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): October 21, 2009
DOCUMENT
SECURITY SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
New
York
|
1-32146
|
16-1229730
|
||
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
First
Federal Plaza, Suite 1525
28
East Main Street
Rochester,
NY
|
14614
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (585) 325-3610
Not
Applicable
(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 (see General Instruction A.2. below):
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item
1.01. Entry into Material Definitive Agreement.
On October 21, 2009, the Company
entered to a Consulting Agreement with Vertical Innovation, Inc. ("Vertical
Innovation") for internet related consulting services (the "Consulting
Agreement"). The Consulting Agreement provides that Vertical
Innovation will provide consulting services upon request during the term of the
agreement related to Internet development and strategy. The
Consulting Agreement is for a two year term unless earlier terminated by the
Company for cause, as defined in the Consulting Agreement. The
compensation to be paid to Vertical Innovation under the Consulting Agreement is
in the form of warrants to purchase 50,000 shares of the Company's common stock
at $3.00, 100,000 shares of common stock at $3.50 and 50,000 shares of common
stock at $4.00. Issuance of the Warrants is subject to NYSE Amex
approval under an additional listing application. The Company valued
these warrants at approximately $265,000 using the Black-Scholes option pricing
model which the Company expects to record as expense over a two year
period.
Item
3.02 Unregistered Sales of Equity
Securities.
Vertical
Innovation Consulting Agreement
In connection with the October 21, 2009
Consulting Agreement entered into with Vertical Innovation described in Item
1.01 above, the Company agreed to issue to Vertical Innovation five year
warrants to purchase 50,000 shares of the Company's common stock at $3.00,
100,000 shares of common stock at $3.50 and 50,000 shares of common stock at
$4.00. Issuance of the Warrants is subject to NYSE Amex approval
under an additional listing application. The Company valued these
warrants at approximately $265,000 using the Black-Scholes option pricing model
which the Company expects to record as expense over a two year
period.
The
warrants and common stock issuable upon exercise of the warrants have not been
registered under the Securities Act and were issued and sold in reliance upon
the exemption from registration contained in Section 4(2) of the Securities Act
and Rule 506 of Regulation D promulgated thereunder. These securities
may not be offered or sold in the United States in the absence of an effective
registration statement or an applicable exemption from registration
requirements. The securities in these transactions were sold solely
to accredited investors. The securities are restricted from resale and were
acquired for investment purposes only. The sales did not involve any
form of general solicitation.
Private
Placement
From
August 24, 2009 to October 19, 2009, the Company completed additional sales
under the $1,491,000 private placement commenced in May 2009 and previously
disclosed in the Company's Current Report on Form 8-K dated June 3,
2009. On August 24, 2009, the Company completed the sale of 7
investment units in a private placement pursuant to subscription agreements with
three accredited investors dated the same date. Each investment unit is
comprised of 7,142 shares of the Company’s common stock and five year warrants
to purchase 1,427 shares of common stock at an exercise price of $2.00 per
share. In the transaction, the Company sold 7 investment units for $10,000 per
unit for gross cash proceeds of $70,000, consisting of 49,994 shares of common
stock and warrants to purchase an aggregate of 9,989 shares of common
stock.
On
September 4, 2009, the Company completed the sale of 44 investment units in a
private placement pursuant to subscription agreements with three accredited
investors dated the same date. Each investment unit is comprised of 6,250 shares
of the Company’s common stock and five year warrants to purchase 1,250 shares of
common stock at an exercise price of $2.00 per share. In the transaction, the
Company sold 44 investment units for $10,000 per unit for gross cash proceeds of
$440,000, consisting of 275,000 shares of common stock and warrants to purchase
an aggregate of 55,000 shares of common stock.
On
October 19, 2009, the Company completed the sale of 17.6 investment units in a
private placement pursuant to subscription agreements with three accredited
investors dated the same date. Each investment unit is comprised of 6,250 shares
of the Company’s common stock and five year warrants to purchase 1,250 shares of
common stock at an exercise price of $2.00 per share. In the transaction, the
Company sold 17.6 investment units for $10,000 per unit for gross cash proceeds
of $176,000, consisting of 110,000 shares of common stock and warrants to
purchase an aggregate of 22,000 shares of common stock.
In
connection with these sales of investment units, the Company entered into a
Registration Rights Agreement, with each purchaser (the “Registration Rights
Agreement”). Pursuant to the Registration Rights Agreement, the Company granted
certain registration rights to the purchasers, including using its best efforts
to file a registration statement with the Securities and Exchange Commission
covering the resale of the shares of the Company's common stock sold in the
transaction and shares underlying the warrants, within 90 business days after
the final closing of the transaction. The Company must use its best
efforts to maintain the effectiveness of the registration statement until the
earlier of (i) one year from the final closing date of the transaction, or (ii)
the date that the holders of the shares receive an opinion of counsel to the
Company that all such shares may be freely traded (without limitation or
restriction as to quantity or timing and without registration) pursuant to Rule
144 or otherwise.
Copies of
the form of subscription agreement, warrant and Registration Rights Agreement
relating to the above referenced transactions are filed herewith as Exhibits
4.1, 10.1 and 10.2, and are incorporated herein by reference. The foregoing
summary descriptions of these agreements are qualified in their entirety by
reference to the full texts of each of such exhibits.
In connection with the sales made on
September 4, 2009 and October 19, 2009, EKN Financial Services Inc., a
registered broker-dealer, acted as non-exclusive placement agent. EKN
Financial Services, Inc., received a cash fee in the aggregate of $61,600 as
commission for these sales.
The
investment units, common stock, warrants and common stock issuable upon exercise
of the warrants have not been registered under the Securities Act and were
issued and sold in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder. These securities may not be offered or sold in the United
States in the absence of an effective registration statement or an applicable
exemption from registration requirements. The securities in these transactions
were sold solely to accredited investors. The securities are restricted from
resale and were acquired for investment purposes only. The sales did
not involve any form of general solicitation.
Item
9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit
No.
|
Description
|
|
4.1
|
Form
of Warrant to Purchase Common Stock of Document Security Systems, Inc.
dated May 29, 2009.*
|
|
10.1
|
Form
of Subscription Agreement dated as of May 29, 2009 between Document
Security Systems, Inc. and the Subscribers.*
|
|
10.2
|
Form
of Registration Rights Agreement dated as of May 29, 2009 executed and
delivered by Document Security Systems, Inc. and the holders listed
therein.*
|
* Such
exhibit was filed as an exhibit to the Current Report on Form 8-K that was filed
by Document Security Systems, Inc. with the SEC on June 3, 2009, and is
incorporated herein by reference.
SIGNATURE
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 hereunto
duly authorized.
DOCUMENT
SECURITY SYSTEMS, INC.
|
|||
Dated:
October 27, 2009
|
By:
|
/s/
Patrick A. White
|
|
Patrick
A. White
|
|||
Chief
Executive Officer
|
|||
EXHIBIT
INDEX
Exhibit
Number
|
Description
|
|
4.1
|
Form
of Warrant to Purchase Common Stock of Document Security Systems, Inc.
dated May 29, 2009.*
|
|
10.1
|
Form
of Subscription Agreement dated as of May 29, 2009 between Document
Security Systems, Inc. and the Subscribers.*
|
|
10.2
|
Form
of Registration Rights Agreement dated as of May 29, 2009 executed and
delivered by Document Security Systems, Inc. and the holders listed
therein.*
|
* Such
exhibit was filed as an exhibit to the Current Report on Form 8-K that was filed
by Document Security Systems, Inc. with the SEC on June 3, 2009, and is
incorporated herein by reference.