Dss, Inc 10-Q for FY2022 Q3

Dss, Inc. (DSS)

10-Q 2022-11-14 For: 2022-09-30

Added on April 10, 2026

About this 10-Q

Dss, Inc filed this 10-Q on November 14, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $11.86M; up 159.8% from $4.57M a year earlier
Net loss: $24.8M; compared with a net loss of $6.68M a year earlier
Diluted EPS: -$0.15; compared with -$0.19 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	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2022 and 2021	6
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 4	Controls and Procedures	36

PART II	OTHER INFORMATION	37
Item 1	Legal Proceedings	37
Item 1A	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3	Defaults upon Senior Securities	37
Item 4	Mine Safety Disclosures	37
Item 5	Other Information	37
Item 6	Exhibits	37

	September 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	22,845,000		$	56,595,000
Accounts receivable, net		8,989,000			5,673,000
Inventory		8,663,000			8,261,000
Current portion of notes receivable		12,273,000			6,310,000
Prepaid expenses and other current assets		2,898,000			3,466,000
Total current assets		55,668,000			80,305,000

Property, plant and equipment, net		16,065,000			17,674,000
Investment in real estate, net		55,493,000			56,374,000
Other investments		8,190,000			11,001,000
Investment, equity method		1,326,000			1,080,000
Marketable securities		28,083,000			14,172,000
Notes receivable		1,704,000			5,878,000
Other assets		1,393,000			489,000
Right-of-use assets		8,459,000			498,000
Goodwill		56,606,000			56,606,000
Other intangible assets, net		31,893,000			38,630,000
Total assets	$	264,880,000		$	282,707,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	4,048,000		$	1,920,000
Accrued expenses and deferred revenue		11,627,000			21,180,000
Other current liabilities		396,000			402,000
Current portion of lease liability		819,000			393,000
Current portion of long-term debt, net		6,680,000			3,916,000
Total current liabilities		23,570,000			27,811,000

Long-term debt, net		50,163,000			55,711,000
Long term lease liability		7,991,000			120,000
Other long-term liabilities		507,000			880,000

Commitments and contingencies (Note 9)		-			-

Stockholders’ equity
Preferred stock, $.02 par value; 47,000 shares authorized, zero shares issued and outstanding (zero on December 31, 2021); Liquidation value $1,000 per share, zero aggregate. zero on December 31, 2021).		-			-
Common stock, $.02 par value; 200,000,000 shares authorized, 139,017,172 shares issued and outstanding (79,745,886 on December 31, 2021)		2,779,000			1,594,000
Additional paid-in capital		317,125,000			294,685,000
Accumulated deficit		(167,417,000	)		(134,503,000	)
Total stockholders’ equity		152,487,000			161,776,000
Non-controlling interest in subsidiaries		30,162,000			36,409,000
Total stockholders’ equity		182,649,000			198,185,000

Total liabilities and stockholders’ equity	$	264,880,000		$	282,707,000

	2022			2021			2022			2021
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue:
Printed products	$	5,032,000		$	3,416,000		$	12,650,000		$	10,652,000
Rental income		1,485,000			184,000			4,656,000			184,000
Management fee income		38,000			-			38,000			-
Net investment income		370,000			-			644,000			-
Direct marketing		4,937,000			966,000			17,939,000			2,382,000
Total revenue		11,862,000			4,566,000			35,927,000			13,218,000

Costs and expenses:
Cost of revenue		11,368,000			3,406,000			27,653,000			10,045,000
Selling, general and administrative (including stock based compensation)		14,677,000			6,705,000			40,316,000			19,164,000
Total costs and expenses		26,045,000			10,111,000			67,969,000			29,209,000
Operating loss		(14,183,000	)		(5,545,000	)		(32,042,000	)		(15,991,000	)

Other income (expense):
Interest income		319,000			1,593,000			613,000			3,130,000
Other income (expense)		3,627,000			325,000			4,203,000			575,000
Interest expense		(606,000	)		(31,000	)		(2,105,000	)		(157,000	)
Gain on extinguishment of debt		-			-			110,000			116,000
Gain/(loss) on equity method investment		344,000			(1,645,000	)		134,000			(2,556,000	)
Loss on investments		(14,302,000	)		(2,996,000	)		(10,479,000	)		(10,894,000	)
Gain on sale of assets		-			-			405,000			-
Loss from continuing operations before income taxes		(24,801,000	)		(8,299,000	)		(39,161,000	)		(25,777,000	)

Income tax benefit		-			1,624,000			-			4,315,000
Loss from continuing operations		(24,801,000	)		(6,675,000	)		(39,161,000	)		(21,462,000	)
Income from discontinued operations, net of tax		-			-			-			2,129,000
Net loss		(24,801,000	)		(6,675,000	)		(39,161,000	)		(19,333,000	)

Loss from continuing operations attributed to noncontrolling interest		4,587,000			77,000			6,247,000			336,000

Net loss attributable to common stockholders		(20,214,000	)		(6,598,000	)		(32,914,000	)		(18,997,000	)

Loss per common share:
Basic	$	(0.15	)	$	(0.19	)	$	(0.32	)	$	(0.78	)
Diluted	$	(0.15	)	$	(0.19	)	$	(0.32	)	$	(0.78	)

Earnings per common share - discontinued operations:
Basic	$	-		$	-		$	-		$	0.08
Diluted	$	-		$	-		$	-		$	0.08

Shares used in computing loss per common share:
Basic		134,893,360			34,888,054			102,390,079			27,203,137
Diluted		134,893,360			34,888,054			102,390,079			27,203,137


	2022			2021
Cash flows from operating activities:
Net loss from continuing operations	$	(39,161,000	)	$	(21,462,000	)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation and amortization		9,351,000			2,075,000
Stock based compensation		4,000			74,000
Gain/(loss) on equity method investment		(134,000	)		2,556,000
Loss (gain) on investments		10,479,000			10,894,000
Loss on allowance for obsolescence of inventory		326,000			-
Change in ROU assets and lease liabilities, net		336,000			-
Gain on extinguishment of debt		(110,000	)		(116,000	)
Deferred tax benefit		-			(4,315,000	)
Accretion of debt discount, origination fee and prepaid interest		-			(2,287,000	)
Gain on sale of assets		(405,000	)
Impairment of notes receivable and other investments		1,899,000			-
Decrease (increase) in assets:
Accounts receivable		(3,316,000	)		829,000
Inventory		(728,000	)		(1,580,000	)
Prepaid expenses and other current assets		568,000			(277,000	)
Other assets		(904,000	)		(25,000	)
Increase (decrease) in liabilities:
Accounts payable		2,128,000			432,000
Accrued expenses		(3,205,000	)		1,808,000
Other liabilities		(379,000	)		(1,054,000	)
Net cash used by operating activities		(23,251,000	)		(12,448,000	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,349,000	)		(2,816,000	)
Purchase of real estate		(689,000	)		(6,565,000	)
Purchase of investment		-			(19,026,000	)
Purchase of marketable securities		(14,254,000	)		(8,789,000	)
Disposal of property, plant and equipment		2,557,000			-
Asset acquired with APB acquisition		-			1,235,000
Purchase of equity investment		-			(1,276,000	)
Sale of marketable securities		-			9,185,000
Issuance of new notes receivable, net origination fees		(4,687,000	)		(24,048,000	)
Payments received on notes receivable		786,000			-
Purchase of intangible assets		(180,000	)		(1,115,000	)
Net cash used by investing activities		(17,816,000	)		(53,215,000	)

Cash flows from financing activities:
Payments of long-term debt		(561,000	)		(1,893,000	)
Borrowings of long-term debt		6,360,000			7,102,000
Deferred financing fees		-			(186,000	)
Issuances of common stock, net of issuance costs		1,518,000			121,737,000
Net cash provided by financing activities		7,317,000			126,760,000

Cash flows from discontinued operations:
Cash provided by discontinued operations		-			207,000
Cash provided by investing activities		-			3,000,000
Net cash used by discontinued operations		-			3,207,000

Net increase (decrease) in cash		(33,750,000	)		64,304,000
Cash and cash equivalents at beginning of period		56,595,000			5,183,000

Cash and cash equivalents at end of period	$	22,845,000		$	69,487,000

	Shares		Amount		Shares			Amount			Capital			Deficit			Equity			Subsidiary			Total
	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, 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		42,924,000		858,000		-			-			16,547,000			-			17,405,000			-			17,405,000
Stock based payments		16,347,000		327,000		-			-			5,893,000			-			6,220,000			-			6,220,000
Net loss		-		-		-			-			-			(32,914,000	)		(32,914,000	)		(6,247,000	)		(39,161,000	)
Balance, September 30, 2022		139,017,000	$	2,779,000		-		$	-		$	317,125,000		$	(167,417,000	)	$	152,487,000		$	30,162,000		$	182,649,000

Balance, December 31, 2020		5,836,000	$	116,000		43,000		$	1,000		$	174,380,000		$	(101,382,000	)	$	73,115,000			3,430,000		$	76,545,000
Beginning balance		5,836,000	$	116,000		43,000		$	1,000		$	174,380,000		$	(101,382,000	)	$	73,115,000			3,430,000		$	76,545,000

Issuance of common stock, net of expenses		67,340,000		1,347,000		-			-			120,434,000			-			121,781,000			-			121,781,000
Stock based payments		-		-		-			-			(2,000	)		-			(2,000	)		-			(2,000	)
Conversion of preferred stock		6,570,000		131,000		(43,000	)		(1,000	)		(130,000	)		-			-			-			-
Acquisition of American Pacific Bancorp		-		-		-			-			-			-			-			20,301,000			20,301,000
Net loss		-		-		-			-			-			(18,997,000	)		(18,997,000	)		(336,000	)		(19,333,000	)
Balance, September 30, 2021		79,746,000	$	1,594,000		-		$	-		$	294,682,000		$	(120,379,000	)	$	175,897,000		$	23,395,000		$	199,292,000
Ending balance		79,746,000	$	1,594,000		-		$	-		$	294,682,000		$	(120,379,000	)	$	175,897,000		$	23,395,000		$	199,292,000

	2022
	Adjusted Cost		Unrealized Gain/(Loss)			Fair Value		Cash and Cash Equivalents		Marketable Securities		Investments
Cash	$	21,151,000	$	-		$	21,151,000	$	21,151,000	$	-	$	-
Level 1
Money Market Funds		1,694,000		-			1,694,000		1,694,000		-		-
Marketable Securities		32,498,000		(4,415,000	)		28,083,000		-		28,083,000		-
Investment in unconsolidated subsidiaries		-		-			-		-		-		-
Level 2
Warrants		3,318,000		(2,246,000	)		1,072,000		-		-		1,072,000
Convertible securities		1,023,000		(725,000)			298,000		-		-		298,000

Total	$	59,684,000	$	(7,386,000	)	$	52,298,000	$	22,845,000	$	28,083,000	$	1,370,000

	2021
		Adjusted Cost		Unrealized Gain/(Loss)		Fair Value		Cash and Cash Equivalents		Marketable Securities		Investments
Cash		$	50,286,000	$	-	$	50,286,000	$	50,286,000	$	-	$	-
Level 1
Money Market Funds		$	6,309,000		-		6,309,000		6,309,000		-		-
Marketable Securities		$	12,993,000		1,544,000		14,537,000		-		14,537,000		-
Level 2
Warrants		$	3,318,000		-		3,318,000		-		-		3,318,000
Convertible securities		$	1,023,000		-		1,023,000		-		-		1,023,000
Total		$	73,929,000	$	1,544,000	$	75,473,000	$	56,595,000	$	14,537,000	$	4,341,000


	Totals
2022		284,000
2023		1,132,000
2024		908,000
2025		877,000
2026		890,000
2027		904,000
After		5,768,000
Total lease payments		10,763,000
Less: Imputed Interest		(1,953,000	)
Present value of remaining lease payments	$	8,810,000

Current	$	819,000
Noncurrent	$	7,991,000

Weighted-average remaining lease term (years)		14.9

Weighted-average discount rate		4.3	%

	2022		2021

Cash paid for interest	$	1,907,000	$	139,000

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	)
Notes receivable converted to equity investments	$	1,940,000	$	-
Shares issued for the acquisition of marketable securities	$	7,169,000	$	-
Shares issued for the acquisition of notes receivable	$	8,717,000	$	-
Right of use asset addition	$	9,895,000	$	-
Shares issued in lieu of bonus cash	$	6,216,000	$	-


Three Months Ended September 30, 2022	Product Packaging			Commercial Lending		Direct Marketing			Biotechnology			Securities			Corporate			Total
Revenue	$	4,707,000		$	370,000	$	4,956,000		$	-		$	1,646,000		$	183,000		$	11,862,000
Depreciation and amortization		168,000			-		41,000			278,000			2,423,000			17,000			2,927,000
Interest expense		42,000			-		193,000			-			371,000			-			606,000
Interest income		-			-		3,000			94,000			79,000			143,000			319,000
Net income (loss) from continuing operations		(1,077,000	)		221,000		(15,379,000	)		(909,000	)		(3,182,000	)		(4,475,000	)		(24,801,000	)
Capital expenditures		300,000			-		73,000			-			-			-			373,000
Identifiable assets		24,035,000			48,121,000		39,979,000			57,225,000			81,766,000			13,754,000			264,880,000


Three Months Ended September 30,2021	Product Packaging		Commercial Lending		Direct Marketing			Biotechnology			Securities			Corporate			Total
Revenue	$	3,416,000	$	-	$	966,000		$	-		$	184,000		$	-		$	4,566,000
Depreciation and amortization		152,000		-		100,000			278,000			135,000			74,000			739,000
Interest expense		11,000		-		-			-			37,000			(17,000	)		31,000
Stock based compensation		1,000		-		-			-			-			12,000			13,000
Income tax benefit		-		-		-			-			-			1,624,000			1,624,000
Net income (loss) from continuing operations		358,000		64,000		(1,304,000	)		(647,000	)		(835,000	)		(4,311,000	)		(6,675,000	)
Capital expenditures		1,399,000		-		-			-			186,000			55,000			1,640,000
Identifiable assets		24,752,000		60,388,000		43,695,000			55,848,000			11,376,000			23,017,000			219,076,000


Nine Months Ended September 30, 2022	Product Packaging			Commercial Lending		Direct Marketing			Biotechnology			Securities			Corporate			Total
Revenue	$	11,876,000		$	644,000	$	18,000,000		$	94,000		$	4,817,000		$	496,000		$	35,927,000
Depreciation and amortization		525,000			-		248,000			835,000			7,637,000			106,000			9,351,000
Interest expense		100,000			-		193,000			-			1,812,000			-			2,105,000
Stock based compensation		1,000			-		-			-			-			3,000			4,000
Net income (loss) from continuing operations		(755,000	)		638,000		(19,102,000	)		(2,198,000	)		(8,334,000	)		(9,410,000	)		(39,161,000	)
Capital expenditures		1,242,000			-		88,000			-			15,000			4,000			1,349,000
Identifiable assets		24,035,000			48,121,000		39,979,000			57,225,000			81,766,000			13,754,000			264,880,000


Nine Months Ended September 30,2021	Product Packaging		Commercial Lending		Direct Marketing			Biotechnology			Securities			Corporate			Total
Revenue	$	10,652,000	$	-	$	2,382,000		$	-		$	184,000		$	-		$	13,218,000
Depreciation and amortization		459,000		-		419,000			835,000			134,000			228,000			2,075,000
Interest expense		49,000		-		2,000			1,000			87,000			18,000			157,000
Stock based compensation		2,000		-		-			-			-			40,000			42,000
Income tax benefit		-		-		-			-			-			4,315,000			4,315,000
Net income (loss) from continuing operations		641,000		64,000		(9,088,000	)		(1,955,000	)		(1,066,000	)		(10,058,000	)		(21,462,000	)
Capital expenditures		2,621,000		-		6,000			-			6,750,000			4,000			9,381,000
Identifiable assets		24,752,000		60,388,000		43,695,000			55,848,000			11,376,000			23,017,000			219,076,000

Printed Products Revenue Information:

Three months ended September 30, 2022
Packaging Printing and Fabrication	$	4,888,000
Commercial and Security Printing		144,000
Total Printed Products	$	5,032,000

Three months ended September 30, 2021
Packaging Printing and Fabrication	$	3,373,000
Commercial and Security Printing		43,000
Total Printed Products	$	3,416,000

Nine months ended September 30, 2022
Packaging Printing and Fabrication	$	12,357,000
Commercial and Security Printing		293,000
Total Printed Products	$	12,650,000

Nine months ended September 30, 2021
Packaging Printing and Fabrication	$	10,428,000
Commercial and Security Printing		224,000
Total Printed Products	$	10,652,000

Direct Marketing

Three months ended September 30, 2022
Direct Marketing Internet Sales	$	4,937,000
Total Direct Marketing	$	4,937,000

Three months ended September 30, 2021
Management fee income	$	-
Total Rental Income	$	-

Nine months ended September 30, 2021
Management fee income	$	-
Total Management fee income	$	-

	●	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 September 30, 2022		Three months ended September 30, 2021		% Change			Nine months ended September 30, 2022		Nine months ended September 30, 2021		% Change

Printed products	$	5,032,000	$	3,416,000		47	%	$	12,650,000	$	10,652,000		19	%
Rental income		1,485,000		184,000		707	%		4,656,000		184,000		2430	%
Management fee income		38,000		-		N/A			38,000		-		N/A
Net investment income		370,000		-		N/A			644,000		-		N/A
Direct marketing		4,937,000		966,000		411	%		17,939,000		2,382,000		653	%

Total Revenue	$	11,862,000	$	4,566,000		160	%	$	35,927,000	$	13,218,000		172	%

Exhibit Number		Exhibit Description

3.1		Articles of Incorporation

3.2		Bylaws

10.1		Revolving Credit Promissory Note between APB and Borrower 15 dated July 26, 2022.

10.2		Asset Purchase Agreement between DSS PureAir and Celios Corporation dated August 25, 2022

10.3		Subordinated Loan Agreement between DSS Financial Management and Borrower 14 dated August 29, 2022

10.4		Agreement between HWH and DSS dated August 9, 2022

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.

November 14, 2022	By:	/s/ Frank D. Heuszel
		Frank D. Heuszel
		Chief Executive Officer
		(Principal Executive Officer)

November 14, 2022	By:	/s/ Todd D. Macko
		Todd D. Macko
		Chief Financial Officer

	(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.