Dss, Inc 10-Q for FY2021 Q2

Dss, Inc. (DSS)

10-Q 2021-08-23 For: 2021-06-30

Added on April 10, 2026

About this 10-Q

Dss, Inc filed this 10-Q on August 23, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.19M; up 50.6% from $2.78M a year earlier
Net loss: $8.42M; compared with a net loss of $792K a year earlier

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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	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of June 30, 2021and December 31, 2020	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	5
	Consolidated Statement of Changes in Stockholders’ Equity for the three and six months ended June 31, 2021 and 2020	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	31

PART II	OTHER INFORMATION	32
Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3	Defaults upon Senior Securities	32
Item 4	Mine Safety Disclosures	32
Item 5	Other Information	32

	June 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	65,645,000		$	5,183,000
Accounts receivable, net		3,223,000			3,589,000
Inventory		3,220,000			1,955,000
Assets held for sale - discontinued operations		-			531,000
Current portion of notes receivable, net		14,511,000			-
Prepaid expenses and other current assets		1,751,000			1,192,000
Total current assets		88,350,000			12,450,000

Property, plant and equipment, net		4,970,000			4,100,000
Investment, real estate		6,565,000			-
Other investments		13,329,000			1,788,000
Investment, equity method		17,033,000			12,234,000
Marketable securities		7,319,000			9,136,000
Notes receivable		3,023,000			537,000
Non-current assets held for sale - discontinued operations		-			790,000
Other assets		308,000			384,000
Right-of-use assets		118,000			182,000
Goodwill		26,862,000			26,862,000
Other intangible assets, net		23,284,000			23,456,000
Total assets	$	191,161,000		$	91,919,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,591,000		$	1,457,000
Accrued expenses and deferred revenue		8,026,000			5,260,000
Other current liabilities		736,000			1,435,000
Current Liabilities held for sale - discontinued operations		-			275,000
Current portion of lease liability		101,000			167,000
Current portion of long-term debt, net		687,000			278,000
Total current liabilities		11,141,000			8,872,000

Long-term debt, net		7,467,000			1,976,000
Long term lease liability		17,000			15,000
Non-current liabilities held for sale - discontinued operations		-			505,000
Other long-term liabilities		507,000			507,000
Deferred tax liability, net		1,341,000			3,499,000

Commitments and contingencies (Note 9)

Stockholders’ equity
Preferred stock, $.02 par value; 47,000 shares authorized, shares issued and outstanding (43,000 on December 31, 2020); Liquidation value $1,000 per share, $ - aggregate ($43,000,000 on December 31, 2020).		-			1,000
Common stock, $.02 par value; 200,000,000 shares authorized, 67,590,000 shares issued and outstanding (5,836,000 on December 31, 2020)		1,351,000			116,000
Additional paid-in capital		279,947,000			174,380,000
Non-controlling interest in subsidiary		3,171,000			3,430,000
Accumulated deficit		(113,781,000	)		(101,382,000	)
Total stockholders’ equity		170,688,000			76,545,000

Total liabilities and stockholders’ equity	$	191,161,000		$	91,919,000

	2021			2020			2021			2020
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
Revenue:
Printed products	$	3,376,000		$	2,272,000		$	7,237,000		$	5,438,000
Direct marketing		809,000			506,000			1,416,000			1,078,000
Total revenue		4,185,000			2,778,000			8,653,000			6,516,000

Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization		3,042,000			1,729,000			6,330,000			4,302,000
Selling, general and administrative (including stock based compensation)		7,377,000			2,039,000			11,434,000			3,878,000
Depreciation and amortization		821,000			273,000			1,335,000			573,000
Total costs and expenses		11,240,000			4,041,000			19,099,000			8,753,000
Operating loss		(7,055,000	)		(1,263,000	)		(10,446,000	)		(2,237,000	)

Other income (expense):
Interest income		1,485,000			27,000			1,537,000			50,000
Other income		250,000			-			250,000			-
Interest expense		(106,000	)		(42,000	)		(126,000	)		(73,000	)
Gain on extinguishment of debt		-			-			116,000			-
(Loss) gain on investments		(6,821,000	)		580,000			(7,898,000	)		584,000
Loss on equity method investment		(332,000	)		-			(911,000	)		-
Loss from continuing operations before income taxes		(12,579,000	)		(698,000	)		(17,478,000	)		(1,676,000	)

Income tax benefit		1,854,000			-			2,691,000			-
Loss from continuing operations		(10,725,000	)		(698,000	)		(14,787,000	)		(1,676,000	)
Income (loss) from discontinued operations, net of tax		2,079,000			(208,000	)		2,129,000			(1,197,000	)
Net loss		(8,646,000	)		(906,000	)		(12,658,000	)		(2,873,000	)

Loss from continuing operations attributed to noncontrolling interest		228,000			114,000			259,000			181,000

Net loss attributable to common stockholders		(8,418,000	)		(792,000	)		(12,399,000	)		(2,692,000	)

Loss per common share - continuing operations:
Basic	$	(0.30	)	$	(0.28	)	$	(0.53	)	$	(0.80	)
Diluted	$	(0.30	)	$	(0.28	)	$	(0.53	)	$	(0.80	)

Earnings/ (loss) per common share - discontinued operations:
Basic	$	0.06		$	(0.10	)	$	0.08		$	(0.64	)
Diluted	$	0.06		$	(0.10	)	$	0.08		$	(0.64	)

Shares used in computing earnings (loss) per common share:
Basic		34,888,054			2,103,199			27,203,137			1,870,439
Diluted		34,888,054			2,103,199			27,203,137			1,870,439

	6 Framark Drive
	Victor, NY 14564
	(Address of principal executive offices)

	(585) 325-3610
	(Registrant’s telephone number, including area code)

	2021			2020
Cash flows from operating activities:
Net loss from continuing operations	$	(14,787,000	)	$	(1,676,000	)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation and amortization		1,335,000			573,000
Stock based compensation		(15,000	)		54,000
Loss on equity method investment		911,000			-
Loss (gain) on investments		7,898,000			(584,000	)
Gain on extinguishment of debt		(116,000	)		-
Deferred tax benefit		(2,693,000	)		-
Accretion of debt discount, origination fee, and prepaid interest		(1,698,000	)		-
Decrease (increase) in assets:
Accounts receivable, net		366,000			1,399,000
Inventory		(1,265,000	)		(266,000	)
Prepaid expenses and other current assets		(559,000	)		(86,000	)
Other assets		(112,000	)		(94,000	)
Increase (decrease) in liabilities:
Accounts payable		159,000			(766,000	)
Accrued expenses and deferred revenue		802,000			(162,000	)
Other liabilities		(698,000	)		133,000
Net cash used by operating activities		(10,248,000	)		(1,475,000	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,263,000	)		(80,000	)
Purchase of real estate		(6,565,000	)		-
Purchase of investments		(18,114,000	)		(1,291,000	)
Purchase of marketable securities		(8,789,000	)		(1,392,000	)
Purchase of equity investment		(400,000	)		-
Sale of marketable securities		9,185,000			-
Purchase of intangible assets		(585,000	)		-
Note receivable investment		(18,799,000	)		(566,000	)
Net cash used by investing activities		(45,330,000	)		(3,329,000	)

Cash flows from financing activities:
Payments of long-term debt		(81,000	)		(142,000	)
Borrowings of long-term debt		6,328,000			1,272,000
Borrowings from revolving lines of credit, net		-			(500,000	)
Deferred financing fees		(186,000	)		-
Issuances of common stock, net of issuance costs		106,772,000			10,220,000
Net cash provided by financing activities		112,833,000			10,850,000

Cash flows from discontinued operations:
Cash provided by discontinued operations		161,000			167,000
Cash provided (used) by investing activities		3,046,000			(66,000	)
Cash used by financing activities		-			(67,000	)
Net cash provided by discontinued operations		3,207,000			34,000

Net increase in cash		60,462,000			6,080,000
Cash and cash equivalents at beginning of period		5,183,000			1,096,000

Cash and cash equivalents at end of period	$	65,645,000		$	7,176,000

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

Balance, December 31, 2020		5,836,000	$	116,000		43,000		$	1,000		$	174,380,000		$	3,430,000		$	(101,382,000	)	$	76,545,000

Issuance of common stock, net		21,834,000		436,000		-			-			60,632,000			-			-			61,068,000
Stock based payments, net of tax effect		-		-		-			-			15,000			-			-			15,000
Stock based payments, net of tax effect, shares
Conversion of preferred stock
Conversion of preferred stock, shares
Net loss		-		-		-			-			-			(31,000	)		(3,981,000	)		(4,012,000	)
Balance, March 31, 2021		27,670,000	$	552,000		43,000		$	1,000		$	235,027,000		$	3,399,000		$	(105,363,000	)	$	133,616,000

Issuance of common stock, net		33,350,000	$	668,000		-		$	-		$	45,080,000		$	-		$	-		$	45,748,000
Stock based payments, net of tax effect		-		-		-			-			(30,000	)		-			-			(30,000	)
Conversion of preferred stock		6,570,000		131,000		(43,000	)		(1,000	)		(130,000	)		-			-			-
Net loss		-		-		-			-			-			(228,000	)		(8,418,000	)		(8,646,000	)
Balance, June 30, 2021		67,590,000	$	1,351,000		-		$	-		$	279,947,000		$	3,171,000		$	(113,781,000	)	$	170,688,000

Balance, December 31, 2019		1,206,000	$	24,000		-		$	-		$	115,560,000			-		$	(103,281,000	)	$	12,303,000

Issuance of common stock, net		863,000		18,000		-			-			4,036,000			-			-			4,054,000
Stock based payments, net of tax effect		-		-		-			-			28,000			-			-			28,000
Net loss		-		-		-			-			-			(67,000	)		(1,900,000	)		(1,967,000	)
Balance, March 31, 2020		2,069,000	$	42,000		-		$	-		$	119,624,000		$	(67,000	)	$	(105,181,000	)	$	14,418,000

Issuance of common stock, net		896,000	$	17,000		-		$	-		$	6,168,000		$	-		$	-		$	6,185,000
Stock based payments, net of tax effect		30,000		1,000		-			-			266,000			-			-			267,000
Net loss		-		-		-			-			-			(114,000	)		(792,000	)		(906,000	)
Balance, June 30, 2020		2,995,000	$	60,000		-		$	-		$	126,058,000		$	(181,000	)	$	(105,973,000	)	$	19,964,000

	2021
	Adjusted Cost		Unrealized Gain/(Loss)			Fair Value		Cash and Cash Equivalents		Marketable Securities		Investments
Cash and cash equivalents	$	6,497,000	$	-		$	6,497,000	$	6,497,000	$	-	$	-
Level 1				-
Money Market Funds		59,148,000		-			59,148,000		59,148,000		-		-
Marketable Securities		4,727,000		2,592,000			7,319,000		-		7,319,000		-
Level 2
Warrants		15,657,000		(6,117,000	)		9,540,000		-		-		9,540,000
Total	$	86,029,000	$	(3,525,000	)	$	82,504,000	$	65,645,000	$	7,319,000	$	9,540,000


Net sales	$	64,811,151
Gross profit	$	46,546,657
Operating loss	$	(2,177,526	)
Loss before income taxes	$	(1,829,530	)
Income tax provision	$	594,509
Net loss	$	(1,235,021	)

	Totals
2021		91,000
2022		19,000
2023		4,000
2024		4,000
2025		4,000
2026		2,000
Total lease payments		124,000
Less: Imputed Interest		(6,000	)
Present value of remaining lease payments	$	118,000

Current	$	101,000
Noncurrent	$	17,000

Weighted-average remaining lease term (years)		1.0

Weighted-average discount rate		5.4	%

	For the Three Months Ended			For the Six Months Ended
	June 30, 2020			June 30, 2020

Revenue:
Printed products	$	603,000		$	1,383,000
Total revenue		603,000			1,383,000

Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization		484,000			1,113,000
Selling, general and administrative (including stock based compensation)		286,000			733,000
Depreciation and amortization		58,000			115,000
Impairment of goodwill		-			685,000
Total costs and expenses		828,000			2,646,000
Operating loss		(225,000	)		(1,263,000	)

Other income (expense):
Interest expense		(7,000	)		(15,000	)
Income (loss) before income taxes		(232,000	)		(1,278,000	)

Income tax expense (benefit)		-			-
Income (loss) from discontinued operations	$	(232,000	)	$	(1,278,000	)

	June 30, 2021		December 31, 2020
	unaudited		unaudited

ASSETS
Current assets:
Cash	$	-	$	43,000
Accounts receivable, net		-		321,000
Prepaid expenses and other current assets		-		167,000
Total current assets		-		531,000

Property, plant and equipment, net		-		46,000
Total assets		-		577,000
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	-	$	25,000
Accrued expenses and deferred revenue		-		10,000
Total current liabilities		-		35,000

	2021			2020

Cash paid for interest	$	126,000		$	73,000

Non-cash investing and financing activities:
Termination of right of use lease asset	$	(744,000	)	$	—
Termination of right of use lease liability	$	744,000		$	—
Shares received for loan origination fee	$	(3,000,000	)
Shares received for prepaid loan interest	$	(2,440,000	)
Long-lived assets acquired through settlement of notes receivable	$	-		$	838,000
Shares issued for marketing services	$	-		$	210,000

	001-32146
	Commission file number

Three Months Ended June 30, 2021	Packaging and Printing		Direct Marketing			Biohealth Group			Securities			Corporate			Total
Revenue	$	3,376,000	$	809,000		$	-		$	-		$	-		$	4,185,000
Depreciation and amortization		191,000		274,000			278,000			-			78,000			821,000
Interest expense		19,000		2,000			1,000			67,000			17,000			106,000
Stock based compensation		1,000		-			-			-			(31,000	)		(30,000	)
Net income (loss) from continuing operations		65,000		(5,985,000	)		(610,000	)		(173,000	)		(4,022,000	)		(10,725,000	)
Capital expenditures		1,202,000		-			-			6,565,000			(57,000	)		7,710,000
Identifiable assets		29,463,000		44,772,000			53,717,000			10,939,000			52,270,000			191,161,000

Three Months Ended June 30, 2020	Packaging and Printing		Direct Marketing			Biohealth Group		Securities	Corporate			Total
Revenue	$	2,272,000	$	506,000		$	-		$	-		$	2,778,000
Depreciation and amortization		195,000		-			-			78,000			273,000
Interest expense		28,000		-			-			14,000			42,000
Stock based compensation		4,000		-			-			(21,000	)		(17,000	)
Net income (loss) from continuing operations		64,000		(25,000	)		-			(735,000	)		(696,000	)
Capital expenditures		31,000		-			-			2,000			33,000
Identifiable assets		9,715,000		1,411,000			-			13,022,000			24,148,000

Six Months Ended June 30, 2021	Packaging and Printing		Direct Marketing			Biohealth Group			Securities			Corporate			Total
Revenue	$	7,237,000	$	1,416,000		$	-		$	-		$	-		$	8,653,000
Depreciation and amortization		307,000		319,000			556,000			-			153,000			1,335,000
Interest expense		39,000		2,000			1,000			67,000			(17,000	)		126,000
Stock based compensation		1,000		-			-			-			(16,000	)		(15,000	)
Net income (loss) from continuing operations		283,000		(7,785,000	)		(1,308,000	)		(231,000	)		(5,746,000	)		(14,787,000	)
Capital expenditures		1,202,000		6,000			-			6,565,000			55,000			7,828,000
Identifiable assets		29,463,000		44,772,000			53,717,000			10,939,000			52,270,000			191,161,000

Six Months Ended June 30, 2020	Packaging and Printing		Direct Marketing		Biohealth Group		Securities		Corporate			Total
Revenue	$	5,438,000	$	1,078,000	$	-	$	-	$	-		$	6,516,000
Depreciation and amortization		418,000		-		-		-		155,000			573,000
Interest expense		55,000		-		-		-		18,000			73,000
Stock based compensation		8,000		-		-		-		46,000			54,000
Net income (loss) from continuing operations		86,000		179,000		-		-		(1,941,000	)		(1,676,000	)
Capital expenditures		76,000		-		-		-		4,000			80,000
Identifiable assets		9,715,000		1,411,000		-		-		13,022,000			24,148,000

Three months ended June 30, 2021
Packaging Printing and Fabrication	$	3,336,000
Commercial and Security Printing		40,000
Total Printed Products	$	3,376,000

Three months ended June 30, 2020
Packaging Printing and Fabrication	$	2,103,000
Commercial and Security Printing		169,000
Total Printed Products	$	2,272,000

Six months ended June 30, 2021
Packaging Printing and Fabrication	$	7,056,000
Commercial and Security Printing		181,000
Total Printed Products	$	7,237,000

Six months ended June 30, 2020
Packaging Printing and Fabrication	$	5,067,000
Commercial and Security Printing		371,000
Total Printed Products	$	5,438,000

Three months ended June 30, 2021
Direct Marketing Internet Sales	$	809,000
Total Direct Marketing	$	809,000

	Three months ended June 30, 2021		Three months ended June 30, 2020		% Change			Six months ended June 30, 2021		Six months ended June 30, 2020		% Change
Revenue
Printed products	$	3,376,000	$	2,272,000		49	%	$	7,237,000	$	5,438,000		33	%
Direct marketing		809,000		506,000		60	%		1,416,000		1,078,000		31	%

Total Revenue	$	4,185,000	$	2,778,000		51	%	$	8,653,000	$	6,516,000		33	%

	Three months ended June 30, 2021			Three months ended June 30, 2020		% Change			Six months ended June 30, 2021			Six months ended June 30,2020		% Change
Costs and expenses
Cost of revenue, exclusive of depreciation and amortization	$	3,042,000		$	1,729,000		76	%	$	6,330,000		$	4,302,000		47	%
Sales, general and administrative compensation		4,609,000			749,000		515	%		6,337,000			1,393,000		355	%
Depreciation and amortization		821,000			273,000		201	%		1,335,000			573,000		133	%
Professional fees		1,235,000			692,000		78	%		2,205,000			1,272,000		73	%
Stock based compensation		(30,000	)		47,000		-164	%		(15,000	)		54,000		-128	%
Sales and marketing		896,000			340,000		164	%		1,570,000			664,000		136	%
Rent and utilities		75,000			78,000		-4	%		108,000			178,000		-39	%
Research and development		211,000			-		N/A			455,000			-		N/A
Other operating expenses		381,000			133,000		186	%		774,000			317,000		144	%

Total costs and expenses	$	11,240,000		$	4,041,000		178	%	$	19,099,000		$	8,753,000		118	%

	Three months ended June 30, 2021			Three months ended June 29, 2020			% Change			Six months ended June 30, 2021			Six months ended June 30,2020			% Change

Loss from continuing operations	$	(10,725,000	)	$	(698,000	)		-1437	%	$	(14,787,000	)	$	(1,676,000	)		-782	%

Income (loss) from discontinued operations		2,079,000			(208,000	)		1100	%		2,129,000			(1,197,000	)		278	%
Net loss	$	(8,646,000	)	$	(906,000	)		-854	%	$	(12,658,000	)	$	(2,873,000	)		-341	%

Exhibit Number		Exhibit Description

10.1		Securities Purchase Agreement, by and among, Sharing Services Global Corporation, and Decentralized Sharing Systems, Inc., dated April 5, 2021 (incorporated by reference to exhibit 1.1 to Form 8-K, filed with the Commission on April 9, 2021
10.2		Convertible Promissory Note, dated April 5, 2021 (incorporated by reference to exhibit 10.2 to Form 8-K filed with Commission on April 9, 2021)
10.3		Stock Purchase Agreement between Proof Authentication Corporation and Document Security Systems, Inc. dated May 7, 2021 Relating to the Purchase and Sale of 100% of the Shares of DSS Digital Inc. (incorporated by reference to Exhibit 1.1 to Form 8-K filed with the Commission on May 11, 2021)
10.4		Underwriting Agreement between Document Security Systems, Inc. and Aegis Capital Corp. (incorporated by reference to Form 8-K filed with the Commission on June 17, 2021)
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		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

	DOCUMENT SECURITY SYSTEMS, INC.

August 23, 2021	By:	/s/ Frank D. Heuszel
		Frank D. Heuszel
		Chief Executive Officer
		(Principal Executive Officer)

August 23, 2021	By:	/s/ Todd D. Macko
		Todd D. Macko
		Interim Chief Financial Officer