ROCHESTER, N.Y., May 12, 2011 /PRNewswire/ -- Document Security
Systems, Inc. (NYSE AMEX: DMC), a leader in patented protection
against counterfeiting and unauthorized copying, scanning and photo
imaging, reported results for the first quarter ended March 31, 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: Thursday, May 12th, 2011
Investor Dial-in (Toll Free): 877-407-9210
Investor Dial-In (International): 201-689-8049
Live Web Cast URL:
http://www.investorcalendar.com/IC/CEPage.asp?ID=164471
A replay of the teleconference will be available until
May 16th, 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 #372657 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 www.documentsecurity.com.
First Quarter 2011 Highlights
- Sales of $2.7 million decreased
$89,000 from the first quarter of
2010.
- Gross profit increased 10% from the first quarter of 2010.
- Gross margin increased 4 basis points to 35%
- Operating expenses decreased 16% from the first quarter of
2010.
- Net loss of ($398,000) was a 65%
improvement from the net loss of ($1,121,000) during the first quarter of
2010.
- Net loss per share of $(0.02)
improved 71% from a net loss per share of ($0.07) during the first quarter of 2010.
Robert Fagenson, Chairman of the
Board, stated: "Our core business continues to improve and despite
the slightly lower sales in this seasonally-weak quarter, our team
continues to move our company in the right direction. The
true value of DMC remains to be in our portfolio of patented
technology and product development staff. Our strategic plan
remains sound and the quality and diversity of our customer base
reinforces our belief that we are on the right track towards our
goals of sustainable growth and profitability for the year."
Document Security System's CEO Patrick
White added: "We are very encouraged to see that our net
loss decreased 65%. Our first quarter sales were essentially
flat due to seasonality and a continued weak commercial print
environment; however, we are very pleased with the sales mix during
the quarter. We continue to replace unprofitable standard
commercial printing by emphasizing security and digital printing.
The result of the evolving sales mix change is having the desired
results on our margins. Our gross margin reached 35% up from
31% from the first quarter of 2010, and up from 28% in the fourth
quarter of 2010. Our gross profit increased 10% and operating
expenses decreased 16% from the first quarter of last year, each of
which favorably impacted our financial results during the quarter.
We continue to be excited by our expanding customer base,
both on the licensing and product sides of our business."
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. and their
wholly-owned subsidiaries can be found by visiting:
Document Security Systems, Inc.:
http://www.documentsecurity.com
DPI of Rochester:
http://www.dpirochester.com
Plastic Printing Professional, Inc.:
http://www.plasticprintingprofessionals.com
Protected Paper: http://www.protectedpaper.com
Premier Custom Packaging: www.premiercustompkg.com
For more information, contact:
Jody Janson
Document Security Systems, Inc.
Investor Relations
Tel: (585) 232-5440
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, 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 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
|
|
For the
Three Months Ended March 31,
|
|
(Unaudited)
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Security and commercial
printing
|
|
$
|
1,414,743
|
|
|
$
|
1,858,775
|
|
|
Packaging
|
|
|
1,036,402
|
|
|
|
740,625
|
|
|
Technology license
royalties and digital solutions
|
|
|
234,096
|
|
|
|
175,330
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
2,685,241
|
|
|
|
2,774,730
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenue
|
|
|
|
|
|
|
|
|
|
Security and commercial
printing
|
|
|
1,032,492
|
|
|
|
1,364,122
|
|
|
Packaging
|
|
|
718,287
|
|
|
|
559,109
|
|
|
Technology license
royalties and digital solutions
|
|
|
-
|
|
|
|
5,476
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs of
revenue
|
|
|
1,750,779
|
|
|
|
1,928,707
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
934,462
|
|
|
|
846,023
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
1,515,254
|
|
|
|
1,635,481
|
|
|
Research and
development
|
|
|
51,293
|
|
|
|
65,667
|
|
|
Amortization of
intangibles
|
|
|
71,964
|
|
|
|
246,399
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
1,638,511
|
|
|
|
1,947,547
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(704,049)
|
|
|
|
(1,101,524)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
Loss on equity
investment
|
|
|
-
|
|
|
|
(51,679)
|
|
|
Interest
expense
|
|
|
(49,956)
|
|
|
|
(65,103)
|
|
|
Change in fair value of
derivative liability
|
|
|
360,922
|
|
|
|
-
|
|
|
Amortization of note
discount
|
|
|
-
|
|
|
|
(40,732)
|
|
|
Other income
|
|
|
-
|
|
|
|
143,063
|
|
|
|
|
|
|
|
|
|
0
|
|
|
Loss before income
taxes
|
|
|
(393,082)
|
|
|
|
(1,115,975)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
4,737
|
|
|
|
4,738
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(397,819)
|
|
|
$
|
(1,120,713)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
|
Interest rate swap income
(loss)
|
|
|
3,678
|
|
|
|
(16,275)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss
|
|
$
|
(394,141)
|
|
|
$
|
(1,136,988)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share -basic and
diluted:
|
|
$
|
(0.02)
|
|
|
$
|
(0.07)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, basic and diluted
|
|
|
19,413,232
|
|
|
|
17,094,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT
SECURITY SYSTEMS, INC. AND SUBSIDIARIES
|
|
Consolidated
Balance Sheets
|
|
|
As
of
|
|
|
|
|
March 31,
2011
|
|
December 31, 2010
|
|
ASSETS
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,720,922
|
|
|
$
|
4,086,574
|
|
|
|
Accounts receivable, net of
allowance
|
|
|
|
|
|
|
|
|
|
|
of $66,000 ($66,000-
2010)
|
|
|
1,533,951
|
|
|
|
2,227,877
|
|
|
|
Inventory
|
|
|
1,114,096
|
|
|
|
601,359
|
|
|
|
Prepaid expenses and other
current assets
|
|
|
280,994
|
|
|
|
231,190
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Total
current assets
|
|
|
5,649,963
|
|
|
|
7,147,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment and leasehold
improvements, net
|
|
|
2,439,089
|
|
|
|
2,543,494
|
|
|
Other assets
|
|
|
325,953
|
|
|
|
325,953
|
|
|
Goodwill
|
|
|
1,943,081
|
|
|
|
1,943,081
|
|
|
Other intangible assets,
net
|
|
|
1,784,963
|
|
|
|
1,847,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,143,049
|
|
|
$
|
13,807,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,325,219
|
|
|
$
|
1,828,138
|
|
|
|
Accrued expenses and other
current liabilities
|
|
|
1,053,822
|
|
|
|
1,312,363
|
|
|
|
Revolving line of
credit
|
|
|
367,845
|
|
|
|
614,833
|
|
|
|
Current portion of long-term
debt
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
Revolving note from related
party
|
|
|
583,000
|
|
|
|
-
|
|
|
|
Current portion of capital lease
obligations
|
|
|
91,650
|
|
|
|
88,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
3,721,536
|
|
|
|
4,144,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving note from related
party
|
|
|
-
|
|
|
|
583,000
|
|
|
Long-term debt
|
|
|
1,503,242
|
|
|
|
1,578,242
|
|
|
Capital lease
obligations
|
|
|
67,678
|
|
|
|
98,532
|
|
|
Deferred tax
liability
|
|
|
94,516
|
|
|
|
89,779
|
|
|
Derivative
liabilities
|
|
|
-
|
|
|
|
3,866,836
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.02 par value;
200,000,000 shares authorized,
19,423,345 shares issued and
outstanding (19,391,319 in 2010)
|
|
|
388,466
|
|
|
|
387,825
|
|
|
|
Additional paid-in
capital
|
|
|
47,881,227
|
|
|
|
44,178,569
|
|
|
|
Accumulated other comprehensive
loss
|
|
|
(22,156)
|
|
|
|
(25,834)
|
|
|
|
Accumulated deficit
|
|
|
(41,491,460)
|
|
|
|
(41,093,672)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
|
6,756,077
|
|
|
|
3,446,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
|
12,143,049
|
|
|
$
|
13,807,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOCUMENT
SECURITY SYSTEMS, INC. AND SUBSIDIARIES
|
|
Consolidated
Statements of Cash Flows
|
|
For the
Three Months Ended March 31,
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(397,819)
|
|
$
|
(1,120,713)
|
|
|
|
Adjustments to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
180,878
|
|
|
331,643
|
|
|
|
Stock based
compensation
|
|
|
100,875
|
|
|
140,127
|
|
|
|
Amortization of note
discount
|
|
|
-
|
|
|
40,732
|
|
|
|
Loss on equity
investment
|
|
|
-
|
|
|
51,679
|
|
|
|
Change in fair value of
derivative liability
|
|
|
(360,922)
|
|
|
|
|
|
|
(Increase) decrease in
assets:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
693,926
|
|
|
453,567
|
|
|
|
Inventory
|
|
|
(512,737)
|
|
|
49,491
|
|
|
|
Prepaid expenses and other
assets
|
|
|
(49,805)
|
|
|
(162,218)
|
|
|
|
Increase (decrease) in
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(502,887)
|
|
|
(547,230)
|
|
|
|
Accrued expenses and other
current liabilities
|
|
|
(10,127)
|
|
|
314,333
|
|
|
|
Net cash used by operating
activities
|
|
|
(858,617)
|
|
|
(448,589)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
Purchase of equipment and
leashold improvements
|
|
|
(4,509)
|
|
|
(40,000)
|
|
|
|
Purchase of other
intangible assets
|
|
|
(9,068)
|
|
|
(80,736)
|
|
|
|
Acquisition of
business
|
|
|
-
|
|
|
(2,272,405)
|
|
|
|
Net cash used by investing
activities
|
|
|
(13,577)
|
|
|
(2,393,141)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
Net (payments) borrowings
on revolving line of credit
|
|
|
(246,988)
|
|
|
73,573
|
|
|
|
Borrowings on long-term
debt
|
|
|
-
|
|
|
1,500,000
|
|
|
|
Payments of long-term
debt
|
|
|
(75,000)
|
|
|
(25,000)
|
|
|
|
Payments of capital lease
obligations
|
|
|
(27,980)
|
|
|
(21,760)
|
|
|
|
Issuance of common stock,
net of issuance costs paid
|
|
|
(143,490)
|
|
|
1,112,310
|
|
|
|
Net cash (used) provided by
financing activities
|
|
|
(493,458)
|
|
|
2,639,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in
cash
|
|
|
(1,365,652)
|
|
|
(202,607)
|
|
|
|
Cash beginning of
period
|
|
|
4,086,574
|
|
|
448,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash end of
period
|
|
$
|
2,720,922
|
|
$
|
246,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Document Security Systems, Inc.