Document Security Systems, Inc. Reports Second Quarter 2011 Financial Results
ROCHESTER, N.Y., Aug. 15, 2011 /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, reported
results for the second quarter ended June 30, 2011. Management will host a
teleconference and web cast today at 4:15 pm ET to discuss the results with the
investment community:
Time: 4:15 p.m. Eastern Time
Date: Monday, August 15th, 2011
Investor Dial-in (Toll Free): 877-407-9210
Investor Dial-In (International): 201-689-8049
Live Web Cast URL: investorcalendar.com
A replay of the teleconference will be available until August 29, 2011, 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
#377482 to access the replay. The webcast will be available for replay within the
Investor Relations "Events & Presentations" section of the DSS home page located
at dsssecure.com.
Second Quarter 2011 Highlights
Sales of $2.9 million up 7% from first quarter of 2011, down 14% from the second
quarter 2010.
Gross margin percentage of 28% from 26% in the second quarter of 2010.
Operating expenses increased 13% from the first quarter of 2011, up 8% from the
second quarter 2010. The bulk of this increase was due to an increase in sales
and marketing related expenses, the acquisition of a cloud computing company
called Extradev, Inc. and a major re-branding project the company recently
completed.
Net loss of $1,112,000, an increase of 12% from the second quarter of 2010.
Net loss per share of $(0.06), flat with the net loss per share in the second
quarter of 2010.
First Half 2011 Highlights
Sales of $5.6 million down 9% from the first half of 2010.
Gross profit up 1% from the first half of 2010.
Gross margin percentage of 31% from 28% in the first half of 2010.
Operating expenses decreased 5% from the first half of 2010.
Net loss of $1,510,000, a decrease of 29% from the first half of 2010 loss.
Net loss per share of $(0.08) compared to $(0.12) in the first half of 2010.
Patrick White, DSS's CEO, stated: "Unfortunately, the positive 2nd quarter
results from four of our five operating divisions were overshadowed by the
continuing struggles in our non-core commercial printing unit, and expense
increases from a front loading of sales and marketing costs and costs associated
with our successful re-branding project we completed during the quarter. We are
excited about the solid financial performances of our core business divisions
(security licensing and printing, plastics, packaging and digital) achieved
during the quarter.
"It is important to note that Management is weighing certain options for the
non-core commercial printing component of our business.
"Furthermore, during the second quarter we formed our new Digital Division based
on our acquisition of Extradev, Inc. which joined DSS in the second quarter. This
new group adds an exciting new business line to our Company as it provides a
delivery system for our various digital security products. Our targeted sales and
marketing efforts, including the launch during the second quarter of our new
marketing identity, logo and website, has allowed DSS to make inroads with
potentially significant customers, as well as increased our recognition in the
industry. The opportunities that exist for our security products continue to be
immense, and we are confident that we are very well positioned to capitalize on
the opportunities."
About DSS (Document Security Systems, Inc.)
DSS is comprised of four core operating groups, DSS Plastics Group, DSS Secure
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:
BPC Financial Marketing John Baldissera 800-368-1217 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, 2010 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.
TABLES FOLLOW.
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
RevenueThree Months Ended June 30, 2011 Three Months Ended June 30, 2010 % changeSix Months Ended June 30, 2011 Six Months Ended June 30, 2010 % changeThree Months Ended March 31, 2011 % change
-------------------------------- -------------------------------- -------------------------------------- ------------------------------ ----------------------------------------- --------
Printing$789,000$1,172,000-33%$1,511,000$2,432,000-38%$722,0009%
Packaging1,183,0001,330,000-11%2,220,0002,071,0007%1,036,00014%
Plastic IDs and cards637,000656,000-3%1,330,0001,258,0006%693,000-8%
Licensing and digital solutions266,000168,00058%500,000340,00047%234,00014%
Total Revenue2,875,0003,326,000-14%5,561,0006,101,000-9%2,685,0007%
Costs of revenue
Printing$754,000$1,004,000-25%$1,384,000$1,956,000-29%$631,00019%
Packaging920,0001,058,000-13%1,638,0001,617,0001%718,00028%
Plastic IDs and cards375,000386,000-3%777,000798,000-3%402,000-7%
Licensing and digital solutions19,000-100%19,0005,000280%-100%
Total cost of revenue2,068,0002,448,000-16%3,818,0004,376,000-13%1,751,000
Gross profit
Printing35,000168,000-79%127,000476,000-73%91,000-62%
Packaging263,000272,000-3%582,000454,00028%318,000-17%
Plastic IDs and cards262,000270,000-3%553,000460,00020%291,000-10%
Licensing and digital solutions247,000168,00047%481,000335,00044%234,0006%
Total gross profit807,000878,000-8%1,743,0001,725,0001%934,000-14%
Operating Expenses
Sales, general and administrative compensation843,000859,000-2%1,604,0001,691,000-5%759,00011%
Professional Fees163,000133,00023%364,000345,0006%200,000-19%
Sales and marketing162,00057,000184%286,000126,000127%124,00031%
Research and development74,00067,00010%125,000133,000-6%51,00045%
Rent and utilities188,000166,00013%354,000308,00015%166,00013%
Other231,000163,00042%364,000372,000-2%133,00074%
-------------------------------- -------------------------------- -------------------------------------- ------------------------------ -----------------------------------------
1,661,0001,445,00015%3,097,0002,975,0004%1,433,00016%
Other Operating Expenses
Depreciation and software amortization31,00031,0000%63,00062,0002%32,000-3%
Stock based compensation101,00065,00055%202,000205,000-1%101,0000%
Amortization of intangibles62,000184,000-66%134,000430,000-69%72,000-14%
-------------------------------- -------------------------------- -------------------------------------- ------------------------------ -----------------------------------------
194,000280,000-31%399,000697,000-43%205,000-5%
Total Operating Expenses1,855,0001,725,0008%3,496,0003,672,000-5%1,638,00013%
Operating loss(1,048,000)(847,000)24%(1,753,000)(1,947,000)-10%(704,000)49%
Other income (expense):
Change in fair value of derivative liability--0%361,000-100%361,000-100%
Interest expense(59,000)(84,000)-30%(109,000)(150,000)-27%(50,000)18%
Amortizaton of note discount-(41,000)-100%-(82,000)-100%-0%
Loss in equity investment-(20,000)-100%-(72,000)-100%-0%
Other income--0%-143,000-100%-0%
-------------------------------- -------------------------------- -------------------------------------- ------------------------------ ----------------------------------------- --------
Other income (expense), net(59,000)(145,000)-59%252,000(161,000)-257%311,000
Loss before income taxes(1,107,000)(992,000)12%(1,501,000)(2,108,000)-29%(392,000)
Income taxes5,0005,0000%9,0009,0000%5,000
Net loss$(1,112,000)$(997,000)12%$(1,510,000)$(2,117,000)-29%$(398,000)179%
Net loss per share, basic and diluted$(0.06)$(0.06)0%$(0.08)$(0.12)-33%$(0.02)200%
Weighted average common shares outstanding, basic and diluted19,420,78017,769,7269%19,416,78617,390,57012%19,413,2320%
DOCUMENT SECURITY SYSTEMS, INC.AND SUBSIDIARIES
Consolidated Balance Sheets
As of
June 30, 2011December 31, 2010
ASSETS(Unaudited)
Current assets:
Cash$1,512,161$4,086,574
Accounts receivable, net of allowance
of$66,000 ($66,000- 2010)1,523,2612,227,877
Inventory916,690601,359
Prepaid expenses and other current assets140,784231,190
------------
Total current assets4,092,8967,147,000
Equipment and leasehold improvements, net2,415,4952,543,494
Other assets315,299325,953
Goodwill2,012,6281,943,081
Other intangible assets, net2,146,0741,847,859
Total assets$10,982,392$13,807,387
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$1,286,391$1,828,138
Accrued expenses and other current liabilities657,0291,312,363
Revolving lines of credit504,081614,833
Current portion of long-term debt424,432300,000
Current portion of capital lease obligations94,61888,776
------------------------
Total current liabilities2,966,5514,144,110
Revolving note from related party-583,000
Long-term debt1,953,8101,578,242
Capital lease obligations37,48698,532
Deferred tax liability99,25389,779
Derivative liabilities-3,866,836
Commitments and contingencies
Stockholders' equity
Common stock, $.02 par value;200,000,000 shares authorized, 19,420,780 shares issued and outstanding (19,391,319 in 2010)388,415387,825
Additional paid-in capital48,163,00344,178,569
Accumulated other comprehensive loss(22,156)(25,834)
Accumulated deficit(42,603,970)(41,093,672)
------------
Total stockholders' equity5,925,2923,446,888
Total liabilities and stockholders' equity$10,982,392$13,807,387
------------------------
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
(Unaudited)
20112010
----------------------------------
Cash flows from operating activities:
Net loss$(1,510,298)$(2,117,225)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization351,548641,548
Stock based compensation201,543204,961
Amortization of note discount-81,464
Loss on equity investment-71,679
Change in fair value of derivative liability(360,922)-
(Increase) decrease in assets:
Accounts receivable773,970889,660
Inventory(315,331)201,010
Prepaid expenses and other assets34,760(17,923)
Increase (decrease) in liabilities:
Accounts payable(610,132)(424,409)
Accrued expenses and other current liabilities(457,137)140,594
----------------------
Net cash used by operating activities(1,891,997)(328,641)
Cash flows from investing activities:
Purchase of equipment and leashold improvements(4,509)(85,400)
Purchase of other intangible assets(24,472)(43,137)
Acquisition of business61,995(2,272,405)
----------------------
Net cash provided (used) by investing activities33,014(2,400,942)
Cash flows from financing activities:
Net borrowings on related party revolving line of credit-100,000
Net payments on revolving line of credit(349,911)
Borrowings on long-term debt-1,500,000
Payments of long-term debt(150,000)(100,000)
Payments of capital lease obligations(55,204)(44,344)
Issuance of common stock, net of issuance costs(160,315)1,134,005
----------------------
Net cash (used) provided by financing activities(715,430)2,589,661
----------------------
Net decrease in cash(2,574,413)(139,922)
Cash beginning of period4,086,574448,895
Cash end of period$1,512,161$308,973
SOURCE Document Security Systems, Inc. |
