DSS (NYSE: DSS) posts deeper Q1 2026 loss and warns on going concern
Rhea-AI Filing Summary
DSS, Inc. reported a larger net loss for the quarter ended March 31, 2026 and raised substantial doubt about its ability to continue as a going concern. Revenue fell to $4.33 million from $4.95 million a year earlier, while cost of revenue and higher selling, general and administrative expenses drove an operating loss of $5.49 million versus $3.73 million in 2025.
Net loss widened to $6.35 million, or $0.60 per share, compared with $5.30 million, or $0.55 per share. Cash and cash equivalents declined to $4.94 million, and operating and investing activities used cash. DSS carries significant debt, including a large medical-facility loan in default, and disclosed substantial doubt about continuing as a going concern despite recognizing an $8.52 million related-party convertible bond investment that lifted total assets and stockholders’ equity.
Positive
- None.
Negative
- Going concern risk: Management states that recurring losses, recent negative operating and investing cash flows, and limited cash raise substantial doubt about DSS’s ability to continue as a going concern within one year.
- High leverage and defaulted debt: DSS carries $58.72 million of liabilities, including about $30.29 million under the LifeCare loan that is in default and past due, plus accrued interest of $7.74 million.
Insights
DSS shows recurring losses, heavy debt, and explicit going concern doubt.
DSS generated Q1 2026 revenue of $4.33 million against total costs and expenses of $9.82 million, producing an operating loss of $5.49 million. Net loss was $6.35 million, continuing a pattern of negative earnings.
Total liabilities of $58.72 million sit against total assets of $71.27 million, with a key LifeCare loan of about $30.29 million in default and classified as current. Accrued interest on long-term debt is high at $7.74 million, underscoring leverage pressure.
Operating cash flow was slightly negative at $0.13 million used, while investing used $2.64 million, including a related-party convertible bond. Management explicitly states that recent losses and negative cash flows raise substantial doubt about the company’s ability to continue as a going concern within one year of issuance.
Key Figures
Key Terms
going concern financial
equity method financial
convertible bond investment financial
Level 3 asset financial
most favored nation provision financial
fair value option financial
Earnings Snapshot
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Commission file number
| (Exact name of registrant as specified in its charter) |
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Indicate
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker symbol(s) | Name of each exchange on which registered | ||
| The
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As of May 12, 2026 there were shares of the registrant’s common stock, $ par value, outstanding.
DSS, INC.
FORM 10-Q
TABLE OF CONTENTS
| PART I | FINANCIAL INFORMATION | |
| Item 1 | ||
| Condensed Consolidated Balance Sheets as March 31, 2026 (Unaudited) and December 31, 2025 (unaudited) | 3 | |
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 (Unaudited) | 4 | |
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (Unaudited) | 6 | |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2026 and 2025 (Unaudited) | 5 | |
| Notes to Interim Condensed Consolidated Financial Statements (Unaudited) | 7 | |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 |
| 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 | 35 |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DSS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
| As
of March 31, 2026 | As
of December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Investment in trading securities | ||||||||
| Current portion of notes receivable, net | ||||||||
| Current portion of notes receivable - related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Investment in real estate, net | ||||||||
| Investment, cost method | ||||||||
| Investment, equity method | ||||||||
| Investment in equity securities | ||||||||
| Convertible bond investment – related party | ||||||||
| Other assets | ||||||||
| Right-of-use assets | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Accrued interest on long-term debt | ||||||||
| Current portion of lease liability | ||||||||
| Current portion of long-term debt, net | ||||||||
| Convertible note payable - related party | ||||||||
| Current portion of long-term debt - related party, net | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Long term lease liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ equity (deficit) | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value; shares authorized, shares issued and outstanding ( on December 31, 2025) | ||||||||
Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity of the Company | ( | ) | ||||||
| Non-controlling interest in subsidiaries | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 3 |
DSS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue: | ||||||||
| Printed products | $ | $ | ||||||
| Rental | ||||||||
| Commercial lending | ||||||||
| Commission | ||||||||
| Biotechnology | ||||||||
| Total revenue | ||||||||
| Costs and expenses: | ||||||||
| Cost of revenue | ||||||||
| Selling, general and administrative (including stock-based compensation) | ||||||||
| Total costs and expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Interest income on note receivable, related party | ||||||||
| Dividend income | ||||||||
| Other income (expense) | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on equity method investment | ( | ) | ( | ) | ||||
| Loss on investments | ( | ) | ( | ) | ||||
| Change in fair value of convertible bond investment – related party | ( | ) | ||||||
| Loss on sale on sale of real estate | ( | ) | ||||||
| Loss from operations before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss from operations attributed to noncontrolling interest | ||||||||
| Net loss attributable to DSS common stockholders | $ | ( | ) | $ | ( | ) | ||
| Loss per common share attributable to common stockholders | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Shares used in computing loss per common share: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to the condensed consolidated financial statements.
| 4 |
DSS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| 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, 2024 | | $ | | $ | $ | | $ | ( | ) | $ | | $ | | $ | | |||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Stock-based payments for professional services | - | |||||||||||||||||||||||||||||||||||
| Stock based payments | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of expenses - Impact BioMedical, Inc. | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock award | - | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Balance, December 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock, net of expenses | - | |||||||||||||||||||||||||||||||||||
| Issuance of warrants in connection with convertible promissory note – related party | - | - | ||||||||||||||||||||||||||||||||||
| Fair value adjustment related to convertible bond received from related party | - | - | ||||||||||||||||||||||||||||||||||
| Stock based payments - Impact BioMedical, Inc. | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
| 5 |
DSS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
(unaudited)
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on allowance for obsolescence of inventory | ( | ) | ||||||
| Stock based payments for professional services rendered | ||||||||
| Stock-based payments to employees and directors | ||||||||
| Loss on equity method investment | ||||||||
| Unrealized loss on investments | ||||||||
| Change in ROU assets | ||||||||
| Change in inventory obsolescence | ||||||||
| Provision for loan loss recoveries | ( | ) | ||||||
| Change in fair value of convertible bond investment - related party | ||||||||
| Loss on sale of real estate | ||||||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Assets held for sale | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Investment in trading securities | ||||||||
| Other assets | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| ROU liabilities | ( | ) | ( | ) | ||||
| Accrued interest on notes payable | ||||||||
| Other liabilities | ||||||||
| Net cash (used) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Purchase of convertible bond - related party | ( | ) | ||||||
| Sale of real estate | ||||||||
| Sale of investment, related party | ||||||||
| Issuance of new notes receivable, net origination fees | ( | ) | ||||||
| Payments received on notes receivable | ||||||||
| Net cash (used) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Payments of long-term debt | ( | ) | ( | ) | ||||
| Borrowings of long-term debt, net | ||||||||
| Payment on margin loans | ( | ) | ( | ) | ||||
| Borrowings of convertible note payable - related party | ||||||||
| Issuances of common stock, net of issuance costs | ||||||||
| Net cash provided (used) by financing activities | ( | ) | ||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents and restricted cash at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 6 |
DSS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2026
(Unaudited)
1. Nature of Operations
The Company, incorporated in the state of New York in May 1984 has conducted business in the name of DSS, Inc. On September 16, 2021, the board of directors approved an agreement and plan of merger with a wholly owned subsidiary, DSS, Inc. (a New York corporation, incorporated in August 2020), for the sole purpose of effecting a name change from Document Security Systems, Inc. to DSS, Inc. This change became effective on September 30, 2021. DSS, Inc. maintained the same trading symbol “DSS”.
DSS, Inc. (together with its consolidated subsidiaries, referred to herein as “DSS,” “we,” “us,” “our” or the “Company”) currently operates four (4) distinct business lines with operations and locations around the globe. These business lines are: (1) Product Packaging, (2) Biotechnology, (3) Commercial Lending, (4) Securities and Investment Management.
Our divisions, their business lines, subsidiaries, and operating territories: (1) Our Product Packaging line is led by Premier Packaging Corporation, Inc. (“Premier”), a New York corporation. Premier operates in the paper board and fiber based folding carton, consumer product packaging, and document security printing markets. It markets, manufactures, and sells sophisticated custom folding cartons, mailers, photo sleeves and complex 3-dimensional direct mail solutions. Premier is currently located in its new facility in Rochester, NY, and primarily serves the US market. (2) The Biotechnology business line was created to invest in or acquire companies in the BioHealth and BioMedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related diseases. This division is also targeting unmet, urgent medical needs, and is developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza. (3) Our Commercial Lending business division, driven by American Pacific Financial (“APF”), provides financing solutions including commercial business lines of credit, land development financing, inventory financing, equipment financing, and third-party loan servicing (4) Securities and Investment Management was established to develop and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, broker dealers, and mutual funds management. Also in this segment is the Company’s real estate investment trusts (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. the REIT was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate.
On June 21, 2025, Impact BioMedical Inc. (“Impact”), Dr Ashleys Limited, a Cayman Islands exempted company limited by shares (“PubCo”), Dr Ashleys Nevada Sub, Inc., a Nevada corporation and wholly-owned subsidiary of PubCo (“Merger Sub”), Dr Ashleys Bio Labs Limited, a Cayman Islands exempted company limited by shares (“Dr Ashleys Cayman”), and Kanans Visvanats (a.k.a. Kannan Vishwanatth), a Latvian national, solely in his capacity as the sole shareholder of Dr Ashleys (“Dr Ashleys Shareholder”) entered into a Merger and Share Exchange Agreement (the “Merger Agreement”). Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, (i) Merger Sub shall be merged with and into Impact with Impact being the surviving entity (the “Merger”), and (ii) simultaneous with or immediately following the Merger, PubCo shall acquire all of the issued and outstanding ordinary shares of Dr Ashleys Cayman from the Dr Ashleys Shareholder (the “Share Exchange”). The closing date of the transaction is uncertain as of May 15, 2026, due to the pending approval from regulatory authorities. Both parties agreed to extend the closing date to July 1, 2026. Management will continue evaluating the status of this deal.
| 7 |
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation - The accompanying condensed unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments, unless otherwise indicated) necessary to present fairly our consolidated financial position as of March 31, 2026 and December 31, 2025, and the results of our consolidated operations for the interim periods presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), the instructions to Form 10-Q and Article 10 of Regulation S-X. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K, for the fiscal year ended December 31, 2025 (“Form 10-K”), and our other reports on file with the Securities and Exchange Commission (the “SEC”).
Principles of Consolidation - The consolidated financial statements include the accounts of DSS, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable, convertible notes receivable, inventory, fair values of investments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company’s common stock, preferred stock, deferred revenue and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Revision
of prior period financial statements - The Company identified and corrected an immaterial classification error in our previously
reported Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Changes in Shareholders’ Equity as of March
31, 2025. The correction of this error between Additional paid-in capital and Non-controlling interest in subsidiary for the Issuance
of common stock, net of expenses - Impact BioMedical, Inc. resulted in a $
Cash Equivalents – All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. Amounts included in cash equivalents in the accompanying consolidated balance sheets are money market funds whose adjusted costs approximate fair value.
Restricted cash - Restricted cash consists of deposits and other cash balances that are restricted as to withdrawal or use under the terms of certain contractual arrangements. These amounts are generally maintained as collateral for letters of credit, lease-related security deposits, or other business requirements. The Company classifies restricted cash as a current assets on noncurrent asset on the Consolidated balance sheets based on when the applicable restrictions are expected to lapse. For purposes of the consolidated statements of cash flows, cash, cash equivalents, and restricted cash are presented in total
Accounts Receivable - The Company extends credit to its customers in the normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are generally 30 days but up to net 120 for certain customers. The Company carries its trade accounts receivable at invoice amounts and its rent receivables at contract amounts, less an allowance for credit losses. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for credit losses based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. In estimating expected losses in the accounts receivable portfolio, customer-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. Assumptions and judgment are applied to measure amounts and timing of expected future cash flows, collateral values and other factors used to determine the customers’ abilities to pay.
At
March 31, 2026, December 31, 2025, the Company established a reserve for credit losses of approximately $
| 8 |
Concentration
of Credit Risk - The Company maintains its cash
in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant
credit risk because of any non-performance by the financial institutions. As of March 31, 2026, one customer accounted for approximately
As
of December 31, 2025, one customers accounted for approximately
Notes receivable, unearned interest, and related recognition - The Company records all future payments of principal and interest on notes as notes receivable, which are then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports the net investment in the notes receivable on the consolidated balance sheet as current or long-term based on the maturity date of the underlying notes. Such net investment is comprised of the amount advanced on the loans, adjusting for net deferred loan fees or costs incurred at origination, amounts allocated to warrants received upon origination, and any payments received in advance. The unearned interest is recognized over the term of the notes and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Net deferred loan fees or costs, together with discounts recognized in connection with warrants acquired at origination, are accreted as an adjustment to yield over the term of the loan.
Allowance
For Loans Losses - ASC Topic 326 which requires an allowance for credit losses to be deducted from the amortized cost basis of
financial assets to present the net carrying value at the amount that is expected to be collected over the contractual term of the asset
considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability
of the reported amount. In estimating expected losses in the loan portfolio, borrower-specific financial data and macro-economic assumptions
are utilized to project losses over a reasonable and supportable forecast period. Assumptions and judgment are applied to measure amounts
and timing of expected future cash flows, collateral values and other factors used to determine the borrowers’ abilities to repay
obligations. After the forecast period, the Company utilizes longer-term historical loss experience to estimate losses over the remaining
contractual life of the loans. At March 31, 2026, and December 31, 2025, the Company established a reserve for credit losses of approximately
$
Investments – Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at fair value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. For equity method investments, the Company regularly reviews its investments to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value. See Note 10 for further discussion on investments.
Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets. |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
| 9 |
The carrying amounts reported in the consolidated balance sheet of cash and cash equivalents, accounts receivable, prepaids, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. Marketable securities classify as a Level 1 fair value financial instrument. The fair value of notes receivable approximates their carrying value as the stated or discounted rates of the notes do not reflect recent market conditions. The fair value of revolving credit lines notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. The fair value of investments where the fair value is not considered readily determinable, are carried at cost. The fair value of the convertible bond investment is classified as a Level 3 asset within the fair value hierarchy because there is no quoted price in an active market for the identical bond and the valuation requires significant unobservable inputs, including issuer credit risk, expected term, volatility, liquidity, conversion probability, and the value of the embedded conversion feature.
Inventory
– Inventories consist primarily of paper, pre-printed security paper, paperboard, fully prepared packaging, air filtration
systems, and health and beauty products which and are stated at the lower of cost or net realizable value on the first-in, first-out
(“FIFO”) method. Packaging work-in-process and finished goods included the cost of materials, direct labor and overhead.
At the closing of each reporting period, the Company evaluates its inventory in order to adjust the inventory balance for obsolete and
slow-moving items. An allowance for obsolescence of approximately $
Investments in real estate, net – Acquisition of assets are recorded at their relative fair value based on total accumulated costs of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. This includes all costs related to finding, analyzing and negotiating a transaction. The allocation of the purchase price is an area that requires judgment and significant estimates. Tangible and intangible assets include land, building and improvements, furniture, fixtures and equipment, acquired above market and below market leases, in-place lease value (if applicable). Acquisition date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates and available market information. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Depreciation, amortization, cost to maintain and secure the buildings as well as interest incurred on the loans to procure the real estate are included in Cost of revenue on the accompanying Condensed consolidated statement of operations. The Company’s policy is to obtain an independent third-party valuation for each major project in the United States as part of our assessment of identifying potential triggering events for impairment. Management may use the market comparison method to value the investments. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant and Equipment (“ASC 360”), the Company applies a fair value-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
Convertible bond investment - The Company accounts for its convertible bond investment as a financial asset measured at fair value. The Company has elected the fair value option under ASC 825, Financial Instruments, and, accordingly, changes in the fair value of the investment are recognized in earnings in the period of change. Interest income is recognized when earned in accordance with the contractual terms of the bond. Fair value is determined in accordance with ASC 820, Fair Value Measurement, using valuation techniques appropriate for the instrument and available market information. The valuation considers, among other factors, the stated interest rate, maturity date, conversion price, market price of the underlying equity securities, foreign currency exchange rates, issuer credit risk, expected term, volatility, liquidity, and conversion economics. The convertible bond investment is classified as a Level 3 financial asset because there is no quoted price in an active market for the identical bond and the valuation requires significant unobservable inputs, including issuer credit risk, expected term, volatility, liquidity, conversion probability, and conversion economics.
Intangible Assets - The estimated fair values of acquired intangibles are generally determined based upon future economic benefits such as earnings and cash flows. Acquired identifiable intangible assets are recorded at fair value and are amortized over their estimated useful lives. Acquired intangible assets with an indefinite life are not amortized but are reviewed for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets are below their estimated fair values. Impairment is tested under ASC 350. No circumstances or events have occurred since the most recent analysis that would indicate the need for an impairment is needed for the three months ended March 31, 2026.
| 10 |
Goodwill –
Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities
assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment
between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. FASB ASC
Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its
carrying amount. If, after completing the assessment, it is determined that it is more likely than not that the fair value of a
reporting unit is less than its carrying value, the Company will proceed to a quantitative test. The Company may also elect to
perform a quantitative test instead of a qualitative test for any or all of our reporting units. The test compares the fair value of
an entity’s reporting units to the carrying value of those reporting units. This quantitative test requires various judgments
and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted
operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair
values of recognized and unrecognized assets and liabilities of the reporting unit. The Company performed its annual goodwill
impairment test as of December 31, 2025, and no impairment was deemed necessary for the goodwill associated with Premier Packaging
Company of approximately $
Impairment of Long-Lived Assets and Goodwill - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. No circumstances or events have occurred since the most recent analysis that would indicate the need for an impairment is needed for the three months ended March 31, 2026.
Convertible Promissory Note - The Company accounts for convertible promissory notes in accordance with ASU 2020-06 and evaluates embedded and freestanding features under ASC 815. Convertible notes are initially recorded at principal amount, net of any original issue discount, debt issuance costs, and discounts arising from the allocation of proceeds to detachable warrants or other freestanding instruments. When a financing transaction includes multiple instruments, the Company allocates proceeds based on the relative fair values of the instruments, or, when required, first records liability-classified instruments at fair value with residual proceeds allocated to the remaining instruments.
The Company evaluates conversion options, redemption provisions, down-round or anti-dilution features, most-favored-nation provisions, default rights, warrants, and other terms to determine whether separate accounting is required. Embedded derivatives or liability-classified instruments are measured at fair value, with changes in fair value recognized in earnings. Debt discounts, original issue discount, and issuance costs are amortized to interest expense using the effective interest method over the contractual term. Convertible notes are classified as current or noncurrent based on contractual maturity and settlement provisions. For diluted earnings per share, the Company applies the if-converted method in accordance with ASC 260.
Business Combinations and Acquisitions - Business combinations and non-controlling interests are recorded in accordance with FASB ASC 805 Business Combinations. Under the guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition and all acquisition costs are expensed as incurred. The excess of the purchase price over the estimated fair values is recorded as goodwill. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded. The application of business combination accounting requires the use of significant estimates and assumptions.
Acquisition of assets are recorded at their relative fair value based on total accumulated costs of the acquisition. Direct acquisition-related costs are expensed as incurred. This includes all costs related to finding, analyzing and negotiating a transaction. The allocation of the purchase price is an area that requires judgment and significant estimates. Tangible and intangible assets include land, building and improvements, furniture, fixtures and equipment, acquired above market and below market leases, in-place lease value (if applicable). Acquisition-date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates and available market information.
| 11 |
Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense.
Going
Concern – The accompanying consolidated financial statements have been prepared assuming that the Company will continue
as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal
course of business. These consolidated financial statements do not include any adjustments to the specific amounts and classifications
of assets and liabilities, which might be necessary should we be unable to continue as a going concern. While the Company has approximately
$
Aside
from its $
Related Party Transactions - Transactions with affiliates and other parties that meet the definition of a related party under ASC 850, Related Party Disclosures are reflected in the accompanying condensed consolidated financial statements. All related-party balances are recorded at the exchange amounts established and agreed to by the parties. All material transaction not in the normal course of business operations are approved by the Audit Committee of the Board of Directors.
Recently Issued Accounting Pronouncements — The Financial Accounting Standards Board (FASB) issues various Accounting Standards Updates relating to the treatment and recording of certain accounting transactions. There are several new accounting pronouncements issued by FASB which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company.
In November 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure through enhanced disclosures about significant segment expenses. The amendment is effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024 and early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company has adopted the enhanced segment disclosures for the year ended December 31, 2024. The Company reports its segment information to reflect the manner in which the Company’s chief operating decision maker (“CODM”) reviews and assesses performance. The Company’s Interim Chief Executive Officer has responsibilities as the CODM and review and assess the performance of the Company as a whole.
The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODM uses net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Information on Net loss and Operating loss is disclosed in the Condensed Consolidated Statements of Operations. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the Condensed Consolidated Statements of Operations.
The CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the notes to the financial statements
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” which is intended to simplify various aspects related to accounting for income taxes. ASU 2023-09 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in ASU 2023-09 are effective for public business entities for fiscal years beginning after December 15, 2024, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods. The adoption of this ASU did not have a material impact on the Condensed Consolidated Financial Statements.
In November 2024, the FASB issued ASU No. 2024-03 (“ASU 2024-03”), Disaggregation of Income Statement Expenses (“DISE”). ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. As revised by ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, the provisions of ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. With the exception of expanding disclosures to include more granular income statement expense categories, we do not expect the adoption of ASU 2024-03 to have a material effect on our consolidated financial statements taken as a whole.
In November 2024, the FASB issued ASU 2024-04 (“ASU 2024-04”), Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions or as extinguishments. The amendments in ASU 2024-04 are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for entities that have adopted ASU 2020-06. The Company is currently evaluating the effect of adopting ASU 2024-04 on its consolidated financial statements and related disclosures. The Company does not currently expect the adoption of this standard to have a material impact on its consolidated financial statements.
In December 2025, the Financial Accounting Standards Board issued Accounting Standards Update No. 2025-11, Interim Reporting (Topic 270). The amendments are intended to improve interim financial reporting disclosures and clarify the application of Topic 270. The Company is currently evaluating the provisions of ASU 2025-11, including the timing of adoption and the potential impact on its interim financial statement presentation and related disclosures. The Company does not currently expect the adoption of ASU 2025-11 to have a material impact on its consolidated financial position, results of operations, or cash flows.
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3. Revenue
The Company recognizes its revenue based on when the title passes to the customer or when the service is completed and accepted by the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for shipped product or service provided. Sales and other taxes billed and collected from customers are excluded from revenue. The Company recognizes rental income associated with its REIT, net of amortization of favorable/unfavorable lease terms relative to market and includes rental abatements and contractual fixed increases attributable to operating leases, where collection has been considered probable, on a straight-line basis over the term of the related lease. Commission revenues are generated when the Company buys and sells bond and equity securities on behalf of its customers. Each time a customer enters into a buy or sell transaction, the Company recognizes a commission. Commissions and related clearing expenses are recorded on the trade date. The Company recognizes net investment income from its investment banking line of business as interest and management fees related to loans managed for third parties owed to the Company occurs.
As of March 31, 2026, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, the Company has applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations. The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.
Costs of revenue
Costs of revenue includes all direct cost of the Company’s packaging, commercial and security printing sales, primarily, paper, inks, dies, and other consumables, and direct labor, transportation, amortization, deprecation, and manufacturing facility costs. In addition, this category includes all direct costs associated with the manufacturing and procurement of the products sold in the Company’s technology sales, services and licensing including hardware and software that is resold, third-party fees, and fees paid to inventors or others as a result of technology licenses or settlements, if any. Cost of revenue for our REIT line of business includes all direct cost associated with the maintenance and upkeep of the related facilities, depreciation, amortization and the costs to acquire the facilities. Our Commercial Lending operating segment has costs of revenue associated with the impairment of notes receivable for those amounts at risk of collection. Costs of revenue do not include expenses related to product development, integration, and support. These costs are included in research and development, which is a component of selling, general and administrative expenses on the consolidated statement of operations. Legal costs are included in selling, general and administrative.
Sales Commissions
Sales
commissions are expensed as incurred for contracts with an expected duration of one year or less. There were
Shipping and Handling Costs
Costs incurred by the Company related to shipping and handling are included in cost of products sold. Amounts charged to customers relating to these costs are reflected as revenue.
See Note 15 for disaggregated revenue information.
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4. Inventory
Inventory consisted of the following as of:
| March 31, 2026 | December 31, 2025 | |||||||
| Finished Goods | $ | $ | ||||||
| Work in Process | ||||||||
| Raw Materials | ||||||||
| $ | $ | |||||||
| Less allowance for obsolescence | ( | ) | ( | ) | ||||
| $ | $ | |||||||
5. Notes Receivable
Note 1
On
May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company entered a convertible promissory note (“Note 1”) with Puradigm,
Inc. (“Puradigm”), a company registered in the state of Texas. Note 1 has an aggregate principal balance up to $
Note 2
On
March 2, 2022, APF and WUURII Commerce, Inc. (“WUURII”), a corporation organized under the laws of the Republic of Korea
entered into a promissory note (“WUURII Note”). Under the terms of WUURRI Note, APF at its discretion, may lend up to
the principal sum of $
Note 3
On
May 9, 2022, DSS PureAir and Puradigm entered into a promissory note (“Puradigm Note 1”) in the principal sum of $
Note 4, related party
BMI
Capital International LLC. (“BMIC LLC”), a related party, entered into a promissory note (“BMIC Note 1”) in
the principal sum of $
Note 5, related party
On
May 8, 2023, DSS Financial Management Inc and BMIC LLC entered into a promissory note (“BMIC Note 2”) in the principal sum of
$
Note 6, related party
On
July 26, 2022, APF and VEII, Inc. (“VEII”) entered into a promissory note (“Note 6”) in the principal sum of
$
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Note 7
On
February 19, 2021, Impact BioMedical, Inc, entered into a promissory note (“Note 7”) with an individual. The Company loaned
the principal sum of $
Note 8
On
March 31, 2023, DSS Biohealth Security, Inc and an individual entered into a promissory note (“Note 8”) in the principal
sum of $
Note 9
On
August 29, 2024, APF entered into a promissory note (“Note 9”) with WestPark. Note has a principal balance of $
6. Convertible Bond Investment – related party
On
March 27, 2026, the Company received a convertible bond investment from True Partners Capital Holding Limited (“True
Partners”), a publicly listed company on the Hong Kong Stock Exchange and a related party of the Company. The bond has a face
value of $
True Partners is considered a related party because the Company holds a significant equity investment in True Partners and has determined that it has the ability to exercise significant influence over True Partners. This determination is based on the Company’s equity ownership, its additional investment through the convertible bond, and the election of the Company’s Executive Chairman and significant stockholder, Heng Fai Ambrose Chan, to True Partners’ board of directors. Accordingly, the Company’s receipt of the convertible bond is considered a related party transaction.
The bond
is convertible into ordinary shares of True Partners at a conversion price of HKD $ per share, which was approximately USD $
The Company
accounts for the convertible bond investment at fair value and has elected the fair value option under ASC 825, Financial Instruments.
Based on a valuation performed as of March 27, 2026, the estimated fair value of the convertible bond was approximately $
The fair value of the convertible bond investment was determined in accordance with ASC 820, Fair Value Measurement. The valuation considered, among other factors, the contractual interest rate, maturity date, mandatory conversion terms, conversion price, market price of the underlying True Partners ordinary shares, foreign currency exchange rates, issuer credit risk, expected term, liquidity, discount rates, and conversion economics. The investment is classified as a Level 3 asset within the fair value hierarchy because there is no quoted price in an active market for the identical convertible bond and the valuation requires significant unobservable inputs, including issuer credit risk, expected term, liquidity assumptions, discount rates, and conversion economics.
Because the convertible bond was received from a related party, the Company
evaluated the substance of the transaction, including the relationship between the parties, the nature of the consideration exchanged,
and whether the fair value of the bond exceeded the stated face amount or consideration transferred. The Company determined that the excess
of the estimated fair value of the convertible bond over the stated face amount or consideration transferred was attributable to the related
party nature of the transaction and, accordingly, was deemed to be a contribution to capital. As a result, the Company recorded the initial
excess fair value of approximately $
7. Financial Instruments
Cash, Cash Equivalents, Restricted Cash and Marketable Securities
The following tables show the Company’s cash, cash equivalents, restricted cash, and marketable securities by significant investment category as of:
| March 31, 2026 | ||||||||||||||||||||||||
| Cost | Unrealized Gain/(Loss) | Fair Value | Cash and Cash Equivalents | Marketable Securities | Convertible bond investment – related party | |||||||||||||||||||
| Cash | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Level 1 | ||||||||||||||||||||||||
| Money Market Funds | ||||||||||||||||||||||||
| Marketable Securities | ( | ) | ||||||||||||||||||||||
| Level 3 | ||||||||||||||||||||||||
| Convertible bond investment – related party | ||||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Adjusted Cost | Unrealized Gain/(Loss) | Fair Value | Cash and Cash Equivalents | Marketable Securities | ||||||||||||||||
| Cash | $ | $ | $ | $ | $ | |||||||||||||||
| Restricted Cash | $ | |||||||||||||||||||
| Level 1 | ||||||||||||||||||||
| Money Market Funds | ||||||||||||||||||||
| Marketable Securities | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
The Company typically invests with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio.
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8. Provision for Credit Losses
ASC Topic 326 for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses.
Accounts receivable are stated at the amount owed by the customer. The Company maintains an allowance for credit losses for accounts receivable and unbilled receivables, based on expected credit losses resulting from the inability of our customers to make required payments. The allowance for credit losses is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers and records its allowance for credit losses based on the results of this analysis.
As of March 31, 2026 and December 31, 2025, we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan.
We
analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss
reserves. For the three months ended March 31, 2026 and year ended December 31, 2025, the Company recorded a Loan loss reserve of approximately$
General
Loan Portfolio Reserve - Based upon the review of our loan portfolio, we do not believe that a substantial general loan portfolio
reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general
contingent portfolio reserve of $
Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of March 31, 2026 and December 31, 2025.
Specific
Loan Reserves - The Company had previously identified credit weakness in Puradigm and has placed a reserve approximating $
No additional reserves were deemed necessary as of March 31, 2026.
9. Disposal of assets
On
March 27, 2025, the Company finalized the sale of its Plano, Tx. Facility for a gross sales price of $
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10. Investments
Alset International Limited, related party
The
Company owns shares or approximately % of the outstanding shares of Alset International Limited (“Alset Intl”),
a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited. This investment is classified as a marketable
security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the
investments for a period of at least one year. The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and
Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of
the Company. The fair value of the marketable security as of March 31, 2026 and December 31, 2025, was approximately $
True Partners Capital Holding Limited, related party
The
Company owns shares
or approximately % of True Partners Capital Holding Limited (“True Partners”), a publicly listed company on the
Hong Kong Stock Exchange. On February 28, 2022, the Company entered into a Stock Purchase Agreement with Alset EHome International
Inc. (“AEI”), pursuant to which AEI has agreed to sell a subsidiary holding shares
of stock of True Partner Capital Holding Limited exchange for shares
of common stock of the Company (the “DSS Shares”). The Company’s Executive Chairman and a significant stockholder,
Heng Fai Ambrose Chan is the Chairman, Chief Executive Officer and largest shareholder of AEI. Further, on February 20, 2025, the
Company acquired an additional shares
of True Partners. The fair value of the marketable security as of March 31, 2026 and December 31, 2025, was approximately $
On March 27, 2026, the
Company acquired or received a convertible bond investment issued by True Partners with an initial fair value of approximately
$
As
a result of the change to equity method accounting, the Company reclassified its investment in True Partners from Investment in equity
securities to Investment, equity method on the consolidated balance sheet. As of March 31, 2026, the carrying value of the Company’s
investment in True Partners, was approximately $
WestPark Capital Group, LLC.
On
December 30, 2020, the Company signed a binding letter of intent with WestPark Capital Group, LLC. (“WestPark”) and Century
TBD, Inc. (“TBD”) where the parties agreed to prepare a note and stock exchange agreement whereby DSS will assign the TBD
Note to WestPark and WestPark shall issue to DSS a stock certificate reflecting
BMI Capital International LLC, related party
On
September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement
with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability
company (“BMIC LLC”) whereas DSS Securities, Inc. purchased
BMIC is a broker-dealer registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”). The Company’s chairman of the board and another independent board member of the Company also have ownership interest in BMIC.
| 17 |
BioMed Technologies Asia Pacific Holdings Limited
On
December 19, 2020, Impact BioMedical, a wholly owned subsidiary of the Company, entered into a subscription agreement (the “Subscription
Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated
in the British Virgin Islands, pursuant to which the Company agreed to purchase ordinary shares or
Under the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries. In exchange, the Company agreed to certain obligations, including mutual marketing obligations to promote sales of the products. This agreement is for ten years with a one year auto-renewal feature.
11. Short-Term and Long-Term Debt
Promissory
Notes - On May 20, 2021, Premier Packaging entered into master loan and security agreement (“BOA Note”) with Bank
of America, N.A. (“BOA”) to secure financing approximating $
On
August 1, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE, entered into a loan agreement (“Shelton
Agreement”) with Patriot Bank, N.A. (“Patriot Bank”) in an amount up to $
On
October 13, 2021, Liquid Value Asset Management Limited (“LVAM”), a majority owned subsidiary of the Company, entered into
loan agreement with BMIC (“BMIC Loan”), a related party, whereas LVAM borrowed the principal amount of $
On
October 13, 2021, LVAM entered into a loan agreement with Lee Wilson Tsz Kin (“Wilson Loan”), a related party, whereas LVAM
borrowed the principal amount of $
| 18 |
On
November 2, 2021, AMRE LifeCare entered into a loan agreement (“LifeCare Agreement”) with Pinnacle Bank, (“Pinnacle
Bank”) in the amount of $
On
March 30, 2023, Premier Packaging, a subsidiary of the Company entered into a loan and security agreement with Union Bank & Trust
Company for the principal amount of $
In
August of 2025, DSS issued a $
| 19 |
On
March 26, 2026, the Company issued a $
A summary of scheduled principal payments of long-term debt, not including revolving lines of credit, subsequent to March 31, 2026, are as follows:
| Year | Notes payable | Convertible note payable - related party | Notes payable - related party | Total | ||||||||||||
| 2026 | $ | $ | $ | $ | ||||||||||||
| 2027 | ||||||||||||||||
| 2028 | ||||||||||||||||
| 2029 | ||||||||||||||||
| 2030 | ||||||||||||||||
| Thereafter | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
12. Lease Liability
The Company has operating leases predominantly for operating facilities. As of March 31, 2026, the remaining lease terms on our operating leases range from less than one to three years. Renewal options to extend our leases have not been exercised due to uncertainty. Termination options are not reasonably certain of exercise by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants. There are no significant finance leases as of March 31, 2026.
| 20 |
Future minimum lease payments as of March 31, 2026 are as follows:
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| After | ||||
| Total lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Present value of remaining lease payments | $ | |||
| Current | $ | |||
| Non-current | $ | |||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate | % |
Total
cash paid for leases during the three months ended March 31, 2026 and 2025 approximated $
13. Commitments and Contingencies
License
Agreement – On March 19, 2022, Impact BioMedical entered into a License Agreement (“Equivir License”) with
a third-party (“Licensee”) where the Licensor is granted the right, amongst other things, to develop, commercialize, and
sell the Company’s Equivir technology.
Royalty Agreement - On August 15, 2018, the Impact BioMedical entered into Royalty Agreement with Chemia Corporation (“Chemia”) pursuant to which Chemia transferred to the Company all of its right to 3F (Functional Fragrance Formulation). This agreement has a 20-year term and auto renews for a period of 1 year unless mutually agreed upon by both parties. 3F consists of 3F Mosquito Repellant and 3F Anti-Viral formulations. Based on the Royalty Agreement, the Company should cover all the costs to prepare and finalize necessary patent application and other intellectual property related to 3F. Chemia agreed to support the Company in efforts leading to development of 3F intellectual property and it is licensing. Based on Royalty Agreement any payments received from development, sales, licensing or transfer of 3F technology will be paid 50% to the Company and 50% to Chemia. On November 27, 2018, Company and Chemia signed an Addendum to Royalty Agreement (“Addendum”), according to which the Company granted Chemia a royalty-based limited license for purposes of making and selling fragrances embodying the 3F technology. Based on the Addendum, Chemia should pay the Company 5% of net sales in royalty. On November 8, 2019, both companies entered into Amendment no.1 to Royalty Agreement, based on which certain expenses borne by the Company towards patent application and licensing should be reimbursed to the Company before any royalty payments are made. For the three months ended March 31, 2026 and 2025, there were no reimbursements or royalties paid to the Company and the Company cannot be assured that Chemia’s efforts will end up in any future sales of the technology.
Employment
Agreements – Impact BioMedical has an employment agreement with it CEO Frank Heuszel in which Mr. Heuszel’s
agreement contains a mandatory bonus clause of $
Contingent Litigation Payments – The Company retains the services of professional service providers, including law firms that specialize in intellectual property licensing, enforcement and patent law. These service providers are often retained on an hourly, monthly, project, contingent or a blended fee basis. In contingency fee arrangements, a portion of the legal fee is based on predetermined milestones or the Company’s actual collection of funds. The Company accrues contingent fees when it is probable that the milestones will be achieved, and the fees can be reasonably estimated. As of March 31, 2026 and December 31, 2025, the Company had not accrued any contingent legal fees pursuant to these arrangements.
| 21 |
14. Stockholders’ Equity
DSS, Inc.
Equity
transactions - On February 6, 2025, as a bonus for compensation awarded to Heng Fai Holdings Limited (“HFHL”), a
Hong Kong Company, which is beneficially owned by Mr. Heng Fai Ambrose Chan, Director of DSS, Inc., and pursuant to DSS, Inc’s.
2020 Employee, Director and Consultant Equity Incentive Plan (the “Plan”), HFHL was awarded shares of the Company’s
common stock, approximating $
On
March 21, 2025, DSS, the parent company of Impact Biomedical, Inc. completed the sale of
shares of Impact Biomedical common stock. These shares were acquired by DSS during Impact’s initial public offering on
September 16, 2024. The sale of these shares, which were previously held by DSS as part of its ownership interest in Impact, was
completed for a total value of $
On
February 4, 2026, DSS entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (“Aegis”),
which provided for the issuance and sale by the Company and the purchase by the underwriter, in a firm commitment underwritten public
offering of shares of the Company’s common stock. Subject to the terms and conditions contained in the Underwriting Agreement,
the shares were sold at a public offering price of $ per share, less certain underwriting discounts and commissions. The Offering
closed on February 5, 2026 and the Company received approximately $
Stock-Based
Compensation - The Company records stock-based payment expense related to options and warrants based on the grant date fair value
in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors,
and consultants. Such awards include option grants, warrant grants, and restricted stock awards On February 6, 2025, as a bonus for compensation awarded to Heng Fai Holdings Limited (“HFHL”), a Hong
Kong Company, which is beneficially owned by Mr. Heng Fai Ambrose Chan, Director of DSS, Inc., and pursuant to DSS, Inc’s. 2020
Employee, Director and Consultant Equity Incentive Plan (the “Plan”), HFHL was awarded shares of the Company’s
common stock, approximating $
| 22 |
Impact BioMedical, Inc.
Equity
Transaction - On February 26, 2025, Impact BioMedical issued
shares of the its common stock as payment of legal
fees incurred associated with Impact’s IPO, registration of shares associated with its equity incentive plan as well as other related
services. The legal fees received were valued at approximately $
Stock-Based
Compensation – IBO records stock-based payment expense related to options and warrants based on the grant date fair
value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees,
directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. On October 1, 2024,
option grants with a purchase price of $
per share were awarded to certain officers, directors and consultants of Impact BioMedical. These options have various vesting
periods, and all expire on October 31, 2031. Potential proceeds of these grants is $
In
January 2026, the Impact BioMedical granted and issued
shares of common stock to various individuals including executives, board members, audit committee members, etc. Agreement included
the individuals rescinding and cancelling any and all unexercised stock options previously granted. Impact Biomedical recorded
stock-based compensation expense of approximately $, of which $
15. Supplemental Cash Flow Information
The following table summarizes supplemental cash flows for the three months ended March 31, 2026 and 2025:
| 2026 | 2025 | |||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Shares issued in lieu of cash as payment for legal services | $ | $ | ||||||
| Stock-based compensation | $ | $ | ||||||
| 23 |
16. Segment Information
The Company reports its segment information to reflect the manner in which the Company’s chief operating decision maker (“CODM”) reviews and assesses performance. The Company’s Interim Chief Executive Officer has responsibilities as the CODM and reviews and assess the performance of the Company as a whole. The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODM uses net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Information on Net income (loss) and Operating income (loss) is disclosed in the Consolidated Statements of Operations. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the Consolidated Statements of Operations. The CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the notes to the financial statements. During the fourth quarter of 2025, we realigned our internal reporting to better reflect how management reviews operating results and allocates resources. As a result of this CODM realignment, Direct Marketing is no longer a reportable segment and is now reported within Corporate and Other or the year ended December 31, 2025 and the three months ended March 31, 2026. This change did not impact consolidated revenue, consolidated net income (loss), total assets, or cash flows for any period presented; it only impacted the presentation of segment information. Segment information for prior periods presented has been recast to conform to the current-period segment presentation. Our four reporting segments are:
Premier Packaging: (“Premier”) Premier Packaging Corporation provides custom packaging services and serves clients in the pharmaceutical, nutraceutical, consumer goods, beverage, specialty foods, confections, photo packaging and direct marketing industries, among others. The group also provides active and intelligent packaging and document security printing services for end-user customers. In addition, the division produces a wide array of printed materials, such as folding cartons and paperboard packaging, security paper, vital records, prescription paper, birth certificates, receipts, identification materials, entertainment tickets, secure coupons and parts tracking forms. The division also provides resources and production equipment for our ongoing research and development of security printing, brand protection, consumer engagement and related technologies.
Commercial Lending: (“Commercial Lending”) through its operating company, American Pacific Financial, Inc. (“APF”) represents our financing business line. is organized for the purposes of being a financial network holding company, focused providing commercial loans and on acquiring equity positions in (i) undervalued commercial bank(s), bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services, mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC (special purpose acquisition company) consulting, and advisory capital raising services. From this financial platform, the Company shall provide an integrated suite of financial services for businesses that shall include commercial business lines of credit, land development financing, inventory financing, third party loan servicing, and services that address the financial needs of the world Gig Economy.
Biotechnology: (“Biotech”) targets unmet, urgent medical needs and expands the borders of medical and pharmaceutical science. Biotech drives mission-oriented research, development, and commercialization of solutions for medical advances in human wellness and healthcare. By leveraging technology and new science with strategic partnerships, Biotech provides advances in drug discovery for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases. Other exciting technologies include a breakthrough alternative sugar aimed to combat diabetes and functional fragrance formulations aimed at the industrial and medical industry.
Securities and Investment Management: (“Securities”) Securities was established to develop and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, real estate investment funds, broker dealers, and mutual funds management.
Approximate
information concerning the Company’s operations by reportable segment for the three months ended March 31, 2026 and 2025
is as follows. The Company relies on intersegment cooperation and management does
| Three Months Ended March 31, 2026 | Product Packaging | Commercial Lending | Biotechnology | Securities | Corporate/ Other | Total | ||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of Revenue | ||||||||||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Operating expense | ||||||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net income (loss) from operations before taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| 24 |
| Three Months Ended March 31, 2025 | Product Packaging | Commercial Lending | Biotechnology | Securities | Corporate/ Other | Total | ||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of revenue | ( | ) | ||||||||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||||||||||
| Operating expense | ||||||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net income (loss) from operations before taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
The following tables disaggregate our business segment revenues by major source:
Printed Products Revenue Information:
| Three months ended March 31, 2026 | ||||
| Packaging Printing and Fabrication | $ | | ||
| Commercial and Security Printing | ||||
| Real Property Rental Income | ||||
| Total Printed Products Revenue | $ | |||
| Three months ended March 31, 2025 | ||||
| Packaging Printing and Fabrication | $ | |||
| Commercial and Security Printing | ||||
| Real Property Rental Income | ||||
| Total Printed Products Revenue | $ | |||
Commercial Lending Revenue Information:
| Three months ended March 31, 2026 | ||||
| Net investment income | $ | |||
| Total Commercial Lending Revenue | $ | |||
| Three months ended March 31, 2025 | ||||
| Net Investment Income | $ | |||
| Total Commercial Lending Revenue | $ | |||
Biotechnology Revenue Information:
| Three months ended March 31, 2026 | ||||
| Retail internet sales | ||||
| Total Biotechnology Revenue | $ | |||
| Three months ended March 31, 2025 | ||||
| Retail internet sales | $ | |||
| Total Biotechnology Revenue | $ | |||
Securities Revenue Information:
| Three months ended March 31, 2026 | ||||
| Rental income | $ | |||
| Commission income | $ | |||
| Total Securities Revenue | $ | |||
| Three months ended March 31, 2025 | ||||
| Rental income | $ | |||
| Commission income | $ | |||
| Total Securities Revenue | $ | |||
| 25 |
17. Related Party Transactions
The
Company owns shares or approximately % of the outstanding shares of Alset International Limited (“Alset Intl”),
a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited. This investment is classified as a marketable
security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the
investments for a period of at least one year. The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and
Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of
the Company. The fair value of the marketable security as of March 31, 2026 and December 31, 2025, was approximately $
On
September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement
with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability
company (“BMIC LLC”) whereas DSS Securities, Inc. purchased
The
Company owns shares or approximately % of True Partners
Capital Holding Limited (“True Partners”), a publicly listed company on the Hong Kong Stock Exchange. On February 28, 2022,
the Company entered into a Stock Purchase Agreement with Alset EHome International Inc. (“AEI”), pursuant to which AEI has
agreed to sell a subsidiary holding shares of stock of True Partner Capital Holding Limited exchange for shares
of common stock of the Company (the “DSS Shares”). The Company’s Executive Chairman and a significant stockholder, Heng
Fai Ambrose Chan is the Chairman, Chief Executive Officer and largest shareholder of AEI. Further, on February 20, 2025, the Company acquired
an additional shares of True Partners. The fair value of the marketable security as of March 31, 2026 and December 31, 2025,
was approximately $
BMI
Capital International LLC. (“BMIC LLC”), a related party, entered into a promissory note (“Note 4”) in the principal
sum of $
On
May 8, 2023, DSS Financial Management Inc and BMIC LLC entered into a promissory note (“Note 5”) in the principal sum of
$
On
July 26, 2022, APF and VEII, Inc. (“VEII”) entered into a promissory note (“Note 6”) in the principal sum of
$
On
October 13, 2021, Liquid Value Asset Management Limited (“LVAM”), a majority owned subsidiary of the Company, entered into
loan agreement with BMIC (“BMIC Loan”), a related party, whereas LVAM borrowed the principal amount of $
On
October 13, 2021, LVAM entered into a loan agreement with Lee Wilson Tsz Kin (“Wilson Loan”), a related party, whereas LVAM
borrowed the principal amount of $
| 26 |
On February 6, 2025, as a bonus for compensation awarded to Heng Fai Holdings Limited (“HFHL”), a Hong Kong Company, which is beneficially owned by Mr. Heng Fai Ambrose Chan, Director of DSS, Inc., and pursuant to DSS, Inc’s. 2020 Employee, Director and Consultant Equity Incentive Plan (the “Plan”), HFHL was awarded shares of the Company’s common stock under the Plan, for services rendered. The issuance was approved by the board of directors on January 31, 2025.
In
August of 2025, DSS issued a $
On
February 6, 2025, as a bonus for compensation awarded to Heng Fai Holdings Limited (“HFHL”), a Hong Kong Company, which is
beneficially owned by Mr. Heng Fai Ambrose Chan, Director of DSS, Inc., HFHL was awarded shares of the Company’s common
stock, approximating $
On
March 21, 2025, DSS, the parent company of Impact Biomedical, Inc. completed the sale of shares of Impact Biomedical common stock.
These shares were acquired by DSS during Impact’s initial public offering on September 16, 2024. The sale of these shares, which
were previously held by DSS as part of its ownership interest in Impact, was completed for a total value of $
On
April 4, 2025, DSS, the parent company of Impact Biomedical, Inc. completed the sale of shares of Impact Biomedical common stock.
The sale of these shares, which were previously held by DSS as part of its ownership interest in Impact, was completed for a total approximate
value of $
On
May 22, 2025, DSS, the parent company of Impact Biomedical, Inc. completed the sale of shares of Impact Biomedical common stock.
The sale of these shares, which were previously held by DSS as part of its ownership interest in Impact, was completed for a total approximate
value of $
On
May 23, 2025, DSS, the parent company of Impact Biomedical, completed the sale of shares of Impact Biomedical common stock. The
sale of these shares, which were previously held by DSS as part of its ownership interest in Impact, was completed for a total approximate
value of $
On
March 26, 2026, Alset International Limited (“AIL”), a majority-owned subsidiary of Alset Inc. (the “Company”)
entered into a securities purchase agreement (the “SPA”) with DSS pursuant to which AIL will loan DSS $
On March 27,
2026, the Company received a convertible bond from True Partners Capital Holding Limited (“True Partners”), a related
party. The bond has a face value of $
18. Subsequent Events
The Company has evaluated all subsequent events and transactions through May 15, 2026 the date that the condensed consolidated financial statements were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure other than noted below:
On April 29, 2026,
True Partner International Limited, a subsidiary of DSS, delivered a conversion notice to True Partner Capital Holding Limited to convert the full outstanding
principal amount of its $
| 27 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). Except for the historical information contained herein, this report contains forward-looking statements (identified by words such as “estimate”, “project”, “anticipate”, “plan”, “expect”, “intend”, “believe”, “hope”, “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties, and factors, that could cause actual results to differ materially from the results anticipated in the forward-looking statements.
Overview
The Company, which was incorporated in the state of New York in May 1984, previously conducted its business under the name of Document Security Systems, Inc On September 16, 2021, our board of directors approved an agreement and plan of merger with a wholly owned subsidiary, DSS, Inc. This subsidiary, incorporated in August 2020, was created for the sole purpose of facilitating a transformational name change from Document Security Systems, Inc. to DSS, Inc. This significant shift in our identity became official on September 30, 2021. With the name change, DSS, Inc. retained its trading symbol, “DSS,” and is currently trading under its CUSIP number to 26253C 201. This change reflects not only our evolution as a company but also our commitment to adapting and growing in an ever-changing business landscape. DSS, Inc. (referred to herein as “DSS,” “we,” “us,” or “our”) now operates across four distinct business lines, each with its own unique scope and presence on a global scale. These business lines encompass a wide range of industries and sectors, including:
Product Packaging: Our involvement in product packaging represents our dedication to delivering innovative and sustainable packaging solutions that meet the evolving needs of various markets.
Biotechnology: In the field of biotechnology, we are focused on pioneering scientific advancements and technologies that have the potential to transform human healthcare and wellness.
Commercial Lending: We are actively engaged in commercial lending, offering a suite of financial services that cater to the unique needs of businesses, ranging from commercial lines of credit to land development financing.
Securities and Investment Management: In the world of securities and investment management, we aim to provide expertise and guidance to help our clients navigate the complexities of the financial markets and achieve their investment goals.
Each of these business lines is at a different stage of development, growth, and income generation, reflecting the diversity of our operations. This multi-faceted approach allows us to adapt to changing market conditions and explore new opportunities for expansion and success. We are committed to our continued evolution and to delivering value to our stakeholders across these diverse business lines.
Diverse Business Lines and Global Presence:
Under the banner of DSS, Inc., we have diversified our operations into four distinct business lines, each with its own unique scope and geographical footprint. These business lines include:
Product Packaging: Led by Premier Packaging Corporation, Inc. (“Premier”), a New York corporation, this segment specializes in paperboard and fiber-based folding carton manufacturing, consumer product packaging, and document security printing. Premier is headquartered in its newly established facility in Rochester, NY, primarily serving the US market.
Biotechnology: This business line is dedicated to investing in or acquiring companies in the BioHealth and BioMedical fields, focusing on drug discovery, prevention, treatment of various diseases, and open-air defense initiatives against infectious diseases.
Commercial Lending: American Pacific Financial, Inc. (“APF”) represents our financing business line. Looking ahead, to better meet the needs of the current financial market, the company is looking to transition away form certain industries like direct marketing and focus more on growing its inventory / equipment loan portfolio as well as engaging in more specialized areas of lending like broker/dealer loans. We will continue to monitor our managed loan portfolio, and explore future opportunities. Importantly, the equity portfolio as a bank holding company is anticipated to remain relatively stable, regardless of stock market fluctuations.
Securities and Investment Management: This division focuses on acquiring assets in the securities trading and management arena, including broker-dealers. It also oversees a real estate investment trust (REIT) that acquires hospitals and care centers.
| 28 |
Results of operations for the three and three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
This discussion should be read in conjunction with the financial statements and footnotes contained in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2025.
Revenue
Three months ended | Three months ended | % Change | ||||||||||
| Product Packaging | $ | 4,163,000 | $ | 3,998,000 | 4 | % | ||||||
| Securities | 155,000 | 920,000 | -83 | % | ||||||||
| Commercial Lending | 6,000 | 21,000 | -71 | % | ||||||||
| Biotechnology | 7,000 | 15,000 | -53 | % | ||||||||
| $ | 4,331,000 | $ | 4,954,000 | -13 | % | |||||||
For the three months ended March 31, 2026, total revenue decreased 13% as compared to the three months ended March 31, 2025. Printed Product revenue increased approximately 4% is driven by new customer orders as well as existing customer orders exceeding their forecasts. The decreases in Securities revenue of approximately 83% is driven by decreases in rental income as a tenant at AMRE LifeCare Pittsburgh facility vacated the location during the second half of 2025. Additionally, the Company received approximately 90% less in commission revenues associated with its Sentinel Brokers subsidiary during the three months ended March 31, 2026 as compared to March 31, 2025.The decreases in Commercial lending income approximating 71% is due to a number of loans made going on non-accrual during 2025 as borrowers have struggled to make expect payments. Biotechnology revenue is driven by sales of the Company’s air purification Celios brand.
Costs and Expenses
Three months ended March 31, 2026 | Three months ended March 31, 2025 | % Change | ||||||||||
| Cost of revenue | ||||||||||||
| Printed products | $ | 4,439,000 | $ | 3,801,000 | 17 | % | ||||||
| Securities | 1,094,000 | 1,396,000 | -22 | % | ||||||||
| Biotechnology | - | 11,000 | -100 | % | ||||||||
| Commercial lending | - | (21,000 | ) | -100 | % | |||||||
| Sales, general and administrative compensation | 999,000 | 1,176,000 | -15 | % | ||||||||
| Professional fees | 597,000 | 506,000 | 18 | % | ||||||||
| Stock-based compensation | 1,440,000 | 872,000 | 65 | % | ||||||||
| Sales and marketing | 375,000 | 401,000 | -6 | % | ||||||||
| Rent and utilities | 132,000 | 126,000 | 5 | % | ||||||||
| Research and development | 46,000 | 236,000 | -81 | % | ||||||||
| Other operating expenses | 696,000 | 176,000 | 295 | % | ||||||||
| Total costs and expenses | $ | 9,818,000 | $ | 8,680,000 | 13 | % | ||||||
Costs of revenue includes all direct costs of the Company’s printed products, including its packaging and printing sales and its direct marketing sales, materials, direct labor, transportation, and manufacturing facility costs. In addition, this category includes all direct costs associated with the Company’s technology sales, services and licensing including hardware and software that are resold, third-party fees, and fees paid to inventors or others because of technology licenses or settlements, if any. Cost of revenue for our REIT line of business includes all direct cost associated with the maintenance and upkeep of the related facilities, depreciation, amortization and the costs to acquire the facilities. Our Commercial Lending operating segment has costs of revenue associated with the impairment of notes receivable for those amounts at risk of collection. Total costs of revenue increased for the three months ended March 31, 2026 as compared to March 31, 2025 by approximately 7%. Cost of revenue increased at our Printed products business line driven by an increase in revenue year over year which was offset by decrease in cost of revenue within our REIT business driven by the sale of the Fort Worth, Tx and Winter Haven, Fl facilities in December 2025 for which costs were incurred during the three months ended March 31, 2025 and not incurred during the three months ended March 31, 2026.
| 29 |
Sales, general and administrative compensation costs, excluding stock-based compensation, decreased 15% for three months ended March 31, 2026 as compared to 2025 is primarily due to headcount reductions within our Securities segment.
Professional fees increased for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 due to cost incurred to expand the sales force at Premier Packaging as well as training for Premier’s operations staff. Additionally, cost have increased at Impact BioMedical as a result of due diligence and other professional fees in connection with potential mergers and/or acquisitions.
Stock-based compensation includes expense charges for all stock-based awards to employees, directors, and consultants of Impact Bio. Such awards can include option grants, warrant grants, and restricted and unrestricted stock awards. In January 2026, the Impact BioMedical granted and issued 3,200,000 shares of common stock, valued at approximately $1,440,000, to various individuals including executives, board members, and audit committee members for services to be provided during the first quarter of 2026. On February 6, 2025, 1,000,000 shares of the Company’s common stock, valued at approximately $870,000, was awarded as compensation to Heng Fai Holdings Limited (“HFHL”), a Hong Kong Company, which is beneficially owned by Mr. Heng Fai Ambrose Chan, Director of DSS, Inc., for consulting services to be provided during the first quarter of 2025.
Sales and marketing which include internet and trade publication advertising, travel and entertainment costs, sales-broker commissions, and trade show participation expenses. Sales and marketing decreased 6% during the three months ended March 31, 2026 as compared to 2025 due to decreases in marketing, and travel costs within our Printed Products division.
Rent and utilities increased 5% during the three months ended March 31, 2026 as compared to 2025 primarily driven by increases in utilities at our Premier Packaging facility.
Research and development represent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns, research on new technologies as well as costs to patent newly developed technologies and other related fees for the development of new technologies. Research and development decreased 81% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 due primarily to a decrease in spending on identifying new technologies as well as pausing the spend on several in-development technologies at our Impact BioMedical subsidiary.
Other operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs. These costs increased approximately 289% during the three months ended March 31, 2026 as compared to March 31, 2025, primarily due to collections of previously written-off of accounts receivable associated with our AMRE LifeCare facilities of approximately $600,000.
Other Income (Expense)
Three months ended March 31, 2026 | Three months ended March 30, 2025 | % Change | ||||||||||
| Interest Income | $ | 1,000 | $ | 3,000 | -67 | % | ||||||
| Interest income on note receivable, related party | 6,000 | 6,000 | 0 | % | ||||||||
| Dividend Income | 10,000 | - | N/A | |||||||||
| Other Income (expense) | (14,000 | ) | 4,000 | -450 | % | |||||||
| Interest Expense | (39,000 | ) | (33,000 | ) | 18 | % | ||||||
| Loss on equity method investment | (3,000 | ) | (3,000 | ) | 0 | % | ||||||
| Loss on investments | (700,000 | ) | (930,000 | ) | -25 | % | ||||||
| Change in fair value of convertible bond investment – related party | (128,000 | ) | - | N/A | ||||||||
| Loss on sale of real estate | - | (684,000 | ) | -100 | % | |||||||
| Total other income | $ | (867,000 | ) | $ | (1,637,000 | ) | 47 | % | ||||
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Interest income is recognized on the Company’s money markets, and a portion of notes receivable, identified in Note 4. The decrease in interest income is driven by several notes being put on non-accrual as the related borrowers have shown an inability to pay timely.
Interest income on notes receivable, related party is recognized on the Company’s notes receivable with related parties identified in Note 4 and remained flat year over year as outstanding principal balances remained flat year over year.
Dividend income for the three months ended March 31, 2026 represent dividends received on certain investments owned by the Company. No such dividends were received the three months ended March 31, 2025.
Other income (expense) for the three months ended March 31, 2026 as compared to 2025 fluctuated due primarily to foreign exchange losses for the three months ended March 31, 2026 of approximately $19,000 as compared to approximately $3,000 for the three months ended March 31, 2025.
Interest expenses increased 18% during the three months ended March 31, 2026, as compared to the same period in 202, due to additional debt taken on during the fourth quarter of 2025.
Loss on equity method investment is the Company’s prorated portion of earnings on its investments treated under the equity method of account for the three months ended March 31, 2026 as compared to 2025.
Loss on investments consists of net realized losses on marketable securities which are recognized as the difference between the purchase price and sale price of the common stock investment, and net unrealized losses on marketable securities which are recognized on the change in fair market value on our common stock investment. The decrease in loss on investment for the three months ended March 31, 2026 as compared to 2025 is driven by the performance of our stock portfolio.
Change in fair value of convertible bond investment – related party represents the change in fair value of the convertible bond investment in True Partners from the acquisition date of March 27, 2026 and March 31, 2026. See Note 6.
Loss on sale of real estate is driven by the sale of the Company’s Plano, Texas facility.
Net Loss
Three months ended March 31, 2026 | Three months ended March 31, 2025 | % Change | ||||||||||
| Net loss | $ | (6,354,000 | ) | $ | (5,296,000 | ) | -20 | % | ||||
For the three months ended March 31, 2026 the Company recorded net losses of $6,354,000 as compared to net losses of $5,296,000 for the same period in 2025. The increase in net loss is driven by a decrease in total revenue of approximately 13% as well as stock-based compensation of approximately $1,440,000 paid at our Impact BioMedical subsidiary during the first quarter of 2026.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its liquidity and capital requirements primarily through the sale of its equity securities and debt financing. As of March 31, 2026 the Company had cash of approximately $4,936,000. As of March 31, 2026, the Company believes that it will have access to sources of capital from the sale of its equity securities and debt financing, and thus believes that it has sufficient cash to meet its cash requirements for at least the next 12 months from the filing date of this Quarterly Report.
Cash Flow from Operating Activities
Net cash used by operating activities was $133,000 for the three months ended March 31, 2026 as compared to cash provided by $1,168,000 for three months ended March 31, 2025. This fluctuation is driven by increases in net loss, after reconciling items, approximating $752,000, an increases in inventory of approximately $211,000 offset by accounts receivable decrease by approximately $229,000 and accounts payable of approximately $789,000.
Cash Flow from Investing Activities
Net cash used by investing activities was $2,639,000 for the three months ended March 31, 2026 as compared to net cash provided by investing activities of $10,070,000 for the three months ended March 31, 2025. This fluctuation is driven by the cash outflow for the purchase of a convertible bond – related party of approximately $2,450,000 during the first quarter of 2026. During the first quart of 2025, there was a cash inflows for the sale of real estate approximating $9,500,000, and the sale of related party investments of approximately $1,500,000, offset by the purchase of marketable securities of approximately $1,000,000.
Cash Flow from Financing Activities
Net cash provided by financing activities was $1,394,000 for the three months ended March 31, 2026 as compared to net cash used by financing activities of $11,694,000 for the three months ended March 31, 2025. This variance is driven by payments toward long term debt of $284,000, payments on margin loans of $1,548,000 offset by borrowings of convertible note payable – related party of $2,450,000 during the first quarter of 2025 versus payments toward long term debt of $8,997,000 and payments on margin loans of $2,806,000 during the first quarter of 2025.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues, or expenses.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. The financial statements as of December 31, 2025, describe the significant accounting policies and methods used in the preparation of the financial statements. There have been no material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.
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ITEM 4 - CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures for the quarter ended March 31, 2026, pursuant to Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation and on the material weaknesses disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 which remained as of March 31, 2026, our principal executive officer and principal financial officer concluded that as of March 31, 2026, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is being recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is being accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Plan for Remediation of Material Weaknesses
As discussed in our Annual Report on Form 10-K for the year ended December 31, 2025, the Company has a remediation plan and is committed to maintaining a strong internal control environment and believes that these remediation efforts will represent significant improvements in our controls. The Company has started to implement these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until the remediation steps set forth above are fully implemented and tested, the material weaknesses described above will continue to exist.
Changes in Internal Control over Financial Reporting
While changes in the Company’s internal control over financial reporting occurred during the quarter ended March 31, 2026 as the Company began implementation of the remediation steps described above, we believe that there were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
See commentary in Note 13 Commitments and Contingencies.
ITEM 1A - RISK FACTORS
There have been no material changes to the discussion of risk factors previously disclosed in our most recently filed Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 25, 2022, the Company entered into a stock purchase agreement with Alset EHome International, Inc. (the “January 25, 2022 SPA”), pursuant to which the Company agreed to issue to Alset EHome International, Inc. (“AEI”) up to 44,619,423 shares of the Company’s common stock (the “Shares”) for a purchase price of $0.3810 per share. On February 28, 2022, the Company entered into an Amendment to Stock Purchase Agreement, pursuant to which the Company and AEI agreed to amend certain terms of the January 25, 2022 SPA. Pursuant to the Amendment, the number of shares of the common stock of the Company that the AEI will purchase has been reduced from 44,619,423 to 3,986,877 shares for an aggregate purchase price of $1,519,000.
On January 18, 2022, the Company entered into a stock purchase agreement with AEI, pursuant to which AEI sold to the Company 100% of the shares of common stock of its wholly owned subsidiary True Partner International Limited (HK) (“TP”), and all of TP’s 62,122,908 ordinary shares of True Partner Capital Holding Limited, for a purchase price of 11,397,080 newly issued shares of the Company’s common stock. This agreement was terminated on February 25, 2022. On February 28, 2022, the Company entered into a Stock Purchase Agreement with Alset EHome International Inc. (the “True Partner Revised Stock Purchase Agreement”), pursuant to which AEI has agreed to sell a subsidiary holding 62,122,908 shares of stock of True Partner Capital Holding Limited in exchange for 17,570,948 shares of common stock of the Company.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 - OTHER INFORMATION
None.
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ITEM 6 - EXHIBITS
Exhibit Number |
Exhibit Description | |
| 3.1 | Certificate of Incorporation * | |
| 3.2 | Certificate of Incorporation of Document Security Systems, Inc., as amended (incorporated by reference to exhibit 3.1 to Form 8-K dated August 25, 2016). | |
| 3.3 | 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. (incorporated by reference to exhibit 10.1 to exhibit 10.1 to the Company’s quarterly report, dated August 13, 2024) | |
| 10.2 | Securities Purchase Agreement between Decentralized Sharing Systems, Inc. and Sharing Services Global Corporation for the sale of HWH World, Inc. (incorporated by reference to exhibit 10.2 to exhibit 10.1 to the Company’s quarterly report, dated August 13, 2024) | |
| 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)* |
*Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| DSS, INC. | ||
| May 15, 2026 | By: | /s/ Jason Grady |
| Jason Grady | ||
| Interim Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May 15, 2026 | By: | /s/ Todd D. Macko |
| Todd D. Macko | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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