x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the quarterly period ended September 30, 2008
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or
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o |
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, Suite 120, San Antonio, Texas
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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 o
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Accelerated filer
o
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Non-accelerated filer
(Do not check if a smaller reporting company) o
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Smaller
reporting company x
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PART
I -
FINANCIAL INFORMATION
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Page
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Item
1.
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Financial
Statements (Unaudited).
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Consolidated
Balance Sheets as of September 30, 2008 and December 31,
2007
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3
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||
Consolidated
Statements of Operations for the three and nine months ended September
30,
2008 and 2007
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4
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Consolidated
Statements of Cash Flows for the nine months ended September 30,
2008 and
2007
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5
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Notes
to Interim Consolidated Financial Statements
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6
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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10
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk.
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15
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Item
4T.
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Controls
and Procedures.
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15
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PART
II -
OTHER INFORMATION
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Item
1.
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Legal
Proceedings.
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16
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Item
1A.
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Risk
Factors.
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17
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds.
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17
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Item
3.
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Defaults
Upon Senior Securities.
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17
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Item
4.
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Submission
of Matters to a Vote of Security Holders.
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17
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Item
5.
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Other
Information.
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17
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Item
6.
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Exhibits.
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17
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September
30, 2008
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December
31, 2007
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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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$
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154,552
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$
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115,597
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|||
Accounts
receivable, net
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180,863
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85,677
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|||||
Prepaid
expenses and other
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54,766
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30,895
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|||||
Total
current assets
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390,181
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232,169
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|||||
Property
and equipment, net
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73,081
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112,072
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|||||
Other
assets
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16,693
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26,693
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|||||
Total
assets
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$
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479,955
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$
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370,934
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|||
Liabilities
and stockholders’ equity (deficit)
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|||||||
Current
liabilities:
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|||||||
Accounts
payable
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$
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92,613
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$
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161,031
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|||
Accrued
expenses
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748,072
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553,901
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|||||
Deferred
revenue
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137,055
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31,325
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|||||
Total
current liabilities
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977,740
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746,257
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|||||
Stockholders’
equity (deficit):
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|||||||
Common
stock, $0.001 par value, 200,000,000 shares authorized; 103,169,483
and
80,172,708 issued and 100,822,128 and 80,172,708
outstanding
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103,170
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80,173
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|||||
Additional
paid-in capital
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55,015,424
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53,758,696
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|||||
Treasury
stock, at cost; 2,347,355 shares
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(176,052
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)
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(176,052
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)
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Deferred
compensation
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(2,411,233
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)
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(1,558,804
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)
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Accumulated
deficit
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(53,029,094
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)
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(52,479,336
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)
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Total
stockholders’ equity (deficit)
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(497,785
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)
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(375,323
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)
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Total
liabilities and stockholders’ equity (deficit)
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$
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479,955
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$
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370,934
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Three
Months Ended September 30,
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Nine
Months Ended September 30,
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||||||||||||
2008
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2007
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2008
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2007
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Revenues
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$
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667,362
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$
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841,171
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$
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2,188,152
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$
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2,236,302
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|||||
Operating
expenses:
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|||||||||||||
Cost
of services
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537,204
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712,652
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1,790,578
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1,844,774
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|||||||||
Selling,
general and administrative:
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|||||||||||||
Stock-based
compensation
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145,439
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178,532
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505,346
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571,678
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|||||||||
Other
expenses
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343,890
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320,213
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1,152,456
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943,203
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|||||||||
Depreciation
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11,166
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20,714
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47,249
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57,900
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|||||||||
Total
operating expenses
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1,037,699
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1,232,111
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3,495,629
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3,417,555
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|||||||||
Operating
loss
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(370,337
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)
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(390,940
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)
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(1,307,477
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)
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(1,181,253
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)
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Other
income (expense):
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|||||||||||||
Interest
income
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410
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55
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9,072
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623
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Interest
expense
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-
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(6,319
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)
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(193
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)
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(76,242
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)
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Other
income (expense)
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-
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-
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748,840
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(94,988
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)
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Total
other income (expense), net
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410
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(6,264
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)
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757,719
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(170,607
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)
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Loss
from operations before income taxes
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(369,927
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)
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(397,204
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)
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(549,758
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)
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(1,351,860
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)
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Income
taxes
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-
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-
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-
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-
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Net
loss
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$
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(369,927
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)
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$
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(397,204
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)
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$
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(549,758
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)
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$
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(1,351,860
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)
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Basic
and diluted net loss per common share:
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$
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0.00
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$
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(0.01
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)
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$
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(0.01
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)
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$
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(0.02
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)
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Weighted
average common shares
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|||||||||||||
outstanding
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100,822,128
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72,203,236
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93,077,167
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67,051,322
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Nine
Months Ended September 30,
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|||||||
2008
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2007
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||||||
Operating
activities
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|||||||
Net
loss
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$
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(549,758
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)
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$
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(1,351,860
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)
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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|||||||
Depreciation
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47,249
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57,900
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Non-cash
issuance of common stock
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78,255
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136,626
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Deferred
compensation
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319,071
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308,495
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|||||
Gain
on sale of patents
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(750,000
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)
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-
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Loss
on disposition of assets
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1,160
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-
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|||||
Amortization
of debt discount
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-
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57,388
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|||||
Changes
in current assets and current liabilities:
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|||||||
Accounts
receivable
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(95,186
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)
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5,201
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||||
Prepaid
expenses and other
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(3,871
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)
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71,051
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||||
Accounts
payable and accrued expenses
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154,086
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7,525
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|||||
Deferred
revenue
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105,730
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(1,459
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)
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||||
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|||||||
Net
cash used in operating activities
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(693,264
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)
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(709,133
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)
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|||||||
Investing
activities
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|||||||
Proceeds
from sale of patents
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750,000
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-
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|||||
Purchases
of property and equipment
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(19,418
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)
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(29,987
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)
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|||||||
Net
cash provided by (used in) investing activities
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730,582
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(29,987
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)
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|||||||
Financing
activities
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|||||||
Principal
payments for notes payable
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-
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(416,668
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)
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||||
Issuance
of common stock, net of issuance costs
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1,637
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1,128,132
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|||||
Net
cash provided by financing activities
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1,637
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711,464
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|||||
Change
in cash and cash equivalents
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38,955
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(27,656
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)
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Cash
and cash equivalents, beginning of period
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115,597
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198,759
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|||||
Cash
and cash equivalents, end of period
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$
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154,552
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$
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171,103
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September
30, 2008
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December
31, 2007
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||||||
Accrued
salaries
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$
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371,510
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$
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174,945
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Reserve
for merchant losses
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209,220
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209,220
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|||||
Customer
deposits
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42,701
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80,499
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|||||
Accrued
taxes
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23,912
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3,308
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|||||
Accrued
professional fees
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5,500
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29,073
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|||||
Other
accrued expenses
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95,229
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56,856
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|||||
Total
accrued expenses
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$
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748,072
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$
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553,901
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Level
1:
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Quoted
prices are available in active markets for identical assets or
liabilities;
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Level
2:
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Quoted
prices in active markets for similar assets and liabilities that
are
observable for the asset or liability; or
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Level
3:
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Unobservable
pricing inputs that are generally less observable from objective
sources,
such as discounted cash flow models or
valuations.
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Item
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
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Exhibit
Number
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Description |
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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Exhibit
Number
|
Description |
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
|
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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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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10.13
|
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. | |||
Date:
November 14, 2008
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By: |
/s/
Michael R. Long
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Michael
R. Long
|
|||
Chairman
of the Board,
|
|||
Chief
Executive Officer and
|
|||
Chief
Financial Officer
|
|||
(principal
executive officer and principal
financial and accounting
officer)
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