KUBRA Data Transfer Selects Payment Data Systems

KUBRA is a leading provider of enterprise information solutions with a leading portfolio of Electronic Bill Presentment and Payment (EBPP) customers and processes hundreds of millions of dollars in consumer payments each year. The partnership provides for both a referral agreement and incentive warrants for a three-year term, renewable thereafter. Under the terms of the referral agreement PDS will become KUBRAs preferred provider of credit/debit card payment processing. PDS will be the preferred payment processor cartridge within KUBRAs comprehensive technology network. The incentive warrant agreement, signed September 30, 2004, is performance-based and provides for both an initial 250,000 warrants -- priced at a premium to market -- and future warrants are earned by KUBRA by referral or transfer of profitable payment processing, from new or existing clients, to PDS. Additional terms allow for KUBRA to earn warrants through the achievement of yearly or quarterly revenue markers, the top tier of which is leveled at $45,000,000 annual gross revenue or $11,250,000 quarterly gross revenue. Future warrants, unregistered and restricted, are only earned through delivery of tiered gross revenue to PDS and are priced at 120% of the market price when earned. Along with opportunity for dramatic revenue growth as the result of referrals, the incentive warrants provided to KUBRA, upon exercise, create significant additional capital for PDS. Payment Data Systems intends to file today a Form 8-K with the Securities and Exchange Commission containing details of the agreement and the incentive warrant contract. A copy of which will be available at: www.sec.gov.