Document Security Systems, Inc. Announces First Quarter 2012 Financial Results
ROCHESTER, N.Y., May 15, 2012 /PRNewswire via COMTEX/ -- Document Security
Systems, Inc. (DSS), a world-wide developer and manufacturer of security and
authentication solutions which prevent counterfeiting and brand fraud, today
announced first quarter 2012 revenues of $3.8 million, a 43% increase over Q1
2011 .
Gross profit for Q1 2012 was $1.3 million, a 34% increase over Q1 2011, driven by
strength in the Company's packaging division. Operating expenses increased 24%
driven by a significant increase in research and development costs, along with
the increase costs associated with the Company's digital group acquired in May
2011.
Net loss for Q1 2012 was $1.1 million compared to $.4 million in Q1 2011.
Increase in net loss primarily due to two significant non-recurring items: 1) a
$221,000 charge for the amortization of note discount expense as the result of
the conversion of debt to equity during Q1 2012; and 2) a $361,000 gain from the
change in the fair value of derivative liability realized in Q1 2011. Adjusted
EBITDA (earnings before interest, taxes, depreciation, amortization, stock based
compensation and other non-recurring items) for Q1 2012 was a loss of $480,000, a
14% increase from Adjusted EBITDA loss of $422,000 in Q1 2011. The Adjusted
EBITDA losses reflect the significant increase of approximately $100,000 in
research and development in Q1 2012, along with year-end audit fees of
approximately $80,000 in Q1 2012, and $90,000 in Q1 2011, that typically
negatively impact first quarter results.
As of March 31, 2012, the Company had approximately $2.8 million in cash.
Document Security System's CEO Patrick White said, "Our revenue and gross profit
growth in the first quarter of 2012 continued the positive trend we saw at the
end of 2011. We continue to see many exciting opportunities for all of our
production divisions that are the foundation of our Company. In addition, I am
very excited about the research and development efforts made during the quarter.
While negatively affecting our bottom line in the short-term, I believe the
investments we are making in this area will significantly strengthen our
competitive position going forward, especially in the digital security
marketplace."
The above description of the Company's financial results for the quarter ending
March 31, 2012 is a summary only and is qualified in its entirety by the
financial information contained in the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 2012, filed earlier today.
CONFERENCE CALL
Management will host a teleconference and web cast today at 4:30 pm ET to discuss
the results with the investment community:
Time: 4:30 p.m. Eastern Time Date: Tuesday, May 15th, 2012 Investor Dial In (Toll
Free): 877-407-9205 Investor Dial In (International): 201-689-8054
Live Webcast URL: investorcalendar.com
A replay of the teleconference will be available until May 29, 2012, which can be
accessed by dialing (877) 660-6853 if calling within the U.S. or (201) 612-7415
if calling internationally. Please enter account #286 and conference ID #394356
to access the replay.
About DSS (Document Security Systems, Inc.)
DSS is comprised of four operating groups, DSS Plastics Group, DSS Printing
Group, DSS Packaging Group and DSS Digital Group. Through these divisions, DSS
provides counterfeit prevention and comprehensive brand and digital information
protection solutions to corporations, governments, and financial institutions
around the world. DSS develops and manufactures products and services containing
patented and patent pending optical deterrent technologies that help prevent
counterfeiting and brand fraud from the use of the most advanced scanners and
copiers in the market.
The Company owns numerous patented and patent-pending technologies and products.
DSS uses its covert and overt technologies to protect a wide range of documents
including, but not limited to, consumer packaging, vital records, ID Cards/RFID,
smart cards, passports, gift certificates, checks and coupons. The Company also
protects digital information via secure cloud computing and disaster recovery
services. Furthermore, DSS uses its extensive knowledgebase to provide
comprehensive brand protection solutions to its customers. From risk analysis and
vulnerability assessment, to systems integration and monitoring, DSS offers the
advanced tools and knowledgebase needed to protect the world's most valuable and
at-risk brands. DSS's customized solutions are designed to protect against
product diversion, counterfeit, and other costly and damaging occurrences. In
addition, DSS offers commercial printing services.
For more information on DSS and its subsidiaries, please visit
dsssecure.com.
Follow DSS on Facebook, click HERE.
For more information:
Investor Relations Document Security Systems (585) 325-3610 Email:
ir@documentsecurity.com
Safe Harbor Statement
The statements contained in this press release that are not purely historical are
forward-looking statements 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, and are intended to be covered by the safe harbors created thereby.
These forward-looking statements include, but are not limited to, statements
regarding expectations for future financial performance, potential sales from new
and existing customers, expected benefits from the Company's cost cutting efforts
and/or statements preceded by, followed by or that include the words "believes,"
"could," "expects," "anticipates," "estimates," "intends," "plans," "projects,"
"seeks," or similar expressions, all of which involve uncertainty and risk. Many
of these risks and uncertainties are discussed in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities
and Exchange Commission (the "SEC"), and in any subsequent reports filed with the
SEC, all of which are available at the SEC's website at sec.gov. It is
possible the company's future financial performance may differ from expectations
due to a variety of factors including, but not limited to, the risks referred to
above, and changes in economic and business conditions in the world, increased
competitive activity, achieving sales levels to fulfill revenue expectations,
consolidation among its competitors and customers, technology advancements,
unexpected costs and charges, adequate funding for plans, changes in interest and
foreign exchange rates, regulatory and other approvals and failure to implement
all plans, for whatever reason. It is not possible to foresee or identify all
such factors. Any forward-looking statements in this report are based on current
conditions; expected future developments and other factors it believes are
appropriate in the circumstances. Prospective investors are cautioned that such
statements are not a guarantee of future performance and actual results or
developments may differ materially from those projected. The company makes no
commitment to update any forward-looking statement included herein, or disclose
any facts, events or circumstances that may affect the accuracy of any
forward-looking statement.
FINANCIAL TABLES FOLLOW
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
For the Three Months Ended March 31,
(Unaudited)
20122011
Revenue
Printing$669,628$721,763
Packaging2,095,3951,036,402
Plastic IDs and cards680,182692,980
Licensing and digital solutions397,616234,096
Total revenue3,842,8212,685,241
Costs of revenue
Printing506,708630,063
Packaging1,630,482718,287
Plastic IDs and cards399,871402,429
Licensing and digital solutions55,191-
Total costs of revenue2,592,2521,750,779
Gross profit1,250,569934,462
Operating expenses:
Selling, general and administrative1,798,3101,515,254
Research and development147,69751,293
Amortization of intangibles76,02671,964
Operating expenses2,022,0331,638,511
Operating loss(771,464)(704,049)
Other income (expense):
Change in fair value of derivative liability-360,922
Interest expense(70,932)(49,955)
Amortization of note discount(226,642)-
Loss before income taxes(1,069,038)(393,082)
Income tax expense4,7374,737
Net loss$(1,073,775)$(397,819)
Other comprehensive loss:
Interest rate swap gain22,6423,678
Comprehensive loss$(1,051,133)$(394,141)
Net loss per share -basic and diluted:$(0.05)$(0.02)
Weighted average common shares outstanding, basic and diluted20,074,17019,413,232
DOCUMENT SECURITY SYSTEMS, INC.AND SUBSIDIARIES
Consolidated Balance Sheets
As of
March 31, 2012 (unaudited)December 31, 2011
ASSETS(Unaudited)
Current assets:
Cash$2,769,351$717,679
Accounts receivable, net of allowance
of$76,000 ($76,000- 2011)1,496,0781,595,750
Inventory718,677783,442
Prepaid expenses and other current assets345,48195,399
Total current assets5,329,5873,192,270
Property, plant and equipment, net3,952,3934,019,829
Other assets239,506244,356
Goodwill3,322,7993,322,799
Other intangible assets, net1,967,1862,043,212
Total assets$14,811,471$12,822,466
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$1,441,016$1,666,963
Accrued expenses and other current liabilities1,278,1321,142,629
Revolving lines of credit793,182763,736
Short-term loan from related party-150,000
Current portion of long-term debt333,083460,598
Current portion of capital lease obligations81,11788,172
Total current liabilities3,926,5304,272,098
Long-term debt, net of unamortized discount of $77,000 ($88,000-2011)2,275,8262,819,783
Interest rate swap hedging liabilities88,046110,688
Capital lease obligations-11,133
Deferred tax liability113,464108,727
Commitments and contingencies
Stockholders' equity
Common stock, $.02 par value;200,000,000 shares authorized, 20,711,026 shares issued and outstanding
(19,513,132 in 2011)414,220390,262
Additional paid-in capital52,329,98448,395,241
Accumulated other comprehensive loss(88,046)(110,688)
Accumulated deficit(44,248,553)(43,174,778)
Total stockholders' equity8,407,6055,500,037
Total liabilities and stockholders' equity$14,811,471$12,822,466
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
(Unaudited)
20122011
Cash flows from operating activities:
Net loss$(1,073,775)$ (397,819)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization192,942180,878
Stock based compensation98,481100,875
Amortization of note discount226,642-
Change in fair value of derivative liability-(360,922)
(Increase) decrease in assets:
Accounts receivable99,672693,926
Inventory64,765(512,737)
Prepaid expenses and other assets(18,133)(87,979)
Increase (decrease) in liabilities:
Accounts payable(225,947)(502,888)
Accrued expenses and other current liabilities140,240(10,126)
Net cash used by operating activities(495,113)(896,792)
Cash flows from investing activities:
Purchase of property, plant and equipment(49,480)(4,509)
Purchase of other intangible assets-(9,068)
Net cash used by investing activities(49,480)(13,577)
Cash flows from financing activities:
Net (payments) borrowings on revolving lines of credit29,446(246,988)
Payment of short-term loan from related party(150,000)-
Payments of long-term debt(102,629)(75,000)
Payments of capital lease obligations(18,188)(27,980)
Issuance of common stock, net of issuance costs2,837,636(105,315)
Net cash provided (used) by financing activities2,596,265(455,283)
Net increase (decrease) in cash2,051,672(1,365,652)
Cash beginning of period717,6794,086,574
Cash end of period$2,769,351$ 2,720,922
Adjusted EBITDA: Non-GAAP Financial Performance Measure
The Company uses Adjusted EBITDA as a non-GAAP financial performance measurement.
Adjusted EBITDA is calculated 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 gain on
the change in fair value of derivative liability. Adjusted EBITDA is provided to
investors to supplement the results of operations reported in accordance with
GAAP. Management believes Adjusted EBITDA is useful to help investors analyze the
operating trends of the business before and after the adoption of FASB ASC 718
and to assess the relative underlying performance of businesses with different
capital and tax structures. 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, 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 (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
20122011% change
(unaudited)(unaudited)
Net Loss$(1,073,775) $(397,819) 170%
Add back:
Depreciation & Amortization192,942180,8787%
Stock based compensation98,481100,875-2%
Interest expense71,00049,95542%
Amortization of note discount227,000-
Change in fair value of derivative liability-(360,922)
Income Taxes4,7374,737-
Adjusted EBITDA(479,615)(422,296)14% |
