DSS DSS Inc

Item 1.01 Entry into a Material Definitive Agreement.

On February 20, 2020, Document Security Systems, Inc., a New York corporation (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “Offering”), of 22,222,223 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement, the shares were sold to the Underwriter at a public offering price of $0.18 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 3,333,333 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Offering. The net offering proceeds to the Company from the Offering are estimated to be approximately $4 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses, and assuming no exercise of the Underwriter’s over-allotment option. The Company intends to use the net proceeds from this offering to fund development of new business lines, to upgrade machinery and facilities, to service remaining commitments under the IP monetization business and for strategic growth initiatives, including possible acquisitions or investments in complementary businesses, products, services, technologies or assets, as well as for working capital and general corporate purposes. Heng Fai Ambrose Chan, the Chairman of the Company’s Board of Directors, purchased $2 million of shares in the Offering.

The Offering is expected to close on or about February 25, 2020, subject to customary closing conditions set forth in the Underwriting Agreement. The Offering is being made pursuant to the Company’s registration statement on Form S-1 (File No. 333-236082), which was declared effective by the Securities and Exchange Commission (the “SEC”) on February 14, 2020 under the Securities Act of 1933, as amended (the “Securities Act”). A final prospectus describing the terms of the proposed offering will be filed with the SEC and will be available on the SEC’s website located at http://www.sec.gov.

The Underwriting Agreement contains customary representations, warranties and covenants of the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriter, including for liabilities under the Securities Act, and termination and other provisions customary for transactions of this nature. The Company and all of the Company’s executive officers and directors have also agreed not to sell or transfer any securities of the Company held by them for a period of 180 days from February 20, 2020, subject to limited exceptions.

This Current Report on Form 8-K contains forward-looking statements that involve risks and uncertainties, such as statements related to the anticipated closing of the Offering and the amount of net proceeds expected from the Offering. The risks and uncertainties involved include the Company’s ability to satisfy certain conditions to closing on a timely basis or at all, as well as other risks detailed from time to time in the Company’s filings with the SEC.

The foregoing summary of the Underwriting Agreement is qualified in its entirety by reference to the full text of the Underwriting Agreement, a copy of which is filed herewith as Exhibit 1.1 to this Current Report on Form 8-K and incorporated herein by reference.