UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 30, 2015
DOCUMENT SECURITY SYSTEMS, INC.
(Exact name of registrant as specified
in its charter)
| New York |
|
001-32146 |
|
16-1229730 |
| (State or other jurisdiction of incorporation) |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
|
First Federal Plaza, Suite 1525
28 East Main Street
Rochester, NY |
|
14614 |
| (Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: (585) 325-3610
Not Applicable
(Former name or former address, if changed
since last report.)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2. below):
| ¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On March 30, 2015,
Document Security Systems, Inc. (“Company”) issued a press release disclosing the Company’s audited financial
results for the full year ended December 31, 2014. A copy of the Company’s press release is attached as Exhibit 99.1 to this
Current Report on Form 8-K.
The information in
this Item 2.02 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange
Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference
in such a filing.
Item 9.01 Financial Statements and Exhibits
| Exhibit No. |
|
Description |
| |
|
|
| 99.1 |
|
Document Security Systems, Inc. Press Release dated March 30, 2015. |
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
| |
|
|
|
|
| |
|
DOCUMENT SECURITY SYSTEMS, INC. |
| |
|
|
| Dated: March 30, 2015 |
|
By: |
|
/s/ Jeffrey Ronaldi |
| |
|
|
|
Jeffrey Ronaldi |
| |
|
|
|
Chief Executive Officer |
Exhibit 99.1
Document Security Systems, Inc. Announces
2014 Fourth Quarter and Full-Year Financial Results
ROCHESTER, N.Y., March 30, 2015 /PRNewswire/ — Document
Security Systems, Inc. (NYSE MKT: DSS), (DSS), a leader in anti-counterfeiting and authentication solutions, reported
results for the fourth quarter and for the full-year of 2014.
"In 2014, DSS made significant progress towards some of
its key goals, including growth and increased profitability in its Printed Products groups, continued development of AuthentiGuard,
its brand protection product line, and an evaluation of its operations that should position the company for continued profitability
improvement. At the same time, the company faced significant headwinds in its technology management business due to changes
in US patent law that resulted in adverse rulings and ultimately significant impairments to our assets." said Jeff Ronaldi,
CEO of Document Security Systems. "In Q4, we recorded significant impairments following an adverse ruling in our Bascom Research
case against Facebook and LinkedIn, which was delivered on January 5, 2015. Investing in intellectual property presents the
opportunity for significant returns but comes with significant risks. We continue to believe that our remaining IP assets
are strong and should be less impacted by the recent patent trends, which focus principally on software patents. Furthermore,
our investment model of sharing risks with co-investors and our legal teams has helped us to weather this storm without significant
cash losses while still retaining significant upside potential in our investments. However, we recognize that the current
climate in the IP investment space is significantly different that it was in 2013 and first half of 2014 and that we will need
to continually adjust our approach to our IP investments."
Mr. Ronaldi continued: "Our brand protection business continued
to strengthen in 2014, and was anchored by the strength of our printed products groups which generated positive adjusted EBITDA
of $1.8 million, a 15% increase over 2013. Also, our Digital group invested heavily in the development of our AuthentiGuard
product line. On the operations front, during the first quarter of 2014 the company completed a combination of its security
printing and packaging operations into one facility, resulting in ongoing savings, and during the fourth quarter the Company instituted
a broad cost reduction program that aims to eliminate up to $1.0 million in expenses during 2015 through a reduction to executive
salaries, reduced head count, and the discontinuation of any non-essential corporate expenses. Unfortunately,
these achievements were overshadowed by the volatility of our IP business and the resulting impact on our stock price.
However, we continue to believe that our IP business offers a risk/return profile that complements our traditional operating divisions,
with the ultimate goal to deliver a valuable return to our shareholders over the long-term."
Q4 2014 Financial Highlights
Revenue for the fourth quarter of 2014 decreased 7% to $4.8 million from $5.2 million in the same year-ago quarter. During
the quarter, printed products revenue decreased 5% while technology sales, services and licensing decreased 21%.
Costs and expenses totaled $32.4 million, an increase of 319%
from $7.7 million in the same year-ago period. The increase was primarily due to the non-recurring and non-cash $25.3 million of
net impairment charges for the write-down of certain of the Company's IP assets and goodwill. Absent the impairment charges,
costs and expenses for the fourth quarter of 2014 totaled $7.2 million, which was an 8% decrease from the same year-ago period. The
decrease was primarily driven by reductions in compensation costs and professional fees.
Net loss to common shareholders totaled $27.7 million
or $(0.66) per basic and diluted share, as compared to net loss to common shareholders of $800,000 or ($0.02) per basic and
diluted share in the fourth quarter of 2014. The increased net loss was primarily due to the $25.3 million net impairment charge
recognized in the fourth quarter of 2014 along with the impact of a $1.8 million deferred tax benefit recognized in the fourth
quarter of 2013.
Adjusted EBITDA loss, a non-GAAP metric defined as earnings
before interest, taxes, depreciation, amortization, and stock-based compensation, and asset impairments as well as other non-recurring
items, totaled $737,000 compared to an adjusted EBITDA loss of $846,000 in the same year-ago period (see further discussion about
the use of adjusted EBITDA, below). The improvement reflected the benefit of cost control initiatives made by the Company that
reduced compensation costs and professional fees.
Full Year 2014 Financial Highlights
Revenue in 2014 increased 5% to $18.3 million from $17.5 million
in 2013. During the year, printed products revenue increased 7% while technology sales, services and licensing decreased
11%.
Costs and expenses totaled $64.7 million, an increase of 153%
from $25.6 million in 2013. The increase was primarily due to a non-recurring and non-cash impairment charges in the aggregate
of $37 million recognized by the Company during 2014. Absent the impairment charges, costs and expenses 2014 totaled
$27.7 million, compared to $25.1 million in 2013, an 11% increase.
Net loss to common shareholders totaled $41.2 million or
$(0.98) per basic and diluted share, as compared to net income to common shareholders of $2.6 million or $0.08 per basic and
diluted share in the fourth quarter of 2014. The variance was primarily due to the $32.4 million of net impairment charges recognized
in 2014 along with the impact of deferred tax benefits of 10.9 million recognized in 2013.
Adjusted EBITDA loss, a non-GAAP metric defined as earnings
before interest, taxes, depreciation, amortization, and stock-based compensation, and asset impairments as well as other non-recurring
items, totaled $2.8 million in 2014 compared to an adjusted EBITDA loss of $2.0 million in 2013. (see further discussion about
the use of adjusted EBITDA, below).
Balance Sheet
In December of 2014, the Company received approximately $1.3 million in net proceeds from the sale of equity and completed the
year with approximately $2.3 million of unrestricted cash. As of December 31, 2014, the Company had net working capital
position of approximately $2.3 million. Total assets of $27.8 million reflect the decrease in assets as a result of
the aggregate write-downs of approximately $37 million of assets made by the Company during the year.
Changes to our Investor Relations Function
As part of the effort to reduce corporate expenses, the Company
has brought its investor relations function in-house and has discontinued quarterly conference calls for the foreseeable future.
Going forward the company will issue press releases reporting quarterly and annual earnings but will not hold investor conference
calls.
Investors can contact DSS investor relations directly at corporate
headquarters in Rochester on 1 (866) 981-7675. Investors can also email investor relations at ir@dsssecure.com.
About Document Security Systems
Document Security Systems, Inc.'s (NYSE MKT: DSS) products and solutions are used by governments, corporations and financial institutions
to defeat fraud and to protect brands and digital information from the expanding world-wide counterfeiting problem. DSS technologies
help ensure the authenticity of both digital and physical financial instruments, identification documents, sensitive publications,
brand packaging and websites.
DSS continually invests in research and development to meet
the ever-changing security needs of its clients and offers licensing of its patented technologies through its subsidiary, DSS Technology
Management, Inc.
For more information on the AuthentiGuard Suite, please visit
www.authentiguard.com. For more information on DSS and its subsidiaries, please visit www.DSSsecure.com. To follow
DSS on Facebook, click here.
For More Information
Investor Relations
Document Security Systems
(585) 325-3610
Email: ir@documentsecurity.com
Forward-Looking Statements
Forward-looking statements that may be contained in this press release, including, without limitation, statements related to the
Company's plans, strategies, objectives, expectations, potential value, intentions and adequacy of resources, are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act and contain words such as "believes," "anticipates,"
"expects," "plans," "intends" and similar words and phrases. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking
statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and
uncertainties that could result in those differences include, but are not limited to, those disclosed in the "Risk Factors"
section of the Company's Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange
Commission. Forward-looking statements that may be contained in this press release are being made as of the date of its release,
and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could
differ from those projected in the forward-looking statements.
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
| | |
Three
Months
Ended December
31, 2014 | | |
Three
Months
Ended December
31, 2013 | | |
%
change | | |
Year
Ended
December 31,
2014 | | |
Year
Ended
December 31,
2013 | | |
%
change | |
| Revenue | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Printed products | |
$ | 4,418,000 | | |
$ | 4,653,000 | | |
| -5 | % | |
$ | 16,478,000 | | |
$ | 15,426,000 | | |
| 7 | % |
| Technology sales, services
and licensing | |
| 394,000 | | |
| 501,000 | | |
| -21 | % | |
| 1,809,000 | | |
$ | 2,027,000 | | |
| -11 | % |
| Total revenue | |
$ | 4,812,000 | | |
$ | 5,154,000 | | |
| -7 | % | |
$ | 18,287,000 | | |
$ | 17,453,000 | | |
| 5 | % |
| Costs and expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cost of revenue, exclusive of depreciation and
amortization | |
$ | 3,184,000 | | |
$ | 3,193,000 | | |
| 0 | % | |
$ | 11,690,000 | | |
$ | 10,458,000 | | |
| 12 | % |
| Sales, general and administrative compensation | |
| 1,064,000 | | |
| 1,371,000 | | |
| -22 | % | |
| 4,677,000 | | |
| 4,931,000 | | |
| -5 | % |
| Depreciation and amortization | |
| 1,351,000 | | |
| 1,305,000 | | |
| 4 | % | |
| 5,274,000 | | |
| 2,966,000 | | |
| 78 | % |
| Professional fees | |
| 343,000 | | |
| 935,000 | | |
| -63 | % | |
| 1,773,000 | | |
| 2,549,000 | | |
| -30 | % |
| Stock based compensation | |
| 250,000 | | |
| 315,000 | | |
| -21 | % | |
| 1,355,000 | | |
| 1,895,000 | | |
| -28 | % |
| Sales and marketing | |
| 106,000 | | |
| 113,000 | | |
| -6 | % | |
| 531,000 | | |
| 443,000 | | |
| 20 | % |
| Rent and utilities | |
| 242,000 | | |
| 201,000 | | |
| 20 | % | |
| 809,000 | | |
| 688,000 | | |
| 18 | % |
| Other operating expenses | |
| 492,000 | | |
| 226,000 | | |
| 118 | % | |
| 1,158,000 | | |
| 906,000 | | |
| 28 | % |
| Research and development | |
| 118,000 | | |
| 78,000 | | |
| 51 | % | |
| 462,000 | | |
| 254,000 | | |
| 82 | % |
| Impairment of goodwill | |
| 3,000,000 | | |
| - | | |
| 100 | % | |
| 3,000,000 | | |
| 239,000 | | |
| 1155 | % |
| Impairment of intangible
assets and investments | |
| 22,285,000 | | |
| - | | |
| 100 | % | |
| 34,035,000 | | |
| 278,000 | | |
| 12143 | % |
| Total costs and expenses | |
$ | 32,435,000 | | |
$ | 7,737,000 | | |
| 319 | % | |
$ | 64,764,000 | | |
$ | 25,607,000 | | |
| 153 | % |
| exclusive of impairments | |
$ | 7,150,000 | | |
$ | 7,737,000 | | |
| -8 | % | |
$ | 21,100,000 | | |
$ | 20,229,000 | | |
| 4 | % |
| Operating loss | |
| (27,623,000 | ) | |
| (2,583,000 | ) | |
| 969 | % | |
| (46,477,000 | ) | |
| (8,154,000 | ) | |
| 470 | % |
| Other expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
$ | (65,000 | ) | |
$ | (87,000 | ) | |
| -25 | % | |
$ | (317,000 | ) | |
$ | (246,000 | ) | |
| 29 | % |
| Gain on sale of fixed assets | |
| - | | |
| 117,000 | | |
| -100 | % | |
| - | | |
| 117,000 | | |
| -100 | % |
| Amortization of note discount and loss on debt
extinguishment | |
| - | | |
| - | | |
| 0 | % | |
| (52,000 | ) | |
| (72,000 | ) | |
| -28 | % |
| Foreign currency translation
gain | |
| - | | |
| - | | |
| 0 | % | |
| - | | |
| - | | |
| 100 | % |
| Other expense, net | |
$ | (65,000 | ) | |
$ | 30,000 | | |
| -317 | % | |
$ | (369,000 | ) | |
$ | (201,000 | ) | |
| 84 | % |
| Loss before income taxes | |
| (27,688,000 | ) | |
| (2,553,000 | ) | |
| 985 | % | |
| (46,846,000 | ) | |
| (8,355,000 | ) | |
| 461 | % |
| Deferred tax provision (benefit) | |
| 1,000 | | |
| (1,753,000 | ) | |
| -100 | % | |
$ | (989,000 | ) | |
$ | (10,949,000 | ) | |
| -91 | % |
| Net (loss) income | |
| (27,689,000 | ) | |
| (800,000 | ) | |
| 3361 | % | |
| (45,857,000 | ) | |
| 2,594,000 | | |
| -1868 | % |
| Less: loss attributable
to noncontrolling interest | |
| - | | |
| - | | |
| 0 | % | |
| 4,700,000 | | |
| - | | |
| 0 | % |
| Net (loss) income to common
shareholders | |
$ | (27,689,000 | ) | |
$ | (800,000 | ) | |
| 3361 | % | |
$ | (41,157,000 | ) | |
$ | 2,594,000 | | |
| -1687 | % |
| (Loss) earnings per share to common stockholders: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | (0.66 | ) | |
$ | (0.02 | ) | |
| 3200 | % | |
$ | (0.98 | ) | |
$ | 0.08 | | |
| -1325 | % |
| Diluted | |
$ | (0.66 | ) | |
$ | (0.02 | ) | |
| 3200 | % | |
$ | (0.98 | ) | |
$ | 0.08 | | |
| -1325 | % |
| Shares used in computing (loss) earnings per share: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 42,243,446 | | |
| 41,911,569 | | |
| 1 | % | |
| 42,105,619 | | |
| 31,838,593 | | |
| 32 | % |
| Diluted | |
| 42,243,446 | | |
| 41,911,569 | | |
| 1 | % | |
| 42,105,619 | | |
| 31,884,957 | | |
| 32 | % |
DOCUMENT SECURITY SYSTEMS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
| | |
2014 | | |
2013 | |
| ASSETS | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash | |
$ | 2,343,675 | | |
$ | 1,977,031 | |
| Restricted cash | |
| 355,793 | | |
| 500,000 | |
| Accounts receivable, net | |
| 2,097,671 | | |
| 2,149,123 | |
| Inventory | |
| 869,262 | | |
| 834,979 | |
| Prepaid expenses and other current assets | |
| 425,671 | | |
| 403,107 | |
| Deferred tax asset,
net | |
| 2,499 | | |
| 223,323 | |
| Total current assets | |
| 6,094,571 | | |
| 6,087,563 | |
| Property, plant and equipment, net | |
| 5,016,539 | | |
| 5,157,852 | |
| Investments and other assets | |
| 686,912 | | |
| 11,448,008 | |
| Goodwill | |
| 12,046,197 | | |
| 15,046,197 | |
| Other intangible assets, net | |
| 3,908,399 | | |
| 29,602,591 | |
| Total assets | |
$ | 27,752,618 | | |
$ | 67,342,211 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable | |
$ | 1,037,359 | | |
$ | 1,421,765 | |
| Accrued expenses and other current liabilities | |
| 1,997,241 | | |
| 1,455,629 | |
| Revolving lines of credit | |
| - | | |
| 158,087 | |
| Short-term debt | |
| - | | |
| 824,857 | |
| Current portion of long-term
debt, net | |
| 754,745 | | |
| 613,488 | |
| Total current liabilities | |
| 3,789,345 | | |
| 4,473,826 | |
| Long-term debt, net | |
| 7,439,036 | | |
| 3,087,358 | |
| Other long-term liabilities | |
| 520,180 | | |
| 27,566 | |
| Deferred tax liability, net | |
| 148,258 | | |
| 1,364,447 | |
| Commitments and contingencies (Note 12) | |
| | | |
| | |
| Stockholders' equity | |
| | | |
| | |
| Common stock, $.02 par value; 200,000,000 shares authorized,
46,172,404 shares issued and outstanding (49,411,486 on December 31, 2013) | |
| 923,448 | | |
| 988,230 | |
| Additional paid-in capital | |
| 101,012,659 | | |
| 97,790,426 | |
| Accumulated other comprehensive loss | |
| (61,180 | ) | |
| (27,566 | ) |
| Accumulated deficit | |
| (86,019,128 | ) | |
| (44,862,076 | ) |
| Non-controlling interest
in subsidiary | |
| - | | |
| 4,500,000 | |
| Total stockholders'
equity | |
| 15,855,799 | | |
| 58,389,014 | |
| Total liabilities and
stockholders' equity | |
$ | 27,752,618 | | |
$ | 67,342,211 | |
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
| | |
2014 | | |
2013 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net (loss) income including noncontrolling interest | |
$ | (45,857,052 | ) | |
$ | 2,593,530 | |
| Adjustments to reconcile net (loss) income to net cash used by operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 5,274,323 | | |
| 2,966,368 | |
| Stock based compensation | |
| 1,355,430 | | |
| 1,894,719 | |
| Paid in-kind interest | |
| 48,000 | | |
| - | |
| Amortization of note discount and premium | |
| 22,707 | | |
| 45,266 | |
| Loss on extinguishment of debt | |
| - | | |
| 26,252 | |
| Gain on sale of fixed assets | |
| - | | |
| (116,569 | ) |
| Impairment of goodwill | |
| 3,000,000 | | |
| 238,926 | |
| Impairment of intangible assets and investments inclusive of noncontrolling interest | |
| 34,034,862 | | |
| 277,800 | |
| Deferred tax benefit | |
| (988,630 | ) | |
| (10,948,875 | ) |
| Foreign currency translation gain | |
| (2,305 | ) | |
| - | |
| Decrease (increase) in assets: | |
| | | |
| | |
| Accounts receivable | |
| 51,452 | | |
| (26,104 | ) |
| Inventory | |
| (34,283 | ) | |
| (17,294 | ) |
| Prepaid expenses and other assets | |
| 30,081 | | |
| (184,956 | ) |
| Restricted cash | |
| 144,207 | | |
| (500,000 | ) |
| Increase (decrease) in liabilities: | |
| | | |
| | |
| Accounts payable | |
| (384,406 | ) | |
| 159,948 | |
| Accrued expenses and other liabilities | |
| 915,376 | | |
| (58,250 | ) |
| Net cash used by operating activities | |
| (2,390,238 | ) | |
| (3,649,239 | ) |
| Cash flows from investing activities: | |
| | | |
| | |
| Purchase of equipment and building improvements | |
| (280,902 | ) | |
| (378,587 | ) |
| Proceeds from sale of equipment | |
| - | | |
| 753,000 | |
| Acquisition of business | |
| - | | |
| 6,568,112 | |
| Purchase of investments | |
| (750,000 | ) | |
| (250,000 | ) |
| Purchase of intangible assets | |
| (1,243,714 | ) | |
| (2,593,495 | ) |
| Net cash (used) provided by investing activities | |
| (2,274,616 | ) | |
| 4,099,030 | |
| Cash flows from financing activities: | |
| | | |
| | |
| Net payments on revolving lines of credit | |
| (158,087 | ) | |
| (80,153 | ) |
| Payments of long-term debt | |
| (616,393 | ) | |
| (353,192 | ) |
| Borrowings of long-term debt | |
| 4,041,000 | | |
| - | |
| Issuances of common stock, net of issuance costs | |
| 1,764,978 | | |
| 73,422 | |
| Net cash provided (used) by financing activities | |
| 5,031,498 | | |
| (359,923 | ) |
| Net increase in cash | |
| 366,644 | | |
| 89,868 | |
| Cash beginning of year | |
| 1,977,031 | | |
| 1,887,163 | |
| Cash end of year | |
$ | 2,343,675 | | |
$ | 1,977,031 | |
About the Presentation of Adjusted EBITDA
The Company uses Adjusted EBITDA as a non-GAAP financial performance measurement. Adjusted EBITDA is calculated by the Company
by adding back to net income (loss) interest, income taxes, depreciation and amortization expense, and impairment charges as further
adjusted to add back stock-based compensation expense and non-recurring items, such as costs related to the Company's merger with
Lexington Technology Group, and impairments of investments and intangible assets. Adjusted EBITDA is provided to investors to supplement
the results of operations reported in accordance with GAAP. Management believes that Adjusted EBITDA provides an additional tool
for investors to use in comparing its financial results with other companies in the industry, many of which also use Adjusted EBITDA
in their communications to investors. By excluding non-cash charges such as amortization, depreciation, stock-based compensation
and impairment charges, as well as non-operating charges for interest and income taxes, investors can evaluate the Company's operations
and its ability to generate cash flows from operations and can compare its results on a more consistent basis to the results of
other companies in the industry. Management also uses Adjusted EBITDA to evaluate potential acquisitions, establish internal budgets
and goals, and evaluate performance of its business units and management. The Company considers Adjusted EBITDA to be an important
indicator of the Company's operational strength and performance of its business and a useful measure of the Company's historical
and prospective operating trends. However, there are significant limitations to the use of Adjusted EBITDA since it excludes interest
income and expense and income taxes and non-recurring items such as costs related to the Company's merger with Lexington Technology
Group, all of which impact the Company's profitability and operating cash flows, as well as depreciation, amortization, impairment
charges and stock-based compensation. The Company believes that these limitations are compensated by clearly identifying the difference
between the two measures. Consequently, Adjusted EBITDA should not be considered in isolation or as a substitute for net income
and loss presented in accordance with GAAP. Adjusted EBITDA as defined by the Company may not be comparable with similarly named
measures provided by other entities. The following is a reconciliation of net loss to Adjusted EBITDA loss:
| | |
Three Months Ended December 31, | | |
Year Ended December 31, | |
| | |
2014 | | |
2013 | | |
% change | | |
2014 | | |
2013 | | |
% change | |
| | |
(unaudited) | | |
(unaudited) | | |
| | |
(unaudited) | | |
(unaudited) | | |
| |
| Net Loss to common stockholders | |
$ | (27,689,000 | ) | |
$ | (800,000 | ) | |
| 3361 | % | |
$ | (41,157,000 | ) | |
$ | 2,594,000 | | |
| -1687 | % |
| Add back: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation & Amortization | |
| 1,351,000 | | |
| 1,305,000 | | |
| 4 | % | |
| 5,274,000 | | |
| 2,966,000 | | |
| 78 | % |
| Stock based compensation | |
| 250,000 | | |
| 315,000 | | |
| -21 | % | |
| 1,355,000 | | |
| 1,895,000 | | |
| -28 | % |
| Interest expense | |
| 65,000 | | |
| 87,000 | | |
| -25 | % | |
| 317,000 | | |
| 246,000 | | |
| 29 | % |
| Amortization of note discount and loss on debt
extinguishment | |
| - | | |
| - | | |
| 0 | % | |
| 52,000 | | |
| 72,000 | | |
| -28 | % |
| Income Taxes | |
| 1,000 | | |
| (1,753,000 | ) | |
| -100 | % | |
| (989,000 | ) | |
| (10,949,000 | ) | |
| -91 | % |
| Impairment of intangible assets, goodwill and
investments, net of noncontrolling interests | |
| 25,285,000 | | |
| - | | |
| 100 | % | |
| 32,335,000 | | |
| 517,000 | | |
| 6154 | % |
| Professional fees and other
costs incurred in conjunction with the Merger with Lexington Technology Group | |
| - | | |
| - | | |
| 0 | % | |
| - | | |
| 677,000 | | |
| -100 | % |
| Adjusted EBITDA | |
| (737,000 | ) | |
| (846,000 | ) | |
| 13 | % | |
| (2,813,000 | ) | |
| (1,982,000 | ) | |
| -42 | % |
| Adjusted EBITDA, by group (unaudited) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Printed Products | |
$ | 490,000 | | |
$ | 597,000 | | |
| -18 | % | |
$ | 1,845,000 | | |
$ | 1,604,000 | | |
| 15 | % |
| Technology Management | |
| (534,000 | ) | |
| (602,000 | ) | |
| -11 | % | |
| (1,877,000 | ) | |
| (1,213,000 | ) | |
| 55 | % |
| Corporate, less Merger costs
in 2013 periods | |
| (693,000 | ) | |
| (841,000 | ) | |
| -18 | % | |
| (2,781,000 | ) | |
| (2,373,000 | ) | |
| 17 | % |
| | |
| (737,000 | ) | |
| (846,000 | ) | |
| 13 | % | |
| (2,813,000 | ) | |
| (1,982,000 | ) | |
| -42 | % |
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