DSS 10-Q

Dss, Inc. (DSS)

10-Q 2024-08-13 For: 2024-06-30

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Added on April 10, 2026

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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	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2024 and 2023 (Unaudited)	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2024 and 2023 (Unaudited)	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

	June 30, 2024 (unaudited)			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	10,719,000		$	6,615,000
Accounts receivable, net		2,531,000			3,994,000
Inventory		3,572,000			2,819,000
Assets held for sale		46,040,000			51,595,000
Current portion of notes receivable		3,907,000			8,772,000
Prepaid expenses and other current assets		929,000			839,000
Total current assets		67,698,000			74,634,000

Property, plant and equipment, net		6,054,000			6,417,000
Investment in real estate, net		6,226,000			6,279,000
Other investments		1,282,000			1,282,000
Investment, equity method		135,000			128,000
Marketable securities		9,558,000			9,979,000
Notes receivable		117,000			111,000
Other assets		139,000			97,000
Right-of-use assets		6,841,000			7,210,000
Goodwill		26,862,000			26,862,000
Other intangible assets, net		19,536,000			20,193,000
Total assets	$	144,448,000		$	153,192,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	3,430,000		$	3,654,000
Accrued expenses and deferred revenue		1,989,000			2,512,000
Other current liabilities		2,456,000			983,000
Current portion of lease liability		661,000			686,000
Current portion of long-term debt, net		49,130,000			47,776,000
Total current liabilities		57,666,000			55,611,000

Long-term debt, net		7,029,000			7,451,000
Long term lease liability		6,603,000			6,917,000

Commitments and contingencies (Note 11)		-			-

Stockholders’ equity
Preferred stock, $.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, $.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		(264,930,000	)		(256,176,000	)
Total stockholders’ equity		55,173,000			63,927,000
Non-controlling interest in subsidiaries		17,977,000			19,286,000
Total stockholders’ equity		73,150,000			83,213,000

Total liabilities and stockholders’ equity	$	144,448,000		$	153,192,000


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023
Revenue:
Printed products	$	3,528,000		$	3,626,000		$	6,601,000		$	9,661,000
Rental income		438,000			1,543,000			838,000			3,228,000
Net investment income		41,000			197,000			136,000			314,000
Direct marketing		-			1,572,000			-			5,566,000
Commission revenue		204,000			295,000			507,000			295,000
Total revenue		4,211,000			7,233,000			8,082,000			19,064,000

Costs and expenses:
Cost of revenue		5,673,000			4,832,000			10,663,000			13,365,000
Selling, general and administrative		3,473,000			8,851,000			7,035,000			17,824,000
Total costs and expenses		9,146,000			13,683,000			17,698,000			31,189,000
Operating loss		(4,935,000	)		(6,450,000	)		(9,616,000	)		(12,125,000	)

Other income (expense):
Interest income		195,000			407,000			302,000			538,000
Dividend income		-			8,000			-			12,000
Other income (expense)		12,000			147,000			38,000			175,000
Interest expense		(142,000	)		(138,000	)		(190,000	)		(388,000	)
Foreign Currency Translation Adjustment		(9,000	)		-			(14,000	)		-
Gain/(loss) on equity method investment		8,000			(18,000	)		7,000			(22,000	)
Loss on investments		(383,000	)		(27,922,000	)		(572,000	)		(30,790,000	)
Provision for loan losses		(53,000	)		(3,757,000	)		(346,000	)		(3,757,000	)
Gain on sale of assets		165,000			-			165,000			-
Loss from continuing operations before income taxes		(5,142,000	)		(37,723,000	)		(10,226,000	)		(46,357,000	)

Income tax benefit		188,000			-			163,000			-
Net loss	$	(4,954,000	)	$	(37,723,000	)	$	(10,063,000	)	$	(46,357,000	)
Loss (gain) from continuing operations attributed to noncontrolling interest		271,000			(200,000	)		1,309,000			398,000

Net loss attributable to common stockholders	$	(4,683,000	)	$	(37,923,000	)	$	(8,754,000	)	$	(45,959,000	)

Loss per common share:
Basic	$	(0.66	)	$	(5.41	)	$	(1.24	)	$	(6.59	)
Diluted	$	(0.66	)	$	(5.41	)	$	(1.24	)	$	(6.59	)
Shares used in computing loss per common share:
Basic		7,066,772			7,007,046			7,066,772			6,978,952
Diluted		7,066,772			7,007,046			7,066,772			6,978,952

	2024			2023
Cash flows from operating activities:
Loss from continuing operations	$	(10,063,000	)	$	(46,357,000	)
Adjustments to reconcile loss from continuing operations to net cash used by operating activities:
Depreciation and amortization		1,136,000			2,647,000
Stock based compensation		-			268,000
Loss (income) on equity method investment		(7,000	)		22,000
Gain on investments		572,000			30,790,000
Change in ROU assets		369,000			774,000
Gain on sale of assets		(165,000	)		-
Provision for loan losses		815,000			3,757,000
Decrease (increase) in assets:
Accounts receivable		1,679,000			2,531,000
Inventory		(753,000	)		4,707,000
Prepaid expenses and other current assets		504,000			592,000
Other assets		(42,000	)		3,123,000
Increase (decrease) in liabilities:
Accounts payable		(224,000	)		(3,846,000	)
Accrued expenses		(529,000	)		(15,958,000	)
ROU liabilities		(339,000	)		(1,052,000	)
Other liabilities		1,473,000			(81,000	)
Net cash used by operating activities - continuing operations		(5,574,000	)		(18,083,000	)
Net cash used by operating activities - held for sale		-			(1,632,000	)
Net cash used by operating activities		(5,574,000	)		(19,715,000	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(29,000	)		(496,000	)
Purchase of investment		(379,000	)		-
Disposal of property, plant and equipment		5,140,000			215,000
Sale of marketable securities		-			11,330,000
Payments received on notes receivable		4,044,000			2,327,000
Net cash provided by investing activities		8,776,000			13,376,000

Cash flows from financing activities:
Payments of long-term debt		(1,269,000	)		(5,519,000	)
Borrowings of long-term debt		2,171,000			2,601,000
Net cash provided (used) by financing activities		902,000			(2,918,000	)

Net increase (decrease) in cash - continuing operations		4,104,000			(7,625,000	)
Net increase (decrease) in cash - held for sale		-			(1,632,000	)
Cash and cash equivalents at beginning of period		6,615,000			19,290,000

Cash and cash equivalents at end of period	$	10,719,000		$	10,033,000


	Common Stock				Preferred Stock				Additional		Accumulated			Total DSS			Non- controlling
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Equity			Interest in 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
															-
Stock based payments		62,350		1,000		-		-		267,000		-			268,000			-			268,000
Deconsolidation of Sharing Services		-		-		-		-		-		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		7,013,208	$	140,000		-	$	-	$	320,033,000	$	(221,529,000	)	$	98,644,000		$	35,785,000		$	134,429,000

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		-		-		-		-		-		(8,754,000	)		(8,754,000	)		(1,309,000	)		(10,063,000	)
Balance, June 30, 2024		7,066,772	$	140,000		-	$	-	$	319,963,000	$	(264,930,000	)	$	55,173,000		$	17,977,000		$	73,150,000

	June			December
	2024			2023
Finished Goods	$	2,592,000		$	2,218,000
Work in Process		173,000			180,000
Raw Materials		837,000			439,000
Inventory Gross	$	3,602,000		$	2,837,000
Less allowance for obsolescence		(30,000	)		(18,000	)
Inventory Net	$	3,572,000		$	2,819,000

	June 30, 2024
	cost		Unrealized Gain/(Loss)			Fair Value		Cash and Cash Equivalents		Marketable Securities
Cash	$	10,649,000	$	-		$	10,649,000	$	10,649,000	$	-
Level 1
Money Market Funds		70,000		-			70,000		70,000		-
Marketable Securities		26,984,000		(17,426,000	)	$	9,558,000		-		9,558,000
Total	$	37,703,000	$	(17,426,000	)	$	20,277,000	$	10,719,000	$	9,558,000

	December 31, 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

Year	Amount
2024	$	49,130,000
2025		831,000
2026		902,000
2027		948,000
2028		996,000
Thereafter		3,352,000

	Totals
2024	$	479,000
2025		860,000
2026		839,000
2027		808,000
2028		824,000
After		4,913,000
Total lease payments		8,723,000
Less: Imputed Interest		(1,459,000	)
Present value of remaining lease payments	$	7,264,000

Current	$	661,000
Noncurrent	$	6,603,000

Weighted-average remaining lease term (years)		10.0

Weighted-average discount rate		4.1	%

Three Months Ended June 30, 2024	Product Packaging			Commercial Lending			Direct Marketing		Biotechnology			Securities			Corporate			Total
Revenue	$	3,539,000		$	44,000		$	3,000	$	1,000		$	624,000		$	-		$	4,211,000
Cost of Revenue		3,598,000			(4,484,000	)		-		10,000			2,066,000			4,483,000			5,673,000
Depreciation and amortization		190,000			-			34,000		288,000			39,000			4,000			555,000
Interest expense		45,000			-			-		-			1,199,000			-			1,244,000
Interest income		-			(1,000	)		36,000		3,000			156,000			1,000			195,000
Net income (loss) from continuing operations		(894,000	)		502,000			104,000		(669,000	)		(2,566,000	)		(1,431,000	)		(4,954,000	)
Capital expenditures		29,000			-			-		-			-			-			29,000
Identifiable assets		19,683,000			12,129,000			442,000		48,631,000			59,211,000			4,352,000			144,448,000
Assets held for sale		-			-			-		-			46,040,000			-			46,040,000

Three Months Ended June 30,2023	Product Packaging			Commercial Lending			Direct Marketing			Biotechnology			Securities			Corporate		Total
Revenue	$	3,626,000		$	197,000		$	1,572,000		$	-		$	1,838,000		$	-	$	7,233,000
Cost of Revenue		2,421,000			-			516,000			2,000			1,820,000			73,000		4,832,000
Depreciation and amortization		193,000			-			43,000			289,000			782,000			7,000		1,314,000
Interest expense		47,000			-			-			-			91,000			-		138,000
Interest income		-			-			280,000			49,000			78,000					407,000
Net income (loss) 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

Six Months Ended June 30, 2024	Product Packaging			Commercial Lending			Direct Marketing		Biotechnology			Securities			Corporate			Total
Revenue	$	6,620,000		$	146,000		$	3,000	$	2,000		$	1,311,000		$	-		$	8,082,000
Cost of Revenue		6,365,000			(4,015,000	)		-		20,000			3,810,000			4,483,000			10,663,000
Depreciation and amortization		381,000			-			68,000		577,000			107,000			3,000			1,136,000
Interest expense		91,000			-			-		-			2,299,000			-			2,390,000
Interest income		-			-			72,000		9,000			219,000			2,000			302,000
Net income (loss) from continuing operations		(1,367,000	)		(880,000	)		34,000		(1,610,000	)		(4,915,000	)		(1,325,000	)		(10,063,000	)
Capital expenditures		29,000			-			-		-			-			-			29,000
Total Identifiable assets		19,683,000			12,129,000			442,000		48,631,000			59,211,000			4,352,000			144,448,000
Assets held for sale		-			-			-		-			46,040,000			-			46,040,000

Six Months Ended June 30,2023	Product Packaging		Commercial Lending			Direct Marketing			Biotechnology			Securities			Corporate			Total
Revenue	$	9,661,000	$	314,000		$	5,566,000		$	-		$	3,523,000		$	-		$	19,064,000
Cost of revenue		7,081,000		-			1,806,000			63,000			4,340,000			75,000			13,365,000
Depreciation and amortization		381,000		-			89,000			586,000			1,526,000			65,000			2,647,000
Interest expense		86,000		-			-			-			302,000			-			388,000
Interest income		-		-			285,000			143,000			110,000			-			538,000
Net income (loss) from continuing operations		491,000		(1,777,000	)		(31,260,000	)		(4,782,000	)		(6,441,000	)		(2,588,000	)		(46,357,000	)
Capital expenditures		580,000		-			-			17,000			35,000			(19,000	)		613,000
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, 2024
Packaging Printing and Fabrication	$	3,441,000
Commercial and Security Printing		87,000
Total Printed Products	$	3,528,000

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

Six months ended June 30, 2024
Packaging Printing and Fabrication	$	6,323,000
Commercial and Security Printing		278,000
Total Printed Products	$	6,601,000

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

Three months ended June 30, 2024
Direct Marketing Internet Sales	$	-
Total Direct Marketing	$	-

Three months ended June 30, 2024
Commission income	$	204,000
Total commission income	$	204,000

	●	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.

	●	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.

	Three months ended June 30, 2024		Three months ended June 30, 2023		% Change			Six months ended June 30, 2024		Six months ended June 30, 2023		% Change

Printed products	$	3,528,000	$	3,626,000		-3	%	$	6,601,000	$	9,661,000		-32	%
Rental income		438,000		1,543,000		-72	%		838,000		3,228,000		-74	%
Net investment income		41,000		197,000		-79	%		136,000		314,000		-57	%
Commission revenue		204,000		295,000		-31	%		507,000		295,000		72	%
Direct marketing		-		1,572,000		-100	%		-		5,566,000		-100	%

Total Revenue	$	4,211,000	$	7,233,000		-42	%	$	8,082,000	$	19,064,000		-58	%

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 13, 2024	By:	/s/ Frank D. Heuszel
		Frank D. Heuszel
		Chief Executive Officer
		(Principal Executive Officer)

August 13, 2024	By:	/s/ Todd D. Macko
		Todd D. Macko
		Chief Financial Officer