EX-99.1 2 ex99-1.htm

 

 

Document Security Systems, Inc. Reports First Quarter

2017 Financial Results

 

-- Quarter-Over-Quarter Revenue up 10% to $4.8 million

-- 1Q 2017 Positive Adjusted EBITDA of $391,000 vs. 1Q 2016 Adjusted EBITDA Loss of ($107,000)

-- Net Loss Per Share Reduced 80% from ($0.05) in 1Q 2016 to ($0.01) in 1Q 2017

 

ROCHESTER, NY — May 15, 2017 — Document Security Systems, Inc. (NYSE MKT: DSS), (“DSS”), a leader in anti-counterfeit, authentication, and diversion protection technologies whose products and solutions are used by governments, corporations and financial institutions to defeat fraud and to help ensure the authenticity of both digital and physical financial instruments, identification documents, sensitive publications, brand packaging and websites, today announced its financial results for the first quarter ended March 31, 2017.

 

“Our first quarter results demonstrate the continued execution of our strategy of focusing on revenue growth and high margin products,” stated Jeff Ronaldi, CEO of DSS. “We’re encouraged by the performance of previously announced relationships within our anti-counterfeiting, fraud protection and plastics card businesses as well as by the significant new opportunities we’ve identified within several of our expanding addressable markets. We remain dedicated to growing each of our revenue channels and increasing value to our shareholders,” added Ronaldi.

 

First Quarter 2017 Financial Highlights

 

  ● Revenue for the first quarter of 2017 increased approximately 10% to $4.8 million from $4.3 million in the same year-ago quarter. During the first quarter of 2017, the Company’s printed products revenue grew by $428,000 or 11%, and technology sales, services and licensing revenue increased by 1%, as compared to the first quarter of 2016.
     
  ● The Company posted an 84% improvement in its operating loss, as compared to the first quarter of 2016. Operating loss for the first quarter 2017 was ($86,000) versus an operating loss of ($537,000) for the first quarter 2016.
     
  ● The Company recorded a significant improvement in Adjusted EBITDA1 for the first quarter ended March 31, 2017. Adjusted EBITDA for the first quarter of 2017 was $391,000 as compared to an Adjusted EBITDA loss of ($102,000) in the first quarter of 2016.
     
  ● Net loss for the Company’s first quarter 2017 was reduced by 71% to ($184,000), or ($0.01) per share, as compared to a net loss of ($624,000), or ($0.05) per share, for the first quarter ended March 31, 2016.

 

A full analysis of results for the quarter ended March 31, 2017 is available in the Company’s Form 10-Q, which 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

 

Document Security Systems, Inc.’s (NYSE MKT: DSS) products and solutions are used by governments, corporations and financial institutions to defeat fraud and to protect brands and digital information from the expanding world-wide counterfeiting problem. DSS technologies help ensure the authenticity of both digital and physical financial instruments, identification documents, sensitive publications, brand packaging and websites. DSS continuously invests in research and development to meet the ever-changing security needs of its clients and offers licensing of its patented technologies. For more information on DSS and its subsidiaries, please visit www.DSSsecure.com.

 

For more information on the AuthentiGuard Suite, please visit www.authentiguard.com.

 

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For more information:

 

Investor Relations

Document Security Systems

(585) 325-3610

Email: ir@documentsecurity.com

 

FORWARD-LOOKING STATEMENTS

 

Forward-looking statements that may be contained in this press release, including, without limitation, statements related to the Company’s plans, strategies, objectives, expectations, potential value, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act and contain words such as “believes,” “anticipates,” “expects,” “plans,” “intends” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, our ability to continue the growth in sales of AuthentiGuard and manage our expenses, as well as those risks disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 28, 2017. Forward-looking statements that may be contained in this press release are being made as of the date of its release, and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.

 

 
 

 

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

 

   Three Months Ended March 31, 2017   Three Months Ended March 31, 2016   % change 
Revenue               
Printed products  $4,403,000   $3,975,000    11%
Technology sales, services and licensing   368,000    364,000    1%
                
Total revenue  $4,771,000   $4,339,000    10%
                
Costs and expenses               
Cost of goods sold, exclusive of depreciation and amortization  $2,788,000   $2,611,000    7%
Sales, general and administrative compensation   898,000    852,000    5%
Depreciation and amortization   343,000    361,000    -5%
Professional fees   161,000    424,000    -62%
Stock based compensation   134,000    74,000    81%
Sales and marketing   94,000    76,000    24%
Rent and utilities   152,000    138,000    10%
Other operating expenses   227,000    227,000    0%
Research and development   60,000    113,000    -47%
                
Total costs and expenses  $4,857,000   $4,876,000    0%
                
Operating income (loss)   (86,000)   (537,000)   -84%
                
Other expenses               
Interest expense  $(58,000)  $(77,000)   -25%
Amortized debt discount   (35,000)   (5,000)   600%
                
Other expense  $(93,000)  $(82,000)   13%
                
Loss before income taxes   (179,000)   (619,000)   -71%
                
Income tax expense   5,000    5,000    0%
                
Net loss  $(184,000)  $(624,000)   -71%
                
Loss per common share:               
Basic and diluted  $(0.01)  $(0.05)   -80%
                
Shares used in computing loss per common share:               
Basic and diluted   13,624,522    12,970,487    5%

 

 
 

 

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

As of

 

   March 31, 2017   December 31, 2016 
   (Unaudited)     
ASSETS          
           
Current assets:          
Cash  $4,866,070   $5,871,738 
Restricted cash   421,671    177,609 
Accounts receivable, net of $50,000 allowance for uncollectible accounts   2,024,970    1,890,981 
Inventory   1,203,523    1,206,377 
Prepaid expenses and other current assets   377,365    350,289 
           
Total current assets   8,893,599    9,496,994 
           
Property, plant and equipment, net   4,467,292    4,573,841 
Other assets   45,821    45,821 
Goodwill   2,453,349    2,453,349 
Other intangible assets, net   1,730,948    1,896,018 
           
Total assets  $17,591,009   $18,466,023 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current liabilities:          
Accounts payable  $1,793,627   $2,212,653 
Accrued expenses and deferred revenue   1,187,096    1,290,593 
Other current liabilities   2,982,175    2,996,310 
Short-term debt   3,538,129    - 
Current portion of long-term debt, net   1,112,335    1,202,335 
           
Total current liabilities   10,613,362    7,701,891 
           
Long-term debt, net   1,651,079    5,249,569 
Other long-term liabilities   2,035,444    2,184,843 
Deferred tax liability, net   50,356    45,619 
           
Commitments and contingencies (Note 6)          
           
Stockholders’ equity          
Common stock, $.02 par value; 200,000,000 shares authorized, 13,652,903 shares issued and outstanding (13,502,653 on December 31, 2016)   273,058    270,053 
Additional paid-in capital   104,468,804    104,338,002 
Accumulated other comprehensive loss   (38,444)   (45,343)
Accumulated deficit   (101,462,650)   (101,278,611)
Total stockholders’ equity   3,240,768    3,284,101 
           
Total liabilities and stockholders’ equity  $17,591,009   $18,466,023 

 

 
 

 

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

(Unaudited)

 

   2017   2016 
Cash flows from operating activities:          
Net loss  $(184,039)  $(624,022)
Adjustments to reconcile net loss to net cash from (used by) operating activities:          
Depreciation and amortization   342,774    360,501 
Stock based compensation   133,807    73,724 
Paid in-kind interest   18,000    19,500 
Change in deferred tax provision   4,737    4,737 
Amortization of deferred financing costs   35,288    5,290 
Decrease (increase) in assets:          
Accounts receivable   (133,989)   183,443 
Inventory   2,854    (52,383)
Prepaid expenses and other current assets   (27,076)   (123,456)
Restricted cash   (244,062)   10,154 
Increase (decrease) in liabilities:          
Accounts payable   (419,482)   219,506 
Accrued expenses and other liabilities   (259,678)   (145,657)
Net cash used by operating activities   (730,866)   (68,663)
           
Cash flows from investing activities:          
Purchase of property, plant and equipment   (66,206)   (51,827)
Purchase of intangible assets   (4,949)   (67,792)
Net cash used by investing activities   (71,155)   (119,619)
           
Cash flows from financing activities:          
Payments of long-term debt   (203,647)   (202,439)
Net cash used by financing activities   (203,647)   (202,439)
           
Net increase (decrease) in cash   (1,005,668)   (390,721)
Cash at beginning of period   5,871,738    1,440,256 
           
Cash at end of period  $4,866,070   $1,049,535 

 

 
 

 

1 ADJUSTED EBITDA

 

The Company uses Adjusted EBITDA as a non-GAAP financial performance measurement. Adjusted EBITDA is calculated by the Company by adding back to net income (loss) interest, income taxes, depreciation and amortization expense, and impairment charges as further adjusted to add back stock-based compensation expense and non-recurring items, and impairments of investments and intangible assets. Adjusted EBITDA is provided to investors to supplement the results of operations reported in accordance with GAAP. Management believes that Adjusted EBITDA provides an additional tool for investors to use in comparing the Company’s financial results with other companies in the industry, many of which also use Adjusted EBITDA in their communications to investors. By excluding non-cash charges such as amortization, depreciation, stock-based compensation and impairment charges, as well as non-operating charges for interest and income taxes, investors can evaluate the Company’s operations and its ability to generate cash flows from operations and can compare its results on a more consistent basis to the results of other companies in the industry. Management also uses Adjusted EBITDA to evaluate potential acquisitions, establish internal budgets and goals, and evaluate performance of its business units and management. The Company considers Adjusted EBITDA to be an important indicator of the Company’s operational strength and performance of its business and a useful measure of the Company’s historical and prospective operating trends. However, there are significant limitations to the use of Adjusted EBITDA since it excludes interest income and expense and income taxes and non-recurring items such as goodwill impairments, each of which impact the Company’s profitability and operating cash flows, as well as depreciation, amortization, impairment charges and stock-based compensation. The Company believes that these limitations are compensated by clearly identifying the difference between the two measures. Consequently, Adjusted EBITDA should not be considered in isolation or as a substitute for net income and loss presented in accordance with GAAP. Adjusted EBITDA as defined by the Company may not be comparable with similarly named measures provided by other entities. The following is a reconciliation of net loss to Adjusted EBITDA loss:

 

   Three Months Ended March 31, 
   2017   2016   % change 
   (unaudited)   (unaudited)     
             
Net Loss:  $(184,000)  $(624,000)   -71%
Add backs:               
Depreciation & amortization   343,000    361,000    -5%
Stock based compensation   134,000    74,000    81%
Interest expense   58,000    77,000    -25%
Amortization of note discount   35,000    5,000    600%
Income Taxes   5,000    5,000    0%
                
Adjusted EBITDA   391,000    (102,000)   -483%
                
Adjusted EBITDA, by group (unaudited)               
                
Printed Products  $773,000   $616,000    25%
Technology Management   (79,000)   (355,000)   -78%
Corporate   (303,000)   (363,000)   -17%
                
    391,000    (102,000)   -483%