UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material under Rule 14a-12

Payment Data Systems, Inc.

(Name of Registrant as Specified In Its Charter)

 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Notice of 20172019 Annual

Shareholders’ Meeting

and Proxy Statement

Tuesday, June 6, 2017

11, 2019

at 10 a.m.

CDT

Hilton Garden Inn San Antonio Airport Fountain

Grass Garden Room, 12828 San Pedro Avenue,

Payment Data Systems' Offices
3611 Paesanos Parkway, Suite 300,
San Antonio, Texas 78216

78231
  






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TABLE OF CONTENTS

Letter to our Shareholders from our Board of Directors
1
Notice of Annual Meeting of Shareholders
2
Proxy Summary
3
General Voting and Meeting Information
3
Voting at the Annual Meeting
3
Questions and Answers
4
Governance
   6
7
Proposal 1 – Election of Director
   6
7
DirectorsDirector Biographies and NomineesQualifications
7
Committees of the Board of Directors   7
9
Director Independence, and Related Person Transactions and Other Legal Information
10
Information about Corporate Governance
11
Director Compensation  13
12
Executive Officers
14
Executive Compensation
15
Outstanding Equity Awards at Fiscal-Year End  18
17
Proposal 2 – Advisory Vote to Approve Executive Compensation  20
18
Share Ownership
  21
19
Equity Compensation Plan Information  21
20
Security Ownership of Certain Beneficial Owners  21
20
Section 16(a) Beneficial Ownership Reporting Compliance  23
21
Audit Matters
  23
21
Report of the Audit Committee  23
21
Proposal 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm
  24
21
Principal Accountant Fees and Services  24
22
Audit Committee Pre-Approval Policies and Procedures  24
22
Proposal 4 – Corporate Name Change
23
Reasons for the Amendment
23
Effects of the Amendment
23
Required Vote
23
Voting Recommendation
23
General Information
  25
24
Shareholder Proposals  25
24
Householding  26
24
Other Matters  26
25
Appendix A – Proxy Card  28
27


12500 San Pedro, Ste. 120


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3611 Paesanos Parkway, Suite 300
San Antonio, TX 78216

78231

(210) 249-4100

April 27, 2017

29, 2019

Dear Fellow Shareholder:

You are cordially invited to attend the 20172019 Annual Meeting of Shareholders of Payment Data Systems, Inc. The meeting will be held at 10 a.m. local time on Tuesday, June 6, 2017,11, 2019, at the Hilton Garden Inn San Antonio Airport, Fountain Grass Garden RoomPayment Data Systems' offices located at 12828 San Pedro Avenue,3611 Paesanos Parkway, Suite 300, San Antonio, Texas 78216.

78231.

The formal noticeNotice of the 20172019 Annual Meeting and Proxy Statement has been made a part of this invitation.

Payment Data Systems continues to grow and evolve, and we are committed to ensuring that highly qualified individuals are seated on our Board of Directors, and that our compensation and stock incentive plans are fair, just, and appropriately motivating, and that our capital structure is appropriate.

Through careful evaluation of this proxy statement,Proxy Statement, you can help us to achieve these goals.

goals and shape our future.

Whether or not you attend the Annual Meeting, it is important that your shares beare represented and voted at the Annual Meeting. After reading the Proxy Statement, please promptly vote and submit your proxy by dating, signing and returning the enclosed proxy card in the enclosed postage-prepaid envelope.Your shares cannot be voted unless you submit your proxy or attend the Annual Meeting in person.

Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholder Meeting to Be Held on June 6, 201711, 2019: The Proxy Statement, form of proxy, Annual Report on Form 10-K for the year ended December 31, 20162018 and related materials are available at www.proxyvote.com, by using the QR codes at the end of this document, or by contacting our Investor Relations department through email at ir@paymentdata.com.

The Board of Directors and our Company Managementmanagement look forward to seeing you at the Annual Meeting.

Thank you.

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Louis A. Hoch
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 Michael R. LongMiguel A. ChapaSteve Huffman

 

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Louis A. Hoch Michael R. Long Miguel A. Chapa Blaise C. Bender Brad Rollins    

Notice of 2017 Annual Meeting of Shareholders


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NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS

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Tuesday, June 6, 2017,11, 2019, 10:00 a.m., Central Daylight Time

Hilton Garden Inn San Antonio Airport, Fountain Grass Garden Room, 12828 San Pedro Avenue,

Payment Data Systems' Offices,
3611 Paesanos Parkway, Suite 300,
San Antonio, TX 78216

78231

We are pleased to invite you to join our Board of Directors, senior leadership and other shareholders for our 20172019 Annual Meeting of Payment Data Systems, Inc. Shareholders. The meeting will be held at the Hilton Garden Inn San Antonio Airport, Fountain Grass Garden Room,our offices, located at 12828 San Pedro Avenue,3611 Paesanos Parkway, Suite 300, San Antonio, TX 78216,78231, at 10:00 a.m. local time on Tuesday, June 6, 2017.11, 2019. The purposes of the meeting are:
To elect one Class II Director, Michael R. Long, nominated by our Board of Directors, to serve until the 2022 Annual Meeting are:

●To elect one Class III Director, Miguel A. Chapa, nominated by our Board of Directors, to serve until the 2020 Annual Meeting of Shareholders;

●To consider and vote on whether to approve, on an advisory basis, the compensation paid to our Named Executive Officers;

●To ratify the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2017; and

●To transact such other business as may properly come before the meeting and at any adjournments or postponements of the meeting.

of Shareholders;

To consider and vote on whether to approve, on an advisory basis, the compensation paid to our Named Executive Officers for the year ended December 31, 2018;
To ratify the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2019;
To approve an amendment to our Amended and Restated Articles of Incorporation, as amended, to change our corporate name to Usio, Inc.; and
To transact such other business as may properly come before the meeting and at any adjournments or postponements of the meeting.

The Board of Directors has set April 13, 201715, 2019 as the record date for the meeting.Annual Meeting. This means that only shareholders of record of Payment Data as of the close of business on that date are entitled to:

●Receive notice of the meeting; and

●Vote at the meeting and any adjournment or postponement of the meeting.

Receive notice of the meeting; and
Vote at the meeting and any adjournment or postponement of the meeting.
For ten days prior to the 2017 Annual Meeting, a complete list of shareholders entitled to vote at the 2017 Annual Meeting will be available at the Secretary’s office, 12500 San Pedro,3611 Paesanos Parkway, Suite 120,300, San Antonio, TX 78216.

78231.

This Proxy Statement, form of proxy and our Annual Report for the year ended December 31, 20162018 are available online at www.proxyvote.com and www.paymentdata.com/proxy and www.paymentdata.com/10k or by using the QR codes at the end of this document. You can also access these materials by contacting our Investor Relations Department by email at ir@paymentdata.com.

By Order of the Board of Directors,

____________________

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Louis A. Hoch

President and Chief Executive Officer

San Antonio, Texas

Your Vote is Important to us. Regardless of whether you plan to attend, we urge all shareholders to vote on the matters described in the accompanying proxy statementProxy Statement we hope that you will promptly vote and submit your proxy by dating, signing and returning the enclosed proxy card. This will not limit your rights to attend or vote at the Annual Meeting.

 

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Proxy Summary


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PROXY SUMMARY

General Voting and Meeting Information

The Notice and Access cards detailing the availability of this proxy statementProxy Statement and proxy card are first mailed to shareholders on or about April 27, 2017,May 1, 2019, and all proxy documents will be made available via www.proxyvote.com. It is important that you carefully review the proxy materials, and follow the instructions below to cast your vote on all voting matters.

Voting Methods

Even if you plan to attend the 20172019 Annual Meeting of Shareholders in person on June 6, 2017,11, 2019, please vote as soon as possible by using one of the following advance voting methods. Make sure to have yournotice card,proxy card orvoting instruction form in hand and to follow the instructions

instructions.

You canvote in advance through one of three ways:

pydsproxy201_image9a01.jpgVia the Internet* – Visit the website listed on your notice card, proxy card or voting instruction form.
pydsproxy20_image15.jpg     By Telephone* – Call the telephone number listed on your notice card, proxy card or voting instruction form.
Via the Internet*–Visit the website listed on your notice card, proxy card or voting instruction form.

By Telephone*–Call the telephone number listed on your notice card, proxy card or voting instruction form.

pydsproxy20_image13.jpg     By Mail –If you are a shareownershareholder of record and have received a notice regarding the availability of proxy materials, you may request a written proxy card by following the instructions in the notice. Then sign, date, and return your proxy card/voting instruction form in the enclosed envelope

* If you are a beneficial owner you may vote via the Telephone or Internet if your bank, broker, or other nominee makes those methods available, in which case they will include the instructions with the proxy materials. If you are a shareholder of record, Payment Data will include instructions on how to vote via Internet or Telephone directly on your notice or proxy voting card.


*If you are a beneficial owner you may vote via the Telephone or Internet, if your bank, broker, or other nominee makes those methods available, in which case they will include the instructions with the proxy materials. If you are a shareholder of record, Payment Data will include instructions on how to vote via Internet or Telephone directly on your notice or proxy voting card.

Voting at the Annual Meeting

Shareholders of record may vote at the Annual Meeting. Beneficial owners may vote in person if they have a legal proxy.Even if you plan to attend the 20172019 Annual Meeting, we recommend that you also submit your proxy or voting instructions or vote by telephoneTelephone or the Internet so that your vote will be counted, if you later decide not to attend the meeting.

Annual Meeting.


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Voting Matters and Board Recommendations

Shareholders are being asked to vote on the following matters at the 20172019 Annual Meeting:

Proposal

Recommendation
PROPOSAL 1 - Election of DirectorFOR

Election of one Class IIIII director nominee, Miguel A. Chapa.Michael R. Long. The Board believes that the nominee’s knowledge, skills, and abilities will 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.

 

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PROPOSAL 2 - Advisory Vote to Approve Executive CompensationFOR

The Say-on-Pay Proposal, to approve, on an advisory basis, the compensation paid to our Named Executive Officers for the year ended December 31, 2016.2018. The Company has designed its compensation programs to reward and motivate employees to continue to grow the Company. The Board of Directors takes shareholder views seriously and will take into account the advisory vote in future executive compensation decisions. Accordingly, your proxy holder will vote your shares FOR the approval of the executive compensation paid to our Named Executive Officers unless you instruct otherwise.

PROPOSAL 3 - Ratification of Independent Registered Public Accounting FirmFOR

Akin, Doherty, Klein & Feuge, P.C. has been appointed as the Company’s independent registered public accounting firm for the year ending December 31, 2017.2019. The Audit Committee and the Board believe that retention of the firm is in the best interests of the Company and its shareholders. Accordingly, your proxy holder will vote your shares FOR the ratification of the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm unless you instruct otherwise.

PROPOSAL 2 - Approval of Corporate Name ChangeFOR
The amendment of our Restated Articles of Incorporation, as amended, to change our corporate name from "Payment Data Systems, Inc." to "Usio, Inc." and to authorize our Board of Directors to effect the change. The Board believes that the change of corporate name better reflects our business as our Company braces for the future. Accordingly, your proxy holder will vote your shares FOR the name change unless you instruct otherwise.

Questions and Answers

1.What is a proxy statement, what is a proxy and how does it work?

A proxy statement is a document that the U.S. Securities and Exchange Commission requires us to give you when we ask you to sign a proxy card designating someone other than you to vote the stock you own. The written document you sign indicating who may vote your shares of common stock is called a proxy card and the person you designate to vote your shares is called a proxy. The Board of Directors is asking to act as your proxy. By signing and returning to us the proxy card you are designating us as your proxy to cast your votes at the 2017 Annual Meeting of Shareholders.Meeting. We will cast your votes as you indicate on the proxy card.

Our employees, officers and directors may solicit proxies. We will bear the cost of soliciting proxies and will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to the owners of our common stock.

2.     Who is entitled to vote at the 2017 Annual Meeting of Shareholders?

Meeting?

Only shareholders who were Payment Data Systems, Inc. shareholders of record at the close of business on April 13, 2017,15, 2019, or the Record Date, may vote at the 20172019 Annual Meeting of Shareholders. As of the close of business on the Record Date, there were 11,761,11116,863,222 shares of our common stock outstanding (which excludes 613,7631,097,910 treasury shares). Each shareholder is entitled to one vote for each share of our common stock held as of the Record Date.

3.     What is the difference between a shareholder of record and a beneficial owner?

If your shares are registered directly in your name with Payment Data’s transfer agent, American Stock Transfer and Trust Company, LLC, you are considered, with respect to those shares, ashareholder of record. As a shareholder of record, we will send you a Notice Regarding the Availability of Proxy Material for the 2017 Annual Meeting of Shareholders has been sent directly to you by us.

Meeting.


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If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of your shares of common stock. The Notice Regarding the Availability of Proxy Material for the 2017 Annual Meeting of Shareholders has been forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee how to vote your shares by using the voting instruction form included in the proxy materials.

 

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4.     What does it mean if I receive more than one proxy card?

If you hold your shares in multiple registrations, or in both registered and street name, you will receive a notice card, proxy card or voting instruction form for each account. Please vote each proxy card or voting instruction form you receive using one of the voting methods outlined elsewhere in this proxy statement.

5.     What proposals will be voted on at the 20172019 Annual Meeting of Shareholders?

Meeting?

The following proposals will be voted on at the 20172018 Annual Meeting:
Election of one Class II director, Michael R. Long, nominated by the Board of Directors, to serve until the 2022 Annual Meeting or until his successor is duly elected and qualified;
Approval on an advisory basis, of Shareholders:

·The election of one Class III director, Miguel A. Chapa, nominated by the Board of Directors, to serve until the 2020 Annual Meeting of Shareholders or until his successor is duly elected and qualified;

·The Say-on-Pay Proposal, to approve on an advisory basis, the compensation paid to our Named Executive Officers;

·The ratification of the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent public accounting firm for the year ending December 31, 2017;

the compensation paid to our Named Executive Officers, or the Say-on-Pay Proposal;

Ratification of the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent public accounting firm for the year ending December 31, 2019; and
Approval of an amendment to the Restated Articles of Incorporation, as amended, to change the corporate name to Usio, Inc.
6.     What are the Board’s recommendations?

Our Board recommends that you vote:

·“FOR” Proposal No. 1 to elect one Class III director nominee, Miguel A. Chapa;

·“FOR” Proposal No. 2, the Say-on-Pay Proposal, to approve on an advisory basis, the compensation paid to our Named Executive Officers;

·“FOR” Proposal No. 3 to ratify the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2017;

“FOR” Proposal No. 1 to elect one Class II director nominee, Michael R. Long;
“FOR” Proposal No. 2, the Say-on-Pay Proposal, to approve on an advisory basis, the compensation paid to our Named Executive Officers;
“FOR” Proposal No. 3 to ratify the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2019; and
"FOR" Proposal No. 4 to approve the amendment to the Restated Articles of Incorporation, as amended, to change the corporate name to Usio, Inc.
7.     Will there be any other items of business on the agenda?

We do not expect any other items of business because the deadline for shareholder proposals and nominations has already passed. Nonetheless, in case there is an unforeseen need, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be brought before the meeting.Annual Meeting. Those persons intend to vote that proxy in accordance with their best judgment.

8.     How will my shares be voted?

To designate how you would like to vote, fill out the proxy card or voting instruction form indicating how you would like your votes cast. If you sign and return the proxy card, but do not specify how to vote, we will vote your shares as follows:

·“FOR” Proposal No. 1 to elect one Class III director nominee, Miguel A. Chapa;

·“FOR” Proposal No. 2, the Say-on-Pay Proposal, to approve on an advisory basis, the compensation paid to our Named Executive Officers;

·“FOR” Proposal No. 3 to ratify the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2017;

“FOR” Proposal No. 1 to elect one Class II director nominee, Michael R. Long;
“FOR” Proposal No. 2, the Say-on-Pay Proposal, to approve on an advisory basis, the compensation paid to our Named Executive Officers;
“FOR” Proposal No. 3 to ratify the appointment of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2019; and
"FOR" Proposal No. 4 to approve the amendment to the Restated Articles of Incorporation, as amended, to change the corporate name to Usio, Inc.
9.     Can I change my vote or revoke my proxy?

You may change your vote or revoke your proxy at any time prior to the vote at the 2017 Annual Meeting. If you submitted your proxy by mail, you must file with our Secretary, at Payment Data Systems, Inc., 12500 San Pedro, Ste. 120,3611 Paesanos Parkway, Suite 300, San Antonio, TX 78216,78231, a written notice of revocation or deliver a valid, later-dated proxy. If you submitted your proxy by telephone or the Internet, you may change

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your vote or revoke your proxy with a later telephone or Internet proxy, as the case may be.Attendance at the 2017 Annual Meeting will not have the effect of revoking a proxy unless you give written notice of revocation to the Secretary before the proxy is exercised or you vote by written ballot at the 2017 Annual Meeting.

 

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10.     What is a broker non-vote and what is the impact of not voting?

A broker “non-vote” occurs when a nominee holding shares of common stock for a beneficial owner, such as a bank or broker, does not vote on one or more proposals because the nominee does not have discretionary voting power on that matter, which is also referred to as holding shares in street name. Your bank or broker does not have discretion to vote uninstructed shares on the proposals in this Proxy Statement, except for Proposal No. 3 to ratify the appointment of our independent registered public accounting firm.firm and Proposal No. 4 to approve the amendment to our Amended and Restated Articles of Incorporation, as amended, to change our corporate name. As a result, if you hold your shares in street name it is critical that you provide instructions to your bank or broker, if you want your vote to count in the election of directors and the advisory vote related to executive compensation.

11.     What constitutes a quorum?

A quorum is the minimum number of shareholders necessary to conduct the Annual Meeting. The presence at the 2017 Annual Meeting, in person or by proxy, of the holders of a majority of common stock outstanding on the Record Date will constitute a quorum. As of the close of business on the Record Date, there were 11,761,11116,863,222 shares of our common stock outstanding (which excludes 613,7631,097,910 treasury shares). Votes withheld from any nominee, abstentions and broker “non-votes” are counted as present or represented for the purpose of determining the presence of a quorum.

12.     Is cumulative voting permitted for the election of directors?

No. Shareholders may not cumulate votes in the election of directors, which means that each shareholder may vote only the number of shares he or she owns for a single director candidate.

13.     What is the vote required for a proposal to pass?

Proposal No. 1—Election of Directors: The affirmative vote of a plurality of the shares of common stock present or represented by proxy and entitled to vote at the 2017 Annual Meeting, in person or by proxy, is required for the election of the nominee. Thus, assuming a quorum is present at the 2017 Annual Meeting, the nominee who receives the most affirmative votes will be elected as Class IIIII director. Abstentions and broker “non-votes” will have no effect on the voting outcome with respect to the election of directors.

Proposal No. 2—Say-on-Pay: 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.

Proposal No. 3—Ratification of the selectionSelection of our independent registered public accounting firm:Independent Registered Public Accounting Firm: The affirmative vote of the holders of a majority of shares of common stock present in person or represented by proxy and entitled to vote at the 2017 Annual Meeting, is required to ratify our selection of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2017.2019. A properly executed proxy marked “ABSTAIN” with respect to this proposal will not be voted, although it will be counted for purposes of determining the number of shares of common stock entitled to vote. Accordingly, an abstention will have the effect of a negative vote. Because Proposal No. 3 is a routine proposal on which a broker or other nominee is generally empowered to vote, broker “non-votes” likely will not result from this Proposal.proposal. Thus, if you are a beneficial owner holding shares through a broker, bank or other holder of record and you do not vote on this Proposal,proposal, your broker may cast a vote on your behalf for this Proposal.

Governance

proposal.
Proposal No. 4—Approval of Corporate Name Change: The affirmative vote of the holders of a majority of shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting, is required to approve the amendment to our Restated Articles of Incorporation, as amended, to change our corporate name to Usio, Inc. A properly executed proxy marked “ABSTAIN” with respect to this proposal will not be voted, although it will be counted for purposes of determining the number of shares of common stock entitled to vote. Accordingly, an abstention will have the effect of a negative vote. Because Proposal No. 4 is a routine proposal on which a broker or other nominee is generally empowered to vote, broker “non-votes” likely will not result from this proposal. Thus, if you are a beneficial owner holding shares through a broker, bank or other holder of record and you do not vote on this proposal, your broker may cast a vote on your behalf for this proposal.

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GOVERNANCE

Proposal No. 1 – Election of Director

Election of one Class IIIII 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 sharesFOR the election of the Board’s nominee named below unless you instruct otherwise.

 

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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 fourfive directors:

 NamePosition with our CompanyDirector SinceTerm Expires
Class I    
 Louis A. HochPresident, CEO, and Class I Director19982018
Class II    
 Michael R. LongChairman of the Board, and Class II Director19982019
 Steve HuffmanClass II Director20162019
Class III    
 Miguel A. ChapaClass III Director20152017

 NamePosition with our CompanyDirector SinceTerm Expires
Class I    
 Louis A. HochPresident, CEO, and Class I Director19982021
 Blaise C. BenderClass I Director20192021
Class II    
 Michael R. LongChairman of the Board, and Class II Director19982022
Class III    
 Miguel A. ChapaClass III Director20152020
 Bradley RollinsClass III Director20172020
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 20172019 Annual Meeting is required to elect the nominee for director.

What am I voting on?

Shareholders are being asked to elect one Class IIIII director nominee for a three-year term. The following sections include information about all Directors, including Miguel A. Chapa,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 2017 Annual Meeting, in person or by proxy, is required for the election of the nominee. Thus, assuming a quorum is present at the 20172019 Annual Meeting, the nominee who receives the most affirmative votes will be elected as Class IIIII 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 voteFOR the election of Class IIIII Director, Miguel A. Chapa.

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 DirectorDirectors with a Three-Year Term Ending with the 20182021 Annual Meeting of Shareholders

Louis A. Hoch, age 5153 – 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 twentytwenty-five years of management

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experience, sixteentwenty years of which were at a senior executive level, in large systems development, 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.”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.

 

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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 DirectorsDirector with a Three-Year Term Ending with the 2019 Annual Meeting of Shareholders

Michael R. Long, age 7274 – 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 partythird-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 an intimate knowledge of our Company due to his longevity in the industry and with us.

Steve Huffman, age 63 – Director

Mr. Huffman currently serves as the President of Huffman Developments, LLC, which specializes in turnkey commercial real estate development, primarily for medical and professional office buildings. Mr. Huffman began his commercial real estate career in 1983, while also running a successful public accounting practice. In addition to his own ventures, Mr. Huffman is often engaged to serve as an owner’s representative to help other organizations, typically nonprofit organizations, complete their own real estate projects. Currently, Mr. HuffmanLong is overseeing the developmentalso a director of the National Museum of the U.S. Army, an 185,000 square foot museum including an 82 acre campus at Fort Belvoir. Mr. Huffman has been actively involved in leadership positions on various civic boards and commissions including the Greater San Antonio Chamber of Commerce, the Finance committee of the Santa Rosa Health Care System, the San Antonio Chapter of the Texas Society of CPAs, Ella Austin Community Center, San Antonio Job Training commission, United Way, the Boy Scouts of America, and Ballet San Antonio. He also was the founder and serves as President of Returning Heroes Home. Mr. Huffman has over 30 years of experience developing commercial real estate, and has a background as a Certified Public Accountant. Mr. Huffman earned his Bachelor of Business Administration from the University of Texas at Austin and began his career as an accountant with Peat Marwick (now KPMG) from 1978 to 1983.

Face Key, Inc.

Class III DirectorDirectors with a Three-Year Term Ending with the 20172020 Annual Meeting of Shareholders

Miguel A. Chapa, age 4448 – 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 degree in Finance in 1998 from the Monterrey Institute of Technology and Higher Education.

Other Involvement

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 Certain Legal Proceedings

Nonecomplete 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 our directors have been involvedPresident and CEO 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 evaluationJanuary 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 abilityUnited Way of San Antonio and integrityserves 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 any director.

 

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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 9nine meetings during 2016,2018, 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. LouisMessrs. Hoch, Long, and Rollins attended the 20162018 Annual Meeting of Shareholders.

Meeting.

Committees of the Board of Directors

Effective November 11, 2016, our Board of Directors appointed Mr. Steve Huffman and Tom Jewell as independent directors. Mr. Jewell resigned from the Board and his respective committee assignments on January 6, 2017, as a result of becoming our Chief Financial Officer. Miguel Chapa serves as our independent director since April 24, 2015. 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 NASDAQNasdaq 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:

Name of Committee MemberAuditCompensationNominations and Corporate Governance
Steve HuffmanBlaise Bender«
«

«
Miguel Chapa●●●
Bradley Rollins●●●

«Committee Chair        ●Committee member

Audit Committee

Effective November 11, 2016, our Board appointed Mr. Huffman as chairpersonchair of our Audit Committee who served until April 1, 2019. Effective April 1, 2019, our Board appointed Mr. Blaise Bender to join Mr. Chapa, bothserve as chair of whom meet the independence standards for independent directors under the rules of the NASDAQ Stock Market published in the NASDAQ Marketplace Rules.our Audit Committee. Mr. Huffman meetsand Mr. Bender meet the standard of “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of Regulation S-K. Mr. Jewell,Chapa serves as an independent director, served ona member of our Audit Committee since May 19, 2015 and Mr. Rollins serves as member to the Audit Committee from November 11, 2016 to January 6, 2017, when he resigned to become our Chief Financial Officer.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 the year ended December 31, 2016.

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 auditingaccounting 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.

 

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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, 2016,2018, the Audit Committee did receivereceived 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 November 11, 2016,April 1, 2019, our Board appointed Mr. HuffmanBender 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 to join Mr.Committee. Messrs. Huffman, Bender, Chapa, both of whomand Rollins meet the independence standards for independent directors under the rules of the NASDAQNasdaq Stock Market published in the NASDAQNasdaq Marketplace Rules. Mr. Jewell, as an independent director, served as chair of the Compensation Committee from November 11, 2016 to January 6, 2017, when he resigned to become our Chief Financial Officer. On January 6, 2017, our Board appointed Mr. Huffman as the chair of the Compensation Committee. The Compensation Committee has a written charter. The Compensation Committee met two times in the year ended December 31, 2016.

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

Effective November 11, 2016, our Board appointed

Mr. Huffman to theserved as chair of our Nominations and Corporate Governance Committee, or the Governance Committee, from January 6, 2017 to joinApril 1, 2019. Effective April 1, 2019, our Board appointed Mr. Bender as chair of the Governance Committee. Mr. Chapa bothserves as a member of whomour 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 NASDAQNasdaq Stock Market published in the NASDAQ MarketplaceNasdaq Listing Rules. Mr. Jewell, as an independent director, served on the Nominations Committee from November 11, 2016 to January 6, 2017, when he resigned to become our Chief Financial Officer. On January 6, 2017, our Board appointed Mr. Huffman as the chair of the Nominations and CorporateThe Governance Committee. The Nominations Committee has a written charter. The Nominations and Corporate Governance Committee met threeone time in the year ended December 31, 2016.

2018.

The Nominations and Corporate 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 Nominations and Corporate 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, and Related Person Transactions

and Other Legal Information

Independent Directors

Standard for Independence— We determine independence using the definitions set forth in the NASDAQNasdaq 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 a family member of the director owns in the Company and whether the director or a family member of the director is associated with the Company’s independent auditor.

 

Page 10

Effective on April 24, 2015, our Board of Directors appointed Mr. Kirk Taylor and Mr. Miguel Chapa as independent directors. Effective November 11, 2016, our Board of Directors appointed Mr. Steve Huffman and Mr. Tom Jewell as independent directors. Mr. Taylor resigned on August 1, 2016 and Dr. Kirby retired on November 11, 2016. Mr. Jewell resigned from the Board on January 6, 2017 when he became our Chief Financial Officer. The Board has determined that Mr. Taylor, Mr.Messrs. Huffman, Mr. JewellBender, Chapa, and Mr. ChapaRollins are independent as defined by Rule 5605(a)(2) of the NASDAQNasdaq 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 December 27, 2016,January 6, 2019, we repurchased 246,71711,860 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 December 27, 2016January 8 and 9, 2018 from employeesdirectors, officers and directorsemployees to cover the respective employees’ and directors’officer or employee's share of taxes for shares that vested on that day, as approved by our Audit Committee and Board of Directors and our Audit Committee on the same day, with the respective directors recusing themselves. In particular we repurchased the following shares from our Named Executive Officers and Directors:

Louis A. Hoch:124,542 shares valued at $1.75 per share or total $217,949;
Michael R. Long:76,269 shares valued at $1.75 per share or total $133,471;
Dr. Peter Kirby:11,573 shares valued at $1.75 per share or total $20,253;
Larry Morrison:17,874 shares valued at $1.75 per share or total $31,280.

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;
Louis A. Hoch (Chief Executive Officer): 158,476 shares valued at $2.40 per share or total of $380,342; and
Tom Jewell (Chief Financial Officer): 13,060 shares valued at $2.50 per share of total of $32,650.
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 yearyears ended December 31, 20162018 and 2015,2017, we purchased $2,250$9,476 and $857,$1,826, respectively, of corporate imprinted sportswear, promotional items and caps from Angry Pug Sportswear. Nikole Killough and Louis Hoch, our President and Chief Executive Officer, are eachis a 50% ownersowner of Angry Pug Sportswear.

Miguel Chapa and Louis Hoch

During the yearyears ended December 31, 20162018 and 2015,2017, we received $51,500$26,709 and $20,901,$29,555, respectively, in revenue from Club Rio Maroc Bar, Lush Rooftop, and Nirvana Bar and Rock.Rooftop. Miguel Chapa, a member of our Board of Directors, and is an owner in Club Rio Maroc Bar, Lush Rooftop,Rooftop. Louis Hoch, our President and Nirvana Bar and Rock.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 Lush Rooftop.

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 ishas 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. EffectiveMr. 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. Tom Jewell and Steve HuffmanBlaise Bender as independent directors. Mr. Tom Jewell resigned from our Board when he became our Chief Financial Officer on January 6, 2017.director. Our Board is currently searching for a suitable candidate to fill our vacant Board seat. Our Board believes that having a majority of independent directors serves our Company well.

 

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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 Meetingannual meeting of Shareholdersshareholders 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 will selectselects nominees for director based on theirthe 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,policy; however, the Nominations and Corporate 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 Nominations and Corporate 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 Nominations and Corporate Governance Committee believes itit'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 NASDAQNasdaq Listing Rules. The Nominations and Corporate Governance Committee also believes itit's appropriate for key members of our management to participate as members of the Board of Directors. Prior to each Annual Meetingannual meeting of Shareholders,shareholders, the Nominations and Corporate Governance Committee identifies nominees first by evaluating the current directors whose term will expire at the Annual Meetingannual 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 Nominations and Corporate 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., 12500 San Pedro,3611 Paesanos Parkway, Suite 120,300, San Antonio, Texas, 78216,78231, and the Board of Directors will consider such nominee.

 

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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., 12500 San Pedro,3611 Paesanos Parkway, Suite 120,300, San Antonio, Texas, 78216.78231. 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, 2016.2018. Compensation provided to Directors who are also employees is listed in the Summary Compensation Table for the years ended December 31, 20162018 and 20152017 in the section addressing Executive Compensation.

Name

Fees earned or paid in cash

($)

Stock

awards

($) (1)

All other compensation

($) (2)

Total

($)

Peter G. Kirby (3)29,00014,84810,66754,515
Kirk Taylor (4)42,000----42,000
Miguel A. Chapa (5)29,00035,003--64,003
Steve Huffman (6)1,00038,446--39,446
Tom Jewell (7)1,00038,446--39,446

Name
Fees earned or paid in cash
($)
All other compensation
($)
Total
($)
Michael R. Long (1)255,000
14,667 (2)269,667
Miguel A. Chapa (3)4,000
--4,000
Steve Huffman (4)19,000
--19,000
Bradley Rollins (5)4,000
--4,000


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(1)Represents the fair value of accrued prior stock awards recognized for financial statement reporting purposes only. The fair value of each restricted stock awardMichael Long is amortized to expense monthly on a straight-line basis over the vesting periodour Co-Founder and served as our Chief Executive Officer until August 4, 2016. He has served as our Chairman of the restricted stock award for the fiscalBoard since July 1998. Mr. Long elected to receive a base salary of $255,000 per year ended December 31, 2016 in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718. See Note 10lieu of the Notesbase salary of $375,000 that would have been due to our Financial Statements contained inhim for 2018 under the annual report on Form 10-Kemployment agreement effective February 27, 2007, as amended. No deferred compensation is owed to Mr. Long for a discussion of all assumptions made by us in determining values of our stock awards.2018.

(2)Represents the difference in value for stock awards at grant dateMr. Long's other compensation consisted of 401(k) contributions and vest date.life insurance benefits.

(3)Dr. Kirby served on our Board of Directors until November 11, 2016. For the year ended December 31, 2016, heMr. Chapa received $4,000 in meeting fees and $25,000 as a one-time cash bonus. 

(4)Mr. Taylor served on our Board of Directors until August 1, 2016.

(5)Mr. Chapa was appointed to our Board of Directors effective April 24, 2015. For the year ended December 31, 2016, he received $4,000 in meeting fees and $25,000 as a one-time cash bonus.fees. As of December 31, 2016,2018, there were 20,00122,223 shares of restricted stock outstanding for Mr. Chapa. An additional 6,667 Of these 22,223 shares, vested on January 1, 2017, and 6,66711,111 shares vest on January 1, 2018.November 22, 2019 and 11,112 shares vest on November 22, 2020.

(6)
(4)Mr. Huffman was appointed to our Boardreceived $19,000 in meeting fees. As of Directors effective November 11, 2016. On November, 11, 2016, we granted Mr. Huffman 66,667December 31, 2018, there were 22,222 restricted stock units convertible into 66,66722,222 shares of our common stock at the start of his directorship term, pursuant and subject to the terms of our 2015 Equity Incentive Plan. 22,223 restricted stock units of common stock outstanding for Mr. Huffman, which vested on January 1, 2017, and were converted into stock on April 12, 2017. 22,222 shares vest on January 1, 2018, and 22,222 shares vest on January 1, 2019.

(7)
(5)Mr. Jewell was appointed to our BoardRollins received $4,000 in meeting fees. As of Directors effective November 11, 2016 and served until January 6, 2017 when he became our Chief Financial Officer. On November 11, 2016, we granted Mr. Jewell 66,667December 31, 2018, there were 44,444 restricted stock units convertible into 66,66744,444 shares of common stock with a grant date fair value of $115,334. 22,223 shares of common stock vestedoutstanding for Mr. Rollins. 22,222 units vest on JanuaryMay 1, 2017,2019 and were converted into stock22,222 units vest on April 12, 2017. As a result of Mr. Jewell accepting the Chief Financial Officer position on January 6, 2017 and resigning from the Board, the remaining 44,444 unvested shares were cancelled.May 1, 2020.

 

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Narrative to Director Compensation Table

During 2016, Messrs. Long and2018, Mr. Hoch received no compensation for serving on our Board due to theirhis status as officersChief Executive Officer of our Company.

Effective on April 24, 2015, 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 Directors appointedthe Board. Prior to Mr. Kirk Taylor and Mr. Miguel ChapaLong’s retirement, we entered into an employment agreement effective February 27, 2007, as two independent directors.amended. In connection with Mr. Taylor’sLong’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. Chapa’s appointments,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 Mr. Taylor, Mr. Chapa andall our long-standing director, Dr. Peter Kirby. Weindependent directors. Per the agreements, we agreed to pay each director $1,000 per quarter for participating in each quarterly board meeting,and committee meetings, including the annual shareholder meeting. As Chairmanchair of the Audit Committee, Mr. TaylorHuffman 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. We also agreed to pay Dr. Kirby one-time cash-bonuses of $20,000 in 2015 and $25,000 in 2016 for continued loyalty and service to our Company. Mr. Chapa and Dr. KirbyOur directors do not receive any additional compensation for ad hoc or preparatory meetings or for being the chair of a committee. On August 1, 2016, Mr. Taylor resigned from our Boardcommittee, other than the chair of Directors,the Audit Committee who receives an additional $15,000 per annum upon the timely filing of the annual report with the Securities and on November 11, 2016, Dr. Kirby retired from our Board of Directors.

On April 24, 2015, we also granted Mr. Taylor 33,334 shares of common stock withExchange Commission. In addition, an Audit Committee member who is not a grant date fair value of $180,000 for his services on our Board of Directors. 11,111 shares vested on April 24, 2015, and 11,112 shares vested on January 1, 2016. 11,110 shares scheduled to vest on January 1, 2017 were cancelled in 2016 aschairperson but holds a result of Mr. Taylor’s resignation from the Board on August 1, 2016. On April 24, 2015, we also granted Mr. Chapa 33,334 shares of common stock with a grant date fair value of $180,000 for his services on our Board. 13,334 shares vested on April 24, 2015, 6,667 shares vested on January 1, 2016, 6,667 shares vested on January 1, 2017, and 6,667 shares vest on January 1, 2018. On April 11, 2017, Mr. Chapa returned 2,000 shares at the closing price of April 11, 2017 of $1.85valid CPA license will receive an additional $5,000 per share to cover taxes.

Effective November 11, 2016, our Board of Directors appointed Tom Jewell and Steve Huffman as independent directors. In connection with Mr. Jewell and Mr. Huffman’s appointments, we entered into our customary independent director agreements with Mr. Jewell and Mr. Huffman. 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 boardBoard by mutual agreement; (c) the removal of the respective director from the boardBoard by the majority stockholders of the Company; and (d) the resignation by the director from the board.

We agreedBoard.


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On April 24, 2015, in connection with his appointment to pay each director $1,000our Board, we granted Mr. Chapa 33,334 shares of common stock with a grant date fair value of $180,000 for participatinghis 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 each quarterly board and committee meeting, including the annual shareholder meeting. Mr. Jewell andconnection 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 not receive any additional compensation for ad hoc or preparatory meetings or for being the chairvest 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 a committee, other than the Audit Committee and only ifcommon stock.

On April 1, 2019, our Board of Directors appointed the Chair of the Audit committee or for being a regular or non-ChairBlaise C. Bender as an independent member of our Board of Directors. Mr. Bender will serve as the chairman of our Audit, committeeCompensation, and holding a valid CPA license.

Nominations and Corporate Governance Committees. Mr. Jewell and Mr. Huffman were also grantedBender received 66,667 restricted stock units convertible into our common stock, at the start of their directorship terms, pursuant and subject to the terms of our 2015 Equity Incentive Plan. Such units will vest in three installments: (1)installments as follows: 22,223 units vested on JanuaryApril 1, 2017, (2)2019, 22,222 units vest on JanuaryApril 1, 2018,2020, and (3)the remaining 22,222 units vest on JanuaryApril 1, 2019. As a result of Mr. Jewell accepting the Chief Financial Officer position on January 6, 2017 and resigning from the Board, his remaining 44,444 unvested shares were cancelled.

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 5153 – President, Chief Executive and Operating Officer and Vice Chairman of the Board

For Mr. Hoch’s biography, please refer to page 7 in the section entitled “Director Biographies and Qualifications.”

 

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Tom Jewell, age 6062 – 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 CFOChief 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 CFOChief 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 a Certified Public Accountant, began his career at Touche Ross (Deloitte). Mr. Jewell iswas 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.

Houston Frost, Ph.D.,Council until 2018. Mr. Jewell was a Certified Public Accountant until 2018.

Vaden Landers, age 3549 – Senior Vice President, Corporate Development and Prepaid Products

Chief Revenue Officer

Mr. FrostLanders has over 30 years of experience in the payments industry. Most recently, he served as our Senior Vicethe 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 Corporate Developmentfor Global Payments from 2000 to 2002 and Prepaid Products since December 2014. Prior to joining us, Mr. Frost served as President and Chief Executive Officer of Akimbo Financial, Inc. since its inception.for Bancard Consulting Group from 1996 to 1998. Mr. Frost co-founded Akimbo in January 2010 motivated by a desire to reinvent the prepaid card. Mr. Frost has more than six years of experience in the prepaidLanders studied criminal justice and payments industry and ten years of experience in financial services. Prior to Akimbo, Mr. Frost worked in New York as an Associatebusiness management at JPMorgan Chase & Co. on the Fixed-Income Strategy team. Mr. Frost earned his Ph.D. in Chemical and Biological Engineering from Northwestern University in 2007 and a Bachelor’s of Science in Chemical and Biological Engineering from the University of Colorado in 2003.

Larry Morrison, age 57 – Senior Vice President, Sales and Marketing

Mr. Morrison has served as our Senior Vice President Sales and Marketing Officer since July 2003. Previously, he also served as our Vice President. Mr. Morrison has over 27 years of experience in all aspects of sales and sales management. Before joining us to oversee all sales and marketing functions, Mr. Morrison served as a major accounts executive for a tier one telecommunications provider and vice president of sales and operations for a major two-way communications firm. His background also includes management and implementation of large government communication systems installations both domestic and abroad.

Lincoln Memorial University.




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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, 2016.2018. 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:

●Michael R. Long, Chief Executive Officer until August 4, 2016;

●Louis A. Hoch, Chief Executive and Operating Officer;

●Houston Frost, Senior Vice President, Corporate Development and Prepaid Products Officer; and

●Larry Morrison, Senior Vice President, Sales and Marketing.

 

Page 15

Louis A. Hoch, Chief Executive and Operating Officer;

Tom Jewell, Chief Financial Officer; and
Vaden Landers, Chief Revenue Officer.
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 boardBoard 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 shortshort- 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, 20162018 and 2015

2017

The following table sets forth the compensation for the fiscal years ended December 31, 20162018 and 20152017 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.”

Name and Principal PositionFiscal Year Ended Dec. 31Salary ($)Bonus ($)Stock Awards ($)(1)All Other Compensation ($)Total ($)

Michael R. Long

Chairman, Former Chief Executive Officer (2)

2016255,000--212,17981,367 (4)548,546
2015255,00090,491 (3)223,24866,697 (5)635,436

Louis A. Hoch

Vice Chairman, President and Chief Executive Officer (6)

2016272,600--226,430320,242 (8)819,272
2015235,00020,000 (7)243,432127,775 (9)626,207

Houston Frost

Senior Vice President, Corporate Development and Prepaid Products

2016130,000--139,4005,788 (11)275,188
2015130,00043,119 (10)139,4006,433 (12)318,952

Larry Morrison

Senior Vice President, Sales and Marketing

2016130,000--68,80034,562 (13)233,362

 

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Name and Principal PositionFiscal Year Ended Dec. 31Salary ($)Bonus ($)Stock Awards ($)(1)All Other Compensation ($)Total ($)
Louis A. Hoch
Vice Chairman, President and Chief Executive Officer
2018350,000
----15,926 (3)365,926
2017350,000
70,000 (2)663,00015,618 (4)1,098,618
Tom Jewell
Chief Financial Officer (5)
2018192,308
----8,280 (6)200,588
2017170,423
30,000 (7)331,5007,365 (8)539,288
Vaden Landers
Chief Revenue Officer (9)
2018300,000
----588 (10)300,588
(1)Represents the amount recognized by our Company for the specific executive during this period for financial statement reporting purposes only and is not compensation earned by the executive. Theaggregate grant date fair value of each restricted stock award is amortized to expense on a straight-line basis over the vesting period of the restricted stock award in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718. See Note 10 of the Notes to our Financial Statements contained in the annual report on Form 10-K for a discussion of all assumptions made by us in determining values of our stock awards.

(2)Mr. Long is our current Chairman of the Board of Directors and served as our Chief Executive Officer until August 4, 2016. In 2016 and 2015, 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 2016 and 2015 under the employment agreement effective February 27, 2007, as amended. No deferred compensation is owed to Mr. Long for 2016 or 2015.

(3)Mr. Long’s 2015Hoch’s 2017 bonus compensation consisted of a one-time cash bonus of $90,491. All bonus compensation was granted pursuant to the terms of our employment agreement, as amended, with Mr. Long declining to receive the full allotted bonus of $216,000.

(4)Mr. Long’s 2016 other compensation consisted of (a) $2,550 of matching 401k contributions, (b) $12,117$70,000 in life insurance premiums, and (c) $66,700 representing the fair value of accrued prior unvested stock awards recognized for financial statement reporting purposes only.

(5)Mr. Long’s 2015 other compensation consisted of (a) $3,445 of matching 401k contributions, (b) $12,117 in life insurance premiums, and (c) $51,125 representing the fair value of accrued prior unvested stock awards recognized for financial statement reporting purposes only.

(6)In 2016 Mr. Hoch received a base salary of $235,000 per year at Mr. Hoch’s election, which was increased to $350,000 in August 2016 when Mr. Hoch became our Chief Executive Officer consistentconnection with his employment agreement. In 2015, Mr. Hoch elected to receive a base salary of $235,000 per year in lieuservices and the performance of the base salary of $350,000 that would have been due to him for 2015 under the employment agreement. No deferred compensation is owed to Mr. Hoch for 2016 and 2015.

(7)Mr. Hoch’s 2015 bonus compensation consisted of one-time cash bonus of $20,000.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.$216,000 in 2017 or 2018.

(8)
(3)Mr. Hoch’s 20162018 other compensation consisted of (a) $9,827$11,000 of matching 401k401(k) contributions (b) $4,710and $4,926 in life insurance premiums, and (c) $305,705 representing the fair value of accrued prior unvested stock awards recognized for financial statement reporting purposes only.premiums.

(9)
(4)Mr. Hoch’s 20152017 other compensation consisted of (a) $10,200$10,800 of matching 401k401(k) contributions (b) $3,831and $4,818 in life insurance premiums, and (c) $113,744 representing the fair value of accrued prior unvested stock awards recognized for financial statement reporting purposes only.premiums.

(10)
(5)Mr. Frost’s 2015 bonusJewell’s 2017 compensation consistedincluded $1,000 in board compensation earned for board services in 2016 and paid in 2017 and a base salary of one-time cash bonuses of $43,119.$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.

(11)
(6)Mr. Frost’s 2016Jewell's 2018 other compensation consisted of (a) $5,200$7,692 of matching 401k401(k) contributions and (b) $588 in life insurance premiums.

(12)
(7)Mr. Frost’s 2015Jewell’s 2017 bonus compensation consisted of a one-time cash new hire bonus of $30,000.
(8)Mr. Jewell’s 2017 other compensation consisted of (a) $5,845$6,777 of matching 401k401(k) contributions and (b) $588 in life insurance premiums.

(13)
(9)Mr. Morrison’s 2016Lander's was appointed our Chief Revenue Officer on September 1, 2017.
(10)Mr. Lander's 2018 other compensation consisted of (a) $5,200 of matching 401k contributions, (b) $ 2,622$588 in life insurance premiums, and (c) $26,700 representing the fair value of accrued prior unvested stock awards recognized for financial statement reporting purposes only.premiums.

 

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Narrative to Summary Compensation Table

Named Executive Officer Employment Agreements

We entered into an employment agreement with Michael R. Long effective February 27, 2007, as amended. Under the agreement, Mr. Long agreed to serve as our Chairman of the Board. 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 2016 and 2015, 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 2016 and 2015 under the employment agreement. No deferred compensation is owed to Mr. Long for 2016 or 2015. Mr. Long’s 2015 bonus compensation consisted of a one-time cash bonus of $90,491. The bonus compensation was granted pursuant to the terms of our employment agreement, as amended, with Mr. Long declining to receive the full allotted bonus of $216,000.

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. In 2016, Mr. Hoch receivedreceives a base salary of $235,000$350,000 per year at Mr. Hoch’s election, which was increased to $350,000 in August 2016 when Mr. Hoch became our Chief Executive Officer consistent with his employment agreement. In 2015, Mr. Hoch elected to receive a base salary of $235,000 in lieu of the base salary of $350,000 that would have been due to him under the employment agreement.year. No deferred compensation is owed to Mr. Hoch for 20162018 or 2015. Mr. Hoch’s 2015 bonus compensation consisted of a one-time cash bonus of $20,000. All bonus compensation was granted pursuant to the terms of our employment agreement2017.
In connection with Mr. Hoch, as amended, declining to receive the full allotted bonus of $216,000.

WeJewell’s appointment on January 6, 2017, we entered into an employment agreement with Houston Frost, Ph.D. from December 23, 2014him. Pursuant to December 31, 2016 when the employment agreement, was not renewed and terminated according to its terms. Under the expired employment agreement, Mr. Frost agreed to serve as our Senior Vice President Corporate Development and Prepaid Products through December 31, 2016. Wewe agreed to pay Mr. Frost anJewell a base annual base salary of $130,000$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 to exceedexceeding 50% of the highest salary received in any year of the agreement and approved and calculated by our executive compensation committee and/or Chief Executive Officer. In addition,agreement. Mr. FrostJewell also received 266,667200,000 restricted stock units convertible into shares of our common stock, pursuant and subject to be vested 120,000 shares in equal incrementsthe terms of 3,334 shares a month with the first 3,334 shares vested January 31,our 2015 and the last 3,334 to vest December 31, 2017. The remaining 146,667 sharesEquity Incentive Plan. Such units will vest allin five equal installments beginning on January 31, 2025. The6, 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 was issuedupon his appointment, which will vest on September 1, 2027 or earlier upon a restricted, non- registered basis.change of control. Mr. FrostLanders 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. As of January 1, 2017, Mr. Frost is serving as our Senior Vice President Corporate Development and Prepaid Products at-will.

We do not have anLander’s employment agreement with Larry Morrison.

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 unexercisedunvested stock options and unvested stockawards by grant date outstanding on December 31, 2016,2018, 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.

Name

Stock awards
Grant dateNumber of shares or units of stock that have not vested (#)(1)Market value of shares or units of stock that have not vested ($)(2)
Michael R. Long   
 1/09/2008516,667955,834
 10/04/201266,667123,334
 12/29/2014533,334986,668
Louis A. Hoch   
 1/09/2008516,667955,834
 10/04/201266,667123,334
 12/29/2014533,334986,668
Larry Morrison   
 1/09/200846,66786,334
 10/04/201230,00055,500
 12/29/2014200,000370,000
Houston Frost (3)   
 12/23/201440,00074,000
 12/23/2014146,667271,334



Name
Stock awards
Grant dateNumber of shares or units of stock that have not vested (#)Market value of shares or units of stock that have not vested ($)(1)
Louis A. Hoch  

 

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10/04/201266,667 (2)110,667
12/29/2014533,334 (3)885,334
11/22/2017300,000 (4)498,000
Tom Jewell
1/6/2017160,000 (5)265,600
11/22/2017150,000 (4)249,000
Vaden Landers
9/1/2017300,000 (6)498,000

(1)Unvested common stock granted January 9, 2008 vests on January 9, 2018. Unvested common stock granted on October 4, 2012 vests on October 4, 2022. Unvested common stock granted on December 29, 2014 vests on December 29, 2024.

(2)(1)Calculated using the NASDAQNasdaq Capital MarketsMarket closing price of $1.85$1.66 per share of our common stock on the last trading day of our fiscal year, or December 30, 2016.31, 2018.

(2)Vests on October 4, 2022.
(3)Vests on December 29, 2024.
(4)Vests on November 21, 2027 or earlier upon a change of control.
(5)The sharesgrant consisted of 200,000 restricted stock units which vest in five equal incrementstranches of 3,334 shares a month with the first 3,334 shares40,000 per year, beginning on January 6, 2018 and becoming fully vested on January 31, 2015 and the last 3,334 to vest December 31, 2017. The remaining 146,667 shares will vest all6, 2022.
(6)Vests on January 31, 2025.September 1, 2027, or earlier upon a change of control.

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 20162018 and 2015,2017, 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 $52,905$88,284 and $49,636$65,478 in 20162018 and 2015,2017, 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. LongHoch, Mr. Jewell, and Mr. Hoch,Landers respectively, provide for potential payments upon termination or a change of control.


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Pursuant to our respective employment agreementsagreement with Michael Long, Chairman, and 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 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) 2.0two 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, 20162018 are approximately $1.2 million each.

$1,494,000.

In the case of termination of the agreement due to the death of the executive,Mr. Hoch, we will be liable for separation payments, equaling an amount of 2.95 times the respective base salary. The deferred compensation does not include amounts paid or accrued to executiveMr. 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 executive’sMr. Hoch’s base salary, minus any monthly base salary already paid to the executiveMr. Hoch prior to his death pursuant to the executive’shis disability, to the executive’shis estate for a period of up to 36 months. If these continuing payments cease before 36 months, we will have to pay the executive’shis estate the deferred compensation minus any base salary payments within 30 days of the cessation. Further, all stock options issued to the executiveMr. Hoch and all restricted stock granted to executive shall continue on their vesting schedule.

 

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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 3 years.36 months. Unpaid and unearned bonus compensation or bonus deferred compensation is forfeited. Further, all stock options issued to the executiveMr. Hoch and all restricted stock granted to executivehim 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, 2016.2018. 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 2016 executive compensation programs and policies and the compensation paid to our Named Executive Officers for the year ended December 31, 2016.

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,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,Proxy Statement, which, among other things, demonstrates:

●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;

●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

●our strong emphasis on the alignment of the incentives of our Named Executive Officers with the creation of increased shareholder value.

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;
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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our strong emphasis on the alignment of the incentives of our Named Executive Officers with the creation of increased shareholder value.
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 voteFORthe 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.”

 

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Share Ownership

SHARE OWNERSHIP

Equity Compensation Plan Information

The following table provides information as of December 31, 20162018 with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance:

Plan CategoryNumber of securities to be issued upon exercise of outstanding options and rightsWeighted-average exercise price of outstanding options and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders--5,350,495
Equity compensation plans not approved by security holders---
Total--5,350,495

Plan CategoryNumber of securities to be issued upon exercise of outstanding options and rightsWeighted-average exercise price of outstanding options and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders349,166$1.864,563,383
Equity compensation plans not approved by security holders---
Total349,166$1.864,563,383
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,stock options, restricted stock, stock units, performance awards, or other Awardsawards 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. During 2016, we granted 133,334 shares from the plan to directors. On January 1, 2016, the authorized common shares under the plan increased by 601,495 shares in accordance with the automatic increase provision described above. 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 13, 201715, 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 13, 2017. We15, 2019. However, we did not deem these shares outstanding however, for the purpose of computing the percentage ownership of any other person.

 

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Shareholders Known by Us to Own 5% or More of Our Common Stock

Name and Address of Beneficial OwnerAmount and Nature of Beneficial OwnershipPercentage of Shares Beneficially Owned (1)

National Services, Inc. (2)

750 E. Green St.

Pasadena, CA 91101

712,5006.1%

Name and Address of Beneficial OwnerAmount and Nature of Beneficial OwnershipPercentage of Shares Beneficially Owned (1)
National Services, Inc. (2)
750 E. Green St.
Pasadena, CA 91101
1,378,5008.2%
(1)On April 13, 2017,15, 2019, we had a total of 11,761,11116,863,222 shares of common stock outstanding (which excludes 613,7631,097,910 treasury shares).

(2)We relied, in part, on the Schedule 13G filed by National Services, Inc. with the SEC on March 18,23, 2016 for this information.

Officers and Directors

  Amount of Beneficial OwnershipPercent of Shares Beneficially Owned (3)
Name and address of beneficial owner (1)Nature of beneficial ownershipShares OwnedShares – Rights to Acquire (2)Total 
Michael LongChairman of the Board2,517,251--2,517,25121.4%
Louis HochPresident, Chief Executive Officer, and Vice Chairman of the Board2,229,972--2,229,97218.9%
Houston FrostSenior Vice President294,027--294,0272.5%
Larry MorrisonSenior Vice President342,839--342,8392.9%
Tom JewellChief Financial Officer22,223200,000222,2231.9%
Miguel ChapaDirector33,334--33,334*
Steve HuffmanDirector22,22344,44466,667*
All directors and executive officers as a group (7 persons)5,461,869244,4445,706,31348.5%

  Amount of Beneficial OwnershipPercent of Shares Beneficially Owned (3)
Name and Address of Beneficial Owner (1)Nature of Beneficial OwnershipShares OwnedShares – Rights to Acquire (2)Total 
Michael LongChairman of the Board2,196,782--
2,196,782
13.0%
Louis HochPresident, Chief Executive Officer, and Vice Chairman of the Board2,292,778--
2,292,778
13.6%
Vaden LandersChief Revenue Officer1,815,152--
1,815,152
10.8%
Tom JewellChief Financial Officer227,303--
227,303
1.3%
Miguel ChapaDirector64,668--
64,668
*
Bradley RollinsDirector22,22322,222
44,445
*
Blaise BenderDirector22,223--
22,223
*
All directors and executive officers as a group6,641,12922,222
6,663,351
39.5%
*    Indicates ownership of less than 1.0%.
*Indicates ownership of less than 1.0%.

(1)Unless otherwise stated, the address of each beneficial owner listed on the table is c/o Payment Data Systems, Inc., 12500 San Pedro,3611 Paesanos Parkway, Suite 120,300, San Antonio, Texas 78216.78231.

(2)Represents shares subject to outstanding stock options and warrantsrestricted stock units currently exercisable or which will be exercisable, or currently vested or that will vest within 60 days of April 13, 2017.15, 2019.

(3)On April 13, 2017,15, 2019, we had a total of 11,761,11116,863,222 shares of common stock outstanding (which excludes 613,7631,097,910 treasury shares).


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As of December 31, 2016,2018, there are no arrangements among our beneficial owners, known to management, which may result in a change in control of our Company.

 

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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, 2015,2018, 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 Form 4 for one transaction filed eightthirteen days late by Mr. Frost. On October 20, 2015,Steve Huffman, our Board of Directors agreed to reduce the number of Section 16(a) filers, removing the obligation from Kenneth Keller, Larry Morrison, John Pullin,former director, and Matthew Decker.

Audit Matters

one filed one hundred and sixty nine days late by Bradley Rollins, our director.


AUDIT MATTERS
Report of the Audit Committee

The

In 2018, the Audit Committee was comprised of our independent directors Mr. Kirk Taylor (chair) (until August 1, 2016), Dr. Peter G. Kirby (until November 11, 2016), Mr. MiguelMessrs. Chapa, Mr. Steve Huffman (chair) (starting November 11, 2016), and Tom Jewell (from November 11, 2016Rollins. Effective April 1, 2019, our Board appointed Mr. Blaise Bender to January 6, 2017) duringchair the year ended December 31, 2016.

Audit Committee.

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 registered auditingaccounting firm, is responsible for performing an independent audit of the consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board.

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. The Audit Committee has met with our independent auditors with regard to our audited financial statements for the year ended December 31, 2016.2018. For the year ended December 31, 2016,2018, the Audit Committee did receive the independent auditor’s letter and written disclosures required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).

In reliance on the reviews and discussion with management and the independent registered public accounting firm referred to above, the Audit Committee recommended to the Board of Directors, and the Board approved, the inclusion of the audited financial statements in Payment Data Systems’ Annual Report on Form 10-K for the year ended December 31, 2016,2018, for filing with the SEC. The Audit Committee recommended, and the Board has appointed Akin, Doherty, Klein & Feuge, P.C. to serve as Payment Data Systems’ independent registered public accounting firm for the year ending December 31, 2017.

2019.

Audit Committee

Steve Huffman                                        Miguel Chapa

(Chairman)

Blaise Bender

 

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Miguel Chapa                Bradley Rollins
(Chairman)

Proposal No. 3 – Ratification of the Appointment of Akin, Doherty, Klein & Feuge, P.C.

The Audit Committee has recommended and the Board has appointed Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2017.2019. Representatives of Akin, Doherty, Klein & Feuge, P.C. are expected to be present at the 20172019 Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. Although shareholder ratification of our independent registered public accounting firm is not required by our Bylaws or otherwise, we are submitting the selection of Akin, Doherty, Klein & Feuge, P.C. to our shareholders for ratification to permit shareholders to participate in this important corporate decision.

Principal Accountant Fees and Services

Akin, Doherty, Klein & Feuge, P.C. has audited our financial statements since 2003. The aggregate fees billed to us for professional accounting services, including the audit of our annual consolidated financial statements by our independent registered public accounting firm for the years ended December 31, 2016 and 2015, are set forth in the table below.

 Year Ended December 31,
20162015
Audit fees$75,000$60,000
Audit-related fees--
Tax fees$16,635$20,200
Other fees$14,330$9,530
Total fees$105,965$89,730

For purposes of the preceding table, the professional fees are classified as follows:

Audit Fees. Audit fees include fees for professional services billed for the audit of the consolidated financial statements included in our annual report on Form 10-K filing, the review of consolidated financial statements included in our quarterly reports on Form 10-Q filings, comfort letters, consents and assistance with and review of documents filed with the SEC.

Audit-Related Fees. Audit-related fees include assurance and related services that are traditionally performed by the independent accountant including employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultation and audits in connection with acquisitions, internal control reviews, attest services related to financial reporting that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.

Tax Fees. Tax fees include fees for professional services rendered by our independent registered public accounting firm for tax compliance, tax planning and tax advice. Tax compliance involves preparation of original and amended tax returns. Tax planning and tax advice encompass a diverse range of subjects, including assistance with tax audits and appeals, tax advice related to dispositions, and requests for rulings or technical advice from taxing authorities.

Other Fees. Other fees include fees for professional services rendered by our independent registered public accounting firm for fees other than represented in Audit Fees and Tax Fees. For 2016, this included review of the annual proxy, review of amendments to the executive employment agreements, and review of the stock buy-back program. For 2015, this included review of the Akimbo acquisition and purchase accounting rules, listing application for NASDAQ, review of the annual proxy, review of the 2015 Equity Incentive Plan, and review of the related S-8 registration statement.

Audit Committee Pre-Approval Policies and Procedures

We may not engage our independent registered public accounting firm to render any audit or non-audit service unless our Audit Committee approves the service in advance. 100% of the services performed by our independent registered public accounting firm described above were approved in advance by our Audit Committee.

 

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Required Vote


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Ratification of the appointment of Akin, Doherty, Klein & Feuge, P.C. requires the affirmative vote of a majority of the shares present and voting at the 20172019 Annual Meeting in person or by proxy. Unless marked to the contrary, proxies received will be voted “FOR” ratification of the appointment. A properly executed proxy marked “ABSTAIN” with respect to this proposal will not be voted, although it will be counted for purposes of determining the number of shares of common stock entitled to vote. Accordingly, an abstention will have the effect of a negative vote. Because this Proposal is a routine proposal on which a broker or other nominee is generally empowered to vote, broker “non-votes” likely will not result from this Proposal. Thus, if you are a beneficial owner holding shares through a broker, bank or other holder of record and you do not vote on this Proposal, your broker may cast a vote on your behalf for this Proposal. In the event ratification is not obtained, the Audit Committee and the Board will review its future selection of our independent registered public accounting firm but will not be required to select a different independent registered public accounting firm.

Voting Recommendation

Your Board of Directors recommends a voteFOR the ratification of Akin, Doherty, Klein & Feuge, P.C. as our independent registered public accounting firm for the year ending December 31, 2017.

2019.

Principal Accountant Fees and Services
Akin, Doherty, Klein & Feuge, P.C. has audited our financial statements since 2003. The aggregate fees billed to us for professional accounting services, including the audit of our annual consolidated financial statements by our independent registered public accounting firm for the years ended December 31, 2018 and 2017, are set forth in the table below.
 Year Ended December 31,
20182017
Audit fees$92,500
$100,285
Tax fees16,475
16,000
Other fees1,480
10,500
Total fees$110,455
$126,785
For purposes of the preceding table, the professional fees are classified as follows:
Audit Fees. Audit fees include fees for professional services billed for the audit of the consolidated financial statements included in our annual report on Form 10-K filing, the review of consolidated financial statements included in our quarterly reports on Form 10-Q filings, comfort letters, consents and assistance with and review of documents filed with the SEC. The fees include amounts billed to us during each respective calendar year.
Tax Fees. Tax fees include fees for professional services rendered by our independent registered public accounting firm for tax compliance, tax planning and tax advice. Tax compliance involves preparation of original and amended tax returns. Tax planning and tax advice encompass a diverse range of subjects, including assistance with tax audits and appeals, tax advice related to dispositions, and requests for rulings or technical advice from taxing authorities. The fees include amounts billed to us during each respective calendar year.
Other Fees. Other fees include fees for professional services rendered by our independent registered public accounting firm for fees other than represented in Audit Fees and Tax Fees. For the year ended December 31, 2018, this included audit related consulting work performed above normal audit procedures related to warrants issued by the Company. For the year ended December 31, 2017, this included $10,500 for additional work completed related to the Singular Payments, LLC acquisition.
Audit Committee Pre-Approval Policies and Procedures
We may not engage our independent registered public accounting firm to render any audit or non-audit service unless our Audit Committee approves the service in advance. 100% of the services performed by our independent registered public accounting firm described above were approved in advance by our Audit Committee.

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PROPOSAL 4 – Corporate Name Change
Our Board unanimously approved an amendment to our Restated Articles of Incorporation, as amended, to change our corporate name from “Payment Data Systems, Inc.” to “Usio, Inc.” The Board believes it is in our Company and our shareholders best interests to effect the name change and recommends to our shareholders the approval and adoption of the name change amendment.
Reasons for the Amendment
We believe changing our corporate name to Usio (pronounced “you-see-oh”) will more accurately reflect our current business activities. Over our more than 20-year history, Payment Data Systems has provided ACH processing and payment card solutions to a number of niche markets. During this time, we became a well-recognized and market leading payments provider within the non-profit and consumer financial services industries. However, over the past several years we have expanded both our product offerings and our target markets. The acquisitions of Akimbo Financial in 2014 and Singular Payments in 2017 accelerated the evolution of our business toward a true Fintech platform that now offers turn-key, full-stack solutions covering processing needs from issuing to acquiring and offering interfaces ranging from mobile apps to application programming interfaces. We believe the market and industry at large has not fully recognized and appreciated this evolution, in part because our current Company name, Payment Data Systems, does not reflect the business that exists today. In addition, not only have we broadened our product suite, but we also adopted a number of brands and logos that have furthered market confusion in regards to our corporate identity. We believe a new brand strategy is required to better position the Company and communicate the value proposition to the marketplace. The new name Usio represents the ‘fusion’ of the many products, many services, many people and infinite possibilities created through innovative technology. We strongly believe that this new brand is innovative, fresh and honors our past while most importantly, provides direction as to where we are headed as a Fintech organization. The Board believes that it is in our and our shareholders’ best interests to change our corporate name to “Usio, Inc.” to better communicate to the public the nature of our business operations and enable us to develop a new brand strategy and position Usio for the future.
Effects of the Amendment
The Board has adopted resolutions setting forth the proposed amendment in the form of an amendment to Article One of our Restated Articles of Incorporation, as amended, and recommends that the shareholders approve and vote “FOR” such amendment. The resolutions also provide that the amendment be submitted to the shareholders entitled to vote thereon for consideration at the Annual Meeting in accordance with Nevada corporation law. The following is the text of the proposed amendment to Article One of our Restated Articles of Incorporation, as amended:
“The name of the corporation is: Usio, Inc.”
If approved, the amendment to our Restated Articles of Incorporation, as amended, will become effective upon the filing of the amendment with the Secretary of State of the State of Nevada, which will occur following the Annual Meeting at the discretion of the Company. We will also change our trading symbol of our common stock from "PYDS" to "USIO" with the Nasdaq Stock Market.
The change in the Company’s name will not affect the status of the Company or the rights of any shareholder in any respect, or the transferability of stock certificates presently outstanding. If the name change amendment becomes effective, the rights of shareholders holding certificated shares under currently outstanding stock certificates and the number of shares represented by those certificates will remain unchanged. The name change will not affect the validity or transferability of any currently outstanding stock certificates nor will it be necessary for shareholders with certificated shares to surrender or exchange any stock certificates they currently hold as a result of the name change. Any new stock certificates that are issued after the name change becomes effective will bear the name “Usio, Inc.”
If the name change amendment is not approved by the shareholders, the proposed amendment to our Restated Articles of Incorporation, as amended, will not be made and our corporate name will remain unchanged.
Required Vote
Approval of an amendment to our Restated Articles of Incorporation, as amended, requires the affirmative vote of the holders of a majority of the outstanding shares of common stock, voting as a class, entitled to vote thereon. Abstentions will have the same effect as a vote against this proposal, and your broker (or another organization that holds your shares for you) may exercise its discretionary authority to vote your shares in favor of this proposal.
Voting Recommendation
Our Board recommends that the shareholders vote “FOR” Proposal 4 to approve an amendment to our Restated Articles of Incorporation, as amended, to change our corporate name to "Usio, Inc."


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General Information


Below you will find general information on Shareholder Proposals, “Householding” of Proxy Materials, and more specific instructions on how to vote, which can be found on your proxy voting card.

Shareholder Proposals

There are no shareholder proposals for the 20172019 Annual Meeting. If you would like information on submitting a shareholder proposal to be included in the 20182020 Proxy Statement and Annual Meeting, please refer to the information below.


How do I submit a Shareholder Proposal to be Included in the Proxy Statement?

Who Presents the Proposal at the Meeting?


You must submit your proposal to our Secretary no later than December 28, 201731, 2019 – 120 calendar days before the anniversary of this Proxy Statement release. This is to comply with Rule 14a-8 under the 1934 Act.

The Shareholder proponent, or a representative who is qualified under state law, must appear in person at the 2018 Annual Meeting of Shareholders to present the proposal.


What if the date of the 20182020 Annual Meeting is significantly different?

How Should I Send my Proposal?


If the date of the Annual Meeting is changed by more than 30 days, the proposal must be submitted to our Secretary by the close of business on the later of:


•    90 days prior to the Annual Meeting, OR

•    7 days following the first public announcement of the Annual Meeting date

 


Who Presents the Proposal at the Meeting?

The Shareholder proponent, or a representative who is qualified under state law, must appear in person at the 2020 Annual Meeting of Shareholders to present the proposal.

How Should I Send my Proposal?

Please send your proposal to our Secretary at:


Payment Data Systems, Inc.
Attn. Secretary
12500 San Pedro,3611 Paesanos Parkway, Ste. 120300
San Antonio, Texas 78216

78231


We strongly suggest that proposals are sent by Certified Mail – Return Receipt Requested.

 

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What Must be Included in My Notice that I send to the Secretary?


1.    A brief description of the proposed business

2.    The text of the proposal

3.    Reasons for conducting the business at the meeting

4.    Name and address (as they appear on our books) of the shareholder proposing such business

5.    The beneficial owner (if any) on whose behalf the proposal is made

6.    Any material interest of the shareholder in such business

7.    Any other information required by proxy proposal submission rules of the SEC

“Householding” of Proxy Materials

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for us. Under this procedure, multiple shareholders who share the same last name and address will receive only one copy of the annual proxy materials, unless they notify us that they wish to continue receiving multiple copies. We have undertaken householding to reduce our printing costs and postage fees.

If you wish to opt-out of householding and continue to receive multiple copies of the proxy materials at the same address, you may do so at any time prior to thirty days before the mailing of proxy materials, which will typically be mailed in June of each year, by notifying us in writing at: Secretary, Payment Data Systems, Inc., 12500 San Pedro,3611 Paesanos Parkway, Ste. 120,300, San Antonio, TX 78216,78231, or by contacting us at (210) 249-4100. You also may request additional copies of the proxy materials by notifying us in writing at the same address or contacting us at (210) 249-4100, and we will undertake to deliver such additional copies promptly. If you share an address with another shareholder and currently are receiving multiple copies of the proxy materials, you may request householding by notifying us at the above referenced address or telephone number.


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Other Matters

Your Board of Directors does not know of any other business that will be presented at the 20172019 Annual Meeting. If any other business is properly brought before the 20172019 Annual Meeting, your proxy holders will vote on it as they think best unless you direct them otherwise in your proxy instructions.

Whether or not you intend to be present at the 20172019 Annual Meeting, we urge you to submit your signed proxy promptly.


By Order of the Board of Directors.

__________________

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________________
Louis A. Hoch

President and Chief Executive Officer

San Antonio, Texas




The Notice of Annual Meeting, Proxy Statement, form of proxy and our 20162018 Annual Report on Form 10-K are available at www.proxyvote.com. We will provide copies of our Proxy Statement and our 20162018 Annual Report free of charge upon request. We will also provide copies of exhibits to our 20162018 Annual Report, but will charge a reasonable fee per page to any requesting shareholder. Shareholders may make such requests in writing to Secretary, Payment Data Systems, Inc., 12500 San Pedro,3611 Paesanos Parkway, Ste. 120,300, San Antonio, TX 78216.78231. The request must include a representation by the shareholder that as of April 13, 2017,15, 2019, the shareholder was entitled to vote at the 20172019 Annual Meeting.

 

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Thank You

Thank you for being a shareowner of Payment Data Systems, Inc.


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Learn more athttp://paymentdata.com/


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Our 20172019 Proxy StatementOur 20162018 Annual ReportOur Company Website

Our NASDAQ

Nasdaq

Listing

 

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Appendix A

 

 

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Proxy Card

 

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