DSS, Inc. (DSS) Q4 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to the Document Security Systems Fourth Quarter and Full-Year [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Peter Salkowski of the Blueshirt Group. Thank you, Mr. Salkowski. You may begin.

Thank you, Doug. Good afternoon, everyone. As Document Security Systems’ Investor Relations representative, I’d like to thank everyone for joining us today for the company’s fourth quarter 2012 earnings conference call. Joining me on the call today from Document Security Systems are Chairman of the Board, Robert Fagenson; Chief Executive Officer, Robert Bzdick; and Chief Financial Officer, Phil Jones. Also, on today’s call from Lexington Technology Group are Chief Executive Officer, Jeff Ronaldi; and Chief Operating Officer, Peter Hardigan. Following management’s prepared remarks, we will open the call for your questions. Before turning the call over to Robert Fagenson for his opening remarks, I’d like to review the company’s Safe Harbor statement. Management will make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. During our call today, we will discuss adjusted EBITDA and our press release issued this afternoon, which is posted on our website, you will find additional disclosures regarding this non-GAAP financial measure and reconciliations of net loss to adjusted EBITDA. I would like to now turn the call over to Robert Fagenson, Chairman of the Board of Document Security Systems. Robert?

Thank you, Peter. Good afternoon, everyone, and thank you for joining us for our fourth quarter and full-year conference call for 2012. As you can see for those of you who had a chance to review the press release and review our earnings, you can see that the numbers continue to move in the right direction. And with Bob Bzdick, leading our management team after Pat White’s retirement, the company has achieved a new focus in how it’s operating. While Pat’s management style was one where he would direct the company in a number of potential areas where he thought we could achieve success. The result unfortunately over time was that many times we were diluting our management talents and time, as well as our financial capabilities. And unfortunately, very often the results did not come to fruition in a way that was meaningful. Bob’s management style is one of much greater focus, trying to find the greatest near-term commercial opportunities with the greatest potential and with laser focus taking our management team and our financial resources and devoting him in that type of focused management style. The results, which Bob and Phil will speak to, and then Jeff will talk about Lexingtons’ recent developments, I think are showing up in both our growth and the ability to produce higher margins and just increasingly better results on a quarter-to-quarter basis. I’m going to turn it over as we move into the final half lap of our merger process to the operating executive, so he’ll give you far greater detail and then I will finish up when they’re done and then we’ll go to Q&A. So with that, I turn it over to our CEO, Bob Bzdick.

Thank you, Robert, and thank you all for your interest in DSS. We are very pleased with our fourth quarter performance and continuation of our recent sales and gross margin progress [ph]. We continue to emphasize sales growth opportunities, as well as explore ways to increase productivity and operating efficiencies in our legacy manufacturing divisions. I believe 2013 was a transformative year for DSS. Our new product offerings as well our pending merger with Lexington Technology Group promises for very active, potentially rewarding 2013. During 2012 we’ve made investments in research and new product development that significantly improved our ability to deliver and manage our corporate print technologies digitally and through the cloud. Developing the ability to read our covert [ph] security market using iPhone's and now Android phones were key developments. This important next step in our technology portfolio resulted in the launch of AuthentiGuard in late 2012. We expect this offering to result in several new licensing opportunities in 2013. AuthentiGuard is a powerful new tool for brand owners in the fight against counterfeiting and product diversion worldwide. We are aggressively promoting and presenting AuthentiGuard to a very receptive and engaged audience of Fortune 500 brand owners. We have seen significant interest from pharmaceutical, cosmetics, fashion and apparel accessories companies as well as in various identification applications. The complexity of introducing and implementing security-related technologies result in lengthy sales cycles. We have several brand owners who are entering or preparing to enter the beta testing phase of the process. Every potential client entering our space is a real accomplishment. This process is very disruptive and it requires the involvement of all internal logistical levels of the brand owner and in most cases, outside venues [ph] and security personnel. As a result, beta testing is not initiated unless significant value is perceived by the brand owner. The fact that we've established that level of interest is extremely encouraging. As it relates to our target markets and brand owners that we are gauging, I would like to make our stockholders aware of DSS’s adopted non-disclosure policy. There are serious potential consequences of counterfeits in diverted products to brand owners. They share sensitive information with DSS during the sales and implementation phases. Accordingly, they deserve, expect and in fact demand the highest levels of discretion to be exercised by the providers of technologies that they implement. Accordingly, going forward, DSS will not provide names of brand owners or specific products it was involved to protect. Accordingly, the merger with Lexington Technology remains on track to close in the second quarter. The SEC review approval process continues to move forward regarding our S4 filing made in connection with that proposed merger. In our view, we are in the final stages of that process. Once we clear the hurdle, the record date will be set and a special stockholder meeting will be scheduled to vote on the merger proposals as set forth in the S4 filing. Stockholders could expect with that meeting and vote will be scheduled approximately 40 days from the SEC approval of the S4. I would like now to turn over the call to Phil Jones, DSS’s CFO to take you through the fourth quarter and full-year results for DSS. Phil?

Thank you, Bob. Today, we announced our fourth quarter and full-year 2012 financial results summarized in the earnings press release we issued after market close today and detailed in our Form 10-K, which we are in the process of filing today with the SEC. To begin, we are very pleased to report that revenues reached $5.5 million in the fourth quarter, a record quarter for the company, up 30% over Q4 of 2011. For the full year, revenues reached $17.1 million, a 28% increase from 2011 and the highest annual level in the company’s history as well. Our packaging division drove revenue growth both during the quarter and for the full-year. Packaging revenue increased 66% during the fourth quarter to finish the full year up 59% over 2011. For the full year 2012, each of our divisions, except for the printing division, achieved revenue increases. The printing group continued to see a reduction in overall revenues as it moved away from certain types of commercial printing to focus on its highest margin opportunities. The strategy is working. In fact, during the fourth quarter of 2012, security printing sales increased 47% as compared to the fourth quarter of 2011. Just as strong as the revenue growth has been the growth in the company’s gross profits. Gross profit for the fourth quarter of 2012 was $1.6 million, a 40% increase over the fourth quarter of 2011. The company has greatly improved margins for the printing division in the fourth quarter which was 34% compared to 4.4% in the fourth quarter 2011, was the primary contributing factor to the company’s ability to increase its gross profit margin to 30% for the quarter, which is a 200 basis point improvement. For the full year, gross profit increased 37% to $5.7 million with a 33% margin compared to a gross profit of $4.2 million for a margin of 31% for the full year of 2011. As has been the case throughout the first 9 months of 2012, our efforts to streamline operating cost and focus our sales efforts on higher margin opportunities has paid off, especially in the printing division. So during 2012, we saw an increase in sales along with an even greater increase in gross margins, which of course, is a very strong formula for success. Moving to operating expenses, for the full year, total operating expenses increased 24%, which was driven by significant increase in professional fees primarily due to the cost associated with our pending merger with Lexington. In addition during 2012, we increased our research and development cost by 72% and had a 96% increase in stock-based compensation cost. Taking out these 3 expense items, on a comparable basis, total operating expenses would have increased only 7% from 2011. So despite a 37% increase in gross profit, what we consider to be core recurring operating costs only increased 7%. As such, we also measure performance using adjusted EBITDA, which is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-recurring items, including for our purposes, the merger-related professional fees. During the fourth quarter, our adjusted EBITDA loss was $280,000, a 49% improvement from the fourth quarter of 2011 and for the full year, our adjusted EBTIDA loss reduced 43% to $1.3 million. I remind everyone that adjusted EBITDA is a non-GAAP measure of performance and I encourage everyone to refer to the table we included in our earnings release today for a reconciliation of our GAAP net loss to our adjusted EBITDA loss that I just referred to. Net loss for the fourth quarter was $1.1 million, or $0.05 per share compared to a net loss of $1 million, or $0.05 per share in the fourth quarter of 2011. Net loss for the full year was $4.3 million, or $0.21 per share compared to a loss of $3.2 million, or $0.17 per share in 2011. Once again, due to the large degree of non-cash expenses that affected our financial performance, including stock-based compensation and the impact of the merger cost, our adjusted EBITDA improvement during both the fourth quarter and full year 2012 is a useful indicator of performance. Moving to the balance sheet; at December 31, 2012, we had approximately $1.9 million in cash and $2.1 million in accounts receivable, which reflects our strong sales in the fourth quarter of the year. Net working capital was a positive $1.3 million compared to a working capital deficit of $1.1 million at the end of 2011. In addition, total debt was reduced by approximately $1.7 million during 2012 to $2.6 million at the end of 2012 compared to $4.3 million at the end of 2011. To summarize, we believe our strong fourth quarter 2012 and our full year performance was based on 3 important metrics, revenue growth, gross profit growth and core operating cost containment. The strengthening of our core financial results as measured by our adjusted EBITDA performance allows the company to continue to focus on research and development and other opportunities such as the proposed merger with Lexington Technology. These have the potential to generate significant long-term benefits to the company. With that, I’d like to turn the call over to Jeff Ronaldi, CEO of Lexington. Jeff, the call is yours.

Thank you, Phil. Yesterday, Lexington Technology Group announced that it made a strategic investment in VirtualAgility Incorporated, a developer of user-friendly programming platforms that facilitate the creation of sophisticated business applications without programming or coding. Lexington’s investment in VirtualAgility reflects our commitment to supporting operating businesses that hold strong IP rights. The stake complements Lexington’s acquisition of Bascom Research LLC in 2012, and it will be relevant to DSS articulate to its AuthentiGuard product line, which will benefit from VirtualAgility’s collaborative development tools. The investment provides Lexington with a minority stake in VirtualAgility and the potential opportunity to expand its ownership in VirtualAgility over time under DSS’ umbrella once the proposed merger is completed. The VirtualAgility investment provides Lexington with the opportunity to participate in VirtualAgility’s future growth and performance including its pending patent litigation recently filed in the U.S. federal district court in Eastern Texas, VirtualAgility versus Salesforce.com and others, which involves several major information technology companies. VirtualAgility’s leading edge inventions are protected by 5 issued U.S. patent and multiple trade secrets. The company also has several additional patents pending on innovative systems and methodologies. Bascom Research litigation against Facebook, LinkedIn, and 3 other companies in the social networking space involving 4 U.S. patents continues to progress. Bascom Research, a wholly-owned subsidiary of Lexington, believes defendants are in violation of key patents covering its technology and is seeking a judgment of infringement, injunctive release, and appropriate damages. Lexington continues to explore opportunities to acquire IP assets, partnered with IP holders and to file patents that would support both strategic business objectives and monetization initiative. The Lexington management team will look forward to the approval of pending merger and working closely with the DSS management. With that, I’ll pass the call back to Robert.

Thanks, Jeff. And also thanks to Bob and to Phil for their reports as well. Before we go to the Q&A, hopefully what you’ve taken from this is the fact that the focus of the company has changed and obviously with a pending merger with Lexington is going to change again. For years, we used our technology as the driver of our sales approach. Trying to sell customers what we thought that they needed and what our patented technology could do for them. The sales cycle was long and arduous and while we had limited success, the big scores that we were waiting for just never materialized. Bob has the taken the team and the company and our new product suite in a different direction. We are using customer demand driven approach, where we take our technology, working with the customers at the early stage and saying, what is that you really need out there in the marketplace that can wrap around our technology and work for you? And if you had it, you would buy it? And that is how we’re operating now. It will do 2 things, one it shortens the sales cycle and that is for a variety reasons, not the least of which is it brings us into the company in a much higher level. We’re operating with the security directors and the people who are actually in charge of brand protection, and who have the authority to proceed. And as Bob alluded to earlier, that has led us into beta stage testing agreements with a number of customers, and that has happened far more quickly that we ever saw in our previous approach. So as we move forward with that and hopefully in the very near future close with Lexington, the company will take on a variety of new dimensions that we are very excited about and the legacy company as you can see continues to expand and perform well, better and better, under focused management with the company that is now solidly financed and with the excitement driven by having a whole different aspect to it, once the merger closes. So I guess the biggest question mark many of you have is why is the stock not performed better under these circumstances. Those of us have been in the market for all of our lives know there is no easy answer. Other than during a pendency of a merger very often forces other than those that you think part of the basics that people rely on tend to take over and distort market fundamentals. As so I say we’ve drawn very, very closely to the conclusion of the merger. Hopefully that phase will end and will get into a point where people start to evaluate the combined companies in a way that will take the merger distortions out and let the future determine, where and how our stock acts going forward. And with that, I will now turn it over to our moderator to open the Q&A period.

[Operator Instructions] Our first question comes from the line of Elliott Blonde from Royal Bank of Canada.

Couple of -- 3 questions. On the $2.1 million outstanding, what’s the DSOs on that?

I don’t have the exact figures in front of me. But our typical DSO is about 45 days. So we’ve seen those collected in the first quarter.

Okay. On the printing side which is doing very well, do you continue to see progress there from where you are now?

We see progress in the security print side of the business, the commercial side of the print business is still, I’ll say this as more of a universal comment, commercial side of the industry is very depressed and still remains depressed.

Okay. And I guess the big question mark would be licensing, you are in the beta testing now, when you said a long cycle what were you referring to? Just give a generalization.

Typically speaking, the brand-owners will pick 1 or 2 brand products that currently are not -- maybe just coming onto the market or something that have specific problems with. We have to go through a cycle with them to train their internal and external logistics partners and then we are able to move forward. Once we test those things and they are successful, I would say that the company is in a position -- the brand-owner is in a position to make the call probably within 30 to 60 days from there.

So are we talking like 6 months perhaps, 9 months? I mean is there a generalization you can make?

I would hope that it would not be that long. In some cases, depending on how involved the beta testing are, we anticipate be able to drive some income even out of the beta testing.

Okay. And just 2 more if I may, what do you expect for continuing merger expenses?

We won’t see the levels we saw from fourth quarter. A lot of the heavy lifting was done in that quarter. So we’ll still see an impact in the first quarter until the merger closes, but we should expect -- not to the same degree as the fourth quarter.

Okay. And then for the Lexington guys, hello Peter, can you comment after we pushed out of Virginia to I believe it's California how that’s proceeding?

The case is proceeding much as we anticipated. We are in discussions with I think all of the defendants and we expect that we will be successful in asserting the patents that we have, with the defendants that we have over sort of a slightly longer time period. I don’t think that there is much of a change in terms of how we anticipate the case to go, just that California is a little bit longer timeframe.

Our next question comes from the line of Brian Merriman [ph], a private investor.

Billionaire investor Dr. Philip Frost has a sizable stake in DSS. My question to you is twofold. Can you comment on what his current share ownership is, and can you comment on whether or not we hope he is more active in this oncoming merger?

We can’t comment on his ownership, only he could comment on that if he chose to and we certainly are always happy to have intelligent, engaged activist investors as part of our shareholder base, whomever it is, in this case, the gentleman you referred to. If you take a look at past history and affiliations, certainly we like to have investors in our shareholder base who have proven successful. And we hope that in the event that Phil Frost is in fact the sizable shareholder that he has done so, because he has same faith in the company that we do, but quite frankly it’s inappropriate for us to either comment on individual shareholdings or be able to speculate on what they might do in the future.

Our next question comes from the line of Mark Argento from Lake Street Capital Markets.

Quick question for Jeff and Peter. I apologize if you already have discussed this, I came on little bit late, but the VirtualAgility transaction that you did recently just put out a press release on, can you talk a talk a little about that in particular, kind of how you structured that deal. And then what is -- it looks like they have at least 1 litigation pending right now. How broad is that portfolio? Is there opportunities above and beyond just the litigation that we see so far?

Sure. This is Jeff Ronaldi. We made an equity investment in VirtualAgility, we see it as an operating company that supported by strong IT [ph] assets. So this isn't strictly a patent play this is -- we’re getting access to the products and services and expect to help them sell their product and services as well as use them ourselves. In the case of the litigation, as a stockholder, we’re going to share in the proceeds of that litigation. It’s currently a single patent filed in Eastern Texas against about 9 defendant SalesForce being them to main product that it’s being asserted against, then a number of others. The VirtualAgility portfolio is currently 5 issued U.S. patents about 5 others pending. We expect to continually look through the portfolio for other opportunities. I can’t really speculate on whether they will add additional defendant, or our additional cases with other patents, but we believe that they also have a very strong portfolio, and we will share in those proceeds as we move forward.

As part of the transaction do you have the ability to scale up your investment if you so choose?

We do. We have options going forward that allow us to invest additional funds if we choose to do so, which would also increase our stake in the company obviously.

And is it safe to assume that you are looking at other opportunities similar to this, in terms of being able to deploy capital both from -- into operating businesses that are also IP-rich?

Yes, what we’re looking for is operating companies with strong IP asset and VirtualAgility fits that mold. So we will look for other opportunities that fit, that can use, that we can use their products, or they could use our products. And complements what we do with DSS.

Our next question comes from the line of Tom Selker [ph], a private investor.

This is for Bob Bzdick, Bob would you describe please the format and functionality of the beta testing that is ongoing with some of your customers, with the iPhone and the Google software, Android?

Yes, as far as the process goes, as I mentioned before the brand-owner has picked 1 or 2 items, one that they are interested in proceeding with is a new pharmacy drug, the other is a consumer product, over-the-shelf kind of thing. Basically the first step obviously is to train them in how the markings [ph] work. The second is to educate their vendors if they want to use their own vendors how to print the products. Then we install a management program that allows them to determine who in their organization is able, or who is in the security arena are able to download apps to do the reading of the products once they get into the field. And then we set up the back-end portal that allows them to actually manage, turn on and off people's access to the apps, to also change what the codes mean if they want to extend the expiration date for instance they can do that right through the portal. They can indicate through the portal that product is under recall -- they have a vast amount of flexibility there. We also demonstrate to them how they can manage the information whether they want to do it on an exception basis, whether they want to do it by region. Each read gives them information as to where -- GPS data point where the read was made, and where the product was whether it passed or failed in real time which is all things that are very valuable to the brand owner. I hope that answers your question, but basically we bring the process to soup to nuts, turnkey capability so they can actually use it for a period of time within restrictions of volume and so forth.

Okay. You answered partially my question. Let’s take for example the pharmaceutical industry, are you starting -- are they starting to use your technology, when the pills for example go into the bottle and are packaged ideally [ph] at a factory and then followed through the distribution chain on to the retail market?

I can’t really disclose as part of our non-disclosure, because again that’s part of the covertness of it, so people don’t know where it is. But it could be anywhere from on the bottle, on the label, on the tamper-proof evident seal, on the box, it could be anywhere and that’s part of the covertness of the marking.

Our next question comes from the line of Maurice Levy [ph] from M A Levy & Associates [ph].

I’m sitting here and thinking about the potential of the company and I’ve heard a lot of good stories about it. And my only question is what kind of valuation do you give on these lawsuits against using a patented information both with Document, with Lexington, Bascom? Do you have any kind of a number that we could kind of -- what kind of valuation could you give all that?

This is Peter Hardigan. I think that one thing that may be helpful. We haven’t disclosed this. It’s not something that is positive to disclose, because it’s something that impacts both the litigation itself, and it’s something which is not always the straightforward thing. But one thing I’d say is, if you look at the last round of financing that Lexington did for our merger as we disclosed in our S-4. We sold approximately 10% of the company to experience investors for about $5.5 million. So the view of the company at that stage when we had acquired the portfolio and assembled the initial management team -- was around that number. So sort of on a market approach, that will give you a sense.

You can't put a number on it. But do you have enough capital now before the merger if it gets completed, I’m sure it will. Do you have enough capital to keep operating?

Part of the merger agreement requires Lexington to have $7.5 million in cash and/or cash equivalent assets at closing in addition to the cash that would be in DSS at the time of closing. And we’ve done litigation analysis to see how much we think we'd need to see the current suite of events through to conclusion. And the answer to your question is, yes, we believe that we have provided adequately for those needs.

Because you can't do it -- you can't do an offering at $2 a share. But I don’t know why the market doesn’t consider the potential of the company, but that’s not my business.

When we did...

I’ve been in a business for 50 years and I know it’s an exciting opportunity. I own a lot of stock and it’s an exciting opportunity if everything falls in place. And I wish you guys, the best of luck and I just want to be sure that you have enough operating capital. I saw you had a TV spot on Fox Business News and was pretty interesting, yet nothing happened after that. But are you going to continue to do these kinds of informational things?

We’re going to continue with the program of trying to help get our story out more effectively. And we expect that with the closing of the merger, which the period we feel is getting very short in time. That then we’ll be able to be far more aggressive in discussing what’s going after we're done with that piece...

After the S-4 is done?

Exactly...

Are there any problems with getting approval of your S-4?

As we sit here today, we do not see any problems. It’s been moving according to schedule.

Our next question comes from the line of Howard Hizz [ph], a private investor.

Yes, I would like to know how many shares have been issued in the year 2012 compared to 2011?

Phil, that would be the offerings that we did, right?

Yes, approximately 2 million shares in 2012 and 40,000 shares in 2011.

I’m just interested because I know that Mr. Ronaldi was on the payroll of DSS. And then he changed over to Lexington and he got several -- amount of shares. And now I see that Mr. Bzdick has been awarded a lot of shares and options, and I’m just wondering are we diluting the stock at the cost of the other stockholders?

Well, we certainly don’t think that we are and I’m not aware that Mr. Ronaldi was affiliated with DSS.

If you look on -- it says on November and then in October that he was on your, is this Mr. Fagenson?

Yes, it is.

Okay, he was on your payroll so to speak.

Jack, have you been on the payroll of Document Security?

Or got options to buy shares of your company.

This is Peter Hardigan. When Jeff agreed to take on the role of CEO at Lexington Technology Group, he was awarded an option package that was in Lexington stock that would convert to DSS stock upon completion of the merger. Jeff has had no relationship with Document Security Systems prior to his involvement with Lexington Technology Group. Jeff was a board advisor to Lexington Technology Group from August through November 2012, and became CEO on November 20, 2012. So he has had no relationship with Document Security...

So all he has is shares of Lexington Technology Group.

Correct, as it stands now. That’s correct. We, at DSS, as DSS shareholders, have not awarded to -- anything to him or been diluted by Jeff at this point.

All right, I’m just worried about the number of shares that have been issued and options given and to lower the value of the stockholders that have been with you for several years and have seen no increase in the value of their stocks, in fact a major decrease.

As someone who with a wife and children personally owns well over 1 million shares. Trust me, we are in the same boat with you.

Our next question comes from the line of Ben Dino [ph], a private investor.

I’ve been investing in DSS for approximately for 6 years and the strategy of the company seems to change every 12 months. I’d like to know the reason for that?

Well, I don’t think the strategy changes so much as the market realities change. We’ve taken a very, very small company when I became a shareholder and then when I agreed to get involved, that had $3 million or $4 million in sales and was losing $4 million a year and we’ve grown it with limited financial resources to one that has just booked record sales and is above $17 million in sales and is rapidly shrinking its negative EBITDA number to the point where I think last quarter is $280,000. With that what we've tried to do is adapt to the market trends, at the point where we acquired the printing company it appeared to us that based on the information and results we were having with customers that having the higher margin security printing business in house rather than at that point giving it out of house and giving away a lot of the margin was the right thing to do. Just as that happened, of course, the bottom fell out of the economy and the regular printing business went through the floor, and suddenly something that looks so bright even a few months ahead looked dismal. And had we not adapted and changed our focus and direction at that point, it could have taken the company under. So I think what we are is chameleon-like and that we have to change and adapting environment we find ourselves and despite the fact that the validity of our technology and the excellence of our technology team has never been challenged. The problem in the marketplace is one that when the economy -- particularly when it’s not doing well, is such that people are not willing to compromise margins for security, it became increasingly difficult to penetrate the markets in the way that were going to yield us the big licensing dollars. And what I meant essentially was that if you are commercial bank and you were paying $0.001 to protect your check with basic outdated security when you go to your printer and say I want the best, but I’m not going to pay more for it, the printer is disinclined to license our technology and come out of their margin. So, essentially our customers and licensees became our enemies to a certain extent, because they were refusing to pay and unable to pass through the cost to their customers. So if we haven’t adopted our approach, I think we would have been standing still and we still be looking at the company with 1/4 of the sales and suffering massive losses. So while I can’t say that you are wrong, I’d say that what we’ve done is taken the approach that we have to adapt to the market and take the basic technological buildings that we’ve got and continue to seek the best way to make the type of scores that we think are out there for this company. And I think the approach that we’re on now, which is one of being customer driven versus technology driven is showing us that the results that we see from the customers who are willing to go much more rapidly into beta testing, because we’ve given the products that they’ve asked for, rather than the products that our technology dictated. So do I know that we’re right, as they say when the check cashes you know it’s good. I can’t tell you for certain, but I can tell you that we have continued to invest time, energy and money, in what we believe, ultimately will bear the best fruits, and disappointing as it may be in terms of current stock price for all of us. I think that the merger with Lexington open the horizons to much brighter potential and continuing to mine the fields more effectively of our technologies, are where we think we have to be at this point. And yes have we changed over the years, there’s no question about it, but at some point you’re faced with adapt or die and that’s basically what’s generated, what we’ve had to do.

What’s interesting is that 4, 5 years ago when I got involved in this stock. I purchased some stock at $8 and $11 and the company was nowhere as you had just mentioned. Now the company is so much better and you're hovering around $2?

It is a fascinating dichotomy, and I can’t deny it. People bought stock in early years based on expectations and hopes that the technology would take off and people would just rush to brand protection on when counterfeiting was just absolutely expanding. And now we are at a time where counterfeiting is at an all-time high, and our technology is finally getting accepted and the stock is selling at 1/4 what it was. Listen all I can do from my own personal financial situation as well as all my fellow shareholders is hope that we’ve reached the bottom and the cycle is going to reverse. I mean all we have to do -- all we can do is drive towards that goal, our stock isn't worth a penny more than yours.

Clearly I just want to know some type of methodology behind when we’re doing, "amazing" at $17 million with 20% of [indiscernible] doing $4 million of sales and losing $4 million now.

If I could figure out why the market does these things then I’d be a genius, but I’m not. But all we can do is the best that we can. We thank you for your continued support in share holding and we hope that this year will prove to be a good one.

There are no other questions in the queue. I would like to hand the call back over to management for closing comments.

Thank you all our shareholders for your interest, for your questions, for your time and for your ownership of DSS shares. I thank our management team for their continued good work. And I hope that in succeeding quarters, next time we meet we will have a merger that’s closed and results that are better. And with that we’ll wrap-up the call. Anyone else want to add anything? Thank you all and good evening.

Ladies and gentlemen this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time. And have wonderful day.