Document Security Systems, Inc. Reports 4th Quarter and 2009 Year End Financial Results
Poster: SySAdmin
Posted on March 24, 2010 at 3:14:01 PM
Document Security Systems, Inc. Reports 4th Quarter and 2009 Year End Financial Results
- 4th Quarter Sales Revenue increased 78% - 4th Quarter Gross Profit increases 40% - 4th Quarter Net Loss decreases 47% - 2009 Sales Revenue increased 49% - 2009 Operating Expenses decrease 31% - 2009 Net loss decreases 52%
ROCHESTER, N.Y., March 24 -- Document Security Systems, Inc. (NYSE AMEX: DMC; "DSS"), a leader in patented protection against counterfeiting and unauthorized copying, scanning and photo imaging, reported results for the fourth quarter and year ended December 31, 2009. Management will host a teleconference and web cast today at 4:30 pm ET to discuss the results with the investment community:
Investor Dial-in (Toll Free): (877) 407-9210
Investor Dial-In (International): (201) 689-8049
Live Web Cast: http://www.investorcalendar.com/IC/CEPage.asp?ID=156727
4th Quarter and 2009 Year-End Results
Fourth Quarter Financial Highlights
-- Sales of $2.3 million increased 78% compared to the fourth quarter of
2008.
-- Operating expenses decreased by 21% compared to the fourth quarter of
2008.
-- Net Loss decreased by 47% to $1.1 million compared to $2.1 million in
the fourth quarter of 2008.
-- Net loss per share of $(0.07) compared to $(0.15) in the fourth
quarter of 2008.
-- Adjusted EBITDA. (See Reconciliation of GAAP to Non-GAAP Financial
Measures table) loss of $189,000 as compared to a loss of $857,000 in
the fourth quarter of 2008.
-- Improved balance sheet from refinancing of $3.9 million of short-term
debt to $2.0 million of equity and $1.9 million of long-term debt.
2009 Financial Highlights
-- Sales of $9.9 million increased 49% compared to 2008.
-- Gross profit of $3.7 million compared to $3.6 million in 2008, an
increase of 1%.
-- Operating expenses decreased by 31% compared to 2008.
-- Net Loss decreased by 52% to $4.0 million compared to a net loss of
$8.3 million in 2008.
-- Net loss per share of $(0.27) compared to $(0.59) in 2008.
-- Adjusted EBITDA. (See Reconciliation of GAAP to Non-GAAP Financial
Measures table) loss of $1,527,000 as compared to a loss of $2,119,000
in 2008.
Robert Fagenson, Chairman of the Board of Document Security Systems, stated: "As we entered 2009, our goals included expanding our sales and product offerings, leveraging our expanded production capacity to attract major end-user customers, continuing to streamline our cost structure and seeking strategic acquisitions. As we enter 2010, believe we have achieved many of those goals. Our recent purchase of Premier Packaging in February 2010 offers significant opportunity to expand use of our technology and positions us in the brand packaging protection market. Furthermore, during the fourth quarter of 2009, we successfully refinanced and converted $3.9 million of short-term debt to equity or longer term debt on more favorable terms significantly improving our balance sheet and working capital position."
Document Security System's CEO Patrick White said, "Despite a difficult economic environment for our business partners and licensee's we still continued to grow and strengthen our business. Our valuable intellectual property holdings continued to grow and show value which further advanced our position in the anti-counterfeiting market that has resulted in wins with well known customers during the year. During 2009, we initiated our entrance into the brand packaging market that culminated in the acquisition of Premier Packaging in February 2010, commenced the divestiture of our Legalstore.com division, strengthened our relationship with a key licensee, and achieved sales successes with several large consumer product companies. Due to these accomplishments along with our lower cost structure the company is well positioned in 2010 and beyond."
About Document Security Systems, Inc.
Document Security Systems is a world leader in the development of optical deterrent technologies that help prevent counterfeiting and brand fraud from the use of the most advanced scanners, copiers and imaging systems in the market. The company's patented and patent-pending technologies protect valuable documents and printed products from counterfeiters and identity thieves. Document Security Systems' customers, which include international governments, major corporations and world financial institutions, use its covert and overt technologies to protect a number of applications including, but not limited to, currency, vital records, brand protection, ID Cards, internet commerce, passports and gift certificates. Document Security Systems' strategy is to become the world's leading producer of cutting-edge security technologies for paper, plastic and electronically generated printed assets.
More information about Document Security Systems, Inc can be found at http://www.documentsecurity.com and http://www.plasticprintingprofessionals.com, http://www.protectedpaper.com, http://www.dpirochester.com, and http://www.premiercustompkg.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, the potential sale of Legalstore.com, 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, 2009 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 http://www.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
Three Months Ended
-----------------------------------------
December 31, December 31, %
2009 2008 Change
------------ ------------ ------------
Revenue
Security and commercial
printing $2,168,000 $966,000 124%
Technology license
royalties and digital
solutions 165,000 220,000 -25%
Legal products - 127,000 -100%
------------ ------------ ------------
Total Revenue 2,333,000 1,313,000 78%
Costs of revenue
Security and commercial
printing 1,517,000 635,000 139%
Digital solutions 4,000 4,000 0%
Legal products - 94,000 -100%
------------ ------------ ------------
Total cost of revenue 1,521,000 733,000 108%
Gross profit
Security and commercial
printing 651,000 331,000 97%
Technology license
royalties 161,000 216,000 -25%
Legal products - 33,000 -100%
------------ ------------ ------------
Total gross profit 812,000 580,000 40%
35% 44% -21%
Operating Expenses
General and administrative
compensation 915,000 708,000 29%
Professional Fees 105,000 116,000 -9%
Sales and marketing 66,000 63,000 5%
Research and development 68,000 111,000 -39%
Other 331,000 434,000 -24%
------------ ------------ ------------
Total selling, general and
administrative 1,485,000 1,432,000 4%
Depreciation and
amortization 32,000 42,000 -24%
Stock based payments 146,000 241,000 -39%
Impairment of patent
defense costs and other
intangible assets - 505,000 0%
Amortization of intangibles 371,000 367,000 1%
------------ ------------ ------------
Total other operating
expenses 549,000 1,155,000 -52%
Total Operating Expenses 2,034,000 2,587,000 -21%
Other income (expense):
Interest income - -
Gain/(Loss) on foreign
currency transactions 5,000 (42,000) -112%
Interest expense (52,000) (49,000) 6%
Amortizaton of note
discount (61,000) 0%
Loss on sale of patent
assets - - 0%
Other income 442,000 - 0%
Income tax (5,000) (5,000) 0%
Other expense- equity
based payments (224,000) - 0%
------------ ------------ ------------
Total other income (loss),
net 105,000 (96,000) -209%
Net loss $(1,117,000) $(2,103,000) -47%
============ ============ ============
Net loss per share, basic
and diluted (0.07) (0.15) -50%
============ ============ ============
Weighted average common
shares outstanding, basic
and diluted 15,276,109 14,364,473 6%
============ ============ ============
Year Ended
------------------------------------------
December 31, December 31, %
2009 2008 Change
------------ ------------ ------------
Revenue
Security and commercial
printing $8,773,000 $4,386,000 100%
Technology license
royalties and digital
solutions 783,000 1,647,000 -52%
Legal products 355,000 610,000 -42%
------------ ------------ ------------
Total Revenue 9,911,000 6,643,000 49%
Costs of revenue
Security and commercial
printing 6,063,000 2,663,000 128%
Digital solutions 14,000 14,000 0%
Legal products 179,000 352,000 -49%
------------ ------------ ------------
Total cost of revenue 6,256,000 3,029,000 107%
Gross profit
Security and commercial
printing 2,710,000 1,723,000 57%
Technology license
royalties 769,000 1,633,000 -53%
Legal products 176,000 258,000 -32%
------------ ------------ ------------
Total gross profit 3,655,000 3,614,000 1%
37% 54% -32%
Operating Expenses
General and administrative
compensation 3,638,000 2,966,000 23%
Professional Fees 539,000 896,000 -40%
Sales and marketing 154,000 340,000 -55%
Research and development 292,000 432,000 -32%
Other 1,187,000 1,316,000 -10%
------------ ------------ ------------
Total selling, general and
administrative 5,810,000 5,950,000 -2%
Depreciation and amortization 148,000 167,000 -11%
Stock based payments 68,000 1,747,000 -96%
Impairment of patent
defense costs and
other intangible assets - 797,000
Amortization of
intangibles 1,342,000 1,972,000 -32%
------------ ------------ ------------
Total other operating
expenses 1,558,000 4,683,000 -67%
Total Operating Expenses 7,368,000 10,633,000 -31%
Other income (expense):
Interest income 18,000 1,000 1700%
Gain/(Loss) on foreign
currency transactions 15,000 (59,000) -125%
Interest expense (259,000) (136,000) 90%
Amortizaton of note
discount (250,000) (8,000) 3025%
Loss on sale of patent
assets - (1,170,000) -100%
Other income 442,000 126,000 251%
Income tax (19,000) (19,000) 0%
Other expense-equity
based payments (224,000) - 0%
------------ ------------ ------------
Total other income (loss),
net (277,000) (1,265,000) -78%
------------ ------------ ------------
Net loss $(3,990,000) $(8,285,000) -52%
============ ============ ============
Net loss per share, basic
and diluted (0.27) (0.59) -54%
============ ============ ============
Weighted average common
shares outstanding,
basic and diluted 14,700,453 14,002,034 5%
============ ============ ============
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
2009 2008
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $448,895 $87,820
Restricted cash - 131,004
Accounts receivable,
net of allowance of
$66,000 ($50,000-2008) 1,143,939 1,284,208
Inventory 184,174 359,034
Loans to employees - 67,781
Prepaid expenses and
other current assets 91,310 75,066
----------- -----------
Total current assets 1,868,318 2,004,913
Fixed assets, net 1,286,226 1,517,357
Other assets 305,507 264,529
Investment 350,000 -
Goodwill 1,315,721 1,396,734
Other intangible assets,
net 1,588,969 2,873,789
----------- -----------
Total assets $6,714,741 $8,057,322
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,673,901 $1,411,942
Accrued expenses & other
current liabilities 909,432 1,312,745
Deferred revenue &
customer deposits 25,163 30,193
Short-term debt, net
of unamortized
discount of $247,000 -
2008 - 652,511
Current portion of
capital lease obligations 78,167 78,367
----------- -----------
Total current
liabilities 2,686,663 3,485,758
Revolving notes from
related parties 583,000 2,283,000
Long term debt, net of
unamortized discount
of $420,000 ($0 -2008) 954,616 -
Capital lease obligations 182,424 210,365
Deferred tax liability 70,830 51,878
Stockholders' equity
Common stock, $.02 par
value; 200,000,000 shares
authorized, 16,397,887 shares
issued and outstanding
(14,369,764 in 2008)
(325,000 subscribed in
2008) 327,957 287,395
Additional paid-in
capital 38,399,033 35,538,695
Common stock subscriptions
receivable - (1,300,000)
Accumulated deficit (36,489,782) (32,499,769)
----------- -----------
Total stockholders'
equity 2,237,208 2,026,321
----------- -----------
Total liabilities and
stockholders' equity $6,714,741 $8,057,322
=========== ===========
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2009 2008
----------- -----------
Cash flows from operating
activities:
Net loss $(3,990,013) $(8,285,142)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 1,661,522 2,288,061
Stock based compensation 67,709 1,747,368
Stock based payments for legal
settlements 115,101 -
Warrants issuable for
registration rights penalty 109,464 -
Impairment of patent defense
costs and other intangible
assets - 797,143
Amortization of note discount 250,102 8,227
Gain on deconsolidation of
division (25,755)
Loss of sale of patent assets - 1,169,947
Decrease in restricted cash for
foreign currency loss - 46,341
(Increase) decrease in assets:
Accounts receivable 109,108 209,399
Inventory 73,849 (32,342)
Prepaid expenses and other
assets (81,547) (36,653)
Increase (decrease) in
liabilities:
Accounts payable 276,070 31,096
Accrued expenses and other
liabilities (155,681) 383,884
Deferred revenue and customer
deposits (5,030) (718,100)
----------- -----------
Net cash used by operating
activities (1,595,101) (2,390,771)
Cash flows from investing
activities:
Purchase of fixed assets (62,522) (334,800)
Decrease in restricted cash 131,004 -
Acquisition of business - (1,082,537)
Proceeds from the sale of patent
assets - 500,000
Purchase of other intangible
assets (176,083) (1,348,666)
----------- -----------
Net cash used by investing
activities (107,601) (2,266,003)
Cash flows from financing activities:
Borrowing on revolving note-
related parties 1,030,000 1,983,000
Repayment on revolving note-
related parties (730,000) -
Borrowings on short-term credit
facility - 500,000
Repayment on short-term credit
facility - (500,000)
Borrowings on short- term debt - 900,000
Payments on short-term debt (900,000) -
Borrowings on long-term debt 575,000 -
Borrowings on long-term
convertible notes 800,000 -
Payments of capital lease
obligations (86,124) (86,037)
Issuance of common stock, net 1,374,901 1,205,163
----------- -----------
Net cash provided by financing
activities 2,063,777 4,002,126
Net increase (decrease) in cash
and cash equivalents 361,075 (654,648)
Cash and cash equivalents
beginning of period 87,820 742,468
----------- -----------
Cash and cash equivalents end of
period $448,895 $87,820
=========== ===========
Adjusted EBITDA: Non-GAAP Financial Performance Measure
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Adjusted EBITDA
Three Months Ended
------------------------------------------------
December 31, December 31,
2009 2008 % Change
------------- ------------- --------
Net Loss $(1,117,000) $(2,103,000) -47%
Add back:
Depreciation 69,000 79,000 -13%
Amortization of
Intangibles 371,000 367,000 1%
Stock based payments 370,000 241,000 54%
Impairment of
patent defense
costs and other
intangible assets - 505,000 -100%
Loss on sale of
patent assets - - 0%
Interest Income - - 0%
Interest Expense 52,000 41,000 27%
Amortization of
bond discount 61,000 8,000 663%
Income Taxes 5,000 5,000 0%
---
Adjusted EBITDA (189,000) (857,000) -78%
======== ======== ===
Adjusted EBITDA
loss per share,
basic and diluted (0.01) (0.09) -87%
===== ===== ===
Weighted average
common shares
outstanding,
basic and diluted 15,276,109 14,364,473 6%
========== ========== ===
Year Ended
---------------------------------------------
December 31, December 31, %
2009 2008 Change
------------- ------------- -------
Net Loss $(3,990,000) $(8,284,000) -52%
Add back:
Depreciation 319,000 316,000 1%
Amortization
of Intangibles 1,342,000 1,972,000 -32%
Stock based payments 292,000 1,747,000 -83%
Impairment of patent
defense costs and
other intangible assets - 797,000 -100%
Loss on sale
of patent assets - 1,170,000 -100%
Interest Income (18,000) (1,000) 1700%
Interest Expense 259,000 145,000 79%
Amortization
of bond discount 250,000
Income Taxes 19,000 19,000 0%
---
Adjusted EBITDA (1,527,000) (2,119,000) -28%
========== ========== ===
Adjusted EBITDA loss
per share, basic and
diluted (0.10) (0.15) -31%
===== ===== ===
Weighted average
common shares
outstanding,
basic and diluted 14,700,453 14,002,034 5%
========== ========== ===
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. 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 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.
Document Security Systems 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. Document Security Systems 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.
For information contact:
Contact: Jody Janson
Company: Document Security Systems, Inc.
Title: Shareholder Relations
Voice: 585-232-5440
Email: ir@documentsecurity.com
Source: Document Security Systems, Inc.
CONTACT: Jody Janson, Document Security Systems, Inc., Shareholder
Relations, +1-585-232-5440, ir@documentsecurity.com
Web Site: http://www.documentsecurity.com/
- 4th Quarter Sales Revenue increased 78% - 4th Quarter Gross Profit increases 40% - 4th Quarter Net Loss decreases 47% - 2009 Sales Revenue increased 49% - 2009 Operating Expenses decrease 31% - 2009 Net loss decreases 52%
ROCHESTER, N.Y., March 24 -- Document Security Systems, Inc. (NYSE AMEX: DMC; "DSS"), a leader in patented protection against counterfeiting and unauthorized copying, scanning and photo imaging, reported results for the fourth quarter and year ended December 31, 2009. Management will host a teleconference and web cast today at 4:30 pm ET to discuss the results with the investment community:
Investor Dial-in (Toll Free): (877) 407-9210
Investor Dial-In (International): (201) 689-8049
Live Web Cast: http://www.investorcalendar.com/IC/CEPage.asp?ID=156727
4th Quarter and 2009 Year-End Results
Fourth Quarter Financial Highlights
-- Sales of $2.3 million increased 78% compared to the fourth quarter of
2008.
-- Operating expenses decreased by 21% compared to the fourth quarter of
2008.
-- Net Loss decreased by 47% to $1.1 million compared to $2.1 million in
the fourth quarter of 2008.
-- Net loss per share of $(0.07) compared to $(0.15) in the fourth
quarter of 2008.
-- Adjusted EBITDA. (See Reconciliation of GAAP to Non-GAAP Financial
Measures table) loss of $189,000 as compared to a loss of $857,000 in
the fourth quarter of 2008.
-- Improved balance sheet from refinancing of $3.9 million of short-term
debt to $2.0 million of equity and $1.9 million of long-term debt.
2009 Financial Highlights
-- Sales of $9.9 million increased 49% compared to 2008.
-- Gross profit of $3.7 million compared to $3.6 million in 2008, an
increase of 1%.
-- Operating expenses decreased by 31% compared to 2008.
-- Net Loss decreased by 52% to $4.0 million compared to a net loss of
$8.3 million in 2008.
-- Net loss per share of $(0.27) compared to $(0.59) in 2008.
-- Adjusted EBITDA. (See Reconciliation of GAAP to Non-GAAP Financial
Measures table) loss of $1,527,000 as compared to a loss of $2,119,000
in 2008.
Robert Fagenson, Chairman of the Board of Document Security Systems, stated: "As we entered 2009, our goals included expanding our sales and product offerings, leveraging our expanded production capacity to attract major end-user customers, continuing to streamline our cost structure and seeking strategic acquisitions. As we enter 2010, believe we have achieved many of those goals. Our recent purchase of Premier Packaging in February 2010 offers significant opportunity to expand use of our technology and positions us in the brand packaging protection market. Furthermore, during the fourth quarter of 2009, we successfully refinanced and converted $3.9 million of short-term debt to equity or longer term debt on more favorable terms significantly improving our balance sheet and working capital position."
Document Security System's CEO Patrick White said, "Despite a difficult economic environment for our business partners and licensee's we still continued to grow and strengthen our business. Our valuable intellectual property holdings continued to grow and show value which further advanced our position in the anti-counterfeiting market that has resulted in wins with well known customers during the year. During 2009, we initiated our entrance into the brand packaging market that culminated in the acquisition of Premier Packaging in February 2010, commenced the divestiture of our Legalstore.com division, strengthened our relationship with a key licensee, and achieved sales successes with several large consumer product companies. Due to these accomplishments along with our lower cost structure the company is well positioned in 2010 and beyond."
About Document Security Systems, Inc.
Document Security Systems is a world leader in the development of optical deterrent technologies that help prevent counterfeiting and brand fraud from the use of the most advanced scanners, copiers and imaging systems in the market. The company's patented and patent-pending technologies protect valuable documents and printed products from counterfeiters and identity thieves. Document Security Systems' customers, which include international governments, major corporations and world financial institutions, use its covert and overt technologies to protect a number of applications including, but not limited to, currency, vital records, brand protection, ID Cards, internet commerce, passports and gift certificates. Document Security Systems' strategy is to become the world's leading producer of cutting-edge security technologies for paper, plastic and electronically generated printed assets.
More information about Document Security Systems, Inc can be found at http://www.documentsecurity.com and http://www.plasticprintingprofessionals.com, http://www.protectedpaper.com, http://www.dpirochester.com, and http://www.premiercustompkg.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, the potential sale of Legalstore.com, 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, 2009 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 http://www.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
Three Months Ended
-----------------------------------------
December 31, December 31, %
2009 2008 Change
------------ ------------ ------------
Revenue
Security and commercial
printing $2,168,000 $966,000 124%
Technology license
royalties and digital
solutions 165,000 220,000 -25%
Legal products - 127,000 -100%
------------ ------------ ------------
Total Revenue 2,333,000 1,313,000 78%
Costs of revenue
Security and commercial
printing 1,517,000 635,000 139%
Digital solutions 4,000 4,000 0%
Legal products - 94,000 -100%
------------ ------------ ------------
Total cost of revenue 1,521,000 733,000 108%
Gross profit
Security and commercial
printing 651,000 331,000 97%
Technology license
royalties 161,000 216,000 -25%
Legal products - 33,000 -100%
------------ ------------ ------------
Total gross profit 812,000 580,000 40%
35% 44% -21%
Operating Expenses
General and administrative
compensation 915,000 708,000 29%
Professional Fees 105,000 116,000 -9%
Sales and marketing 66,000 63,000 5%
Research and development 68,000 111,000 -39%
Other 331,000 434,000 -24%
------------ ------------ ------------
Total selling, general and
administrative 1,485,000 1,432,000 4%
Depreciation and
amortization 32,000 42,000 -24%
Stock based payments 146,000 241,000 -39%
Impairment of patent
defense costs and other
intangible assets - 505,000 0%
Amortization of intangibles 371,000 367,000 1%
------------ ------------ ------------
Total other operating
expenses 549,000 1,155,000 -52%
Total Operating Expenses 2,034,000 2,587,000 -21%
Other income (expense):
Interest income - -
Gain/(Loss) on foreign
currency transactions 5,000 (42,000) -112%
Interest expense (52,000) (49,000) 6%
Amortizaton of note
discount (61,000) 0%
Loss on sale of patent
assets - - 0%
Other income 442,000 - 0%
Income tax (5,000) (5,000) 0%
Other expense- equity
based payments (224,000) - 0%
------------ ------------ ------------
Total other income (loss),
net 105,000 (96,000) -209%
Net loss $(1,117,000) $(2,103,000) -47%
============ ============ ============
Net loss per share, basic
and diluted (0.07) (0.15) -50%
============ ============ ============
Weighted average common
shares outstanding, basic
and diluted 15,276,109 14,364,473 6%
============ ============ ============
Year Ended
------------------------------------------
December 31, December 31, %
2009 2008 Change
------------ ------------ ------------
Revenue
Security and commercial
printing $8,773,000 $4,386,000 100%
Technology license
royalties and digital
solutions 783,000 1,647,000 -52%
Legal products 355,000 610,000 -42%
------------ ------------ ------------
Total Revenue 9,911,000 6,643,000 49%
Costs of revenue
Security and commercial
printing 6,063,000 2,663,000 128%
Digital solutions 14,000 14,000 0%
Legal products 179,000 352,000 -49%
------------ ------------ ------------
Total cost of revenue 6,256,000 3,029,000 107%
Gross profit
Security and commercial
printing 2,710,000 1,723,000 57%
Technology license
royalties 769,000 1,633,000 -53%
Legal products 176,000 258,000 -32%
------------ ------------ ------------
Total gross profit 3,655,000 3,614,000 1%
37% 54% -32%
Operating Expenses
General and administrative
compensation 3,638,000 2,966,000 23%
Professional Fees 539,000 896,000 -40%
Sales and marketing 154,000 340,000 -55%
Research and development 292,000 432,000 -32%
Other 1,187,000 1,316,000 -10%
------------ ------------ ------------
Total selling, general and
administrative 5,810,000 5,950,000 -2%
Depreciation and amortization 148,000 167,000 -11%
Stock based payments 68,000 1,747,000 -96%
Impairment of patent
defense costs and
other intangible assets - 797,000
Amortization of
intangibles 1,342,000 1,972,000 -32%
------------ ------------ ------------
Total other operating
expenses 1,558,000 4,683,000 -67%
Total Operating Expenses 7,368,000 10,633,000 -31%
Other income (expense):
Interest income 18,000 1,000 1700%
Gain/(Loss) on foreign
currency transactions 15,000 (59,000) -125%
Interest expense (259,000) (136,000) 90%
Amortizaton of note
discount (250,000) (8,000) 3025%
Loss on sale of patent
assets - (1,170,000) -100%
Other income 442,000 126,000 251%
Income tax (19,000) (19,000) 0%
Other expense-equity
based payments (224,000) - 0%
------------ ------------ ------------
Total other income (loss),
net (277,000) (1,265,000) -78%
------------ ------------ ------------
Net loss $(3,990,000) $(8,285,000) -52%
============ ============ ============
Net loss per share, basic
and diluted (0.27) (0.59) -54%
============ ============ ============
Weighted average common
shares outstanding,
basic and diluted 14,700,453 14,002,034 5%
============ ============ ============
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
2009 2008
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $448,895 $87,820
Restricted cash - 131,004
Accounts receivable,
net of allowance of
$66,000 ($50,000-2008) 1,143,939 1,284,208
Inventory 184,174 359,034
Loans to employees - 67,781
Prepaid expenses and
other current assets 91,310 75,066
----------- -----------
Total current assets 1,868,318 2,004,913
Fixed assets, net 1,286,226 1,517,357
Other assets 305,507 264,529
Investment 350,000 -
Goodwill 1,315,721 1,396,734
Other intangible assets,
net 1,588,969 2,873,789
----------- -----------
Total assets $6,714,741 $8,057,322
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,673,901 $1,411,942
Accrued expenses & other
current liabilities 909,432 1,312,745
Deferred revenue &
customer deposits 25,163 30,193
Short-term debt, net
of unamortized
discount of $247,000 -
2008 - 652,511
Current portion of
capital lease obligations 78,167 78,367
----------- -----------
Total current
liabilities 2,686,663 3,485,758
Revolving notes from
related parties 583,000 2,283,000
Long term debt, net of
unamortized discount
of $420,000 ($0 -2008) 954,616 -
Capital lease obligations 182,424 210,365
Deferred tax liability 70,830 51,878
Stockholders' equity
Common stock, $.02 par
value; 200,000,000 shares
authorized, 16,397,887 shares
issued and outstanding
(14,369,764 in 2008)
(325,000 subscribed in
2008) 327,957 287,395
Additional paid-in
capital 38,399,033 35,538,695
Common stock subscriptions
receivable - (1,300,000)
Accumulated deficit (36,489,782) (32,499,769)
----------- -----------
Total stockholders'
equity 2,237,208 2,026,321
----------- -----------
Total liabilities and
stockholders' equity $6,714,741 $8,057,322
=========== ===========
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2009 2008
----------- -----------
Cash flows from operating
activities:
Net loss $(3,990,013) $(8,285,142)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 1,661,522 2,288,061
Stock based compensation 67,709 1,747,368
Stock based payments for legal
settlements 115,101 -
Warrants issuable for
registration rights penalty 109,464 -
Impairment of patent defense
costs and other intangible
assets - 797,143
Amortization of note discount 250,102 8,227
Gain on deconsolidation of
division (25,755)
Loss of sale of patent assets - 1,169,947
Decrease in restricted cash for
foreign currency loss - 46,341
(Increase) decrease in assets:
Accounts receivable 109,108 209,399
Inventory 73,849 (32,342)
Prepaid expenses and other
assets (81,547) (36,653)
Increase (decrease) in
liabilities:
Accounts payable 276,070 31,096
Accrued expenses and other
liabilities (155,681) 383,884
Deferred revenue and customer
deposits (5,030) (718,100)
----------- -----------
Net cash used by operating
activities (1,595,101) (2,390,771)
Cash flows from investing
activities:
Purchase of fixed assets (62,522) (334,800)
Decrease in restricted cash 131,004 -
Acquisition of business - (1,082,537)
Proceeds from the sale of patent
assets - 500,000
Purchase of other intangible
assets (176,083) (1,348,666)
----------- -----------
Net cash used by investing
activities (107,601) (2,266,003)
Cash flows from financing activities:
Borrowing on revolving note-
related parties 1,030,000 1,983,000
Repayment on revolving note-
related parties (730,000) -
Borrowings on short-term credit
facility - 500,000
Repayment on short-term credit
facility - (500,000)
Borrowings on short- term debt - 900,000
Payments on short-term debt (900,000) -
Borrowings on long-term debt 575,000 -
Borrowings on long-term
convertible notes 800,000 -
Payments of capital lease
obligations (86,124) (86,037)
Issuance of common stock, net 1,374,901 1,205,163
----------- -----------
Net cash provided by financing
activities 2,063,777 4,002,126
Net increase (decrease) in cash
and cash equivalents 361,075 (654,648)
Cash and cash equivalents
beginning of period 87,820 742,468
----------- -----------
Cash and cash equivalents end of
period $448,895 $87,820
=========== ===========
Adjusted EBITDA: Non-GAAP Financial Performance Measure
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Adjusted EBITDA
Three Months Ended
------------------------------------------------
December 31, December 31,
2009 2008 % Change
------------- ------------- --------
Net Loss $(1,117,000) $(2,103,000) -47%
Add back:
Depreciation 69,000 79,000 -13%
Amortization of
Intangibles 371,000 367,000 1%
Stock based payments 370,000 241,000 54%
Impairment of
patent defense
costs and other
intangible assets - 505,000 -100%
Loss on sale of
patent assets - - 0%
Interest Income - - 0%
Interest Expense 52,000 41,000 27%
Amortization of
bond discount 61,000 8,000 663%
Income Taxes 5,000 5,000 0%
---
Adjusted EBITDA (189,000) (857,000) -78%
======== ======== ===
Adjusted EBITDA
loss per share,
basic and diluted (0.01) (0.09) -87%
===== ===== ===
Weighted average
common shares
outstanding,
basic and diluted 15,276,109 14,364,473 6%
========== ========== ===
Year Ended
---------------------------------------------
December 31, December 31, %
2009 2008 Change
------------- ------------- -------
Net Loss $(3,990,000) $(8,284,000) -52%
Add back:
Depreciation 319,000 316,000 1%
Amortization
of Intangibles 1,342,000 1,972,000 -32%
Stock based payments 292,000 1,747,000 -83%
Impairment of patent
defense costs and
other intangible assets - 797,000 -100%
Loss on sale
of patent assets - 1,170,000 -100%
Interest Income (18,000) (1,000) 1700%
Interest Expense 259,000 145,000 79%
Amortization
of bond discount 250,000
Income Taxes 19,000 19,000 0%
---
Adjusted EBITDA (1,527,000) (2,119,000) -28%
========== ========== ===
Adjusted EBITDA loss
per share, basic and
diluted (0.10) (0.15) -31%
===== ===== ===
Weighted average
common shares
outstanding,
basic and diluted 14,700,453 14,002,034 5%
========== ========== ===
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. 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 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.
Document Security Systems 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. Document Security Systems 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.
For information contact:
Contact: Jody Janson
Company: Document Security Systems, Inc.
Title: Shareholder Relations
Voice: 585-232-5440
Email: ir@documentsecurity.com
Source: Document Security Systems, Inc.
CONTACT: Jody Janson, Document Security Systems, Inc., Shareholder
Relations, +1-585-232-5440, ir@documentsecurity.com
Web Site: http://www.documentsecurity.com/