Document Security Systems, Inc. Reports First Quarter 2010 Financial Results

ROCHESTER, N.Y., May 17 /PRNewswire-FirstCall/ -- Document Security Systems, Inc. (NYSEAMEX: DMC; "DSS"), a leader in patented protection against counterfeiting and unauthorized copying, scanning and photo imaging, reported results for the first quarter ended March 31, 2010.   Management will host a teleconference and web cast today at 4:30 pm ET to discuss the results with the investment community:

Live Web Cast URL:  http://www.investorcalendar.com/IC/CEPage.asp?ID=158538

Highlights

• Sales of $2.8 million increased 19% sequentially from the fourth quarter of 2009, unchanged from the first quarter of 2009.
• Operating expenses decreased 4% sequentially, and decreased 1% from the first quarter of 2009.
• Net loss increased 1% sequentially, and increased by 19% compared to $944,000 in the first quarter of 2009.
• Net loss per share of $(0.07) unchanged sequentially and from the first quarter of 2009.
• Adjusted EBITDA. (See Reconciliation of GAAP to Non-GAAP Financial Measures table) loss of $487,000 compared to a loss of $189,000 loss in the fourth quarter of 2009 and an Adjusted EBITDA loss of $532,000 in the first quarter of 2009.
• Completed acquisition of Premier Packaging ("Premier") in February 2010.  
• Received favorable patent validity decision in Spain.

Document Security System's CEO Patrick White stated: "The addition of Premier Packaging during the first quarter of 2010 has strengthened our balance sheet and diversified our revenue streams.  In the six weeks since our acquisition of Premier, they have generated sales of $741,000 and we are confident that DSS will benefit greatly from this acquisition for years to come.  We are, however, disappointed that this increase was offset by the absence of orders from a large commercial print customer that had made significant orders during the first quarter of 2009.  While we believe that this customer is pushing this year's order further into the 2010 calendar year, the acquisition of Premier enables us to reduce the reliance on our commercial print group.  Sequentially, our revenue was comparable to the fourth quarter of 2009, and the reductions in our operating expenses continue to show the benefit of the cost cuts and synergies we are realizing with our acquisitions."

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

Plastic Printing Professional, Inc.: http://www.plasticprintingprofessionals.com/

Protected Paper: http://www.protectedpaper.com

DPI of Rochester: http://www.dpirochester.com

Premier Custom Packaging: 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 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.

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, and other non-cash items such as loss in equity investments or other unusual items 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 and other non-cash items such as loss in equity investments or other unusual items. 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.

SOURCE Document Security Systems, Inc.