2014

Document Security Systems, Inc. Announces Fourth Quarter and 2011 Year-End Financial Results

ROCHESTER, N.Y., March 19, 2012 /PRNewswire/ -- Document Security Systems, Inc. (NYSE Amex: DSS; "DSS"), a world-wide developer and manufacturer of security and authentication solutions which prevent counterfeiting and brand fraud, reported results for the fourth quarter and year ended December 31, 2011.  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:  March 19th, 2012

Investor Dial-in (Toll Free):  877-407-9205

Investor Dial-In (International):  201-689-8054

Live Web Cast URL:  http://www.investorcalendar.com/IC/CEPage.asp?ID=167798

A replay of the teleconference will be available until April 2, 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 #391059 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.DSSsecure.com.

Fourth Quarter 2011 Highlights

  • Sales of $4.2 million up 16% from the third quarter of 2011, up 2% from the fourth quarter of 2010.
  • Gross profit of $1.2 million down 9% from the third quarter of 2011, up 8% from the fourth quarter of 2010.
  • Gross margin percentage of 28% up from 26% in the fourth quarter of 2010.
  • Operating expenses decreased 5% from the third quarter of 2011 and decreased 13% from the fourth quarter of 2010.
  • Net loss of $955,000, an increase of 26% from the third quarter of 2011, and a decrease of 40% from the fourth quarter of 2010.
  • Net loss per share of $(0.05), compared to a net loss per share of $(0.04) during the third quarter of 2011, and a net loss per share of $(0.11) during the fourth quarter of 2010.

Full Year 2011 Highlights

  • Sales of $13.4 million, even with 2010.
  • Gross profit of $4.2 million up 13% from 2010.
  • Gross margin percentage of 31% up from 28% in 2010.
  • Operating expenses up 1% from 2010.
  • Net loss of $3.2 million, a 7% decrease from 2010.
  • Net loss per share of $(0.17) compared to $(0.20) in 2010.

Robert Fagenson, Chairman of the Board of Document Security Systems, stated: "During 2011, we set in motion several significant initiatives that will help shape our company going forward.  First, we more fully committed ourselves to our digital division through the acquisition of ExtraDev in May, and have been bringing in talent and dedicating resources to that division ever since.  Second, our plastics division made a major push into more sophisticated products such as RFID and smart cards which has materialized into significant performance improvement at that division.  We also have right-sized our printing division to ensure long-term sustainability, with a focus on core security printing for our government and corporate clients.  Finally, we continued our focus on research and development and expanded our patent and patent protection efforts, which we expect will deliver long term benefits to our company."  

Document Security System's CEO Patrick White said, "We were able to finish 2011 with a strong fourth quarter that allowed us to increase revenue despite a significant reduction in printing sales.  Our successful push towards higher margin product sales in our plastics division and our digital division has stabilized our core business and are positive trends for this company going forward.  As we enter 2012, we will build upon this foundation and continue to focus on our core security technology offerings, especially in digital applications, to take advantage of the myriad of opportunities that exist in the security industry."

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 www.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 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 Years Ended December 31,



For The Three Months Ended December 31,















2011

2010



2011


2010











Revenue












(unaudited)




(unaudited)


Printing


$

3,227,457



$

4,697,142




$

884,994



$

1,208,791


Packaging



5,940,077




5,752,601





2,144,478




2,300,495


Plastic IDs and cards



2,769,085




2,290,788





681,889




469,158


Licensing and digital solutions



1,446,985




641,050





495,316




151,999






































Total revenue



13,383,604




13,381,581





4,206,677




4,130,443




















Costs of revenue


















Printing



2,928,410




3,799,108





845,600




978,656


Packaging



4,430,860




4,386,829





1,667,919




1,713,374


Plastic IDs and cards



1,698,439




1,504,844





467,360




361,701


Licensing and digital solutions



154,016




5,476





67,139




-






































Total costs of revenue



9,211,725




9,696,257





3,048,018




3,053,731




















Gross profit



4,171,879




3,685,324





1,158,659




1,076,712





31%




28%





28%




26%


Operating expenses:


















Selling, general and administrative



7,075,822




6,136,152





1,863,034




1,694,359


Research and development



285,450




265,360





76,952




61,274


Impairment of intangible assets



-




376,481





-




376,481


Amortization of intangibles



284,716




803,468





79,300




183,801




















        Operating expenses



7,645,988




7,581,461





2,019,286




2,315,915




















Operating loss



(3,474,109)




(3,896,137)





(860,627)




(1,239,203)




















Other income (expense):


















Change in fair value of derivative liability



360,922




-





-




-


Interest expense



(259,142)




(290,087)





(89,431)




(62,005)


Loss on equity investment



-




(121,393)





-




-


Amortizaton of note discount



-




(420,385)





-




(298,189)


Other income



-




143,061





-




-









0









0


Loss before income taxes



(3,372,329)




(4,584,941)





(950,058)




(1,599,397)




















Income (tax benefit) expense



(150,183)




(1,122,091)





4,738




4,737




















Net loss


$

(3,222,146)



$

(3,462,850)




$

(954,796)



$

(1,604,134)






































Other comprehensive income (loss):


















Interest rate swap income (loss)



(84,854)




(25,834)





(88,532)




6,000




















Comprehensive Loss


$

(3,307,000)



$

(3,488,684)




$

(1,043,328)



$

(1,598,134)






































Net loss per share -basic and diluted:


$

(0.17)



$

(0.20)




$

(0.05)



$

(0.11)




















Dividend per share


$

-



$

0.01




$

-



$

-




















Weighted average common shares outstanding, basic and diluted



19,454,046




17,755,141





19,507,806




14,700,453








































DOCUMENT SECURITY SYSTEMS, INC.  AND SUBSIDIARIES

Consolidated Balance Sheets


As of December 31,




2011


2010










ASSETS



















Current assets:










Cash


$

717,679



$

4,086,574



Accounts receivable, net of allowance










of  $76,000 ($66,000- 2010)



1,595,750




2,227,877



Inventory



783,442




601,359



Prepaid expenses and other current assets



95,399




231,190










-


      Total current assets



3,192,270




7,147,000












Property, plant and equipment, net



4,019,829




2,543,494


Other assets



244,356




325,953


Goodwill



3,322,799




3,084,121


Other intangible assets, net



2,043,212




1,847,859












Total assets


$

12,822,466



$

14,948,427












LIABILITIES AND STOCKHOLDERS' EQUITY
















Current liabilities:










Accounts payable


$

1,666,963



$

1,828,138



Accrued expenses and other current liabilities



1,142,629




1,286,529



Revolving lines of credit



763,736




614,833



Short-term loan from related party



150,000




-



Current portion of long-term debt



460,598




300,000



Current portion of capital lease obligations



88,172




88,776












      Total current liabilities



4,272,098




4,118,276






















Revolving note from related party



-




583,000


Long-term debt, net of unamortized discount of $88,000 ($0-2010)



2,819,783




1,578,242


Interest rate swap hedging liabilities



110,688




25,834


Capital lease obligations



11,133




98,532


Deferred tax liability



108,727




89,779


Derivative liabilities



-




3,866,836


Commitments and contingencies (see Note 12)





























Stockholders' equity










Common stock, $.02 par value;  200,000,000 shares authorized, 19,513,132 shares issued and outstanding










(19,391,319 in 2010)



390,262




387,825



Additional paid-in capital



48,395,241




44,178,569



Accumulated other comprehensive loss



(110,688)




(25,834)



Accumulated deficit



(43,174,778)




(39,952,632)













Total stockholders' equity



5,500,037




4,587,928












Total liabilities and stockholders' equity


$

12,822,466



$

14,948,427
























DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended December 31,













2011



2010














Cash flows from operating activities:









     Net loss


$

(3,222,146)


$

(3,462,850)



     Adjustments to reconcile net loss to net cash used by operating activities:









Depreciation and amortization



766,977



1,261,122



Stock based compensation



398,090



423,471



Amortization of note discount



-



420,385



Loss on equity investment



-



121,393



Change in fair value of derivative liability



(360,922)



-



Deferred tax benefit



(169,131)



(1,141,040)



Intangible asset impairment



-



376,481



(Increase) decrease in assets:









Accounts receivable



701,482



200,339



Inventory



(182,083)



86,977



Prepaid expenses and other assets



112,911



(101,465)



Increase (decrease) in liabilities:









Accounts payable



(229,528)



(209,516)



Accrued expenses and other current liabilities



59,845



265,450



Net cash used by operating activities



(2,124,505)



(1,759,253)












Cash flows from investing activities:









Purchase of property, plant and equipment



(523,596)



(157,422)



Purchase of other intangible assets



(72,069)



(269,729)



Acquisition of business



61,995



(2,000,000)



Net cash used by investing activities



(533,670)



(2,427,151)












Cash flows from financing activities:









Net (payments) borrowings on revolving lines of credit



(90,256)



342,428



Borrowings on long-term debt



-



1,553,242



Payments of long-term debt



(359,399)



(250,000)



Payments of capital lease obligations



(88,003)



(73,283)



Issuance of common stock, net of issuance costs



(173,062)



6,251,696



Net cash (used) provided by financing activities



(710,720)



7,824,083












Net (decrease) increase in cash



(3,368,895)



3,637,679



Cash beginning of period



4,086,574



448,895












Cash end of period


$

717,679


$

4,086,574























SOURCE Document Security Systems, Inc.



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