PYDS Reports First Quarter Results and Summarizes Milestones

- Revenue Up 43 Percent from Prior Year Quarter -

San Antonio, TX, May 17, 2006 Payment Data Systems, Inc. (NASDAQ OTCBB: PYDS) an integrated electronic payments solutions provider, today announced financial results for the quarter ended March 31, 2006.

Revenues increased 43% to $348,010 for the first quarter of 2006 from $242,962 for the first quarter of 2005. Net loss for the quarter ended March 31, 2006 decreased to $425,957, or $0.01 per share, from a net loss of $455,980, or $0.02 per share, for the first quarter of 2005. Net loss for the first quarter of 2006 included $60,228 of non-cash deferred compensation expense related to long-term employee incentive restricted stock grants.

The Company as also received several inquiries regarding licensing opportunities related to compliance with our patent for bill payment and debit cards. Furthermore, the patent has also contributed to creating new and positive discussions with a number of prospective customers.

Commenting on the results for the quarter, Michael R. Long, Chairman and Chief Executive Officer of Payment Data Systems, said, “We are pleased to get off to a good start for the year as witnessed by our continuing growth in revenue and improvement in the bottom line.”

Long added, “Revenue generated by our merchant customers was approximately 92% of our total revenues in the first quarter of 2006 compared with 80% in the first quarter last year, with the growth in card processing leading the increase. We expect the trend of increasing card-based revenues to continue with the growth of our merchant processing portfolio and the introduction of our Prepaid and Gift Card Programs within the next few weeks.”

For further information regarding our financial results for the quarter ended March 31, 2006, please read our 10 QSB that was filed on May 15, 2006.
 
About Payment Data Systems, Inc.

Payment Data Systems is an integrated payment solutions provider to merchants and billers. We provide an extensive set of tailored products to deliver world-class payment acceptance, processing, and risk/fraud management. Payment Data has solutions for merchants, billers, banks, service bureaus and card issuers. Whether you are in the market for card issuance, payment acceptance or bill payment solutions we have a solution for you.

Payment Data is the owner of the electronic bill payment portal, http://www.billx.com. Billx.com has the ability to transmit payments to thousands of national billers.

Payment Data’s intellectual property includes U.S. Patent Number 7,021,530 that relates to bill payments made with debit, prepaid and stored value cards.
Payment Data Systems, Inc.
Michael Long
Chairman and CEO
phone: 210-249-4040
 
  
FORWARD-LOOKING STATEMENTS DISCLAIMER Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by safe harbors. Those statements include, but may not be limited to, all statements regarding our and management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, the factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect, our businesses and financial results in the future and could cause actual results to differ materially from plans and projections. We believe that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.