DSS, Inc. — 2023 Form 10-K Summary
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023; it does not provide standalone fourth-quarter results. DSS reports five operating segments: Product Packaging, Commercial Lending, Direct Marketing, Biotechnology, and Securities and Investment Management. Several other business lines were discontinued or wound down during 2023. The company’s packaging operations are its clearest established revenue-generating business; other activities include lending, securities, medical real estate, and development or licensing of biomedical intellectual property.
Key financial results
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $30.3 million | $47.3 million |
| Operating loss | $21.5 million | $46.5 million |
| Net loss | $97.5 million | $69.7 million |
| Net loss attributable to common stockholders | $80.6 million | $59.8 million |
| Net cash used in operating activities | $19.2 million | $27.0 million |
| Cash and cash equivalents at year-end | $6.6 million | $19.3 million |
| Current assets / current liabilities | $74.6 million / $55.6 million | $48.0 million / $73.7 million |
- Revenue fell 36%. Printed-products revenue rose 3% to $18.5 million; direct-marketing revenue declined 72% to $6.1 million, principally after Sharing Services Global Corporation (SHRG) was deconsolidated in May 2023. Rental income decreased 42% to $3.6 million, including because a LifeCare tenant did not pay rent. Commission revenue increased to $1.6 million from $0.3 million.
- Cost of revenue was $26.6 million, implying gross profit of approximately $3.6 million and a gross margin of approximately 11.9%, compared with approximately 14.9% in 2022. These are calculations from reported figures.
- The operating loss narrowed, but net loss worsened, reflecting substantial non-operating losses and impairments. Reported items included a $29.2 million SHRG deconsolidation loss within investment losses, $31.0 million of goodwill impairment, $7.4 million of intangible-asset impairment, and a $3.8 million provision for loan losses. The statements report $0.8 million of real-estate impairment, while MD&A cites approximately $8.2 million; the filing text does not provide a clear reconciled value.
- Investing activities provided $8.9 million, mainly reflecting marketable-security sales; financing activities used $2.4 million. Cash decreased by $12.7 million during the year.
Debt, liquidity, and financial position
- At December 31, 2023, reported current and long-term debt totaled approximately $55.2 million, excluding lease liabilities. Of this, $47.8 million was classified as current and scheduled principal payments for 2024 were also reported at $47.8 million. Year-end lease liabilities were $7.6 million.
- Major debt concerns include the approximately $41.3 million LifeCare loan, which was past due and in default, and the approximately $3.0 million Winter Haven loan, also in default with payment demanded. The company reported annual covenant defaults for both loans. Other debt includes related-party loans; Premier’s Bank of America note was approximately $2.9 million and Premier was in compliance with its covenants.
- Management said it believed available resources could fund operations for at least 12 months and that substantial doubt about the company’s ability to continue as a going concern had been alleviated. Its plan relies on $6.6 million of cash, selling approximately $10.0 million of marketable securities, collecting approximately $8.8 million of notes receivable through 2024, selling real estate classified as held for sale at approximately $51.6 million, and reducing costs. The filing also reports operating losses and negative operating cash flows over the past two years.
- Notes receivable and customer collections involve material credit risk: the company recorded a $5.1 million 2023 provision for loan losses and had a $2.5 million allowance for credit losses on accounts receivable at year-end.
Changes, outlook, and material risks
- Revenue and operating costs both contracted as SHRG was deconsolidated and the company sold or discontinued activities. DSS distributed SHRG shares to shareholders in May 2023 and reported retaining approximately 7% ownership afterward. It also distributed four Impact BioMedical shares per DSS share in August 2023; the filing describes an intended Impact BioMedical IPO, but its timing and outcome are not assured.
- Management highlighted improved packaging performance and a contract extension with a major retailer expected to generate at least $12 million over three years, with a fourth-year option that could bring potential revenue above $15 million. These are expected contract values, not reported revenue.
- Management said it planned to grow lending in inventory and equipment financing, improve AmericaFirst fund performance and marketing, and launch a Total Return Bond Fund. The filing provides no quantified company-wide financial guidance.
- Management reported that three of four AmericaFirst funds had outperformed their benchmarks since a new advisory team took over in May 2023. Biomedical assets remain dependent on development, licensing, regulatory progress, and commercial adoption; management’s product and market claims are not evidence of realized revenue.
- Customer concentration increased: two customers represented approximately 20% and 11% of 2023 consolidated revenue, and 39% and 30% of year-end trade receivables. One supplier represented approximately 25% and a second approximately 13% of paper and paperboard purchases.
- NYSE American notified DSS that continued listing depended on a reverse split or sustained share-price improvement by April 20, 2024. DSS reported a 1-for-20 reverse split effective in January 2024; the filing gives differing effective dates in different passages. The company also reported that its disclosure controls and internal control over financial reporting were ineffective at year-end, citing insufficient accounting staffing and documentation of monthly close and reconciliations.
- Other risks include possible impairment of intangible assets and investments, loan and real-estate defaults, reliance on asset sales and financing, competition, regulatory and intellectual-property risks, and related-party relationships. The Maiden Biosciences litigation was settled for $8.75 million; the judgment was vacated and the case dismissed with prejudice.
Most important facts for investors to verify
- Current status and terms of the LifeCare and Winter Haven defaults, including extensions, repayment demands, covenant waivers, or foreclosure risk.
- Whether DSS can complete the planned real-estate and securities sales and collect the forecast notes receivable, and how much usable liquidity those actions generate.
- The real-estate impairment amount: the statements report $0.8 million while MD&A reports approximately $8.2 million.
- Progress in remediating material weaknesses in financial reporting controls, and whether controls are documented and tested effectively.
- Actual revenue, margins, and customer retention at Premier; fulfillment of the retailer contract; and commercialization or licensing milestones for Impact BioMedical.
- Impact BioMedical IPO and distribution status, DSS’s continuing ownership and consolidation treatment, and the reverse-split effective date and listing compliance status.