ROCHESTER, N.Y., Aug. 13, 2015 /PRNewswire/ -- Document
Security Systems, Inc. (NYSE MKT: DSS),(DSS), a leader
in anti-counterfeiting and authentication solutions, reported
results for the second quarter ended June
30, 2015.
Q2 2015 Financial Highlights
Revenue for the second
quarter of 2015 decreased 14% to $4.2
million from $4.9 million in
the same year-ago quarter. During the quarter, printed
products revenue decreased 16% while technology sales, services and
licensing increased 8%. Sales of ID cards with technology
(including RFID, smart cards, and prox cards) increased 34% from
the second quarter of 2014 which partially offset significant
declines in commercial offset printing revenue during the
quarter. Licensing revenue increased 80% as the result
of licenses granted during the quarter from settlements reached
during the quarter of certain of the Company's litigation.
Costs and expenses totaled $5.3
million, a decrease of 25% from $7.1
million from the second quarter of 2014. The decrease
reflected cost decreases in nearly every expense category.
Direct costs of goods sold, excluding depreciation and
amortization, decreased to 63.5% of sales from 65.5% of sales in
the second quarter of 2014. In addition, depreciation and
amortization costs decreased approximately $897,000 or 70% due to a significant reduction in
the carrying-value of the Company's IP assets in 2015 as compared
to 2014.
Net loss totaled $1.0 million
or $(0.02) per basic and diluted
share, as compared to net loss of $2.3
million or ($0.06) per basic
and diluted share in the second quarter of 2014. The 56% 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 the 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 $238,000 compared to an adjusted EBITDA loss of
$633,000 in the second quarter of
2014 (see further discussion about the use of adjusted EBITDA,
below). The improvement reflected the benefit of the cost
reductions made by the Company that significantly reduced corporate
costs and the licenses granted by the Company's Technology
Management division during the quarter.
As of June 30, 2015, the Company
had cash and restricted cash of approximately $1.3 million.
Management Commentary
With respect to the Company's most recent fiscal quarter, CEO
Jeff Ronaldi stated, "During the
quarter we continued to solidify the financial footing of our core
operating businesses, by reviewing costs and product lines to
ensure that we maximize the return on our resources in those
areas. While this has resulted in an improvement in financial
performance, we were hoping to maintain revenue growth during the
quarter and first half of the year. While this has not
happened primarily due to significant reductions in commercial
printing, we believe that some of our revenue miss is due to timing
of orders from certain of our customers which should materialize in
the second half of the year. In addition, we are pleased with
the product sales mix as we replace lost commercial printing sales
with higher value products sales. In regards to our
AuthentiGuard sales efforts, while
we continue to seek an impactful customer order for that product,
we are pleased to have received a smaller AuthentiGuard order during the quarter for
usage of the product on high value plastic cards. The order
was for the development of a customized application for the
customer along with an annual license component.
Finally, we reached license agreements to settle litigation with
certain defendants of our IP litigation cases during the quarter
which we feel point to the strength of the patents in our
portfolio.
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
verify 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, our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, 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 June 30,
2015
|
Three Months Ended
June 30, 2014
|
%
change
|
|
Six Months Ended
June 30, 2015
|
Six Months Ended
June 30, 2014
|
%
change
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Printed
products
|
|
|
$
3,683,000
|
$
4,407,000
|
-16%
|
|
$
6,703,000
|
$
7,571,000
|
-11%
|
|
Technology sales,
services and licensing
|
|
|
513,000
|
476,000
|
8%
|
|
922,000
|
940,000
|
-2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
|
$
4,196,000
|
$
4,883,000
|
-14%
|
|
$
7,625,000
|
$
8,511,000
|
-10%
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold,
exclusive of depreciation and amortization
|
|
|
$
2,663,000
|
$
3,197,000
|
-17%
|
|
$
4,650,000
|
$
5,395,000
|
-14%
|
|
Sales, general and
administrative compensation
|
|
|
1,007,000
|
1,154,000
|
-13%
|
|
2,013,000
|
2,446,000
|
-18%
|
|
Depreciation and
amortization
|
|
|
391,000
|
1,288,000
|
-70%
|
|
770,000
|
2,602,000
|
-70%
|
|
Professional
fees
|
|
|
307,000
|
502,000
|
-39%
|
|
1,026,000
|
1,042,000
|
-2%
|
|
Stock based
compensation
|
|
|
318,000
|
294,000
|
8%
|
|
643,000
|
841,000
|
-24%
|
|
Sales and
marketing
|
|
|
90,000
|
128,000
|
-30%
|
|
193,000
|
301,000
|
-36%
|
|
Rent and
utilities
|
|
|
165,000
|
181,000
|
-9%
|
|
324,000
|
366,000
|
-11%
|
|
Other operating
expenses
|
|
|
233,000
|
242,000
|
-4%
|
|
413,000
|
465,000
|
-11%
|
|
Research and
development
|
|
|
117,000
|
112,000
|
4%
|
|
233,000
|
226,000
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
$
5,291,000
|
$
7,098,000
|
-25%
|
|
$ 10,265,000
|
$ 13,684,000
|
-25%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(1,095,000)
|
(2,215,000)
|
-51%
|
|
(2,640,000)
|
(5,173,000)
|
-49%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
$
(90,000)
|
$
(89,000)
|
1%
|
|
$
(169,000)
|
$
(164,000)
|
3%
|
|
Gains on sales of
investment and equipment
|
|
|
146,000
|
-
|
100%
|
|
146,000
|
-
|
100%
|
|
Net loss on debt
modification and extinguishment
|
|
|
-
|
(35,000)
|
-100%
|
|
(19,000)
|
(52,000)
|
-63%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
$
56,000
|
$
(124,000)
|
-145%
|
|
$
(42,000)
|
$
(216,000)
|
-81%
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(1,039,000)
|
(2,339,000)
|
-56%
|
|
(2,682,000)
|
(5,389,000)
|
-50%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
5,000
|
5,000
|
0%
|
|
9,000
|
9,000
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,043,000)
|
(2,344,000)
|
-56%
|
|
(2,690,000)
|
(5,399,000)
|
-50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
$
(0.02)
|
$
(0.06)
|
-67%
|
|
$
(0.06)
|
$
(0.13)
|
-54%
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing loss per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
46,302,404
|
42,040,907
|
10%
|
|
46,271,078
|
41,982,770
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
|
As
of
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
December 31,
2014
|
ASSETS
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,014,857
|
|
|
$
|
2,343,675
|
|
|
Restricted
cash
|
|
|
306,215
|
|
|
|
355,793
|
|
|
Accounts receivable,
net
|
|
|
1,667,531
|
|
|
|
2,097,671
|
|
|
Inventory
|
|
|
1,120,417
|
|
|
|
869,262
|
|
|
Prepaid expenses and
other current assets
|
|
|
426,081
|
|
|
|
425,671
|
|
|
Deferred tax asset,
net
|
|
|
2,499
|
|
|
|
2,499
|
|
Total current
assets
|
|
|
4,537,600
|
|
|
|
6,094,571
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
5,295,495
|
|
|
|
5,016,539
|
|
Investments and other
assets, net
|
|
|
626,337
|
|
|
|
686,912
|
|
Goodwill
|
|
|
12,046,197
|
|
|
|
12,046,197
|
|
Other intangible
assets, net
|
|
|
3,445,040
|
|
|
|
3,908,399
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
25,950,669
|
|
|
$
|
27,752,618
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,624,519
|
|
|
$
|
1,037,359
|
|
|
Accrued expenses and
other current liabilities
|
|
|
1,452,965
|
|
|
|
1,997,241
|
|
|
Current portion of
long-term debt, net
|
|
|
1,555,222
|
|
|
|
754,745
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
4,632,706
|
|
|
|
3,789,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
6,791,564
|
|
|
|
7,439,036
|
|
Other long-term
liabilities
|
|
|
517,621
|
|
|
|
520,180
|
|
Deferred tax
liability, net
|
|
|
157,732
|
|
|
|
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
|
|
|
101,692,748
|
|
|
|
101,012,659
|
|
|
Accumulated other
comprehensive loss
|
|
|
(58,621)
|
|
|
|
(61,180)
|
|
|
Accumulated
deficit
|
|
|
(88,709,129)
|
|
|
|
(86,019,128)
|
|
|
Total stockholders'
equity
|
|
|
13,851,046
|
|
|
|
15,855,799
|
|
Total liabilities
and stockholders' equity
|
|
$
|
25,950,669
|
|
|
$
|
27,752,618
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
For the Six Months
Ended June 30,
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,690,001)
|
|
$
|
(5,398,680)
|
|
|
Adjustments to reconcile net
loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
770,126
|
|
|
2,601,684
|
|
|
Stock based
compensation
|
|
|
643,138
|
|
|
840,879
|
|
|
Paid in-kind
interest
|
|
|
44,000
|
|
|
-
|
|
|
Gain on sale of
equipment
|
|
|
(46,283)
|
|
|
-
|
|
|
Net loss on debt
modification and extinguishment
|
|
|
19,096
|
|
|
51,915
|
|
|
Change in deferred
tax provision
|
|
|
9,474
|
|
|
9,474
|
|
|
Foreign currency
translation (gain) loss
|
|
|
(29,400)
|
|
|
16,420
|
|
|
Decrease (increase)
in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
430,140
|
|
|
359,137
|
|
|
Inventory
|
|
|
(251,155)
|
|
|
(84,680)
|
|
|
Prepaid expenses and
other assets
|
|
|
60,165
|
|
|
(174,616)
|
|
|
Restricted
cash
|
|
|
49,578
|
|
|
254,521
|
|
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
587,160
|
|
|
33,081
|
|
|
Accrued expenses and
other liabilities
|
|
|
(523,629)
|
|
|
387,188
|
|
|
Net cash used by
operating activities
|
|
|
(927,591)
|
|
|
(1,103,677)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
(57,486)
|
|
|
(157,789)
|
|
|
Sale of
equipment
|
|
|
46,283
|
|
|
-
|
|
|
Purchase of
investments
|
|
|
-
|
|
|
(750,000)
|
|
|
Purchase of
intangible assets
|
|
|
(3,237)
|
|
|
(1,196,980)
|
|
|
Net cash used by
investing activities
|
|
|
(14,440)
|
|
|
(2,104,769)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Net payments on
revolving lines of credit
|
|
|
-
|
|
|
(158,087)
|
|
|
Payments of long-term
debt
|
|
|
(386,787)
|
|
|
(298,816)
|
|
|
Borrowings of
long-term debt
|
|
|
-
|
|
|
2,691,000
|
|
|
Issuances of common
stock, net of issuance costs
|
|
|
-
|
|
|
301,974
|
|
|
Net cash (used)
provided by financing activities
|
|
|
(386,787)
|
|
|
2,536,071
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in
cash
|
|
|
(1,328,818)
|
|
|
(672,375)
|
|
|
Cash beginning of
period
|
|
|
2,343,675
|
|
|
1,977,031
|
|
|
|
|
|
|
|
|
|
|
|
Cash end of
period
|
|
$
|
1,014,857
|
|
$
|
1,304,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. 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, 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
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2015
|
2014
|
%
change
|
|
|
2015
|
2014
|
%
change
|
|
|
(unaudited)
|
(unaudited)
|
|
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss:
|
|
$
(1,043,000)
|
$
(2,344,000)
|
-56%
|
|
|
$
(2,690,000)
|
$
(5,399,000)
|
-50%
|
Add backs:
|
|
|
|
|
|
|
|
|
|
Depreciation &
amortization
|
|
391,000
|
1,288,000
|
-70%
|
|
|
770,000
|
2,602,000
|
-70%
|
Stock based
compensation
|
|
318,000
|
294,000
|
8%
|
|
|
643,000
|
841,000
|
-24%
|
Interest
expense
|
|
90,000
|
89,000
|
1%
|
|
|
169,000
|
164,000
|
3%
|
Amortization of note
discount and net loss on debt
extinguishment and
modification
|
|
-
|
35,000
|
0%
|
|
|
19,000
|
52,000
|
-63%
|
Income
Taxes
|
|
5,000
|
5,000
|
0%
|
|
|
9,000
|
9,000
|
0%
|
Foreign currency
translation (gain) loss
|
|
-
|
-
|
0%
|
|
|
(29,000)
|
-
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
(239,000)
|
(633,000)
|
62%
|
|
|
(1,109,000)
|
(1,731,000)
|
36%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA,
by group (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Printed
Products
|
|
$
339,000
|
$
469,000
|
-28%
|
|
|
$
687,000
|
$
752,000
|
-9%
|
Technology
Management
|
|
(97,000)
|
(386,000)
|
-75%
|
|
|
(883,000)
|
(854,000)
|
3%
|
Corporate
|
|
(481,000)
|
(716,000)
|
-33%
|
|
|
(913,000)
|
(1,629,000)
|
-44%
|
|
|
|
|
|
|
|
|
|
|
|
|
(239,000)
|
(633,000)
|
62%
|
|
|
(1,109,000)
|
(1,731,000)
|
36%
|
|
|
|
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/document-security-systems-reports-second-quarter-of-2015-financial-results-300128158.html
SOURCE Document Security Systems, Inc.