DSS, Inc. Navigates Diverse Business Landscape with Evolving Strategy

Overview

DSS, Inc., formerly known as Document Security Systems, Inc., has undergone a significant transformation in recent years. In September 2021, the company officially changed its name to DSS, Inc. to better reflect its diversified business operations across five distinct segments: Product Packaging, Biotechnology, Direct Marketing, Commercial Lending, and Securities and Investment Management.

This shift in identity marks DSS, Inc.’s commitment to adapting and growing in an ever-changing business environment. The company, initially incorporated in New York in 1984, has expanded its reach and capabilities, leveraging its expertise across a wide range of industries and sectors.

Diverse Business Lines and Global Presence

Under the DSS, Inc. banner, the company has diversified its operations into five key business lines, each with its own unique scope and geographical footprint:

1. Product Packaging: Led by Premier Packaging Corporation, this segment specializes in paperboard and fiber-based folding carton manufacturing, consumer product packaging, and document security printing, primarily serving the US market.

2. Biotechnology: This division is dedicated to investing in or acquiring companies in the BioHealth and BioMedical fields, focusing on drug discovery, disease prevention and treatment, and open-air defense initiatives against infectious diseases.

3. Direct Marketing: Operating under Decentralized Sharing Systems, Inc., this division provides services to companies in the emerging “Gig” business model of peer-to-peer decentralized sharing marketplaces, with a presence across North America, Asia Pacific, Middle East, and Eastern Europe.

4. Commercial Lending: American Pacific Financial, Inc. represents the company’s banking and financing business line, with a focus on transitioning towards inventory/equipment loans and specialized lending areas like broker/dealer loans.

5. Securities and Investment Management: This division focuses on acquiring assets in the securities trading and management arena, including broker-dealers and mutual funds management, as well as overseeing a real estate investment trust (REIT) that acquires hospitals and care centers.

Financial Performance

For the fiscal year ended December 31, 2024, DSS, Inc. reported a 26% decrease in total revenue, from approximately $25.9 million in 2023 to $19.1 million in 2024. This decline was primarily driven by the following factors:

• Printed products sales, including packaging and printing products, decreased by 13% due to order delays and a decrease in orders from two existing customers.
• Rental income decreased by 51% due to a tenant at the company’s AMRE LifeCare subsidiary not making rent payments.
• Net investment income from the company’s Commercial Lending segment decreased by 41% due to a number of notes receivable being deemed uncollectible and impaired.
• The company’s Direct Marketing revenues decreased by 100% as the transition from maintaining its own sales force to licensing its products at the HWH World subsidiary has been slow to generate revenue.
• Commission revenue associated with the Sentinel Brokers Company subsidiary decreased by 41% due to a change in clearing houses that required equity trading transactions to be put on hold during the transition.

Costs and Expenses

Total costs and expenses for the year ended December 31, 2024, decreased by 20% compared to the previous year, primarily due to the following:

• Cost of revenue for the Printed Products, Securities, Biotechnology, Commercial Lending, and Direct Marketing segments decreased in line with the revenue declines in those areas.
• Sales, general, and administrative compensation costs decreased by 19%, primarily related to the decrease in headcount as the company transitioned its Direct Marketing business segment to a licensing model.
• Professional fees decreased by 16%, mainly due to a reduction in legal fees associated with the Direct Marketing segment, accounting fees, and due diligence fees related to potential acquisitions.
• Research and development costs decreased by 84%, primarily due to a decrease in such activities at the company’s Impact Biomedical, Inc. subsidiary.
• Impairment of goodwill totaled $25.1 million in 2024, as the company determined that the goodwill associated with its Impact BioMedical subsidiary required full impairment.
• Other operating expenses decreased by 68%, primarily due to the reserves put against rent receivables at the AMRE subsidiary in 2023 as the tenant was unable to pay rent.

Other Income and Expense

DSS, Inc. reported a total other expense of $11.1 million in 2024, a significant improvement from the $23.3 million in other expense recorded in 2023. The key changes include:

• Interest income decreased by 79% due to several notes being put on non-accrual as the related borrowers showed an inability to pay.
• Gain (loss) on investments improved from a loss of $4.9 million in 2023 to a gain of $224,000 in 2024, primarily driven by an improved performance in the company’s True Partners Capital Holdings Limited investment.
• Impairment of real estate assets increased from $812,000 in 2023 to $7.3 million in 2024, primarily due to a write-down of the AMRE LifeCare Pittsburgh and Fort Worth locations and the sale of the AMRE LifeCare Plano location at a price significantly below its 2023 fair value.
• Impairment of investments totaled $782,000 in 2024, as the company determined impairments were necessary for its investments in Nano9 and BioMed Technologies.
• Provision for loan losses remained relatively stable, decreasing by 3% from 2023 to 2024.

Liquidity and Capital Resources

As of December 31, 2024, DSS, Inc. had cash of approximately $11.4 million. The company believes it has sufficient cash to meet its cash requirements for at least the next 12 months, and it also believes it will have access to sources of capital from the sale of its equity securities and debt financing.

The company’s net cash used by operating activities decreased from $19.2 million in 2023 to $9.1 million in 2024, primarily due to a decrease in payments of accrued expenses, accounts payable, and an increase in other liabilities incurred but not paid.

Net cash provided by investing activities was approximately $8.8 million in 2024, which included $5.6 million from the sale of the company’s Lindon, UT facility, $3.0 million from the sale of marketable securities, and $4.2 million received from notes receivable, offset by $3.3 million in purchases of investments.

Net cash provided by financing activities was $5.1 million in 2024, primarily due to $4.5 million in additional borrowings on long-term debt and $3.2 million in proceeds received from Impact BioMedical’s IPO, offset by $2.6 million in payments toward long-term debt.

Continuing Operations and Going Concern

The company has incurred operating losses and negative cash flows from operating activities over the past two years. However, the company believes it can continue as a going concern due to its $11.4 million in cash as of December 31, 2024, its ability to generate operating cash through the sale of $9.2 million in marketable securities, and the $1.9 million in proceeds from the sale of shares in its Impact BioMedical subsidiary in March 2025.

Additionally, the company has taken steps to materially reduce expenses and cash burn at all corporate and business line levels. Based on these factors, the company has concluded that substantial doubt about its ability to continue as a going concern has been alleviated.

Outlook and Challenges

DSS, Inc. faces several challenges as it navigates its diverse business landscape. The decline in revenue across multiple segments, including Printed Products, Commercial Lending, and Direct Marketing, highlights the need for the company to adapt its strategies and find new avenues for growth.

The significant impairment charges related to goodwill, intangible assets, and real estate assets also indicate that the company has faced difficulties in effectively integrating and managing some of its acquisitions and investments. Addressing these issues and improving the performance of its underperforming business lines will be crucial for the company’s long-term success.

On a positive note, the company’s Biotechnology and Securities and Investment Management segments appear to be areas of potential growth, and the company’s efforts to reduce expenses and cash burn may help stabilize its financial position. However, the company will need to continue to closely monitor its operations, identify and address any emerging challenges, and develop a clear, cohesive strategy to drive sustainable growth across its diverse business lines.

Overall, DSS, Inc. has undergone a significant transformation, and its ability to navigate the evolving business landscape and capitalize on new opportunities will be critical in determining its future success.