Document Security Systems, Inc. (DSS or the “Company”)
(NYSE American: DSS), a leader in anti-counterfeit,
authentication and consumer engagement technologies today announced
its financial results for the year ended December 31, 2019.
Full Year 2019 Business Highlights
- DSS named Mr. Chan Heng Fai Ambrose, as
Executive Chairman of the Board of Directors. Mr. Chan is an
accomplished global business professional with a track record of
success for more than 45 years. Mr. Chan specializes in financial
restructuring and corporate transformation to unlock value and
unleash entrepreneurial zeal while managing risk.
- DSS named Mr. Frank D. Heuszel, JD, CPA, CIA,
as Chief Executive Officer. Mr Heuszel is a seasoned banker and
attorney with over 30 years of turnaround management
experience.
- DSS promoted Mr. Jason Grady to Chief
Operating Officer.
- DSS named Mr. Vincent Lum
President of DSS Asia and CEO of its subsidiary, HWH World,
Inc.
- The new management team designed and put in place a
Strategic Business Plan, initiated for a major
business turnaround with the focus of maximizing shareholder value
and generating sustainable growth for the Company.
- The Company’s Board of Directors was enhanced
through the addition of highly qualified and proven business
leaders with the expertise and experience to successfully execute
the Company’s new Strategic Business Plan.
- New business divisions were established as
part of the Strategic Business Plan – DSS Blockchain Security,
Inc., Decentralized Sharing Systems, Inc., DSS Securities, Inc.,
DSS BioHealth Security, Inc. and DSS Secure Living, Inc.
- Partnership developed with Zappar, Inc., a
global leader in augmented reality, to combine proprietary
technologies to bring together Augmented Reality and Product
Authentication to help their respective customers with brand
protection and consumer engagement.
- Brand protection agreement established with Market
Defence, LLC.
- Release of blockchain tracking and authentication
technology, “Sentinel,” to combat unauthorized sellers,
map violators and retail arbitrage within Amazon Marketplace.
- DSS in partnership with Luminescence Sun Chemical Security
announced agreement to provide augmented reality and brand
authentication for Wyeth Nutrition (A Division of
Nestle).
- Company established “DSS Certified Printer
Program” for qualified printers and packagers with DSS
portfolio of printed and digital anti-counterfeiting
technologies.
Recent Developments
- DSS entered into Letter of Intent to acquire Impact Biomedical,
Inc., a company with upside potential for healthcare and biomedical
applications. Impact Biomedical, Inc.’s products feature possible
virus combating technology, diabetes mitigation offerings via a
breakthrough alternative sugar, and functional fragrances for
industrial and medical application, amongst others.
- DSS entered into a joint venture to establish a U.S.-based
medical real estate investment trust (REIT) focused on acquiring
purpose-built healthcare facilities and leasing them to leading
clinical operators with strong market share under secure triple net
leases.
- The Company is responding to the current coronavirus pandemic
by strategically repositioning itself, reorganizing where
appropriate and carefully managing its resources, while continuing
to execute its expansive strategy.
“2019 was a period of change and transformation for
DSS,” said Frank D. Heuszel, CEO of DSS. “We made the
decision to strengthen our position through strategic investment
opportunities into existing key scalable business lines that would
materially improve our top line revenue, improve profitability and
be sustainable.
“In 2019 we made some key new appointments to our
board of directors with individuals that will bring our company a
new level of expertise and vision. In addition, we hired new
senior management that will play a key role in helping us grow and
carry out our business plan.
“Our goal and focus are to create and deliver
long-term, sustained shareholder value as we continue to identify
potential operational cost-reduction opportunities while
simultaneously aligning resources to support and build a foundation
for strategic growth opportunities. Toward that goal, in 2019 we
took significant steps to stabilize the Company and to strengthen
our balance sheet and liquidity. As an example, our Executive
Chairman, Mr. Chan Heng Fai made, and continues to make,
substantial investments in our company, including purchasing an
entire private placement offering on his own at above market price
and by introducing us to valuable business opportunities. With Mr.
Chan’s guidance, DSS has now formed multiple new divisions and is
looking to substantially transform and grow the company through
additional mergers and acquisitions.”
TechnologyMr. Heuszel continued:
“We have enhanced our technology by engaging in new partnerships
with complimentary products and services, while improving on our
own offerings internally such as releasing “Sentinel” which will
fight fraud within the Amazon Marketplace.
“Despite the challenges in 2019, there are many
very favorable financial trends that indicate the positive effects
of our cost saving measures and core business invigoration.
For example, I am happy to report that our technology sales,
services and licensing revenues increased 36% in 2019, primarily
due to increases in sales of our AuthentiGuard product offerings.
We continue to expand our marketing and sales efforts to
drive market penetration and conversion of the pent-up customer
demand for associated anti-counterfeiting. In addition, we
believe our recent participation in emerging growth sectors such as
blockchain and the biomedical segment could lead to further
top-line growth.”
Biohealth Security“Looking into
2020, our recent agreement to acquire Impact Biomedical will
enhance our product offerings, especially in these challenging days
that need products to assist in the mitigation of COVID-19. There
is no doubt that the effects of the coronavirus outbreak on global
organizations and economies will continue to be far-reaching and
significant. The preservation of health and safety is the
number-one priority, and Impact’s Equivir product has been shown in
studies to be effective as an antiviral against a broad range of
viruses and could be a potential treatment in the fight against
COVID-19. This technology is among other highly-anticipated
technologies that may prove to be effective in dealing with
existing global healthcare issues. Biomedical science is becoming
increasingly vital and Impact Biomedical strives to leverage its
scientific knowhow and intellectual property rights to provide
solutions that have been plaguing the biomedical field for
decades,” added Mr. Heuszel.
Real Estate Investment
Trust“Consistent with our strategic business plan, we
continue to pursue accretive, complementary businesses such as our
recent joint venture to establish a U.S.– based medical real estate
investment trust. During the first quarter of 2020, DSS
entered into a joint venture to form American Medical REIT Inc.,
(AMRE). AMRE was founded to originate, acquire, and lease a
credit-centric portfolio of licensed medical real estate. AMRE
provides investors the opportunity for direct ownership of Class A
licensed medical real estate. AMRE intends to acquire purpose-built
healthcare facilities and lease them to leading clinical operators
with strong market share under secure triple net leases. AMRE
targets hospitals (both Critical Access and Specialty Surgical),
Physician Group Practices, Ambulatory Surgical Centers, and other
licensed medical treatment facilities.
“The team that is heading AMRE is the same team
that founded a similar REIT – Global Medical Real Estate (GMRE) –
that is currently listed on the New York Stock Exchange with market
capitalization of over $800 Million and was recently added to the
Morgan Stanley Capital International (MSCI) US REIT Index. Mr. Chan
Heng Fai, Executive Chairman of the board and largest shareholder
of the Company, was the sole funder and founder of the GMRE REIT at
the initial stage,” concluded Mr. Heuszel.
2019 Financial Highlights
Revenues for the year ended December 31, 2019,
revenue increased 5% to approximately $19.4 million as compared to
revenues of $18.5 million for the year ended December 31, 2018.
Printed products sales, which include sales of packaging, printing
and plastic products, increased 1% in 2019 as compared to 2018,
driven by an increase in the sales of printing and packaging
products of 4% and offset by a decrease in sales of plastic card
products of 8%. The Company’s technology sales, services and
licensing revenues increased 36% in 2019, as compared to 2018, due
primarily to increases in sales of our AuthentiGuard® product,
which increased approximately $642,000 year-over-year.
Costs of revenue sold, exclusive of depreciation
and amortization, includes all direct cost of the Company’s printed
products, including its packaging, printing and plastic ID card
sales, materials, direct labor, transportation and manufacturing
facility costs. In addition, this category includes all direct
costs associated with the Company’s technology sales, services and
licensing, including hardware and software that are resold,
third-party fees, and fees paid to inventors or others as a result
of technology licenses or settlements, if any. Costs of revenue
increased 6% in 2019 as compared to 2018, primarily due to an
increase in paper costs, freight costs, and machine maintenance at
the Company’s two production facilities.
During 2019, the Company had net loss of $2.9
million as compared to a net income of $1.5 million in 2018.
The increases in operating losses incurred during the year ended
December 31, 2019 as compared to the same period in 2018 primarily
reflect the increases in paper costs, freight costs, and machine
maintenance at the Company’s two production facilities, as well as
an increases in professional fees, stock based compensation, costs
associated with the Company’s expansion into Asia, and the impact
of the net gain from extinguishment of liabilities of approximately
$3.5 million, which occurred during the second quarter of 2018.
A full analysis of results for the year ended
December 31, 2019 is available in the Company’s Form 10-K which was
filed with the SEC and is available on the Company’s website at
www.dsssecure.com or through the Securities and Exchange
Commission’s Edgar database at www.sec.gov.
About Document Security Systems, Inc.
(DSS)
For over 15 years, DSS has protected corporations,
financial institutions, and governments from sophisticated and
costly fraud. DSS' innovative anti-counterfeit, authentication, and
brand protection solutions are deployed to prevent attacks which
threaten products, digital presence, financial instruments, and
identification. AuthentiGuard®, the company's flagship product,
provides authentication capability through a smartphone application
so businesses can empower a wide range of employees, supply chain
personnel, and consumers to track their brands and verify
authenticity. For more information on DSS visit
http://www.dsssecure.com.
Safe Harbor Disclosure
This press release contains forward-looking
statements that are made pursuant to the safe harbor provisions
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements include, but are not
limited to, statements related to the Company's ability to complete
the financing, its intended use of proceeds and other statements
that are not historical facts. Forward-looking statements are based
on management’s current expectations and are subject to risks and
uncertainties that may cause actual results or events to differ
materially from those projected. These risks and uncertainties,
many of which are beyond our control, include: risks relating to
our growth strategy; our ability to obtain, perform under and
maintain financing and strategic agreements and relationships;
risks relating to the results of development activities; our
ability to attract, integrate and retain key personnel; our need
for substantial additional funds; patent and intellectual property
matters; competition; as well as other risks described in the
section entitled “Risk Factors” in the section entitled “Risk
Factors” and elsewhere in our Annual Report on Form 10-K filed with
the SEC and in our other filings with the SEC, including, without
limitation, our reports on Forms 8-K and 10-Q, all of which can be
obtained on the SEC website at www.sec.gov. Readers are cautioned
not to place undue reliance on the forward- looking statements,
which speak only as of the date on which they are made and reflect
management’s current estimates, projections, expectations and
beliefs. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our
expectations or any changes in events, conditions or circumstances
on which any such statement is based, except as required by
law.
Investor Contact: Bret Shapiro, Core IR(516)
222-2560, ir@dsssecure.com
|
|
DOCUMENT SECURITY SYSTEMS, INC. AND
SUBSIDIARIESConsolidated Balance
SheetsAs of December 31, 2019, and
2018 |
|
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,096,248 |
|
|
$ |
2,447,985 |
|
Accounts receivable, net of $41,000 and $50,000 respectively
allowance for doubtful accounts |
|
|
4,211,906 |
|
|
|
2,217,877 |
|
Inventory |
|
|
1,707,690 |
|
|
|
1,563,593 |
|
Prepaid expenses and other current assets |
|
|
459,868 |
|
|
|
285,580 |
|
Total current assets |
|
|
7,475,712 |
|
|
|
6,515,035 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment,
net |
|
|
5,060,698 |
|
|
|
5,014,494 |
|
Investment |
|
|
2,154,175 |
|
|
|
324,930 |
|
Notes receivable |
|
|
793,195 |
|
|
|
- |
|
Other assets |
|
|
49,875 |
|
|
|
90,319 |
|
Right-of-use assets |
|
|
1,222,742 |
|
|
|
- |
|
Goodwill |
|
|
2,453,597 |
|
|
|
2,453,597 |
|
Other intangible assets,
net |
|
|
934,765 |
|
|
|
881,411 |
|
Total
assets |
|
$ |
20,144,759 |
|
|
$ |
15,279,786 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,492,494 |
|
|
$ |
1,347,491 |
|
Accrued expenses and deferred revenue |
|
|
935,041 |
|
|
|
1,106,346 |
|
Other current liabilities |
|
|
390,494 |
|
|
|
2,255,942 |
|
Revolving line of credit |
|
|
500,000 |
|
|
|
- |
|
Current portion of lease liability |
|
|
397,097 |
|
|
|
- |
|
Current portion of long-term debt, net |
|
|
440,699 |
|
|
|
713,427 |
|
Total current liabilities |
|
|
4,155,825 |
|
|
|
5,423,206 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, net |
|
|
2,309,847 |
|
|
|
1,721,936 |
|
Long term lease liability |
|
|
825,645 |
|
|
|
- |
|
Other long-term
liabilities |
|
|
507,058 |
|
|
|
391,325 |
|
Deferred tax liability,
net |
|
|
43,567 |
|
|
|
168,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity |
|
|
|
|
|
|
|
|
Common stock, $.02 par value; 200,000,000 shares authorized,
36,180,626 shares issued and outstanding (17,425,858 on December
31, 2018) |
|
|
723,612 |
|
|
|
348,517 |
|
Additional paid-in capital |
|
|
114,860,150 |
|
|
|
107,624,666 |
|
Accumulated other comprehensive loss |
|
|
- |
|
|
|
(7,052 |
) |
Accumulated deficit |
|
|
(103,280,945 |
) |
|
|
(100,391,798 |
) |
Total stockholders’ equity |
|
|
12,302,817 |
|
|
|
7,574,333 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
|
$ |
20,144,759 |
|
|
$ |
15,279,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT SECURITY SYSTEMS, INC. AND
SUBSIDIARIESConsolidated Statements of Operations
and Comprehensive Income (Loss)For the Years Ended
December 31, 2019 and 2018 |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Printed products |
|
$ |
17,089,740 |
|
|
$ |
16,940,262 |
|
Technology sales, services and licensing |
|
|
2,147,740 |
|
|
|
1,574,820 |
|
Direct selling |
|
|
171,750 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
19,409,230 |
|
|
|
18,515,082 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of revenue, exclusive of depreciation and amortization |
|
|
12,602,494 |
|
|
|
11,853,499 |
|
Selling, general and administrative (including stock-based
compensation) |
|
|
8,283,266 |
|
|
|
7,088,610 |
|
Depreciation and amortization |
|
|
1,403,836 |
|
|
|
1,281,634 |
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
22,289,596 |
|
|
|
20,223,743 |
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(2,880,366 |
) |
|
|
(1,708,661 |
) |
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Interest income |
|
|
24,953 |
|
|
|
8,634 |
|
Interest expense |
|
|
(157,319 |
) |
|
|
(144,819 |
) |
Amortization of deferred financing costs and debt discount |
|
|
(1,901 |
) |
|
|
(46,251 |
) |
Impairment of investment |
|
|
- |
|
|
|
(160,000 |
) |
Gain on extinguishment of liabilities, net |
|
|
- |
|
|
|
3,532,659 |
|
Income (loss) before
income taxes |
|
|
(3,014,634 |
) |
|
|
1,481,562 |
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit) |
|
|
(125,487 |
) |
|
|
16,593 |
|
Net income
(loss) |
|
$ |
(2,889,147 |
) |
|
$ |
1,464,969 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss): |
|
|
|
|
|
|
|
|
Interest rate swap gain (loss) |
|
|
(15,431 |
) |
|
|
16,017 |
|
Settlement of Interest rate swap |
|
|
22,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
(loss): |
|
$ |
(2,882,095 |
) |
|
$ |
1,480,986 |
|
|
|
|
|
|
|
|
|
|
Income (loss) per
common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.11 |
) |
|
$ |
0.09 |
|
Diluted |
|
$ |
(0.11 |
) |
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
Shares used in
computing income (loss) per common share: |
|
|
|
|
|
|
|
|
Basic |
|
|
25,505,404 |
|
|
|
16,724,376 |
|
Diluted |
|
|
25,505,404 |
|
|
|
16,930,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT SECURITY SYSTEMS, INC. AND
SUBSIDIARIESConsolidated Statements of Cash
FlowsFor the Years Ended December 31, 2019 and
2018 |
|
|
|
2019 |
|
|
2018 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(2,889,147 |
) |
|
$ |
1,464,969 |
|
Adjustments to reconcile net income (loss) to net cash used by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,403,836 |
|
|
|
1,281,634 |
|
Stock based compensation |
|
|
421,673 |
|
|
|
131,733 |
|
Paid in-kind interest |
|
|
- |
|
|
|
12,000 |
|
Change in deferred tax provision |
|
|
(125,419 |
) |
|
|
9,673 |
|
Amortization of deferred financing costs and debt discount |
|
|
1,901 |
|
|
|
46,251 |
|
Gain on extinguishment of liabilities, net |
|
|
- |
|
|
|
(3,532,659 |
) |
Impairment of investment |
|
|
- |
|
|
|
160,000 |
|
Decrease (increase) in assets: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(1,994,029 |
) |
|
|
(192,593 |
) |
Inventory |
|
|
(144,097 |
) |
|
|
87,653 |
|
Prepaid expenses and other assets |
|
|
(133,844 |
) |
|
|
(31,198 |
) |
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
145,003 |
|
|
|
618,836 |
|
Accrued expenses |
|
|
(279,036 |
) |
|
|
(113,793 |
) |
Other liabilities |
|
|
(1,749,715 |
) |
|
|
(1,325,427 |
) |
Net cash used by operating
activities |
|
|
(5,342,874 |
) |
|
|
(1,382,921 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(988,876 |
) |
|
|
(1,003,413 |
) |
Purchase of investment |
|
|
(1,829,245 |
) |
|
|
- |
|
Issuance of notes receivable |
|
|
(793,195 |
) |
|
|
- |
|
Purchase of intangible assets |
|
|
(369,735 |
) |
|
|
(100,138 |
) |
Net cash used by investing
activities |
|
|
(3,981,051 |
) |
|
|
(1,103,551 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Payments of long-term debt |
|
|
(274,468 |
) |
|
|
(1,188,081 |
) |
Borrowings from lines of credit, net |
|
|
587,750 |
|
|
|
502,155 |
|
Borrowings from revolving lines of credit, net |
|
|
500,000 |
|
|
|
- |
|
Borrowings from conversion of note |
|
|
500,000 |
|
|
|
- |
|
Issuances of common stock, net of issuance costs |
|
|
6,658,906 |
|
|
|
887,755 |
|
Receipt of subscription receivable, net of issuance costs |
|
|
- |
|
|
|
288,000 |
|
Net cash provided by financing
activities |
|
|
7,972,188 |
|
|
|
489,829 |
|
|
|
|
|
|
|
|
|
|
Net decrease in
cash |
|
|
(1,351,737 |
) |
|
|
(1,996,643 |
) |
Cash and cash
equivalents at beginning of year |
|
|
2,447,985 |
|
|
|
4,444,628 |
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at end of year |
|
$ |
1,096,248 |
|
|
$ |
2,447,985 |
|
DSS (AMEX:DSS)
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From Aug 2024 to Sep 2024
DSS (AMEX:DSS)
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From Sep 2023 to Sep 2024