ROCHESTER, N.Y., May 15, 2015 /PRNewswire/ -- Document
Security Systems, Inc. (NYSE MKT: DSS), (DSS), a leader in
anti-counterfeiting and authentication solutions, reported results
for the first quarter ended March 31,
2015.
Q1 2015 Financial Highlights
Revenue for the first quarter of 2015 decreased 5% to
$3.4 million from $3.6 million in the same year-ago quarter.
During the quarter, printed products revenue decreased 5%
while technology sales, services and licensing decreased 12%.
Sales of documents printed with security features, such as coupons
and vital records, increased 94% from first quarter of 2014.
Sales of ID cards with technology (including RFID, smart cards, and
prox cards) increased 80% from the first quarter of 2014
Costs and expenses totaled $5.0
million, a decrease of 24% from $6.6
million from the first quarter of 2014. The decrease
reflected cost decreases in nearly every expense category except
for professional fees, which increased 33% due to increased
activity in some of its IP litigation matters.
Otherwise, the Company saw decreases in costs due to the benefits
of the a reduction costs in its printing and packaging operations
due to the combination of two facilities the Company finalized in
the first quarter of 2015, along with the benefits of reductions in
compensation and other general administrative costs.
Direct costs of goods sold, excluding depreciation and
amortization, decreased to 57.9% of sales from 60.6% of sales in
the first quarter of 2014. In addition, depreciation and
amortization costs decreased approximately $934,000 or 71% due to a significant reduction in
the carry-value of the Company's IP assets in 2015 as compared to
2014.
Net loss totaled $1.6 million
or $(0.04) per basic and diluted
share, as compared to net loss of $3.1
million or ($0.07) per basic
and diluted share in the first quarter of 2014. The 46% decrease in
net loss was the result of the improvement in results due to the
reductions in costs of nearly every expense category that more than
offset the decrease in revenue incurred during quarter.
Adjusted EBITDA loss, a non-GAAP metric defined as earnings
before interest, taxes, depreciation, amortization, and stock-based
compensation, and other non-recurring items, totaled $869,000 compared to an adjusted EBITDA loss of
$1,082,000 in the first quarter of
2014 (see further discussion about the use of adjusted EBITDA,
below). The improvement reflected the benefit of cost control
initiatives made by the Company that significantly reduced
corporate costs and improved results for the Company's Printed
Products group. These improvements were offset by increased
losses at the Company's DSS Technology Management group, which was
negatively affected by a significant increase in professional fees
during the 2015 quarter.
As of March 31, 2015, the Company
had cash and restricted cash of approximately $1.9 million.
Management Commentary
With respect to the Company's most recent fiscal quarter, CEO
Jeff Ronaldi stated "We continue to
aggressively press forward with our remaining patent litigation
matters, which involve several very large corporate defendants. We
continue to believe that the intellectual property underlying these
patent infringement cases is strong, despite recent set-backs we
have experienced with certain cases. In addition, we
were able to achieve strong growth in sales for many of our higher
margin printed products such as secure coupons and ID cards with
technology that has driven strong performance in our core
production business. In addition, we continue to pursue
opportunities for AuthentiGuard™ and are deep in the sales cycle
with prospective customers of AuthentiGuard™ that we believe will
come to fruition during this year."
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, and updated in our Form 10-Q
filed today 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.
FINANCIAL TABLES FOLLOW
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
Three Months Ended
March 31, 2015
|
Three Months Ended
March 31, 2014
|
%
change
|
|
Revenue
|
|
|
|
|
|
|
Printed
products
|
|
|
$
3,020,000
|
$
3,164,000
|
-5%
|
|
Technology sales,
services and licensing
|
|
|
410,000
|
464,000
|
-12%
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
|
$
3,430,000
|
$
3,628,000
|
-5%
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
Cost of goods sold,
exclusive of depreciation and amortization
|
|
|
$
1,986,000
|
$
2,198,000
|
-10%
|
|
Sales, general and
administrative compensation
|
|
|
1,006,000
|
1,290,000
|
-22%
|
|
Depreciation and
amortization
|
|
|
380,000
|
1,313,000
|
-71%
|
|
Professional
fees
|
|
|
719,000
|
540,000
|
33%
|
|
Stock based
compensation
|
|
|
325,000
|
547,000
|
-41%
|
|
Sales and
marketing
|
|
|
103,000
|
171,000
|
-40%
|
|
Rent and
utilities
|
|
|
159,000
|
184,000
|
-14%
|
|
Other operating
expenses
|
|
|
180,000
|
229,000
|
-21%
|
|
Research and
development
|
|
|
116,000
|
114,000
|
2%
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
$
4,974,000
|
$
6,586,000
|
-24%
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(1,544,000)
|
(2,958,000)
|
-48%
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
|
Interest
expense
|
|
|
$
(78,000)
|
$
(75,000)
|
4%
|
|
Amortizaton of note
discount and loss on debt modification and
extinguishment
|
|
|
(19,000)
|
(17,000)
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
$
(97,000)
|
$
(92,000)
|
5%
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(1,641,000)
|
(3,050,000)
|
-46%
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
5,000
|
5,000
|
0%
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,647,000)
|
(3,055,000)
|
-46%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
$
(0.04)
|
$
(0.07)
|
-43%
|
|
|
|
|
|
|
|
|
Shares used in
computing loss per share:
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
46,239,404
|
41,923,987
|
10%
|
|
|
|
|
|
|
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
|
Condensed
Consolidated Balance Sheets
|
|
|
As
of
|
|
|
|
|
March 31,
2015
|
|
December 31,
2014
|
|
|
|
|
|
ASSETS
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,591,859
|
|
|
$
|
2,343,675
|
|
|
|
Restricted
cash
|
|
|
337,307
|
|
|
|
355,793
|
|
|
|
Accounts receivable,
net
|
|
|
1,445,734
|
|
|
|
2,097,671
|
|
|
|
Inventory
|
|
|
1,071,802
|
|
|
|
869,262
|
|
|
|
Prepaid expenses and
other current assets
|
|
|
509,291
|
|
|
|
425,671
|
|
|
|
Deferred tax asset,
net
|
|
|
2,499
|
|
|
|
2,499
|
|
|
Total current
assets
|
|
|
4,958,492
|
|
|
|
6,094,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
4,906,012
|
|
|
|
5,016,539
|
|
|
Investments and other
assets, net
|
|
|
631,624
|
|
|
|
686,912
|
|
|
Goodwill
|
|
|
12,046,197
|
|
|
|
12,046,197
|
|
|
Other intangible
assets, net
|
|
|
3,667,124
|
|
|
|
3,908,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
26,209,449
|
|
|
$
|
27,752,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,348,103
|
|
|
$
|
1,037,359
|
|
|
|
Accrued expenses and
other current liabilities
|
|
|
1,625,424
|
|
|
|
1,997,241
|
|
|
|
Current portion of
long-term debt, net
|
|
|
709,031
|
|
|
|
754,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
3,682,558
|
|
|
|
3,789,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
7,280,460
|
|
|
|
7,439,036
|
|
|
Other long-term
liabilities
|
|
|
535,932
|
|
|
|
520,180
|
|
|
Deferred tax
liability, net
|
|
|
152,995
|
|
|
|
148,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.02
par value; 200,000,000 shares authorized, 46,302,404 shares
issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
(46,172,404 on
December 31, 2014)
|
|
|
926,048
|
|
|
|
923,448
|
|
|
|
Additional paid-in
capital
|
|
|
101,374,209
|
|
|
|
101,012,659
|
|
|
|
Accumulated other
comprehensive loss
|
|
|
(76,932)
|
|
|
|
(61,180)
|
|
|
|
Accumulated
deficit
|
|
|
(87,665,821)
|
|
|
|
(86,019,128)
|
|
|
|
Total stockholders'
equity
|
|
|
14,557,504
|
|
|
|
15,855,799
|
|
|
Total liabilities
and stockholders' equity
|
|
$
|
26,209,449
|
|
|
$
|
27,752,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
For the Three
Months Ended March 31,
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,646,693)
|
|
$
|
(3,055,154)
|
|
|
Adjustments to reconcile net
loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
379,593
|
|
|
1,313,371
|
|
|
Stock based
compensation
|
|
|
324,599
|
|
|
547,142
|
|
|
Paid in-kind
interest
|
|
|
20,000
|
|
|
-
|
|
|
Amortization of note
discount
|
|
|
-
|
|
|
17,367
|
|
|
Net loss on debt
modification and extinguishment
|
|
|
19,096
|
|
|
|
|
|
Change in deferred
tax provision
|
|
|
4,737
|
|
|
4,737
|
|
|
Foreign currency
translation (gain) loss
|
|
|
(29,400)
|
|
|
16,420
|
|
|
Decrease (increase)
in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
651,937
|
|
|
997,619
|
|
|
Inventory
|
|
|
(202,540)
|
|
|
(386,366)
|
|
|
Prepaid expenses and
other assets
|
|
|
(28,332)
|
|
|
(183,462)
|
|
|
Restricted
cash
|
|
|
18,486
|
|
|
-
|
|
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
310,744
|
|
|
(86,460)
|
|
|
Accrued expenses and
other liabilities
|
|
|
(351,167)
|
|
|
326,700
|
|
|
Net cash used by
operating activities
|
|
|
(528,941)
|
|
|
(488,086)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
(27,791)
|
|
|
(134,373)
|
|
|
Purchase of
investments
|
|
|
-
|
|
|
(750,000)
|
|
|
Purchase of
intangible assets
|
|
|
-
|
|
|
(39,126)
|
|
|
Net cash used by
investing activities
|
|
|
(27,791)
|
|
|
(923,499)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Net payments on
revolving lines of credit
|
|
|
-
|
|
|
(158,087)
|
|
|
Payments of long-term
debt
|
|
|
(195,084)
|
|
|
(156,485)
|
|
|
Borrowings of
long-term debt
|
|
|
-
|
|
|
2,691,000
|
|
|
Net cash (used)
provided by financing activities
|
|
|
(195,084)
|
|
|
2,376,428
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)
increase in cash
|
|
|
(751,816)
|
|
|
964,843
|
|
|
Cash beginning of
period
|
|
|
2,343,675
|
|
|
1,977,031
|
|
|
|
|
|
|
|
|
|
|
|
Cash end of
period
|
|
$
|
1,591,859
|
|
$
|
2,941,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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. 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 and
stock-based compensation, 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 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
March 31,
|
|
|
2015
|
2014
|
%
change
|
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
Net Loss:
|
|
$
(1,647,000)
|
$
(3,055,000)
|
-46%
|
Add backs:
|
|
|
|
|
Depreciation & Amortization
|
|
380,000
|
1,313,000
|
-71%
|
Stock based
compensation
|
|
325,000
|
547,000
|
-41%
|
Interest
expense
|
|
78,000
|
75,000
|
4%
|
Amortization of note
discount and loss on debt extinguishment
|
|
19,000
|
17,000
|
12%
|
Income
Taxes
|
|
5,000
|
5,000
|
0%
|
Foreign currency
translation (gain) loss
|
|
(29,000)
|
16,000
|
-281%
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
(869,000)
|
(1,082,000)
|
20%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA,
by group (unaudited)
|
|
|
|
|
|
|
|
|
|
Printed
Products
|
|
$
349,000
|
$
283,000
|
23%
|
Technology
Management
|
|
(786,000)
|
(468,000)
|
68%
|
Corporate
|
|
(432,000)
|
(897,000)
|
-52%
|
|
|
|
|
|
|
|
(869,000)
|
(1,082,000)
|
20%
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/document-security-systems-reports-first-quarter-of-2015-financial-results-300084227.html
SOURCE Document Security Systems, Inc.