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)  June 6, 2017

 

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):

 

☐            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐            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 ☐

 

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. ☐

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On June 6, 2017, we and Singular Payments, LLC, a Florida limited liability company, mutually agreed to extend the interest start date under a $500,000 secured line of credit promissory note from May 31, 2017 to the earlier of August 1, 2017, the date of closing and funding our proposed acquisition of Singular Payments or the termination of a non-binding letter of intent regarding the proposed acquisition, or until such mutually agreed upon extended date. Thereafter, interest will accrue at a rate of ten percent per annum. Upon an event of default, interest will accrue at the maximum lawful rate or 15% per annum. The line of credit matures on November 1, 2019.

 

Item 5.07. Submission of Matters to a Vote of Security Holders.

 

Our annual meeting of stockholders was held on June 6, 2017. Proxies were solicited pursuant to our definitive proxy statement filed on April 27, 2017 with the Securities and Exchange Commission under Section 14(a) of the Securities Exchange Act of 1934.

 

The number of shares of our common stock entitled to vote at the annual meeting was 11,761,111. The holders of 9,432,585 shares of common stock were present or represented by valid proxy at the annual meeting. Each share of common stock was entitled to one vote with respect to matters submitted to our stockholders at the annual meeting. At the annual meeting, our stockholders voted on the matters set forth below.

 

Proposal 1 – Election of Class III Director

 

Miguel A. Chapa was duly elected as the Company’s Class III director. The result of the election was as follows:

 

NOMINEE FOR WITHHELD
Miguel A. Chapa 5,323,019 96,725

 

Proposal 2 – Advisory Vote on Executive Compensation

 

Our stockholders voted upon and approved, by non-binding advisory vote, the compensation of our Named Executive Officers, as described in our proxy statement dated April 27, 2017. The votes on this proposal were as follows:

 

FOR AGAINST ABSTAIN
5,294,888 121,352 3,504

 

Proposal 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm

 

Our stockholders voted upon and approved the ratification of the appointment of Akin, Doherty, Klein & Feuge, P.C. to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2017 was ratified. The votes on this proposal were as follows:

 

FOR AGAINST ABSTAIN
9,411,887 8,936 11,762

 

Item 8.01 Other Events.

 

Attached is our presentation delivered at our 2017 annual meeting of stockholders.

 

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 our future activities, or future events or conditions. 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 those risks discussed in our Annual Report on Form 10-K and in other documents that we file from time to time with the SEC. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this report, except as required by law.

 

 

 

 

Item 9.01 Financial Statements and Exhibits.

 

(d)       Exhibits.

 

10.1 Amendment No. 1 to Line of Credit Promissory Note, dated June 6, 2017, by and between Singular Payments, LLC, as Borrower and Payment Data Systems, Inc., as Lender.
99.1 Payment Data Systems, Inc. Presentation for 2017 Annual Meeting of Stockholders on June 6, 2017.

 

The information filed as Exhibit 99.1 to this Current Report on Form 8-K is being furnished in accordance with Item 8.01 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.

 

 

 

SIGNATURES

 

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

 

    PAYMENT DATA SYSTEMS, INC.
     
Date: June 8, 2017   By:  /s/ Louis A. Hoch
    Name:  Louis A. Hoch
    Title: Chief Executive Officer and President
     
     

 

 

EXHIBIT 10.1

 

AMENDMENT NO. 1 to

LINE OF CREDIT PROMISSORY NOTE

 

 

 

This Amendment No. 1 to the Line of Credit Promissory Note dated March 6, 2017 (“ Note ”) is made on June 6, 2017, by and between Payment Data Systems, Inc., 12500 San Pedro, Ste. 120, San Antonio, TX 78216, and Singular Payments, LLC, 5203 Maryland Way, Suite 102, Brentwood, TN 37027.

 

By way of this Amendment No. 1 to the Note, the undersigned parties hereby mutually extend the Interest Start Date from May 31, 2017 to the earlier of August 1, 2017, the date of the closing and funding of the Proposed Transaction (as defined in the Note), the termination of the Letter of Intent (as defined in the Note), or such extended date if Lender and Borrower mutually agree in writing (the “ Extended Interest Start Date ”). All remaining terms and conditions of the Note shall remain in effect.

 

 

    PAYMENT DATA SYSTEMS, INC.
     
    /s/ Louis Hoch
    By: Louis Hoch
    President and CEO
     
     
    Singular Payments, LLC
     
    /s/ Vaden Landers
    By: Vaden Landers
    Manager

 

 

 

EXHIBIT 99.1

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Annual Shareholder Meeting June, 2017

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Forward Looking Statements Disclosure Except for historical information herein, matters set forth in this presentation are forward - looking within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements about commercial operations, technology progress, growth and future financial performance of Payment Data Systems, Inc. and its subsidiaries (the “Company”). These forward - looking statements are identified by the use of words such as “believe,” “expect,” “prepare,” “anticipate,” “target,” “launch,” and “create,” among others. Forward - looking statements in this press release 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, 2015. 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. 2

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Louis Hoch President and CEO

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Payment Data Systems is a next - generation integrated, custom payment solutions provider for merchants, billers , banks, service bureaus and card issuers. PYDS (NASDAQ) Overview Management & Team 21 Employees NASDAQ Price at 5/31/17 ($) 1.43 52 Week Range ($) 1.00 - 3.81 Market Cap ($MM) 17.0 Shares Outstanding (MM) 11.8 Float (MM) 4.6 4 Experienced Management Team with 80+ Combined Years in Payment Processing Headquartered in San Antonio with offices in New York and Los Angeles Founded 1998 Shares held by insiders 55.7%

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Company Highlights 4 Positive Adjusted EBITDA 1 Leading provider of ACH and credit card payment processing in niche verticals No debt Clean capital s tructure Blue chip customers Growth company in booming online and mobile payment space Sustainable competitive advantages by leading with technology and customized solutions First prepaid card integrated with Apple Pay 1 See Appendix for GAAP to Non - GAAP Reconciliation

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Three Pillars of Business Prepaid Card Processor & Program Manager Payment Processing Credit, Debit and ACH Social Payment Provider & Prepaid Card Program Manager 6 1 For the six months ending June 30, 2016 2 As of June 30, 2016

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) What We Do Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) 7 ACH Processing Credit Card Processing Prepaid Card Issuing Bill Payment Processing ACH Origination eCheck Conversion Processing NSF Returned Check Recovery Mobile, Web, and Virtual Terminal Payments Credit / Debit Card Processing Debit Card ONLY Processing Account Validation POS/Card Swipe Retail General Purpose Reloadable Corporate Incentives/ Rewards Open Loop Issuance Card - to - Card Transfer Electronic Bill Payment Over 6,000 National Billers Web Payment MasterCard RPPS Gateway Custom Solutions +

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Transactions Processed per Year 8 2012 2013 2014 2015 8.6 2.7 13.0 24 % CAGR Since 2011 Millions 12.4 2016 14.3

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Dollars Processed per Year 9 2012 2013 2014 2015 $ 257 $ 630 $ 2,978 $ 3,300 70 % CAGR Since 2011 USD Millions 2016 $ 2,916

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Houston Frost Senior Vice President, Prepaid Processing

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Three Core Products: Custom Prepaid Program Management Incentive, Promotional and Disbursement Cards Akimbo: Consumer Card Program

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) 12 Launch your own next - generation prepaid card solution to serve the unique needs of your customers. Program Management Services: Program Management Processing Web and Mobile Applications Customer Service Program Types: Consumer Reloadable Card (GPR) Gift Cards Corporate Incentive Cards

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) 13 Pioneering the digital incentive, promotional and gift card to lower costs and improve the customer experience. Incentive and Promotional

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Akimbo This Card is issued by Sunrise Banks N.A., St. Paul, MN 55103, Member FDIC, pursuant to a license from MasterCard Internation al Incorporated. This card may be used everywhere Debit MasterCard is accepted. Use of this card constitutes acceptance of the terms and conditions stated in the Cardholder Agreeme nt. 14 Encouraging responsible spending with a card for the modern household.

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Tom Jewell Senior Vice President, CFO

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Growth Strategies 16 Organic ACH n etwork expansion Platform innovation Increased marketing for Akimbo Strategic M&A Credit card processing New products and services Accretive

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Singular Payments Pending Acquisition 17 • FinTech payments provider. Focused on Niche Verticals • Processed $440MM in payments in 2016 • Processed over 2.5MM transactions in 2016 • 10 Employees – Nashville, TN and St. Augustine, FL • Founded and Led by Industry Veteran, Vaden Landers • EBPP (Electronic Bill Presentment & Payment) Technology • Should close by August 1 st

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) PYDS Generates Cash $4.1 MM 18 2015 YE $2.1 MM 2014 YE $2.1 MM Free Cash Generated Cash on Hand December 31, 2016 2016 YE $0.9 MM

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Balance Sheet Highlights Cash Restricted cash & Settlement funds Short - term/long - term debt Account Total Assets Total Liabilities 57.8 - 4.1 12/31/15 68.4 59.2 - 2.8 52.2 12/31/14 61.1 54.1 19 USD Millions 59.7 - 4.1 12/31/16 69.5 60.5 ~$40 million in unused tax NOL carry - forward Total Equity 9.1 7.0 9.0

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Income Statement Highlights Revenues Cost of sales Gross Profit SG&A Depreciation Net Income Income tax benefit (expense) 12/31/15 YE 14.4 9.4 5.0 (3.5) (0.5) 1.1 (0.1) 12/31/14 YE 13.4 9.2 4.2 (1.9) (0.04) 3.8 1.5 20 USD Millions 12/31/16 YE 12.1 8.3 3.8 (4.3) (0.9) (1.2) 0.2 Adjusted EBITDA 0.6 See Non - GAAP Reconciliation in the Appendix 2.6 2.9

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) 12/31/2016 and 2015 Non - GAAP EBITDA Reconciliation 25 RECONCILIATION OF GAAP TO NON - GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ended December 31, 2016 2015 Reconciliation from Operating Income to Adjusted EBITDA: Operating income $ (1,360,573) $ 946,877 Depreciation and amortization 901,600 496,368 EBITDA (458,973) 1,443,245 Professional fees related to non - recurring items - 315,903 Acquisition costs - 20,000 Non - cash stock compensation expense (net) 1,053,570 1,111,194 Adjusted EBITDA $ 594,597 $ 2,890,342 Calculation of Adjusted EBITDA margins: Revenues $ 12,076,358 $ 14,380,459 Adjusted EBITDA $ 594,597 $ 2,890,342 Adjusted EBITDA margins 4.9% 20.1 %

 

 

Confidential and Proprietary to Payment Data Systems, Inc. (NASDAQ: PYDS) Financial Highlights Strong Growth Initiatives Underway Significant cash flow generation $0.5M CFOPS 2016 YE Investing in growth while maintaining positive Adjusted EBITDA 1 Strong balance sheet; clean capital structure $40 million NOL carryforward 22 1 See Non - GAAP reconciliation