Market Overview

LML Reports Profitable Results for the Second Quarter and Six Month Period of Fiscal 2013

VANCOUVER, British Columbia, Nov. 9, 2012 (GLOBE NEWSWIRE) -- LML PAYMENT SYSTEMS INC. ("LML") (Nasdaq: LMLP), a leading payments technology provider of financial payment processing solutions for e-commerce and traditional businesses, reports results for its second quarter and six month period ended September 30, 2012.

Revenue for the second quarter ended September 30, 2012 was $5.8 million compared to $13 million in revenue for the second quarter ended September 30, 2011. Gross profit for the quarter was $2.5 million or 43% compared to $7.3 million or 57% last year. Net income for the quarter was $349,000, or $0.01 per share, compared to net income of $3.4 million or $0.12 per share, for the second quarter ended September 30, 2011.

Revenue for the six month period ended September 30, 2012 was $11.4 million compared to revenue of $18.9 million for the six months ended September 30, 2011. Gross profit for the six months ended September 30, 2012 was $4.8 million compared to gross profit of $10 million for the six months ended September 30, 2011. Net income for the same period was $796,000, or $0.03 per share, compared to net income of $4.1 million or $0.15 per share (basic), for the same period during fiscal 2012.

Highlights

  • Transaction Payment Processing segment revenue increases 31% year over year for the second quarter
  • Added over 770 customers during the quarter, increasing total customer base to over 15,000
  • Subsidiary Beanstream named a Sage North America Endorsed/OEM development partner of the year for 2012

Pending Arrangement

As previously announced, on September 21, 2012, LML entered into an Arrangement Agreement (the "Arrangement Agreement") with Digital River, Inc. ("Digital River") and LML Acquisition Corp., a direct wholly-owned subsidiary of Digital River ("Merger Sub"). The Arrangement Agreement contemplates the acquisition by Digital River, through Merger Sub, of all of the outstanding equity securities of LML pursuant to a "plan of arrangement" (the "Arrangement") under the Business Corporations Act (British Columbia), under which LML is now governed. LML's Board of Directors, acting upon the unanimous recommendation of a special committee of the Board of Directors comprised of all the independent members of the Board of Directors, has approved and adopted the Arrangement Agreement and has recommended that LML's shareholders vote to approve the Arrangement Agreement. The Arrangement Agreement has also been approved by the boards of directors of all other parties to the Arrangement Agreement.

Additional Information and Where to Find It

LML has filed a preliminary proxy statement with the SEC indicating its intention to call a special meeting of its shareholders to vote on the Arrangement and the Arrangement Agreement. Completion of the Arrangement is subject to the approval of the shareholders of LML, regulatory approvals, and other customary conditions. LML's shareholder meeting to vote on the Arrangement Agreement and the closing of the Arrangement are expected to occur during the latter half of the fourth quarter of 2012 or the first quarter of 2013; however, no assurance can be given that the Arrangement Agreement will be approved by LML's shareholders or that the Arrangement will ultimately be completed. SHAREHOLDERS OF LML ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION CONCERNING THE ARRANGEMENT AND LML. Shareholders of LML will be able to obtain a free copy of the definitive proxy statement, as well as other filings containing information about LML and the Arrangement, when available, without charge, at the SEC's Internet site (www.sec.gov). In addition, copies of the definitive proxy statement and other filings containing information about LML and the Arrangement can be obtained, when available and without charge, by directing a request to LML, Attention: Investor Relations, 1140 West Pender Street, Suite 1680, Vancouver, British Columbia V6E 4G1, by phone at (800) 888-2260, or on LML's website at www.lmlpayment.com.

LML, Digital River and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from LML's shareholders in respect of the Arrangement. You can find information about LML's directors and executive officers in LML's definitive annual proxy statement filed with the SEC on July 31, 2012. You can obtain free copies of LML's annual proxy statement, and LML's definitive proxy statement in connection with the Arrangement (when it becomes available), by contacting LML's investor relations department. Additional information regarding the interests of LML's directors and executive officers will be included in the definitive proxy statement and the other relevant documents filed with the SEC when they become available. You can find information about Digital River's directors and executive officers in Digital River's definitive annual proxy statement filed with the SEC on April 18, 2012. You can obtain free copies of Digital River's annual proxy statement by contacting Digital River's investor relations department.

About LML Payment Systems Inc.

LML Payment Systems Inc., through its Canadian subsidiary Beanstream Internet Commerce Inc., and its U.S. subsidiaries Beanstream Internet Commerce Corp. and LML Payment Systems Corp., is a leading provider of financial payment processing solutions for e-commerce and traditional businesses. We provide credit card processing, online debit, electronic funds transfer, automated clearinghouse payment processing and authentication services, along with routing of selected transactions to third party processors and banks for authorization and settlement. For more details about LML Payment Systems, visit www.lmlpayment.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as "aims," "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects" or "targets" or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be evaluated by events that will occur in the future. Forward-looking statements are based on the opinions and estimates of the management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect LML's actual results include, among others, the impact, if any, of stock-based compensation charges, the potential failure to establish and maintain strategic relationships, inability to integrate recent and future acquisitions, inability to develop new products or product enhancements on a timely basis, inability to protect our proprietary rights or to operate without infringing the patents and proprietary rights of others, and quarterly and seasonal fluctuations in operating results. More information about factors that potentially could affect LML's financial results is included in LML's quarterly reports on Form 10-Q and our most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. Except as required by law, LML undertakes no obligation to update any forward-looking or other statements in this press release, whether as a result of new information, future events or otherwise.

LML PAYMENT SYSTEMS INC.
         
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(In U.S. Dollars)
(Unaudited)
         
  Three Months Ended Six Months Ended
  September 30 September 30
  2012 2011 2012 2011
         
         
REVENUE $5,759,228 $12,921,122 $11,372,260 $18,890,387
COST OF REVENUE 3,280,872 5,610,876 6,531,844 8,932,702
GROSS PROFIT 2,478,356 7,310,246 4,840,416 9,957,685
         
OPERATING EXPENSES        
General and administrative 1,330,308 981,091 2,296,495 1,912,095
Sales and marketing 273,928 214,727 525,152 522,237
Product development and enhancement 307,769 248,516 617,743 522,211
INCOME BEFORE OTHER INCOME (LOSS) AND INCOME TAXES 566,351 5,865,912 1,401,026 7,001,142
         
OTHER INCOME (LOSS)        
Foreign exchange (loss) gain (68,794) (34,394) (73,000) (2,744)
Interest income 43,744 11,708 70,501 28,885
  (25,050) (19,686) (2,499) 26,141
         
INCOME BEFORE INCOME TAXES 541,301 5,843,226 1,398,527 7,027,283
         
Income tax expense (recovery)        
Current 319,610 2,222,008 775,229 2,428,205
Deferred (127,148) 207,485 (172,870) 497,999
  192,462 2,429,493 602,359 2,926,204
         
NET INCOME 348,839 3,413,733 796,168 4,101,079
         
OTHER COMPREHENSIVE INCOME (LOSS)        
Unrealized foreign exchange gain (loss) on translation of foreign operations  
231,359
 
(398,154)
 
100,200
 
(383,791)
         
TOTAL COMPREHENSIVE INCOME $580,198 $3,015,579 $896,368 $3,717,288
         
EARNINGS PER SHARE, basic $0.01 $0.12 $0.03 $0.15
EARNINGS PER SHARE, diluted $0.01 $0.12 $0.03 $0.14
         
WEIGHTED AVERAGE SHARES OUTSTANDING        
Basic 28,246,684 28,233,434 28,246,684 28,191,808
Diluted 29,107,280 28,898,811 28,858,501 28,932,332
 
 
LML PAYMENT SYSTEMS INC.
 
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In U.S. Dollars, except as noted below)
(Unaudited)
     
  September 30, March 31,
  2012 2012
ASSETS    
Current Assets    
Cash and cash equivalents $27,402,745 $26,783,754
Funds held for merchants 12,391,538 9,485,182
Short-term investments 2,586,393 3,290,393
Restricted cash 175,000 175,000
Accounts receivable, less allowance of $190,513 (March 31, 2012 -- $27,397) 1,530,081 1,272,580
Other receivable 852,889 --
Inventory 38,049 --
Corporate taxes receivable 358,724 373,939
Prepaid expenses 244,473 331,361
Total current assets 45,579,892 41,712,209
     
Property and equipment, net 197,521 121,496
Patents 31,093 120,457
Restricted cash 260,395 258,095
Deferred tax assets 982,821 809,951
Goodwill 17,874,202 17,874,202
Other intangible assets 3,472,462 3,720,037
Other assets 20,919 20,796
Total assets $68,419,305 $64,637,243
     
LIABILITIES    
Current Liabilities    
Accounts payable $809,973 $720,666
Accrued liabilities 1,860,478 1,445,490
Corporate taxes payable -- 386,607
Funds due to merchants 12,391,538 9,485,182
Current portion of obligations under finance lease 2,460 2,460
Current portion of deferred revenue 811,048 1,342,828
Total current liabilities 15,875,497 13,383,233
     
Obligations under finance lease 3,510 4,920
Total liabilities 15,879,007 13,388,153
     
EQUITY    
Capital Stock    
Class A, preferred stock, $1.00 CDN par value, 150,000,000 shares authorized, issuable in series, none issued or outstanding -- --
Class B, preferred stock, $1.00 CDN par value, 150,000,000 shares authorized, issuable in series, none issued or outstanding -- --
Common shares, no par value, 100,000,000 shares authorized, 28,246,684 issued and outstanding (March 31, 2012 - 28,246,684) 53,918,912 53,918,912
     
Contributed surplus 10,396,434 10,001,594
Warrants 113,662 113,662
Deficit (12,261,392) (13,057,560)
Accumulated other comprehensive income 372,682 272,482
Total equity 52,540,298 51,249,090
     
Total liabilities and equity $68,419,305 $64,637,243
 
 
 
LML PAYMENT SYSTEMS INC.
         
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars)
(Unaudited)
         
  Three Months Ended Six Months Ended
  September 30 September 30
  2012 2011 2012 2011
         
Operating Activities:        
Net income $348,839 3,413,733 $796,168 4,101,079
Adjustments to reconcile net income to net cash (used in) provided by operating activities        
Amortization of property and equipment 23,375 25,038 45,575 59,278
Amortization of intangible assets 168,469 165,645 336,938 331,290
Share-based payments 195,733 152,657 394,840 289,094
Deferred income taxes (127,148) 207,485 (172,870) 497,999
Foreign exchange (gain) loss (124,223) 195,701 (70,242) 191,998
         
Changes in non-cash operating working capital        
Accounts receivable (54,346) 838,251 (234,589) (36,299)
Other receivable (852,889) -- (852,889) --
Inventory 1,188 -- (37,317) --
Corporate taxes receivable (90,723) (106,308) 6,375 (165,477)
Prepaid expenses 31,314 10,818 88,030 32,325
Accounts payable and accrued liabilities 547,298 (309,966) 494,922 (447,990)
Corporate taxes payable (836,236) 1,631,891 (376,158) (2,706,864)
Deferred revenue (298,362) (339,475) (539,387) (648,681)
Net cash (used in) provided by operating activities (1,067,711) 5,885,470 (120,604) 1,497,752
         
Investing Activities:        
Acquisition of short term investments -- (3,294,525) -- (3,294,525)
Maturity of short term investments 766,125 -- 766,125 --
Acquisition of property and equipment (93,238) (21,655) (119,769) (42,897)
Net cash provided by (used in) investing activities 672,887 (3,316,180) 646,356 (3,337,422)
         
Financing Activities:        
Proceeds from exercise of stock options -- -- -- 205,375
Net cash provided by financing activities -- -- -- 205,375
         
Effects of foreign exchange rate changes on cash and cash equivalents  
237,008
 
(375,299)
93,239 (362,912)
         
(DECREASE)  INCREASE IN CASH AND CASH EQUIVALENTS  
(157,816)
 
2,193,991
618,991 (1,997,207)
         
Cash and cash equivalents, beginning of period 27,560,561 22,726,293 26,783,754 26,917,491
         
Cash and cash equivalents, end of period $27,402,745 $24,920,284 $27,402,745 $24,920,284
         
Supplemental disclosure of cash flow information        
Taxes paid $1,260,548 $697,000 $1,260,548 $5,296,921
CONTACT: Patrick H. Gaines CEO (604) 689-4440 Investor Relations (800) 888-2260

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