The
information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to these
securities became effective under the Securities Act of 1933, as amended. This preliminary prospectus supplement and the accompanying
prospectus are not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any jurisdiction
where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JUNE 14, 2021
Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-256446
PRELIMINARY
PROSPECTUS SUPPLEMENT
(To
Prospectus dated June 7, 2021)
Document
Security Systems, Inc.
Shares
of Common Stock
Pre-Funded
Warrants to Purchase up to Shares of Common Stock
We
are offering shares of our common stock and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to shares of our
common stock at an exercise price of $0.01 per share to such purchaser in lieu of shares of common stock that would otherwise result
in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common
stock pursuant to this prospectus supplement and the accompanying prospectus. The purchase price of each Pre-Funded Warrant is equal
to the price per share of common stock being sold to the public in this offering, minus $0.01. The Pre-Funded Warrants will be immediately
exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
Our common stock
is listed on the NYSE American LLC under the symbol “DSS.” The aggregate market value of our outstanding common stock
held by non-affiliates is $81,875,597, based on 33,120,125 shares of outstanding common stock, of which 25,747,043 shares are held by
non-affiliates, and a per share price of $3.18 based on the closing sale price of our common stock as reported by the NYSE American LLC
on April 29, 2021. The last reported sale price of our common stock on the NYSE American LLC on June 11, 2021 was $2.96 per share.
Investing
in our common stock involves risks that are described in the “Risk Factors” beginning on page S-9 of this prospectus for
a discussion of information that should be considered in connection with an investment in our securities.
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Per Share
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Per Pre-Funded Warrant
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Total
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Public offering price
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$
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$
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$
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Underwriting discount(1)
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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(1)
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The
underwriters will receive compensation in addition to the underwriting discount. See the “Underwriting” section of this
prospectus for additional information regarding total underwriter compensation.
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We
have granted a 45-day option to the underwriters to purchase up to additional shares of common stock solely to cover over-allotments,
if any.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed
upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal
offense.
The
underwriters expect to deliver our shares to purchasers in the offering on or about ,
2021.
Sole
Book-Running Manager
Aegis
Capital Corp.
The
date of this prospectus supplement is June, 2021.
TABLE
OF CONTENTS
Prospectus
Supplement
Prospectus
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering and also
adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus. The second part, the accompanying prospectus, gives more general information about securities
we may offer from time to time, some of which does not apply to this offering. Generally, when we refer to this prospectus, we are referring
to both parts of this document combined together with all documents incorporated by reference. If the description of the offering varies
between this prospectus supplement and the accompanying prospectus, you should rely on the information contained in this prospectus supplement.
However, if any statement in one of these documents is inconsistent with a statement in another document having a later date —
for example, a document incorporated by reference into this prospectus supplement or the accompanying prospectus — the statement
in the document having the later date modifies or supersedes the earlier statement. You should rely only on the information contained
in or incorporated by reference into this prospectus supplement or contained in or incorporated by reference into the accompanying prospectus
to which we have referred you. We have not authorized anyone to provide you with information that is different. If anyone provides you
with different or inconsistent information, you should not rely on it. The information contained in, or incorporated by reference into,
this prospectus supplement and contained in, or incorporated by reference into, the accompanying prospectus is accurate only as of the
respective dates thereof, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or of any
sale of securities. It is important for you to read and consider all information contained in this prospectus supplement and the accompanying
prospectus, including the documents incorporated by reference herein and therein, in making your investment decision. You should also
read and consider the information in the documents to which we have referred you under the captions “Where You Can Find More Information”
and “Incorporation of Information by Reference” in this prospectus supplement and in the accompanying prospectus.
We
are offering to sell, and are seeking offers to buy, securities only in jurisdictions where such offers and sales are permitted. The
distribution of this prospectus supplement and the accompanying prospectus and the offering of securities in certain jurisdictions or
to certain persons within such jurisdictions may be restricted by law. Persons outside the United States who come into possession of
this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the
offering of securities and the distribution of this prospectus supplement and the accompanying prospectus outside the United States.
This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell,
or a solicitation of an offer to buy, any securities offered by this prospectus supplement and the accompanying prospectus by any person
in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
All
trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, the trademarks
and trade names in this prospectus are referred to without the ® and ™ symbols, but such references should not be construed
as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do
not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship
of us by, any other companies.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement and any accompanying prospectus, including the documents that we incorporate by reference, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements include those that express plans, anticipation,
intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking
statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties
known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In
some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,”
“estimates,” “plans,” “believes,” “seeks,” “may,” “should,” “could”
or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties
that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed throughout this prospectus supplement.
You
should read this prospectus supplement, the accompanying prospectus and the documents that we reference herein and therein and have filed
as exhibits to the registration statement, of which this prospectus supplement is part, completely and with the understanding that our
actual future results may be materially different from what we expect. You should assume that the information appearing in this prospectus
supplement and any accompanying prospectus is accurate as of the date on the cover page of this prospectus supplement. Because the risk
factors referred to above, as well as the risk factors referred to on page S-9 of this prospectus supplement and incorporated herein
by reference, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made
by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and except as may be required under applicable securities laws, we undertake no obligation
to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect
the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors
will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the
information presented in this prospectus supplement and the accompanying prospectus, and particularly our forward-looking statements,
by these cautionary statements.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights information contained elsewhere or incorporated by reference into this prospectus supplement and the accompanying
prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our common stock.
You should read this entire prospectus supplement and the accompanying prospectus carefully, including the “Risk Factors”
contained in this prospectus supplement and incorporated by reference herein, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and our consolidated financial statements and the related notes and the other documents incorporated
by reference into this prospectus supplement and the accompanying prospectus.
Unless
we have indicated otherwise or the context otherwise requires, references in this prospectus supplement, the accompanying prospectus
or the documents incorporated by reference herein and therein to the “Company,” DSS,” “we,” “us”
and “our” refer to Document Security Systems, Inc. and its subsidiaries.
Company
Overview
Document
Security Systems, Inc. (the “Company of DSS”) operates eight (8) business lines through eight (8) DSS subsidiaries located
around the globe.
Of
the eight subsidiaries, three of those have historically been the core subsidiaries of the Company: (1) Premier Packaging Corporation
(“Premier Packaging”), (2) DSS Digital Inc., and its subsidiaries (“Digital Group”), and (3) DSS Technology Management,
Inc. (“IP Technology”). Premier Packaging operates in the paper board folding carton, smart packaging, and document security
printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional
direct mail solutions designed to provide functionality, marketability, and sustainability to product packaging while providing counterfeit
protection and consumer engagement platform. Digital Group researches, develops, markets, and sells the Company’s digital products
worldwide. As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features and
cutting-edge technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s
primary product is AuthentiGuard®, which is a brand authentication application that integrates the Company’s counterfeit deterrent
technologies with proprietary digital data security-based solutions. IP Technology Management Inc., manages, licenses, and acquires intellectual
property assets 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. In 2020, under its (4) Decentralize Sharing Systems, Inc. subsidiary, created a fourth business segment, Direct Marketing/Online
Sales Group (“Direct”). This group provides services to assist companies in the emerging growth gig business model of peer-to-peer
decentralized sharing marketplaces. Direct specializes in marketing and distributing its products and services through its subsidiary
and partner network, using the popular gig economic marketing strategy as a form of direct marketing.
In
addition to the four subsidiaries listed above, in 2019 and early 2020, DSS has created four new, wholly owned subsidiaries. (5) DSS
Blockchain Security, Inc., a Nevada corporation, specializes in the development of blockchain security technologies for tracking and
tracing solutions for supply chain logistics and cyber securities across global markets. (6) DSS Securities, Inc., a Nevada corporation,
has been established to develop or to acquire assets in the securities trading or management arena, and to pursue two parallel streams
of digital asset exchanges in multiple jurisdictions: (i) securitized token exchanges, focusing on digitized assets from different vertical
industries and (ii) utilities token exchanges, focusing on “blue-chip” utility tokens from solid businesses. (7) DSS BioHealth
Security, Inc., a Nevada corporation, is our business line which we will intend to invest in or to acquire companies related to the bio-health
and biomedical field, including businesses focused on the research to advance drug discovery and development for the prevention, inhibition,
and treatment of neurological, oncology and immuno-related diseases. This new division will place special focus on open-air defense initiatives,
which curb transmission of air-borne infectious diseases such as tuberculosis and influenza, among others. (8) DSS Secure Living, Inc.,
a Nevada Corporation, develops top of the line advanced technology, energy efficiency, quality of life living environments and home security
for everyone for new construction and renovations of residential single and multifamily living facilities. Aside from Decentralized Sharing
Systems, Inc. the activity in these newly created subsidiaries have been minimal or in various start-up or organizational phases.
On
March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with
LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc. (“LVAM”), and American Medical REIT Inc. under which it
acquired a 52.5% controlling ownership interest in AMRE Asset Management Inc. (“AAMI”) which currently has a 93% equity interest
in American Medical REIT Inc. (“AMRE”). AAMI is a real estate investment trust (“REIT”) management company that
sets the strategic vision and formulate investment strategy for AMRE. It manages the REIT’s assets and liabilities and provides
recommendations to AMRE on acquisition and divestments in accordance with the investment strategies. AMRE is a Maryland corporation,
organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant
market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. AMRE was formed
to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE is planned to qualify as a Real Estate
Investment Trust for federal income tax purposes, which will provide. AMRE’s investors the opportunity for direct ownership of
Class A licensed medical real estate. As of March 31, 2021, AAMI has yet to generate any revenue. LVAM is an 82% owned subsidiary of
Alset International Limited (formally Singapore eDevelopment Ltd.), whose Chief Executive Officer and largest shareholder is Mr. Heng
Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the Company.
On
August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact BioMedical”), pursuant to a Share
Exchange Agreement by and among the Company, DSS BioHealth Security, Inc. (“DSS BioHealth”), Alset International Limited,
and Global Biomedical Pte Ltd. (“GBM”), which was previously approved by the Company’s shareholders (the “Share
Exchange”). Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value
$0.02 per share, nominally valued at $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred
Stock (“Series A Preferred Stock”). As a result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary
of DSS BioHealth, the Company’s wholly owned subsidiary. Alset International Limited (formally Singapore eDevelopment Ltd.), whose
Chief Executive Officer and largest shareholder is Mr. Heng Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the
Company.
Impact
BioMedical strives to leverage its scientific know-how and intellectual property rights to provide solutions that have been plaguing
the biomedical field for decades. By tapping into the scientific expertise of its partners, Impact BioMedical has undertook a concerted
effort in the research and development (R&D), drug discovery and development for the prevention, inhibition, and treatment of neurological,
oncological and immune related diseases.
In
August 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a
real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities,
Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting
process.
On
October 7, 2020, DSS Securities took part in an initial public offering of Presidio Property Trust, Inc. (“Presidio”), a
Maryland corporation, that invests primarily in commercial properties, such as office, industrial and retail properties, as well as in
residential across the United States. As part of this offering, we purchased 200,000 shares of Presidio’s Series A Common Stock
at $5.00 per share for a total purchase price of $1,000,000.
Effective
December 9, 2020, Impact BioMedical entered into an exclusive distribution agreement with BioMed Technologies Asia Pacific Holdings Limited
(“BioMed”), which is focused on manufacturing natural probiotics. Under the terms of this distribution agreement, Impact
BioMedical will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed
by Impact BioMedical include BioMed’s PGut Premium ProbioticsTM, PGut Allergy ProbioticsTM, PGut SupremeSlim ProbioticsTM, PGut
Kids ProbioticsTM, and PGut Baby ProbioticsTM. Under the terms of the ten-year distribution agreement, Impact BioMedical will have exclusive
rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution
rights in all other countries.
On
February 8, 2021, DSS Securities announced that it entered into a joint venture (“JV”) with Coinstreet Partners (“Coinstreet”),
a global decentralized digital investment banking group and digital asset financial service firm, and GSX Group (“GSX”),
a global digital exchange ecosystem for the issuance, trading, and settlement of tokenized securities, using its proprietary blockchain
solution. The JV leverages the operational strengths and assets of three key leaders in their field, combining traditional capital market
experience, Fintech innovations, and business networks from three continents, North America, Europe, and Asia, to capitalize on unique
digital asset opportunities. The JV reported that it intended to first pursue a digital securities exchange license in the US. Moving
forward, this JV will be the key operational company building and operating a digital securities exchange that utilizes the GSX STACS
blockchain technology, serving corporate issuers and investors in the sector.
On
February 25, 2021, DSS Securities announced its acquisition of an equity interest in WestPark Capital, Inc.(“WestPark”) and
an investment in BMI Capital International LLC (“BMICI”). DSS Securities executed two separate transactions that were designed
to grow the securities division by signing a binding note and stock exchange letter of intent to own 7.5% of the issued and outstanding
shares of WestPark and acquiring 24.9% of BMICI through a purchase agreement. WestPark is a full-service investment banking and securities
brokerage firm which serves the needs of both private and public companies worldwide, as well as individual and institutional investors.
BMI is a private investment bank specializing in corporate finance advising, raising equity, and venture services, providing a global
“one-stop” corporate consultancy to listed companies. From corporate finance to professional valuation, corporate communications
to event management, BMICI services companies in the US, Hong Kong, Singapore, Taiwan, Japan, Canada, and Australia.
On
March 1, 2021, Decentralized Sharing Systems, Inc. (“Decentralized”) announced that it increased its investment in Sharing
Services Global Corporation (“Sharing Services” or “SHRG”), a publicly traded company dedicated to maximizing
shareholder value through the acquisition and development of innovative companies, products, and technologies in the direct selling industry,
through a $30 million convertible promissory note dated April 5, 2021. Decentralized’s financing was made as an investment that
would help accelerate Sharing Services sales and growth, as well as international expansion, with the expectation that such capital reserves
would help make Sharing Services a dominant player in the global marketplace over the next two years. It was reported that the new $30
million investment would have the potential to exponentially increase Sharing Services sales channels and substantially expand its product
portfolio, and to position Sharing Services to capitalize on consolidation and roll up opportunities of other direct selling companies.
In the joint announcement, Sharing Services reported that the additional funding would now allow it to accelerate its global expansion
with a direct focus on the Asian markets, and specifically in countries such as South Korea, Japan, Hong Kong, China, Singapore, Taiwan,
Thailand, Malaysia, and the Philippines. As of March 31, 2021, DSS owned 64,207,378 class A shares of Sharing Services or approximately
40.2% of the Sharing Services outstanding shares. This aggregated to a fair value at March 31, 2021 of approximately $16,052,000. The
Company, via four (4) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board of director
seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along
with Mr. Heng Fai Ambrose Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020),
Mr. Sassuan “Sam” Lee, DSS Independent Director (joined the SHRG Board effective September 29, 2020) and Mr. Frank D. Heuszel,
the CEO of the Company (joined the SHRG Board effective September 29, 2020).
On
March 15, 2021, the Company, through one of its subsidiaries, DSS BioMedical International, Inc. entered into a Stock Purchase Agreement
(the “Agreement”) with Vivacitas Oncology Inc. (“Vivacitas”), to purchase 500,000 shares of its common stock
at the per share price of $1.00, with an option to purchase 1,500,000 additional shares at the per share price of $1.00. In addition,
under the terms of the Agreement, the Company will be allocated two seats on the board of Vivacitas. On March 18, 2021, the Company entered
into an agreement with Alset EHome International, Inc. (“Seller”) to acquire the Seller’s wholly owned subsidiary Impact
Oncology PTE Ltd for the purchase price of $2,480,000 to effectively purchase ownership of 2,480,000 shares of common stock of Vivacitas..
This agreement includes an option to purchase an additional 250,000 shares of common stock. As a result of these two transactions, which
were closed on March 21, 2021 and March 29, 2021, respectively, the Company owns an approximate 15.7% equity position in Vivacitas. The
Seller’s largest shareholder is Mr. Heng Fai Ambrose Chan, the Chairman of the Company’s board of directors and its largest
shareholder.
On
April 21, 2021, the Company announced its wholly owned subsidiary, Premier Packaging Corporation’s intentions to relocate from
its current 48,000 square-foot manufacturing facility from Victor, NY to a new 105,000 square-foot facility in the Town of Henrietta,
NY approximately 15 miles from its Victor location by the end of 2021. In connection with this relocation, Premier Packaging has entered
into an agreement to sell its current Victor location with the anticipated closing date of January 31, 2022.
On
May 19, 2021, the Company announced that its wholly owned subsidiary, DSS PureAir, Inc., a Texas corporation (“DSS PureAir”),
closed on a Securities Purchase Agreement with Puradigm LLC, a Nevada limited liability corporation (“Puradigm”). Pursuant
to the terms of the Securities Purchase Agreement, DSS PureAir agreed to provide Puradigm a secured convertible promissory note in the
maximum principal amount of $5,000,000.00 (the “Puradigm Note”). The Puradigm Note has a two year term with interest at 6.65%
payable quarterly. All, or part of the Puradigm Note principal balance can be converted at the sole discretion of DSS PureAir for up
to an 18% membership interest in Puradigm LLC. The Puradigm Note is secured by all the assets of Puradigm under a security agreement
with Puradigm.
The
four reporting segments are as follows:
Premier
Packaging: (“Premier”) The Company’s packaging and security printing group is coordinated by the wholly owned
subsidiary, Premier Packaging Corporation, a New York corporation. Premier operates in the paper board folding carton, smart packaging,
and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons,
and complex 3-dimensional direct mail solutions. These products are designed to provide functionality and marketability while also providing
counterfeit protection. Premier is currently located in Victor, NY and serves the US market.
BioHealth
Group: (“BioHealth”) The BioHealth Group is our business line created to invest in, or acquire companies in the biohealth
and biomedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of
neurological, oncological, and immune related diseases. This division is also developing open-air defense initiatives, which curb transmission
of air-borne infectious diseases, such as tuberculosis and influenza. The BioHealth Group is also targeting unmet, urgent medical needs.
Assets of this group are organized under the holding company, DSS BioHealth Security, Inc. Its subsidiaries are currently headquartered
in Rochester, NY. The group also has a research facility in Winter Haven, Florida.
Digital
Group: (“Digital”) Digital researches, develops, markets, and sells the Company’s digital products worldwide.
As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features and cutting-edge
technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s primary
product is AuthentiGuard®, which is a brand authentication application that integrates the Company’s counterfeit deterrent
technologies with proprietary digital data security-based solutions. Digital Group is headquartered in Rochester, NY, but it also has
offices and staff in Hong Kong. On May 7, 2021, Document Security Systems, Inc. (the “Company”) completed the sale of 100%
of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication
Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Purchase Agreement”). Pursuant to the
terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash;
$1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary
of the closing and ending the day before the six-year of the closing; and $0.5 million in trade credit or license fee rebates. The Hong
Kong staff and operations will remain with the Company. Included in the Consolidate Balance Sheet as of March 31, 2021 is approximately
$790,000 of assets and $48,000 of liabilities for DSS Digital. Also, included in the Consolidated Statement of Operations and Comprehensive
Loss for the three months ended March 31, 2021 for DSS Digital is net income of approximately $162,000.
Direct
Marketing/Online Sales Group: (“Direct” or “DM”) Led by the holding corporation, Decentralize Sharing
Systems, Inc. (“Decentralized”), this group provides services to assist companies in the emerging growth gig business model
of peer-to-peer decentralized sharing marketplaces. Direct specializes in marketing and distributing its products and services through
its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing. Direct marketing
products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern
Europe. Over the past 12 months, Direct has made substantial investments in acquiring marketing software, product opportunities, and
operational capabilities in this marketplace. Additionally, it has acquired and developed an independent contractor sales force. It has
also made substantial investments into other direct marketing companies, including its investment and partnership with Sharing Services
Global Corporation (OTCQB: SHRG) (“Sharing Services” or “SHRG”), which as of March 31, 2021, Decentralized owned
approximately 40% of the outstanding shares of Sharing Services. Currently, Direct and SHRG operate offices in USA, Canada, Hong Kong,
Singapore, S. Korea, Australia, New Zealand, Malaysia, and Singapore, with additional offices or presence being added monthly. Decentralized
sharing systems’ mission is to become the leading direct sales platform, training, developing and empowering leaders on a global
scale to achieve maximum human and economic potential.
Stock
Listing
Our
common stock is listed on The NYSE American LLC under the symbol “DSS.”
Corporate
Information
Our
principal executive offices are located at 6 Framark Drive, Victor, New York 14564, USA. Our telephone number is +1-585-325-3610. Our
corporate website is www.dsssecure.com. Information contained in or accessible through our website is not part of this prospectus.
Securities
offered by us (excluding the securities underlying the over-allotment option)
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_________shares
of common stock and Pre-Funded Warrants to purchase up to ________ shares of common stock in lieu of shares of common stock that
would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%)
of our outstanding common stock. The Pre-Funded Warrants will have an exercise price of $0.01 per share, will be exercisable immediately
and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. We are also offering the shares of common
stock issuable upon exercise of the Pre-Funded Warrants.
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Common
stock outstanding prior to this offering (as of June 14, 2021)
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33,120,125
shares
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Common
stock to be outstanding immediately following this offering
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_________shares,
(or _________shares, if the underwriters exercise their over-allotment option in full), assuming none of the Pre-Funded Warrants
issued in this offering are exercised
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Overallotment
option
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We
have granted the underwriters a 45-day option to purchase ___________shares of common stock, representing up to 15% of the shares
of common stock and the shares underlying the Pre-Funded Warrants sold in the offering.
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Use
of proceeds
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We
estimate that we will receive net proceeds from this offering of approximately $___ million, or approximately $__ million if the
underwriters exercise their overallotment option, after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us. We currently intend to use the net proceeds from this offering, together with our existing cash,
to fund (1) the development and growth of our new business lines, (2) acquisition opportunities, and (3) the Company’s general
corporate and working capital needs. We estimate that at least $___ million of the net proceeds from this offering will be invested
into our new business line growth and development, $___ million will be used for possible acquisitions or investments in complementary
businesses, products, services, technologies or existing assets, and approximately $___ million will be used for general corporate
and working capital needs. See “Use of Proceeds” below.
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Dividend
policy
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We
have never paid cash dividends, and we do not anticipate paying a cash dividend in 2021. We anticipate that we will retain any earnings
and other cash resources for investment in our business. The payment of dividends on our common stock is subject to the discretion
of our board of directors and will depend on our operations, financial position, financial requirements, general business conditions,
restrictions imposed by financing arrangements, if any, legal restrictions on the payment of dividends and other factors that our
board of directors deems relevant.
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Risk
factors
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An
investment in our common stock involves a high degree of risk. You should read the “Risk Factors” section of this prospectus
for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.
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NYSE
American symbol
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DSS
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The
number of shares of common stock to be outstanding after this offering is based on 33,120,125 shares of common stock outstanding at June
14, 2021, and excludes the following:
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13,596
shares of common stock issuable upon exercise of stock options outstanding at a weighted-average exercise price of $196.41 per share;
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29,314
shares of common stock issuable upon exercise of warrants outstanding at a weighted-average exercise price of $30.47 per share;
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1,096,359
shares of common stock issuable upon conversion of the outstanding Series A Preferred Stock, subject to a beneficial ownership conversion
limitation; and
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191,314
shares of common stock reserved and available for issuance under our equity compensation plans.
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Unless
otherwise indicated, all information in this prospectus reflects or assumes no exercise by the underwriters of their option to purchase
up to additional shares of common stock in this offering.
RISK
FACTORS
Our
business is influenced by many factors that are difficult to predict and that involve uncertainties that may materially affect our actual
operating results, cash flows and financial condition. Before making an investment decision about our common stock, you should carefully
consider the specific factors set forth under the caption “Risk Factors” in this prospectus supplement and in our periodic
and current reports filed with the SEC that are incorporated by reference herein (including the “Risk Factors” set forth
in our Annual Report on Form 10-K filed with the SEC on March 31, 2021), together with all of the other information appearing in this
prospectus, in the applicable prospectus supplement or incorporated by reference into this prospectus in light of your particular investment
objectives and financial circumstances.
Risks
Relating to Our Business
We
have secured indebtedness, and a potential risk exists that we may be unable to satisfy our obligations to pay interest and principal
thereon when due or negotiate acceptable extensions or settlements.
We
have outstanding indebtedness (described below), most of which is secured by assets of various DSS subsidiaries and guaranteed by the
Company. Given our history of operating losses and our cash position, there is a risk that we may not be able to repay indebtedness when
due. If we were to default on any of our other indebtedness that require payments of cash to settle such default and we do not receive
an extension or a waiver from the creditor and the creditor were to foreclose on the secured assets, it could have a material adverse
effect on our business, financial condition and operating results.
As
of March 31, 2021, we had the following significant amounts of outstanding indebtedness:
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$1,090,000
due under a promissory note with Citizens Bank used to purchase our packaging division facility. We are required to pay monthly installments
of $7,000 with interest fixed at 4.22% until June 2029, at which time a balloon payment of the remaining principal balance will be
due. The promissory note is secured by a first mortgage on our packaging division facility.
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$900,000
in a term note non-revolving line of credit with Citizens Bank used by Premier Packaging Corporation (“Premier Packaging”)
to purchase equipment. Effective on the Conversion Date, the interest shall be adjusted to a fixed rate equal to 2% above the bank’s
Cost of Funds, as determined by Citizens Bank. The note had no borrowings against it as of March 31, 2021.
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$741,000
in a term note non-revolving line of credit with Citizens Bank used by Premier Packaging Corporation (“Premier Packaging”)
to purchase equipment. The note is amortized over a 48-month period and payable in monthly installments of $13,000. Interest accrues
at fixed rate equal to 2% above the bank’s cost of funds, as determined by Citizens Bank.
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$100,000
in a zero-interest promissory note entered into by the Company’s DSS Asia subsidiary to acquire Guangzhou Hotapps Technology
Pte Ltd., a Chinese company. This note was paid in full in October 2020.
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$800,000
revolving credit line with Citizens Bank by Premier Packaging payable in monthly installments of interest only. The revolving credit
line bears interest at 1 Month LIBOR plus 2.0% and had no borrowings against it at as of March 31, 2021.
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$200,000
unsecured promissory note between AMRE and LiquidValue Asset Management Pte Ltd. The note calls for interest to be paid annually
on March 2 with interest fixed at 8.0% and matures on March 2, 2022. As of March 31, 2021, the new promissory note, inclusive of
unpaid interest, had a balance of $218,000. The holder is a related party owned by the Chairman of the Company’s board of directors.
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$110,000
under the Paycheck Protection Program (“PPP”), which was established as part of CARES Act, and provides for loans to
qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The PPP has
a fixed interest rate of 1% and a 60-month maturity term.
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The
Citizens credit facilities for the Company’s subsidiary, Premier Packaging, contain various covenants including fixed charge coverage
ratio, tangible net worth and current ratio covenants which are tested annually at December 31. For the year ended December 31, 2020,
Premier Packaging was in compliance with the annual covenants.
The
value of our intangible assets and investments may not be equal to their carrying values.
As
of December 31, 2020, we had approximately $23.4 million of net intangible assets. Approximately $22.3 million is associated with the
acquisition of Impact Biomedical, Inc. The Company has completed valuations for certain developed technology assets acquired in the transaction
as well the non-controlling interest portion of Impact BioMedical, Inc. and its subsidiaries. Approximately $267,000 of this amount are
intangible assets which derive their value from patents or patent rights. If licensing efforts and litigation are not successful, the
values of these assets could be reduced. We are required to evaluate the carrying value of such intangibles and goodwill and the fair
value of investments whenever events or changes in circumstances indicate that the carrying value of an intangible asset, including goodwill,
and investment may not be recoverable. If any of our intangible assets, goodwill or investments are deemed to be impaired then it will
result in a significant reduction of the operating results in such period.
Risks
Relating to this Offering
Our
share price may be volatile and could decline substantially
The
market price of our common stock has been and may continue to be volatile. Many factors may cause the market price for our common stock
to decline, including:
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shortfalls
in revenues, cash flows or continued losses from operations;
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delays
in development or roll-out of any of our products;
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announcements
by one or more competitors of new product acquisitions or technological innovations; and
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unfavorable
outcomes from litigation.
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In
addition, the stock market experiences extreme fluctuations in price and volume that particularly affect the market price of shares of
companies like ours. These price and volume fluctuations are often unrelated or disproportionate to the operating performance of the
affected companies. Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts, and
our stock price could decline as a result. Declines in our stock price for any reason, as well as broad-based market fluctuations or
fluctuations related to our financial results or other developments, may adversely affect your ability to sell your shares at a price
equal to or above the price at which you purchased them. Decreases in the price of our common stock may also lead to de-listing of our
common stock.
Management
will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
We
have not allocated specific amounts of the net proceeds from this offering for any specific purpose. Accordingly, our management will
have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that you do not
agree with or that do not improve our results of operations or enhance the value of our common stock. See “Use of Proceeds.”
Our failure to apply these funds effectively could have a material adverse effect on our business, financial results, operating results
and/or cash flow and could cause the price of our common stock to decline.
Our
outstanding options, warrants and convertible preferred stock, and the availability for resale of certain of the underlying shares, may
adversely affect the trading price of our common stock.
As
of June 14, 2021, there were outstanding:
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stock
options to purchase approximately 13,596 shares of our common stock at a weighted-average exercise price of $196.41 per share;
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29,314
shares of common stock issuable upon exercise of warrants outstanding at a weighted-average exercise price of $30.47 per share; and
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1,096,359
shares of common stock issuable upon conversion of the outstanding Series A Preferred Stock, subject to a beneficial ownership conversion
limitation.
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Our
outstanding options, warrants and convertible preferred stock could adversely affect our ability to obtain future financing or engage
in certain mergers or other transactions, since the holders thereof may exercise them at a time when we may be able to obtain additional
capital through a new offering of securities on terms more favorable to us than the terms of outstanding securities. For the life
of the options, warrants and convertible preferred stock, the holders have the opportunity to profit from a rise in the market price
of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding options, warrants
and preferred stock would also dilute the ownership interests of our existing stockholders.
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Additional
financing or future equity issuances may result in future dilution to our shareholders.
We
expect that we will need to raise additional funds in the future to finance our internal growth, our merger and acquisition plans, investment
activities, continued research and product development, and for other reasons. Any required additional financing may not be available
on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities, you may experience significant dilution
of your ownership interest and the newly issued securities may have rights senior to those of the holders of our common stock. The price
per share at which we sell additional securities in future transactions may be higher or lower than the price per share in this offering.
Alternatively, if we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include
negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to fund
additional interest expense. If adequate additional financing is not available when required or is not available on acceptable terms,
we may be unable to successfully execute our business plan.
Because
we do not currently intend to pay cash dividends on our common stock, stockholders will primarily benefit from an investment in our stock
only if it appreciates in value.
We
have never declared or paid any cash dividends on our shares of stock. We currently intend to retain all future earnings, if any, for
use in the operations and expansion of the business. As a result, we do not anticipate paying cash dividends in the foreseeable future.
Any future determination as to the declaration and payment of cash dividends or non-cash dividends will be at the discretion of our board
of directors and will depend on factors the board of directors deems relevant, including among others, our results of operations, financial
condition and cash requirements, business prospects, and the terms of any of our financing arrangements. Accordingly, realization of
a gain on stockholders’ investments will primarily depend on the appreciation of the price of our stock. There is no guarantee
that our stock will appreciate in value.
There
is no established public trading market for the Pre-Funded Warrants being offered in this offering, and we do not expect a market
to develop for the Pre-funded Warrants.
There
is no established public trading market for the Pre-Funded Warrants being offered in this offering, and we do not expect a market to
develop. In addition, we do not intend to apply to list the Pre-Funded Warrants on any national securities exchange or other nationally
recognized trading system. Without an active market, the liquidity of the Pre-Funded Warrants will be limited. Further, the existence
of the Pre-funded Warrants may act to reduce both the trading volume and the trading price of our common stock.
The
Pre-funded Warrants are speculative in nature.
Except
as otherwise provided in the Pre-Funded Warrants, until holders of Pre-Funded Warrants acquire our common stock upon exercise of the
Pre-Funded Warrants, holders of Pre-Funded Warrants will have no rights with respect to our common stock underlying such Pre-Funded
Warrants. Upon exercise of the Pre-Funded Warrants, the holders will be entitled to exercise the rights of a stockholder of our common
stock only as to matters for which the record date occurs after the exercise date.
Moreover, following this offering, the market value of the Pre-funded Warrants is uncertain.
There can be no assurance that the market price of our common stock will ever equal or exceed the price of the Pre-Funded Warrants, and,
consequently, whether it will ever be profitable for investors to exercise their Pre-funded Warrants.
An
increase in our net asset value or market capitalization following this offering could result in bonus payments to Mr. Heng Fai Chan,
the CEO of DCS and the Chairman of the Board of Directors of the Company.
On
November 19, 2020, we, DSS Cyber Security Pte. Ltd. (“DCS”) and Mr. Heng Fai Chan, the CEO of DCS and the Chairman of the
Board of Directors of the Company, entered into an amendment (the “2020 Amendment”) to Mr. Chan’s employment agreement
dated September 23, 2019, effective January 1, 2020. Under the 2020 Amendment, Mr. Chan’s compensation will include a fixed salary
of $1 per month and two bonus payments each year consisting of: (i) one payment equal to Five Percent (5%) of the growth in market capitalization
the Company experiences in any year; and (ii) one payment equal to Five Percent (5%) of the growth in net asset value the Company experiences
in any year. To the extent this offering contributes to an increase in our market capitalization and/or net asset value at December 31,
2021 as compared to December 31, 2020, we would be obligated to pay such bonus in cash or stock, at Mr. Chan’s election.
General
Risks
Because
certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions
requiring stockholder approval.
As
of June 14, 2021, our directors, executive officers and principal stockholders (those beneficially owning in excess of 5%), and
their respective affiliates, beneficially own approximately 22% of our outstanding shares of common stock. As a result, these stockholders,
acting together, could have the ability to control the outcome of matters submitted to our stockholders for approval, including the election
of directors and any merger, consolidation or sale of all or substantially all of our assets. As such, these stockholders, acting together,
could have the ability to exert influence over the management and affairs of our company. Accordingly, this concentration of ownership
might harm the market price of our common stock by:
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delaying,
deferring or preventing a change in corporate control;
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impeding
a merger, consolidation, takeover or other business combination involving us; or
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discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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If
securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding
our stock adversely, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about
us or our business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases,
if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts
cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in
turn could cause our stock price or trading volume to decline.
USE
OF PROCEEDS
We
estimate that we will receive net proceeds of approximately $ million from the sale of the shares of common stock and Pre-Funded Warrants
offered in this offering, or approximately $ million if the underwriters exercise their over-allotment option in full, after deducting
the underwriting discounts and commissions and estimated offering expenses payable by us.
We
currently intend to use the net proceeds from this offering, together with our existing cash, to fund (1) the development and growth
of our new business lines, (2) acquisition opportunities, and (3) the general corporate and working capital needs. We estimate
that at least $ of the net proceeds from this offering will be invested into our new business line growth and development, $ will be
used for possible acquisitions or investments in complementary businesses, products, services, technologies or existing assets, and approximately
$ will be used for general corporate and working capital needs, which may include amounts required to pay officers’ salaries and
bonuses.
We
may change the amount of net proceeds to be used specifically for any of the foregoing purposes. The amounts and timing of our actual
expenditures will depend upon numerous factors, including our sales and marketing and commercialization efforts, demand for our products,
our operating costs and the other factors described under “Risk Factors” in this prospectus. Accordingly, our management
will have significant discretion and flexibility in applying the net proceeds from this offering. Pending any use, as described above,
we intend to invest the net proceeds in high-quality, short-term, interest-bearing securities.
Although
we may use a portion of the net proceeds of this offering for the acquisition or licensing, as the case may be, of additional technologies,
other assets or businesses, or for other strategic investments or opportunities, we have no current understandings, agreements or commitments
to do so.
DIVIDEND
POLICY
We
have never paid cash dividends, and we do not anticipate paying a cash dividend in 2021. We anticipate that we will retain any earnings
and other cash resources for investment in our business. The payment of dividends, whether in cash or in non-cash form, on our common
stock is subject to the discretion of our board of directors and will depend on our operations, financial position, financial requirements,
general business conditions, restrictions imposed by financing arrangements, if any, legal restrictions on the payment of dividends and
other factors that our board of directors deems relevant.
CAPITALIZATION
The
following table sets forth our capitalization as of March 31, 2021:
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on
an actual basis;
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on
a pro forma basis to give effect to the conversion of 35,316 of Series A Preferred Stock into 5,450,000 restricted shares of common
stock on May 26, 2021; and
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on
a pro forma as-adjusted basis to reflect the issuance and sale by us of shares of our common stock (assuming no exercise of
the Pre-Funded Warrants) in this offering at the public offering price of $ per share, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us and the receipt by us of the proceeds of such sale.
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You
should read this information together with the section titled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, as adjusted, by reference to
the Company’ Current Report on Form 8-K filed on May 24, 2021, in order to give effect to a change in segment reporting, and our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which are incorporated by reference in this prospectus, and our consolidated
financial statements and related notes incorporated by reference in this prospectus.
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As of March 31, 2021
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Actual
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Pro Forma
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Pro Forma As Adjusted
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(unaudited)
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(unaudited)
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(unaudited)
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Cash and cash equivalents
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$
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52,061,000
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$
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$
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Long-term debt, net
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$
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1,661,000
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$
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$
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Stockholders’ equity:
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Preferred stock, $.02 par value; 47,000 shares authorized, 43,000 shares issued and outstanding (actual); Liquidation value $1,000 per share, $43,000,000 aggregate;[*] shares issued and outstanding (pro forma); ]*] issued and outstanding (as adjusted);
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1,000
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Common stock, $0.02 par value; 200,000,000 shares authorized, 27,670,000 shares issued and outstanding (actual); [*] shares issued and outstanding (pro forma); ]*] issued and outstanding (as adjusted)
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552,000
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Additional paid-in capital
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235,027,000
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Non-controlling interest in subsidiary
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3,399,000
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Accumulated deficit
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(105,363,000
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)
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Total shareholders’ equity
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133,616,000
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Total capitalization
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$
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135,277,000
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$
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$
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The
number of shares of our common stock to be outstanding upon completion of this offering is based on 27,670,000 shares of our common stock
outstanding as of March 31, 2021, and excludes:
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13,596
shares of common stock issuable upon exercise of stock options outstanding at a weighted-average exercise price of $196.41 per share;
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29,314
shares of common stock issuable upon exercise of warrants outstanding at a weighted-average exercise price of $30.47 per share;
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6,570,174
shares of common stock issuable upon conversion of the outstanding Series A Preferred Stock, subject to a beneficial ownership conversion
limitation; and
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191,314
shares of common stock reserved and available for issuance under our equity compensation plans.
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(See
“Prospectus Summary—The Offering” above for information on shares of common stock, options and warrants as of June
14, 2021.)
DILUTION
If
you purchase our securities in this offering, your interest will be diluted to the extent of the difference between the public offering
price per share of our common stock and the net tangible book value per share of our common stock after this offering. We calculate net
tangible book value per share by dividing our net tangible assets (tangible assets less total liabilities) by the number of shares of
our common stock issued and outstanding as of March 31, 2021.
Our
net tangible book value at March 31, 2021, was $83,677,000, or $3.02 per share, based on 27,670,000 shares of our common stock outstanding.
After giving effect to issuances of common stock after March 31, 2021, on a pro forma basis, and the issuance and sale of shares of common
stock in this offering (assuming no exercise of the Pre-Funded Warrants) at the public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses, our as adjusted net tangible book value at March 31, 2021, would
be $ or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders
and an immediate dilution of $ per share to investors in this offering. The following table illustrates this per share dilution:
Public offering price per share of common stock
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$
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Net tangible book value per share as of March 31, 2021
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$
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3.02
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Increase per share attributable to this offering
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$
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As adjusted net tangible book value per share as of March 31, 2021, after this offering
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$
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Dilution per share to new investors participating in this offering
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$
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If
the underwriters exercise in full their option to purchase additional shares of common stock at the public offering price of $ per share,
the as adjusted net tangible book value after giving effect to issuances of common stock after March 31, 2021, on a pro forma basis,
and offering would be $ per share, representing an increase in net tangible book value of $ per share to existing stockholders and immediate
dilution in net tangible book value of $ per share to purchasers in this offering at the public offering price.
To
the extent that outstanding options or warrants are exercised, or we issue new options under our equity incentive plans, you will experience
further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if
we believe we have sufficient funds for our current or future operating plans. To the extent that the additional capital is raised through
the sale of common stock or securities convertible or exchangeable into common stock, such issuance could result in further dilution
to our stockholders.
The
above table excludes, as of March 31, 2021:
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13,596
shares of common stock issuable upon exercise of stock options outstanding at a weighted-average exercise price of $196.41 per share;
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29,314
shares of common stock issuable upon exercise of warrants outstanding at a weighted-average exercise price of 30.47 per share;
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6,570,174
shares of common stock issuable upon conversion of the outstanding Series A Preferred Stock, subject to a beneficial ownership conversion
limitation; and
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191,314
shares of common stock reserved and available for issuance under our equity compensation plans.
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(See “Prospectus Summary—The Offering” above for information on shares of common stock, options and warrants outstanding
as of June 14, 2021.)
DESCRIPTION
OF THE SECURITIES WE ARE OFFERING
In
this offering, we are offering shares of our common stock at the public offering price of $ per share. The material terms and provisions
of our common stock are described under the captions “Description of Securities,” “Description of Common Stock”
and “Description of Warrants” beginning on page 6 of the accompanying prospectus.
Below
is a summary of the Pre-Funded Warrants being offered in this offering.
Pre-Funded
Warrants
The
term “pre-funded” refers to the fact that the purchase price of our common stock in this offering includes almost the entire
exercise price that will be paid under the Pre-Funded Warrants, except for a nominal remaining exercise price of $0.01. The purpose of
the Pre-Funded Warrants is to enable investors that may have restrictions on their ability to beneficially own more than 4.99% (or, upon
election of the holder, 9.99%) of our outstanding common stock following the consummation of this offering the opportunity to make an
investment in the Company without triggering their ownership restrictions, by receiving Pre-Funded Warrants in lieu of our common stock
which would result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to purchase the
shares underlying the Pre-Funded Warrants at such nominal price at a later date.
Exercise
of Warrants. Each Pre-Funded Warrant is exercisable for one share of our common stock, with an exercise price equal to $0.01 per
share, at any time that the Pre-Funded Warrant is outstanding. There is no expiration date for the Pre-Funded Warrants. The holder of
a Pre-Funded Warrant will not be deemed a holder of our underlying common stock until the Pre-Funded Warrant is exercised.
Subject
to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrants if
the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such
holder’s affiliates) would beneficially own a number of shares of common stock in excess of 4.99% (or, at the election of the purchaser
prior to the date of issuance, 9.99%) of the shares of our common stock then outstanding after giving effect to such exercise.
The
exercise price and the number of shares issuable upon exercise of the Pre-Funded Warrants is subject to appropriate adjustment in the
event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events
affecting our common stock. The Pre-Funded Warrant holders must pay the exercise price in cash upon exercise of the Pre-Funded Warrants,
unless such Pre-Funded Warrant holders are utilizing the cashless exercise provision of the Pre-Funded Warrants.
Upon
the holder’s exercise of a Pre-Funded Warrant, we will issue the shares of common stock issuable upon exercise of the Pre-Funded
Warrant within two trading days following our receipt of a notice of exercise, provided that payment of the exercise price has been made
(unless exercised to the extent permitted via the “cashless” exercise provision). Prior to the exercise of any Pre-Funded
Warrants to purchase common stock, holders of the Pre-Funded Warrants will not have any of the rights of holders of the common stock
purchasable upon exercise, including the right to vote, except as set forth therein.
Warrant
holders may exercise Pre-Funded Warrants only if the issuance of the shares of common stock upon exercise of the Pre-Funded Warrants
is covered by an effective registration statement, or an exemption from registration is available under the Securities Act and the securities
laws of the state in which the holder resides. The Pre-Funded Warrant holders must pay the exercise price in cash upon exercise of the
Pre-Funded Warrants unless there is not an effective registration statement or, if required, there is not an effective state law registration
or exemption covering the issuance of the shares underlying the Pre-Funded Warrants (in which case, the Pre-Funded Warrants may only
be exercised via a “cashless” exercise provision).
Fundamental
Transaction. In the event we consummate a merger or consolidation with or into another person or other reorganization event in which
our common stock are converted or exchanged for securities, cash or other property, or we sell, lease, license, assign, transfer, convey
or otherwise dispose of all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares
of common stock, then following such event, the holders of the Pre-Funded Warrants will be entitled to receive upon exercise of such
Pre-Funded Warrants the same kind and amount of securities, cash or property which the holders would have received had they exercised
their Pre-Funded Warrants immediately prior to such fundamental transaction. Any successor to us or surviving entity shall assume the
obligations under the Pre-Funded Warrants.
Exchange
Listing. We do not intend to apply for listing of the Pre-Funded Warrants on any securities exchange or other trading system.
Book-Entry
Form
The
Pre-Funded Warrants will be registered securities and will be evidenced by a global certificate, which will be deposited on behalf of
the Company with a custodian for The Depository Trust Company (“DTC”) and registered in the name of Cede & Co., a nominee
of DTC. If DTC subsequently ceases to make its book-entry settlement system available for the Pre-Funded Warrants, the Company may instruct
the warrant agent (“Warrant Agent”) regarding making other arrangements for book-entry settlement. In the event that any
Pre-Funded Warrants are not eligible for, or it is no longer necessary to have the Pre-Funded Warrants available in, book-entry form,
then the Company may instruct the Warrant Agent to provide written instructions to DTC to deliver to the Warrant Agent for cancellation
the global certificate, and the Company will instruct the Warrant Agent to deliver to DTC separate warrant certificates as requested
through the DTC system.
Prior
to due presentment for registration of transfer of any Pre-Funded Warrant, the Company and the Warrant Agent may deem and treat the person
in whose name that Pre-Funded Warrants will be registered on the warrant register (the “holder”) as the absolute owner of
such warrant for purposes of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent will be
affected by any notice to the contrary. Notwithstanding the foregoing, nothing herein will prevent the Company, the Warrant Agent or
any agent of the Company from giving effect to any written certification, proxy or other authorization furnished by DTC governing the
exercise of the rights of a holder of a beneficial interest in any warrant. The rights of beneficial owners in a Pre-Funded Warrant evidenced
by the global certificate will be exercised by the holder or a participant through the DTC system, except to the extent set forth herein
or in the global certificate.
A
holder whose interest in a global warrant is a beneficial interest in a global warrant held in book-entry form through DTC (or another
established clearing corporation performing similar functions), will effect exercises by delivering to DTC (or such other clearing corporation,
as applicable) the appropriate instruction form for exercise, complying with the procedures to effect exercise that are required by DTC
(or such other clearing corporation, as applicable).
Beneficial
Ownership Exercise Limitation
Each
holder of the Pre-Funded Warrants will be subject to a requirement that they will not have the right to exercise the Pre-Funded Warrants
to the extent that, after giving effect to such exercise, such holder (together with its affiliates) would beneficially own in excess
of 4.99% (subject to increase at the option of the holder to 9.99% upon 61 days’ prior written notice) of the shares of our common
stock outstanding immediately after giving effect to such exercise.
Warrant
Agent
The
Pre-Funded Warrants will be issued in registered form under a warrant agency agreement (the “Warrant Agency Agreement”) between
us and our Warrant Agent. The material provisions of the Pre-Funded Warrants are set forth herein.
UNDERWRITING
Aegis
Capital Corp. (the “Representative”) is acting as the representative of the underwriters of the offering. We have entered
into an underwriting agreement dated June 14, 2021, with the Representative. Subject to the terms and conditions of the underwriting
agreement, we have agreed to sell to the underwriters named below and the underwriters named below have severally agreed to purchase,
at the public offering price less the underwriting discount set forth on the cover page of this prospectus supplement, the following
respective number of shares of our common stock and Pre-Funded Warrants:
Underwriter
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Number of
Shares
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Number of
Pre-Funded Warrants
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Aegis Capital Corp.
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The
underwriters are committed to purchase all the shares of common stock and the Pre-Funded Warrants offered by us other than those covered
by the option to purchase additional shares described below, if they purchase any shares. The obligations of the underwriters may be
terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement,
the underwriters’ obligations are subject to customary conditions and representations and warranties contained in the underwriting
agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
We
have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act of 1933, as amended,
and to contribute to payments the underwriters may be required to make in respect thereof.
The
underwriters are offering the common stock and the Pre-Funded Warrants, subject to prior sale, when, as and if issued to and accepted
by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
The
underwriters propose to offer the common stock and the Pre-Funded Warrants offered by us to the public at the public offering price set
forth on the cover page of this prospectus supplement. In addition, the underwriters may offer some of the common stock and/or the Pre-Funded
Warrants to other securities dealers at such price less a concession of $ per share or per Pre-Funded Warrant. After the initial offering,
the public offering price and concession to dealers may be changed.
We
have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus
supplement, permits the underwriters to purchase a maximum of additional shares of common stock from us to cover over-allotments. If
the underwriters exercise all or part of this option, they will purchase shares of common stock covered by the option at the public offering
price per share that appears on the cover page of this prospectus supplement, less the underwriting discount. If this option is exercised
in full, the total price to the public will be approximately $ million and the total proceeds, before expenses, to us will be $ million.
Underwriting
Discount. The following table shows the public offering price, underwriting discount, non-accountable underwriters’ expense
allowance and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their
over-allotment option.
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Total
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Per Share
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Per Pre-Funded Warrant
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Without
Over-Allotment
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With
Over-Allotment
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Public offering price
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$
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$
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$
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Underwriting discount (7%)
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$
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$
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$
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Non-accountable expense allowance (1%)
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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We
have also agreed to pay all expenses relating to the offering, (a) all filing fees and communication expenses relating to the registration
of the Securities to be issued and sold in the offering with the Securities and Exchange Commission; (b) all filing fees associated with
the review of the offering by FINRA; (c) all fees and expenses relating to the listing of the Securities on the NYSE American; (d) all
fees, expenses and disbursements relating to the registration or qualification of the Securities under the “blue sky” securities
laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing
and registration fees, and the reasonable fees and disbursements of “blue sky” counsel which will be the Representative counsel);
(e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Securities under the securities
laws of such foreign jurisdictions as the Representative may reasonably designate; (f) the costs of all mailing and printing of the underwriting
documents (including, without limitation, the underwriting agreement, any Blue Sky Surveys and, if appropriate, any agreement among Underwriters,
Selected Dealers’ Agreement, Underwriters’ Questionnaire and power of attorney), registration statements, preliminary prospectuses,
disclosure packages and prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses
as the Representative may reasonably deem necessary; (g) the costs of preparing, printing and delivering certificates representing the
Securities; (h) fees and expenses of the Company’s transfer agent and warrant agent; (j) stock transfer and/or stamp taxes, if
any, payable upon the transfer of securities from the Company to the Underwriters; (k) the fees and expenses of the Company’s accountants;
(l) the fees and expenses of the Company’s legal counsel and other agents and representatives; and (m) a maximum of $75,000 for
the actual fees and expenses incurred by the Representative in connection with the offering including the legal fees and expenses of
the Representative counsel in the event that the offering is consummated or $25,000 if the offering is not consummated.
We
estimate that the total expenses of the offering, excluding underwriting discount and non-accountable expense allowance, will be approximately
$ .
Discretionary
Accounts. The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary
authority.
Lock-Up
Agreements. Pursuant to certain “lock-up” agreements, (a) our executive officers and directors as of the pricing date
of the offering, have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option
for the sale of or otherwise dispose of any securities of the Company without the prior written consent of the Representative, until
forty five (45) days from the date of the offering, and (b) we, and any successor, have agreed, subject to certain exceptions, until
forty five (45) days from the date of the offering, not to (1) offer, sell or otherwise transfer or dispose of, directly or indirectly,
any shares of capital stock of the Company or (2) file or caused to be filed any registration statement with the SEC relating to the
offering of any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of our capital
stock.
This
lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for common stock. It also
applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement
later acquires the power of disposition. The exceptions permit, among other things and subject to restrictions, the issuance of common
stock upon the exercise of outstanding stock options and warrants or other outstanding convertible securities.
Right
of First Refusal. The Representative shall have a right of first refusal for a period of twelve months after the date of the offering,
to act as lead managing underwriter and book runner and/or lead placement agent for each and every future public equity or equity convertible
offering of the Company.
Electronic
Offer, Sale and Distribution of Shares. A prospectus in electronic format may be made available on the websites maintained by one
or more of the underwriters or selling group members, if any, participating in this offering and one or more of the underwriters participating
in this offering may distribute prospectuses electronically. The Representative may agree to allocate a number of shares to underwriters
and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters
and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in
electronic format, the information on these websites is not part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon
by investors.
Other
Relationships. Certain of the underwriters and their affiliates have provided, and may in the future provide, various investment
banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future
receive, customary fees; however, except as disclosed in this prospectus, we have no present arrangements with any of the underwriters
for any further services.
Within
the last twelve months, we and the Representative have had the following relationships:
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1.
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In
connection with a firm commitment underwritten public offering pursuant to the Company’s registration statement on Form S-1
(File No. 333-238587) and Form S-1MEF (File No. 333-239220), on June 16, 2020, we entered into an underwriting agreement with
the Representative pursuant to which we paid the Representative an aggregate of $551,999.13 in commissions and
non-accountable expenses.
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2.
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In
connection with a firm commitment underwritten public offering pursuant to the Company’s registration statement on Form S-3
(File No. 333-230740), on July 1, 2020, we entered into an underwriting agreement with the Representative pursuant to which we paid
the Representative an aggregate of $591,560 in commissions and non-accountable expenses.
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3.
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In
connection with a firm commitment underwritten public offering pursuant to the Company’s registration statement on Form S-3
(File No. 333-230740), on July 28, 2020, we entered into an underwriting agreement with the Representative pursuant to which
we paid the Representative an aggregate of $295,119.60 in commissions and non-accountable expenses.
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4.
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In
connection with a firm commitment underwritten public offering pursuant to the Company’s registration statements on Form S-1
(File No. 333-249857) and Form S-1MEF (File No. 333-252239), on January 19, 2021, we entered into an underwriting agreement with
the Representative pursuant to which we paid the Representative an aggregate of $2,484,000 in commissions and non-accountable
expenses. Under this underwriting agreement, the Representative has a right of first refusal for 12 months after the date of the
offering.
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5.
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In
connection with a firm commitment underwritten public offering pursuant to the Company’s registration statements on Form S-3
(File No. 333-230740) and Form S-3MEF (File No. 333-252757), on February 4, 2021, we entered into an underwriting agreement with
the Representative pursuant to which we paid the Representative an aggregate of $3,371,804.79 in commissions and non-accountable
expenses. Under this underwriting agreement, we and the Representative acknowledge and agree that Section 7 of the previous underwriting
agreement dated January 19, 2021 regarding the right of first refusal shall remain in full force and effect.
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Stabilization.
In connection with this offering, the underwriters may engage in stabilizing transactions, overallotment transactions, syndicate covering
transactions, penalty bids and purchases to cover positions created by short sales.
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Stabilizing
transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in
for the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress.
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Overallotment
transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase.
This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase
in the overallotment option. In a naked short position, the number of shares involved is greater than the number of shares in the
overallotment option. The underwriters may close out any short position by exercising their overallotment option and/or purchasing
shares in the open market.
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Syndicate
covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover
syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase
shares through exercise of the overallotment option. If the underwriters sell more shares than could be covered by exercise of the
overallotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open
market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward
pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.
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Penalty
bids permit the Representative to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate
member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
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These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price
of our shares or common stock or preventing or retarding a decline in the market price of our shares or common stock. As a result, the
price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we
nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price
of our common stock. These transactions may be effected on NYSE American.
Passive
Market Making. In connection with this offering, underwriters and selling group members may engage in passive market making transactions
in our common stock on the NYSE American marketplace in accordance with Rule 103 of Regulation M under the Exchange Act, during a period
before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker
must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered
below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded.
Offer
restrictions outside the United States
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered
by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be
offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with
the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result
in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are
advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus.
This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in
any jurisdiction in which such an offer or a solicitation is unlawful.
China
The
information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s
Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region
and Taiwan). The securities may not be offered or sold directly or indirectly in the People’s Republic of China to legal or natural
persons other than directly to “qualified domestic institutional investors.”
Hong
Kong
Each
underwriter has represented and agreed that:
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it
has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any of our common stock other than (i)
to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules
made under that Ordinance; or (ii) in other circumstances which do not result in the document being a “prospectus” as
defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of
that Ordinance; and
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it
has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes
of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to our common stock, which is directed
at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the
securities laws of Hong Kong) other than with respect to shares of our common stock which are or are intended to be disposed of only
to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and
any rules made under that Ordinance.
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Singapore
This
prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated
or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether
directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures
Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A),
and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where
the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
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a
corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments
and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
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a
trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust
is an individual who is an accredited investor,
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shares,
debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described)
in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to
an offer made under Section 275 of the SFA except:
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to
an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the
SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures
of that corporation or such rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent
in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other
assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
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where
no consideration is or will be given for the transfer; or
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where
the transfer is by operation of law.
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LEGAL
MATTERS
The
validity of the issuance of the securities offered hereby will be passed upon for us by Sichenzia Ross Ference LLP, New York, New York.
Certain legal matters in connection with this offering will be passed upon for the underwriters by Kaufman & Canoles, P.C., Richmond,
VA.
EXPERTS
The
consolidated financial statements of Document Security Systems, Inc., and Subsidiaries as of and for the years ended December 31, 2020
and 2019, incorporated in this prospectus by reference to the Company’s Annual Report on Form 10-K for the year ended December
31, 2020, as adjusted, by reference to the Company’ Current Report on Form 8-K filed on May 24, 2021, in order to give effect to
a change in segment reporting, have been audited by Freed Maxick CPAs, P.C., an independent registered public accounting firm, as stated
in its report incorporated by reference herein, and have been so incorporated in reliance upon such report and upon the authority of
such firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus supplement and the accompanying prospectus are part of the registration statement on Form S-3 we filed with the Securities
and Exchange Commission, or SEC, under the Securities Act, and do not contain all the information set forth in the registration statement.
Whenever a reference is made in this prospectus supplement or the accompanying prospectus to any of our contracts, agreements or other
documents, the reference may not be complete, and you should refer to the exhibits that are a part of the registration statement or the
exhibits to the reports or other documents incorporated by reference into this prospectus supplement and the accompanying prospectus
for a copy of such contract, agreement or other document. You may inspect a copy of the registration statement, including the exhibits
and schedules, without charge, at the SEC’s public reference room mentioned below, or obtain a copy from the SEC upon payment of
the fees prescribed by the SEC.
We
file periodic reports, proxy statements and other information with the SEC. Our filings are available to the public over the Internet
at the SEC’s web site at http://www.sec.gov. We will also provide you with a copy of any or all of the reports or documents that
have been incorporated by reference into this prospectus or the registration statement of which it is a part upon written or oral request,
and at no cost to you. If you would like to request any reports or documents from the Company, please contact Frank D. Heuszel at 585-325-3610.
Our
Internet address is www.dsssecure.com. We have not incorporated by reference into this prospectus the information on our website,
and you should not consider it to be a part of this document. Our web address is included in this document as an inactive textual reference
only.
INCORPORATION
OF DOCUMENTS BY REFERENCE
This
prospectus is part of the registration statement, but the registration statement includes and incorporates by reference additional information
and exhibits. The Securities and Exchange Commission permits us to “incorporate by reference” the information contained in
documents we file with the Securities and Exchange Commission, which means that we can disclose important information to you by referring
you to those documents rather than by including them in this prospectus. Information that is incorporated by reference is considered
to be part of this prospectus and you should read it with the same care that you read this prospectus. Information that we file later
with the Securities and Exchange Commission will automatically update and supersede the information that is either contained, or incorporated
by reference, in this prospectus, and will be considered to be a part of this prospectus from the date those documents are filed.
We
are incorporating by reference the following documents that we have filed with the SEC (other than any filing or portion thereof that
is furnished, rather than filed, under applicable SEC rules):
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our
Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021;
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our
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 14, 2021;
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our
Current Reports on Form 8-K filed with the SEC on January
6, 2021, January
22, 2021, February
10, 2021, April
1, 2021, April
9, 2021, May
11, 2021, May
21, 2021, May
24, 2021 and June 1, 2021; and
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the
description of our common stock, which is registered under Section 12 of the Exchange Act, contained in Exhibit 4.1 to our Annual
Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021, including any amendments or reports
filed for the purpose of updating such description.
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We
also incorporate by reference all additional documents that we file with the Securities and Exchange Commission under the terms of Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act that are made after the initial filing date of the registration statement of which this
prospectus is a part until the offering of the particular securities covered by this prospectus has been completed. We are not, however,
incorporating, in each case, any documents or information that we are deemed to furnish and not file in accordance with Securities and
Exchange Commission rules.
You
may request a copy of these filings at no cost, by writing or telephoning us at the following address or telephone number:
Frank
D. Heuszel
Document
Security Systems, Inc.
6
Framark Drive
Victor,
New York 14564
Tel:
+1-585-325-3610
Except
as expressly provided above, no other information, including none of the information on our website, is incorporated by reference into
this prospectus.
Any
statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a statement contained in this prospectus modifies, supersedes
or replaces such statement.
PROSPECTUS
DOCUMENT
SECURITY SYSTEMS, INC.
$200,000,000
Common
Stock
Preferred
Stock
Warrants
Units
We may from time to time, in one or more offerings at prices and on terms that we will determine at the time of each offering, sell common
stock, preferred stock, warrants, or a combination of these securities, or units, for an aggregate initial offering price of up to $200,000,000.
This prospectus describes the general manner in which our securities may be offered using this prospectus. Each time we offer and sell
securities, we will provide you with a prospectus supplement that will contain specific information about the terms of that offering.
Any prospectus supplement may also add, update, or change information contained in this prospectus. You should carefully read this prospectus
and the applicable prospectus supplement as well as the documents incorporated or deemed to be incorporated by reference in this prospectus
before you purchase any of the securities offered hereby.
This
prospectus may not be used to offer and sell securities unless accompanied by a prospectus supplement.
Our
common stock is currently traded on the NYSE American LLC under the symbol “DSS.” On May 19, 2021, the closing sales price
for our common stock was $2.81 per share. If we decide to seek a listing or qualification for trading of any preferred stock, warrants,
subscriptions rights, depositary shares or units offered by this prospectus, the related prospectus supplement will disclose the exchange
or market on which the securities will be listed or traded, if any, or where we have made an application for listing or trading, if any.
The
securities offered by this prospectus involve a high degree of risk. See “Risk Factors” beginning on page 8, in addition
to Risk Factors contained in the applicable prospectus supplement.
Neither
the Securities and Exchange Commission nor any State securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We
may offer the securities directly or through agents or to or through underwriters or dealers. If any agents or underwriters are involved
in the sale of the securities their names, and any applicable purchase price, fee, commission or discount arrangement between or among
them, will be set forth, or will be calculable from the information set forth, in an accompanying prospectus supplement. We can sell
the securities through agents, underwriters or dealers only with delivery of a prospectus supplement describing the method and terms
of the offering of such securities. See “Plan of Distribution.”
This
prospectus is dated June 7, 2021
TABLE
OF CONTENTS
You
should rely only on the information contained or incorporated by reference in this prospectus or any prospectus supplement. We have not
authorized anyone to provide you with information different from that contained or incorporated by reference into this prospectus. If
any person does provide you with information that differs from what is contained or incorporated by reference in this prospectus, you
should not rely on it. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained
in this prospectus. You should assume that the information contained in this prospectus or any prospectus supplement is accurate only
as of the date on the front of the document and that any information contained in any document we have incorporated by reference is accurate
only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus or any prospectus
supplement or any sale of a security. These documents are not an offer to sell or a solicitation of an offer to buy these securities
in any circumstances under which the offer or solicitation is unlawful.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a shelf registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the “SEC”)
using a “shelf” registration process. Under this shelf registration process, we may sell up to $200,000,000 of our common
stock, warrants, units or rights in one or more offerings from time to time. This prospectus provides you with a general description
of the securities we may offer. Each time we offer securities, we will provide you with a prospectus supplement that describes the specific
amounts, prices and terms of the securities we offer. The prospectus supplement also may add, update or change information contained
in this prospectus.
This
prospectus does not contain all the information provided in the registration statement we filed with the SEC. You should read both this
prospectus, including the section titled “Risk Factors,” and any prospectus supplement, together with the additional information
described under the heading “Where You Can Find More Information.”
You
should rely only on the information contained or incorporated by reference in this prospectus or a prospectus supplement. We have not
authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information,
you should not rely on it. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities in
any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any
prospectus supplement, as well as information we have previously filed with the SEC and incorporated by reference, is accurate as of
the date on the front of those documents only. Our business, financial condition, results of operations and prospects may have changed
since those dates
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement and any accompanying prospectus, including the documents that we incorporate by reference, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements include those that express plans, anticipation,
intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking
statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties
known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In
some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,”
“estimates,” “plans,” “believes,” “seeks,” “may,” “should,” “could”
or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties
that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed throughout this prospectus supplement.
You
should read this prospectus supplement, the accompanying prospectus and the documents that we reference herein and therein and have filed
as exhibits to the registration statement, of which this prospectus supplement is part, completely and with the understanding that our
actual future results may be materially different from what we expect. You should assume that the information appearing in this prospectus
supplement and any accompanying prospectus is accurate as of the date on the cover page of this prospectus supplement. Because the risk
factors referred to above, as well as the risk factors incorporated herein by reference, could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on
any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as
may be required under applicable securities laws, we undertake no obligation to update any forward-looking statement to reflect events
or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge
from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. We qualify all of the information presented in this prospectus supplement and the
accompanying prospectus, and particularly our forward-looking statements, by these cautionary statements.
THE
COMPANY
Overview
Document
Security Systems, Inc. (the “Company of DSS”) operates eight (8) business lines through eight (8) DSS subsidiaries located
around the globe.
Of
the eight subsidiaries, three of those have historically been the core subsidiaries of the Company: (1) Premier Packaging Corporation
(“Premier Packaging”), (2) DSS Digital Inc., and its subsidiaries (“Digital Group”), and (3) DSS Technology Management,
Inc. (“IP Technology”). Premier Packaging operates in the paper board folding carton, smart packaging, and document security
printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional
direct mail solutions designed to provide functionality, marketability, and sustainability to product packaging while providing counterfeit
protection and consumer engagement platform. Digital Group researches, develops, markets, and sells the Company’s digital products
worldwide. As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features and
cutting-edge technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s
primary product is AuthentiGuard®, which is a brand authentication application that integrates the Company’s counterfeit deterrent
technologies with proprietary digital data security-based solutions. IP Technology Management Inc., manages, licenses, and acquires intellectual
property assets 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. In 2020, under its (4) Decentralize Sharing Systems, Inc. subsidiary, created a fourth business segment, Direct Marketing/Online
Sales Group (“Direct”). This group provides services to assist companies in the emerging growth gig business model of peer-to-peer
decentralized sharing marketplaces. Direct specializes in marketing and distributing its products and services through its subsidiary
and partner network, using the popular gig economic marketing strategy as a form of direct marketing.
In
addition to the four subsidiaries listed above, in 2019 and early 2020, DSS has created four new, wholly owned subsidiaries. (5) DSS
Blockchain Security, Inc., a Nevada corporation, specializes in the development of blockchain security technologies for tracking and
tracing solutions for supply chain logistics and cyber securities across global markets. (6) DSS Securities, Inc., a Nevada corporation,
has been established to develop or to acquire assets in the securities trading or management arena, and to pursue two parallel streams
of digital asset exchanges in multiple jurisdictions: (i) securitized token exchanges, focusing on digitized assets from different vertical
industries and (ii) utilities token exchanges, focusing on “blue-chip” utility tokens from solid businesses. (7) DSS BioHealth
Security, Inc., a Nevada corporation, is our business line which we will intend to invest in or to acquire companies related to the bio-health
and biomedical field, including businesses focused on the research to advance drug discovery and development for the prevention, inhibition,
and treatment of neurological, oncology and immuno-related diseases. This new division will place special focus on open-air defense initiatives,
which curb transmission of air-borne infectious diseases such as tuberculosis and influenza, among others. (8) DSS Secure Living, Inc.,
a Nevada Corporation, develops top of the line advanced technology, energy efficiency, quality of life living environments and home security
for everyone for new construction and renovations of residential single and multifamily living facilities. Aside from Decentralized Sharing
Systems, Inc. the activity in the these newly created subsidiaries have been minimal or in various start-up or organizational phases.
On
March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with
LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc. (“LVAM”), and American Medical REIT Inc. under which it
acquired a 52.5% controlling ownership interest in AMRE Asset Management Inc. (“AAMI”) which currently has a 93% equity interest
in American Medical REIT Inc. (“AMRE”). AAMI is a real estate investment trust (“REIT”) management company that
sets the strategic vision and formulate investment strategy for AMRE. It manages the REIT’s assets and liabilities and provides
recommendations to AMRE on acquisition and divestments in accordance with the investment strategies. AMRE is a Maryland corporation,
organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant
market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. AMRE was formed
to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE is planned to qualify as a Real Estate
Investment Trust for federal income tax purposes, which will provide. AMRE’s investors the opportunity for direct ownership of
Class A licensed medical real estate. As of March 31, 2021, AAMI has yet to generate any revenue. LVAM is an 82% owned subsidiary of
Alset International Limited (formally Singapore eDevelopment Ltd.), whose Chief Executive Officer and largest shareholder is Mr. Heng
Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the Company.
On
August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact BioMedical”), pursuant to a Share
Exchange Agreement by and among the Company, DSS BioHealth Security, Inc. (“DSS BioHealth”), Alset International Limited,
and Global Biomedical Pte Ltd. (“GBM”), which was previously approved by the Company’s shareholders (the “Share
Exchange”). Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value
$0.02 per share, nominally valued at $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred
Stock (“Series A Preferred Stock”). As a result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary
of DSS BioHealth, the Company’s wholly owned subsidiary. Alset International Limited (formally Singapore eDevelopment Ltd.), whose
Chief Executive Officer and largest shareholder is Mr. Heng Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the
Company.
Impact
BioMedical strives to leverage its scientific know-how and intellectual property rights to provide solutions that have been plaguing
the biomedical field for decades. By tapping into the scientific expertise of its partners, Impact BioMedical has undertook a concerted
effort in the research and development (R&D), drug discovery and development for the prevention, inhibition, and treatment of neurological,
oncological and immune related diseases.
In
August 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a
real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities,
Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting
process.
On
October 7, 2020, DSS Securities took part in an initial public offering of Presidio Property Trust, Inc., a Maryland corporation, that
invests primarily in commercial properties, such as office, industrial and retail properties, as well as in residential across the United
States. As part of this offering, we purchased 200,000 shares of Presidio’s Series A Common Stock at $5.00 per share for a total
purchase price of $1,000,000.
Effective
December 9, 2020, Impact BioMedical entered into an exclusive distribution agreement with BioMed Technologies Asia Pacific Holdings Limited
(“BioMed”), which is focused on manufacturing natural probiotics. Under the terms of this distribution agreement, h Impact
BioMedical will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed
by Impact BioMedical include BioMed’s PGut Premium ProbioticsTM, PGut Allergy ProbioticsTM, PGut SupremeSlim ProbioticsTM, PGut
Kids ProbioticsTM, and PGut Baby ProbioticsTM. Under the terms of the ten-year distribution agreement, Impact BioMedical will have exclusive
rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution
rights in all other countries.
On
February 8, 2021, DSS Securities announced that it entered into a joint venture (“JV”) with Coinstreet Partners (“Coinstreet”),
a global decentralized digital investment banking group and digital asset financial service firm, and GSX Group (“GSX”),
a global digital exchange ecosystem for the issuance, trading, and settlement of tokenized securities, using its proprietary blockchain
solution. The JV leverages the operational strengths and assets of three key leaders in their field, combining traditional capital market
experience, Fintech innovations, and business networks from three continents, North America, Europe, and Asia, to capitalize on unique
digital asset opportunities. The JV reported that it intended to first pursue a digital securities exchange license in the US. Moving
forward, this JV will be the key operational company building and operating a digital securities exchange that utilizes the GSX STACS
blockchain technology, serving corporate issuers and investors in the sector.
On
February 25, 2021, DSS Securities announced its acquisition of an equity interest in WestPark Capital, Inc.(“WestPark”) and
an investment in BMI Capital International LLC (“BMICI”). DSS Securities executed two separate transactions that were designed
to grow the Securities division by signing a binding note and stock exchange letter of intent to own 7.5% of the issued and outstanding
shares of WestPark and acquiring 24.9% of BMICI through a purchase agreement. WestPark is a full-service investment banking and securities
brokerage firm which serves the needs of both private and public companies worldwide, as well as individual and institutional investors.
BMI is a private investment bank specializing in corporate finance advising, raising equity, and venture services, providing a global
“one-stop” corporate consultancy to listed companies. From corporate finance to professional valuation, corporate communications
to event management, BMICI services companies in the US, Hong Kong, Singapore, Taiwan, Japan, Canada, and Australia.
On
March 1, 2021, Decentralized Sharing Systems, Inc. announced that it increased its investment in Sharing Services Global Corporation,
a publicly traded company dedicated to maximizing shareholder value through the acquisition and development of innovative companies,
products, and technologies in the direct selling industry, through a $30 million convertible promissory note dated April 5, 2021. Decentralized’s
financing was made as an investment that would help accelerate Sharing Services sales and growth, as well as international expansion,
with the expectation that such capital reserves would help make Sharing Services a dominant player in the global marketplace over the
next two years. It was reported that the new $30 million investment would have the potential to exponentially increase Sharing Services
sales channels and substantially expand its product portfolio, and to position Sharing Services to capitalize on consolidation and roll
up opportunities of other direct selling companies. In the joint announcement, Sharing Services reported that the additional funding
would now allow it to accelerate its global expansion with a direct focus on the Asian markets, and specifically in countries such as
South Korea, Japan, Hong Kong, China, Singapore, Taiwan, Thailand, Malaysia, and the Philippines. As of March 31, 2021, DSS owned 64,207,378
class A shares of Sharing Services or approximately 40.2% of the Sharing Services outstanding shares. This aggregated to a fair value
at March 31, 2021 of approximately $16,052,000. The Company, via four (4) of the Company’s existing board members, currently holds
four (4) of the five (5) SHRG board of director seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as
well the CEO of SHRG is on the SHRG Board, along with Mr. Heng Fai Ambrose Chan, DSS’s Executive Chairman of the board of directors
(joined the SHRG Board effective May 4, 2020), Mr. Sassuan “Sam” Lee, DSS Independent Director (joined the SHRG Board effective
September 29, 2020) and Mr. Frank D. Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020).
On
March 15, 2021, the Company, through one of its subsidiaries, DSS BioMedical International, Inc. entered into a Stock Purchase Agreement
(the “Agreement”) with Vivacitas Oncology Inc. (“Vivacitas”), to purchase 500,000 shares of its common stock
at the per share price of $1.00, with an option to purchase 1,500,000 additional shares at the per share price of $1.00. In addition,
under the terms of the Agreement, the Company will be allocated two seats on the board of Vivacitas. On March 18, 2021, the Company entered
into an agreement to with Alset EHome International, Inc. (“Seller”) indirectly the Seller’s wholly owned subsidiary
Impact Oncology PTE Ltd. to effectively purchase ownership of 2,480,000 shares of common stock of Vivacitas for a purchase price $2,480,000.
This agreement includes an option to purchase an additional 250,000 shares of common stock. As a result of these two transactions, which
were closed on March 21, 2021 and March 29, 2021, respectively, the Company owns approximate 15.7% equity position in Vivacitas. The
Sellers largest shareholder is Mr. Heng Fai Ambrose Chan, the Chairman of the Company’s board of directors and its largest shareholder.
On
April 21, 2021, the Company announced its wholly owned subsidiary, Premier Packaging Corporation’s intentions to relocate from
its current 48,000 square-foot manufacturing facility from Victor, NY to a new 105,000 square-foot facility in the Town of Henrietta,
NY approximately 15 miles from its Victor location by the end of 2021. In connection with this relocation, Premier Packaging has entered
into an agreement to sell its current Victor location with the anticipated closing date of January 31, 2022.
On
May 19, 2021, the Company announced that its wholly owned subsidiary, DSS PureAir , Inc., a Texas corporation (“DSS PureAir”),
closed on a Securities Purchase Agreement with Puradigm LLC, a Nevada limited liability corporation (“Puradigm”). Pursuant
to the terms of the Securities Purchase Agreement, DSS PureAir agreed to purchase from Puradigm a secured convertible promissory note
in the maximum principal amount of $5,000,000.00 (the “Puradigm Note”). The Puradigm Note has a two year term with interest
at 6.65% payable quarterly. All, or part of the Puradigm Note principal balance can be converted at the sole discretion of DSS PureAir
for up to an 18% membership interest in Puradigm LLC. The Puradigm Note is secured by all the assets of Puradigm under a security agreement
with Puradigm.
The
four reporting segments are as follows:
Premier
Packaging: (“Premier”) The Company’s packaging and security printing group is coordinated by the wholly owned
subsidiary, Premier Packaging Corporation, a New York corporation. Premier operates in the paper board folding carton, smart packaging,
and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons,
and complex 3-dimensional direct mail solutions. These products are designed to provide functionality and marketability while also providing
counterfeit protection. Premier is currently located in Victor, NY and serves the US market.
BioHealth
Group: (“BioHealth”) The BioHealth Group is our business line created to invest in, or acquire companies in the biohealth
and biomedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of
neurological, oncological, and immune related diseases. This division is also developing open-air defense initiatives, which curb transmission
of air-borne infectious diseases, such as tuberculosis and influenza. The BioHealth Group is also targeting unmet, urgent medical needs.
Assets of this group are organized under the holding company, DSS BioHealth Security, Inc. Its subsidiaries are currently headquartered
in Rochester, NY. The group also has a research facility in Winter Haven, Florida.
Digital
Group: (“Digital”) Digital researches, develops, markets, and sells the Company’s digital products worldwide.
As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features and cutting-edge
technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s primary
product is AuthentiGuard®, which is a brand authentication application that integrates the Company’s counterfeit deterrent
technologies with proprietary digital data security-based solutions. Digital Group is headquartered in Rochester, NY, but it also has
offices and staff in Hong Kong. On May 7, 2021, Document Security Systems, Inc. (the “Company”) completed the sale of 100%
of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication
Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Purchase Agreement”). Pursuant to the
terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash;
$1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary
of the closing and ending the day before the six-year of the closing; and $0.5 million in trade credit or license fee rebates. The Hong
Kong staff and operations will remain with the Company. Included in the Consolidate Balance Sheet as of March 31, 2021 is approximately
$790,000 of assets and $48,000 of liabilities for DSS Digital. Also, included in the Consolidated Statement of Operations and Comprehensive
Loss for the three months ended March 31, 2021 for DSS Digital is net income of approximately $162,000.
Direct
Marketing/Online Sales Group: (“Direct” or “DM”) Led by the holding corporation, Decentralize Sharing
Systems, Inc. (“Decentralized”, this group provides services to assist companies in the emerging growth gig business model
of peer-to-peer decentralized sharing marketplaces. Direct specializes in marketing and distributing its products and services through
its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing. Direct marketing
products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern
Europe. Over the past 12 months, Direct has made substantial investments in acquiring marketing software, product opportunities, and
operational capabilities in this marketplace. Additionally, it has acquired and developed an independent contractor sales force. It has
also made substantial investments into other direct marketing companies, including its investment and partnership with Sharing Services
Global Corporation (OTCQB: SHRG) (“Sharing Services” or “SHRG”), which as of March 31, 2021, Decentralized owned
approximately 40% of the outstanding shares of Sharing Services. Currently, Direct and SHRG operate offices in USA, Canada, Hong Kong,
Singapore, S. Korea, Australia, New Zealand, Malaysia, and Singapore, with additional offices or presence being added monthly. Decentralized
sharing systems’ mission is to become the leading direct sales platform, training, developing and empowering leaders on a global
scale to achieve maximum human and economic potential.
Stock
Listing
Our
common stock is listed on The NYSE American LLC under the symbol “DSS.”
Corporate
Information
Our
principal executive offices are located at 6 Framark Drive, Victor, New York 14564, USA. Our telephone number is +1-585-325-3610. Our
corporate website is www.dsssecure.com. Information contained in or accessible through our website is not part of this prospectus.
RISK
FACTORS
Investing
in our securities involves a high degree of risk. Before making an investment decision, you should consider carefully the risks, uncertainties
and other factors described in our most recent Annual Report on Form 10-K, as supplemented and updated by subsequent quarterly reports
on Form 10-Q and current reports on Form 8-K that we have filed or will file with the SEC, which are incorporated by reference into this
prospectus.
Our
business, affairs, prospects, assets, financial condition, results of operations and cash flows could be materially and adversely affected
by these risks. For more information about our SEC filings, please see “Where You Can Find More Information”.
USE
OF PROCEEDS
Unless
otherwise indicated in a prospectus supplement, we intend to use the net proceeds from the sale of the securities under this prospectus
for general corporate purposes, including working capital.
DESCRIPTION
OF SECURITIES
This
prospectus contains a summary of the securities that we may sell. These summaries are not meant to be a complete description of each
security. However, this prospectus and the accompanying prospectus supplement contain the material terms of the securities being offered.
DESCRIPTION
OF COMMON STOCK
General
Our
authorized capital stock consists of 200,000,000 shares of common stock, $0.02 par value per share, 27,670,125 of which were issued and
outstanding, and 46,868 shares of Series A Preferred Stock, 42,575 of which were issued and outstanding, as of May 7, 2021.
The
following description of our common stock summarizes the material terms and provisions of the common stock that we may offer under this
prospectus but is not complete. For the complete terms of our common stock, please refer to our certificate of incorporation, as amended,
(the “Certificate of Incorporation”) which may be further amended from time to time, and our fifth amended and restated by-laws,
as further amended from time to time (the “By-laws”). The New York Business Corporation Law (“NYBCL”) may also
affect the terms of these securities.
Holders
of our common stock: (i) have equal rights to dividends from funds legally available therefore, ratably when as and if declared by the
Company’s board of directors; (ii) are entitled to share ratably in all assets of the Company available for distribution to holders
of common stock upon liquidation, dissolution, or winding up of the affairs of the Company; (iii) do not have preemptive, subscription
or conversion rights and there are no redemption or sinking fund provisions applicable thereto; (iv) are entitled to one non-cumulative
vote per share of common stock, on all matters which stockholders may vote on at all meetings of stockholders; and (v) the holders of
common stock have no conversion, preemptive or other subscription rights. There is no cumulative voting for the election of directors.
Each holder of our common stock is entitled to one vote for each share of our common stock held on all matters submitted to a vote of
stockholders.
Anti-Takeover
Effects of Certain Provisions of our Certificate of Incorporation, By-laws and the NYBCL
Section
912 of the NYBCL generally provides that a New York corporation may not engage in a business combination with an interested stockholder
for a period of five years following the interested stockholder’s becoming such. Such a business combination would be permitted
where it is approved by the board of directors before the interested stockholder’s becoming such. Covered business combinations
include certain mergers and consolidations, dispositions of assets or stock, plans for liquidation or dissolution, reclassifications
of securities, recapitalizations and similar transactions. An interested stockholder is generally a stockholder owning at least 20% of
a corporation’s outstanding voting stock. In addition, New York corporations may not engage at any time with any interested stockholder
in a business combination other than: (i) a business combination approved by the board of directors before the stock acquisition, or
where the acquisition of the stock had been approved by the board of directors before the stock acquisition; (ii) a business combination
approved by the affirmative vote of the holders of a majority of the outstanding voting stock not beneficially owned by the interested
stockholder at a meeting called for that purpose no earlier than five years after the stock acquisition; or (iii) a business combination
in which the interested stockholder pays a formula price designed to ensure that all other stockholders receive at least the highest
price per share that is paid by the interested stockholder and that meets certain other requirements.
A
corporation may opt out of the interested stockholder provisions described in the preceding paragraph by expressly electing not to be
governed by such provisions in its by-laws, which must be approved by the affirmative vote of a majority of votes of the outstanding
voting stock of such corporation and is subject to further conditions. However, our By-laws do not contain any provisions electing not
to be governed by Section 912 NYBCL. Under our By-laws, any corporate action to be taken by vote of the shareholders, shall be authorized
by a majority of votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon.
Transfer
Agent and Registrar
The
Transfer Agent and Registrar for our common stock is American Stock Transfer and Trust Company, LLC.
DESCRIPTION
OF WARRANTS
The
following description, together with the additional information we may include in any applicable prospectus supplements, summarizes the
material terms and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant
certificates. While the terms summarized below will apply generally to any warrants that we may offer, we will describe the particular
terms of any series of warrants in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement,
the terms of any warrants offered under that prospectus supplement may differ from the terms described below. If there are differences
between that prospectus supplement and this prospectus, the prospectus supplement will control. Thus, the statements we make in this
section may not apply to a particular series of warrants. Specific warrant agreements will contain additional important terms and provisions
and will be incorporated by reference as an exhibit to the registration statement which includes this prospectus.
General
We
may issue warrants for the purchase of common stock. We may issue warrants independently or together with common stock, and the warrants
may be attached to or separate from these securities.
We
will evidence each series of warrants by warrant certificates that we may issue under a separate agreement. We may enter into the warrant
agreement with a warrant agent. Each warrant agent may be a bank that we select which has its principal office in the United States and
a combined capital and surplus of at least $50,000,000. We may also choose to act as our own warrant agent. We will indicate the name
and address of any such warrant agent in the applicable prospectus supplement relating to a particular series of warrants.
We
will describe in the applicable prospectus supplement the terms of the series of warrants, including:
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the case of warrants to purchase common stock, the number of shares of common stock, as the case may be, purchasable upon the exercise
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the
effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
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anti-dilution
provisions of the warrants, if any;
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the
terms of any rights to redeem or call the warrants;
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any
provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the
dates on which the right to exercise the warrants will commence and expire or, if the warrants are not continuously exercisable during
that period, the specific date or dates on which the warrants will be exercisable;
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the
manner in which the warrant agreement and warrants may be modified;
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the
identities of the warrant agent and any calculation or other agent for the warrants;
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federal
income tax consequences of holding or exercising the warrants;
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the
terms of the securities issuable upon exercise of the warrants;
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any
securities exchange or quotation system on which the warrants or any securities deliverable upon exercise of the warrants may be
listed; and
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any
other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before
exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise,
including in the case of warrants to purchase common stock, the right to receive dividends, if any, or, payments upon our liquidation,
dissolution or winding up or to exercise voting rights, if any.
Exercise
of Warrants
Each
warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price
that we describe in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders
of the warrants may exercise the warrants at any time up to 5:00 p.m. Eastern Time on the expiration date that we set forth in the applicable
prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Holders
of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with
specified information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable
prospectus supplement. We will set forth on the reverse side of the warrant certificate, and in the applicable prospectus supplement,
the information that the holder of the warrant will be required to deliver to the warrant agent.
Until
the warrant is properly exercised, no holder of any warrant will be entitled to any rights of a holder of the securities purchasable
upon exercise of the warrant.
Upon
receipt of the required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue a new
warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants
may surrender securities as all or part of the exercise price for warrants.
Enforceability
of Rights by Holders of Warrants
Any
warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship
of agency or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of
warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or
warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action
its right to exercise, and receive the securities purchasable upon exercise of, its warrants in accordance with their terms.
Warrant
Agreement Will Not Be Qualified Under Trust Indenture Act
No
warrant agreement will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture
Act. Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect
to their warrants.
Governing
Law
Each
warrant agreement and any warrants issued under the warrant agreements will be governed by New York law.
Calculation
Agent
Calculations
relating to warrants may be made by a calculation agent, an institution that we appoint as our agent for this purpose. The prospectus
supplement for a particular warrant will name the institution that we have appointed to act as the calculation agent for that warrant
as of the original issue date for that warrant. We may appoint a different institution to serve as calculation agent from time to time
after the original issue date without the consent or notification of the holders.
The
calculation agent’s determination of any amount of money payable or securities deliverable with respect to a warrant will be final
and binding in the absence of manifest error.
DESCRIPTION
OF UNITS
As
specified in the applicable prospectus supplement, we may issue units consisting of shares of common stock or warrants or any combination
of such securities.
The
applicable prospectus supplement will specify the following terms of any units in respect of which this prospectus is being delivered:
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the
terms of the units and of any of the common stock and warrants comprising the units, including
whether and under
what
circumstances the securities comprising the units may be traded separately;
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a
description of the terms of any unit agreement governing the units; and
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a
description of the provisions for the payment, settlement, transfer or exchange of the units.
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DESCRIPTION
OF RIGHTS
We
may offer to our shareholders rights to purchase common stock or other securities. Rights may be issued independently or together with
any other offered security and may or may not be transferable by the person purchasing or receiving the rights. In connection with any
rights offering to our shareholders, we may enter into a standby underwriting or other arrangement with one or more underwriters or other
persons pursuant to which such underwriters or other person would purchase any offered securities remaining unsubscribed for after such
rights offering. Each series of rights will be issued under a separate rights agent agreement to be entered into between us and a bank
or trust company, as rights agent, that we will name in the applicable prospectus supplement. The rights agent will act solely as our
agent in connection with the certificates relating to the rights that we may issue and will not assume any obligation or relationship
of agency or trust for or with any holders of rights certificates or beneficial owners of rights.
The
prospectus supplement relating to any rights we offer will include specific terms relating to the offering, including, among others,
the date of determining the shareholders entitled to the rights distribution, the aggregated number of rights issued and the aggregate
number of shares of common stock or other securities purchasable upon exercise of the rights, the exercise price, the conditions to completion
of the offering, the date on which the right to exercise the rights will commence and the date on which the right will expire and any
applicable U.S. federal income tax considerations. To the extent that any particular terms of the rights, rights agent agreements or
rights certificates described in a prospectus supplement differ from any of the terms described herein, then the terms described herein
will be deemed to have been superseded by that prospectus supplement.
Each
right would entitle the holder of the rights to purchase for cash the principal amount of shares of common stock or other securities
at the exercise price set forth in the applicable prospectus supplement. Rights may be exercised at any time up to the close of business
on the expiration date for the rights provided in the applicable prospectus supplement. After the close of business on the expiration
date, all unexercised rights would become void and have no further force or effect.
Holders
may exercise rights as described in the applicable prospectus supplement. Upon receipt of payment and the rights certificate properly
completed and duly executed at the corporate trust office of the rights agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the shares of common stock purchasable upon exercise of the rights. If less than all of the
rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other than shareholders,
to or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby arrangements, as
described in the applicable prospectus supplement.
The
description in the applicable prospectus supplement and other offering material of any rights we offer will not necessarily be complete
and will be qualified in its entirety by reference to the applicable rights agent agreement which will be filed with the SEC if we offer
rights. For more information on how you can obtain copies of the applicable rights agent agreement if we offer rights, see the sections
above entitled “Where You can Find More Information” and “Incorporation of Certain Information by Reference”.
We urge you to read the applicable rights agent agreement and the applicable prospectus supplement and any other offering material in
their entirety.
FORMS
OF SECURITIES
Each
warrant, unit and right will be represented either by a certificate issued in definitive form to a particular investor or by one or more
global securities representing the entire issuance of securities. Certificated securities in definitive form and global securities will
be issued in registered form. Definitive securities name you or your nominee as the owner of the security, and in order to transfer or
exchange these securities or to receive payments other than interest or other interim payments, you or your nominee must physically deliver
the securities to the trustee, registrar, paying agent or other agent, as applicable. Global securities name a depositary or its nominee
as the owner of warrants, units or rights represented by these global securities. The depositary maintains a computerized system that
will reflect each investor’s beneficial ownership of the securities through an account maintained by the investor with its broker/dealer,
bank, trust company or other representative, as we explain more fully below.
Registered
Global Securities
We
may issue the registered warrants, units and rights in the form of one or more fully registered global securities that will be deposited
with a depositary or its nominee identified in the applicable prospectus supplement and registered in the name of that depositary or
nominee. In those cases, one or more registered global securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal or face amount of the securities to be represented by registered global securities. Unless and
until it is exchanged in whole for securities in definitive registered form, a registered global security may not be transferred except
as a whole by and among the depositary for the registered global security, the nominees of the depositary or any successors of the depositary
or those nominees.
If
not described below, any specific terms of the depositary arrangement with respect to any securities to be represented by a registered
global security will be described in the prospectus supplement relating to those securities. We anticipate that the following provisions
will apply to all depositary arrangements.
Ownership
of beneficial interests in a registered global security will be limited to persons, called participants, that have accounts with the
depositary or persons that may hold interests through participants. Upon the issuance of a registered global security, the depositary
will credit, on its book-entry registration and transfer system, the participants’ accounts with the respective principal or face
amounts of the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution
of the securities will designate the accounts to be credited. Ownership of beneficial interests in a registered global security will
be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with respect
to interests of participants, and on the records of participants, with respect to interests of persons holding through participants.
The laws of some states may require that some purchasers of securities take physical delivery of these securities in definitive form.
These laws may impair your ability to own, transfer or pledge beneficial interests in registered global securities.
So
long as the depositary, or its nominee, is the registered owner of a registered global security, that depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the securities represented by the registered global security for all purposes
under the applicable indenture, warrant agreement or unit agreement. Except as described below, owners of beneficial interests in a registered
global security will not be entitled to have the securities represented by the registered global security registered in their names,
will not receive or be entitled to receive physical delivery of the securities in definitive form and will not be considered the owners
or holders of the securities under the applicable indenture, warrant agreement or unit agreement. Accordingly, each person owning a beneficial
interest in a registered global security must rely on the procedures of the depositary for that registered global security and, if that
person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights
of a holder under the applicable indenture, warrant agreement or unit agreement. We understand that under existing industry practices,
if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to give or take any
action that a holder is entitled to give or take under the applicable indenture, warrant agreement or unit agreement, the depositary
for the registered global security would authorize the participants holding the relevant beneficial interests to give or take that action,
and the participants would authorize beneficial owners owning through them to give or take that action or would otherwise act upon the
instructions of beneficial owners holding through them.
Any
payments to holders with respect to warrants, units or rights, represented by a registered global security registered in the name of
a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the registered
global security. None of DSS, the trustees, the warrant agents, the unit agents or any other agent of DSS, agent of the trustees or agent
of the warrant agents or unit agents will have any responsibility or liability for any aspect of the records relating to payments made
on account of beneficial ownership interests in the registered global security or for maintaining, supervising or reviewing any records
relating to those beneficial ownership interests.
We
expect that the depositary for any of the securities represented by a registered global security, upon receipt of any payment of principal,
premium, interest or other distribution of underlying securities or other property to holders on that registered global security, will
immediately credit participants’ accounts in amounts proportionate to their respective beneficial interests in that registered
global security as shown on the records of the depositary. We also expect that payments by participants to owners of beneficial interests
in a registered global security held through participants will be governed by standing customer instructions and customary practices,
as is now the case with the securities held for the accounts of customers in bearer form or registered in “street name” and
will be the responsibility of those participants.
If
the depositary for any of these securities represented by a registered global security is at any time unwilling or unable to continue
as depositary or ceases to be a clearing agency registered under the Securities and Exchange Act of 1934, as amended (the “Exchange
Act”) and a successor depositary registered as a clearing agency under the Exchange Act is not appointed by us within 90 days,
we will issue securities in definitive form in exchange for the registered global security that had been held by the depositary. Any
securities issued in definitive form in exchange for a registered global security will be registered in the name or names that the depositary
gives to the relevant trustee, warrant agent, unit agent or other relevant agent of ours or theirs. It is expected that the depositary’s
instructions will be based upon directions received by the depositary from participants with respect to ownership of beneficial interests
in the registered global security that had been held by the depositary.
PLAN
OF DISTRIBUTION
We
may sell the securities offered through this prospectus (i) to or through underwriters or dealers, (ii) directly to purchasers, including
our affiliates, (iii) through agents, or (iv) through a combination of any these methods. The securities may be distributed at a fixed
price or prices, which may be changed, market prices prevailing at the time of sale, prices related to the prevailing market prices,
or negotiated prices. The prospectus supplement will include the following information:
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the
terms of the offering;
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the
names of any underwriters or agents;
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the
name or names of any managing underwriter or underwriters;
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the
purchase price of the securities;
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any
over-allotment options under which underwriters may purchase additional securities from us;
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the
net proceeds from the sale of the securities;
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any
delayed delivery arrangements;
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any
underwriting discounts, commissions and other items constituting underwriters’ compensation;
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any
initial public offering price;
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any
discounts or concessions allowed or re-allowed or paid to dealers;
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any
commissions paid to agents; and
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any
securities exchange or market on which the securities may be listed.
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Sale
through Underwriters or Dealers
Only
underwriters named in the prospectus supplement are underwriters of the securities offered by the prospectus supplement.
If
underwriters are used in the sale, the underwriters will acquire the securities for their own account, including through underwriting,
purchase, security lending or repurchase agreements with us. The underwriters may resell the securities from time to time in one or more
transactions, including negotiated transactions. Underwriters may sell the securities in order to facilitate transactions in any of our
other securities (described in this prospectus or otherwise), including other public or private transactions and short sales. Underwriters
may offer securities to the public either through underwriting syndicates represented by one or more managing underwriters or directly
by one or more firms acting as underwriters. Unless otherwise indicated in the prospectus supplement, the obligations of the underwriters
to purchase the securities will be subject to certain conditions, and the underwriters will be obligated to purchase all the offered
securities if they purchase any of them. The underwriters may change from time to time any initial public offering price and any discounts
or concessions allowed or re-allowed or paid to dealers.
If
dealers are used in the sale of securities offered through this prospectus, we will sell the securities to them as principals. They may
then resell those securities to the public at varying prices determined by the dealers at the time of resale. The prospectus supplement
will include the names of the dealers and the terms of the transaction.
Direct
Sales and Sales through Agents
We
may sell the securities offered through this prospectus directly. In this case, no underwriters or agents would be involved. Such securities
may also be sold through agents designated from time to time. The prospectus supplement will name any agent involved in the offer or
sale of the offered securities and will describe any commissions payable to the agent. Unless otherwise indicated in the prospectus supplement,
any agent will agree to use its reasonable best efforts to solicit purchases for the period of its appointment.
We
may sell the securities directly to institutional investors or others who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any sale of those securities. The terms of any such sales will be described in the prospectus supplement.
Delayed
Delivery Contracts
If
the prospectus supplement indicates, we may authorize agents, underwriters or dealers to solicit offers from certain types of institutions
to purchase securities at the public offering price under delayed delivery contracts. These contracts would provide for payment and delivery
on a specified date in the future. The contracts would be subject only to those conditions described in the prospectus supplement. The
applicable prospectus supplement will describe the commission payable for solicitation of those contracts.
Continuous
Offering Program
Without
limiting the generality of the foregoing, we may enter into a continuous offering program equity distribution agreement with a broker-dealer,
under which we may offer and sell shares of our common stock from time to time through a broker-dealer as our sales agent. If we enter
into such a program, sales of the shares of common stock, if any, will be made by means of ordinary brokers’ transactions on the
NYSE American LLC or other market on which are shares may then trade at market prices, block transactions and such other transactions
as agreed upon by us and the broker-dealer. Under the terms of such a program, we also may sell shares of common stock to the broker-dealer,
as principal for its own account at a price agreed upon at the time of sale. If we sell shares of common stock to such broker-dealer
as principal, we will enter into a separate terms agreement with such broker-dealer, and we will describe this agreement in a separate
prospectus supplement or pricing supplement.
Market
Making, Stabilization and Other Transactions
Unless
the applicable prospectus supplement states otherwise, other than our common stock, all securities we offer under this prospectus will
be a new issue and will have no established trading market. We may elect to list offered securities on an exchange or in the over-the-counter
market. Any underwriters that we use in the sale of offered securities may make a market in such securities, but may discontinue such
market making at any time without notice. Therefore, we cannot assure you that the securities will have a liquid trading market.
Any
underwriter may also engage in stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Rule 104
under the Securities Exchange Act. Stabilizing transactions involve bids to purchase the underlying security in the open market for the
purpose of pegging, fixing or maintaining the price of the securities. Syndicate covering transactions involve purchases of the securities
in the open market after the distribution has been completed in order to cover syndicate short positions.
Penalty
bids permit the underwriters to reclaim a selling concession from a syndicate member when the securities originally sold by the syndicate
member are purchased in a syndicate covering transaction to cover syndicate short positions. Stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the securities to be higher than it would be in the absence of the transactions.
The underwriters may, if they commence these transactions, discontinue them at any time.
General
Information
Agents,
underwriters, and dealers may be entitled, under agreements entered into with us, to indemnification by us against certain liabilities,
including liabilities under the Securities Act. Our agents, underwriters, and dealers, or their affiliates, may be customers of, engage
in transactions with or perform services for us, in the ordinary course of business.
LEGAL
MATTERS
The
validity of the rights and the shares of common stock offered by this prospectus have been passed upon for us by Sichenzia Ross Ference
LLP, New York, New York.
EXPERTS
The
consolidated financial statements of Document Security Systems, Inc., and Subsidiaries as of and for the years ended December 31,
2020 and 2019, incorporated in this prospectus by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020, as adjusted, by reference to the Company’ Current Report on Form 8-K filed on May 24, 2021, in order to
give effect to a change in segment reporting, have been audited by Freed Maxick CPAs, P.C., an independent registered public
accounting firm, as stated in its report incorporated by reference herein, and have been so incorporated in reliance upon such
report and upon the authority of such firm as experts in accounting and auditing.
The
consolidated financial statements of Impact BioMedical Inc., and subsidiaries as of and for the years ended December 31, 2019 and 2018,
incorporated in this prospectus by reference to the Company’s Amendment No. 1 filed on June 8, 2020 to Current Report on Form 8-K
filed with the SEC on May 1, 2020, have been audited by Turner, Stone & Company, L.L.P., an independent registered public accounting
firm, as stated in its report incorporated by reference herein, and have been so incorporated in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
INCORPORATION
OF INFORMATION BY REFERENCE
This
prospectus is part of the registration statement, but the registration statement includes and incorporates by reference additional information
and exhibits. The Securities and Exchange Commission permits us to “incorporate by reference” the information contained in
documents we file with the Securities and Exchange Commission, which means that we can disclose important information to you by referring
you to those documents rather than by including them in this prospectus. Information that is incorporated by reference is considered
to be part of this prospectus and you should read it with the same care that you read this prospectus. Information that we file later
with the Securities and Exchange Commission will automatically update and supersede the information that is either contained, or incorporated
by reference, in this prospectus, and will be considered to be a part of this prospectus from the date those documents are filed.
We
are incorporating by reference the following documents that we have filed with the SEC (other than any filing or portion thereof that
is furnished, rather than filed, under applicable SEC rules):
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our
Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021;
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our
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 14, 2021;
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our
Current Reports on Form 8-K filed with the SEC on May 1, 2020 (as amended June 8, 2020) August 27, 2020, January 6, 2021, January 22, 2021, February 10, 2021, April 1, 2021, April 9, 2021, May 11, 2021, May 21, 2021 and May 24, 2021; and
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the
description of our Common Stock, which is registered under Section 12 of the Exchange Act, contained in Exhibit 4.1 to our Annual
Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021, including any amendments or reports
filed for the purpose of updating such description.
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We
also incorporate by reference all additional documents that we file with the Securities and Exchange Commission under the terms of Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act that are made after the initial filing date of the registration statement of which this
prospectus is a part until the offering of the particular securities covered by this prospectus has been completed. We are not, however,
incorporating, in each case, any documents or information that we are deemed to furnish and not file in accordance with Securities and
Exchange Commission rules.
You
may request a copy of these filings at no cost, by writing or telephoning us at the following address or telephone number:
Frank
D. Heuszel
Document
Security Systems, Inc.
6
Framark Drive
Victor,
New York 14564
Tel:
+1 (585) 325-3610
Except
as expressly provided above, no other information, including none of the information on our website, is incorporated by reference into
this prospectus.
Any
statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a statement contained in this prospectus modifies, supersedes
or replaces such statement.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus supplement and the accompanying prospectus are part of the registration statement on Form S-3 we filed with the Securities
and Exchange Commission, or SEC, under the Securities Act, and do not contain all the information set forth in the registration statement.
Whenever a reference is made in this prospectus supplement or the accompanying prospectus to any of our contracts, agreements or other
documents, the reference may not be complete, and you should refer to the exhibits that are a part of the registration statement or the
exhibits to the reports or other documents incorporated by reference into this prospectus supplement and the accompanying prospectus
for a copy of such contract, agreement or other document. You may inspect a copy of the registration statement, including the exhibits
and schedules, without charge, at the SEC’s public reference room mentioned below, or obtain a copy from the SEC upon payment of
the fees prescribed by the SEC.
We
file periodic reports, proxy statements and other information with the SEC. Our filings are available to the public over the Internet
at the SEC’s web site at http://www.sec.gov. We will also provide you with a copy of any or all of the reports or documents that
have been incorporated by reference into this prospectus or the registration statement of which it is a part upon written or oral request,
and at no cost to you. If you would like to request any reports or documents from the Company, please contact Frank D. Heuszel at +1
(585) 325-3610.
Our
Internet address is www.dsssecure.com. We have not incorporated by reference into this prospectus the information on our website,
and you should not consider it to be a part of this document. Our web address is included in this document as an inactive textual reference
only.
Document
Security Systems, Inc.
Shares
of Common Stock
Pre-Funded
Warrants to Purchase _______Shares of Common Stock
PROSPECTUS
SUPPLEMENT
Sole
Book-Running Manager
Aegis
Capital Corp.
,
2021
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