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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001125282-05-004737.txt : 20050909
<SEC-HEADER>0001125282-05-004737.hdr.sgml : 20050909
<ACCEPTANCE-DATETIME>20050909122700
ACCESSION NUMBER:		0001125282-05-004737
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050909
DATE AS OF CHANGE:		20050909

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DOCUMENT SECURITY SYSTEMS INC
		CENTRAL INDEX KEY:			0000771999
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
		IRS NUMBER:				161229730
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-125373
		FILM NUMBER:		051076996

	BUSINESS ADDRESS:	
		STREET 1:		36 WEST MAIN ST
		STREET 2:		SUITE 710
		CITY:			ROCHESTER
		STATE:			NY
		ZIP:			14614
		BUSINESS PHONE:		585 232 1500

	MAIL ADDRESS:	
		STREET 1:		36 W MAIN ST
		STREET 2:		SUITE 710
		CITY:			ROCHESTER
		STATE:			NY
		ZIP:			14614

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NEW SKY COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	THOROUGHBREDS USA INC
		DATE OF NAME CHANGE:	19861118
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>b408727_424b3.htm
<DESCRIPTION>PROSPECTUS
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Financial
</title>
</head>
<body bgcolor="#FFFFFF">
<div style="page-break-before:always"></div>
<page>
<p align="left"><font size="2" face="serif"><b>PROSPECTUS </b></font></p>
<p align="center"><font size="2" face="serif"><b>DOCUMENT SECURITY SYSTEMS, INC.<br>
108,290 Shares<br>
of Common Stock </b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">This is a public offering of 108,290 shares of our common stock by the selling shareholders described in this prospectus.  We are not offering any shares for sale and we will not receive any of the proceeds from the sale of these shares. The shares will be sold, if at all, at prevailing market prices for our common stock or at prices negotiated by the selling shareholders.  See &#147;Selling Shareholders&#148; commencing on page 18.</font></p>
<p align="left"><font size="2" face="serif">Our common stock currently trades on the American Stock Exchange under the symbol DMC.  On August 1, 2005, the closing price of our common stock was $9.55 per share. </font></p>
<p align="left"><font size="2" face="serif">Investing in our common stock involves risks. See &#147;Risk Factors&#148; on pages 11 to 16.  You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with any different information. </font></p>
<p align="left"><font size="2" face="serif">NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR ANY FOREIGN SECURITIES AUTHORITY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. </font></p>
</div>
<p align="center"><font size="2" face="serif"><b>This Prospectus is dated August 10, 2005 </b></font></p>
<p align="center"><font size="2" face="serif"><b>(declared effective by SEC on August 10, 2005 at 1:30 pm)</b></font></p>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="contents"></a>
<p align="center"><font size="2" face="serif"><b>Table of Contents</b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p3"><font size="2" face="serif">Prospectus Summary</font></a></td>
<td width="8%" align="right"><a href="#p3"><font size="2" face="serif">3</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p10"><font size="2" face="serif">Risk Factors</font></a></td>
<td align="right"><a href="#p10"><font size="2" face="serif">10</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p16"><font size="2" face="serif">Forward-Looking Statements</font></a></td>
<td align="right"><a href="#p16"><font size="2" face="serif">16</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p16"><font size="2" face="serif">Use of Proceeds</font></a></td>
<td align="right"><a href="#p16"><font size="2" face="serif">16</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p17"><font size="2" face="serif">Selling Shareholders</font></a></td>
<td align="right"><a href="#p17"><font size="2" face="serif">17</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p21"><font size="2" face="serif">Plan of Distribution</font></a></td>
<td align="right"><a href="#p21"><font size="2" face="serif">21</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p23"><font size="2" face="serif">Where You Can Find More Information</font></a></td>
<td align="right"><a href="#p23"><font size="2" face="serif">23</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p23"><font size="2" face="serif">Documents Incorporated by Reference</font></a></td>
<td align="right"><a href="#p23"><font size="2" face="serif">23</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p24"><font size="2" face="serif">Indemnification of Officers and Directors</font></a></td>
<td align="right"><a href="#p24"><font size="2" face="serif">24</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p24"><font size="2" face="serif">Legal Matters</font></a></td>
<td align="right"><a href="#p24"><font size="2" face="serif">24</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p24"><font size="2" face="serif">Experts</font></a></td>
<td align="right"><a href="#p24"><font size="2" face="serif">24</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p24"><font size="2" face="serif">Transfer Agent</font></a></td>
<td align="right"><a href="#p24"><font size="2" face="serif">24</font></a></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
</table>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Document
    Security Systems has not authorized anyone to give any information or make
    any representation about the offering that differs from, or adds to, the
    information in this Prospectus or the documents that are publicly filed with
    the SEC. Therefore, if anyone does give you different or additional information,
    you should not rely on it. The delivery of this Prospectus does not mean
    that there have not been any changes in Document Security Systems&#146; condition
    since the date of this Prospectus. If you are in a jurisdiction where it
    is unlawful to offer to purchase or exercise the securities offered by this
    Prospectus, or if you are a person to whom it is unlawful to direct such
    activities, then the offer presented by this Prospectus does not extend to
    you. This Prospectus speaks only as of its date except where it indicates
    that another date applies. Documents that are incorporated by reference in
    this Prospectus speak only as of their date, except where they specify that
    other dates apply. The information in this Prospectus may not be complete
    and may be changed. The selling shareholders may not sell any securities
    until the registration statement filed with the SEC is effective. This Prospectus
    is not an offer to purchase or exercise these securities and it is not soliciting
    an offer to purchase or exercise these securities in any state or other jurisdiction
    where the purchase or exercise is not permitted.</font></p>
</div>
<p align="center"><font face="serif" size="2">2</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p3"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>

<p align="center"><font size="2" face="serif"><b>PROSPECTUS SUMMARY </b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif"><i>This summary highlights only selected
      information contained elsewhere in this prospectus. It does not contain
      all of the information that is important to you before investing in our
      common stock. To understand this offering fully, you should read the entire
      prospectus carefully, including the risk factors and financial statements
      included or incorporated by reference herein.</i></font></p>
</div>
<p align="left"><font size="2" face="serif"><b>Business of the Company</b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Document
    Security Systems, Inc. (&#147;we&#148;, &#147;us&#148;, &#147;DSS&#148; or &#147;Document
    Security&#148;) develops licenses and sells anti-counterfeiting technology
    and products. We are a reporting company under the Securities and Exchange
    Act of 1934 and our common stock trades on the American Stock Exchange under
    the symbol &#147;DMC.&#148;  Prior to April 22, 2004, our common stock
    traded on the Over the Counter Bulletin Board under the symbol DCSS. Until
    the third calendar quarter of 2002, as New Sky Communications, Inc. (trading
    symbol: NSCI) we developed and produced theatrical motion pictures and home
    video cassettes. We were originally organized in 1984 in New York State under
    the name Thoroughbreds U.S.A., Incorporated.  </font></p>
<p align="left"><font size="2" face="serif">We operate through three wholly-owned
    subsidiaries, Thomas A. Wicker Enterprises, Inc., Lester Levin Inc. and Document
    Security Consultants Corp, and one 51% owned subsidiary, Imperial Encryptions,
    Inc., all of which were acquired in the third and fourth quarters of calendar
    year 2002. We entered into the anti-counterfeiting and document security
    businesses as a result of these acquisitions. To date we have generated minimal
    revenue through several sources which are:</font></p>
</div>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%">&nbsp;</td>
    <td width="3%"><font size="2" face="serif">&#149;</font></td>
    <td><font size="2" face="serif">Royalties and Licensing fees</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="serif">&#149;</font></td>
    <td><font size="2" face="serif">Printing and Copying Sales</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="serif">&#149;</font></td>
    <td><font size="2" face="serif">Legal Supply Sales</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="serif">&#149;</font></td>
    <td><font size="2" face="serif">Safety Paper Sales</font></td>
  </tr>
</table>

<p align="left"><font size="2" face="serif"><b>Our Core Products, Technology and Services&nbsp;</b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    core business is counterfeit document prevention, including government issued
    documents, currency, private corporate records and securities. Our business
    plan is aimed at profiting from our technologies and trade secrets through
    manufacturing and licensing arrangements. We also offer our verification
    technology to authenticate originals from forgeries. We currently have exclusive
    and complete ownership of 21 technologies for which patent applications have
    been made in the United States and 133 other countries through the Patent
    Cooperation Treaty. These proprietary technologies as expected to provide
    us with nearly all of our total technology revenue. We also have acquired
the complete ownership interests in 3 U.S. patents, a European Patent Office
    patent that covers 13 European countries, and one Canadian patent for document
    anti-counterfeit and anti-fraud technology.</font></p>
<p align="left"><font size="2" face="serif">In
    2004 we trademarked the name AuthentiGuard&#153; for our various technologies
    and products. Our full commercial product suite now includes: AuthentiGuard&#153; Block-Out,
    AuthentiGuard&#153; Pantograph 4000, AuthentiGuard&#153; ObscuraScan, AuthentiGuard&#153; Prism&reg;,
    AuthentiGuard&#153; Survivor 21, AuthentiGuard&#153; Laser Moir&eacute;,
    and AuthentiGuard&#153; VeriGlow, AuthentiGuard&#153; Concentric Fine Lines,
    AuthentiGuard&#153; MicroPerf, and AuthentiGuard&#153; Phantom.</font></p>
</div>
<p align="center"><font face="serif" size="2">3</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p4"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    primary anti-counterfeiting technologies, marketed under the following trade
    names, are summarized below:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left" width="31%"><font size="2" face="serif">AuthentiGuard&#153; Laser
Moir&eacute; Technology</font></td>
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Process prevents desktop scanners
    from imaging documents into computers
and software. The technology is
    embedded into whatever the user wishes to protect from duplication and theft,
    such as photographs, portraits and backgrounds of currencies or documents.
    When the document is scanned that contains this hidden security technology,
    the resulting scan is moir&eacute;d and/or pixilated, in which bars are
	placed over the image, and colors appear as rainbow wavy-like distortions,
	which renders the resulting image unusable. Laser Moir&eacute; can protect
	ID cards, photographs, prints, original art, currency, drivers&#146; licenses,
	postage stamps, tickets, labels, and brand packaging.</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">AuthentiGuard&#153; Prism Technology</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">An authentication technology that indicates whether a document is genuine, as opposed to indicating whether it is an unauthorized copy. Prism requires the use of our proprietary handheld plastic verifier. When the verifier is held over a document or image, a multi-color hidden word, symbol, or image is displayed. This technology can hide warning words, codes, logos, images, and symbols into two-color and full color process printed documents. A counterfeiter cannot capture the hidden image when creating a forgery. Therefore, when a handheld plastic verifier is placed over the counterfeited document, the hidden verification image is absent, thereby alerting the user the document is a fake. This technology protects verification forms such as spare
parts, packing slips, checks, currency, licenses, travelers&#146; checks, legal documents, tickets, labels, brand packaging, and any full color images such as art prints or color pictures of any sort. </font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">AuthentiGuard&#153; Pantograph 4000</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">A patented security feature that alerts users that counterfeiting has taken place. Hidden alert words such as &#147;VOID,&#148; &#147;COPY,&#148;
or &#147;UNAUTHORIZED COPY,&#148; or bar codes, logos, or other custom images appear when a handheld verifier is placed on a paper containing the technology or when the secured document is copied, scanned, faxed or reproduced in any form.  Utilized with our Safety Paper.  Customers that may utilize this product include: governments, printers, publishers, schools, financial services providers, pharmaceutical companies, hospitals, engineers and manufacturers. This line of security paper has been approved by several states for writing prescriptions for controlled substances. Any printable surface can
utilize the technology such as paper text and cover, Teslin, PVC, Tyvek and cardboard packaging. This technology has been used for gift certificates, school transcripts, coupons, tickets, checks, packing slips, receipts, schematic drawings, plans, music, scripts, training manuals, business plans, internal memos, letterhead, legal forms, prescription pads, and any other sensitive documents. In 2004 we entered into a North American exclusive paper distribution agreement for our newest Safety Paper, containing Pantograph 4000, with Boise White Paper LLC, a multi-billion dollar distribution company. </font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">AuthentiGuard&#153; Survivor 21</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">A new technology that verifies the
    authenticity of electronic check scans which were outlined by the Federal
    Reserve in a voluntary program called &#147;CHECK 21&#148;.&nbsp;&nbsp; This
    is the latest in our line of pantograph backgrounds that is used exclusively
    on financial instruments, such as checks. This new program allows banks to
    end the daily manual sorting and distribution of checks and replace it with
    scanned images. We built our Survivor 21 icon with our technology and when
    a check is printed with this feature it is invisible to the human eye but
    when the check is scanned for transmittal to the originating bank, our icon
    appears on the scan. A joint test of this technology with the NCR Corporation
    was completed in 2004 and provided
our company with test samples for our research.</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
</table>

<p align="center"><font face="serif" size="2">4</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p5"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="31%">&nbsp;</td>
<td width="3%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td width="31%" align="left"><font size="2" face="serif">AuthentiGuard&#153; ObscuraScan</font></td>
<td width="3%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">A color separation multiplier technology that protects against the counterfeiting of any process color document, package, image or label. We have developed a way of embedding a hidden technology that severely alters images so that printing plates or digital color separations for the four-color process are distorted and therefore unable to re-create the full color image. Our technology multiplies the intensity of the scans for the four primary colors, yellow, magenta, cyan and black which are necessary in producing a full color image. A normal color separation may contain the following percentages of color intensity; 12% yellow, 24% magenta, 19% cyan and 23% black. Our technology magnifies the density of these scans, thus creating a 65% yellow,
71% cyan, 34% magenta and 81% black. When the counterfeiter produces his counterfeits with these settings, the output is a muddy, dark unusable blend of colors. Chattering wavy lines are also produced causing even more distortion.&nbsp;</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="31%">&nbsp;</td>
<td width="3%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td width="31%" align="left"><font size="2" face="serif">AuthentiGuard&#153; Block-Out Anti-Color Copy Technology</font></td>
<td width="3%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Also called the &#147;anti-color reproduction system&#148;.
This system prevents color copiers and photo processors from replicating any image that contains
our patented block-out image. Our patented copy distortion image triggers a mechanism built by the
Omoron Corporation. This trigger mechanism is housed in most color copier models and color photo
processors built after 1997. On some models a &nbsp;solid black or barred image is produced. On
other color copiers, no copy at all is produced.&nbsp;&nbsp; This technology is capable of being
integrated into and protecting highly sensitive government documents such as currency, car titles,
passports and licenses as well as checks, travelers&#146; checks, postage stamps, photographs, original
art and brand packaging.</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="31%">&nbsp;</td>
<td width="3%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td width="31%" align="left"><font size="2" face="serif">AuthentiGuard&#153; Microperf Embedded PerfImage </font></td>
<td width="3%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Technology that can be placed on vital records, documents, packaging or currency and is a micro sized perforation in the shape of a word or image that cannot be removed or altered in any way thereby protecting the authenticity of the original document. A special secure perf plate containing the technology is created with the technology and is applied by a press during the actual printing of the original item. The MicroPerf could replace holographs since they pass the currency crush tests and are a much more controlled technology than the world-wide availability of holographs.</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="31%">&nbsp;</td>
<td width="3%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td width="31%" align="left"><font size="2" face="serif">AuthentiGuard&#153; Phantom Embossment</font></td>
<td width="3%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Technology that is placed on vital
    records, documents, packaging or currency. This technology is an embossment
    of a word or image that can only be seen when the protected item is tilted
    on a particular angle. When the ghosting appearance becomes visible, it verifies
    the authenticity of the item. Absence of the phenomena indicates a counterfeit.
    A special secure Embossment plate containing the technology is created with
    the technology and is applied during or after the printing process. The Phantom
    can only be seen when the user tips the protected package, label, currency
    or document at a particular angle, thus revealing the hidden word, code or
    symbol. The counterfeiter cannot
    scan the image since it is not visible by the scanner, thereby making it
    impossible for the counterfeiter to duplicate the ghosting effect.</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="31%">&nbsp;</td>
<td width="3%">&nbsp;</td>
<td>&nbsp;</td> </tr>
</table>

<p align="center"><font face="serif" size="2">5</font></p>
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<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td width="3%" align="left"><font size="2" face="serif">&#149;</font></td>
<td width="31%" align="left"><font size="2" face="serif">AuthentiGuard&#153; VeriGlow
    Invisible Code Image</font></td>
<td width="3%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Technology that is placed on vital records, documents, packaging or currency and is an invisible area of the document that can only be seen and revealed with our viewing system. The invisible image appears with the viewing system, and its hidden code or image is revealed with a special reading device. This is a two layer security product. First, the invisibility makes it impossible for the counterfeiter to capture or scan the image and secondly, the counterfeiter would have to have the de-coder reading device which releases the hidden code from the invisible area. This technology can be applied during the printing process or it can be applied to pre-printed items. The technology is slated for the protection of world wide currency and
pharmaceutical packaging.&nbsp;</font></td>
</tr>
</table>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif"><b>Revenue Sources</b></font></p>
<p align="left"><font size="2" face="serif">Our core document security business
    segment has or is intended to have the following revenue sources:</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Licensing
    Fees and Royalties &#150; generally a one-time licensing fee with continuing
    periodic quarterly or annual royalties based on a percentage of sales or
    a per piece royalty, subject to, in some cases, a minimum payment.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sales
    of blank SAFETY PAPER &#150; blank Safety Paper is sold through our exclusive
    distribution agreement with Boise White Paper LLC to wholesale paper distributors
    and printers throughout North America under the brand name &#147;Boise Beware.&#148;&nbsp; We
    sell the same Safety Paper to end users anywhere in the world and paper distributors
    and printers outside North America. We also sell custom Safety Paper throughout
    the world.&nbsp;Boise White Paper LLC is developing a retail sales strategy
    for the product. Pricing is determined on mark-up from cost. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font size="2" face="serif">The
    revenue we receive from our commercial printing operation is viewed by us
    as a convenient means to reduce the cost of maintaining our research and
    development facilities. As to revenues we receive from the sale of legal
    supplies, other than the sale of Safety Paper, we consider this a source
    that is unrelated to our core business operation, as well as our former motion
    picture operations, from which we occasionally obtain distribution fees.&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font size="2" face="serif">We
    expect to exploit our anti-counterfeiting technology and trade secrets through
    licensing arrangements with potential customers, including government entities
    and private companies. Our technology can be utilized in protecting against
    counterfeiting and unauthorized copying or creation of many different forms
    of documents, including corporate documents such as internal reports or memorandums,
    paper currency, identification records and securities. Further, we also currently
    derive revenue through sales in our Legal Store business. We do not expect
    this business to be a primary source of revenue in the long term.</font></p>
<p align="left"><font size="2" face="serif">We
    also expect to increase our efforts to protect our technology rights. These
    efforts may include commencing litigation against persons, corporations or
    government agencies which we believe are infringing upon our rights. These
    efforts, if successful, could result in revenue emanating from license agreements
    which we may obtain from these persons.</font></p>
</div>
<p align="center"><font face="serif" size="2">6</font></p>
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<p align="left"><font size="2" face="serif"><b>Technology Ownership</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">In
    February 2005, we consolidated our ownership of the Wicker Family based technologies.
    At that time, we completed the purchase of economic interests and actual
    ownership from approximately 40 persons and entities in technologies that
    the Wicker Family and/or licensed has sold over several decades. &nbsp;The
    technology related to these interests include patent rights and trade secrets
    in certain document anti-fraud and anti-counterfeiting technology. Document
    Security Systems was a partial owner or licensee of the technology prior
    to the completion of the transaction. Prior to completion of the transaction,
    there were approximately 49 interest holders (other than the Wicker Family)
with varying degrees of ownership in the technology. Some interest holders held
    net rights, others held gross rights and others actual legal ownership and/or
    expansive licensing rights to the technology. See further discussion below
    under <i>&#147;Recent Events &#150; Consolidation of Technology Interests.&#148;</i>&nbsp;</font></p>
<p align="left"><font size="2" face="serif">We
    have also entered into a definitive agreement with the Wicker Family which
    provides that we have obtained the legal ownership of the same technology
    (including patent ownership rights) previously held by the Wicker Family.
    The members of the Wicker Family executing the agreement were The Estate
    of Ralph Wicker, Mary Wicker, Thomas Wicker, David Wicker, Christine Wicker,
    Kenneth Wicker and Michael Caton. Thomas Wicker serves as an officer and
    director of Document Security, and his brother, David Wicker, is an officer
    of Document Security. The agreement with the Wicker Family provides that
    we will retain 70% of the future economic benefit derived from the exploitation
    of the technology, which may include licensing or royalty rights, patent
    or other infringement suits or enforcement actions, and the Wicker Family
    will receive 30% of such economic benefit, on a gross basis. The Wicker Family
    may not enter into any new assignments or licenses with respect to the technology.
    The Wicker Family members did not receive any of our securities in connection
    with this transaction.  </font></p>
<p align="left"><font size="2" face="serif">As
    discussed below, we did not reach an agreement with approximately 9 interest
    holders of the patents and related technology. Accordingly, we cannot be
    assured that such other persons may not develop the technology and exploit
    it in direct competition with us. Management believes, however, that our
    research and development efforts have resulted in trade secrets which provide
    us with competitive advantages in the development of products, and two of
    our executive officers, Thomas Wicker and David Wicker, have been intimately
    involved with development of the patents and technologies and have entered
    into employment and non-competition agreements with us.  </font></p>
</div>
<p align="left"><font size="2" face="serif"><b>Recent Events</b></font></p>
<p align="left"><font size="2" face="serif"><i>Consolidation of Technology Interests</i></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Effective
    February 25, 2005, we completed the purchase of various legal ownership and
    economic interests in certain technology (consisting of patents, license
    rights and trade secrets) from 40 persons and entities (referred to as the &#147;Interest
    Holders&#148;) who had purchased these interests in the technology from
    the original inventors of the technology, Ralph C. Wicker (deceased) and
    members of his family the Wicker Family. The technology related to these
    interests included patent rights and trade secrets in certain document anti-fraud
    and anti-counterfeiting technology. We were a partial owner or licensee of
    the technology prior to the completion of the transaction. Prior to completion
    of the transaction, there were 49 interest holders (other than the Wicker
    Family) with varying degrees of ownership in the technology. Some Interest
    Holders held &#147;net&#148; rights, others held &#147;gross&#148; rights
    and others actual legal ownership and/or expansive licensing rights to the
    technology.</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
    had sought to purchase these interests in order to centralize the ownership
    of the technology utilized in our business, which we believe will allow for
    more coordinated protection and enforcement of the technology rights, and
    allow for greater exploitation of the rights. We were not able to reach an
    agreement with 7 Interest Holders and are continuing negotiations with two
    of the Interest Holders. Any gross or net
	Interest Holder who does not or
      has not completed a transaction with us will continue to maintain the rights
      under their original license agreements with the Wicker Family.</font></p>
</div>

<p align="center"><font face="serif" size="2">7</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The &#147;net&#148; Interest
    Holders have no legal ownership in the technology; rather they are only entitled
    to receive &#147;net profits&#148; from the sale and licensing of the relevant
    technology. Net profits is generally defined in the net agreements as cash
    funds remaining after payment of reasonable operating expenses from monies
    received from the licensing of the technology or patents covered by the net
    agreements. Each net royalty interest holders received 3,000 shares of our
    stock for every 1% net royalty interest owned (pro rated accordingly) in
    exchange for the surrender of all of their respective current rights, title,
    and interest in such net royalty interests. We issued a total of 168,313 shares
of our common stock for the exchange of interests with the net Interest Holders.</font></p>
<p align="left"><font size="2" face="serif">Similar
    to the net Interest Holders, the &#147;gross&#148; Interest Holders have
    no legal ownership in the technology. These holders are instead entitled
    receive &#147;gross profits&#148; or &#147;gross revenue&#148; from the
    sale and licensing of the relevant technology. &#147;Gross profits&#148; or &#147;gross
    revenue&#148; is generally defined in the agreements as all income and consideration
    from all commercialization, sale, exchange, license, lease or other disposition
    of any right, title or interest of the technology, including royalties, license
    payments or purchase amounts. All gross royalty Interest Holders received
    5,000 shares of our common stock for every 1% gross royalty interest owned
    (pro rated accordingly) in exchange for the surrender of all of their respective
    current rights, title, and interest in such gross royalty interests. We issued
    a total of 22,147 shares of our common stock for the exchange of interests
    with the gross Interest Holders.</font></p>
<p align="left"><font size="2" face="serif">There
    were also several individuals and entities which held legal or beneficial
    ownership interests in the technology (including United States and foreign
    patent ownership rights) in addition to their &#147;gross&#148; or &#147;net&#148; interests,
    or had superior licensing rights to use the technology and future technology
    which might have been invented by DSS or the members of the Wicker family.
    These persons and entities received an aggregate of 351,000 shares of our
    common stock in exchange for their various rights.</font></p>
<p align="left"><font size="2" face="serif">As
    part of the transactions, the Interest Holders agreed to a non-competition
    agreement. This non-competition agreement provides that the Interest Holders
    will not, for a period of 2 years, compete with us in the business of anti-counterfeiting
    technology. The Wicker Family members agreed to a five year non-competition
    term.</font></p>
<p align="left"><font size="2" face="serif">In
    total, we issued an aggregate of 541,460 shares of our common stock for the
    rights of the Interest Holders who accepted the offer. These shares are &#147;restricted
    securities&#148; within the meaning of Rule 144 of the Securities Act of
    1933. We relied upon the exemption from registration under the Securities
    Act of 1933 provided by Section 4(2) thereof in connection with the issuance
    of the securities. We had commenced the offer to the Interest Holders on
    January 26, 2005. The value of the shares of common stock was determined
    based upon the price of our common stock on February 15, 2005. Based upon
    the closing price of the shares of our common stock on the American Stock
    Exchange on February 15, 2005 ($7.25 per share), the total aggregate cost
    of the acquisition of the interests from the Interest Holders was approximately
    $3,925,000. The securities issued to the Interest Holders are subject to
    restrictions on transferability and resale and may not be transferred or
    resold except as permitted under the Securities Act of 1933, and the applicable
    state securities laws, pursuant to registration or exemption therefrom. We
    agreed with the Interest Holders that we would file a registration statement
    under the Securities Act of 1933 to allow for the resale by them of up to
    20% of the shares received by them through the buyout. We are filing the
    registration statement of which this prospectus forms a part in satisfaction
    of our obligations under our agreements with the Interest Holders.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b>About Us</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    principal address is 28 Main Street East, Suite 1525, Rochester, New York
    14614 and our telephone number is (585) 232-1500.  </font></p>
</div>
<p align="center"><font size="2" face="serif">8</font></p>
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<p align="center"><font size="2" face="serif"><b>The Offering </b></font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="bottom">
  <td><font size="2" face="serif">Common stock to be outstanding after the offering
    based on shares outstanding on July 25, 2005</font></td>
  <td>&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;12,258,434 shares</font></td>
</tr>
<tr valign="bottom">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td><font size="2" face="serif">Common stock offered by selling shareholders</font></td>
  <td>&nbsp;</td>
  <td align="left"><font size="2" face="serif">108,290 shares</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td width="45%"><font size="2" face="serif">&nbsp;American Stock Exchange Symbol&nbsp;</font></td>
<td width="5%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;DMC</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td><font size="2" face="serif">&nbsp;Use of Proceeds&nbsp;&nbsp;</font></td>
<td><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">We will not receive any proceeds from the sale of shares of our common stock by the selling security holders listed in this prospectus under &#147;Selling Security Holders&#148; beginning on page 18.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td><font size="2" face="serif">&nbsp;Risk Factors&nbsp;&nbsp;&nbsp;</font></td>
<td><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">An investment in our securities is subject to numerous risks.  Investors should be able to bear the loss of their entire investment.  See ARisk Factors@. </font></td>
</tr>
</table>
<p align="left"><font size="2" face="serif">The total of 12,258,434 shares of common stock to be outstanding after this offering, as of July 25, 2005 excludes: </font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 200,000 shares reserved for issuance under our 2004 Employee Option Plan, of which 123,000 options have been issued and an additional 144,000 option have been approved for issuance subject to approval of shareholders of an increase in the Employee Option Plan. </font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 100,000 shares reserved for issuance under our Director Option Plan, of which 36,250 options have been issued.</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 508,877 shares reserved for issuance pursuant to outstanding warrants to purchase shares of our common stock. </font></p>
<p align="left"><font size="2" face="serif">This is a continuous offering and is not being underwritten by any securities brokerage firm. We cannot predict when or if any of the selling shareholders will sell their shares or exercise warrants that entitle them to purchase and possibly sell shares underlying the warrants. This offering assumes that the selling shareholders will exercise all warrants they hold for purchase of our common stock. </font></p>
</div>
<p align="center"><font face="serif" size="2">9</font></p>
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<p align="center"><font size="2" face="serif"><b>RISK FACTORS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif"><i>This offering involves a high
      degree of risk. You should carefully consider the risks described below
      and the other information in this prospectus before deciding whether to
      invest in our common stock. </i></font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>We have a limited operating history with our business model, which limits the information available to you to evaluate our business.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Since
    our inception in 1984, we have accumulated deficits from historical operations
    of approximately $7,900,000 at December 31, 2003, which has increased to
    approximately $9,550,000 at December 31, 2004. As of March 31, 2005, our
    deficit was $10,116,063. The bulk of those deficits were mainly derived from
    the previous movie production business organization that preceded our document
    security technology business. Our current business is based upon technology
    and assets that we have acquired only since July 2002. We have had minimal
    revenues generated to date from this technology. We have continued to incur
    losses since we began these new operations. Also, you have limited operating
    and financial information relating to this new business to evaluate our performance
    and future prospects. Due to the change in our business model since July&nbsp;2002,
    we do not view our historical financials as being a good indication of our
    future. We face the risks and difficulties of a company going into a new
    business including the uncertainties of market acceptance, competition, cost
    increases and delays in achieving business objectives. There can be no assurance
    that we will succeed in addressing any or all of these risks, and the failure
    to do so could have a material adverse effect on our business, financial
    condition and operating results.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>We are not the exclusive owner of certain of our technology, including patented technology and others may develop competing products or claim rights to license fees or royalties.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">As
    of the date of this Prospectus, we have non-exclusive ownership interests
    in United States patents No. 5,707,083, 5,735,547 and 5,018,767 and the European
    patent No. 0455750. These patents were originally developed by the Wicker
    Group, which was founded by Mr. Ralph Wicker, the father of Thomas and Dave
    Wicker. Other persons own &#147;gross&#148; and &#147;net&#148; interests
    in these patents. As described above, we recently consummated a &#147;buyout&#148; of
    the royalty obligations owed to 40 of these persons. However, there are 9
    interests holders with whom we did not reach an agreement and who continue
    to hold their ownership and/or royalty interests. As a result, these persons
    may develop competing products and services based upon certain of the technology
    that we utilize. Further, although we have obtained assurances from the Wicker
    Group that they have advised us of all of these other potential owners, it
    is possible that other third parties may claim ownership or other rights
    in certain technology. Additionally, we cannot assure that the Wicker Group
    was enforcing its rights and taking necessary steps to protect its technology
    rights prior to our becoming involved in the document security business,
    and as a result, there can be no assurance that certain technology rights
    that we may seek to enforce may be enforced or protected. These persons may
    also claim that they are entitled to royalties or license fees from products
    developed by us. The development and marketing of other
products may adversely impact our ability to compete in the market place, or
    to successfully obtain preferential pricing on our products. Further, claims
    by other owners of the patents could result in litigation against us, increase
    costs of litigation, or reduce our profitability. There can be no assurance
    that others may not be successful in their claims.</font></p>
</div>
<p align="center"><font size="2" face="serif">10</font></p>
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<p align="left"><font size="2" face="serif"><b><i>Current litigation may affect our technology rights and plan of operation.</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">On
    January 31, 2003, we commenced an action entitled <i>New Sky Communications,
    Inc., As Successor-In-Interest To Thomas M. Wicker, Thomas M.Wicker Enterprises,
    Inc. And Document Security Consultants V. Adler Technologies, Inc. N/K/A
    Adlertech International, Inc. And Andrew Mctaggert (United States District
    Court, Western District Of New York Case No.03-Cv-6044t(F)) </i>regarding
    certain intellectual property in which our company has an interest. We commenced
    this action alleging various causes of action against Adler Technologies,
    Inc. and Andrew McTaggert for breach of contract, breach of the duty of good
    faith and fair dealing and various business torts. Adler distributes and
    supplies anti-counterfeit currency devices and McTaggert is a principal of,
    and the primary contact at, Adler. Adler had entered into several agreements
    with Thomas M. Wicker Enterprises and Document Security Consultants, both
    of which we acquired in 2002. These agreements, generally, authorized Adler
    to manufacture in Canada our &#147;Checkmate<sup>&reg;</sup>&#148; patented
    system for verifying the authenticity of currency and documents. Other agreements
    were entered into between the parties and Thomas Wicker regarding other technology
    owned by Wicker and assigned to us including &#147;Archangel,&#148; an
    anti-copy technology, and &#147;Blockade,&#148; which creates a wave pattern
    on documents when they are reproduced or scanned. It is our contention that
    Adler has breached these agreements, failed to make an appropriate accounting,
    and may have exceeded the scope of its license. Adler has denied the material
    allegations of the complaint and has counterclaimed against our company,
    claiming it (Adler) owns or co-owns or has a license to use certain technologies
    of ours, including several U.S. patents. If Adler is successful it may materially
    affect us, our financial condition, and our ability to market certain technology.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>If we are unable to adequately protect our intellectual property, our competitive advantage may disappear</i></b>.</font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our success will be determined in
    part by our ability to obtain United States and foreign patent protection
    for our technology, to enforce our existing rights and to preserve our trade
    secrets. Because of the substantial length of time and expense associated
    with developing new document security technology, we place considerable importance
    on patent and trade secret protection. Our ability to compete and the ability
    of our business to grow could suffer if these rights are not adequately protected.
    There can be no assurance that our patent applications will result in patents
    being issued or that current or additional patents will afford protection
    against competitors. We also may be required to enforce our technology rights
    in order to protect them from infringement. Further, although we have obtained
    assurances from the Wicker Group that they have advised us of all of these
    other potential owners or interest holders, it is possible that other third
    parties may claim ownership or other rights in certain technology upon which
    we rely or intend to develop revenue. Additionally, we cannot assure that
    the Wicker Group was enforcing its rights and taking necessary steps to protect
    its technology rights prior to our becoming involved in the document security
    business, and as a result, there can be no assurance that certain technology
    rights that we may seek to enforce may be enforced or protected. Enforcing
    technology and intellectual property can be quite expensive
and time consuming.  We may not have adequate funds to enforce our rights and
    there can be no assurance that we will be successful in any such effort.
    We also rely on trade secrets that are not patented. No guarantee can be
    given that others will not independently develop substantially equivalent
    proprietary information or techniques, or otherwise gain access to our
	proprietary technology.</font></p>
</div>
<p align="center"><font size="2" face="serif">11</font></p>
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<p align="left"><font size="2" face="serif"><b><i>We may face intellectual property infringement or other claims against us or our customers that could be costly to defend and result in our loss of significant rights.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Although
    we have received U.S. Patents and a European Patent with respect to certain
    technologies of ours, there can be no assurance that these patents will afford
    us any meaningful protection. We intend to rely primarily on a combination
    of trade secrets, technical measures, copyright protection and nondisclosure
    agreements with our employees to establish and protect the ideas, concepts
    and documentation of software and trade secrets developed by us. Such methods
    may not afford complete protection, and there can be no assurance that third
    parties will not independently develop such technology or obtain access to
    the software we have developed. Although we believe that our use of the technology
    and products we developed and other trade secrets used in our operations
    does not infringe upon the rights of others, our use of the technology and
    trade secrets we developed may infringe upon the patents or intellectual
    property rights of others. In the event of infringement, we could, under
    certain circumstances, be required to obtain a license or modify aspects
    of the technology and trade secrets we developed or refrain from using same.
    We may not have the necessary financial resources to defend any infringement
    claim made against us or be able to successfully terminate any infringement
    in a timely manner, upon acceptable terms and conditions or at all. Failure
    to do any of the foregoing could have a material adverse effect on us. Moreover,
    if the patents, technology or
trade secrets we developed or use in our business are deemed to infringe upon
    the rights of others, we could, under certain circumstances, become liable
    for damages, which could have a material adverse effect on us. As we continue
    to market our products, we could encounter patent barriers that are not known
    today. A patent search will not disclose applications that are currently
    pending in the United States Patent Office; and there may be one or more
    such pending applications that would take precedence over our applications.</font></p>
<p align="left"><font size="2" face="serif">Furthermore,
    since the date of invention (and not the date of application) governs under
    U.S. patent law, future applications could be filed by another party, which
    would preempt our position. While we have taken and continue to take steps
    to become aware of related technical developments, there can be no assurance
    that we will not encounter an unfavorable patent situation. Other parties
    may assert intellectual property infringement claims against us or our customers,
    and our products may infringe the intellectual property rights of third parties.
    If we become involved in litigation, we could lose our proprietary rights,
    be subject to damages and incur substantial unexpected operating expenses.
    Intellectual property litigation is expensive and time-consuming, even if
    the claims are subsequently proven unfounded, and could divert management&#146;s
    attention from our business. If there is a successful claim of infringement,
    we may not be able to develop non-infringing technology or enter into royalty
    or license agreements on acceptable terms, if at all. This could prohibit
    us from providing our products and services to customers.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>If our products and services do not achieve market acceptance, we may not achieve our revenue and net income goals in the time prescribed or at all.</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">We
    are at the very early stage of introducing our document security technology
    and products to the market. If we are unable to operate our business as contemplated
    by our business model or if the assumptions underlying our business model
    prove to be unfounded, we could fail to achieve our revenue and net income
    goals within the time we have projected, or at all, which could have a material
    adverse effect on our business. As a result, the value of your investment
    could be significantly reduced or completely lost.</font></p>
<p align="left"><font size="2" face="serif">We
    cannot assure you that a sufficient number of such companies will demand
    our products or services or other document security products. In addition,
    we cannot predict the rate of market&#146;s acceptance of our document security
    solutions. Failure to maintain a significant customer base may have a material
    adverse effect on our business.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>The results of our research and development efforts are uncertain and there can be no assurance of the commercial success of our products.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">We
    believe that we will need to continue to incur research and development expenditures
    to remain competitive. The products we currently are developing or may develop
    in the future may not be technologically successful. In addition, the length
    of our product development cycle may be greater than we originally expect
    and we may experience delays in future product development. If our resulting
    products are not technologically successful, they may not achieve market
    acceptance or compete effectively with our competitors&#146; products.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>Changes in document security technology and standards could render our applications and services obsolete.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    market for document security products, applications, and services is fast
    moving and evolving. Identification and authentication technology is constantly
    changing as we and our competitors introduce new products, applications,
    and services, and retire old ones as customer requirements quickly develop
    and change. In addition, the standards for document security are continuing
    to evolve. If any segments of our market adopt technologies or standards
    that are inconsistent with our applications and technology, sales to those
    market segments could decline.</font></p>
</div>

<p align="center"><font size="2" face="serif">12</font></p>
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<p align="left"><font size="2" face="serif"><b><i>The market in which we operate is highly competitive, and we may not be able to compete effectively, especially against established industry competitors with greater market presence and financial resources.</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    market is highly competitive and characterized by rapid technological change
    and product innovations. Our competitors may have advantages over us because
    of their longer operating histories, more established products, greater name
    recognition, larger customer bases, and greater financial, technical and
    marketing resources. As a result, they may be able to adapt more quickly
    to new or emerging technologies and changes in customer requirements, and
    devote greater resources to the promotion and sale of their products. Competition
    may also force us to decrease the price of our products and services. We
    cannot assure you that we will be successful in developing and introducing
    new technology on a timely basis, new products with enhanced features, or
    that these products, if introduced, will enable us to establish selling prices
    and gross margins at profitable levels. Although several potential competitors
    have expressed an interest to us in forming marketing alliances, there can
    be no assurance that we will undertake such efforts or if undertaken, such
    efforts will prove profitable.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>If we fail to retain our key personnel and attract and retain additional qualified personnel, we might not be able to pursue our growth strategy.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    future success depends upon the continued service of our executive officers
    and other key sales and research personnel who possess longstanding industry
    relationships and technical knowledge of our products and operations. The
    loss of any of our key employees, in particular, Patrick White, our President,
    Chief Executive Officer and Chief Financial Officer; Thomas Wicker, our Vice-President
    of Research and Development; and David Wicker, our Vice-President of Operations,
    could negatively impact our ability to pursue our growth strategy and conduct
    operations. Although we believe that our relationship with these individuals
    is positive, there can be no assurance that the services of these individuals
    will continue to be available to us in the future. We have entered into an
    employment agreement with Patrick White which expires in June 2009 in order
    to obtain his employment for the foreseeable future. We have also extended
    our employment agreements with Thomas Wicker and David Wicker to June 2007.
    There can be no assurance that these persons will continue to agree to be
    employed by us after such dates.</font></p>
<p align="left"><font size="2" face="serif">We
    intend to hire a Chief Financial Officer for our company and believe that
    our ability to obtain a qualified Chief Financial Officer is material to
    our future success. We also must continue to hire other highly qualified
    individuals. Our failure to attract, train and retain management and technical
    personnel could adversely affect our company&#146;s ability to grow and to
    develop new products or product enhancements now and in the future.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>If we do not successfully expand our sales force, we may be unable to increase our revenues.</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">We
    must expand the size of our marketing activities and sales force to increase
    revenues. We continue to evaluate various methods of expanding our marketing
    activities, including the use of outside marketing consultants and representatives
    and expanding our in-house marketing capabilities. Going forward, we anticipate
    an increasing percentage of our revenues to come from the licensing of our
    newer technologies, where profit margins are significantly higher than those
    provided by Safety Paper. If we are unable to hire or retain qualified sales
    personnel, if newly hired personnel fail to develop the necessary skills
    to be productive, or if they reach productivity more slowly than anticipated,
    our ability to increase our revenues and grow could be compromised. The challenge
    of attracting, training and retaining qualified candidates may make it difficult
    to meet our sales growth targets. Further, we may not generate sufficient
    sales to offset th increased expense resulting from expanding our sales force
    or we may be unable to manage a larger sales force.</font></p>
</div>
<p align="center"><font size="2" face="serif">13</font></p>
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<p align="left"><font size="2" face="serif"><b><i>Future growth in our business could make it difficult to manage our resources.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    anticipated business expansion could place a significant strain on our management,
    administrative and financial resources. Significant growth in our business
    may require us to implement additional operating, product development and
    financial controls, improve coordination among marketing, product development
    and finance functions, increase capital expenditures and hire additional
    personnel. There can be no assurance that we will be able to successfully
    manage any substantial expansion of our business, including attracting and
    retaining qualified personnel. Any failure to properly manage our future
    growth could negatively impact our business and operating results.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>We cannot predict our future capital needs and we may not be able to secure additional financing.</i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">We
    may need to raise additional funds in the future to fund more aggressive
    expansion of our business, complete the development, testing and marketing
    of our products, or make strategic acquisitions or investments. We may require
    additional equity or debt financings, collaborative arrangements with corporate
    partners or funds from other sources for these purposes. No assurance can
    be given that these funds will be available for us to finance our development
    on acceptable terms, if at all. Such additional financings may involve substantial
    dilution of our stockholders or may require that we relinquish rights to
    certain of our technologies or products. In addition, we may experience operational
    difficulties and delays due to working capital restrictions. If adequate
    funds are not available from operations or additional sources of financing,
    we may have to delay or scale back our growth plans.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>There are restrictions on the transferability of, and there is a limited public market for, our common stock.</i></b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
    should be aware of the long-term nature of your investment. There is a limited
    public trading market for the common stock. The registration for resale of
    a large number of additional shares, such as the shares being sold pursuant
    to this Prospectus, could adversely impact the prices for our common stock.
    Accordingly, you may be required to bear the economic risks of an investment
    in our securities for an indefinite period of time.</font></p>
<p align="left"><font size="2" face="serif"><b><i>We do not intend to pay cash dividends.</i></b></font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
    do not intend to declare or pay cash dividends on our common stock in the
    foreseeable future. We anticipate that we will retain any earnings and other
    cash resources for investment in our business. The payment of dividends on
    our common stock is subject to the discretion of our Board of Directors and
    will depend on our operations, financial position, financial requirements,
    general business conditions, restrictions imposed by financing arrangements,
    if any, legal restrictions on the payment of dividends and other factors
    that our Board of Directors deems relevant.</font></p>
<p align="left"><font size="2" face="serif"><b><i>Provisions of our certificate of incorporation and agreements could delay or prevent a change in control of our company.</i></b></font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Certain
    provisions of our certificate of incorporation may discourage, delay, or
    prevent a merger or acquisition that a shareholder may consider favorable.
    These provisions include:</font></p>
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  <tr>
    <td width="3%">&nbsp;</td>
    <td width="3%"><font size="2" face="serif">&#149;</font></td>
    <td><font size="2" face="serif">Authority of the Board of Directors to issue
    preferred stock. </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td width="3%"><font size="2" face="serif">&#149;</font></td>
    <td><font size="2" face="serif">Prohibition on cumulative voting in the election
    of directors.</font></td>
  </tr>
</table>
<p align="center"><font size="2" face="serif">14</font></p>
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<p align="left"><font size="2" face="serif"><b><i>By further increasing the number of shares of our common stock that may be sold into the market, this offering could cause the market price of our common stock to drop significantly, even if our business is doing well. </i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">On
    February 25, 2005, we issued an aggregate of 561,460 shares of our common
    stock to the selling shareholders and agreed to register for resale up to
    20% of the common stock issued to such persons (108,290 shares). All of the
    108,290 shares of common stock will be freely saleable beginning on the date
    that the registration statement of which this prospectus forms a part is
    declared effective by the Commission. The 108,290 shares covered by this
    prospectus represent less than 1% of the total number of our shares of common
    stock that are issued and outstanding as of July 25, 2005. Sales of these
    shares in the public market, or the perception that future sales of these
    shares could occur, could have the effect of lowering the market price of
    our common stock below current levels and make it more difficult for us and
    our shareholders to sell our equity securities in the future.   </font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>The exercise of our outstanding options and warrants may depress our stock price.  </i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">As of July 25, 2005, there were outstanding the following options and warrants:</font></p>
</div>
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<tr valign="top">
  <td width="3%"></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td>
<font size="2" face="serif">Stock options to purchase an aggregate of 303,250 shares of common stock at exercise prices ranging from $2.20 to $8.38 per share, not all of which are immediately exercisable.  The weighted average exercise price of the outstanding stock options is $7.40.</font></td>
</tr>
<tr>
  <td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
  <td width="3%"></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td>
<font size="2" face="serif">Immediately exercisable warrants to purchase an aggregate of 508,877 shares of common stock at exercise prices ranging from $2.00 to $5.00 per share.  The weighted average exercise price of the outstanding warrants is $4.46.</font></td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
    the extent that these securities are exercised, dilution to our shareholders
    will occur. Moreover, the terms upon which we will be able to obtain additional
    equity capital may be adversely affected, since the holders of these securities
    can be expected to exercise or convert them at a time when we would, in all
    likelihood, be able to obtain any needed capital on terms more favorable
    to us than the exercise and conversion terms provided by those securities.</font></p>
</div>
<p align="left"><font size="2" face="serif"><b><i>We have outstanding shares of restricted shares which may, when they are sellable under Rule 144, depress our stock price.  </i></b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">As
    of July 25, 2005, there were approximately 12,258,434 shares of common stock
    currently outstanding, including the shares being registered for resale pursuant
    to this Prospectus, of approximately  <b></b>4,939,000 shares which may be
    deemed &#147;restricted securities&#148; as that term is defined under
    the Securities Act of 1933 (the &#147;Act&#148;), and in the future, may
    be sold pursuant to a registration under the Act, in compliance with Rule
    144 under the Act, or pursuant to another exemption. Rule 144 provides, that,
    in general, a person holding restricted securities for a period of one year
    may, every three months thereafter, sell in brokerage transactions an amount
    of shares which does not exceed the greater of one percent of our then outstanding
    common stock or the average weekly trading volume of the common stock during
    the four calendar weeks prior to such sale. Rule 144 also permits, under
    certain circumstances, the sale of shares without any quantity limitations
    by a person who is not an affiliate of ours and was not an affiliate at any
    time during the 90 day period prior to sale and who has satisfied a two year
    holding period. Sales of our common stock by certain present stockholders
    under Rule 144 may, in the future, have a depressive effect on the market
    price of our securities. In addition, the sale of shares by officers and
    directors and other affiliated shareholders, may also have a depressive effect
    on the market for our securities.</font></p>
</div><p align="center"><font face="serif" size="2">15</font></p>
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<p align="center"><font size="2" face="serif"><b>FORWARD-LOOKING STATEMENTS </b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">This
    prospectus contains certain forward-looking statements that involve risks
    and uncertainties. These statements refer to objectives, expectations, intentions,
    future events, or our future financial performance, and involve known and
    unknown risks, uncertainties, and other factors that may cause our actual
    results, level of activity, performance, or achievements to be materially
    different from any results expressed or implied by these forward-looking
    statements. In some cases, you can identify forward-looking statements by
    words such as &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;could,&#148; &#147;expect,&#148; &#147;anticipate,&#148; &#147;intend,&#148; &#147;plan,&#148;
&#147;believe,&#148; &#147;estimate,&#148; &#147;predict,&#148; &#147;potential,&#148; and
similar expressions. Our actual results could differ materially from those included
in forward-looking statements. Factors that could contribute to these differences
include those matters discussed in ARisk Factors@ and elsewhere in this prospectus. </font></p>
<p align="left"><font size="2" face="serif">In
    addition, such forward-looking statements necessarily depend on assumptions
    and estimates that may prove to be incorrect. Although we believe the assumptions
    and estimates reflected in such forward-looking statements are reasonable,
    we cannot guarantee that our plans, intentions, or expectations will be achieved.
    The information contained in this prospectus, including the section discussing
    risk factors, identifies important factors that could cause such differences. </font></p>
<p align="left"><font size="2" face="serif">The
    cautionary statements made in this prospectus are intended to be applicable
    to all forward-looking statements wherever they appear in this prospectus.
    We assume no obligation to update such forward-looking statements or to update
    the reasons that actual results could differ materially from those anticipated
    in such forward-looking statements. </font></p>
</div>
<p align="center"><font size="2" face="serif"><b>USE OF PROCEEDS </b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">All
    of the shares sold in this offering will be sold by certain holders of our
    common stock. We will not receive any proceeds directly from the sale of the
    shares offered in this prospectus. </font></p>
</div>
<p align="center"><font face="serif" size="2">16</font></p>
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<p align="center"><font size="2" face="serif"><b>SELLING SHAREHOLDERS</b></font></p>
<p align="left"><font size="2" face="serif"><b>Summary</b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Set
    forth below is a summary of the circumstances that led to the issuance to
    the listed selling security holders of shares of our common stock covered
    by this prospectus.</font></p>
</div>
<p align="left"><font size="2" face="serif"><i>Consolidation of Technology Interests</i></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Effective
    February 25, 2005, we completed the purchase of various legal ownership and
    economic interests in certain technology (consisting of patents and trade
    secrets) from 40 persons and entities (referred to as the &#147;Interest
    Holders&#148;) who had purchased these interests in the technology from
    the original inventors of the technology, Ralph C. Wicker (deceased) and
    members of his family the Wicker Family. The technology related to these
    interests included patent rights and trade secrets in certain document anti-fraud
    and anti-counterfeiting technology. We were a partial owner or licensee of
    the technology prior to the completion of the transaction. Prior to completion
    of the transaction, there were 49 interest holders (other than the Wicker
    Family) with varying degrees of ownership in the technology. Some Interest
    Holders held &#147;net&#148; rights, others held &#147;gross&#148; rights
    and others actual legal ownership and/or expansive licensing rights to the
    technology. As described in greater detail elsewhere in this prospectus,
    we had sought to purchase these interests in order to centralize the ownership
    of the technology utilized in our business, which we believe will allow for
    more coordinated protection and enforcement of the technology rights, and
    allow for greater exploitation of the rights. </font></p>
<p align="left"><font size="2" face="serif">As
    described in greater detail elsewhere in this prospectus, we issued shares
    of our common stock to different classes of Interest Holders as follows:</font></p>
</div>
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<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="serif">&nbsp;</font></td>
<td width="3%">
<font size="2" face="serif">&#149;</font></td>
<td>
<font size="2" face="serif">Each net royalty Interest Holder received 3,000 shares of our stock for every 1% net royalty interest owned (pro rated accordingly) in exchange for the surrender of all of their respective current rights, title, and interest in such net royalty interests. We issued a total of 168,313 shares of our common stock for the exchange of interests with the net Interest Holders.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td><font size="2" face="serif">Each gross royalty Interest Holder received 5,000 shares of our common stock for every 1% gross royalty interest owned (pro rated accordingly) in exchange for the surrender of all of their respective current rights, title, and interest in such gross royalty interests.  We issued a total of 22,147 shares of our common stock for the exchange of interests with the gross Interest Holder.  </font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td><font size="2" face="serif">There were also several individuals and entities which held legal or beneficial ownership interests in the technology (including United States and foreign patent ownership rights) in addition to their &#147;gross&#148; or &#147;net&#148; interests, or had superior licensing rights to use the technology and future technology which might have been invented by DSS or the members of the Wicker family. These persons and entities received an aggregate of 351,000 shares of our common stock in exchange for their various rights.</font></td>
</tr>
</table>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">In
    these transactions, we issued an aggregate of 541,460 shares of our common
    stock for the rights of a total of 42 Interest Holders who accepted the offer.
    These shares are &#147;restricted securities&#148; within the meaning of
    Rule 144 of the Securities Act of 1933. We relied upon the exemption from
    registration under the Securities Act of 1933 provided by Section 4(2) thereof
    in connection with the issuance of the securities. We had commenced the offer
    to the Interest Holders on January 26, 2005. The value of the shares of common
    stock was determined based upon the price of our common stock on February
    15, 2005. Based upon the closing price of the shares of our common stock
    on the American Stock Exchange on February 15, 2005 ($7.25 per share), the
    total aggregate cost of the acquisition of the interests from the Interest
    Holders was approximately $3,925,000. The securities issued to the Interest
    Holders are subject to restrictions on transferability and resale and may
    not be transferred or resold except as permitted under the Securities Act
    of 1933, and the applicable state securities laws, pursuant to registration
    or exemption therefrom. We are filing the registration statement of which
    this prospectus forms a part in satisfaction of our obligations under our
    agreements with the Interest Holders.</font></p>
</div>
<p align="center"><font face="serif" size="2">17</font></p>
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<p align="left"><font size="2" face="serif"><b>Selling Shareholders Table</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">We
    have filed a registration statement with the SEC, of which this prospectus
    forms a part, with respect to the resale of shares of our common stock covered
    by this prospectus from time to time under Rule&nbsp;415 of the Securities
    Act. The shares offered for resale under this prospectus are being registered
    for resale by selling security holders of Document Security Systems, Inc.
    who presently hold such shares or may acquire such shares in the future upon
    the exercise of warrants, or the transferees of such selling security holders.
    Such persons may resell from time to time all, a portion, or none of such
    shares. In addition, the selling shareholders may sell, transfer or otherwise
    dispose of a portion of our common stock being offered under this prospectus
    in transactions exempt from the registration requirements of the Securities
    Act. See &#147;Plan of Distribution.&#148; </font></p>
<p align="left"><font size="2" face="serif">The
    following table (and the footnotes below) sets forth information as to each
    of the selling shareholders listed below and the shares that the selling
    shareholders (and their pledgees, assignees and successors in interest) may
    offer and sell from time to time under this prospectus, as of the date that
    each selling shareholder completed a Questionnaire. More specifically, the
    following table and related footnotes sets forth as to the selling shareholders:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="serif">&nbsp; <font size="2" face="serif">&#149;</font></font></td>
<td>
<font size="2" face="serif">          the names of the selling shareholders and any material affiliation or relationship we have, if any, with each selling shareholder;  </font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="serif">&nbsp; <font size="2" face="serif">&#149;</font></font></td>
<td>
<font size="2" face="serif">The number of shares of our common stock that the selling shareholder beneficially owned prior to offering for resale of any shares of our common stock being registered by the registration statement of which this prospectus is a part; </font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="serif">&nbsp; <font size="2" face="serif">&#149;</font></font></td>
<td>
<font size="2" face="serif">the number of shares of our common stock that may be offered for resale for the selling shareholder&#146;s accounts under this prospectus; and </font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="serif">&nbsp; <font size="2" face="serif">&#149;</font></font></td>
<td>
<font size="2" face="serif">&nbsp;the number and percent
of shares of our common stock to be held by the selling shareholders after the
offering of the shares registered hereunder, assuming all of such shares are
sold by the selling shareholder and that such person does not acquire any other
shares of our common stock prior to the assumed sale of all of the resale shares.
The selling shareholders may sell all, some or none of the common stock being
offered pursuant to this prospectus.  </font></td>
</tr>
</table>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    table is prepared based on information supplied to us by the selling shareholders.
    Although we have assumed for purposes of the table below that the selling
    shareholders will sell all of the shares offered by this prospectus, because
    the selling shareholders may offer from time to time all or some of their
    shares covered under this prospectus, or in another permitted manner, no
    assurances can be given as to the actual number of shares that will be resold
    by the selling shareholders or that will be held by the selling shareholders
    after completion of the resales. In addition, the selling shareholders may
    have sold, transferred or otherwise disposed of the shares in transactions
    exempt from the registration requirements of the Securities Act since the
    date the selling shareholders provided the information regarding their shares.
    Information concerning the selling shareholders may change from time to time
    and changed information will be presented in a supplement to this prospectus
    if and when necessary and required. Except as described in this section,
    there are currently no agreements, arrangements or understandings with respect
    to the resale of any of the shares covered by this prospectus. Beneficial
    ownership includes shares owned and shares that the shareholder has the right
    to acquire within 60 days. Except as may be notes in a footnote below, all
    of the shares listed as underlying warrants are immediately acquirable and
    thus are beneficially owned by the selling shareholder holding the
respective warrants. However, we have no control over when, if ever, a selling
    shareholder may exercise the option to exercise warrants held by such selling shareholder. </font></p>
</div>

<p align="center"><font face="serif" size="2">18</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p19"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>

<table width="100%" cellspacing="0" cellpadding="3" align="center" border="1" bordercolor="#000000">
<tr valign="bottom">
<td align="center"><font size="1" face="serif"><b>Name of<br>
Selling Security Holder</b></font></td>
<td align="center"><font size="1" face="serif"><b>Shares<br>
Beneficially<br>
Owned Prior<br>
to Offering</b></font></td>
<td align="center"><font size="1" face="serif"><b>Shares<br>
Offered </b></font></td>
<td align="center"><font size="1" face="serif"><b>Shares<br>
Owned After<br>
Offering</b></font></td>
<td align="center"><font size="1" face="serif"><b>Percentage<br>
of Shares<br>
Owned<br>
After<br>
Offering(1)</b></font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Charles Githler II</font></td>
<td width="15%" align="center"><font size="2" face="serif">11,790</font></td>
<td width="15%" align="center"><font size="2" face="serif">2,358</font></td>
<td width="15%" align="center"><font size="2" face="serif">9,432</font></td>
<td width="15%" align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Cameron Computers Inc. (2)</font></td>
<td align="center"><font size="2" face="serif">2,100</font></td>
<td align="center"><font size="2" face="serif">420</font></td>
<td align="center"><font size="2" face="serif">1,680</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Bradley L. Harcourt</font></td>
<td align="center"><font size="2" face="serif">3,000</font></td>
<td align="center"><font size="2" face="serif">600</font></td>
<td align="center"><font size="2" face="serif">2,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">David R. Scheftic</font></td>
<td align="center"><font size="2" face="serif">3,938</font></td>
<td align="center"><font size="2" face="serif">787</font></td>
<td align="center"><font size="2" face="serif">3,151</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">James M. Hartman</font></td>
<td align="center"><font size="2" face="serif">6,000</font></td>
<td align="center"><font size="2" face="serif">1,200</font></td>
<td align="center"><font size="2" face="serif">4,800</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Denise Shaw</font></td>
<td align="center"><font size="2" face="serif">3,038</font></td>
<td align="center"><font size="2" face="serif">608</font></td>
<td align="center"><font size="2" face="serif">2,430</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Kathryn Poluch</font></td>
<td align="center"><font size="2" face="serif">1,147</font></td>
<td align="center"><font size="2" face="serif">229</font></td>
<td align="center"><font size="2" face="serif">918</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Richard P. Saur</font></td>
<td align="center"><font size="2" face="serif">3,000</font></td>
<td align="center"><font size="2" face="serif">600</font></td>
<td align="center"><font size="2" face="serif">2,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Ralph T. Tipple</font></td>
<td align="center"><font size="2" face="serif">11,280</font></td>
<td align="center"><font size="2" face="serif">2,256</font></td>
<td align="center"><font size="2" face="serif">9,024</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Laurel O&#146;Donaghue</font></td>
<td align="center"><font size="2" face="serif">3,000</font></td>
<td align="center"><font size="2" face="serif">600</font></td>
<td align="center"><font size="2" face="serif">2,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Karen M. Grover</font></td>
<td align="center"><font size="2" face="serif">1,500</font></td>
<td align="center"><font size="2" face="serif">300</font></td>
<td align="center"><font size="2" face="serif">1,200</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Gerald R. Laraby</font></td>
<td align="center"><font size="2" face="serif">3,000</font></td>
<td align="center"><font size="2" face="serif">600</font></td>
<td align="center"><font size="2" face="serif">2,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Charles Githler, III</font></td>
<td align="center"><font size="2" face="serif">11,280</font></td>
<td align="center"><font size="2" face="serif">2,256</font></td>
<td align="center"><font size="2" face="serif">9,024</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Michael P. McDonough Revocable Trust</font></td>
<td align="center"><font size="2" face="serif">4,000</font></td>
<td align="center"><font size="2" face="serif">800</font></td>
<td align="center"><font size="2" face="serif">3,200</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Gary R. Maneeley</font></td>
<td align="center"><font size="2" face="serif">75</font></td>
<td align="center"><font size="2" face="serif">15</font></td>
<td align="center"><font size="2" face="serif">60</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Robert A. Ford</font></td>
<td align="center"><font size="2" face="serif">14,250</font></td>
<td align="center"><font size="2" face="serif">2,850</font></td>
<td align="center"><font size="2" face="serif">11,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Halbert Living Trust, Jerome <br>
  Halbert/Pauline Halbert Trustees</font></td>
<td align="center"><font size="2" face="serif">375</font></td>
<td align="center"><font size="2" face="serif">75</font></td>
<td align="center"><font size="2" face="serif">300</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Thomas S. Felker</font></td>
<td align="center"><font size="2" face="serif">80,500</font></td>
<td align="center"><font size="2" face="serif">16,100</font></td>
<td align="center"><font size="2" face="serif">64,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Cord Harms Zum Spreckel</font></td>
<td align="center"><font size="2" face="serif">80,500</font></td>
<td align="center"><font size="2" face="serif">16,100</font></td>
<td align="center"><font size="2" face="serif">64,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Dorothy L. Gans</font></td>
<td align="center"><font size="2" face="serif">278</font></td>
<td align="center"><font size="2" face="serif">56</font></td>
<td align="center"><font size="2" face="serif">222</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Thomas R. Monks</font></td>
<td align="center"><font size="2" face="serif">9,000</font></td>
<td align="center"><font size="2" face="serif">1,800</font></td>
<td align="center"><font size="2" face="serif">7,200</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Thomas M. O&#146;Donaghue</font></td>
<td align="center"><font size="2" face="serif">30,000</font></td>
<td align="center"><font size="2" face="serif">6,000</font></td>
<td align="center"><font size="2" face="serif">24,000</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Mary Kathryn Decker</font></td>
<td align="center"><font size="2" face="serif">14,666</font></td>
<td align="center"><font size="2" face="serif">2,933</font></td>
<td align="center"><font size="2" face="serif">11,733</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Nancy Dimmick</font></td>
<td align="center"><font size="2" face="serif">188</font></td>
<td align="center"><font size="2" face="serif">38</font></td>
<td align="center"><font size="2" face="serif">150</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Charles T. Watts</font></td>
<td align="center"><font size="2" face="serif">63,333</font></td>
<td align="center"><font size="2" face="serif">12,667</font></td>
<td align="center"><font size="2" face="serif">50,666</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Fredric T. Morelle</font></td>
<td align="center"><font size="2" face="serif">63,333</font></td>
<td align="center"><font size="2" face="serif">12,667</font></td>
<td align="center"><font size="2" face="serif">50,666</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Albert L. Schmeiser </font></td>
<td align="center"><font size="2" face="serif">63,334</font></td>
<td align="center"><font size="2" face="serif">12,667</font></td>
<td align="center"><font size="2" face="serif">50,666</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Richard Kintz</font></td>
<td align="center"><font size="2" face="serif">300</font></td>
<td align="center"><font size="2" face="serif">60</font></td>
<td align="center"><font size="2" face="serif">240</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Michael O&#146;Hara</font></td>
<td align="center"><font size="2" face="serif">3,000</font></td>
<td align="center"><font size="2" face="serif">600</font></td>
<td align="center"><font size="2" face="serif">2,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Robert W. Gardner</font></td>
<td align="center"><font size="2" face="serif">1,500</font></td>
<td align="center"><font size="2" face="serif">300</font></td>
<td align="center"><font size="2" face="serif">1,200</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Judy Solaro</font></td>
<td align="center"><font size="2" face="serif">6,375</font></td>
<td align="center"><font size="2" face="serif">1,275</font></td>
<td align="center"><font size="2" face="serif">5,100</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Ann Marie Young</font></td>
<td align="center"><font size="2" face="serif">5,250</font></td>
<td align="center"><font size="2" face="serif">1,050</font></td>
<td align="center"><font size="2" face="serif">4,200</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Jill W. Warren</font></td>
<td align="center"><font size="2" face="serif">3,000</font></td>
<td align="center"><font size="2" face="serif">600</font></td>
<td align="center"><font size="2" face="serif">2,400</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Neal Eckhardt</font></td>
<td align="center"><font size="2" face="serif">17,000</font></td>
<td align="center"><font size="2" face="serif">3,400</font></td>
<td align="center"><font size="2" face="serif">13,600</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Raymond McHargue</font></td>
<td align="center"><font size="2" face="serif">30</font></td>
<td align="center"><font size="2" face="serif">3</font></td>
<td align="center"><font size="2" face="serif">27</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Alex N. Chiosa, Jr.</font></td>
<td align="center"><font size="2" face="serif">9,150</font></td>
<td align="center"><font size="2" face="serif">1,830</font></td>
<td align="center"><font size="2" face="serif">7,320</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
</table>
<p align="center"><font face="serif" size="2">19</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p20"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>

<table width="100%" cellspacing="0" cellpadding="3" align="center" border="1" bordercolor="#000000">
<tr valign="bottom">
<td align="center"><font size="1" face="serif"><b>Name of<br>
Selling Security Holder</b></font></td>
<td align="center"><font size="1" face="serif"><b>Shares<br>
Beneficially<br>
Owned Prior<br>
to Offering</b></font></td>
<td align="center"><font size="1" face="serif"><b>Shares<br>
Offered </b></font></td>
<td align="center"><font size="1" face="serif"><b>Shares<br>
Owned After<br>
Offering</b></font></td>
<td align="center"><font size="1" face="serif"><b>Percentage<br>
of Shares<br>
Owned<br>
After<br>
Offering(1)</b></font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Alex Picozzi, Trustee or his successors<br>
  in trust, under the Picozzi Family Trust</font></td>
<td width="15%" align="center"><font size="2" face="serif">6,000</font></td>
<td width="15%" align="center"><font size="2" face="serif">1,200</font></td>
<td width="15%" align="center"><font size="2" face="serif">4,800</font></td>
<td width="15%" align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Loren Edward Osborne<br>Maureen Rose Osborne</font></td>
<td align="center"><font size="2" face="serif">1,200</font></td>
<td align="center"><font size="2" face="serif">240</font></td>
<td align="center"><font size="2" face="serif">960</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">David J. Andolina</font></td>
<td align="center"><font size="2" face="serif">375</font></td>
<td align="center"><font size="2" face="serif">75</font></td>
<td align="center"><font size="2" face="serif">300</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Electa Daniels</font></td>
<td align="center"><font size="2" face="serif">375</font></td>
<td align="center"><font size="2" face="serif">75</font></td>
<td align="center"><font size="2" face="serif">300</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
<tr valign="bottom" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif"><b>TOTALS</b></font></td>
<td align="center"><font size="2" face="serif">541,460</font></td>
<td align="center"><font size="2" face="serif">108,290</font></td>
<td align="center"><font size="2" face="serif">433,169</font></td>
<td align="center"><font size="2" face="serif">*</font></td>
</tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><hr align="left" width="133" size="1" noshade></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2" face="serif">(1)</font></td>
    <td><font size="2" face="serif">Figures include the shares of common stock
        being registered in the registration statement of which this prospectus
        forms a part. Percentage is based on 12,258,434 shares of common stock
        outstanding
as of July 25, 2005.</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2" face="serif">(*)</font></td>
    <td><font size="2" face="serif">Represents less than 1%.</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2" face="serif">(2)</font></td>
    <td><font size="2" face="serif">Cameron Computers is controlled by Mr. Joseph
        Cameron, who has the power to dispose of, sell and vote the
securities.</font></td>
  </tr>
</table>
<p align="center"><font size="2" face="serif">20</font></p>
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<p align="center"><font size="2" face="serif"><b>PLAN OF DISTRIBUTION </b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    selling shareholders and any of their pledgees, assignees and successors-in-interest
    may, from time to time, sell any or all of their shares of common stock on
    any stock exchange, market or trading facility on which the shares are traded
    or in private transactions. Our common stock currently trades on the American
    Stock Exchange. Any sales by the selling shareholders may be at fixed or
    negotiated prices. The selling shareholders may use any one or more of the
    following methods when selling shares: </font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">purchases by a broker-dealer as principal and resale by the broker-dealer for its account; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">an exchange distribution in accordance with the rules of the applicable exchange; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">privately negotiated transactions; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">short sales; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share; </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">a combination of any such methods of sale; and </font></td>
</tr>
<tr valign="top">
  <td width="3%" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" width="3%"><font size="2" face="serif">&#149;</font></td>
<td align="left"><font size="2" face="serif">any other method permitted pursuant to applicable law. </font></td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    selling shareholders may also sell shares under Rule 144 under the Securities
    Act, if available, rather than under this prospectus. </font></p>
<p align="left"><font size="2" face="serif">Broker-dealers
    engaged by the selling shareholders may arrange for other brokers-dealers
    to participate in sales. Broker-dealers may receive commissions or discounts
    from the selling shareholders (or, if any broker-dealer acts as agent for
    the purchaser of shares, from the purchaser) in amounts to be negotiated.
    The selling shareholders do not expect these commissions and discounts to
    exceed what is customary in the types of transactions involved.  </font></p>
<p align="left"><font face="serif" size="2">Any selling shareholder may from
    time to time pledge or grant a security interest in some or all of the shares
    of common stock or warrants owned by them and, if they default in the performance
    of their secured obligations, the pledgees or secured parties may offer and
    sell the shares of common stock from time to time under this prospectus,
    or under an amendment to this prospectus under Rule 424(b)(3) or other applicable
    provision of the Securities Act of 1933 amending the list of selling shareholders
    to include the pledgee, transferee or other successors in interest as selling
    shareholders under this prospectus. </font></p>
<p align="left"><font size="2" face="serif">The selling shareholders also may
    transfer the shares of common stock in other circumstances, in which case
    the transferees, pledgees or other successors in interest will be the selling
    beneficial owners for purposes of this prospectus. </font></p>
<p align="left"><font size="2" face="serif">The selling shareholders and any
    broker-dealers or agents that are involved in selling the shares may be deemed
    to be &#147;underwriters&#148; within the meaning of the Securities Act
    in connection with such sales. In such event, any commissions received by
    such broker-dealers or agents and any profit on the resale of the shares
    purchased by them may be deemed to be underwriting commissions or discounts
    under the Securities Act. The selling shareholders have informed us that
    they do not have any agreement or understanding, directly or indirectly,
    with any person to distribute the common stock.  </font></p>
</div>
<p align="center"><font face="serif" size="2">21</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">In order to comply with the securities
    laws of some states, the selling shareholders must sell the shares in those
    states only through registered or licensed brokers or dealers. In addition,
    in some states the Selling Holders must sell the shares only if we have registered
    or qualified those shares for sale in the applicable state or an exemption
    from the registration or qualification requirement is available and the selling
    shareholder complies with the exemption.</font></p>
<p align="left"><font size="2" face="serif">We have advised the selling shareholders
    that the anti-manipulation rules of Regulation M under the Exchange Act may
    apply to sales of shares in the market and to the activities of the selling
    shareholders and their affiliates. In addition, we will make copies of this
    Prospectus available to the selling shareholders for the purpose of satisfying
    the Prospectus delivery requirements of the Securities Act. The selling shareholders
    may indemnify any broker-dealer that participates in transactions involving
    the sale of the shares against liabilities, including liabilities arising
    under the Securities Act.</font></p>
<p align="left"><font size="2" face="serif">At the time a selling shareholder
    makes a particular offer of shares we will, if required under applicable
    rules and regulations, distribute a Prospectus supplement that will set forth:</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the number of shares that the Selling Holder is offering;</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the terms of the offering, including the name of any underwriter, dealer or agent;</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the purchase price paid by any underwriter;</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any discount, commission and other underwriter compensation;</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any discount, commission or concession allowed or reallowed or paid to  any dealer; and</font></p>
<p align="left"><font size="2" face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the proposed selling price to the public.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
    are required to pay all fees and expenses incident to the registration of
    the shares. We have agreed to indemnify the selling shareholders against
    certain losses, claims, damages and liabilities, including liabilities under
    the Securities Act. </font></p>
<p align="left"><font size="2" face="serif">We will not receive any proceeds from sales of any shares by the selling shareholders.</font></p>
</div>
<p align="center"><font face="serif" size="2">22</font></p>
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<p align="center"><font size="2" face="serif"><b>WHERE YOU CAN FIND MORE INFORMATION </b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">We
    file annual, quarterly and current reports, proxy statements, and other information
    with the SEC. You may read and copy any reports, statements, or other information
    on file at the SEC&#146;s public reference room in Washington, D.C. You can request
    copies of those documents, upon payment of a duplicating fee, by writing
    to the SEC. </font></p>
<p align="left"><font size="2" face="serif">We
    have filed a Registration Statement on Form S-3 with the SEC. This prospectus,
    which forms a part of the Registration Statement, does not contain all of
    the information included in the Registration Statement. Certain information
    is omitted, and you should refer to the Registration Statement and its exhibits.
    With respect to references made in this prospectus to any contract or other
    document of ours, such references are not necessarily complete, and you should
    refer to the exhibits attached to the Registration Statement for copies of
    the actual contract or document. You may review a copy of the Registration
    Statement at the SEC&#146;s public reference rooms at 450 Fifth Street, N.W.,
    Washington, D.C. 20549; Chicago, Illinois; or New York, New York. Please
    call the Securities
    and Exchange Commission at 1-800-SEC-0330 for further information on the
    operation of the public reference rooms. Our Securities and Exchange Commission
    filings and the Registration Statement can also be reviewed by accessing
    the SEC&#146;s Web site at <u>http://www.sec.gov.</u></font></p>
</div>

<p align="center"><font size="2" face="serif"><b>DOCUMENTS INCORPORATED BY REFERENCE</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    SEC allows us to &#147;incorporate by reference&#148; information that
    we file with it, which means that we can disclose important information to
    you by referring you to those documents. The information incorporated by
    reference is an important part of this prospectus. Information in this prospectus
    supersedes information incorporated by reference that we filed with the SEC
    prior to the date of this prospectus, while information that we file later
    with the SEC will automatically update and supersede this information. We
    incorporate by reference into this registration statement and prospectus
    the documents listed below and any future filings we will make with the SEC
    under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
    of the initial registration statement but prior to effectiveness of the registration
    statement and after the date of this prospectus but prior to the termination
    of the offering of the shares covered by this prospectus. The following documents
    filed with the SEC are incorporated by reference in this prospectus: </font></p>
<p align="left"><font size="2" face="serif">1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    description of our common stock set forth in our registration statement on
    Form 8-A, filed with the SEC on May 12, 1986. </font></p>
<p align="left"><font size="2" face="serif">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our
    annual report on Form 10-KSB for the year ended December 31, 2004. </font></p>
<p align="left"><font size="2" face="serif">3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our
    form 8-A as filed on April 19, 2004.</font></p>
<p align="left"><font size="2" face="serif">4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our report on Form 10-QSB for the fiscal quarter ended March 31, 2005.</font></p>
<p align="left"><font size="2" face="serif">5.  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our
    Current Reports on Form 8-K as filed on January 25, 2005, March 2, 2005, June
    1, 2005 and June 6, 2005.</font></p>
<p align="left"><font size="2" face="serif">We
    will furnish without charge to you, on written or oral request, a copy of
    any or all of the documents incorporated by reference, including exhibits
    to these documents. You should direct any requests for documents to Document
    Security Systems, Incorporated, 28 Main Street East, Suite 1525, Rochester,
    New York 14614, attention: Chief Financial Officer and the telephone number is
    (585) 325-3610. </font></p>
<p align="left"><font size="2" face="serif">To
    the extent that any statement in this prospectus is inconsistent with any
    statement that is incorporated by reference and that was made on or before
    the date of this prospectus, the statement in this prospectus shall control.
    The incorporated statement shall not be deemed, except as modified or superceded,
    to constitute a part of this prospectus or the registration statement of
    which this prospectus is a part. Statements contained in this prospectus
    as to the contents of any contract or other document are not necessarily
    complete and, in each instance, we refer you to the copy of each contract
    or document filed as an exhibit to the registration statement of which this prospectus
    is a part.</font></p>
</div>
<p align="center"><font size="2" face="serif">23</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">You
    should rely only on the information provided or incorporated by reference
    in this prospectus. We have not authorized anyone to provide you with any
    different information. This prospectus does not constitute an offer to sell,
    or a solicitation of an offer to buy, these securities in any state where
    the offer or sale is prohibited. You should not assume that the information
    in this prospectus or any prospectus supplement is accurate as of any date
    other than the date on the front of the document. </font></p>
</div>
<p align="center"><font size="2" face="serif"><b>INDEMNIFICATION OF OFFICERS AND DIRECTORS </b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    New York Business Corporation Law contains provisions permitting and, in
    some situations, requiring New York corporations to provide indemnification
    to their officers and directors for losses and litigation expense incurred
    in connection with their service to the corporation. Our bylaws contain provisions
    requiring our indemnification of our directors and officers and other persons
    acting in their corporate capacities. </font></p>
<p align="left"><font size="2" face="serif">In
    addition, we may enter into agreements with our directors providing contractually
    for indemnification consistent with the articles and bylaws. Currently, we
    have no such agreements. The New York Business Corporation Law also authorizes
    us to purchase insurance for our directors and officers insuring them against
    risks as to which we may be unable lawfully to indemnify them. We have obtained
    limited insurance coverage for our officers and directors as well as insurance
    coverage to reimburse us for potential costs of our corporate indemnification
    of officers and directors. </font></p>
<p align="left"><font size="2" face="serif">As
    far as exculpation or indemnification for liabilities arising under the Securities
    Act of 1933 may be permitted for directors and officers and controlling persons,
    we have been advised that in the opinion of the Securities and Exchange Commission
    such exculpation or indemnification is against public policy as expressed
    in the Act and is, therefore, unenforceable. </font></p>
</div>

<p align="center"><font size="2" face="serif"><b>LEGAL MATTERS </b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    legality of the issuance of shares offered hereby will be passed upon by
    Goldstein &amp; DiGioia LLP located in New York, New York. </font></p>
</div>
<p align="center"><font size="2" face="serif"><b>EXPERTS </b></font></p>

<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">The
    financial statements of Document Security Systems, Incorporated appearing
    in Annual Report (Form 10-KSB) for the year ended December 31, 2004, have
    been audited by Freed Maxick &amp; Battaglia CPA&#146;s P.C., registered independent
    accountants, as set forth in their report thereon included therein and incorporated
    herein by reference. Such consolidated financial statements are incorporated
    herein by reference in reliance upon such report given on the authority of
    such firm as experts in accounting and auditing.</font></p>
</div>
<p align="center"><font size="2" face="serif"><b>TRANSFER AGENT AND WARRANT AGENT </b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">Our
    stock transfer agent is American Stock Transfer located at 6201 15<sup>th</sup> Avenue
    Brooklyn, New York 11219. We act as our own warrant agent for our outstanding warrants.</font></p>
</div>
<p align="center"><font face="serif" size="2">24</font></p>
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