Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 8-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | PAYMENT DATA SYSTEMS INC | |
Entity Central Index Key | 1088034 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 180,199,445 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Assets | ||
Cash and cash equivalents | $65,322,779 | $54,989,851 |
Accounts receivable, net | 911,831 | 1,037,208 |
Deferred tax asset, current | 773,000 | 773,000 |
Prepaid expenses and other | 240,384 | 129,258 |
Total current assets | 67,247,994 | 56,929,317 |
Property and equipment, net | 2,883,801 | 2,705,517 |
Other assets | ||
Intangibles, net | 402,442 | 412,363 |
Deferred tax asset, noncurrent | 848,000 | 848,000 |
Other assets | 208,852 | 204,112 |
Total other assets | 1,459,294 | 1,464,475 |
Total assets | 71,591,089 | 61,099,309 |
Current liabilities: | ||
Accounts payable | 203,138 | 37,808 |
Accrued expenses | 1,636,984 | 1,851,033 |
Customer deposits payable | 61,948,682 | 52,186,396 |
Total current liabilities | 63,788,804 | 54,075,237 |
Stockholders' equity | ||
Common stock, $0.001 par value, 200,000,000 shares authorized; 185,194,589 and 184,176,582Â Â issued, and 180,199,445 and 179,181,438 outstanding at March 31, 2015 (unaudited) and December 31, 2014, respectively | 185,195 | 184,177 |
Additional paid-in capital | 64,000,311 | 62,989,131 |
Treasury stock, at cost; 4,995,144Â Â and 4,995,144Â Â shares | -238,157 | -238,157 |
Deferred compensation | -6,782,593 | -5,839,992 |
Accumulated deficit | -49,362,471 | -50,071,087 |
Total stockholders' equity | 7,802,285 | 7,024,072 |
Total liabilities and stockholders' equity | $71,591,089 | $61,099,309 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Stockholders Equity | ||
Common Stock Shares Par Value | $0.00 | $0.00 |
Common Stock Shares Authorized | 200,000,000 | 200,000,000 |
Common Stock Shares Issued | 185,194,589 | 184,176,582 |
Common Stock Shares Outstanding | 180,199,445 | 179,181,438 |
Treasury Stock | 4,995,144 | 4,995,144 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Revenues | $3,742,460 | $2,730,823 |
Operating expenses | ||
Cost of services | 2,303,999 | 2,092,026 |
Selling, general and administrative | ||
Stock-based compensation | 233,531 | 72,995 |
Cancellation of stock-based compensation | -163,936 | 0 |
Other expenses | 588,574 | 385,433 |
Depreciation and amortization | 85,571 | 9,905 |
Total operating expenses | 3,047,739 | 2,560,359 |
Operating income (loss) | 694,721 | 170,464 |
Other income and (expense) | ||
Interest income | 19,000 | 6,813 |
Other income (expense) | -104 | -3,360 |
Total other income and (expense),net | 18,896 | 3,453 |
Income before income taxes | 713,617 | 173,917 |
Income taxes | 5,000 | 12,179 |
Net income | $708,617 | $161,738 |
Earnings (Loss) Per Share | ||
Basic earnings per common share: | $0.01 | $0 |
Diluted earnings per common share: | $0 | $0 |
Weighted average common shares outstanding | ||
Basic | 110,389,704 | 96,962,397 |
Diluted | 181,836,454 | 137,427,089 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Operating activities | ||
Net income | $708,617 | $161,738 |
Adjustments to reconcile net income to net cash (used) by operating activities | ||
Depreciation | 75,651 | 9,905 |
Amortization | 9,921 | 0 |
Non-cash stock based compensation | 233,531 | 72,995 |
Cancellation of stock based compensation | -163,936 | 0 |
Issuance of stock to employee | 0 | 5,000 |
Changes in current assets and current liabilities | ||
Accounts receivable | 125,377 | -70,834 |
Prepaid expenses and other | -111,126 | -18,378 |
Other assets | -4,741 | -41,791 |
Accounts payable and accrued expenses | -48,719 | -15,817 |
Customer deposits payable | 9,762,286 | 27,967,833 |
Net cash provided by operating activities: | 10,586,861 | 28,070,651 |
Investing activities | ||
Purchases of property and equipment | -253,933 | -30,233 |
Net cash (used) by investing activities: | -253,933 | -30,233 |
Financing activities | ||
Net cash (used) by financing activities: | 0 | 0 |
Change in cash and cash equivalents | 10,332,928 | 28,040,418 |
Cash and cash equivalents, beginning of period | 54,989,851 | 26,573,771 |
Cash and cash equivalents, end of period | 65,322,779 | 54,614,189 |
Cash paid during the period for: | ||
Interest | 0 | 151 |
Income taxes | $50,000 | $12,179 |
1_Basis_of_Presentation
1. Basis of Presentation | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
1. Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of Payment Data Systems, Inc. and its subsidiaries (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 30, 2015. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year. |
Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash also includes customer deposits. | |
Customer Deposits: Customer deposits include security deposits that may be required by the Company from certain customers and cash held in transit that we collected on behalf of all our customers via our ACH processing service. The security deposit is used to offset any returned items or chargebacks to the Company and to indemnify the Company against third-party claims and any expenses that may be created by the customer as a result of any claim or fine. The Company may require the customer security deposit based on estimated transaction volumes, amounts, and chargebacks and may revise the deposit based on periodic review of the same items. Repayment of the deposit to the customer is generally within 90 to 180 days beyond the date the last item is processed by the Company on behalf of the customer. The customer security deposit does not accrue interest to the benefit of the customer. | |
Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
New Accounting Pronouncement: In May 2014, the Financial Accounting Standards Board issued a new accounting pronouncement regarding revenue from contracts with customers. This new standard provides guidance on recognizing revenue, including a five step model to determine when revenue recognition is appropriate. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2016, with early adoption not permitted. The Company is currently evaluating the potential impact that the adoption of this standard will have on its financial position, results of operations, and related disclosures, and will adopt the provisions of this new standard in the first quarter of 2017. | |
Reclassifications: Certain amounts from 2014 have been reclassified for comparative purposes for 2015. | |
2_Accrued_Expenses
2. Accrued Expenses | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Payables and Accruals [Abstract] | |||||||||
2. Accrued Expenses | Accrued expenses consisted of the following balances: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Indemnification liability | $ | 450,000 | $ | 450,000 | |||||
Accrued commissions | 417,431 | 460,977 | |||||||
Reserve for processing losses | 272,365 | 272,365 | |||||||
Accrued salaries | 137,652 | 158,380 | |||||||
Assumed liabilities | 98,313 | 255,772 | |||||||
Accrued taxes | 81,232 | 125,194 | |||||||
Other accrued expenses | 179,991 | 128,345 | |||||||
Total accrued expenses | $ | 1,636,984 | $ | 1,851,033 | |||||
On December 22, 2014, the Company entered into an Asset Purchase Agreement with Akimbo Financial, Inc. (“Akimbo”), a Texas corporation (the “Asset Purchase Agreement”). The assumed liabilities account is part of the Akimbo acquisition. Under the Asset Purchase Agreement, the Company entered into a transition agreement which provides for the continuation of the Akimbo business. Under the terms of the transition agreement, Akimbo will provide services to customer cardholders in the ordinary course of business, and deduct any contract costs from the contract revenues for a period of 180 days following December 22, 2014 and the Company agreed to pay the costs on behalf of Akimbo up to a total amount of $300,000. |
3_Net_Income_Loss_Per_Share
3. Net Income (Loss) Per Share | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings (Loss) Per Share | |||||||||
3. Net Income (Loss) Per Share | Basic earnings per share (EPS) were computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net income for the three months ended March 31, 2015 and 2014. | ||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Numerator: | |||||||||
Numerator for basic and diluted earnings per share, net income available to common shareholders | $ | 708,617 | $ | 161,738 | |||||
Denominator: | |||||||||
Denominator for basic earnings per share, weighted average shares outstanding | 110,389,704 | 96,962,397 | |||||||
Effect of dilutive securities | 71,446,750 | 40,464,692 | |||||||
Denominator for diluted earnings per share, adjusted weighted average shares and assumed conversion | 181,836,454 | 137,427,089 | |||||||
Basic earnings per common share | $ | 0.01 | $ | 0 | |||||
Diluted earnings per common share and common share equivalent | $ | 0 | $ | 0 |
4_Acquisition
4. Acquisition | 3 Months Ended | |
Mar. 31, 2015 | ||
Business Combinations [Abstract] | ||
4. Acquisition | On December 22, 2014, the Company acquired the assets of Akimbo Financial, Inc. to increase market share of prepaid debit card services. The purchase price for the software, customer list, fixed assets and goodwill was $3 million in company stock. The operations are included in the consolidated financial statements from the date of acquisition. The purchase price was allocated based on the fair values of the assets at the date of acquisition as follows: | |
Software | $2,585,385 | |
Equipment and other assets | 2,252 | |
Customer list and contracts | 396,824 | |
Goodwill | 15,539 | |
Trade accounts payable | -300,000 | |
Indemnification liability | -450,000 | |
Total | $ 2,250,000 | |
Goodwill is being amortized for 15 years for tax purposes. |
5_Income_Taxes
5. Income Taxes | 3 Months Ended |
Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
5. Income Taxes | The Company has recognized a deferred tax asset of $1.6 million and has recorded a valuation allowance of $12.2 million to reduce the other deferred tax assets. The Company does not anticipate there will be a significant change through the end of 2015. As such, management has determined that the assessment of the deferred tax asset and valuation allowance will be made on an annual basis. |
6_Related_Party_Transactions
6. Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
6. Related Party Transactions | Michael R. Long and Louis A. Hoch |
On March 11, 2013, in accordance with the Company’s employment agreements with Mr. Long and Mr. Hoch, the Company accepted shares of the Company’s common stock owned by Mr. Long and Mr. Hoch as satisfaction in full for the remaining amounts owed to the Company as annual payments due to the loss on margin loans guaranteed by the Company for Mr. Long and Mr. Hoch in 2002. | |
On March 11, 2013, the Company also agreed to purchase additional shares of its common stock owned by Mr. Long and Mr. Hoch, valued at $156,852 and $144,403, respectively, in lieu of the issuances of cash bonuses to Mr. Long and Mr. Hoch. Such bonuses were intended to compensate the executives for their service. As a result, the Company incurred a one-time reduction in cash of $301,255. | |
Accordingly, on March 11, 2013, the Company accepted an aggregate of 2,969,459 shares of the Company’s common stock valued at $534,503, and an aggregate of 2,606,051 shares of the Company’s common stock valued at $469,089 from Mr. Long and Mr. Hoch, respectively, as satisfaction in full of their aggregated outstanding amounts of $702,337 owed to the Company and aggregated compensation of $301,255 paid to Mr. Long and Mr. Hoch in lieu of cash bonuses. The common stock accepted from Mr. Long and Mr. Hoch was valued at $0.18 per share, which was the closing price of the common stock on March 1, 2013. The common stock accepted from Mr. Long and Mr. Hoch was recorded as treasury stock and the Company no longer carries a “Related Party Receivable” on its balance sheet. | |
Accordingly, following the completion of these transactions, the Company has no remaining receivables or payables related to Mr. Long, Mr. Hoch or any other officer of the Company at December 31, 2014 or 2013. | |
Herb Authier | |
During the three months ending March 31, 2015 and the year ended December 31, 2014, the Company paid Herb Authier a total of $12,115 and $42,000 in cash, respectively, for services related to network engineering and administration that he provided to the Company. Mr. Authier is the father-in-law of Louis Hoch, the Company’s President and Chief Operating Officer. | |
Nikole Hoch | |
During the three months ending March 31, 2015 and the year ended December 31, 2014, the Company purchased a total of $0 and $6,227 of corporate imprinted sportswear and caps from Angry Pug Sportswear. Nikole Hoch, the spouse of our President and Chief Operating Officer Louis Hoch, is the sole owner of Angry Pug Sportswear. |
7_Legal_Proceedings
7. Legal Proceedings | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
7. Legal Proceedings | The Company is involved in a lawsuit with a customer that alleges it did not warn or stop the processing of $181,709 in fraudulent credit transactions from occurring. The Company believes that the customer breached the Company’s processing agreement and that a security breach occurred because of the customer’s lack of controls over the login and password information utilized by the customer to process transactions resulting in the customer becoming a victim of a malware attack. The agreement between the customer and the Company has a limitation of liability provision that allows for the maximum liability of the Company to not exceed the amount of fees of a single month of service. |
While the Company believes the claims of the customer are without merit, the outcome of the dispute is still uncertain. The Company believes that any potential loss or judgment amount does not need to be accounted for at this time beyond the current balance in the reserve for losses on merchant account. | |
Aside from the lawsuit described above, the Company may be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation, will not have a material adverse effect on the Company’s business, financial condition or results of operations. | |
1_Basis_of_Presentation_Polici
1. Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash also includes customer deposits. |
Customer Deposits | Customer Deposits: Customer deposits include security deposits that may be required by the Company from certain customers and cash held in transit that we collected on behalf of all our customers via our ACH processing service. The security deposit is used to offset any returned items or chargebacks to the Company and to indemnify the Company against third-party claims and any expenses that may be created by the customer as a result of any claim or fine. The Company may require the customer security deposit based on estimated transaction volumes, amounts, and chargebacks and may revise the deposit based on periodic review of the same items. Repayment of the deposit to the customer is generally within 90 to 180 days beyond the date the last item is processed by the Company on behalf of the customer. The customer security deposit does not accrue interest to the benefit of the customer. |
Estimates | Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
New Accounting Pronouncement | New Accounting Pronouncement: In May 2014, the Financial Accounting Standards Board issued a new accounting pronouncement regarding revenue from contracts with customers. This new standard provides guidance on recognizing revenue, including a five step model to determine when revenue recognition is appropriate. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2016, with early adoption not permitted. The Company is currently evaluating the potential impact that the adoption of this standard will have on its financial position, results of operations, and related disclosures, and will adopt the provisions of this new standard in the first quarter of 2017. |
Reclassification | Reclassifications: Certain amounts from 2014 have been reclassified for comparative purposes for 2015. |
2_Accrued_Expenses_Tables
2. Accrued Expenses (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Denominator | |||||||||
Accrued Expenses | Accrued expenses consisted of the following balances: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Indemnification liability | $ | 450,000 | $ | 450,000 | |||||
Accrued commissions | 417,431 | 460,977 | |||||||
Reserve for processing losses | 272,365 | 272,365 | |||||||
Accrued salaries | 137,652 | 158,380 | |||||||
Assumed liabilities | 98,313 | 255,772 | |||||||
Accrued taxes | 81,232 | 125,194 | |||||||
Other accrued expenses | 179,991 | 128,345 | |||||||
Total accrued expenses | $ | 1,636,984 | $ | 1,851,033 |
3_Net_Income_Loss_Per_Share_Ta
3. Net Income (Loss) Per Share (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings (Loss) Per Share | |||||||||
Earnings per Share Numerator and Denominator | Three Months Ended | ||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Numerator: | |||||||||
Numerator for basic and diluted earnings per share, net income available to common shareholders | $ | 708,617 | $ | 161,738 | |||||
Denominator: | |||||||||
Denominator for basic earnings per share, weighted average shares outstanding | 110,389,704 | 96,962,397 | |||||||
Effect of dilutive securities | 71,446,750 | 40,464,692 | |||||||
Denominator for diluted earnings per share, adjusted weighted average shares and assumed conversion | 181,836,454 | 137,427,089 | |||||||
Basic earnings per common share | $ | 0.01 | $ | 0 | |||||
Diluted earnings per common share and common share equivalent | $ | 0 | $ | 0 |
4_Acquisition_Tables
4. Acquisition (Tables) | 3 Months Ended | |
Mar. 31, 2015 | ||
Business Combinations [Abstract] | ||
Business Acquisition | Software | $2,585,385 |
Equipment and other assets | 2,252 | |
Customer list and contracts | 396,824 | |
Goodwill | 15,539 | |
Trade accounts payable | -300,000 | |
Indemnification liability | -450,000 | |
Total | $ 2,250,000 |
2_Accrued_Expenses_Details
2. Accrued Expenses (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Numerator | ||
Indemnification liability | $450,000 | $450,000 |
Accrued commissions | 417,431 | 460,977 |
Reserve for processing losses | 272,365 | 272,365 |
Accrued salaries | 137,652 | 158,380 |
Assumed liabilities | 98,313 | 255,772 |
Accrued taxes | 81,232 | 125,194 |
Other accrued expenses | 179,991 | 128,345 |
Total accrued expenses | $1,636,984 | $1,851,033 |
3_Net_Income_Loss_Per_Share_De
3. Net Income (Loss) Per Share (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Net Income Loss Per Share Details | ||
Numerator for basic and diluted earnings per share, net income available to common shareholders | $708,617 | $161,738 |
Denominator for basic earnings per share, weighted average shares outstanding | 110,389,704 | 96,962,397 |
Effect of dilutive securities | $71,446,750 | $40,464,692 |
Denominator for diluted earnings per share, adjusted weighted average shares and assumed conversion | 181,836,454 | 137,427,089 |
Basic earnings (loss) per common share | $0.01 | $0 |
Diluted earnings (loss) per common share and common share equivalent | $0 | $0 |
4_Acquisition_Details
4. Acquisition (Details) (USD $) | Mar. 31, 2015 |
Business Combinations [Abstract] | |
Software | $2,585,385 |
Equipment and other assets | 2,252 |
Customer list and contracts | 396,824 |
Goodwill | 15,539 |
Trade accounts payable | -300,000 |
Indemnification liability | -450,000 |
Total | $2,250,000 |
6_Related_Party_Transactions_D
6. Related Party Transactions (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Herb Authier | ||
Related party transaction expense | $12,115 | $42,000 |
Nikole Hoch | ||
Related party transaction expense | $0 | $6,227 |