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Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Stockholders' Equity

NOTE 10 - STOCKHOLDERS’ EQUITY

Sales of Equity – On July 3, 2018, the Company sold 214,286 shares of its common stock, par value $0.02 per share, to a related party accredited investor, Heng Fai Holdings Limited. The purchase price was $1.40 per share, for total proceeds of $300,000.

On December 17, 2018, the Company sold 612,245 shares of its common stock, par value $0.02 per share, to a related party accredited investor, Heng Fai Holdings Limited. The purchase price was $0.98 per share, for total proceeds of $600,000.

On February 18, 2019, the Company had entered into a Convertible Promissory Note with LiquidValue Development Pte Ltd ., a company owned and controlled by Mr. Heng Fai Ambrose Chan, DSS’s Chairman, in the principal sum of $500,000, of which up to $500,000 of the Principal Amount could be paid by the conversion of such amount into the Company’s common stock, par value $0.02 per share, up to a maximum of 446,428 shares of common stock (the “Maximum Conversion Amount”), at a conversion price of $1.12 per share. Effective on March 25, 2019, LiquidValue Development Pte Ltd exercised its conversion option and converted the Maximum Conversion Amount under the Note. (Note 8)

On March 5, 2019, the Company issued 130,435 shares of its common stock at $1.15 per share as partial consideration for a licensing and distribution agreement entered into with Advanced Cyber Security Corp. (Note7)

On June 5, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp., acting as representative of the several underwriters, which provided for the issuance and sale by the Company in an underwritten public offering (the “Offering”) and the purchase by the Underwriters of 11,200,000 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement, the shares were sold to the Underwriters at a public offering price of $0.50 per share, less certain underwriting discounts and commissions. As part of this transaction, 2,000,000 shares were purchased by Heng Fai Ambrose Chan, Chairman of the Board of directors. The Company also granted the Underwriters a 45-day option to purchase up to 1,680,000 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Offering (519,186 shares were exercised on July 18, 2019 at $0.50 per share, less underwriting discounts and expenses). The net offering proceeds to the Company was approximately $5.0 million, inclusive of the July 18, 2019 transaction and after deducting underwriting discounts, commissions and other offering expenses.

On November 1, 2019, pursuant to a Subscription Agreement, LiquidValue Development Pte LTD, a company owned and controlled by Mr. Heng Fai Ambrose Chan, DSS’s Chairman, purchased from the Company, in a private placement, and aggregate of 6,000,000 shares of common stock, for an above market purchase price equal to $0.30 per share (at the time of LiquidValues’ commitment, the closing stock price was $0.26 per share) for net proceeds to the Company of approximately $1.6 million after deducting underwriting discounts, commissions and other offering expenses.

Stock Warrants –The following is a summary with respect to warrants outstanding and exercisable at December 31, 2019 and 2018 and activity during the years then ended:

		2019								2018
		Number of Warrants				Weighted Average Exercise Price				Number of Warrants				Weighted Average Exercise Price
Outstanding at January 1,			1,430,116			$	4.00				2,645,090			$	10.98
Granted			-				-				-				-
Lapsed/terminated			(209,812	)			20.78				(1,214,974	)			19.20

Outstanding at December 31,			1,220,304			$	1.12				1,430,116			$	4.00
Exercisable at December 31,			1,220,304			$	1.12				1,430,116			$	4.00
Weighted average of months remaining							20.7								27.9

The Company did not issue any warrants in 2019 or 2018.

Stock Options - On June 20, 2013 the Company’s shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the issuance of up to a total of 1,500,000 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”). As of December 31, 2019, no shares remained available under this plan.

On December 9, 2019, the Company’s shareholders adopted the 2020 Employee, Director and Consultant Equity Incentive Plan (the “2020 Plan”). The 2020 Plan provides for the issuance of up to a total of 7,236,125 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 2020 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”).

The following is a summary with respect to options outstanding at December 31, 2019 and 2018 and activity during the years then ended:

		2019												2018
		Number of Options				Weighted Average Exercise Price				Weighted Average life Remaining (Years)				Number of Options				Weighted Average Exercise Price				Weighted Average life Remaining (Years)
Outstanding at January 1,			782,655			$	6.66								482,667			$	10.72
Granted			-				-								405,000				1.38
Lapsed/terminated			(204,738	)			7.7								(105,012	)			4.96
Outstanding at December 31,			577,917			$	5.01				3.2				782,655			$	6.66				3.2
Exercisable at December 31,			408,750			$	6.50				3.5				490,988			$	8.30				2.8
Expected to vest at December 31,			169,167			$	1.43				3.4				291,667			$	1.41				4.5

Aggregate intrinsic value of outstanding options at December 31,		$	-											$	-
Aggregate intrinsic value of exercisable options at December 31,		$	-											$	-
Aggregate intrinsic value of options expected to vest at December 31,		$	-											$	-

During the year ended December 31, 2018, the Company issued an aggregate of 405,000 options to purchase the Company’s common stock at between $1.30 and $1.55 per share with a term of five years to employees at its technology, corporate and printed products divisions, as well as independent board members. For 265,000 options granted during 2018 the options 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. For the remaining 140,000 options granted during 2018 the options vest pro-ratably as follows: 1/3 on the first anniversary of the grant date, 1/3 on the second anniversary of the grant date and 1/3 on the third anniversary of the grant date.

The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The Company estimates 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 following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options and warrants granted during the year ended December 31, 2018. There were no options or warrants granted for compensation during the year ended December 31, 2019.

Volatility			98.20	%
Expected option term			3.6 years
Risk-free interest rate			2.7	%
Expected forfeiture rate			0.0	%
Expected dividend yield			0.0	%

The aggregate grant date fair value of options that vested during 2019 and 2018 was approximately $104,000 and $122,000, respectivly. There were no options exercised during 2019 or 2018.

Restricted Stock - Restricted common stock may be issued under the Company’s 2013 or 2020 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, if 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.

On September 6, 2019, the Company issued an aggregate of 224,310 shares of fully vested restricted stock to members of the Company’s management team of with a two-year lock-up period and had an aggregated grant date fair value of approximately $94,000 which is included in stock based compensation for the year ended December 31, 2019. The Company did not grant any restricted stock in 2018.

Stock-Based Compensation – The Company records stock-based payment expense related to options and warrants based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During the twelve months ended December 31, 2019, the Company had stock compensation expense of approximately $422,000 or less than $0.01 basic and diluted earnings per share ($132,000, or less than $0.01 basic and diluted earnings per share for the corresponding twelve months ended December 31, 2018). Of the $422,000, $114,500 was accrued for the CEO of a subsidiary of the Company.

In July 2019, by unanimous written consent, the Board of Directors authorized the Company to issue individual stock grants of the Company’s common stock, pursuant to the Company’s 2013 Employee, Director and Consultant Equity Incentive Plan, to certain officers and directors in the amount of 458,719 shares, at $0.42 per share which were immediately vested and issued on September 6, 2019. 224,310 of these shares where were fully vested restricted stock to members of the Company’s management team of with a two-year lock-up period.