10-Q 1 form10-q.htm
false Q1 --12-31 0000771999 P1Y 0000771999 2024-01-01 2024-03-31 0000771999 2024-05-03 0000771999 2024-03-31 0000771999 2023-12-31 0000771999 2023-01-01 2023-03-31 0000771999 DSS:PrintedProductsMember 2024-01-01 2024-03-31 0000771999 DSS:PrintedProductsMember 2023-01-01 2023-03-31 0000771999 DSS:RentalIncomeMember 2024-01-01 2024-03-31 0000771999 DSS:RentalIncomeMember 2023-01-01 2023-03-31 0000771999 DSS:NetInvestmentIncomeMember 2024-01-01 2024-03-31 0000771999 DSS:NetInvestmentIncomeMember 2023-01-01 2023-03-31 0000771999 DSS:DirectMarketingMember 2024-01-01 2024-03-31 0000771999 DSS:DirectMarketingMember 2023-01-01 2023-03-31 0000771999 DSS:CommissionRevenueMember 2024-01-01 2024-03-31 0000771999 DSS:CommissionRevenueMember 2023-01-01 2023-03-31 0000771999 2022-12-31 0000771999 2023-03-31 0000771999 us-gaap:CommonStockMember 2022-12-31 0000771999 us-gaap:PreferredStockMember 2022-12-31 0000771999 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0000771999 us-gaap:RetainedEarningsMember 2022-12-31 0000771999 us-gaap:ParentMember 2022-12-31 0000771999 us-gaap:NoncontrollingInterestMember 2022-12-31 0000771999 us-gaap:CommonStockMember 2023-12-31 0000771999 us-gaap:PreferredStockMember 2023-12-31 0000771999 us-gaap:AdditionalPaidInCapitalMember 2023-12-31 0000771999 us-gaap:RetainedEarningsMember 2023-12-31 0000771999 us-gaap:ParentMember 2023-12-31 0000771999 us-gaap:NoncontrollingInterestMember 2023-12-31 0000771999 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0000771999 us-gaap:PreferredStockMember 2023-01-01 2023-03-31 0000771999 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0000771999 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0000771999 us-gaap:ParentMember 2023-01-01 2023-03-31 0000771999 us-gaap:NoncontrollingInterestMember 2023-01-01 2023-03-31 0000771999 us-gaap:CommonStockMember 2024-01-01 2024-03-31 0000771999 us-gaap:PreferredStockMember 2024-01-01 2024-03-31 0000771999 us-gaap:AdditionalPaidInCapitalMember 2024-01-01 2024-03-31 0000771999 us-gaap:RetainedEarningsMember 2024-01-01 2024-03-31 0000771999 us-gaap:ParentMember 2024-01-01 2024-03-31 0000771999 us-gaap:NoncontrollingInterestMember 2024-01-01 2024-03-31 0000771999 us-gaap:CommonStockMember 2023-03-31 0000771999 us-gaap:PreferredStockMember 2023-03-31 0000771999 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0000771999 us-gaap:RetainedEarningsMember 2023-03-31 0000771999 us-gaap:ParentMember 2023-03-31 0000771999 us-gaap:NoncontrollingInterestMember 2023-03-31 0000771999 us-gaap:CommonStockMember 2024-03-31 0000771999 us-gaap:PreferredStockMember 2024-03-31 0000771999 us-gaap:AdditionalPaidInCapitalMember 2024-03-31 0000771999 us-gaap:RetainedEarningsMember 2024-03-31 0000771999 us-gaap:ParentMember 2024-03-31 0000771999 us-gaap:NoncontrollingInterestMember 2024-03-31 0000771999 DSS:SharingServicesGlobalCorpMember 2023-05-04 2023-05-04 0000771999 DSS:SharingServicesGlobalCorpMember 2023-05-04 0000771999 2023-05-04 2023-05-04 0000771999 DSS:CustomerOneMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2024-01-01 2024-03-31 0000771999 DSS:CustomerOneMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2024-01-01 2024-03-31 0000771999 DSS:CustomerOneMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0000771999 DSS:CustomerTwoMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0000771999 DSS:CustomerOneMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0000771999 DSS:CustomerTwoMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0000771999 DSS:VendorOneMember us-gaap:CostOfGoodsProductLineMember us-gaap:CustomerConcentrationRiskMember 2024-01-01 2024-03-31 0000771999 DSS:VendorOneMember us-gaap:CostOfGoodsProductLineMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-03-31 0000771999 DSS:PremierSubsidiaryMember 2024-03-31 0000771999 DSS:PremierSubsidiaryMember 2023-12-31 0000771999 stpr:UT 2024-03-31 0000771999 DSS:AMRELifeCarePortfolioLLCMember 2024-03-31 0000771999 DSS:AMREWinterHavenLLCMember 2024-03-31 0000771999 2023-01-01 2023-12-31 0000771999 DSS:PremierPackagingCorpMember 2024-03-31 0000771999 DSS:ImpactBioMedicalMember 2024-03-31 0000771999 DSS:AmericanPacificBancorpMember 2023-12-31 0000771999 DSS:SentinelBrokersCompanyIncMember 2023-12-31 0000771999 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-03-31 0000771999 us-gaap:EmployeeStockOptionMember 2024-01-01 2024-03-31 0000771999 DSS:NoteOneMember 2021-05-14 0000771999 DSS:NoteOneMember 2021-05-14 2021-05-14 0000771999 DSS:NoteOneMember 2024-03-31 0000771999 DSS:NoteOneMember 2023-12-31 0000771999 DSS:NoteTwoMember 2021-09-23 0000771999 DSS:NoteTwoMember 2023-12-31 0000771999 DSS:NoteThreeMember srt:MaximumMember 2021-10-25 0000771999 DSS:NoteThreeMember 2021-10-25 0000771999 DSS:NoteThreeMember 2021-10-24 2021-10-25 0000771999 DSS:NoteThreeMember 2022-12-31 0000771999 DSS:NoteFourMember 2021-12-28 0000771999 DSS:NoteFourMember 2021-12-28 2021-12-28 0000771999 DSS:NoteFourMember 2022-12-29 2022-12-29 0000771999 DSS:NoteFourMember 2023-11-27 0000771999 DSS:NoteFourMember 2024-03-31 0000771999 DSS:NoteFourMember 2023-12-31 0000771999 DSS:NoteFiveMember 2022-01-24 0000771999 DSS:NoteFiveMember 2022-01-23 2022-01-24 0000771999 DSS:NoteFiveMember 2024-03-31 0000771999 DSS:NoteFiveMember 2023-12-31 0000771999 DSS:NoteSixMember 2022-03-02 0000771999 DSS:NoteSixMember 2022-03-02 2022-03-02 0000771999 DSS:NoteSixMember 2024-03-31 0000771999 DSS:NoteSixMember 2023-12-31 0000771999 DSS:NoteSixMember 2024-01-01 2024-03-31 0000771999 DSS:NoteSixMember 2023-01-01 2023-12-31 0000771999 DSS:NoteSevenMember 2022-05-09 0000771999 DSS:NoteSevenMember 2022-05-09 2022-05-09 0000771999 DSS:NoteSevenMember 2024-03-31 0000771999 DSS:NoteSevenMember 2023-12-31 0000771999 DSS:NoteEightMember 2022-08-29 0000771999 DSS:NoteEightMember 2022-08-28 2022-08-29 0000771999 DSS:NoteEightMember 2024-03-31 0000771999 DSS:NoteEightMember 2023-12-31 0000771999 DSS:NoteEightMember DSS:DSSFinancialManagementIncMember 2024-03-31 0000771999 DSS:NoteNineMember 2023-05-08 0000771999 DSS:NoteNineMember 2024-03-31 0000771999 DSS:NoteNineMember 2023-12-31 0000771999 DSS:NoteNineMember 2023-05-08 2023-05-08 0000771999 DSS:NoteTenMember 2022-07-26 0000771999 DSS:NoteTenMember 2022-07-25 2022-07-26 0000771999 DSS:NoteTenMember 2024-03-31 0000771999 DSS:NoteTenMember 2024-01-01 2024-03-31 0000771999 DSS:NoteTenMember 2023-12-31 0000771999 DSS:NoteTenMember 2023-01-01 2023-12-31 0000771999 DSS:NoteElevenMember 2021-02-19 0000771999 DSS:NoteElevenMember 2021-02-19 2021-02-19 0000771999 DSS:NoteElevenMember 2023-12-31 0000771999 DSS:NoteTwelveMember 2023-06-27 0000771999 DSS:NoteTwelveMember 2023-06-27 2023-06-27 0000771999 DSS:NoteThirteenMember 2023-03-31 0000771999 DSS:NoteThirteenMember 2023-12-31 0000771999 DSS:NoteThirteenMember 2023-03-31 2023-03-31 0000771999 DSS:NoteThirteenMember 2024-03-31 0000771999 us-gaap:CashMember 2024-01-01 2024-03-31 0000771999 us-gaap:CashMember 2024-03-31 0000771999 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2024-01-01 2024-03-31 0000771999 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2024-03-31 0000771999 DSS:MarketableSecuritiesMember us-gaap:FairValueInputsLevel1Member 2024-01-01 2024-03-31 0000771999 DSS:MarketableSecuritiesMember us-gaap:FairValueInputsLevel1Member 2024-03-31 0000771999 us-gaap:CashMember 2023-01-01 2023-12-31 0000771999 us-gaap:CashMember 2023-12-31 0000771999 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2023-01-01 2023-12-31 0000771999 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2023-12-31 0000771999 DSS:MarketableSecuritiesMember us-gaap:FairValueInputsLevel1Member 2023-01-01 2023-12-31 0000771999 DSS:MarketableSecuritiesMember us-gaap:FairValueInputsLevel1Member 2023-12-31 0000771999 DSS:LoanMember 2024-01-01 2024-03-31 0000771999 DSS:LoanMember 2023-01-01 2023-03-31 0000771999 DSS:GeneralLoanPortfolioReserveMember DSS:AmericanPacificBancorpMember 2024-01-01 2024-03-31 0000771999 DSS:GeneralLoanPortfolioReserveMember DSS:AmericanPacificBancorpMember 2023-01-01 2023-12-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerThreeMember 2023-01-01 2023-12-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerThreeMember 2024-01-01 2024-03-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerOneMember 2023-12-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerOneMember 2024-03-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerTwelveMember 2023-12-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerTwelveMember 2024-03-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerTenMember 2024-03-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerThirteenMember 2024-03-31 0000771999 DSS:SpecificLoanReservesMember DSS:BorrowerEightMember 2024-03-31 0000771999 DSS:HWHWorldIncMember DSS:SharingServicesGlobalCorporationMember 2023-07-01 2023-07-01 0000771999 DSS:SharingServicesGlobalCorporationMember DSS:AmendedAgreementMember 2023-07-01 2023-07-01 0000771999 DSS:SharingServicesGlobalCorporationMember DSS:AmendedAgreementMember 2024-01-01 2024-03-31 0000771999 DSS:HWHWorldIncMember 2023-07-01 0000771999 DSS:HWHWorldIncMember 2023-07-01 2023-07-01 0000771999 DSS:AlsetInternationalLimitedMember 2024-03-31 0000771999 DSS:AlsetInternationalLimitedMember 2024-01-01 2024-03-31 0000771999 DSS:AlsetInternationalLimitedMember 2023-12-31 0000771999 DSS:AlsetInternationalLimitedMember 2023-01-01 2023-03-31 0000771999 DSS:WestParkCapitalIncMember 2020-12-30 2020-12-30 0000771999 DSS:WestParkCapitalIncMember 2023-12-31 0000771999 DSS:WestParkCapitalIncMember 2024-03-31 0000771999 DSS:DSSSecuritiesIncMember 2020-09-10 0000771999 DSS:DSSSecuritiesIncMember 2020-09-09 2020-09-10 0000771999 DSS:BMICapitalInternationalLLCMember 2020-09-09 2020-09-10 0000771999 DSS:BMICapitalInternationalLLCMember 2020-09-10 0000771999 DSS:BMICapitalInternationalLLCMember 2024-01-01 2024-03-31 0000771999 DSS:BMICapitalInternationalLLCMember 2023-01-01 2023-03-31 0000771999 DSS:BioMedTechnologiesAsiaPacificHoldingsLimitedMember 2020-12-18 2020-12-19 0000771999 DSS:BioMedTechnologiesAsiaPacificHoldingsLimitedMember 2020-12-19 0000771999 DSS:PremierPackagingBankOfAmericaNAMember 2021-05-20 0000771999 DSS:PremierPackagingBankOfAmericaNAMember 2024-03-31 0000771999 DSS:PremierPackagingBankOfAmericaNAMember 2023-12-31 0000771999 DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2021-08-01 0000771999 DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2021-07-29 2021-08-01 0000771999 DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2022-12-31 0000771999 DSS:FacilityMember DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2021-07-29 2021-08-01 0000771999 us-gaap:LandMember DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2021-07-29 2021-08-01 0000771999 DSS:TenantImprovementsMember DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2021-07-29 2021-08-01 0000771999 us-gaap:OtherIntangibleAssetsMember DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2021-08-01 0000771999 DSS:LoanAgreementMember DSS:AMRESheltonLLCMember 2024-03-31 0000771999 DSS:BMICLoanMember 2021-10-13 0000771999 DSS:BMICLoanMember 2021-10-13 2021-10-13 0000771999 DSS:BMICLoanMember 2024-03-31 0000771999 DSS:BMICLoanMember 2023-12-31 0000771999 DSS:WilsonLoanMember 2021-10-13 0000771999 DSS:WilsonLoanMember 2021-10-13 2021-10-13 0000771999 DSS:WilsonLoanMember 2024-03-31 0000771999 DSS:WilsonLoanMember 2023-12-31 0000771999 DSS:PinnacleBankMember DSS:LifeCareAgreementMember 2021-11-02 0000771999 DSS:PinnacleBankMember DSS:LifeCareAgreementMember 2021-11-01 2021-11-02 0000771999 DSS:FacilityMember DSS:LifeCareAgreementMember DSS:PinnacleBankMember 2021-11-01 2021-11-02 0000771999 us-gaap:LandMember DSS:LifeCareAgreementMember DSS:PinnacleBankMember 2021-11-01 2021-11-02 0000771999 DSS:SiteImprovementsMember DSS:LifeCareAgreementMember DSS:PinnacleBankMember 2021-11-01 2021-11-02 0000771999 DSS:LifeCareAgreementMember DSS:PinnacleBankMember srt:MinimumMember 2021-11-02 0000771999 DSS:LifeCareAgreementMember DSS:PinnacleBankMember srt:MaximumMember 2021-11-02 0000771999 DSS:LifeCareAgreementMember DSS:PinnacleBankMember 2024-03-31 0000771999 DSS:PinnacleBankMember DSS:LifeCareAgreementMember 2022-07-29 0000771999 DSS:PinnacleBankMember DSS:LifeCareAgreementMember 2023-12-31 0000771999 DSS:PinnacleBankMember DSS:LifeCareAgreementMember 2024-01-01 2024-03-31 0000771999 DSS:PinnacleBankMember DSS:LifeCareAgreementMember 2023-01-01 2023-03-31 0000771999 DSS:PinnacleLoanMember 2022-03-17 0000771999 DSS:PinnacleLoanMember 2022-03-16 2022-03-17 0000771999 DSS:FacilityMember DSS:PinnacleLoanMember 2022-03-16 2022-03-17 0000771999 us-gaap:LandMember DSS:PinnacleLoanMember 2022-03-16 2022-03-17 0000771999 DSS:SiteAndTenantImprovementsMember DSS:PinnacleLoanMember 2022-03-16 2022-03-17 0000771999 DSS:PinnacleLoanMember 2024-03-31 0000771999 DSS:PinnacleLoanMember 2023-12-31 0000771999 DSS:PinnacleLoanMember 2024-01-01 2024-03-31 0000771999 DSS:PinnacleLoanMember 2023-01-01 2023-03-31 0000771999 DSS:SecurityAgreementMember 2023-03-30 0000771999 DSS:SecurityAgreementMember DSS:UnionBankAndTrustCompanyMember 2023-03-30 0000771999 DSS:SecurityAgreementMember 2023-03-30 2023-03-30 0000771999 DSS:SecurityAgreementMember 2024-03-31 0000771999 DSS:SecurityAgreementMember 2023-12-31 0000771999 DSS:SecurityAgreementMember 2024-01-01 2024-03-31 0000771999 DSS:SecurityAgreementMember 2023-01-01 2023-03-31 0000771999 srt:MinimumMember 2024-03-31 0000771999 srt:MaximumMember 2024-03-31 0000771999 DSS:LicenseAgreementMember DSS:BioMedicalMember 2022-03-18 2022-03-19 0000771999 DSS:LicenseAgreementMember 2022-03-19 2022-03-19 0000771999 DSS:LicenseAgreementMember DSS:EquivirLicenseMember 2024-03-31 0000771999 DSS:LicenseAgreementMember DSS:EquivirLicenseMember 2023-12-31 0000771999 DSS:FrankHeuszelMember DSS:EmploymentAgreementMember 2023-04-10 2023-04-10 0000771999 2024-01-04 2024-01-04 0000771999 us-gaap:ConvertibleCommonStockMember 2023-12-31 0000771999 us-gaap:ConvertibleCommonStockMember 2023-01-01 2023-12-31 0000771999 2023-05-09 2023-05-10 0000771999 us-gaap:OperatingSegmentsMember DSS:ProductPackagingMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:CommercialBankingMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:DirectMarketingOnlineSalesMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:BiotechnologyMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:SecuritiesMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember us-gaap:CorporateMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember 2024-01-01 2024-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:ProductPackagingMember 2023-01-01 2023-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:CommercialBankingMember 2023-01-01 2023-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:DirectMarketingOnlineSalesMember 2023-01-01 2023-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:BiotechnologyMember 2023-01-01 2023-03-31 0000771999 us-gaap:OperatingSegmentsMember DSS:SecuritiesMember 2023-01-01 2023-03-31 0000771999 us-gaap:OperatingSegmentsMember us-gaap:CorporateMember 2023-01-01 2023-03-31 0000771999 us-gaap:OperatingSegmentsMember 2023-01-01 2023-03-31 0000771999 DSS:PackagingPrintingandFabricationMember DSS:PrintedProductsMember 2024-01-01 2024-03-31 0000771999 DSS:CommercialandSecurityPrintingMember DSS:PrintedProductsMember 2024-01-01 2024-03-31 0000771999 DSS:PackagingPrintingandFabricationMember DSS:PrintedProductsMember 2023-01-01 2023-03-31 0000771999 DSS:CommercialandSecurityPrintingMember DSS:PrintedProductsMember 2023-01-01 2023-03-31 0000771999 DSS:DirectMarketingInternetSalesMember DSS:DirectMarketingMember 2024-01-01 2024-03-31 0000771999 DSS:DirectMarketingInternetSalesMember DSS:DirectMarketingMember 2023-01-01 2023-03-31 0000771999 DSS:RentalIncomeMember DSS:RentalRevenueIncomeMember 2024-01-01 2024-03-31 0000771999 DSS:RentalRevenueIncomeMember 2024-01-01 2024-03-31 0000771999 DSS:RentalIncomeMember DSS:RentalRevenueIncomeMember 2023-01-01 2023-03-31 0000771999 DSS:RentalRevenueIncomeMember 2023-01-01 2023-03-31 0000771999 DSS:CommissionIncomeMember DSS:CommissionRevenueMember 2024-01-01 2024-03-31 0000771999 DSS:CommissionIncomeMember DSS:CommissionRevenueMember 2023-01-01 2023-03-31 0000771999 DSS:NetInvestmentIncomeMember DSS:NetInvestmentRevenueIncomeMember 2024-01-01 2024-03-31 0000771999 DSS:NetInvestmentRevenueIncomeMember 2024-01-01 2024-03-31 0000771999 DSS:NetInvestmentIncomeMember DSS:NetInvestmentRevenueIncomeMember 2023-01-01 2023-03-31 0000771999 DSS:NetInvestmentRevenueIncomeMember 2023-01-01 2023-03-31 0000771999 DSS:NoteNineMember DSS:DSSFinancialManagementIncMember 2024-03-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares utr:acre DSS:Segments utr:sqft xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

001-32146

Commission file number

 

 

DSS, INC.
(Exact name of registrant as specified in its charter)

 

New York   16-1229730

(State or other Jurisdiction of

incorporation- or Organization)

 

(IRS Employer

Identification No.)

 

275 Wiregrass Pkwy,

West Henrietta, NY 14586

 

(Address of principal executive offices)

 

(585) 325-3610

 

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer Smaller reporting company
Emerging growth company      

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which registered
Common Stock, $0.02 par value per share   DSS   The NYSE American LLC

 

As of May 3, 2024 there were 7,066,772 shares of the registrant’s common stock, $0.02 par value, outstanding.

 

 

 

 
 

 

DSS, INC.

FORM 10-Q

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION 3
Item 1 Condensed Consolidated Financial Statements (Unaudited) 3
  Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 3
  Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 4
  Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 5
  Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023 6
  Notes to Interim Condensed Consolidated Financial Statements 7
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
Item 4 Controls and Procedures 33
     
PART II OTHER INFORMATION 34
Item 1 Legal Proceedings 34
Item 1A Risk Factors 34
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 34
Item 3 Defaults upon Senior Securities 34
Item 4 Mine Safety Disclosures 34
Item 5 Other Information 34
Item 6 Exhibits 34

 

2

 

 

PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

  

March 31, 2024

(unaudited)

   December 31, 2023 
ASSETS          
Current assets:          
Cash and cash equivalents  $9,252,000   $6,615,000 
Accounts receivable, net   2,863,000    3,994,000 
Inventory   3,627,000    2,819,000 
Assets held for sale   51,624,000    51,595,000 
Current portion of notes receivable   4,062,000    8,772,000 
Prepaid expenses and other current assets   736,000    839,000 
Total current assets   72,164,000    74,634,000 
           
Property, plant and equipment, net   6,225,000    6,417,000 
Investment in real estate, net   6,252,000    6,279,000 
Other investments   1,282,000    1,282,000 
Investment, equity method   127,000    128,000 
Marketable securities   8,483,000    9,979,000 
Notes receivable   87,000    111,000 
Other assets   133,000    97,000 
Right-of-use assets   7,026,000    7,210,000 
Goodwill   26,862,000    26,862,000 
Other intangible assets, net   19,859,000    20,193,000 
Total assets  $148,500,000   $153,192,000 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current liabilities:          
Accounts payable  $4,084,000   $3,654,000 
Accrued expenses and deferred revenue   3,004,000    2,512,000 
Other current liabilities   932,000    983,000 
Current portion of lease liability   684,000    686,000 
Current portion of long-term debt, net   47,509,000    47,776,000 
Total current liabilities   56,213,000    55,611,000 
           
Long-term debt, net   7,431,000    7,451,000 
Long term lease liability   6,752,000    6,917,000 
           
Commitments and contingencies (Note 11)   -     -  
           
Stockholders’ equity          
Preferred stock, $0.02 par value; 47,000 shares authorized, zero shares issued and outstanding (zero on December 31, 2023); Liquidation value $1,000 per share, zero aggregate. zero on December 31, 2023).   -    - 
Common stock, $0.02 par value; 200,000,000 shares authorized, 7,066,772 shares issued and outstanding (7,066,772 on December 31, 2023)   140,000    140,000 
Additional paid-in capital   319,963,000    319,963,000 
Accumulated deficit   (260,248,000)   (256,176,000)
Total DSS stockholders’ equity   59,855,000    63,927,000 
Non-controlling interest in subsidiaries   18,249,000    19,286,000 
Total stockholders’ equity   78,104,000    83,213,000 
           
Total liabilities and stockholders’ equity  $148,500,000   $153,192,000 

 

See accompanying notes to the condensed consolidated financial statements.

 

3

 

 

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

 

           
   For the Three Months Ended
March 31,
 
   2024   2023 
Revenue:          
Printed products  $3,073,000   $6,130,000 
Rental income   400,000    1,685,000 
Net investment income   95,000    117,000 
Direct marketing   -    3,994,000 
Commission revenue   303,000    - 
Total revenue   3,871,000    11,926,000 
           
Costs and expenses:          
Cost of revenue   4,990,000    8,533,000 
Selling, general and administrative   3,561,000    8,973,000 
Total costs and expenses   8,551,000    17,506,000 
           
Operating loss   (4,680,000)   (5,580,000)
           
Other income (expense):          
Interest income   107,000    130,000 
Dividend income   -    4,000 
Other income (expense)   21,000    (65,000)
Interest expense   (48,000)   (249,000)
Loss on equity method investment   (1,000)   (4,000)
Loss on investments   (189,000)   (2,869,000)
Provision for loan losses   (294,000)   - 
Loss from operations before income taxes   (5,084,000)   (8,633,000)
           
Income tax loss   (25,000)   - 
           
Net loss  $(5,109,000)  $(8,633,000)
           
Loss from operations attributed to noncontrolling interest   1,037,000    598,000 
           
Net loss attributable to DSS common stockholders  $(4,072,000)  $(8,035,000)
           
Loss per common share:          
Basic  $(0.58)  $(1.16)
Diluted  $(0.58)  $(1.16)
           
Shares used in computing loss per common share:          
Basic   7,066,772    6,950,858 
Diluted   7,066,772    6,950,858 

 

See accompanying notes to the condensed consolidated financial statements.

 

4

 

 

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

(unaudited)

 

   2024   2023 
Cash flows from operating activities:          
Loss from continuing operations  $(5,109,000)  $(8,633,000)
Adjustments to reconcile loss from continuing operations to net cash used by operating activities:          
Depreciation and amortization   582,000    1,333,000 
Loss on equity method investment   1,000    - 
Loss on investments   189,000    2,869,000 
Change in ROU assets   184,000    16,000 

Provision for loan losses

   763,000    - 
Decrease (increase) in assets:          
Accounts receivable   1,347,000    608,000 
Inventory   (808,000)   459,000 
Prepaid expenses and other current assets   36,000    (383,000)
Other assets   (36,000)   (55,000)
Increase (decrease) in liabilities:          
Accounts payable   430,000    (819,000)
Accrued expenses   489,000    (9,551,000)
Change in ROU liabilities   (167,000)   (43,000)
Other liabilities   (51,000)   - 
Net cash used by operating activities   (2,150,000)   (14,199,000)
           
Cash flows from investing activities:          
Purchase of property, plant and equipment   (3,000)   (594,000)
Purchase of investment   (31,000)   - 
Disposal of property, plant and equipment   -    32,000 
Change in equity investment   -    5,000 
Sale of marketable securities   1,160,000    11,330,000 
Payments received on notes receivable   3,971,000    764,000 
Net cash provided by investing activities   5,097,000    11,537,000 
           
Cash flows from financing activities:          
Payments of long-term debt   (1,062,000)   (4,002,000)
Borrowings of long-term debt   752,000    1,106,000 
Net cash used by financing activities   (310,000)   (2,896,000)
           
Net increase (decrease) in cash   2,637,000    (5,558,000)
Cash and cash equivalents at beginning of period   6,615,000    19,290,000 
           
Cash and cash equivalents at end of period  $9,252,000   $13,732,000 

 

See accompanying notes to the condensed consolidated financial statements.

 

5

 

 

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

                                  -           
   Common Stock   Preferred Stock   Additional Paid-in   Accumulated   Total DSS   Non- controlling Interest in     
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity   Subsidiary   Total 
                                     
Balance, December 31, 2022   6,950,858   $139,000           -   $          -   $319,766,000   $(194,343,000)  $125,562,000   $31,119,000   $156,681,000 
                                  -           
Net loss   -    -    -    -    -    (8,035,000)   (8,035,000)   (598,000)   (8,633,000)
Balance, March 31, 2023   6,950,858   $139,000    -   $-   $319,766,000   $(202,378,000)  $117,527,000   $30,521,000   $148,048,000 
                                              
Balance, December 31, 2023   7,066,772   $140,000    -   $-   $319,963,000   $(256,176,000)  $63,927,000   $19,286,000   $83,213,000 
                                              
Net loss   -    -    -    -    -    (4,072,000)   (4,072,000)   (1,037,000)   (5,109,000)
Balance, March 31, 2024   7,066,772   $140,000    -   $-   $319,963,000   $(260,248,000)  $59,855,000   $18,249,000   $78,104,000 

 

See accompanying notes to the condensed consolidated financial statements.

 

6

 

 

DSS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

(Unaudited)

 

1. Basis of Presentation and Significant Accounting Policies

 

The Company, incorporated in the state of New York in May 1984 has conducted business in the name of DSS, Inc. On September 16, 2021, the board of directors approved an agreement and plan of merger with a wholly owned subsidiary, DSS, Inc. (a New York corporation, incorporated in August 2020), for the sole purpose of effecting a name change from Document Security Systems, Inc. to DSS, Inc. This change became effective on September 30, 2021. DSS, Inc. maintained the same trading symbol “DSS”.

 

DSS, Inc. (together with its consolidated subsidiaries, referred to herein as “DSS,” “we,” “us,” “our” or the “Company”), currently operates nine (9) distinct business lines with operations and locations around the globe. These business lines are: (1) Product Packaging, (2) Biotechnology, (3) Direct, (4) Commercial Lending, (5) Securities and Investment Management, (6) Alternative Trading (7) Digital Transformation (discontinued in 2023), (8) Secure Living (discontinued in 2023), and (9) Alternative Energy (discontinued in 2023). Each of these business lines are in different stages of development, growth, and income generation. 

 

Our divisions, their business lines, subsidiaries, and operating territories: (1) Our Product Packaging line is led by Premier Packaging Corporation, Inc. (“Premier”), a New York corporation. Premier operates in the paper board and fiber based folding carton, consumer product packaging, and document security printing markets. It markets, manufactures, and sells sophisticated custom folding cartons, mailers, photo sleeves and complex 3-dimensional direct mail solutions. Premier is currently located in its new facility in Rochester, NY, and primarily serves the US market. (2) The Biotechnology business line was created to invest in or acquire companies in the BioHealth and BioMedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related diseases. This division is also targeting unmet, urgent medical needs, and is developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza. (3) Direct Marketing, led by the holding corporation, Decentralized Sharing Systems, Inc. (“Decentralized”) provides services to assist companies in the emerging growth “Gig” business model of peer-to-peer decentralized sharing marketplaces. Direct Marketing’s products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific, Middle East, and Eastern Europe. (4) Our Commercial Lending business division, driven by American Pacific Bancorp (“APB”), is organized for the purposes of being a financial network holding company, focused on acquiring equity positions in (i) undervalued commercial bank(s), bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services, mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC (special purpose acquisition company) consulting services, and advisory capital raising services. (5) Securities and Investment Management was established to develop and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, broker dealers, and mutual funds management. Also in this segment is the Company’s real estate investment trusts (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. the REIT was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. (6) Alternative Trading was established to develop and/or acquire assets and investments in the securities trading and/or funds management arena. Alternative Trading, in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility tokens, and cryptocurrency via an alternative trading platform using blockchain technology. The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency, and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s). (7) Digital Transformation was established to be a Preferred Technology Partner and Application Development Solution for mid cap brands in various industries including the direct selling and affiliate marketing sector. Digital improves marketing, communications and operations processes with custom software development and implementation (discontinued in 2023). (8) The Secure Living division has developed a plan for fully sustainable, secure, connected, and healthy living communities with homes incorporating advanced technology, energy efficiency, and quality of life living environments both for new construction and renovations for single and multi-family residential housing (discontinued in 2023). (9) The Alternative Energy group was established to help lead the Company’s future in the clean energy business that focuses on environmentally responsible and sustainable measures. Alset Energy, Inc, the holding company for this group, and its wholly owned subsidiary, Alset Solar, Inc., pursue utility-scale solar farms to serve US regional power grids and to provide underutilized properties with small microgrids for independent energy (discontinued in 2023).

 

7

 

 

The accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments, unless otherwise indicated) necessary to present fairly our consolidated financial position as of March 31, 2024 and December 31, 2023, and the results of our consolidated operations for the interim periods presented. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K, for the fiscal year ended December 31, 2023 (“Form 10-K”), and our other reports on file with the Securities and Exchange Commission (the “SEC”).

 

Principles of Consolidation - The consolidated financial statements include the accounts of DSS, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

 

Deconsolidation of Sharing Services Global Corporation(“SHRG”) - On May 4, 2023, the Company distributed approximately 280 million shares of SHRG beneficially held by DSS and Decentralized Sharing Systems in the form of a dividend to the shareholders of DSS common stock. Upon completion of this distribution, DSS will retain an ownership interest in SHRG of approximately 7%. Immediately prior to this distribution, DSS owned approximately 81% of the issued and outstanding common shares of SHRG. As a result, SHRG, whose operations represented a significant portion of our Direct Marketing segment, was deconsolidated from our consolidated financial statements effective as of May 1, 2023 (the “Deconsolidation”). The consolidated statement of operations for the fiscal quarter ended September 30, 2023, therefore includes one month of activity related to SHRG prior to the Deconsolidation. Subsequent to April 30, 2023 the assets and liabilities of SHRG are no longer included within our consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with SHRG refer to the periods prior to the Deconsolidation.

 

Upon Deconsolidation, we recognized a loss before income taxes of approximately $29,196,000 which is recorded within gain/loss investments in our consolidated statements of operations for the three and nine months ended September 30, 2023. Subsequent to the Deconsolidation, we accounted for our equity ownership interest in SHRG as a marketable security and at the quoted price stock price of SHRG.

 

8

 

 

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable, convertible notes receivable, inventory, fair values of investments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company’s common stock, preferred stock, deferred revenue and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

 

Cash Equivalents All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. Amounts included in cash equivalents in the accompanying consolidated balance sheets are money market funds whose adjusted costs approximate fair value.

 

Accounts/Rents Receivable - The Company extends credit to its customers in the normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are generally 30 days but up to net 120 for certain customers. The Company carries its trade accounts receivable at invoice amounts and its rent receivables at contract amounts, less an allowance for credit losses. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for credit losses based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. In estimating expected losses in the accounts receivable portfolio, customer-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. Assumptions and judgment are applied to measure amounts and timing of expected future cash flows, collateral values and other factors used to determine the customers’ abilities to pay.

 

At March 31, 2024, and December 31, 2023, the Company established a reserve for credit losses of approximately $2,492,000 and $2,494,000, respectively. The Company does not accrue interest on past due accounts receivable.

 

9

 

 

Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk because of any non-performance by the financial institutions. As of March 31, 2024, one customers accounted for approximately 25% of our consolidated revenue. As of March 31, 2024, one customers accounted for approximately 44% of our trade accounts receivable balance. As of December 31, 2023, two customers accounted for approximately 20% and 11% of our consolidated revenue and 39% and 30% of our trade accounts receivable balance. As of March 31, 2024 and 2023, one vendor accounted for approximately 16% and 11%, respectively, of our cost of revenue.

 

Notes receivable, unearned interest, and related recognition - The Company records all future payments of principal and interest on notes as notes receivable, which are then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports the net investment in the notes receivable on the consolidated balance sheet as current or long-term based on the maturity date of the underlying notes. Such net investment is comprised of the amount advanced on the loans, adjusting for net deferred loan fees or costs incurred at origination, amounts allocated to warrants received upon origination, and any payments received in advance. The unearned interest is recognized over the term of the notes and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Net deferred loan fees or costs, together with discounts recognized in connection with warrants acquired at origination, are accreted as an adjustment to yield over the term of the loan.

 

Allowance For Loans And Lease Losses - On January 1, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” which requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that is expected to be collected over the contractual term of the asset considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In estimating expected losses in the loan and lease portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. Assumptions and judgment are applied to measure amounts and timing of expected future cash flows, collateral values and other factors used to determine the borrowers’ abilities to repay obligations. After the forecast period, the company utilizes longer-term historical loss experience to estimate losses over the remaining contractual life of the loans. Prior to 2022, the allowance for credit losses represented the amount that in management’s judgment reflected incurred credit losses inherent in the loan and lease portfolio as of the balance sheet date.

 

Investments – Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at fair value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. For equity method investments, the Company regularly reviews its investments to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value. See Note 8 for further discussion on investments.

 

Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets.

 

● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

10

 

 

The carrying amounts reported in the consolidated balance sheet of cash and cash equivalents, accounts receivable, prepaids, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. Marketable securities classify as a Level 1 fair value financial instrument. The fair value of notes receivable approximates their carrying value as the stated or discounted rates of the notes do not reflect recent market conditions. The fair value of revolving credit lines notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. The fair value of investments where the fair value is not considered readily determinable, are carried at cost.

 

Inventory – Inventories consist primarily of paper, pre-printed security paper, paperboard, fully prepared packaging, air filtration systems, and health and beauty products which and are stated at the lower of cost or net realizable value on the first-in, first-out (“FIFO”) method. Packaging work-in-process and finished goods included the cost of materials, direct labor and overhead. At the closing of each reporting period, the Company evaluates its inventory in order to adjust the inventory balance for obsolete and slow-moving items. An allowance for obsolescence of approximately $15,000 and $18,000 associated with the inventory at our Premier subsidiary for March 31, 2024, and December 31, 2023, respectively. Write- downs and write-offs are charged to cost of revenue.

 

Investments in real estate, net – Acquisition of assets are recorded at their relative fair value based on total accumulated costs of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. This includes all costs related to finding, analyzing and negotiating a transaction. The allocation of the purchase price is an area that requires judgment and significant estimates. Tangible and intangible assets include land, building and improvements, furniture, fixtures and equipment, acquired above market and below market leases, in-place lease value (if applicable). Acquisition-date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates and available market information. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. During 2023, the land and buildings related to AMRE LifeCare and AMRE Winter Haven were reclassified to Assets held for sale.

 

Assets held for sale – The Company has several buildings and the associated land they occupy for sale as of March 31, 2024 and December 31, 2023. These consist of primarily of retail space in Lindon, Utah approximating $5,593,000 and the medical facilities associated with AMRE LifeCare of approximately $41,570,000 and AMRE Winter Haven of approximately $4,396,000, and $65,000 of other assets.

 

Intangible Assets - The estimated fair values of acquired intangibles are generally determined based upon future economic benefits such as earnings and cash flows. Acquired identifiable intangible assets are recorded at fair value and are amortized over their estimated useful lives. Acquired intangible assets with an indefinite life are not amortized but are reviewed for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets are below their estimated fair values. Impairment is tested under ASC 350. At December 31, 2023, The Company impaired approximately $7,418,000 associated with intangible assets for AMRE Lifecare and AMRE Winter Haven.

 

11

 

 

Goodwill – Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after completing the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company will proceed to a quantitative test. The Company may also elect to perform a quantitative test instead of a qualitative test for any or all of our reporting units. The test compares the fair value of an entity’s reporting units to the carrying value of those reporting units. This quantitative test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. The Company performed its annual goodwill impairment test as of December 31, 2023, and no impairment was deemed necessary for the goodwill associated with Premier Packaging Company, and Impact BioMedical of $1,769,000 and $25,093,000, respectively. The goodwill for APB, and Sentinel Co. of approximately $29,744,000, and $1,234,000 respectively, were deemed impaired and written off at December 31, 2023. No circumstances or events have occurred since the most recent analysis that would indicate the need for an impairment is needed for the three months ended March 31, 2024.

 

Impairment of Long-Lived Assets and Goodwill - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

 

Business Combinations - Business combinations and non-controlling interests are recorded in accordance with FASB ASC 805 Business Combinations. Under the guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition and all acquisition costs are expensed as incurred. The excess of the purchase price over the estimated fair values is recorded as goodwill. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded. The application of business combination accounting requires the use of significant estimates and assumptions.

 

Loss Per Common Share - The Company presents basic and diluted (loss) earnings per share. Basic (loss) earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted (loss) earnings per share are computed including the number of additional shares from outstanding warrants, stock options and preferred stock that would have been outstanding if dilutive potential shares had been issued and is calculated utilizing the treasury stock method. In a loss period, the calculation for basic and diluted (loss) earnings per share is the same, as the impact of potential common shares is anti-dilutive. For the three months ended March 31, 2023 potential dilutive instruments include options of 5,000 shares. For the three months ended March 31, 2024, potential dilutive instruments was 0.

 

12

 

 

Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense.

 

Going Concern - The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern. While the Company has approximately $9.3 million in cash, the Company has incurred operating losses as well as negative cash flows from operating and investing activities over the past two years.

 

Aside from its $9.3 million in cash as of March 31, 2024, the Company believes it can continue as a going concern, due to its ability to generate operating cash through the sale of its $8.5 million of Marketable Securities, and the anticipated receipts of principal and interest on its Notes receivable of approximately $723,000 through December 31, 2024. The Company has also taken steps to sell its real estate holdings in Utah, as well as the assets of AMRE LifeCare located in Texas, Pennsylvania, and Florida. These properties approximate $51.6 million in assets and are identified on the accompanying balance sheet as Held for sale. In addition, the Company has taken steps, and will continue to take measures, to materially reduce the expenses and cash burn at all corporate and business line levels. Although there are no assurances, we believe the above would allow us to fund our nine business lines current and planned operations for the twelve months from the filing date of this Annual Report. Based on this, the Company has concluded that substantial doubt of its ability to continue as a going concern has been alleviated.

 

2. Revenue

 

The Company recognizes its revenue based on when the title passes to the customer or when the service is completed and accepted by the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for shipped product or service provided. Sales and other taxes billed and collected from customers are excluded from revenue. The Company recognizes rental income associated with its REIT, net of amortization of favorable/unfavorable lease terms relative to market and includes rental abatements and contractual fixed increases attributable to operating leases, where collection has been considered probable, on a straight-line basis over the term of the related lease. The Company recognizes net investment income from its investment banking line of business as interest and management fees related to loans managed for third parties owed to the Company occurs. The Company generates revenue from its direct marketing line of business primarily through internet sales and recognizes revenue as items are shipped.

 

As of March 31, 2024, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, the Company has applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations. The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.

 

13

 

 

Sales Commissions

 

Sales commissions are expensed as incurred for contracts with an expected duration of one year or less. There were no sales commissions capitalized as of March 31, 2024 or March 31, 2023.

 

Shipping and Handling Costs

 

Costs incurred by the Company related to shipping and handling are included in cost of products sold. Amounts charged to customers relating to these costs are reflected as revenue.

 

See Note 14 for disaggregated revenue information.

 

3. Inventory

 

Inventory consisted of the following as of:

   March   December 
   2024   2023 
Finished Goods  $2,318,000   $2,218,000 
Work in Process   845,000    180,000 
Raw Materials   479,000    439,000 
Inventory Gross   $3,642,000   $2,837,000 
Less allowance for obsolescence   (15,000)   (18,000)
Inventory Net   $3,627,000   $2,819,000 

 

4. Notes Receivable

 

Note 1

 

On May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company entered a convertible promissory note (“Note 1”) with Borrower 1, a company registered in the state of Texas. Note 1 has an aggregate principal balance up to $5,000,000, to be funded at the request of Borrower 1. Note 1, which incurs interest at a rate of 6.65% due quarterly, has a maturity date of May 1, 2023. Note 1 contains an optional conversion clause that allows the Company to convert all, or a portion of all, into newly issued member units of Borrower 1 with the maximum principal amount equal to 18% of the total equity position of Borrower 1 at conversion. The outstanding principal and interest as of March 31, 2024 and December 31, 2023, approximated $5,544,000 which is included in current notes receivable on the accompanying consolidated balance sheet. As of March 31, 2024 and December 31, 2023, the Company has a reserve of $2,772,000 and $2,772,000, respectively, against the principal and interest outstanding.

 

Note 2

 

On September 23, 2021, APB entered into refunding bond anticipatory note (“Note 2”) with Borrower 2, which operates as a conservation and reclamation district pursuant to Chapter 3891, Texas Special District Local Laws Code; Chapter 375, Texas Local Government Code; and Chapter 49, Texas Water Code. The District Note was in the sum of $3,500,000 and incurs interest at a rate of 5.59% per annum. Principal and interest are due in full on September 22, 2022, and later amended to extend the maturity date to September 19, 2024. The outstanding principal and interest of $3,910,000 was included in the current portion of notes receivable on the consolidated balance sheet at December 31, 2023. Note 2 was repaid in full during March 2024.

 

Note 3

 

On October 25, 2021, APB entered into a loan agreement (“Note 3”) with Borrower 3, a company registered in the state of Utah. Note 3 has an initial aggregate principal balance up to $1,000,000, to be funded at the request of Borrower 3, with an option to increase the maximum principal borrowing to $3,000,000. Note 3, which incurs interest at a rate of 8.0% with principal and interest due at the maturity date of October 25, 2022. This note contains an optional conversion feature allowing APB to convert the outstanding principal to a 10% membership interest. APB, as holder of Note 3, has the right to elect one member to the Board of Managers. This note is in default and the outstanding principal and interest of approximately $884,000 was reserved for fully as of December 31, 2022.

 

Note 4

 

On December 28, 2021, APB entered into a promissory note (“Note 4”) with Borrower 4, a company registered in the state of California. Note 4 has a principal balance of $700,000. Note 4, which incurs interest at a rate of 12.0% with principal and interest due at the maturity date of December 28, 2022. On December 29, 2022, the maturity date of this note was extended to May 31, 2023. On November 27, 2023, the parties to Note 4 agreed to modify the payment terms of the note to be monthly payments of $50,000 until the outstanding principal and interest are paid in full. The outstanding principal and interest of $158,000 and $253,000 is included in the Current portion of notes receivable on the consolidated balance sheet at March 31, 2024 and December 31, 2023, respectively.

 

14

 

 

Note 5

 

On January 24, 2022, APB and Borrower 5 entered into a promissory note (“Note 5”) in the principal sum of $100,000 with interest of 6%, due annually, and maturing in January 2024. The outstanding principal and interest at March 31, 2024 and December 31, 2023 approximates $107,000 and $103,000, respectively, and is included in Current portion of notes receivable on the accompanying consolidate balance sheet. The terms of this note are currently being renegotiated.

 

Note 6

 

On March 2, 2022, APB and Borrower 6, a corporation organized under the laws of the Republic of Korea entered into a promissory note (“Note 6”). Under the terms of Note 6, APB at its discretion, may lend up to the principal sum of $893,000 with an interest rate of 8%, and matured in March 2024, with interest payable quarterly. The outstanding principal and interest at March 31, 2024 and December 31, 2023 is $458,000 and $446,000 (net of $3,500 of unamortized origination fees), respectively. APB and Borrower 6 are currently negotiating an extension of the maturity date of this note.

 

Note 7

 

On May 9, 2022, DSS PureAir and Borrower 1 entered into a promissory note (“Note 7”) in the principal sum of $210,000 with interest of 10%, is due in three quarterly installments beginning on August 9, 2022, with the first two payment consisting of interest only. All unpaid principal and interest are due on February 9, 2023. This loan is currently in default and terms are currently being re-negotiated. The outstanding principal and interest at March 31, 2024 and December 31, 2023 approximates $224,000 of which $112,000 has been reserved for and is included in Current portions of notes receivable on the accompanying consolidate balance sheet.

 

Note 8, related party

 

On August 29, 2022, DSS Financial Management Inc and Borrower 8, a related party, entered into a promissory note (“Note 8”) in the principal sum of $100,000 with interest of 8%, is due in three quarterly installments beginning on September 14, 2022. All unpaid principal and interest is due on August 29, 2025. The outstanding principal and interest at March 31, 2024 approximated $101,000, of which approximately $76,000 has been reserved for with the net balance is included Current portions of notes receivable. At December 31, 2023, the balance approximated $100,000 of which $76,000 is included in the Current portion of notes receivable and $24,000 is included in the long-term portion of notes receivable. DSS owns 24.9% of the outstanding common shares of Borrower 8.

 

Note 9, related party

 

On May 8, 2023, DSS Financial Management Inc and Borrower 8 entered into a promissory note (“Note 9”) in the principal sum of $102,000 with interest at the prime rate plus 2% (10.5% at March 31, 2024 and December 31, 2023) with a maturity date of May 7, 2026. The outstanding principal and interest at March 31, 2024 approximated $110,000, of which approximately $82,000 has been reserved for with the net balance included of approximately $28,000 included in the long-term portion of notes receivable. At December 31, 2023 approximates $107,000 with approximately $53,000 of principal and accrued interest classified as Current portion notes receivable, and the remaining balance of approximately $54,000 is recorded as notes receivable, on the accompanying consolidated balance sheet. DSS owns 24.9% of the outstanding common shares of Borrower 8.

 

Note 10, related party

 

On July 26, 2022, APB and Borrower 10 entered into a promissory note (“Note 10”) in the principal sum of $1,000,000 with interest of 8%. All unpaid principal and interest due on July 26, 2024. The outstanding principal and interest on March 31, 2024 approximates $949,000, net of $10,000 of unamortized origination fees and is included in notes receivable on the accompanying consolidate balance sheet. Approximately $475,000 of Note 10 was reserved for as of March 31, 2024. The outstanding principal and interest on December 31, 2023, approximates $939,000, net of $20,000 of unamortized origination fees and is included in notes receivable on the accompanying consolidate balance sheet. Heng Fai Ambrose Chan, the Chairman of DSS, Inc is also the on the board of directors of Borrower 10.

 

15

 

 

Note 11

 

On February 19, 2021, Impact BioMedical, Inc, entered into a promissory note with an individual. The Company loaned the principal sum of $206,000, with interest at a rate of 6.5%, and maturity date of August 19, 2022 later amended to February 19, 2024. Monthly payments are due on the twenty-first day of each month and continuing each month thereafter until February 19, 2024. This note is secured by certain real property situated in Collier County, Florida. The outstanding principal and interest as of March 31, 2024 and December 31, 2023, was approximately $203,000, and is classified in Current notes receivable on the accompanying consolidated balance sheets. The maturity date of this note is currently being renegotiated.

 

Note 12

 

On June 27, 2023, DSS and Borrower 15 entered into a convertible promissory note (“Note 15”) in the principal sum of $1,400,000 with a discount of $300,000 and interest rate of 10% and maturity date of September 1, 2024. The outstanding principal, interest, and associated discount was fully reserved for as of December 31, 2023.

 

Note 13

 

On March 31,2023, DSS Biohealth Security, Inc and Borrower 13 entered into a promissory note (“Note 13”) in the principal sum of $140,000 and interest rate floating daily to Wall Street Journal Prime rate per annum (8.5% at March 31, 2024 and December 31, 2023) with the total outstanding principal and interest due at the maturity date of March 31, 2025. The outstanding principal and interest at December 31, 2023 approximates $133,000. Of the total financed, approximately $99,000 of principal and accrued interest is classified as Current portion of notes receivable and the remaining balance of approximately $34,000 is recorded as Notes receivable on the accompanying consolidated balance sheet at December 31, 2023. As of March 31, 2024, the outstanding balance sheet approximating $135,000 was fully reserved for.

 

5. Financial Instruments

 

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

 

The following tables show the Company’s cash, cash equivalents, restricted cash, and marketable securities by significant investment category as of March 31, 2024 and December 31, 2023:

 

   2024 
   cost  

Unrealized

Gain/(Loss)

  

Fair

Value

  

Cash and

Cash

Equivalents

  

 

Marketable

Securities

 
Cash  $9,182,000   $-   $9,182,000   $9,182,000   $- 
Level 1                         
Money Market Funds   70,000    -   70,000    70,000    - 
Marketable Securities   26,629,000    (17,146,000)  8,483,000    -    8,483,000 
Total  $34,881,000   $(17,146,000)  $17,735,000   $9,252,000   $8,483,000 

 

   2023 
  

Adjusted

Cost

  

Unrealized

Gain/(Loss)

  

Fair

Value

  

Cash and

Cash

Equivalents

  

 

Marketable

Securities

 
Cash  $6,545,000   $-   $6,545,000   $6,545,000   $- 
Level 1                       
Money Market Funds  $70,000    -   $70,000    70,000    - 
Marketable Securities  $27,304,000    (17,325,000)  $9,979,000    -    9,979,000 
Total  $33,919,000   $(17,325,000)  $16,594,000   $6,615,000   $9,979,000 

 

The Company typically invests with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio.

 

16

 

 

 

 

6. Provision for Credit Losses

 

Effective January 1, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses.

 

Accounts receivable are stated at the amount owed by the customer. The Company maintains an allowance for credit losses for accounts receivable and unbilled receivables, based on expected credit losses resulting from the inability of our customers to make required payments. The allowance for credit losses is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers and records its allowance for credit losses based on the results of this analysis.

 

As of March 31, 2024 and December 31, 2023, we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan.

 

We analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss reserves. For the three months ended March 31, 2024 and 2023, the Company recorded a Loan loss reserve of approximately $249,000 and $0, respectively.

 

General Loan Portfolio Reserve - Based upon a relatively young loan portfolio that are relatively new loans to generally credit worthy borrowers, we do not believe that a substantial general loan portfolio reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general contingent portfolio reserve of $249,000 and $194,000 of the loan portfolio loan balance as of March 31, 2024 and December 31, 2023, respectively.

 

Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of March 31, 2024 and December 31, 2023.

 

Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness with Borrower 3, which has a current principal and interest balance of $884,000 and have recorded a loan loss reserve for the full balance due the Company as of December 31, 2023 and March 31, 2024. The Company had also previously identified credit weakness in Borrower 1 and has placed a reserve approximating $2,884,000 against the outstanding principal and interest as of December 31, 2023 and March 31, 2024. Previously, the Company identified credit weakness in Borrower 12 and has placed a reserve approximating $1,045,000 against the outstanding principal and interest as of December 31, 2023 and March 31, 2024. During the first quarter of 2024, the Company identified credit weakness in Borrower 10 and 13 and has placed a reserve approximating $475,000 and $135,000, respectively, against the outstanding principal and interest as of March 31, 2024. Also during the first quarter of 2024, the Company identified credit weakness in Borrower 8, a related party, and has placed a reserve approximating $158,000 and against the outstanding principal and interest as of March 31, 2024.

 

7. Disposal of assets

 

On July 1st, 2023, The Company intended to sell its subsidiary, HWH World, Inc. to SHRG. The proposed transaction had the Company sell 1,000 shares of common stock, representing all the issued and outstanding common stock shares of HWH World for the sum $706,000 representing the gross proceeds of the sale of HWH inventory less cost of goods sold. The parties involved amended the terms of this agreement during the third quarter of 2023 from that of equity transaction to the purchase of inventory and assumption of certain liabilities by SHRG. The amended agreement identified the purchase price approximating $758,000 to be paid from amongst other things, the gross proceeds generated by the sale of the inventory acquired. The value of the inventory sold approximates $698,000 and the value of the liabilities assumed by SHRG as part of this transaction is approximately $59,000. Further, the agreement includes payment of 1% royalty, starting November 1, 2023, being defined as 1% of the gross sale price of all Seller’s new products made and sold outside of existing inventory on the schedule, for a period ending October 31, 2033. There is substantial doubt regarding SHRG’s ability to sell and pay for the inventory acquired, and therefore, the Company has determined not to record a receivable for the purchase price. A net loss approximating $639,000 associated with this transaction has been recorded during the third quarter of 2023 and is included in Loss/Gain on sale of assets on the consolidated statement of operations.

 

17

 

 

On July 1st, 2023, The Company sold 100% of the equity in its subsidiary HWH Holdings, Inc, a Texas corporation (HWHH) to SHRG for a purchase price approximating $259,000. This amount is to be paid from gross proceeds generated by the sale of the inventory acquired as part of the transaction. This transaction was later amended during the third quarter of 2023 to assign the purchase of HWHH from SHRG to Ascend Management Pte., Ltd. (“Ascend”), a Singaporean limited company. There is substantial doubt regarding Ascend’s ability to sell and pay for the inventory acquired, and therefore, the Company has determined not to record a receivable for the purchase price. A net loss approximating $617,000 associated with this transaction has been recorded during the third quarter of 2023 and is included in Loss/Gain on sale of assets on the consolidated statement of operations.

 

8. Investments

 

Alset International Limited, related party

 

The Company owns 127,179,291 shares or approximately 4% of the outstanding shares of Alset International Limited (“Alset Intl”), a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited. This investment is classified as a marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the investments for a period of at least one year. The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The fair value of the marketable security as of March 31, 2024 and December 31, 2023, was approximately $2,353,000 and $3,269,000, respectively. During the three month ended March 31, 2024 and 2023, the Company recorded unrealized loss of approximately $ 916,000 and $1,156,000, respectively.

 

West Park Capital, Inc.

 

On December 30, 2020, the Company signed a binding letter of intent with West Park Capital, Inc (“West Park”) and TBD where the parties agreed to prepare a note and stock exchange agreement whereby DSS will assign the TBD Note to West Park and West Park shall issue to DSS a stock certificate reflecting 7.5% of the issued and outstanding shares of West Park. This note and stock exchange agreement was finalized during the first quarter 2022 and valued at approximately $500,000 and is included in Investments on the consolidated balance sheet on December 31, 2023 and as of March 31, 2024. 

 

BMI Capital International LLC, related party

 

On September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability company (“BMIC”) whereas DSS Securities, Inc. purchased 14.9% membership interests in BMIC for $100,000. DSS Securities also had the option to purchase an additional 10% of the outstanding membership interest which it exercised for $100,000 in January of 2021 and increased its ownership to 24.9%. The Company is currently accounting for this investment under the equity method of accounting per ASC 323. The Company’s portion of net loss in BMIC during the three months ended March 31, 2024 and 2023, approximated $1,000 and $4,000, respectively

 

BMIC is a broker-dealer registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”). The Company’s chairman of the board and another independent board member of the Company also have ownership interest in BMIC.

 

BioMed Technologies Asia Pacific Holdings Limited

 

On December 19, 2020, Impact BioMedical, a wholly owned subsidiary of the Company, entered into a subscription agreement (the “Subscription Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated in the British Virgin Islands, pursuant to which the Company agreed to purchase 525 ordinary shares or 4.99% of BioMed at a purchase price of approximately $632,000. The Subscription Agreement provides, among other things, the Company has the right to appoint a new director to the board of BioMed. With respect to an issuance of shares to a third party by BioMed, the Company will have the right of first refusal to purchase such shares, as well as customary tag-along rights. In connection with the Subscription Agreement, Impact Biomedical entered into an exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to directly market, advertise, promote, distribute, and sell certain BioMed products, which focus on manufacturing natural probiotics, to resellers. This investment is valued at cost as it does not have a readily determined fair value.

 

18

 

 

Under the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries. In exchange, the Company agreed to certain obligations, including mutual marketing obligations to promote sales of the products. This agreement is for ten years with a one year auto-renewal feature.

 

9. Short-Term and Long-Term Debt

 

DSS, Inc.

 

Promissory Notes - On May 20, 2021, Premier Packaging entered into master loan and security agreement (“BOA Note”) with Bank of America, N.A. (“BOA”) to secure financing approximating $3,710,000 to purchase and use as collateral, a new Heidelberg XL 106-7+L printing press. The aggregate principal balance outstanding under the BOA Note shall bear interest at a variable rate on or before the loan closing. As of March 31, 2024, and December 31, 2023, the outstanding principal on the BOA Note was $2,810,000 and $2,932,000, respectively and had an interest rate of 4.63%. As of March 31, 2024, $502,000 was included in the Current portion of long-term debt, net, and the remaining balance of approximately $2,308,000 is recorded as Long-term debt. The BOA Note contains certain covenants that are analyzed annually. As of March 31, 2024, Premier is in compliance with these covenants. 

 

On August 1, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE, entered into a loan agreement (“Shelton Agreement”) with Patriot Bank, N.A. (“Patriot Bank”) in an amount up to $6,155,000, with the amount financed approximating $5,105,000. The Shelton Agreement contains monthly payments of principal and an initial interest of 4.25%. The interest will be adjusted commencing on July 1, 2026 and continuing for the next succeeding 5-year period shall be determined one month prior to the change date and shall be an interest rate equal to two hundred fifty (250) basis points above the Federal Home Loan Bank Boston 5-Year/25-Year amortizing advance rate, but in no event less than 4.25% for the term of 120 months with a balloon payment approximating $2,829,000 due at term end. The affective interest rate at December 31, 2022 was 4.25%. The funds borrowed were used to purchase a 40,000 square foot, 2.0 story, Class A+ multi-tenant medical office building located on a 13.62-acre site, which serves as collateral for the Shelton Agreement. The purchase price has been allocated as $4,640,000, $1,600,000, and $325,000 for the facility, land, and tenant improvements, respectively. Also included in the value of the property is $585,000 of intangible assets with an estimated useful life of approximating 3 years. The net book value of these assets as of March 31, 2024 approximated $6,252,000. Of the total financed, approximately $209,000 of principal and accrued interest is classified as current portion of long-term debt, net, and the remaining balance of approximately $4,354,000 recorded as long-term debt, net of $44,000 in deferred financing costs.

 

On October 13, 2021, LVAM entered into loan agreement with BMIC (“BMIC Loan”), a related party, whereas LVAM borrowed the principal amount of $3,000,000, with interest to be charged at a variable rate to be adjusted at the maturity date. The BMIC Loan matures on October 12, 2022, and contains an auto renewal period of three months. As of March 31, 2024 and December 31, 2023, $512,000 and $547,000, respectively, are included in Current portion of long-term debt, net on the consolidated balance sheet.

 

On October 13, 2021, LVAM entered into a loan agreement with Lee Wilson Tsz Kin (“Wilson Loan”), a related party, whereas LVAM borrowed the principal amount of $3,000,000, with interest to be charged at a variable rate to be calculated at the maturity date. The Wilson Loan matures on October 12, 2022, and contains an auto renewal period of nine months. As of March 31, 2024, $1,143,000 is included in the Current portion of long-term debt, net on the consolidated balance sheet. As of December 31, 2023 $2,131,000 is included in the Current portion of long-term debt, net on the consolidated balance sheet.

 

On November 2, 2021, AMRE LifeCare entered into a loan agreement (“LifeCare Agreement”) with Pinnacle Bank, (“Pinnacle Bank”) in the amount of $40,300,000. The LifeCare Agreement supported the acquisition of three medical facilities located in Fort Worth, Texas, Plano, Texas, and Pittsburgh, Pennsylvania for a purchase price of $62,000,000. These assets are classified as investments, real estate on the consolidated balance sheet, and serves as collateral for the LifeCare Agreement. The purchase price has been allocated as $32,100,000, $12,100,000, and $1,500,000 for the facility, land and site improvements, respectively. Also included in the value of the property is $15,901,000 of intangible assets with estimated useful lives ranging from 1 to 11 years. The net book value of the assets acquired as of March 31, 2024 is approximately $41,570,000. The LifeCare Agreement calls for the principal amount of the in equal, consecutive monthly installments based upon a twenty-five (25) year amortization of the original principal amount of the LifeCare Agreement at an initial rate of interest equal to the interest rate determined in accordance as of July 29, 2022 provided, however, such rate of interest shall not be less than 4.28%, with the first such installment being payable on August 29, 2022 and subsequent installments being payable on the first day of each succeeding month thereafter until the maturity date, at which time any outstanding principal and interest is due in full. The affective interest rate at March 31, 2024 was 9.6%. As of December 31, 2023, the outstanding principal and interested approximates $41,331,000 and is included in current portion of long-term debt, on the consolidated balance sheet. As of March 31, 2024, the outstanding principal and interested approximates $42,308,000 and is included in current portion of long-term debt, on the consolidated balance sheet. Interest expense for the three months ended March 31, 2024 and 2023 approximated $977,000 and $850,000, respectively. This note is in default and demand was made for final payment to be made by December 22, 2023. This amount is past due.

 

19

 

 

On March 17, 2022, AMRE Winter Haven, LLC (“AMRE Winter Haven”) and Pinnacle Bank (“Pinnacle”) entered into a term loan (“Pinnacle Loan”) whereas Pinnacle lent to AMRE Winter Haven the principal sum of $2,990,000, maturing on March 7, 2024 (later extended to July 7, 2024) to acquire a medical facility located in Winter Haven, Florida for a purchase price of $4,500,000. The assets acquired are classified as investments, real estate on the consolidated balance sheet, and serves as collateral for the Pinnacle Loan. The purchase price has been allocated as $3,200,000, $1,000,000, and $222,000 for the facility, land and site and tenant improvements, respectively. Also included in the value of the property is $29,000 of intangible assets with an estimated useful life of approximately 5 years. The net book value of the assets acquired as of March 31, 2024 is approximately $4,380,000. Payments are to be made in equal, consecutive installments based on a 25-year amortization period with interest at 4.28%. The first installment is due January 1, 2023. This AMRE note is currently due. The outstanding principal and interest, net of debt issuance costs of $17,000, approximates $2,977,000 and is included in the current portion of long-term debt, net on the accompanying consolidated balance sheet at December 31, 2023. The outstanding principal and interest, approximates $2,987,000 and is included in current portion of long-term debt, net on the accompanying consolidated balance sheet at March 31, 2024. Interest expense equaled $38,000 and $23,000 for the three months ended March 31, 2024 and 2023, respectively.

 

On March 30, 2023, Premier Packaging, a subsidiary of the Company entered into a loan and security agreement with Union Bank & Trust Company for the principal amount of $790,000 and shall accrued interest at the rate of 7.44%. Principal and interest shall be repaid in the approximate amount of $14,000 through March 2029. This loan is collateralized by a Bobst Model Novacut and is guaranteed by DSS, Inc. As of March 31, 2024, the outstanding principal and interest approximates $691,000 of which $116,000 was included in the current portion of long-term debt, net, and the remaining balance of approximately $575,000 recorded as long-term debt. As of December 31, 2023, the outstanding principal and interest approximates $719,000 of which $112,000 was included in the current portion of long-term debt, net, and the remaining balance of approximately $607,000 recorded as long-term debt. Interest expense equaled $13,000 and $0 for the three months ended March 31, 2024 and 2023, respectively.

 

A summary of scheduled principal payments of long-term debt, not including revolving lines of credit, subsequent to March 31, 2024, are as follows:

 

Year  Amount 
2024  $47,509,000 
2025   

858,000

 
2026   

902,000

 
2027   948,000  
2028   996,000  
Thereafter   3,727,000  

 

10. Lease Liability

 

The Company has operating leases predominantly for operating facilities. As of March 31, 2024, the remaining lease terms on our operating leases range from less than one to twelve years. Renewal options to extend our leases have not been exercised due to uncertainty. Termination options are not reasonably certain of exercise by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants. There are no significant finance leases as of March 31, 2024.

 

20

 

 

Future minimum lease payments as of March 31 2024, are as follows:

 

Maturity of Lease Liability:

 

   Totals 
2024  $719,000 
2025   861,000 
2026   839,000 
2027   808,000 
2028   824,000 
After   4,913,000 
Total lease payments   8,964,000 
Less: Imputed Interest   (1,598,000)
Present value of remaining lease payments  $7,436,000 
      
Current  $684,000 
Noncurrent  $6,752,000 
      
Weighted-average remaining lease term (years)   10.1 
      
Weighted-average discount rate   4.1%

 

Total cash paid for leases during the three months ended March 31, 2024 and 2023 approximated $220,000 and $305,000, respectively.

 

11. Commitments and Contingencies

 

License AgreementOn March 19, 2022, Impact BioMedical entered into a License Agreement (“Equivir License”) with a third-party (“Licensee”) where the Licensor is granted the right, amongst other things, to develop, commercialize, and sell the Company’s Equivir technology. In exchange, the Licensee shall pay the Company a royalty of 5.5% of net sales. Under the terms of the Equivir Agreement, the Company shall reimburse the Licensee for 50% of the development costs provided that the development costs shall not exceed $1,250,000. As of March 31, 2024 and December 31, 2023, $152,000 and $200,000, respectively, has been accrued for in relation to the Equivir License as development of the Equivir technology.

 

21

 

 

12. Stockholders’ Equity

 

Equity transactions

 

On April 10, 2023, the Company issued 1,247,078 shares of common stock to Mr. Frank Heuszel, CEO of DSS, pursuant to his employment agreement. These shares were issued to settle a previously recorded liability of approximately $268,000.

 

On January 4, 2024 the Company effected a reverse stock split of 1 for 20. As of December 31, 2023 there were 140,264,240 shares of our Common Stock issued and outstanding, which was converted to 7,066,772.

 

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 three months ended March 31, 2024, there were none.

 

Impact BioMedical, Inc. Equity Transactions –

 

On May 10, 2023, the Company, the Company’s Board of Directors approved an amendment to the Articles of Incorporation of the Company to increase the total number of shares of Common Stock to 4,000,000,000 shares with a par value of $0.001. Each share of Common Stock when issued, shall have one (1) vote on all matters presented to the stockholders. Our Amended and Restated Articles of Incorporation also authorized 100,000,000 shares of preferred stock, par value $0.001 per share. On May 11, 2023, the Company effected a forward split. As a result, there were 3,877,282,251 shares of our Common Stock and no shares of preferred stock issued and outstanding. Prior to the split, there were 125,073,621 shares of our Common Stock and no shares of preferred stock issued and outstanding. On October 31, 2023, the Company effected a reverse stock split of 1 for 55. Also on October 31, 2023, DSS BioHealth Securities, Inc., the Company’s largest shareholder converted 60,496,041 shares of Common Stock into 60,496,041 shares of Series A Convertible Preferred Shares, reducing its ownership of the Company’s Common Stock from approximately 88% to approximately 12%. As of March 31, 2024 and December 31, 2023, there were 10,000,000 shares of our Common Stock and 60,496,041 shares of preferred stock issued and outstanding.

 

On August 8, 2023 DSS, the Company’s largest shareholder, distributed to its shareholders of record on July 10, 2023 4 shares of Impact Bio’s stock for 1 share they owned. Each share of Impact BioMedical distributed as part of the distribution will not be eligible for resale until 180 days from the date Impact BioMedical’s initial public offering becomes effective under the Securities Act, subject to the discretion of the Company to lift the restriction sooner.

 

13. Supplemental Cash Flow Information

 

The following table summarizes supplemental cash flows for the three months ended March 31, 2024, and 2023:

 

   2024   2023 
         
Cash paid for interest  $

337,000

   $249,000 

 

22

 

 

14. Segment Information

 

The Company’s nine businesses lines are organized, managed, and internally reported as five operating segments. One of these operating segments, Product Packaging, is the Company’s packaging and printing group. Product Packaging operates in the paper board folding carton, smart packaging, and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct mail solutions. These products are designed to provide functionality and marketability while also providing counterfeit protection. A second, Biotechnology, invests in, or acquires companies in the biohealth and biomedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related diseases. This division is also developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza. Biotechnology is also targeting unmet, urgent medical needs. A third operating segment, Securities, and Investment Management (“Securities”) was established to develop and/or acquire assets and investments in the securities trading and/or funds management arena. Further, Securities, in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility tokens, stable coins and cryptocurrency via a digital asset trading platform using blockchain technology. The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, STO and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency, and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s). Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. the REIT was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. The fourth segment, Direct, provides services to assist companies in the emerging growth gig business model of peer-to-peer decentralized sharing marketplaces. It specializes in marketing and licensing its products and services through its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing. Direct marketing products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern Europe (see Note 1, Deconsolidation of Sharing Services Global Corporation). The fifth business line, Commercial Banking, is organized for the purposes of being a financial network holding company, focused providing commercial loans and on acquiring equity positions in (i) undervalued commercial bank(s), bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services, mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC (special purpose acquisition company) consulting, and advisory capital raising services. From this financial platform, the Company shall provide an integrated suite of financial services for businesses that shall include commercial business lines of credit, land development financing, inventory financing, third party loan servicing, and services that address the financial needs of the world Gig Economy.

 

Approximate information concerning the Company’s operations by reportable segment for the three months ended March 31, 2024 and 2023 is as follows. The Company relies on intersegment cooperation and management does not represent that these segments, if operated independently, would report the results contained herein:

 

Three Months Ended

March 31, 2024

 

Product

Packaging

  

Commercial

Lending

  

Direct

Marketing

   Biotechnology   Securities   Corporate   Total 
Revenue  $3,080,000   $104,000   $-   $-   $687,000   $-   $3,871,000 
Depreciation and amortization   190,000    -    34,000    288,000    69,000    1,000    582,000 
Cost of Revenue   2,767,000    469,000    -    10,000    1,744,000    -    4,990,000 
Interest expense   47,000    -    -    -    1,099,000    -    1,146,000 
Interest income   -    -    36,000    6,000    63,000    2,000    107,000 
Net income (loss) from continuing operations   (474,000)   (1,382,000)   (70,000)   (942,000)   (2,349,000)   108,000    (5,109,000)
Capital expenditures   3,000    -    -    -    -    -    3,000 
Total Identifiable assets   20,475,000    9,361,000    6,178,000    48,882,000    58,327,000    5,277,000    148,500,000 
Assets held for sale   -    -    -    -    51,595,000    -    51,595,000 

 

Three Months Ended

March 31,2023

  Product Packaging   Commercial Lending   Direct Marketing   Biotechnology   Securities   Corporate   Total 
Revenue  $6,130,000   $117,000   $3,994,000   $-   $1,685,000   $-   $11,926,000 
Depreciation and amortization   188,000    -    46,000    298,000    743,000    58,000    1,333,000 
Cost of revenue   4,660,000    -    1,290,000    -    2,537,000    46,000    8,533,000 
Interest expense   39,000    -    -    -    210,000    -    249,000 
Interest income   -    -    4,000    94,000    32,000    -    130,000 
Net income (loss) from continuing operations   696,000    (564,000)   (3,187,000)   (848,000)   (2,028,000)   (2,702,000)   (8,633,000)
Capital expenditures   576,000    -    (15,000)   5,000    28,000    -    594,000 
Identifiable assets   25,217,000    43,133,000    20,539,000    52,983,000    76,003,000    8,875,000    226,750,000 

 

23

 

 

The following tables disaggregate our business segment revenues by major source:

 

Printed Products Revenue Information:

 

Three months ended March 31, 2024    
Packaging Printing and Fabrication  $2,882,000 
Commercial and Security Printing   191,000 
Total Printed Products  $3,073,000 

 

Three months ended March 31, 2023    
Packaging Printing and Fabrication  $5,865,000 
Commercial and Security Printing   265,000 
 Total Printed Products  $6,130,000 

 

Direct Marketing

 

Three months ended March 31, 2024    
Direct Marketing Internet Sales  $- 
Total Direct Marketing  $- 

 

Three months ended March 31, 2023    
Direct Marketing Internet Sales  $3,994,000 
Total Direct Marketing  $3,994,000 

 

Rental Income

 

Three months ended March 31, 2024    
Rental income  $400,000 
Total Rental Income  $400,000 

 

Three months ended March 31, 2023    
Rental income  $1,685,000 
Total Rental Income  $1,685,000 

 

Commission Income

 

Three months ended March 31, 2024    
Commission income  $303,000 
Total commission income  $303,000 

 

Three months ended March 31, 2023    
Commission income  $ -  
Total commission income  $- 

 

Net Investment Income

 

Three months ended March 31, 2024    
Net investment income  $95,000 
Total Management fee income  $95,000 

 

Three months ended March 31, 2023    
Net Investment Income  $117,000 
Total Management fee income  $117,000 

 

24

 

 

15. Related Party Transactions

 

The Company owns 127,179,291 shares or approximately 4% of the outstanding shares of Alset International Limited (“Alset Intl”), a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited. This investment is classified as a marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the investments for a period of at least one year. The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The fair value of the marketable security as of March 31, 2024 and December 31, 2023, was approximately $2,353,000 and $3,269,000, respectively. During the three month ended March 31, 2024 and 2023, the Company recorded unrealized loss of approximately $ 916,000 and $1,156,000, respectively.

 

On September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability company (“BMIC”) whereas DSS Securities, Inc. purchased 14.9% membership interests in BMIC for $100,000. DSS Securities also had the option to purchase an additional 10% of the outstanding membership interest which it exercised for $100,000 in January of 2021 and increased its ownership to 24.9%. The Company is currently accounting for this investment under the equity method of accounting per ASC 323. The Company’s portion of net loss in BMIC during the three months ended March 31, 2024 and 2023, approximated $1,000 and $4,000, respectively

 

On October 13, 2021, LVAM entered into loan agreement with BMIC (“BMIC Loan”), a related party, whereas LVAM borrowed the principal amount of $3,000,000, with interest to be charged at a variable rate to be adjusted at the maturity date. The BMIC Loan matures on October 12, 2022, and contains an auto renewal period of three months. As of March 31, 2024 and December 31, 2023, $512,000 and $547,000, respectively, are included in Current portion of long-term debt, net on the consolidated balance sheet.

 

On October 13, 2021, LVAM entered into a loan agreement with Lee Wilson Tsz Kin (“Wilson Loan”), a related party, whereas LVAM borrowed the principal amount of $3,000,000, with interest to be charged at a variable rate to be calculated at the maturity date. The Wilson Loan matures on October 12, 2022, and contains an auto renewal period of nine months. As of March 31, 2024, $1,143,000 is included in the Current portion of long-term debt, net on the consolidated balance sheet. As of December 31, 2023 $2,131,000 is included in the Current portion of long-term debt, net on the consolidated balance sheet.

 

On August 29, 2022, DSS Financial Management Inc and Borrower 8, a related party, entered into a promissory note (“Note 8”) in the principal sum of $100,000 with interest of 8%, is due in three quarterly installments beginning on September 14, 2022. All unpaid principal and interest is due on August 29, 2025. The outstanding principal and interest at March 31, 2024 approximated $101,000, of which approximately $76,000 has been reserved for with the net balance is included Current portions of notes receivable. At December 31, the balance approximated $100,000 of which $76,000 is included in the Current portion of notes receivable and $24,000 is included in the long-term portion of notes receivable at December 31, 2023. DSS owns 24.9% of the outstanding common shares of Borrower 8.

 

On May 8, 2023, DSS Financial Management Inc and Borrower 8 entered into a promissory note (“Note 9”) in the principal sum of $102,000 with interest at the prime rate plus 2% (10.5% at March 31, 2024 and December 31, 2023) with a maturity date of May 7, 2026. The outstanding principal and interest at March 31, 2024 approximated $110,000, of which approximately $82,000 has been reserved for with the net balance included in December 31, 2023 approximates $107,000 with approximately $53,000 of principal and accrued interest classified as Current portion notes receivable, and the remaining balance of approximately $54,000 is recorded as notes receivable, on the accompanying consolidated balance sheet. DSS owns 24.9% of the outstanding common shares of Borrower 8.

 

On July 26, 2022, APB and Borrower 10 entered into a promissory note (“Note 10”) in the principal sum of $1,000,000 with interest of 8%. All unpaid principal and interest due on July 26, 2024. The outstanding principal and interest on March 31, 2024 approximates $940,000, net of $10,000 of unamortized origination fees and is included in notes receivable on the accompanying consolidate balance sheet. Approximately $475,000 of Note 10 was reserved for as of March 31, 2024. The outstanding principal and interest on December 31, 2023, approximates $939,000, net of $20,000 of unamortized origination fees and is included in notes receivable on the accompanying consolidate balance sheet. Heng Fai Ambrose Chan, the Chairman of DSS, Inc is also the on the board of directors of Borrower 10.

 

16. Subsequent Events

 

The Company has evaluated all subsequent events and transactions through May 14, 2024, the date that the condensed consolidated financial statements were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure other than what was identified below:

 

25

 

 

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

Certain statements contained herein this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). Except for the historical information contained herein, this report contains forward-looking statements (identified by words such as “estimate”, “project”, “anticipate”, “plan”, “expect”, “intend”, “believe”, “hope”, “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements.

 

Overview

 

The Company, incorporated in the state of New York in May 1984 has conducted business in the name of Document Security Systems, Inc. On September 16, 2021, the board of directors approved an agreement and plan of merger with a wholly owned subsidiary, DSS, Inc. (a New York corporation, incorporated in August 2020), for the sole purpose of effecting a name change from Document Security Systems, Inc. to DSS, Inc. This change became effective on September 30, 2021. DSS, Inc. maintained the same trading symbol “DSS” and updated its CUSIP number to 26253C 102.

 

DSS, Inc. (together with its consolidated subsidiaries, referred to herein as “DSS,” “we,” “us,” “our” or the “Company”), currently operates nine (9) distinct business lines with operations and locations around the globe. These business lines are: (1) Product Packaging, (2) Biotechnology, (3) Direct, (4) Commercial Lending, (5) Securities and Investment Management, (6) Alternative Trading (7) Digital Transformation (discontinued in 2023), (8) Secure Living (discontinued in 2023), and (9) Alternative Energy (discontinued in 2023). Each of these business lines are in different stages of development, growth, and income generation.

 

Our divisions, their business lines, subsidiaries, and operating territories: (1) Our Product Packaging line is led by Premier Packaging Corporation, Inc. (“Premier”), a New York corporation. Premier operates in the paper board and fiber based folding carton, consumer product packaging, and document security printing markets. It markets, manufactures, and sells sophisticated custom folding cartons, mailers, photo sleeves and complex 3-dimensional direct mail solutions. Premier is currently located in its new facility in Rochester, NY, and primarily serves the US market. (2) The Biotechnology business line was created to invest in or acquire companies in the BioHealth and BioMedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related diseases. This division is also targeting unmet, urgent medical needs, and is developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza. (3) Direct Marketing, led by the holding corporation, Decentralized Sharing Systems, Inc. (“Decentralized”) provides services to assist companies in the emerging growth “Gig” business model of peer-to-peer decentralized sharing marketplaces. Direct Marketing’s products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific, Middle East, and Eastern Europe. (4) Our Commercial Lending business division, driven by American Pacific Bancorp (“APB”), is organized for the purposes of being a financial network holding company, focused on acquiring equity positions in (i) undervalued commercial bank(s), bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services, mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC (special purpose acquisition company) consulting services, and advisory capital raising services. (5) Securities and Investment Management was established to develop and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, broker dealers, and mutual funds management. Also in this segment is the Company’s real estate investment trusts (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. the REIT was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. (6) Alternative Trading was established to develop and/or acquire assets and investments in the securities trading and/or funds management arena. Alternative Trading, in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility tokens, and cryptocurrency via an alternative trading platform using blockchain technology. The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency, and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s). (7) Digital Transformation was established to be a Preferred Technology Partner and Application Development Solution for mid cap brands in various industries including the direct selling and affiliate marketing sector. Digital improves marketing, communications and operations processes with custom software development and implementation (discontinued in 2023). (8) The Secure Living division has developed a plan for fully sustainable, secure, connected, and healthy living communities with homes incorporating advanced technology, energy efficiency, and quality of life living environments both for new construction and renovations for single and multi-family residential housing (discontinued in 2023). (9) The Alternative Energy group was established to help lead the Company’s future in the clean energy business that focuses on environmentally responsible and sustainable measures. Alset Energy, Inc, the holding company for this group, and its wholly owned subsidiary, Alset Solar, Inc., pursue utility-scale solar farms to serve US regional power grids and to provide underutilized properties with small microgrids for independent energy (discontinued in 2023).

 

26

 

 

On December 23, 2021, DSS purchased 50,000,000 shares at $0.06 per share of Sharing Services Global Corporation (“SHRG”) via a private placement. With this purchase, DSS increased its ownership of voting shares from approximately 47% of SHRG to approximately 58%. On January 24, 2022, the Company exercised 50,000,000 warrants received as part of a consulting agreement with SHRG at the exercise price of $0.0001, bring its ownership percentage of voting shares to approximately 65%. SHRG aims to build shareholder value by developing or acquiring businesses that increase the Company’s product and services portfolio, business competencies and geographic reach. Currently, the Company, through its subsidiaries, markets and distributes its health and wellness and other products primarily in the United States, Canada, and the Asia Pacific region using a direct selling business model. The Company markets its products and services through its independent sales force, using its proprietary websites, including: www.elevacity.com and www.thehappyco.com. The Company, headquartered in Plano, Texas, was incorporated in the State of Nevada on April 24, 2015, and is an emerging growth company. The Company’s Common Stock is traded, under the symbol “SHRG,” in the OTCQB Market, an over-the-counter trading platforms market operated by OTC Markets Group Inc. On May 4, 2023, the Company distributed approximately 280 million shares of SHRG beneficially held by DSS and Decentralized Sharing Systems in the form of a dividend to the shareholders of DSS common stock. Upon completion of this distribution, DSS will retain an ownership interest in SHRG of approximately 7%. Immediately prior to this distribution, DSS owned approximately 81% of the issued and outstanding common shares of SHRG. As a result, SHRG, whose operations represented a significant portion of our Direct Marketing segment, was deconsolidated from our consolidated financial statements effective as of May 1, 2023 (the “Deconsolidation”). The consolidated statement of operations for the fiscal quarter ended September 30, 2023, therefore includes one month of activity related to SHRG prior to the Deconsolidation. Subsequent to April 30, 2023 the assets and liabilities of SHRG are no longer included within our consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with SHRG refer to the periods prior to the Deconsolidation.

 

The five reporting segments are as follows:

 

Premier Packaging: (“Premier”) Premier Packaging Corporation provides custom packaging services and serves clients in the pharmaceutical, nutraceutical, consumer goods, beverage, specialty foods, confections, photo packaging and direct marketing industries, among others. The group also provides active and intelligent packaging and document security printing services for end-user customers. In addition, the division produces a wide array of printed materials, such as folding cartons and paperboard packaging, security paper, vital records, prescription paper, birth certificates, receipts, identification materials, entertainment tickets, secure coupons and parts tracking forms. The division also provides resources and production equipment for our ongoing research and development of security printing, brand protection, consumer engagement and related technologies.

 

Commercial Lending: (“Commercial Lending”) through its operating company, American Pacific Bancorp, Inc. (“APB”) is organized for the purposes of being a financial network holding company, focused providing commercial loans and on acquiring equity positions in (i) undervalued commercial bank(s), bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services, mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC (special purpose acquisition company) consulting, and advisory capital raising services. From this financial platform, the Company shall provide an integrated suite of financial services for businesses that shall include commercial business lines of credit, land development financing, inventory financing, third party loan servicing, and services that address the financial needs of the world Gig Economy.

 

Biotechnology: (“Biotech”) Impact BioMedical, Inc. targets unmet, urgent medical needs and expands the borders of medical and pharmaceutical science. Impact drives mission-oriented research, development, and commercialization of solutions for medical advances in human wellness and healthcare. By leveraging technology and new science with strategic partnerships, Impact BioMedical provides advances in drug discovery for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases. Other technologies include a breakthrough alternative sugar aimed to combat diabetes and functional fragrance formulations aimed at the industrial and medical industry.

 

27

 

 

The business model of BioHealth and Impact BioMedical revolves around two methodologies – Licensing and Sales Distribution.

 

1) Impact develops valuable and unique patented technologies which will be licensed to pharmaceutical, large consumer package goods companies and venture capitalists in exchange for usage licensing and royalties.

 

2) Impact utilizes the DSS ecosystem to leverage its sister companies that have in place distribution networks on a global scale. Impact will engage in branded and private labelling of certain products for sales generation through these channels. This global distribution model will give direct access to end users of Impact’s nutraceutical and health related products.

 

Securities and Investment Management: (“Securities”) Securities was established to develop and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, real estate investment funds, broker dealers, and mutual funds management. This business sector has already established the following business lines and associated products and services:

 

  REIT Management Fund: In March 2020, DSS Securities formed AMRE (“American Medical REIT”) and its management company AAMI (“AMRE Asset Management, Inc.) Through AAMI/AMRE, a medical real estate investment trust, fulfills community needs for quality healthcare facilities while enabling care providers to allocate their capital to growth and investment in their contemporary clinical and critical care businesses.

 

  Sentinel Brokers Company, Inc.: Sentinel primarily operates as a financial intermediary, facilitating institutional trading of municipal and corporate bonds as well as preferred stock, and accelerates the trajectory of the DSS digital securities business.
     
  DSS AmericaFirst: DSS AmericaFirst is a suite of mutual funds managed by DSS Wealth Management. DSS AmericaFirst expects to expand into numerous investment platforms including additional mutual funds, exchange-traded funds, unit investment trusts, and closed-end funds. DSS AmericaFirst currently consists of four mutual funds that seek to outperform their respective benchmark indices by applying a quantitative rules-based approach to security selection.

 

Direct Marketing: (“Direct”) Through its holding company, Decentralized Sharing Systems, Inc. and its subsidiaries and partners, provide an array of products and services which include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern Europe, through licensing agreements.

 

28

 

 

Results of operations for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

 

This discussion should be read in conjunction with the financial statements and footnotes contained in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

  

Three months ended

March 31, 2024

  

Three months ended

March 31, 2023

   % Change 
             
Printed products  $3,073,000   $6,130,000    -50%
Rental income   400,000    1,685,000    -76%
Net investment income   95,000    117,000    -19%
Commission revenue   303,000    -    N/A 
Direct marketing   -    3,994,000    -100%
                
Total Revenue  $3,871,000   $11,926,000    -68%

 

For the three months ended March 31, 2024, total revenue decreased 68% as compared to the three months ended March 31, 2023. Revenues from the sale of Printed products decreased 50% during three months ended March 31, 2024, as compared to the same period in 2023 due primarily to orders expected to ship during the 4th quarter 2022 being pushed to the 1st quarter 2023. The decreases in Rental income of 76% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 is driven by the tenants at AMRE LifeCare being unable to make rental payments in 2024. The decreases in Net investment income approximating 19% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 is due to a number of loans made going on non-accrual as borrowers have struggled to make expect payments. The Company’s Direct Marketing revenues decreased three months ended March 31, 2024 as compared to the three months ended March 31, 2023 is due to the Deconsolidation of SHRG as described in Note 1.

 

29

 

 

  

Three months ended

March 31, 2024

  

Three months ended

March 31, 2023

   % Change 
             
Cost of revenue               
Printed products  $2,767,000   $4,660,000    -41%
Securities   1,744,000    2,537,000    -31%
Biotechnology   10,000    -    N/A 
Commercial lending   469,000    -    N/A 
Direct marketing   -    1,290,000    -100%
Other   -    46,000    -100%
Sales, general and administrative compensation   1,229,000    5,140,000    -76%
Professional fees   991,000    561,000    77%
Sales and marketing   493,000    1,810,000    -73