Questions Submitted by Email
With Management’s Answers

1.    We had a few questions about our name change to Zbill and our new subsidiary.

• Could you clarify the new role and function that our subsidiary, FiCentive, will play, and how we plan on increasing shareholder value with FiCentive?

• We'd like to know how quickly FiCentive will be up and running and what market we'll be targeting?

Answer:  The 2008 Annual Shareholder Meeting presentation details much of the benefit that is anticipated for FiCentive and Zbill.  However, the overall goal is to spread costs to the specific unit that incurs them, create three “pure play” companies with individual identities and market presence, and create a higher valuation for PDS than is being provided by the combined company today.

The operations of FiCentive and Zbill are for all practical purposes functioning today.  The target market for FiCentive’s products and services is corporations, financial institutions, affinity groups or any organization that needs to deliver a financial incentive to their customers, vendors, or employees.

2.    Was there a purpose to our name change from Billx to Zbill?

Answer:  The name change was an opportunity to “rebrand” the company as it redefines.  Also, Zbill is going to offer expanded services (see 2008 Annual Shareholder Meeting presentation for details) that the current Billx company does not bring to the marketplace.

3.    Are we still pursuing the acquisition?

Answer:  Yes, we are looking at acquisitions that would be accretive to our earnings and complementary to our business lines.

4.    Are we fully back online with our large insurance client? 

Answer:   Yes.

5.    Can we realistically expect to be cash flow positive by the final quarter of this year?

Answer:  Certainly it remains an elusive goal.  While the achievement of positive cash flow from operations is at the forefront of our plan, it is most likely dependent upon successfully growing our revenues from profitable business. We are unable to predict with any certainty if and when that will occur, but are expecting that the closing of more deals in our pipeline will bring us closer to positive cash flow.

6.    Can we hope to keep shareholder dilution to a minimum?

Answer:  Dilution remains a concern for us and other shareholders, and we do what we can to minimize it.  However, we cannot guarantee that no further dilution will occur. We have only drawn down about $71,000 on our equity line since August 2007 through today.  The majority of the dilution that has occurred in the last year was due to performance-based stock grants to employees.  We view those grants, while dilutive, not to be harmful to the company.

      7.    Will we start posting our processing increases from month to month again?

Answer:  We see no reason not to do so.

8.    Why do losses go higher when revenues go up?

Answer:  As revenues increase, we continue to see a corresponding increase in our gross profit due to the quality of business we are writing today.  One thing that is not always as obvious as perhaps it should be, but the loss is not a result of PDS adding profitable business.  The primary reason that the growth in gross profit is not reflected in bottom-line loss reduction is the offsetting increase in non-cash compensation expense related to common stock issued to employees as a long-term incentive in order to retain and reward them for their efforts. Growth stage companies like us typically use equity rather than cash to attract and keep employees. While this practice results in current expense that impacts profitability, it preserves limited cash resources and allows employees to participate in the success of the company through an ownership stake.

9.    How are our celebrity cards doing? Do they reach a large enough market? Are we planning any more celebrity cards this year?

Answer:  Overall, the celebrity cards are performing below our expectations but we have not reached full distribution yet as we have not started the sales distribution of the Natalie Gulbis Gift MasterCard in pro-shops and country clubs. While we remain excited about the Natalie Gulbis program, we have decided to turn off the Carmen Electra programs and move the card holders to our Billx Prepaid MasterCard or Natalie Gulbis Gift MasterCard programs. There are no current plans for any new celebrity cards at this time but we are in discussions with other celebrity brands for future programs.

10.  Do we have any specific plans to use our card program to more effectively reach the Mexican, Latin American or  Asian unbanked market?

Answer:  We have an agreement with a company that will be bringing an Ethnic/Affinity program to the marketplace in the latter half of 2008.

11.   Do we get the discounted rate for high volume credit card and or debit card processing? How much does that or can that save us? 

Answer:  We currently enjoy “pass through” rates for our acquiring business.  That simply means we get the same rates as First Data or Paymentech, which allows us to compete with any card processor. We do have discounted transaction tiered pricing for both our acquiring and prepaid card businesses.  As our transactions grow in both business lines and the tiers are met, we will benefit from the discounted rates for the affected transactions.

12.  In a recent PR about FiCentive you said, “ the timing is perfect to position our card issuing business to capitalize on higher valuations the industry is demanding”…Did you mean that PDS could be positioning FiCentive to possibly merge with other card issuers in the future?

Answer:  We believe the future is wide open for both FiCentive and Zbill.  Being separate companies and pure play in their orientation, the increased visibility into each business segment could help investors, strategic partners or potential acquirers more appropriately value these operations based on their particular operating industry.

13.  Which type of card that we’ll be issuing has the best revenue potential? (Payroll, teen etc.) 

Answer:  As shown in our 2008 Annual Shareholder Meeting presentation, the global prepaid market is estimated to be $6.5 trillion so each of the various segments have ample revenue potential. The margins on prepaid/gift cards are also attractive, especially when compared to the acquiring model.  Each card program will experience its own margin due to the marketplace in which they are placed as well as the needs of the organization for which we are providing the program.

14.  In light of recent data breeches in the industry, have PDS servers been recently updated? Do they need to be?  

Answer:  PDS enjoys a high degree of security.  We have just completed our third certification of PCI (Payment Card Industry) compliance as a Level One third party service provider.

15.  Is there any future guidance you can offer your long-standing loyal shareholders about where PDS is headed? 

Answer:  As you know, historically PDS has not provided specific guidance related to financial results, such as earnings or revenues.  We are also careful about disclosing too much detail of our strategies, but when you consider our announced intentions of portfolio acquisitions to support the acquiring side growth and now the separation of the issuing and bill payment segments, it should be clear that we are committed to growing all of our lines of business in order to increase the overall value of PDS to our shareholders.