UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14C INFORMATION
Proxy
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Soliciting
Material Pursuant to §240.14a-12
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DOCUMENT
SECURITY SYSTEMS, INC.
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(Name
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VOTE
FOR DOCUMENT SECURITY SYSTEMS DIRECTOR NOMINEES
ON
THE ENCLOSED WHITE PROXY CARD TODAY
November
18, 2019
Dear
Fellow Document Security Systems Stockholder,
I
am writing to you, concerning your Company’s upcoming 2019 Annual Meeting of Stockholders, which will be held on December
9, 2019. For this meeting, you will be making important voting decisions, which can improve your Company’s prospects for
recovery and growth, and thereby have a major impact on the future value of your investment.
We
are in the process of executing a major business turnaround for your Company which is outlined below. Last spring, soon after
my appointment as CEO, I determined that the prior management had made a major strategic blunder, by focusing too much of the
Company’s time and resources on attempting to monetize the Company’s intellectual property assets, while neglecting
our core businesses.
The
Company was also in need of a major capital infusion, to financially stabilize the business. Our Chairman, Mr.
Heng Fai Ambrose Chan, stepped forward to make crucially needed equity investments, to enable your new management team
time to better implement our strategic business turnaround plan and return your Company to profitability. Mr. Chan is a highly
accomplished, world class entrepreneur, whose wisdom, advice and experience is proving invaluable, as we proceed with this turnaround
effort.
Your
Board of Directors has also been enhanced and transformed by the addition of highly qualified and proven business leaders, who
are included in our proposed slate of seven directors. We possess the experience and expertise needed to successfully execute
our Company’s new strategic business plan. These proposed directors include current and former C-level executives from major
companies, and veteran professionals responsible for investing hundreds of millions of dollars into growth companies. Collectively,
we bring fresh perspectives to the Company’s business, and we are committed to the execution of a major business turnaround,
for the benefit of all of our stockholders.
I
am requesting that you take prompt action to vote “FOR” all of Document Security Systems’ director candidates,
on the enclosed WHITE proxy card or instruction form, in order to help assure that there is no disruption in the execution
of our plan to turnaround the Company. We have high confidence that our strategic plan for profitable growth will realize Document
Security Systems’ potential and create substantial long-term stockholder value.
Here
in summary are the primary elements of our new strategic business plan:
Revive
the Company’s Core Businesses – We are upgrading equipment and products to enhance cross-selling opportunities
with existing customers and will rejuvenate research and development on digital anti-counterfeit technology products.
Substantial
Reduction of Corporate Overhead and Cash Burn* – Since last spring, we have reduced the Company’s monthly cash
burn by more than $160,000, by eliminating non-essential layers of management and redundant operating expense and by renegotiating
vendor contracts.
Exit
Unprofitable Business Lines – To preserve capital and stop further cash drain, we are shutting down the costly IP monetization
business line.
Implement
Business Diversification Initiatives – As stability of the core business is restored, we plan to both internally
develop and acquire profitable new businesses, which are in some cases complimentary to our core businesses and addressable
markets and, in others, open exciting new opportunities for expansion into new business lines.
PLEASE
SUPPORT OUR STRATEGIC PLAN TO REVIVE DOCUMENT SECURITY SYSTEMS
BY
VOTING THE WHITE PROXY CARD TODAY.
As
you might be aware, three small stockholders, who have labeled themselves as a “Concerned Shareholders Group,” are
now threatening to launch a proxy contest, to displace your new CEO and six current members of your Board of Directors, with seven
of their own hand-picked nominees, none of whom have disclosed that they possess any prior public company Board experience or
any public company management experience. In addition, this group has not disclosed any concrete alternative business plan to
create stockholder value and is instead deceptively seeking to assign blame to your new management for the blunders of the prior
management.
From
our perspective, a proxy contest involving these seven questionable alternate director nominees can only serve to disrupt the
implementation of our new strategic business plan to turn around your Company. Should you receive proxy materials from this
so-called Concerned Shareholders Group, or their affiliates, we urge you to completely disregard them and take no action. Please
do NOT vote any BLUE proxy card this Group may send.
Your
new management team and reconstituted Board of Directors are committed to the successful turnaround of your Company, and the creation
of substantial long-term stockholder value. Please vote the enclosed WHITE proxy card today “FOR” all of your Company’s
seven director nominees, “FOR” Proposals 2, 3, and 4, and for “1 YEAR” for Proposal 5.
Thank
you for your prompt attention and your support. Sincerely,
Frank
D. Heuszel, CEO of Document Security Systems, Inc.
You
may also vote your shares electronically, via telephone or internet, by following the enclosed instructions. If you have any questions
about voting your shares, you may also contact The Proxy Advisory Group, LLC, which is assisting us in this matter, by calling
212-616-2180, or by emailing info@proxyadvisory.net
*Prior
to April 2019, DSS was burning cash by approximately $255,000 per month. Over the previous five years, the Company had transitioned
from a profitable packaging and security printing company to a company more focused on an IP Monetization business line. (IP monetization
is simply the business art of turning a patent to value and return by monetizing that asset through licensing, sale-license back,
joint-venturing, exploiting co-development arrangements, and pursuing aggressive legal prosecutions of other businesses that infringe
on the patent.) The company’s attempted transformation to this new line of business failed simply because the company didn’t
have sufficient capital to initiate and sustain litigation against major corporations (Apple, Intel Corp, SK Hynix, Samsung Electronics,
Qualcomm, Seoul Semiconductor, Everlight, Cree, Lite-On Inc, and Nichia Corp.), and the selection of the initial patents which
were purchased, were not strong cases. The result was that all available capital was focused on the IP business and the previous
core business lines suffered from want of capital and attention, and in fact management specifically instructed line managers
to pare back the companies and its new business searches. As a result, business lines revenues were insufficient to meet their
own cash flow needs let alone the holding company’s overhead costs, and the Company burned capital at an accelerated rate
and DSS was unable to meet its operating payments as they became due.
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