Dss, Inc 10-Q for FY2023 Q2

Dss, Inc. (DSS)

10-Q 2023-08-14 For: 2023-06-30

Added on April 10, 2026

About this 10-Q

Dss, Inc filed this 10-Q on August 14, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $7.23M; down 38.6% from $11.77M a year earlier
Net loss: $37.92M; compared with a net loss of $4.65M a year earlier
Diluted EPS: -$0.27; compared with -$0.05 a year earlier

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New York		16-1229730
(State or other Jurisdiction of		(IRS Employer
incorporation- or Organization)		Identification No.)

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒

Emerging growth company ☐

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

PART I	FINANCIAL INFORMATION	3
Item 1	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2023 and 2022 (Unaudited)	6
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 4	Controls and Procedures	39

PART II	OTHER INFORMATION	40
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults upon Senior Securities	40
Item 4	Mine Safety Disclosures	40
Item 5	Other Information	40
Item 6	Exhibits	40

	June 30, 2023 (Unaudited)			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	10,033,000		$	19,290,000
Accounts receivable, net		2,468,000			7,564,000
Inventory		5,300,000			7,721,000
Assets held for sale		1,524,000			-
Current portion of notes receivable		9,269,000			11,719,000
Prepaid expenses and other current assets		1,199,000			1,700,000
Total current assets		29,793,000			47,994,000

Property, plant and equipment, net		12,438,000			13,391,000
Investment in real estate, net		53,997,000			55,029,000
Other investments		1,163,000			1,534,000
Investment, equity method		139,000			162,000
Marketable securities		11,575,000			27,307,000
Notes receivable		1,112,000			922,000
Non-current assets held for sale		480,000			-
Other assets		261,000			2,699,000
Right-of-use assets		7,515,000			8,219,000
Goodwill		57,880,000			60,919,000
Other intangible assets, net		28,508,000			30,740,000
Total assets	$	204,861,000		$	248,916,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	3,046,000		$	5,914,000
Accrued expenses and deferred revenue		3,080,000			19,341,000
Other current liabilities		396,000			477,000
Current Liabilities held for sale		1,129,000			-

Current portion of lease liability		633,000			796,000
Current portion of long-term debt, net		47,206,000			47,161,000
Total current liabilities		55,490,000			73,689,000

Long-term debt, net		7,218,000			10,181,000
Long term lease liability		7,120,000			7,820,000
Non-current liabilities held for sale		59,000			-
Other long-term liabilities		507,000			507,000
Deferred tax liability		38,000			38,000

Commitments and contingencies (Note 11)		-			-

Stockholders’ equity
Common stock, $.02 par value; 200,000,000 shares authorized, 140,264,250 shares issued and outstanding (139,017,172 on December 31, 2022)		2,804,000			2,779,000
Additional paid-in capital		317,369,000			317,126,000
Accumulated deficit		(221,529,000	)		(194,343,000	)
Total stockholders’ equity		98,644,000			125,562,000
Non-controlling interest in subsidiaries		35,785,000			31,119,000
Total stockholders’ equity		134,429,000			156,681,000

Total liabilities and stockholders’ equity	$	204,861,000		$	248,916,000

	2023			2022			2023			2022
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Revenue:
Printed products	$	3,626,000		$	4,048,000		$	9,661,000		$	7,617,000
Rental income		1,543,000			1,508,000			3,228,000			3,171,000
Net investment income		197,000			145,000			314,000			274,000
Direct marketing		1,572,000			6,070,000			5,566,000			13,002,000
Commission revenue		295,000			-			295,000			-
Total revenue		7,233,000			11,771,000			19,064,000			24,064,000

Costs and expenses:
Cost of revenue:
Printed Products		2,421,000			2,603,000			7,081,000			6,026,000
Securities		1,820,000			2,551,000			4,340,000			5,124,000
Biotechnology		2,000			308,000			63,000			308,000
Direct Marketing		516,000			1,990,000			1,806,000			4,127,000
Others		73,000			218,000			75,000			700,000
Selling, general and administrative (including stock-based compensation)		8,851,000			15,283,000			17,824,000			25,639,000
Total costs and expenses		13,683,000			22,953,000			31,189,000			41,924,000
Operating loss		(6,450,000	)		(11,182,000	)		(12,125,000	)		(17,860,000	)

Other income (expense):
Interest income		407,000			139,000			538,000			295,000
Dividend income		8,000			-			12,000			-
Other income (expense)		147,000			2,344,000			175,000			576,000
Interest expense		(138,000	)		(121,000	)		(388,000	)		(1,499,000	)
Gain on extinguishment of debt		-			110,000			-			110,000
Loss on equity method investment		(18,000	)		(99,000	)		(22,000	)		(211,000	)
(Loss)/gain on investments		(27,922,000	)		3,399,000			(30,790,000	)		3,823,000
Provision for loan losses		(3,757,000	)		-			(3,757,000	)		-
Gain on sale of assets		-			-			-			405,000
Loss from continuing operations before income taxes		(37,723,000	)		(5,410,000	)		(46,357,000	)		(14,361,000	)

Income tax benefit (loss)		-			-			-			-
Net loss		(37,723,000	)		(5,410,000	)		(46,357,000	)		(14,361,000	)

(Income)/loss from continuing operations attributed to noncontrolling interest		(200,000	)		758,000			398,000			1,661,000

Net loss attributable to common stockholders	$	(37,923,000	)	$	(4,652,000	)	$	(45,959,000	)	$	(12,700,000	)

Loss per common share:
Basic	$	(0.27	)	$	(0.05	)	$	(0.33	)	$	(0.15	)
Diluted	$	(0.27	)	$	(0.05	)	$	(0.33	)	$	(0.15	)

Shares used in computing loss per common share:
Basic		140,140,913			34,888,054			139,579,043			85,641,957
Diluted		140,140,913			34,888,054			139,579,043			85,641,957

	2023			2022
Cash flows from operating activities:
Net loss from continuing operations	$	(46,357,000	)	$	(14,361,000	)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation and amortization		2,647,000			6,425,000
Gain on allowance for obsolescence of inventory		-			(280,000	)
Stock based compensation		268,000			4,000
Income on equity method investment		22,000			211,000
(Gain) loss on investments		30,790,000			(3,823,000	)
Change in ROU assets		774,000			(10,202,000	)
Change in ROU liabilities		(1,052,000	)		10,122,000
Gain on extinguishment of debt		-			(110,000	)
Gain on sale of assets		-			(405,000	)
Impairment of notes receivable		3,757,000			1,745,000
Decrease (increase) in assets:
Accounts receivable		2,531,000			(460,000	)
Inventory		4,707,000			591,000
Prepaid expenses and other current assets		592,000			1,307,000
Other assets		3,123,000			(312,000	)
Increase (decrease) in liabilities:
Accounts payable		(3,846,000	)		192,000
Accrued expenses		(15,958,000	)		(3,036,000	)
Other liabilities		(81,000	)		(373,000	)
Net cash used by operating activities - continuing operations		(18,083,000	)		(13,947,000	)
Net cash used by operating activities - held for sale		(1,632,000	)		-
Net cash used by operating activities		(19,715,000	)		(13,947,000	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(496,000	)		(976,000	)
Purchase of real estate		-			(689,000	)
Purchase of marketable securities		-			(4,805,000	)
Disposal of property, plant and equipment		215,000			2,557,000
Sale of marketable securities		11,330,000			-
Issuance of new notes receivable		-			(3,362,000	)
Payments received on notes receivable		2,327,000			863,000
Net cash provided by (used in) investing activities		13,376,000			(6,412,000	)

Cash flows from financing activities:
Payments of long-term debt		(5,519,000	)		(169,000	)
Borrowings of long-term debt		2,601,000			6,360,000
Deferred financing fees		-			-
Issuances of common stock, net of issuance costs		-			1,518,000
Net cash (used in) provided by financing activities		(2,918,000	)		7,709,000

Net increase (decrease) in cash - continuing operations		(7,625,000	)		(12,650,000	)
Net increase (decrease) in cash – held for sale		(1,632,000	)		-
Cash and cash equivalents at beginning of period		19,290,000			56,595,000
Cash and cash equivalents at end of period	$	10,033,000		$	43,945,000

	Shares		Amount		Shares		Amount		Capital		Deficit			Equity			Subsidiary			Total
																	Non-
									Additional								controlling
	Common Stock				Preferred Stock				Paid-in		Accumulated			Total DSS			Interest in
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity			Subsidiary			Total

Balance, December 31, 2022		139,017,000	$	2,779,000		-	$	-	$	317,126,000	$	(194,343,000	)	$	125,562,000		$	31,119,000		$	156,681,000
															-
Stock based compensation		1,247,000		25,000		-		-		243,000		-			268,000			-			268,000
Deconsolidation of Sharing Services Global Corp		-		-		-		-		-		18,773,000			18,773,000			5,064,000			23,837,000
Net loss		-		-		-		-		-		(45,959,000	)		(45,959,000	)		(398,000	)		(46,357,000	)
Balance, June 30, 2023		140,264,000	$	2,804,000		-	$	-	$	317,369,000	$	(221,529,000	)	$	98,644,000		$	35,785,000		$	134,429,000

Balance, December 31, 2021		79,746,000	$	1,594,000		-	$	-	$	294,685,000	$	(134,503,000	)	$	161,776,000			36,409,000		$	198,185,000
															-						-
Issuance of common stock, net of expenses		3,987,000		80,000		-		-		1,438,000		-			1,518,000			-			1,518,000
Stock based payments		16,347,000		327,000		-		-		5,894,000		-			6,221,000			-			6,221,000
Conversion of preferred stock		-		-		-		-		-		-			-			-			-
Net loss		-		-		-		-		-		(12,700,000	)		(12,700,000	)		(1,661,000	)		(14,361,000	)
Balance, June 30, 2022		100,080,000	$	2,001,000		-	$	-	$	302,017,000	$	(147,203,000	)	$	156,815,000		$	34,748,000		$	191,563,000


	June 30, 2023			December 31, 2022
Finished Goods	$	3,226,000		$	6,779,000
Work in Process		749,000			403,000
Raw Materials		1,381,000			1,281,000
Inventory Gross	$	5,357,000		$	8,463,000
Less allowance for obsolescence		(57,000	)		(742,000	)
Inventory Net	$	5,300,000		$	7,721,000

	2023
			Unrealized Gain/			Fair		Cash and Cash		Marketable
	Cost		(Loss)			Value		Equivalents		Securities
Cash	$	9,971,000	$	-		$	9,971,000	$	9,971,000	$	-
Level 1
Money Market Funds	$	62,000		-			62,000		62,000		-
Marketable Securities		15,165,000		(3,590,000	)		11,575,000		-		11,575,000
Total	$	25,198,000	$	(3,590,000	)	$	21,608,000	$	10,033,000	$	11,575,000

	2022 (unaudited)
Revenue	$	49,076,804
Net loss	$	(61,680,088	)
Basic loss per share	$	(0.55	)
Diluted loss per share	$	(0.55	)

Year	Amount
2023	$	47,206,000
2024		3,801,000
2025		858,000
2026		901,000
2027		947,000
Thereafter		711,000

	Totals
2023		633,000
2024		950,000
2025		803,000
2026		794,000
2027		808,000
2028		824,000
After		4,675,000
Total lease payments		9,487,000
Less: Imputed Interest		(1,734,000	)
Present value of remaining lease payments	$	7,753,000

Current	$	633,000
Noncurrent	$	7,120,000

Weighted-average remaining lease term (years)		13.9

Weighted-average discount rate		4.3	%

	Product			Commercial			Direct
Three Months Ended June 30, 2023	Packaging			Lending			Marketing			Biotechnology			Securities			Corporate		Total
Revenue	$	3,626,000		$	197,000		$	1,572,000		$	-		$	1,838,000		$	-	$	7,233,000
Interest expense		47,000			-			-			-			91,000			-		138,000
Interest income		-			-			280,000			49,000			78,000			-		407,000
Net Loss (income) from continuing operations		(205,000	)		(1,213,000	)		(28,074,000	)		(3,934,000	)		(4,413,000	)		116,000		(37,723,000	)
Capital expenditures		4,000			-			(4,000	)		12,000			7,000			-		19,000
Identifiable assets		23,080,000			41,324,000			7,159,000			49,952,000			71,610,000			9,619,000		202,744,000
Assets held for sale		-			-			2,004,000			-			-			-		2,004,000

Three months ended June 30, 2023
Packaging Printing and Fabrication	$	3,571,000
Commercial and Security Printing		55,000
Total Printed Products	$	3,626,000

Three months ended June 30, 2022
Packaging Printing and Fabrication	$	3,952,000
Commercial and Security Printing		96,000
Total Printed Products	$	4,048,000

Six months ended June 30, 2023
Packaging Printing and Fabrication	$	9,341,000
Commercial and Security Printing		320,000
Total Printed Products	$	9,661,000

Six months ended June 30, 2022
Packaging Printing and Fabrication	$	7,468,000
Commercial and Security Printing		149,000
Total Printed Products	$	7,617,000

Three months ended June 30, 2023
Direct Marketing Internet Sales	$	1,572,000
Total Direct Marketing	$	1,572,000

Three months ended June 30, 2023
Commission income	$	295,000
Total commission income	$	295,000

	●	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. Urban and suburban communities are in need of modern healthcare facilities that provide a range of medical outpatient services. The funds ultimate product is an investor opportunity in a managed medical real estate investment trust.

	●	Real Estate Title Services: Alset Title Company, Inc. provides buyers, sellers, and brokers alike confidence during big real estate transactions, not just in a transaction, but in the property itself. Through bundled services, Alset Title Company, Inc. provides it all from title searches and insurance to escrow agent assistance.

	●	Sentinel: 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.

	●	WestPark: WestPark, a company we hold a minority interest in, is a full-service investment banking and securities brokerage firm which serves the needs of both private and public companies worldwide, as well as individual and institutional investors.

	●	BMI: BMI is a private investment bank specializing in corporate finance advising, raising equity, and venture services, providing a global “one-stop” corporate consultancy to listed companies. From corporate finance to professional valuation, corporate communications to event management, BMI services companies in the US, Hong Kong, Singapore, Taiwan, Japan, Canada, and Australia.

	●	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.

	Three months ended June 30, 2023		Three months ended June 30, 2022		% Change			Six months ended June 30, 2023		Six months ended June 30, 2022		% Change

Printed products	$	3,626,000	$	4,048,000		-10	%	$	9,661,000	$	7,617,000		27	%
Rental income		1,543,000		1,508,000		2	%		3,228,000		3,171,000		2	%
Net investment income		197,000		145,000		36	%		314,000		274,000		15	%
Commission revenue		295,000		-		N/A			295,000		-		N/A
Direct marketing		1,572,000		6,070,000		-74	%		5,556,000		13,002,000		-57	%

Total Revenue	$	7,233,000	$	11,771,000		-39	%	$	19,064,000	$	24,064,000		-21	%

Exhibit Number		Exhibit Description

3.1		Certificate of Incorporation *

3.2		Fifth Amended and Restated Bylaws *

3.3		Amendment 1 to Fifth Amended and Restated Bylaws

10.1		Securities Purchase Agreement between Decentralized Sharing Systems, Inc. and Sharing Services Global Corporation for the sale of HWH Holdings, Inc.

10.2		Securities Purchase Agreement between Decentralized Sharing Systems, Inc. and Sharing Services Global Corporation for the sale of HWH World, Inc.

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*

31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. *

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. *

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. *

101.INS		Inline XBRL Instance Document*
101.SCH		Inline XBRL Taxonomy Extension Schema Document*
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)*

	DSS, INC.

August 14, 2023	By:	/s/ Frank D. Heuszel
		Frank D. Heuszel
		Chief Executive Officer
		(Principal Executive Officer)

August 14, 2023	By:	/s/ Todd D. Macko
		Todd D. Macko
		Chief Financial Officer

	If to Buyer to:		Sharing Services Global Corporation Address: 5200 Tennyson Parkway Plano TX 75024

	If to Seller to:		Decentralized Sharing Systems, Inc. Address: 275 Wiregrass Pkwy Henrietta, New York 14586

	With copies to:		Sichenzia Ross Ference LLP 1185 Avenue of the Americas, 31^st Floor New York, New York 10036 Attention: Darrin M. Ocasio Facsimile No.: (212) 930-9725 Sichenzia Email: DMOcasio@SRF.LAW

	By Seller:

	DECENTRALIZED SHARING SYSTEMS, INC.

	By:
	Name:
	Title:

	By Buyer:

	SHARING SERVICES GLOBAL CORPORATION

	By:
	Name:
	Title:

	(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.