ROCHESTER, N.Y., Nov. 13, 2015 /PRNewswire/ -- Document
Security Systems, Inc. (NYSE MKT: DSS), (DSS), a leader in
anti-counterfeiting and authentication solutions, reported results
for the third quarter ended September 30,
2015.
Q3 2015 Financial Highlights
Revenue for the
third quarter of 2015 decreased 11% to $4.4
million from $5.0 million in
the same year-ago quarter. During the quarter, printed
products revenue decreased 11% while technology sales, services and
licensing decreased 6%. During the quarter the Company
experienced declines in its commercial printing and packaging
revenues partially offset by an increase in its plastic cards sales
and in particular, increases in sales of ID cards with technology
(including RFID, smart cards, and proximity cards).
Costs and expenses totaled $5.2
million, a decrease of 72% from $18.7
million in the third quarter of 2014. The decrease reflected
cost decreases in nearly every expense category, along with the
impact of an $11.8 million impairment
expense recorded in the third quarter of 2014. Direct
costs of goods sold, excluding depreciation and amortization,
decreased to 57.8% of sales from 62.7% of sales in the third
quarter of 2014. In addition, depreciation and amortization
costs decreased approximately $917,000 or 69% due to a significant reduction in
the carrying-value of the Company's IP assets in 2015 as compared
to 2014.
Net loss to common shareholders totaled $860,000 or $(0.02)
per basic and diluted share, as compared to net loss to common
shareholders of $8.1 million or
($0.19) per basic and diluted share
in the third quarter of 2014. The 89% 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. In addition, in 2014,
the Company's net loss reflected a net impairment charge for one of
the Company's investments of approximately $7.1 million which did not reoccur in the 2015
period.
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 $162,000 compared to an adjusted EBITDA loss of
$362,000 in the third quarter of 2014
(see further discussion about the use of adjusted EBITDA, below).
The improvement reflected the increase in adjusted EBITDA generated
by the Company's printed products groups and the benefit of the
cost reductions made by the Company that significantly reduced
corporate costs.
As of September 30, 2015, the
Company had cash and restricted cash of approximately $1.5 million.
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" sections of the Company's Annual Report on Form 10-K for
the year ended December 31, 2014, and
our Quarterly Report on Form 10-Q for the quarters ended
March 31, 2015 and June 30, 2015 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.
FINANCIAL TABLES FOLLOW
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
|
Three Months
Ended
September 30,
2015
|
Three Months
Ended
September 30,
2014
|
%
change
|
|
Nine Months
Ended
September 30,
2015
|
Nine Months
Ended
September 30,
2014
|
%
change
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Printed
products
|
|
|
$
3,975,000
|
$
4,489,000
|
-11%
|
|
$ 10,678,000
|
$ 12,060,000
|
-11%
|
|
Technology sales,
services and licensing
|
|
|
445,000
|
475,000
|
-6%
|
|
1,367,000
|
1,415,000
|
-3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
|
$
4,420,000
|
$
4,964,000
|
-11%
|
|
$ 12,045,000
|
$ 13,475,000
|
-11%
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold,
exclusive of depreciation and amortization
|
|
|
$
2,556,000
|
$
3,111,000
|
-18%
|
|
$
7,206,000
|
$
8,506,000
|
-15%
|
|
Sales, general and
administrative compensation
|
|
|
1,008,000
|
1,168,000
|
-14%
|
|
3,021,000
|
3,613,000
|
-16%
|
|
Depreciation and
amortization
|
|
|
405,000
|
1,322,000
|
-69%
|
|
1,175,000
|
3,923,000
|
-70%
|
|
Professional
fees
|
|
|
508,000
|
388,000
|
31%
|
|
1,534,000
|
1,430,000
|
7%
|
|
Stock based
compensation
|
|
|
199,000
|
265,000
|
-25%
|
|
842,000
|
1,105,000
|
-24%
|
|
Sales and
marketing
|
|
|
57,000
|
124,000
|
-54%
|
|
250,000
|
425,000
|
-41%
|
|
Rent and
utilities
|
|
|
186,000
|
201,000
|
-7%
|
|
510,000
|
567,000
|
-10%
|
|
Other operating
expenses
|
|
|
151,000
|
216,000
|
-30%
|
|
564,000
|
665,000
|
-15%
|
|
Research and
development
|
|
|
117,000
|
118,000
|
-1%
|
|
350,000
|
344,000
|
2%
|
|
Impairment of
intangible assets and investments
|
|
|
-
|
11,750,000
|
-100%
|
|
-
|
11,750,000
|
100%
|
|
Total
costs and expenses
|
|
|
$
5,187,000
|
$
18,663,000
|
-72%
|
|
$ 15,452,000
|
$ 32,328,000
|
-52%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(767,000)
|
(13,699,000)
|
-94%
|
|
(3,407,000)
|
(18,853,000)
|
-82%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
$
(89,000)
|
$
(89,000)
|
0%
|
|
$
(257,000)
|
$
(253,000)
|
2%
|
|
Gains on sales of
investment and equipment
|
|
|
-
|
-
|
0%
|
|
146,000
|
-
|
100%
|
|
Net loss on debt
modification and extinguishment
|
|
|
-
|
-
|
0%
|
|
(19,000)
|
(52,000)
|
-63%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
$
(89,000)
|
$
(89,000)
|
0%
|
|
$
(130,000)
|
$
(305,000)
|
-57%
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(856,000)
|
(13,788,000)
|
-94%
|
|
(3,537,000)
|
(19,158,000)
|
-82%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
|
5,000
|
(1,000,000)
|
0%
|
|
14,000
|
(990,000)
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss including
noncontrolling interest
|
|
|
(860,000)
|
(12,769,000)
|
-93%
|
|
(3,550,000)
|
(18,168,000)
|
-80%
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: loss
attributable to noncontrolling interest
|
|
|
-
|
4,700,000
|
-100%
|
|
-
|
4,700,000
|
-100%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss to common
shareholders
|
|
|
$
(860,000)
|
$
(8,069,000)
|
-89%
|
|
$ (3,550,000)
|
$ (13,468,000)
|
-74%
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
$
(0.02)
|
$
(0.19)
|
-89%
|
|
$
(0.08)
|
$
(0.32)
|
-75%
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing loss per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
46,813,768
|
42,213,654
|
11%
|
|
46,453,962
|
42,060,015
|
10%
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
|
As
of
|
|
|
|
|
|
September 30,
2015
|
|
December 31,
2014
|
ASSETS
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,244,696
|
|
|
$
|
2,343,675
|
|
|
Restricted
cash
|
|
|
293,043
|
|
|
|
355,793
|
|
|
Accounts receivable,
net
|
|
|
2,051,744
|
|
|
|
2,097,671
|
|
|
Inventory
|
|
|
1,239,860
|
|
|
|
869,262
|
|
|
Prepaid expenses and
other current assets
|
|
|
471,655
|
|
|
|
425,671
|
|
|
Deferred tax asset,
net
|
|
|
2,499
|
|
|
|
2,499
|
|
Total current
assets
|
|
|
5,303,497
|
|
|
|
6,094,571
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
5,177,053
|
|
|
|
5,016,539
|
|
Investments and other
assets, net
|
|
|
621,049
|
|
|
|
686,912
|
|
Goodwill
|
|
|
12,046,197
|
|
|
|
12,046,197
|
|
Other intangible
assets, net
|
|
|
3,217,472
|
|
|
|
3,908,399
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
26,365,268
|
|
|
$
|
27,752,618
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,016,693
|
|
|
$
|
1,037,359
|
|
|
Accrued expenses and
other current liabilities
|
|
|
1,578,878
|
|
|
|
1,997,241
|
|
|
Current portion of
long-term debt, net
|
|
|
1,330,604
|
|
|
|
754,745
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
4,926,175
|
|
|
|
3,789,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
6,689,483
|
|
|
|
7,439,036
|
|
Other long-term
liabilities
|
|
|
539,630
|
|
|
|
520,180
|
|
Deferred tax
liability, net
|
|
|
162,469
|
|
|
|
148,258
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Common stock, $.02
par value; 200,000,000 shares authorized, 50,620,585 shares
issued and outstanding
|
|
|
|
|
|
|
|
|
|
(46,172,404 on
December 31, 2014)
|
|
|
1,012,412
|
|
|
|
923,448
|
|
|
Additional paid-in
capital
|
|
|
102,685,296
|
|
|
|
101,012,659
|
|
|
Accumulated other
comprehensive loss
|
|
|
(80,630)
|
|
|
|
(61,180)
|
|
|
Accumulated
deficit
|
|
|
(89,569,567)
|
|
|
|
(86,019,128)
|
|
|
Total stockholders'
equity
|
|
|
14,047,511
|
|
|
|
15,855,799
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
|
$
|
26,365,268
|
|
|
$
|
27,752,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
For the Nine
Months Ended September 30,
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,550,439)
|
|
$
|
(18,167,659)
|
|
|
Adjustments to reconcile net
loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,174,900
|
|
|
3,923,220
|
|
|
Stock based
compensation
|
|
|
842,265
|
|
|
1,105,395
|
|
|
Paid in-kind
interest
|
|
|
68,000
|
|
|
30,000
|
|
|
Gain on sale of
equipment
|
|
|
(46,283)
|
|
|
-
|
|
|
Amortization of note
discount
|
|
|
-
|
|
|
30,010
|
|
|
Impairment of
intangible assets and investments inclusive of noncontrolling
interest
|
|
|
-
|
|
|
11,749,528
|
|
|
Net loss on debt
modification and extinguishment
|
|
|
19,096
|
|
|
-
|
|
|
Change in deferred
tax provision
|
|
|
14,211
|
|
|
(990,093)
|
|
|
Foreign currency
translation gain
|
|
|
(29,400)
|
|
|
(2,305)
|
|
|
Decrease (increase)
in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
45,927
|
|
|
293,927
|
|
|
Inventory
|
|
|
(370,598)
|
|
|
(330,944)
|
|
|
Prepaid expenses and
other assets
|
|
|
19,879
|
|
|
(210,504)
|
|
|
Restricted
cash
|
|
|
62,750
|
|
|
108,707
|
|
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
979,334
|
|
|
48,669
|
|
|
Accrued expenses and
other liabilities
|
|
|
(396,513)
|
|
|
831,239
|
|
|
Net cash used by
operating activities
|
|
|
(1,166,871)
|
|
|
(1,580,810)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
(118,497)
|
|
|
(257,764)
|
|
|
Sale of
equipment
|
|
|
46,283
|
|
|
-
|
|
|
Purchase of
investments
|
|
|
-
|
|
|
(750,000)
|
|
|
Purchase of
intangible assets
|
|
|
(990)
|
|
|
(1,216,063)
|
|
|
Net cash used by
investing activities
|
|
|
(73,204)
|
|
|
(2,223,827)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Net payments on
revolving lines of credit
|
|
|
-
|
|
|
(158,087)
|
|
|
Payments of long-term
debt
|
|
|
(737,240)
|
|
|
(457,303)
|
|
|
Borrowings of
long-term debt
|
|
|
-
|
|
|
4,041,000
|
|
|
Issuances of common
stock, net of issuance costs
|
|
|
878,336
|
|
|
301,973
|
|
|
Net cash provided by
financing activities
|
|
|
141,096
|
|
|
3,727,583
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in
cash
|
|
|
(1,098,979)
|
|
|
(77,054)
|
|
|
Cash beginning of
period
|
|
|
2,343,675
|
|
|
1,977,031
|
|
|
|
|
|
|
|
|
|
|
|
Cash end of
period
|
|
$
|
1,244,696
|
|
$
|
1,899,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2015
|
2014
|
%
change
|
|
2015
|
2014
|
%
change
|
|
|
(unaudited)
|
(unaudited)
|
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net Loss:
|
|
$
(860,000)
|
$
(8,069,000)
|
-89%
|
|
$
(3,550,000)
|
$
(13,468,000)
|
-74%
|
Add backs:
|
|
|
|
|
|
|
|
|
Depreciation & amortization
|
|
405,000
|
1,322,000
|
-69%
|
|
1,175,000
|
3,923,000
|
-70%
|
Stock based
compensation
|
|
199,000
|
265,000
|
-25%
|
|
842,000
|
1,105,000
|
-24%
|
Interest
expense
|
|
89,000
|
89,000
|
0%
|
|
257,000
|
253,000
|
2%
|
Amortization of note
discount and net loss on debt
extinguishment and modification
|
|
-
|
-
|
0%
|
|
19,000
|
52,000
|
-63%
|
Income
Taxes
|
|
5,000
|
(1,000,000)
|
-101%
|
|
14,000
|
(990,000)
|
-101%
|
Foreign currency
translation gain
|
|
-
|
(19,000)
|
-100%
|
|
(29,000)
|
(2,000)
|
100%
|
Impairment of
intangible assets and investments, net of noncontrolling
interests
|
|
-
|
7,050,000
|
100%
|
|
-
|
7,050,000
|
100%
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
(162,000)
|
(362,000)
|
55%
|
|
(1,272,000)
|
(2,077,000)
|
39%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA,
by group (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Printed
Products
|
|
$
724,000
|
$
603,000
|
20%
|
|
$
1,411,000
|
$
1,355,000
|
4%
|
Technology
Management
|
|
(490,000)
|
(424,000)
|
16%
|
|
(1,373,000)
|
(1,285,000)
|
7%
|
Corporate
|
|
(396,000)
|
(541,000)
|
-27%
|
|
(1,310,000)
|
(2,147,000)
|
-39%
|
|
|
|
|
|
|
|
|
|
|
|
(162,000)
|
(362,000)
|
-55%
|
|
(1,272,000)
|
(2,077,000)
|
-39%
|
|
|
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/document-security-systems-reports-third-quarter-of-2015-financial-results-300178443.html
SOURCE Document Security Systems, Inc.