Document Security Systems, Inc.
(Exact name of registrant as specified in its charter)
| New York | 16-1229730 |
| (State or other jurisdiction of | |
| incorporation or organization) | (I.R.S. Employer Identification No.) |
First Federal Plaza, Suite 1525
28 East Main Street
Rochester, NY 14614
(585) 325-3610
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Jeffrey Ronaldi
Chief Executive Officer
Document Security Systems, Inc.
First Federal Plaza
28 East Main Street, Suite 1525
Rochester, New York 14614
Telephone: (585) 325-3610
(Name, address including zip code, and telephone number, including area code, of agent for service)
With copies to:
Gregory Sichenzia, Esq.
Marcelle S. Balcombe, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, New York 10006
(212) 930-9700
(212) 930-9725 - Facsimile
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of thisIf the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.¨o
If any of the securities being registered on this Form are beingto be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.¨ o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.¨ o
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. o
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitionthe definitions of “large“ large accelerated filer”, “accelerated filer”filer “, “ accelerated filer “ and “smaller“ smaller reporting company”company “ in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filero | Accelerated filero | Non-accelerated filero (do not check if smaller reporting company) | Smaller reporting companyx |
Title of Each Class of Securities To Be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Share | Proposed Maximum Aggregate Offering Price (1) | Amount of Registration Fee | ||||||||||||
| Common Stock, par value $.02 per share | 1,555,543 | $ | 4.57 | $ | 7,108,832 | $ | 825 | |||||||||
| Title of Each Class of Securities to be Registered | Amount to be Registered(1) | Proposed Maximum Offering Price Per Share(2) | Proposed Maximum Aggregate Offering Price (2) | Amount of Registration Fee | ||||||||||||
| Primary Offering | ||||||||||||||||
| Common Stock, $.02 par value per share | 15,000,000 | $ | 1.075 | (3) | $ | 16,125,000 | $ | 2,076.90 | ||||||||
| Warrants | — | (4) | (4) | (4) | ||||||||||||
| Secondary Offering | ||||||||||||||||
| Common Stock | 4,859,894 | $ | 1.075 | (3) | $ | 5,224,386.05 | $ | 672.90 | ||||||||
| Total | 19,859,894 | $ | 2,749.80 | |||||||||||||
| (1) | There are being registered under this registration statement such indeterminate number of shares of common stock as may be issued pursuant to the anti-dilution provisions of any such common stock. In addition, pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends, or similar transactions. |
| (2) | Estimated solely for calculating the amount of the registration fee, pursuant to Rule 457(c) promulgated under the Securities Act of 1933, on the basis of the average of the high and low sale prices of the Common Stock on the NYSE MKT on October 8, 2013, within five business days prior to filing. |
| (3) | Calculated pursuant to Rule 457(o) under the Securities Act based on the proposed maximum aggregate offering price of all securities listed. |
| (4) | Pursuant to Rule 457(g), no separate fee is required. |
The Registrant hereby amends this Registration Statement on thesuch date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment whichthat specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on thesuch date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The Selling Security ShareholderWe may not sell these securities or accept an offer to buy these securities until the registration statement filed with the Securities and Exchange Commission isdeclares our registration statement effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED March 24, 2011
PROSPECTUS
DOCUMENT SECURITY SYSTEMS, INC.
15,000,000 shares
Common Stock
Warrants
____________________________
4,859,894 shares of
We may offer and sell, from time to (a) the sale oftime in one or more offerings up to 1,555,543
In addition, the selling stockholders identified in this prospectus, and any of their respective pledgees, donees, transferees or other successors in interest, may offer and sell up to 4,859,894 shares of our common stock from time to time under this prospectus and any prospectus supplement. The selling stockholders may offer and sell such shares to or through one or more underwriters, dealers and agents, or directly to purchasers, on February 18, 2011 and March 14, 2011 (collectively,a continuous or delayed basis. The selling stockholders may offer the "Agreement"), by and between the Selling Security Holder and us.
Our common stock, currently tradesis traded on theThe NYSE AmexMKT under the symbol DMC.DSS. On March 23, 2011,October 10, 2013, the closinglast reported sale price of our common stock was $4.56 per share.
The shares of common stock offered by us may be sold directly by us, through dealers or agents designated from time to time, to or through underwriters or dealers or through a combination of these methods on a continuous or delayed basis. See “Plan of Distribution” in this prospectus. We may also describe the plan of distribution for any particular offering of our securities in a prospectus supplement. If any agents, underwriters or dealers are involved in the sale of any securities in respect of which this prospectus is being delivered, we will disclose their names and the nature of our arrangements with them in a prospectus supplement. The net proceeds we expect to receive from any such sale will also be included in a prospectus supplement.
Investing in our common stocksecurities involves various risks. See “Risk Factors” contained herein for more information on pages 6 to 11.these risks. Additional risks will be described in the related prospectus supplements under the heading “Risk Factors”. You should rely only onreview that section of the information containedrelated prospectus supplements for a discussion of matters that investors in our securities should consider.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the adequacy or accuracy of this prospectus. We have not authorized anyoneprospectus or any accompanying prospectus supplement. Any representation to provide you with any different information.the contrary is a criminal offense.
The date of this prospectus is October 11, 2013.
TABLE OF CONTENTS
| Page | ||||
| About this Prospectus | 1 | |||
| 1 | ||||
| Risk Factors | 4 | |||
| 20 | ||||
| Use of Proceeds | 21 | |||
| 21 | ||||
| The Securities We May Offer | 30 | |||
| 31 | ||||
| Description of Warrants | 32 | |||
| 34 | ||||
| Legal Matters | 37 | |||
| 37 | ||||
| Where You Can Find More Information | 37 | |||
| 37 |
ABOUT THIS PROSPECTUS
This prospectus is part of a shelf registration statement that we filed with the Securities and Exchange Commission.Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, we may sell up to15,000,000shares of our common stock and /or warrants to purchase common stock in one or more offerings from time to time,and the selling stockholders may from time to time sell up to 4,859,894shares of common stock in one or more offerings. This prospectus togetherprovides you with a general description of the applicable prospectus supplements andsecurities we may offer or the documents incorporated by reference into this prospectus, includes all material information relating to this offering. To the extent that any statement thatselling stockholders may offer. Each time we make inoffer securities, we will provide you with a prospectus supplement is inconsistent with statements madethat describes the specific amounts, prices and terms of the securities we offer. The prospectus supplement also may add, update or change information contained in this prospectus, the statements made in this prospectus will be deemed modified or superseded by those made in a prospectus supplement.prospectus. You should read carefully both this prospectus and any prospectus supplement together with additional information described below under the caption “Where You Can Find More Information.”
This prospectus does not contain all the information provided in the registration statement we filed with the SEC. You should read both this prospectus, including the section titled “Risk Factors,” and the accompanying prospectus supplement, together with the additional information described under the heading “Where You Can Find More Information.”
You should rely only as of its date except where it indicates that another date applies. Documents that are incorporated by reference in this Prospectus speak only as of their date, except where they specify that other dates shall apply.
OUR BUSINESS
General
This summary highlights selected information about us, but may not contain all information that may be important to you. The following summary is qualified in our securities involves risks. Therefore, pleaseits entirety by the more detailed information included in or incorporated by reference into this prospectus. Before making your investment decision, you should carefully considerread this entire prospectus, any applicable prospectus supplement, and the information provided underdocuments referred to in the heading “Risk Factors” starting on page 6.
As used in this prospectus, references to “the Company”, “we”, “our”, “ours” and “us” refer to Document Security Systems, Inc. (referredand consolidated subsidiaries, unless otherwise indicated. References to “DSS” refer to Document Security Systems, Inc. In addition, references to our “financial statements” are to our consolidated financial statements except as the context otherwise requires.
We prepare our financial statements in United States dollars and in accordance with generally accepted accounting principles as applied in the United States, referred to as U.S. GAAP. In this prospectus, as “Document Security,references to “$” “DSS,” “we,” “us,” “our” or “Company”) develops, markets, manufactures and sells paper and plastic products designed“dollars” are to protect valuable information from unauthorized scanning, copying, and digital imaging. We have developed security technologies that are applied during the normal printing process and by all printing methods including traditional offset, gravure, flexo, digital or via the internet on paper, plastic, or packaging. Our technologies and products are used by federal, state and local governments, law enforcement agencies and are also applied to a broad variety of industries as well, including financial institutions, high technology and consumer goods, entertainment and gaming, healthcare/pharmaceutical, defense and genuine parts industries. Our customers use our technologies where there is a need for enhanced security for protecting and verification of critical financial instruments and vital records, or where there are concerns of counterfeiting, fraud, identity theft, brand protection and liability.
Overview
We were organized as aformed in New York corporation in 1984 and, in 2002, chose to strategically focus on becoming a developer and marketer of secure technologiestechnologies. We specialize in fraud and counterfeit protection for all forms of print media. To accomplish this, we acquired Lester Levin, Inc, an operatorprinted documents and digital information. The Company holds numerous patents for optical deterrent technologies that provide protection of printed information from unauthorized scanning and copying. We operate three production facilities, a smallsecurity and commercial printing company called Patrick Printing and an Internet-based business called Legalstore.com, and Thomas M. Wicker Enterprises, Inc. and Document Security Consultants, Inc., two privately owned companies engaged in the document security technology business with rights to certain patents developed by certain members of the Wicker Family. Asfacility, a result of these acquisitions, we compiled the basis of our document security business by combining basic print capabilities necessary for research and development with the knowledge and expertise of our team of printing professionalspackaging facility and a foundation of patentedplastic card facility- where we produce secure and non-secure documents for our customers. We license our anti-counterfeiting technologies to printers and trade secrets from which to launch our product offerings. Since this early stage,brand-owners. In addition, we have focused our efforts on developing and in some cases patenting new technologies and products, building our corporate, operational, marketing and sales staff to accommodate our expected growth, and developing and implementing our patent and intellectual property protection strategy. In September 2007, we sold certain assets and the operations of Patrick Printing to a private company, as this operation no longer supported our core industry focus. In October 2009, we sold the assets and liabilities associated with our Legalstore.com business in exchange for common stock of Internet Media Services, Inc., in order to concentrate our efforts on the security and printing segments of our Company.
Prior to 2006, the Company’s primary revenue source in its document security division was derived from the licensing of its technology. The Company had limited production capabilities. In 2006, the Company began a series of acquisitions designed to expand its ability to be a provider of anti-counterfeitingproduce its products that utilize the Company’s anti-counterfeiting technologies.for end-user customers. In 2006, we acquired San Francisco-based Plastic Printing Professionals, Inc. (“P3”), a privately held plastic cards manufacturer located in the San Francisco, CACalifornia area. P3’s primary focusP3 is manufacturing long-life composite,also referred to herein as the “DSS Plastics Group”. In 2008, we acquired substantially all of the assets of DPI of Rochester, LLC, a privately held commercial printer located in Rochester, New York, referred to herein as “Secuprint” or “DSS Printing Group”. In 2010, the Company acquired Premier Packaging Corporation (“Premier Packaging”), a privately held packaging company located in the Rochester New York area. Premier Packaging is also referred to herein as the “DSS Packaging Group”. In May 2011, we acquired all of the capital stock of ExtraDev, Inc. (“ExtraDev”), a privately held information technology and cloud computing company located in the Rochester, New York area. ExtraDev is also referred to herein as “DSS Digital Group”.
In October 2012, the Company introduced AuthentiGuard®, an iPhone application for authentication, targeted to major pharmaceutical and other companies worldwide. The application is a cloud-enabled solution that permits efficient and cost effective authentication for packaging, documents and credentials. The solution embeds customizable, covert AuthentiGuard® Prism technology that resists duplication on copiers and scanners in a product's packaging. Product verification using the iPhone application creates real-time, accurate authentication results for brand owners that can be integrated into existing information systems.
The Company does business in four operating segments as follows:
DSS Printing Group — Provides secure and commercial printing services for end-user customers along with technical support for the Company’s technology licensees. The division produces a wide array of printed materials such as security paper, vital records, prescription paper, birth certificates, receipts, manuals, identification materials, entertainment tickets, secure coupons, parts tracking forms, brochures, direct mailing pieces, catalogs, business cards, etc. The division also provides the basis of research and development for the Company’s security printing technologies.
DSS Plastics Group — Manufactures laminated and surface printed cards which can include magnetic stripes, bar codes, holograms, signature panels, invisible ink, micro fine printing, guilloche patterns, Biometric, RFIDRadio Frequency Identification (RFID) and a patent-pending watermark technology. P3’s products are marketed through an extensive broker network that covers much of North America, Europewatermarks for printed plastic documents such as ID cards, event badges, and South America and by manufacturing for various industry integrators.
DSS Packaging Corporation, a privately held packaging company located in the Rochester NY area. Premier Packaging Corporation is an ISO 9001:2008 registered manufacturer ofGroup — Produces custom paperboard packaging serving clients in the pharmaceutical, beverage, photo packaging, toy, specialty foods and direct marketing industries, among others. The Company expectsdivision incorporates our security technologies into printed packaging to help companies prevent or deter brand and product counterfeiting.
DSS Digital Group — Provides data center centric solutions to businesses and governments delivered via the acquisition will allow it to introduce anti-counterfeiting products“cloud”. This division developed the Company’s iPhone based application that integrates some of the Company’s traditional optical deterrent technologies into proprietary digital data security based solutions for brand protection and product diversion prevention.
Completion of Merger with DSS Technology Management, Inc.
On July 1, 2013 (the “Closing Date”), DSSIP, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary ofDSS merged with and into DSS Technology Management., Inc. (f/k/a Lexington Technology Group, Inc.), a Delaware corporation (“DSSTM”), pursuant to the packaging market that further expandsterms and conditions of the usagepreviously announced Agreement and Plan of its technologies. The Company believes thatMerger, dated as of October 1, 2012 (as amended, the ability to deter“Merger Agreement”), by and prevent counterfeiting of brand packaging will provide major benefits to companies around the globe who are affected by product counterfeiting.
As a result of the consummation of the Merger, as of the Closing Date, the former stockholders of DSSTM own approximately $4.1 million51% of the outstanding common stock of the combined company and the stockholders of the Company prior to the completion of the Merger own approximately 49% of the outstanding common stock of the combined company.
Pursuant to the Escrow Agreement, the shares of the Company’s Common Stock deposited in cashthe escrow account will be released to the holders of the DSSTM common stock (pro rata on a fully-diluted basis as of the effective time of the Merger) if and cash equivalents available to fund its operations.
If after one year, the shares held in escrow are cancelled because the conditions discussed above were not met, the former stockholders of DSSTM are expected to own approximately 45% of the outstanding common stock of the combined company and the stockholders of the Company prior to the completion of the Merger are expected to own approximately 55% of the outstanding common stock of the combined company (without taking into account any shares of the Company’s Common Stock held by DSSTM’s stockholders prior to the completion of the Merger, and excluding the exercise of any options and warrants).
The transaction will be accounted for as a business combination in accordance with the Business Combination Topic of the FASB ASC 805. Under the guidance, the assets and liabilities of the acquired business, DSSTM, are recorded at their fair value at the date of acquisition. The excess of the purchase price over the estimated fair values is recorded as goodwill, if any. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded.
DSSTM is a private intellectual property monetization company that recently acquired a patent portfolio of six patents and four pending patent applications relating to technology invented by Thomas Bascom (the “Bascom Portfolio”) and invested in VirtualAgility, a developer of user-friendly programming platforms that facilitate the creation of sophisticated business applications without programming or scanned. The hidden words appearcoding. DSSTM is focused on the duplicateeconomic benefits of intellectual property assets through acquiring or the computer digital file and essentially prevent documents, including forms, coupons and tickets, from being counterfeited. We market and sell our AuthentiGuard® Security Paper primarily through several major paper distributors such as Boise Cascade and Blanks USA. Since 2005, Boise has marketed our AuthentiGuard® Security Paper under its Boise Beware brand name in North America, primarily through its commercial paper sales group. Blanks USA sells and manufactures the technology under the “Kant Kopy” brand name. The company also sells its security paper on the internet utilizing a ecommerce website, www.protectedpaper.com. We retain the rights to sell the AuthentiGuard® Security Paper directly to end-users anywhere in the world. The company also had a version of its security paper tested and certified for use on Hewlett Packard (“HP”) Indigo Digital presses by the Rochester Institute of Technology’s Printing Applications Laboratory. This certification allows the Company’s security paper to be marketed to HP Indigo users worldwide.
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Our Corporate Information
We also ownedare headquartered in Rochester, New York and operated Legalstore.com, an Internet company which sells legal supplies and documents, including security paper and products for the users of legal documents and supplieswere incorporated in the legal, medical and educational fields. On October 8, 2009 we sold the assets and liabilities associated with our Legalstore.com businessNew York in exchange for 7,500,000 shares of common stock of Internet Media Services, Inc., representing approximately 37% of the outstanding shares of the newly formed company. On October 15, 2010, the Company distributed these 7,500,000 shares to its stockholders of record on October 8, 2010, on a pro-rata basis. The shares of Internet Media Services were recorded as an equity method investment and had an estimated book value of approximately $229,000 on the date of the dividend.
RISK FACTORS
You should carefully consider the risks described below before buying Common Stock offered in this offering. The followingrisks and uncertainties described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may impair our business operations. If any of the adverse events described in this risk factors should be considered carefully in evaluating whether to purchase sharessection actually occur, our business, results of our common stock. These factors should be considered carefully in conjunction with any other information included or incorporated by reference herein, including in conjunction with forward-looking statements made herein. See “Where You Can Find More Information” on page 16.
We have identified the following risks. Theadditional risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations in the future. References to the “combined company” made in this registration statement relate to the recent business combination of DSS and DSSTM, whereby DSSTM became a wholly-owned subsidiary of DSS effective on July 1, 2013. Our business faces significant risks, and the risks described below aremay not be the only onesrisks we face. Additional risks we are not presently aware ofknown to us or that we currently believe are immaterial may also materially affectsignificantly impair our business. The tradingbusiness operations. If any of these risks occur, our business, results of operations or financial condition could suffer, the market price of our Common Stockcommon stock could decline dueand you could lose all or part of your investment in our common stock.
The failure to integrate successfully the businesses of DSS and DSSTM in the expected timeframe could adversely affect the combined company’s future results.
The success of the recently closed Merger will depend, in large part, on the ability of the combined company to realize the anticipated benefits from combining the businesses of DSS and DSSTM.
The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company’s failure to achieve some or all of the anticipated benefits of the Merger.
Potential difficulties that may be encountered in the integration process include the following:
| • | using the combined company’s cash and other assets efficiently to develop the business of the combined company; | |
| • | appropriately managing the liabilities of the combined company; | |
| • | potential unknown or currently unquantifiable liabilities associated with the Merger and the operations of the combined company; | |
| • | potential unknown and unforeseen expenses, delays or regulatory conditions associated with the Merger; and | |
| • | performance shortfalls resulting from diversion of management’s attention to the task of efficiently integrating the companies’ operations. |
DSS may not realize the potential value and benefits created by the Merger.
The success of the Merger will depend, in part, on DSS’s ability to realize the expected potential value and benefits created from integrating DSS’s existing business with DSSTM’s business, which includes the maximization of the economic benefits of the combined company’s intellectual property portfolio. The integration process may be complex, costly, and time-consuming. The difficulties of integrating the operations of DSSTM’s business could include, among others:
| • | failure to effectively implement the business plan for the combined business; | |
| • | unanticipated issues in integrating the business of both companies; | |
| • | potential lost sales and customers if any customer of DSS decides not to do business with DSS after the Merger; | |
| • | loss of key employees with knowledge of DSS’s historical business and operations; | |
| • | unanticipated changes in applicable laws and regulations; and | |
| • | other unanticipated issues, expenses, or liabilities that could impact, among other things, DSS’s ability to realize any expected benefits on a timely basis, or at all. |
DSS may not accomplish the integration of DSSTM’s business smoothly, successfully, or within the anticipated costs or time frame. The diversion of the attention of management from DSS’s current operations to the integration effort and any difficulties encountered in combining businesses could prevent DSS from realizing the full expected potential value and benefits to result from the Merger and could adversely affect its business. In addition, the integration efforts could divert the focus and resources of the management of DSS and DSSTM from other strategic opportunities and operational matters during the integration process.
If the Merger does not qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code (the “Code”), the stockholders of DSSTM may be required to pay substantial United States federal income taxes as a result of the Merger.
DSS and DSSTM intend that the Merger will qualify as a “reorganization” under Section 368(a) of the Code. DSS and DSSTM currently anticipate that the United States holders of shares of DSSTM capital stock generally should not recognize taxable gain or loss as a result of the Merger. However, neither DSS nor DSSTM has requested, or intends to request, a ruling from the IRS with respect to the tax consequences of the Merger, and there can be no assurance that the companies’ position would be sustained if challenged by the IRS. Accordingly, if there is a final determination that the Merger does not qualify as a “reorganization” under Section 368(a) of the Code and is taxable for United States federal income tax purposes, DSSTM stockholders generally would recognize taxable gain or loss on their receipt of equity securities of DSS in connection with the Merger equal to the difference between such stockholder’s adjusted tax basis in their shares of DSSTM capital stock and the fair market value of the equity securities of DSS.
The combined company will be dependent on certain key personnel, and the loss of these risks. In assessing these risks, you should also referkey personnel could have a material adverse effect on the combined company’s business, financial conditions and results of operations.
The success and future prospects of the combined company largely depend on the skills, experience and efforts of its key personnel, including Jeffrey Ronaldi, Peter Hardigan and Robert Bzdick. The loss of Messrs. Ronaldi, Hardigan and/or Bzdick, or other executives and managers of the combined company, or the combined company’s failure to retain other key personnel, could jeopardize the combined company’s ability to execute its strategic plan and materially harm its business.
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The Merger resulted in changes to the DSS board of directors and the combined company may pursue different strategies than either DSS or DSSTM may have pursued independently.
The board of directors of DSS following the Merger consists of eight (8) directors, four designated by DSSTM and four designated by DSS. Currently, it is anticipated that the combined company will maximize the economic benefits of its intellectual property portfolio, add significant talent in technological innovation and potentially enhance its opportunities for revenue generation through the monetization of the combined company’s assets. However, because the composition of the board of directors of the combined company will consist of directors from both DSS and DSSTM, the combined company may determine to pursue certain business strategies that neither DSS nor DSSTM would have pursued independently.
The success of the combined company will depend in part on relationships with third parties, which relationships may be affected by third-party preferences or public attitudes about the Merger. Any adverse changes in these relationships could adversely affect the combined company’s business, financial condition, or results of operations.
The combined company’s success will be dependent on its ability to maintain and renew the business relationships of both DSS and DSSTM and to establish new business relationships. There can be no assurance that the management of the combined company will be able to maintain such business relationships, or enter into or maintain new business contracts and other information containedbusiness relationships, on acceptable terms, if at all. The failure to maintain important business relationships could have a material adverse effect on the business, financial condition, or incorporatedresults of operations of the combined company.
Future results of the combined company may differ materially from the unaudited pro forma financial statements presented in the Company’s proxy statement/prospectus and the financial forecasts prepared by referenceDSS and DSSTM in our Form 10-K forconnection with discussions concerning the year ended December 31, 2009Merger.
The future results of the combined company may be materially different from those shown in the unaudited pro forma combined financial statements presented in the proxy statement/prospectus filed by the Company with the SEC, which show only a combination of the historical results of DSS and DSSTM, prepared by DSS and DSSTM in connection with the Merger. DSS expects to incur significant costs associated with combining the operations of the two companies. The exact magnitude of these costs are not yet known, but are estimated to be approximately $1,000,000. Furthermore, these costs may decrease the capital that the combined company could use for continued development of the combined company’s business in the future or may cause the combined company to seek to raise new capital sooner than expected.
The combined company may require additional capital to support its present business plan and its anticipated business growth, and such capital may not be available on March 25, 2010, including our financial statementsacceptable terms, or at all, which would adversely affect the combined company’s ability to operate.
DSS believes that the Bascom intellectual property will significantly augment the scope and related notes, competitionvalue of DSS’s litigation and licensing business without impacting its current operations or resource allocation plan.
The Bascom Portfolio will expand upon DSS’s licensing potential and ability to compete within its current areas of commercial focus. DSS’s primary commercial focus is to develop integrated security solutions for authentication and brand protection that incorporate DSS’s proprietary print and digital technologies such as its suite of AuthentiGuard patents, the DSS Digital Group’s cloud computing platform and intellectual property.
The Bascom Research intellectual property licensing program provides a significant new potential income stream for DSS’s litigation and licensing business that will be funded by DSSTM, and as such, will not alter the current resource allocation for DSS’s existing litigation and licensing business. DSSTM has delivered approximately $6.25 million in capital (net of transaction fees) in connection with the Merger, which will be used in part to fund the Bascom Research licensing effort. We havedo not expect that DSS capital resources will initially be used for Bascom Research, and the Bascom Research effort will not initially divert other DSS resources aside from requiring some oversight by the current DSS General Counsel, who will be involved in all ongoing litigation and licensing matters for the combined company.
The combined company may require additional funds to further develop its business plan. Based on current operating plans of DSS and DSSTM, the current resources of the combined company are expected to be sufficient to fund its planned operations into the fourth quarter of 2014. Since it is impossible to predict the timing and amount of any recovery, if any, resulting from the DSSTM litigation, we anticipate that we will need to raise additional funds through equity offerings in order to meet our liquidity requirements in the fourth quarter of 2014. However, if revenues of DSS do not meet expectations or if operating expenses exceed expectations, or a combination of both, then the combined company may require additional resources prior to the fourth quarter of 2014. Any such financing that DSS undertakes will likely be dilutive to DSS’s current stockholders.
The combined company intends to continue to make investments to support its business growth, including patent or other intellectual property asset creation. In addition, the combined company may also need additional funds to respond to business opportunities and challenges, including its ongoing operating expenses, protecting its assets, satisfying debt payment obligations, developing new lines of business and enhancing its operating infrastructure. While the combined company may need to seek additional funding for such purposes, it may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of the combined company’s financings may be dilutive to, or otherwise adversely affect, holders of its common stock. The combined company may also seek additional funds through arrangements with collaborators or other third parties. The combined company may not be able to negotiate any such arrangements on acceptable terms, if at all. If the combined company is unable to obtain additional funding on a timely basis, it may be required to curtail or terminate some or all of its business plans.
Risks Related to DSS’s Business
DSS is currently subject to the additional risks described below.
DSS has a history of losses.
DSS has a history of losses. In first six months of 2013 and for the fiscal 2009, 2008,years of 2012, 2011, and 2007, we2010, DSS incurred losses of approximately $4.0$3.1 million, $8.3$4.3 million, $3.2 million, and $7.0$3.5 million, respectively. OurDSS’s results of operations in the future will depend on many factors, but largely on ourDSS’s ability to successfully market ourDSS’s anti-counterfeiting products, technologies and services. OurDSS’s failure to achieve profitability in the future could adversely affect the trading price of ourits common stock and ourits ability to raise additional capital and, accordingly, ourits ability to continue to grow ourits business. There can be no assurance that weDSS will succeed in addressing any or all of these risks, and the failure to do so could have a material adverse effect on ourDSS’s business, financial condition and operating results.
DSS has a significant amount of indebtedness, some of which is secured by its assets, and may be unable to satisfy ourits obligations to pay interest and principal thereon when due.
As of December 31, 2010, we haveJune 30, 2013, DSS has the following approximatesignificant amounts of outstanding indebtedness:
| (i) | $ |
| (ii) | $ |
| Up to $1,000,000 in a revolving line of credit with Citizens Bank available for use by Premier Packaging, subject to certain limitations, |
| (iv) | $1,159,000 due under a promissory note with Citizens Bank used to purchase DSS’s packaging division facility. DSS is required to pay monthly installments of $7,658 plus interest until August 2021 at which time a balloon payment of the remaining principal balance of $919,677 is due. DSS subsequently entered into an interest rate swap agreement to lock into a 5.865% effective interest rate over the life of the term loan. The promissory note is secured by a first mortgage. |
| (v) |
All of our technology rights, which may affect our business plan.
If DSS were to default on any of the above indebtedness, and the creditors were to foreclose on secured assets, this could have a material adverse effect on DSS’s business, financial condition and our ability to market and sell certain of our products based on any patent thatoperating results.
If DSS is invalidated. Furthermore, we have granted nearly all control over our ECB Litigation to a third party, Trebuchet Capital Partners, LLC., who may or may not have the resources or capabilities to successfully defend our patent rights or meet its financial obligations. If Trebuchet is unable to meet its financial obligations, then we may be obligated to pay for certain court mandated legal costs to the ECB or other parties, which may materially affect our financial condition.
The success of DSS will be determined in part by ourits ability to obtain United States and foreign patent protection for ourits technology and to preserve ourits trade secrets. Because of the substantial length of time and expense associated with developing new document security technology, we placeDSS places considerable importance on patent and trade secret protection. We intendDSS intends to continue to rely primarily on a combination of patent protection, trade secrets, technical measures, copyright protection and nondisclosure agreements with ourits employees and customers to establish and protect the ideas, concepts and documentation of software and trade secrets developed by us. OurDSS. DSS’s ability to compete and the ability of ourits business to grow could suffer if these intellectual property rights are not adequately protected. There can be no assurance that ourDSS’s patent applications will result in patents being issued or that current or additional patents will afford protection against competitors. We rely on a combination of patents, copyrights, trademarks and trade secret protection and contractual rights to establish and protect our intellectual property. Failure of ourDSS’s patents, copyrights, trademarks and trade secret protection, non-disclosure agreements and other measures to provide protection of ourits technology and ourits intellectual property rights could enable ourDSS’s competitors to more effectively compete with usit and have an adverse effect on ourDSS’s business, financial condition and results of operations. In addition, ourDSS’s trade secrets and proprietary know-how may otherwise become known or be independently discovered by others. No guarantee can be given that others will not independently develop substantially equivalent proprietary information or techniques, or otherwise gain access to ourDSS’s proprietary technology.
In addition, weDSS may be required to litigate in the future to enforce ourits intellectual property rights, to protect ourits trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on ourDSS’s business, financial condition or results of operations, and there can be no assurances of the success of any such litigation.
DSS may face intellectual property infringement or other claims against us, ourit, its customers or ourits intellectual property that could be costly to defend and result in ourits loss of significant rights.
Although we haveDSS has received patents with respect to certain technologies of ours,its technologies, there can be no assurance that these patents will afford usDSS any meaningful protection. Although we believeDSS believes that ourits use of the technology and products weit has developed and other trade secrets used in ourits operations do not infringe upon the rights of others, ourDSS’s use of the technology and trade secrets weit developed may infringe upon the patents or intellectual property rights of others. In the event of infringement, weDSS could, under certain circumstances, be required to obtain a license or modify aspects of the technology and trade secrets weit developed or refrain from using the same. WeDSS may not have the necessary financial resources to defend an infringement claim made against usit or be able to successfully terminate any infringement in a timely manner, upon acceptable terms and conditions or at all. Failure to do any of the foregoing could have a material adverse effect on usDSS and ourits financial condition. Moreover, if the patents, technology or trade secrets weDSS developed or useuses in ourits business are deemed to infringe upon the rights of others, weDSS could, under certain circumstances, become liable for damages, which could have a material adverse effect on usDSS and ourits financial condition. As we continueDSS continues to market ourits products, weDSS could encounter patent barriers that are not known today. A patent search willmay not disclose all related applications that are currently pending in the United States Patent Office, and there may be one or more such pending applications that would take precedence over any or all of ourDSS’s applications.
Furthermore, third parties may assert that ourDSS’s intellectual property rights are invalid, which could result in significant expenditures by usDSS to refute such assertions. If we becomeDSS becomes involved in litigation, weDSS could lose ourits proprietary rights, be subject to damages and incur substantial unexpected operating expenses. Intellectual property litigation is expensive and time-consuming, even if the claims are subsequently proven unfounded, and could divert management’s attention from ourDSS’s business. If there is a successful claim of infringement, weDSS may not be able to develop non-infringing technology or enter into royalty or license agreements on acceptable terms, if at all. If we areDSS is unsuccessful in defending claims that ourits intellectual property rights are invalid, weDSS may not be able to enter into royalty or license agreements on acceptable terms, if at all. This could prohibit usDSS from providing ourits products and services to customers, which could have a material adverse effect on usDSS and ourits financial condition.
As of SeptemberJune 30, 2010, we2013, DSS had approximately $4.3$5.1 million of net intangible assets, including goodwill. We areDSS is required to evaluate the carrying value of such intangibles. Whenever events or changes in circumstances indicate that the carrying value of an intangible asset, including goodwill, may not be recoverable, weDSS will have to determine whether there has been impairment by comparing the anticipated undiscounted cash flows (discounted cash flows for goodwill) from the operation and eventual disposition of the product line with its carrying value. If any of ourDSS’s intangible assets are deemed to be impaired then it will result in a significant reduction of the operating results in such period.
Certain of ourDSS’s recently developed products are not yet commercially accepted and there can be no assurance that those products will be accepted, which would adversely affect ourDSS’s financial results.
Over the past several years, we haveDSS has spent significant funds and time to create new products by applying ourits technologies onto media other than paper, including plastic and cardboard packaging, and delivered ourdelivery of DSS’s technologies digitally. We haveDSS has had limited success to date in selling ourits products that are on cardboard packaging and those that are delivered digitally. OurDSS’s business plan for 2011the remainder of 2013 and beyond includes plans to incur significant marketing, intellectual property development and sales costs for these newer products, particularly the digitally delivered products. If we areDSS is not able to sell these new products, ourits financial results will be adversely affected.
The results of ourDSS’s research and development efforts are uncertain and there can be no assurance of the commercial success of ourits products.
DSS believes that weit will need to continue to incur research and development expenditures to remain competitive. The products weDSS is currently are developing or may develop in the future may not be technologically successful. In addition, the length of ourDSS’s product development cycle may be greater than weit originally expectexpected and weDSS may experience delays in future product development. If ourDSS’s resulting products are not technologically successful, they may not achieve market acceptance or compete effectively with ourDSS’s competitors’ products.
Changes in document security technology and standards could render ourDSS’s applications and services obsolete.
The market for document security products, applications, and services is fast moving and evolving. Identification and authentication technology is constantly changing as weDSS and ourits competitors introduce new products, applications, and services, and retire old ones as customer requirements quickly develop and change. In addition, the standards for document security are continuing to evolve. If any segments of ourDSS’s market adopt technologies or standards that are inconsistent with ourDSS’s applications and technology, sales to those market segments could decline, which could have a material adverse effect on usDSS and ourits financial condition.
The market in which we operateDSS operates is highly competitive, and weDSS may not be able to compete effectively, especially against established industry competitors with greater market presence and financial resources.
DSS’s market is highly competitive and characterized by rapid technological change and product innovations. OurDSS competitors may have advantages over usDSS because of their longer operating histories, more established products, greater name recognition, larger customer bases, and greater financial, technical and marketing resources. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, and devote greater resources to the promotion and sale of their products. Competition may also force usDSS to decrease the price of ourDSS’s products and services. WeDSS cannot assure you that weit will be successful in developing and introducing new technology on a timely basis, new products with enhanced features, or that these products, if introduced, will enable usDSS to establish selling prices and gross margins at profitable levels.
DSS’s growth strategy depends, in part, on ourDSS acquiring complementary businesses and assets and expanding ourDSS’s existing operations to include manufacturing capabilities, which weDSS may be unable to do.
DSS’s growth strategy is based, in part, on ourits ability to acquire businesses and assets that are complementary to ourits existing operations and expanding ourDSS’s operations to include manufacturing capabilities. WeDSS may also seek to acquire other businesses. The success of this acquisition strategy will depend, in part, on ourDSS’s ability to accomplish the following:
Although we wereDSS has been able to acquire our Plastic Printing Professionals, Inc. subsidiarymake acquisitions in February 2006 and our DPI Secuprint subsidiary in December 2008, and Premier Packaging in February 2010,the past, there can be no assurance that weDSS will be successful in pursuing any or all of these steps on future transactions. OurDSS’s failure to implement ourits acquisition strategy could have an adverse effect on other aspects of ourDSS’s business strategy and ourits business in general. WeDSS may not be able to find appropriate acquisition candidates, acquire those candidates that we findDSS finds or integrate acquired businesses effectively or profitably.
DSS has in the past used, and may continue to use, our Common Stockits common stock as payment for all or a portion of the purchase price for acquisitions. If we issueDSS issues significant amounts of our Common Stockits common stock for such acquisitions, this could result in substantial dilution of the equity interests of ourDSS stockholders.
If we failDSS fails to retain ourcertain of its key personnel and attract and retain additional qualified personnel, weDSS might not be able to pursue ourits growth strategy.
DSS’s future success depends upon the continued service of ourcertain of its executive officers and other key sales and research personnel who possess longstanding industry relationships and technical knowledge of ourDSS products and operations. The loss of any of our key employees could negatively impact our ability to pursue our growth strategy and conduct operations. Although we believeDSS believes that ourits relationship with these individuals is positive, there can be no assurance that the services of these individuals will continue to be available to usDSS in the future. There can be no assurance that these persons will continueagree to agreecontinue to be employed by usDSS after such dates.
If we doDSS does not successfully expand ourits sales force, weit may be unable to increase ourits revenues.
DSS must expand the size of ourits marketing activities and sales force to increase revenues. We continueDSS continues to evaluate various methods of expanding ourits marketing activities, including the use of outside marketing consultants and representatives and expanding ourits in-house marketing capabilities. If we areDSS is unable to hire or retain qualified sales personnel or if newly hired personnel fail to develop the necessary skills to be productive, or if they reach productivity more slowly than anticipated, ourDSS’s ability to increase ourits revenues and grow could be compromised. The challenge of attracting, training and retaining qualified candidates may make it difficult to meet ourDSS’s sales growth targets. Further, weDSS may not generate sufficient sales to offset the increased expense resulting from expanding ourDSS’s sales force or weDSS may be unable to manage a larger sales force.
Future growth in ourDSS’s business could make it difficult to manage ourDSS’s resources.
DSS’s anticipated business expansion could place a significant strain on ourits management, administrative and financial resources. Significant growth in ourDSS’s business may require usit to implement additional operating, product development and financial controls, improve coordination among marketing, product development and finance functions, increase capital expenditures and hire additional personnel. There can be no assurance that weDSS will be able to successfully manage any substantial expansion of ourits business, including attracting and retaining qualified personnel. Any failure to properly manage ourits future growth could negatively impact ourits business and operating results.
DSS cannot predict ourits future capital needs and weDSS may not be able to secure additional financing.
DSS may need to raise additional funds in the future to fund ourits working capital needs, to fund more aggressive expansion of ourits business, to complete development, testing and marketing of ourits products and technologies, or to make strategic acquisitions or investments. WeDSS may require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available for usDSS to finance ourits development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of ourDSS stockholders or may require that weDSS relinquish rights to certain of ourits technologies or products. In addition, weDSS may experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, weDSS may have to delay or scale back ourits growth plans.
If DSS is unable to respond to regulatory or industry standards effectively, its growth and development could be delayed or limited.
DSS’s future success will depend in part on its ability to enhance and improve the functionality and features of its products and services in accordance with regulatory or industry standards. DSS’s ability to compete effectively will depend in part on its ability to influence and respond to emerging industry governmental standards in a timely and cost-effective manner. If DSS is unable to influence these or other standards or respond to these or other standards effectively, its growth and development of various products and services could be delayed or limited.
Changes in the laws and regulations to which DSS are subject may increase DSS’s costs.
DSS is subject to numerous laws and regulations, including, but not limited to, environmental and health and welfare benefit regulations, as well as those associated with being a public company. These rules and regulations may be changed by local, state, provincial, national or foreign governments or agencies. Such changes may result in significant increases in DSS’s compliance costs. Compliance with changes in rules and regulations could require increases to DSS’s workforce, and could result in increased costs for services, compensation and benefits, and investment in new or upgraded equipment.
Declines in general economic conditions or acts of war and terrorism may adversely impact DSS’s business.
Demand for printing services is typically correlated with general economic conditions. The recent declines in United States economic conditions have adversely impacted DSS’s business and results of operations, and may continue to do so for the foreseeable future. The overall business climate of DSS’s industry may also be impacted by domestic and foreign wars or acts of terrorism, which events may have sudden and unpredictable adverse impacts on demand for DSS’s products and services.
Post-Merger Risks Related to Our Stock
DSSTM’s limited operating history makes it difficult to evaluate its current business and future prospects.
DSSTM is a newly formed development stage company and has generated minimal revenue to date and has incurred expenses which exceed its revenues. DSSTM was incorporated in May 2012 and acquired a portfolio of incorporationpatents fromThomas Bascom in July 2012, and agreementsalso invested in VirtualAgility in March 2013 and again in August 2013. Therefore, DSSTM not only has a very limited operating history, but also a very limited track record in executing its business model which includes, among other things, creating, prosecuting, licensing, litigating or otherwise monetizing its patent assets. DSSTM’s limited operating history makes it difficult to evaluate its current business model and future prospects.
In light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development with limited operating history, there is a significant risk that DSSTM will not be able to:
If DSSTM cannot execute any one of the foregoing or similar matters relating to its operations, its business may fail.
DSSTM is presently reliant primarily on the patent assets it recently acquired. If DSSTM is unable to license or otherwise monetize such assets and generate revenue and profit through those assets or by other means, there is a significant risk that DSSTM’s business would fail.
In July 2012, DSSTM acquired a portfolio of patent assets from Thomas Bascom that DSSTM plans to license or otherwise monetize. If DSSTM’s efforts to generate revenue from such assets fail, DSSTM will have incurred significant losses and may be unable to acquire additional assets. If this occurs, DSSTM’s business would likely fail.
DSSTM has commenced legal proceedings against five companies, including Facebook, Inc. and LinkedIn Corporation, and DSSTM expects such litigation to be time-consuming and costly, which may adversely affect DSSTM’s financial condition and its ability to operate its business.
To license or otherwise monetize the patent assets DSSTM acquired from Thomas Bascom, DSSTM commenced legal proceedings against five companies, including Facebook, Inc. and LinkedIn Corporation, pursuant to which DSSTM alleges that such companies infringe on one or more of DSSTM’s patents. DSSTM’s viability is highly dependent on the outcome of this litigation, and there is a risk that DSSTM may be unable to achieve the results it desires from such litigation, which failure would harm DSSTM’s business to a great degree. In addition, the defendants in this litigation are much larger than DSSTM and have substantially more resources than DSSTM does, which could delaymake DSSTM’s litigation efforts more difficult.
DSSTM anticipates that these legal proceedings may continue for several years and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, DSSTM may be forced to litigate against others to enforce or preventdefend DSSTM’s intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which DSSTM is involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may have a changegreat impact on the value of the patents and preclude DSSTM’s ability to derive licensing revenue from the patents, or any revenue. Therefore, a negative outcome of any such litigation, or one or more claims contained within any such Litigation, could materially and adversely impact DSSTM’s business. Additionally, DSSTM anticipates that its legal fees and other expenses will be material and will negatively impact DSSTM’s financial condition and results of operations and may result in controlits inability to continue its business. DSSTM estimates that its legal fees over the next twelve months will be approximately $2,000,000. Expenses thereafter are dependent on the outcome of our company.
While DSSTM believes that the patents acquired from Thomas Bascom are infringed by the defendants in the Litigation, there is a risk that a stockholdercourt will find the patents invalid, not infringed or unenforceable and/or that the US Patent and Trademark Office (USPTO) will either invalidate the patents or materially narrow the scope of their claims during the course of a re-examination. In addition, even with a positive trial court verdict, the patent may consider favorable. Thesebe invalidated, found not infringed or rendered unenforceable on appeal. This risk may occur either presently in DSSTM’s initial litigation or from time to time in connection with future litigations DSSTM may bring. If this were to occur, it would have a material adverse effect on the viability of its company and its operations.
DSSTM believes that certain social and business networking and other companies infringe on at least four of its patents, but recognizes that obtaining and collecting a judgment against such infringers may be difficult or impossible. Patent litigation is inherently risky and the outcome is uncertain. Some of the parties DSSTM believes infringe on DSSTM’s patents are large and well-financed companies with substantially greater resources than DSSTM. DSSTM believes that these parties will devote a substantial amount of resources in an attempt to avoid or limit a finding that they are liable for infringing DSSTM’s patents or, in the event liability is found, to avoid or limit the amount of associated damages. In addition, there is a risk that these parties may file re-examinations or other proceedings with the USPTO or other government agencies in an attempt to invalidate, narrow the scope or render unenforceable the patents DSSTM acquired from Thomas Bascom. As of the date of this registration statement, DSSTM has settled with two defendants, and is legally precluded from disclosing other developments in the cases.
At this time, DSSTM cannot predict the outcome of such potential litigation or administrative action, and if DSSTM is unsuccessful in its litigation efforts for any reason, the value of the patents acquired from Thomas Bascom, which are DSSTM’s most significant assets, would be significantly reduced and DSSTM’s business, financial condition and results of operations would be significantly harmed.
Moreover, in connection with any of DSSTM’s present or future patent enforcement actions, it is possible that a defendant may request and/or a court may rule that DSSTM has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against DSSTM or its operating subsidiaries or award attorneys’ fees and/or expenses to one or more defendants, which could be material, and if DSSTM or its subsidiaries are required to pay such monetary sanctions, attorneys’ fees and/or expenses, such payment could materially harm DSSTM’s operating results and its financial position.
In addition, it is difficult in general to predict the outcome of patent enforcement litigation at the trial level. There is a higher rate of appeals in patent enforcement litigation than more standard business litigation. Such appeals are expensive and time-consuming, and the outcomes of such appeals are sometimes unpredictable, resulting in increased costs and reduced or delayed revenue.
Finally, DSSTM believes that the more prevalent patent enforcement actions become, the more difficult it will be for DSSTM to license its patents without engaging in litigation. As a result, DSSTM may need to increase the number of its patent enforcement actions to cause infringing companies to license the patent or pay damages for lost royalties. This will adversely affect DSSTM’s operating results due to the high costs of litigation and the uncertainty of the results.
If DSSTM is unsuccessful in its pending litigation or is unable to adequately protect its patent rights, the value of such patents would be significantly reduced and DSSTM’s business would be negatively impacted.
DSSTM believes its patents are valid, enforceable and valuable. Notwithstanding this belief, third parties may make claims of infringement or invalidity claims with respect to DSSTM’s patents and such claims could give rise to material costs for defense or settlement or both, jeopardize or substantially delay a successful outcome of litigation DSSTM is or may become involved in, or otherwise materially and adversely affect its business. At this time, DSSTM cannot predict the outcome of its current pending patent infringement litigation. If DSSTM is unsuccessful in its litigation efforts for any reason or is otherwise unable to protect its patent rights, the value of the patents acquired from Thomas Bascom, which are DSSTM’s most significant assets, would be significantly reduced and DSSTM’s business, financial condition and results of operations would be significantly harmed.
DSSTM may be unable to retain key advisors and legal counsel to represent DSSTM in the current patent infringement Litigation and in future legal proceedings.
The success of DSSTM’s pending legal proceedings and future legal proceedings depends in part upon DSSTM’s ability to retain key advisors and legal counsel to represent DSSTM in such litigation. The retention of such key advisors and legal counsel is likely to be expensive and DSSTM may not be able to retain such key advisors and legal counsel on favorable economic terms. Therefore, DSSTM may be unable to retain key advisors and legal counsel to represent DSSTM in its litigation, which could have a material adverse effect on DSSTM’s business.
The patent infringement cases initiated by DSSTM will likely take longer and be more expensive in the United States District Court in the Northern District of California than if the cases were litigated in the United States District Court for the Eastern District of Virginia.
DSSTM’s wholly-owned subsidiary, Bascom Research LLC, initiated its patent infringement litigation in the United States District Court for the Eastern District of Virginia. It is difficult to predict the length of time it will take to complete such litigation. In December, 2012, the lawsuits were transferred to the United States District Court in the Northern District of California. As of the date of this Registration Statement, DSSTM has settled with two defendants, and is legally precluded from disclosing certain other developments in the cases. As of October 11, 2013, Bascom Research has reached settlements with two defendants in connection with its ongoing litigation in the Northern District of California and the case against Salesforce.com was dismissed. Bascom Research is precluded from releasing the specific terms and in certain cases, the existence of its settlements as a result of confidentiality provisions include:contained in the various settlement agreements. The litigation is still pending against the other defendants (including Facebook, Inc. and LinkedIn Corporation). DSSTM believes that as a result of the transfer to California, the patent infringement litigation may take significantly longer, become more expensive, and possibly adversely impact the financial position of DSSTM moving forward.
DSSTM may seek to internally develop additional new inventions and intellectual property, which would take time and would be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of DSSTM’s investments in such activities.
Members of DSSTM’s management team have significant experience as inventors. As such, part of DSSTM’s business may include the internal development of new inventions and intellectual property that DSSTM will seek to monetize. However, this aspect of DSSTM’s business would likely require significant capital and would take time to achieve. Such activities could also distract DSSTM’s management team from its present business initiatives, which could have a material and adverse effect on DSSTM’s business. There is also the risk that DSSTM’s initiatives in this regard would not yield any viable new inventions or technology, which would lead to a loss of DSSTM’s investments in time and resources in such activities.
In addition, even if DSSTM is able to internally develop new inventions, in order for those inventions to be viable and to compete effectively, DSSTM would need to develop and maintain, and it would heavily rely on, a proprietary position with respect to such inventions and intellectual property. However, there are significant risks associated with any such intellectual property DSSTM may develop principally including the following:
| • | other companies may challenge patents issued to DSSTM; |
DSSTM cannot be certain that patents will be issued as a result of any future applications, or that any of DSSTM’s patents, once issued, will provide DSSTM with adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags behind actual discoveries, DSSTM cannot be certain that it will be the first to make its additional new inventions or to file patent applications covering those inventions. It is also possible that others may have or may obtain issued patents that could prevent DSSTM from commercializing DSSTM’s products or require DSSTM to obtain licenses requiring the payment of significant fees or royalties in order to enable DSSTM to conduct its business. As to those patents that DSSTM may license or otherwise monetize, DSSTM’s rights will depend on maintaining its obligations to the licensor under the applicable license agreement, and DSSTM may be unable to do so. DSSTM’s failure to obtain or maintain intellectual property rights for DSSTM’s inventions would lead to the loss of DSSTM’s investments in such activities, which would have a material and adverse effect on DSSTM’s company.
Moreover, patent application delays could cause delays in recognizing revenue from DSSTM’s internally generated patents and could cause DSSTM to miss opportunities to license patents before other competing technologies are developed or introduced into the market.
New legislation, regulations or court rulings related to enforcing patents could harm DSSTM’s business and operating results.
If Congress, the United States Patent and Trademark Office or courts implement new legislation, regulations or rulings that impact the patent enforcement process or the rights of patent holders, these changes could negatively affect DSSTM’s business model. For example, limitations on the ability to bring patent enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in the cost to resolve patent disputes and other similar developments could negatively affect DSSTM’s ability to assert its patent or other intellectual property rights.
In addition, on September 16, 2011, the Leahy-Smith America Invents Act (or the Leahy-Smith Act), was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The U.S. Patent and Trademark Office is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act will not become effective until one year or 18 months after its enactment. Accordingly, it is too early to tell what, if any, impact the Leahy-Smith Act will have on the operation of DSSTM’s business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of DSSTM’s issued patents, all of which could have a material adverse effect on DSSTM’s business and financial condition.
Further, and in general, it is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become enacted as laws. Compliance with any new or existing laws or regulations could be difficult and expensive, affect the manner in which DSSTM conducts its business and negatively impact DSSTM’s business, prospects, financial condition and results of operations.
DSSTM’s acquisitions of patent assets may be time consuming, complex and costly, which could adversely affect DSSTM’s operating results.
Acquisitions of patent or other intellectual property assets, which are and will be critical to DSSTM’s business plan, are often time consuming, complex and costly to consummate. DSSTM may utilize many different transaction structures in its acquisitions and the terms of such acquisition agreements tend to be heavily negotiated. As a result, DSSTM expects to incur significant operating expenses and will likely be required to raise capital during the negotiations even if the acquisition is ultimately not consummated. Even if DSSTM is able to acquire particular patent assets, there is no guarantee that DSSTM will generate sufficient revenue related to those patent assets to offset the acquisition costs. While DSSTM will seek to conduct confirmatory due diligence on the patent assets DSSTM is considering for acquisition, DSSTM may acquire patent assets from a seller who does not have proper title to those assets. In those cases, DSSTM may be required to spend significant resources to defend DSSTM’s interest in the patent assets and, if DSSTM is not successful, its acquisition may be invalid, in which case DSSTM could lose part or all of its investment in the assets.
DSSTM may also identify patent or other intellectual property assets that cost more than DSSTM is prepared to spend with its own capital resources. DSSTM may incur significant costs to organize and negotiate a structured acquisition that does not ultimately result in an acquisition of any patent assets or, if consummated, proves to be unprofitable for DSSTM. These higher costs could adversely affect DSSTM’s operating results, and if DSSTM incurs losses, the value of its securities will decline.
In addition, DSSTM may acquire patents and technologies that are in the early stages of adoption in the commercial, industrial and consumer markets. Demand for some of these technologies will likely be untested and may be subject to fluctuation based upon the rate at which DSSTM’s licensees will adopt its patents and technologies in their products and services. As a result, there can be no assurance as to whether technologies DSSTM acquires or develops will have value that it can monetize.
In certain acquisitions of patent assets, DSSTM may seek to defer payment or finance a portion of the acquisition price. This approach may put DSSTM at a competitive disadvantage and could result in harm to DSSTM’s business.
DSSTM has limited capital and may seek to negotiate acquisitions of patent or other intellectual property assets where DSSTM can defer payments or finance a portion of the acquisition price. These types of debt financing or deferred payment arrangements may not be as attractive to sellers of patent assets as receiving the full purchase price for those assets in cash at the closing of the acquisition. As a result, DSSTM might not compete effectively against other companies in the market for acquiring patent assets, many of whom have greater cash resources than DSSTM has. In addition, any failure to satisfy DSSTM’s debt repayment obligations may result in adverse consequences to its operating results.
Any failure to maintain or protect DSSTM’s patent assets or other intellectual property rights could significantly impair its return on investment from such assets and harm DSSTM’s brand, its business and its operating results.
DSSTM’s ability to operate its business and compete in the intellectual property market largely depends on the superiority, uniqueness and value of DSSTM’s acquired patent assets and other intellectual property. To protect DSSTM’s proprietary rights, DSSTM relies on and will rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with its employees and third parties, and protective contractual provisions. No assurances can be given that any of the measures DSSTM undertakes to protect and maintain its assets will have any measure of success.
Following the acquisition of patent assets, DSSTM will likely be required to spend significant time and resources to maintain the effectiveness of those assets by paying maintenance fees and making filings with the United States Patent and Trademark Office. DSSTM may acquire patent assets, including patent applications, which require DSSTM to spend resources to prosecute the applications with the United States Patent and Trademark Office. Further, there is a material risk that patent related claims (such as, for example, infringement claims (and/or claims for indemnification resulting therefrom), unenforceability claims, or invalidity claims) will be asserted or prosecuted against DSSTM, and such assertions or prosecutions could materially and adversely affect DSSTM’s business. Regardless of whether any such claims are valid or can be successfully asserted, defending such claims could cause DSSTM to incur significant costs and could divert resources away from DSSTM’s other activities.
Despite DSSTM’s efforts to protect its intellectual property rights, any of the following or similar occurrences may reduce the value of DSSTM’s intellectual property:
Moreover, DSSTM may not be able to effectively protect its intellectual property rights in certain foreign countries where DSSTM may do business in the future or from which competitors may operate. If DSSTM fails to maintain, defend or prosecute its patent assets properly, the value of those assets would be reduced or eliminated, and DSSTM’s business would be harmed.
DSSTM may not be able to capitalize on potential market opportunities related to its licensing strategy or patent portfolio.
In order to capitalize on its patent portfolio, DSSTM intends to enter into licensing relationships. However, there can be no assurance that DSSTM will be able to capitalize on its patent portfolio or any potential market opportunity in the foreseeable future. DSSTM’s inability to generate licensing revenues associated with potential market opportunities could result from a number of factors, including, but not limited to:
Weak global economic conditions may cause infringing parties to delay entering into licensing agreements, which could prolong DSSTM’s litigation and adversely affect its financial condition and operating results.
DSSTM’s business plan depends significantly on worldwide economic conditions, and the United States and world economies have recently experienced weak economic conditions. Uncertainty about global economic conditions poses a risk as businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values. This response could have a material negative effect on the willingness of parties infringing on DSSTM’s assets to enter into licensing or other revenue generating agreements voluntarily. Entering into such agreements is critical to DSSTM’s business plan, and DSSTM’s failure to do so could cause material harm to its business.
Risks Related to Ownership of our Common Stock
DSS has a large number of authorized but unissued shares of common stock, which ourDSS’s management may issue without further stockholder approval, thereby causing dilution of your holdings of ourDSS common stock.
As of December 31, 2010,July 1, 2013, after the Company’s merger with DSSTM, there were approximately 181154 million authorized but unissued shares of ourDSS common stock. OurDSS management continues to have broad discretion to issue shares of ourits common stock in a range of transactions, including capital-raising transactions, mergers, acquisitions, for anti-takeover purposes, and in other transactions, without obtaining stockholder approval, unless stockholder approval is required for a particular transaction under the rules of the NYSE Amex, New YorkMKT, state and federal law, or other applicable laws. If our BoardDSS’s board of Directorsdirectors determines to issue additional shares of ourDSS common stock from the large pool of authorized but unissued shares for any purpose in the future without obtaining stockholder approval, your ownership position would be diluted without your further ability to vote on such transaction.
The exercise of ourDSS’s outstanding options and warrants, and vesting of restricted stock awards and conversion of debt securities may depress ourDSS’s stock price.
As of February 18, 2011, we had outstandingJune 30, 2013 and 2012, there were up to 4,286,534 and 4,225,691, respectively, of shares potentially issuable under convertible debt agreements, options, warrants, restricted stock optionsagreements and employment agreements that could potentially dilute basic earnings per share in the future. These shares were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses in the respective periods. On July 1, 2013, in connection with the Merger, the Company issued the following: (i) 16,558,387 shares of the Company’s common stock (including exchange shares), (ii) 7,100,000 shares of the Company’s Common Stock to be held in escrow pursuant to an escrow agreement, dated July 1, 2013, (iii) warrants to purchase up to an aggregate of 4,859,894 shares of the Company’s Common Stock, at an exercise price of $4.80 per share and expiring on July 1, 2018, and (iv) warrants to purchase up to an aggregate of 3,432,170 shares of the Company’s Common Stock, at an exercise price of $0.02 per share and expiring on July 1, 2023. In addition, the Company assumed options to purchase an aggregate of 3,523,4182,000,000 shares of ourthe Company’s Common Stock at an exercise prices ranging from $1.86price of $3.00 per share, in exchange for 3,600,000 outstanding and unexercised stock options to $12.65 per share. This amount includespurchase shares of DSSTM’s common stock. The Company also issued an aggregate of 786,678 shares of Common Stock to Palladium Capital Advisors, LLC as compensation for their services in connection with the warrantstransactions contemplated by the Merger Agreement. Of those shares issued to Fletcher International, Ltd. on December 31, 2010,Palladium Capital Advisors, LLC, 400,000 are held in escrow pursuant to the same terms and conditions as amended on February 18, 2011 and 45,000 unvested restricted shares of our common stock that are subject to various vesting terms. Tothose set forth in the extent that these securities are converted into common stock, dilution to our stockholders will occur. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely affected, since the holders of these securities can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than the exercise and conversion terms provided by those securities.
Sales of these sharessecurities in the public market, or the perception that future sales of these sharessecurities could occur, could have the effect of lowering the market price of ourDSS common stock below current levels and make it more difficult for usDSS and ourDSS’s stockholders to sell ourDSS’s equity securities in the future.
Sale or the availability for sale of shares of common stock by stockholders could cause the market price of ourDSS common stock to decline and could impair ourDSS’s ability to raise capital through an offering of additional equity securities.
DSS does not intend to pay cash dividends.
DSS does not intend to declare or pay cash dividends on ourits common stock in the foreseeable future. We anticipateDSS anticipates that weit will retain any earnings and other cash resources for investment in ourits business. The payment of dividends on ourDSS’s common stock is subject to the discretion of our Boardits board of Directorsdirectors and will depend on ourDSS’s operations, financial position, financial requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal restrictions on the payment of dividends and other factors that our Boardits board of Directorsdirectors deems relevant.
DSS has material weaknesses in ourits internal control over financial reporting structure, which, until remedied, may cause errors in ourits financial statements that could require restatements of ourits financial statements and investors may lose confidence in ourDSS’s reported financial information, which could lead to a decline in ourDSS’s stock price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires usDSS to evaluate the effectiveness of ourits internal control over financial reporting as of the end of each year, and to include a management report assessing the effectiveness of ourDSS’s internal control over financial reporting in each Annual Report on Form 10-K.
DSS has identified two material weaknesses in ourits internal control over financial reporting in ourits annual assessment of internal controls over financial reporting that management performed for the year ended December 31, 2010, in which management2012. Those identified material weaknesses remain as of the date of this registration statement. Management has concluded that (i) weDSS did not maintain a sufficient complement of qualified accounting personnel and controls associated with segregation of duties; and (ii) we lackDSS lacks sufficient resources within the accounting department to have effective controls associated with identifying and accounting for complex and non-routine transactions in accordance with U.S.United States generally accepted accounting principles, and that the foregoing represented material weaknesses in ourits internal control over financial reporting. DSS is uncertain at this time of the costs to remediate all of the above listed material weaknesses, however, DSS anticipates the cost to be in the range of $200,000 to $400,000 (including the cost of hiring additional qualified accounting personnel to eliminate segregation of duties issues and using the services of accounting consultants for complex and non-routine transactions if and when they arise). DSS cannot guarantee that the actual costs to remediate these deficiencies will not exceed this amount. If ourDSS’s internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in ourDSS’s financial statements and in ourDSS’s disclosure that could require restatements. Investors may lose confidence in ourDSS’s reported financial information and in ourDSS’s disclosure, which could lead to a decline in ourDSS’s stock price.
DSS’s management, including ourits Chief Executive Officer and Chief Financial Officer, does not expect that ourDSS’s internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system'ssystem’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As a result, weDSS cannot assure you that significant deficiencies or material weaknesses in ourits internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounterDSS encounters in their implementation, could result in significant deficiencies or material weaknesses, cause usDSS to fail to timely meet ourDSS’s periodic reporting obligations, or result in material misstatements in ourDSS’s financial statements. Any such failure could also materially adversely affect the results of periodic management evaluations regarding disclosure controls and procedures and the effectiveness of ourDSS’s internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the future.
Our common stock is traded on The NYSE MKT and, despite certain increases of trading volume from time to time, there have been periods when it could be considered “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. Finance transactions resulting in a large amount of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares, could place downward pressure on the trading price of our stock. In addition, the existencelack of a material weaknessrobust resale market may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.
If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons, including the ending of restriction on resale, substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. We may become involved in securities class action litigation that could divert management’s attention and harm our business.
Our common stock is subject to volatility.
There can be no assurance that the market price for our common stock will remain at its current level and a decrease in the market price could result in errors insubstantial losses for investors. The market price of our financial statements that could result in a restatement of financial statements, thatcommon stock may cause investors to lose confidence in our reported financial information, leading to a decline in our stock price
In December 2008, we received a letter from the NYSE Amex stating that, based on the NYSE Amex’s review of publicly available information, we were considered to be below the NYSE Amex’s continued listing standards. After submitting a plan of compliance·announcements or press releases relating to the NYSE Amexindustry or to our own business or prospects;
·regulatory, legislative, or other developments affecting us or the industry generally;
·sales by holders of restricted securities pursuant to effective registration statements or exemptions from registration; and additional evaluation by
·market conditions specific to biopharmaceutical companies, the Exchange, we were informed in March 2010 that we had resolvedhealthcare industry and the continued listing deficiencies. On January 25, 2011, we received a warning letter from the NYSE Amex in connection with the Company's failure to seek NYSE Amex approval for the additional issuances of our securities as required by Section 301 of the NYSE Amex Company Guide and its continued listing standards. Our failure to report covered three stock issuances totaling 1,235,153 shares in November and December of 2010. We thereafter filed our applications for the additional share listings with the NYSE Amex. On March 15, 2011, we received notification from NYSE Amex that our additional share listing applications have been approved, and that the Company has regained full compliance with NYSE Amex listing requirements. We cannot assure you that we will not receive additional deficiency letters in the future, or that we will continue to satisfy the continued listing standards in order to remain listed on the Exchange.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this prospectus, and they may also be made a part of this prospectus by reference to other documents filed with the Securities and Exchange Commission, which is known as “incorporation by reference.”
In some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,” “estimates,” “plans,” “believes,” “seeks,” “may,” “should”, “could” or the negative of riskssuch terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those describedexpressed in the forward-looking statements. Forward-looking statements might include one or more of the following:
You should read this prospectus and any accompanying prospectus supplement and the documents that we reference herein and therein and have filed as exhibits to the registration statement, of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this prospectus and any accompanying prospectus supplement is accurate as of the date on the front cover of this prospectus or such prospectus supplement only. Because the risk factors referred to above, as well as the risk factors referred to on page 4 of this prospectus and incorporated herein by reference, could cause actual results or outcomes to differ materially from those expressed in any document incorporatedforward-looking statements made by reference mightus or on our behalf, you should not occur. Investors are cautioned not to place undue reliance on theany forward-looking statements, which speakstatements. Further, any forward-looking statement speaks only as of the date of this prospectus or the date of the document incorporated by reference in this prospectus. We are not under any obligation,on which it is made, and we expressly disclaim anyundertake no obligation to update or alter any forward-looking statements, whether as a result of new information, futurestatement to reflect events or otherwise. All subsequentcircumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this prospectus and any accompanying prospectus supplement, and particularly our forward-looking statements, attributable to Document Security Systems or to any person acting on its behalf are expressly qualified in their entirety by thethese cautionary statements contained or referred to in this section.
USE OF PROCEEDS
Except as otherwise provided in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities offered by us in this prospectus for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments, and the repayment, refinancing, redemption or repurchase of future indebtedness or capital stock.
The intended application of proceeds from the sale of any particular offering of securities using this prospectus will be described in the accompanying prospectus supplement relating to such offering. The precise amount and timing of the application of these proceeds will depend on our funding requirements and the availability and costs of other funds.
We will not receive any of the proceeds from the sale or disposition of shares of our common stock or interests therein, by the selling stockholder. stockholders, and there are no executive management members or directors among the selling stockholders.
STOCKHOLDERS
The proceeds fromfollowing table sets forth the number of shares of common stock beneficially owned by the selling stockholders as of October 11, 2013, the number of shares of common stock covered by this prospectus on behalf of the stockholders and the total number of shares of common stock that the selling stockholders will beneficially own upon completion of the offering. The shares of common stock covered by this prospectus represent shares of common stock that the selling stockholders may acquire upon exercise of warrants which they hold. The warrants were issued in connection with the Merger Agreement discussed on page 2 of this prospectus and are exercisable at a price of $4.80 per share and expire on July 1, 2018. Other than as set forth in the following table, the selling stockholders have not held any position or office or had any other material relationship with us or any of our predecessors or affiliates within the past three years. This table assumes that the stockholders will offer for sale or dispositionall of the shares of our common stock or interests therein, covered by this prospectus.
The common stock may be offered under this prospectus are solely for the accounts offrom time to time by the selling stockholder. Westockholders, or by any of their respective pledgees, donees, transferees or other successors in interest. The amounts set forth below are based upon information provided to us by the selling stockholders, or in our records, as of October 11, 2013, and are accurate to the best of our knowledge. It is possible, however, that the selling stockholders may receive proceeds uponacquire or dispose of additional shares of common stock from time to time after the exercisedate of warrantsthis prospectus.
Other than as set forth in such warrants. We intend to use any such proceeds for general corporate purposes, including working capital, to pay off debts, and to increase sales and marketing resources.
The selling stockholderstockholders will pay any underwriting discounts and commissions and expenses incurred by the selling stockholder for brokerage, accounting, tax or legal services or any other expenses incurred by the selling stockholder in disposing of the shares, or interests therein.shares. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, all registration and filing fees and fees and expenses of our counsel and our accountants.
| Ownership Before Offering | Ownership After Offering (1) | |||||||||||||||||
| Selling Stockholder | Number of shares of Common Stock beneficially owned | Number of shares offered | Number of shares of Common Stock beneficially owned | Percentage of Common Stock beneficially owned | ||||||||||||||
| 1960480 BT, LLC | 5,026,329 | (2) | 764,541 | 4,261,788 | 7.88 | % | ||||||||||||
| 2004 Leon Scharf Irrevocable Trust | 99,956 | (3) | 15,204 | 84,752 | * | |||||||||||||
| Aaron Wise | 5,145 | (4) | 2,091 | 3,054 | * | |||||||||||||
| Abraham Belsky | 33,319 | (5) | 5,068 | 28,251 | * | |||||||||||||
| Abraham Einhorn | 98,622 | (6) | 15,001 | 83,621 | * | |||||||||||||
| Adam Lucks | 9,995 | (7) | 1,520 | 8,475 | * | |||||||||||||
| Adam Malamed | 22,763 | (8) | 9,250 | 13,513 | * | |||||||||||||
| Adam Mesh | 54,245 | (9) | 20,417 | 33,828 | * | |||||||||||||
| Alan Honig | 51,547 | (10) | 20,946 | 30,601 | * | |||||||||||||
| Alexander Hasenfeld, Inc. Profit Sharing Plan | 33,319 | (11) | 5,068 | 28,251 | * | |||||||||||||
| Alpha Capital Anstalt | 634,828 | (12) | 96,562 | 538,266 | 1.0 | % | ||||||||||||
| American European Insurance Company | 66,637 | (13) | 10,136 | 56,501 | * | |||||||||||||
| Auxol Capital LLC | 30,044 | (14) | 4,570 | 25,474 | * | |||||||||||||
| Barry Honig | 803,591 | (15) | 122,232 | 681,359 | 1.26 | % | ||||||||||||
| Birchtree Capital, LLC(21) | 31,194 | (16) | 12,676 | 18,518 | * | |||||||||||||
| Brian Bauer | 33,984 | (17) | 5,169 | 28,815 | * | |||||||||||||
| Brio Capital LP | 179,920 | (18) | 27,367 | 152,553 | * | |||||||||||||
| Brio Capital Select LLC | 116,614 | (19) | 17,738 | 98,876 | * | |||||||||||||
| BST Cold, LLC | 7,483 | (20) | 3,041 | 4,442 | * | |||||||||||||
| Channa Levin 2008 Trust | 66,637 | (21) | 10,136 | 56,501 | * | |||||||||||||
| Cranshire Capital Master Fund Ltd | 82,454 | (22) | 33,505 | 48,949 | * | |||||||||||||
| Daniel W. Armstrong | 19,991 | (23) | 3,041 | 16,950 | * | |||||||||||||
| Darren Goodrich, Inc. | 12,472 | (24) | 5,068 | 7,404 | * | |||||||||||||
| Eisenberg Family Foundation, Inc. | 49,978 | (25) | 7,602 | 42,376 | * | |||||||||||||
| Empery Asset Master, Ltd. | 629,509 | (26) | 95,753 | 533,756 | * | |||||||||||||
| Ownership Before Offering | Ownership After Offering (1) | |||||||||||||||||
| Selling Stockholder | Number of shares of Common Stock beneficially owned | Number of shares offered | Number of shares of Common Stock beneficially owned | Percentage of Common Stock beneficially owned | ||||||||||||||
| Four Kids Investment Funds LLC | 927,837 | (27) | 377,026 | 550,811 | 1.02 | % | ||||||||||||
| Frank Salvatore | 9,995 | (28) | 1,520 | 8,475 | * | |||||||||||||
| Frederick Kuykendall | 99,956 | (29) | 15,204 | 84,752 | * | |||||||||||||
| Frost Gamma Investments Trust | 887,452 | (30) | 264,279 | 623,173 | 1.15 | % | ||||||||||||
| Grander Holdings Inc. 401(k) | 41,157 | (31) | 16,724 | 24,433 | * | |||||||||||||
| GRQ Consultants, Inc. 401K | 468,398 | (32) | 190,333 | 278,065 | * | |||||||||||||
| GRQ Consultants, Inc. Roth 401K FBO Barry Honig | 788,438 | (33) | 320,381 | 468,057 | * | |||||||||||||
| Harvey Kesner | 44,055 | (34) | 6,701 | 37,354 | * | |||||||||||||
| Harvey Kesner & Renee Kesner | 22,582 | (35) | 3,435 | 19,147 | * | |||||||||||||
| Hope Adams c/f Sara Adams | 23,073 | (36) | 9,376 | 13,697 | * | |||||||||||||
| HS Contrarian Investments, LLC | 29,522 | (37) | 11,996 | 17,526 | * | |||||||||||||
| HSI Partnership | 33,319 | (38) | 5,068 | 28,251 | * | |||||||||||||
| Hudson Bay Master Fund Ltd. | 5,994,307 | (39) | 1,402,800 | 5,403,596 | 9,99 | % | ||||||||||||
| Iroquois Master Fund Ltd. | 1,765,878 | (40) | 268,603 | 1,497,275 | 2.77 | % | ||||||||||||
| Israel Berl | 29,369 | (41) | 4,467 | 24,902 | * | |||||||||||||
| James T. Nakaoka & Mai S. Nakaoka | 47,579 | (42) | 7,237 | 40,342 | * | |||||||||||||
| Jason D. Papastavrou | 24,944 | (43) | 10,136 | 14,808 | * | |||||||||||||
| Jeff Merkel | 10,014 | (44) | 1,523 | 8,491 | * | |||||||||||||
| Jeffrey Ronaldi | 353,427 | (45) | 13,402 | 340,025 | * | |||||||||||||
| JGB Capital LP | 376,976 | (46) | 57,341 | 319,635 | * | |||||||||||||
| JGB Capital Offshore Ltd. | 251,316 | (47) | 38,227 | 213,089 | * | |||||||||||||
| Jill Strauss | 41,648 | (48) | 6,335 | 35,313 | * | |||||||||||||
| John Arlo, Inc. | 12,472 | (49) | 5,068 | 7,404 | * | |||||||||||||
| John Baleno | 17,622 | (50) | 2,680 | 14,942 | * | |||||||||||||
| John Ford | 29,191 | (51) | 4,440 | 24,751 | * | |||||||||||||
| John O'Rourke | 13,744 | (52) | 2,091 | 11,653 | * | |||||||||||||
| Jonathan Honig | 137,469 | (53) | 20,910 | 116,559 | * | |||||||||||||
| Kerry Propper | 29,987 | (54) | 4,561 | 25,426 | * | |||||||||||||
| Ownership Before Offering | Ownership After Offering (1) | |||||||||||||||||
| Selling Stockholder | Number of shares of Common Stock beneficially owned | Number of shares offered | Number of shares of Common Stock beneficially owned | Percentage of Common Stock beneficially owned | ||||||||||||||
| Kristin M. O'Connor | 314,145 | (55) | 47,784 | 266,361 | * | |||||||||||||
| Leiden & Quest LLC | 58,739 | (56) | 8,935 | 49,804 | * | |||||||||||||
| Levitansky Family L.P. | 99,956 | (57) | 15,204 | 84,752 | * | |||||||||||||
| Linda M. Fitzgerald | 43,319 | (58) | 5,068 | 38,251 | * | |||||||||||||
| Louis Schonfeld | 66,637 | (59) | 10,136 | 56,501 | * | |||||||||||||
| Louise Fawzi | 8,811 | (60) | 1,340 | 7,471 | * | |||||||||||||
| Melechdavid Inc. | 17,622 | (61) | 2,680 | 14,942 | * | |||||||||||||
| Michael Brauser | 108,507 | (62) | 44,092 | 64,415 | * | |||||||||||||
| Michael Roth | 9,995 | (63) | 1,520 | 8,475 | * | |||||||||||||
| Morris Fuchs | 166,592 | (64) | 25,340 | 141,252 | * | |||||||||||||
| MZ Trading LLC | 22,763 | (65) | 9,250 | 13,513 | * | |||||||||||||
| Nachum Stein | 33,319 | (66) | 5,068 | 28,251 | * | |||||||||||||
| Periscope Partners L.P. (100) | 166,592 | (67) | 25,340 | 141,252 | * | |||||||||||||
| Peter Hardigan | 377,802 | (68) | 18,679 | 359,123 | * | |||||||||||||
| Philip Lucks | 9,995 | (69) | 1,520 | 8,475 | * | |||||||||||||
| Robert S. Colman Trust (104) | 333,829 | (70) | 50,778 | 283,051 | * | |||||||||||||
| Ruby Rinker | 29,957 | (71) | 4,557 | 25,400 | * | |||||||||||||
| Rutgers Casualty Insurance Company | 33,319 | (72) | 5,068 | 28,251 | * | |||||||||||||
| Samuel Ginzburg | 14,685 | (73) | 2,234 | 12,451 | * | |||||||||||||
| Sandor Capital Master Fund (110) | 273,628 | (74) | 41,621 | 232,007 | * | |||||||||||||
| Stetson Capital Investments, Inc. | 78,725 | (75) | 31,990 | 46,735 | * | |||||||||||||
| Stuart Smith | 149,933 | (76) | 22,806 | 127,127 | * | |||||||||||||
| Suzanne Adams | 48,641 | (77) | 19,765 | 28,876 | * | |||||||||||||
| The Special Equities Group, LLC | 16,870 | (78) | 6,855 | 10,015 | * | |||||||||||||
| Thomas L. Bascom | 33,383 | (79) | 5,078 | 28,305 | * | |||||||||||||
| Triage Capital Management L.P. | 66,637 | (80) | 10,136 | 56,501 | * | |||||||||||||
| Vincent G. Young | 33,984 | (81) | 5,169 | 28,815 | * | |||||||||||||
| Werdiger Family Foundation Inc. | 168,257 | (82) | 25,593 | 142,664 | * | |||||||||||||
| Ownership Before Offering | Ownership After Offering (1) | |||||||||||||||||
| Selling Stockholder | Number of shares of Common Stock beneficially owned | Number of shares offered | Number of shares of Common Stock beneficially owned | Percentage of Common Stock beneficially owned | ||||||||||||||
| White Trout Lake LLC | 26,058 | (83) | 10,589 | 15,469 | * | |||||||||||||
| Yuri Minkovsky & Eleanora Minkovsky | 66,637 | (84) | 10,136 | 56,501 | * | |||||||||||||
| TOTAL: | 23,591,640 | (85) | 4,859,894 | 19,543,832 | ||||||||||||||
* Less than 1%
| (1) |
| Represents the amount of shares |
Shares of Common Stock Beneficially Owned Prior To Offering | Shares Currently Outstanding and Being Registered in Offering | Shares of Common Stock Beneficially Owned After Offering | ||||||||||||||||||
| Number | Percentage | Number | Percentage | |||||||||||||||||
| Name of Selling Security Holder | ||||||||||||||||||||
| Fletcher International, LTD (4) | 2,059,374 | (1) | 9.9 | % (2) | 1,555,543 | (3) | 503,831 | (1) | 2.4 | % (2) | ||||||||||
| (2) | Includes 2,963,515 shares of |
| (3) | Includes 62,540 shares of Common Stock, 15,204 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 22,212 Escrow Shares (as defined in footnote 85 below). Willy Beer as Trustee of 2004 Leon Scharf Irrevocable Trust, has voting and dispositive power over the securities held by 2004 Leon Scharf Irrevocable Trust. | |
| (4) | Includes 2,091 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 3,054 Escrow Shares (as defined in footnote 85 below). | |
| (5) | Includes 20,847 shares of Common Stock, 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). | |
| (6) | Includes 61,705 shares of Common Stock, 15,001 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 21,916 Escrow Shares (as defined in footnote 85 below). | |
| (7) | Includes 6,254 shares of Common Stock, 1,520 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 2,221 Escrow Shares (as defined in footnote 85 below). | |
| (8) | Includes 9,250 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 13,513 Escrow Shares (as defined in footnote 85 below). The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. | |
| (9) | Includes 4,000 shares of Common Stock, 20,417 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 29,828 Escrow Shares (as defined in footnote 85 below). | |
| (10) | Includes 20,946 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 30,601 Escrow Shares (as defined in footnote 85 below). | |
| (11) | Includes 20,847 shares of Common Stock, 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). Nachum Stein as Trustee of the Alexander Hasenfeld Inc. Profit Sharing Plan, has voting and dispositive power over the securities held by Alexander Hasenfeld Inc. Profit Sharing Plan. | |
| (12) | Includes 397,195 shares of Common Stock, 96,562 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 141,071 Escrow Shares (as defined in footnote 85 below). Konrad Ackerman, as Director of Alpha Capital Anstalt, has voting and dispositive power over the securities held by Alpha Capital Anstalt. | |
| (13) | Includes 41,693 shares of Common Stock, 10,136 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 14,808 Escrow Shares (as defined in footnote 85 below). Nachum Stein as Chairman of American European Insurance Company, has voting and dispositive power over the securities held by American European Insurance Company. |
| (14) | Includes 18,798 shares of Common Stock, 4,570 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 6,676 Escrow Shares (as defined in footnote 85 below). R. Douglas Armstrong as Member and President of Auxol Capital LLC, has voting and dispositive power over the securities held by Auxol Capital LLC. The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, it had no agreements or understandings, directly or indirectly, with any person to distribute the securities. | |
| (15) | Includes 502,786 shares of Common Stock, 122,232 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 178,573 Escrow Shares (as defined in footnote 85 below). | |
| (16) | Includes 12,676 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 18,518 Escrow Shares (as defined in footnote 85 below). Michael Brauser as Manager of Birchtree Capital LLC, has voting and dispositive power over the securities held by Birchtree Capital LLC. | |
| (17) | Includes 21,263 shares of Common Stock, 5,169 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,552 Escrow Shares (as defined in footnote 85 below). | |
| (18) | Includes 112,571 shares of Common Stock, 27,367 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 39,982 Escrow Shares (as defined in footnote 85 below). Shaye Hirsch as Managing Partner of Brio Capital LP, has voting and dispositive power over the securities held by Brio Capital LP. | |
| (19) | Includes 72,962 shares of Common Stock, 17,738 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 25,914 Escrow Shares (as defined in footnote 85 below). Shaye Hirsch as Managing Member of Brio Capital Select LLC, has voting and dispositive power over the securities held by Brio Capital Select LLC. | |
| (20) | Includes 3,041 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 4,442 Escrow Shares (as defined in footnote 85 below). Hope Adams as Managing Member of BST Cold, LLC, has voting and dispositive power over the securities held by BST Cold, LLC. | |
| (21) | Includes 41,693 shares of Common Stock, 10,136 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 14,808 Escrow Shares (as defined in footnote 85 below). Channa Levin as trustee of the Channa Levin 2008 Trust, has voting and dispositive power over the securities held by the Channa Levin 2008 Trust. | |
| (22) | Includes 33,505 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 48,949 Escrow Shares (as defined in footnote 85 below). Cranshire Capital Advisors, LLC (“CCA”) is the investment manager of Cranshire Capital Master Fund, Ltd. (“Cranshire Master Fund”) and has voting control and investment discretion over the securities held by Cranshire Master Fund. Mitchell P. Kopin (“Mr. Kopin”), the president, the sole member and the sole member of the Board of Managers of CCA, had voting control over CCA. As a result, each of Mr. Kopin and CCA may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by Cranshire Master Fund. | |
| (23) | Includes 12,508 shares of Common Stock, 3,041 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 4,442 Escrow Shares (as defined in footnote 85 below). | |
| (24) | Includes 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). Darren Goodrich as President of Darren Goodrich, Inc., has voting and dispositive power over the securities held by Darren Goodrich, Inc. The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, it had no agreements or understandings, directly or indirectly, with any person to distribute the securities. | |
| (25) | Includes 31,270 shares of Common Stock, 7,602 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 11,106 Escrow Shares (as defined in footnote 85 below). Solomon Eisenberg as CEO of Eisenberg Family Foundation, Inc., has voting and dispositive power over shares held by Eisenberg Family Foundation, Inc. | |
| (26) | Includes 371,157 shares of Common Stock, 95,753 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, 22,710 shares of Common Stock issuable upon the exercise of outstanding warrants at an exercise price of $0.02, and 139,889 Escrow Shares (as defined in footnote 85 below). Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd (“EAM”), has discretionary authority to vote and dispose of the securities held by EAM and may be deemed to be the beneficial owner of these securities. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over the securities held by EAM. EAM, Mr. Hoe and Mr. Lane each disclaim beneficial ownership of these securities. |
| (27) | Includes 377,026 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 550,811 Escrow Shares (as defined in footnote 85 below). Alan S. Honig as Managing Member of Four Kids Investment Funds LLC, has voting and dispositive power over the securities held by Four Kids Investment Funds LLC. | |
| (28) | Includes 6,254 shares of Common Stock, 1,520 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 2,221 Escrow Shares (as defined in footnote 85 below). | |
| (29) | Includes 62,540 shares of Common Stock, 15,204 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 22,212 Escrow Shares (as defined in footnote 85 below). | |
| (30) | Includes 237,078 shares of Common Stock, 264,279 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 386,095 Escrow Shares (as defined in footnote 85 below). Phillip Frost as trustee of the Frost Gamma Investments Trust, has voting and dispositive power over the securities held by the Frost Gamma Investments Trust. The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. | |
| (31) | Includes 16,724 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 24,433 Escrow Shares (as defined in footnote 85 below). Michael Brauser has voting and dispositive power over the securities held by Grander Holdings, Inc. | |
| (32) | Includes 190,333 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 278,065 Escrow Shares (as defined in footnote 85 below). Barry Honig as the trustee of GRQ Consultants, Inc. 401K, has voting and dispositive power over the securities held by GRQ Consultants, Inc. 401K. | |
| (33) | Includes 320,381 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 468,057 Escrow Shares (as defined in footnote 85 below). Barry Honig as the trustee of GRQ Consultants, Inc. Roth 401K FBO Barry Honig, has voting and dispositive power over the securities held by GRQ Consultants, Inc. Roth 401K FBO Barry Honig. | |
| (34) | Includes 27,564 shares of Common Stock, 6,701 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 9,790 Escrow Shares (as defined in footnote 85 below). | |
| (35) | Includes 14,129 shares of Common Stock, 3,435 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 5,018 Escrow Shares (as defined in footnote 85 below). Harvey Kesner and Renee Kesner shave voting and dispositive power over the securities held jointly by Harvey Kesner and Renee Kesner. | |
| (36) | Includes 38,566 shares of Common Stock, 9,376 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 13,697 Escrow Shares (as defined in footnote 85 below). Hope Adams as custodian for Sara Adams, has voting and dispositive power over the securities held by Sara Adams. | |
| (37) | Includes 11,996 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 17,526 Escrow Shares (as defined in footnote 85 below). John Stetson as Managing Member of HS Contrarian Investments, LLC, has voting and dispositive power over the securities held by HS Contrarian Investments, LLC. | |
| (38) | Includes 20,847 shares of Common Stock, 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). Nachum Stein as Partner of HSI Partnership, has voting and dispositive power over the securities held by HSI Partnership. | |
| (39) | Includes 2,542,105 shares of Common Stock, 1,402,800 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80 and 2,049,402 Escrow Shares (as defined in footnote 85 below). Beneficial ownership after the offering does not include the exercise of all outstanding warrants held by the selling stockholder which warrants contain a 9.9% beneficial ownership limitation. Hudson Bay Capital Management, L.P., the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power over the securities held by Hudson Bay Master Fund Ltd.. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management, L.P. Sander Gerber disclaims beneficial ownership | |
| (40) | Includes 1,104,863 shares of Common Stock, 268,603 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 392,412 Escrow Shares (as defined in footnote 85 below). Iroquois Capital Management L.L.C., or Iroquois Capital, is the investment manager of Iroquois Master Fund Ltd., or IMF. Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As managing members of Iroquois Capital, Joshua Silverman and Richard Abbe make voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF. As a result of the foregoing, Messrs. Silverman and Abbe may be deemed to have beneficial ownership (as determined under Section 13(d) of the Exchange Act) of the securities held by IMF. Notwithstanding the foregoing, Messrs. Silverman and Abbe disclaim such beneficial ownership. |
| (41) | Includes 18,376 shares of Common Stock, 4,467 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 6,526 Escrow Shares (as defined in footnote 85 below). | |
| (42) | Includes 29,769 shares of Common Stock, 7,237 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 10,573 Escrow Shares (as defined in footnote 85 below). James T. Nakaoka and Mai S. Nakaoka share voting and dispositive power over the securities held jointly by James T. Nakaoka and Mai S. Nakaoka. | |
| (43) | Includes 10,136 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 14,808 Escrow Shares (as defined in footnote 85 below). | |
| (44) | Includes 6,266 shares of Common Stock, 1,523 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 2,225 Escrow Shares (as defined in footnote 85 below). | |
| (45) | Includes 70,445 shares of Common Stock, 13,402 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 19,580 Escrow Shares (as defined in footnote 85 below). Also includes opotions to purchase 250,000 shares of Common Stock which vested or will vest within 60 days of the date of this prospectus. Mr. Ronaldi currently serves as the Company’s Chief Executive Officer and a Director. | |
| (46) | Includes 235,864 shares of Common Stock, 57,341 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 83,771 Escrow Shares (as defined in footnote 85 below). Brett Cohen as President of JGB Capital LP, has voting and dispositive power over the securities held by JGB Capital LP. | |
| (47) | Includes 157,242 shares of Common Stock, 38,227 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 55,847 Escrow Shares (as defined in footnote 85 below). Brett Cohen as President of JGB Capital Offshore Ltd., has voting and dispositive power over the securities held by JGB Capital Offshore Ltd. | |
| (48) | Includes 26,058 shares of Common Stock, 6,335 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 9,255 Escrow Shares (as defined in footnote 85 below). | |
| (49) | Includes 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). John Arlo as President of John Arlo, Inc., has voting and dispositive power over the securities held by John Arlo, Inc. The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, it had no agreements or understandings, directly or indirectly, with any person to distribute the securities. | |
| (50) | Includes 11,026 shares of Common Stock, 2,680 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 3,916 Escrow Shares (as defined in footnote 85 below). | |
| (51) | Includes 18,264 shares of Common Stock, 4,440 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 6,487 Escrow Shares (as defined in footnote 85 below). | |
| (52) | Includes 8,599 shares of Common Stock, 2,091 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 3,054 Escrow Shares (as defined in footnote 85 below). | |
| (53) | Includes 86,011 shares of Common Stock, 20,910 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 30,548 Escrow Shares (as defined in footnote 85 below). | |
| (54) | Includes 18,762 shares of Common Stock, 4,561 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 6,664 Escrow Shares (as defined in footnote 85 below). The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. | |
| (55) | Includes 196,552 shares of Common Stock, 47,784 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 69,809 Escrow Shares (as defined in footnote 85 below). | |
| (56) | Includes 36,751 shares of Common Stock, 8,935 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 13,053 Escrow Shares (as defined in footnote 85 below). Avery Egart as Partner of Leiden & Quest LLC, has voting and dispositive power over the securities held by Leiden & Quest LLC. | |
| (57) | Includes 62,540 shares of Common Stock, 15,204 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 22,212 Escrow Shares (as defined in footnote 85 below). Nathan Levitansky as General Partner of Levitansky Family L.P., has voting and dispositive power over the securities held by Levitansky Family L.P. |
| (58) | Includes 30,847 shares of Common Stock, 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). | |
| (59) | Includes 41,693 shares of Common Stock, 10,136 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 14,808 Escrow Shares (as defined in footnote 85 below). | |
| (60) | Includes 5,513 shares of Common Stock, 1,340 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 1,958 Escrow Shares (as defined in footnote 85 below). | |
| (61) | Includes 11,026 shares of Common Stock, 2,680 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 3,916 Escrow Shares (as defined in footnote 85 below). Mark Groussman as President of Melechdavid Inc., has voting and dispositive power over the securities held by Melechdavid Inc. | |
| (62) | Includes 44,092 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 64,415 Escrow Shares (as defined in footnote 85 below). | |
| (63) | Includes 6,254 shares of Common Stock, 1,520 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 2,221 Escrow Shares (as defined in footnote 85 below). | |
| (64) | Includes 104,232 shares of Common Stock, 25,340 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 37,020 Escrow Shares (as defined in footnote 85 below). | |
| (65) | Includes 9,250 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 13,513 Escrow Shares (as defined in footnote 85 below). Mark Zeitchick as Manager of MZ Trading LLC, has voting and dispositive power over the securities held by MZ Trading LLC. | |
| (66) | Includes 20,847 shares of Common Stock, 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). | |
| (67) | Includes 104,232 shares of Common Stock, 25,340 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 37,020 Escrow Shares (as defined in footnote 85 below). Leon Frenkel as General Partner of Periscope Partners L.P., has voting and dispositive power over the securities held by Periscope Partners L.P. | |
| (68) | Includes 81,834 shares of Common Stock, 18,679 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 27,289 Escrow Shares (as defined in footnote 85 below). Also includes options to purchase 250,000 shares of Common Stock which vested or will vest within 60 days of the date of this prospectus. Mr. Hardigan currently serves as the Company’s Chief Operating Officer and a Director. | |
| (69) | Includes 6,254 shares of Common Stock, 1,520 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 2,221 Escrow Shares (as defined in footnote 85 below). | |
| (70) | Includes 208,868 shares of Common Stock, 50,778 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 74,183 Escrow Shares (as defined in footnote 85 below). Robert S. Colman as trustee of the Robert S. Colman Trust, has voting and dispositive power over the securities held by the Robert S. Colman Trust. | |
| (71) | Includes 18,743 shares of Common Stock, 4,557 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 6,657 Escrow Shares (as defined in footnote 85 below). | |
| (72) | Includes 20,847 shares of Common Stock, 5,068 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,404 Escrow Shares (as defined in footnote 85 below). Nachum Stein as Chairman of Rutgers Casualty Insurance Company, has voting and dispositive power over the securities held by Rutgers Casualty Insurance Company. | |
| (73) | Includes 9,188 shares of Common Stock, 2,234 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 3,263 Escrow Shares (as defined in footnote 85 below). | |
| (74) | Includes 171,202 shares of Common Stock, 41,621 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 60,805 Escrow Shares (as defined in footnote 85 below). John S. Lemak as Manager of Sandor Capital Master Fund, has voting and dispositive power over the securities held by Sandor Capital Master Fund. | |
| (75) | Includes 31,990 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 46,735 Escrow Shares (as defined in footnote 85 below). John Stetson as President of Stetson Capital Investments, Inc., has voting and dispositive power over the securities held by Stetson Capital Investments, Inc. | |
| (76) | Includes 93,809 shares of Common Stock, 22,806 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 33,318 Escrow Shares (as defined in footnote 85 below). |
| (77) | Includes 19,765 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 28,876 Escrow Shares (as defined in footnote 85 below).. | |
| (78) | Includes 6,855 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 10,015 Escrow Shares (as defined in footnote 85 below). Jonathan Schechter, Joseph Reda and Adam Selkin share the voting and dispositive power over the securities held by The Special Equities Group, LLC. The selling stockholder is an affiliate of a broker-dealer and has certified that the securities registered in this prospectus were purchased in the ordinary course of business, and at the time of the purchase, he had no agreements or understandings, directly or indirectly, with any person to distribute the securities | |
| (79) | Includes 20,887 shares of Common Stock, 5,078 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,418 Escrow Shares (as defined in footnote 85 below). | |
| (80) | Includes 41,693 shares of Common Stock, 10,136 shares of Common Stock issuable upon exercise of certain warrants at an exercise price of $4.80, and 14,808 Escrow Shares (as defined in footnote 85 below). Leon Frenkel as Senior Manager of the General Partner of Triage Capital Management L.P., has voting and dispositive power over the securities held by Triage Capital Management L.P. | |
| (81) | Includes 21,263 shares of Common Stock, 5,169 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 7,552 Escrow Shares (as defined in footnote 85 below). | |
| (82) | Includes 105,274 shares of Common Stock, 25,593 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 37,390 Escrow Shares (as defined in footnote 85 below). Sol Werdiger as CEO of Werdiger Family Foundation Inc., has voting and dispositive power over the securities held by Werdiger Family Foundation Inc. | |
| (83) | Includes 10,589 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 15,469 Escrow Shares (as defined in footnote 85 below). Alexander Berger as Managing Member of White Trout Lake LLC, has voting and dispositive power over the securities held by White Trout Lake LLC. | |
| (84) | Includes 41,693 shares of Common Stock, 10,136 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80, and 14,808 Escrow Shares (as defined in footnote 85 below). Yuri Minkovsky and Eleanora Minkovsky share voting and dispositive power over the securities held jointly by Yuri Minkovsky and Eleanora Minkovsky. | |
| (85) | Includes 13,372,045 shares of Common Stock, 4,859,894 shares of Common Stock issuable upon exercise of warrants at an exercise price of $4.80 and 7,099,998 shares of Common Stock held in escrow by American Stock Transfer & Trust Company, LLC (“Escrow Shares”). These Escrow Shares will be released to the Reporting Person if and when the closing price per share of the Company's Common Stock exceeds $5.00 per share (as adjusted for stock splits, stock dividends and similar events) for 40 trading days within a continuous 90 day trading period following July 1, 2013. If prior to July 1, 2014, such threshold is not achieved, these Escrow Shares will be canceled and returned to treasury. |
THE SECURITIES WE MAY OFFER
The descriptions of the securities contained in this prospectus, together with the applicable prospectus supplements, summarize all the material terms and provisions of the various types of securities that we may offer. We will describe in the applicable prospectus supplement relating to any securities the particular terms of the securities offered by that prospectus supplement. If we indicate in the applicable prospectus supplement, the terms of the securities may differ from the terms we have summarized below. We will also include in the prospectus supplement information, where applicable, about material United States federal income tax considerations relating to the securities, and the securities exchange, if any, on which the securities will be listed.
We may sell from time to time, in one or more offerings:
PLAN·shares of our common stock;
· warrants to purchase common stock; and/or
·units consisting of any of the securities listed above.
The terms of any securities we offer will be determined at the time of sale. We may issue securities that are exchangeable for or convertible into common stock or any of the other securities that may be sold under this prospectus. When particular securities are offered, a supplement to this prospectus will be filed with the SEC, which will describe the terms of the offering and sale of the offered securities.
DESCRIPTION OF DISTRIBUTION
General
The following description of common stock, together with the additional information we include in any applicable prospectus supplements, summarizes the material terms and provisions of the common stock that we may offer under this prospectus but is not complete. For the complete terms of our common stock, please refer to our certificate of incorporation, as amended, (the “Certificate of Incorporation”) which may be further amended from time to time, and our amended and restated bylaws, as amended from time to time (the “Bylaws”). New York Business Corporation Law (“NYBCL”) may also affect the terms of these securities. While the terms we have summarized below will apply generally to any future common stock that we may offer, we will describe the particular terms of any series of these securities in more detail in the applicable prospectus supplement. If we so indicate in a prospectus supplement, the terms of any common stock we offer under that prospectus supplement may differ from the terms we describe below.
As of October 11, 2013, our authorized capital stock consisted of 200,000,000 shares of common stock, $0.02 par value per share, 49,230,159 of which are issued and outstanding.
Common Stock
Holders of our common stock: (i) have equal rights to dividends from funds legally available therefore, ratably when as and if declared by the selling stockholderCompany’s Board of Directors; (ii) are entitled to permitshare ratably in all assets of the resale of these sharesCompany available for distribution to holders of common stock upon liquidation, dissolution, or winding up of the affairs of the Company; (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions applicable thereto; (iv) are entitled to one non-cumulative vote per share of common stock, on all matters which stockholders may vote on at all meetings of stockholders; and (v) the holders of common stock have no conversion, preemptive or other subscription rights. There is no cumulative voting for the election of directors. Each holder of our common stock is entitled to one vote for each share of our common stock held on all matters submitted to a vote of stockholders.
Anti-Takeover Effects of Certain Provisions of our Certificate of Incorporation, Bylaws and the BCL
New York Law
Section 912 of the NYBCL generally provides that a New York corporation may not engage in a business combination with an interested stockholder for a period of five years following the interested stockholder’s becoming such. Such a business combination would be permitted where it is approved by the board of directors before the interested stockholder’s becoming such. Covered business combinations include certain mergers and consolidations, dispositions of assets or stock, plans for liquidation or dissolution, reclassifications of securities, recapitalizations and similar transactions. An interested stockholder is generally a stockholder owning at least 20% of a corporation’s outstanding voting stock. In addition, New York corporations may not engage at any time with any interested stockholder in a business combination other than: (i) a business combination approved by the board of directors before the stock acquisition, or where the acquisition of the stock had been approved by the board of directors before the stock acquisition; (ii) a business combination approved by the affirmative vote of the holders of a majority of the outstanding voting stock not beneficially owned by the interested stockholder at a meeting called for that purpose no earlier than five years after the stock acquisition; or (iii) a business combination in which the interested stockholder pays a formula price designed to ensure that all other stockholders receive at least the highest price per share that is paid by the interested stockholder and that meets certain other requirements.
A corporation may opt out of the interested stockholder provisions described in the preceding paragraph by expressly electing not to be governed by such provisions in its bylaws, which must be approved by the affirmative vote of a majority of votes of the outstanding voting stock of such corporation and is subject to further conditions. However, DSS’s Bylaws do not contain any provisions electing not to be governed by Section 912 NYBCL. Under DSS’s bylaws, any corporate action other than the election of directors (which requires the affirmative vote of a plurality of shares entitled to vote) to be taken by vote of the shareholders, shall be authorized by a majority of votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is American Stock Transfer and Trust Company, LLC.
DESCRIPTION OF WARRANTS
The following description, together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates. While the terms summarized below will apply generally to any warrants that we may offer, we will describe the particular terms of any series of warrants in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement, the terms of any warrants offered under that prospectus supplement may differ from the terms described below. If there are differences between that prospectus supplement and this prospectus, the prospectus supplement will control. Thus, the statements we make in this section may not apply to a particular series of warrants. Specific warrant agreements will contain additional important terms and provisions and will be incorporated by reference as an exhibit to the registration statement which includes this prospectus.
General
We may issue warrants for the purchase of common stock. We may issue warrants independently or together with common stock or debt, and the warrants may be attached to or separate from these securities.
We will evidence each series of warrants by warrant certificates that we may issue under a separate agreement. We may enter into the warrant agreement with a warrant agent. Each warrant agent may be a bank that we select which has its principal office in the United States and a combined capital and surplus of at least $50,000,000. We may also choose to act as our own warrant agent. We will indicate the name and address of any such warrant agent in the applicable prospectus supplement relating to a particular series of warrants.
We will describe in the applicable prospectus supplement the terms of the series of warrants, including:
| · | the offering price and aggregate number of warrants offered; |
| · | the currency for which the warrants may be purchased; |
| · | if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security; |
| · | if applicable, the date on and after which the warrants and the related securities will be separately transferable; |
| · | in the case of warrants to purchase common stock, the number of shares of common stock, as the case may be, purchasable upon the exercise of one warrant and the price at which these shares may be purchased upon such exercise; |
| · | the warrant agreement under which the warrants will be issued; |
| · | the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants; |
| · | anti-dilution provisions of the warrants, if any; |
| · | the terms of any rights to redeem or call the warrants; |
| · | any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants; |
| · | the dates on which the right to exercise the warrants will commence and expire or, if the warrants are not continuously exercisable during that period, the specific date or dates on which the warrants will be exercisable; |
| · | the manner in which the warrant agreement and warrants may be modified; |
| · | the identities of the warrant agent and any calculation or other agent for the warrants; |
| · | federal income tax consequences of holding or exercising the warrants; |
| · | the terms of the securities issuable upon exercise of the warrants; |
| · | any securities exchange or quotation system on which the warrants or any securities deliverable upon exercise of the warrants may be listed; and |
| · | any other specific terms, preferences, rights or limitations of or restrictions on the warrants. |
Before exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including in the case of warrants to purchase common stock, the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
Exercise of Warrants
Each warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time up to 5:00 p.m. Eastern Time on the expiration date that we set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Holders of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the warrant certificate, and in the applicable prospectus supplement, the information that the holder of the warrant will be required to deliver to the warrant agent.
Until the warrant is properly exercised, no holder of any warrant will be entitled to any rights of a holder of the securities purchasable upon exercise of the warrant.
Upon receipt of the required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or part of the exercise price for warrants.
Enforceability of Rights By Holders of Warrants
Any warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise, and receive the securities purchasable upon exercise of, its warrants in accordance with their terms.
Warrant Agreement Will Not Be Qualified Under Trust Indenture Act
No warrant agreement will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture Act. Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect to their warrants.
Governing Law
Each warrant agreement and any warrants issued under the warrant agreements will be governed by New York law.
Calculation Agent
Calculations relating to warrants may be made by a calculation agent, an institution that we appoint as our agent for this purpose. The prospectus supplement for a particular warrant will name the institution that we have appointed to act as the calculation agent for that warrant as of the original issue date for that warrant. We may appoint a different institution to serve as calculation agent from time to time after the original issue date without the consent or notification of the holders.
The calculation agent’s determination of any amount of money payable or securities deliverable with respect to a warrant will be final and binding in the absence of manifest error.
PLAN OF DISTRIBUTION
We or the selling stockholder,stockholders may sell shares of our common stock from time to time pursuant to underwritten public offerings, negotiated transactions, block trades or by its transferees, pledges, donees and successors,a combination of these methods. We or the selling stockholders may sell the securities through underwriters or dealers, through agents, or directly to one or more purchasers. We or the selling stockholders may distribute shares of our common stock from time to time in one or more transactions:
| · | at a fixed price or prices, which may be changed; |
| · | at market prices prevailing at the time of sale; |
| · | at prices related to such prevailing market prices; or |
| · | at negotiated prices. |
A prospectus supplement or supplements will describe the terms of the offering of our common stock, including:
| · | the name or names of any underwriters, if any; |
| · | the purchase price of the shares of our common stock and the proceeds we will receive from the sale; |
| · | any over-allotment options under which underwriters may purchase additional shares from us; |
| · | any agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation; |
| · | any public offering price; |
| · | any discounts or concessions allowed or re-allowed or paid to dealers; and |
| · | any securities exchange or market on which the shares of common stock may be listed. |
Only underwriters named in the prospectus supplement are underwriters of the shares of common stock from time to time afteroffered by the date of this prospectus. We will not receive any of the proceeds fromprospectus supplement.
If underwriters are used in the sale, of these shares of common stock. Wethey will bear all fees and expenses incident to our obligation to register the shares of common stock.
We or the selling stockholders may sell shares of our common stock directly or through underwriters, broker-dealers or agents such underwriters, broker-dealers or agents may receive commissionswe designate from time to time. We will name any agent involved in the formoffering and sale of discounts, concessionsshares and we will describe any commissions we or commissions from the Selling Security Holderstockholders will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, any such agent will act on a best-efforts basis for the period of its appointment.
We or commissions from purchasersthe selling stockholders may authorize agents or underwriters to solicit offers by certain types of theinstitutional investors to purchase shares of common stock for whom they may act as agentfrom us or to whom they may sell as principal. Such commissions will be in amounts to be negotiated, but, except asfrom the stockholders at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a supplement to this prospectus,specified date in the casefuture. We will describe the conditions to these contracts and the commissions we or the stockholders must pay for solicitation of an agency transaction will not bethese contracts in the prospectus supplement.
We or the selling stockholders may provide agents and underwriters with indemnification against civil liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Agents and underwriters may engage in transactions with, or perform services for, us or the stockholders in the ordinary course of business.
Any underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Overallotment involves sales in excess of the offering size, which create a customary brokerage commission in compliance with NASD Rule 2440; andshort position. Stabilizing transactions permit bids to purchase the underlying shares so long as the stabilizing bids do not exceed a specified maximum price. Short covering transactions involve purchases of the securities in the caseopen market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the common stock originally sold by the dealer is purchased in a covering transaction to cover short positions. Those activities may cause the price of the common stock to be higher than it would be otherwise. If commenced, the underwriters may discontinue any of the activities at any time.
Any underwriters that are qualified market-makers on the NYSE MKT may engage in passive market-making transactions in the common stock on the NYSE MKT in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of the offering, before the commencement of offers or sales of the common stock. Passive market-makers must comply with applicable volume and price limitations and must be identified as passive market-makers. In general, a principal transactionpassive market-maker must display its bid at a markupprice not in excess of the highest independent bid for such shares; if all independent bids are lowered below the passive market-maker’s bid, however, the passive market-maker’s bid must then be lowered when certain purchase limits are exceeded.
In addition, we and the selling stockholders will be subject to applicable provisions of the Exchange Act and the associated rules and regulations under the Exchange Act, including Regulation M, which provisions may limit any timing of our and any stockholder’s purchases and sales of the shares. We will make copies of this prospectus available to the stockholders and have informed them of the need for delivery of copies of this prospectus to purchasers at or markdownprior to the time of any sale of the shares.
Certain underwriters, dealers or agents and their associates may engage in compliancetransactions with NASD IM-2440.
In connection with salesthe sale of shares or interests therein, the shares of common stock or otherwise, the Selling Security Holderselling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may, in turn, engage in short sales of the shares of common stock in the course of hedging inthe positions they assume. The Selling Security Holderselling stockholders may also sell shares of our common stock short and if such short sale shall take place after the date that this Registration Statement is declared effective by the SEC, the Selling Security Holder may deliver shares of common stock covered by this prospectus to close out its short positions and to return borrowed shares in connection with suchprovided it has met its prospectus delivery obligations at the time of the short sales.sale. The Selling Security Holderselling stockholders may also loan or pledge shares of common stock to broker- dealersbroker-dealers that in turn may sell suchthe shares to the extent permitted by applicable law.offered hereby. The Selling Security Holderstockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares, offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). NotwithstandingThe stockholders may also sell the shares in privately negotiated transactions, through block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, through an exchange distribution in accordance with the rules of the applicable exchange, ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers, to broker-dealers who may agree with the stockholders to sell a specified number of such shares at a stipulated price per share or a combination of any of the foregoing methods described in this paragraph.
The selling stockholders also may resell all or a portion of the Selling Security Holder has been advisedshares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that they may not use shares registered on this registration statement to cover shortit meets the criteria and those sales of our common stock made priorconform to the date the registration statement,requirements of which this prospectus forms a part, has been declared effective by the SEC.
From time to time, the selling stockholders may pledge or grant a security interest in some or all of the shares of common stock owned by themthat it owns and, if they defaultit defaults in the performance of theirits secured obligations, the pledgees or secured parties may offer and sell some or all of the shares of common stock from time to time pursuant tounder this prospectus or anyan amendment to this prospectus under Rule 424(b)(3) of the Securities Act, or otheranother applicable provision of the Securities Act, amending, if necessary,which amends the list of selling stockholders to include the pledgee, transfereepledgees, transferees or other successors in interest as the selling stockholders under this prospectus.
The Selling Security Holderselling stockholders also may transfer and donate the shares of common stock in other circumstances, in which case the transferees, pledgees, donees pledgees or other successors in interest will be the sellingreselling beneficial owners for purposes of this prospectus.
To the distribution of the shares of common stock may be deemedextent required pursuant to be “underwriters” within the meaning of Section 2(11)Rule 424(b) of the Securities Act, in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Because the Selling Security Holder may be deemed to be an “underwriters” within the meaning of Section 2(11) of the Securities Act, it will be subject to theother applicable prospectus delivery requirements of the Securities Act, including Rule 172 thereunder, and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
| · | the name of the participating broker-dealer(s); |
| · | the number of shares involved; |
| · | the price at which such shares were sold; |
| · | the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable; |
| · | that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and |
| · | other facts material to the transaction. |
The selling stockholders will pay any underwriting discounts and commissions and expenses incurred by the stockholders for brokerage, accounting, tax or legal services or any other expenses incurred by the stockholders in disposing of the shares. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, fees and expenses of our counsel and our accountants.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be passed upon for us by Sichenzia Ross Friedman Ference LLP, New York, New York.
EXPERTS
The financial statements as of and for the years ended December 31, 2012 and 2011 incorporated by reference in this prospectus and (vi) other facts material to the transaction. The Selling Security Holder may indemnify any broker-dealer that participates in transactions involving the sale of the shares of common stock against certain liabilities, including liabilities arising under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-3 filed under the Securities Act. As permitted by the SEC’s rules, this prospectus and any prospectus supplement, which form a part of the registration statement, do not contain all the information that is included in the registration statement. You will find additional information about us in the registration statement. Any statements made in this prospectus or any prospectus supplement concerning legal documents are not necessarily complete and you should read the documents that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more complete understanding of the document or matter.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read, without charge, and copy any reports, statements, or other information onthe documents we file at the SEC’s public reference roomrooms in Washington, D.C. at 100 F Street, NE, Room 1580, Washington, DC 20549. You can request copies of thosethese documents upon payment of a duplicating fee, by writing to the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
We have filed a registration statement on Form S-3 with the Securities and Exchange Commission filingsunder the Securities Act. This prospectus is part of the registration statement but the registration statement includes and the Registration Statement can also be reviewedincorporates by accessing the SEC’s Web site at www.sec.gov.
| • | Our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2012 filed with the SEC on April 26, 2013; |
| • | Our Current Reports on Form 8-K or 8-K/A, filed with the SEC on: | ||
| · | January 22, 2013; | ||
| · | March 6, 2013; | ||
| · | March 15, 2013; | ||
| · | April 16, 2013; | ||
| · | April 30, 2013; | ||
| · | May 1, 2013; | ||
| · | May 15, 2013; | ||
| · | May 28, 2013; | ||
| · | June 21, 2013; | ||
| · | July 1, 2013; | ||
| · | July 25, 2013; | ||
| · | August 13, 2013; and | ||
| · | September 13, 2013 | ||
| • | Our Quarterly Report on Form 10-Q for the period ended March 31, 2013, filed with the SEC on May | ||
| • | Our Quarterly Report on Form 10-Q for the period ended June 30, 2013, filed with the SEC on August 13, 2013; | ||
| • | The description of our | ||
We will furnish without charge to you, on writtenalso incorporate by reference all additional documents that we file with the Securities and Exchange Commission under the terms of Sections 13(a), 13(c), 14 or oral request, a copy of any or all15(d) of the documents incorporated by reference, including exhibits to these documents. You should direct any requests for documents to Document Security Systems, Incorporated, 28 Main Street East, Suite 1525, Rochester, New York 14614, attention: Chief Executive Officer andExchange Act that are made after the telephone number is (585) 325-3610.
You may request a copy of each contractthese filings at no cost, by writing or document filed as an exhibit totelephoning us at the registration statement of which this prospectus is a part.
Jeffrey D’Angelo, VP and General Counsel
Document Security Systems, Inc. appearing in Annual Report (Form 10-K) for the year ended December 31, 2009, have been audited by Freed Maxick & Battaglia CPAs PC, registered independent accountants, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
First Federal Plaza, Suite 1525
28 East Main Street
Rochester, NY 14614
Tel: (585) 325-3610
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate of the various costsfees and expenses payable by the Registrant in connection withrelating to the issuance and distribution of the common stocksecurities being registered hereby, other than underwriting discounts and commissions.commissions, all of which shall be borne by the Registrant. All amounts are estimatedof such fees and expenses, except for the SEC registration fee.
| Securities and Exchange Commission Registration Fee | $ | 825 | ||
| Legal Fees and Expenses * | $ | 5,000 | ||
| Accounting Fees and Expenses * | $ | 2,500 | ||
| Printing Fees * | $ | 1,000 | ||
| Miscellaneous * | $ | 1,000 | ||
| Total | $ | 10,325 |
| SEC registration fee | $ | 2,749.80 | ||
| FINRA filing fee | $ | 2,112.50 | * | |
| Transfer agent’s fees and expenses | $ | 2,000 | * | |
| Legal fees and expenses | $ | 35,000 | ||
| Printing fees and expenses | $ | 3,000 | * | |
| Accounting fees and expenses | $ | 2,500 | * | |
| Miscellaneous fees and expenses | $ | 2,637.70 | ||
| Total | $ | 50,000 |
* Indicates estimate forEstimated
Item 15. Indemnification of Officers and Directors.
Under the purposeprovisions of the certificate of incorporation and by-laws of the registrant, as amended, as of the date of this filing.
Under such law, to the extent that such person is successful on the merits of defense of a suit or proceeding brought against such person by reason of the fact that such person is a director or officer of the registrant, such person shall be indemnified against expenses (including attorneys’ fees) reasonably incurred in connection with their servicesuch action. If unsuccessful in defense of a third-party civil suit or a criminal suit is settled, such a person shall be indemnified under such law against both (a) expenses (including attorneys’ fees) and (b) judgments, fines and amounts paid in settlement if such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the corporation. Our bylaws contain provisions requiring our indemnificationbest interests of our directorsthe registrant, and officers and other persons actingwith respect to any criminal action, had no reasonable cause to believe such person’s conduct was unlawful. If unsuccessful in their corporate capacities.
Item 16. Exhibits.
a) Exhibits.
Exhibit Number | Description of Document | |
| 1.1* | Form of Underwriting Agreement. | |
| Specimen Common Stock Certificate of the Registrant |
| 4.2* | Form of Warrant | |
| 5.1** | Opinion of Sichenzia Ross Friedman Ference LLP. | |
| 23.1** | Consent of | |
| 23.2** | Consent of FREED MAXICK CPAs, P.C., Independent Registered Public Accounting Firm. | |
| 24.1 | Power of Attorney |
| ** | Filed herewith |
Item 17. Undertakings.
The undersigned Registrantregistrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of thethis registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in thethis registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percenta 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in thethis registration statement or any material change to such information in thethis registration statement;
provided, however, that the undertakings set forth in paragraphs (a)(1)(a)(i), 1(b)(a)(1)(ii) and 1(c) of this Item(a)(1)(iii) above do not apply to a registration statement on Form S-3 andif the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SECCommission by the Registrantregistrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are incorporated by reference in this registration statement or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of thethis registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B;
(A) Each prospectus filed by the registrant pursuant to Rule 424 (b)(3) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424 (b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date of the Securities Act prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser ifwith a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities:
The undersigned Registrantregistrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’sregistrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act)Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relationrelating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons controllingof the Registrant underregistrant pursuant to the foregoing provisions, or otherwise, the Registrantregistrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrantregistrant of expenses incurred or paid by a director, officer or controlling personsperson of the Registrantregistrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrantregistrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether thesuch indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to Form S-3 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rochester, State of New York, on March 24, 2011.
| Document Security Systems, Inc. | ||
| By: | /s/ Jeffrey Ronaldi | |
| Chief Executive Officer | ||
| By: | /s/ Philip Jones | |
| Philip Jones | ||
| Chief Financial Officer | ||
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Patrick WhiteJeffrey Ronaldi, his her or its true and lawful attorney-in-fact and agent with full power of substitution and resubstitution,re-substitution, for him, him/her or it and in his her or its name, place and stead, in any and all capacities to sign and file any andor all amendments (including, without limitation, post-effective amendments) to this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933 and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite orand necessary to be done in and about the premises, as fully tofor all intents and purposes as he she, or itshe might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or hisany substitute or substitutes for him, may lawfully do or cause to be done by virtue hereof.
| Signature | Date | |||
/s/ Jeffrey Ronaldi | October 11, 2013 | |||
| Officer and Director | ||||
/s/ Peter Hardigan | Chief | October 11, 2013 | ||
/s/ Philip Jones | October 11, 2013 | |||
| Officer and Principal Accounting Officer | ||||
/s/ Robert B. Bzdick | October 11, 2013 | |||
/s/ Jonathon Perrelli | Director | October 11, 2013 | ||
/s/ Warren Hurwitz | Director | October 11, 2013 | ||
/s/ David Klein | Director | October 11, 2013 | ||
/s/ Ira A. Greenstein | ||||