s1form2008.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
LML
PAYMENT SYSTEMS INC.
(Exact
name of registrant as specified in its charter)
Yukon
Territory
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7389
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(State
or other jurisdiction of incorporation or organization)
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(Primary
Standard Industrial Classification Code Number)
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1680-1140
West Pender Street
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###-##-####
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Vancouver,
British Columbia Canada V6E
4G1
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(I.R.S.
Employer Identification No.)
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(Address
of principal executive offices)
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Registrant’s
Telephone Number, Including Area Code: (604)
689-4440
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LML
PAYMENT SYSTEMS INC.
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1680
– 1140 West Pender St.
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Vancouver, British
Columbia Canada V6E 4G1
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Tel:
604-689-4440
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(Name,
address, including zip code, and telephone number, including area code, of
agent for service)
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Approximate date of commencement of
proposed sale to the public: From time to time after this registration
statement becomes effective as determined by market conditions and other
factors.
If any of
the securities being registered on the Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box: [X]
If this
Form is filed to register additional common stock for an offering pursuant to
Rule 462(b) of the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) of the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) of the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer
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[ ]
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Accelerated
Filer
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[ ]
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Non-accelerated
Filer
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[ ]
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Smaller
reporting company
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[X]
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(Do
not check if a smaller reporting company)
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Calculation
of Registration Fee
Title of Each Class Of
Securities To Be Registered
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Amount
to be Registered(1)
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Offering
Price per Share
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Maximum
Aggregate Offering Price
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Amount
of Registration Fee
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Common
Stock, no par value, currently outstanding
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4,000,000 |
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$ |
2.68 |
(2) |
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$ |
10,720,000 |
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$ |
421.30 |
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Common
Stock, no par value, underlying Warrants
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400,000 |
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$ |
3.40 |
(3) |
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$ |
1,360,000 |
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$ |
53.45 |
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Total
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4,400,000 |
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$ |
12,080,000 |
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$ |
474.75 |
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(1)
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In
accordance with Rule 416(a) of the Securities Act of 1933, the Registrant
also hereby registers an indeterminate number of shares that may be issued
and resold pursuant to terms which provide for a change in the amount of
securities being offered or issued to prevent dilution resulting from
stock splits, stock dividends, or similar
transactions.
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(2)
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Estimated
solely for purposes of calculating the registration fee based on the
average of the high and low prices of the Common Stock on the Nasdaq
Capital Market on June 30, 2008 pursuant to Rule 457(c) of the Securities
Act of 1933.
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(3)
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Estimated
solely for purposes of calculating the registration fee based on the
maximum price at which the warrants may be exercised over the terms of the
warrants, pursuant to Rule 457(g) of the Securities Act of
1933.
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The
registrant hereby amends this Registration Statement on such date or dates as
may by necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
The
information in this Prospectus is not complete and may be
changed. The selling stockholders may not sell their shares until the
Registration Statement filed with the Securities and Exchange Commission becomes
effective. This Prospectus is not an offer to sell shares and it is
not soliciting an offer to buy shares in any state where the offer or sale is
not permitted.
(Subject
to completion, dated July 2, 2008)
PROSPECTUS
4,400,000
Shares
LML
PAYMENT SYSTEMS INC.
Common
Stock
This
Prospectus relates solely to the resale by the selling stockholders described on
page 11 of this Prospectus (including their pledgees, assignees or other
successors-in-interest), of up to 4,400,000 shares of our common
stock comprised of (i) 4,000,000 shares of our common stock that a
selling stockholder acquired in a private placement transaction pursuant to a
securities purchase agreement dated as of March 26, 2008 and (ii) up to 400,000
additional shares of our common stock issuable upon exercise of common share
purchase warrants that we issued to another selling stockholder, in connection
with that transaction. The warrants are exercisable at a price of
$3.40 per share and are exercisable for a period of five years from the Closing
Date. We have agreed to bear all of the expenses incurred in connection with the
registration of these shares. The selling stockholders will pay any
brokerage commissions and/or similar charges incurred in connection with the
sale of the shares.
The
selling stockholders may offer the shares from time to time through public or
private transactions at prevailing market prices or at privately negotiated
prices or through any other means described under the heading “Plan of
Distribution” beginning on page 12. The selling stockholders may
elect to sell all, or a portion of, or none of the shares of common stock being
offered hereby. No underwriter or any other person has been engaged
to facilitate the sale of securities in this offering
We are
not selling any shares of common stock in this offering and, therefore, we will
not receive any of the proceeds from the sale of the shares by the selling
stockholders. Upon exercise of the warrants by the payment of cash,
however, we will receive aggregate proceeds of $1,360,000, which is based on an
exercise price of $3.40 per share.
Our
common stock is traded on The NASDAQ Stock Market’s Capital Market, which is the
principal market for our common stock, and trades under the symbol
"LMLP". On June 27, 2008, the last reported sale price of our common
stock on The NASDAQ Stock Market’s Capital Market was $2.74 per
share.
This
investment involves a high degree of risk. You should carefully
consider the risks and uncertainties described under the heading “Risk Factors”
beginning on page 3 of this Prospectus before making a decision to purchase our
common stock.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this Prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
The
date of this Prospectus is ,
2008
TABLE
OF CONTENTS
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Page
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PROSPECTUS
SUMMARY
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1
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RISK
FACTORS
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3
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FORWARD-LOOKING
STATEMENTS
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10
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TRANSACTION
WITH MILLENNIUM PARTNERS L.P.
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11
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USE
OF PROCEEDS
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11
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SELLING
STOCKHOLDERS
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11
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PLAN
OF DISTRIBUTION
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12
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DESCRIPTION
OF SECURITIES TO BE REGISTERED
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14
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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14
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EXPERTS
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15
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WHERE
YOU CAN FIND MORE INFORMATION
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15
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INCORPORATION
BY REFERENCE OF IMPORTANT INFORMATION REGARDING LML
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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16
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ABOUT
THIS PROSPECTUS
You
should rely only on the information contained in or incorporated by reference
into this Prospectus or any Prospectus supplement. We and the selling
stockholders have not authorized anyone else to provide you with different
information. You should not assume that the information in this
Prospectus or any Prospectus supplement is accurate as of any date other than
the date on the front page of those documents. Our business,
financial condition, results of operations and prospects may have changed since
that date.
This
Prospectus is an offer to sell only the securities offered hereby, but only
under circumstances and in jurisdictions where it is lawful to do
so.
PROSPECTUS
SUMMARY
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Unlesss the
context otherwise requires, references in this Prospectus to the
“Company”, the "Corporation", “LML,” “we,” “us” or “our” refer
to LML Payment Systems Inc. and its direct and indirect subsidiaries. LML
Payment Systems Inc.’s subsidiaries areBeanstream Internet Commerce, Inc.,
LML Corp., Legacy Promotions Inc., and LHTW Properties, Inc LML Corp’s
subsidiaries are LML Patent Corp., and LML Payment Systems
Corp. Unless otherwise specified herein, all references
herein to “$” are to United States (“U.S.”) Dollars. From time
to time the Company has made and may continue to make written or oral
“forward-looking statements” including those contained in this Prospectus.
These forward-looking statements represent the Company’s present
expectations or beliefs concerning future events. The Company
cautions that such statements are qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements including those factors identified below in
“Risk Factors”.
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This
Prospectus summary highlights selected information contained elsewhere in
this Prospectus. You should read the following summary together
with the more detailed information regarding our company and the shares of
common stock being sold in this offering, which information appears
elsewhere in this Prospectus.
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The
Company
We
are a leading provider of electronic payment and risk management and
authentication services primarily to businesses and organizations who use
the Internet to receive or send payments.
We
link merchants selling products or services to customers wanting to buy
them and financial institutions who allow the transfer of payments to
occur. We have partnership arrangements and certified
connections to financial institutions, payment processors and other
payment service providers in order to enable our customers to safely and
reliably conduct e-commerce. We provide our electronic payment,
authentication and risk management services to over 6,000 businesses and
organizations in Canada and the United States.
Our
payment services allow our customers to accept or process a wide array of
payments including credit cards, debit cards, electronic fund transfers
and ACH transactions. We process Mastercard, VISA, American
Express, Diners, JCB, Discover cards on behalf of the majority of Canadian
and American merchant account acquirers. We also offer leading
risk management solutions to both online and brick and mortar customers
who wish to use the Internet as a cost effective means of communicating
with their own bank or credit reporting agency.
On
June 30, 2007, we acquired Beanstream Internet Commerce Inc., a leading
provider of Internet-based electronic payment, risk management and
authentication services to businesses and organizations in Canada and the
United States. We believe the acquisition was complementary to
our existing payment processing business. The transaction was a
cash, stock and debt transaction valued at $22 million.
We
operate three separate lines of business: transaction payment processing,
intellectual property licensing and check processing/software licensing.
Our transaction payment processing services consist predominantly of
Internet-based services, while our check processing services involve
predominantly traditional and electronic check processing and recovery
services that do not utilize the Internet. With the completion
of our 2007 acquisition of Beanstream (which had a strong Internet-based
product and service offering), we expect that our transaction payment
processing services will be our principal line of business for the
foreseeable future, while our other lines of business (including the
electronic check processing services that we have historically relied on
for a significant source of revenue) will become less important to our
overall service offerings and less significant to the financial
performance of our company.
LML
was originally incorporated under the laws of the Province of British
Columbia, Canada, as a “specially limited company” on January 24, 1974. In
October 1997, after receipt of shareholder approval, our directors elected
to change our governing corporate jurisdiction to the Yukon Territory,
which change became effective in November 1997. Under the Yukon
Business Corporations Act, we are a corporation that enjoys limited
liability for its shareholders, is governed by its Board of Directors and
generally has the powers and capacity attributable to a
corporation.
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The
Offering
Securities
offered
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4,400,000
shares, consisting of 4,000,000 shares currently issued and outstanding
and 400,000 shares underlying outstanding warrants.
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Common
stock authorized
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100,000,000
shares.
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Common
stock outstanding
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26,341,832
shares as of June 30, 2008
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Terms
of the Offering
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The
selling stockholders will determine when and how they will sell the common
stock offered in this Prospectus
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Use
of proceeds
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We
will not receive any of the proceeds from the sale of shares by the
selling stockholders.
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NASDAQ
Capital Market symbol
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LMLP
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Risk
factors
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The
offering involves a high degree of risk. Please refer to “Risk
Factors” beginning on page 3 for a description of the risk factors you
should consider.
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Unless
otherwise indicated, the share information in this Prospectus is based on
26,341,832 shares of common stock outstanding as of June 30,
2008. This number excludes the 400,000 shares subject to outstanding
warrants and 4,207,500 shares subject to options granted as of June 30, 2008 but
not yet exercised, with exercise prices ranging from $2.95 to $6.25 per
share.
Private
Placement and Warrants
On March
26, 2008 (the “Closing Date”), we entered into a definitive Securities Purchase
Agreement (the “Securities Purchase Agreement”) with Millennium Partners, L.P.,
an institutional investor organized under the laws of the Cayman Islands (the
“Purchaser”). Under the Securities Purchase Agreement, LML and the
Purchaser completed a private placement transaction pursuant to which the
Purchaser acquired 4,000,000 common shares, without par value (the “Common
Stock”), of LML for an aggregate purchase price (the “Purchase Price”) of
$7,200,000, or $1.80 per share. See “Selling Stockholders” beginning
on page 11 for more information with respect to the Purchaser as well as
“Transaction with Millennium Partners, L.P.” beginning on page 11.
We also
entered into a Registration Rights Agreement on the Closing Date with the
Purchaser pursuant to which we agreed that we would prepare and file a
Registration Statement with the Securities and Exchange Commission covering the
resale of the Common Stock sold to the Purchaser.
If we
fail to file the Registration Statement by the Filing Deadline or if the
Registration Statement fails to be declared effective by the SEC within a
certain time period after filing (each, an “Event”), then we have agreed to pay
the Purchaser liquidated damages up to a maximum of six percent (6%) of the
aggregate Purchase Price paid by the Purchaser pursuant to the Securities
Purchase Agreement. The Registration Statement also grants
“piggyback” registration rights to the Purchaser.
Ladenburg
Thalmann & Co. Inc. acted as our placement agent and financial advisor in
connection with the Transaction (the “Placement Agent”). In
consideration thereof, we paid the Placement Agent a placement fee in the amount
$468,000 and issued warrants to the Placement Agent to acquire 400,000 shares of
our Common Stock (the “Warrants”). The Warrants are exercisable at a
price of $3.40 per share and are exercisable for a period of five years from the
Closing Date.
We issued
the Common Stock and the Warrants to purchase shares of our common stock in
reliance on an exemption from regulation pursuant to Rule 506 and Regulation D
promulgated under the Securities Act of 1933, as amended.
RISK
FACTORS
Introduction
In
addition to the normal risks of business, we are subject to significant risks
and uncertainties, including those listed below and others described elsewhere
in this Registration Statement on Form S-1. Any of the risks
described herein could result in a significant adverse effect on our results of
operations and financial condition and could cause our actual results of
operations to differ materially from the results contemplated by the
forward-looking statements contained in this report.
We
have a general history of losses and may not operate profitably in the
future.
We have
incurred losses for the last five fiscal years. Our net losses and negative cash
flow may continue for the foreseeable future. As of March 31, 2008, our
accumulated deficit was approximately $34,206,622. We believe that our planned
growth and profitability will depend in large part on our ability to expand our
client base. Accordingly, we intend to invest in marketing, development of our
client base and development of our marketing technology and operating
infrastructure. If we are not successful in expanding our client base, it will
have a material adverse effect on our financial condition and our ability to
continue to operate our business.
Excessive
chargeback losses could significantly affect our results of operations and
liquidity.
Our
agreements with our sponsoring financial institutions and certain payment
processors require us to assume and bear the risk of “chargeback”
losses. Under the rules of Visa and MasterCard, when a merchant
processor acquires card transactions, it has certain contingent liabilities for
the transactions processed. This contingent liability arises in the
event of a billing dispute between the merchant and a cardholder that is
ultimately resolved in the cardholder’s favor. In such a case, the
disputed transaction is charged back to the merchant and the disputed amount is
credited or otherwise refunded to the cardholder. If we are unable to
collect this amount from the merchant’s account, or if the merchant refuses or
is unable to reimburse us for the chargeback due to merchant fraud, insolvency
or other reasons, we will bear the loss for the amount of the refund paid to the
cardholders. In addition, if we are unable to recover these
chargeback amounts from merchants, having to pay the aggregate of any such
amounts could have a material adverse effect on our results of operations and
liquidity.
Because
a small number of customers have historically accounted for a substantial
portion of our revenue, our financial results would be materially adversely
affected if we are unable to retain customers.
We have
had in the past and may have in the future, a small number of customers that
have accounted for a significant portion of our revenue. During the
fiscal year ended March 31, 2008, revenue from and associated with our three
largest customers amounted to approximately 47% of total revenue. Our
revenue could materially decline because of a delay in signing agreements with a
single customer or the failure to retain an existing customer.
Merchant
fraud with respect to Internet-based bankcard and EFT transactions could cause
us to incur significant losses.
We
significantly rely on the processing revenue derived from bankcard and EFT
transactions. If any merchant or customer were to submit or process
unauthorized or fraudulent bankcard or EFT transactions, depending on the dollar
amount, we could incur significant losses which could have a material adverse
effect on our business and results of operations and
liquidity.
Despite
systems designed to manage such risk, we cannot guarantee that our systems will
prevent fraudulent transactions from being submitted and processed or that the
funds set aside to address such activity will be adequate to cover all potential
situations that might occur. We do not have insurance to protect us
from these losses. There is no assurance that any chargeback or
processing reserve will be adequate to offset against any unauthorized or
fraudulent processing losses that we may incur. Accordingly, should
we experience such fraudulent activity and such losses, our results of
operations could be immediately and materially adversely affected.
Our
reliance on financial institutions, providers of financial payment networks and
payment technology vendors could adversely affect our ability to provide our
services to our clients on a timely and cost-efficient basis.
We rely
to a substantial extent on third parties to provide access to networks and
technology including software, data, systems and services. In some
circumstances, we rely on a single supplier or limited group of
suppliers. For example, we require the services of financial
institutions and third-party payment processors for access to payment
networks. If any of these processors cease to allow us to access
their processing platforms and/or networks, our ability to process credit card,
debit card, EFT and ACH payments would be severely impacted and this would, in
turn, have a materially adverse impact on our results of operations and
liquidity.
If
we are unable to protect our intellectual property rights or if others claim
that we are infringing on their intellectual property, we could lose any
competitive advantage we may have with respect to our intellectual
property or we may be required to incur significant costs with
respect to the infringement of the intellectual property rights of
others.
We may be
unable to successfully assert patent infringement claims against others and
could incur significant costs with respect to asserting such
claims. Defending patent infringement claims brought against us could
cause us to incur significant costs. The failure to successfully
prosecute our patent infringement claims or defend patent infringement claims
brought against us could have a material adverse effect upon our business and
our financial results.
We have
in the past asserted patent infringement claims against others. The
cost of prosecuting a patent infringement claim against others carries a high
degree of uncertainly and is expensive. While we believe our patents
to be valid, if we were to enter future litigation against others regarding the
infringement of our patents we face the risk that our patents could ultimately
be determined to be invalid or otherwise not infringed by a court, jury or the
United States Patent and Trademark Office. Furthermore, all patents
have an expiration date and our patent nos. 5,484,988, 6,164,528, 6,283,366,
6,354,491 and RE40,220, regarding electronic check processing, expire on January
16, 2013. Failure to prevail in a patent infringement claim against
others would have a material adverse impact on our business and our financial
results and our stock price.
We
could be subject to liability as a result of security breaches, service
interruptions by cyber terrorists or fraudulent or illegal use of our
services.
Because
some of our activities involve the storage and transmission of confidential
personal or proprietary information, such as credit card numbers and bank
account numbers, and because we are a link in the chain of e-Commerce, we are
vulnerable to internal and external security breaches, service interruptions and
third-party and employee fraud schemes that could damage our reputation and
expose us to a risk of loss or litigation and monetary damages. Our payment
services may be susceptible to credit card and other payment fraud schemes,
including unauthorized use of credit cards, debit cards or bank account
information, identity theft or merchant fraud. We expect that technically
sophisticated criminals will continue to attempt to circumvent our anti-fraud
systems. If such fraud schemes are successful or otherwise cause merchants,
customers or partners to lose confidence in our services in particular, or in
Internet systems generally, our business would be materially adversely
affected.
Our
business may also be susceptible to potentially illegal or improper uses. These
uses may include illegal online gambling, fraudulent sales of goods or services,
illicit sales of prescription medications or controlled substances, software and
other intellectual property piracy, money laundering, bank fraud, child
pornography trafficking, prohibited sales of alcoholic beverages and tobacco
products and online securities fraud. Despite measures we have taken to detect
and lessen the risk of this kind of conduct, we cannot ensure that these
measures will succeed.
We
believe we are compliant with the Payment Card Industry’s (PCI) Security
Standard which incorporates Visa’s Cardholder Information Security Program
(CISP) and MasterCard’s Site Data Protection (SDP) standard. However, there
is no guarantee that we will maintain such compliance or that compliance will
prevent illegal or improper use of our payment system.
Our
security measures may not prevent security breaches, service interruptions and
fraud schemes and the failure to do so may disrupt our business, damage our
reputation and expose us to risk of loss or litigation and possible monetary
damages that would materially adversely effect our business, results of
operation and financial condition.
Changes
to credit card association, debit networks and ACH rules or practices could
adversely impact our business.
We do not
belong to nor can we directly access the bank card associations. As a result, we
must rely on banks and their processing providers to process our credit, debit,
EFT and ACH transactions. However, we must comply with the operating rules of
the credit card associations and other payment networks such as debit networks
and ACH networks. The associations’ member banks and network owners set these
rules and the associations and network owners interpret them. Some of
those member banks and network owners compete with us in certain
situations. Visa, MasterCard, American Express, Discover, Interac or
the Automated Clearing House could adopt new operating rules or interpretations
of existing rules which we might find difficult or even impossible to comply
with, resulting in our inability to give customers the option of using credit
cards, debit cards, EFT and ACH facilities to fund their payments. If we were
unable to provide a gateway for these payment services, our business would be
materially and adversely affected.
We
and our clients must comply with complex and changing laws and
regulations.
Government
regulation influences our activities and the activities of our current and
prospective clients, as well as our clients’ expectations and needs in relation
to our products and services. Businesses that handle consumers’ funds, such as
our’s, are subject to numerous state, federal, provincial and international
regulations, including those related to banking, credit cards, electronic
transactions and communication, escrow, fair credit reporting, privacy of
personal information and financial records, internet gambling and others. State,
federal and provincial money transmitter regulations and federal and
international anti-money laundering and money services business regulations can
also apply under some circumstances. The application of many of these laws with
regard to electronic commerce is unclear. In addition, it is possible that a
number of laws and regulations may be applicable or may be adopted in the future
with respect to conducting business over the Internet concerning matters such as
taxes, pricing, content and distribution. If applied to us, any of the foregoing
rules and regulations could require us to change the way we do business in a way
that increases costs or makes our business more complex. In addition, violation
of some statutes may result in severe penalties or restrictions on our ability
to engage in e-Commerce, which could have a material adverse effect on our
business.
Privacy
legislation, including the Gramm-Leach-Bliley Act and regulations thereunder,
the Personal Information Protection and Electronic Documents Act in Canada, as
well as provincial and state laws may also affect the nature and extent of the
products or services that we can provide to clients as well as our ability to
collect, monitor and disseminate information subject to privacy
protection.
Consumer
protection laws in the areas of privacy of personal information and credit and
financial transactions have been evolving rapidly at the state, federal,
provincial and international levels. As the electronic transmission,
processing and storage of financial information regarding consumers continues to
grow and develop, it is likely that more stringent consumer protection laws may
impose additional burdens on companies involved in such transactions including,
without limitation, notification of unauthorized disclosure of personal
information of individuals. Uncertainty and new laws and regulations,
as well as the application of existing laws, could limit our ability to operate
in our markets, expose us to compliance costs, fines, penalties and substantial
liability, and result in costly and time-consuming litigation. We
have in the past collected personal data about consumers for use in our check
authorization products, which has given rise to litigation involving our
corporation.
Furthermore,
the growth and development of the market for e-Commerce may prompt more
stringent consumer protection laws that may impose additional regulatory burdens
on companies that provide services to online businesses. The adoption of
additional laws or regulations, or taxation requirements may affect the ability
to offer, or cost effectiveness of offering, goods or services online, which
could, in turn, decrease the demand for our products and services and increase
our cost of doing business.
The
Canadian Securities Administrators in Canada and the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. in the
United States, have also enacted regulations affecting our corporate governance,
securities disclosure and compliance practices. We expect these regulations to
increase our compliance costs and require additional time and attention. If we
fail to comply with any of these regulations, we could be subject to legal
actions by regulatory authorities or private parties.
Our
business is highly dependent on the efficient and uninterrupted operation of our
computer network systems and data centers, and any disruption or material breach
of security of our systems could materially harm our business.
Our
ability to provide reliable service largely depends on the efficient and
uninterrupted operation of our computer network systems and data centers. Any
significant interruptions or security or privacy breaches in our facilities,
computer networks, firewalls and databases could harm our business and
reputation, result in a loss of customers or cause inquiries and fines or
penalties from regulatory or governmental authorities. Our systems and
operations could be exposed to damage or interruption from fire, natural
disaster, power loss, telecommunications failure, unauthorized entry or physical
break-ins, computer viruses and hackers. The measures we have enacted, such as
the implementation of security access and disaster recovery plans, may not be
successful and we may experience problems other than system failures. We may
also experience software defects, development delays and installation
difficulties, which would harm our business and reputation and expose us to
potential liability and increased operating expenses.
Our business may be harmed by errors
in our software.
The
software that we develop and use in providing our transaction payment processing
is extremely complex and contains thousands of lines of computer code. Complex
software systems such as ours are susceptible to errors. We believe our software
design, development and testing processes are adequate to detect errors in our
software prior to its release. Because of the complexity of our systems and the
large volume of transactions we process on a daily basis, it is possible that we
may not detect software errors until after they have affected a significant
number of transactions. Software errors can have the effect of causing
merchants, customers or partners who utilize our products and services to fail
to comply with their intended business policies, or to fail to comply with
legal, credit card, debit card and banking requirements, such as those under the
Fair Credit Reporting Act, Gramm-Leach-Bliley Act, NACHA rules, MasterCard’s
Site Data Protection (SDP) Standard, Visa’s Cardholder Information Security
Program (CISP) and Payment Card Industry’s (PCI) Data Security
Standard.
Our future revenues may be uncertain
because of reliance on third parties for marketing and
distribution.
We
distribute our service offerings primarily through third party sales
distribution partners and our revenues are derived predominantly through these
relationships.
We intend
to continue to market and distribute our current and future products and
services through existing and other relationships both in and outside of Canada.
There are no minimum purchase obligations applicable to any existing distributor
or other sales and marketing partners and we do not expect to have any
guarantees of continuing orders. Failure by our existing and future distributors
or other sales and marketing partners to generate significant revenues, our
failure to establish additional distribution or sales and marketing alliances,
changes in the industry that render third party distribution networks obsolete,
termination of relationships with significant distributors or marketing partners
would have a material adverse effect on our business, operating results and
financial condition. In addition, we may be required to pay higher commission
rates in order to maintain loyalty among our third-party distribution partners,
which may have a material adverse impact on our
profitability.
We
may require additional capital, which may not be available on commercially
reasonable terms, or at all. Capital raised through the sale or issuance of
equity securities may result in dilution to our shareholders. Failure to obtain
such additional capital could have a materially adverse impact on our business
development.
Our
future business activities, the development or acquisition of new or enhanced
products and services, the acquisition of additional computer and network
equipment, the costs of compliance with government regulations and future
expansions including acquisitions will require us to make significant capital
expenditures. If our available cash resources prove to be insufficient, because
of unanticipated expenses, previous acquisitions, revenue shortfalls or
otherwise, we may need to seek additional financing or curtail our expansion
activities. If we obtain equity financing for any reason, our existing
shareholders may experience dilution in their investments. If we obtain debt
financing, our business could become subject to restrictions that affect our
operations or increase the level of risk in our business. It is also possible
that, if we need additional financing, we will not be able to obtain it on
acceptable terms, or at all.
Our
ability to expand through acquisitions involves risks and may not be
successful.
As part
of our growth strategy, we have made business acquisitions in recent years and
we expect to be an active business acquirer in the future. We
anticipate that we will seek to acquire complementary businesses, products and
services in the future. The acquisition and integration of businesses
involves a number of risks and challenges, including:
·
|
Maintaining
the acquired business’ customer
relationships;
|
·
|
Demonstrating
to the customers of the acquired business that the acquisition has not
resulted in changes that would adversely impact the ability of the
acquired business to address the needs of its
customers;
|
·
|
The
operations, technology and personnel of an acquired business may be
difficult to integrate;
|
·
|
An
acquired business may not achieve anticipated revenues, earnings or cash
flow;
|
·
|
The
allocation of management resources to complete a business acquisition may
divert management resources from our business and disrupt our day-to-day
operations.
|
There can
be no assurance that we will be able to fully integrate all aspects of an
acquired business successfully or fully realize the potential benefits of any
business combination and our failure to successfully integrate acquired
businesses may have a material adverse effect on our financial results and stock
price.
Currency
exchange rate fluctuations could adversely affect our financial results, which
may have an adverse impact on our business, results of operations and financial
condition as well as the value of our foreign assets.
Fluctuations
in foreign currency exchange rates may have an adverse impact on our business,
results of operations and financial condition, as well as the value of our
foreign assets, which, in turn, may adversely affect reported earnings or losses
and the comparability of period-to-period results of operations, with the
exception of our newly acquired subsidiary Beanstream. The U.S.
dollar is the functional currency of our operations since substantially all of
our operations are conducted in U.S. currency. As a result, when we
are paying any obligation that is denominated in a foreign currency (including,
for example, the Beanstream promissory notes which are denominated in Canadian
dollars), we must generate the equivalent amount of cash in U.S dollars that,
when exchanged at the then-prevailing applicable foreign currency exchange rate,
will equal the amount of the obligation to be paid (which means that we may pay
more U.S. dollars than initially anticipated if the foreign currency strengthens
against the U.S. dollar between the time we incur the obligation and the time we
are required to pay the obligation). Given recent and unexpected
fluctuations in the U.S./Canadian currency exchange rate, the amount owing on
the Beanstream promissory notes has increased as of March 31, 2008 from
approximately U.S. $4,975,000 to approximately U.S.
$5,167,000. Changes in the U.S./Canadian currency exchange rate could
have a significant adverse impact on our current liquidity and capital resources
and could also have a material adverse impact on our profitability and results
of operations.
Failure
to maintain effective internal controls in accordance with Section 404 of
the Sarbanes-Oxley Act could have a material adverse effect on our business and
stock price.
We are
required to certify and report on our compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act, which requires annual management
assessments of the effectiveness of our internal control over financial
reporting and a report by our independent registered chartered accounting firm
addressing these assessments. If we fail to maintain the adequacy of our
internal controls, as such standards are modified, supplemented or amended from
time to time, we may not be able to ensure that we can conclude on an ongoing
basis that we have effective internal controls over financial reporting in
accordance with Section 404. In order to achieve effective internal
controls we may need to enhance our accounting systems or processes which could
increase our cost of doing business. Any failure to achieve and maintain an
effective internal control environment could have a material adverse effect on
our business, financial results and stock price.
We
have historically experienced fluctuations in our operating results and expect
these fluctuations to continue in future periods, which may result in volatility
in our stock price.
Our
operating results may fluctuate in the future based upon a number of factors,
many of which are not within our control. Our revenue model is based largely on
recurring revenues, billed monthly, predominately derived from growth in
customers and the numbers of transactions processed within a monthly billing
period. The number of transactions processed is affected by many factors,
several of which are beyond our control, including general consumer trends and
holiday shopping in the fourth quarter of the year.
Our
operating results may also fluctuate in the future due to a variety of other
factors, including the timing and extent of restructuring, and impairment and
other charges that may occur in a given fiscal year, the final disposition of
any patent litigation and new changes in accounting rules, such as the
requirement to record stock-based compensation expense for employee stock option
grants made at fair market value. As a result of these factors, we believe that
our fiscal year results are not predictable with any significant degree of
certainty, and year-to-year comparisons of our results of operations are not
necessarily meaningful. You should not rely on our fiscal year results of
operations to predict our future performance.
If our
operating results fall below the expectations of investors or public market
analysts, the price of our common stock could fall dramatically. Our common
stock price could also fall dramatically if investors or public market analysts
reduce their estimates of our future quarterly operating results, whether as a
result of information we disclose, or based on industry, market or economic
trends, or other factors.
We
face competition from a broad and increasing range of vendors which could reduce
or eliminate demand for our products and services.
The
market for products and services offered to participants in online transactions
is highly competitive and is characterized by rapid technological change,
evolving industry standards, merchant requirements, pricing competition, rapid
rates of product obsolescence, and rapid rates of new product introduction. This
market is fragmented and a number of companies offer one or more products or
services competitive with ours. We face competition from several providers of
online payment processing services, including CyberSource Corporation,
Plug & Pay Technologies, Inc., Verisign/PayPal, Inc., Google, Inc. and
LinkPoint International, Inc., a subsidiary of First Data Corporation as well as
financial services companies, credit card and payment processing
companies. We anticipate continued growth and the formation of new
alliances in the market in which we compete, which will result in the entrance
of new or the creation of bigger competitors in the future.
Because
competitors can penetrate one or more of our markets, we anticipate additional
competition from other established and new companies. In addition,
competition may intensify as competitors establish cooperative relationships
among themselves or alliances with others.
Many of
our current and potential competitors have significantly greater financial,
marketing, technical and other competitive resources than we do. As a
result, these competitors may be able to adapt more quickly to new or emerging
technologies and changes in client requirements, or may be able to devote
greater resources to the promotion and sale of their products and
services. In addition, in order to meet client requirements, we must
often work cooperatively with companies that are, in other circumstances,
competitors. The need for us to work cooperatively with such
companies may limit our ability to compete aggressively with those companies in
other circumstances.
If we lose customers, our business
operations may be materially
adversely affected, which could cause us to
cease our business or curtail our business to a point
where we are no longer able to generate sufficient revenue
to fund operations.
The demand for many of our products
and services could be negatively affected by reduced growth of
e-Commerce,
delays in the
development of the Internet infrastructure, a general
economic slowdown or any other event causing a material slowing of consumer
spending.
A
significant portion of our revenue is derived from transaction processing fees.
Any changes in economic factors that adversely affect consumer spending and
related consumer debt, or a reduction in check writing or credit and debit card
usage, could reduce the volume of transactions that we process, and have a
materially adverse effect on our business, financial condition and results of
operations. We depend on the growing use and acceptance of the Internet by
merchants and customers in Canada and the United States as a means to grow our
business. We cannot be certain that acceptance and use of the Internet will
continue to grow or that a sufficiently broad base of merchants and consumers
will adopt, and continue to use, the Internet as a medium of
commerce.
It is
also possible that continued growth in the number of Internet users and the use
of the Internet generally, may overwhelm the existing Internet infrastructure.
Delays in the development or adoption of new standards and protocols required to
handle increased levels of Internet activity could also have a detrimental
effect on the Internet and correspondingly on our business. These factors would
adversely affect usage of the Internet, and lower demand for our products and
services.
If
we do not continue to enhance our existing products and services and develop or
acquire new ones, we will not be able to compete effectively.
As part
of our business strategy, we are seeking to further penetrate into the
transaction payment processing market and to expand our business into new
markets or markets that are complementary to our existing transaction payment
processing segment operations. If we are not able to successfully expand our
penetration into the existing transaction payment processing market or into new
or complementary markets, our financial results and future prospects may be
harmed. Our ability to increase market penetration and enter new or
complementary markets depends on a number of factors, including growth in our
existing and targeted markets, our ability to provide products and services to
address the needs of those markets and competition in those
markets.
The
industries in which we do business or intend to do business have been changing
rapidly as a result of increasing competition, technological advances, changing
consumer payment habits, regulatory changes and evolving industry practices and
standards, and we expect these changes will continue. Current and
potential clients have also experienced significant changes as the result of
competition and economic conditions. In addition, the business practices and
technical requirements of our clients are subject to changes that may require
modifications to our products and services. In order to remain competitive and
successfully address the evolving needs of our clients, we must commit a
significant portion of our resources to:
·
|
identify
and anticipate emerging technological and market trends affecting the
markets in which we do business;
|
·
|
enhance
our current products and services in order to increase their
functionality, features and cost-effectiveness to clients that are seeking
to control costs and to meet regulatory
requirements;
|
·
|
develop
or acquire new products and services that meet emerging client needs, such
as products and services for the online
market;
|
·
|
modify
our products and services in response to changing business practices and
technical requirements of our clients, as well as to new regulatory
requirements;
|
·
|
integrate
our current and future products with third-party products;
and
|
·
|
create
and maintain interfaces to changing client and third party
systems.
|
We must
achieve these goals in a timely and cost-effective manner and successfully
market our new and enhanced products and services to clients.
There is no assurance that our current
products and services will stay competitive with those of our
competitors or that we will be
able to introduce new products and services
to compete successfully in the future. If we are unable to
expand or appropriately enhance or modify our products and services quickly and
efficiently, our business and operating results will be adversely
affected.
We
may not be able to attract, retain or integrate key personnel, including
executive officers, which may prevent us from successfully operating our
business.
We may
not be able to retain our key personnel or attract other qualified personnel in
the future. Our success will depend upon the continued service of key management
personnel as well as the skills, experience and efforts of our executive
officers. The loss of services of any of the key members of our management team
or our failure to attract and retain other key personnel could disrupt
operations and have a negative effect on employee productivity and morale and
have a material adverse impact upon our financial results. The loss of any of
our executive officers could impair our ability to successfully manage our
current business or implement our planned business objectives and our future
operations may be adversely affected.
Our
business depends on the services of skilled software engineers who can develop,
maintain and enhance our products, consultants who can undertake complex client
projects and sales and marketing personnel. In general, only highly qualified,
highly educated personnel have the training and skills necessary to perform
these tasks successfully. In order to maintain the competitiveness of our
products and services and to meet client requirements, we need to attract,
motivate and retain a significant number of software engineers, consultants and
sales and marketing personnel. Qualified personnel such as these are in short
supply and we face significant competition for these employees, from not only
our competitors but also clients and other enterprises. Other employers may
offer software engineers, consultants and sales and marketing personnel
significantly greater compensation and benefits or more attractive career paths
than we are able to offer. Any failure on our part to hire, train and retain a
sufficient number of qualified personnel would seriously damage our
business.
Consolidation
in the industries we serve may adversely affect our ability to sell our products
and services.
Mergers,
acquisitions and personnel changes at financial institutions, payment processors
and payment technology providers including brick and mortar and e-Commerce
retailers may adversely affect our business, financial condition and results of
operations. The payments industry continues to consolidate and this
consolidation could cause us to lose:
·
|
current
and potential customers; and
|
·
|
market
share if an entity resulting from a combination of our customers
determines that it is more efficient to develop in-house products and
services similar to ours or to use our competitors’ products and
services.
|
Estimates
of future financial results are inherently unreliable.
From time
to time, the Corporation and its representatives may make public predictions or
forecasts regarding the Corporation’s future results, including estimates
regarding future revenues, expense levels, tax rates, acquisition expenses,
capital expenditures, earnings or earnings from operations. Any forecast
regarding our future performance reflects various assumptions and judgments by
management regarding the likelihood that certain possible future events will in
fact occur. These assumptions and judgments are subject to significant
uncertainties and shifting market dynamics, and, as a matter of course, many of
them will prove to be incorrect. Further, events that may seem unlikely or
relatively certain at the time a given prediction is made may in fact occur or
fail to occur. Many of the factors that can influence the outcome of any
prediction or projection are beyond our control. As a result, there can be no
assurance that our performance will be consistent with any management forecasts
or that the variation from such forecasts will not be material and adverse.
Investors are cautioned that any prediction, projection or other forward looking
statement made by us should be considered current only as of the date made.
Investors are encouraged to utilize the entire available mix of historical and
forward-looking information made available by us, and other information relating
to our Corporation and our products and services, when evaluating our
prospective results of operations.
We May Not Be Able to Successfully
Manage Operational Changes.
Over the
last several years, our operations have experienced rapid significant growth in
some areas and significant restructurings and cutbacks in others. These changes
have created significant demands on our executive, operational, development and
financial personnel and other resources. If we achieve future growth in our
business, or if we are forced to make additional restructurings, we may further
strain our management, financial and other resources. Our future operating
results will depend on the ability of our officers and key employees to manage
changing business conditions and to continue to improve our operational and
financial controls and reporting systems. We cannot ensure that we will be able
to successfully manage the future changes in our business.
FORWARD-
LOOKING STATEMENTS AND INFORMATION
All
statements other than statements of historical fact contained in this Prospectus
and Registration Statement are forward-looking
statements. Forward-looking statements generally are accompanied by
words such as “anticipate,” “believe,” “estimate,”
“intend,” “project,” “potential” or “expect” or similar
statements. The forward-looking statements were prepared on the basis
of certain assumptions which relate, among other things, to the demand for and
cost of marketing our services, the volume and total value of transactions
processed by merchants utilizing our services, the technological adaptation of
electronic check conversion end-users, the renewal of material contracts in our
business, our ability to anticipate and respond to technological changes,
particularly with respect to financial payments and e-Commerce, in a highly
competitive industry characterized by rapid technological change and rapid rates
of product obsolescence, our ability to develop and market new product
enhancements and new products and services that respond to technological change
or evolving industry standards, no unanticipated developments relating to
previously disclosed lawsuits against us, and the cost of protecting our
intellectual property. Even if the assumptions on which the
forward-looking statements are based prove accurate and appropriate, the actual
results of our operations in the future may vary widely due to technological
changes, increased competition, new government regulation or intervention in the
industry, general economic conditions and other risks described elsewhere in
this Prospectus and Registration Statement. See “Risk
Factors”. Accordingly, the actual results of our operations in the
future may vary widely from the forward-looking statements included
herein. All forward-looking statements included herein are expressly
qualified in their entirety by the cautionary statements in this
paragraph.
TRANSACTION
WITH MILLENNIUM PARTNERS, L.P.
On March
26, 2008 (the “Closing Date”), we entered into a definitive Securities Purchase
Agreement (the “Securities Purchase Agreement”) with Millennium Partners, L.P.,
an institutional investor organized under the laws of the Cayman Islands (the
“Purchaser”). Under the Securities Purchase Agreement, LML and the
Purchaser completed a private placement transaction on the Closing Date (the
“Transaction”) pursuant to which the Purchaser acquired 4,000,000 common shares,
without par value (the “Common Stock”), of LML for an aggregate purchase price
(the “Purchase Price”) of $7,200,000, or $1.80 per share.
We also
entered into a Registration Rights Agreement dated the Closing Date with the
Purchaser (the “Registration Rights Agreement”). Under the
Registration Rights Agreement, we agreed that by the earlier of (i) the 15th
calendar day following the date we file our form 10-K on Edgar for the fiscal
year ended March 31, 2008, and (ii) one hundred (100) calendar days after the
Closing Date (the “Filing Deadline”), that we would prepare and file with the
Securities and Exchange Commission (the “SEC”) a Registration Statement on Form
S-1 (or, if we were then eligible, on Form S-3) covering the resale of the
Common Stock sold to the Purchaser. Once the Registration Statement
is declared effective by the SEC, we have agreed to cause the Registration
Statement to remain effective for up to six years from the effective date of the
Registration Statement, or less if the shares may be freely sold without being
subject to the volume restrictions of Rule 144.
If we
fail to file the Registration Statement by the Filing Deadline or if the
Registration Statement fails to be declared effective by the SEC within a
certain time period after filing (each, an “Event”), then we have agreed to pay
the Purchaser liquidated damages in cash on each such Event date and on each
monthly anniversary of each such Event date until the applicable Event is cured,
in an amount equal to 1.0% of the Purchase Price of the Purchaser’s Common Stock
then held by the Purchaser. The maximum aggregate liquidated damages
payable to the Purchaser under the Registration Rights Agreement is six percent
(6%) of the aggregate Purchase Price paid by the Purchaser pursuant to the
Securities Purchase Agreement. The Registration Statement also grants
“piggyback” registration rights to the Purchaser.
Ladenburg
Thalmann & Co. Inc. acted as our placement agent and financial advisor in
connection with the Transaction (the “Placement Agent”). In
consideration thereof, we paid the Placement Agent on the Closing Date a
placement fee in the amount $468,000 (6.5% of the aggregate Purchase Price of
the Common Stock sold to the Purchaser) and issued to the Placement Agent
warrants to acquire 400,000 shares of our Common Stock (the
“Warrants”). The Warrants are exercisable by the Placement Agent at
$3.40 per share and are exercisable for a period of five years from the Closing
Date.
We issued
the Common Stock and the Warrants to purchase shares of our common stock in
reliance on an exemption from registration pursuant to Rule 506 and Regulation D
promulgated under the Securities Act of 1933, as amended.
USE
OF PROCEEDS
We are
not selling any shares of common stock in this offering and, therefore, we will
not receive any of the proceeds from the sale of the shares of our common stock
being offered for sale by the selling security holders, although we may receive
proceeds of up to $1,360,000 if all of the warrants are exercised. We
expect to use the proceeds received from the exercise of the warrants, if any,
for general corporate purposes. We will bear all of the expenses
incurred in connection with the registration of these shares. The
selling stockholders will pay any brokerage commissions and/or similar charges
incurred in connection with the sale of the shares.
SELLING
STOCKHOLDERS
The
shares of common stock being offered by the selling stockholders include
4,000,000 shares of
our common stock which were acquired by Millennium Partners, L.P. in a private
placement transaction ("Private Placement") pursuant to a Securities Purchase
Agreement dated as of March 26, 2008 and up to an aggregate of 400,000
additional shares of our common stock issuable upon exercise of warrants that we
issued to Ladenburg Thalmann & Co. Inc. ("Ladenburg") in
connection with the Private Placement. The Warrants are
exercisable at a price of $3.40 per share until March 26, 2013. See
“Transaction with Millennium Partners, L.P.”
None of
the selling stockholders had or have any position, office or other material
relationship with our Company or any of its affiliates within the past three
years, other than as a result of the ownership of the securities, except that
the Company engaged Ladenburg, a registered broker-dealer, to act as placement
agent in connection with the Private Placement.
Millennium
Partners, L.P. has indicated to us that it is an affiliate of Millenco
LLC, which is a registered broker-dealer, and other registered
broker-dealers. Millennium Partners, L.P. has indicated to us that it
purchased shares of common stock being registered hereunder in the ordinary
course of business, and at the time of such purchase had no agreements or
understanding, directly or indirectly, with any person to distribute the shares
of common stock.
The
following table sets forth information known to us with respect to: (i) the
beneficial ownership of our common stock by the selling stockholders; (ii) the
number of shares and percentage of our common stock offered hereby and (iii) the
number of shares and percentage of outstanding common stock to be owned after
completion of this offering. This information is based on the
assumptions that: (i) all warrants (400,000 in total) have been fully exercised,
and (ii) all of the shares to be offered hereby are sold.
The
selling stockholders may, from time to time, sell some, all or none of their
shares of our common stock offered by this Prospectus and we are unable to
determine the exact number of shares that will actually be sold. We
do not know how long the selling stockholders will hold the shares of our common
stock before selling them and we currently have no agreements, arrangements or
understandings with any of the selling stockholders regarding the sale of any of
the shares of our common stock offered hereby. The information in the
table below is current only as of the date of this Prospectus.
|
|
Shares
of common stock beneficially owned before the offering
|
|
|
|
|
Shares
of common stock beneficially owned after the offering
|
|
Selling
Stockholders
|
|
Number
|
|
|
Percentage
|
|
|
Number
of shares being offered
|
|
|
Number
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millennium
Partners, L.P. (1)
|
|
|
4,000,000 |
|
|
|
15.2
% |
|
|
|
4,000,000 |
|
|
|
0 |
|
|
|
* |
|
Ladenburg
Thalmann & Co. Inc. (2)
|
|
|
400,000(3) |
|
|
|
1.5
%(4) |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
* |
|
|
(1)
|
Millennium
Management LLC, a Delaware limited liability company (“Millennium
Management”), is the managing partner of Millennium Partners, L.P., and
consequently, may be deemed to have voting control and investment
discretion over securities owned by Millennium Partners, L.P.
Israel A. Englander (“Mr. Englander”) is the managing member of
Millennium Management. As a result, Mr. Englander may be deemed
to be the beneficial owner of any shares deemed to be beneficially owned
by Millennium Management.
|
|
(2)
|
Ladenburg
Thalmann & Co. Inc. is a wholly-owned subsidiary of Ladenburg Thalmann
Financial Services Inc. ("LTFS"), a publicly-traded company.
Accordingly, LTFS may be deemed to have voting and dispositive power over
the securities held by Ladenburg Thalmann & Co.
Inc.
|
|
(3)
|
Represents
the aggregate number of shares Ladenburg may acquire upon the exercise of
a warrant to purchase 400,000 shares of our common
stock.
|
|
(4)
|
Based
on 26,341,832 shares of common stock issued and outstanding as of June 30,
2008. Shares of common stock subject to options or warrants currently
exercisable, or exercisable within 60 days of June 30, 2008, are deemed
outstanding for purposes of computing the percentage ownership of the
person holding such option or warrants, but are not deemed outstanding for
purposes of computing the percentage ownership of any other
person.
|
PLAN
OF DISTRIBUTION
Each
selling stockholder (the “Selling
Stockholders”) of the common stock and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock on the NASDAQ Capital Market or any other stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may act as principal or through one or
more underwriters, brokers, dealers or resellers and may use any one or more of
the following methods when selling shares:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
settlement
of short sales after the effective date of the Registration Statement of
which this Prospectus is a part;
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
·
|
a
combination of any such methods of sale;
or
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if
available, rather than under this Prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in
compliance with NASD Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASD IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Stockholders may, if permitted, enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common
stock short and deliver these securities to close out their short positions, or
loan or pledge the common stock to broker-dealers that in turn may sell these
securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
Prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this Prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock.
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
The
Selling Stockholders may, if permitted, from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this Prospectus after we have filed an amendment to this
Prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of Selling Stockholders to include the pledgee,
assignee or other successor in interest as a Selling Stockholder under this
Prospectus.
The
Selling Stockholders also may, if permitted, transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this Prospectus and may sell the shares of common stock from time to time under
this Prospectus after we have filed an amendment to this Prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, assignee or other
successor in interest as a selling stockholder under this
Prospectus.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the Prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than under this
Prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale of shares by the Selling
Stockholders.
Under
applicable rules and regulations under the Securities and Exchange Act of 1934
(the “Exchange Act”), any person engaged in the distribution of the resale
shares may not simultaneously engage in market making activities with respect to
the Common Stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. We have advised
each Selling Stockholder that it may not use shares registered under this
Registration Statement to cover short sales of common stock made prior to the
date on which this Registration Statement shall have been declared effective by
the Securities and Exchange Commission. In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of the Common Stock by the Selling
Stockholders or any other person. We will make copies of this
Prospectus available to the Selling Stockholders and have informed them of the
need to deliver a copy of this Prospectus to each purchaser at or prior to the
time of the sale.
DESCRIPTION
OF SECURITIES
As of
June 30, 2008, the total authorized and issued capital stock of LML Payment
Systems Inc. consisted of the following shares:
Type of Shares
|
Number
of Shares Authorized
|
Number
of Shares Issued
|
|
|
|
Class
A Preferred Shares, par value Cdn.$1.00
|
150,000,000
|
-
|
Class
B Preferred Shares, par value Cdn.$1.00
|
150,000,000
|
-
|
Common
shares, no par value
|
100,000,000
|
26,341,832
|
Share
Rights and Restrictions of LML Payment Systems Inc.'s common
shares
Common
Shares
The
holders of Common Shares are entitled:
|
(a)
|
to
vote at all meetings of shareholders of LML Payment Systems Inc. except
meetings at which only holders of a specified class of shares are entitled
to vote;
|
|
(b)
|
to
receive, subject to the rights of the holders of another class of shares,
any dividend declared by LML Payment Systems Inc.;
and
|
|
(c)
|
to
receive, subject to the rights of the holders of another class of shares,
the remaining property of LML Payment Systems Inc. on the
liquidation, dissolution or winding up of LML, whether voluntary or
involuntary.
|
Class
A Preferred Shares Issuable in Series
The Class
A Preferred Shares of the registrant have the rights and are subject to the
restrictions, conditions and limitations as follows:
|
(a)
|
LML
Payment Systems Inc. may issue Class A Preferred Shares in one or more
series;
|
|
(b)
|
the
board of directors of LML Payment Systems Inc. may, by resolution,
authorize Articles of Amendment of the registrant fixing the number of
shares in, and determining the designation of the shares of, each series
of Class A Preferred Shares; and
|
|
(c)
|
the
board of directors of LML Payment Systems Inc. may, by resolution,
authorize Articles of Amendment of the registrant creating, defining and
attaching special rights and restrictions to the shares of each
series.
|
Class
B Preferred Shares Issuable in Series
The Class
B Preferred Shares of LML Payment Systems Inc. shall have the rights and shall
be subject to the restrictions, conditions and limitations as
follows:
|
(a)
|
LML
Payment Systems Inc. may issue Class B Preferred Shares in one or
more series;
|
|
(b)
|
the
board of directors of LML Payment Systems Inc. may by resolution
authorize Articles of Amendment of LML Payment Systems Inc. fixing the
number of shares in, and determining the designation of the shares of,
each series of Class B Preferred Shares;
and
|
|
(c)
|
the
board of directors of LML Payment Systems Inc. may by resolution
authorize Articles of Amendment of LML Payment Systems Inc. creating,
defining and attaching special rights and restrictions to the shares of
each series.
|
Dividend
Policy
The Corporation
has not paid any dividends on the Common Shares in the past and has no current
plan to pay dividends on Common Shares in the
future. The Corporation intends to devote all funds to the
operation of its businesses.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this Prospectus as having prepared or certified any part of
this Prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis or had, or
is to receive, in connection with the offering, a substantial interest, directly
or indirectly, in the registrant or any of its parents or subsidiaries. Nor was
any such person connected with the registrant or any of its parents,
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer or employee.
EXPERTS
The
financial statements of our Corporation for the fiscal years ended 2008, 2007
and 2006 have been audited by Grant Thornton LLP, Chartered Accountants and are
incorporated by reference into the Registration Statement and
Prospectus. To the extent and for the period set forth in their
report, these financial statements are included in reliance upon such report
given upon the authority of said firm as experts in auditing and
accounting.
Clark
Wilson LLP, of 800-885 W Georgia Street, Vancouver, British Columbia, Canada,
our independent legal counsel, has provided an opinion on the validity of the
shares of our Common Stock that are the subject of this Prospectus.
WHERE
YOU CAN FIND MORE INFORMATION
We file
reports, proxy statements and other documents with the Securities and Exchange
Commission. You may read and copy any document we file with the SEC
at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room.
The SEC
also maintains a website, the address of which is www.sec.gov. That
site also contains our annual, quarterly and current reports, proxy statements,
information statements and other information.
We have
filed this Prospectus with the SEC as part of a Registration Statement on Form
S-1 under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement because some parts of
the Registration Statement are omitted in accordance with the rules and
regulations of the SEC. You can obtain a copy of the Registration
Statement from the SEC at the address listed above or from the SEC’s
website.
We also
maintain a website at www. lmlpayment.com, through which you can access our SEC
filings. The information set forth on our website is not part of this
Prospectus.
INCORPORATION
BY REFERENCE OF IMPORTANT INFORMATION REGARDING LML
The U.S.
Securities and Exchange Commission, or the SEC, allows us to “incorporate by
reference” the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is an important part of this Prospectus,
and later information that we file with the SEC will automatically update and
supersede some of this information. We incorporate by reference the
documents listed below, and any future filings we make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the effectiveness
of the Registration Statement. The following documents filed with the
SEC are hereby incorporated by reference in this Prospectus:
·
|
Our
Annual Report on Form 10-K for the year ended March 31, 2008, filed
with the SEC on June 19, 2008, (File
No. 0-13959).
|
·
|
Our
Current Report on Form 8-K filed with the SEC on April 1,
2008;
|
·
|
Our
Current Report on Form 8-K filed with the SEC on April 2,
2008;
|
·
|
Our
Current Report on Form 8-K filed with the SEC on April 14,
2008;
|
·
|
Our
Current Report on Form 8-K filed with the SEC on June 17,
2008;
|
·
|
Our
Current Report on Form 8-K filed with the SEC on June 20, 2008;
and
|
·
|
Our
Definitive Proxy Statement pursuant to Section 14(a) of the Exchange
Act, filed with the SEC on June 30, 2008 (File
No. 0-13959).
|
We hereby
undertake to provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon written or oral
request of any such person, a copy of any and all of the reports or documents
that have been incorporated by reference in this Prospectus, other than exhibits
to such documents unless such exhibits have been specifically incorporated by
reference thereto. Requests for such copies should be directed to Carolyn
Gaines, Corporate Secretary, at the following address:
Attn: Carolyn
Gaines, Corporate Secretary
Any
statement contained in a document that is incorporated by reference will be
modified or superseded for all purposes to the extent that a statement contained
in this Prospectus (or in any other document that is subsequently filed with the
SEC and incorporated by reference) modifies or is contrary to that previous
statement. Any statement so modified or superseded will not be deemed
a part of this Prospectus except as so modified or
superseded.
There
have been no material changes in our affairs since our fiscal year ended March
31, 2008, except as disclosed in our filings with the SEC that we have
incorporated herein by reference.
DISCLOSURE
OF SECURITIES AND EXCHANGE COMMISSION POSITION OF
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
By-laws provide we shall indemnify any director, officer, employee or agent of
our company, or any person serving in any such capacity of any other entity or
enterprise at our request, against any and all legal expenses, including
attorney’s fees, claims and or liabilities arising out of any action, suit or
proceeding, except an action by or in the right of our company. We may, but are
not required, to indemnify any person where such person acted in good faith and
in a manner reasonably believed to be or not opposed to the best interests of
our Corporation and, with respect to any criminal action or proceeding, where
there was not reasonable cause to believe the conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order or settlement
or conviction, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of our Corporation, and that, with respect to any
criminal action or proceeding, there was reasonable cause to believe that the
conduct was unlawful.
Indemnification
will be made by us only when authorized in the specific case and upon a
determination that indemnification is proper by (i) the stockholders, (ii) a
majority vote of a quorum of the board of directors, consisting of directors who
were not parties to the action, suit or proceeding, or (iii) independent legal
counsel in a written legal opinion, if a quorum of disinterested directors so
orders or if a quorum of disinterested directors cannot be
obtained.
Expenses
incurred in defending any action, suit or proceeding may be paid by our company
in advance of the final disposition, when authorized by our board of directors,
upon receipt of any undertaking by or on behalf of the person defending to repay
such advances if indemnification is not ultimately available under the
indemnification provisions of our By-laws.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of our Corporation
under Yukon law or otherwise, our Corporation has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and
is, therefore, unenforceable.
LML
PAYMENT SYSTEMS INC.
4,400,000
Shares of Common Stock
PROSPECTUS
_______________________,
2008
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the costs and expenses payable by us in connection
with the issuance and distribution of the securities being registered hereunder.
No expenses shall be borne by the Selling Stockholders. All of the amounts shown
are estimates.
SEC
registration fees
|
|
$ |
475 |
|
Printing
and engraving expenses
|
|
|
100 |
|
Accounting
fees and expenses
|
|
|
5,000 |
|
Legal
fees and expenses
|
|
|
10,000 |
|
Transfer
agent and registrar fees
|
|
|
1,000 |
|
Miscellaneous
|
|
|
500 |
|
Total
|
|
$ |
17,075 |
|
ITEM
14. INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
The only
statutes, charter provisions, bylaws, contracts or other arrangements under
which a director or officer of the Corporation is insured or indemnified in any
manner against liability which such officer or director may incur in such
capacity is Section 126 of the Yukon Business Corporations Act (the “Act”) and
Section 7.03 through 7.04 of the Corporation’s Bylaws. Taken
together, the statutory and bylaw provisions generally allow the Corporation to
indemnify its directors or officers against liability and expenses provided the
officer or director seeking indemnity (1) was substantially successful on the
merits in the defense of the action or proceeding, (2) (a) acted honestly and in
good faith with a view to the best interest of the Corporation and (b) in the
case of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, the officer or director had reasonable grounds for believing
the conduct was lawful, and (3) is fairly and reasonably entitled to
indemnity.
Section
126 of the Yukon Corporation Act is set forth in its entirety as
follows:
|
126.
|
(1)
|
Except
in respect of an action by or on behalf of the corporation or body
corporate to procure a judgment in its favour, a corporation may indemnify
a director or officer of the corporation, a former director or officer of
the corporation or a person who acts or acted at the corporation’s request
as a director or officer of a body corporate of which the corporation is
or was a shareholder or creditor, and his heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to
settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to
which he is made a party by reason of being or having been a director or
officer of that corporation or body corporate,
if
|
|
(a)
|
he
acted honestly and in good faith with a view to the best interests of the
corporation, and
|
|
(b)
|
in
the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, he had reasonable grounds for believing
that his conduct was lawful.
|
|
(2)
|
a
corporation may with the approval of the Supreme Court indemnify a person
referred to in subsection (1) in respect of an action by or on behalf of
the corporation or body corporate to procure a judgment in its favour, to
which he is made a party by reason of being or having been a director or
an officer of the corporation or body corporate, against all costs,
charges and expenses reasonably incurred by him in connection with the
action if he fulfills the conditions set out in paragraphs (1)(a) and
(b).
|
|
(3)
|
Notwithstanding
anything in this section, a person referred to in subsection (1) is
entitled to indemnity from the corporation in respect of all costs,
charges and expenses reasonably incurred by him in connection with the
defense of any civil, criminal or administrative action or proceeding to
which he is made a party by reason of being or having been a director or
officer of the corporation or body corporate, if the person seeking
indemnity
|
|
(a)
|
was
substantially successful on the merits in his defense of the action or
proceeding,
|
|
(b)
|
fulfills
the conditions set out in paragraphs (1)(a) and (b),
and
|
|
(c)
|
is
fairly and reasonably entitled to
indemnity.
|
|
(4)
|
A
corporation may purchase and maintain insurance for the benefit of any
person referred to in subsection (1) against any liability incurred by
him
|
|
(a)
|
in
his capacity as a director or officer of the corporation, except when the
liability relates to his failure to act honestly and in good faith with a
view to the best interests of the corporation,
or
|
|
(b)
|
in
his capacity as a director or officer of another body corporate if he acts
or acted in that capacity at the corporation’s request, except when the
liability relates to his failure to act honestly and in good faith with a
view to the best interests of the body
corporate.
|
|
(5)
|
A
corporation or a person referred to in subsection (1) may apply to the
Supreme Court for an order approving an indemnity under this section and
the Supreme Court may so order and make any further order it thinks
fit.
|
|
(6)
|
On
an application under subsection (5), the Supreme Court may order notice to
be given to any interested person and that person is entitled to appear
and be heard in person or by
counsel.
|
Sections
7.02 through 7.04 of the Corporation’s By-laws are set forth in their entirety
as follows:
|
7.02
|
Limitation of
Liability
|
Subject
to the Act, no director or officer for the time being of the Corporation shall
be liable for the acts, receipts, neglects or defaults of any other director or
officer or employee, or for the joining in any receipt or act for conformity, or
for any loss or damage or expense happening to the Corporation through the
insufficiency or deficiency of title to any property acquired by the Corporation
or for or on behalf of the Corporation or for the insufficiency or deficiency of
any security in or upon which any of the money of or belonging to the
Corporation shall be placed or invested, or for any loss or damage arising from
the bankruptcy, insolvency or tortuous act of any person, firm or corporation
including any person, firm or corporation with whom or with which any moneys,
securities or effects shall be lodged or deposited, or for any loss, conversion,
misapplication or misappropriation of or any damage resulting from any dealing
with any moneys, securities or other assets of or belonging to the Corporation
or for any other loss, damage or misfortune whatsoever which may happen in the
execution of the duties of his respective office or trust or in relation thereto
unless the same shall happen by or through his failure to exercise the powers
and to discharge the duties of his office honestly and in good faith with a view
to the best interests of the Corporation and to exercise the care, diligence and
skill that a reasonably prudent person would exercise in comparable
circumstances.
Subject
to the Act, the Corporation shall indemnify a director or officer, a former
director or officer, and a person who acts or acted at the Corporation’s request
as a director or officer of a body corporate of which the Corporation is or was
a shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including any amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Corporation or such body
corporate, if:
|
(a)
|
he
acted honestly and in good faith with a view to the best interests of the
Corporation; and
|
|
(b)
|
in
the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, he had reasonable grounds for believing
his conduct was lawful.
|
The
Corporation may, subject to and in accordance with the Act, purchase and
maintain insurance for the benefit of any director or officer as such against
any liability incurred by him.
ITEM
15. RECENT
SALES OF UNREGISTERED SECURITIES.
On March
26, 2008 (the “Closing Date”), the Corporation entered into a definitive
Securities Purchase Agreement (the “Securities Purchase Agreement”) with
Millennium Partners, L.P., an institutional investor organized under the laws of
the Cayman Islands (the “Purchaser”). Under the Securities Purchase
Agreement, the Corporation and the Purchaser completed a private placement
transaction on the Closing Date (the “Transaction”) pursuant to which the
Purchaser acquired 4,000,000 common shares, without par value (the “Common
Stock”), of LML for an aggregate purchase price (the “Purchase Price”) of
$7,200,000, or $1.80 per share. Ladenburg Thalmann & Co. Inc.
acted as the Corporation’s placement agent and financial advisor in connection
with the Transaction (the “Placement Agent”). In consideration
thereof, the Corporation paid the Placement Agent on the Closing Date a
placement fee in the amount $468,000 (6.5% of the aggregate Purchase Price of
the Common Stock sold to the Purchaser) and issued to the Placement Agent
warrants to acquire 400,000 shares of the Corporation’s Common Stock (the
“Warrants”). The Warrants are exercisable by the Placement Agent at
$3.40 per share and are exercisable for a period of five years from the Closing
Date. The Corporation issued the Common Stock and the Warrants to
purchase shares of the Corporation’s Common Stock in reliance on an exemption
from registration pursuant to Rule 506 and Regulation D promulgated under the
Securities Act of 1933, as amended (the “Securities Act”).
On June
30, 2007, the Corporation closed the acquisition of all of the outstanding
capital stock of Beanstream Internet Commerce Inc.
(“Beanstream”). The acquisition of the outstanding stock of
Beanstream was made pursuant to an Arrangement Agreement dated as of April 30,
2007 between the Corporation and Beanstream (the “Arrangement
Agreement”). The purchase price paid by the Corporation at closing to
the holders of Beanstream’s common stock (the “Shareholders”) for the
outstanding capital stock of Beanstream was $CDN19.5 million, which consisted of
(i) $CDN7.6 million in cash paid by the Corporation, (ii) $CDN5.0 million in a
two-year promissory note issued by the Corporation, and (iii) $CDN6.9 million
(or $US6.1 million based on then-current applicable currency exchange rates)
paid by the Corporation through the issuance of 1,963,555 shares of its Common
Stock. The per share price of the Corporation’s Common Stock issued
at closing (for purposes of determining how many shares of Common Stock were to
be issued) was $US3.123 ($CDN3.503) per share, which (as required by the
Arrangement Agreement) was equal to the volume weighted average of the closing
price for the purchase of one share of Common Stock as reported on the NASDAQ
Stock Exchange during the ten trading days immediately before the execution date
of the Arrangement Agreement (which was April 30, 2007). Such shares
of Common Stock were offered and sold by the Corporation in reliance on an
exemption from registration available under Section 3(a)(10) and/or Section 4(2)
of the Securities Act.
In
connection with the closing of the Beanstream transaction, the Corporation also
issued 144,933 shares of its Common Stock as a finder’s fee to a British
Columbia company retained by the Corporation to assist with identifying
potential acquisitions. The shares were offered and sold by the
Corporation in reliance on an exemption from registration available under
Section 4(2) of the Securities Act.
ITEM
16. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
Exhibit
Number
|
|
Description
of Document
|
|
|
|
2.1
|
|
Arrangement
Agreement dated as of April 30, 2007, between LML Payment Systems Inc. and
Beanstream Internet Commerce Inc. and the schedules thereto (incorporated
by reference to Exhibit 2.1 to the Form 8-K dated April 30, 2007 of LML
(file No. 0-13959)).
|
|
|
|
2.2
|
|
Amending
Agreement between LML Payment Systems Inc. and Beanstream Internet
Commerce Inc. dated as of May 24, 2007 (incorporated by reference to
Exhibit 99.2 to the Form 8-K dated June 4, 2007 of LML (file No.
0-13959)).
|
|
|
|
3.1
|
|
Restated
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the
Annual Report on Form 10-K for the period ended March 31, 2006 of LML
(File No. 0-13959)).
|
|
|
|
3.2
|
|
Bylaws
of LML, as amended (incorporated by reference to Exhibit 3.2 to the
Quarterly Report on Form 10-Q for the period ended September 30, 2007 of
LML (File No. 0-13959)).
|
|
|
|
5.1*
|
|
Legal
Opinion of Clark Wilson LLP.
|
|
|
|
10.1
|
|
Securities
Purchase Agreement dated as of March 26, 2008, between LML Payment Systems
Inc. and Millennium Partners, L.P. (incorporated by reference to Exhibit
10.1 to the Form 8-K dated March 26, 2008 of LML (file
0-13959)).
|
|
|
|
10.2
|
|
Registration
Rights Agreement dated as of March 26, 2008, between LML Payment Systems
Inc. and Millennium Partners, L.P. (incorporated by reference to Exhibit
10.2 to the Form 8-K dated March 26, 2008 of LML (file
0-13959)).
|
|
|
|
10.3
|
|
Warrant
dated as of March 26, 2008, between LML Payment Systems Inc. and Ladenburg
Thalmann & Co. Inc. (incorporated by reference to Exhibit 10.3 to the
Form 8-K dated March 26, 2008 of LML (file 0-13959)).
|
|
|
|
10.4
|
|
Employment
agreement between LML Payment Systems Inc. and Patrick H. Gaines dated
March 31, 2008 (incorporated by reference to Exhibit 10.1 to the Form 8-K
dated March 31, 2008 of LML (file 0-13959)).
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|
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10.5
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Employment
agreement between LML Payment Systems Inc. and Richard R. Schulz dated
March 31, 2008 (incorporated by reference to Exhibit 10.2 to the Form 8-K
dated March 31, 2008 of LML (file 0-13959)).
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|
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10.6
|
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Employment
agreement between LML Payment Systems Inc. and Carolyn
L. Gaines dated March 31, 2008 (incorporated by reference to
Exhibit 10.1 to the Form 8-K dated March 31, 2008 of LML (file
0-13959)).
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21*
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Subsidiaries
of LML.
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|
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23.1*
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Consent
of Grant Thornton LLP.
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23.2*
|
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Consent
of Clark Wilson LLP (included in Exhibit 5.1 hereto).
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|
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24.1*
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Power
of Attorney (included on signature page to this Registration
Statement).
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(b)
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Financial
Statement Schedules. Schedules not listed above have been
omitted because the information to be set forth therein is not material,
not applicable or is shown in the financial statements or notes that are
incorporated herein by reference.
|
_______
* filed
herewith
ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
(1)
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration
Statement:
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(i)
|
to
include any Prospectus required by Section 10(a)(3) of the Securities Act
of 1933 ; and,
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(ii)
|
to
reflect in the Prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of a Prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the change in volume and price
represents no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in
the effective Registration
Statement.
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(iii)
|
to
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration
Statement.
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
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(3)
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
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(4)
|
That,
for the purpose of determining liability under the Securities Act of 1933
to any purchaser, each Prospectus filed pursuant to Rule 424(b) as part of
a Registration Statement relating to an offering, other than Registration
Statements relying on 430B or other than Prospectuses filed in reliance on
Rule 430A shall be deemed to be part of and included in the Registration
Statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a Registration Statement or Prospectus
that is part of the Registration Statement or made in a document
incorporated or deemed incorporated by reference into the Registration
Statement or Prospectus that is part of the Registration Statement will,
as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the Registration
Statement or Prospectus that was part of the Registration Statement or
made in any such document immediately prior to such date of first
use.
|
|
Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer, or
controlling person connected with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Vancouver, British
Columbia, on this first day of July, 2008.
|
LML
PAYMENT SYSTEMS INC.
|
|
|
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/s/
Patrick H. Gaines
|
|
Patrick
H. Gaines
|
|
President
and Chief Executive Officer
|
POWER
OF ATTORNEY
KNOW TO
ALL PERSONS BY THESE PRESENTS, that each such person whose signature appears
below constitutes and appoints, jointly and severally, Patrick H. Gaines his
true and lawful attorney-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this Registration Statement on
Form S-1 (including post-effective amendments), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or here substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Patrick H.
Gaines
|
|
Chairman
of the Board, Chief Executive Officer, President and
Director
|
|
July
1, 2008
|
Patrick
H. Gaines
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/ Richard R.
Schulz
|
|
Controller
and Chief Accounting Officer
|
|
July
1, 2008
|
Richard
R. Schulz
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ L. William
Seidman
|
|
Director
|
|
July
1, 2008
|
L.
William Seidman
|
|
|
|
|
|
|
|
|
|
/s/ Jacqueline
Pace
|
|
Director
|
|
July
1, 2008
|
Jacqueline
Pace
|
|
|
|
|
|
|
|
|
|
/s/ Greg A.
MacRae
|
|
Director
|
|
July
1, 2008
|
Greg
A. MacRae
|
|
|
|
|