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STOCKHOLDERS' EQUITY | 12 Months Ended
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Dec. 31, 2014
STOCKHOLDERS' EQUITY [Abstract] |
STOCKHOLDERS' EQUITY | NOTE 8 - STOCKHOLDERS' EQUITY Sales of Equity - On December 23, 2014, the Company sold 3,715,000 shares of DSS's common stock at a price to the public of $0.45 per share for gross proceeds of $1.672 million. The shares included 415,000 shares of common stock sold pursuant to the underwriters' over-allotment option, which was partially exercised at $0.45 per share. On June 16, 2014, the Company sold 209,700 shares of common stock at a purchase price of $1.44 per share to an institutional investor for a total purchase price of approximately $302,000. Additionally, from the date of the closing until 90 days after the closing date, the investor had a non-transferable overallotment right to purchase up to 209,700 additional shares of common stock at a price per share of $1.60, for an additional subscription amount of up to an aggregate of approximately $335,500. The overallotment option was not executed by the investor and expired on September 14, 2014. Stock Warrants - From time to time, the Company issues warrants in conjunction with the sale of its common stock in private placements. The Company also issued to certain consultants for services during 2014 an aggregate of 8,443 shares of its common stock in exchange for warrants to purchase 80,645 shares of the Company which were exercisable at a price of $3.10 per share, dated February 13, 2012 and expiring February 12, 2017. In May 2014, the Company issued a warrant to purchase up to 60,000 of the Company's common stock at $1.60 per share to a vendor of investor relations services. The warrants have a term of 3 years and will vest pro ratably over 12 monthly periods. The warrant was valued at approximately $34,000 using the Black-Scholes-Merton option pricing model with a volatility of 71.4%, a risk free rate of return of 1.67% and zero dividend and forfeiture estimates. Also in May 2014, the Company issued fully vested five-year warrants to purchase 40,000 shares of the Company's common stock at $1.50 per share in conjunction with the extension of the Company's $850,000 term note that was due to expire in May 2014 to May 2015. The estimated fair value of the warrant was recognized as expense on the date of grant. The warrant was valued at approximately $27,000 using the Black-Scholes-Merton option pricing model with a volatility of 65.5%, a risk free rate of return of 1.57% and zero dividend and forfeiture estimates. On July 1, 2013 in conjunction with its Merger with DSS Technology Management, the Company issued warrants to purchase up to an aggregate of 4,859,894 shares of the Company's common stock, at an exercise price of $4.80 per share and expiring on July 1, 2018; and warrants to purchase up to an aggregate of 3,432,170 shares of the Company's common stock, at an exercise price of $0.02 per share and expiring on July 1, 2023 to DSS Technology Management's preferred stockholders that would beneficially own more than 9.99% of the shares of the Company's common stock as a result of the Merger (the “Beneficial Ownership Condition”). During 2013, a total of 3,472,170 shares of common stock were issued by the Company upon the exercise of warrants in exchange for aggregate proceeds of approximately $148,000. The following is a summary with respect to warrants outstanding and exercisable at December 31, 2014 and 2013 and activity during the years then ended:
|  | 2014 |  |  | 2013 |
|  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Exercise |  |  |  |  |  | Exercise |
|  | Warrants |  |  | Price |  |  | Warrants |  |  | Price |
Outstanding January 1 |  |  | 6,875,586 |  |  | $ | 4.64 |  |  |  | 2,255,692 |  |  | $ | 4.34 |
Granted during the year |  |  | 100,000 |  |  |  | 1.56 |  |  |  | 8,342,064 |  |  |  | 2.82 |
Exercised/transferred |  |  | (80,645 | ) |  |  | 3.10 |  |  |  | (3,472,170 | ) |  |  | 0.04 |
Lapsed/terminated |  |  | (328,556 | ) |  |  | 2.91 |  |  |  | (250,000 | ) |  |  | 5.10 |
Outstanding at December 31 |  |  | 6,566,385 |  |  | $ | 4.70 |  |  |  | 6,875,586 |  |  | $ | 4.64 |
Exercisable at December 31 |  |  | 6,535,274 |  |  | $ | 4.71 |  |  |  | 6,742,253 |  |  | $ | 4.64 |
Weighted average months remaining |  |  |  |  |  |  | 40.0 |  |  |  |  |  |  |  | 49.8 |
Stock Options - On June 20, 2013 the Company's shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”), which replaced both the Company's Amended and Restated 2004 Employee Stock Option Plan and Amended and Restated 2004 Non-Executive Director Stock Option Plan. The 2013 Plan provides for the issuance of up to a total of 6,000,000 shares of common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants. Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”). On March 5, 2014, the Company issued an aggregate of 1,138,697 options to purchase the Company's common stock at $2.00 per share with a term of 5 years to its employees covered under the 2013 Plan. The options will vest pro-ratably as follows: 1/3 on the grant date, 1/3 on the first anniversary of the grant date and 1/3 on the second anniversary of the grant date as long as the employee is employed on such dates. The options were valued at approximately $833,000 using the Black-Scholes-Merton option pricing model with a volatility of 67.0%, a risk free rate of return of 0.92% and zero dividend and forfeiture estimates. On March 13, 2014, the Company issued an aggregate of 84,025 shares of common stock to three of its directors to pay approximately $134,000 of accrued director's fees. In December 2014, the Company issued 33,500 options to purchase the Company's common stock at $0.60 per share with a term of 5 years to members of the Company's executive management in exchange for an agreement by each employee to reduce his cash compensation for the fiscal year of 2015. The options will vest on August 15, 2015 and had a grant date fair value of $6,643. The options were valued using the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates. During 2013, the Company issued options to purchase up to an aggregate of 178,750 shares of its common stock to its non-executive board members at exercise prices between $1.40 and $2.51 per share. The fair value of these options amounted to approximately $123,000 determined by utilizing the Black-Scholes-Merton option pricing model. On January 10, 2013, the Company modified 80,000 fully vested options held by former non-executive board members that were set to expire on January 14, 2013 by extending the expiration dates to between January 2, 2014 and January 14, 2014. These options had been granted between 2009 and 2012. The incremental compensation costs associated with this modification of approximately $34,000 was recognized during the year ended December 31, 2013 and is included in selling, general and administrative expenses. On July 1, 2013 in conjunction with its Merger with DSS Technology Management, the Company assumed options to purchase an aggregate of 2,000,000 shares of the Company's Common Stock at an exercise price of $3.00 per share, in exchange for 3,600,000 outstanding and unexercised stock options to purchase shares of DSS Technology Management's common stock (See Note 9). The following is a summary with respect to options outstanding at December 31, 2014 and 2013 and activity during the years then ended:
|  | 2014 |  |  | 2013 |
|  | Number of Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Life Remaining |  |  | Number of Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Life Remaining |
|  |  |  |  |  |  |  | (in years) |  |  |  |  |  |  |  |  | (in years) |
Outstanding at January 1: |  |  | 4,073,898 |  |  |  | 3.25 |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |
Transferred |  |  | - |  |  |  | - |  |  |  |  |  |  |  | 1,980,898 |  |  |  | 3.65 |  |  |  |  |
Granted |  |  | 1,172,197 |  |  |  | 1.96 |  |  |  |  |  |  |  | 2,150,000 |  |  |  | 2.89 |  |  |  |  |
Exercised |  |  | - |  |  |  | - |  |  |  |  |  |  |  | (20,000 | ) |  |  | 1.86 |  |  |  |  |
Lapsed/terminated |  |  | (317,804 | ) |  |  | 3.56 |  |  |  |  |  |  |  | (37,000 | ) |  |  | 6.31 |  |  |  |  |
Outstanding at December 31: |  |  | 4,928,291 |  |  |  | 2.92 |  |  |  | 4.0 |  |  |  | 4,073,898 |  |  |  | 3.25 |  |  |  | 5.7 |
Exercisable at December 31: |  |  | 2,806,696 |  |  |  | 2.94 |  |  |  | 5.0 |  |  |  | 1,718,024 |  |  |  | 3.25 |  |  |  | 4.3 |
Expected to vest at December 31: |  |  | 1,660,169 |  |  |  | 2.46 |  |  |  | 5.8 |  |  |  | 1,905,874 |  |  |  | 2.95 |  |  |  | 7.8 |
Aggregate intrinsic value of outstanding options at December 31: |  | $ | - |  |  |  |  |  |  |  |  |  |  | $ | 104,700 |  |  |  |  |  |  |  |  |
Aggregate intrinsic value of exercisable options at December 31: |  | $ | - |  |  |  |  |  |  |  |  |  |  | $ | 37,365 |  |  |  |  |  |  |  |  |
Aggregate intrinsic value of options expected to vest at December 31: |  | $ | - |  |  |  |  |  |  |  |  |  |  | $ | 67,335 |  |  |  |  |  |  |  |  |
Included in these amounts are earn-out options issued to the previous owners of ExtraDev with a contractual term of 5 years, to purchase an aggregate of 450,000 shares of common stock at an exercise price of $4.50 per share that will be vested if the Company's Digital division achieves certain annual revenue targets by the end of fiscal year 2016. The fair value of the earn-out options amounted to $594,000. If the annual revenue targets are met or are deemed probable to occur, then the Company will record stock based compensation expense. As of December 31, 2014 vesting is considered remote. All options granted to the owners of ExtraDev were classified as compensation for post combination services since the vesting of each grant is based on length of employment, with all unvested options forfeiting upon termination of employment, therefore, the fair value of these equity instruments was not considered a component of the purchase price of the ExtraDev acquisition. The weighted-average grant date fair value of options granted during the year ended December 31, 2014 was $0.71($0.82 -2013). The aggregate grant date fair value of options that vested during the year was approximately $1,145,000 ($1,009,000 -2013). There were 20,000 options exercised on a cashless basis during 2013. The intrinsic value of options exercised during 2013 was approximately $20,000. There were no options exercised during 2014. The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The Company estimated the expected volatility of the Company's common stock at the grant date using the historical volatility of the Company's common stock over the most recent period equal to the expected stock option term. The expected volatility utilized ranged between 67.0% and 72.6% during 2014. The risk-free interest rate assumptions were determined using the equivalent U.S. Treasury bonds yield and ranged between 0.92% and 1.66% in 2014. The Company estimates pre-vesting option forfeitures at the time of grant. The Company has had minimal pre-vesting forfeitures in the past. The Company has never paid any cash dividends and does not anticipate paying any cash dividends in the foreseeable future. Therefore, the Company assumed an expected dividend yield of zero. The following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options and warrants granted during the years ended December 31, 2014 and 2013:
|  | 2014 |  |  | 2013 |
Volatility |  |  | 67.1 | % |  |  | 60.9 | %
Expected option term |  |  | 3.5years |  |  |  | 5.7years |
Risk-free interest rate |  |  | 0.9 | % |  |  | 1.6 | %
Expected forfeiture rate |  |  | 0.0 | % |  |  | 0.0 | %
Expected dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Restricted Stock - Restricted common stock may be issued under the Company's 2013 Plan for services to be rendered which may not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources. Restricted stock compensation cost is measured as the stock's fair value based on the quoted market price at the date of grant. The restricted shares issued reduce the amount available under the employee stock option plans. Compensation cost is recognized only on restricted shares that will ultimately vest. The Company estimates the number of shares that will ultimately vest at each grant date based on historical experience and adjust compensation cost and the carrying amount of unearned compensation based on changes in those estimates over time. Restricted stock compensation cost is recognized ratably over the requisite service period which approximates the vesting period. An employee may not sell or otherwise transfer unvested shares and, in the event that employment is terminated prior to the end of the vesting period, any unvested shares are surrendered to us. The Company has no obligation to repurchase any restricted stock. In conjunction with its Merger with Lexington Technology Group on July 1, 2013 (See Note 9) the Company issued 7,100,000 shares of the Company's common stock to be held in escrow pursuant to an escrow agreement, dated July 1, 2013. Pursuant to the escrow agreement, the shares of the Company's common stock deposited in the escrow account would be released to the holders if and when the closing price per share of the Company's common stock exceeded $5.00 per share (as adjusted for stock splits, stock dividends and similar events) for 40 trading days within a continuous 90 trading day period following the closing of the Merger. If within one year following the closing of the Merger, such threshold was not achieved, the shares of the Company's common stock held in escrow would be cancelled and returned to the treasury of the Company. The holders of the escrow shares had voting rights with respect to the shares until such shares were either released or retired after one year. As of July 1, 2014, the vesting criteria for the escrow shares was not met. As a result, the Company received authorization from holders of an aggregate of 3,038,357 of the escrow shares to retire such shares as of June 29, 2014. The remaining 4,061,643 escrow shares were retired on July 1, 2014. The Company had also issued an aggregate of 786,678 shares of Common Stock to Palladium Capital as compensation for advisory services performed in connection with the Merger. Of those shares issued to Palladium Capital, 400,000 were being held in escrow pursuant to the same terms and conditions as those set forth in the escrow agreement. Since Paladium Capital's escrow shares did not vest, the Company received authorization from Palladium Capital to retire their 400,000 escrow shares as of June 29, 2014. In December 2014, the Company issued an aggregate of 243,750 shares of restricted common stock to certain members of the Company's executive and senior management in exchange for agreements by the employees to reduce their cash compensation for the fiscal year of 2015. The restricted shares will vest on August 15, 2015 and had an aggregate grant date fair value of $117,000. The following is a summary of activity of restricted stock during the years ended at December 31, 2014 and 2013:
|  | Shares |  |  | Weighted- average Grant Date Fair Value |
Restricted shares outstanding, December 31, 2012 |  |  | 61,764 |  |  | $ | 3.33 |
Restricted shares granted |  |  | - |  |  |  | - |
Restricted shares vested |  |  | (20,588 | ) |  |  | 3.33 |
Restricted shares outstanding, December 31, 2013 |  |  | 41,176 |  |  | $ | 3.33 |
Restricted shares granted |  |  | 243,750 |  |  |  | 0.48 |
Restricted shares vested |  |  | (20,588 | ) |  |  | 3.33 |
Restricted shares outstanding, December 31, 2014 |  |  | 264,338 |  |  | $ | 0.70 |
Stock-Based Compensation - The Company records stock-based payment expense related to these options based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During 2014, the Company had stock compensation expense of approximately $1,355,000 or $0.03 basic earnings per share ($1,895,000; $0.06 basic earnings per share - 2013). As of December 31, 2014, there was approximately $1,308,000 of total unrecognized compensation costs related to options and restricted stock granted under the Company's stock option plans, which the Company expects to recognize over the weighted average period of approximately three years. This amount excludes $536,000 of potential stock based compensation for stock options that vest upon the occurrence of certain events which the Company does not believe are likely.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(d),(e)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Article 4 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph d -Article 4 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 + Details
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