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Payment Data Systems, Inc. (OTCBB: PYDS), an integrated electronic payments solutions provider, today announced financial results for the quarter ended March 31, 2012.

Revenues increased 65% to $1,295,870 for the first quarter of 2012 up from $785,262 for the first quarter of 2011 due to higher transaction growth. The operating income for the quarter ended March 31, 2012 was $58,981 compared to operating loss of $144,017 for the first quarter of 2011. Net income for the quarter ended March 31, 2012 was $69,072 up from a net loss of $144,017 for the first quarter of 2011.

Gross profit increased 200% to $523,098 from $174,301 from the first quarter of 2011.

During the quarter, we were able to retire 100% of our debt with cash flow from operations and are now debt free.

Commenting on the results for the quarter, Michael R. Long, Chairman and Chief Executive Officer of Payment Data Systems, said, “The continuing growth we experienced this quarter has caused us to remain very enthusiastic about our future.”

Mr. Long continued, “All financial metrics and operational metrics remained at positive levels. As you recall, we accomplished tremendous growth in previous year with record growth in revenues, income from operations, and two consecutive quarters of profitability. That profitability continues for the third consecutive quarter as we complete the first fiscal quarter of 2012. We are continuing with a strong outlook for the remainder of 2012. We are forecasting revenues of 7.5MM to 8MM and net income of 1.75M to 2MM for the year.”

PAYMENT DATA SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)     Three Months Ended March 31,

2012

2011

  Revenues $ 1,295,870 $ 785,262   Operating expenses: Cost of services 880,477 610,960 Selling, general and administrative: Stock-based compensation 87,192 133,650 Other expenses 268,789 183,396 Depreciation   431   1,273   Total operating expenses   1,236,889   929,279     Operating income (loss) 58,981 (144,017 )   Other income, net   10,091   -     Income (loss) before income taxes 69,072 (144,017 ) Income taxes   -   -     Net income (loss) $ 69,072 $ (144,017 )     Earnings (loss) per share Basic and diluted earnings (loss) per common share: $ 0.00 $ (0.00 ) Weighted average common shares outstanding Basic 137,725,833 136,284,330 Diluted 137,725,833 136,284,330  

About Payment Data Systems, Inc.

Payment Data Systems is an integrated payment solutions provider to merchants and billers. The organization provides an extensive set of products to deliver world-class payment acceptance. Payment Data has solutions for merchants, billers, banks, service bureaus and card issuers. The strength of the company is its ability to offer specifically tailored solutions for card issuance, payment acceptance and bill payments.

For additional information, visit www.paymentdata.com. Contact Michael Long for Investor Relations information at 210.249.4040 or email at ir@paymentdata.com.

Website: www.paymentdata.com, www.ficentive.com, www.zbill.com

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FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by safe harbors. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, the factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect, our businesses and financial results and could cause actual results to differ materially from plans and projections. We believe that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.