UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 7, 2021

DOCUMENT SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

6 Framark Drive

Victor, New York 14564

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (585) 325-3610

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Item 1.01 Entry into a Material Definitive Agreement.

The information contained in Item 2.01 of this Current Report on Form 8-K is incorporated in its entirety herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On May 7, 2021, Document Security Systems, Inc. (the “Company”) completed the sale of 100% of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash; $1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary of the closing and ending the day before the six-year of the closing; and $0.5 million in trade credit or license fee rebates.

In connection with the sale of DSS Digital, the Company and Buyer also entered into certain ancillary agreements, including a referral agreement and transition services agreement. Pursuant to the referral agreement, the Buyer engaged the Company as a non-exclusive finder with respect to the sale of DSS Digital products to certain key customers. In consideration for the services rendered by the Company under the referral agreement, the Buyer shall compensate the Company on sales made to certain customers introduced by the Company to the Buyer within twelve months from the date of introduction at a rate of 30% of the purchase price of such sale. The referral agreement has a term of three years and may be renewed upon written consent by the parties, unless earlier terminated. Pursuant to the transition services agreement, the Buyer shall grant the Company a non-exclusive, royalty-free, personal, non-sub-licensable and non-transferable limited license to provide the AuthentiGuard technology to certain existing customers of the Company for a term of three years, which may be extended upon written consent by the parties.

The foregoing description of the terms and conditions of the Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement, a copy of which is attached as an exhibit hereto.

Item 8.01 Other Events.

On May 11, 2021, the Company issued a press release relating to the sale of DSS Digital. A copy of this press release is filed as Exhibit 99.1 hereto, and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

SIGNATURES

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