NOTE 12 - COMMITMENTS AND CONTINGENCIES

Facilities - The Company's corporate offices and Digital division together occupy approximately 11,000 square feet of commercial office space at 28 East Main Street, Rochester, New York 14614 under a lease that expires in September 30, 2015, at a rental rate of approximately $13,000, $14,000 and $11,000 per month in 2013, 2014 and 2015, respectively. The Company's digital division also leases space at a data center in Rochester, New York for $5,567 per month that expires in July, 2014. In addition, as a result of it merger, the Company leases office space in New York, New York under a lease that expires in December 2014 for $3,000 per month. From May 2007 to December 2013, our Plastics division leased approximately 25,000 square feet of commercial production and warehouse space for an average of $23,000 per month in Brisbane, California under a lease that was set to expire in July 2014. Commencing January 1, 2014, the Plastics division amended its lease agreement to reduce the lease space to approximately 15,000 square feet for approximately $13,000 per month and extend the term to December 31, 2018. From December 2008 to December 2013, our Printing division leased approximately 20,000 square foot of commercial production and warehouse space in Rochester, New York, for $7,100 per month, under a lease that expired in January 2014. Commencing in January 2014, the Company moved its printing operations to a 40,000 square foot packaging plant in Victor, New York, a suburb of Rochester, New York, which the Company owns. The Company's DSS Technology Management division leases executive office space in Tysons Corner, Virginia under a 12 month lease that expires in July 2014 for approximately $3,780 per month, and also leases a sales and research and development facility in Tyler, Texas under a 12 month lease that expires in December 2014 for approximately $1,190 per month. The Company's subsidiary Bascom Research LLC leases shared office space in Mclean Virginia on a month to month basis at $1,370 per month.

Equipment Leases - From time to time, the Company leases certain production and office equipment, digital and offset presses, laminating and finishing equipment for its various printing operations. The leases may be capital leases or operating leases and are generally for a term of 36 to 60 months. The leases expire at various dates February 2017. As of December 31, 2013, the Company did not have any capital leases.

The following table summarizes the Company's lease commitments.

	Operating Leases
	Equipment		Facilities		Total

Payments made in 2013	$	130,686	$	633,072	$	763,758
Future minimum lease commitments:
2014		30,540		457,851		488,391
2015		16,907		292,450		309,357
2016		5,241		164,183		169,424
2017		874		169,109		169,983
2018		-		174,182		174,182
Total future minimum lease commitments	$	53,562	$	1,257,775	$	1,311,337

Employment Agreements - The Company has employment agreements with nine members of its management team with terms ranging from one to 5 years through November 2015. The agreements provide for severance payments in the event of termination for certain causes. As of December 31, 2013, the minimum annual severance payments under these employment agreements are, in aggregate, approximately $1,382,000.

Related Party Consulting Payments - During 2013 and 2012, the Company paid consulting fees of approximately $188,000 and $54,000, respectively, to Patrick White, its former CEO, under a consulting agreement and expects to pay an aggregate amount of approximately $175,000 in future monthly payments through the expiration of the agreement in March 2015.

Contingent Litigation Payments - The Company retains the services of professional service providers, including law firms that specialize in intellectual property licensing, enforcement and patent law. These service providers are often retained on an hourly, monthly, project, contingent or a blended fee basis. In contingency fee arrangements, a portion of the legal fee is based on predetermined milestones or the Company's actual collection of funds. The Company accrues contingent fees when it is probable that the milestones will be achieved and the fees can be reasonably estimated. As of December 31, 2013, the Company has not accrued any contingent legal fees pursuant to these arrangements.

Legal Proceedings - From August 2005 until May 2013, the Company was involved in lawsuits in various foreign jurisdictions against the European Central Bank ("ECB") alleging patent infringement by the ECB and claimed unspecified damages (the "ECB Litigation"). The Company brought the suit in the European Court of First Instance in Luxembourg. The Company alleged that all Euro banknotes in circulation infringed the Company's European Patent 0 455 750B1 (the "Patent") which covered a method of incorporating an anti-counterfeiting feature into banknotes or similar security documents to protect against forgeries by digital scanning and copying devices. The ECB then filed claims against the Company in eight European countries seeking to invalidate the patents. During the course of the ECB Litigation, the losing party, in certain jurisdictions, was responsible for the prevailing party's legal fees and disbursements. As of December 31, 2013, pursuant to foreign judgments for costs and fees, the Company has recorded as accrued liabilities approximately €175,000 ($241,000) for such fees. In addition, the ECB formally requested the Company to pay attorneys and court fees for the Court of First Instance case in Luxembourg which amounts to €93,752 ($127,000) as of December 31, 2013, which, unless the amount is settled, will be subject to an assessment procedure that has not been initiated. The Company will accrue the assessed amount, if any, as soon as it is reasonably estimable.

On August 20, 2008, the Company entered into an agreement (the "Trebuchet Agreement") with Trebuchet Capital Partners, LLC ("Trebuchet") under which Trebuchet agreed to pay substantially all of the litigation costs associated with validity proceedings in eight European countries relating to the ECB Litigation, and the Company provided Trebuchet with the sole and exclusive right to manage infringement litigation relating to the Patent in Europe, including the right to initiate litigation in the name of the Company, Trebuchet or both, and to choose whom and where to sue, subject to certain limitations set forth in the Trebuchet Agreement. On February 18, 2010, Trebuchet, on behalf of the Company, filed an infringement suit in The Netherlands against the ECB and two security printing entities with manufacturing operations in The Netherlands. The Netherlands Court determined in December 2010 that the patent was invalid in The Netherlands, and the infringement case was terminated by Trebuchet. Trebuchet was responsible for cost and fee reimbursements associated with the case which Trebuchet paid in February 2012. On July 7, 2011, Trebuchet and the Company entered into a series of related agreements and general releases wherein Trebuchet effectively ended its ongoing participation in the ECB Litigation.

On October 24, 2011 the Company initiated a law suit against Coupons.com Incorporated ("Coupons.com"). The suit was filed in the United States District Court, Western District of New York, located in Rochester, New York. Coupons.com is a Delaware corporation having its principal place of business located in Mountain View, California. In the Coupons.com suit, the Company alleged breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment, and is seeking in excess of $10 million in money damages from Coupons.com for those claims. The Company's breach of contract claim remains intact as of the date of this report.

On October 3, 2012, DSS Technology Management's subsidiary, Bascom Research, LLC, commenced legal proceedings against five companies, including Facebook, Inc. and LinkedIn Corporation, pursuant to which Bascom Research, LLC alleges that such companies infringe on one or more of its patents. The Company anticipates that these legal proceedings may continue for several years and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, the Company may be forced to litigate against others to enforce or defend Bascom Research's intellectual property rights or to determine the validity and scope of other parties' proprietary rights. The defendants or other third parties involved in the lawsuits in which the Company is involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may have a material adverse effect on the value of the patents and preclude the Company's ability to derive licensing revenue from the patents, or any revenue.

The Company estimates that its legal fees and expenses to pursue the Bascom case to trial will be approximately $2,000,000. This estimate depends on several variables, including the cost of retaining experts, actions taken by defendants in the litigation, and any potential proceedings with the USPTO. Expenses thereafter are dependent on the outcome of the litigation; in the event the case is appealed, legal fees and expenses through appeal over the course of the subsequent twelve months could range from $250,000 to over $750,000. The Company expects it will receive between 45% to 60% of the total consideration (including cash payments, equity, assets, or any other form of consideration) received from any license, settlement, judgment or other award relating to the Bascom Research patents, depending on the total amount of consideration earned and the stage of the case in which consideration is earned.

On November 26, 2013, DSS Technology Management filed suit against Apple, Inc., in the United States District Court for the Eastern District of Texas, for patent infringement (the "Apple Litigation"). The Apple Litigation relates to certain patents owned by DSS Technology Management in the Bluetooth technology space. Counsel retained by DSS Technology Management in connection with the Apple Litigation has agreed to handle the litigation on a contingent fee basis. The fee agreement with counsel calls for counsel to receive 25% of any licensing proceeds, and 33% - 38% of any litigation proceeds recovered, depending on size of recovery. DSS Technology Management is responsible to pay for up to $1,000,000 of expenses incurred in connection with the Apple Litigation. Expenses incurred over $1,000,000 will be advanced by counsel, and recoverable from proceeds obtained from the Apple Litigation.

In addition to the foregoing, we are subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance in this regard, in the opinion of management, none of the legal proceedings to which we are a party, whether discussed herein or otherwise, will have a material adverse effect on our results of operations, cash flows or our financial condition.