New York
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1-32146
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16-1229730
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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First Federal Plaza, Suite 1525
28 East Main Street
Rochester, NY
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14614
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(Address of principal executive offices)
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(Zip Code)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02
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Results of Operations and Financial Condition
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Item 4.02
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Non-Reliance on Previously Issued Financial Issued Financial Statements or a Related Audit Report or Completed Interim Review
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Item 9.01
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Financial Statements and Exhibits
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(d)
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Exhibits
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99.1
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Press Release dated November 14, 2011
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DOCUMENT SECURITY SYSTEMS, INC.
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Dated: November 14, 2011
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By:
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/s/ Patrick White
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Patrick A. White
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Chief Executive Officer |
Exhibit No.
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Description
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||
99.1 |
Press Release dated November 14, 2011
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§
|
Sales of $3.6 million up 26% from the second quarter of 2011, up 15% from the third quarter of 2010.
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§
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Gross profit of $1.3 million up 57% from the second quarter of 2011, up 44% from the third quarter of 2010.
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§
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Gross margin percentage of 35% up from 28% in the second quarter of 2011 and the third quarter of 2010.
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§
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Operating expenses increased 15% from the second quarter of 2011, up 34% from the third quarter of 2010.
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§
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Lower net loss of $757,000, a decrease of 32% from the second quarter of 2011, and a decrease of 14% from the third quarter of 2010.
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§
|
Lower net loss per share of $(0.04), compared to a net loss per share of $(0.06) during the second quarter of 2011, and a net loss per share of $(0.05) during the third quarter of 2010.
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§
|
Sales of $9.2 million down 1% from the first nine months of 2010.
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§
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Gross profit of $3.0 million up 15% from the first nine months of 2010.
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§
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Gross margin percentage of 33% up from 28% in the first nine months of 2010.
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§
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Operating expenses up 7% from the first nine months of 2010.
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§
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Net loss of $2.3 million, an increase of 22% from the first nine months of 2010 (as restated).
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§
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Net loss per share of $(0.12) compared to $(0.11) in the first nine months of 2010 (as restated).
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Three Months Ended September 30, 2011
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Three Months Ended September 30, 2010
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% change
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Nine Months Ended September 30, 2011
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Nine Months Ended September 30, 2010 (Restated)
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% change
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Three Months Ended June 30, 2011
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% change
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|||||||||||||||||||||||||
Revenue
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||||||||||||||||||||||||||||||||
Printing
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$ | 832,000 | $ | 1,056,000 | -21 | % | $ | 2,342,000 | $ | 3,488,000 | -33 | % | $ | 789,000 | 5 | % | ||||||||||||||||
Packaging
|
1,576,000 | 1,382,000 | 14 | % | 3,796,000 | 3,452,000 | 10 | % | 1,183,000 | 33 | % | |||||||||||||||||||||
Plastic IDs and cards
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757,000 | 564,000 | 34 | % | 2,087,000 | 1,822,000 | 15 | % | 637,000 | 19 | % | |||||||||||||||||||||
Licensing and digital solutions
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451,000 | 149,000 | 203 | % | 952,000 | 489,000 | 95 | % | 266,000 | 70 | % | |||||||||||||||||||||
Total Revenue
|
$ | 3,616,000 | $ | 3,151,000 | 15 | % | $ | 9,177,000 | $ | 9,251,000 | -1 | % | $ | 2,875,000 | 26 | % | ||||||||||||||||
Costs of revenue
|
||||||||||||||||||||||||||||||||
Printing
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$ | 699,000 | $ | 865,000 | -19 | % | $ | 2,083,000 | $ | 2,821,000 | -26 | % | $ | 754,000 | -7 | % | ||||||||||||||||
Packaging
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1,125,000 | 1,056,000 | 7 | % | 2,763,000 | 2,673,000 | 3 | % | 920,000 | 22 | % | |||||||||||||||||||||
Plastic IDs and cards
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453,000 | 345,000 | 31 | % | 1,231,000 | 1,143,000 | 8 | % | 375,000 | 21 | % | |||||||||||||||||||||
Licensing and digital solutions
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68,000 | - | 100 | % | 87,000 | 5,000 | 1640 | % | 19,000 | 258 | % | |||||||||||||||||||||
Total cost of revenue
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2,345,000 | 2,266,000 | 3 | % | 6,164,000 | 6,642,000 | -7 | % | 2,068,000 | 13 | % | |||||||||||||||||||||
Gross profit
|
||||||||||||||||||||||||||||||||
Printing
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133,000 | 191,000 | -30 | % | 259,000 | 667,000 | -61 | % | 35,000 | 280 | % | |||||||||||||||||||||
Packaging
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451,000 | 326,000 | 38 | % | 1,033,000 | 779,000 | 33 | % | 263,000 | 71 | % | |||||||||||||||||||||
Plastic IDs and cards
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304,000 | 219,000 | 39 | % | 856,000 | 679,000 | 26 | % | 262,000 | 16 | % | |||||||||||||||||||||
Licensing and digital solutions
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383,000 | 149,000 | 157 | % | 865,000 | 484,000 | 79 | % | 247,000 | 55 | % | |||||||||||||||||||||
Total gross profit
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$ | 1,271,000 | $ | 885,000 | 44 | % | $ | 3,013,000 | $ | 2,609,000 | 15 | % | $ | 807,000 | 57 | % | ||||||||||||||||
Operating Expenses
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||||||||||||||||||||||||||||||||
Sales, general and administrative compensation
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$ | 870,000 | 24 | % | $ | 2,684,000 | $ | 2,561,000 | 5 | % | $ | 845,000 | 28 | % | ||||||||||||||||||
Professional Fees
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219,000 | 92,000 | 138 | % | 582,000 | 437,000 | 33 | % | 163,000 | 34 | % | |||||||||||||||||||||
Sales and marketing
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127,000 | 46,000 | 176 | % | 413,000 | 172,000 | 140 | % | 162,000 | -22 | % | |||||||||||||||||||||
Research and development
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83,000 | 72,000 | 15 | % | 208,000 | 205,000 | 1 | % | 74,000 | 12 | % | |||||||||||||||||||||
Rent and utilities
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195,000 | 170,000 | 15 | % | 547,000 | 478,000 | 14 | % | 188,000 | 4 | % | |||||||||||||||||||||
Other
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212,000 | (10,000 | ) | 2220 | % | 575,000 | 361,000 | 59 | % | 231,000 | -8 | % | ||||||||||||||||||||
1,916,000 | 1,240,000 | 55 | % | 5,009,000 | 4,214,000 | 19 | % | 1,663,000 | 15 | % | ||||||||||||||||||||||
Other Operating Expenses
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||||||||||||||||||||||||||||||||
Depreciation and software amortization
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34,000 | -9 | % | 94,000 | 96,000 | -2 | % | 31,000 | 0 | % | ||||||||||||||||||||||
Stock based compensation
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114,000 | 130,000 | -12 | % | 319,000 | 336,000 | -5 | % | 101,000 | 13 | % | |||||||||||||||||||||
Amortization of intangibles
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71,000 | 189,000 | -62 | % | 205,000 | 620,000 | -67 | % | 62,000 | 15 | % | |||||||||||||||||||||
216,000 | 353,000 | -39 | % | 618,000 | 1,052,000 | -41 | % | 194,000 | 11 | % | ||||||||||||||||||||||
Total Operating Expenses
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$ | 2,132,000 | $ | 1,593,000 | 34 | % | $ | 5,627,000 | $ | 5,266,000 | 7 | % | $ | 1,857,000 | 15 | % | ||||||||||||||||
Operating loss
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(861,000 | ) | (708,000 | ) | 22 | % | (2,614,000 | ) | (2,657,000 | ) | -2 | % | (1,050,000 | ) | -18 | % | ||||||||||||||||
Other income (expense):
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||||||||||||||||||||||||||||||||
Change in fair value of derivative liability
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$ | - | 0 | % | $ | 361,000 | $ | - | 0 | % | $ | - | 0 | % | ||||||||||||||||||
Interest expense
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(61,000 | ) | (79,000 | ) | -23 | % | (170,000 | ) | (228,000 | ) | -25 | % | (59,000 | ) | 3 | % | ||||||||||||||||
Amortizaton of note discount
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- | (41,000 | ) | -100 | % | - | (122,000 | ) | -100 | % | - | 0 | % | |||||||||||||||||||
Loss in equity investment
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- | (50,000 | ) | -100 | % | - | (121,000 | ) | -100 | % | - | 0 | % | |||||||||||||||||||
Other income
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- | - | 0 | % | - | 143,000 | -100 | % | - | 0 | % | |||||||||||||||||||||
Other income (expense), net
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$ | (61,000 | ) | $ | (170,000 | ) | -64 | % | $ | 191,000 | $ | (328,000 | ) | -158 | % | $ | (59,000 | ) | 3 | % | ||||||||||||
Loss before income taxes
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(922,000 | ) | (878,000 | ) | 5 | % | (2,423,000 | ) | (2,985,000 | ) | -19 | % | (1,109,000 | ) | -17 | % | ||||||||||||||||
Income taxes (benefit) expense
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(165,000 | ) | 5,000 | -3400 | % | (156,000 | ) | (1,127,000 | ) | -86 | % | 5,000 | #### | |||||||||||||||||||
Net loss
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$ | (757,000 | ) | $ | (883,000 | ) | -14 | % | $ | (2,267,000 | ) | $ | (1,891,000 | ) | 22 | % | $ | (1,112,000 | ) | -32 | % | |||||||||||
Net loss per share, basic and diluted
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$ | (0.05 | ) | -20 | % | $ | (0.12 | ) | $ | (0.11 | ) | 9 | % | $ | (0.06 | ) | -33 | % | ||||||||||||||
Weighted average common shares outstanding, basic and diluted
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18,008,012 | 8 | % | 19,435,930 | 17,599,410 | 10 | % | 19,420,780 | 0 | % |
September 30, 2011
|
December 31, 2010
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|||||||
ASSETS
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(Unaudited)
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(Restated)
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||||||
Current assets:
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||||||||
Cash
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$ | 1,070,510 | $ | 4,086,574 | ||||
Accounts receivable, net of allowance
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||||||||
of $66,000 ($66,000- 2010) | 1,805,735 | 2,227,877 | ||||||
Inventory
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1,043,780 | 601,359 | ||||||
Prepaid expenses and other current assets
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98,102 | 231,190 | ||||||
Total current assets
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4,018,127 | 7,147,000 | ||||||
Property, plant & equipment, net
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4,147,327 | 2,543,494 | ||||||
Other assets
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244,356 | 325,953 | ||||||
Goodwill
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3,322,799 | 3,084,121 | ||||||
Other intangible assets, net
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2,076,508 | 1,847,859 | ||||||
Total assets
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$ | 13,809,117 | $ | 14,948,427 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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||||||||
Accounts payable
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$ | 1,595,952 | $ | 1,828,138 | ||||
Accrued expenses and other current liabilities
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1,181,767 | 1,312,363 | ||||||
Revolving lines of credit
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842,109 | 614,833 | ||||||
Short-term loan from related party
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150,000 | - | ||||||
Current portion of long-term debt
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447,645 | 300,000 | ||||||
Current portion of capital lease obligations
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97,683 | 88,776 | ||||||
Total current liabilities
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4,315,156 | 4,144,110 | ||||||
Revolving note from related party
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- | 583,000 | ||||||
Long-term debt
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3,035,414 | 1,578,242 | ||||||
Capital lease obligations
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16,698 | 98,532 | ||||||
Deferred tax liability
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103,990 | 89,779 | ||||||
Derivative liabilities
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- | 3,866,836 | ||||||
Commitments and contingencies
|
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Stockholders' equity
|
||||||||
Common stock, $.02 par value; 200,000,000 shares authorized, 19,503,132 shares issued and outstanding
|
||||||||
(19,391,319 in 2010)
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390,062 | 387,825 | ||||||
Additional paid-in capital
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48,189,936 | 44,178,569 | ||||||
Accumulated other comprehensive loss
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(22,156 | ) | (25,834 | ) | ||||
Accumulated deficit
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(42,219,983 | ) | (39,952,632 | ) | ||||
Total stockholders' equity
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6,337,859 | 4,587,928 | ||||||
Total liabilities and stockholders' equity
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$ | 13,809,117 | $ | 14,948,427 |
2011 |
2010
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Cash flows from operating activities:
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(Restated)
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|||||||
Net loss
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$ | (2,267,351 | ) | $ | (1,858,714 | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities:
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||||||||
Depreciation and amortization
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534,292 | 949,683 | ||||||
Stock based compensation
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319,106 | 336,111 | ||||||
Amortization of note discount
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- | 122,196 | ||||||
Loss on equity investment
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- | 121,393 | ||||||
Change in fair value of derivative liability
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(360,922 | ) | - | |||||
Deferred tax benefit
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(169,131 | ) | (1,141,040 | ) | ||||
(Increase) decrease in assets:
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||||||||
Accounts receivable
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491,497 | 593,122 | ||||||
Inventory
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(442,421 | ) | (125,381 | ) | ||||
Prepaid expenses and other assets
|
110,208 | (59,881 | ) | |||||
Increase (decrease) in liabilities:
|
||||||||
Accounts payable
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(300,291 | ) | (406,598 | ) | ||||
Accrued expenses and other current liabilities
|
67,821 | 207,614 | ||||||
Net cash used by operating activities
|
(2,017,193 | ) | (1,261,495 | ) | ||||
Cash flows from investing activities:
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||||||||
Purchase of property, plant and equipment
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(497,709 | ) | (138,640 | ) | ||||
Purchase of other intangible assets
|
(26,313 | ) | (118,999 | ) | ||||
Acquisition of business
|
61,995 | (2,272,405 | ) | |||||
Net cash used by investing activities
|
(462,027 | ) | (2,530,044 | ) | ||||
Cash flows from financing activities:
|
||||||||
Net (payments) borrowings on revolving lines of credit
|
(11,883 | ) | 285,705 | |||||
Borrowings on long-term debt
|
- | 1,500,000 | ||||||
Payments of long-term debt
|
(245,183 | ) | (175,000 | ) | ||||
Payments of capital lease obligations
|
(72,927 | ) | (69,424 | ) | ||||
Issuance of common stock, net of issuance costs
|
(206,851 | ) | 2,209,445 | |||||
Net cash (used) provided by financing activities
|
(536,844 | ) | 3,750,726 | |||||
Net decrease in cash
|
(3,016,064 | ) | (40,813 | ) | ||||
Cash beginning of period
|
4,086,574 | 448,895 | ||||||
Cash end of period
|
$ | 1,070,510 | $ | 408,082 |