EX-10.27

EXHIBIT 10.27

INDEPENDENT DIRECTOR AGREEMENT

THIS INDEPENDENT DIRECTOR AGREEMENT is made effective as of the 24th of April, 2015 (the “Agreement”), between PAYMENT DATA SYSTEMS, INC., a Nevada corporation with an address at 12500 San Pedro, Suite 120, San Antonio, Texas, 78216 (the “Company”), and Kirk Taylor (“Director”).

WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available to serve on the board of directors of the Company (the “Board”); and

WHEREAS, the Company believes that Director possesses the necessary qualifications and abilities to serve as a director of the Company and to perform the functions and meet the Company’s needs related to its Board, and

WHEREAS, the Company appointed the Director effective as of the date hereof (the “Effective Date”) and desires to enter into an agreement with the Director with respect to such appointment; and

WHEREAS, the Director is willing to accept such appointment and to serve the Company on the terms set forth herein and in accordance with the provisions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Position.  Subject to the terms and provisions of this Agreement, the Company shall cause the Director to be appointed, and the Director hereby agrees to serve the Company in such position upon the terms and conditions hereinafter set forth, provided, however, that the Director’s continued service on the Board after the initial three-year term on the Board, which term is subject to the Company’s bylaws, as amended, and as may be subsequently amended, and pursuant the Company’s bylaws, state or federal law or the rules of any stock exchange on which the Company’s securities are listed, shall be subject to any necessary approval by the Company’s stockholders.

2. Service.  Director will serve as a director of the Company and perform all duties as a director of the Company, including without limitation (a) attending meetings of the Board, (b) serving on one or more committees of the Board (each a “Committee”) and attending meetings of each Committee of which Director is a member, and (c) using reasonable efforts to promote the business of the Company. The Company currently intends to hold at least one in-person regular meeting of the Board and each Committee each quarter, together with additional meetings of the Board and Committees as may be required by the business and affairs of the Company. In fulfilling his responsibilities as a director of the Company, Director agrees that he shall act honestly and in good faith with a view to the best interests of the Company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

3. Compensation.

(a) Cash Compensation. The Director shall receive one thousand dollars ($1,000) each quarter in arrears for participation in quarterly Board and Committee meetings, including the annual stockholders’ meeting. There will be no additional compensation for ad hoc or preparatory meetings or for being the chair of a Committee, other than the Audit Committee. The Chair of the Audit Committee will receive fifteen thousand dollars ($15,000) upon timely, including extensions granted by the SEC, and compliant filing of the 10K each year.

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(b) Restricted Stock.  The Director shall receive five hundred thousand (500,000) shares of the Company’s common stock at the start of the Directorship Term, pursuant and subject to the Company’s 2015 Equity Incentive Plan.  Such shares shall vest in 3 stages: (1) 166,667 on the Effective Date, (2) 166,667 on January 1, 2016, and (3) 166,666 on January 1, 2017.Notwithstanding the foregoing, if the Director ceases to be a member of Board at any time during the vesting period for any reason (such as resignation, withdrawal, death, disability or any other reason), then any unvested shares shall be irrefutably forfeited.  Furthermore, the Director agrees that the shares shall be subject to any “lock up” agreement required to be signed by the Company’s officers in connection with any financing.

(c) Independent Contractor.  The Director’s status during the Directorship Term shall be that of an independent contractor and not, for any purpose, that of an employee or agent with authority to bind the Company in any respect. All payments and other consideration made or provided to the Director under this Section 3 shall be made or provided without withholding or deduction of any kind, and the Director shall assume sole responsibility for discharging all tax or other obligations associated therewith.

(d) Expense Reimbursements.  Upon submission of appropriate receipts, invoices or vouchers as may be reasonably required by the Company, the Company will reimburse Director for all reasonable out-of-pocket expenses incurred in connection with the performance of Director’s duties under this Agreement during the Directorship Term. Any reimbursements for out-of-pocket expenses of the Director in excess of $500.00 must be approved in advance by the Company.

4. Directorship Term.  The “Directorship Term,” as used in this Agreement, shall mean the period commencing on the Effective Date and terminating on the earliest of the following to occur: (a) the death or disability of the Director; (b) the termination of the Director from membership on the Board by the mutual agreement of the Company and the Director; (c) the removal of the Director from the Board by the majority stockholders of the Company; and (d) the resignation by the Director from the Board.

5. Director’s Representation and Acknowledgment.  The Director represents to the Company that the execution and performance of this Agreement shall not be in violation of any agreement or obligation (whether or not written) that he may have with or to any person or entity, including without limitation, any prior or current employer. The Director hereby acknowledges and agrees that this Agreement (and any other agreement or obligation referred to herein) shall be an obligation solely of the Company, and the Director shall have no recourse whatsoever against any stockholder of the Company or any of their respective affiliates with regard to this Agreement.

6. Director Covenants.

(a) Unauthorized Disclosure.  The Director agrees and understands that in the Director’s position with the Company, the Director has been and will be exposed to and receive information relating to the confidential affairs of the Company, including, but not limited to, technical information, business and marketing plans, strategies, customer information, other information concerning the Company’s products, promotions, development, financing, expansion plans, business policies and practices, and other forms of information considered by the Company to be confidential and in the nature of trade secrets. The Director agrees that during the Directorship Term and thereafter, the Director will keep such information confidential and will not disclose such information, either directly or indirectly, to any third person or entity without the prior written consent of the Company; provided, however, that (i) the Director shall have no such obligation to the extent such information is or becomes publicly known or generally known in the Company’s industry other than as a result of the Director’s breach of his obligations hereunder and (ii) the Director may, after giving prior notice to the Company to the extent practicable under the circumstances, disclose such information to the extent required by applicable laws or governmental regulations or judicial or regulatory process. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of the Directorship Term, the Director will promptly return to the Company and/or destroy at the Company’s direction all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data, other product or document, and any summary or compilation of the foregoing, in whatever form, including, without limitation, in electronic form, which has been produced by, received by or otherwise submitted to the Director in the course or otherwise as a result of the Director’s position with the Company during or prior to the Directorship Term, provided that the Company shall retain such materials and make them available to the Director if requested in connection with any litigation against the Director under circumstances in which (i) the Director demonstrates to the reasonable satisfaction of the Company that the materials are necessary to his defense in the litigation and (ii) the confidentiality of the materials is preserved to the reasonable satisfaction of the Company.

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(b) Non-Solicitation.  During the Directorship Term and for a period of two (2) years thereafter, the Director shall not interfere with the Company’s relationship with, or endeavor to entice away from the Company, any person who, on the date of the termination of the Directorship Term and/or at any time during the one year period prior to the termination of the Directorship Term, was an employee or customer of the Company or otherwise had a material business relationship with the Company.

(c) Non-Compete. The Director agrees that during the Directorship Term and for a period of two (2) years thereafter, he shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or consultant to any other corporation or enterprise; engage in the business of developing, marketing, selling or supporting technology to or for businesses in which the Company engages in or in which the Company has an actual intention, as evidenced by the Company's written business plans, to engage in, within any geographic area in which the Company is then conducting such business.  Nothing in this Section 6 shall prohibit the Director from being (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than three percent of the outstanding stock of any class of securities of a corporation, which are publicly traded, so long as the Director has no active participation in the business of such corporation.

(d) Code of Ethics and Insider Trading Guidelines.  Director agrees to comply with the Company’s Code of Ethics and to execute the Company’s Insider Trading Guidelines in Attachments A and B, respectively. The Code of Ethics and Insider Trading Guidelines may either or both be amended by the Company from time to time.

7. Director and Officer Liability Insurance. Director shall be covered by the Company’s director and officer’s liability insurance policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.

8. Limitation of Liability; Right to Indemnification. Director shall be entitled to limitations of liability and the right to indemnification against expenses and damages in connection with claims against Director relating to his service to the Company to the fullest extent permitted by the Company’s Certificate of Incorporation and Bylaws (as such documents may be amended from time to time) and other applicable law.

9. Amendments and Waiver. No supplement, modification or amendment of this Agreement will be binding unless executed in writing by both parties. No waiver of any provision of this Agreement on a particular occasion will be deemed or will constitute a waiver of that provision on a subsequent occasion or a waiver of any other provision of this Agreement.

10. Binding Effect, Assignments. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Notwithstanding the provisions of the immediately preceding sentence, neither the Director nor the Company shall assign all or any portion of this Agreement without the prior written consent of the other party.

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11. Severability. The provisions of this Agreement are severable, and any provision of this Agreement that is held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable in any respect will not affect the validity or enforceability of any other provision of this Agreement.

12. Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in that state without giving effect to the principles of conflicts of laws.

13. Entire Agreement. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understanding relating to such subject matter.

14. Miscellaneous. This Agreement may be executed by the Company and Director in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. Any party may execute this Agreement by facsimile signature and the other party will be entitled to rely on such facsimile signature as evidence that this Agreement has been duly executed by such party. Any party executing this Agreement by facsimile signature will promptly forward to the other party an original signature page by overnight courier. Director acknowledges that this Agreement does not constitute a contract of employment and does not imply that the Company will continue his service as a director for any period of time.

Signature Page Follows.

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IN WITNESS WHEREOF, the parties have executed this Independent Director Agreement as of the date shown above.

Payment Data Systems, Inc.

By: /s/ Michael R. Long

Name: Michael R. Long

Title: Chairman of the Board of Directors

By: /s/ Kirk Taylor

Name: Kirk Taylor

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Attachment A

Payment Data Systems, Inc.

Code of Ethics

In accordance with the requirements of the U.S. Securities and Exchange Commission, the Board of Directors of Payment Data Systems, Inc. (with its subsidiaries, the “Company”) has adopted this Code of Ethics (this “Code”) in order to:

· encourage honest and ethical conduct, including fair dealing and the ethical handling of conflicts of interest;

· encourage full, fair, accurate, timely and understandable disclosure;

· encourage compliance with applicable laws and governmental rules and regulations;

· ensure the protection of the Company's legitimate business interests, including corporate opportunities, assets and confidential information;

· deter wrongdoing; and

· ensure accountability for adherence to the Code.

All directors, officers and employees of the Company are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in Section 6, Reporting and Accountability. The Code will be strictly enforced and violations will be dealt with immediately. Violations that involve illegal behavior will be reported to the appropriate authorities.

This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees, officers and directors of the Company. All such persons must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. Those who violate the standards in this Code or who fail to cooperate with management directions given to effect compliance with this Code may be subject to disciplinary action, possibly including termination of employment. For guidance with respect to issues not addressed in this Code, employees should follow the Company’s internal policies and procedures.

If you have any questions regarding this Code, you should address these questions to your supervisor, or to the general counsel or other person identified by the Company as its compliance officer (the “Compliance Officer”). The Code is enforced by the General Counsel where the suspected violation involves a person who is not a director or officer. The audit committee, or, if there is no audit or another independent committee, the Board of Directors enforces any suspected violations involving a director or officer.

1. Honest and Ethical Conduct

Each director, officer and employee owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest and ethical. This includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Deceit and subordination of principle are inconsistent with integrity.

Each director, officer and employee must:

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· Act with integrity, including being honest and ethical while still maintaining the confidentiality of information where required or consistent with the Company’s policies.

· Observe both the form and spirit of laws and governmental rules and regulations and accounting standards.

· Adhere to a high standard of business ethics.

· Accept no improper or undisclosed material personal benefits from third parties as a result of any transaction or transactions of the Company.

2. Conflicts of Interest

A “conflict of interest” arises when a person’s loyalties or actions are divided between the interests of the Company and those of another, such as a competitor, supplier or customer, or personal business. A conflict of interest can arise when an employee takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. A conflict of interest may also arise when an individual, or members of his or her family, receives an improper personal benefit as a result of his or her position in, or relationship with, the Company. Moreover, the appearance of a conflict of interest alone can adversely affect the Company and its relations with business partners, customers, suppliers and employees.

Employees are expected to use good judgment, to adhere to high ethical standards and to avoid situations that create an actual or potential conflict of interest. It is almost always a conflict of interest for employees to work simultaneously for a competitor, customer or supplier. In this regard, Company personnel shall not have any undisclosed financial interest in any competitor, supplier, customer, or strategic partner if that interest would create a conflict of interest with the Company. If there is such an interest, the employee should disclose the nature of the interest to the human resources department or the general counsel, as appropriate; provided, however, that employees may maintain small investments in publicly held companies in which an employee has no influence or control.

A conflict of interest can also arise with respect to employment of relatives and persons with close personal relationships. If a director, officer or employee (or someone with whom the person has a close relationship (e.g., a family member or close companion) has a financial or employment relationship with an actual or potential competitor, supplier or customer, the director, officer or employee must disclose this fact in writing to the Compliance Officer. The Company may take any action that it deems necessary in its sole discretion to avoid or remedy an actual, prospective or perceived conflict of interest, including a reassignment of some or all of the employee’s duties or change of the employee’s position.

Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or officer (or their family members) are expressly prohibited unless approved by the Board of Directors.

A conflict of interest may not always be clear; therefore, you should consult with the Compliance Officer if you have any questions. Any employee who becomes aware of a conflict or a potential conflict should bring it to the attention of the Compliance Officer.

3. Disclosure

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Each director, officer and employee, to the extent involved in the Company’s disclosure process, including the Chief Executive Officer, the Chief Financial Officer, and the Controller (the “Senior Financial Officers”) and the General Counsel, is required to be familiar with the Company’s disclosure controls and procedures applicable to him or her so that the Company’s public reports and documents filed with the Securities and Exchange Commission (the “SEC”) comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each such person having direct or supervisory authority regarding these SEC filings or the Company’s other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

Each director, officer and employee, to the extent involved in the Company’s disclosure process, including without limitation the Senior Financial Officers and the General Counsel, must:

· Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.

· Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, governmental regulators and self-regulatory organizations.

4. Compliance

It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations in the performance of their duties for the Company, including those relating to accounting and auditing matters and insider trading. Other policies issued by the Company also provide guidance as to certain of the laws, rules and regulations that apply to the Company’s activities.

5. Insider Trading

Generally, it is against Company policy for any individual to profit from undisclosed information relating to the Company or any other company in violation of insider trading or other laws. Inside information is any material, non-public information a reasonable investor is likely to consider important when making an investment decision. Anyone who is aware of material non-public information relating to the Company, our business partners, or other companies may not use the information to trade directly or indirectly or tip others to trade in stock or other securities of that company in violation of the federal securities laws.

If you are uncertain about the legal rules involving your purchase or sale of any Company securities or any securities in companies that you are familiar with by virtue of your work for the Company, you should consult with the Compliance Officer before making any such purchase or sale. You should also consult the Company’s Insider Trading Policy which applies to all directors, officers and employees as well as consultants and independent contractors of the Company and is hereby incorporated by reference.

6. Reporting and Accountability

The Board of Directors has the authority to interpret this Code in any particular situation. Any director, officer or employee who becomes aware of any violation of this Code is required to notify the audit committee, if there is one or if not, the full Board or the Compliance Officer promptly.

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Any questions relating to how these policies should be interpreted or applied should be addressed to the Compliance Officer or the audit committee or Board, as applicable. Any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, as discussed in Section 2 of this Code, should be discussed with the Compliance Officer or the audit committee or Board, as applicable. A director, officer or employee who is unsure of whether a situation violates this Code should discuss the situation with the Compliance Officer or the audit committee, if there is one or if not, the full Board, as applicable.

Each director, officer or employee must:

· Notify the appropriate contact promptly of any existing or potential violation of this Code.

· Cooperate in any internal investigation of misconduct under this Code.

· Not retaliate against any other director, officer or employee for good faith reports of known or suspected acts of misconduct or other violations of this Code.

The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code:

· The Compliance Officer, the audit committee, if there is one or if not, the full Board, as the case may be, will take all appropriate action to investigate any violations reported. In addition, the audit committee, Board or the Compliance Officer, as appropriate, shall report each violation and alleged violation involving a director or an executive officer to the Chairperson of the Board. To the extent he or she deems appropriate, the Chairperson of the Board shall participate in any investigation of a director or executive officer. After the conclusion of an investigation of a director or executive officer, the conclusions shall be reported to the entire Board.

· The Board will conduct such additional investigation as it deems necessary. If the Board determines that a director or executive officer has violated this Code, it will take such disciplinary or preventive action as deemed appropriate, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities.

· The Company will make every effort to protect the integrity of every investigation, including protecting reporters and witnesses from harassment, intimidation and retaliation, keep evidence from being destroyed, ensure testimony is honest and identify root causes. The Company will make every effort to keep the identity of every reporter private and to secure any data relating to the investigation. Also, the Company may require witnesses to maintain a particular investigation and their role in strict confidence.

7. Corporate Opportunities

Employees, officers and directors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers and directors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.

Sometimes the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Employees, officers and directors who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with the Compliance Officer, the audit committee or the Board.

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8. Confidentiality

In carrying out the Company’s business, employees, officers and directors often learn confidential or proprietary information about the Company, its customers, suppliers, or joint venture parties. Employees, officers and directors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.

9. Fair Dealing

We seek to succeed through honest business competition. We do not seek competitive advantages through illegal or unethical business practices. Each employee, officer and director should endeavor to deal fairly with the Company’s customers, consultants, service providers, suppliers, competitors and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

10. Protection and Proper Use of Company Assets

All employees, officers and directors should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes.

11. Payments to Government Personnel

The United States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.

In addition, the United States government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. It is the Company’s policy to not provide any gifts, favors or gratuities to any government official.

12. Amendment, Modification and Waiver

This Code may be amended or modified by the Company’s Board of Directors. Any employee or director who believes that a waiver may be called for should discuss the matter with the Compliance Officer, the audit committee, if there is one or if not, the full Board. Waivers of this code may only be granted by the Board of Directors or a committee of the Board of Directors with specific delegated authority to grant such waivers at their sole discretion. Any waivers involving a director or executive officer may only be granted by the Board of Directors at its sole discretion. Waivers will be disclosed as required by the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder and any applicable rules relating to the maintenance of the listing of our securities on any stock exchange. The company will review this Code regularly to assess its utility given the changing demands of the company and the scale and scope of its operations.

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[acknowledgement on following page]

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 ACKNOWLEDGEMENT

I acknowledge that I have read and understood the Payment Data Systems Code of Ethics and will comply with its terms and conditions, I understand that if I have any questions regarding this policy, I will direct them to the Company’s General Counsel.

Signed: /s/ Kirk Taylor

Name: Kirk Taylor

Dated: April 24, 2015

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Attachment B

Payment Data Systems, Inc.

Insider Trading Policy

THIS POLICY HAS BEEN ADOPTED BY THE BOARD OF

DIRECTORS OF Payment Data Systems, Inc.

AND IS APPLICABLE TO ALL DIRECTORS, OFFICERS,

EMPLOYEES AND CONSULTANTS OF THE COMPANY.

The Need for a Policy Statement

The purchase or sale of securities while possessing material nonpublic information or the selective disclosure of such information to others who may trade is prohibited by federal and state laws.

The Company has adopted the following policy with respect to purchases and sales of the Company's securities by directors, officers, employees and consultants who have material nonpublic information about the Company and about other firms with which it works closely. For purposes of this policy, outside directors and consultants are included within the term "employee." Each employee is responsible for ensuring that he or she does not violate federal or state securities laws or the Company's policy concerning securities trading. This policy is designed to promote compliance with the federal securities laws and to protect the Company, as well as those persons, from the very serious liabilities and penalties that can result from violations of these laws.

Potential penalties for insider trading violations include civil fines for up to three times the profit gained or loss avoided by the trading, criminal fines of up to $1,000,000.00 and jail sentences of up to ten (10) years. In addition, a company whose employee violates the insider trading prohibitions may be liable for a civil fine of up to the greater of $1,000,000.00 and three times the profit gained or loss avoided as a result of the employee's insider trading violations.

The Company's Policy

Company employees may not trade in the stock or other securities of any firm when they know "material nonpublic information" about the firm. This restriction on "insider trading" is not limited to trading in the Company's securities. It includes trading in the securities of other firms, such as customers or suppliers of the Company and those with which the Company may be negotiating major transactions, such as an acquisition, investment or sale. Information that is not material to the Company may nevertheless be material to one of those other firms.

"Trading" includes purchases and sales of stock, bonds, debentures, options, puts, calls and other similar securities. This policy includes trades made pursuant to any investment direction under employee benefit plans as well as trades in the open market. For example, sales of stock acquired through any employee stock purchase plan or transactions in the self-directed portion of any retirement or pension plan are covered by this policy. This policy also applies to the exercise of options with an immediate sale of some or all of the shares through a broker.

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Employees must not pass material nonpublic information on to others or recommend to anyone the purchase or sale of any securities on the basis of such information. This practice, known as "tipping," also violates the securities laws and can result in the same civil and criminal penalties that apply to insider trading, whether or not the employee derives any benefit from another's actions.

The same restrictions apply to family members and other persons living in an employee's household. Employees are expected to be responsible for the compliance of the members of their immediate family and personal household. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception to the policy.

Because of the unique potential for abuse of material nonpublic information, it is also the Company's policy that directors, officers and employees may not engage in short-term speculative transactions involving "trading" the Company's securities. This would include short sales and buying or selling puts or calls. In addition, the purchase of the Company's securities on margin (except for the exercise of employee stock options) is prohibited.

Definition of Material Nonpublic Information

Material Information. Information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. Therefore, any information that could reasonably be expected to affect the price of the security is material. Common examples of material information are:

* Projections of future earnings or losses or changes in such projections.

* Actual changes in earnings.

* A pending or prospective joint venture, merger, acquisition, tender offer or financing.

* A significant sale of assets or disposition of a subsidiary.

* A gain or loss of a material contract, customer or supplier or material changes in the profitability status of a current contract.

* The development or release of a new product or service.

* Changes in a previously announced schedule for the development or release of a new product or service.

* Changes in management, other major personnel changes or labor negotiations.

* Significant increases or decreases in dividends or the declaration of a stock split or the offering of additional securities.

* Financial liquidity problems.

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Both positive and negative information can be material. Because trading that receives scrutiny will be evaluated after the fact with the benefit of hindsight, questions concerning the materiality of particular information should be resolved in favor of materiality, and trading should be avoided.

Nonpublic Information. Nonpublic information is information that is not generally known or available to the public. Information is considered to be available to the public only when it has been released to the public through appropriate channels, e.g., by means of a press release or a statement from one of the corporation's senior officers, and enough time has elapsed to permit the investment market to absorb and evaluate the information. As a general rule, information is considered nonpublic until the second business day after public disclosure.

Unauthorized Disclosure

Maintaining the confidentiality of Company information is essential for competitive, security and other business reasons, as well as to comply with securities laws. All information an employee learns about the Company or its business plans in connection with his or her employment is potentially "inside" information until publicly disclosed or made available by the Company. The employee should treat all such information as confidential and proprietary to the Company. The employee may not disclose it to others, such as family members, other relatives, or business or social acquaintances, who do not need to know it for legitimate business reasons.

Also, the timing and nature of the Company's disclosure of material information to outsiders is subject to legal rules the breach of which could result in substantial liability to the employee, the Company and its management. Accordingly, it is important that only specifically designated representatives of the Company discuss the Company and its affiliates and subsidiaries with the news media, securities analysts and investors. Inquiries of this type received by any employee should be referred to the Company’s Chief Executive Officer.

Additional Restrictions and Requirements

The following additional procedures are designed to help prevent inadvertent violations and avoid even the appearance of improper transactions in the Company's securities. Employees who wish to trade in the Company's securities should trade only during the period beginning one (1) trading day after the release of quarterly earnings and extending until the fifteenth (15th) day of the third month of the quarter. Of course, even during this trading window period, an employee may not trade if he or she is aware of any material nonpublic information. If an employee believes there are compelling reasons why he or she needs to trade in the Company's securities during periods other than the recommended "windows," the employee needs to consult the Company’s General Counsel.

Systematic Trading Plans

Officers and other insiders who wish to enter into arrangements for systematic trading of the Company's securities under a systematic trading plan pursuant to Rule 10b5-1 are permitted to do so upon the approval of the Company’s Board of Directors. The trading plan must be entered into by an insider during an open trading window period as defined above while he or she is unaware of any material nonpublic information and must be in compliance with the Rules and Regulations of the Securities and Exchange Commission and all other applicable federal and state laws.

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Personal Responsibility; Assistance

Each employee should remember that the ultimate responsibility for adhering to this policy and avoiding improper trading rests with the employee. In this regard, it is important that each employee use his or her best judgment. If an employee violates this policy, the Company may take disciplinary action, including dismissal for cause. Compliance with this policy by all employees is of the utmost importance both for the employee and for the Company. Any person who has any questions about the application of this policy to any particular case may obtain additional guidance from the Company’s General Counsel.

[acknowledgement on following page]

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ACKNOWLEDGEMENT

I acknowledge that I have read and understood the Payment Data Systems Insider Trading Policy and will comply with its terms and conditions, except for the additional restriction limiting my trading of the Company’s securities to designated time periods referred to as trading window periods. I understand that if I have any questions regarding this policy, I will direct them to the Company’s General Counsel.

Signed: /s/ Kirk Taylor

Name: Kirk Taylor

Dated: April 24, 2015

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EX-10.28

EXHIBIT 10.28

INDEPENDENT DIRECTOR AGREEMENT

THIS INDEPENDENT DIRECTOR AGREEMENT is made effective as of the 24th of April, 2015 (the “Agreement”), between PAYMENT DATA SYSTEMS, INC., a Nevada corporation with an address at 12500 San Pedro, Suite 120, San Antonio, Texas, 78216 (the “Company”), and Peter G. Kirby, PhD (“Director”).

WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available to serve on the board of directors of the Company (the “Board”); and

WHEREAS, the Company believes that Director possesses the necessary qualifications and abilities to serve as a director of the Company and to perform the functions and meet the Company’s needs related to its Board, and

WHEREAS, the Company appointed the Director effective as of the date hereof (the “Effective Date”) and desires to enter into an agreement with the Director with respect to such appointment; and

WHEREAS, the Director is willing to accept such appointment and to serve the Company on the terms set forth herein and in accordance with the provisions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Position.  Subject to the terms and provisions of this Agreement, the Company shall cause the Director to be appointed, and the Director hereby agrees to serve the Company in such position upon the terms and conditions hereinafter set forth, provided, however, that the Director’s continued service on the Board after the initial three-year term on the Board, which term is subject to the Company’s bylaws, as amended, and as may be subsequently amended, and pursuant the Company’s bylaws, state or federal law or the rules of any stock exchange on which the Company’s securities are listed, shall be subject to any necessary approval by the Company’s stockholders.

2. Service.  Director will serve as a director of the Company and perform all duties as a director of the Company, including without limitation (a) attending meetings of the Board, (b) serving on one or more committees of the Board (each a “Committee”) and attending meetings of each Committee of which Director is a member, and (c) using reasonable efforts to promote the business of the Company. The Company currently intends to hold at least one in-person regular meeting of the Board and each Committee each quarter, together with additional meetings of the Board and Committees as may be required by the business and affairs of the Company. In fulfilling his responsibilities as a director of the Company, Director agrees that he shall act honestly and in good faith with a view to the best interests of the Company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

3. Compensation.

(a) Cash Compensation. The Director shall receive one thousand dollars ($1,000) each quarter in arrears for participation in quarterly Board and Committee meetings, including the annual stockholders’ meeting. There will be no additional compensation for ad hoc or preparatory meetings or for being the chair of a Committee, other than the Audit Committee. The Chair of the Audit Committee will receive fifteen thousand dollars ($15,000) upon timely, including extensions granted by the SEC, and compliant filing of the 10K each year. The Company also agrees to pay Director a one-time twenty thousand dollar ($20,000) bonus for continued loyalty and service to the Company.

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(b) Independent Contractor.  The Director’s status during the Directorship Term shall be that of an independent contractor and not, for any purpose, that of an employee or agent with authority to bind the Company in any respect. All payments and other consideration made or provided to the Director under this Section 3 shall be made or provided without withholding or deduction of any kind, and the Director shall assume sole responsibility for discharging all tax or other obligations associated therewith.

(c) Expense Reimbursements.  Upon submission of appropriate receipts, invoices or vouchers as may be reasonably required by the Company, the Company will reimburse Director for all reasonable out-of-pocket expenses incurred in connection with the performance of Director’s duties under this Agreement during the Directorship Term. Any reimbursements for out-of-pocket expenses of the Director in excess of $500.00 must be approved in advance by the Company.

4. Directorship Term.  The “Directorship Term,” as used in this Agreement, shall mean the period commencing on the Effective Date and terminating on the earliest of the following to occur: (a) the death or disability of the Director; (b) the termination of the Director from membership on the Board by the mutual agreement of the Company and the Director; (c) the removal of the Director from the Board by the majority stockholders of the Company; and (d) the resignation by the Director from the Board.

5. Director’s Representation and Acknowledgment.  The Director represents to the Company that the execution and performance of this Agreement shall not be in violation of any agreement or obligation (whether or not written) that he may have with or to any person or entity, including without limitation, any prior or current employer. The Director hereby acknowledges and agrees that this Agreement (and any other agreement or obligation referred to herein) shall be an obligation solely of the Company, and the Director shall have no recourse whatsoever against any stockholder of the Company or any of their respective affiliates with regard to this Agreement.

6. Director Covenants.

(a) Unauthorized Disclosure.  The Director agrees and understands that in the Director’s position with the Company, the Director has been and will be exposed to and receive information relating to the confidential affairs of the Company, including, but not limited to, technical information, business and marketing plans, strategies, customer information, other information concerning the Company’s products, promotions, development, financing, expansion plans, business policies and practices, and other forms of information considered by the Company to be confidential and in the nature of trade secrets. The Director agrees that during the Directorship Term and thereafter, the Director will keep such information confidential and will not disclose such information, either directly or indirectly, to any third person or entity without the prior written consent of the Company; provided, however, that (i) the Director shall have no such obligation to the extent such information is or becomes publicly known or generally known in the Company’s industry other than as a result of the Director’s breach of his obligations hereunder and (ii) the Director may, after giving prior notice to the Company to the extent practicable under the circumstances, disclose such information to the extent required by applicable laws or governmental regulations or judicial or regulatory process. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of the Directorship Term, the Director will promptly return to the Company and/or destroy at the Company’s direction all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data, other product or document, and any summary or compilation of the foregoing, in whatever form, including, without limitation, in electronic form, which has been produced by, received by or otherwise submitted to the Director in the course or otherwise as a result of the Director’s position with the Company during or prior to the Directorship Term, provided that the Company shall retain such materials and make them available to the Director if requested in connection with any litigation against the Director under circumstances in which (i) the Director demonstrates to the reasonable satisfaction of the Company that the materials are necessary to his defense in the litigation and (ii) the confidentiality of the materials is preserved to the reasonable satisfaction of the Company.

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(b) Non-Solicitation.  During the Directorship Term and for a period of two (2) years thereafter, the Director shall not interfere with the Company’s relationship with, or endeavor to entice away from the Company, any person who, on the date of the termination of the Directorship Term and/or at any time during the one year period prior to the termination of the Directorship Term, was an employee or customer of the Company or otherwise had a material business relationship with the Company.

(c) Non-Compete. The Director agrees that during the Directorship Term and for a period of two (2) years thereafter, he shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or consultant to any other corporation or enterprise; engage in the business of developing, marketing, selling or supporting technology to or for businesses in which the Company engages in or in which the Company has an actual intention, as evidenced by the Company's written business plans, to engage in, within any geographic area in which the Company is then conducting such business.  Nothing in this Section 6 shall prohibit the Director from being (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than three percent of the outstanding stock of any class of securities of a corporation, which are publicly traded, so long as the Director has no active participation in the business of such corporation.

(d) Code of Ethics and Insider Trading Guidelines.  Director agrees to comply with the Company’s Code of Ethics and to execute the Company’s Insider Trading Guidelines in Attachments A and B, respectively. The Code of Ethics and Insider Trading Guidelines may either or both be amended by the Company from time to time.

7. Director and Officer Liability Insurance. Director shall be covered by the Company’s director and officer’s liability insurance policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.

8. Limitation of Liability; Right to Indemnification. Director shall be entitled to limitations of liability and the right to indemnification against expenses and damages in connection with claims against Director relating to his service to the Company to the fullest extent permitted by the Company’s Certificate of Incorporation and Bylaws (as such documents may be amended from time to time) and other applicable law.

9. Amendments and Waiver. No supplement, modification or amendment of this Agreement will be binding unless executed in writing by both parties. No waiver of any provision of this Agreement on a particular occasion will be deemed or will constitute a waiver of that provision on a subsequent occasion or a waiver of any other provision of this Agreement.

10. Binding Effect, Assignments. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Notwithstanding the provisions of the immediately preceding sentence, neither the Director nor the Company shall assign all or any portion of this Agreement without the prior written consent of the other party.

11. Severability. The provisions of this Agreement are severable, and any provision of this Agreement that is held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable in any respect will not affect the validity or enforceability of any other provision of this Agreement.

12. Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in that state without giving effect to the principles of conflicts of laws.

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13. Entire Agreement. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understanding relating to such subject matter.

14. Miscellaneous. This Agreement may be executed by the Company and Director in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. Any party may execute this Agreement by facsimile signature and the other party will be entitled to rely on such facsimile signature as evidence that this Agreement has been duly executed by such party. Any party executing this Agreement by facsimile signature will promptly forward to the other party an original signature page by overnight courier. Director acknowledges that this Agreement does not constitute a contract of employment and does not imply that the Company will continue his service as a director for any period of time.

Signature Page Follows.

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IN WITNESS WHEREOF, the parties have executed this Independent Director Agreement as of the date shown above.

 Payment Data Systems, Inc.

By: /s/ Michael R. Long

Name: Michael R. Long

Title: Chairman of the Board of Directors

By: /s/ Peter G. Kirby

Name: Peter G. Kirby, PhD

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Attachment A

Payment Data Systems, Inc.

Code of Ethics

In accordance with the requirements of the U.S. Securities and Exchange Commission, the Board of Directors of Payment Data Systems, Inc. (with its subsidiaries, the “Company”) has adopted this Code of Ethics (this “Code”) in order to:

· encourage honest and ethical conduct, including fair dealing and the ethical handling of conflicts of interest;

· encourage full, fair, accurate, timely and understandable disclosure;

· encourage compliance with applicable laws and governmental rules and regulations;

· ensure the protection of the Company's legitimate business interests, including corporate opportunities, assets and confidential information;

· deter wrongdoing; and

· ensure accountability for adherence to the Code.

All directors, officers and employees of the Company are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in Section 6, Reporting and Accountability. The Code will be strictly enforced and violations will be dealt with immediately. Violations that involve illegal behavior will be reported to the appropriate authorities.

This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees, officers and directors of the Company. All such persons must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. Those who violate the standards in this Code or who fail to cooperate with management directions given to effect compliance with this Code may be subject to disciplinary action, possibly including termination of employment. For guidance with respect to issues not addressed in this Code, employees should follow the Company’s internal policies and procedures.

If you have any questions regarding this Code, you should address these questions to your supervisor, or to the general counsel or other person identified by the Company as its compliance officer (the “Compliance Officer”). The Code is enforced by the General Counsel where the suspected violation involves a person who is not a director or officer. The audit committee, or, if there is no audit or another independent committee, the Board of Directors enforces any suspected violations involving a director or officer.

1. Honest and Ethical Conduct

Each director, officer and employee owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest and ethical. This includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Deceit and subordination of principle are inconsistent with integrity.

Each director, officer and employee must:

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· Act with integrity, including being honest and ethical while still maintaining the confidentiality of information where required or consistent with the Company’s policies.

· Observe both the form and spirit of laws and governmental rules and regulations and accounting standards.

· Adhere to a high standard of business ethics.

· Accept no improper or undisclosed material personal benefits from third parties as a result of any transaction or transactions of the Company.

2. Conflicts of Interest

A “conflict of interest” arises when a person’s loyalties or actions are divided between the interests of the Company and those of another, such as a competitor, supplier or customer, or personal business. A conflict of interest can arise when an employee takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. A conflict of interest may also arise when an individual, or members of his or her family, receives an improper personal benefit as a result of his or her position in, or relationship with, the Company. Moreover, the appearance of a conflict of interest alone can adversely affect the Company and its relations with business partners, customers, suppliers and employees.

Employees are expected to use good judgment, to adhere to high ethical standards and to avoid situations that create an actual or potential conflict of interest. It is almost always a conflict of interest for employees to work simultaneously for a competitor, customer or supplier. In this regard, Company personnel shall not have any undisclosed financial interest in any competitor, supplier, customer, or strategic partner if that interest would create a conflict of interest with the Company. If there is such an interest, the employee should disclose the nature of the interest to the human resources department or the general counsel, as appropriate; provided, however, that employees may maintain small investments in publicly held companies in which an employee has no influence or control.

A conflict of interest can also arise with respect to employment of relatives and persons with close personal relationships. If a director, officer or employee (or someone with whom the person has a close relationship (e.g., a family member or close companion) has a financial or employment relationship with an actual or potential competitor, supplier or customer, the director, officer or employee must disclose this fact in writing to the Compliance Officer. The Company may take any action that it deems necessary in its sole discretion to avoid or remedy an actual, prospective or perceived conflict of interest, including a reassignment of some or all of the employee’s duties or change of the employee’s position.

Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or officer (or their family members) are expressly prohibited unless approved by the Board of Directors.

A conflict of interest may not always be clear; therefore, you should consult with the Compliance Officer if you have any questions. Any employee who becomes aware of a conflict or a potential conflict should bring it to the attention of the Compliance Officer.

3. Disclosure

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Each director, officer and employee, to the extent involved in the Company’s disclosure process, including the Chief Executive Officer, the Chief Financial Officer, and the Controller (the “Senior Financial Officers”) and the General Counsel, is required to be familiar with the Company’s disclosure controls and procedures applicable to him or her so that the Company’s public reports and documents filed with the Securities and Exchange Commission (the “SEC”) comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each such person having direct or supervisory authority regarding these SEC filings or the Company’s other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

Each director, officer and employee, to the extent involved in the Company’s disclosure process, including without limitation the Senior Financial Officers and the General Counsel, must:

· Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.

· Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, governmental regulators and self-regulatory organizations.

4. Compliance

It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations in the performance of their duties for the Company, including those relating to accounting and auditing matters and insider trading. Other policies issued by the Company also provide guidance as to certain of the laws, rules and regulations that apply to the Company’s activities.

5. Insider Trading

Generally, it is against Company policy for any individual to profit from undisclosed information relating to the Company or any other company in violation of insider trading or other laws. Inside information is any material, non-public information a reasonable investor is likely to consider important when making an investment decision. Anyone who is aware of material non-public information relating to the Company, our business partners, or other companies may not use the information to trade directly or indirectly or tip others to trade in stock or other securities of that company in violation of the federal securities laws.

If you are uncertain about the legal rules involving your purchase or sale of any Company securities or any securities in companies that you are familiar with by virtue of your work for the Company, you should consult with the Compliance Officer before making any such purchase or sale. You should also consult the Company’s Insider Trading Policy which applies to all directors, officers and employees as well as consultants and independent contractors of the Company and is hereby incorporated by reference.

6. Reporting and Accountability

The Board of Directors has the authority to interpret this Code in any particular situation. Any director, officer or employee who becomes aware of any violation of this Code is required to notify the audit committee, if there is one or if not, the full Board or the Compliance Officer promptly.

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Any questions relating to how these policies should be interpreted or applied should be addressed to the Compliance Officer or the audit committee or Board, as applicable. Any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, as discussed in Section 2 of this Code, should be discussed with the Compliance Officer or the audit committee or Board, as applicable. A director, officer or employee who is unsure of whether a situation violates this Code should discuss the situation with the Compliance Officer or the audit committee, if there is one or if not, the full Board, as applicable.

Each director, officer or employee must:

· Notify the appropriate contact promptly of any existing or potential violation of this Code.

· Cooperate in any internal investigation of misconduct under this Code.

· Not retaliate against any other director, officer or employee for good faith reports of known or suspected acts of misconduct or other violations of this Code.

The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code:

· The Compliance Officer, the audit committee, if there is one or if not, the full Board, as the case may be, will take all appropriate action to investigate any violations reported. In addition, the audit committee, Board or the Compliance Officer, as appropriate, shall report each violation and alleged violation involving a director or an executive officer to the Chairperson of the Board. To the extent he or she deems appropriate, the Chairperson of the Board shall participate in any investigation of a director or executive officer. After the conclusion of an investigation of a director or executive officer, the conclusions shall be reported to the entire Board.

· The Board will conduct such additional investigation as it deems necessary. If the Board determines that a director or executive officer has violated this Code, it will take such disciplinary or preventive action as deemed appropriate, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities.

· The Company will make every effort to protect the integrity of every investigation, including protecting reporters and witnesses from harassment, intimidation and retaliation, keep evidence from being destroyed, ensure testimony is honest and identify root causes. The Company will make every effort to keep the identity of every reporter private and to secure any data relating to the investigation. Also, the Company may require witnesses to maintain a particular investigation and their role in strict confidence.

7. Corporate Opportunities

Employees, officers and directors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers and directors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.

Sometimes the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Employees, officers and directors who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with the Compliance Officer, the audit committee or the Board.

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8. Confidentiality

In carrying out the Company’s business, employees, officers and directors often learn confidential or proprietary information about the Company, its customers, suppliers, or joint venture parties. Employees, officers and directors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.

9. Fair Dealing

We seek to succeed through honest business competition. We do not seek competitive advantages through illegal or unethical business practices. Each employee, officer and director should endeavor to deal fairly with the Company’s customers, consultants, service providers, suppliers, competitors and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

10. Protection and Proper Use of Company Assets

All employees, officers and directors should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes.

11. Payments to Government Personnel

The United States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.

In addition, the United States government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. It is the Company’s policy to not provide any gifts, favors or gratuities to any government official.

12. Amendment, Modification and Waiver

This Code may be amended or modified by the Company’s Board of Directors. Any employee or director who believes that a waiver may be called for should discuss the matter with the Compliance Officer, the audit committee, if there is one or if not, the full Board. Waivers of this code may only be granted by the Board of Directors or a committee of the Board of Directors with specific delegated authority to grant such waivers at their sole discretion. Any waivers involving a director or executive officer may only be granted by the Board of Directors at its sole discretion. Waivers will be disclosed as required by the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder and any applicable rules relating to the maintenance of the listing of our securities on any stock exchange. The company will review this Code regularly to assess its utility given the changing demands of the company and the scale and scope of its operations.

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[acknowledgement on following page]

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ACKNOWLEDGEMENT

I acknowledge that I have read and understood the Payment Data Systems Code of Ethics and will comply with its terms and conditions,. I understand that if I have any questions regarding this policy, I will direct them to the Company’s General Counsel.

Signed: /s/ Peter G. Kirby

Name: Peter G. Kirby, PhD

Dated: April 24, 2015

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Attachment B

Payment Data Systems, Inc.

Insider Trading Policy

THIS POLICY HAS BEEN ADOPTED BY THE BOARD OF

DIRECTORS OF Payment Data Systems, Inc.

AND IS APPLICABLE TO ALL DIRECTORS, OFFICERS,

EMPLOYEES AND CONSULTANTS OF THE COMPANY.

The Need for a Policy Statement

The purchase or sale of securities while possessing material nonpublic information or the selective disclosure of such information to others who may trade is prohibited by federal and state laws.

The Company has adopted the following policy with respect to purchases and sales of the Company's securities by directors, officers, employees and consultants who have material nonpublic information about the Company and about other firms with which it works closely. For purposes of this policy, outside directors and consultants are included within the term "employee." Each employee is responsible for ensuring that he or she does not violate federal or state securities laws or the Company's policy concerning securities trading. This policy is designed to promote compliance with the federal securities laws and to protect the Company, as well as those persons, from the very serious liabilities and penalties that can result from violations of these laws.

Potential penalties for insider trading violations include civil fines for up to three times the profit gained or loss avoided by the trading, criminal fines of up to $1,000,000.00 and jail sentences of up to ten (10) years. In addition, a company whose employee violates the insider trading prohibitions may be liable for a civil fine of up to the greater of $1,000,000.00 and three times the profit gained or loss avoided as a result of the employee's insider trading violations.

The Company's Policy

Company employees may not trade in the stock or other securities of any firm when they know "material nonpublic information" about the firm. This restriction on "insider trading" is not limited to trading in the Company's securities. It includes trading in the securities of other firms, such as customers or suppliers of the Company and those with which the Company may be negotiating major transactions, such as an acquisition, investment or sale. Information that is not material to the Company may nevertheless be material to one of those other firms.

"Trading" includes purchases and sales of stock, bonds, debentures, options, puts, calls and other similar securities. This policy includes trades made pursuant to any investment direction under employee benefit plans as well as trades in the open market. For example, sales of stock acquired through any employee stock purchase plan or transactions in the self-directed portion of any retirement or pension plan are covered by this policy. This policy also applies to the exercise of options with an immediate sale of some or all of the shares through a broker.

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Employees must not pass material nonpublic information on to others or recommend to anyone the purchase or sale of any securities on the basis of such information. This practice, known as "tipping," also violates the securities laws and can result in the same civil and criminal penalties that apply to insider trading, whether or not the employee derives any benefit from another's actions.

The same restrictions apply to family members and other persons living in an employee's household. Employees are expected to be responsible for the compliance of the members of their immediate family and personal household. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception to the policy.

Because of the unique potential for abuse of material nonpublic information, it is also the Company's policy that directors, officers and employees may not engage in short-term speculative transactions involving "trading" the Company's securities. This would include short sales and buying or selling puts or calls. In addition, the purchase of the Company's securities on margin (except for the exercise of employee stock options) is prohibited.

Definition of Material Nonpublic Information

Material Information. Information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. Therefore, any information that could reasonably be expected to affect the price of the security is material. Common examples of material information are:

* Projections of future earnings or losses or changes in such projections.

* Actual changes in earnings.

* A pending or prospective joint venture, merger, acquisition, tender offer or financing.

* A significant sale of assets or disposition of a subsidiary.

* A gain or loss of a material contract, customer or supplier or material changes in the profitability status of a current contract.

* The development or release of a new product or service.

* Changes in a previously announced schedule for the development or release of a new product or service.

* Changes in management, other major personnel changes or labor negotiations.

* Significant increases or decreases in dividends or the declaration of a stock split or the offering of additional securities.

* Financial liquidity problems.

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Both positive and negative information can be material. Because trading that receives scrutiny will be evaluated after the fact with the benefit of hindsight, questions concerning the materiality of particular information should be resolved in favor of materiality, and trading should be avoided.

Nonpublic Information. Nonpublic information is information that is not generally known or available to the public. Information is considered to be available to the public only when it has been released to the public through appropriate channels, e.g., by means of a press release or a statement from one of the corporation's senior officers, and enough time has elapsed to permit the investment market to absorb and evaluate the information. As a general rule, information is considered nonpublic until the second business day after public disclosure.

Unauthorized Disclosure

Maintaining the confidentiality of Company information is essential for competitive, security and other business reasons, as well as to comply with securities laws. All information an employee learns about the Company or its business plans in connection with his or her employment is potentially "inside" information until publicly disclosed or made available by the Company. The employee should treat all such information as confidential and proprietary to the Company. The employee may not disclose it to others, such as family members, other relatives, or business or social acquaintances, who do not need to know it for legitimate business reasons.

Also, the timing and nature of the Company's disclosure of material information to outsiders is subject to legal rules the breach of which could result in substantial liability to the employee, the Company and its management. Accordingly, it is important that only specifically designated representatives of the Company discuss the Company and its affiliates and subsidiaries with the news media, securities analysts and investors. Inquiries of this type received by any employee should be referred to the Company’s Chief Executive Officer.

Additional Restrictions and Requirements

The following additional procedures are designed to help prevent inadvertent violations and avoid even the appearance of improper transactions in the Company's securities. Employees who wish to trade in the Company's securities should trade only during the period beginning one (1) trading day after the release of quarterly earnings and extending until the fifteenth (15th) day of the third month of the quarter. Of course, even during this trading window period, an employee may not trade if he or she is aware of any material nonpublic information. If an employee believes there are compelling reasons why he or she needs to trade in the Company's securities during periods other than the recommended "windows," the employee needs to consult the Company’s General Counsel.

Systematic Trading Plans

Officers and other insiders who wish to enter into arrangements for systematic trading of the Company's securities under a systematic trading plan pursuant to Rule 10b5-1 are permitted to do so upon the approval of the Company’s Board of Directors. The trading plan must be entered into by an insider during an open trading window period as defined above while he or she is unaware of any material nonpublic information and must be in compliance with the Rules and Regulations of the Securities and Exchange Commission and all other applicable federal and state laws.

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Personal Responsibility; Assistance

Each employee should remember that the ultimate responsibility for adhering to this policy and avoiding improper trading rests with the employee. In this regard, it is important that each employee use his or her best judgment. If an employee violates this policy, the Company may take disciplinary action, including dismissal for cause. Compliance with this policy by all employees is of the utmost importance both for the employee and for the Company. Any person who has any questions about the application of this policy to any particular case may obtain additional guidance from the Company’s General Counsel.

[acknowledgement on following page]

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ACKNOWLEDGEMENT

I acknowledge that I have read and understood the Payment Data Systems Insider Trading Policy and will comply with its terms and conditions, except for the additional restriction limiting my trading of the Company’s securities to designated time periods referred to as trading window periods. I understand that if I have any questions regarding this policy, I will direct them to the Company’s General Counsel.

Signed: /s/ Peter G. Kirby

Name: Peter G. Kirby, PhD

Dated: April 24, 2015

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EX-10.29

EXHIBIT 10.29

INDEPENDENT DIRECTOR AGREEMENT

THIS INDEPENDENT DIRECTOR AGREEMENT is made effective as of the 24th of April 2015 (the “Agreement”), between PAYMENT DATA SYSTEMS, INC., a Nevada corporation with an address at 12500 San Pedro, Suite 120, San Antonio, Texas, 78216 (the “Company”), and Miguel A. Chapa (“Director”).

WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available to serve on the board of directors of the Company (the “Board”); and

WHEREAS, the Company believes that Director possesses the necessary qualifications and abilities to serve as a director of the Company and to perform the functions and meet the Company’s needs related to its Board, and

WHEREAS, the Company appointed the Director effective as of the date hereof (the “Effective Date”) and desires to enter into an agreement with the Director with respect to such appointment; and

WHEREAS, the Director is willing to accept such appointment and to serve the Company on the terms set forth herein and in accordance with the provisions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Position.  Subject to the terms and provisions of this Agreement, the Company shall cause the Director to be appointed, and the Director hereby agrees to serve the Company in such position upon the terms and conditions hereinafter set forth, provided, however, that the Director’s continued service on the Board after the initial three-year term on the Board, which term is subject to the Company’s bylaws, as amended, and as may be subsequently amended, and pursuant the Company’s bylaws, state or federal law or the rules of any stock exchange on which the Company’s securities are listed, shall be subject to any necessary approval by the Company’s stockholders.

2. Service.  Director will serve as a director of the Company and perform all duties as a director of the Company, including without limitation (a) attending meetings of the Board, (b) serving on one or more committees of the Board (each a “Committee”) and attending meetings of each Committee of which Director is a member, and (c) using reasonable efforts to promote the business of the Company. The Company currently intends to hold at least one in-person regular meeting of the Board and each Committee each quarter, together with additional meetings of the Board and Committees as may be required by the business and affairs of the Company. In fulfilling his responsibilities as a director of the Company, Director agrees that he shall act honestly and in good faith with a view to the best interests of the Company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

3. Compensation.

(a) Cash Compensation. The Director shall receive one thousand dollars ($1,000) each quarter in arrears for participation in quarterly Board and Committee meetings, including the annual stockholders’ meeting. There will be no additional compensation for ad hoc or preparatory meetings or for being the chair of a Committee, other than the Audit Committee. The Chair of the Audit Committee will receive fifteen thousand dollars ($15,000) upon timely, including extensions granted by the SEC, and compliant filing of the 10K each year.

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(b) Restricted Stock.  The Director shall receive five hundred thousand (500,000) shares of the Company’s common stock at the start of the Directorship Term, pursuant and subject to the Company’s 2015 Equity Incentive Plan.  Such shares shall vest in 4 stages: (1) 200,000 on the Effective Date, (2) 100,000 on January 1, 2016, (3) 100,000 on January 1, 2017, and (4) 100,000 on January 1, 2018.  Notwithstanding the foregoing, if the Director ceases to be a member of Board at any time during the vesting period for any reason (such as resignation, withdrawal, death, disability or any other reason), then any unvested shares shall be irrefutably forfeited.  Furthermore, the Director agrees that the shares shall be subject to any “lock up” agreement required to be signed by the Company’s officers in connection with any financing.

(c) Independent Contractor.  The Director’s status during the Directorship Term shall be that of an independent contractor and not, for any purpose, that of an employee or agent with authority to bind the Company in any respect. All payments and other consideration made or provided to the Director under this Section 3 shall be made or provided without withholding or deduction of any kind, and the Director shall assume sole responsibility for discharging all tax or other obligations associated therewith.

(d) Expense Reimbursements.  Upon submission of appropriate receipts, invoices or vouchers as may be reasonably required by the Company, the Company will reimburse Director for all reasonable out-of-pocket expenses incurred in connection with the performance of Director’s duties under this Agreement during the Directorship Term. Any reimbursements for out-of-pocket expenses of the Director in excess of $500.00 must be approved in advance by the Company.

4. Directorship Term.  The “Directorship Term,” as used in this Agreement, shall mean the period commencing on the Effective Date and terminating on the earliest of the following to occur: (a) the death or disability of the Director; (b) the termination of the Director from membership on the Board by the mutual agreement of the Company and the Director; (c) the removal of the Director from the Board by the majority stockholders of the Company; and (d) the resignation by the Director from the Board.

5. Director’s Representation and Acknowledgment.  The Director represents to the Company that the execution and performance of this Agreement shall not be in violation of any agreement or obligation (whether or not written) that he may have with or to any person or entity, including without limitation, any prior or current employer. The Director hereby acknowledges and agrees that this Agreement (and any other agreement or obligation referred to herein) shall be an obligation solely of the Company, and the Director shall have no recourse whatsoever against any stockholder of the Company or any of their respective affiliates with regard to this Agreement.

6. Director Covenants.

(a) Unauthorized Disclosure.  The Director agrees and understands that in the Director’s position with the Company, the Director has been and will be exposed to and receive information relating to the confidential affairs of the Company, including, but not limited to, technical information, business and marketing plans, strategies, customer information, other information concerning the Company’s products, promotions, development, financing, expansion plans, business policies and practices, and other forms of information considered by the Company to be confidential and in the nature of trade secrets. The Director agrees that during the Directorship Term and thereafter, the Director will keep such information confidential and will not disclose such information, either directly or indirectly, to any third person or entity without the prior written consent of the Company; provided, however, that (i) the Director shall have no such obligation to the extent such information is or becomes publicly known or generally known in the Company’s industry other than as a result of the Director’s breach of his obligations hereunder and (ii) the Director may, after giving prior notice to the Company to the extent practicable under the circumstances, disclose such information to the extent required by applicable laws or governmental regulations or judicial or regulatory process. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of the Directorship Term, the Director will promptly return to the Company and/or destroy at the Company’s direction all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data, other product or document, and any summary or compilation of the foregoing, in whatever form, including, without limitation, in electronic form, which has been produced by, received by or otherwise submitted to the Director in the course or otherwise as a result of the Director’s position with the Company during or prior to the Directorship Term, provided that the Company shall retain such materials and make them available to the Director if requested in connection with any litigation against the Director under circumstances in which (i) the Director demonstrates to the reasonable satisfaction of the Company that the materials are necessary to his defense in the litigation and (ii) the confidentiality of the materials is preserved to the reasonable satisfaction of the Company.

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(b) Non-Solicitation.  During the Directorship Term and for a period of two (2) years thereafter, the Director shall not interfere with the Company’s relationship with, or endeavor to entice away from the Company, any person who, on the date of the termination of the Directorship Term and/or at any time during the one year period prior to the termination of the Directorship Term, was an employee or customer of the Company or otherwise had a material business relationship with the Company.

(c) Non-Compete. The Director agrees that during the Directorship Term and for a period of two (2) years thereafter, he shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or consultant to any other corporation or enterprise; engage in the business of developing, marketing, selling or supporting technology to or for businesses in which the Company engages in or in which the Company has an actual intention, as evidenced by the Company's written business plans, to engage in, within any geographic area in which the Company is then conducting such business.  Nothing in this Section 6 shall prohibit the Director from being (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than three percent of the outstanding stock of any class of securities of a corporation, which are publicly traded, so long as the Director has no active participation in the business of such corporation.

(d) Code of Ethics and Insider Trading Guidelines.  Director agrees to comply with the Company’s Code of Ethics and to execute the Company’s Insider Trading Guidelines in Attachments A and B, respectively. The Code of Ethics and Insider Trading Guidelines may either or both be amended by the Company from time to time.

7. Director and Officer Liability Insurance. Director shall be covered by the Company’s director and officer’s liability insurance policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.

8. Limitation of Liability; Right to Indemnification. Director shall be entitled to limitations of liability and the right to indemnification against expenses and damages in connection with claims against Director relating to his service to the Company to the fullest extent permitted by the Company’s Certificate of Incorporation and Bylaws (as such documents may be amended from time to time) and other applicable law.

9. Amendments and Waiver. No supplement, modification or amendment of this Agreement will be binding unless executed in writing by both parties. No waiver of any provision of this Agreement on a particular occasion will be deemed or will constitute a waiver of that provision on a subsequent occasion or a waiver of any other provision of this Agreement.

10. Binding Effect, Assignments. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Notwithstanding the provisions of the immediately preceding sentence, neither the Director nor the Company shall assign all or any portion of this Agreement without the prior written consent of the other party.

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11. Severability. The provisions of this Agreement are severable, and any provision of this Agreement that is held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable in any respect will not affect the validity or enforceability of any other provision of this Agreement.

12. Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in that state without giving effect to the principles of conflicts of laws.

13. Entire Agreement. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understanding relating to such subject matter.

14. Miscellaneous. This Agreement may be executed by the Company and Director in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. Any party may execute this Agreement by facsimile signature and the other party will be entitled to rely on such facsimile signature as evidence that this Agreement has been duly executed by such party. Any party executing this Agreement by facsimile signature will promptly forward to the other party an original signature page by overnight courier. Director acknowledges that this Agreement does not constitute a contract of employment and does not imply that the Company will continue his service as a director for any period of time.

Signature Page Follows.

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IN WITNESS WHEREOF, the parties have executed this Independent Director Agreement as of the date shown above.

Payment Data Systems, Inc.

By: /s/ Michael R. Long

Name: Michael R. Long

Title: Chairman of the Board of Directors

By: /s/ Miguel A. Chapa

Name: Miguel A. Chapa

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Attachment A

Payment Data Systems, Inc.

Code of Ethics

In accordance with the requirements of the U.S. Securities and Exchange Commission, the Board of Directors of Payment Data Systems, Inc. (with its subsidiaries, the “Company”) has adopted this Code of Ethics (this “Code”) in order to:

· encourage honest and ethical conduct, including fair dealing and the ethical handling of conflicts of interest;

· encourage full, fair, accurate, timely and understandable disclosure;

· encourage compliance with applicable laws and governmental rules and regulations;

· ensure the protection of the Company's legitimate business interests, including corporate opportunities, assets and confidential information;

· deter wrongdoing; and

· ensure accountability for adherence to the Code.

All directors, officers and employees of the Company are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in Section 6, Reporting and Accountability. The Code will be strictly enforced and violations will be dealt with immediately. Violations that involve illegal behavior will be reported to the appropriate authorities.

This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees, officers and directors of the Company. All such persons must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. Those who violate the standards in this Code or who fail to cooperate with management directions given to effect compliance with this Code may be subject to disciplinary action, possibly including termination of employment. For guidance with respect to issues not addressed in this Code, employees should follow the Company’s internal policies and procedures.

If you have any questions regarding this Code, you should address these questions to your supervisor, or to the general counsel or other person identified by the Company as its compliance officer (the “Compliance Officer”). The Code is enforced by the General Counsel where the suspected violation involves a person who is not a director or officer. The audit committee, or, if there is no audit or another independent committee, the Board of Directors enforces any suspected violations involving a director or officer.

1. Honest and Ethical Conduct

Each director, officer and employee owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest and ethical. This includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Deceit and subordination of principle are inconsistent with integrity.

Each director, officer and employee must:

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· Act with integrity, including being honest and ethical while still maintaining the confidentiality of information where required or consistent with the Company’s policies.

· Observe both the form and spirit of laws and governmental rules and regulations and accounting standards.

· Adhere to a high standard of business ethics.

· Accept no improper or undisclosed material personal benefits from third parties as a result of any transaction or transactions of the Company.

2. Conflicts of Interest

A “conflict of interest” arises when a person’s loyalties or actions are divided between the interests of the Company and those of another, such as a competitor, supplier or customer, or personal business. A conflict of interest can arise when an employee takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. A conflict of interest may also arise when an individual, or members of his or her family, receives an improper personal benefit as a result of his or her position in, or relationship with, the Company. Moreover, the appearance of a conflict of interest alone can adversely affect the Company and its relations with business partners, customers, suppliers and employees.

Employees are expected to use good judgment, to adhere to high ethical standards and to avoid situations that create an actual or potential conflict of interest. It is almost always a conflict of interest for employees to work simultaneously for a competitor, customer or supplier. In this regard, Company personnel shall not have any undisclosed financial interest in any competitor, supplier, customer, or strategic partner if that interest would create a conflict of interest with the Company. If there is such an interest, the employee should disclose the nature of the interest to the human resources department or the general counsel, as appropriate; provided, however, that employees may maintain small investments in publicly held companies in which an employee has no influence or control.

A conflict of interest can also arise with respect to employment of relatives and persons with close personal relationships. If a director, officer or employee (or someone with whom the person has a close relationship (e.g., a family member or close companion) has a financial or employment relationship with an actual or potential competitor, supplier or customer, the director, officer or employee must disclose this fact in writing to the Compliance Officer. The Company may take any action that it deems necessary in its sole discretion to avoid or remedy an actual, prospective or perceived conflict of interest, including a reassignment of some or all of the employee’s duties or change of the employee’s position.

Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or officer (or their family members) are expressly prohibited unless approved by the Board of Directors.

A conflict of interest may not always be clear; therefore, you should consult with the Compliance Officer if you have any questions. Any employee who becomes aware of a conflict or a potential conflict should bring it to the attention of the Compliance Officer.

3. Disclosure

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Each director, officer and employee, to the extent involved in the Company’s disclosure process, including the Chief Executive Officer, the Chief Financial Officer, and the Controller (the “Senior Financial Officers”) and the General Counsel, is required to be familiar with the Company’s disclosure controls and procedures applicable to him or her so that the Company’s public reports and documents filed with the Securities and Exchange Commission (the “SEC”) comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each such person having direct or supervisory authority regarding these SEC filings or the Company’s other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

Each director, officer and employee, to the extent involved in the Company’s disclosure process, including without limitation the Senior Financial Officers and the General Counsel, must:

· Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.

· Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, governmental regulators and self-regulatory organizations.

4. Compliance

It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations in the performance of their duties for the Company, including those relating to accounting and auditing matters and insider trading. Other policies issued by the Company also provide guidance as to certain of the laws, rules and regulations that apply to the Company’s activities.

5. Insider Trading

Generally, it is against Company policy for any individual to profit from undisclosed information relating to the Company or any other company in violation of insider trading or other laws. Inside information is any material, non-public information a reasonable investor is likely to consider important when making an investment decision. Anyone who is aware of material non-public information relating to the Company, our business partners, or other companies may not use the information to trade directly or indirectly or tip others to trade in stock or other securities of that company in violation of the federal securities laws.

If you are uncertain about the legal rules involving your purchase or sale of any Company securities or any securities in companies that you are familiar with by virtue of your work for the Company, you should consult with the Compliance Officer before making any such purchase or sale. You should also consult the Company’s Insider Trading Policy which applies to all directors, officers and employees as well as consultants and independent contractors of the Company and is hereby incorporated by reference.

6. Reporting and Accountability

The Board of Directors has the authority to interpret this Code in any particular situation. Any director, officer or employee who becomes aware of any violation of this Code is required to notify the audit committee, if there is one or if not, the full Board or the Compliance Officer promptly.

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Any questions relating to how these policies should be interpreted or applied should be addressed to the Compliance Officer or the audit committee or Board, as applicable. Any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, as discussed in Section 2 of this Code, should be discussed with the Compliance Officer or the audit committee or Board, as applicable. A director, officer or employee who is unsure of whether a situation violates this Code should discuss the situation with the Compliance Officer or the audit committee, if there is one or if not, the full Board, as applicable.

Each director, officer or employee must:

· Notify the appropriate contact promptly of any existing or potential violation of this Code.

· Cooperate in any internal investigation of misconduct under this Code.

· Not retaliate against any other director, officer or employee for good faith reports of known or suspected acts of misconduct or other violations of this Code.

The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code:

· The Compliance Officer, the audit committee, if there is one or if not, the full Board, as the case may be, will take all appropriate action to investigate any violations reported. In addition, the audit committee, Board or the Compliance Officer, as appropriate, shall report each violation and alleged violation involving a director or an executive officer to the Chairperson of the Board. To the extent he or she deems appropriate, the Chairperson of the Board shall participate in any investigation of a director or executive officer. After the conclusion of an investigation of a director or executive officer, the conclusions shall be reported to the entire Board.

· The Board will conduct such additional investigation as it deems necessary. If the Board determines that a director or executive officer has violated this Code, it will take such disciplinary or preventive action as deemed appropriate, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities.

· The Company will make every effort to protect the integrity of every investigation, including protecting reporters and witnesses from harassment, intimidation and retaliation, keep evidence from being destroyed, ensure testimony is honest and identify root causes. The Company will make every effort to keep the identity of every reporter private and to secure any data relating to the investigation. Also, the Company may require witnesses to maintain a particular investigation and their role in strict confidence.

7. Corporate Opportunities

Employees, officers and directors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers and directors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.

Sometimes the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Employees, officers and directors who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with the Compliance Officer, the audit committee or the Board.

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8. Confidentiality

In carrying out the Company’s business, employees, officers and directors often learn confidential or proprietary information about the Company, its customers, suppliers, or joint venture parties. Employees, officers and directors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.

9. Fair Dealing

We seek to succeed through honest business competition. We do not seek competitive advantages through illegal or unethical business practices. Each employee, officer and director should endeavor to deal fairly with the Company’s customers, consultants, service providers, suppliers, competitors and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

10. Protection and Proper Use of Company Assets

All employees, officers and directors should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes.

11. Payments to Government Personnel

The United States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.

In addition, the United States government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. It is the Company’s policy to not provide any gifts, favors or gratuities to any government official.

12. Amendment, Modification and Waiver

This Code may be amended or modified by the Company’s Board of Directors. Any employee or director who believes that a waiver may be called for should discuss the matter with the Compliance Officer, the audit committee, if there is one or if not, the full Board. Waivers of this code may only be granted by the Board of Directors or a committee of the Board of Directors with specific delegated authority to grant such waivers at their sole discretion. Any waivers involving a director or executive officer may only be granted by the Board of Directors at its sole discretion. Waivers will be disclosed as required by the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder and any applicable rules relating to the maintenance of the listing of our securities on any stock exchange. The company will review this Code regularly to assess its utility given the changing demands of the company and the scale and scope of its operations.

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[acknowledgement on following page]

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ACKNOWLEDGEMENT

I acknowledge that I have read and understood the Payment Data Systems Code of Ethics and will comply with its terms and conditions. I understand that if I have any questions regarding this policy, I will direct them to the Company’s General Counsel.

Signed: /s/ Miguel A. Chapa

Name: Miguel A. Chapa

Dated: April 24, 2015

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Attachment B

Payment Data Systems, Inc.

Insider Trading Policy

THIS POLICY HAS BEEN ADOPTED BY THE BOARD OF

DIRECTORS OF Payment Data Systems, Inc.

AND IS APPLICABLE TO ALL DIRECTORS, OFFICERS,

EMPLOYEES AND CONSULTANTS OF THE COMPANY.

The Need for a Policy Statement

The purchase or sale of securities while possessing material nonpublic information or the selective disclosure of such information to others who may trade is prohibited by federal and state laws.

The Company has adopted the following policy with respect to purchases and sales of the Company's securities by directors, officers, employees and consultants who have material nonpublic information about the Company and about other firms with which it works closely. For purposes of this policy, outside directors and consultants are included within the term "employee." Each employee is responsible for ensuring that he or she does not violate federal or state securities laws or the Company's policy concerning securities trading. This policy is designed to promote compliance with the federal securities laws and to protect the Company, as well as those persons, from the very serious liabilities and penalties that can result from violations of these laws.

Potential penalties for insider trading violations include civil fines for up to three times the profit gained or loss avoided by the trading, criminal fines of up to $1,000,000.00 and jail sentences of up to ten (10) years. In addition, a company whose employee violates the insider trading prohibitions may be liable for a civil fine of up to the greater of $1,000,000.00 and three times the profit gained or loss avoided as a result of the employee's insider trading violations.

The Company's Policy

Company employees may not trade in the stock or other securities of any firm when they know "material nonpublic information" about the firm. This restriction on "insider trading" is not limited to trading in the Company's securities. It includes trading in the securities of other firms, such as customers or suppliers of the Company and those with which the Company may be negotiating major transactions, such as an acquisition, investment or sale. Information that is not material to the Company may nevertheless be material to one of those other firms.

"Trading" includes purchases and sales of stock, bonds, debentures, options, puts, calls and other similar securities. This policy includes trades made pursuant to any investment direction under employee benefit plans as well as trades in the open market. For example, sales of stock acquired through any employee stock purchase plan or transactions in the self-directed portion of any retirement or pension plan are covered by this policy. This policy also applies to the exercise of options with an immediate sale of some or all of the shares through a broker.

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Employees must not pass material nonpublic information on to others or recommend to anyone the purchase or sale of any securities on the basis of such information. This practice, known as "tipping," also violates the securities laws and can result in the same civil and criminal penalties that apply to insider trading, whether or not the employee derives any benefit from another's actions.

The same restrictions apply to family members and other persons living in an employee's household. Employees are expected to be responsible for the compliance of the members of their immediate family and personal household. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception to the policy.

Because of the unique potential for abuse of material nonpublic information, it is also the Company's policy that directors, officers and employees may not engage in short-term speculative transactions involving "trading" the Company's securities. This would include short sales and buying or selling puts or calls. In addition, the purchase of the Company's securities on margin (except for the exercise of employee stock options) is prohibited.

Definition of Material Nonpublic Information

Material Information. Information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. Therefore, any information that could reasonably be expected to affect the price of the security is material. Common examples of material information are:

* Projections of future earnings or losses or changes in such projections.

* Actual changes in earnings.

* A pending or prospective joint venture, merger, acquisition, tender offer or financing.

* A significant sale of assets or disposition of a subsidiary.

* A gain or loss of a material contract, customer or supplier or material changes in the profitability status of a current contract.

* The development or release of a new product or service.

* Changes in a previously announced schedule for the development or release of a new product or service.

* Changes in management, other major personnel changes or labor negotiations.

* Significant increases or decreases in dividends or the declaration of a stock split or the offering of additional securities.

* Financial liquidity problems.

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Both positive and negative information can be material. Because trading that receives scrutiny will be evaluated after the fact with the benefit of hindsight, questions concerning the materiality of particular information should be resolved in favor of materiality, and trading should be avoided.

Nonpublic Information. Nonpublic information is information that is not generally known or available to the public. Information is considered to be available to the public only when it has been released to the public through appropriate channels, e.g., by means of a press release or a statement from one of the corporation's senior officers, and enough time has elapsed to permit the investment market to absorb and evaluate the information. As a general rule, information is considered nonpublic until the second business day after public disclosure.

Unauthorized Disclosure

Maintaining the confidentiality of Company information is essential for competitive, security and other business reasons, as well as to comply with securities laws. All information an employee learns about the Company or its business plans in connection with his or her employment is potentially "inside" information until publicly disclosed or made available by the Company. The employee should treat all such information as confidential and proprietary to the Company. The employee may not disclose it to others, such as family members, other relatives, or business or social acquaintances, who do not need to know it for legitimate business reasons.

Also, the timing and nature of the Company's disclosure of material information to outsiders is subject to legal rules the breach of which could result in substantial liability to the employee, the Company and its management. Accordingly, it is important that only specifically designated representatives of the Company discuss the Company and its affiliates and subsidiaries with the news media, securities analysts and investors. Inquiries of this type received by any employee should be referred to the Company’s Chief Executive Officer.

Additional Restrictions and Requirements

The following additional procedures are designed to help prevent inadvertent violations and avoid even the appearance of improper transactions in the Company's securities. Employees who wish to trade in the Company's securities should trade only during the period beginning one (1) trading day after the release of quarterly earnings and extending until the fifteenth (15th) day of the third month of the quarter. Of course, even during this trading window period, an employee may not trade if he or she is aware of any material nonpublic information. If an employee believes there are compelling reasons why he or she needs to trade in the Company's securities during periods other than the recommended "windows," the employee needs to consult the Company’s General Counsel.

Systematic Trading Plans

Officers and other insiders who wish to enter into arrangements for systematic trading of the Company's securities under a systematic trading plan pursuant to Rule 10b5-1 are permitted to do so upon the approval of the Company’s Board of Directors. The trading plan must be entered into by an insider during an open trading window period as defined above while he or she is unaware of any material nonpublic information and must be in compliance with the Rules and Regulations of the Securities and Exchange Commission and all other applicable federal and state laws.

Personal Responsibility; Assistance

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Each employee should remember that the ultimate responsibility for adhering to this policy and avoiding improper trading rests with the employee. In this regard, it is important that each employee use his or her best judgment. If an employee violates this policy, the Company may take disciplinary action, including dismissal for cause. Compliance with this policy by all employees is of the utmost importance both for the employee and for the Company. Any person who has any questions about the application of this policy to any particular case may obtain additional guidance from the Company’s General Counsel.

[acknowledgement on following page]

Initials: MAC

16 of 17

ACKNOWLEDGEMENT

I acknowledge that I have read and understood the Payment Data Systems Insider Trading Policy and will comply with its terms and conditions, except for the additional restriction limiting my trading of the Company’s securities to designated time periods referred to as trading window periods. I understand that if I have any questions regarding this policy, I will direct them to the Company’s General Counsel.

Signed: /s/ Miguel A. Chapa

Name: Miguel A. Chapa

Dated: April 24, 2015

17 of 17

EX-14.1

EXHIBIT 14.1

Payment Data Systems, Inc.

Code of Ethics

In accordance with the requirements of the U.S. Securities and Exchange Commission, the Board of Directors of Payment Data Systems, Inc. (with its subsidiaries, the “Company”) has adopted this Code of Ethics (this “Code”) in order to:

· encourage honest and ethical conduct, including fair dealing and the ethical handling of conflicts of interest;

· encourage full, fair, accurate, timely and understandable disclosure;

· encourage compliance with applicable laws and governmental rules and regulations;

· ensure the protection of the Company's legitimate business interests, including corporate opportunities, assets and confidential information;

· deter wrongdoing; and

· ensure accountability for adherence to the Code.

All directors, officers and employees of the Company are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in Section 6, Reporting and Accountability. The Code will be strictly enforced and violations will be dealt with immediately. Violations that involve illegal behavior will be reported to the appropriate authorities.

This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees, officers and directors of the Company. All such persons must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. Those who violate the standards in this Code or who fail to cooperate with management directions given to effect compliance with this Code may be subject to disciplinary action, possibly including termination of employment. For guidance with respect to issues not addressed in this Code, employees should follow the Company’s internal policies and procedures.

If you have any questions regarding this Code, you should address these questions to your supervisor, or to the general counsel or other person identified by the Company as its compliance officer (the “Compliance Officer”). The Code is enforced by the General Counsel where the suspected violation involves a person who is not a director or officer. The audit committee, or, if there is no audit or another independent committee, the Board of Directors enforces any suspected violations involving a director or officer.

1. Honest and Ethical Conduct

Each director, officer and employee owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest and ethical. This includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Deceit and subordination of principle are inconsistent with integrity.

Each director, officer and employee must:

· Act with integrity, including being honest and ethical while still maintaining the confidentiality of information where required or consistent with the Company’s policies.

1

· Observe both the form and spirit of laws and governmental rules and regulations and accounting standards.

· Adhere to a high standard of business ethics.

· Accept no improper or undisclosed material personal benefits from third parties as a result of any transaction or transactions of the Company.

2. Conflicts of Interest

A “conflict of interest” arises when a person’s loyalties or actions are divided between the interests of the Company and those of another, such as a competitor, supplier or customer, or personal business. A conflict of interest can arise when an employee takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. A conflict of interest may also arise when an individual, or members of his or her family, receives an improper personal benefit as a result of his or her position in, or relationship with, the Company. Moreover, the appearance of a conflict of interest alone can adversely affect the Company and its relations with business partners, customers, suppliers and employees.

Employees are expected to use good judgment, to adhere to high ethical standards and to avoid situations that create an actual or potential conflict of interest. It is almost always a conflict of interest for employees to work simultaneously for a competitor, customer or supplier. In this regard, Company personnel shall not have any undisclosed financial interest in any competitor, supplier, customer, or strategic partner if that interest would create a conflict of interest with the Company. If there is such an interest, the employee should disclose the nature of the interest to the human resources department or the general counsel, as appropriate; provided, however, that employees may maintain small investments in publicly held companies in which an employee has no influence or control.

A conflict of interest can also arise with respect to employment of relatives and persons with close personal relationships. If a director, officer or employee (or someone with whom the person has a close relationship (e.g., a family member or close companion) has a financial or employment relationship with an actual or potential competitor, supplier or customer, the director, officer or employee must disclose this fact in writing to the Compliance Officer. The Company may take any action that it deems necessary in its sole discretion to avoid or remedy an actual, prospective or perceived conflict of interest, including a reassignment of some or all of the employee’s duties or change of the employee’s position.

Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or officer (or their family members) are expressly prohibited unless approved by the Board of Directors.

A conflict of interest may not always be clear; therefore, you should consult with the Compliance Officer if you have any questions. Any employee who becomes aware of a conflict or a potential conflict should bring it to the attention of the Compliance Officer.

3. Disclosure

Each director, officer and employee, to the extent involved in the Company’s disclosure process, including the Chief Executive Officer, the Chief Financial Officer, and the Controller (the “Senior Financial Officers”) and the General Counsel, is required to be familiar with the Company’s disclosure controls and procedures applicable to him or her so that the Company’s public reports and documents filed with the Securities and Exchange Commission (the “SEC”) comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each such person having direct or supervisory authority regarding these SEC filings or the Company’s other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

2

Each director, officer and employee, to the extent involved in the Company’s disclosure process, including without limitation the Senior Financial Officers and the General Counsel, must:

· Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.

· Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, governmental regulators and self-regulatory organizations.

4. Compliance

It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations in the performance of their duties for the Company, including those relating to accounting and auditing matters and insider trading. Other policies issued by the Company also provide guidance as to certain of the laws, rules and regulations that apply to the Company’s activities.

5. Insider Trading

Generally, it is against Company policy for any individual to profit from undisclosed information relating to the Company or any other company in violation of insider trading or other laws. Inside information is any material, non-public information a reasonable investor is likely to consider important when making an investment decision. Anyone who is aware of material non-public information relating to the Company, our business partners, or other companies may not use the information to trade directly or indirectly or tip others to trade in stock or other securities of that company in violation of the federal securities laws.

If you are uncertain about the legal rules involving your purchase or sale of any Company securities or any securities in companies that you are familiar with by virtue of your work for the Company, you should consult with the Compliance Officer before making any such purchase or sale. You should also consult the Company’s Insider Trading Policy which applies to all directors, officers and employees as well as consultants and independent contractors of the Company and is hereby incorporated by reference.

6. Reporting and Accountability

The Board of Directors has the authority to interpret this Code in any particular situation. Any director, officer or employee who becomes aware of any violation of this Code is required to notify the audit committee, if there is one or if not, the full Board or the Compliance Officer promptly.

3

Any questions relating to how these policies should be interpreted or applied should be addressed to the Compliance Officer or the audit committee or Board, as applicable. Any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, as discussed in Section 2 of this Code, should be discussed with the Compliance Officer or the audit committee or Board, as applicable. A director, officer or employee who is unsure of whether a situation violates this Code should discuss the situation with the Compliance Officer or the audit committee, if there is one or if not, the full Board, as applicable.

4

Each director, officer or employee must:

· Notify the appropriate contact promptly of any existing or potential violation of this Code.

· Cooperate in any internal investigation of misconduct under this Code.

· Not retaliate against any other director, officer or employee for good faith reports of known or suspected acts of misconduct or other violations of this Code.

The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code:

· The Compliance Officer, the audit committee, if there is one or if not, the full Board, as the case may be, will take all appropriate action to investigate any violations reported. In addition, the audit committee, Board or the Compliance Officer, as appropriate, shall report each violation and alleged violation involving a director or an executive officer to the Chairperson of the Board. To the extent he or she deems appropriate, the Chairperson of the Board shall participate in any investigation of a director or executive officer. After the conclusion of an investigation of a director or executive officer, the conclusions shall be reported to the entire Board.

· The Board will conduct such additional investigation as it deems necessary. If the Board determines that a director or executive officer has violated this Code, it will take such disciplinary or preventive action as deemed appropriate, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities.

· The Company will make every effort to protect the integrity of every investigation, including protecting reporters and witnesses from harassment, intimidation and retaliation, keep evidence from being destroyed, ensure testimony is honest and identify root causes. The Company will make every effort to keep the identity of every reporter private and to secure any data relating to the investigation. Also, the Company may require witnesses to maintain a particular investigation and their role in strict confidence.

7. Corporate Opportunities

Employees, officers and directors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers and directors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.

Sometimes the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Employees, officers and directors who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with the Compliance Officer, the audit committee or the Board.

8. Confidentiality

In carrying out the Company’s business, employees, officers and directors often learn confidential or proprietary information about the Company, its customers, suppliers, or joint venture parties. Employees, officers and directors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.

5

9. Fair Dealing

We seek to succeed through honest business competition. We do not seek competitive advantages through illegal or unethical business practices. Each employee, officer and director should endeavor to deal fairly with the Company’s customers, consultants, service providers, suppliers, competitors and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

10. Protection and Proper Use of Company Assets

All employees, officers and directors should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes.

11. Payments to Government Personnel

The United States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.

In addition, the United States government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. It is the Company’s policy to not provide any gifts, favors or gratuities to any government official.

12. Amendment, Modification and Waiver

This Code may be amended or modified by the Company’s Board of Directors. Any employee or director who believes that a waiver may be called for should discuss the matter with the Compliance Officer, the audit committee, if there is one or if not, the full Board. Waivers of this code may only be granted by the Board of Directors or a committee of the Board of Directors with specific delegated authority to grant such waivers at their sole discretion. Any waivers involving a director or executive officer may only be granted by the Board of Directors at its sole discretion. Waivers will be disclosed as required by the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder and any applicable rules relating to the maintenance of the listing of our securities on any stock exchange. The company will review this Code regularly to assess its utility given the changing demands of the company and the scale and scope of its operations.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Michael R. Long, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Payment Data Systems, Inc. for the quarter ended June 30, 2015;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2015
	By:	/s/ Michael R. Long Michael R. Long Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Habib Yunus, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Payment Data Systems, Inc. for the quarter ended June 30, 2015;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2015
	By:	/s/ Habib Yunus Habib Yunus Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Payment Data Systems, Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2015
	By:	/s/ Michael R. Long Michael R. Long Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Date: August 14, 2015
	By:	/s/ Habib Yunus Habib Yunus Chief Financial Officer (Principal Financial and Accounting Officer)

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Note 5 - Income Taxes (Details Textual) $ in Millions	Jun. 30, 2015 USD ($)
Deferred Tax Assets, Net of Valuation Allowance	$ 1.6
Deferred Tax Assets, Valuation Allowance	$ 12.2

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Note 4 - Acquisition

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 4. Acquisition

On December 22, 2014, the Company acquired the assets of Akimbo 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 common stock of the Company.  The Akimbo operations are included in the Company’s consolidated financial statements from the date of acquisition.  The purchase price for Akimbo 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 over 15 years for tax purposes.

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Note 9 - Reverse Stock Split (Details Textual)		1 Months Ended
	Jul. 23, 2015 $ / shares shares	Aug. 06, 2015 shares	Jun. 30, 2015 $ / shares shares	Dec. 31, 2014 $ / shares shares
Subsequent Event [Member] | Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	15
Subsequent Event [Member]
Common Stock, Shares, Issued		12,347,591
Stock Issued During Period, Shares, New Issues		0
Common Stock, Shares Authorized	200,000,000
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.001
Preferred Stock, Shares Authorized	10,000,000
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.01
Common Stock, Shares, Outstanding		12,347,591
Difference in Shares Issued from Reserve Stock Split		1,117
Prior to Reverse Stock Split [Member]
Common Stock, Shares, Issued			185,197,097
Common Stock, Shares, Outstanding			180,201,953
Treasury Stock, Shares			4,995,144
Common Stock, Shares, Issued			12,346,474	12,278,439
Common Stock, Shares Authorized			200,000,000	200,000,000
Common Stock, Par or Stated Value Per Share | $ / shares			$ 0.001	$ 0.001
Common Stock, Shares, Outstanding			12,013,464	11,945,430
Treasury Stock, Shares			333,010	333,010

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Note 8 - Subsequent Events (Details Textual)	Jul. 23, 2015 $ / shares shares	Jul. 02, 2015	Jun. 30, 2015 $ / shares shares	Dec. 31, 2014 $ / shares shares
Subsequent Event [Member] | Equity Incentive Plan 2025 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	5,000,000
Subsequent Event [Member] | Reverse Stock Split [Member] | Minimum [Member]
Stockholders' Equity Note, Stock Split, Approved Conversion Ratio		12
Subsequent Event [Member] | Reverse Stock Split [Member] | Maximum [Member]
Stockholders' Equity Note, Stock Split, Approved Conversion Ratio		15
Subsequent Event [Member] | Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	15
Subsequent Event [Member]
Common Stock, Shares Authorized	200,000,000
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.001
Preferred Stock, Shares Authorized	10,000,000
Preferred Stock, Par or Stated Value Per Share | $ / shares	$ 0.01
Common Stock, Shares Authorized			200,000,000	200,000,000
Common Stock, Par or Stated Value Per Share | $ / shares			$ 0.001	$ 0.001

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Note 3 - Net Income Per Share

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 3. Net Income 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 and six months ended June 30, 2015 and 2014. All of the share numbers used are after the 1-for-15 reverse split effected on July 23, 2015 by using the June 30, 2015 share numbers and dividing by 15. Any fractional shares were rounded up.

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator:
Numerator for basic and diluted earnings per share, net income  available to common shareholders	$	24,850	$	486,801	$	733,465	$	648,540
Denominator:
Denominator for basic earnings per share, weighted average shares outstanding		7,369,329		8,334,304		7,369,329		8,333,949
Effect of dilutive securities		4,712,425		521,255		4,733,590		503,067
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion		12,081,754		8,855,559		12,102,919		8,837,016
Basic earnings (loss) per common share	$	0.00	$	0.06	$	0.10	$	0.08
Diluted earnings (loss) per common share and common share equivalent	$	0.00	$	0.05	$	0.06	$	0.07

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Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 64,865,661	$ 54,989,851
Accounts receivable, net	904,903	1,037,208
Deferred tax asset, current	773,000	773,000
Prepaid expenses and other	158,695	129,258
Total current assets	66,702,259	56,929,317
Property and equipment, net	3,102,824	2,705,517
Other assets:
Intangibles, net	392,522	412,363
Deferred tax asset, noncurrent	848,000	848,000
Other assets	176,548	204,112
Total other assets	1,417,070	1,464,475
Total assets	71,222,153	61,099,309
Current liabilities:
Accounts payable	185,990	37,808
Accrued expenses	1,541,178	$ 1,851,033
Stock award payable	131,993
Customer deposits payable	61,274,120	$ 52,186,396
Total current liabilities	63,133,281	54,075,237
Stockholders’ equity:
Common stock, $0.001 par value, 200,000,000 shares authorized; 12,346,474 and 12,278,439 issued, and 12,013,464 and 11,945,430 outstanding at June 30, 2015 and December 31, 2014, respectively (see Note 9)	185,197	184,177
Additional paid-in capital	64,000,513	62,989,131
Treasury stock, at cost; 333,010 and 333,010 shares at June 30, 2015 and December 31, 2014, respectively (see Note 9)	(238,157)	(238,157)
Deferred compensation	(6,521,061)	(5,839,992)
Accumulated deficit	(49,337,620)	(50,071,087)
Total stockholders’ equity	8,088,872	7,024,072
Total liabilities and stockholders’ equity	$ 71,222,153	$ 61,099,309

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Note 1 - Basis of Presentation

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

Note 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 instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). 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 SEC 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, 2017. 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 2018.

Reclassifications

: Certain amounts from 2014 have been reclassified for comparative purposes for 2015. These reclassifications have no impact on the Company’s previously reported results.

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Note 3 - Earnings per Share Numerator and Denominator (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Numerator for basic and diluted earnings per share, net income available to common shareholders	$ 24,850	$ 486,801	$ 733,465	$ 648,540
Denominator:
Denominator for basic earnings per share, weighted average shares outstanding (in shares)	7,369,329	8,334,304	7,369,329	8,333,949
Effect of dilutive securities (in shares)	4,712,425	521,255	4,733,590	503,067
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion (in shares)	12,081,754	8,855,559	12,102,919	8,837,016
Basic earnings (loss) per common share (in dollars per share)	$ 0	$ 0.06	$ 0.10	$ 0.08
Diluted earnings (loss) per common share and common share equivalent (in dollars per share)	$ 0	$ 0.05	$ 0.06	$ 0.07

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Note 4 - Business Acquisition (Details) - Akimbo [Member]	Dec. 22, 2014 USD ($)
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

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Note 2 - Accrued Expenses

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

Note 2. Accrued Expenses

Accrued expenses consisted of the following balances:

	June 30, 2015		December 31, 2014
Indemnification liability	$	450,000	$	450,000
Accrued commissions		412,394		460,977
Reserve for processing losses		272,365		272,365
Accrued salaries		174,703		158,380
Assumed liabilities		52,147		255,772
Accrued taxes		29,954		125,194
Other accrued expenses		149,615		128,345
Total accrued expenses	$	1,541,178	$	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 agreed to 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. As of June 30, 2015 the remaining balance is $52,147. Akimbo and the Company have agreed to extend the 180 days to apply the remaining balance of assumed liabilities. 

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - Scenario, Unspecified [Domain] - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	12,346,474	12,278,439
Common stock, shares outstanding (in shares)	12,013,464	11,945,430
Treasury stock, shares (in shares)	333,010	333,010

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Note 3 - Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator:
Numerator for basic and diluted earnings per share, net income  available to common shareholders	$	24,850	$	486,801	$	733,465	$	648,540
Denominator:
Denominator for basic earnings per share, weighted average shares outstanding		7,369,329		8,334,304		7,369,329		8,333,949
Effect of dilutive securities		4,712,425		521,255		4,733,590		503,067
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion		12,081,754		8,855,559		12,102,919		8,837,016
Basic earnings (loss) per common share	$	0.00	$	0.06	$	0.10	$	0.08
Diluted earnings (loss) per common share and common share equivalent	$	0.00	$	0.05	$	0.06	$	0.07

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 06, 2015
Entity Registrant Name	PAYMENT DATA SYSTEMS INC
Entity Central Index Key	0001088034
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		12,347,591
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false

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Note 4 - Acquisition (Tables)

6 Months Ended

Jun. 30, 2015

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

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

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues	$ 3,424,756	$ 3,304,173	$ 7,167,216	$ 6,034,996
Operating expenses:
Cost of services	2,426,612	2,349,268	4,802,006	4,441,294
Selling, general and administrative:
Stock-based compensation	$ 393,525	$ 72,995	627,056	$ 150,990
Cancellation of stock based compensation			(163,936)
Other expenses	$ 419,838	$ 404,825	937,018	$ 785,258
Depreciation and amortization	92,948	10,706	178,520	20,611
Total operating expenses	3,332,923	2,837,794	6,380,664	5,398,153
Operating income	91,833	466,379	786,552	636,843
Other income and (expense):
Interest income	19,358	22,424	38,358	29,238
Other income (expense)	(32,305)	8,593	(32,409)	5,233
Total other income and (expense), net	(12,947)	31,017	5,949	34,471
Income before income taxes	78,886	497,396	792,501	671,314
Income taxes	54,036	10,595	59,036	22,774
Net income	$ 24,850	$ 486,801	$ 733,465	$ 648,540
Basic earnings (loss) per common share (in dollars per share)	$ 0	$ 0.06	$ 0.10	$ 0.08
Diluted earnings (loss) per common share and common share equivalent (in dollars per share)	$ 0	$ 0.05	$ 0.06	$ 0.07
Weighted average common shares outstanding
Denominator for basic earnings per share, weighted average shares outstanding (in shares)	7,369,329	8,334,304	7,369,329	8,333,949
Diluted (in shares)	12,081,754	8,855,559	12,102,919	8,837,016

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Note 7 - Legal Proceedings

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

Note 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. 

On June 26, 2015, Michael McFarland, derivatively on behalf the Company, and individually on behalf of himself and all other similarly situated shareholders of the Company, filed a class-action lawsuit in United States District Court, District of Nevada. The suit alleges breach of fiduciary duties and unjust enrichment by the Company’s Board of Directors and certain executive officers and directors in connection with excessive and unfair compensation paid or awarded during fiscal years 2013 and 2014. The lawsuit seeks disgorgement of excessive compensation as well as damages in an unspecified amount.

The Company believes the claims are without merit and it is unlikely that a loss will be incurred, therefore the Company has not accrued for a potential loss. However, the outcomes of the disputes are still uncertain and it is possible the Company may incur legal fees and losses in the future.

Aside from the lawsuits 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.

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Note 6 - Related Party Transactions

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note 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 had 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 six months ending June 30, 2015 and the year ended December 31, 2014, the Company paid Herb Authier a total of $23,830 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 six months ending June 30, 2015 and the year ended December 31, 2014, the Company purchased a total of $0 and $6,227, respectively, 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. 

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Note 4 - Acquisition (Details Textual) - Dec. 22, 2014 - Akimbo [Member] - USD ($) $ in Millions	Total
Stock Issued During Period, Value, Acquisitions	$ 3
Goodwill Amortization Period	15 years

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Note 2 - Accrued Expenses (Details Textual) - USD ($)	Dec. 22, 2014	Jun. 30, 2015	Dec. 31, 2014
Akimbo [Member] | Maximum [Member]
Business Combination, Contingent Consideration, Liability, Current	$ 300,000
Akimbo [Member]
Business Combination, Transition Period	180 days
Assumed Liabilities		$ 52,147
Assumed Liabilities		$ 52,147	$ 255,772

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Cash and Cash Equivalents, Policy [Policy Text Block]

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.

Deposit Contracts, Policy [Policy Text Block]

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.

Use of Estimates, Policy [Policy Text Block]

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 Pronouncements, Policy [Policy Text Block]

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, 2017. 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 2018.

Reclassification, Policy [Policy Text Block]

Reclassifications

: Certain amounts from 2014 have been reclassified for comparative purposes for 2015. These reclassifications have no impact on the Company’s previously reported results.

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Note 8 - Subsequent Events

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Subsequent Events [Text Block]

Note 8. Subsequent Events

On July 2, 2015, the Company’s shareholders approved the Payment Data Systems, Inc. 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan permits the Company to issue up to 5,000,000 shares (after the effects of the 1-for-15 reverse split effected on July 23, 2015) of our common capital stock, including automatic increases through the fiscal year 2025 for awards to employees, non-employee directors, and consultants. The Plan is administered by the Company’s Compensation Committee.

On July 2, 2015, the Company’s shareholders approved a reverse stock split of our common stock in a whole number ratio of 1-for-12 to 1-for-15. On July 2, 2015, the Board of Directors approved the implementation of the reverse stock split at a ratio of 1-for-15. On July 23, 2015, pursuant to shareholder and board approval, the Company effected a 1-for-15 reverse stock split of the outstanding common stock by filing a certificate of change with the Secretary of State of the State of Nevada and obtaining approval by the Financial Industry Regulatory Authority. The number of our authorized common shares remained unchanged at 200,000,000 shares, par value $0.001 per share, after the reverse stock split. The number of our authorized preferred stock remains unchanged at 10,000,000 shares, par value $0.01 per share.

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Note 9 - Reverse Stock Split

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Reverse Stock Split [Text Block]

Note 9. Reverse Stock Split

On July 23, 2015, pursuant to shareholder and board approval, the Company effected a 1-for-15 reverse stock split of the outstanding common stock by filing a certificate of change with the Secretary of State of the State of Nevada and obtaining approval by the Financial Industry Regulatory Authority. The number of our authorized common shares remained unchanged at 200,000,000 shares, par value $0.001 per share, after the reverse stock split. The number of our authorized preferred stock remains unchanged at 10,000,000 shares, par value $0.01 per share.

The number of shares issued and outstanding as of August 6, 2015 was 12,347,591. The number of shares issued and outstanding prior to the reverse split was 185,197,097 and 180,201,953 at June 30, 2015 respectively. The Condensed Consolidated Balance Sheets shows 12,346,474 and 12,013,464 issued and outstanding at June 30, 2015, respectively. These were calculated by dividing the pre-split number of shares by 15, and rounding up any fractional shares.

There were no issuances of shares between June 30, 2015 and August 6, 2015 other than rounding of fractional shares. The difference of 1,117 between the issued shares at June 30, 2015 and August 6, 2015 is due to rounding of fractional shares because the Company agreed to issue a full share for any fractional shares that resulted from the reverse split.

The number of treasury shares was 4,995,144 at June 30, 2015 prior to the reverse split. The Condensed Consolidated Balance Sheets shows 333,010 treasury shares for June 30, 2015. This was calculated by dividing the pre-split number of shares by 15, and rounding up any fractional shares.

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Note 2 - Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2015

Notes Tables

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	June 30, 2015		December 31, 2014
Indemnification liability	$	450,000	$	450,000
Accrued commissions		412,394		460,977
Reserve for processing losses		272,365		272,365
Accrued salaries		174,703		158,380
Assumed liabilities		52,147		255,772
Accrued taxes		29,954		125,194
Other accrued expenses		149,615		128,345
Total accrued expenses	$	1,541,178	$	1,851,033

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Note 3 - Net Income Per Share (Details Textual)	Jul. 23, 2015
Subsequent Event [Member] | Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	15

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Note 6 - Related Party Transactions (Details Textual) - USD ($)		6 Months Ended	12 Months Ended
	Mar. 11, 2013	Jun. 30, 2015	Dec. 31, 2014	Dec. 31, 2013
Michael R. Long [Member]
Payments for Repurchase of Common Stock	$ 156,852
Treasury Stock, Shares, Acquired	2,969,459
Treasury Stock, Value, Acquired, Cost Method	$ 534,503
Louis A. Hoch [Member]
Payments for Repurchase of Common Stock	$ 144,403
Treasury Stock, Shares, Acquired	2,606,051
Treasury Stock, Value, Acquired, Cost Method	$ 469,089
Michael R. Long and Louis A. Hoch [Member]
Accounts Receivable, Related Parties	702,337
Payments for Repurchase of Common Stock	$ 301,255
Treasury Stock Acquired, Average Cost Per Share	$ 0.18
Herb Authier [Member]
Related Party Transaction, Purchases from Related Party		$ 23,830	$ 42,000
Nikole Hoch [Member]
Related Party Transaction, Purchases from Related Party		$ 0	6,227
Accounts Receivable, Related Parties			0	$ 0
Accounts Payable, Related Parties			$ 0	$ 0

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities:
Numerator for basic and diluted earnings per share, net income available to common shareholders	$ 733,465	$ 648,540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	158,679	$ 20,611
Amortization	19,841
Non-cash stock based compensation	627,056	$ 150,990
Cancellation of stock based compensation	$ (163,936)
Issuance of stock to employee
Changes in current assets and current liabilities:
Accounts receivable	$ 132,305	$ (302,444)
Prepaid expenses and other	(29,437)	(2,648)
Other assets	27,564	(50,011)
Accounts payable and accrued expenses	(161,673)	32,410
Customer deposits payable	9,087,724	33,749,138
Net cash provided by operating activities:	10,431,588	34,246,586
Investing activities:
Purchases of property and equipment	(555,778)	(30,233)
Net cash (used) by investing activities:	(555,778)	(30,233)
Financing activities:
Net cash (used) by financing activities:	0	0
Change in cash and cash equivalents	9,875,810	34,216,353
Cash and cash equivalents, beginning of period	54,989,851	26,573,771
Cash and cash equivalents, end of period	$ 64,865,661	$ 60,790,124
Cash paid during the period for:
Interest
Income taxes	$ 77,369

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Note 5 - Income Taxes

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 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.

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Note 7 - Legal Proceedings (Details Textual)	Jun. 30, 2015 USD ($)
Fraudulent Credit Transactions on a Customer Account [Member]
Loss Contingency, Range of Possible Loss, Maximum	$ 181,709

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Note 2 - Accrued Expenses (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Indemnification liability	$ 450,000	$ 450,000
Accrued commissions	412,394	460,977
Reserve for processing losses	272,365	272,365
Accrued salaries	174,703	158,380
Assumed liabilities	52,147	255,772
Accrued taxes	29,954	125,194
Other accrued expenses	149,615	128,345
Total accrued expenses	$ 1,541,178	$ 1,851,033