Document Security Systems Reports Revenue Increase of 93% in First Quarter 2009

Business Wire, May 14, 2009

-- Operating expenses decrease 36%

-- Net loss decreased by 59%

ROCHESTER, N.Y. -- Document Security Systems, Inc. (NYSE/Alternext US LLC: 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, 2009.

Revenue for the first quarter of 2009 was $2.8 million, an increase of 93% that reflects the impact of the Company’s acquisition of DPI Secuprint in December, 2008. During the quarter, this new division generated $1.7 million in revenue and was profitable. Otherwise, sales in the Company’s other divisions in the first quarter of 2009 were $1,079,000, a decrease of 25% as compared to the first quarter of 2008. All of the Company’s divisions were adversely affected by significant delays or reductions in orders by core customers that reflected the rapid decline in the U.S. and global economies during the latter half of 2008 and the first quarter of 2009.

Operating expenses for the first quarter of 2009 were $1.9 million compared with $3.0 million in 2008, a decrease of 36%. While the Company added approximately $420,000 in operating expenses as a result of the Company’s acquisition of DPI Secuprint in December, 2008, the Company offset these added expenses with approximately $1.5 million of cost cuts that the Company had initiated in the middle of 2008. The cost reductions were the result of significant decreases in selling, general & administrative compensation costs, professional fees, sales and marketing costs, stock based compensation costs and intangible amortization costs.

Net loss for the first quarter of 2009 was reduced by 59% to $944,000, or $0.07 per share, compared with a net loss of $2.3 million, or $0.17 per share, for the first quarter of 2008. Adjusted EBITDA for the first quarter of 2009 improved to a loss of $532,000 or $0.04 per share, from a loss of $970,000, or $0.07 per share, in the first quarter of 2008 (See Reconciliation of GAAP to Non-GAAP Financial Measures table).

Robert Fagenson, Chairman of the Board of Document Security Systems, stated, “As we have previously discussed with our shareholders, the addition of DPI Secuprint was an important milestone for our Company. As we mature into a full-service provider of security solutions, our goal of delivering consistent financial performance to our shareholders is becoming a reality. Despite the most difficult economic environment in recent history, we have been able to deliver significantly improved financial performance by many measurements. We believe that we are well positioned in our target markets to capitalize on our expanded resources and capabilities in paper and plastic production, while continuing our focus on development of leading edge anti-counterfeiting solutions for our customers.”

Document Security System’s CEO Patrick White said, “The first quarter of 2009 was very unusual with regard to customer activities. During the quarter, it appeared as though customers were shopping at unprecedented levels as we experienced high volumes of requests for quotations. On the other hand, the actual buying decisions were slow in coming and/or delayed. For example, we have been working with a particular government agency and several Fortune 500 companies on security print revenue opportunities - most of which have been delayed by the clients. We are continuing dialog with these clients and remain confident that these opportunities will eventually come to fruition. In spite of these timing issues, with the strategic acquisition of DPI Secuprint and the positive affects we are seeing as a result of the previously implemented cost reduction initiatives, I feel that the Company’s financial condition has turned a corner and is showing improvement in key benchmarks. Notwithstanding the current economic conditions, there exist significant opportunities for our patented, cutting-edge security and anti-counterfeiting technologies. We are extremely encouraged by the activity we are seeing within our product channels and addressable markets and look forward to communicating these developments to our shareholders and the market in the upcoming weeks.”

Management will review its first quarter results during its Annual Meeting of Shareholders on May 28, 2009, which will be webcast. We plan to accept questions via telephone as well. Additional information regarding the Annual Meeting of Shareholders webcast will be provided in a press release prior to the event.

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.