ROCHESTER, N.Y., May 17, 2016 /PRNewswire/ -- Document
Security Systems, Inc. (NYSE MKT: DSS), (DSS), a leader in
anti-counterfeiting and authentication solutions, reported results
for the first quarter of 2016.
"During the first quarter of 2016, the Company took advantage of
an increase in orders from several of our largest packaging group
customers resulting in strong revenue and operating results.
We continue to see growth from our best customers, and highest
margin product and service offerings. This is starting to translate
into revenue strength even while reducing our cost base. The
momentum with which we ended 2015 has continued during the
quarter," said Jeff Ronaldi, CEO of
Document Security Systems. Mr. Ronaldi continued: "As 2016
progresses, we expect successes from new product initiatives will
add to the strength of our business in the anti-counterfeiting and
authentication marketplace. As companies continue to
fight the ever-increasing problem of counterfeiting, DSS' wide
array of product offerings is well positioned to continue to widen
our share of this expanding market
opportunity."
Q1 2016 Financial Highlights
Revenue for the first
quarter of 2016 increased 27% to $4.3
million from $3.4 million in
the same year-ago quarter. During the quarter, the Company
had strong performance from its printed products groups, whose
revenues which increased 32%, which was partially offset by a
decline in technology sales, services and licensing revenue of
11%.
Costs and expenses totaled $4.9
million, a decrease of 2% from $5.0
million in the same year-ago period. During the quarter,
direct costs of goods sold increased in correlation with the
increase in revenue. Otherwise, nearly all other expense
categories decreased as compared to the first quarter of
2015.
Net loss during the quarter was approximately $624,000 ($0.01 per
share), which was a 62% decrease in net loss of $1.6 million ($0.04
per share) in the first quarter of 2016. The significant decrease
in net loss was the combined result of the Company's ability to
increase revenues while decreasing non-direct costs during the
quarter.
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, was approximately $107,000
during the quarter compared to an adjusted EBITDA loss of
$869,000 in the first quarter of 2015
(see further discussion about the use of adjusted EBITDA, below).
Once again, the significant improvement reflected both the increase
in revenues and the decrease in costs in nearly every expense
category.
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.
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, 2015,
filed with the Securities and Exchange Commission on March 30, 2016. 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
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended March
31, 2016
|
Three Months
Ended March
31, 2015
|
%
change
|
Revenue
|
|
|
|
|
|
Printed
products
|
|
|
$
3,975,000
|
$
3,020,000
|
32%
|
Technology sales,
services and licensing
|
|
|
364,000
|
410,000
|
-11%
|
Total
revenue
|
|
|
$
4,339,000
|
$
3,430,000
|
27%
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
Cost of goods sold,
exclusive of depreciation and
amortization
|
|
|
$
2,611,000
|
$
1,986,000
|
31%
|
Sales, general and
administrative compensation
|
|
|
852,000
|
1,006,000
|
-15%
|
Depreciation and
amortization
|
|
|
361,000
|
380,000
|
-5%
|
Professional
fees
|
|
|
424,000
|
719,000
|
-41%
|
Stock based
compensation
|
|
|
74,000
|
325,000
|
-77%
|
Sales and
marketing
|
|
|
76,000
|
103,000
|
-26%
|
Rent and
utilities
|
|
|
138,000
|
159,000
|
-13%
|
Other operating
expenses
|
|
|
232,000
|
180,000
|
29%
|
Research and
development
|
|
|
113,000
|
116,000
|
-3%
|
Total
costs and expenses
|
|
|
$
4,881,000
|
$
4,974,000
|
-2%
|
|
|
|
|
|
|
Operating
loss
|
|
|
(542,000)
|
(1,544,000)
|
-65%
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
Interest
expense
|
|
|
$
(77,000)
|
$
(78,000)
|
-1%
|
Net loss on debt
modification and extinguishment
|
|
|
-
|
(19,000)
|
-100%
|
|
|
|
|
|
|
Other
expense
|
|
|
$
(77,000)
|
$
(97,000)
|
-21%
|
Loss before income
taxes
|
|
|
(619,000)
|
(1,641,000)
|
-62%
|
|
|
|
|
|
|
Income tax
expense
|
|
|
5,000
|
5,000
|
0%
|
|
|
|
|
|
|
Net
loss
|
|
|
(624,000)
|
(1,647,000)
|
-62%
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common
share:
|
|
|
|
|
|
Basic and
diluted
|
|
|
$
(0.01)
|
$
(0.04)
|
-75%
|
|
|
|
|
|
|
Shares used in
computing loss per common share:
|
|
|
|
|
|
Basic and
diluted
|
|
|
51,881,948
|
46,239,404
|
12%
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
|
As
of
|
|
|
|
|
|
|
|
March 31,
2016
|
December 31,
2015
|
|
|
|
|
|
|
ASSETS
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,049,535
|
|
|
$
|
1,440,256
|
|
|
Restricted
cash
|
|
|
282,889
|
|
|
|
293,043
|
|
|
Accounts receivable,
net
|
|
|
1,913,990
|
|
|
|
2,097,433
|
|
|
Inventory
|
|
|
990,213
|
|
|
|
937,830
|
|
|
Prepaid expenses and
other current assets
|
|
|
435,211
|
|
|
|
313,528
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
4,671,838
|
|
|
|
5,082,090
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
4,885,521
|
|
|
|
5,003,818
|
|
Other
assets
|
|
|
45,823
|
|
|
|
44,050
|
|
Goodwill
|
|
|
2,453,349
|
|
|
|
2,453,349
|
|
Other intangible
assets, net
|
|
|
2,894,959
|
|
|
|
3,017,544
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
14,951,490
|
|
|
$
|
15,600,851
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,164,579
|
|
|
$
|
1,945,073
|
|
|
Accrued expenses and
other current liabilities
|
|
|
1,819,069
|
|
|
|
1,964,726
|
|
|
Short-term
debt
|
|
|
4,008,504
|
|
|
|
3,984,316
|
|
|
Current portion of
long-term debt, net
|
|
|
819,653
|
|
|
|
1,553,061
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
8,811,805
|
|
|
|
9,447,176
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
2,772,167
|
|
|
|
2,240,596
|
|
Other long-term
liabilities
|
|
|
90,015
|
|
|
|
63,697
|
|
Deferred tax
liability, net
|
|
|
166,844
|
|
|
|
162,107
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Common stock, $.02
par value; 200,000,000 shares authorized, 51,881,948 shares
issued and outstanding
|
|
|
|
|
|
|
|
|
|
(51,881,948 on
December 31, 2015)
|
|
|
1,037,639
|
|
|
|
1,037,639
|
|
|
Additional paid-in
capital
|
|
|
103,115,665
|
|
|
|
103,041,941
|
|
|
Accumulated other
comprehensive loss
|
|
|
(90,015)
|
|
|
|
(63,697)
|
|
|
Accumulated
deficit
|
|
|
(100,952,630)
|
|
|
|
(100,328,608)
|
|
|
Total stockholders'
equity
|
|
|
3,110,659
|
|
|
|
3,687,275
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
|
$
|
14,951,490
|
|
|
$
|
15,600,851
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
For the Three
Months Ended March 31,
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(624,022)
|
|
$
|
(1,646,693)
|
|
|
Adjustments to reconcile net
loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
360,501
|
|
|
379,593
|
|
|
Stock based
compensation
|
|
|
73,724
|
|
|
324,598
|
|
|
Paid in-kind
interest
|
|
|
19,500
|
|
|
20,000
|
|
|
Net loss on debt
modification and extinguishment
|
|
|
-
|
|
|
19,096
|
|
|
Change in deferred
tax provision
|
|
|
4,737
|
|
|
4,737
|
|
|
Foreign currency
transaction gain
|
|
|
-
|
|
|
(29,400)
|
|
|
Amortization of
deferred financing costs
|
|
|
5,290
|
|
|
5,290
|
|
|
Decrease (increase)
in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
183,443
|
|
|
651,937
|
|
|
Inventory
|
|
|
(52,383)
|
|
|
(202,540)
|
|
|
Prepaid expenses and
other assets
|
|
|
(123,456)
|
|
|
(33,622)
|
|
|
Restricted
cash
|
|
|
10,154
|
|
|
18,486
|
|
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
219,506
|
|
|
310,744
|
|
|
Accrued expenses and
other liabilities
|
|
|
(145,657)
|
|
|
(351,167)
|
|
|
Net cash used by
operating activities
|
|
|
(68,663)
|
|
|
(528,941)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(51,827)
|
|
|
(27,791)
|
|
|
Purchase of
intangible assets
|
|
|
(67,792)
|
|
|
-
|
|
|
Net cash used by
investing activities
|
|
|
(119,619)
|
|
|
(27,791)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Payments of long-term
debt
|
|
|
(202,439)
|
|
|
(195,084)
|
|
|
Net cash used by
financing activities
|
|
|
(202,439)
|
|
|
(195,084)
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in
cash
|
|
|
(390,721)
|
|
|
(751,816)
|
|
|
Cash beginning of
period
|
|
|
1,440,256
|
|
|
2,343,675
|
|
|
|
|
|
|
|
|
|
|
|
Cash end of
period
|
|
$
|
1,049,535
|
|
$
|
1,591,859
|
|
|
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, 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, 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
March 31,
|
|
|
|
|
|
2016
|
2015
|
%
change
|
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
Net Loss:
|
|
$
(624,000)
|
$
(1,647,000)
|
-62%
|
Add backs:
|
|
|
|
|
Depreciation
& amortization
|
|
361,000
|
380,000
|
-5%
|
Stock based
compensation
|
|
74,000
|
325,000
|
-77%
|
Interest
expense
|
|
77,000
|
78,000
|
-1%
|
Amortization of note
discount and net loss on debt
extinguishment and modification
|
|
-
|
19,000
|
-100%
|
Income
Taxes
|
|
5,000
|
5,000
|
0%
|
Foreign currency
transaction gain
|
|
-
|
(29,000)
|
-100%
|
|
|
|
|
|
Adjusted
EBITDA
|
|
(107,000)
|
(869,000)
|
-88%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA,
by group (unaudited)
|
|
|
|
|
|
|
|
|
|
Printed
Products
|
|
$
616,000
|
$
349,000
|
77%
|
Technology
Management
|
|
(355,000)
|
(786,000)
|
-55%
|
Corporate
|
|
(368,000)
|
(432,000)
|
-15%
|
|
|
(107,000)
|
(869,000)
|
-88%
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/document-security-systems-inc-announces-2016-first-quarter-financial-results-300269820.html
SOURCE Document Security Systems, Inc.