x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Nevada
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98-0190072
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(State
or other jurisdiction of incorporation
or organization)
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(I.R.S.
Employer Identification
No.)
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12500
San Pedro, Ste. 120, San Antonio, TX
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78216
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(Address
of principal executive offices)
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(Zip
Code)
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨ (Do not check if
a smaller reporting company)
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Smaller
reporting company x
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Page
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PART
I – FINANCIAL INFORMATION
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Item
1.
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Financial
Statements (Unaudited).
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Consolidated
Balance Sheets as of June 30, 2009 and December 31, 2008
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1 | ||||
Consolidated
Statements of Operations for the three and six months ended June 30, 2009
and 2008
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2 | ||||
Consolidated
Statements of Cash Flows for the six months ended June 30, 2009 and
2008
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3 | ||||
Notes
to Consolidated Financial Statements
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4 | ||||
Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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7 | |||
Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk.
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12 | |||
Item
4T.
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Controls
and Procedures.
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12 | |||
PART
II – OTHER INFORMATION
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Item
1.
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Legal
Proceedings.
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13 | |||
Item
A.
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Risk
Factors.
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14 | |||
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds.
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14 | |||
Item
3.
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Defaults
Upon Senior Securities.
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14 | |||
Item
4.
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Submission
of Matters to a Vote of Security Holders.
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14 | |||
Item
5.
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Other
Information.
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14 | |||
Item
6.
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Exhibits.
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14 |
June
30, 2009
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December
31, 2008
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(Unaudited)
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Assets
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Current
assets:
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Cash
and cash equivalents
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$ | 337,629 | $ | 103,428 | ||||
Accounts
receivable, net
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144,775 | 158,736 | ||||||
Prepaid
expenses and other
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18,165 | 20,852 | ||||||
Total
current assets
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500,569 | 283,016 | ||||||
Property
and equipment, net
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42,742 | 62,114 | ||||||
Other
assets:
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Related
party receivable
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210,000 | 246,168 | ||||||
Other
assets
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16,693 | 16,693 | ||||||
Total
other assets
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226,693 | 262,861 | ||||||
Total
assets
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$ | 770,004 | $ | 607,991 | ||||
Liabilities
and stockholders’ equity (deficit)
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Current
liabilities:
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Accounts
payable
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$ | 130,723 | $ | 108,055 | ||||
Accrued
expenses
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1,262,487 | 751,379 | ||||||
Customer
deposits payable
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324,596 | 44,865 | ||||||
Deferred
revenue
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54,206 | 71,537 | ||||||
Total
current liabilities
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1,772,012 | 975,836 | ||||||
Stockholders’
equity (deficit):
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Common
stock, $0.001 par value, 200,000,000 shares authorized; 115,773,691 issued
and 111,513,842 and 112,547,215 outstanding
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115,774 | 115,774 | ||||||
Additional
paid-in capital
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55,444,770 | 55,444,770 | ||||||
Treasury
stock, at cost; 4,259,849 and 3,226,476 shares
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(212,420 | ) | (176,252 | ) | ||||
Deferred
compensation
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(2,153,800 | ) | (2,328,184 | ) | ||||
Accumulated
deficit
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(54,196,332 | ) | (53,423,953 | ) | ||||
Total
stockholders’ equity (deficit)
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(1,002,008 | ) | (367,845 | ) | ||||
Total
liabilities and stockholders’ equity (deficit)
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$ | 770,004 | $ | 607,991 |
Three
Months Ended June 30,
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Six
Months Ended June 30,
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2009
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2008
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2009
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2008
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Revenues
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$ | 834,993 | $ | 659,045 | $ | 1,653,809 | $ | 1,520,790 | ||||||||
Operating
expenses:
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Cost
of services
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679,076 | 571,181 | 1,373,661 | 1,253,374 | ||||||||||||
Selling,
general and administrative:
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Stock-based
compensation
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133,650 | 144,350 | 267,300 | 359,907 | ||||||||||||
Other
expenses
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345,676 | 416,130 | 759,855 | 808,566 | ||||||||||||
Depreciation
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9,483 | 17,975 | 19,372 | 36,083 | ||||||||||||
Total
operating expenses
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1,167,885 | 1,149,636 | 2,420,188 | 2,457,930 | ||||||||||||
Operating
loss
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(332,892 | ) | (490,591 | ) | (766,379 | ) | (937,140 | ) | ||||||||
Other
income (expense):
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Interest
income
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- | 513 | - | 8,662 | ||||||||||||
Interest
expense
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- | - | - | (193 | ) | |||||||||||
Other
income (expense)
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- | (1,160 | ) | - | 748,840 | |||||||||||
Total
other income (expense), net
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- | (647 | ) | - | 757,309 | |||||||||||
Loss
before income taxes
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(332,892 | ) | (491,238 | ) | (766,379 | ) | (179,831 | ) | ||||||||
Income
taxes
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3,000 | - | 6,000 | - | ||||||||||||
Net
loss
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$ | (335,892 | ) | $ | (491,238 | ) | $ | (772,379 | ) | $ | (179,831 | ) | ||||
Basic
and diluted net loss per common share:
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$ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | 0.00 | |||||||
Weighted
average common shares
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outstanding
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111,513,842 | 99,991,359 | 112,016,255 | 89,162,132 |
Six
Months Ended June 30,
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2009
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2008
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Operating
activities:
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Net
loss
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$ | (772,379 | ) | $ | (179,831 | ) | ||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
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Depreciation
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19,372 | 36,083 | ||||||
Non-cash
issuance of common stock
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- | 78,255 | ||||||
Deferred
compensation
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174,384 | 229,134 | |||||
Gain
on sale of patents
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- | (750,000 | ) | |||||
Loss
on disposition of assets
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1,160 | |||||||
Changes
in current assets and current liabilities:
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Accounts
receivable
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13,961 | (49,336 | ) | |||||
Prepaid expenses and
other
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2,687 | 4,965 | ||||||
Accounts payable and accrued
expenses
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533,776 | 36,209 | ||||||
Customer deposits
payable
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279,731 | (13,107 | ) | |||||
Deferred
revenue
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(17,331 | ) | 56,818 | |||||
Net
cash provided by (used in) operating activities
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234,201 | (549,650 | ) | |||||
Investing
activities:
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Proceeds
from sale of patents
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- | 750,000 | ||||||
Purchases
of property and equipment
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- | (10,316 | ) | |||||
Net
cash provided by investing activities
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- | 739,684 | ||||||
Financing
activities:
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Issuance
of common stock, net of issuance costs
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- | 1,637 | ||||||
Net
cash provided by financing activities
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- | 1,637 | ||||||
Change
in cash and cash equivalents
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234,201 | 191,671 | ||||||
Cash
and cash equivalents, beginning of period
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103,428 | 115,597 | ||||||
Cash
and cash equivalents, end of period
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$ | 337,629 | $ | 307,268 |
June
30, 2009
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December
31, 2008
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Accrued
salaries
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$ | 781,403 | $ | 311,880 | ||||
Reserve
for merchant losses
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205,400 | 209,220 | ||||||
Accrued
commissions
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223,318 | 144,202 | ||||||
Accrued
taxes
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47,426 | 77,469 | ||||||
Other
accrued expenses
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4,940 | 8,608 | ||||||
Total
accrued expenses
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$ | 1,262,487 | $ | 751,379 |
Item
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
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Exhibit
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Number
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Description
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3.1
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Amended
and Restated Articles of Incorporation (included as exhibit 3.1 to the
Form 10-KSB filed March 31, 2006, and incorporated herein by
reference).
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3.2
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Amended
and Restated By-laws (included as exhibit 3.2 to the Form 10-KSB filed
March 31, 2006, and incorporated herein by reference).
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4.1
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Amended
and Restated 1999 Employee Comprehensive Stock Plan (included as exhibit
10.1 to the Form 8-K filed January 3, 2006, and incorporated herein by
reference).
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4.2
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Amended
and Restated 1999 Non-Employee Director Plan (included as exhibit 10.2 to
the Form 8-K filed January 3, 2006, and incorporated herein by
reference).
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4.3
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Employee
Stock Purchase Plan (included as exhibit 4.3 to the Form S-8 filed
February 23, 2000, and incorporated herein by
reference).
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4.4
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Amended
Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, Ltd., dated August 21, 2007 (included as exhibit 10.2 to
the Form 8-K filed August 23, 2007, and incorporated herein by
reference).
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4.5
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Rights
Agreement between the Company and American Stock Transfer & Trust
Company, dated February 28, 2007 (included as exhibit 4.1 to the Form 8-K
filed March 5, 2007, and incorporated herein by
reference).
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10.1
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Lease
Agreement between the Company and Frost National Bank, Trustee for a
Designated Trust, dated August 2003 (included as exhibit 10.3 to the Form
10-Q filed November 14, 2003, and incorporated herein by
reference).
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10.2
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Employment
Agreement between the Company and Michael R. Long, dated February 27, 2007
(included as exhibit 10.1 to the Form 8-K filed March 2, 2007, and
incorporated herein by
reference).
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10.3
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Employment
Agreement between the Company and Louis A. Hoch, dated February 27, 2007
(included as exhibit 10.2 to the Form 8-K filed March 2, 2007, and
incorporated herein by reference).
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10.4
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Investment
Agreement between the Company and Dutchess Private Equities Fund, LP,
dated June 4, 2004 (included as exhibit 10.8 to the Form SB-2 filed June
18, 2004, and incorporated herein by reference).
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10.5
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Placement
Agent Agreement between the Company, Charleston Capital Corporation, and
Dutchess Private Equities Fund, LP, dated June 4, 2004 (included as
exhibit 10.10 to the Form SB-2 filed June 18, 2004, and incorporated
herein by reference).
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10.6
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Affiliate
Office Agreement between the Company and Network 1 Financial, Inc.
(included as exhibit 10.11 to the Form SB-2 filed April 28, 2004, and
incorporated herein by reference).
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10.7
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Warrant
Agreement between the Company and Kubra Data Transfer LTD, dated as of
September 30, 2004 (included as exhibit 10.1 to the Form 8-K filed October
6, 2004, and incorporated herein by reference).
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10.8
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Promissory
Note between the Company and Dutchess Private Equities Fund, II, LP, dated
August 21, 2006 (included as exhibit 10.1 to the Form 8-K filed
August 25, 2006, and incorporated herein by
reference).
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10.9
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Stock
Purchase Agreement between the Company and Robert D. Evans, dated
January 18, 2007 (included as exhibit 10.1 to the Form 8-K filed
January 23, 2007, and incorporated herein by
reference).
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10.10
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Stock
Purchase Agreement between the Company and Robert D. Evans, dated March
1, 2007 (included as exhibit 10.1 to the Form 8-K filed March 5,
2007, and incorporated herein by reference).
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10.11
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Amended
Investment Agreement between the Company and Dutchess Private Equities
Fund, Ltd., dated August 21, 2007 (included as exhibit 10.16 to the Form
8-K filed August 23, 2007, and incorporated herein by
reference).
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10.12
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Amended
Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, Ltd., dated August 21, 2007 (included as exhibit 10.2 to
the Form 8-K filed August 23, 2007, and incorporated herein by
reference).
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10.13
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Trademark
and Domain Name Purchase Agreement between the Company and Alivio
Holdings, LLC, dated November 14, 2005 (included as exhibit 10.1 to the
Form 8-K filed November 17, 2005, and incorporated herein by
reference).
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10.14
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Patent
Purchase Agreement between the Company and PCT Software Data, LLC, dated
January 11, 2008 (included as exhibit 10.14 to the Form 10-K filed March
27, 2008, and incorporated herein by reference).
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31.1
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Certification
of the Chief Executive Officer/Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
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32.1
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Certification
of the Chief Executive Officer/Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed
herewith).
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PAYMENT
DATA SYSTEMS, INC.
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Date:
August 14, 2009
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By:
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/s/
Michael R. Long
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Michael
R. Long
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Chairman
of the Board,
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Chief
Executive Officer and
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Chief
Financial Officer
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(principal
executive officer and principal financial and accounting
officer)
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