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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0in; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Washington, D.C. 20549 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FORM 8-K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>CURRENT REPORT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Date of Report (Date of earliest event reported):
<B>February 13, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>DOCUMENT SECURITY SYSTEMS, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Exact name of registrant as specified in
its charter) </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <TD STYLE="width: 32%; vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0"><B>New York</B></TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0"><B>&nbsp;</B></TD>
    <TD STYLE="width: 32%; vertical-align: bottom; font-weight: bold; text-align: center; padding: 0; text-indent: 0"><B>1-32146</B></TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0"><B>&nbsp;</B></TD>
    <TD STYLE="width: 32%; vertical-align: bottom; padding: 0; text-align: center"><B>16-1229730</B></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">(State or other jurisdiction of incorporation)</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">(Commission File Number)</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">(IRS Employer Identification No.)</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>First Federal Plaza, Suite 1525</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>28 East Main Street</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Rochester, NY </B></P></TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-weight: bold; text-align: center; padding: 0; text-indent: 0">14614</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">(Address of principal executive offices)</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center; padding: 0; text-indent: 0">(Zip Code)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Registrant&rsquo;s telephone number, including
area code: <B>(585) 325-3610</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Not Applicable</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Former name or former address, if changed
since last report.) </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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    <TD STYLE="width: 4%; padding: 0; text-indent: 0"><FONT STYLE="font: 10pt Wingdings; color: black">&uml;</FONT></TD>
    <TD STYLE="width: 96%; padding: 0; text-indent: 0">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Wingdings; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Wingdings; padding: 0; text-indent: 0">&uml;</TD>
    <TD STYLE="padding: 0; text-indent: 0">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Wingdings; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Wingdings; padding: 0; text-indent: 0">&uml;</TD>
    <TD STYLE="padding: 0; text-indent: 0">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Wingdings; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Wingdings; padding: 0; text-indent: 0">&uml;</TD>
    <TD STYLE="padding: 0; text-indent: 0">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Item 1.01 Entry into a Material Definitive Agreement.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The disclosure set forth below in Item
3.02 (Unregistered Sale of Equity Securities) is incorporated by reference into this Item 1.01.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Item 3.02 Unregistered Sale of Equity Securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">On
February 13, 2012, Document Security Systems, Inc. (the &ldquo;Company&rdquo;) completed the sale of $3,000,000 of investment units
(the &ldquo;Units&rdquo;) in a private placement (the &ldquo;Offering&rdquo;) pursuant to subscription agreements (each a &ldquo;Subscription
Agreement&rdquo;, and collectively, the &ldquo;Subscription Agreements&rdquo;) with three accredited investors (the &ldquo;Investors&rdquo;).
A total of 30 Units were sold, at a price of $100,000 per Unit. Each Unit consists of (i) 32,258 shares of the Company&rsquo;s
common stock, par value $.02 per share  (the &ldquo;Common Stock&rdquo;), and (ii) a five-year warrant
to purchase up to 16,129 shares of Common Stock at an exercise price of $3.10 per share (each individually a &ldquo;Warrant&rdquo;,
and collectively, the &ldquo;Warrants&rdquo;). The Warrants (and Placement Agent Warrants described below) contain a provision
for cashless exercise in the event that a registration statement is not effective</FONT> <FONT STYLE="font-size: 10pt">for the
resale by the holder of all of the Warrant Stock issuable upon exercise of the Warrant. In addition, the holder is not entitled
to exercise the Warrant if (i) the number of shares of Common Stock beneficially owned by the holder and its affiliates and (ii)
the number shares of Common Stock issuable upon the exercise of this Warrant would result in beneficial ownership by the holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock except that this restriction may be waived upon
61 days prior notice from the holder to increase such percentage up to 9.99%.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The Offering resulted in
aggregate cash proceeds to the Company of $3,000,000. A total of 967,740 shares of Common Stock were sold, and Warrants to purchase
up to an additional 483,870 shares of Common Stock (the &ldquo;Warrant Stock&rdquo;) were issued to the Investors in the Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The Company entered into
a Registration Rights Agreement with the Investors whereby the Company has agreed to file a registration statement (the &ldquo;Registration&rdquo;)
with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;) within 30 days of closing for the Common Stock sold in the
Offering and the Warrant Stock underlying the Warrants. The Company has 60 days (or 90 days if the Registration is subject to a
full review by the SEC) from closing to have the Registration declared effective by the SEC. If the Company fails to file the Registration
in a timely manner, have the Registration declared effective in a timely manner, maintain its effectiveness or file current public
information with the SEC the Company will be required to pay to each holder an amount in cash equal to 1% of the aggregate purchase
price of such holder on the date of each such failure and each 30 days thereafter until cured with interest thereon at the rate
of 1% per month except no such payments will be due with respect to any period during which all of such holder&rsquo;s registrable
securities may be sold under Rule 144..</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">In connection with the
Offering, the Company paid a placement agent fee of $210,000 to Palladium Capital Advisors, LLC (the &ldquo;Placement Agent&rdquo;),
and issued a five-year warrant to the Placement Agent (the &ldquo;Placement Agent Warrant&rdquo;) to purchase up to an aggregate
of 58,064 shares of Common Stock at an exercise price of $3.10 per share pursuant to a one-year placement agent agreement (&ldquo;Placement
Agreement&rdquo;) with the Placement Agent. Under the Placement Agreement, the Placement Agent is also entitled to 3% of the aggregate
consideration raised pursuant to the exercise of any Warrants by Investors. If the Company enters into a binding agreement for
certain corporate transactions described in the Placement Agreement at any time during the term of the Agreement and for 2 years
thereafter with an entity introduced to the Company by the Placement Agent, the Placement Agent will be entitled to a 2% fee in
cash and 2% in Company common stock of the aggregate consideration of such transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">The
form of Warrant, Placement Agent Warrant, form of Subscription Agreement, form of Registration Rights Agreement and Placement Agreement
are filed herewith as exhibits 4.1, 4.2, 10.1 10.2 and 10.3, respectively. The foregoing summary descriptions of the Warrant, Placement
Agent Warrant, Subscription Agreement, Registration Rights Agreement and Placement Agreement are qualified in their entirety by
reference to the full texts of each such exhibit.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The Units, Common Stock,
Warrants and Common Stock issuable upon exercise of the Warrants (collectively, the &ldquo;Securities&rdquo;) have not been registered
under the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;), and were issued and sold in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
These Securities may not be offered or sold by the Investors in the United States in the absence of an effective registration statement
or an applicable exemption from registration requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Item 9.01 Financial Statements and Exhibits.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; padding: 0; font-weight: bold; text-decoration: underline; text-align: justify; text-indent: 0">Exhibit No.</TD>
    <TD STYLE="width: 91%; padding: 0; font-weight: bold; text-decoration: underline; text-align: justify; text-indent: 0">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">4.1</TD>
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">Form of Warrant</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">4.2</TD>
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">Placement Agent Warrant</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">10.1</TD>
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">Form of Subscription Agreement</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">10.2</TD>
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">Form of Registration Rights Agreement</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">10.3</TD>
    <TD STYLE="padding: 0; text-align: justify; text-indent: 0">Placement Agent Agreement  with Palladium Capital Advisors, LLC</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">SIGNATURE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 24.5pt">Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 47%; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 4%; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 47%; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: bottom; font-weight: bold; padding: 0; text-indent: 0">DOCUMENT SECURITY SYSTEMS, INC.</TD></TR>
<TR>
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">Dated: February 13, 2012</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">By:</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">/s/ Patrick A. White</P></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-weight: bold; text-align: center; padding: 0; text-indent: 0">Patrick A. White</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-style: italic; font-weight: bold; text-align: center; padding: 0; text-indent: 0">Chief Executive Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>Exhibit Index</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; padding: 0; font-weight: bold; text-decoration: underline; text-indent: 0">Exhibit No.</TD>
    <TD STYLE="width: 91%; padding: 0; font-weight: bold; text-decoration: underline; text-indent: 0">Description</TD></TR>
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    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
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<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">4.1</TD>
    <TD STYLE="padding: 0; text-indent: 0">Form of Warrant</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">4.2</TD>
    <TD STYLE="padding: 0; text-indent: 0">Placement Agent Warrant</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">10.1</TD>
    <TD STYLE="padding: 0; text-indent: 0">Form of Subscription Agreement</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">10.2</TD>
    <TD STYLE="padding: 0; text-indent: 0">Form of Registration Rights Agreement</TD></TR>
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    <TD STYLE="padding: 0; text-indent: 0">10.3</TD>
    <TD STYLE="padding: 0; text-indent: 0">Placement Agent Agreement with Palladium Capital Advisors, LLC</TD></TR>
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[{"type": "8-K", "sequence": "1", "filename": "v302206_8k.htm", "description": "FORM 8-K", "secsgml_size_bytes": 26222}]
{"company-data": {"conformed-name": "DOCUMENT SECURITY SYSTEMS INC", "cik": "0000771999", "assigned-sic": "7373", "irs-number": "161229730", "state-of-incorporation": "NY", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-32146", "film-number": "12599107"}, "business-address": {"street1": "36 WEST MAIN ST", "street2": "SUITE 710", "city": "ROCHESTER", "state": "NY", "zip": "14614", "phone": "585 232 1500"}, "mail-address": {"street1": "36 W MAIN ST", "street2": "SUITE 710", "city": "ROCHESTER", "state": "NY", "zip": "14614"}, "former-company": [{"former-conformed-name": "NEW SKY COMMUNICATIONS INC", "date-changed": "19920703"}, {"former-conformed-name": "THOROUGHBREDS USA INC", "date-changed": "19861118"}]}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 13, 2012
DOCUMENT SECURITY SYSTEMS, INC.
(Exact name of registrant as specified in
its charter)
New York
1-32146
16-1229730
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
First Federal Plaza, Suite 1525
28 East Main Street
Rochester, NY
14614
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including
area code:
(585) 325-3610
Not Applicable
(Former name or former address, if changed
since last report.)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
The disclosure set forth below in Item
3.02 (Unregistered Sale of Equity Securities) is incorporated by reference into this Item 1.01.
Item 3.02 Unregistered Sale of Equity Securities.
On
February 13, 2012, Document Security Systems, Inc. (the "Company") completed the sale of $3,000,000 of investment units
(the "Units") in a private placement (the "Offering") pursuant to subscription agreements (each a "Subscription
Agreement", and collectively, the "Subscription Agreements") with three accredited investors (the "Investors").
A total of 30 Units were sold, at a price of $100,000 per Unit. Each Unit consists of (i) 32,258 shares of the Company's
common stock, par value $.02 per share  (the "Common Stock"), and (ii) a five-year warrant
to purchase up to 16,129 shares of Common Stock at an exercise price of $3.10 per share (each individually a "Warrant",
and collectively, the "Warrants"). The Warrants (and Placement Agent Warrants described below) contain a provision
for cashless exercise in the event that a registration statement is not effective
for the
resale by the holder of all of the Warrant Stock issuable upon exercise of the Warrant. In addition, the holder is not entitled
to exercise the Warrant if (i) the number of shares of Common Stock beneficially owned by the holder and its affiliates and (ii)
the number shares of Common Stock issuable upon the exercise of this Warrant would result in beneficial ownership by the holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock except that this restriction may be waived upon
61 days prior notice from the holder to increase such percentage up to 9.99%.
The Offering resulted in
aggregate cash proceeds to the Company of $3,000,000. A total of 967,740 shares of Common Stock were sold, and Warrants to purchase
up to an additional 483,870 shares of Common Stock (the "Warrant Stock") were issued to the Investors in the Offering.
The Company entered into
a Registration Rights Agreement with the Investors whereby the Company has agreed to file a registration statement (the "Registration")
with the Securities and Exchange Commission (the "SEC") within 30 days of closing for the Common Stock sold in the
Offering and the Warrant Stock underlying the Warrants. The Company has 60 days (or 90 days if the Registration is subject to a
full review by the SEC) from closing to have the Registration declared effective by the SEC. If the Company fails to file the Registration
in a timely manner, have the Registration declared effective in a timely manner, maintain its effectiveness or file current public
information with the SEC the Company will be required to pay to each holder an amount in cash equal to 1% of the aggregate purchase
price of such holder on the date of each such failure and each 30 days thereafter until cured with interest thereon at the rate
of 1% per month except no such payments will be due with respect to any period during which all of such holder's registrable
securities may be sold under Rule 144..
In connection with the
Offering, the Company paid a placement agent fee of $210,000 to Palladium Capital Advisors, LLC (the "Placement Agent"),
and issued a five-year warrant to the Placement Agent (the "Placement Agent Warrant") to purchase up to an aggregate
of 58,064 shares of Common Stock at an exercise price of $3.10 per share pursuant to a one-year placement agent agreement ("Placement
Agreement") with the Placement Agent. Under the Placement Agreement, the Placement Agent is also entitled to 3% of the aggregate
consideration raised pursuant to the exercise of any Warrants by Investors. If the Company enters into a binding agreement for
certain corporate transactions described in the Placement Agreement at any time during the term of the Agreement and for 2 years
thereafter with an entity introduced to the Company by the Placement Agent, the Placement Agent will be entitled to a 2% fee in
cash and 2% in Company common stock of the aggregate consideration of such transaction.
The
form of Warrant, Placement Agent Warrant, form of Subscription Agreement, form of Registration Rights Agreement and Placement Agreement
are filed herewith as exhibits 4.1, 4.2, 10.1 10.2 and 10.3, respectively. The foregoing summary descriptions of the Warrant, Placement
Agent Warrant, Subscription Agreement, Registration Rights Agreement and Placement Agreement are qualified in their entirety by
reference to the full texts of each such exhibit.
The Units, Common Stock,
Warrants and Common Stock issuable upon exercise of the Warrants (collectively, the "Securities") have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and were issued and sold in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
These Securities may not be offered or sold by the Investors in the United States in the absence of an effective registration statement
or an applicable exemption from registration requirements.
Item 9.01 Financial Statements and Exhibits.
Exhibit No.
Description
4.1
Form of Warrant
4.2
Placement Agent Warrant
10.1
Form of Subscription Agreement
10.2
Form of Registration Rights Agreement
10.3
Placement Agent Agreement  with Palladium Capital Advisors, LLC
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
DOCUMENT SECURITY SYSTEMS, INC.
Dated: February 13, 2012
By:
/s/ Patrick A. White
Patrick A. White
Chief Executive Officer
Exhibit Index
Exhibit No.
Description
4.1
Form of Warrant
4.2
Placement Agent Warrant
10.1
Form of Subscription Agreement
10.2
Form of Registration Rights Agreement
10.3
Placement Agent Agreement with Palladium Capital Advisors, LLC