10-Q

UNITED STATES SECURITIES AND EXCHANGE

COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________________to______________________.

001-32146

Commission file number

DOCUMENT SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

New York	16-1229730
(State or other Jurisdiction of incorporation- or Organization)	(IRS Employer Identification No.)

28 Main Street East, Suite 1525

Rochester, NY 14614

(Address of principal executive offices)

(585) 325-3610

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨   Accelerated filer ¨   Non-accelerated filer (Do not check if a smaller reporting company)   ¨   Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x

As of August 12, 2015, there were 46,302,404 shares of the registrant’s common stock, $0.02 par value, outstanding.

DOCUMENT SECURITY SYSTEMS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3
Item 1	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2015 (Unaudited)  and December 31, 2014  (Audited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2015 and 2014  (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 (Unaudited)	5
	Notes to Interim Condensed  Consolidated Financial Statements (Unaudited)	6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4	Controls and Procedures	20
PART II	OTHER INFORMATION	21
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	22
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3	Defaults upon Senior Securities	22
Item 4	Mine Safety Disclosures	22
Item 5	Other Information	22
Item 6	Exhibits	23
Signatures		24

2

PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

DOCUMENT SECURITY SYSTEMS, INC.  AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

As of

	June 30, 2015			December 31, 2014
	(unaudited)
ASSETS
Current assets:
Cash	$	1,014,857		$	2,343,675
Restricted cash		306,215			355,793
Accounts receivable, net		1,667,531			2,097,671
Inventory		1,120,417			869,262
Prepaid expenses and other current assets		426,081			425,671
Deferred tax asset, net		2,499			2,499
Total current assets		4,537,600			6,094,571
Property, plant and equipment, net		5,295,495			5,016,539
Investments and other assets, net		626,337			686,912
Goodwill		12,046,197			12,046,197
Other intangible assets, net		3,445,040			3,908,399
Total assets	$	25,950,669		$	27,752,618
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,624,519		$	1,037,359
Accrued expenses and other current liabilities		1,452,965			1,997,241
Current portion of long-term debt, net		1,555,222			754,745
Total current liabilities		4,632,706			3,789,345
Long-term debt, net		6,791,564			7,439,036
Other long-term liabilities		517,621			520,180
Deferred tax liability, net		157,732			148,258
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock, $.02 par value;  200,000,000 shares authorized, 46,302,404 shares issued and outstanding (46,172,404 on December 31, 2014)		926,048			923,448
Additional paid-in capital		101,692,748			101,012,659
Accumulated other comprehensive loss		(58,621	)		(61,180	)
Accumulated deficit		(88,709,129	)		(86,019,128	)
Total stockholders' equity		13,851,046			15,855,799
Total liabilities and stockholders' equity	$	25,950,669		$	27,752,618

See accompanying notes to the condensed consolidated financial statements

3

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Revenue
Printed products	$	3,683,311		$	4,407,261		$	6,703,197		$	7,570,761
Technology sales, services and licensing		512,789			476,130			922,434			940,361
Total revenue		4,196,100			4,883,391			7,625,631			8,511,122
Costs and expenses
Cost of goods sold, exclusive of depreciation and amortization		2,663,378			3,196,633			4,649,679			5,394,895
Selling, general and administrative (including stock based compensation)		2,236,713			2,613,781			4,844,828			5,687,979
Depreciation and amortization		390,533			1,288,313			770,126			2,601,684
Total costs and expenses		5,290,624			7,098,727			10,264,633			13,684,558
Operating loss		(1,094,524	)		(2,215,336	)		(2,639,002	)		(5,173,436	)
Other income and (expense):
Interest expense		(90,330	)		(88,905	)		(168,712	)		(163,855	)
Net loss on debt modification and extinguishment		-			(34,548	)		(19,096	)		(51,915	)
Gains on sales of investment and equipment		146,283			-			146,283			-
Loss before income taxes		(1,038,571	)		(2,338,789	)		(2,680,527	)		(5,389,206	)
Income tax expense		4,737			4,737			9,474			9,474
Net loss	$	(1,043,308	)	$	(2,343,526	)	$	(2,690,001	)	$	(5,398,680	)
Other comprehensive loss:
Interest rate swap gain (loss)		18,311			(15,274	)		2,559			(25,217	)
Comprehensive loss:	$	(1,024,997	)	$	(2,358,800	)	$	(2,687,442	)	$	(5,423,897	)
Loss  per share:
Basic and diluted	$	(0.02	)	$	(0.06	)	$	(0.06	)	$	(0.13	)
Shares used in computing loss per share:
Basic and diluted		46,302,404			42,040,907			46,271,078			41,982,770

See accompanying notes to condensed consolidated financial statements

4

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

(unaudited)

	2015			2014
Cash flows from operating activities:
Net loss	$	(2,690,001	)	$	(5,398,680	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		770,126			2,601,684
Stock based compensation		643,138			840,879
Paid in-kind interest		44,000			-
Gain on sale of equipment		(46,283	)		-
Net loss on debt modification and extinguishment		19,096			51,915
Change in deferred tax provision		9,474			9,474
Foreign currency translation (gain) loss		(29,400	)		16,420
Decrease (increase) in assets:
Accounts receivable		430,140			359,137
Inventory		(251,155	)		(84,680	)
Prepaid expenses and other assets		60,165			(174,616	)
Restricted cash		49,578			254,521
Increase (decrease) in liabilities:
Accounts payable		587,160			33,081
Accrued expenses and other liabilities		(523,629	)		387,188
Net cash used by operating activities		(927,591	)		(1,103,677	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(57,486	)		(157,789	)
Proceeds from the sale of equipment		46,283			-
Purchase of investments		-			(750,000	)
Purchase of intangible assets		(3,237	)		(1,196,980	)
Net cash used by investing activities		(14,440	)		(2,104,769	)
Cash flows from financing activities:
Net payments on revolving lines of credit		-			(158,087	)
Payments of long-term debt		(386,787	)		(298,816	)
Borrowings of long-term debt		-			2,691,000
Issuances of common stock, net of issuance costs		-			301,974
Net cash (used) provided by financing activities		(386,787	)		2,536,071
Net decrease in cash		(1,328,818	)		(672,375	)
Cash beginning of period		2,343,675			1,977,031
Cash end of period	$	1,014,857		$	1,304,656

See accompanying notes to the condensed consolidated financial statements.

5

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Document Security Systems, Inc. (the “Company”), through two of its subsidiaries, Premier Packaging Corporation, which operates under the assumed name of DSS Packaging Group, and Plastic Printing Professionals, Inc., which operates under the assumed name of DSS Plastics Group, operates in the security and commercial printing, packaging and plastic ID markets. The Company develops, markets, manufactures and sells paper and plastic products designed to protect valuable information from unauthorized scanning, copying, and digital imaging. The Company’s subsidiary, Extradev, Inc., which operates under the assumed name of DSS Digital Group, develops, markets and sells digital information services, including data hosting, disaster recovery and data back-up and security services. The Company’s subsidiary, DSS Technology Management, Inc., acquires intellectual property (“IP”) assets, interests in companies owning intellectual property assets, or assists others in managing their intellectual property monetization efforts, for the purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments in the development and commercialization of patented technologies, licensing, strategic partnerships and commercial litigation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X for smaller reporting companies. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying balance sheets and related interim statements of operations and comprehensive loss and cash flows include all adjustments, considered necessary for their fair presentation in accordance with U.S. GAAP. All significant intercompany transactions have been eliminated in consolidation.

Interim results are not necessarily indicative of results expected for the full year. For further information regarding the Company’s accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 2014.

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure.

Restricted Cash – As of June 30, 2015, cash of $306,215 ($355,793 – December 31, 2014) is restricted for payments of costs and expenses associated with one of the Company’s IP monetization programs.

Derivative Instruments - The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility. The Company has an interest rate swap that changes a variable rate into a fixed rate on a term loan. The swap qualifies as a Level 2 fair value financial instrument. The swap agreement is not held for trading purposes and the Company does not intend to sell the derivative swap financial instrument. The Company records the interest swap agreement on the balance sheet at fair value because the agreement qualifies as a cash flow hedge under U.S. GAAP. Gains and losses on the instrument are recorded in other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) (“AOCI”) to the Condensed Consolidated Statement of Operations on the same line item as the underlying transaction. The valuation of the interest rate swap is derived from proprietary models of Citizens Bank (defined below) based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swap decreases over the life of the agreement. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreement. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to this cash flow hedge recorded in accumulated other comprehensive loss and other liabilities at June 30, 2015 was approximately $59,000 ($61,000 - December 31, 2014), which is included in other long-term liabilities on the balance sheet.

6

The Company has a notional amount of approximately $1,050,000 as of June 30, 2015 on its interest rate swap agreement for its debt with RBS Citizens, N.A. (“Citizens Bank”) (See Note 5) which changes a variable rate into a fixed rate on a term loan as follows:

Notional		Variable
Amount		Rate			Fixed Cost			Maturity Date
$	1,050,203		3.33	%		5.87	%	August 30, 2021

Impairment of Long Lived Assets and Goodwill - Long-lived and intangible assets and goodwill are assessed for potential impairment whenever events or changes in circumstances indicate that full recoverability of net asset balances through future cash flows is in question. Goodwill and indefinite-lived intangible assets are assessed at least annually, but also whenever events or changes in circumstances indicate the carrying values may not be recoverable. Factors that could trigger an impairment review, include (a) significant underperformance relative to historical or projected future operating results; (b) significant changes in the manner of or use of the acquired assets or the strategy for our overall business; (c) significant negative industry or economic trends; (d) significant decline in our stock price for a sustained period; and (e) a decline in our market capitalization below net book value.

Goodwill - Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Financial Accounting Standards Board (“FASB”) Accounting Standard Classification (“ASC”) Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. During the Company’s annual assessment of goodwill in 2014, the Company assessed that the negative trends in patent litigation that have recently reduced the success of patent owners in protecting their patents in the federal court system had caused an impairment of the Company’s goodwill assigned to its DSS Technology Management division and accordingly, the Company recorded a $3,000,000 goodwill impairment charge to the goodwill assigned to its DSS Technology Management division.

Contingent Legal Expenses - Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period in which a conclusion is reached in an enforcement action that does not yield future royalties potential.

Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

As of June 30, 2015 and 2014, there were 11,448,047 and 16,239,947 respectively, of common stock share equivalents potentially issuable under convertible debt agreements, employment agreements, options, warrants, overallotment options, and restricted stock agreements, that could potentially dilute basic earnings per share in the future. These shares are excluded from the calculation of diluted earnings per share in periods in which the Company had a net loss because their inclusion would be anti-dilutive to the Company’s losses in the respective periods.

7

Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits.  The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

During the six months ended June 30, 2015 and 2014, one customer accounted for 22% and 30%, respectively, of the Company’s consolidated revenue and accounted for 14% and 20%, respectively, of the Company’s accounts receivable balance as of June 30, 2015 and December 31, 2014. The risk with respect to accounts receivables is mitigated by credit evaluations the Company performs on its customers, the short duration of its payment terms for the significant majority of its customer contracts and by the diversification of its customer base.

Reclassifications - Certain prior year amounts have been reclassified to conform to the current year presentation.

Continuing Operations - The Company has incurred significant net losses in previous years and through the six months of 2015. The Company’s ability to fund its current and future commitments out of its available cash and cash generated from its operations depends on a number of factors. Some of these factors include the Company’s ability to (i) increase sales of the Company’s digital products; (ii) decrease legal and professional expenses for the Company’s intellectual property monetization business; and (iii) continue to generate operating profits from the Company’s packaging and plastic printing operations.As of June 30, 2015, the Company had approximately $1,015,000 in unrestricted cash and $306,000 in restricted cash and up to $800,000 available under a revolving credit line at its packaging subsidiary, which may not be sufficient to cover the Company’s future working capital requirements if these and other factors are not met. If the Company cannot generate sufficient cash from its operations, the Company may need to raise additional funds in the future in order to fund its working capital needs and pursue its growth strategy, although there can be no assurances, management believes that sources for these additional funds will be available through either current or future investors.

New Accounting Pronouncements Not Yet Adopted – In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update (“ASU“) No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe the adoption of this ASU will have a significant impact on its financial statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual and interim periods beginning on or after December 15, 2015.  The Company does not believe the adoption of this ASU will have a significant impact on its financial statements.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-11 on its consolidated balance sheets.

2. Inventory

Inventory consisted of the following:

	June 30, 2015		December 31, 2014
Finished Goods	$	749,922	$	572,695
Work in process		168,596		123,611
Raw Materials		201,899		172,956
	$	1,120,417	$	869,262

3. Investments

In January and February 2014, DSS Technology Management made investments of $100,000 and $400,000, respectively, to purchase an aggregate of 594,530 shares of common stock of Express Mobile, Inc. (“Express Mobile”), which represented approximately 6% of the outstanding common stock of Express Mobile at the time of investment. Express Mobile is a developer of custom mobile applications and websites. The investments were recorded using the cost method and had a balance of $500,000 as of June 30, 2015 ($500,000 – December 31, 2014).

8

4. Intangible Assets

Intangible assets are comprised of the following:

			June 30, 2015						December 31, 2014
	Useful Life		Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount
Acquired intangibles- customer lists and non-compete agreements	5 -10 years		$	1,997,300	$	1,592,207	$	405,093	$	1,997,300	$	1,532,123	$	465,177
Acquired intangibles-patents and patent rights	Varied	(1)		3,650,000		1,207,435		2,442,565		3,650,000		852,343		2,797,657
Patent application costs	Varied	(2)		1,062,070		464,688		597,382		1,058,833		413,268		645,565
			$	6,709,370	$	3,264,330	$	3,445,040	$	6,706,133	$	2,797,734	$	3,908,399

(1) Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 4.9 years.

(2) Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 9.5 years.

Intangible asset amortization expense for the six months ended June 30, 2015 amounted to $466,596 ($2,312,737 - June 30, 2014).

On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendant Facebook, Inc. in connection with a lawsuit filed on October 3, 2012 by Plaintiff Bascom Research, LLC (a subsidiary of the Company) alleging patent infringement. As a result of the Court’s decision, the Company evaluated the valuation of the patents that were the basis of the case for impairment as of December 31, 2014. The Company determined that since the patents had been invalidated the probability of future cash flows derived from the patents that would support the value of the assets had decreased so the assets were impaired. As a result, the Company recorded an impairment charge for the underlying patent assets of the net book value of the patents as of December 31, 2014 of approximately $22,285,000.

On March 3, 2015, a Markman hearing was held in the Eastern District of Texas in connection with the pending DSS Technology Management v.Taiwan Semiconductor Manufacturing Company, Limited, et. al (“TSMC”) case. Based on the District Court’s claim construction order issued on April 9, 2015, the Company’s subsidiary, DSS Technology Management and TSMC entered in to a Joint Stipulation and Proposed Final Judgment of Non-Infringement dated May 4, 2015, subject to DSS Technology Management’s right to appeal the court’s claim construction decision to the Federal Circuit, thus preserving the status quo in the event an appeal results in remand for further proceedings in the District Court. During its review for the quarter ended March 31, 2015, the Company determined that this court action was a triggering event requiring that goodwill and certain of the Company’s intangible assets be tested for impairment. Furthermore, during the quarters ended March 31, 2015 and June 30, 2015, the Company’s market capitalization significantly declined and was considered an impairment indicator of goodwill in accordance with ASC 350-20. As such, the Company performed impairment tests for goodwill and certain of its intangible assets as described below for the quarters ended March 31, 2015 and June 30, 2015, respectively.

In performing the impairment analysis related to the Company’s subsidiary DSS Technology Management’s intangible assets, the Company determined that the patent portfolio containing the patents being litigated in DSS Technology Management’s suits against TSMC, Samsung, and Intel, among others, had a net carrying value of approximately $1.4 million as of March 31, 2015. In the second step of the impairment test, the Company utilized its projections of future undiscounted cash flows based on the Company’s existing use of the patents. As a result, it was determined that the Company’s projections of future undiscounted cash flows were greater than the carrying value of the asset group. Accordingly, the Company did not perform the second step of the impairment test and deemed no impairment had occurred.

9

As a result of the aforementioned triggering events, during the quarters ended March 31, 2015 and June 30, 2015, the Company performed the first step of the goodwill impairment test on the goodwill allocated to DSS Technology Management in order to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. The carrying amount of the Company’s goodwill as of March 31, 2015 and June 30, 2015 was approximately $12 million of which approximately $9.6 million is allocated to the Company’s subsidiary DSS Technology Management as a reportable unit. For the Company’s DSS Technology Management reporting unit, a significant amount of future value is based on the value of patents and patent rights, the Company uses a valuation methodology that assess the potential value of the claims against parties the Company believes have infringed on the patents and therefore, the Company has the rights to receive royalties for those infringers. The Company assessed the impact of the decision in the TSMC case referenced above on the expected future value of those assets. Based on the Company’s analysis, the Company determined that the fair value of the reporting unit exceeded the carrying value of the reporting unit, and therefore, no impairment of goodwill had occurred during each of the periods tested.

5. Short-Term and Long-Term Debt

Revolving Credit Lines - The Company’s subsidiary Premier Packaging Corporation (“Premier Packaging”) has a revolving credit line with Citizens Bank of up to $800,000 (as amended on April 28, 2015) that bears interest at 1 Month LIBOR plus 3.75% (3.93% as of June 30, 2015) and matures on May 31, 2016 (as amended on April 28, 2015) . As of June 30, 2015, the revolving line had a balance of $0 ($0 as of December 31, 2014).  

Long-Term Debt - On December 30, 2011, the Company issued a $575,000 convertible note that was due on December 29, 2013, and carries an interest rate of 10% per annum. Interest is payable quarterly, in arrears. The convertible note was convertible at any time during the term at lender’s option into a total of 260,180 shares of the Company’s common stock at a conversion price of $2.21 per share. On February 23, 2015, the Company entered into Convertible Promissory Note Amendment No. 2 to extend the maturity date to December 30, 2016, eliminate the conversion feature, and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $230,000 due on the extended maturity date. As of June 30, 2015, the balance of the note was $500,000 ($604,000 at December 31, 2014).

On May 24, 2013, the Company entered into a promissory note in the principal sum of $850,000 to purchase three printing presses that were previously leased by the Company’s wholly-owned subsidiary, Secuprint Inc., and carries an interest rate of 9% per annum. Interest is payable quarterly, in arrears. On February 23, 2015, the Company entered into Promissory Note Amendment No. 2 to extend the maturity date to May 31, 2016 and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $610,000 due on the extended maturity date. As of June 30, 2015, the balance of the term loan was $775,000 ($850,000 at December 31, 2014).

Term Loan Debt - On October 8, 2010, Premier Packaging amended its credit facility agreement with Citizens Bank to add a standby term loan note pursuant to which Citizens Bank was to provide Premier Packaging with up to $450,000 towards the funding of eligible equipment purchases for up to one year. In October 2011, the Company had borrowed $42,594 under the facility which amount was converted into a term note payable in 60 monthly installments of $887 plus interest at 1 Month LIBOR plus 3% (3.18% at June 30, 2015). As of June 30, 2015, the balance under this term note was $14,197 ($19,522 at December 31, 2014).

On July 19, 2013, Premier Packaging entered into an equipment loan with People’s Capital and Leasing Corp. (“Peoples Capital”) for a printing press. The loan was for $1,303,900, repayable over a 60-month period which commenced when the equipment was placed in service in January 2014. The loan bears interest at 4.84% and is payable in equal monthly installments of $24,511. As of June 30, 2015, the loan had a balance of $945,130 ($1,067,586 at December 31, 2014).

On April 28, 2015, Premier Packaging entered into a term note with Citizens for $525,000, repayable over a 60-month period. The loan bears interest at 3.61% and is payable in equal monthly installments of $9,591. Premier Packaging used the proceeds of the term note to acquire a HP Indigo 7800 Digital press. As of June 30, 2015, the loan had a balance of $509,009.

Promissory Notes -On August 30, 2011, Premier Packaging purchased the packaging plant it occupies in Victor, New York, for $1,500,000, which was partially financed with a $1,200,000 promissory note obtained from Citizens Bank (“Promissory Note”). The Promissory Note calls for monthly payments of principal and interest in the amount of $7,658, with interest calculated as 1 Month LIBOR plus 3.15% (3.33% at June 30, 2015). Concurrently with the transaction, the Company entered into an interest rate swap agreement to lock into a 5.87% effective interest rate for the life of the loan.  The Promissory Note matures in August 2021 at which time a balloon payment of the remaining principal balance will be due. As of June 30, 2015, the Promissory Note had a balance of $1,050,203 ($1,078,220 at December 31, 2014).

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On December 6, 2013, Premier Packaging entered into a Construction to Permanent Loan with Citizens Bank for up to $450,000 that was converted into a promissory note upon the completion and acceptance of building improvements to the Company’s packaging plant in Victor, New York. In May 2014, the Company converted the loan into a $450,000 note payable in monthly installments over a 5 year period of $2,500 plus interest calculated at a variable rate of 1 Month Libor plus 3.15% (3.33% at June 30, 2015), which payments commenced on July 1, 2014. The note matures in July 2019 at which time a balloon payment of the remaining principal balance of $300,000 is due. As of June 30, 2015, the note had a balance of $420,247 ($435,000 at December 31, 2014).

Under the Citizens Bank credit facilities, the Company’s subsidiary, Premier Packaging, is subject to various covenants including fixed charge coverage ratio, tangible net worth and current ratio covenants. For the quarters ended March 31, 2015 and June 30, 2015, Premier Packaging was in compliance with the covenants. The Citizens Bank obligations are secured by all of the assets of Premier Packaging and are also secured through cross guarantees by the Company and its other wholly-owned subsidiaries, Plastic Printing Professionals and Secuprint.

Promissory Notes and other long-term liabilities - On February 13, 2014, the Company’s subsidiary, DSS Technology Management, entered into an agreement with certain investors pursuant to which the Company contracted to receive a series of advances up to $4,500,000 from the investors in exchange for promissory notes, fixed return interests and contingent interests collateralized by certain of the Company’s intellectual property (the “Agreement”). The notes bear interest at 1.95% and are subject to various covenants and will also be subject to a Make Whole Amount calculation (as defined in the Agreement), which would result in an effective annual interest rate of approximately 4.23% for the term thereof, assuming no prepayments. At the Company’s option, it may pay accrued interest when due on the Notes, or elect to capitalize the accrued interest, adding it to the principal thereof. The maturity date of all the Notes is the date four years after issuance (February 13, 2018) of the Initial Advance Note. As of June 30, 2015, an aggregate of $4,133,000 ($4,089,000 as of December 31, 2014) was outstanding which includes $92,000 of accrued interest. In addition, $459,000 ($459,000 as of December 31, 2014) was outstanding under the fixed return equity interest and contingent equity interests which is included in other long-term liabilities on the balance sheet. See Note 7 - Commitments and Contingencies.

6. Stockholders’ Equity

On February 23, 2015, the Company amended two of its debt obligations that, among other things, extended the maturity dates of the notes, instituted principal payments for the notes, and eliminated a conversion feature on one of the notes. In conjunction with these agreements, the Company issued an aggregate of 100,000 shares of its common stock with a grant date fair value of $41,000.

Restricted Shares – In January 2015, the Company issued an aggregate of 30,000 shares of restricted common stock to certain members of the Company’s board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The restricted shares will vest on August 15, 2015 and had an aggregate grant date fair value of approximately $11,000.

Stock Options - In January 2015, the Company issued an aggregate of 53,550 options to purchase shares of the Company’s common stock with an exercise price of $0.60 per share to certain members of the Company’s board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The options shares will vest on August 15, 2015 and had an aggregate grant date fair value of approximately $6,000. The aggregate fair value of these options was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates.

Stock-Based Payments and Compensation - The Company records stock-based payment expense related to options and warrants based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During the six months ended June 30, 2015, the Company had stock compensation expense of approximately $643,000 or $0.01 basic and diluted earnings per share ($841,000; $0.02 basic earnings per share for the corresponding six months ended June 30, 2014).

As of June 30, 2015, there was approximately $685,000 of total unrecognized compensation costs related to options, warrants and restricted stock granted under the Company’s stock option plans that will be recognized over the next 12 months. This amount excludes $536,000 of potential stock based compensation for stock options that vest upon the occurrence of certain events which the Company does not believe are likely.

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7. Commitments and Contingencies

On October 24, 2011 the Company initiated a lawsuit against Coupons.com Incorporated (“Coupons.com”). The suit was filed in the United States District Court, Western District of New York, located in Rochester, New York. Coupons.com is a Delaware corporation having its principal place of business located in Mountain View, California. In the Coupons.com suit, the Company alleged breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment, and sought in excess of $10 million in money damages from Coupons.com for those claims. On October 28, 2014, the District Court granted Coupons.com’s motion for summary judgment, dismissing the case. On November 25, 2014, the Company appealed that decision to the United States Court of Appeals for the Second Circuit. On March 5, 2015, the parties entered into a Stipulation whereby the Company withdrew the appeal without prejudice so that the parties could complete settlement negotiations. On March 31, 2015, a confidential settlement was reached by the parties, ending the case.

On November 26, 2013, DSS Technology Management filed suit against Apple, Inc. (“Apple”) in the United States District Court for the Eastern District of Texas, for patent infringement (the “Apple Litigation”). The Apple Litigation relates to certain patents owned by DSS Technology Management in the Bluetooth technology space. DSS Technology Management is seeking a judgment for infringement, injunctive relief, and compensatory damages from Apple. On October 28, 2014, the case was stayed by the District Court pending a determination of Apple’s motion to transfer the case to the Northern District of California. On November 7, 2014, Apple’s motion to transfer the case to the Northern District of California was granted. On December 30, 2014, Apple filed two petitions for Inter Partes Review (“IPRs”) of the patents at issue in the case with the PTAB. DSS Technology Management filed its responses to the petitions on March 30, 2015. On May 1, 2015, the District Court issued an order granting Apple’s motion to stay the case until the IPRs are decided. On June 25, 2015, the PTAB instituted the IPR of Apple’s claims.

On March 10, 2014, DSS Technology Management filed suit in the United States District Court for the Eastern District of Texas against Taiwan Semiconductor Manufacturing Company, TSMC North America, TSMC Development, Inc. (referred to collectively as “TSMC”), Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Telecommunications America L.L.C., Samsung Semiconductor, Inc., Samsung Austin Semiconductor LLC (referred to collectively as “Samsung”), and NEC Corporation of America (referred to as “NEC”), for patent infringement involving certain of its semiconductor patents. DSS Technology Management is seeking a judgment for infringement, injunctive relief, and money damages from each of the named defendants. In June 2014, TSMC filed a petition for Inter Partes Review of the patents at issue with the PTAB. DSSTM filed its preliminary response to the petition in October 2014. Samsung also filed an IPR relating to the same patents in September 2014. DSSTM filed its preliminary response to that petition in December, 2014. On December 31, 2014, the PTAB instituted review of several of the patent claims at issue in the case. Samsung filed a motion with PTAB to join TSMC’s IPR proceeding. The request was granted by the PTAB. On March 3, 2015, a Markman hearing was held in the Eastern District of Texas. Based on the District Court’s claim construction order issued on April 9, 2015, DSS Technology Management and TSMC entered in to a Joint Stipulation and Proposed Final Judgment of Non-Infringement dated May 4, 2015, subject to DSS Technology Management’s right to appeal the court’s claim construction decision to the Federal Circuit, thus preserving the status quo in the event an appeal results in remand for further proceedings in the District Court. On April 28, 2015, DSS Technology Management reached a confidential settlement with NEC. A PTAB hearing was scheduled for August 12, 2015 in connection with the pending TSMC/Samsung IPR proceeding.

On May 30, 2014, DSS Technology Management filed suit against Lenovo (United States), Inc. (“Lenovo”) in the United States District Court for the Eastern District of Texas, for patent infringement. The complaint alleged infringement by Lenovo of one of DSS Technology Management’s patents that relates to systems and methods of using low power wireless peripheral devices. DSS Technology Management is seeking judgment for infringement and money damages from Lenovo in connection with the case. On April 27, 2015, Lenovo moved for summary judgment in the District Court on the grounds that the patent at issue is invalid for indefiniteness. On June 17, 2015, the parties entered in to a confidential non-suit agreement which ended the litigation with Lenovo.

On February 16, 2015, DSS Technology Management filed suit in the United States District Court, Eastern District of Texas, against defendants Intel Corporation, Dell, Inc., GameStop Corp., Conn’s Inc., Conn Appliances, Inc., NEC Corporation of America, Wal-Mart Stores, Inc., Wal-Mart Stores Texas, LLC, and AT&T, Inc. The complaint alleges patent infringement and seeks judgment for infringement of two of DSSTM’s patents, injunctive relief and money damages. The case is currently in the initial pleadings stage. On April 28, 2015, a confidential settlement was reached with NEC. On June 29, 2015, Intel filed its Answer to the complaint and also filed a motion to have the case transferred to the Northern District of California, which motion is currently pending as of the date of this report.

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On April 28, 2015, the Company was served with a shareholder derivative lawsuit that was filed in the Supreme Court of the State of New York, County of Kings: Benjamin Lapin, Derivatively on Behalf of Himself and All Others Similarly Situated, Plaintiff v. Robert Fagenson, Jeffrey Ronaldi, Peter Hardigan, Robert Bzdick, Jonathon Perrelli, Warren Hurwitz, Ira Greenstein, David Klein and Philip Jones, Defendants, and Document Security Systems, Inc., Nominal Defendant. The complaint alleges, among other things, breach of fiduciary duty, gross mismanagement, abuse of control, and waste of corporate assets since October 2, 2012, and alleges that demand on the Board of Directors to take action would be futile. The complaint seeks unspecified damages, attorneys’ fees, and other costs and expenses. The Company believes that all of the claims in this lawsuit are without merit and intends to vigorously defend against these claims, but is unable to predict the outcome or reasonably estimate a range of possible loss. On June 29, 2015, the Company filed a motion to dismiss the suit, which motion is currently pending as of the date of this report.

On July 16, 2015, DSS Technology Management filed three separate lawsuits in the United States District Court for the Eastern District of Texas alleging infringement of one of its semiconductor patents. The defendants are SK Hynix et al., Samsung Electronics et al., and Qualcomm Incorporated. Each respective complaint alleges patent infringement and seeks judgment for infringement, injunctive relief and money damages. These cases are currently in the initial pleadings stage.

In addition to the foregoing, we are subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. The Company accrues for potential litigation losses when a loss is probable and estimable.

Contingent Litigation Payments – The Company retains the services of professional service providers, including law firms that specialize in intellectual property licensing, enforcement and patent law. These service providers are often retained on an hourly, monthly, project, contingent or a blended fee basis. In contingency fee arrangements, a portion of the legal fee is based on predetermined milestones or the Company’s actual collection of funds. The Company accrues contingent fees when it is probable that the milestones will be achieved and the fees can be reasonably estimated. As of June 30, 2015, the Company has not accrued any contingent legal fees pursuant to these arrangements.

Contingent Payments – The Company is party to certain agreements with funding partners who have rights to portions of intellectual property monetization proceeds that the Company receives. As of June 30, 2015, there are no contingent payments due.

Related Party Consulting Payments –  During 2015 the Company paid consulting fees of approximately $35,000 to Patrick White, its former CEO, under a consulting agreement that expired on February 28, 2015.

8. Supplemental Cash Flow Information

Supplemental cash flow information for the six months ended June 30, 2015 and 2014 is approximately as follows:

	2015		2014
Cash paid for interest	$	125,000	$	151,000
Non-cash investing and financing activities:
Gain (Loss) from change in fair value of interest rate swap derivatives	$	3,000	$	(25,000	)
Accrued liabilities with related parties settled with equity	$	-	$	134,000
Financing of equipment purchases	$	525,000	$	-
Financing of building improvements	$	-	$	200,000
Change in non-controlling interest	$	-	$	200,000

9. Segment Information

The Company’s businesses are organized, managed and internally reported as four operating segments.  Two of these operating segments, Packaging and Printing, and Plastics are engaged in the printing and production of paper, cardboard and plastic documents with a wide range of features, including the Company’s patented technologies and trade secrets designed for the protection of documents against unauthorized duplication and altering.     The two other operating segments, ExtraDev, Inc., dba DSS Digital Group, and DSS Technology Management, Inc., are engaged in various aspects of developing, acquiring, selling and licensing technology assets and are grouped into one reportable segment called Technology. 

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Approximate information concerning the Company’s operations by reportable segment for the three and six months ended June 30, 2015 and 2014 is as follows. The Company relies on intersegment cooperation and management does not represent that these segments, if operated independently, would report the results contained herein:

Three Months Ended June 30, 2015	Packaging and Printing		Plastics		Technology			Corporate			Total
Revenues from external customers	$	2,710,000		974,000		512,000			-		$	4,196,000
Depreciation and amortization		144,000		28,000		217,000			2,000			391,000
Stock based compensation		18,000		10,000		34,000			256,000			318,000
Net income (loss)		94,000		11,000		(372,000	)		(776,000	)		(1,043,000	)

Six Months Ended June 30, 2015	Packaging and Printing		Plastics		Technology			Corporate			Total
Revenues from external customers	$	4,792,000		1,912,000		922,000			-		$	7,626,000
Depreciation and amortization		272,000		61,000		433,000			4,000			770,000
Stock based compensation		35,000		20,000		67,000			521,000			643,000
Net income (loss)		135,000		98,000		(1,427,000	)		(1,496,000	)		(2,690,000	)
Identifiable assets		9,461,000		2,017,000		12,911,000			1,562,000			25,951,000

Three Months Ended June 30, 2014	Packaging and Printing		Plastics			Technology			Corporate			Total
Revenues from external customers	$	3,503,000		899,000			481,000			-		$	4,883,000
Depreciation and amortization		106,000		44,000			1,127,000			11,000			1,288,000
Stock based compensation		18,000		10,000			24,000			241,000			293,000
Net income (loss)		263,000		(13,000	)		(1,557,000	)		(1,037,000	)		(2,344,000	)

Six Months Ended June 30, 2014	Packaging and Printing		Plastics			Technology			Corporate			Total
Revenues from external customers	$	5,746,000		1,820,000			945,000			-		$	8,511,000
Depreciation and amortization		256,000		87,000			2,245,000			14,000			2,602,000
Stock based compensation		92,000		52,000			117,000			579,000			840,000
Net income (loss)		199,000		(22,000	)		(3,236,000	)		(2,340,000	)		(5,399,000	)
Identifiable assets		9,143,000		2,059,000			53,786,000			1,321,000			66,309,000

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). Document Security Systems, Inc. desires to avail itself of certain “safe harbor” provisions of the 1995 Reform Act and is therefore including this special note to enable us to do so. Except for the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate”, “project”, “anticipate”, “plan”, “expect”, “intend”, “believe”, “hope”, “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors, as previously set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2014, and supplemented in the Risk Factors sections of our previously filed Form 10-Q for the first quarter of 2015 and this report, that could cause actual results to differ materially from the results anticipated in the forward-looking statements.

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Overview

Document Security Systems, Inc. (referred to in this report as “Document Security Systems”, “DSS”, “we”, “us”, “our” or “Company”) was formed in New York in 1984 and, in 2002, chose to strategically focus on becoming a developer and marketer of secure technologies. We specialize in fraud and counterfeit protection for all forms of printed documents and digital information. The Company holds numerous patents for optical deterrent technologies that provide protection of printed information from unauthorized scanning and copying. We operate two production facilities, consisting of a combined security printing and packaging facility and a plastic card facility where we produce secure and non-secure documents for our customers. We license our anti-counterfeiting technologies to printers and brand-owners. In addition, we have a digital division which provides cloud computing services for its customers, including disaster recovery, back-up and data security services. In 2013, the Company expanded its business focus by merging with DSS Technology Management, Inc., formerly known as Lexington Technology Group, Inc., which acquires intellectual property assets and interests in companies owning 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 litigation.

Prior to 2006, our primary revenue source in our document security division was derived from the licensing of our technology. In 2006, we began a series of acquisitions designed to expand our ability to produce products for end-user customers. In 2006, we acquired Plastic Printing Professionals, Inc. (“P3”), a privately held plastic cards manufacturer located in the San Francisco, California area. P3 is also referred to herein as the “DSS Plastics Group”. In 2008, we acquired substantially all of the assets of DPI of Rochester, LLC, a privately held commercial printer located in Rochester, New York, referred to herein as “Secuprint” or “DSS Printing Group”. In 2010, we acquired Premier Packaging Corporation, a privately held packaging company located in the Rochester, New York area. Premier Packaging Corporation is also referred to herein as “Premier Packaging” or the “DSS Packaging Group.” In May 2011, we acquired all of the capital stock of ExtraDev, Inc. (“ExtraDev”), a privately held information technology and cloud computing company located in the Rochester, New York area. ExtraDev is also referred to herein as the “DSS Digital Group”.

On July 1, 2013, we merged with DSS Technology Management, Inc. (formerly known as Lexington Technology Group, Inc.), a private intellectual property monetization company. DSS Technology Management, Inc. is also referred to herein as “DSS Technology Management” or “DSSTM”. DSS Technology Management is focused on extracting the economic benefits of intellectual property assets through acquiring or internally developing patents or other intellectual property assets (or interests therein) and then monetizing such assets through a variety of value enhancing initiatives.

In January 2014, we moved our printing operation to the same location as our packaging operation in Victor, New York in an effort to make our printing and packaging operations more efficient.

We do business in four operating segments as follows:

DSS Packaging and Printing Group - Produces custom paperboard packaging serving clients in the pharmaceutical, beverage, photo packaging, toy, specialty foods and direct marketing industries, among others. The group also provides secure and commercial printing services for end-user customers along with technical support for our technology licensees. The division produces a wide array of printed materials such as security paper, vital records, prescription paper, birth certificates, receipts, manuals, identification materials, entertainment tickets, secure coupons, parts tracking forms, brochures, direct mailing pieces, catalogs, business cards, etc. The division also provides resources and production equipment resources for our ongoing research and development of security printing and related technologies. 

DSS Plastics Group - Manufactures laminated and surface printed cards which can include magnetic stripes, bar codes, holograms, signature panels, invisible ink, micro fine printing, guilloche patterns, biometric, radio frequency identification (RFID) and watermarks for printed plastic documents such as ID cards, event badges, and driver’s licenses.

DSS Digital Group - Provides data center centric solutions to businesses and governments delivered via the “cloud”. This division developed an iPhone based application that integrates some of our traditional optical deterrent technologies into proprietary digital data security based solutions for brand protection and product diversion prevention.

DSS Technology Management - Acquires or internally develops patented technology or intellectual property assets (or interests therein), with 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. Since 2013, DSS Technology Management has been involved in several patent litigation lawsuits, and as of the date of this filing, has active litigation against several companies, as summarized below.

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On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendants Facebook and LinkedIn, effectively ending the case at the trial court level.  On January 22, 2015, Bascom Research, LLC, a subsidiary of DSS Technology Management, Inc. (“DSS Technology Management”), and Facebook, entered into a Stipulation filed with the District Court whereby Bascom Research agreed not to appeal the District Court’s judgment, and Facebook agreed to request the dismissal of its pending CBM with PTAB. On February 19, 2015, Facebook and Bascom Research filed a joint motion with the Patent Trial and Appeal Board (“PTAB”) to terminate the Covered Business Method (“CBM”) proceeding. The CBM proceeding was terminated on February 24, 2015.

On November 26, 2013, DSS Technology Management filed suit against Apple, Inc. (“Apple”) in the United States District Court for the Eastern District of Texas, for patent infringement. The complaint alleged infringement by Apple of two of DSS Technology Management’s’s patents that relate to systems and methods of using low power wireless peripheral devices. DSS Technology Management is seeking a judgment for infringement and money damages from Apple in connection with the case. On October 28, 2014, the case was stayed by the District Court pending a determination of Apple’s motion to transfer the case to the Northern District of California, which was filed on March 3, 2014. On November 7, 2014, Apple’s motion to transfer the case was granted. On December 30, 2014, Apple filed two petitions for inter partes review (“IPRs”) of the patents at issue with the PTAB. DSS Technology Management’s filed its responses to the petitions on March 30, 2015. On May 1, 2015, the District Court issued an order granting Apple’s motion to the stay the case until the IPRs are decided. On June 25, 2015, the PTAB instituted the IPR of Apple’s claims.

On March 10, 2014, DSS Technology Management filed suit in the United States District Court for the Eastern District of Texas against Taiwan Semiconductor Manufacturing Company, TSMC North America, TSMC Development, Inc. (referred to collectively as “TSMC”), Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Telecommunications America L.L.C., Samsung Semiconductor, Inc., Samsung Austin Semiconductor LLC (referred to collectively as “Samsung”), and NEC Corporation of America (referred to as “NEC”), for patent infringement involving one of its semiconductor patents. In this case, DSS Technology Management is seeking a judgment for infringement, injunctive relief, and money damages from each of the named defendants. On June 24, 2014, TSMC filed a petition for Inter Partes Review with the PTAB, and DSS Technology Management filed its preliminary response to that petition on October 17, 2014. Samsung filed an IPR relating to the same patents on September 12, 2014, and filed a corrected IPR on October 3, 2014. DSS Technology Management filed its preliminary response to the Samsung IPR in December, 2014. On December 31, 2014, the PTAB instituted review of several of the patent claims at issue in the case. Samsung filed a motion with PTAB to join TSMC’s IPR proceeding. The request was granted by the PTAB. A PTAB hearing is currently scheduled for August 12, 2015 in connection with the pending TSMC/Samsung IPR proceeding.

On March 3, 2015, a Markman hearing was held in the Eastern District of Texas. Based on the District Court’s claim construction order issued on April 9, 2015, DSS Technology Management and TSMC entered in to a Joint Stipulation and Proposed Final Judgement of Non-Infringement dated May 4, 2015, subject to DSS Technology Management’s right to appeal the court’s claim construction decision to the Federal Circuit, thus preserving the status quo in the event an appeal results in remand for further proceedings in the District Court. On April 28, 2015, DSS Technology Management reached a confidential settlement with NEC.

On May 30, 2014, DSS Technology Management filed suit against Lenovo (United States), Inc. (“Lenovo”) in the United States District Court for the Eastern District of Texas, for patent infringement. The complaint alleges infringement by Lenovo of one of DSS Technology Management’s patents that relates to systems and methods of using low power wireless peripheral devices. DSS Technology Management is seeking judgment for infringement and money damages from Lenovo in connection with the case. On April 27, 2015, Lenovo moved for summary judgment in the District Court on the grounds that the patent at issue is invalid for indefiniteness. A decision on the motion is currently pending. On June 17, 2015, the parties entered in to a confidential non-suit agreement which ended the litigation with Lenovo.

On February 16, 2015, DSS Technology Management filed suit in the United States District Court, Eastern District of Texas, against defendants Intel Corporation, Dell, Inc., GameStop Corp., Conn’s Inc., Conn Appliances, Inc., NEC Corporation of America, Wal-Mart Stores, Inc., Wal-Mart Stores Texas, LLC, and AT&T, Inc. The complaint alleges patent infringement and seeks a judgment for infringement of two of DSSTM’s patents, injunctive relief and money damages. The case is currently in the initial pleadings stage. On April 28, 2015, a confidential settlement was reached with NEC. On June 29, 2015, Intel filed its Answer to the complaint and also filed a motion to have the case transferred to the Northern District of California, which motion is currently pending as of the date of this report.

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On July 16, 2015, DSS Technology Management filed three separate lawsuits in the United States District Court for the Eastern District of Texas alleging infringement of one of its semiconductor patents. The defendants are SK Hynix et al., Samsung Electronics et al., and Qualcomm Incorporated. Each respective complaint alleges patent infringement and seeks judgment for infringement, injunctive relief and Money damages. These cases are currently in the initial pleadings stage.

 Results of Operations for the Three and Six Months Ended June 30, 2015 Compared to the Three and Six Months Ended June 30, 2014

This discussion should be read in conjunction with the financial statements and footnotes contained in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2014.

Revenue

	Three Months Ended June 30,  2015		Three Months Ended June 30,  2014		% change			Six Months Ended  June 30,  2015		Six Months Ended June 30,  2014		% change
Revenue
Printed products	$	3,683,000	$	4,407,000		-16	%	$	6,703,000	$	7,571,000		-11	%
Technology sales, services and licensing		513,000		476,000		8	%		922,000		940,000		-2	%
Total revenue	$	4,196,000	$	4,883,000		-14	%	$	7,625,000	$	8,511,000		-10	%

For the three months ended June 30, 2015, total revenue was approximately $4.2 million, representing a decrease of 14% from the corresponding three months ended June 30, 2014. Revenues from the sale of printed products decreased 16% during the three months ended June 30, 2015, as compared to the same period in 2014, which reflected a decrease in revenues from packaging and commercial printing sales offset by an increase in plastic card sales. Technology sales, services and licensing revenue increased 8% which reflected an increase in licensing revenues due to an increase in one-time license agreements signed during the quarter offset in 2015 by a 29% decrease in revenues from the sale of the Company’s digital products during the three months ended June 30, 2015, as compared to the same period in 2014.

For the six months ended June 30, 2015, total revenue was approximately $7.6 million, representing a decrease of 10% from the corresponding six months ended June 30, 2014. During the same period, revenues from the sale of printed products decreased 11% as compared to the same period in 2014, which reflected a decrease in revenues from packaging and commercial printing sales offset by an increase in security printing and plastic card sales. Technology sales, services and licensing revenue decreased 2% which reflected an increase in licensing revenues due to an increase in one-time license agreements signed during the second quarter offset by a 19% decrease in revenues from the sale of the Company’s digital products during the six months ended June 30, 2015, as compared to the same period in 2014.

Costs and expenses

	Three Months Ended June 30,  2015		Three Months Ended June 30,  2014		% change			Six Months Ended June 30,  2015		Six Months Ended June 30,  2014		% change
Costs and expenses
Cost of goods sold, exclusive of depreciation and amortization	$	2,663,000	$	3,197,000		-17	%	$	4,650,000	$	5,395,000		-14	%
Sales, general and administrative compensation		1,007,000		1,154,000		-13	%		2,013,000		2,446,000		-18	%
Depreciation and amortization		391,000		1,288,000		-70	%		770,000		2,602,000		-70	%
Professional fees		307,000		502,000		-39	%		1,026,000		1,042,000		-2	%
Stock based compensation		318,000		294,000		8	%		643,000		841,000		-24	%
Sales and marketing		90,000		128,000		-30	%		193,000		301,000		-36	%
Rent and utilities		165,000		181,000		-9	%		324,000		366,000		-11	%
Other operating expenses		233,000		242,000		-4	%		413,000		466,000		-11	%
Research and development		117,000		112,000		4	%		233,000		226,000		3	%
Total costs and expenses	$	5,291,000	$	7,098,000		-25	%	$	10,265,000	$	13,685,000		-25	%

17

Costs of goods sold, exclusive of depreciation and amortization includes all direct costs of printed products revenues, including materials, direct labor, transportation and manufacturing facility costs. In addition, this category includes all direct costs associated with technology sales, services and licensing including hardware and software that are resold, third-party fees, and fees paid to inventors or others as a result of technology licenses or settlements, if any. Costs of goods sold decreased 17% during the three months ended June 30, 2015 as compared to the same period in 2014. The decrease exceeded the correlated decrease in revenue experienced by the Company during the period primarily due to the increase in higher margin license revenue that offset decreases in lower margin revenue during the quarter. Costs of goods sold decreased 14% during the six months ended June 30, 2015 as compared to the same period in 2014. The decrease exceeded the correlated decrease in revenue experienced by the Company during the period primarily due to the increase in higher margin license revenue that offset decreases in lower margin revenue during the first six months of 2015 as compared to the same period in 2014.

Sales, general and administrative compensation costs, excluding stock-based compensation, decreased 13% and 18% during the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014, primarily due to a reduction of employee headcount, a reduction in bonus compensation and a reduction in executive management compensation.

Depreciation and amortization includes the depreciation of machinery and equipment used for production, depreciation of office equipment and building and leasehold improvements, amortization of software, and amortization of acquired intangible assets such as customer lists, trademarks, non-compete agreements and patents, and internally developed patent assets. Depreciation and amortization decreases during the three and six months ended June 30, 2015 as compared to the same periods in 2014, were due to the significant decrease in the carrying value of the Company’s patent assets as a result of impairments recognized by the Company in the fourth quarter of 2014.

Professional fees decreased 39% for the three months ended June 30, 2015 as compared to the same period in 2014. The second quarter 2015 decrease was primarily due to the decreases in accounting, consulting and investor relations costs for the quarter. For the six months ended June 30, 2015, professional fees decreased 2%, as compared to the same time period in 2014, as a result of decreases in accounting, consulting and investor relations costs which were partially offset by increases in legal costs, of which a significant portion was incurred in the first three months of 2015 in conjunction with the Company’s intellectual property monetization business.

Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. Stock-based compensation costs for the three months ended June 30, 2015 increased 8% and decreased 24% during the six months ended June 30, 2015 as compared to the same periods in 2014, which reflect changes in the number and value of equity compensation being granted by the Company since 2014.

Sales and marketing costs, which includes internet and trade publication advertising, travel and entertainment costs, sales-broker commissions, and trade show participation expenses, decreased 30% and 36% during the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014, primarily due to decreases in travel and marketing study costs.

Rent and utilities  decreased 9% and 11% during the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014, due to decreases in rented space costs utilized by the Company’s Technology Management division along with reductions in utilities costs incurred by the Company’s printed products division.

Other operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, bad debt expense and insurance costs.  Other operating expenses decreased 4% and 11% for the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014 which reflected a general decrease in office, delivery, equipment repair and software costs in 2015.

Research and development costs consist primarily of compensation costs for research personnel, third-party research costs, and consulting costs. Research and development costs were virtually flat during the three and six month periods of 2015 as compared to same periods in 2014 as the Company made no changes to the number or compensation of research personnel involved in the research and development of the Company’s AuthentiGuard product line.

18

Other Income and Expense

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			% change			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			%  change
Other expenses
Interest expense	$	(90,000	)	$	(89,000	)		1	%	$	(169,000	)	$	(164,000	)		3	%
Gains on sales of investment and equipment		146,000			-			100	%		146,000			-			100	%
Net loss on debt modification and extinguishment		-			(35,000	)		-100	%		(19,000	)		(52,000	)		-63	%
Other expense	$	56,000		$	(124,000	)		-145	%	$	(42,000	)	$	(216,000	)		-81	%

Gains on sales of investments and equipment consists of approximately $46,000 received by the Company’s subsidiary Premier Packaging during the three months ended June 30, 2015 for the sale of a printing press that had a zero book value, and $100,000 received by the Company’s subsidiary DSS Technology Management as a distribution from its investment in Virtual Agility Technology Investment LLC that the Company had previously written down to zero.

Net Loss and Net Loss per Share

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			% change			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			%  change
Net loss	$	(1,043,000	)	$	(2,344,000	)		-56	%	$	(2,690,000	)	$	(5,399,000	)		-50	%
Loss per share:
Basic and diluted	$	(0.02	)	$	(0.06	)		-67	%	$	(0.06	)	$	(0.13	)		-54	%
Shares used in computing loss per share:
Basic and diluted		46,302,404			42,040,907			10	%		46,271,078			41,982,770			10	%

For the three months ended June 30, 2015, net loss was $1.0 million, a 56% decrease from a net loss of $2.3 million in the three months ended June 30, 2014. The decrease was primarily the result of a $935,000 reduction in amortization of intangibles expense in 2015, along with a reduction in nearly all other cost categories during 2015 as compared to the same period in 2014.

For the six months ended June 30, 2015, net loss was $2.7 million, a 50% decrease from a net loss of $5.4 million in the six months ended June 30, 2014. The decrease was primarily the result of a $1.8 million reduction in amortization of intangibles expense in 2015, along with a reduction in nearly all other cost categories during the first six months of 2015 as compared to the same period in 2014.

LIQUIDITY AND CAPITAL RESOURCES

We have historically met our liquidity and capital requirements primarily through the private placement of our equity securities and debt financings. As of June 30, 2015, we had cash of approximately $1.0 million and restricted cash of approximately $306,000. In addition, we have $800,000 available to our packaging division under a revolving credit line.

Operating Cash Flow – During the first six months of 2015, we used approximately $928,000 of cash for operations, representing a 16% decrease from a use of cash for operations during the first six months of 2014. The reduction in operating cash use reflects the reduction in the Company’s net loss during 2015 that was due to the reduction in cash-based operating expenses such as compensation, professional fees, sales and marketing and occupancy costs.

Investing Cash Flow - During the first six months of 2015, we used approximately $57,000 for capital improvements, which resulted in a significant reduction of investing cash outflows as compared to the first six months of 2014. In addition, the Company did not purchase any investment or intangible assets during 2015 other than minimal costs associated with the filing of internally developed patents pending.

Financing Cash Flows - During the first six months of 2015, we made aggregate principal payments for long-term debt of approximately $387,000, which reflects a significant reduction in financing cash flow activity from the same period in 2014.

19

Future Capital Needs  -As of June 30, 2015, the Company had approximately $1.0 million in unrestricted cash and $306,000 in restricted cash and up to $800,000 available under a revolving credit line at its packaging subsidiary, which may not be sufficient to cover the Company’s future working capital requirements. The Company believes that its current cash resources and credit line resources provide  it with sufficient resources to fund its operations and meet its obligations for at least the next twelve months, provided that the Company achieves or substantially achieves the key factors of its business plan over the next twelve months, including but not limited to (i) increasing sales of the Company’s digital products; (ii) decreasing legal and professional expenses for the Company’s intellectual property monetization business; and (iii) continuing to generate operating profits from the Company’s packaging and plastic printing operations. Furthermore, the Company believes that it will be able to raise additional equity and/or debt funding if necessary, to fund working capital requirements not met by its current cash and credit resources. The Company has been able to obtain equity and/or debt based financing in the past, including most recently, in December 2014 when the Company raised gross proceeds of approximately $1.7 million from the sale of common stock. However, there is no assurance the Company will be able to raise such funds if necessary.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues or expenses.

Critical Accounting Policies and Estimates

As of June 30, 2015, our critical accounting policies and estimates have not changed materially from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2014.

ITEM 4 - CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of June 30, 2015, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management identified the following material weakness in its internal control over financial reporting in its annual assessment of internal controls over financial reporting that management performed for the year ended December 31, 2014. This material weakness still remains as of June 30, 2015.

The Company’s controls associated with identifying and accounting for complex and non-routine transactions in accordance with GAAP were ineffective.  Specifically, during the course of the annual audit, adjustments were made to correct the recorded amounts for impairment of goodwill that could have resulted in a material misstatement of our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Plan for Remediation of Material Weaknesses

In response to the identified material weaknesses, management, with oversight from the Company’s audit committee, plans to continue to monitor and review our control environment and to evaluate whether cost effective solutions are available to remedy the identified material weaknesses by expanding the resources available to the financial reporting process.

20

Changes in Internal Control over Financial Reporting

In the ordinary course of business, we may routinely modify, upgrade or enhance our internal controls and procedures for financial reporting. In June 2015, the Company’s corporate staff accountant voluntarily terminated her employment. The Company is in the process of evaluating the options to replace or transfer the position, and the impact that the change has on the Company’s internal control over financial reporting. Otherwise, there have not been any changes in our internal controls over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act during the second quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting,

PART II
OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On October 24, 2011 the Company initiated a lawsuit against Coupons.com Incorporated (“Coupons.com”). The suit was filed in the United States District Court, Western District of New York, located in Rochester, New York. Coupons.com is a Delaware corporation having its principal place of business located in Mountain View, California. In the Coupons.com suit, the Company alleged breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment, and sought in excess of $10 million in money damages from Coupons.com for those claims. On October 28, 2014, the District Court granted Coupons.com’s motion for summary judgment, dismissing the case. On November 25, 2014, the Company appealed that decision to the United States Court of Appeals for the Second Circuit. On March 5, 2015, the parties entered into a Stipulation whereby the Company withdrew the appeal without prejudice so that the parties could complete settlement negotiations. On March 31, 2015, a confidential settlement was reached by the parties, ending the case.

On April 28, 2015, DSS Technology Management reached a confidential settlement with NEC Corporation of America (“NEC”) that resulted in the termination of litigation against NEC in connection with DSS Technology Management’s pending litigation filed in the Eastern District of Texas against TSMC, Samsung and NEC, on March 10, 2014, and its pending litigation filed in the Eastern District of Texas against Intel Corporation, Dell, Inc., GameStop Corp., Conn’s, Inc., Conn Appliances, Inc., NEC, Wal-Mart Stores, Inc., Wal-Mart Stores Texas, LLC and AT&T, Inc., on February 16, 2015.

On April 28, 2015, the Company was served with a shareholder derivative lawsuit that was filed in the Supreme Court of the State of New York, County of Kings: Benjamin Lapin, Derivatively on Behalf of Himself and All Others Similarly Situated, Plaintiff v. Robert Fagenson, Jeffrey Ronaldi, Peter Hardigan, Robert Bzdick, Jonathon Perrelli, Warren Hurwitz, Ira Greenstein, David Klein and Philip Jones, Defendants, and Document Security Systems, Inc., Nominal Defendant. The complaint alleges, among other things, breach of fiduciary duty, gross mismanagement, abuse of control, and waste of corporate assets since October 2, 2012, and alleges that demand on the Board of Directors to take action would be futile. The complaint seeks unspecified damages, attorneys’ fees, and other costs and expenses. The Company believes that all of the claims in this lawsuit are without merit and intends to vigorously defend against these claims, but is unable to predict the outcome or reasonably estimate a range of possible loss. On June 29, 2015, the Company filed a motion to dismiss the suit, which motion is currently pending as of the date of this report.

On May 1, 2015, in connection with DSS Technology Management’s pending litigation against Apple, Inc. (“Apple”) originally filed on November 26, 2013, the District Court for the Northern District of California issued an order granting Apple’s motion to stay the case until the pending IPR proceedings are decided by the Patent Trial and Appeal Board (PTAB). On June 25, 2015, the PTAB instituted the IPR of Apple’s claims..

On May 4, 2015, based on the District Court’s claim construction order issued on April 9, 2015 in connection with DSS Technology Management’s pending litigation filed on March 10, 2014 in the Eastern District of Texas against defendants TSMC, Samsung and NEC, DSS Technology Management and TSMC entered in to a Joint Stipulation and Proposed Final Judgment of Non-Infringement, subject to DSS Technology Management’s right to appeal the court’s claim construction decision to the Federal Circuit, thus preserving the status quo in the event an appeal results in remand for further proceedings in the District Court. A PTAB hearing is currently scheduled for August 12, 2015 in connection with the TSMC/Samsung IPR proceeding.

21

On June 17, 2015, DSS Technology Management and Lenovo (United States) Inc. (“Lenovo”) entered into a confidential non-suit agreement which ended DSS Technology Management’s patent infringement lawsuit against Lenovo, which was originally filed on May 30, 2014 in the United States District Court for the Eastern District of Texas.

On July 16, 2015, DSS Technology Management filed three separate lawsuits in the United States District Court for the Eastern District of Texas alleging infringement of one of its semiconductor patents. The defendants are SK Hynix et al., Samsung Electronics et al., and Qualcomm Incorporated. Each respective complaint alleges patent infringement and seeks judgment for infringement, injunctive relief and money damages. These cases are currently in the initial pleadings stage.

ITEM 1A - RISK FACTORS

Except as set forth below and in our first quarter 10-Q filing, there have been no material changes to the discussion of risk factors included in our most recent Annual Report on Form 10-K.

Due to our low cash balance and negative cash flow, unless we raise additional capital we may have to further reduce our costs by curtailing future operations to continue as a business, and substantial doubt may be raised about our ability to continue as a going concern.

We have incurred significant net losses in previous years, including for the year ended December 31, 2014 and through the first six months of 2015. As of June 30, 2015, the Company had approximately $1,015,000 in unrestricted cash and $306,000 in restricted cash and up to $800,000 available under a revolving credit line at its packaging subsidiary, Our ability to fund our capital requirements out of our available cash and cash generated from our operations in the future will depend on many factors, but largely on our ability to (i) increase sales of the Company’s digital products; (ii) decrease legal and professional expenses for the Company’s intellectual property monetization business; and (iii) continue to generate operating profits from the Company’s packaging and plastic printing operations.The Company has been able to obtain equity and/or debt based financing in the past, including most recently, in December 2014 when the Company raised gross proceeds of approximately $1.7 million from the sale of common stock. However, we may not be able to find financing in the capital markets or from lenders on acceptable terms or at all in the future. If we are not successful in generating needed funds from operations or in equity or debt capital raising transactions, we may need to reduce our costs which measures could include selling or consolidating certain operations or assets, and delaying, canceling or scaling back product development and marketing programs. These measures could materially and adversely affect our ability to operate profitably. In addition, if we are not successful in generating needed funds from operations or from capital raising transactions, substantial doubt may be raised about our status as a going concern.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 – MINE SAFETY DISCLOSURES

None

ITEM 5 - OTHER INFORMATION

None

22

ITEM 6 - EXHIBITS

Exhibit Number	Exhibit Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer as required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*

101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

*Filed herewith.

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DOCUMENT SECURITY SYSTEMS, INC.
August 13, 2015	By:	/s/ Jeffrey Ronaldi
		Jeffrey Ronaldi
		Chief Executive Officer (Principal Executive Officer)
August 13, 2015	By:	/s/ Philip Jones
		Philip Jones
		Chief Financial Officer (Principal Financial Officer)

24

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Jeffrey Ronaldi, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Document Security Systems, Inc. for the quarter ended June 30, 2015;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the registrant’s audit committee of the board of directors (or persons performing the equivalent functions):

a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2015

/s/Jeffrey Ronaldi

Jeffrey Ronaldi

Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Philip Jones, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Document Security Systems, Inc. for the quarter ended June 30, 2015;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the registrant’s audit committee of the board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2015

/s/ Philip Jones

Philip Jones,

Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. 1350

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Document Security Systems, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Ronaldi, as Chief Executive Officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 13, 2015

/s/Jeffrey Ronaldi

Jeffrey Ronaldi

Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. 1350

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Document Security Systems, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip Jones, as Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 13, 2015

/s/Philip Jones

Philip Jones

Chief Financial Officer (Principal Financial Officer)

XML

Supplemental Cash Flow Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Supplemental Cash Flow Information [Abstract]
Cash paid for interest	$ 125,000	$ 151,000
Non-cash investing and financing activities:
Loss from change in fair value of interest rate swap derivatives	$ 3,000	(25,000)
Accrued liabilities with related parties settled with equity		$ 134,000
Financing of equipment purchases	$ 525,000
Financing of building improvements		$ 200,000
Change in non-controlling interest		$ 200,000

XML

Intangible Assets (Narrative) (Details) - Range [Domain] - USD ($)		6 Months Ended
	Jan. 05, 2015	Jun. 30, 2015	Jun. 30, 2014	Mar. 31, 2015	Dec. 31, 2014
Goodwill [Line Items]
Amortization of intangibles		$ 466,596	$ 2,312,737
Impairment of assets	$ 22,285,000
Goodwill		12,046,197		$ 12,000,000	$ 12,046,197
Impairment of goodwill		$ 3,000,000
DSS Technology Management [Member]
Goodwill [Line Items]
Goodwill				9,600,000
Patents [Member]
Goodwill [Line Items]
Useful Life		9 years 6 months
Patents [Member] | DSS Technology Management [Member]
Goodwill [Line Items]
Net carrying value of intangible assets				$ 1,400,000

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Intangible Assets

6 Months Ended

Jun. 30, 2015

Intangible Assets [Abstract]

Intangible Assets

4. Intangible Assets

Intangible assets are comprised of the following:

				June 30, 2015						December 31, 2014
	Useful Life			Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount
Acquired intangibles- customer lists and non-compete agreements		5 -10 years		$	1,997,300	$	1,592,207	$	405,093	$	1,997,300	$	1,532,123	$	465,177
Acquired intangibles-patents and patent rights		Varied	(1)		3,650,000		1,207,435		2,442,565		3,650,000		852,343		2,797,657
Patent application costs		Varied	(2)		1,062,070		464,688		597,382		1,058,833		413,268		645,565
				$	6,709,370	$	3,264,330	$	3,445,040	$	6,706,133	$	2,797,734	$	3,908,399

(1)

Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 4.9 years.

(2)

Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 9.5 years.

Intangible asset amortization expense for the six months ended June 30, 2015 amounted to $466,596 ($2,312,737 - June 30, 2014).

On January 5, 2015, the United States District Court for the Northern District of California issued a decision granting summary judgment to defendant Facebook, Inc. in connection with a lawsuit filed on October 3, 2012 by Plaintiff Bascom Research, LLC (a subsidiary of the Company) alleging patent infringement. As a result of the Court's decision, the Company evaluated the valuation of the patents that were the basis of the case for impairment as of December 31, 2014. The Company determined that since the patents had been invalidated the probability of future cash flows derived from the patents that would support the value of the assets had decreased so the assets were impaired. As a result, the Company recorded an impairment charge for the underlying patent assets of the net book value of the patents as of December 31, 2014 of approximately $22,285,000.

On March 3, 2015, a Markman hearing was held in the Eastern District of Texas in connection with the pending DSS Technology Management v.Taiwan Semiconductor Manufacturing Company, Limited, et. al (“TSMC”) case. Based on the District Court's claim construction order issued on April 9, 2015, the Company's subsidiary, DSS Technology Management and TSMC entered in to a Joint Stipulation and Proposed Final Judgment of Non-Infringement dated May 4, 2015, subject to DSS Technology Management's right to appeal the court's claim construction decision to the Federal Circuit, thus preserving the status quo in the event an appeal results in remand for further proceedings in the District Court. During its review for the quarter ended March 31, 2015, the Company determined that this court action was a triggering event requiring that goodwill and certain of the Company's intangible assets be tested for impairment.  Furthermore, during the quarters ended March 31, 2015 and June 30, 2015, the Company's market capitalization significantly declined and was considered an impairment indicator of goodwill in accordance with ASC 350-20. As such, the Company performed impairment tests for goodwill and certain of its intangible assets as described below for the quarters ended March 31, 2015 and June 30, 2015, respectively.

In performing the impairment analysis related to the Company's subsidiary DSS Technology Management's intangible assets, the Company determined that the patent portfolio containing the patents being litigated in DSS Technology Management's suits against TSMC, Samsung, and Intel, among others, had a net carrying value of approximately $1.4 million as of March 31, 2015. In the second step of the impairment test, the Company utilized its projections of future undiscounted cash flows based on the Company's existing use of the patents. As a result, it was determined that the Company's projections of future undiscounted cash flows were greater than the carrying value of the asset group. Accordingly, the Company did not perform the second step of the impairment test and deemed no impairment had occurred.

As a result of the aforementioned triggering events, during the quarters ended March 31, 2015 and June 30, 2015, the Company performed the first step of the goodwill impairment test on the goodwill allocated to DSS Technology Management in order to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. The carrying amount of the Company's goodwill as of March 31, 2015 and June 30, 2015 was approximately $12 million of which approximately $9.6 million is allocated to the Company's subsidiary DSS Technology Management as a reportable unit. For the Company's DSS Technology Management reporting unit, a significant amount of future value is based on the value of patents and patent rights, the Company uses a valuation methodology that assess the potential value of the claims against parties the Company believes have infringed on the patents and therefore, the Company has the rights to receive royalties for those infringers. The Company assessed the impact of the decision in the TSMC case referenced above on the expected future value of those assets. Based on the Company's analysis, the Company determined that the fair value of the reporting unit exceeded the carrying value of the reporting unit, and therefore, no impairment of goodwill had occurred during each of the periods tested.

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Short-Term and Long-Term Debt (Promissory Note) (Details) - USD ($)	1 Months Ended						6 Months Ended
	Apr. 28, 2015	Feb. 23, 2015	May. 31, 2014	Feb. 13, 2014	Oct. 31, 2011	Aug. 30, 2011	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 06, 2013	May. 24, 2013
Debt Instrument [Line Items]
Purchase of equipment and building improvements							$ 57,486	$ 157,789
Long-term debt, net							6,791,564		$ 7,439,036
Other long-term liabilities							$ 517,621		520,180
RBS Citizens [Member]
Debt Instrument [Line Items]
Interest rate additional rate above LIBOR					3.00%		3.18%
Debt interest rate	3.61%
Monthly installments	$ 9,591				$ 887
Promissory Notes [Member]
Debt Instrument [Line Items]
Periodic installments amount		$ 15,000
Debt interest rate				1.95%							9.00%
Interest rate on outstanding term loan				4.23%
Debt instrument, carrying amount							$ 775,000		850,000
Debt instrument, face amount											$ 850,000
Advances				$ 4,500,000
Long-term debt, net							4,133,000		4,089,000
Accrued interest, noncurrent							92,000
Other long-term liabilities							$ 459,000		459,000
Debt instrument, maturity date		May 31, 2016		Feb. 13, 2018
Promissory Notes [Member] | RBS Citizens [Member]
Debt Instrument [Line Items]
Purchase price for Real Estate acquired						$ 1,500,000
Purchase of equipment and building improvements						1,200,000
Periodic installments amount						$ 7,658
Interest rate additional rate above LIBOR			3.15%			3.15%	3.33%
Interest rate on outstanding term loan						5.87%
Debt instrument, carrying amount							$ 1,050,203		1,078,220
Debt instrument, face amount										$ 450,000
Carrying amount of loan convertible into note payable			$ 450,000
Monthly installments			$ 2,500
Maturity term			5 years
Promissory Notes Matured in July 2019 [Member] | RBS Citizens [Member]
Debt Instrument [Line Items]
Interest rate additional rate above LIBOR							3.33%
Debt instrument, final balloon payment										$ 300,000
Debt instrument, carrying amount							$ 420,247		$ 435,000

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Short-Term and Long-Term Debt (Short and Long-Term Debt) (Details) - USD ($)	1 Months Ended
	Feb. 23, 2015	Jan. 31, 2015	Feb. 13, 2014	Aug. 30, 2011	Jun. 30, 2015	Apr. 28, 2015	Dec. 31, 2014	Dec. 06, 2013	May. 24, 2013	Dec. 31, 2011
Debt Instrument [Line Items]
Stock options issued, exercise price per share		$ 0.60
RBS Citizens [Member]
Debt Instrument [Line Items]
Debt interest rate						3.61%
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Debt instrument, face amount										$ 575,000
Debt interest rate										10.00%
Shares to be issued upon conversion of convertible note, shares										260,180
Debt conversion, price per share										$ 2.21
Debt instrument, carrying amount					$ 500,000		$ 604,000
Periodic installments amount	$ 15,000
Debt instrument, final balloon payment	$ 230,000
Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument, face amount									$ 850,000
Debt instrument, maturity date	May 31, 2016		Feb. 13, 2018
Debt interest rate			1.95%						9.00%
Debt instrument, carrying amount					775,000		850,000
Periodic installments amount	$ 15,000
Debt instrument, final balloon payment	$ 610,000
Promissory Notes [Member] | RBS Citizens [Member]
Debt Instrument [Line Items]
Debt instrument, face amount								$ 450,000
Debt instrument, carrying amount					$ 1,050,203		$ 1,078,220
Periodic installments amount				$ 7,658

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Short-Term and Long-Term Debt (Standby Term Note) (Details) - Credit Facility [Domain]	1 Months Ended			6 Months Ended
	Apr. 28, 2015 USD ($)	Jul. 19, 2013 USD ($)	Oct. 31, 2011 USD ($)	Jun. 30, 2015 USD ($)	Jun. 29, 2015 USD ($)	Dec. 31, 2014 USD ($)	Oct. 08, 2010 USD ($)
Debt Instrument [Line Items]
Credit facility, amount outstanding					$ 509,009
Rbs Citizens [Member]
Debt Instrument [Line Items]
Line of credit, maximum borrowing amount	$ 525,000						$ 450,000
Debt instrument, monthly principal payment	$ 9,591		$ 887
Credit facility, amount outstanding				$ 14,197		$ 19,522
Interest rate additional rate above LIBOR			3.00%	3.18%
Debt interest rate	3.61%
Number of monthly installments	60		60
Amount borrowed			$ 42,594
Peoples Capital [Member]
Debt Instrument [Line Items]
Line of credit, maximum borrowing amount		$ 1,303,900
Debt instrument, monthly principal payment		$ 24,511
Credit facility, amount outstanding				$ 945,130		$ 1,067,586
Debt interest rate		4.84%
Number of monthly installments		60

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Stockholders' Equity (Details) - USD ($)	1 Months Ended		3 Months Ended		6 Months Ended
	Feb. 23, 2015	Jan. 31, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stockholders' Equity [Abstract]
Value of common stock sold	$ 41,000
Number of shares of common stock sold	100,000
Stock options issued		53,550
Stock options issued, exercise price per share		$ 0.60
Fair value of options issued		$ 6,000
Volatility		72.60%
Risk free interest rate		1.66%
Dividend yield		0.00%
Stock based compensation			$ 318,000	$ 293,000	$ 643,138	$ 840,879
Share-based compensation, earnings per share					$ 0.01	$ 0.02
Unrecognized compensation costs			685,000		$ 685,000
Stock based compensation expense, employee stock options			$ 536,000		$ 536,000
Restricted stock, shares		30,000
Restricted stock, value		$ 11,000

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Investments

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Investments

3. Investments

In January and February 2014, DSS Technology Management made investments of $100,000 and $400,000, respectively, to purchase an aggregate of 594,530 shares of common stock of Express Mobile, Inc. (“Express Mobile”), which represented approximately 6% of the outstanding common stock of Express Mobile at the time of investment. Express Mobile is a developer of custom mobile applications and websites. The investments were recorded using the cost method and had a balance of $500,000 as of June 30, 2015 ($500,000 – December 31, 2014).

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Commitments and Contingencies (Details) - USD ($)

1 Months Ended

6 Months Ended

Oct. 24, 2011

Jun. 30, 2015

Commitments and Contingencies Disclosure [Line Items]

Damages sought

10

Former CEO [Member]

Commitments and Contingencies Disclosure [Line Items]

Consulting fees paid to related party

$ 35,000

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Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash	$ 1,014,857	$ 2,343,675
Restricted cash	306,215	355,793
Accounts receivable, net	1,667,531	2,097,671
Inventory	1,120,417	869,262
Prepaid expenses and other current assets	426,081	425,671
Deferred tax asset, net	2,499	2,499
Total current assets	4,537,600	6,094,571
Property, plant and equipment, net	5,295,495	5,016,539
Investments and other assets, net	626,337	686,912
Goodwill	12,046,197	12,046,197
Other intangible assets, net	3,445,040	3,908,399
Total assets	25,950,669	27,752,618
Current liabilities:
Accounts payable	1,624,519	1,037,359
Accrued expenses and other current liabilities	1,452,965	1,997,241
Current portion of long-term debt, net	1,555,222	754,745
Total current liabilities	4,632,706	3,789,345
Long-term debt, net	6,791,564	7,439,036
Other long-term liabilities	517,621	520,180
Deferred tax liability, net	$ 157,732	$ 148,258
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock, $.02 par value; 200,000,000 shares authorized, 46,302,404 shares issued and outstanding (46,172,404 on December 31, 2014)	$ 926,048	$ 923,448
Additional paid-in capital	101,692,748	101,012,659
Accumulated other comprehensive loss	(58,621)	(61,180)
Accumulated deficit	(88,709,129)	(86,019,128)
Total stockholders' equity	13,851,046	15,855,799
Total liabilities and stockholders' equity	$ 25,950,669	$ 27,752,618

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Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Basis of Presentation and Significant Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

1. Basis of Presentation and Significant Accounting Policies

Document Security Systems, Inc. (the “Company”), through two of its subsidiaries, Premier Packaging Corporation, which operates under the assumed name of DSS Packaging Group, and Plastic Printing Professionals, Inc., which operates under the assumed name of DSS Plastics Group, operates in the security and commercial printing, packaging and plastic ID markets. The Company develops, markets, manufactures and sells paper and plastic products designed to protect valuable information from unauthorized scanning, copying, and digital imaging. The Company's subsidiary, Extradev, Inc., which operates under the assumed name of DSS Digital Group, develops, markets and sells digital information services, including data hosting, disaster recovery and data back-up and security services. The Company's subsidiary, DSS Technology Management, Inc., acquires intellectual property (“IP”) assets, interests in companies owning intellectual property assets, or assists others in managing their intellectual property monetization efforts, for the purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments in the development and commercialization of patented technologies, licensing, strategic partnerships and commercial litigation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X for smaller reporting companies. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying balance sheets and related interim statements of operations and comprehensive loss and cash flows include all adjustments, considered necessary for their fair presentation in accordance with U.S. GAAP. All significant intercompany transactions have been eliminated in consolidation.

Interim results are not necessarily indicative of results expected for the full year. For further information regarding the Company's accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 2014.

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure.

Restricted Cash – As of June 30, 2015, cash of $306,215 ($355,793 – December 31, 2014) is restricted for payments of costs and expenses associated with one of the Company's IP monetization programs.

Derivative Instruments - The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility. The Company has an interest rate swap that changes a variable rate into a fixed rate on a term loan. The swap qualifies as a Level 2 fair value financial instrument. The swap agreement is not held for trading purposes and the Company does not intend to sell the derivative swap financial instrument. The Company records the interest swap agreement on the balance sheet at fair value because the agreement qualifies as a cash flow hedge under U.S. GAAP. Gains and losses on the instrument are recorded in other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) (“AOCI”) to the Condensed Consolidated Statement of Operations on the same line item as the underlying transaction. The valuation of the interest rate swap is derived from proprietary models of Citizens Bank (defined below) based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swap decreases over the life of the agreement. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreement. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to this cash flow hedge recorded in accumulated other comprehensive loss and other liabilities at June 30, 2015 was approximately $59,000 ($61,000 - December 31, 2014), which is included in other long-term liabilities on the balance sheet.

The Company has a notional amount of approximately $1,050,000 as of June 30, 2015 on its interest rate swap agreement for its debt with RBS Citizens, N.A. (“Citizens Bank”) (See Note 5) which changes a variable rate into a fixed rate on a term loan as follows:

Notional		Variable
Amount		Rate			Fixed Cost			Maturity Date
$	1,050,203		3.33	%		5.87	%	August 30, 2021

Impairment of Long Lived Assets and Goodwill-Long-lived and intangible assets and goodwill are assessed for potential impairment whenever events or changes in circumstances indicate that full recoverability of net asset balances through future cash flows is in question. Goodwill and indefinite-lived intangible assets are assessed at least annually, but also whenever events or changes in circumstances indicate the carrying values may not be recoverable. Factors that could trigger an impairment review, include (a) significant underperformance relative to historical or projected future operating results; (b) significant changes in the manner of or use of the acquired assets or the strategy for our overall business; (c) significant negative industry or economic trends; (d) significant decline in our stock price for a sustained period; and (e) a decline in our market capitalization below net book value.

Goodwill - Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Financial Accounting Standards Board (“FASB”) Accounting Standard Classification (“ASC”) Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. During the Company's annual assessment of goodwill in 2014, the Company assessed that the negative trends in patent litigation that have recently reduced the success of patent owners in protecting their patents in the federal court system had caused an impairment of the Company's goodwill assigned to its DSS Technology Management division and accordingly, the Company recorded a $3,000,000 goodwill impairment charge to the goodwill assigned to its DSS Technology Management division.

Contingent Legal Expenses - Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period in which a conclusion is reached in an enforcement action that does not yield future royalties potential.

Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

As of June 30, 2015 and 2014, there were 11,448,047 and 16,239,947 respectively, of common stock share equivalents potentially issuable under convertible debt agreements, employment agreements, options, warrants, overallotment options, and restricted stock agreements, that could potentially dilute basic earnings per share in the future. These shares are excluded from the calculation of diluted earnings per share in periods in which the Company had a net loss because their inclusion would be anti-dilutive to the Company's losses in the respective periods.

Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits.  The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

During the six months ended June 30, 2015 and 2014, one customer accounted for 22% and 30%, respectively, of the Company's consolidated revenue and accounted for 14% and 20%, respectively, of the Company's accounts receivable balance as of June 30, 2015 and December 31, 2014. The risk with respect to accounts receivables is mitigated by credit evaluations the Company performs on its customers, the short duration of its payment terms for the significant majority of its customer contracts and by the diversification of its customer base.

Reclassifications - Certain prior year amounts have been reclassified to conform to the current year presentation.

Continuing Operations - The Company has incurred significant net losses in previous years and through the six months of 2015. The Company's ability to fund its current and future commitments out of its available cash and cash generated from its operations depends on a number of factors. Some of these factors include the Company's ability to (i) increase sales of the Company's digital products; (ii) decrease legal and professional expenses for the Company's intellectual property monetization business; and (iii) continue to generate operating profits from the Company's packaging and plastic printing operations.As of June 30, 2015, the Company had approximately $1,015,000 in unrestricted cash and $306,000 in restricted cash and up to $800,000 available under a revolving credit line at its packaging subsidiary, which may not be sufficient to cover the Company's future working capital requirements if these and other factors are not met. If the Company cannot generate sufficient cash from its operations, the Company may need to raise additional funds in the future in order to fund its working capital needs and pursue its growth strategy, although there can be no assurances, management believes that sources for these additional funds will be available through either current or future investors.

New Accounting Pronouncements Not Yet Adopted – In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update (“ASU“) No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe the adoption of this ASU will have a significant impact on its financial statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual and interim periods beginning on or after December 15, 2015.  The Company does not believe the adoption of this ASU will have a significant impact on its financial statements.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-11 on its consolidated balance sheets.

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Basis of Presentation and Significant Accounting Policies (Schedule of Derivative Instrument) (Details) - Jun. 30, 2015 - USD ($)	Total
Derivative [Line Items]
Notional Amount	$ 1,050,000
Matures August 30, 2021 [Member]
Derivative [Line Items]
Notional Amount	$ 1,050,203
Variable Rate	3.33%
Fixed Cost	5.87%

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Investments (Details) - USD ($)	1 Months Ended
	Feb. 28, 2014	Jan. 31, 2014	Jun. 30, 2015	Dec. 31, 2014
Related Party Transaction [Line Items]
Investment owned shares	594,530
DSS Technology Management [Member]
Related Party Transaction [Line Items]
Percent of outstanding common stock	6.00%
Total cash investment	$ 400,000	$ 100,000
Cost of investment			$ 500,000	$ 500,000

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Inventory

6 Months Ended

Jun. 30, 2015

Inventory [Abstract]

Inventory

2. Inventory

Inventory consisted of the following:

	June 30, 2015		December 31, 2014
Finished Goods	$	749,922	$	572,695
Work in process		168,596		123,611
Raw Materials		201,899		172,956
	$	1,120,417	$	869,262

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Condensed Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 0.02	$ 0.02
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	46,302,404	46,172,404
Common stock, shares outstanding	46,302,404	46,172,404

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Inventory (Tables)

6 Months Ended

Jun. 30, 2015

Inventory [Abstract]

Schedule of Inventory

	June 30, 2015		December 31, 2014
Finished Goods	$	749,922	$	572,695
Work in process		168,596		123,611
Raw Materials		201,899		172,956
	$	1,120,417	$	869,262

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 12, 2015
Document And Entity Information Abstract
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Entity Registrant Name	DOCUMENT SECURITY SYSTEMS INC
Entity Central Index Key	0000771999
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		46,302,404

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2015

Intangible Assets [Abstract]

Schedule of Other Intangible Assets

				June 30, 2015						December 31, 2014
	Useful Life			Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount
Acquired intangibles- customer lists and non-compete agreements		5 -10 years		$	1,997,300	$	1,592,207	$	405,093	$	1,997,300	$	1,532,123	$	465,177
Acquired intangibles-patents and patent rights		Varied	(1)		3,650,000		1,207,435		2,442,565		3,650,000		852,343		2,797,657
Patent application costs		Varied	(2)		1,062,070		464,688		597,382		1,058,833		413,268		645,565
				$	6,709,370	$	3,264,330	$	3,445,040	$	6,706,133	$	2,797,734	$	3,908,399

(1)

Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 4.9 years.

(2)

Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 9.5 years.

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Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue
Printed products	$ 3,683,311	$ 4,407,261	$ 6,703,197	$ 7,570,761
Technology sales, services and licensing	512,789	476,130	922,434	940,361
Total revenue	4,196,100	4,883,391	7,625,631	8,511,122
Costs and expenses
Cost of goods sold, exclusive of depreciation and amortization	2,663,378	3,196,633	4,649,679	5,394,895
Selling, general and administrative (including stock based compensation)	2,236,713	2,613,781	4,844,828	5,687,979
Depreciation and amortization	390,533	1,288,313	770,126	2,601,684
Total costs and expenses	5,290,624	7,098,727	10,264,633	13,684,558
Operating loss	(1,094,524)	(2,215,336)	(2,639,002)	(5,173,436)
Other income and (expense):
Interest expense	$ (90,330)	(88,905)	(168,712)	(163,855)
Net loss on debt modification and extinguishment		$ (34,548)	(19,096)	$ (51,915)
Gains on sales of investment and equipment	$ 146,283		146,283
Loss before income taxes	(1,038,571)	$ (2,338,789)	(2,680,527)	$ (5,389,206)
Income tax expense	4,737	4,737	9,474	9,474
Net loss	(1,043,308)	(2,343,526)	(2,690,001)	(5,398,680)
Other comprehensive loss:
Interest rate swap gain (loss)	18,311	(15,274)	2,559	(25,217)
Comprehensive loss:	$ (1,024,997)	$ (2,358,800)	$ (2,687,442)	$ (5,423,897)
Loss per share:
Basic and diluted	$ (0.02)	$ (0.06)	$ (0.06)	$ (0.13)
Shares used in computing loss per share:
Basic and diluted	46,302,404	42,040,907	46,271,078	41,982,770

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

On October 24, 2011 the Company initiated a lawsuit against Coupons.com Incorporated (“Coupons.com”). The suit was filed in the United States District Court, Western District of New York, located in Rochester, New York. Coupons.com is a Delaware corporation having its principal place of business located in Mountain View, California. In the Coupons.com suit, the Company alleged breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment, and sought in excess of $10 million in money damages from Coupons.com for those claims. On October 28, 2014, the District Court granted Coupons.com's motion for summary judgment, dismissing the case. On November 25, 2014, the Company appealed that decision to the United States Court of Appeals for the Second Circuit. On March 5, 2015, the parties entered into a Stipulation whereby the Company withdrew the appeal without prejudice so that the parties could complete settlement negotiations. On March 31, 2015, a confidential settlement was reached by the parties, ending the case.

On November 26, 2013, DSS Technology Management filed suit against Apple, Inc. (“Apple”) in the United States District Court for the Eastern District of Texas, for patent infringement (the “Apple Litigation”). The Apple Litigation relates to certain patents owned by DSS Technology Management in the Bluetooth technology space. DSS Technology Management is seeking a judgment for infringement, injunctive relief, and compensatory damages from Apple. On October 28, 2014, the case was stayed by the District Court pending a determination of Apple's motion to transfer the case to the Northern District of California. On November 7, 2014, Apple's motion to transfer the case to the Northern District of California was granted. On December 30, 2014, Apple filed two petitions for Inter Partes Review (“IPRs”) of the patents at issue in the case with the PTAB. DSS Technology Management filed its responses to the petitions on March 30, 2015. On May 1, 2015, the District Court issued an order granting Apple's motion to stay the case until the IPRs are decided. On June 25, 2015, the PTAB instituted the IPR of Apple's claims.

On March 10, 2014, DSS Technology Management filed suit in the United States District Court for the Eastern District of Texas against Taiwan Semiconductor Manufacturing Company, TSMC North America, TSMC Development, Inc. (referred to collectively as “TSMC”), Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Telecommunications America L.L.C., Samsung Semiconductor, Inc., Samsung Austin Semiconductor LLC (referred to collectively as “Samsung”), and NEC Corporation of America (referred to as “NEC”), for patent infringement involving certain of its semiconductor patents. DSS Technology Management is seeking a judgment for infringement, injunctive relief, and money damages from each of the named defendants. In June 2014, TSMC filed a petition for Inter Partes Review of the patents at issue with the PTAB. DSSTM filed its preliminary response to the petition in October 2014. Samsung also filed an IPR relating to the same patents in September 2014. DSSTM filed its preliminary response to that petition in December, 2014. On December 31, 2014, the PTAB instituted review of several of the patent claims at issue in the case. Samsung filed a motion with PTAB to join TSMC's IPR proceeding. The request was granted by the PTAB. On March 3, 2015, a Markman hearing was held in the Eastern District of Texas. Based on the District Court's claim construction order issued on April 9, 2015, DSS Technology Management and TSMC entered in to a Joint Stipulation and Proposed Final Judgment of Non-Infringement dated May 4, 2015, subject to DSS Technology Management's right to appeal the court's claim construction decision to the Federal Circuit, thus preserving the status quo in the event an appeal results in remand for further proceedings in the District Court. On April 28, 2015, DSS Technology Management reached a confidential settlement with NEC. A PTAB hearing was scheduled for August 12, 2015 in connection with the pending TSMC/Samsung IPR proceeding.

On May 30, 2014, DSS Technology Management filed suit against Lenovo (United States), Inc. (“Lenovo”) in the United States District Court for the Eastern District of Texas, for patent infringement. The complaint alleged infringement by Lenovo of one of DSS Technology Management's patents that relates to systems and methods of using low power wireless peripheral devices. DSS Technology Management is seeking judgment for infringement and money damages from Lenovo in connection with the case. On April 27, 2015, Lenovo moved for summary judgment in the District Court on the grounds that the patent at issue is invalid for indefiniteness. On June 17, 2015, the parties entered in to a confidential non-suit agreement which ended the litigation with Lenovo.

On February 16, 2015, DSS Technology Management filed suit in the United States District Court, Eastern District of Texas, against defendants Intel Corporation, Dell, Inc., GameStop Corp., Conn's Inc., Conn Appliances, Inc., NEC Corporation of America, Wal-Mart Stores, Inc., Wal-Mart Stores Texas, LLC, and AT&T, Inc. The complaint alleges patent infringement and seeks judgment for infringement of two of DSSTM's patents, injunctive relief and money damages. The case is currently in the initial pleadings stage. On April 28, 2015, a confidential settlement was reached with NEC. On June 29, 2015, Intel filed its Answer to the complaint and also filed a motion to have the case transferred to the Northern District of California, which motion is currently pending as of the date of this report.

On April 28, 2015, the Company was served with a shareholder derivative lawsuit that was filed in the Supreme Court of the State of New York, County of Kings: Benjamin Lapin, Derivatively on Behalf of Himself and All Others Similarly Situated, Plaintiff v. Robert Fagenson, Jeffrey Ronaldi, Peter Hardigan, Robert Bzdick, Jonathon Perrelli, Warren Hurwitz, Ira Greenstein, David Klein and Philip Jones, Defendants, and Document Security Systems, Inc., Nominal Defendant. The complaint alleges, among other things, breach of fiduciary duty, gross mismanagement, abuse of control, and waste of corporate assets since October 2, 2012, and alleges that demand on the Board of Directors to take action would be futile. The complaint seeks unspecified damages, attorneys' fees, and other costs and expenses. The Company believes that all of the claims in this lawsuit are without merit and intends to vigorously defend against these claims, but is unable to predict the outcome or reasonably estimate a range of possible loss. On June 29, 2015, the Company filed a motion to dismiss the suit, which motion is currently pending as of the date of this report.

On July 16, 2015, DSS Technology Management filed three separate lawsuits in the United States District Court for the Eastern District of Texas alleging infringement of one of its semiconductor patents. The defendants are SK Hynix et al., Samsung Electronics et al., and Qualcomm Incorporated. Each respective complaint alleges patent infringement and seeks judgment for infringement, injunctive relief and money damages. These cases are currently in the initial pleadings stage.

In addition to the foregoing, we are subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. The Company accrues for potential litigation losses when a loss is probable and estimable.

Contingent Litigation Payments – The Company retains the services of professional service providers, including law firms that specialize in intellectual property licensing, enforcement and patent law. These service providers are often retained on an hourly, monthly, project, contingent or a blended fee basis. In contingency fee arrangements, a portion of the legal fee is based on predetermined milestones or the Company's actual collection of funds. The Company accrues contingent fees when it is probable that the milestones will be achieved and the fees can be reasonably estimated. As of June 30, 2015, the Company has not accrued any contingent legal fees pursuant to these arrangements.

Contingent Payments – The Company is party to certain agreements with funding partners who have rights to portions of intellectual property monetization proceeds that the Company receives.  As of June 30, 2015, there are no contingent payments due.

Related Party Consulting Payments –  During 2015 the Company paid consulting fees of approximately $35,000 to Patrick White, its former CEO, under a consulting agreement that expired on February 28, 2015.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Stockholders' Equity [Abstract]

Stockholders' Equity

6. Stockholders' Equity

On February 23, 2015, the Company amended two of its debt obligations that, among other things, extended the maturity dates of the notes, instituted principal payments for the notes, and eliminated a conversion feature on one of the notes. In conjunction with these agreements, the Company issued an aggregate of 100,000 shares of its common stock with a grant date fair value of $41,000.

Restricted Shares – In January 2015, the Company issued an aggregate of 30,000 shares of restricted common stock to certain members of the Company's board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The restricted shares will vest on August 15, 2015 and had an aggregate grant date fair value of approximately $11,000.

Stock Options - In January 2015, the Company issued an aggregate of 53,550 options to purchase shares of the Company's common stock with an exercise price of $0.60 per share to certain members of the Company's board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The options shares will vest on August 15, 2015 and had an aggregate grant date fair value of approximately $6,000. The aggregate fair value of these options was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates.

Stock-Based Payments and Compensation - The Company records stock-based payment expense related to options and warrants based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During the six months ended June 30, 2015, the Company had stock compensation expense of approximately $643,000 or $0.01 basic and diluted earnings per share ($841,000; $0.02 basic earnings per share for the corresponding six months ended June 30, 2014).

As of June 30, 2015, there was approximately $685,000 of total unrecognized compensation costs related to options, warrants and restricted stock granted under the Company's stock option plans that will be recognized over the next 12 months. This amount excludes $536,000 of potential stock based compensation for stock options that vest upon the occurrence of certain events which the Company does not believe are likely.

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Inventory (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Inventory [Abstract]
Finished Goods	$ 749,922	$ 572,695
Work in process	168,596	123,611
Raw Materials	201,899	172,956
Inventory	$ 1,120,417	$ 869,262

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Information [Abstract]

Schedule of Supplemental Cash Flow Information

	2015		2014
Cash paid for interest	$	125,000	$	151,000
Non-cash investing and financing activities:
Loss from change in fair value of interest rate swap derivatives	$	3,000	$	(25,000	)
Accrued liabilities with related parties settled with equity	$	-	$	134,000
Financing of equipment purchases	$	525,000	$	-
Financing of building improvements	$	-	$	200,000
Change in non-controlling interest	$	-	$	200,000

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Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Basis of Presentation and Significant Accounting Policies [Abstract]

Use of Estimates

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure.

Restricted Cash

Restricted Cash – As of June 30, 2015, cash of $306,215 ($355,793 – December 31, 2014) is restricted for payments of costs and expenses associated with one of the Company's IP monetization programs.

Derivative Instruments

Derivative Instruments - The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility. The Company has an interest rate swap that changes a variable rate into a fixed rate on a term loan. The swap qualifies as a Level 2 fair value financial instrument. The swap agreement is not held for trading purposes and the Company does not intend to sell the derivative swap financial instrument. The Company records the interest swap agreement on the balance sheet at fair value because the agreement qualifies as a cash flow hedge under U.S. GAAP. Gains and losses on the instrument are recorded in other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) (“AOCI”) to the Condensed Consolidated Statement of Operations on the same line item as the underlying transaction. The valuation of the interest rate swap is derived from proprietary models of Citizens Bank (defined below) based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swap decreases over the life of the agreement. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreement. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to this cash flow hedge recorded in accumulated other comprehensive loss and other liabilities at June 30, 2015 was approximately $59,000 ($61,000 - December 31, 2014), which is included in other long-term liabilities on the balance sheet.

The Company has a notional amount of approximately $1,050,000 as of June 30, 2015 on its interest rate swap agreement for its debt with RBS Citizens, N.A. (“Citizens Bank”) (See Note 5) which changes a variable rate into a fixed rate on a term loan as follows:

Notional		Variable
Amount		Rate			Fixed Cost			Maturity Date
$	1,050,203		3.33	%		5.87	%	August 30, 2021

Impairment of Long Lived Assets and Goodwill

Impairment of Long Lived Assets and Goodwill-Long-lived and intangible assets and goodwill are assessed for potential impairment whenever events or changes in circumstances indicate that full recoverability of net asset balances through future cash flows is in question. Goodwill and indefinite-lived intangible assets are assessed at least annually, but also whenever events or changes in circumstances indicate the carrying values may not be recoverable. Factors that could trigger an impairment review, include (a) significant underperformance relative to historical or projected future operating results; (b) significant changes in the manner of or use of the acquired assets or the strategy for our overall business; (c) significant negative industry or economic trends; (d) significant decline in our stock price for a sustained period; and (e) a decline in our market capitalization below net book value.

Goodwill

Goodwill - Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Financial Accounting Standards Board (“FASB”) Accounting Standard Classification (“ASC”) Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. During the Company's annual assessment of goodwill in 2014, the Company assessed that the negative trends in patent litigation that have recently reduced the success of patent owners in protecting their patents in the federal court system had caused an impairment of the Company's goodwill assigned to its DSS Technology Management division and accordingly, the Company recorded a $3,000,000 goodwill impairment charge to the goodwill assigned to its DSS Technology Management division.

Contingent Legal Expenses

Contingent Legal Expenses - Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period in which a conclusion is reached in an enforcement action that does not yield future royalties potential.

Earnings Per Common Share

Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

As of June 30, 2015 and 2014, there were 11,448,047 and 16,239,947 respectively, of common stock share equivalents potentially issuable under convertible debt agreements, employment agreements, options, warrants, overallotment options, and restricted stock agreements, that could potentially dilute basic earnings per share in the future. These shares are excluded from the calculation of diluted earnings per share in periods in which the Company had a net loss because their inclusion would be anti-dilutive to the Company's losses in the respective periods.

Concentration of Credit Risk

Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits.  The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

During the six months ended June 30, 2015 and 2014, one customer accounted for 22% and 30%, respectively, of the Company's consolidated revenue and accounted for 14% and 20%, respectively, of the Company's accounts receivable balance as of June 30, 2015 and December 31, 2014. The risk with respect to accounts receivables is mitigated by credit evaluations the Company performs on its customers, the short duration of its payment terms for the significant majority of its customer contracts and by the diversification of its customer base.

Reclassifications

Reclassifications - Certain prior year amounts have been reclassified to conform to the current year presentation.

Continuing Operations

Continuing Operations - The Company has incurred significant net losses in previous years and through the six months of 2015. The Company's ability to fund its current and future commitments out of its available cash and cash generated from its operations depends on a number of factors. Some of these factors include the Company's ability to (i) increase sales of the Company's digital products; (ii) decrease legal and professional expenses for the Company's intellectual property monetization business; and (iii) continue to generate operating profits from the Company's packaging and plastic printing operations.As of June 30, 2015, the Company had approximately $1,015,000 in unrestricted cash and $306,000 in restricted cash and up to $800,000 available under a revolving credit line at its packaging subsidiary, which may not be sufficient to cover the Company's future working capital requirements if these and other factors are not met. If the Company cannot generate sufficient cash from its operations, the Company may need to raise additional funds in the future in order to fund its working capital needs and pursue its growth strategy, although there can be no assurances, management believes that sources for these additional funds will be available through either current or future investors.

New Accounting Pronouncements Not Yet Adopted

New Accounting Pronouncements Not Yet Adopted – In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update (“ASU“) No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The guidance requires an entity to evaluate whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe the adoption of this ASU will have a significant impact on its financial statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual and interim periods beginning on or after December 15, 2015.  The Company does not believe the adoption of this ASU will have a significant impact on its financial statements.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-11 on its consolidated balance sheets.

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Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

8. Supplemental Cash Flow Information

Supplemental cash flow information for the six months ended June 30, 2015 and 2014 is approximately as follows:

	2015		2014
Cash paid for interest	$	125,000	$	151,000
Non-cash investing and financing activities:
Loss from change in fair value of interest rate swap derivatives	$	3,000	$	(25,000	)
Accrued liabilities with related parties settled with equity	$	-	$	134,000
Financing of equipment purchases	$	525,000	$	-
Financing of building improvements	$	-	$	200,000
Change in non-controlling interest	$	-	$	200,000

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Segment Information

6 Months Ended

Jun. 30, 2015

Segment Information [Abstract]

Segment Information

9. Segment Information

The Company's businesses are organized, managed and internally reported as four operating segments.  Two of these operating segments, Packaging and Printing, and Plastics are engaged in the printing and production of paper, cardboard and plastic documents with a wide range of features, including the Company's patented technologies and trade secrets designed for the protection of documents against unauthorized duplication and altering.     The two other operating segments, ExtraDev, Inc., dba DSS Digital Group, and DSS Technology Management, Inc., are engaged in various aspects of developing, acquiring, selling and licensing technology assets and are grouped into one reportable segment called Technology. 

Approximate information concerning the Company's operations by reportable segment for the three and six months ended June 30, 2015 and 2014 is as follows. The Company relies on intersegment cooperation and management does not represent that these segments, if operated independently, would report the results contained herein:

Three Months Ended June 30, 2015	Packaging and Printing		Plastics		Technology			Corporate			Total
Revenues from external customers	$	2,710,000		974,000		512,000			-		$	4,196,000
Depreciation and amortization		144,000		28,000		217,000			2,000			391,000
Stock based compensation		18,000		10,000		34,000			256,000			318,000
Net income (loss)		94,000		11,000		(372,000	)		(776,000	)		(1,043,000	)

Six Months Ended June 30, 2015	Packaging and Printing		Plastics		Technology			Corporate			Total
Revenues from external customers	$	4,792,000		1,912,000		922,000			-		$	7,626,000
Depreciation and amortization		272,000		61,000		433,000			4,000			770,000
Stock based compensation		35,000		20,000		67,000			521,000			643,000
Net income (loss)		135,000		98,000		(1,427,000	)		(1,496,000	)		(2,690,000	)
Identifiable assets		9,461,000		2,017,000		12,911,000			1,562,000			25,951,000

Three Months Ended June 30, 2014	Packaging and Printing		Plastics			Technology			Corporate			Total
Revenues from external customers	$	3,503,000		899,000			481,000			-		$	4,883,000
Depreciation and amortization		106,000		44,000			1,127,000			11,000			1,288,000
Stock based compensation		18,000		10,000			24,000			241,000			293,000
Net income (loss)		263,000		(13,000	)		(1,557,000	)		(1,037,000	)		(2,344,000	)

Six Months Ended June 30, 2014	Packaging and Printing		Plastics			Technology			Corporate			Total
Revenues from external customers	$	5,746,000		1,820,000			945,000			-		$	8,511,000
Depreciation and amortization		256,000		87,000			2,245,000			14,000			2,602,000
Stock based compensation		92,000		52,000			117,000			579,000			840,000
Net income (loss)		199,000		(22,000	)		(3,236,000	)		(2,340,000	)		(5,399,000	)
Identifiable assets		9,143,000		2,059,000			53,786,000			1,321,000			66,309,000

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Basis of Presentation and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2015

Basis of Presentation and Significant Accounting Policies [Abstract]

Summary of Derivative Financial Instruments

Notional		Variable
Amount		Rate			Fixed Cost			Maturity Date
$	1,050,203		3.33	%		5.87	%	August 30, 2021

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Segment Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Revenues from external customers	$ 4,196,100	$ 4,883,391	$ 7,625,631	$ 8,511,122
Depreciation and amortization	391,000	1,288,000	770,126	2,601,684
Stock based compensation	318,000	293,000	643,138	840,879
Net income (loss)	(1,043,308)	(2,343,526)	(2,690,001)	(5,398,680)
Identifiable assets	25,950,669	66,309,000	25,950,669	66,309,000	$ 27,752,618
Packaging and Printing Segment [Member]
Segment Reporting Information [Line Items]
Revenues from external customers	2,710,000	3,503,000	4,792,000	5,746,000
Depreciation and amortization	144,000	106,000	272,000	256,000
Stock based compensation	18,000	18,000	35,000	92,000
Net income (loss)	94,000	263,000	135,000	199,000
Identifiable assets	9,461,000	9,143,000	9,461,000	9,143,000
Plastics Segment [Member]
Segment Reporting Information [Line Items]
Revenues from external customers	974,000	899,000	1,912,000	1,820,000
Depreciation and amortization	28,000	44,000	61,000	87,000
Stock based compensation	10,000	10,000	20,000	52,000
Net income (loss)	11,000	(13,000)	98,000	(22,000)
Identifiable assets	2,017,000	2,059,000	2,017,000	2,059,000
Technology Segment [Member]
Segment Reporting Information [Line Items]
Revenues from external customers	512,000	481,000	922,000	945,000
Depreciation and amortization	217,000	1,127,000	433,000	2,245,000
Stock based compensation	34,000	24,000	67,000	117,000
Net income (loss)	(372,000)	(1,557,000)	(1,427,000)	(3,236,000)
Identifiable assets	$ 12,911,000	$ 53,786,000	$ 12,911,000	$ 53,786,000
Corporate Segment [Member]
Segment Reporting Information [Line Items]
Revenues from external customers
Depreciation and amortization	$ 2,000	$ 11,000	$ 4,000	$ 14,000
Stock based compensation	256,000	241,000	521,000	579,000
Net income (loss)	(776,000)	(1,037,000)	(1,496,000)	(2,340,000)
Identifiable assets	$ 1,562,000	$ 1,321,000	$ 1,562,000	$ 1,321,000

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Basis of Presentation and Significant Accounting Policies (Narrative) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Significant Accounting Policies
Shares issuable, excluding from calculation of diluted earnings per share	11,448,047	16,239,947
Net gain (loss) attributable to cash flow hedge	$ (59,000)	$ (61,000)
Notional Amount	1,050,000
Impairment of goodwill	3,000,000
Unrestricted cash	1,014,857	$ 1,304,656	$ 2,343,675	$ 1,977,031
Restricted cash	306,215		$ 355,793
Available under a revolving credit line at packaging subsidiary	$ 800,000
Accounts Receivable [Member] | Major Customer 1
Significant Accounting Policies
Concentration of credit risk, percentage	14.00%	20.00%
Revenue [Member] | Major Customer 1
Significant Accounting Policies
Concentration of credit risk, percentage	22.00%	30.00%

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Intangible Assets (Schedule of Other Intangible Assets) (Details) - USD ($)		6 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Other Intangible Assets
Gross Carrying Amount		$ 6,709,370	$ 6,706,133
Accumulated Amortization		3,264,330	2,797,734
Net Carrying Amount		3,445,040	3,908,399
Acquired intangibles - customer lists and non-compete agreements [Member]
Other Intangible Assets
Gross Carrying Amount		1,997,300	1,997,300
Accumulated Amortization		1,592,207	1,532,123
Net Carrying Amount		$ 405,093	465,177
Useful Life		5 years
Acquired intangibles - customer lists and non-compete agreements [Member] | Maximum [Member]
Other Intangible Assets
Useful Life		10 years
Acquired intangibles-patents and patent rights [Member]
Other Intangible Assets
Gross Carrying Amount	[1]	$ 3,650,000	3,650,000
Accumulated Amortization	[1]	1,207,435	852,343
Net Carrying Amount	[1]	$ 2,442,565	2,797,657
Useful Life		4 years 10 months 24 days
Patent application costs [Member]
Other Intangible Assets
Gross Carrying Amount	[2]	$ 1,062,070	1,058,833
Accumulated Amortization	[2]	464,688	413,268
Net Carrying Amount	[2]	$ 597,382	$ 645,565
Useful Life		9 years 6 months

[1] Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 4.9 years.

[2] Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of June 30, 2015, the weighted average remaining useful life of these assets in service was approximately 9.5 years.

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Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net loss	$ (2,690,001)	$ (5,398,680)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	770,126	2,601,684
Stock based compensation	643,138	$ 840,879
Paid in-kind interest	44,000
Gain on sale of equipment	(46,283)
Net loss on debt modification and extinguishment	19,096	$ 51,915
Change in deferred tax provision	9,474	9,474
Foreign currency translation (gain) loss	(29,400)	16,420
Decrease (increase) in assets:
Accounts receivable	430,140	359,137
Inventory	(251,155)	(84,680)
Prepaid expenses and other assets	60,165	(174,616)
Restricted cash	49,578	254,521
Increase (decrease) in liabilities:
Accounts payable	587,160	33,081
Accrued expenses and other liabilities	(523,629)	387,188
Net cash used by operating activities	(927,591)	(1,103,677)
Cash flows from investing activities:
Purchase of property, plant and equipment	(57,486)	$ (157,789)
Proceeds from the sale of equipment	$ 46,283
Purchase of investments		$ (750,000)
Purchase of intangible assets	$ (3,237)	(1,196,980)
Net cash used by investing activities	$ (14,440)	(2,104,769)
Cash flows from financing activities:
Net payments on revolving lines of credit		(158,087)
Payments of long-term debt	$ (386,787)	(298,816)
Borrowings of long-term debt		2,691,000
Issuances of common stock, net of issuance costs		301,974
Net cash (used) provided by financing activities	$ (386,787)	2,536,071
Net decrease in cash	(1,328,818)	(672,375)
Cash beginning of period	2,343,675	1,977,031
Cash end of period	$ 1,014,857	$ 1,304,656

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Short-Term and Long-Term Debt

6 Months Ended

Jun. 30, 2015

Short-Term and Long-Term Debt [Abstract]

Short-Term and Long-Term Debt

5. Short-Term and Long-Term Debt

Revolving Credit Lines - The Company's subsidiary Premier Packaging Corporation (“Premier Packaging”) has a revolving credit line with Citizens Bank of up to $800,000 (as amended on April 28, 2015) that bears interest at 1 Month LIBOR plus 3.75% (3.93% as of June 30, 2015) and matures on May 31, 2016 (as amended on April 28, 2015) . As of June 30, 2015, the revolving line had a balance of $0 ($0 as of December 31, 2014).  

Long-Term Debt - On December 30, 2011, the Company issued a $575,000 convertible note that was due on December 29, 2013, and carries an interest rate of 10% per annum. Interest is payable quarterly, in arrears. The convertible note was convertible at any time during the term at lender's option into a total of 260,180 shares of the Company's common stock at a conversion price of $2.21 per share. On February 23, 2015, the Company entered into Convertible Promissory Note Amendment No. 2 to extend the maturity date to December 30, 2016, eliminate the conversion feature, and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $230,000 due on the extended maturity date. As of June 30, 2015, the balance of the note was $500,000 ($604,000 at December 31, 2014).

On May 24, 2013, the Company entered into a promissory note in the principal sum of $850,000 to purchase three printing presses that were previously leased by the Company's wholly-owned subsidiary, Secuprint Inc., and carries an interest rate of 9% per annum. Interest is payable quarterly, in arrears. On February 23, 2015, the Company entered into Promissory Note Amendment No. 2 to extend the maturity date to May 31, 2016 and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $610,000 due on the extended maturity date. As of June 30, 2015, the balance of the term loan was $775,000 ($850,000 at December 31, 2014).

Term Loan Debt - On October 8, 2010, Premier Packaging amended its credit facility agreement with Citizens Bank to add a standby term loan note pursuant to which Citizens Bank was to provide Premier Packaging with up to $450,000 towards the funding of eligible equipment purchases for up to one year. In October 2011, the Company had borrowed $42,594 under the facility which amount was converted into a term note payable in 60 monthly installments of $887 plus interest at 1 Month LIBOR plus 3% (3.18% at June 30, 2015). As of June 30, 2015, the balance under this term note was $14,197 ($19,522 at December 31, 2014).

On July 19, 2013, Premier Packaging entered into an equipment loan with People's Capital and Leasing Corp. (“Peoples Capital”) for a printing press. The loan was for $1,303,900, repayable over a 60-month period which commenced when the equipment was placed in service in January 2014. The loan bears interest at 4.84% and is payable in equal monthly installments of $24,511. As of June 30, 2015, the loan had a balance of $945,130 ($1,067,586 at December 31, 2014).

On April 28, 2015, Premier Packaging entered into a term note with Citizens for $525,000, repayable over a 60-month period. The loan bears interest at 3.61% and is payable in equal monthly installments of $9,591. Premier Packaging used the proceeds of the term note to acquire a HP Indigo 7800 Digital press. As of June 30, 2015, the loan had a balance of $509,009.

Promissory Notes -On August 30, 2011, Premier Packaging purchased the packaging plant it occupies in Victor, New York, for $1,500,000, which was partially financed with a $1,200,000 promissory note obtained from Citizens Bank (“Promissory Note”). The Promissory Note calls for monthly payments of principal and interest in the amount of $7,658, with interest calculated as 1 Month LIBOR plus 3.15% (3.33% at June 30, 2015). Concurrently with the transaction, the Company entered into an interest rate swap agreement to lock into a 5.87% effective interest rate for the life of the loan.  The Promissory Note matures in August 2021 at which time a balloon payment of the remaining principal balance will be due. As of June 30, 2015, the Promissory Note had a balance of $1,050,203 ($1,078,220 at December 31, 2014).

On December 6, 2013, Premier Packaging entered into a Construction to Permanent Loan with Citizens Bank for up to $450,000 that was converted into a promissory note upon the completion and acceptance of building improvements to the Company's packaging plant in Victor, New York. In May 2014, the Company converted the loan into a $450,000 note payable in monthly installments over a 5 year period of $2,500 plus interest calculated at a variable rate of 1 Month Libor plus 3.15% (3.33% at June 30, 2015), which payments commenced on July 1, 2014. The note matures in July 2019 at which time a balloon payment of the remaining principal balance of $300,000 is due. As of June 30, 2015, the note had a balance of $420,247 ($435,000 at December 31, 2014).

Under the Citizens Bank credit facilities, the Company's subsidiary, Premier Packaging, is subject to various covenants including fixed charge coverage ratio, tangible net worth and current ratio covenants. For the quarters ended March 31, 2015 and June 30, 2015, Premier Packaging was in compliance with the covenants. The Citizens Bank obligations are secured by all of the assets of Premier Packaging and are also secured through cross guarantees by the Company and its other wholly-owned subsidiaries, Plastic Printing Professionals and Secuprint.

Promissory Notes and other long-term liabilities - On February 13, 2014, the Company's subsidiary, DSS Technology Management, entered into an agreement with certain investors pursuant to which the Company contracted to receive a series of advances up to $4,500,000 from the investors in exchange for promissory notes, fixed return interests and contingent interests collateralized by certain of the Company's intellectual property (the “Agreement”). The notes bear interest at 1.95% and are subject to various covenants and will also be subject to a Make Whole Amount calculation (as defined in the Agreement), which would result in an effective annual interest rate of approximately 4.23% for the term thereof, assuming no prepayments. At the Company's option, it may pay accrued interest when due on the Notes, or elect to capitalize the accrued interest, adding it to the principal thereof. The maturity date of all the Notes is the date four years after issuance (February 13, 2018) of the Initial Advance Note. As of June 30, 2015, an aggregate of $4,133,000 ($4,089,000 as of December 31, 2014) was outstanding which includes $92,000 of accrued interest. In addition, $459,000 ($459,000 as of December 31, 2014) was outstanding under the fixed return equity interest and contingent equity interests which is included in other long-term liabilities on the balance sheet. See Note 7 - Commitments and Contingencies.

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Short-Term and Long-Term Debt (Revolving Credit Lines) (Details) - USD ($)	1 Months Ended	6 Months Ended
	Oct. 31, 2011	Jun. 30, 2015	Jun. 29, 2015	Apr. 28, 2015	Dec. 31, 2014	Oct. 08, 2010
Debt Instrument [Line Items]
Credit facility, amount outstanding			$ 509,009
RBS Citizens [Member]
Debt Instrument [Line Items]
Line of credit, maximum borrowing amount				$ 525,000		$ 450,000
Debt interest rate				3.61%
Interest rate additional rate above LIBOR	3.00%	3.18%
Credit facility, amount outstanding		$ 14,197			$ 19,522
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Revolving credit facility, expiration date		May 31, 2016
Revolving Credit Facility [Member] | RBS Citizens [Member]
Debt Instrument [Line Items]
Line of credit, maximum borrowing amount		$ 800,000
Debt interest rate		3.93%
Interest rate additional rate above LIBOR		3.75%
Credit facility, amount outstanding		$ 0			$ 0

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Information [Abstract]

Schedule of Operations by Reportable Segment

Three Months Ended June 30, 2015	Packaging and Printing		Plastics		Technology			Corporate			Total
Revenues from external customers	$	2,710,000		974,000		512,000			-		$	4,196,000
Depreciation and amortization		144,000		28,000		217,000			2,000			391,000
Stock based compensation		18,000		10,000		34,000			256,000			318,000
Net income (loss)		94,000		11,000		(372,000	)		(776,000	)		(1,043,000	)

Six Months Ended June 30, 2015	Packaging and Printing		Plastics		Technology			Corporate			Total
Revenues from external customers	$	4,792,000		1,912,000		922,000			-		$	7,626,000
Depreciation and amortization		272,000		61,000		433,000			4,000			770,000
Stock based compensation		35,000		20,000		67,000			521,000			643,000
Net income (loss)		135,000		98,000		(1,427,000	)		(1,496,000	)		(2,690,000	)
Identifiable assets		9,461,000		2,017,000		12,911,000			1,562,000			25,951,000

Three Months Ended June 30, 2014	Packaging and Printing		Plastics			Technology			Corporate			Total
Revenues from external customers	$	3,503,000		899,000			481,000			-		$	4,883,000
Depreciation and amortization		106,000		44,000			1,127,000			11,000			1,288,000
Stock based compensation		18,000		10,000			24,000			241,000			293,000
Net income (loss)		263,000		(13,000	)		(1,557,000	)		(1,037,000	)		(2,344,000	)

Six Months Ended June 30, 2014	Packaging and Printing		Plastics			Technology			Corporate			Total
Revenues from external customers	$	5,746,000		1,820,000			945,000			-		$	8,511,000
Depreciation and amortization		256,000		87,000			2,245,000			14,000			2,602,000
Stock based compensation		92,000		52,000			117,000			579,000			840,000
Net income (loss)		199,000		(22,000	)		(3,236,000	)		(2,340,000	)		(5,399,000	)
Identifiable assets		9,143,000		2,059,000			53,786,000			1,321,000			66,309,000