Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 24, 2015 | Jun. 30, 2014 | |
Document And Entity Information Abstract | |||
Document Type | 10-K | ||
Amendment Flag | FALSE | ||
Document Period End Date | 31-Dec-14 | ||
Document Fiscal Year Focus | 2014 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | dss | ||
Entity Registrant Name | DOCUMENT SECURITY SYSTEMS INC | ||
Entity Central Index Key | 771999 | ||
Current Fiscal Year End Date | -19 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 46,272,404 | ||
Entity Public Float | $60,608,173 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash | $2,343,675 | $1,977,031 |
Restricted cash | 355,793 | 500,000 |
Accounts receivable, net | 2,097,671 | 2,149,123 |
Inventory | 869,262 | 834,979 |
Prepaid expenses and other current assets | 425,671 | 403,107 |
Deferred tax asset, net | 2,499 | 223,323 |
Total current assets | 6,094,571 | 6,087,563 |
Property, plant and equipment, net | 5,016,539 | 5,157,852 |
Investments and other assets | 686,912 | 11,448,008 |
Goodwill | 12,046,197 | 15,046,197 |
Other intangible assets, net | 3,908,399 | 29,602,591 |
Total assets | 27,752,618 | 67,342,211 |
Current liabilities: | ||
Accounts payable | 1,037,359 | 1,421,765 |
Accrued expenses and other current liabilities | 1,997,241 | 1,455,629 |
Revolving lines of credit | 158,087 | |
Short-term debt | 824,857 | |
Current portion of long-term debt, net | 754,745 | 613,488 |
Total current liabilities | 3,789,345 | 4,473,826 |
Long-term debt, net | 7,439,036 | 3,087,358 |
Other long-term liabilities | 520,180 | 27,566 |
Deferred tax liability, net | 148,258 | 1,364,447 |
Commitments and contingencies (Note 12) | ||
Stockholders' equity | ||
Common stock, $.02 par value; 200,000,000 shares authorized, 46,172,404 shares issued and outstanding (49,411,486 on December 31, 2013) | 923,448 | 988,230 |
Additional paid-in capital | 101,012,659 | 97,790,426 |
Accumulated other comprehensive loss | -61,180 | -27,566 |
Accumulated deficit | -86,019,128 | -44,862,076 |
Non-controlling interest in subsidiary | 4,500,000 | |
Total stockholders' equity | 15,855,799 | 58,389,014 |
Total liabilities and stockholders' equity | $27,752,618 | $67,342,211 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Consolidated Balance Sheets [Abstract] | ||
Common stock, par value | $0.02 | $0.02 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 46,172,404 | 49,411,486 |
Common stock, shares outstanding | 46,172,404 | 49,411,486 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations and Comprehensive (Loss) Income (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue | ||
Printed products | $16,478,303 | $15,425,514 |
Technology sales, services and licensing | 1,809,193 | 2,026,930 |
Total revenue | 18,287,496 | 17,452,444 |
Costs and expenses | ||
Costs of revenue, exclusive of depreciation and amortization | 11,689,743 | 10,458,110 |
Selling, general and administrative, (including stock based compensation) | 10,765,144 | 11,665,667 |
Depreciation and amortization | 5,274,323 | 2,966,368 |
Impairment of goodwill | 3,000,000 | 238,926 |
Impairment of assets | 34,034,862 | 277,800 |
Total costs and expenses | 64,764,072 | 25,606,871 |
Operating loss | -46,476,576 | -8,154,427 |
Other expense: | ||
Interest expense | -317,191 | -245,969 |
Gain on sale of fixed assets | 116,569 | |
Amortization of note discount and loss on debt extinguishment | -51,915 | -71,518 |
Loss before income taxes | -46,845,682 | -8,355,345 |
Income tax benefit | -988,630 | -10,948,875 |
Net (loss) income | -45,857,052 | 2,593,530 |
Less: loss attributable to noncontrolling interest | 4,700,000 | |
Net (loss) income to common stockholders | -41,157,052 | 2,593,530 |
Other comprehensive (loss) income: | ||
Interest rate swap (loss) gain | -33,614 | 100,317 |
Comprehensive (loss) income | ($41,190,666) | $2,693,847 |
(Loss) earnings per share to common stockholders: | ||
Basic | ($0.98) | $0.08 |
Diluted | ($0.98) | $0.08 |
Shares used in computing (loss) earnings per share to common stockholders: | ||
Basic | 42,105,619 | 31,838,593 |
Diluted | 42,105,619 | 31,884,957 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities: | ||
Net (loss) income | ($45,857,052) | $2,593,530 |
Adjustments to reconcile net (loss) income to net cash used by operating activities: | ||
Depreciation and amortization | 5,274,323 | 2,966,368 |
Stock based compensation | 1,355,430 | 1,894,719 |
Paid in-kind interest | 48,000 | |
Amortization of note discount and premium | 22,707 | 45,266 |
Loss on extinquishment of debt | 26,252 | |
Gain on sale of fixed assets | -116,569 | |
Impairment of goodwill | 3,000,000 | 238,926 |
Impairment of intangible assets and investments inclusive of noncontrolling interest | 34,034,862 | 277,800 |
Deferred tax benefit | -988,630 | -10,948,875 |
Foreign currency gain | -2,305 | |
Decrease (increase) in assets: | ||
Accounts receivable | 51,452 | -26,104 |
Inventory | -34,283 | -17,294 |
Prepaid expenses and other assets | 30,081 | -184,956 |
Restricted cash | 144,207 | -500,000 |
Increase (decrease) in liabilities: | ||
Accounts payable | -384,406 | 159,948 |
Accrued expenses and other liabilities | 915,376 | -58,250 |
Net cash used by operating activities | -2,390,238 | -3,649,239 |
Cash flows from investing activities: | ||
Purchase of equipment and building improvements | -280,902 | -378,587 |
Proceeds from sale of equipment | 753,000 | |
Acquisition of business | 6,568,112 | |
Purchase of investments | -750,000 | -250,000 |
Purchase of intangible assets | -1,243,714 | -2,593,495 |
Net cash (used) provided by investing activities | -2,274,616 | 4,099,030 |
Cash flows from financing activities: | ||
Net payments on revolving lines of credit | -158,087 | -80,153 |
Payments of long-term debt | -616,393 | -353,192 |
Borrowings of long-term debt | 4,041,000 | |
Issuance of common stock, net of issuance costs | 1,764,978 | 73,422 |
Net cash provided (used) by financing activities | 5,031,498 | -359,923 |
Net increase in cash | 366,644 | 89,868 |
Cash beginning of year | 1,977,031 | 1,887,163 |
Cash end of year | $2,343,675 | $1,977,031 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Stockholders' Equity (USD $) | Total | Common Stock | Additional Paid- in Capital | Accumulated Other Comprehensive Income | Non-controlling Interest in Subsidiary | Accumulated Deficit |
Beginning Balance at Dec. 31, 2012 | $8,723,546 | $434,118 | $55,872,917 | ($127,883) | ($47,455,606) | |
Beginning Balance (in shares) at Dec. 31, 2012 | 21,705,969 | |||||
Issuance of common stock, net (in shares) | 3,479,208 | |||||
Issuance of common stock, net | 148,643 | 69,584 | 79,059 | |||
Stock based payments, net of tax effect (in shares) | 786,678 | |||||
Stock based payments, net of tax effect | 1,810,379 | 15,734 | 1,794,645 | |||
Issuance of common stock for acquisition of Lexington Technology Group, net, (in shares) | 23,439,631 | |||||
Issuance of common stock for acquisition of Lexington Technology Group, net | 44,820,582 | 468,794 | 40,051,788 | 4,300,000 | ||
Beneficial conversion feature, net | -7,983 | -7,983 | ||||
Exchange of warrants for common stock (in shares) | 3,432,170 | |||||
Other comprehensive income (loss) | 100,317 | 100,317 | ||||
Sale of shares in Virtual Agility Technology Investment, LLC | 200,000 | 200,000 | ||||
Net income (loss) | 2,593,530 | 2,593,530 | ||||
Ending Balance at Dec. 31, 2013 | 58,389,014 | 988,230 | 97,790,426 | -27,566 | 4,500,000 | -44,862,076 |
Ending Balance (in shares) at Dec. 31, 2013 | 49,411,486 | |||||
Issuance of common stock, net (in shares) | 3,924,700 | |||||
Issuance of common stock, net | 1,550,667 | 78,494 | 1,472,173 | |||
Stock based payments, net of tax effect (in shares) | 327,775 | |||||
Stock based payments, net of tax effect | 1,506,616 | 6,556 | 1,500,060 | |||
Retirement of shares held in escrow (in shares) | -7,500,000 | |||||
Retirement of shares held in escrow | -150,000 | 150,000 | ||||
Exchange of warrants for common stock (in shares) | 8,443 | |||||
Exchange of warrants for common stock | 168 | 168 | ||||
Change in noncontrolling interest in Virtual Agility Technology Investment, LLC | 300,000 | 100,000 | 200,000 | |||
Other comprehensive income (loss) | -33,614 | -33,614 | ||||
Net income (loss) | -45,857,052 | -4,700,000 | -41,157,052 | |||
Ending Balance at Dec. 31, 2014 | $15,855,799 | $923,448 | $101,012,659 | ($61,180) | ($86,019,128) | |
Ending Balance (in shares) at Dec. 31, 2014 | 46,172,404 |
DESCRIPTION_OF_BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2014 | |
DESCRIPTION OF BUSINESS [Abstract] | |
DESCRIPTION OF BUSINESS | NOTE 1 - DESCRIPTION OF BUSINESS |
Document Security Systems, Inc. (the “Company”), through two of its subsidiaries, Premier Packaging Corporation, which operates under the assumed name of DSS Packaging Group, and Plastic Printing Professionals, Inc., which operates under the assumed name of DSS Plastics Group, operates in the security and commercial printing, packaging and plastic ID markets. The Company develops, markets, manufactures and sells paper and plastic products designed to protect valuable information from unauthorized scanning, copying, and digital imaging. The Company's subsidiary, Extradev, Inc., which operates under the assumed name of DSS Digital Group, develops, markets and sells digital information services, including data hosting, disaster recovery and data back-up and security services. The Company's subsidiary as a result of a merger completed on July 1, 2013 (as described in greater detail below), DSS Technology Management, Inc., acquires intellectual property assets, interests in companies owning intellectual property assets, or assists others in managing their intellectual property monetization efforts, for the purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments in the development and commercialization of patented technologies, licensing, strategic partnerships and commercial litigation. | |
On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendant Facebook, Inc. in connection with a lawsuit filed on October 3, 2012 by Plaintiff Bascom Research, LLC (a subsidiary of Document Security Systems, Inc., the “Company”) alleging patent infringement. As a result of the Court's decision, the Company evaluated the valuation of the patents that were the basis of the case for impairment as of December 31, 2014. The Company determined that since the patents had been invalidated the probability of future cash flows derived from the patents that would support the value of the assets had decreased so that the assets had been impaired. As a result, the Company recorded an impairment charge for the underlying patent assets of the net book value of the patents as of December 31, 2014 of approximately $22,285,000. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||
Principles of Consolidation - The consolidated financial statements include the accounts of Document Security System and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | |||||||||||||
Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable, fair values of intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company's common stock, deferred revenue and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The Company engages third-party valuation consultants to assist management in the allocation of the purchase price of significant acquisitions, and the determination of the fair value of derivative liabilities. | |||||||||||||
Reclassifications - Certain prior year amounts have been reclassified to conform to the current year presentation. | |||||||||||||
Restricted Cash –As of December 31, 2014, cash of $355,793 ($500,000 – December 31, 2013) is restricted for payments of costs and expenses associated with one of the Company's IP monetization programs. | |||||||||||||
Accounts Receivable - The Company carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management's estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. At December 31, 2014, the Company established a reserve for doubtful accounts of approximately $60,000 ($60,000 – 2013). The Company does not accrue interest on past due accounts receivable. | |||||||||||||
Inventory - Inventories consist primarily of paper, plastic materials and cards, pre-printed security paper, paperboard and fully-prepared packaging which and are stated at the lower of cost or market on the first-in, first-out (“FIFO”) method. Packaging work-in-process and finished goods included the cost of materials, direct labor and overhead. | |||||||||||||
Property, Plant and Equipment - Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives or lease period of the assets whichever is shorter. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Any gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place. Depreciation expense in 2014 was approximately $622,000 ($560,000 - 2013). | |||||||||||||
Investments – The Company's investments consist of non-recourse promissory notes and common stock of VirtualAgility, Inc (“VirtualAgility”) and common stock of Express Mobile. The Company does not control nor exert significant influence over its investments and therefore carries the investments at cost. The VirtualAgility investment is held by the Company's subsidiary, VirtualAgility Technology Investment, LLC (“VATI”) of which the Company owned 60% on December 31, 2014. Management determined the Company has control over VATI, and has consolidated VATI in the accompanying consolidated Financial Statements. The portion of capital owned by the minority owner of VATI is shown as non-controlling interest on the balance sheet. | |||||||||||||
Business Combinations - Business combinations are recorded in accordance with FASB ASC 805. Under the guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair values is recorded as goodwill. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed then a gain on acquisition is recorded. Under the guidance, all acquisition costs are expensed as incurred. The application of business combination and impairment accounting requires the use of significant estimates and assumptions. | |||||||||||||
Goodwill - Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicated the carrying amount may be impaired. FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. The Company tests goodwill for impairment at least annually in conjunction with preparation of its annual business plan, or more frequently if events or circumstances indicate it might be impaired. FASB ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. During the Company's annual assessment of goodwill in 2014, the Company assessed that the negative trends in patent litigation that have recently reduced the success of patent owners in protecting their patents in the federal court system had impaired the Company's goodwill assigned to its DSS Technology Management division and accordingly, the Company recorded a $3,000,000 goodwill impairment charge to the goodwill assigned to its DSS Technology Management division. | |||||||||||||
Other Intangible Assets and Patent Application Costs - Other intangible assets consists of costs associated with the application for patents, acquisition of patents and contractual rights to patents and trade secrets associated with the Company's technologies. The Company's patents and trade secrets are generally for document anti-counterfeiting and anti-scanning technologies and processes that form the basis of the Company's document security business. Patent application costs are capitalized and amortized over the estimated useful life of the patent, which generally approximates its legal life. In addition, intangible assets include customer lists and non-compete agreements obtained as a result of acquisitions. Intangible asset amortization expense is classified as an operating expense. The Company believes that the decision to incur patent costs is discretionary as the associated products or services can be sold prior to or during the application process. The Company accounts for other intangible amortization as an operating expense, unless the underlying asset is directly associated with the production or delivery of a product. Subsequent to acquisition of patents and trade secrets, legal and associated costs incurred in prosecuting alleged infringements of the patents will be recognized as expense when incurred. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, and patent defense costs are expensed as incurred. To date, the amount of related amortization expense for other intangible assets directly attributable to revenue recognized is not material. | |||||||||||||
Impairment of Long Lived Assets - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. | |||||||||||||
On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendant Facebook, Inc. in connection with a lawsuit filed on October 3, 2012 by Plaintiff Bascom Research, LLC (a subsidiary of Document Security Systems, Inc., the “Company”) alleging patent infringement. As a result of the Court's decision, the Company evaluated the valuation of the patents that were the basis of the case for impairment as of December 31, 2014. The Company determined that since the patents had been invalidated the probability of future cash flows derived from the patents that would support the value of the assets had decreased so that the assets had been impaired. As a result, the Company recorded an impairment charge for the underlying patent assets of the net book value of the patents as of December 31, 2014 of approximately $22,285,000. | |||||||||||||
Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the FASB ASC establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: | |||||||||||||
• | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | ||||||||||||
• | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | ||||||||||||
• | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | ||||||||||||
The carrying amounts reported in the balance sheet of cash, accounts receivable, prepaids, notes receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of revolving credit lines, notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. Derivative instruments, as discussed below, are recorded as assets and liabilities at estimated fair value based on available market information. The Company's convertible note payable is recorded at its face amount, net of an unamortized premium for a beneficial conversion feature and has an estimated fair value of approximately $117,000 ($539,000 - December 31, 2013) based on the underlying shares the note can be converted into at the trading price on December 31, 2014. Since the underlying shares are trading in an active, observable market, the fair value measurement qualifies as a Level 1 input. See Note 5 for additional details regarding the fair value of the Company's investments in notes receivable. | |||||||||||||
Derivative Instruments - The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility. The Company has two interest rate swaps that change variable rates into fixed rates on two term loans. These swaps qualify as Level 2 fair value financial instruments. These swap agreements are not held for trading purposes and the Company does not intend to sell the derivative swap financial instruments. The Company records the interest swap agreements on the balance sheet at fair value because the agreements qualify as a cash flow hedges under accounting principles generally accepted in the United States of America. Gains and losses on these instruments are recorded in other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) (AOCI) to the Consolidated Statement of Operations on the same line item as the underlying transaction. The valuations of the interest rate swaps have been derived from proprietary models of the bank based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swaps decrease over the life of the agreements. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreements. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to this cash flow hedge recorded in accumulated other comprehensive loss and other liabilities as of December 31, 2014 were approximately $61,000 ($28,000 - December 31, 2013). | |||||||||||||
The Company has notional amounts of approximately $1,128,000 as of December 31, 2014 on its interest rate swap agreements for its Citizens Bank debt. The Company has two interest rate swaps that change variable rates into fixed rates on two term loans and the terms of these instruments are as follows: | |||||||||||||
Notional Amount | Variable Rate | Fixed Cost | Maturity Date | ||||||||||
$ | 50,000 | 3.91 | % | 5.7 | % | 1-Feb-15 | |||||||
$ | 1,078,220 | 3.32 | % | 5.87 | % | 30-Aug-21 | |||||||
Conventional Convertible Debt - When the convertible feature of a conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF"). Prior to the determination of the BCF, the proceeds from the debt instrument are first allocated between the convertible debt and any detachable free standing instruments that are included, such as common stock warrants. The Company records a BCF as a debt discount pursuant to FASB ASC Topic 470-20. In those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | |||||||||||||
Share-Based Payments - Compensation cost for stock awards are measured at fair value and the Company recognizes compensation expense over the service period for which awards are expected to vest. The Company uses the Black-Scholes-Merton option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes-Merton model requires the use of subjective assumptions which determine the fair value of stock-based awards, including the option's expected term and the price volatility of the underlying stock. For equity instruments issued to consultants and vendors in exchange for goods and services the Company determines the measurement date for the fair value of the equity instruments issued at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | |||||||||||||
Revenue Recognition - Sales of printed products including commercial and security printing, packaging, and plastic cards are recognized when a product or service is delivered, shipped or provided to the customer and all material conditions relating to the sale have been substantially performed. | |||||||||||||
For technology sales and services, revenue is recognized in accordance with the FASB ASC 985-605. Accordingly, revenue is recognized when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service or product has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is reasonably assured. We recognize cloud computing revenue, including data backup, recovery and security services, on a monthly basis, beginning on the date the customer commences use of our services. Professional services are recognized in the period services are provided. | |||||||||||||
For printing technology licenses revenue is recognized once all the following criteria for revenue recognition have been met: (1) persuasive evidence of an agreement exists; (2) the right and ability to use the product or technology has been rendered; (3) the fee is fixed and determinable and not subject to refund or adjustment; and (4) collection of the amounts due is reasonably assured. | |||||||||||||
For other technology licenses, revenue arrangements generally provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. These rights typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. Pursuant to the terms of these agreements, the Company has no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on the Company's part to maintain or upgrade the technology, or provide future support or services. Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals. As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectability is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met. | |||||||||||||
Certain of the Company's revenue arrangements provide for future royalties or additional required payments based on future licensee activities. Additional royalties are recognized in revenue upon resolution of the related contingency provided that all revenue recognition criteria, as described above, have been met. Amounts of additional royalties due under these license agreements, if any, cannot be reasonably estimated by management. | |||||||||||||
Costs of revenue - Costs of revenue includes all direct cost of the Company's packaging, commercial and security printing and plastic ID card sales, primarily, paper, plastic, inks, dies, and other consumables, and direct labor, transportation and manufacturing facility costs. In addition, this category includes all direct costs associated with the Company's technology sales, services and licensing including hardware and software that is resold, third-party fees, and fees paid to inventors or others as a result of technology licenses or settlements, if any. Costs of revenue recorded in the DSS Technology Management group include contingent legal fees, inventor royalties, legal, consulting and other professional fees directly related to the Company's patent monetization, litigation and licensing activities. Amortization of patent costs and acquired technology are included in depreciation and amortization on the consolidated statement of operations. Costs of revenue do not include expenses related to product development, integration, and support. These costs are included in research and development, which is a component of selling, general and administrative expenses on the consolidated statement of operations. Legal costs are included in selling, general and administrative. | |||||||||||||
Contingent Legal Expenses - Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period a conclusion is reached in an enforcement action that does not yield future royalties potential. | |||||||||||||
Advertising Costs – Generally consist of online, keyword advertising with Google with additional amounts spent on certain print media in targeted industry publications. Advertising costs were approximately $39,000 in 2014 ($48,000 – 2013). | |||||||||||||
Research and Development - Research and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs for research personnel, third-party research costs, and consulting costs. The Company spent approximately $462,000 and $254,000 on research and development during 2014 and 2013, respectively. | |||||||||||||
Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense. | |||||||||||||
Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. | |||||||||||||
As of December 31, 2014 and 2013, there were 12,019,194 and 18,750,840, respectively, of common stock share equivalents potentially issuable under convertible debt agreements, employment agreements, options, warrants, and restricted stock agreements that could potentially dilute basic earnings per share in the future. The amount as of December 31, 2013 also includes common shares held in escrow pursuant to the Merger Agreement that did not vest prior to their expiration on July 1, 2014. For the year ended December 31, 2013, based on the average market price of the Company's common stock during that period of $1.98, 46,364 common stock equivalents were added to the basic shares outstanding to calculate dilutive earnings per share. Common stock equivalents were excluded from the calculation of diluted earnings per share for 2014 in which the Company had a net loss, since their inclusion would have been anti-dilutive. | |||||||||||||
Comprehensive Income (Loss) - Comprehensive income (loss) is defined as the change in equity of the Company during a period from transactions and other events and circumstances from non-owner sources. It consists of net income (loss) and other income and losses affecting stockholders' equity that, under GAAP, are excluded from net income (loss). The change in fair value of interest rate swaps was the only item impacting accumulated other comprehensive loss for the years ended December 31, 2014 and 2013. | |||||||||||||
Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions. | |||||||||||||
During 2014, two customers accounted for 40% of the Company's consolidated revenue. As of December 31, 2014, these two customers accounted for 25% of the Company's trade accounts receivable balance. During 2013, these same two customers accounted for 35% of the Company's consolidated revenue. As of December 31, 2013, these two customers accounted for 30% of the Company's trade accounts receivable balance. | |||||||||||||
Recent Accounting Pronouncements - In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company has not yet selected a transition method and its currently evaluating the effect that the updated standard will have on its financial statements and related disclosures. | |||||||||||||
In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe the adoption of this ASU will have a significant impact on its financial statements. |
INVENTORY
INVENTORY | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INVENTORY [Abstract] | |||||||||||||
INVENTORY | NOTE 3 – INVENTORY | ||||||||||||
Inventory consisted of the following at December 31: | |||||||||||||
2014 | 2013 | ||||||||||||
Finished Goods | $ | 572,695 | $ | 395,767 | |||||||||
Work in process | 123,611 | 129,627 | |||||||||||
Raw Materials | 172,956 | 309,585 | |||||||||||
$ | 869,262 | $ | 834,979 | ||||||||||
PROPERTY_PLANT_AND_EQUIPMENT
PROPERTY PLANT AND EQUIPMENT | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
PROPERTY PLANT AND EQUIPMENT [Abstract] | |||||||||||||
PROPERTY PLANT AND EQUIPMENT | NOTE 4 - PROPERTY PLANT AND EQUIPMENT | ||||||||||||
Property, plant and equipment consisted of the following at December 31: | |||||||||||||
2014 | 2013 | ||||||||||||
Estimated | Purchased | Purchased | |||||||||||
Useful Life | |||||||||||||
Machinery and equipment | 5-10 years | $ | 5,156,060 | $ | 5,109,121 | ||||||||
Building and improvements | 39 years | 1,913,727 | 1,655,613 | ||||||||||
Land | 185,000 | 185,000 | |||||||||||
Leasehold improvements | See(1) | 818,846 | 774,912 | ||||||||||
Furniture and fixtures | 7 years | 163,300 | 138,135 | ||||||||||
Software and websites | 3 years | 439,373 | 359,308 | ||||||||||
Total cost | $ | 8,676,306 | $ | 8,222,089 | |||||||||
Less accumulated depreciation | 3,659,767 | 3,064,237 | |||||||||||
Property, plant, and equipment, net | $ | 5,016,539 | $ | 5,157,852 | |||||||||
(1) Expected lease term between 3 and 10 years. | |||||||||||||
INVESTMENTS
INVESTMENTS | 12 Months Ended |
Dec. 31, 2014 | |
INVESTMENTS [Abstract] | |
INVESTMENTS | |
NOTE 5 — INVESTMENTS | |
Commencing in March 2013, DSS Technology Management made a series of investments in VirtualAgility, Inc. (“VirtualAgility”), a developer of programming platforms that facilitate the creation of business applications without programming or coding. The initial investment consisted of a $200,000 non-recourse note plus an equity stake of 1/8 of 7% of the outstanding common stock of VirtualAgility, for a total cash investment of $250,000. The non-recourse note is eligible for a preferred return of $1,250,000, plus a variable return of 1.875% based on gross proceeds, if any, derived from VirtualAgility's patent portfolio. In addition, VirtualAgility granted DSS Technology Management a total of seven additional options to make additional quarterly investments of $250,000 apiece, under the same terms as the first investment. If all of such options are exercised, DSS Technology Management will have invested an aggregate of $2,000,000, consisting of $1,600,000 in non-recourse notes that would be eligible for an aggregate preferred return of $10,000,000 plus up to 15% of variable returns and, based on the current capitalization of VirtualAgility, DSS Technology Management would also own approximately 7% of the outstanding common stock of VirtualAgility. In May 2013, DSS Technology Management created a subsidiary called VirtualAgility Technology Investment, LLC (“VATI”) and transferred its ownership of the VirtualAgility investment and future investment options to VATI. Also in May 2013, a third-party investor became a 40% member of VATI. In exchange, the investor contributed $250,000 into VATI which was used to exercise one of the investment options in VirtualAgility per the terms described above. As of July 1, 2013, DSS Technology Management owned 60% of VATI. In conjunction with its acquisition accounting, the Company assessed the fair value of the VirtualAgility investment, including the expected exercise of future investment options as of the acquisition date, at approximately $10,750,000, which became the cost basis of the investment as of July 1, 2013. A relief from royalty methodology was used to value the potential proceeds to be derived from the patent portfolio and the analysis included a discounted cash flow which estimated future net cash flows resulting from the licensing and enforcement of the VirtualAgility patent portfolio based on information as of the date of acquisition, considering assumptions and estimates related to potential infringers of the patents, applicable industries, usage of the underlying patented technologies, estimated license fee revenues, contingent legal fee arrangements, other estimated costs, tax implications and other factors. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of estimated net cash flows. The measurement of the VirtualAgility investment constitutes a Level 3 input. In August 2013, the Company contributed $250,000 into VATI which used the funds to make an additional investment in VirtualAgility per the terms described above. In November 2013, the other member of VATI contributed $250,000 into VATI which used the funds to make an additional investment in VirtualAgility per the terms described above. As of December 31, 2013, the investment in VATI was $11,250,000 and DSS Technology Management owned 60% of VATI. As of December 31, 2013, VATI owned 438,401 shares of common stock of VirtualAgility. On February 14, 2014, DSS Technology Management contributed $250,000 into VATI which used the funds to make an additional investment in VirtualAgility per the terms described above. In May 2014, the other member of VATI contributed $250,000 into VATI which used the funds to make an additional investment in VirtualAgility per the terms described above. As of June 30, 2014, VATI owned 657,119 shares of common stock of VirtualAgility. As of June 30, 2014, investment in VATI was approximately $11,750,000 and DSS Technology Management owned 60% of VATI. | |
VirtualAgility was the plaintiff in a patent infringement lawsuit against Salesforce.com, Inc. et al. In May of 2014, Salesforce.Com, Inc., as Petitioner, filed a petition with the United States Patent and Trademark Office's Patent Trial and Appeal Board (“PTAB”) requesting covered business method patent review of claims 1-21 of U.S. Patent No. 8,095,413 B1, which is the patent being asserted by VirtualAgility in the lawsuit (the “413 Patent”), alleging that claims 1-21 of the 413 Patent are unpatentable. On September 16, 2014, the PTAB issued a written decision holding that challenged claims 1-21 of the 413 Patent are unpatentable, and also denied VirtualAgility's contingent motion to amend the challenged claims. As a result of the PTAB's decision, the Company estimated that its investment in VATI was impaired and as a result, the Company recorded an impairment of its investment in the gross amount of approximately $11,750,000 of which 40%, or $4,700,000 of such investment was attributable to a noncontrolling interest, which equated to a net impairment charge during the third quarter of 2014 of approximately $7,050,000. | |
In January and February 2014, DSS Technology Management made investments of $100,000 and $400,000, respectively, to purchase an aggregate of 594,530 shares of common stock of Express Mobile, Inc. (“Express Mobile”), which represented approximately 6% of the outstanding common stock of Express Mobile at the time of investment. Express Mobile is a developer of custom mobile applications and websites. The investments were recorded using the cost method. In accordance with paragraphs 16 through 19 of ASC 825-10-50 the Company determined that it is not practicable to estimate the fair value of these investments since Express Mobile is a privately-held company that is not subject to the same disclosure regulations as U.S. public companies, and as such, the basis for an estimated fair value is subject to the completeness, quality, timing and accuracy of data received from Express Mobile. |
INTANGIBLE_ASSETS_AND_GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended | ||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||
INTANGIBLE ASSETS AND GOODWILL [Abstract] | |||||||||||||||||||||||||||
INTANGIBLE ASSETS AND GOODWILL | NOTE 6 - INTANGIBLE ASSETS AND GOODWILL | ||||||||||||||||||||||||||
During 2014 and 2013, the Company spent approximately $94,000 and $78,000 on patent application costs, and $1,150,000 and $2,500,000 on patent and patent rights acquisition costs, respectively. In addition, in 2013, the Company acquired patents as a result of its acquisition of DSS Technology Management which were valued in conjunction with the Company's purchase accounting at approximately $27,856,000 (see Note 9). The patents and patent rights acquired have estimated economic useful lives of approximately 2.5 to 7.5 years. | |||||||||||||||||||||||||||
On July 8, 2013, the Company's subsidiary, DSS Technology Management, purchased two patents for $500,000 covering certain methods and processes related to Bluetooth devices. In conjunction with the patent purchases, DSS Technology Management entered into a Proceed Right Agreement with certain investors pursuant to which DSS Technology Management initially received $250,000 of a total of $750,000 which it will ultimately receive thereunder, subject to certain payment milestones, in exchange for 40% of the proceeds which it receives, if any, from the use, sale or licensing of the two patents. As of December 31, 2014, the Company had received an aggregate of $650,000 ($500,000 in 2013) from the investors pursuant to the agreement, of which approximately $603,000 was in accrued expenses in the consolidated balance sheet ($500,000 as December 31, 2014). | |||||||||||||||||||||||||||
In September 2013, DSS Technology Management purchased 10 patents covering certain methods and processes in the semiconductor industry for $2,000,000. | |||||||||||||||||||||||||||
On May 23, 2014, the Company's subsidiary, DSS Technology Management, purchased 115 patents covering certain methods and processes in the semiconductor industry for $1,150,000. | |||||||||||||||||||||||||||
On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendant Facebook, Inc. in connection with a lawsuit filed on October 3, 2012 by Plaintiff Bascom Research, LLC (a subsidiary of the Company) alleging patent infringement. As a result of the Court's decision, the Company evaluated the valuation of the patents that were the basis of the case for impairment as of December 31, 2014. The Company determined that since the patents had been invalidated the probability of future cash flows derived from the patents that would support the value of the assets had decreased so that the assets had been impaired. As a result, the Company recorded an impairment charge for the underlying patent assets of the net book value of the patents as of December 31, 2014 of approximately $22,285,000. | |||||||||||||||||||||||||||
Intangible assets are comprised of the following: | |||||||||||||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||||||||||||
Useful Life | Gross Carrying | Accumulated | Net Carrying | Gross Carrying | Accumulated | Net Carrying | |||||||||||||||||||||
Amount | Amortizaton | Amount | Amount | Amortizaton | Amount | ||||||||||||||||||||||
Acquired intangibles- customer lists and non-compete agreements | 5 -10 years | 1,997,300 | 1,532,123 | 465,177 | 1,997,300 | 1,343,819 | 653,481 | ||||||||||||||||||||
Acquired intangibles-patents and patent rights | Varied (1) | 3,650,000 | 852,343 | 2,797,657 | 30,356,164 | 2,042,083 | 28,314,081 | ||||||||||||||||||||
Patent application costs | Varied (2) | 1,058,833 | 413,268 | 645,565 | 965,523 | 330,494 | 635,029 | ||||||||||||||||||||
$ | 6,706,133 | $ | 2,797,734 | $ | 3,908,399 | $ | 33,318,987 | $ | 3,716,396 | $ | 29,602,591 | ||||||||||||||||
-1 | Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2014, the weighted average remaining useful life of these assets in service was approximately 5.4 years. | ||||||||||||||||||||||||||
-2 | Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2014, the weighted average remaining useful life of these assets in service was approximately 10.0 years. | ||||||||||||||||||||||||||
Amortization expense for the year ended December 31, 2014 amounted to approximately $4,653,000 ($2,406,000 –2013). | |||||||||||||||||||||||||||
Approximate expected amortization for each of the five succeeding fiscal years is as follows: | |||||||||||||||||||||||||||
Year | Amount | ||||||||||||||||||||||||||
2015 | $ | 894,000 | |||||||||||||||||||||||||
2016 | $ | 692,000 | |||||||||||||||||||||||||
2017 | $ | 673,000 | |||||||||||||||||||||||||
2018 | $ | 537,000 | |||||||||||||||||||||||||
2019 | $ | 265,000 | |||||||||||||||||||||||||
The Company recorded goodwill of approximately $12.0 million in connection with its acquisition of DSS Technology Management in July 2013. The goodwill was recorded due to the establishment of a deferred tax liability which resulted from the increase in basis of the DSS Technology Management tangible and intangible assets, excluding goodwill, for book purposes but not for tax purposes. Under the acquisition method of accounting, the impact on the acquiring company's deferred tax assets is recorded outside of acquisition accounting. Accordingly, the valuation allowance on the Company's deferred tax assets was partially released to offset part of the increase in deferred tax liability and resulted in an estimated deferred tax benefit of approximately $11.0 million, which was recorded in the statement of operations in 2013. The goodwill is not deductible for income tax purposes. | |||||||||||||||||||||||||||
During 2014, as a result of the Company's net loss and the impairments of certain of its assets and other intangible assets, the Company performed an evaluation of its goodwill for impairment. When performing the evaluation of goodwill for impairment, if the Company concludes qualitatively that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is not required. If unable to reach this conclusion, then the Company would perform the two-step impairment test. Initially, the fair value of the reporting unit is compared to its carrying amount. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit; then a second step is required, as this is an indication that the reporting unit goodwill may be impaired. In this step, the implied fair value of the reporting unit goodwill is compared with the carrying amount of the reporting unit goodwill and a charge for impairment is recognized to the extent the carrying value exceeds the implied fair value. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and liabilities of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. | |||||||||||||||||||||||||||
Due to the large losses incurred by the Company during 2014, of which a significant portion was the result of impairments of certain of the Company's investments and patent assets, the Company determined that it could not qualitatively conclude that impairment of goodwill had not occurred. As a result, the Company compared the fair value of its reporting units to the carrying values of the reporting units to determine if goodwill for each of the reporting units had been impaired. For its packaging and plastics reporting units, the Company uses a discounted cash flow model to estimate the fair value of the each reporting units respectively. This model uses revenue, expense, and capital expenditure forecasts which are based on managements' experience with each business, along with cost of capital and residual value estimates based on standard valuation methodologies. For the Company's technology reporting unit for which a significant amount of future value is based on the value of patents and patent rights, the Company uses a valuation methodology that assess the potential value of claims against parties the Company believes have infringed on the patents and therefore, the Company has the rights to receive royalties for those infringers. The Company uses its best estimates to determine the amount and timing of royalties that would be due from each potential infringing party based on the estimated scope of usage of the patented technology by each potential infringing party. Furthermore, the Company uses discount factors to take into account the potential of settlements at various stages of a typical patent infringement court case depending on the stage of each of the Company's infringement proceedings. During the Company's annual assessment of goodwill in 2014, the Company assessed that the negative trends in patent litigation that have recently reduced the success of patent owners in protecting their patents in the federal court system had impaired the Company's goodwill assigned to its DSS Technology Management division and accordingly, the Company recorded a $3,000,000 goodwill impairment charge to the goodwill assigned to its DSS Technology Management division. | |||||||||||||||||||||||||||
There are inherent assumptions and estimates used in developing future cash flows requiring management's judgment in applying these assumptions and estimates to the analysis of identifiable intangibles and asset impairment including projecting revenues, timing and amount of claim or settlements related to patent infringement cases, royalty rates, interest rates, and the cost of capital. Many of the factors used in assessing fair value are outside the Company's control and it is reasonably likely that assumptions and estimates will change in future periods. These changes can result in future impairments. | |||||||||||||||||||||||||||
Refer to Note 9 to these consolidated financial statements for additions to patents and goodwill in connection with the Company's acquisition of DSS Technology Management and the related application of the acquisition method of accounting. | |||||||||||||||||||||||||||
During the year ended December 31, 2013, the Company determined that the intangible assets the Company recorded as a result of its acquisition of ExtraDev, Inc. in May 2011 were impaired as a result of a decline of customers for its historical IT hosting and custom programming and services businesses due to increased competition, including competition from Microsoft, and the digital group's focus on new products such as the Company's AuthentiGuard Suite, which has reduced resources directed to supporting its IT hosting and custom programming businesses. As a result of this decline, the Company performed a present value analysis of the expected future cash flows of the revenues and expenses associated with ExtraDev's historical business and determined that the intangible assets that the Company had recorded as a result of the acquisition of ExtraDev were impaired. As a result, the Company wrote-off approximately $239,000 of goodwill, customer lists with a gross value of $258,000 and a net book value $198,000, and non-compete agreements with a gross value of $150,000 and a net book value of $80,000 associated with ExtraDev, Inc. in the third quarter of 2013. | |||||||||||||||||||||||||||
The changes in the carrying amount of goodwill for the years ended December 31, 2014 and 2013 are as follows: | |||||||||||||||||||||||||||
Packaging | Plastics | Technology | Total | ||||||||||||||||||||||||
Segment | Segment | Segment | |||||||||||||||||||||||||
Balance as of January 1, 2013 | |||||||||||||||||||||||||||
Goodwill | $ | 1,768,400 | $ | 684,949 | $ | 869,450 | $ | 3,322,799 | |||||||||||||||||||
Accumulated impairment losses | - | - | - | - | |||||||||||||||||||||||
1,768,400 | 684,949 | 869,450 | 3,322,799 | ||||||||||||||||||||||||
Goodwill acquired during the year | - | - | 11,962,324 | 11,962,324 | |||||||||||||||||||||||
Impairment losses | - | - | (238,926 | ) | (238,926 | ) | |||||||||||||||||||||
Balance as of December 31, 2013 | |||||||||||||||||||||||||||
Goodwill | 1,768,400 | 684,949 | 12,831,774 | 15,285,123 | |||||||||||||||||||||||
Accumulated impairment losses | - | - | (238,926 | ) | (238,926 | ) | |||||||||||||||||||||
1,768,400 | 684,949 | 12,592,848 | 15,046,197 | ||||||||||||||||||||||||
Goodwill acquired during the year | - | - | - | - | |||||||||||||||||||||||
Impairment losses | - | - | (3,000,000 | ) | (3,000,000 | ) | |||||||||||||||||||||
Balance as of December 31, 2014 | |||||||||||||||||||||||||||
Goodwill | 1,768,400 | 684,949 | 12,831,774 | 15,285,123 | |||||||||||||||||||||||
Accumulated impairment losses | - | - | (3,238,926 | ) | (3,238,926 | ) | |||||||||||||||||||||
$ | 1,768,400 | $ | 684,949 | $ | 9,592,848 | $ | 12,046,197 | ||||||||||||||||||||
SHORT_TERM_AND_LONG_TERM_DEBT
SHORT TERM AND LONG TERM DEBT | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
SHORT TERM AND LONG TERM DEBT [Abstract] | |||||
SHORT TERM AND LONG TERM DEBT | NOTE 7 – SHORT TERM AND LONG TERM DEBT | ||||
Revolving Credit Lines - The Company's subsidiary Premier Packaging Corporation (“Premier Packaging”) has a revolving credit line with Citizens Bank of up to $1,000,000 that bears interest at 1 Month LIBOR plus 3.75% (3.91% as of December 31, 2014) and matures on May 31, 2015. As of December 31, 2014, the revolving line had a balance of $0 ($158,087 as of December 31, 2013). | |||||
Long-Term Debt - On December 30, 2011, the Company issued a $575,000 convertible note that was due on December 29, 2013, and carries an interest rate of 10% per annum. Interest is payable quarterly, in arrears. The convertible note can be converted at any time during the term at lender's option into a total of 260,180 shares of the Company's common stock at a conversion price of $2.21 per share. In conjunction with the issuance of the convertible note, the Company determined a beneficial conversion feature existed amounting to approximately $88,000, which was recorded as a debt discount to be amortized over the term of the note. On May 24, 2013, the Company amended the convertible note to extend the maturity date of the note from December 29, 2013 to December 29, 2015. The change in the fair value of the embedded conversion option exceeded 10% of the carrying value of the original debt and, therefore, the Company accounted for this restructuring as an extinguishment in accordance with FASB ASC 470-50 “Debt Modifications and Extinguishments” and recognized a loss on extinguishment of $26,252. The note was written up to its fair value on the date of modification of approximately $650,000 and the premium recorded in excess of its face value will be amortized over the remaining life of the note. The carrying amount of the note on December 31, 2014 was approximately $604,000 ($633,000 at December 31, 2013). On February 23, 2015, the Company entered into Convertible Promissory Note Amendment No. 2 to extend the maturity date to December 30, 2016, eliminate the conversion feature, and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $230,000 due on the extended maturity date. | |||||
On May 24, 2013, the Company entered into a promissory note in the principal sum of $850,000 to purchase three printing presses that were previously leased by the Company's wholly-owned subsidiary, Secuprint Inc., and carries an interest rate of 9% per annum. Interest is payable quarterly, in arrears. The Company also issued the lender as additional consideration a five-year warrant to purchase up to 60,000 shares of the Company's common stock at an exercise price of $3.00 per share. The warrant was valued at approximately $69,000 using the Black-Scholes-Merton option pricing model with a volatility of 60.0%, a risk free rate of return of 0.89% and zero dividend and forfeiture estimates. In conjunction with the issuance of the warrants, the Company recorded a discount on debt of approximately $69,000 that was amortized over the original term of the note. The note was set to mature on May 24, 2014, but its maturity date was extended on May 2, 2014 to May 24, 2015 by the lender. In exchange for the extension, the Company also issued the lender as additional consideration a five-year warrant to purchase up to 40,000 shares of the Company's common stock at an exercise price of $1.50 per share. The warrant was valued at approximately $29,000 using the Black-Scholes-Merton option pricing model with a volatility of 70.0%, a risk free rate of return of 1.53% and zero dividend and forfeiture estimates. In conjunction with the issuance of the warrants, the Company recorded expense for modification of debt of approximately $29,000. On February 23, 2015, the Company entered into Promissory Note Amendment No. 2 to extend the maturity date to May 31, 2016 and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $610,000 due on the extended maturity date. As of December 31, 2014, the balance of the term loan was $850,000 ($850,000 at December 31, 2013). | |||||
Term Loan Debt - On February 12, 2010, in conjunction with the credit facility agreement with Citizens Bank, Premier Packaging entered into a term loan with Citizens Bank for $1,500,000. As amended on July 26, 2011, the term loan requires monthly principal payments of $25,000 plus interest through maturity in February 2015. Interest accrues at 1 Month LIBOR plus 3.75% (3.91% at December 31, 2014). The Company entered into an interest rate swap agreement to lock into a 5.7% effective interest rate over the remaining life of the amended term loan. As of December 31, 2014, the balance of the term loan was $50,000 ($350,000 at December 31, 2013). | |||||
On October 8, 2010, Premier Packaging amended its credit facility agreement with Citizens Bank to add a standby term loan note pursuant to which Citizens Bank was to provide Premier Packaging with up to $450,000 towards the funding of eligible equipment purchases for up to one year. In October 2011, the Company had borrowed $42,594 under the facility which amount was converted into a term note payable in 60 monthly installments of $887 plus interest at 1 Month LIBOR plus 3% (3.15% at December 31, 2014). As of December 31, 2014, the balance under this term note was $19,522 ($30,171 at December 31, 2013). | |||||
On July 19, 2013, Premier Packaging entered into an equipment loan with People's Capital and Leasing Corp. (“Peoples Capital”) for a printing press. The loan was for $1,303,900, repayable over a 60-month period which commenced when the equipment was placed in service in January 2014. The loan bears interest at 4.84% and is payable in equal monthly installments of $24,511. As of December 31, 2014, the loan had a balance of $1,067,586 ($1,303,900 at December 31, 2013). | |||||
Promissory Notes - On August 30, 2011, Premier Packaging purchased the packaging plant it occupies in Victor, New York, for $1,500,000, which was partially financed with a $1,200,000 promissory note obtained from Citizens Bank (“Promissory Note”). The Promissory Note calls for monthly payments of principal and interest in the amount of $7,658, with interest calculated as 1 Month LIBOR plus 3.15% (3.31% at December 31, 2014). Concurrently with the transaction, the Company entered into an interest rate swap agreement to lock into a 5.87% effective interest rate for the life of the loan. The Promissory Note matures in August 2021 at which time a balloon payment of the remaining principal balance will be due. As of December 31, 2014, the Promissory Note had a balance of $1,078,220 ($1,132,998 at December 31, 2013). | |||||
On December 6, 2013, Premier Packaging entered into a Construction to Permanent Loan with Citizens Bank for up to $450,000 that was converted into a promissory note upon the completion and acceptance of building improvements to the Company's packaging plant in Victor, New York. In May 2014, the Company converted the loan into a $450,000 note payable in monthly installments over a 5 year period of $2,500 plus interest calculated at a variable rate of 1 Month Libor plus 3.15% (3.31% at December 31, 2014), which payments commenced on July 1, 2014. The note matures in July 2019 at which time a balloon payment of the remaining principal balance of $300,000 is due. As of December 31, 2014, the note had a balance of $435,000 (250,464 –December 31, 2013). | |||||
Under the Citizens Bank credit facilities, the Company's subsidiary, Premier Packaging, is subject to various covenants including fixed charge coverage ratio, tangible net worth and current ratio covenants. In March 2014, Premier Packaging was notified that it was not in compliance with the required fixed charge coverage ratio as of December 31, 2013. In March 2014, the Company received a waiver as of December 31, 2013 from Citizens Bank, relating to the above-mentioned financial covenant. For the quarters ended March 31, 2014, June 30, 2014, September 30, 2014, and December 31, 2014, Premier Packaging was in compliance with the covenants. The Citizens Bank obligations are secured by all of the assets of Premier Packaging and are also secured through cross guarantees by the Company and its other wholly-owned subsidiaries, Plastic Printing Professionals and Secuprint. | |||||
Promissory Notes and other long-term liabilities - On February 13, 2014, the Company's subsidiary, DSS Technology Management, entered into an agreement with certain investors pursuant to which the Company contracted to receive a series of advances up to $4,500,000 from the investors in exchange for promissory notes, fixed return interests and contingent interests collateralized by certain of the Company's intellectual property (the “Agreement”). On February 13, 2014, the Company received the first advance of $2,000,000 in exchange for a promissory note in the amount of $1,791,000 (the “Initial Advance Note”) fixed return equity interests in the amount of $199,000, and contingent equity interests in the amount of $10,000. On March 27, 2014, upon achieving the First Milestone as defined in the Agreement, the Company issued to the investors a promissory note in the amount of $900,000 (the “First Milestone Note”) and fixed return equity interests in the amount of $100,000, and in turn received $1,000,000 (collectively, the “First Milestone Advance”). On September 5, 2014, upon achieving the Second Milestone as defined in the Agreement, the Company issued to the investors a promissory note in the amount of $1,350,000 (the “Second Milestone Note”) and fixed return equity interests in the amount of $150,000, and in turn received $1,500,000 (collectively, the “Second Milestone Advance”). This Second Milestone payment was the final payment under the Agreement. The Initial Advance Note, the First Milestone Note, and the Second Milestone Note (collectively, the “Notes”) bear interest at a rate per annum equal to the Applicable Federal Rate on the unpaid principal amount thereof, which was 1.95% as of December 31, 2014. The Notes are subject to various covenants and will also be subject to a Make Whole Amount calculation (as defined in the Agreement), which will result in an effective annual interest rate of approximately 4.23% for the term thereof, assuming no prepayments. At the Company's option, it may pay accrued interest when due on the Notes, or elect to capitalize the accrued interest, adding it to the principal thereof. The maturity date of all the Notes is the date four years after issuance (February 13, 2018) of the Initial Advance Note. As of December 31, 2014, an aggregate of $4,089,000, which includes $48,000 of accrued interest, was outstanding under the Notes and is included in long-term debt on the balance sheet and $459,000 was outstanding under the fixed return equity interest and contingent equity interests which is included in other long-term liabilities on the balance sheet. See Note 12. Commitments and Contingencies. | |||||
A summary of scheduled principal payments of long-term debt, not including revolving lines of credit, premiums or discounts subsequent to December 31, 2014 are as follows: | |||||
Year | Amount | ||||
2015 | $ | 754,745 | |||
2016 | $ | 1,452,963 | |||
2017 | $ | 363,945 | |||
2018 | $ | 4,468,510 | |||
2019 | $ | 80,070 | |||
Thereafter | $ | 1,073,548 | |||
Total | $ | 8,193,781 |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY [Abstract] | |||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | NOTE 8 - STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||
Sales of Equity - On December 23, 2014, the Company sold 3,715,000 shares of DSS's common stock at a price to the public of $0.45 per share for gross proceeds of $1.672 million. The shares included 415,000 shares of common stock sold pursuant to the underwriters' over-allotment option, which was partially exercised at $0.45 per share. | |||||||||||||||||||||||||||||||||||||
On June 16, 2014, the Company sold 209,700 shares of common stock at a purchase price of $1.44 per share to an institutional investor for a total purchase price of approximately $302,000. Additionally, from the date of the closing until 90 days after the closing date, the investor had a non-transferable overallotment right to purchase up to 209,700 additional shares of common stock at a price per share of $1.60, for an additional subscription amount of up to an aggregate of approximately $335,500. The overallotment option was not executed by the investor and expired on September 14, 2014. | |||||||||||||||||||||||||||||||||||||
Stock Warrants - From time to time, the Company issues warrants in conjunction with the sale of its common stock in private placements. The Company also issued to certain consultants for services during 2014 an aggregate of 8,443 shares of its common stock in exchange for warrants to purchase 80,645 shares of the Company which were exercisable at a price of $3.10 per share, dated February 13, 2012 and expiring February 12, 2017. In May 2014, the Company issued a warrant to purchase up to 60,000 of the Company's common stock at $1.60 per share to a vendor of investor relations services. The warrants have a term of 3 years and will vest pro ratably over 12 monthly periods. The warrant was valued at approximately $34,000 using the Black-Scholes-Merton option pricing model with a volatility of 71.4%, a risk free rate of return of 1.67% and zero dividend and forfeiture estimates. Also in May 2014, the Company issued fully vested five-year warrants to purchase 40,000 shares of the Company's common stock at $1.50 per share in conjunction with the extension of the Company's $850,000 term note that was due to expire in May 2014 to May 2015. The estimated fair value of the warrant was recognized as expense on the date of grant. The warrant was valued at approximately $27,000 using the Black-Scholes-Merton option pricing model with a volatility of 65.5%, a risk free rate of return of 1.57% and zero dividend and forfeiture estimates. | |||||||||||||||||||||||||||||||||||||
On July 1, 2013 in conjunction with its Merger with DSS Technology Management, the Company issued 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 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 to DSS Technology Management's preferred stockholders that would beneficially own more than 9.99% of the shares of the Company's common stock as a result of the Merger (the “Beneficial Ownership Condition”). During 2013, a total of 3,472,170 shares of common stock were issued by the Company upon the exercise of warrants in exchange for aggregate proceeds of approximately $148,000. | |||||||||||||||||||||||||||||||||||||
The following is a summary with respect to warrants outstanding and exercisable at December 31, 2014 and 2013 and activity during the years then ended: | |||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
Average | Average | ||||||||||||||||||||||||||||||||||||
Exercise | Exercise | ||||||||||||||||||||||||||||||||||||
Warrants | Price | Warrants | Price | ||||||||||||||||||||||||||||||||||
Outstanding January 1 | 6,875,586 | $ | 4.64 | 2,255,692 | $ | 4.34 | |||||||||||||||||||||||||||||||
Granted during the year | 100,000 | 1.56 | 8,342,064 | 2.82 | |||||||||||||||||||||||||||||||||
Exercised/transferred | (80,645 | ) | 3.1 | (3,472,170 | ) | 0.04 | |||||||||||||||||||||||||||||||
Lapsed/terminated | (328,556 | ) | 2.91 | (250,000 | ) | 5.1 | |||||||||||||||||||||||||||||||
Outstanding at December 31 | 6,566,385 | $ | 4.7 | 6,875,586 | $ | 4.64 | |||||||||||||||||||||||||||||||
Exercisable at December 31 | 6,535,274 | $ | 4.71 | 6,742,253 | $ | 4.64 | |||||||||||||||||||||||||||||||
Weighted average months remaining | 40 | 49.8 | |||||||||||||||||||||||||||||||||||
Stock Options - On June 20, 2013 the Company's shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”), which replaced both the Company's Amended and Restated 2004 Employee Stock Option Plan and Amended and Restated 2004 Non-Executive Director Stock Option Plan. The 2013 Plan provides for the issuance of up to a total of 6,000,000 shares of common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants. Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”). | |||||||||||||||||||||||||||||||||||||
On March 5, 2014, the Company issued an aggregate of 1,138,697 options to purchase the Company's common stock at $2.00 per share with a term of 5 years to its employees covered under the 2013 Plan. The options will vest pro-ratably as follows: 1/3 on the grant date, 1/3 on the first anniversary of the grant date and 1/3 on the second anniversary of the grant date as long as the employee is employed on such dates. The options were valued at approximately $833,000 using the Black-Scholes-Merton option pricing model with a volatility of 67.0%, a risk free rate of return of 0.92% and zero dividend and forfeiture estimates. On March 13, 2014, the Company issued an aggregate of 84,025 shares of common stock to three of its directors to pay approximately $134,000 of accrued director's fees. In December 2014, the Company issued 33,500 options to purchase the Company's common stock at $0.60 per share with a term of 5 years to members of the Company's executive management in exchange for an agreement by each employee to reduce his cash compensation for the fiscal year of 2015. The options will vest on August 15, 2015 and had a grant date fair value of $6,643. The options were valued using the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates. | |||||||||||||||||||||||||||||||||||||
During 2013, the Company issued options to purchase up to an aggregate of 178,750 shares of its common stock to its non-executive board members at exercise prices between $1.40 and $2.51 per share. The fair value of these options amounted to approximately $123,000 determined by utilizing the Black-Scholes-Merton option pricing model. | |||||||||||||||||||||||||||||||||||||
On January 10, 2013, the Company modified 80,000 fully vested options held by former non-executive board members that were set to expire on January 14, 2013 by extending the expiration dates to between January 2, 2014 and January 14, 2014. These options had been granted between 2009 and 2012. The incremental compensation costs associated with this modification of approximately $34,000 was recognized during the year ended December 31, 2013 and is included in selling, general and administrative expenses. | |||||||||||||||||||||||||||||||||||||
On July 1, 2013 in conjunction with its Merger with DSS Technology Management, the Company assumed options to purchase an aggregate of 2,000,000 shares of the Company's Common Stock at an exercise price of $3.00 per share, in exchange for 3,600,000 outstanding and unexercised stock options to purchase shares of DSS Technology Management's common stock (See Note 9). | |||||||||||||||||||||||||||||||||||||
The following is a summary with respect to options outstanding at December 31, 2014 and 2013 and activity during the years then ended: | |||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||
Number of | Weighted | Weighted | Number of | Weighted | Weighted | ||||||||||||||||||||||||||||||||
Options | Average | Average Life | Options | Average | Average Life | ||||||||||||||||||||||||||||||||
Exercise Price | Remaining | Exercise Price | Remaining | ||||||||||||||||||||||||||||||||||
(in years) | (in years) | ||||||||||||||||||||||||||||||||||||
Outstanding at January 1: | 4,073,898 | 3.25 | - | ||||||||||||||||||||||||||||||||||
Transferred | - | - | 1,980,898 | 3.65 | |||||||||||||||||||||||||||||||||
Granted | 1,172,197 | 1.96 | 2,150,000 | 2.89 | |||||||||||||||||||||||||||||||||
Exercised | - | - | (20,000 | ) | 1.86 | ||||||||||||||||||||||||||||||||
Lapsed/terminated | (317,804 | ) | 3.56 | (37,000 | ) | 6.31 | |||||||||||||||||||||||||||||||
Outstanding at December 31: | 4,928,291 | 2.92 | 4 | 4,073,898 | 3.25 | 5.7 | |||||||||||||||||||||||||||||||
Exercisable at December 31: | 2,806,696 | 2.94 | 5 | 1,718,024 | 3.25 | 4.3 | |||||||||||||||||||||||||||||||
Expected to vest at December 31: | 1,660,169 | 2.46 | 5.8 | 1,905,874 | 2.95 | 7.8 | |||||||||||||||||||||||||||||||
Aggregate intrinsic value of outstanding options at December 31: | $ | - | $ | 104,700 | |||||||||||||||||||||||||||||||||
Aggregate intrinsic value of exercisable options at December 31: | $ | - | $ | 37,365 | |||||||||||||||||||||||||||||||||
Aggregate intrinsic value of options expected to vest at December 31: | $ | - | $ | 67,335 | |||||||||||||||||||||||||||||||||
Included in these amounts are earn-out options issued to the previous owners of ExtraDev with a contractual term of 5 years, to purchase an aggregate of 450,000 shares of common stock at an exercise price of $4.50 per share that will be vested if the Company's Digital division achieves certain annual revenue targets by the end of fiscal year 2016. The fair value of the earn-out options amounted to $594,000. If the annual revenue targets are met or are deemed probable to occur, then the Company will record stock based compensation expense. As of December 31, 2014 vesting is considered remote. All options granted to the owners of ExtraDev were classified as compensation for post combination services since the vesting of each grant is based on length of employment, with all unvested options forfeiting upon termination of employment, therefore, the fair value of these equity instruments was not considered a component of the purchase price of the ExtraDev acquisition. | |||||||||||||||||||||||||||||||||||||
The weighted-average grant date fair value of options granted during the year ended December 31, 2014 was $0.71($0.82 -2013). The aggregate grant date fair value of options that vested during the year was approximately $1,145,000 ($1,009,000 -2013). There were 20,000 options exercised on a cashless basis during 2013. The intrinsic value of options exercised during 2013 was approximately $20,000. There were no options exercised during 2014. | |||||||||||||||||||||||||||||||||||||
The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The Company estimated the expected volatility of the Company's common stock at the grant date using the historical volatility of the Company's common stock over the most recent period equal to the expected stock option term. The expected volatility utilized ranged between 67.0% and 72.6% during 2014. The risk-free interest rate assumptions were determined using the equivalent U.S. Treasury bonds yield and ranged between 0.92% and 1.66% in 2014. The Company estimates pre-vesting option forfeitures at the time of grant. The Company has had minimal pre-vesting forfeitures in the past. The Company has never paid any cash dividends and does not anticipate paying any cash dividends in the foreseeable future. Therefore, the Company assumed an expected dividend yield of zero. | |||||||||||||||||||||||||||||||||||||
The following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options and warrants granted during the years ended December 31, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||
Volatility | 67.1 | % | 60.9 | % | |||||||||||||||||||||||||||||||||
Expected option term | 3.5years | 5.7years | |||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.9 | % | 1.6 | % | |||||||||||||||||||||||||||||||||
Expected forfeiture rate | 0 | % | 0 | % | |||||||||||||||||||||||||||||||||
Expected dividend yield | 0 | % | 0 | % | |||||||||||||||||||||||||||||||||
Restricted Stock - Restricted common stock may be issued under the Company's 2013 Plan for services to be rendered which may not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources. Restricted stock compensation cost is measured as the stock's fair value based on the quoted market price at the date of grant. The restricted shares issued reduce the amount available under the employee stock option plans. Compensation cost is recognized only on restricted shares that will ultimately vest. The Company estimates the number of shares that will ultimately vest at each grant date based on historical experience and adjust compensation cost and the carrying amount of unearned compensation based on changes in those estimates over time. Restricted stock compensation cost is recognized ratably over the requisite service period which approximates the vesting period. An employee may not sell or otherwise transfer unvested shares and, in the event that employment is terminated prior to the end of the vesting period, any unvested shares are surrendered to us. The Company has no obligation to repurchase any restricted stock. In conjunction with its Merger with Lexington Technology Group on July 1, 2013 (See Note 9) the Company issued 7,100,000 shares of the Company's common stock to be held in escrow pursuant to an escrow agreement, dated July 1, 2013. Pursuant to the escrow agreement, the shares of the Company's common stock deposited in the escrow account would be released to the holders if and when the closing price per share of the Company's common stock exceeded $5.00 per share (as adjusted for stock splits, stock dividends and similar events) for 40 trading days within a continuous 90 trading day period following the closing of the Merger. If within one year following the closing of the Merger, such threshold was not achieved, the shares of the Company's common stock held in escrow would be cancelled and returned to the treasury of the Company. The holders of the escrow shares had voting rights with respect to the shares until such shares were either released or retired after one year. As of July 1, 2014, the vesting criteria for the escrow shares was not met. As a result, the Company received authorization from holders of an aggregate of 3,038,357 of the escrow shares to retire such shares as of June 29, 2014. The remaining 4,061,643 escrow shares were retired on July 1, 2014. The Company had also issued an aggregate of 786,678 shares of Common Stock to Palladium Capital as compensation for advisory services performed in connection with the Merger. Of those shares issued to Palladium Capital, 400,000 were being held in escrow pursuant to the same terms and conditions as those set forth in the escrow agreement. Since Paladium Capital's escrow shares did not vest, the Company received authorization from Palladium Capital to retire their 400,000 escrow shares as of June 29, 2014. | |||||||||||||||||||||||||||||||||||||
In December 2014, the Company issued an aggregate of 243,750 shares of restricted common stock to certain members of the Company's executive and senior management in exchange for agreements by the employees to reduce their cash compensation for the fiscal year of 2015. The restricted shares will vest on August 15, 2015 and had an aggregate grant date fair value of $117,000. | |||||||||||||||||||||||||||||||||||||
The following is a summary of activity of restricted stock during the years ended at December 31, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Shares | Weighted- average | ||||||||||||||||||||||||||||||||||||
Grant Date Fair | |||||||||||||||||||||||||||||||||||||
Value | |||||||||||||||||||||||||||||||||||||
Restricted shares outstanding, December 31, 2012 | 61,764 | $ | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares granted | - | - | |||||||||||||||||||||||||||||||||||
Restricted shares vested | (20,588 | ) | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares outstanding, December 31, 2013 | 41,176 | $ | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares granted | 243,750 | 0.48 | |||||||||||||||||||||||||||||||||||
Restricted shares vested | (20,588 | ) | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares outstanding, December 31, 2014 | 264,338 | $ | 0.7 | ||||||||||||||||||||||||||||||||||
Stock-Based Compensation - The Company records stock-based payment expense related to these options based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During 2014, the Company had stock compensation expense of approximately $1,355,000 or $0.03 basic earnings per share ($1,895,000; $0.06 basic earnings per share - 2013). As of December 31, 2014, there was approximately $1,308,000 of total unrecognized compensation costs related to options and restricted stock granted under the Company's stock option plans, which the Company expects to recognize over the weighted average period of approximately three years. This amount excludes $536,000 of potential stock based compensation for stock options that vest upon the occurrence of certain events which the Company does not believe are likely. |
BUSINESS_COMBINATION
BUSINESS COMBINATION | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
BUSINESS COMBINATION [Abstract] | |||||
BUSINESS COMBINATION | NOTE 9 – BUSINESS COMBINATION | ||||
On July 1, 2013 (the “Closing Date”), DSSIP, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of DSS merged with and into Lexington Technology Group, Inc. (the “Merger”) pursuant to the terms and conditions of an Agreement and Plan of Merger, dated as of October 1, 2012 (as amended, the “Merger Agreement”). Effective on July 1, 2013, as a result of the Merger, Lexington Technology Group, Inc (“Lexington”), which changed its name to DSS Technology Management, Inc. on August 2, 2013, became a wholly-owned subsidiary of the Company. The Company believes the Merger with Lexington was an opportunity to significantly increase its intellectual property assets and expand its intellectual property development, acquisition and monetization business. In connection with the Merger, the Company issued on the Closing Date, its securities in exchange for the capital stock owned by Lexington stockholders, as follows (the “Merger Consideration”): (i) an aggregate of 16,558,387 shares of the Company's common stock, par value $0.02 per share (the “Common Stock”), which includes 240,559 shares of the Company's common stock owned by DSS Technology Management prior to the Merger that were exchanged for shares issuable to Lexington stockholders pursuant to the Merger (the “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 $0.02 per share and expiring on July 1, 2023 (the “$.02 Warrants”), to Lexington's preferred stockholders that would beneficially own more than 9.99% of the shares of the Company's common stock as a result of the Merger. In addition, the Company assumed options to purchase an aggregate of 2,000,000 shares of the Company's common stock at an exercise price of $3.00 per share, in exchange for 3,600,000 outstanding and unexercised stock options to purchase shares of DSS Technology Management's common stock. Pursuant to the escrow agreement, the shares of the Company's common stock deposited in the escrow account would be released to the holders if and when the closing price per share of the Company's common stock exceeded $5.00 per share (as adjusted for stock splits, stock dividends and similar events) for 40 trading days within a continuous 90 trading day period following the closing of the Merger. If within one year following the closing of the Merger, such threshold was not achieved, the shares of the Company's common stock held in escrow would be cancelled and returned to the treasury of the Company. The holders of the escrow shares had voting rights with respect to the shares until such shares were either released or retired after one year. As of July 1, 2014, the vesting criteria for the escrow shares was not met. As a result, the Company received authorization from holders of an aggregate of 3,038,357 of the escrow shares to retire such shares as of June 29, 2014. The remaining 4,061,643 escrow shares were retired on July 1, 2014. The Company had also issued an aggregate of 786,678 shares of Common Stock to Palladium Capital as compensation for advisory services performed in connection with the Merger. Of those shares issued to Palladium Capital, 400,000 were being held in escrow pursuant to the same terms and conditions as those set forth in the escrow agreement. Since Paladium Capital's escrow shares did not vest, the Company received authorization from Palladium Capital to retire their 400,000 escrow shares as of June 29, 2014. The Company spent approximately $1,445,000 in legal, accounting, consulting and filing fees related to the Merger. | |||||
Purchase Price Allocation | |||||
The Merger was accounted for in accordance with the acquisition method of accounting under FASB ASC Topic 805, “Business Combinations” (“Topic 805”). Under Topic 805, the assets and liabilities of the acquired business, DSS Technology Management, are recorded at their fair values 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. The purchase price was based on the fair value of the Company's common stock, and common stock to be held in escrow and issued if certain contingencies were met, warrants to purchase the Company's common stock issued by the Company to DSS Technology Management stockholders, and replacement options awards related to pre-combination services granted to certain DSS Technology Management employees pursuant to the Merger Agreement. The Company measured the identifiable assets acquired and liabilities assumed based on the acquisition date fair value. The fair value of the equity instruments issued to former stockholders of DSS Technology Management was based on a $1.87 share price of the Company's common stock which was the closing share price of the Company's common stock on the Closing Date of July 1, 2013. For warrants and employee options to purchase DSS common stock issued or assumed as consideration in the Merger, the Company used the Black Scholes Merton option pricing model to determine fair values, with terms set at the remaining life of the option or warrant, a volatility of approximately 59%, and a risk free rate of return of approximately 0.9% with zero forfeitures expected. For the Company common stock held in escrow, the Company used a Monte Carlo simulation model to determine an average expected fair value. | |||||
($ -in | |||||
thousands) | |||||
Current assets, net of current liabilities | $ | 6,252 | |||
Deposits and non-current assets | 9 | ||||
Investments at fair value | 10,750 | ||||
Other intangible assets- patent and patent rights | 27,856 | ||||
Goodwill | 11,962 | ||||
56,829 | |||||
Deferred tax liability, net | 11,962 | ||||
44,867 | |||||
Non-controlling interest in subsidiary | (4,300 | ) | |||
Total purchase price | $ | 40,567 | |||
Consideration issued: | |||||
Fair value of 16,317,828 shares of DSS common stock issued to DSS Technology Management stockholders | $ | 30,514 | |||
Fair value of 7,100,000 shares of DSS common stock issued to DSS Technology Management stockholders to be held in escrow for up to one year | 901 | ||||
Fair value of options to purchase 2,000,000 shares DSS common stock for $3.00 per share exchanged for options to purchase DSS Technology Management's common stock that were granted to DSS Technology Management's employees which relate to pre-combination services | 141 | ||||
Fair value of warrants to purchase up to 4,859,894 shares of DSS common stock for $4.80 per share issued to DSS Technology Management shareholders | 2,661 | ||||
Fair value of warrants to purchase 3,432,170 shares of DSS common stock for $0.02 per share issued to certain DSS Technology Management stockholders | 6,350 | ||||
Total purchase price | $ | 40,567 | |||
The Company's management was responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Closing Date. Management considered a number of factors, including reference to an analysis under Topic 805 solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The Company's estimates were based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions, which would not reflect unanticipated events and circumstances that occur. A relief from royalty methodology was used to value the patent portfolio and investment and the analysis included a discounted cash flow which estimated future net cash flows resulting from the licensing and enforcement of the patent portfolio based on information as of the date of acquisition, considering assumptions and estimates related to potential infringers of the patents, applicable industries, usage of the underlying patented technologies, estimated license fee revenues, contingent legal fee arrangements, other estimated costs, tax implications and other factors. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of estimated net cash flows. | |||||
Set forth below is the unaudited pro-forma revenue, operating loss, net loss and loss per share of the Company as if DSS Technology Management had been acquired by the Company as of January 1, 2013. | |||||
(unaudited) | Year Ended | ||||
31-Dec-13 | |||||
Revenue | $ | 18,046,000 | |||
Operating Loss | (11,527,000 | ) | |||
Net loss | (12,489,000 | ) | |||
Earnings per share: | |||||
Basic and diluted | $ | (0.24 | ) | ||
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INCOME TAXES [Abstract] | |||||||||||||
INCOME TAXES | NOTE 10 - INCOME TAXES | ||||||||||||
Following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31: | |||||||||||||
2014 | 2013 | ||||||||||||
Currently payable: | |||||||||||||
Federal | $ | - | $ | - | |||||||||
State | 6,735 | - | |||||||||||
Total currently payable | 6,735 | - | |||||||||||
Deferred: | |||||||||||||
Federal | (13,939,671 | ) | (2,217,527 | ) | |||||||||
State | 488,406 | (528,872 | ) | ||||||||||
Total deferred | (13,451,265 | ) | (2,746,399 | ) | |||||||||
Less: (decrease) increase in allowance | 12,455,900 | (8,202,476 | ) | ||||||||||
Net deferred | (995,365 | ) | (10,948,875 | ) | |||||||||
Total income tax benefit | $ | (988,630 | ) | $ | (10,948,875 | ) | |||||||
Individual components of deferred taxes are as follows: | |||||||||||||
2014 | 2013 | ||||||||||||
Deferred tax assets: | |||||||||||||
Net operating loss carry forwards | $ | 16,104,083 | $ | 15,960,340 | |||||||||
Equity issued for services | 1,050,348 | 721,934 | |||||||||||
Goodwill and other intangibles | 773,019 | 218,896 | |||||||||||
Investment in pass-through entity | 268,476 | - | |||||||||||
Other | 591,259 | 338,087 | |||||||||||
Gross deferred tax assets | 18,787,185 | 17,239,257 | |||||||||||
Deferred tax liabilities: | |||||||||||||
Goodwill and other intangibles | $ | 312,277 | $ | 9,827,201 | |||||||||
Depreciation and amortization | 312,823 | 286,520 | |||||||||||
Investment in pass-through entity | - | 2,414,716 | |||||||||||
Gross deferred tax liabilities | $ | 625,100 | $ | 12,528,437 | |||||||||
Less valuation allowance | (18,307,844 | ) | (5,851,944 | ) | |||||||||
Net deferred tax liabilities | $ | (145,759 | ) | $ | (1,141,124 | ) | |||||||
During 2014, the Company recognized a $995,000 net deferred tax benefit primarily as a result of the expense recognized during the period related to the impairment of the investment in VATI and the Bascom patents. In 2013, the Company recognized a $10,962,000 deferred tax benefit as a result of the acquisition of DSS Technology Management, Inc. on July 1, 2013. Due to the acquisition, a temporary difference between the book fair value and the tax basis of the other intangible assets acquired created an approximately $11,962,000 deferred tax liability and additional goodwill. With the increase in the deferred tax liability, the Company reduced the deferred tax asset valuation allowance by the amount of net operating loss that could offset the amortization of the deferred tax liability associated with the value of the patents acquired and recognized a deferred tax benefit of approximately $10,949,000. | |||||||||||||
The Company has approximately $48,513,000 in federal net operating loss carryforwards (“NOLs”) available to reduce future taxable income, which will expire at various dates from 2022 through 2034. Due to the uncertainty as to the Company's ability to generate sufficient taxable income in the future and utilize the NOLs before they expire, the Company has recorded a valuation allowance accordingly. The Company's NOLs could also be subject to annual limitation as a result of a change in its equity ownership as defined under the Internal Revenue Code Section 382. This limitation, as applicable, could further limit the use of the NOLs. | |||||||||||||
The excess tax benefits associated with stock option exercises are recorded directly to stockholders' equity only when realized. As a result, the excess tax benefits available in net operating loss carryforwards but not reflected in deferred tax assets was approximately $1,019,000. These carryforwards expire at various dates from 2022 through 2030. The excess tax benefits associated with stock option exercises are recorded directly to stockholders' equity only when realized. | |||||||||||||
The differences between the United States statutory federal income tax rate and the effective income tax rate in the accompanying consolidated statements of operations are as follows: | |||||||||||||
2014 | 2013 | ||||||||||||
Statutory United States federal rate | 34 | % | 34 | % | |||||||||
State income taxes net of federal benefit | (0.7 | ) | 4.2 | ||||||||||
Noncontrolling interest in pass-through entity | (3.4 | ) | - | ||||||||||
Permanent differences | (2.3 | ) | (4.5 | ) | |||||||||
Other | 1.1 | (0.8 | ) | ||||||||||
Change in valuation reserves | (26.6 | ) | 98.1 | ||||||||||
Effective tax rate | 2.1 | % | 131 | % | |||||||||
At December 31, 2014 and 2013, the total unrecognized tax benefits of $446,000 have been netted against the related deferred tax assets. | |||||||||||||
The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2014 and 2013 the Company recognized no interest and penalties. | |||||||||||||
The Company files income tax returns in the U.S. federal jurisdiction and various states. The tax years 2011-2014 generally remain open to examination by major taxing jurisdictions to which the Company is subject. |
DEFINED_CONTRIBUTION_PENSION_P
DEFINED CONTRIBUTION PENSION PLAN | 12 Months Ended |
Dec. 31, 2014 | |
DEFINED CONTRIBUTION PENSION PLAN [Abstract] | |
DEFINED CONTRIBUTION PENSION PLAN | NOTE 11 - DEFINED CONTRIBUTION PENSION PLAN |
The Company maintains qualified employee savings plans (the “401(k) Plans”) which qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code which covers all employees. Employees generally become eligible to participate in the 401(k) Plan immediately following the employee's hire date. Employees may contribute a percentage of their earnings, subject to the limitations of the Internal Revenue Code. Commencing July 1, 2011, the Company matched up to 1% of the employee's earnings. On December 17, 2013, the Company increased its matching percentage to 50% of the employee's contribution up to a maximum match of 3% of the employee's contribution. The total matching contributions for 2014 were approximately $107,000 ($41,000 -2013). |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
COMMITMENTS AND CONTINGENCIES [Abstract] | |||||||||||||
COMMITMENTS AND CONTINGENCIES | NOTE 12 – COMMITMENTS AND CONTINGENCIES | ||||||||||||
Facilities - Our corporate offices and Digital division together occupy approximately 11,000 square feet of commercial office space at 28 East Main Street, Rochester, New York 14614 under a lease that expires September 30, 2015, at a rental rate of approximately $14,000 and $15,000 per month in 2014 and 2015, respectively. Our Plastics division leases approximately 15,000 square feet in a lease that expires December 31, 2018 for approximately $13,000 per month. In addition, the Company owns a 40,000 square foot packaging and printing plant in Victor, New York, a suburb of Rochester, New York. The Company's Technology Management division leases executive office space in Reston, Virginia under a 13 month lease that expires in December 2015 for approximately $2,700 per month, and also leases a sales and research and development facility in Plano, Texas under a 12 month lease that expires in December 2015 for approximately $1,044 per month. In addition, during 2014, the Company's Technology Management division leased office space in New York City for approximately $3,000 under an agreement it terminated in December 2014. The Company believes that it can negotiate renewals or similar lease arrangements on acceptable terms when its current leases expire. The Company believes that its acilities are adequate for our current operations. | |||||||||||||
Equipment Leases – From time to time, the Company leases certain production and office equipment, digital and offset presses, laminating and finishing equipment for its various printing operations. The leases may be capital leases or operating leases and are generally for a term of 36 to 60 months. The leases expire at various dates February 2017. As of December 31, 2014, the Company did not have any capital leases. During 2013, the Company made payments in the aggregate of approximately $764,000 under operating leases. | |||||||||||||
The following table summarizes the Company's lease commitments. | |||||||||||||
Operating Leases | |||||||||||||
Equipment | Facilities | Total | |||||||||||
Payments made in 2014 | $ | 30,540 | $ | 513,669 | $ | 544,209 | |||||||
Future minimum lease commitments: | |||||||||||||
2015 | 16,907 | 337,738 | 354,645 | ||||||||||
2016 | 5,241 | 164,183 | 169,424 | ||||||||||
2017 | 874 | 169,109 | 169,983 | ||||||||||
2018 | - | 174,182 | 174,182 | ||||||||||
2019 | - | - | - | ||||||||||
Total future minimum lease commitments | $ | 23,022 | $ | 845,212 | $ | 868,234 | |||||||
Employment Agreements - The Company has employment agreements with nine members of its management team with terms ranging from one to five years through December 2019. The agreements provide for severance payments in the event of termination for certain causes. As of December 31, 2014, the minimum annual severance payments under these employment agreements are, in aggregate, approximately $1,282,000. | |||||||||||||
Related Party Payments - During 2014 and 2013, the Company paid consulting fees of approximately $145,000 and $188,000, respectively, to Patrick White, its former CEO, under a consulting agreement and paid an aggregate of approximately $35,000 in 2015 through the expiration of the agreement in February 2015. | |||||||||||||
On December 29, 2014, the Company paid National Securities Corporation underwriting fees of approximately $134,000 and $100,000 in underwriter expenses pursuant to an underwritten offering the Company made of 3,715,000 shares of common stock. (See Note 8). Robert Fagenson, the Company's Board chairman, is also the chairman of the board of directors of National Holdings Corporation, the parent company of National Securities Corporation. | |||||||||||||
Contingent Litigation Payments – The Company retains the services of professional service providers, including law firms that specialize in intellectual property licensing, enforcement and patent law. These service providers are often retained on an hourly, monthly, project, contingent or a blended fee basis. In contingency fee arrangements, a portion of the legal fee is based on predetermined milestones or the Company's actual collection of funds. The Company accrues contingent fees when it is probable that the milestones will be achieved and the fees can be reasonably estimated. As of December 31, 2014 and 2013, the Company has not accrued any contingent legal fees pursuant to these arrangements. | |||||||||||||
Legal Proceedings - On October 24, 2011 the Company initiated a lawsuit against Coupons.com Incorporated (“Coupons.com”). The suit was filed in the United States District Court, Western District of New York, located in Rochester, New York. Coupons.com is a Delaware corporation having its principal place of business located in Mountain View, California. In the Coupons.com suit, the Company alleged breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment, and sought in excess of $10 million in money damages from Coupons.com for those claims. On October 28, 2014, the District Court granted Coupons.com's motion for summary judgment, dismissing the case. On November 25, 2014, the Company appealed that decision to the United States Court of Appeals for the Second Circuit. On March 5, 2015, the parties entered into a Stipulation whereby the Company withdrew the appeal without prejudice so that the parties could complete settlement negotiations. The Company has a right to re-file the appeal if settlement is not reached. | |||||||||||||
On October 3, 2012, Lexington Technology Group's (now DSS Technology Management) subsidiary, Bascom Research, LLC, commenced legal proceedings against five companies, including Facebook, Inc. and LinkedIn Corporation, pursuant to which Bascom Research, LLC alleged that such companies infringed on one or more of its patents. On January 5, 2015, the U.S. District Court for the Northern District of California granted summary judgment to defendants Facebook, Inc., and LinkedIn Corp. effectively ending the case at the trial court level. On January 22, 2015, Bascom Research, LLC and Facebook, Inc. entered in to a Stipulation filed with the District Court whereby Bascom Research, LLC agreed not to appeal the District Court's judgment, and Facebook, Inc. agreed to request the dismissal of a pending CBM review it had previously filed with the USPTO's Patent Trial and Appeal Board (PTAB). The CBM proceeding was terminated on February 24, 2015. | |||||||||||||
On November 26, 2013, DSS Technology Management filed suit against Apple, Inc. (“Apple”), in the United States District Court for the Eastern District of Texas, for patent infringement (the “Apple Litigation”). The Apple Litigation relates to certain patents owned by DSS Technology Management in the Bluetooth technology space. On November 7, 2014, the case was transferred to the Northern District of California. In December, 2014, Apple filed two petitions for Inter Partes Review of the patents at issue with the USPTO's Patent Trial and Appeal Board (PTAB). DSSTM intends to file its responses to the petitions by March 30, 2015. | |||||||||||||
On March 10, 2014, DSS Technology Management filed suit in the United States District Court for the Eastern District of Texas against Taiwan Semiconductor Manufacturing Company, TSMC North America, TSMC Development, Inc. (referred to collectively as TSMC), Samsung Electronics Co., Ltd, Samsung Electronics America, Inc., Samsung Telecommunications America L.L.C., Samsung Semiconductor, Inc., Samsung Austin Semiconductor LLC (referred to collectively as Samsung), and NEC Corporation of America (referred to as NEC), for patent infringement involving certain of its semiconductor patents. DSS Technology Management is seeking a judgment for infringement, injunctive relief, and money damages from each of the named defendants. In June, 2014, TSMC filed a petition for Inter Partes Review (IPR) of the patents at issue with the USPTO's Patent Trial and Appeal Board (PTAB). DSSTM filed its preliminary response to the petition in October, 2014. Samsung also filed an IPR relating to the same patents in September, 2014. DSSTM filed its preliminary response to that petition in December, 2014. On December 31, 2014, the PTAB instituted review of several of the patent claims at issue in the case. Samsung filed a motion with PTAB to join TSMC's IPR proceeding. The request was granted by the PTAB. On March 3, 2015, a Markman hearing was held in the Eastern District of Texas, and the court's decision is pending. | |||||||||||||
On May 30, 2014, DSS Technology Management filed suit against Lenovo (United States), Inc. (“Lenovo”) in the United States District Court for the Eastern District of Texas, for patent infringement. The complaint has alleged infringement by Lenovo of one of DSSTM's patents that relates to systems and methods of using low power wireless peripheral devices. DSS Technology Management is seeking judgment for infringement and money damages from Lenovo in connection with the case. The case is currently in the discovery phase. | |||||||||||||
On February 16, 2015, DSS Technology Management filed suit in the United States District Court, Eastern District of Texas, against defendants Intel Corporation, Dell, Inc., GameStop Corp., Conn's Inc., Conn Appliances, Inc., NEC Corporation of America, Wal-Mart Stores, Inc., Wal-Mart Stores Texas, LLC, and AT&T, Inc. The complaint alleges patent infringement and seeks judgment for infringement of two of DSSTM's patents, injunctive relief and money damages. | |||||||||||||
In addition to the foregoing, the Company is subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance in this regard, in the opinion of management, none of the legal proceedings to which we are a party, whether discussed herein or otherwise, will have a material adverse effect on its results of operations, cash flows or our financial condition. The Company accrues for potential litigation losses when a loss is probable and estimatable. |
SUPPLEMENTAL_CASH_FLOW_INFORMA
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION [Abstract] | |||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||||||
Supplemental cash flow information for the years ended December 31: | |||||||||||||
2014 | 2013 | ||||||||||||
Cash paid for interest | $ | 298,000 | $ | 246,000 | |||||||||
Non-cash investing and financing activities: | |||||||||||||
Equity issued for acquisition | $ | - | $ | 40,567,000 | |||||||||
Accrued liabilities with related parties settled with equity | $ | 134,000 | $ | - | |||||||||
Financing of building improvements | $ | 200,000 | $ | - | |||||||||
Change in non-controlling interest | $ | (4,700,000 | ) | $ | - | ||||||||
(Loss) gain from change in fair value of interest rate swap derivative | $ | (34,000 | ) | $ | 100,000 | ||||||||
Warrants issued with debt | $ | - | $ | 69,000 | |||||||||
Accounts payable converted to debt | $ | - | $ | 153,000 | |||||||||
Financing of equipment purchase and building improvements | $ | - | $ | 2,404,000 | |||||||||
Intrinsic value of beneficial conversion feature at reaquisition | $ | - | $ | 75,000 | |||||||||
Escrow shares retired | $ | 150,000 | $ | - | |||||||||
SEGMENT_INFORMATION
SEGMENT INFORMATION | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||
SEGMENT INFORMATION [Abstract] | |||||||||||||||||||||
SEGMENT INFORMATION | NOTE 14 - SEGMENT INFORMATION | ||||||||||||||||||||
As of January 1, 2014, the Company's businesses are organized, managed and internally reported as four operating segments. Two of these operating segments, Packaging and Printing, and Plastics are engaged in the printing and production of paper, cardboard and plastic documents with a wide range of features, including the Company's patented technologies and trade secrets designed for the protection of documents against unauthorized duplication and altering. Previously, the Company maintained a separately located operating segment, DSS Printing Group. This operating segment was relocated to the Company's packaging facility in Victor, New York in January 2014 and is no longer being evaluated by management as a segment separate from packaging. For presentation purposes, the 2013 Printing Group segment and Packaging segment amounts were combined to be consistent with the 2014 segment presentation. The two other operating segments, ExtraDev, Inc., dba DSS Digital Group, and DSS Technology Management, Inc., are engaged in various aspects of developing, acquiring, selling and licensing technology assets and are grouped into one reportable segment called Technology. | |||||||||||||||||||||
Approximate information concerning the Company's operations by reportable segment for the years ended December 31, 2014 and 2013 is as follows. The Company relies on intersegment cooperation and management does not represent that these segments, if operated independently, would report the results contained herein: | |||||||||||||||||||||
Year Ended December 31, 2014 | Packaging and | Plastics | Technology | Corporate | Total | ||||||||||||||||
Printing | |||||||||||||||||||||
Revenues from external customers | $ | 12,926,000 | 3,552,000 | 1,809,000 | - | $ | 18,287,000 | ||||||||||||||
Depreciation and amortization | 567,000 | 171,000 | 4,532,000 | 4,000 | 5,274,000 | ||||||||||||||||
Interest expense | 156,000 | 7,000 | 54,000 | 100,000 | 317,000 | ||||||||||||||||
Stock based compensation | 121,000 | 69,000 | 155,000 | 1,010,000 | 1,355,000 | ||||||||||||||||
Impairment of goodwill | - | - | 3,000,000 | - | 3,000,000 | ||||||||||||||||
Impairment of intangible assets and investments | - | - | 34,035,000 | - | 34,035,000 | ||||||||||||||||
Loss attributable to noncontrolling interest | - | - | (4,700,000 | ) | - | (4,700,000 | ) | ||||||||||||||
Income tax benefit | - | - | - | (989,000 | ) | (989,000 | ) | ||||||||||||||
Net income (loss) to common stockholders | 842,000 | (106,000 | ) | (38,843,000 | ) | (3,050,000 | ) | (41,157,000 | ) | ||||||||||||
Capital expenditures | 717,000 | 131,000 | 1,244,000 | - | 2,092,000 | ||||||||||||||||
Identifiable assets | 8,873,000 | 1,872,000 | 14,872,000 | 2,136,000 | 27,753,000 | ||||||||||||||||
Year Ended December 31, 2013 | Packaging and | Plastics | Technology | Corporate | Total | ||||||||||||||||
Printing | |||||||||||||||||||||
Revenues from external customers | $ | 12,242,000 | 3,639,000 | 1,571,000 | - | $ | 17,452,000 | ||||||||||||||
Depreciation and amortization | 570,000 | 170,000 | 2,225,000 | 1,000 | 2,966,000 | ||||||||||||||||
Interest expense | 165,000 | - | 5,000 | 76,000 | 246,000 | ||||||||||||||||
Stock based compensation | - | - | - | 1,895,000 | 1,895,000 | ||||||||||||||||
Impairment of goodwill | - | - | 239,000 | - | 239,000 | ||||||||||||||||
Income tax benefit | - | - | - | (10,949,000 | ) | (10,949,000 | ) | ||||||||||||||
Net income (loss) | 676,000 | 89,000 | (3,968,000 | ) | 5,797,000 | 2,594,000 | |||||||||||||||
Capital expenditures | 1,889,000 | 15,000 | 2,864,000 | 12,000 | 4,780,000 | ||||||||||||||||
Identifiable assets | 9,170,000 | 2,125,000 | 55,193,000 | 854,000 | 67,342,000 | ||||||||||||||||
International revenue, which consists of sales to customers with operations in Canada, Western Europe, Latin America, Africa, the Middle East and Asia comprised 2% of total revenue for 2014, (2%- 2013). Revenue is allocated to individual countries by customer based on where the product is shipped to, location of services performed or the location of equipment that is under an annual maintenance agreement. The Company had no long-lived assets in any country other than the United States for any period presented. | |||||||||||||||||||||
Major Customers - During 2014, two customers accounted for 40% of the Company's consolidated revenue. As of December 31, 2014, these two customers accounted for 27% of the Company's trade accounts receivable balance. During 2013, these same two customers accounted for 35% of the Company's consolidated revenue. As of December 31, 2013, these two customers accounted for 30% of the Company's trade accounts receivable balance. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||
Principles of Consolidation | Principles of Consolidation - The consolidated financial statements include the accounts of Document Security System and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | ||||||||||||
Use of Estimates | Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable, fair values of intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company's common stock, deferred revenue and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The Company engages third-party valuation consultants to assist management in the allocation of the purchase price of significant acquisitions, and the determination of the fair value of derivative liabilities. | ||||||||||||
Reclassifications | Reclassifications - Certain prior year amounts have been reclassified to conform to the current year presentation. | ||||||||||||
Restricted Cash | Restricted Cash –As of December 31, 2014, cash of $355,793 ($500,000 – December 31, 2013) is restricted for payments of costs and expenses associated with one of the Company's IP monetization programs. | ||||||||||||
Accounts Receivable | Accounts Receivable - The Company carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management's estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. At December 31, 2014, the Company established a reserve for doubtful accounts of approximately $60,000 ($60,000 – 2013). The Company does not accrue interest on past due accounts receivable. | ||||||||||||
Inventory | Inventory - Inventories consist primarily of paper, plastic materials and cards, pre-printed security paper, paperboard and fully-prepared packaging which and are stated at the lower of cost or market on the first-in, first-out (“FIFO”) method. Packaging work-in-process and finished goods included the cost of materials, direct labor and overhead. | ||||||||||||
Property, Plant and Equipment | Property, Plant and Equipment - Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives or lease period of the assets whichever is shorter. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Any gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place. Depreciation expense in 2014 was approximately $622,000 ($560,000 - 2013). | ||||||||||||
Investments | Investments – The Company's investments consist of non-recourse promissory notes and common stock of VirtualAgility, Inc (“VirtualAgility”) and common stock of Express Mobile. The Company does not control nor exert significant influence over its investments and therefore carries the investments at cost. The VirtualAgility investment is held by the Company's subsidiary, VirtualAgility Technology Investment, LLC (“VATI”) of which the Company owned 60% on December 31, 2014. Management determined the Company has control over VATI, and has consolidated VATI in the accompanying consolidated Financial Statements. The portion of capital owned by the minority owner of VATI is shown as non-controlling interest on the balance sheet. | ||||||||||||
Business Combinations | Business Combinations - Business combinations are recorded in accordance with FASB ASC 805. Under the guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair values is recorded as goodwill. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed then a gain on acquisition is recorded. Under the guidance, all acquisition costs are expensed as incurred. The application of business combination and impairment accounting requires the use of significant estimates and assumptions. | ||||||||||||
Goodwill | Goodwill - Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicated the carrying amount may be impaired. FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. The Company tests goodwill for impairment at least annually in conjunction with preparation of its annual business plan, or more frequently if events or circumstances indicate it might be impaired. FASB ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. During the Company's annual assessment of goodwill in 2014, the Company assessed that the negative trends in patent litigation that have recently reduced the success of patent owners in protecting their patents in the federal court system had impaired the Company's goodwill assigned to its DSS Technology Management division and accordingly, the Company recorded a $3,000,000 goodwill impairment charge to the goodwill assigned to its DSS Technology Management division. | ||||||||||||
Other Intangible Assets and Patent Application Costs | Other Intangible Assets and Patent Application Costs - Other intangible assets consists of costs associated with the application for patents, acquisition of patents and contractual rights to patents and trade secrets associated with the Company's technologies. The Company's patents and trade secrets are generally for document anti-counterfeiting and anti-scanning technologies and processes that form the basis of the Company's document security business. Patent application costs are capitalized and amortized over the estimated useful life of the patent, which generally approximates its legal life. In addition, intangible assets include customer lists and non-compete agreements obtained as a result of acquisitions. Intangible asset amortization expense is classified as an operating expense. The Company believes that the decision to incur patent costs is discretionary as the associated products or services can be sold prior to or during the application process. The Company accounts for other intangible amortization as an operating expense, unless the underlying asset is directly associated with the production or delivery of a product. Subsequent to acquisition of patents and trade secrets, legal and associated costs incurred in prosecuting alleged infringements of the patents will be recognized as expense when incurred. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, and patent defense costs are expensed as incurred. To date, the amount of related amortization expense for other intangible assets directly attributable to revenue recognized is not material. | ||||||||||||
Impairment of Long Lived Assets | Impairment of Long Lived Assets - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. | ||||||||||||
On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendant Facebook, Inc. in connection with a lawsuit filed on October 3, 2012 by Plaintiff Bascom Research, LLC (a subsidiary of Document Security Systems, Inc., the “Company”) alleging patent infringement. As a result of the Court's decision, the Company evaluated the valuation of the patents that were the basis of the case for impairment as of December 31, 2014. The Company determined that since the patents had been invalidated the probability of future cash flows derived from the patents that would support the value of the assets had decreased so that the assets had been impaired. As a result, the Company recorded an impairment charge for the underlying patent assets of the net book value of the patents as of December 31, 2014 of approximately $22,285,000. | |||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the FASB ASC establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: | ||||||||||||
• | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | ||||||||||||
• | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | ||||||||||||
• | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | ||||||||||||
The carrying amounts reported in the balance sheet of cash, accounts receivable, prepaids, notes receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of revolving credit lines, notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. Derivative instruments, as discussed below, are recorded as assets and liabilities at estimated fair value based on available market information. The Company's convertible note payable is recorded at its face amount, net of an unamortized premium for a beneficial conversion feature and has an estimated fair value of approximately $117,000 ($539,000 - December 31, 2013) based on the underlying shares the note can be converted into at the trading price on December 31, 2014. Since the underlying shares are trading in an active, observable market, the fair value measurement qualifies as a Level 1 input. See Note 5 for additional details regarding the fair value of the Company's investments in notes receivable. | |||||||||||||
Derivative Instruments | Derivative Instruments - The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility. The Company has two interest rate swaps that change variable rates into fixed rates on two term loans. These swaps qualify as Level 2 fair value financial instruments. These swap agreements are not held for trading purposes and the Company does not intend to sell the derivative swap financial instruments. The Company records the interest swap agreements on the balance sheet at fair value because the agreements qualify as a cash flow hedges under accounting principles generally accepted in the United States of America. Gains and losses on these instruments are recorded in other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) (AOCI) to the Consolidated Statement of Operations on the same line item as the underlying transaction. The valuations of the interest rate swaps have been derived from proprietary models of the bank based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swaps decrease over the life of the agreements. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreements. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to this cash flow hedge recorded in accumulated other comprehensive loss and other liabilities as of December 31, 2014 were approximately $61,000 ($28,000 - December 31, 2013). | ||||||||||||
The Company has notional amounts of approximately $1,128,000 as of December 31, 2014 on its interest rate swap agreements for its Citizens Bank debt. The Company has two interest rate swaps that change variable rates into fixed rates on two term loans and the terms of these instruments are as follows: | |||||||||||||
Notional Amount | Variable Rate | Fixed Cost | Maturity Date | ||||||||||
$ | 50,000 | 3.91 | % | 5.7 | % | 1-Feb-15 | |||||||
$ | 1,078,220 | 3.32 | % | 5.87 | % | 30-Aug-21 | |||||||
Conventional Convertible Debt | Conventional Convertible Debt - When the convertible feature of a conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF"). Prior to the determination of the BCF, the proceeds from the debt instrument are first allocated between the convertible debt and any detachable free standing instruments that are included, such as common stock warrants. The Company records a BCF as a debt discount pursuant to FASB ASC Topic 470-20. In those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | ||||||||||||
Share-Based Payments | Share-Based Payments - Compensation cost for stock awards are measured at fair value and the Company recognizes compensation expense over the service period for which awards are expected to vest. The Company uses the Black-Scholes-Merton option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes-Merton model requires the use of subjective assumptions which determine the fair value of stock-based awards, including the option's expected term and the price volatility of the underlying stock. For equity instruments issued to consultants and vendors in exchange for goods and services the Company determines the measurement date for the fair value of the equity instruments issued at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | ||||||||||||
Revenue Recognition | Revenue Recognition - Sales of printed products including commercial and security printing, packaging, and plastic cards are recognized when a product or service is delivered, shipped or provided to the customer and all material conditions relating to the sale have been substantially performed. | ||||||||||||
For technology sales and services, revenue is recognized in accordance with the FASB ASC 985-605. Accordingly, revenue is recognized when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service or product has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is reasonably assured. We recognize cloud computing revenue, including data backup, recovery and security services, on a monthly basis, beginning on the date the customer commences use of our services. Professional services are recognized in the period services are provided. | |||||||||||||
For printing technology licenses revenue is recognized once all the following criteria for revenue recognition have been met: (1) persuasive evidence of an agreement exists; (2) the right and ability to use the product or technology has been rendered; (3) the fee is fixed and determinable and not subject to refund or adjustment; and (4) collection of the amounts due is reasonably assured. | |||||||||||||
For other technology licenses, revenue arrangements generally provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. These rights typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. Pursuant to the terms of these agreements, the Company has no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on the Company's part to maintain or upgrade the technology, or provide future support or services. Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals. As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectability is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met. | |||||||||||||
Certain of the Company's revenue arrangements provide for future royalties or additional required payments based on future licensee activities. Additional royalties are recognized in revenue upon resolution of the related contingency provided that all revenue recognition criteria, as described above, have been met. Amounts of additional royalties due under these license agreements, if any, cannot be reasonably estimated by management. | |||||||||||||
Costs of Revenue | Costs of revenue - Costs of revenue includes all direct cost of the Company's packaging, commercial and security printing and plastic ID card sales, primarily, paper, plastic, inks, dies, and other consumables, and direct labor, transportation and manufacturing facility costs. In addition, this category includes all direct costs associated with the Company's technology sales, services and licensing including hardware and software that is resold, third-party fees, and fees paid to inventors or others as a result of technology licenses or settlements, if any. Costs of revenue recorded in the DSS Technology Management group include contingent legal fees, inventor royalties, legal, consulting and other professional fees directly related to the Company's patent monetization, litigation and licensing activities. Amortization of patent costs and acquired technology are included in depreciation and amortization on the consolidated statement of operations. Costs of revenue do not include expenses related to product development, integration, and support. These costs are included in research and development, which is a component of selling, general and administrative expenses on the consolidated statement of operations. Legal costs are included in selling, general and administrative. | ||||||||||||
Contingent Legal Expenses | Contingent Legal Expenses - Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period a conclusion is reached in an enforcement action that does not yield future royalties potential. | ||||||||||||
Advertising Costs | Advertising Costs – Generally consist of online, keyword advertising with Google with additional amounts spent on certain print media in targeted industry publications. Advertising costs were approximately $39,000 in 2014 ($48,000 – 2013). | ||||||||||||
Research and Development | Research and Development - Research and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs for research personnel, third-party research costs, and consulting costs. The Company spent approximately $462,000 and $254,000 on research and development during 2014 and 2013, respectively. | ||||||||||||
Income Taxes | Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense. | ||||||||||||
Earnings Per Common Share | Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. | ||||||||||||
As of December 31, 2014 and 2013, there were 12,019,194 and 18,750,840, respectively, of common stock share equivalents potentially issuable under convertible debt agreements, employment agreements, options, warrants, and restricted stock agreements that could potentially dilute basic earnings per share in the future. The amount as of December 31, 2013 also includes common shares held in escrow pursuant to the Merger Agreement that did not vest prior to their expiration on July 1, 2014. For the year ended December 31, 2013, based on the average market price of the Company's common stock during that period of $1.98, 46,364 common stock equivalents were added to the basic shares outstanding to calculate dilutive earnings per share. Common stock equivalents were excluded from the calculation of diluted earnings per share for 2014 in which the Company had a net loss, since their inclusion would have been anti-dilutive. | |||||||||||||
Comprehensive Income (Loss) | Comprehensive Income (Loss) - Comprehensive income (loss) is defined as the change in equity of the Company during a period from transactions and other events and circumstances from non-owner sources. It consists of net income (loss) and other income and losses affecting stockholders' equity that, under GAAP, are excluded from net income (loss). The change in fair value of interest rate swaps was the only item impacting accumulated other comprehensive loss for the years ended December 31, 2014 and 2013. | ||||||||||||
Concentration of Credit Risk | Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions. | ||||||||||||
During 2014, two customers accounted for 40% of the Company's consolidated revenue. As of December 31, 2014, these two customers accounted for 25% of the Company's trade accounts receivable balance. During 2013, these same two customers accounted for 35% of the Company's consolidated revenue. As of December 31, 2013, these two customers accounted for 30% of the Company's trade accounts receivable balance. | |||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements - In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company has not yet selected a transition method and its currently evaluating the effect that the updated standard will have on its financial statements and related disclosures. | ||||||||||||
In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe the adoption of this ASU will have a significant impact on its financial statements. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||
Schedule of Derivative Instruments | Notional Amount | Variable Rate | Fixed Cost | Maturity Date | |||||||||
$ | 50,000 | 3.91 | % | 5.7 | % | 1-Feb-15 | |||||||
$ | 1,078,220 | 3.32 | % | 5.87 | % | 30-Aug-21 |
INVENTORY_Tables
INVENTORY (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INVENTORY [Abstract] | |||||||||||||
Schedule of Inventory | 2014 | 2013 | |||||||||||
Finished Goods | $ | 572,695 | $ | 395,767 | |||||||||
Work in process | 123,611 | 129,627 | |||||||||||
Raw Materials | 172,956 | 309,585 | |||||||||||
$ | 869,262 | $ | 834,979 |
PROPERTY_PLANT_AND_EQUIPMENT_T
PROPERTY PLANT AND EQUIPMENT (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
PROPERTY PLANT AND EQUIPMENT [Abstract] | |||||||||||||
Schedule of Property, Plant and Equipment | Property, plant and equipment consisted of the following at December 31: | ||||||||||||
2014 | 2013 | ||||||||||||
Estimated | Purchased | Purchased | |||||||||||
Useful Life | |||||||||||||
Machinery and equipment | 5-10 years | $ | 5,156,060 | $ | 5,109,121 | ||||||||
Building and improvements | 39 years | 1,913,727 | 1,655,613 | ||||||||||
Land | 185,000 | 185,000 | |||||||||||
Leasehold improvements | See(1) | 818,846 | 774,912 | ||||||||||
Furniture and fixtures | 7 years | 163,300 | 138,135 | ||||||||||
Software and websites | 3 years | 439,373 | 359,308 | ||||||||||
Total cost | $ | 8,676,306 | $ | 8,222,089 | |||||||||
Less accumulated depreciation | 3,659,767 | 3,064,237 | |||||||||||
Property, plant, and equipment, net | $ | 5,016,539 | $ | 5,157,852 | |||||||||
(1) Expected lease term between 3 and 10 years. | |||||||||||||
INTANGIBLE_ASSETS_AND_GOODWILL1
INTANGIBLE ASSETS AND GOODWILL (Tables) | 12 Months Ended | ||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||
INTANGIBLE ASSETS AND GOODWILL [Abstract] | |||||||||||||||||||||||||||
Schedule of Other Intangible Assets | 31-Dec-14 | 31-Dec-13 | |||||||||||||||||||||||||
Useful Life | Gross Carrying | Accumulated | Net Carrying | Gross Carrying | Accumulated | Net Carrying | |||||||||||||||||||||
Amount | Amortizaton | Amount | Amount | Amortizaton | Amount | ||||||||||||||||||||||
Acquired intangibles- customer lists and non-compete agreements | 5 -10 years | 1,997,300 | 1,532,123 | 465,177 | 1,997,300 | 1,343,819 | 653,481 | ||||||||||||||||||||
Acquired intangibles-patents and patent rights | Varied (1) | 3,650,000 | 852,343 | 2,797,657 | 30,356,164 | 2,042,083 | 28,314,081 | ||||||||||||||||||||
Patent application costs | Varied (2) | 1,058,833 | 413,268 | 645,565 | 965,523 | 330,494 | 635,029 | ||||||||||||||||||||
$ | 6,706,133 | $ | 2,797,734 | $ | 3,908,399 | $ | 33,318,987 | $ | 3,716,396 | $ | 29,602,591 | ||||||||||||||||
Schedule of Estimated Future Amortization of Intangible Assets | |||||||||||||||||||||||||||
Year | Amount | ||||||||||||||||||||||||||
2015 | $ | 894,000 | |||||||||||||||||||||||||
2016 | $ | 692,000 | |||||||||||||||||||||||||
2017 | $ | 673,000 | |||||||||||||||||||||||||
2018 | $ | 537,000 | |||||||||||||||||||||||||
2019 | $ | 265,000 | |||||||||||||||||||||||||
Schedule of Goodwill | Packaging | Plastics | Technology | Total | |||||||||||||||||||||||
Segment | Segment | Segment | |||||||||||||||||||||||||
Balance as of January 1, 2013 | |||||||||||||||||||||||||||
Goodwill | $ | 1,768,400 | $ | 684,949 | $ | 869,450 | $ | 3,322,799 | |||||||||||||||||||
Accumulated impairment losses | - | - | - | - | |||||||||||||||||||||||
1,768,400 | 684,949 | 869,450 | 3,322,799 | ||||||||||||||||||||||||
Goodwill acquired during the year | - | - | 11,962,324 | 11,962,324 | |||||||||||||||||||||||
Impairment losses | - | - | (238,926 | ) | (238,926 | ) | |||||||||||||||||||||
Balance as of December 31, 2013 | |||||||||||||||||||||||||||
Goodwill | 1,768,400 | 684,949 | 12,831,774 | 15,285,123 | |||||||||||||||||||||||
Accumulated impairment losses | - | - | (238,926 | ) | (238,926 | ) | |||||||||||||||||||||
1,768,400 | 684,949 | 12,592,848 | 15,046,197 | ||||||||||||||||||||||||
Goodwill acquired during the year | - | - | - | - | |||||||||||||||||||||||
Impairment losses | - | - | (3,000,000 | ) | (3,000,000 | ) | |||||||||||||||||||||
Balance as of December 31, 2014 | |||||||||||||||||||||||||||
Goodwill | 1,768,400 | 684,949 | 12,831,774 | 15,285,123 | |||||||||||||||||||||||
Accumulated impairment losses | - | - | (3,238,926 | ) | (3,238,926 | ) | |||||||||||||||||||||
$ | 1,768,400 | $ | 684,949 | $ | 9,592,848 | $ | 12,046,197 |
SHORT_TERM_AND_LONG_TERM_DEBT_
SHORT TERM AND LONG TERM DEBT (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
SHORT TERM AND LONG TERM DEBT [Abstract] | |||||
Schedule of Notes Payable and Long-Term Debt | Year | Amount | |||
2015 | $ | 754,745 | |||
2016 | $ | 1,452,963 | |||
2017 | $ | 363,945 | |||
2018 | $ | 4,468,510 | |||
2019 | $ | 80,070 | |||
Thereafter | $ | 1,073,548 | |||
Total | $ | 8,193,781 |
STOCKHOLDERS_EQUITY_Tables
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Warrant Activity | 2014 | 2013 | |||||||||||||||||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
Average | Average | ||||||||||||||||||||||||||||||||||||
Exercise | Exercise | ||||||||||||||||||||||||||||||||||||
Warrants | Price | Warrants | Price | ||||||||||||||||||||||||||||||||||
Outstanding January 1 | 6,875,586 | $ | 4.64 | 2,255,692 | $ | 4.34 | |||||||||||||||||||||||||||||||
Granted during the year | 100,000 | 1.56 | 8,342,064 | 2.82 | |||||||||||||||||||||||||||||||||
Exercised/transferred | (80,645 | ) | 3.1 | (3,472,170 | ) | 0.04 | |||||||||||||||||||||||||||||||
Lapsed/terminated | (328,556 | ) | 2.91 | (250,000 | ) | 5.1 | |||||||||||||||||||||||||||||||
Outstanding at December 31 | 6,566,385 | $ | 4.7 | 6,875,586 | $ | 4.64 | |||||||||||||||||||||||||||||||
Exercisable at December 31 | 6,535,274 | $ | 4.71 | 6,742,253 | $ | 4.64 | |||||||||||||||||||||||||||||||
Weighted average months remaining | 40 | 49.8 | |||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity Under Stock Option and Incentive Plans | 2014 | 2013 | |||||||||||||||||||||||||||||||||||
Number of | Weighted | Weighted | Number of | Weighted | Weighted | ||||||||||||||||||||||||||||||||
Options | Average | Average Life | Options | Average | Average Life | ||||||||||||||||||||||||||||||||
Exercise Price | Remaining | Exercise Price | Remaining | ||||||||||||||||||||||||||||||||||
(in years) | (in years) | ||||||||||||||||||||||||||||||||||||
Outstanding at January 1: | 4,073,898 | 3.25 | - | ||||||||||||||||||||||||||||||||||
Transferred | - | - | 1,980,898 | 3.65 | |||||||||||||||||||||||||||||||||
Granted | 1,172,197 | 1.96 | 2,150,000 | 2.89 | |||||||||||||||||||||||||||||||||
Exercised | - | - | (20,000 | ) | 1.86 | ||||||||||||||||||||||||||||||||
Lapsed/terminated | (317,804 | ) | 3.56 | (37,000 | ) | 6.31 | |||||||||||||||||||||||||||||||
Outstanding at December 31: | 4,928,291 | 2.92 | 4 | 4,073,898 | 3.25 | 5.7 | |||||||||||||||||||||||||||||||
Exercisable at December 31: | 2,806,696 | 2.94 | 5 | 1,718,024 | 3.25 | 4.3 | |||||||||||||||||||||||||||||||
Expected to vest at December 31: | 1,660,169 | 2.46 | 5.8 | 1,905,874 | 2.95 | 7.8 | |||||||||||||||||||||||||||||||
Aggregate intrinsic value of outstanding options at December 31: | $ | - | $ | 104,700 | |||||||||||||||||||||||||||||||||
Aggregate intrinsic value of exercisable options at December 31: | $ | - | $ | 37,365 | |||||||||||||||||||||||||||||||||
Aggregate intrinsic value of options expected to vest at December 31: | $ | - | $ | 67,335 | |||||||||||||||||||||||||||||||||
Schedule of Assumptions Used to Compute the Share-based Compensation Expense for Stock Options and Warrants | 2014 | 2013 | |||||||||||||||||||||||||||||||||||
Volatility | 67.1 | % | 60.9 | % | |||||||||||||||||||||||||||||||||
Expected option term | 3.5years | 5.7years | |||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.9 | % | 1.6 | % | |||||||||||||||||||||||||||||||||
Expected forfeiture rate | 0 | % | 0 | % | |||||||||||||||||||||||||||||||||
Expected dividend yield | 0 | % | 0 | % | |||||||||||||||||||||||||||||||||
Summary of Restricted Stock | Shares | Weighted- average | |||||||||||||||||||||||||||||||||||
Grant Date Fair | |||||||||||||||||||||||||||||||||||||
Value | |||||||||||||||||||||||||||||||||||||
Restricted shares outstanding, December 31, 2012 | 61,764 | $ | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares granted | - | - | |||||||||||||||||||||||||||||||||||
Restricted shares vested | (20,588 | ) | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares outstanding, December 31, 2013 | 41,176 | $ | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares granted | 243,750 | 0.48 | |||||||||||||||||||||||||||||||||||
Restricted shares vested | (20,588 | ) | 3.33 | ||||||||||||||||||||||||||||||||||
Restricted shares outstanding, December 31, 2014 | 264,338 | $ | 0.7 |
BUSINESS_COMBINATION_Tables
BUSINESS COMBINATION (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
BUSINESS COMBINATION [Abstract] | |||||
Schedule of Business Combination | ($ -in | ||||
thousands) | |||||
Current assets, net of current liabilities | $ | 6,252 | |||
Deposits and non-current assets | 9 | ||||
Investments at fair value | 10,750 | ||||
Other intangible assets- patent and patent rights | 27,856 | ||||
Goodwill | 11,962 | ||||
56,829 | |||||
Deferred tax liability, net | 11,962 | ||||
44,867 | |||||
Non-controlling interest in subsidiary | (4,300 | ) | |||
Total purchase price | $ | 40,567 | |||
Consideration issued: | |||||
Fair value of 16,317,828 shares of DSS common stock issued to DSS Technology Management stockholders | $ | 30,514 | |||
Fair value of 7,100,000 shares of DSS common stock issued to DSS Technology Management stockholders to be held in escrow for up to one year | 901 | ||||
Fair value of options to purchase 2,000,000 shares DSS common stock for $3.00 per share exchanged for options to purchase DSS Technology Management's common stock that were granted to DSS Technology Management's employees which relate to pre-combination services | 141 | ||||
Fair value of warrants to purchase up to 4,859,894 shares of DSS common stock for $4.80 per share issued to DSS Technology Management shareholders | 2,661 | ||||
Fair value of warrants to purchase 3,432,170 shares of DSS common stock for $0.02 per share issued to certain DSS Technology Management stockholders | 6,350 | ||||
Total purchase price | $ | 40,567 | |||
Summary of Unaudited Pro Forma Financial Information | (unaudited) | Year Ended | |||
31-Dec-13 | |||||
Revenue | $ | 18,046,000 | |||
Operating Loss | (11,527,000 | ) | |||
Net loss | (12,489,000 | ) | |||
Earnings per share: | |||||
Basic and diluted | $ | (0.24 | ) |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INCOME TAXES [Abstract] | |||||||||||||
Schedule of Income Tax Provision | 2014 | 2013 | |||||||||||
Currently payable: | |||||||||||||
Federal | $ | - | $ | - | |||||||||
State | 6,735 | - | |||||||||||
Total currently payable | 6,735 | - | |||||||||||
Deferred: | |||||||||||||
Federal | (13,939,671 | ) | (2,217,527 | ) | |||||||||
State | 488,406 | (528,872 | ) | ||||||||||
Total deferred | (13,451,265 | ) | (2,746,399 | ) | |||||||||
Less: (decrease) increase in allowance | 12,455,900 | (8,202,476 | ) | ||||||||||
Net deferred | (995,365 | ) | (10,948,875 | ) | |||||||||
Total income tax benefit | $ | (988,630 | ) | $ | (10,948,875 | ) | |||||||
Schedule of Deferred Tax Assets and Liabilities | Individual components of deferred taxes are as follows: | ||||||||||||
2014 | 2013 | ||||||||||||
Deferred tax assets: | |||||||||||||
Net operating loss carry forwards | $ | 16,104,083 | $ | 15,960,340 | |||||||||
Equity issued for services | 1,050,348 | 721,934 | |||||||||||
Goodwill and other intangibles | 773,019 | 218,896 | |||||||||||
Investment in pass-through entity | 268,476 | - | |||||||||||
Other | 591,259 | 338,087 | |||||||||||
Gross deferred tax assets | 18,787,185 | 17,239,257 | |||||||||||
Deferred tax liabilities: | |||||||||||||
Goodwill and other intangibles | $ | 312,277 | $ | 9,827,201 | |||||||||
Depreciation and amortization | 312,823 | 286,520 | |||||||||||
Investment in pass-through entity | - | 2,414,716 | |||||||||||
Gross deferred tax liabilities | $ | 625,100 | $ | 12,528,437 | |||||||||
Less valuation allowance | (18,307,844 | ) | (5,851,944 | ) | |||||||||
Net deferred tax liabilities | $ | (145,759 | ) | $ | (1,141,124 | ) | |||||||
Schedule of Effective Income Tax Rate Reconciliation | 2014 | 2013 | |||||||||||
Statutory United States federal rate | 34 | % | 34 | % | |||||||||
State income taxes net of federal benefit | (0.7 | ) | 4.2 | ||||||||||
Noncontrolling interest in pass-through entity | (3.4 | ) | - | ||||||||||
Permanent differences | (2.3 | ) | (4.5 | ) | |||||||||
Other | 1.1 | (0.8 | ) | ||||||||||
Change in valuation reserves | (26.6 | ) | 98.1 | ||||||||||
Effective tax rate | 2.1 | % | 131 | % |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
COMMITMENTS AND CONTINGENCIES [Abstract] | |||||||||||||
Schedule of Future Minimum Payments Under Operating Leases | Operating Leases | ||||||||||||
Equipment | Facilities | Total | |||||||||||
Payments made in 2014 | $ | 30,540 | $ | 513,669 | $ | 544,209 | |||||||
Future minimum lease commitments: | |||||||||||||
2015 | 16,907 | 337,738 | 354,645 | ||||||||||
2016 | 5,241 | 164,183 | 169,424 | ||||||||||
2017 | 874 | 169,109 | 169,983 | ||||||||||
2018 | - | 174,182 | 174,182 | ||||||||||
2019 | - | - | - | ||||||||||
Total future minimum lease commitments | $ | 23,022 | $ | 845,212 | $ | 868,234 |
SUPPLEMENTAL_CASH_FLOW_INFORMA1
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION [Abstract] | |||||||||||||
Schedule of Supplemental Cash Flow Information | 2014 | 2013 | |||||||||||
Cash paid for interest | $ | 298,000 | $ | 246,000 | |||||||||
Non-cash investing and financing activities: | |||||||||||||
Equity issued for acquisition | $ | - | $ | 40,567,000 | |||||||||
Accrued liabilities with related parties settled with equity | $ | 134,000 | $ | - | |||||||||
Financing of building improvements | $ | 200,000 | $ | - | |||||||||
Change in non-controlling interest | $ | (4,700,000 | ) | $ | - | ||||||||
(Loss) gain from change in fair value of interest rate swap derivative | $ | (34,000 | ) | $ | 100,000 | ||||||||
Warrants issued with debt | $ | - | $ | 69,000 | |||||||||
Accounts payable converted to debt | $ | - | $ | 153,000 | |||||||||
Financing of equipment purchase and building improvements | $ | - | $ | 2,404,000 | |||||||||
Intrinsic value of beneficial conversion feature at reaquisition | $ | - | $ | 75,000 | |||||||||
Escrow shares retired | $ | 150,000 | $ | - |
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||
SEGMENT INFORMATION [Abstract] | |||||||||||||||||||||
Schedule of Operations by Reportable Segment | |||||||||||||||||||||
Year Ended December 31, 2014 | Packaging and | Plastics | Technology | Corporate | Total | ||||||||||||||||
Printing | |||||||||||||||||||||
Revenues from external customers | $ | 12,926,000 | 3,552,000 | 1,809,000 | - | $ | 18,287,000 | ||||||||||||||
Depreciation and amortization | 567,000 | 171,000 | 4,532,000 | 4,000 | 5,274,000 | ||||||||||||||||
Interest expense | 156,000 | 7,000 | 54,000 | 100,000 | 317,000 | ||||||||||||||||
Stock based compensation | 121,000 | 69,000 | 155,000 | 1,010,000 | 1,355,000 | ||||||||||||||||
Impairment of goodwill | - | - | 3,000,000 | - | 3,000,000 | ||||||||||||||||
Impairment of intangible assets and investments | - | - | 34,035,000 | - | 34,035,000 | ||||||||||||||||
Loss attributable to noncontrolling interest | - | - | (4,700,000 | ) | - | (4,700,000 | ) | ||||||||||||||
Income tax benefit | - | - | - | (989,000 | ) | (989,000 | ) | ||||||||||||||
Net income (loss) to common stockholders | 842,000 | (106,000 | ) | (38,843,000 | ) | (3,050,000 | ) | (41,157,000 | ) | ||||||||||||
Capital expenditures | 717,000 | 131,000 | 1,244,000 | - | 2,092,000 | ||||||||||||||||
Identifiable assets | 8,873,000 | 1,872,000 | 14,872,000 | 2,136,000 | 27,753,000 | ||||||||||||||||
Year Ended December 31, 2013 | Packaging and | Plastics | Technology | Corporate | Total | ||||||||||||||||
Printing | |||||||||||||||||||||
Revenues from external customers | $ | 12,242,000 | 3,639,000 | 1,571,000 | - | $ | 17,452,000 | ||||||||||||||
Depreciation and amortization | 570,000 | 170,000 | 2,225,000 | 1,000 | 2,966,000 | ||||||||||||||||
Interest expense | 165,000 | - | 5,000 | 76,000 | 246,000 | ||||||||||||||||
Stock based compensation | - | - | - | 1,895,000 | 1,895,000 | ||||||||||||||||
Impairment of goodwill | - | - | 239,000 | - | 239,000 | ||||||||||||||||
Income tax benefit | - | - | - | (10,949,000 | ) | (10,949,000 | ) | ||||||||||||||
Net income (loss) | 676,000 | 89,000 | (3,968,000 | ) | 5,797,000 | 2,594,000 | |||||||||||||||
Capital expenditures | 1,889,000 | 15,000 | 2,864,000 | 12,000 | 4,780,000 | ||||||||||||||||
Identifiable assets | 9,170,000 | 2,125,000 | 55,193,000 | 854,000 | 67,342,000 | ||||||||||||||||
DESCRIPTION_OF_BUSINESS_Detail
DESCRIPTION OF BUSINESS (Details) (USD $) | 0 Months Ended | 12 Months Ended | |
Jan. 05, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
DESCRIPTION OF BUSINESS [Abstract] | |||
Impairment of assets | $22,285,000 | $34,034,862 | $277,800 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||
Jan. 05, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Jul. 02, 2013 | |
Significant Accounting Policies [Line Items] | ||||
Accounts receivable, allowance | $60,000 | $60,000 | ||
Depreciation expense | 622,000 | 560,000 | ||
Net gain (loss) attributable to cash flow hedge | 61,000 | 28,000 | ||
Derivative notional amount | 1,128,000 | |||
Advertising costs | 39,000 | 48,000 | ||
Research and development | 462,000 | 254,000 | ||
Antidilutive securities | 12,019,194 | 18,750,840 | ||
Average stock price | $1.98 | |||
Debt instrument, fair value | 117,000 | 539,000 | ||
Equity ownership percentage | 9.99% | |||
Impairment of assets | 22,285,000 | 34,034,862 | 277,800 | |
Dilutive securities | 46,364 | |||
Impairment of goodwill | $3,000,000 | $238,926 | ||
VATI [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Equity ownership percentage | 60.00% | |||
Revenues [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration of credit risk, percentage | 40.00% | 35.00% | ||
Accounts Receivable [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Concentration of credit risk, percentage | 25.00% | 30.00% |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Derivative Instrument) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Derivative [Line Items] | |
Notional Amount | $1,128,000 |
Matures February 1, 2015 [Member] | |
Derivative [Line Items] | |
Notional Amount | 50,000 |
Variable Rate | 3.91% |
Fixed Cost | 5.70% |
Maturity Date | 1-Feb-15 |
Matures August 30, 2021 [Member] | |
Derivative [Line Items] | |
Notional Amount | $1,078,220 |
Variable Rate | 3.32% |
Fixed Cost | 5.87% |
Maturity Date | 30-Aug-21 |
INVENTORY_Details
INVENTORY (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
INVENTORY [Abstract] | ||
Finished Goods | $572,695 | $395,767 |
Work in process | 123,611 | 129,627 |
Raw Materials | 172,956 | 309,585 |
Inventory | $869,262 | $834,979 |
PROPERTY_PLANT_AND_EQUIPMENT_D
PROPERTY PLANT AND EQUIPMENT (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | $8,676,306 | $8,222,089 | ||
Less accumulated depreciation, Purchased | 3,659,767 | 3,064,237 | ||
Property, plant, and equipment, net, Purchased | 5,016,539 | 5,157,852 | ||
Machinery and equipment [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | 5,156,060 | 5,109,121 | ||
Machinery and equipment [Member] | Minimum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Property and equipment, estimated useful life | 5 years | |||
Machinery and equipment [Member] | Maximum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Property and equipment, estimated useful life | 10 years | |||
Building and improvements [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | 1,913,727 | 1,655,613 | ||
Property and equipment, estimated useful life | 39 years | |||
Land [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | 185,000 | 185,000 | ||
Leasehold improvements [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | 818,846 | [1] | 774,912 | [1] |
Leasehold improvements [Member] | Minimum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Property and equipment, estimated useful life | 3 years | |||
Leasehold improvements [Member] | Maximum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Property and equipment, estimated useful life | 10 years | |||
Furniture and Fixtures [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | 163,300 | 138,135 | ||
Property and equipment, estimated useful life | 7 years | |||
Software and websites [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Total cost, Purchased | $439,373 | $359,308 | ||
Property and equipment, estimated useful life | 3 years | |||
[1] | (1) Expected lease term between 3 and 10 years. |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | 1 Months Ended | 3 Months Ended | 1 Months Ended | |||||||||||
31-May-14 | Feb. 14, 2014 | Nov. 30, 2013 | Aug. 31, 2013 | Jul. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Feb. 28, 2014 | Jan. 31, 2014 | 31-May-13 | Jul. 02, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jul. 01, 2013 | |
Related Party Transaction [Line Items] | ||||||||||||||
Equity ownership percentage | 9.99% | |||||||||||||
VATI [Member] | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Initial investment, non-recourse note | $200,000 | |||||||||||||
Percent of outstanding common stock | 7.00% | |||||||||||||
Total cash investment | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | |||||||||
Preferred return on each non-recourse note | 1,250,000 | |||||||||||||
Aggregate investment | 2,000,000 | |||||||||||||
Additional quarterly investments | 250,000 | |||||||||||||
Cost of investment | 11,750,000 | 11,250,000 | ||||||||||||
Investment owned shares | 594,530 | 657,119 | 438,401 | |||||||||||
Aggregate preferred return | 10,750,000 | |||||||||||||
Non-recourse notes | 1,600,000 | |||||||||||||
Equity ownership percentage | 60.00% | |||||||||||||
Variable return percentage | 1.88% | |||||||||||||
Impairment of investment | 7,050,000 | |||||||||||||
DSS Technology Management [Member] | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Percent of outstanding common stock | 7.00% | 6.00% | ||||||||||||
Total cash investment | 400,000 | 100,000 | ||||||||||||
Aggregate preferred return | 10,000,000 | |||||||||||||
Equity ownership percentage | 60.00% | 60.00% | 60.00% | |||||||||||
Variable return percentage | 15.00% | |||||||||||||
Third Party Investor [Member] | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Total cash investment | 250,000 | |||||||||||||
Equity ownership percentage | 40.00% | |||||||||||||
Parent [Member] | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Impairment of investment | 11,750,000 | |||||||||||||
Noncontrolling Interest [Member] | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Equity ownership percentage | 40.00% | |||||||||||||
Impairment of investment | $4,700,000 |
INTANGIBLE_ASSETS_AND_GOODWILL2
INTANGIBLE ASSETS AND GOODWILL (Narrative) (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 0 Months Ended | 1 Months Ended | |||||
Jan. 05, 2015 | 31-May-14 | Sep. 30, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Jul. 08, 2013 | Jul. 31, 2013 | Jul. 02, 2013 | Dec. 31, 2012 | Jul. 30, 2013 | |
Goodwill [Line Items] | ||||||||||
Patent application costs | $94,000 | $78,000 | ||||||||
Patent and patent acquisition costs | 1,150,000 | 2,000,000 | 1,150,000 | 2,500,000 | ||||||
Acquired patents and patent rights | 27,856,000 | |||||||||
Goodwill | 11,962,000 | |||||||||
Write-off of goodwill amount | 239,000 | |||||||||
Equity ownership percentage | 9.99% | |||||||||
Impairment of assets | 22,285,000 | 34,034,862 | 277,800 | |||||||
Amortization of intangibles | 4,653,000 | 2,406,000 | ||||||||
Amount received from investors | 650,000 | 500,000 | ||||||||
Goodwill | 12,046,197 | 15,046,197 | 3,322,799 | |||||||
Impairment of goodwill | 3,000,000 | 238,926 | ||||||||
Accrued expenses from investors | 603,000 | 500,000 | ||||||||
DSS Technology Management [Member] | ||||||||||
Goodwill [Line Items] | ||||||||||
Goodwill | 12,000,000 | |||||||||
Estimate income tax benefit | 11,000,000 | |||||||||
Total cash investment | 250,000 | |||||||||
Return of investment in unconsolidated business | 750,000 | |||||||||
Equity ownership percentage | 40.00% | |||||||||
Customer list [Member] | ||||||||||
Goodwill [Line Items] | ||||||||||
Write-off amount, gross | 258,000 | |||||||||
Write-off amount | 198,000 | |||||||||
Non-compete agreement [Member] | ||||||||||
Goodwill [Line Items] | ||||||||||
Write-off amount, gross | 150,000 | |||||||||
Write-off amount | 80,000 | |||||||||
Bluetooth device patent [Member] | ||||||||||
Goodwill [Line Items] | ||||||||||
Patent and patent acquisition costs | $500,000 | |||||||||
Minimum [Member] | Patents and Patent Rights [Member] | ||||||||||
Goodwill [Line Items] | ||||||||||
Useful Life | 2 years 6 months | |||||||||
Maximum [Member] | Patents and Patent Rights [Member] | ||||||||||
Goodwill [Line Items] | ||||||||||
Useful Life | 7 years 6 months |
INTANGIBLE_ASSETS_AND_GOODWILL3
INTANGIBLE ASSETS AND GOODWILL (Schedule of Other Intangible Assets) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Other Intangible Assets | ||||
Gross Carrying Amount | $6,706,133 | $33,318,987 | ||
Accumulated Amortization | 2,797,734 | 3,716,396 | ||
Net Carrying Amount | 3,908,399 | 29,602,591 | ||
Acquired intangibles - customer lists and non-compete agreements [Member] | ||||
Other Intangible Assets | ||||
Gross Carrying Amount | 1,997,300 | 1,997,300 | ||
Accumulated Amortization | 1,532,123 | 1,343,819 | ||
Net Carrying Amount | 465,177 | 653,481 | ||
Acquired intangibles - customer lists and non-compete agreements [Member] | Minimum [Member] | ||||
Other Intangible Assets | ||||
Useful Life | 5 years | |||
Acquired intangibles - customer lists and non-compete agreements [Member] | Maximum [Member] | ||||
Other Intangible Assets | ||||
Useful Life | 10 years | |||
Acquired intangibles-patents and patent rights [Member] | ||||
Other Intangible Assets | ||||
Gross Carrying Amount | 3,650,000 | [1] | 30,356,164 | [1] |
Accumulated Amortization | 852,343 | [1] | 2,042,083 | [1] |
Net Carrying Amount | 2,797,657 | [1] | 28,314,081 | [1] |
Useful Life | 5 years 4 months 24 days | |||
Patent Application Costs [Member] | ||||
Other Intangible Assets | ||||
Gross Carrying Amount | 1,058,833 | [2] | 965,523 | [2] |
Accumulated Amortization | 413,268 | [2] | 330,494 | [2] |
Net Carrying Amount | $645,565 | [2] | $635,029 | [2] |
Useful Life | 10 years | |||
[1] | Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2014, the weighted average remaining useful life of these assets in service was approximately 5.4 years. | |||
[2] | Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2014, the weighted average remaining useful life of these assets in service was approximately 10.0 years. |
INTANGIBLE_ASSETS_AND_GOODWILL4
INTANGIBLE ASSETS AND GOODWILL (Schedule of Future Amortization Expense) (Details) (USD $) | Dec. 31, 2014 |
INTANGIBLE ASSETS AND GOODWILL [Abstract] | |
2015 | $894,000 |
2016 | 692,000 |
2017 | 673,000 |
2018 | 537,000 |
2019 | $265,000 |
INTANGIBLE_ASSETS_AND_GOODWILL5
INTANGIBLE ASSETS AND GOODWILL (Schedule of Changes on Carrying Amount of Goodwill) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Goodwill [Line Items] | ||
Goodwill, Beginning balance | $15,285,123 | $3,322,799 |
Accumulated impairment losses, Beginning balance | -238,926 | |
Goodwill, net, Beginning balance | 15,046,197 | 3,322,799 |
Goodwill acquired during the year | 11,962,324 | |
Impairment losses | -3,000,000 | -238,926 |
Goodwill, Ending balance | 15,285,123 | 15,285,123 |
Accumulated impairment losses, Ending balance | -3,238,926 | -238,926 |
Goodwill, net, Ending balance | 12,046,197 | 15,046,197 |
Packaging Segment [Member] | ||
Goodwill [Line Items] | ||
Goodwill, Beginning balance | 1,768,400 | 1,768,400 |
Accumulated impairment losses, Beginning balance | ||
Goodwill, net, Beginning balance | 1,768,400 | 1,768,400 |
Goodwill acquired during the year | ||
Impairment losses | ||
Goodwill, Ending balance | 1,768,400 | 1,768,400 |
Accumulated impairment losses, Ending balance | ||
Goodwill, net, Ending balance | 1,768,400 | 1,768,400 |
Plastics Segment [Member] | ||
Goodwill [Line Items] | ||
Goodwill, Beginning balance | 684,949 | 684,949 |
Accumulated impairment losses, Beginning balance | ||
Goodwill, net, Beginning balance | 684,949 | 684,949 |
Goodwill acquired during the year | ||
Impairment losses | ||
Goodwill, Ending balance | 684,949 | 684,949 |
Accumulated impairment losses, Ending balance | ||
Goodwill, net, Ending balance | 684,949 | 684,949 |
Technology Segment [Member] | ||
Goodwill [Line Items] | ||
Goodwill, Beginning balance | 12,831,774 | 869,450 |
Accumulated impairment losses, Beginning balance | -238,926 | |
Goodwill, net, Beginning balance | 12,592,848 | 869,450 |
Goodwill acquired during the year | 11,962,324 | |
Impairment losses | -3,000,000 | -238,926 |
Goodwill, Ending balance | 12,831,774 | 12,831,774 |
Accumulated impairment losses, Ending balance | -3,238,926 | -238,926 |
Goodwill, net, Ending balance | $9,592,848 | $12,592,848 |
SHORT_TERM_AND_LONG_TERM_DEBT_1
SHORT TERM AND LONG TERM DEBT (Revolving Credit Facility) (Details) (RBS Citizens [Member], USD $) | 1 Months Ended | 12 Months Ended | |
Jul. 26, 2011 | Dec. 31, 2014 | Dec. 31, 2013 | |
RBS Citizens [Member] | |||
Debt Instrument [Line Items] | |||
Line of credit, maximum borrowing amount | $1,000,000 | ||
Interest rate additional rate above LIBOR | 3.75% | 3.91% | |
Revolving credit facility, expiration date | 31-May-15 | ||
Credit facility, amount outstanding | $0 | $158,087 |
SHORT_TERM_AND_LONG_TERM_DEBT_2
SHORT TERM AND LONG TERM DEBT (Short-Term and Long-Term Debt) (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 24 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||
Mar. 05, 2014 | Jul. 02, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Jul. 26, 2011 | Dec. 30, 2011 | Jul. 19, 2013 | Feb. 12, 2010 | Oct. 31, 2011 | Dec. 06, 2013 | Feb. 23, 2015 | Sep. 05, 2014 | 2-May-14 | 24-May-13 | Aug. 31, 2011 | Oct. 08, 2010 | Mar. 27, 2014 | Feb. 28, 2014 | Feb. 13, 2014 | |
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, face amount | 1,350,000 | ||||||||||||||||||||
Debt instrument, carrying amount | 1,500,000 | ||||||||||||||||||||
Amortization of note discount and premium | 22,707 | 45,266 | |||||||||||||||||||
Stock options issued, exercise price per share | $2 | $3 | $0.60 | $4.50 | |||||||||||||||||
Loss on settlement of debt with related party | -26,252 | ||||||||||||||||||||
Short-term debt | 824,857 | ||||||||||||||||||||
RBS Citizens [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Line of credit, maximum borrowing amount | 1,000,000 | ||||||||||||||||||||
Interest rate additional rate above LIBOR | 3.91% | 3.75% | |||||||||||||||||||
Credit facility, amount outstanding | 0 | 0 | 158,087 | 0 | |||||||||||||||||
Convertible Notes Payable [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, face amount | 575,000 | ||||||||||||||||||||
Debt instrument, maturity date | 30-Dec-16 | ||||||||||||||||||||
Debt interest rate | 10.00% | ||||||||||||||||||||
Shares to be issued upon conversion of convertible note, shares | 260,180 | ||||||||||||||||||||
Debt conversion, price per share | $2.21 | ||||||||||||||||||||
Beneficial conversion feature recorded as a debt discount | 88,000 | ||||||||||||||||||||
Debt instrument, carrying amount | 604,000 | 604,000 | 633,000 | 604,000 | 650,000 | ||||||||||||||||
Periodic installments amount | 15,000 | ||||||||||||||||||||
Debt instrument, final balloon payment | 230,000 | 230,000 | 230,000 | ||||||||||||||||||
Term Loan [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, carrying amount | 19,522 | 19,522 | 30,171 | 19,522 | 1,303,900 | ||||||||||||||||
Credit facility agreement, monthly principal payment | 24,511 | ||||||||||||||||||||
Interest rate additional rate above LIBOR | 3.15% | ||||||||||||||||||||
Interest rate on outstanding term loan | 4.84% | ||||||||||||||||||||
Debt instrument, term | 60 months | ||||||||||||||||||||
Term Loan [Member] | RBS Citizens [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, face amount | 1,500,000 | ||||||||||||||||||||
Debt interest rate | 5.70% | 5.70% | 5.70% | ||||||||||||||||||
Debt instrument, carrying amount | 50,000 | 50,000 | 350,000 | 50,000 | 42,594 | ||||||||||||||||
Line of credit, maximum borrowing amount | 450,000 | ||||||||||||||||||||
Credit facility agreement, monthly principal payment | 25,000 | ||||||||||||||||||||
Interest rate additional rate above LIBOR | 3.91% | 3.75% | 3.00% | ||||||||||||||||||
Periodic installments amount | 887 | ||||||||||||||||||||
Debt instrument, term | 60 months | ||||||||||||||||||||
Term Loan [Member] | People's Capital [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, carrying amount | 1,067,586 | 1,067,586 | 1,303,900 | 1,067,586 | |||||||||||||||||
Commercial Term Note [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, face amount | 450,000 | ||||||||||||||||||||
Debt instrument, carrying amount | 435,000 | 435,000 | 250,464 | 435,000 | |||||||||||||||||
Interest rate additional rate above LIBOR | 3.31% | 3.15% | |||||||||||||||||||
Periodic installments amount | 2,500 | ||||||||||||||||||||
Debt instrument, final balloon payment | 300,000 | 300,000 | 300,000 | ||||||||||||||||||
Debt instrument, term | 5 years | ||||||||||||||||||||
Promissory Notes [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, face amount | 850,000 | 900,000 | 2,000,000 | ||||||||||||||||||
Debt instrument, maturity date | 31-May-16 | ||||||||||||||||||||
Debt interest rate | 4.23% | 9.00% | |||||||||||||||||||
Shares to be issued upon conversion of convertible note, shares | 60,000 | ||||||||||||||||||||
Long-term debt, unamortized discount | 29,000 | 69,000 | |||||||||||||||||||
Debt instrument, carrying amount | 850,000 | 850,000 | 850,000 | 850,000 | 1,000,000 | 1,791,000 | |||||||||||||||
Line of credit, maximum borrowing amount | 4,500,000 | ||||||||||||||||||||
Credit facility, amount outstanding | 4,089,000 | 4,089,000 | 4,089,000 | ||||||||||||||||||
Periodic installments amount | 15,000 | ||||||||||||||||||||
Debt instrument, final balloon payment | 610,000 | ||||||||||||||||||||
Fair value of notes payable | 29,000 | 69,000 | |||||||||||||||||||
Debt instrument, term | 4 years | ||||||||||||||||||||
Interest accrued in the period | 48,000 | ||||||||||||||||||||
Stock options issued, exercise price per share | $3 | ||||||||||||||||||||
Expected volatility | 70.00% | 60.00% | |||||||||||||||||||
Risk-free interest rate per annum | 1.53% | 0.89% | |||||||||||||||||||
Expected dividend yield | 0.00% | 0.00% | |||||||||||||||||||
Sale of investment units, shares issuable per warrant | 40,000 | ||||||||||||||||||||
Sale of investment units, warrant exercise price per share | $1.50 | ||||||||||||||||||||
Promissory Notes [Member] | Fixed Return Equity [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, carrying amount | 150,000 | 100,000 | 199,000 | ||||||||||||||||||
Interest rate on outstanding term loan | 1.95% | 1.95% | 1.95% | ||||||||||||||||||
Credit facility, amount outstanding | 459,000 | 459,000 | 459,000 | ||||||||||||||||||
Promissory Notes [Member] | Contingent Equity [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, carrying amount | 10,000 | ||||||||||||||||||||
Promissory Notes [Member] | RBS Citizens [Member] | |||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||
Debt instrument, carrying amount | 1,078,220 | 1,078,220 | 1,132,998 | 1,078,220 | |||||||||||||||||
Interest rate additional rate above LIBOR | 3.15% | ||||||||||||||||||||
Periodic installments amount | $7,658 |
SHORT_TERM_AND_LONG_TERM_DEBT_3
SHORT TERM AND LONG TERM DEBT (Promissory Note) (Details) (USD $) | 12 Months Ended | 1 Months Ended | ||||||
Dec. 31, 2014 | Dec. 31, 2013 | Jul. 26, 2011 | Feb. 23, 2015 | Aug. 31, 2011 | Sep. 05, 2014 | Mar. 27, 2014 | Feb. 13, 2014 | |
Debt Instrument [Line Items] | ||||||||
Cash payment for real estate | $280,902 | $378,587 | ||||||
Debt instrument, carrying amount | 1,500,000 | |||||||
RBS Citizens [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate additional rate above LIBOR | 3.91% | 3.75% | ||||||
Promissory Notes [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Periodic installments amount | 15,000 | |||||||
Debt instrument, carrying amount | 850,000 | 850,000 | 1,000,000 | 1,791,000 | ||||
Promissory Notes [Member] | Bzdick Properties Limited Liability Company [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Purchase price for Real Estate acquired | 1,500,000 | |||||||
Purchase price for Real Estate acquired, loan obtained | 1,200,000 | |||||||
Interest rate additional rate above LIBOR | 3.31% | |||||||
Interest rate on outstanding term loan | 5.87% | |||||||
Promissory Notes [Member] | RBS Citizens [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Periodic installments amount | 7,658 | |||||||
Interest rate additional rate above LIBOR | 3.15% | |||||||
Debt instrument, carrying amount | $1,078,220 | $1,132,998 |
SHORT_TERM_AND_LONG_TERM_DEBT_4
SHORT TERM AND LONG TERM DEBT (Schedule of Principal Payments of Notes Payable and Long-Term Debt) (Details) (USD $) | Dec. 31, 2014 |
SHORT TERM AND LONG TERM DEBT [Abstract] | |
2015 | $754,745 |
2016 | 1,452,963 |
2017 | 363,945 |
2018 | 4,468,510 |
2019 | 80,070 |
Thereafter | 1,073,548 |
Total future principal payment | $8,193,781 |
STOCKHOLDERS_EQUITY_Sale_of_Eq
STOCKHOLDERS' EQUITY (Sale of Equity) (Details) (USD $) | 1 Months Ended | ||
Dec. 29, 2014 | Dec. 23, 2014 | Jun. 16, 2014 | |
Capital Unit [Line Items] | |||
Stock sold | 3,715,000 | 3,715,000 | 209,700 |
Stock sold, price per share | $0.45 | $1.44 | |
Proceeds from stock sold | $1.67 | $302,000 | |
Over-Allotment Option [Member] | |||
Capital Unit [Line Items] | |||
Stock sold | 415,000 | 209,700 | |
Stock sold, price per share | $0.45 | $1.60 | |
Proceeds from stock sold | $335,500 |
STOCKHOLDERS_EQUITY_Stock_Warr
STOCKHOLDERS' EQUITY (Stock Warrants) (Details) (USD $) | 1 Months Ended | 12 Months Ended | 1 Months Ended | |||||||
Dec. 28, 2014 | Dec. 29, 2014 | Dec. 23, 2014 | Jun. 16, 2014 | 31-May-14 | Dec. 31, 2014 | Dec. 31, 2013 | 2-May-14 | Jul. 02, 2013 | 24-May-13 | |
Stockholders' Equity Note [Line Items] | ||||||||||
Professional fees - accounting and legal | $100,000 | $134,000 | ||||||||
Value of warrant | 117,000 | |||||||||
Issuance of common stock, net (in shares) | 3,715,000 | 3,715,000 | 209,700 | |||||||
Issuance of common stock, net | 1,550,667 | 148,643 | ||||||||
Stock based compensation | 1,355,430 | 1,894,719 | ||||||||
Exercise price | $3 | |||||||||
Common stock, shares issued | 46,172,404 | 49,411,486 | ||||||||
Common stock, par value | $0.02 | $0.02 | ||||||||
Equity ownership percentage | 9.99% | |||||||||
Term loan | 850,000 | |||||||||
Exercise Price 2 [Member] | ||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||
Exercise price | 0.02 | |||||||||
Common stock, shares issued | 3,432,170 | |||||||||
Exercise Price 3 [Member] | ||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||
Fair value of warrants | 148,000 | |||||||||
Common stock, shares issued | 3,472,170 | |||||||||
Consultant [Member] | ||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||
Warrant term | 5 years | 3 years | ||||||||
Warrants to purchase common stock, shares | 60,000 | 80,645 | ||||||||
Sale of investment units, warrant exercise price per share | $1.50 | $3.10 | $1.60 | |||||||
Fair value of warrants | 34,000 | |||||||||
Issuance of common stock, net (in shares) | 8,443 | |||||||||
Expected volatility | 71.40% | |||||||||
Risk-free interest rate per annum | 1.67% | |||||||||
Expected dividend yield | 0.00% | |||||||||
Consultant [Member] | Exercise Price 1 [Member] | ||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||
Fair value of warrants | $27,000 | |||||||||
Expected volatility | 65.50% | |||||||||
Risk-free interest rate per annum | 1.57% | |||||||||
Expected dividend yield | 0.00% | |||||||||
DSS [Member] | ||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||
Warrants to purchase common stock, shares | 40,000 | |||||||||
Exercise price | 4.8 | |||||||||
Common stock, shares issued | 4,859,894 | |||||||||
Equity ownership percentage | 9.99% |
STOCKHOLDERS_EQUITY_Stock_Opti
STOCKHOLDERS' EQUITY (Stock Options) (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 24 Months Ended | |||||
Mar. 05, 2014 | Jul. 02, 2013 | Dec. 31, 2014 | Mar. 13, 2014 | Jun. 20, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Jan. 10, 2013 | |
Stockholders' Equity Note [Line Items] | |||||||||
Stock options issued | 1,138,697 | 2,000,000 | 33,500 | 84,025 | 6,000,000 | 178,750 | 450,000 | ||
Stock options issued, exercise price per share | $2 | $3 | $0.60 | $4.50 | |||||
Fair value of options issued | $833,000 | $6,643 | $134,000 | $123,000 | $594,000 | ||||
Number of fully vested options held | 80,000 | ||||||||
Incremental compensation cost | 34,000 | ||||||||
Total number of shares authorized | 3,600,000 | ||||||||
Exercisable at December 31, Weighted Average Exercise Price | $3 | ||||||||
Options exercised | 20,000 | ||||||||
Volatility | 67.00% | 72.60% | 67.10% | 60.90% | |||||
Risk free interest rate | 0.92% | 1.66% | 0.90% | 1.60% | |||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% | |||||
Weighted-average grant date fair value | $0.71 | $0.82 | |||||||
Exercised, intrinsic value | 20,000 | ||||||||
Vested, fair value | $1,145,000 | $1,009,000 | |||||||
Minimum [Member] | |||||||||
Stockholders' Equity Note [Line Items] | |||||||||
Stock options issued, exercise price per share | $1.40 | ||||||||
Volatility | 67.00% | ||||||||
Risk free interest rate | 0.92% | ||||||||
Maximum [Member] | |||||||||
Stockholders' Equity Note [Line Items] | |||||||||
Stock options issued, exercise price per share | $2.51 | ||||||||
Volatility | 72.60% | ||||||||
Risk free interest rate | 1.66% |
STOCKHOLDERS_EQUITY_StockBased
STOCKHOLDERS' EQUITY (Stock-Based Compensation) (Details) (USD $) | 1 Months Ended | 12 Months Ended | ||||
Jul. 31, 2014 | Jun. 16, 2014 | Aug. 31, 2013 | Jul. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
STOCKHOLDERS' EQUITY [Abstract] | ||||||
Stock based compensation | $1,355,430 | $1,894,719 | ||||
Stock compensation expense, per share | $0.03 | $0.06 | ||||
Unrecognized compensation costs | 1,308,000 | |||||
Unrecognized compensation costs, amount excluded for awards that vest upon the occurrence of certain events | 536,000 | |||||
Restricted shares granted, Shares | 3,038,357 | 786,678 | 7,100,000 | 243,750 | ||
Fair value of shares | $117,000 | |||||
Retirement of shares held in escrow (in shares) | 4,061,643 | 400,000 |
STOCKHOLDERS_EQUITY_Schedule_o
STOCKHOLDERS' EQUITY (Schedule of Warrants Outstanding and Exercisable) (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 24 Months Ended | 12 Months Ended | |
Mar. 05, 2014 | Jul. 02, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Exercised/transferred | -20,000 | |||||
Granted, Weighted Average Exercise Price | $2 | $3 | $0.60 | $4.50 | ||
Exercisable at December 31, Weighted Average Exercise Price | $3 | |||||
Warrant [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Outstanding, Beginning balance | 2,255,692 | 2,255,692 | 6,875,586 | |||
Granted during the year | 8,342,064 | 100,000 | ||||
Exercised/transferred | -3,472,170 | -80,645 | ||||
Lapsed/terminated | -250,000 | -328,556 | ||||
Outstanding, Ending balance | 6,566,385 | 6,875,586 | 6,566,385 | 6,566,385 | ||
Exercisable at December 31 | 6,535,274 | 6,742,253 | 6,535,274 | 6,535,274 | ||
Outstanding Beginning balance, Weighted Average Exercise Price | $4.34 | $4.34 | $4.64 | |||
Granted, Weighted Average Exercise Price | $2.82 | $1.56 | ||||
Exercised, Weighted Average Exercise Price | $0.04 | $3.10 | ||||
Lapsed, Weighted Average Exercise Price | $5.10 | $2.91 | ||||
Outstanding, Ending balance, Weighted Average Exercise Price | $4.70 | $4.64 | $4.70 | $4.70 | ||
Exercisable at December 31, Weighted Average Exercise Price | $4.71 | $4.64 | $4.71 | $4.71 | ||
Weighted average months remaining | 49 months 24 days | 40 months |
STOCKHOLDERS_EQUITY_Schedule_o1
STOCKHOLDERS' EQUITY (Schedule of Options Outstanding) (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 24 Months Ended | 12 Months Ended | ||
Mar. 05, 2014 | Jul. 02, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Jan. 10, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Exercised | -20,000 | ||||||
Expected to vest at December 31 | 80,000 | ||||||
Granted, Weighted Average Exercise Price | $2 | $3 | $0.60 | $4.50 | |||
Exercisable at December 31, Weighted Average Exercise Price | $3 | ||||||
Employee Stock Option [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Outstanding, Beginning balance | 4,073,898 | ||||||
Transferred | 1,980,898 | ||||||
Granted | 2,150,000 | 1,172,197 | |||||
Exercised | -20,000 | ||||||
Lapsed/terminated | -37,000 | -317,804 | |||||
Outstanding, Ending balance | 4,928,291 | 4,073,898 | 4,928,291 | 4,928,291 | |||
Exercisable at December 31 | 2,806,696 | 1,718,024 | 2,806,696 | 2,806,696 | |||
Expected to vest at December 31 | 1,660,169 | 1,905,874 | 1,660,169 | 1,660,169 | |||
Outstanding Beginning balance, Weighted Average Exercise Price | $3.25 | ||||||
Transferred, Weighted Average Exercise Price | $3.65 | ||||||
Granted, Weighted Average Exercise Price | $2.89 | $1.96 | |||||
Exercised, Weighted Average Exercise Price | $1.86 | ||||||
Lapsed/terminated, Weighted Average Exercise Price | $6.31 | $3.56 | |||||
Outstanding, Ending balance, Weighted Average Exercise Price | $2.92 | $3.25 | $2.92 | $2.92 | |||
Exercisable at December 31, Weighted Average Exercise Price | $2.94 | $3.25 | $2.94 | $2.94 | |||
Expected to vest at December 31, Weighted Average Exercise Price | $2.46 | $2.95 | $2.46 | $2.46 | |||
Oustanding, Weighted Average Life Remaining | 5 years 8 months 12 days | 4 years | |||||
Exercisable, Weighted Average Life Remaining | 4 years 3 months 18 days | 5 years | |||||
Expected to vest, Weighted Average Life Remaining | 7 years 9 months 18 days | 5 years 9 months 18 days | |||||
Aggregate intrinsic value of outstanding options at December 31 | $104,700 | ||||||
Aggregate intrinsic value of exercisable options at December 31 | 37,365 | ||||||
Aggregate intrinsic value of options expected to vest at December 31 | $67,335 |
STOCKHOLDERS_EQUITY_Schedule_o2
STOCKHOLDERS' EQUITY (Schedule of Share-Based Compensation Assumptions) (Details) | 0 Months Ended | 1 Months Ended | 12 Months Ended | |
Mar. 05, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
STOCKHOLDERS' EQUITY [Abstract] | ||||
Volatility | 67.00% | 72.60% | 67.10% | 60.90% |
Expected option term | 3 years 6 months | 5 years 8 months 12 days | ||
Risk-free interest rate | 0.92% | 1.66% | 0.90% | 1.60% |
Expected forfeiture rate | 0.00% | 0.00% | ||
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
STOCKHOLDERS_EQUITY_Schedule_o3
STOCKHOLDERS' EQUITY (Schedule of Restricted Stock Activity) (Details) (USD $) | 1 Months Ended | 12 Months Ended | |||
Jul. 31, 2014 | Aug. 31, 2013 | Jul. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
STOCKHOLDERS' EQUITY [Abstract] | |||||
Restricted shares outstanding, Beginning balance, Shares | 41,176 | 61,764 | |||
Restricted shares granted, Shares | 3,038,357 | 786,678 | 7,100,000 | 243,750 | |
Restricted shares vested, Shares | -20,588 | -20,588 | |||
Restricted shares outstanding, Ending balance, Shares | 264,338 | 41,176 | |||
Restricted shares outstanding, Beginning balance, Weighted-average Grant Date Fair Value | $3.33 | $3.33 | |||
Restricted shares granted, Weighted-average Grant Date Fair Value | $0.48 | ||||
Restricted shares vested, Weighted-average Grant Date Fair Value | $3.33 | $3.33 | |||
Restricted shares outstanding, Ending balance, Weighted-average Grant Date Fair Value | $0.70 | $3.33 |
BUSINESS_COMBINATION_Narrative
BUSINESS COMBINATION (Narrative) (Details) (USD $) | 1 Months Ended | 12 Months Ended | |||||
Jul. 31, 2014 | Jun. 16, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Jul. 02, 2013 | Jul. 08, 2013 | Jul. 01, 2013 | |
Business Acquisition [Line Items] | |||||||
Common stock, par value | $0.02 | $0.02 | |||||
Shares held in escrow | 3,038,357 | ||||||
Warrants issued in acquisition | 3,432,170 | ||||||
Common stock, shares issued | 49,411,486 | 46,172,404 | |||||
Exercisable at December 31, Weighted Average Exercise Price | $3 | ||||||
Equity ownership percentage | 9.99% | ||||||
Professional fees | $1,445,000 | ||||||
Retirement of shares held in escrow (in shares) | 4,061,643 | 400,000 | |||||
DSS [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Issuance of common stock for acquisition of Lexington Technology Group, net, (in shares) | 16,558,387 | ||||||
Common stock, par value | $0.02 | ||||||
Shares held in escrow | 7,100,000 | ||||||
Common stock, shares issued | 4,859,894 | ||||||
Exercisable at December 31, Weighted Average Exercise Price | $4.80 | ||||||
Options outstanding | 2,000,000 | ||||||
Expected volatility | 59.00% | ||||||
Risk-free interest rate per annum | 0.90% | ||||||
Retirement of shares held in escrow (in shares) | 4,061,643 | ||||||
Lexington [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Options expired/forfeited | 3,600,000 | ||||||
Sale of investment units, price per unit | $5 | ||||||
Palladium Capital Advisors [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Shares held in escrow | 400,000 | ||||||
Common stock, shares issued | 786,678 | ||||||
Retirement of shares held in escrow (in shares) | 400,000 | ||||||
DSS Technology Management [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Common stock, shares issued | 240,559 | 16,317,828 | |||||
Equity ownership percentage | 40.00% | ||||||
Sale of investment units, price per unit | $1.87 |
BUSINESS_COMBINATION_Schedule_
BUSINESS COMBINATION (Schedule of Purchase Price Allocation) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Business Acquisition [Line Items] | |
Current assets, net of current liabilities | $6,252,000 |
Deposits and non-current assets | 9,000 |
Investments at fair value | 10,750,000 |
Other intangible assets - patent and patent rights | 27,856,000 |
Goodwill | 11,962,000 |
Fair value of assets acquired | 56,829,000 |
Deferred tax liability, net | 11,962,000 |
Net assets acquired | 44,867,000 |
Non-controlling interest in subsidiary | -4,300,000 |
Total purchase price | 40,567,000 |
Value of equity issued to acquiree | 40,567,000 |
Fair value of 16,317,828 shares of DSS common stock issued to DSS Technology Management shareholders [Member] | |
Business Acquisition [Line Items] | |
Value of equity issued to acquiree | 30,514,000 |
Fair value of 7,100,000 shares of DSS common stock issued to DSS Technology Management shareholders to be held in escrow for up to one year [Member] | |
Business Acquisition [Line Items] | |
Value of equity issued to acquiree | 901,000 |
Fair value of options to purchase 2,000,000 shares DSS common stock for $3.00 per share exchanged for options to purchase DSS Technology Management's common stock that were granted to DSS Technology Management's employees which relate to pre-combination services [Member] | |
Business Acquisition [Line Items] | |
Value of equity issued to acquiree | 141,000 |
Fair value of warrants to purchase up to 4,859,894 shares of DSS common stock for $4.80 per share issued to DSS Technology Management shareholders [Member] | |
Business Acquisition [Line Items] | |
Value of equity issued to acquiree | 2,661,000 |
Fair value of warrants to purchase 3,432,170 shares of DSS common stock for $0.02 per share issued to certain DSS Technology Management shareholders | |
Business Acquisition [Line Items] | |
Value of equity issued to acquiree | $6,350,000 |
BUSINESS_COMBINATION_Schedule_1
BUSINESS COMBINATION (Schedule of Pro Forma Information) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
BUSINESS COMBINATION [Abstract] | |
Revenue | $18,046,000 |
Operating Loss | -11,527,000 |
Net Loss | ($12,489,000) |
Basic | ($0.24) |
Diluted | ($0.24) |
INCOME_TAXES_Narrative_Details
INCOME TAXES (Narrative) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income tax benefit | ($988,630) | ($10,948,875) |
Deferred tax liability, net | 11,962,000 | |
Net operating loss carryforwards | 48,513,000 | |
Excess tax benefits associated with stock option exercises included in net operating loss carryforwards but not reflected in deferred tax assets | 1,019,000 | |
Unrecognized tax benefits netted against deferred tax assets | 446,000 | 446,000 |
Minimum [Member] | ||
Net operating loss carryforwards, expiration date | 31-Dec-22 | |
Maximum [Member] | ||
Net operating loss carryforwards, expiration date | 31-Dec-34 | |
Excess Tax Benefits [Member] | ||
Income tax benefit | $10,949,000 | |
Excess Tax Benefits [Member] | Minimum [Member] | ||
Net operating loss carryforwards, expiration date | 31-Dec-22 | |
Excess Tax Benefits [Member] | Maximum [Member] | ||
Net operating loss carryforwards, expiration date | 31-Dec-30 |
INCOME_TAXES_Schedule_of_Incom
INCOME TAXES (Schedule of Income Tax Provision (Benefit) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Currently payable: | ||
Federal | ||
State | 6,735 | |
Total currently payable | 6,735 | |
Deferred: | ||
Federal | -13,939,671 | -2,217,527 |
State | 488,406 | -528,872 |
Total deferred | -13,451,265 | -2,746,399 |
Less: (decrease) increase in allowance | 12,455,900 | -8,202,476 |
Net deferred | -995,365 | -10,948,875 |
Total income tax provision (benefit) | ($988,630) | ($10,948,875) |
INCOME_TAXES_Schedule_of_Defer
INCOME TAXES (Schedule of Deferred Tax Assets/Liabilities) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred tax assets: | ||
Net operating loss carryforwards | $16,104,083 | $15,960,340 |
Equity issued for services | 1,050,348 | 721,934 |
Goodwill and other intangibles | 773,019 | 218,896 |
Investment in pass-through entity | 268,476 | |
Other | 591,259 | 338,087 |
Gross deferred tax assets | 18,787,185 | 17,239,257 |
Deferred tax liabilities: | ||
Goodwill and other intangibles | 312,277 | 9,827,201 |
Depreciation and amortization | 312,823 | 286,520 |
Investment in pass-through entity | 2,414,716 | |
Gross deferred tax liabilities | 625,100 | 12,528,437 |
Less valuation allowance | -18,307,844 | -5,851,944 |
Net deferred tax liabilities | ($145,759) | ($1,141,124) |
INCOME_TAXES_Schedule_of_Effec
INCOME TAXES (Schedule of Effective Income Tax Rate Reconciliation) (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Effective income rax rate reconciliation: | ||
Statutory United States federal rate | 34.00% | 34.00% |
State income taxes net of federal benefit | -0.70% | 4.20% |
Noncontrolling interest in pass-through entity | -3.40% | |
Permanent difference | -2.30% | -4.50% |
Other | 1.10% | -0.80% |
Change in valuation reserves | -26.60% | 98.10% |
Effective tax rate | 2.10% | 131.00% |
DEFINED_CONTRIBUTION_PENSION_P1
DEFINED CONTRIBUTION PENSION PLAN (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
DEFINED CONTRIBUTION PENSION PLAN [Abstract] | |||
Employer match percentage | 3.00% | 1.00% | |
Contributions by company | $107,000 | $41,000 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Facilities) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies [Line Items] | |
Facilities operating lease, monthly rent expense 2015 | $169,424 |
Corporate Offices, Rochester, New York [Member] | |
Commitments and Contingencies [Line Items] | |
Facilities operating lease, monthly rent expense | 14,000 |
Facilities operating lease, monthly rent expense 2015 | 15,000 |
Plastics Division, Brisbane, California [Member] | |
Commitments and Contingencies [Line Items] | |
Facilities operating lease, monthly rent expense | 13,000 |
Technology Division Lease One [Member] | |
Commitments and Contingencies [Line Items] | |
Facilities operating lease, monthly rent expense | 2,700 |
Technology Division Lease Two [Member] | |
Commitments and Contingencies [Line Items] | |
Facilities operating lease, monthly rent expense | 1,044 |
Technology Division Lease Three [Member] | |
Commitments and Contingencies [Line Items] | |
Facilities operating lease, monthly rent expense | $3,000 |
COMMITMENTS_AND_CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Equipment Leases) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Property Subject to or Available for Operating Lease [Line Items] | |
Aggregate payments made | $764,000 |
Operating Leases | |
Payments made in 2014 | 544,209 |
2015 | 354,645 |
2016 | 169,424 |
2017 | 169,983 |
2018 | 174,182 |
2019 | |
Total future minimum lease commitments | 868,234 |
Equipment [Member] | |
Operating Leases | |
Payments made in 2014 | 30,540 |
2015 | 16,907 |
2016 | 5,241 |
2017 | 874 |
2018 | |
2019 | |
Total future minimum lease commitments | 23,022 |
Facilities [Member] | |
Operating Leases | |
Payments made in 2014 | 513,669 |
2015 | 337,738 |
2016 | 164,183 |
2017 | 169,109 |
2018 | 174,182 |
2019 | |
Total future minimum lease commitments | $845,212 |
COMMITMENTS_AND_CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Employment Agreements) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
Severance payment amount | $1,282,000 |
COMMITMENTS_AND_CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Related Party Payments) (Details) (USD $) | 1 Months Ended | 2 Months Ended | 12 Months Ended | ||||
Dec. 28, 2014 | Dec. 29, 2014 | Dec. 23, 2014 | Jun. 16, 2014 | Feb. 28, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Line Items] | |||||||
Consulting fees paid to related party | $100,000 | $134,000 | |||||
Issuance of common stock, net (in shares) | 3,715,000 | 3,715,000 | 209,700 | ||||
Former CEO [Member] | |||||||
Commitments and Contingencies Disclosure [Line Items] | |||||||
Consulting fees paid to related party | $35,000 | $145,000 | $188,000 |
COMMITMENTS_AND_CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Legal Proceedings) (Details) (USD $) | 1 Months Ended |
In Millions, unless otherwise specified | Oct. 31, 2011 |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
Money damages sought | $10 |
SUPPLEMENTAL_CASH_FLOW_INFORMA2
SUPPLEMENTAL CASH FLOW INFORMATION (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
SUPPLEMENTAL CASH FLOW INFORMATION [Abstract] | ||
Cash paid for interest | $298,000 | $246,000 |
Non-cash investing and financing activities: | ||
Equity issued for acquisition | 40,567,000 | |
Accrued liabilities with related parties settled with equity | 134,000 | |
Financing of building improvements | 200,000 | |
Change in non-controlling interest | -4,700,000 | |
(Loss) gain from change in fair value of interest rate swap derivative | -34,000 | 100,000 |
Warrants issued with debt | 69,000 | |
Accounts payable converted to debt | 153,000 | |
Financing of equipment purchase and building improvements | 2,404,000 | |
Intrinsic value of beneficial conversion feature at reaquisition | 75,000 | |
Escrow shares retired | $150,000 |
SEGMENT_INFORMATION_Narrative_
SEGMENT INFORMATION (Narrative) (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
International Revenue [Member] | ||
Segment Reporting Information [Line Items] | ||
Concentration of credit risk, percentage | 2.00% | 2.00% |
Revenue [Member] | ||
Segment Reporting Information [Line Items] | ||
Concentration of credit risk, percentage | 40.00% | 35.00% |
Trade Accounts Receivable [Member] | ||
Segment Reporting Information [Line Items] | ||
Concentration of credit risk, percentage | 27.00% | 30.00% |
SEGMENT_INFORMATION_Schedule_o
SEGMENT INFORMATION (Schedule of Segment Information) (Details) (USD $) | 0 Months Ended | 12 Months Ended | |
Jan. 05, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Segment Reporting Information [Line Items] | |||
Revenues from external customers | $18,287,496 | $17,452,444 | |
Depreciation and amortization | 5,274,323 | 2,966,368 | |
Interest expense | 317,191 | 245,969 | |
Stock based compensation | 1,355,430 | 1,894,719 | |
Impairment of goodwill | 3,000,000 | 238,926 | |
Impairment of intangible assets and investments | 22,285,000 | 34,034,862 | 277,800 |
Loss attributable to noncontrolling interest | -4,700,000 | ||
Income tax benefit | -988,630 | -10,948,875 | |
Net income (loss) to common stockholders | -41,157,052 | 2,593,530 | |
Capital expenditures | 280,902 | 378,587 | |
Identifiable assets | 27,752,618 | 67,342,211 | |
Packaging and Printing Segment [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues from external customers | 12,926,000 | 12,242,000 | |
Depreciation and amortization | 567,000 | 570,000 | |
Interest expense | 156,000 | 165,000 | |
Stock based compensation | 121,000 | ||
Impairment of goodwill | |||
Impairment of intangible assets and investments | |||
Loss attributable to noncontrolling interest | |||
Income tax benefit | |||
Net income (loss) to common stockholders | 842,000 | 676,000 | |
Capital expenditures | 717,000 | 1,889,000 | |
Identifiable assets | 8,873,000 | 9,170,000 | |
Plastics Segment [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues from external customers | 3,552,000 | 3,639,000 | |
Depreciation and amortization | 171,000 | 170,000 | |
Interest expense | 7,000 | ||
Stock based compensation | 69,000 | ||
Impairment of goodwill | |||
Impairment of intangible assets and investments | |||
Loss attributable to noncontrolling interest | |||
Income tax benefit | |||
Net income (loss) to common stockholders | -106,000 | 89,000 | |
Capital expenditures | 131,000 | 15,000 | |
Identifiable assets | 1,872,000 | 2,125,000 | |
Technology Segment [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues from external customers | 1,809,000 | 1,571,000 | |
Depreciation and amortization | 4,532,000 | 2,225,000 | |
Interest expense | 54,000 | 5,000 | |
Stock based compensation | 155,000 | ||
Impairment of goodwill | 3,000,000 | 239,000 | |
Impairment of intangible assets and investments | 34,035,000 | ||
Loss attributable to noncontrolling interest | -4,700,000 | ||
Income tax benefit | |||
Net income (loss) to common stockholders | -38,843,000 | -3,968,000 | |
Capital expenditures | 1,244,000 | 2,864,000 | |
Identifiable assets | 14,872,000 | 55,193,000 | |
Corporate Segment [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues from external customers | |||
Depreciation and amortization | 4,000 | 1,000 | |
Interest expense | 100,000 | 76,000 | |
Stock based compensation | 1,010,000 | 1,895,000 | |
Impairment of goodwill | |||
Impairment of intangible assets and investments | |||
Loss attributable to noncontrolling interest | |||
Income tax benefit | -989,000 | -10,949,000 | |
Net income (loss) to common stockholders | -3,050,000 | 5,797,000 | |
Capital expenditures | 12,000 | ||
Identifiable assets | $2,136,000 | $854,000 |