stock outstanding for Mr. Huffman, which vested on January 1, 2019.
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(5)
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Mr. Rollins received $4,000 in meeting fees. As of December 31, 2018, there were 44,444 restricted stock units convertible into 44,444 shares of common stock outstanding for Mr. Rollins. 22,222 units vest on May 1, 2019 and 22,222 units vest on May 1, 2020.
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Narrative to Director Compensation Table
During 2018, Mr. Hoch received no compensation for serving on our Board due to his status as Chief Executive Officer of our Company. Mr. Hoch's compensation is detailed in the section "Executive Compensation" below.
Mr. Michael Long is our Co-Founder and has served as our Chief Executive Officer and Chairman of the Board since 1998. On August 4, 2016, Mr. Long retired as our Chief Executive Officer but he continues to provide his extensive knowledge as our Chairman of the Board. Prior to Mr. Long’s retirement, we entered into an employment agreement effective February 27, 2007, as amended. In connection with Mr. Long’s retirement as our Chief Executive Officer, we agreed to continue paying his agreed-upon compensation, benefits and expense reimbursements. The agreement provides for an annual base salary of $375,000 per year, unless increased by us. In addition, Mr. Long will receive an annual bonus of $216,000 during the term of the agreement to be paid in cash or stock at our sole discretion. In 2018, Mr. Long elected to receive a base salary of $255,000 per year in lieu of the base salary of $375,000 that would have been due to him for 2018 under the employment agreement and no bonus compensation. No deferred compensation is owed to Mr. Long for 2018.
Also, pursuant to our employment agreement with Michael Long, as amended, in the event of change in control, termination without cause, or non-renewal of the employment agreement, we will be liable for separation payments, equaling an amount of (a) 2.95 times the respective base salary and bonus payments, plus (b) a pro rata portion of the respective annual bonus based on the number of days elapsed in the year prior, plus (c) 2.0 times the respective base salary for non-competition, and (d) one year of continuing other benefits. We will also accelerate vesting of stock incentive awards, which as of December 31, 2018 are approximately $996,000.
In the case of termination of the agreement due to the death of Mr. Long, we will be liable for separation payments, equaling an amount of 2.95 times the base salary. The deferred compensation does not include amounts paid or accrued to Mr. Long for bonuses or bonus compensation, benefits or equity awards. Unpaid and unearned bonus compensation or bonus deferred compensation is forfeited. No deferred compensation will be due as long as we and/or an insurance company continue to pay executive’s Mr. Long’s base salary, minus any monthly base salary already paid to the executive prior to his death pursuant to the executive’s disability, to the executive’s estate for a period of up to 36 months. If these continuing payments cease before 36 months, we will have to pay the executive’s estate the deferred compensation minus any base salary payments within 30 days of the cessation. Further, all stock options issued to the executive and all restricted stock granted to executive shall continue on their vesting schedule. In the case of termination of the agreement due to disability without death by Mr. Long, we will be liable for separation payments, equaling an amount of disability benefits constituting base salary for 36 months. Unpaid and unearned bonus compensation or bonus deferred compensation is forfeited. Further, all stock options issued to the executive and all restricted stock granted to executive Mr. Long shall continue on their vesting schedule. No further compensation will be due for compliance with the agreements’ non-compete, non-solicitation and disparagement clauses.
We entered into independent director agreements with all our independent directors. Per the agreements, we agreed to pay each director $1,000 per quarter for participating in board and committee meetings, including the annual shareholder meeting. As chair of the Audit Committee, Mr. Huffman received $15,000 in additional annual compensation, but no additional compensation for ad hoc or preparatory meetings or for being the chair of another committee. Our directors do not receive any additional compensation for ad hoc or preparatory meetings or for being the chair of a committee, other than the chair of the Audit Committee who receives an additional $15,000 per annum upon the timely filing of the annual report with the Securities and Exchange Commission. In addition, an Audit Committee member who is not a chairperson but holds a valid CPA license will receive an additional $5,000 per annum.
Pursuant to the independent director agreements, the terms of their respective directorships terminate on the earliest of the following: (a) the death or disability of the director; (b) the termination of the director from membership on the Board by mutual agreement; (c) the removal of the respective director from the Board by the majority stockholders of the Company; and (d) the resignation by the director from the Board.
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On April 24, 2015, in connection with his appointment to our Board, we granted Mr. Chapa 33,334 shares of common stock with a grant date fair value of $180,000 for his services on our Board. On April 11, 2017, Mr. Chapa returned 2,000 shares at the closing price of April 11, 2017 of $1.85 per share to cover taxes. On November 22, 2017, we granted Mr. Chapa 33,334 shares which vest as follows: 11,111 shares vested on November 22, 2018, 11,111 shares vest on November 22, 2019, and 11,112 shares vest on November 22, 2020 or upon an earlier change of control.
On November 11, 2016, in connection with his appointment to our Board, we granted Mr. Huffman 66,667 restricted stock units convertible into 66,667 shares of our common stock. Such units vested as follows: 22,223 units vested on January 1, 2017, 22,222 units vested on January 1, 2018, and 22,222 units vested on January 1, 2019. On April 11, 2017, Mr. Huffman converted 22,223 units into 22,223 shares of common stock, on January 2, 2018, Mr. Huffman converted 22,222 units into 22,222 shares of common stock., and on January 2, 2019, Mr. Huffman converted the remaining units into 22,222 shares of common stock. Mr. Huffman resigned from our Board and Committees effective April 1, 2019.
On May 5, 2017, in connection with his appointment to our Board, we granted Mr. Brad Rollins 66,667 restricted stock units convertible into 66,667 shares of our common stock. Such units will vest as follows: 22,223 units vested on May 1, 2018, 22,222 units vest on May 1, 2019, and 22,222 units vest on January 1, 2020. Mr. Rollins converted 22,223 units into 22,223 shares of common stock.
On April 1, 2019, our Board of Directors appointed Blaise C. Bender as an independent member of our Board of Directors. Mr. Bender will serve as the chairman of our Audit, Compensation, and Nominations and Corporate Governance Committees. Mr. Bender received 66,667 restricted stock units convertible into our common stock, pursuant and subject to the terms of our 2015 Equity Incentive Plan. Such units will vest in three installments as follows: 22,223 units vested on April 1, 2019, 22,222 units vest on April 1, 2020, and the remaining 22,222 units vest on April 1, 2021.
Executive Officers
Executive Officers’ Biographies and Qualifications
The biographies of our executive officers and certain information regarding each officer’s experience, attributes, skills and/or qualifications that led to the conclusion that the officer should be serving as an officer of Payment Data are stated below.
Louis A. Hoch, age 53 – President, Chief Executive and Operating Officer and Vice Chairman of the Board
For Mr. Hoch’s biography, please refer to the section entitled “
Director Biographies and Qualifications
.”
Tom Jewell, age 62 – Chief Financial Officer
Mr. Jewell has served as our Senior Vice President and Chief Financial Officer since January 6, 2017. He was a member of our Board of Directors from November 11, 2016 to January 6, 2017. Mr. Jewell has over 35 years of business leadership experience focused on management, auditing, accounting, internal controls and finance. Previously, Mr. Jewell was the founder and owner of LTJ Financial Consulting, LLC. LTJ Financial Consulting which provided Chief Financial Officer and Controller advisory services for middle market companies in need of accounting process improvements or were looking to scale their business. Mr. Jewell performed this role from May 2009 to January 2017. His clients included start-ups seeking funding, clients in retail, staffing, construction and software industries and included serving as an FDIC approved consultant assisting the FDIC close failed banking institutions during the banking crisis. Prior to 2009, Mr. Jewell served as Chief Financial Officer for a multi-state photography studio chain from 2007 to 2009. Prior to 2007, Mr. Jewell provided financial leadership to divisional units of RadioShack, Verizon and Kentucky Fried Chicken. Mr. Jewell began his career at Touche Ross (Deloitte). Mr. Jewell was a member of the Dallas and Fort Worth chapters of Financial Executives International (FEI) and a founding member of the Dallas Chapter of the CFO Leadership Council until 2018. Mr. Jewell was a Certified Public Accountant until 2018.
Vaden Landers, age 49 – Chief Revenue Officer
Mr. Landers has over 30 years of experience in the payments industry. Most recently, he served as the Chairman and Managing Partner of Singular Payments, LLC since late 2010, leading Singular Payments, an independent sales organization whose portfolio comprised of largely healthcare clients processes more than 2.5 million transactions totaling roughly half a billion dollars annually in card volume. He also currently serves as Strategic Advisor for MAPP Advisors, a boutique consulting and M&A brokerage firm in the payments space. Mr. Landers has previously held executive and board positions in multiple companies, including as director for SparkBase from 2012 to 2015, as Chief Executive Officer for ProfitPoint, Inc. from 2003 to 2010, as Chief Marketing Officer for iPayment, Inc. from 2002 to 2004, as President for Global Payments from 2000 to 2002 and as President and Chief Executive Officer for Bancard Consulting Group from 1996 to 1998. Mr. Landers studied criminal justice and business management at Lincoln Memorial University.
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14
Other Involvement in Certain Legal Proceedings
None of our executive officers have been involved in any bankruptcy or criminal proceedings, nor have there been any judgments or injunctions brought against any of our executive officers during the last ten years that we consider material to the evaluation of the ability and integrity of any executive officer.
Executive Compensation
Named Executive Officers
This Proxy Statement contains information about the compensation paid to our Named Executive Officers, as defined by Item 402(m)(2) of Regulation S-K, during our fiscal year ended December 31, 2018. In accordance with the rules and regulations of the Securities and Exchange Commission for smaller reporting companies, we determined that the following officers were our Named Executive Officers:
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•
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Louis A. Hoch, Chief Executive and Operating Officer;
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•
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Tom Jewell, Chief Financial Officer; and
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•
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Vaden Landers, Chief Revenue Officer.
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Compensation Overview
We qualify as a “smaller reporting company” under the rules promulgated by the Securities and Exchange Commission, and we have elected to comply with the disclosure requirements applicable to smaller reporting companies. Accordingly, this executive compensation summary is not intended to meet the “Compensation Discussion and Analysis” disclosure required of larger reporting companies.
Role of the Compensation Committee
The Compensation Committee’s primary functions are to assist the Board of Directors in meeting its responsibilities in regards to oversight and determination of executive compensation and to review and make recommendations with respect to our major compensation plans, policies and programs. All compensation for our executive officers is determined by the Compensation Committee of our Board of Directors, which is composed only of independent directors. The Compensation Committee is charged with the responsibility of reviewing the performance and establishing the total compensation of our executive officers on an annual basis. The Compensation Committee often discusses compensation matters as part of regularly scheduled Board and committee meetings. The Compensation Committee administers our incentive plans, and is responsible for approving grants of equity awards under such plans. The Compensation Committee acts under the authority of a written charter, which is available on our website at paymentdata.com/invest.
Compensation Philosophy and Objectives
Due to the size of our Company, the performance of the Named Executive Officers directly affects all aspects of our results. Consequently, our compensation philosophy is to reward executive officers for the achievement of short- and long-term corporate and individual performance, as measured by the attainment of specific goals for the creation of long-term shareholder value. Also, to ensure that we are strategically and competitively positioned for the future, the Compensation Committee has the discretion to attribute significant weight to other factors in determining executive compensation, such as maintaining competitiveness, expanding markets, pursuing growth opportunities and achieving other long-range business and operating objectives. The level of compensation should also allow us to attract, motivate, and retain talented executive officers that contribute to our long-term success. The compensation of our Chief Executive Officer and other executive officers is comprised of cash compensation and long-term incentive compensation in the form of base salary, restricted stock awards and stock options with the possibility to earn bonuses.
Summary Compensation Table for the Years Ended December 31, 2018 and 2017
The following table sets forth the compensation for the years ended December 31, 2018 and 2017 awarded to, earned by, or paid to (i) all persons who served as our principal executive officers during the last fiscal year; (ii) our most highly compensated executive officer other than the principal executive officers; and (iii) one other person for whom disclosure would have been provided but for the fact that the person was not serving as an executive officer at the end of the last fiscal year. We refer to the individuals included in the Summary Compensation Table as our “named executive officers.”
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15
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Name and Principal Position
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Fiscal Year Ended Dec. 31
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Salary ($)
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Bonus ($)
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Stock Awards ($)(1)
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All Other Compensation ($)
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Total ($)
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Louis A. Hoch
Vice Chairman, President and Chief Executive Officer
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2018
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350,000
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--
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--
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15,926 (3)
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365,926
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2017
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350,000
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70,000 (2)
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663,000
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15,618 (4)
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1,098,618
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Tom Jewell
Chief Financial Officer (5)
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2018
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192,308
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--
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--
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8,280 (6)
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200,588
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2017
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170,423
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30,000 (7)
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331,500
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7,365 (8)
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539,288
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Vaden Landers
Chief Revenue Officer (9)
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2018
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300,000
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--
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--
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588 (10)
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300,588
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(1)
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Represents the aggregate grant date fair value of stock award in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718.
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(2)
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Mr. Hoch’s 2017 bonus compensation consisted of a one-time cash bonus of $70,000 in connection with his services and the performance of the Company. All bonus compensation was granted pursuant to the terms of our employment agreement, as amended, with Mr. Hoch declining to receive the full allotted bonus of $216,000 in 2017 or 2018.
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(3)
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Mr. Hoch’s 2018 other compensation consisted of $11,000 of matching 401(k) contributions and $4,926 in life insurance premiums.
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(4)
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Mr. Hoch’s 2017 other compensation consisted of $10,800 of matching 401(k) contributions and $4,818 in life insurance premiums.
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(5)
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Mr. Jewell’s 2017 compensation included $1,000 in board compensation earned for board services in 2016 and paid in 2017 and a base salary of $175,000 per year, which increased to $190,000 per year effective November 27, 2017, and to $220,000 per year, effective November 26, 2018.
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(6)
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Mr. Jewell's 2018 other compensation consisted of $7,692 of matching 401(k) contributions and $588 in life insurance premiums.
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(7)
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Mr. Jewell’s 2017 bonus compensation consisted of a one-time cash new hire bonus of $30,000.
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(8)
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Mr. Jewell’s 2017 other compensation consisted of $6,777 of matching 401(k) contributions and $588 in life insurance premiums.
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(9)
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Mr. Lander's was appointed our Chief Revenue Officer on September 1, 2017.
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(10)
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Mr. Lander's 2018 other compensation consisted of $588 in life insurance premiums.
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Narrative to Summary Compensation Table
Named Executive Officer Employment Agreements
We entered into an employment agreement with Louis A. Hoch effective February 27, 2007, as amended. Under the agreement, Mr. Hoch agreed to serve as our Vice Chairman of the Board, President and Chief Executive and Operating Officer. Mr. Hoch assumed the Chief Executive Officer role in August 2016. The employment agreement provides for an annual base salary of $350,000 per year, unless increased by us. In addition, Mr. Hoch will receive an annual bonus of $216,000 during the term of the agreement to be paid in cash or stock at our sole discretion. Mr. Hoch receives a base salary of $350,000 per year. No deferred compensation is owed to Mr. Hoch for 2018 or 2017.
In connection with Mr. Jewell’s appointment on January 6, 2017, we entered into an employment agreement with him. Pursuant to the employment agreement, we agreed to pay Mr. Jewell a base annual salary of $175,000, which was increased to $190,000 effective November 27, 2017, and then increased to $220,000 effective November 26, 2018. Mr. Jewell received a one-time signing bonus of $30,000 and reimbursement of actual relocation expenses of up to $10,000. In addition, Mr. Jewell will be entitled to receive performance stock grants or stock options as awarded by our management annually up to an amount not exceeding 50% of the highest salary received in any year of the agreement. Mr. Jewell also received 200,000 restricted stock units convertible into shares of our common stock, pursuant and subject to the terms of our 2015 Equity Incentive Plan. Such units will vest in five equal installments beginning on January 6, 2018, continuing yearly and becoming fully vested on January 6, 2022.
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In connection with Mr. Landers’ appointment on September 1, 2017, we entered into an employment agreement with him. Pursuant to the employment agreement, we agreed to pay Mr. Landers a base annual salary of $300,000, and he may be able to receive bonus compensation during his period of employment, which cannot exceed 100% of the highest salary received in any year of the employment agreement. Mr. Landers also received 300,000 shares of restricted stock upon his appointment, which will vest on September 1, 2027 or earlier upon a change of control. Mr. Landers will also be entitled to receive stock grants and future stock options as authorized by our executive compensation committee and/or our Chief Executive Officer. Mr. Lander’s employment agreement is for a term of three years and may be extended for successive one-year periods.
Outstanding Equity Awards at Fiscal Year-End
The following table shows grants of unvested stock awards by grant date outstanding on December 31, 2018, the last day of our fiscal year, to each of the named executive officers included in the Summary Compensation Table.
Share numbers have been adjusted for 1-for-15 reverse stock split effective July 23, 2015.
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Name
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Stock awards
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Grant date
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Number of shares or units of stock that have not vested (#)
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Market value of shares or units of stock that have not vested ($)(1)
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Louis A. Hoch
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10/04/2012
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66,667 (2)
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110,667
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12/29/2014
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533,334 (3)
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885,334
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11/22/2017
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300,000 (4)
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498,000
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Tom Jewell
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1/6/2017
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160,000 (5)
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265,600
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11/22/2017
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150,000 (4)
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249,000
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Vaden Landers
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9/1/2017
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300,000 (6)
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498,000
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(1)
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Calculated using the Nasdaq Capital Market closing price of $1.66 per share of our common stock on the last trading day of our fiscal year, or December 31, 2018.
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(2)
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Vests on October 4, 2022.
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(3)
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Vests on December 29, 2024.
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(4)
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Vests on November 21, 2027 or earlier upon a change of control.
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(5)
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The grant consisted of 200,000 restricted stock units which vest in five equal tranches of 40,000 per year, beginning on January 6, 2018 and becoming fully vested on January 6, 2022.
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(6)
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Vests on September 1, 2027, or earlier upon a change of control.
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Narrative to Outstanding Equity Awards at Fiscal Year-End Table
Retirement Benefits
We do not have any qualified or non-qualified defined benefit plans. We do have a tax-qualified defined contribution plan pursuant to Section 401(k) of the Internal Revenue Code. All of our eligible full and part-time employees who meet certain age requirements may participate in this 401(k) plan. Participants may contribute between 1% and 80% of their pre-tax compensation but may not contribute more than the maximum as mandated by law. The 401(k) plan allows for us to make discretionary and matching contributions. In 2018 and 2017, we matched 100% of employee contributions up to 3% and 50% of the employee contribution over 3% with a maximum employee contribution of 5%. We made matching contributions of $88,284 and $65,478 in 2018 and 2017, respectively.
Non-qualified Deferred Compensation
We do not have any non-qualified defined contribution plans or other deferred compensation plans.
Potential Payments Upon Termination or Change of Control
The employment agreements we entered into with Mr. Hoch, Mr. Jewell, and Mr. Landers respectively, provide for potential payments upon termination or a change of control.
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Pursuant to our employment agreement with Louis Hoch, our President, Chief Executive Officer, and Chief Operating Officer, as amended, in the event of change in control, termination without cause, or non-renewal of the employment agreement, we will be liable for separation payments, equaling an amount of (a) 2.95 times the base salary and bonus payments, plus (b) a pro rata portion of the annual bonus based on the number of days elapsed in the year prior, plus (c) two times the base salary for non-competition, and (d) one year of continuing other benefits. We will also accelerate vesting of stock incentive awards, which as of December 31, 2018 are approximately $1,494,000.
In the case of termination of the agreement due to the death of Mr. Hoch, we will be liable for separation payments, equaling an amount of 2.95 times the base salary. The deferred compensation does not include amounts paid or accrued to Mr. Hoch for bonuses or bonus compensation, benefits or equity awards. Unpaid and unearned bonus compensation or bonus deferred compensation is forfeited. No deferred compensation will be due as long as we and/or an insurance company continue to pay Mr. Hoch’s base salary, minus any monthly base salary already paid to Mr. Hoch prior to his death pursuant to his disability, to his estate for a period of up to 36 months. If these continuing payments cease before 36 months, we will have to pay his estate the deferred compensation minus any base salary payments within 30 days of the cessation. Further, all stock options issued to Mr. Hoch and all restricted stock granted to executive shall continue on their vesting schedule.
In the case of termination of the agreement due to disability without death by Mr. Hoch, we will be liable for separation payments, equaling an amount of disability benefits constituting base salary for 36 months. Unpaid and unearned bonus compensation or bonus deferred compensation is forfeited. Further, all stock options issued to Mr. Hoch and all restricted stock granted to him shall continue on their vesting schedule. No further compensation will be due for compliance with the agreements’ non-compete, non-solicitation and disparagement clauses.
Pursuant to our employment agreement with Mr. Jewell, our Chief Financial Officer, in the event of change in control, termination upon our default, for good reason or without cause we will be liable for separation payments. The deferred compensation shall be the amount which is calculated as the base salary payments Mr. Jewell would have received had his employment continued for the remaining term of the employment agreement (including yearly increases calculated at the maximum increase for the prior two years), plus all of the benefits remaining under the employment agreement and a pro rata portion of the bonus compensation for that year. In addition, all stock options and restricted stock granted to Mr. Jewell will become fully vested.
Pursuant to our employment agreement with Mr. Vanders, our Chief Revenue Officer, in the event of change in control, termination upon our default, for good reason or without cause we will be liable for separation payments. The deferred compensation shall be the amount which is calculated as the base salary payments Mr. Landers would have received had his employment continued for the remaining term of the employment agreement (including yearly increases calculated at the maximum increase for the prior two years), plus all of the benefits remaining under the employment agreement and a pro-rata portion of the bonus compensation for that year. In the event of a change of control, Mr. Landers will also receive an amount equal to twelve months of his base salary, which was in effect immediately prior to the change of control. In addition, all stock options and restricted stock granted to Mr. Landers will become fully vested.
Proposal No. 2 – Advisory Vote to Approve Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 14A to the Securities Exchange Act of 1934. As required pursuant to Section 14A of the Exchange Act, Proposal No. 2 is a non-binding, advisory proposal on the compensation that we paid to our Named Executive Officers for the year ended December 31, 2018. The Board of Directors is providing shareholders with the opportunity to cast an advisory vote on the compensation of our Named Executive Officers. This proposal, commonly known as a “say-on-pay” proposal, gives you, as a shareholder, the opportunity to endorse or not endorse our executive compensation programs and policies and the compensation paid to our Named Executive Officers for the year ended December 31, 2018.
We believe in the power of open disclosure and know the only way to build and strengthen our reputation and our Company is through honesty and trust. In connection with that belief and as required by SEC rules, we are asking our shareholders to approve, on an advisory basis, the compensation that we paid to our Named Executive Officers.
As discussed under the heading “
Executive Compensation—Compensation Overview
” in this Proxy Statement, our compensation objectives are to: attract and retain highly qualified individuals with a demonstrated record of achievement; reward past performance; provide incentives for future performance; and align the interests of the Named Executive Officers with the interests of our shareholders. The Board is asking shareholders to support this proposal based on the disclosure set forth in these sections of this Proxy Statement, which, among other things, demonstrates:
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•
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our commitment to ensuring executive compensation is aligned with our corporate strategies and business objectives and competitive with those of other companies in our industry;
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•
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the design of our compensation programs is intended to reward our Named Executive Officers for the achievement of key strategic and financial performance measures by linking short- and long-term cash and equity incentives to the achievement of measurable corporate and individual performance goals; and
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18
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•
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our strong emphasis on the alignment of the incentives of our Named Executive Officers with the creation of increased shareholder value.
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Required Vote
Because this proposal asks for a non-binding, advisory vote, there is no required vote that would constitute approval. We value the opinions expressed by our shareholders in this advisory vote, and our Compensation Committee, which is responsible for overseeing and administering our executive compensation programs, will consider the outcome of the vote when designing our compensation programs and making future compensation decisions for our Named Executive Officers. Abstentions and broker “non-votes,” if any, will not have any impact on this advisory vote.
Voting Recommendation
The Board of Directors is asking shareholders to cast a non-binding, advisory vote
FOR
the following resolution:
“RESOLVED, the shareholders of Payment Data Systems, Inc. approve on an advisory basis, the compensation paid to our Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the SEC, including the compensation tables and accompanying narrative disclosure under the heading “
Executive Compensation.
”
SHARE OWNERSHIP
Equity Compensation Plan Information
The following table provides information as of December 31, 2018 with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance:
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Plan Category
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Number of securities to be issued upon exercise of outstanding options and rights
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Weighted-average exercise price of outstanding options and rights
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
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Equity compensation plans approved by security holders
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349,166
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$1.86
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4,563,383
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Equity compensation plans not approved by security holders
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-
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-
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-
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Total
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349,166
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$1.86
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4,563,383
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Our 2015 Equity Incentive Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code and the grant of stock options, restricted stock, stock units, performance awards, or other awards to employees, non-employee directors, and consultants.
The Board of Directors authorized 5,000,000 shares (adjusted for the 1-for-15 reverse split effective on July 23, 2015) of our common stock for issuance under the 2015 Equity Incentive Plan, including automatic increases provided for in the 2015 Equity Incentive Plan through fiscal year 2025. The number of shares of our common stock reserved for issuance under the 2015 Equity Incentive Plan will automatically increase, with no further action by the shareholders, on the first business day of each fiscal year during the term of the Plan, beginning January 1, 2016, in an amount equal to 5% of the issued and outstanding shares of stock on the last day of the immediately preceding year, or such lesser amount if so determined by the Board or the Administrator. On January 1, 2017 and 2018, respectively, the number of authorized common shares under the plan increased by 589,797 and 808,468, respectively, in accordance with the automatic increase provision described above.
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Security Ownership of Certain Beneficial Owners
The following tables set forth, to our knowledge, certain information concerning the beneficial ownership of our common stock as of April 15, 2019 by: (i) each shareholder known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (ii) each of our Named Executive Officers, (iii) each of our current directors, and (iv) all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days after April 15, 2019. However, we did not deem these shares outstanding for the purpose of computing the percentage ownership of any other person.
Shareholders Known by Us to Own 5% or More of Our Common Stock
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Name and Address of Beneficial Owner
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Amount and Nature of Beneficial Ownership
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Percentage of Shares Beneficially Owned (1)
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National Services, Inc. (2)
750 E. Green St.
Pasadena, CA 91101
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1,378,500
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8.2%
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(1)
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On April 15, 2019, we had a total of 16,863,222 shares of common stock outstanding (which excludes 1,097,910 treasury shares).
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(2)
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We relied, in part, on the Schedule 13G filed by National Services, Inc. with the SEC on March 23, 2016 for this information.
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Officers and Directors
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Amount of Beneficial Ownership
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Percent of Shares Beneficially Owned (3)
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Name and Address of Beneficial Owner (1)
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Nature of Beneficial Ownership
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Shares Owned
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Shares – Rights to Acquire (2)
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Total
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Michael Long
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Chairman of the Board
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2,196,782
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--
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2,196,782
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13.0%
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Louis Hoch
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President, Chief Executive Officer, and Vice Chairman of the Board
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2,292,778
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--
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2,292,778
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13.6%
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Vaden Landers
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Chief Revenue Officer
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1,815,152
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--
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1,815,152
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10.8%
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Tom Jewell
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Chief Financial Officer
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227,303
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--
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227,303
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1.3%
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Miguel Chapa
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Director
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64,668
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--
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64,668
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*
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Bradley Rollins
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Director
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22,223
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22,222
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44,445
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*
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Blaise Bender
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Director
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22,223
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--
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22,223
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*
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All directors and executive officers as a group
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6,641,129
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22,222
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6,663,351
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39.5%
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* Indicates ownership of less than 1.0%.
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(1)
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Unless otherwise stated, the address of each beneficial owner listed on the table is c/o Payment Data Systems, Inc., 3611 Paesanos Parkway, Suite 300, San Antonio, Texas 78231.
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(2)
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Represents shares subject to outstanding stock options and restricted stock units currently exercisable or which will be exercisable, or currently vested or that will vest within 60 days of April 15, 2019.
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(3)
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On April 15, 2019, we had a total of 16,863,222 shares of common stock outstanding (which excludes 1,097,910 treasury shares).
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As of December 31, 2018, there are no arrangements among our beneficial owners, known to management, which may result in a change in control of our Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who own more than 10% of a registered class of our securities to file reports of beneficial ownership and changes in beneficial ownership with the Securities and Exchange Commission on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of copies of such reports furnished to us by our officers and directors, we believe that, during the fiscal year ended December 31, 2018, no person required to file reports under Section 16(a) of the Securities Exchange Act of 1934 failed to file such reports on a timely basis during such fiscal year, except for two Form 4s for two unrelated transactions, one filed thirteen days late by Steve Huffman, our former director, and one filed one hundred and sixty nine days late by Bradley Rollins, our director.
AUDIT MATTERS