DSS.AMEXDss, INC
10-Q: DSS Reports Reduced Q3 Loss Amid Revenue Growth, Liquidity Concerns Persist
Sentiment:
Quarterly Report
DSS, Inc. reported a significant reduction in net loss for the third quarter and first nine months of 2025, driven by increased revenue in its Printed Products and Securities segments, despite ongoing liquidity challenges and internal control weaknesses.
Delay expectedThe closing date of the Impact BioMedical Inc. merger with Dr Ashleys Limited is uncertain due to pending approval from regulatory authorities.Land and buildings related to AMRE Shelton, previously classified as held for sale, were reclassified to Investment in real estate, net, as the sale is not expected to be finalized within 12 months.
Capital raiseThe company historically obtains equity and/or debt-based financing to meet working capital needs.The company believes it will have access to sources of capital from the sale of its equity securities and debt financing.The company can generate operating cash through the sale of its $1.6 million of Marketable Securities.In August 2025, DSS issued a $500,000 convertible promissory note to Alset, Inc., a related party and the company's largest shareholder.
Worse than expectedThe 'going concern' warning indicates a fundamental financial instability worse than expected for a publicly traded company.Persistent negative cash flows from operating activities, increasing from the prior year, are worse than expected.The shift to net cash used by financing activities, from cash provided in the prior year, indicates a worsening ability to raise capital or manage debt.The continued existence of material weaknesses in disclosure controls and procedures is worse than expected, indicating ongoing issues with financial reporting reliability.The default status of a significant $39.14 million loan (LifeCare Agreement) and other notes receivable is worse than expected for a commercial lending and investment management segment.The subsequent event regarding the tenant not renewing its lease at the Pittsburgh facility, with outstanding receivables, points to worsening asset performance.
Summary
- Net loss for the nine months ended September 30, 2025, decreased to $10.09 million from $15.76 million in the prior year period, a 36% improvement.
- Total revenue for the nine months increased by 22% to $16.63 million, up from $13.68 million in the same period last year.
- Printed Products revenue grew 16% to $13.25 million, and Securities revenue increased 61% to $3.34 million.
- Operating loss for the nine months improved to $10.38 million from $14.29 million year-over-year.
- Cash and cash equivalents decreased to $7.02 million as of September 30, 2025, from $11.43 million at December 31, 2024.
- The company recorded a $1.11 million gain on investments for the nine months, a significant improvement from a $1.02 million loss in the prior year.
- A $600,000 impairment of intangible assets was recognized due to the resignation as the registered investment advisor for American First Mutual Funds.
- The sale of the Plano, Texas facility for $9.5 million resulted in a $727,000 loss.
- Disclosure controls and procedures were deemed not effective as of September 30, 2025, due to existing material weaknesses.
Sentiment
Score: 3
Explanation: While revenue growth and reduced net loss are positive, the severe 'going concern' warning, persistent negative cash flows, ineffective internal controls, and significant loan defaults indicate a highly precarious financial position. The reliance on future capital raises and asset sales for liquidity, coupled with related-party transactions, adds to the risk profile. The overall sentiment is negative due to fundamental solvency concerns.
Positives
- Net loss significantly reduced by 36% for the nine months ended September 30, 2025, to $10.09 million from $15.76 million in the prior year.
- Total revenue increased by 22% for the nine months ended September 30, 2025, reaching $16.63 million.
- Printed Products revenue grew 16% to $13.25 million, driven by new and existing customer orders.
- Securities segment revenue increased 61% to $3.34 million, primarily due to higher rental income from new tenants at the AMRE LifeCare Pittsburgh facility.
- A gain on investments of $1.11 million was recorded for the nine months, a substantial improvement from a $1.02 million loss in the prior year.
- Provision for loan losses decreased significantly to $0 for the nine months ended September 30, 2025, compared to $908,000 in the prior year, with no additional reserves deemed necessary.
- Operating loss improved to $10.38 million for the nine months, down from $14.29 million in the previous year.
Negatives
- The company's ability to continue as a going concern is in substantial doubt due to incurred operating losses and negative cash flows from operating and investing activities over the past two years.
- Cash and cash equivalents decreased by $4.41 million to $7.02 million as of September 30, 2025, from $11.43 million at December 31, 2024.
- Net cash used by operating activities increased to $7.58 million for the nine months ended September 30, 2025, from $5.89 million in the prior year.
- Net cash used by financing activities was $8.82 million for the nine months ended September 30, 2025, a significant shift from $989,000 provided in the prior year.
- A $600,000 impairment of intangible assets was recognized due to the resignation as the registered investment advisor for American First Mutual Funds.
- The sale of the Plano, Texas facility resulted in a loss of $727,000.
- Net investment income decreased by 80% to $36,000 for the nine months, primarily due to several loans going on non-accrual as borrowers struggled with payments.
- Accumulated deficit increased to $(312.26) million as of September 30, 2025, from $(303.07) million at December 31, 2024.
- Disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses.
- A tenant at the Pittsburgh facility will not be continuing its lease, leading to a past due rent receivable of $90,000 and a lease receivable of $1.18 million for the remaining term, which may result in a loss at year-end.
Risks
- Substantial doubt about the company's ability to continue as a going concern within one year due to ongoing operating losses and negative cash flows from operating and investing activities.
- The closing date of the Impact BioMedical Inc. merger with Dr Ashleys Limited is uncertain due to pending regulatory approval.
- Material weaknesses in disclosure controls and procedures persist, indicating a risk in the accuracy and timeliness of financial reporting.
- Several notes receivable are in default or on non-accrual, including Puradigm ($5.54 million), Asili, LLC ($884,000), WUURII Commerce, Inc. ($465,000), DSS PureAir and Puradigm ($224,000), and related party BMIC notes ($83,000 and $110,000), indicating significant credit risk in the loan portfolio.
- The LifeCare Agreement with Pinnacle Bank, with an outstanding principal of $39.14 million, is in default, and a demand for final payment was made by December 22, 2023, which is past due.
- A tenant at the Pittsburgh facility will not be continuing its lease, potentially leading to a loss at year-end related to a $90,000 past due rent receivable and a $1.18 million lease receivable.
- The company relies on obtaining equity and/or debt-based financing to meet working capital needs, which may not always be available.
- The company's investment in BioMed Technologies Asia Pacific Holdings Limited was impaired in full at December 31, 2024, as it does not have a readily determined fair value, indicating potential for further investment losses.
Future Outlook
Management will continue evaluating the status of the Impact BioMedical Inc. merger with Dr Ashleys Limited at year-end, as the closing date remains uncertain due to pending regulatory approval. The company believes it has sufficient cash to meet its requirements for at least the next 12 months from the filing date, primarily through potential equity and/or debt-based financing and the sale of marketable securities. Remediation efforts for internal control weaknesses are ongoing, with full integration and effectiveness expected to take time.
Management Comments
- We believe that we have sufficient cash to meet our cash requirements for at least the next 12 months from the filing date of this Quarterly Report.
- We have taken steps, and will continue to take measures, to materially reduce the expenses and cash burn at all corporate and business line levels.
- We are committed to maintaining a strong internal control environment and believe that these remediation efforts will represent significant improvements in our controls.
- Some of these steps [remediation of material weaknesses] will take time to be fully integrated and confirmed to be effective and sustainable.
Industry Context
The company operates across diverse sectors including product packaging, biotechnology, commercial lending, securities and investment management, and direct marketing. The increase in Printed Products revenue suggests resilience or growth in its niche packaging and security printing markets. The growth in Securities revenue, particularly rental income, indicates a positive trend in its medical real estate investment trust (REIT) segment, potentially benefiting from demand for healthcare facilities. However, the significant decrease in net investment income within Commercial Lending, attributed to borrowers struggling to make payments, points to challenges in the broader lending environment or specific portfolio risks. The biotechnology segment is still nascent in terms of retail revenue but is actively pursuing M&A and R&D in biohealth, aligning with broader industry trends in medical innovation.
Comparison to Industry Standards
- The company's diverse business lines make direct comparisons challenging without specific industry benchmarks for each segment.
- The significant operating losses and negative cash flows from operations, coupled with the 'going concern' warning, indicate performance well below industry standards for a healthy, profitable enterprise.
- The 22% revenue growth for the nine months is positive, but its impact is overshadowed by the persistent net losses and cash burn.
- The impairment of intangible assets related to the American First Mutual Funds RIA position suggests a strategic divestment or underperformance in that specific investment management area, which could be compared to the competitive landscape of mutual fund management.
- The default status of multiple notes receivable and the LifeCare Agreement with Pinnacle Bank (a $39.14 million loan) indicates a higher-than-average risk profile for its commercial lending and REIT segments compared to more conservative financial institutions.
- The sale of the Plano, TX facility at a loss, while generating cash, suggests a divestment that did not yield a positive return on that specific asset.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Interim Chief Executive Officer | NA | Jason Grady | NA | NA |
| Chief Financial Officer | NA | Todd D. Macko | NA | NA |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Effectiveness | Disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses identified in the Annual Report on Form 10-K for the year ended December 31, 2024, which remained as of the current reporting period. | 2025-09-30 | Indicates a risk to the reliability and timeliness of financial reporting and communication to management. A remediation plan is in progress, but full integration and effectiveness will take time. |
| Accounting Standard Adoption | Adopted Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Accounting for Income Taxes, effective for the fiscal year beginning January 1, 2025, using a modified retrospective approach. No immediate material impact due to ongoing operating losses and NOL carryforwards. | 2025-01-01 | Enhances guidance on income tax accounting and disclosures, but current financial state limits immediate impact on statements. |
| Accounting Standard Evaluation | Evaluating the impact of ASU No. 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, effective for annual periods beginning after December 15, 2024. | NA | Expected to enhance transparency and decision usefulness of income tax disclosures, but impact on financial statements is still being evaluated. |
| Accounting Standard Evaluation | Evaluating the impact of ASU No. 2024-03, Disaggregation of Income Statement Expenses (DISE), effective for fiscal years beginning after December 15, 2026. Not expected to have a material effect on consolidated financial statements as a whole, except for expanding disclosures. | NA | Will require more granular income statement expense categories in footnotes, enhancing transparency. |
Legal Proceedings
- The LifeCare Agreement with Pinnacle Bank, with an outstanding principal of approximately $39,144,000, is in default, and a demand for final payment was made by December 22, 2023. This amount is past due as of September 30, 2025.
Related Party Transactions
- The Company owns approximately 4% of Alset International Limited (Alset Intl), where DSS Chairman Mr. Heng Fai Ambrose Chan is the Executive Director, CEO, and majority shareholder.
- The Company acquired an additional 19,500,000 shares of True Partners Capital Holding Limited on February 20, 2025. DSS Executive Chairman Heng Fai Ambrose Chan is also the Chairman, CEO, and largest shareholder of Alset EHome International Inc. (AEI), which sold shares of True Partner to DSS.
- DSS Securities, Inc. owns 24.9% of BMI Capital International LLC (BMIC). DSS's Chairman and another independent board member also have ownership interests in BMIC.
- DSS Financial Management Inc. and BMIC (related party) entered into a promissory note (Note 6) for $100,000 on August 29, 2022, which was fully reserved for as of September 30, 2025.
- DSS Financial Management Inc. and BMIC (related party) entered into a promissory note (Note 7) for $102,000 on May 8, 2023, which was fully reserved for as of September 30, 2025.
- APF and VEII, Inc. (VEII) entered into a promissory note (Note 8) for $1,000,000 on July 26, 2022, with Heng Fai Ambrose Chan, DSS Chairman, also on VEII's board of directors. This note was fully reserved for as of September 30, 2025.
- Liquid Value Asset Management Limited (LVAM), a majority-owned subsidiary, borrowed $3,000,000 from BMIC (related party) via the BMIC Loan on October 13, 2021.
- LVAM borrowed $3,000,000 from Lee Wilson Tsz Kin (related party) via the Wilson Loan on October 13, 2021.
- On February 6, 2025, 1,000,000 shares of DSS common stock, valued at approximately $870,000, were awarded as a bonus to Heng Fai Holdings Limited (HFHL), beneficially owned by Mr. Heng Fai Ambrose Chan, for strategic planning and M&A services.
- In August 2025, DSS issued a $500,000 convertible promissory note to Alset, Inc., the company's largest shareholder and a related party.
Stakeholder Impact
- Shareholders face substantial doubt about the company's ability to continue as a going concern, increased accumulated deficit, and dilution from stock issuances (e.g., bonus shares to related parties). Potential for further losses if loan defaults or asset sales do not resolve favorably.
- Creditors face significant risk due to substantial long-term debt, including a $39.14 million loan in default. The reclassification of assets from 'held for sale' to 'investment in real estate' indicates delays in debt reduction through asset sales.
- Employees and Directors received stock-based compensation, including a significant bonus to a related party entity. However, the overall financial instability could impact job security or future compensation.
- Customers in Product Packaging and Biotechnology segments continue to be served, with revenue growth in these areas.
- Suppliers may face risks due to the company's liquidity challenges and going concern warning, potentially impacting timely payments.
Next Steps
- Management will continue evaluating the status of the Impact BioMedical Inc. merger with Dr Ashleys Limited at year-end.
- The company will continue to take measures to materially reduce expenses and cash burn at all corporate and business line levels.
- Remediation steps for material weaknesses in internal controls are being implemented, with full integration and effectiveness taking time.
- The company will continue to monitor its tax positions and Net Operating Loss (NOL) utilization, making adjustments to its deferred tax asset valuation allowance as needed.
- The company will evaluate the circumstance of the Pittsburgh facility tenant not continuing its lease and determine whether a loss would be recognized at year-end.
Key Dates
| Date | Description |
|---|---|
| 2018-08-15 | Impact BioMedical entered into a Royalty Agreement with Chemia Corporation for 3F technology. |
| 2018-11-27 | Impact BioMedical and Chemia signed an Addendum to Royalty Agreement, granting Chemia a royalty-based limited license for 3F technology. |
| 2019-04-26 | Fifth Amended and Restated By-Laws of Document Security Systems, Inc. adopted and effective. |
| 2019-11-08 | Impact BioMedical and Chemia entered into Amendment no.1 to Royalty Agreement, requiring reimbursement of patent application and licensing expenses to the Company before royalty payments. |
| 2020-09-10 | DSS Securities, Inc. purchased 14.9% membership interests in BMI Capital International LLC (BMIC) for $100,000. |
| 2020-12-19 | Impact BioMedical entered into a subscription agreement with BioMed Technologies Asia Pacific Holdings Limited to purchase 4.99% of BioMed for approximately $632,000, and an exclusive distribution agreement. |
| 2020-12-30 | Company signed a binding letter of intent with WestPark Capital Group, LLC. (WestPark) and Century TBD, Inc. (TBD) for a note and stock exchange agreement. |
| 2021-01-01 | DSS Securities exercised option to purchase an additional 10% of BMIC, increasing ownership to 24.9% for $100,000. |
| 2021-05-14 | DSS Pure Air, Inc. entered a convertible promissory note (Note 1) with Puradigm, Inc. for up to $5,000,000. |
| 2021-05-20 | Premier Packaging entered into a master loan and security agreement (BOA Note) with Bank of America, N.A. for $3,710,000 to purchase a new Heidelberg XL 106-7+L printing press. |
| 2021-08-01 | AMRE Shelton, LLC. entered into a loan agreement (Shelton Agreement) with Patriot Bank, N.A. for up to $6,155,000. |
| 2021-09-16 | Board of directors approved merger agreement for name change from Document Security Systems, Inc. to DSS, Inc. |
| 2021-09-30 | Name change from Document Security Systems, Inc. to DSS, Inc. became effective. |
| 2021-10-13 | Liquid Value Asset Management Limited (LVAM) entered into a loan agreement with BMIC (BMIC Loan) for $3,000,000. |
| 2021-10-13 | LVAM entered into a loan agreement with Lee Wilson Tsz Kin (Wilson Loan) for $3,000,000. |
| 2021-10-25 | APF entered into a loan agreement (Note 2) with Asili, LLC. for up to $1,000,000. |
| 2021-11-02 | AMRE LifeCare entered into a loan agreement (LifeCare Agreement) with Pinnacle Bank for $40,300,000. |
| 2022-01-24 | APF and an individual entered into a promissory note (Note 3) for $100,000. |
| 2022-02-28 | Company entered into a Stock Purchase Agreement with Alset EHome International Inc. (AEI) to sell a subsidiary holding 62,336,908 shares of True Partner Capital Holding Limited in exchange for 17,570,948 shares of common stock of the Company. |
| 2022-03-02 | APF and WUURII Commerce, Inc. entered into a promissory note (Note 4) for up to $893,000. |
| 2022-03-17 | AMRE Winter Haven, LLC and Pinnacle Bank entered into a term loan (Pinnacle Loan) for $2,990,000. |
| 2022-03-19 | Impact BioMedical entered into a License Agreement (Equivir License) with a third-party for its Equivir technology. |
| 2022-05-09 | DSS PureAir and Puradigm entered into a promissory note (Note 5) for $210,000. |
| 2022-07-26 | APF and VEII, Inc. entered into a promissory note (Note 8) for $1,000,000. |
| 2022-08-29 | DSS Financial Management Inc and BMI Capital, Inc. (BMIC) entered into a promissory note (Note 6) for $100,000. |
| 2023-03-30 | Premier Packaging entered into a loan and security agreement with Union Bank & Trust Company for $790,000. |
| 2023-03-31 | DSS Biohealth Security, Inc and an individual entered into a promissory note (Note 11) for $140,000. |
| 2023-05-08 | DSS Financial Management Inc and BMIC entered into a promissory note (Note 7) for $102,000. |
| 2023-05-10 | IBO's Board of Directors approved an amendment to the Articles of Incorporation to increase common stock to 4,000,000,000 shares. |
| 2023-05-11 | IBO effected a forward stock split. |
| 2023-09-27 | Decentralized Sharing Systems, Inc. and Stemtech Corporation entered into a convertible promissory note (Note 10) for $1,400,000. |
| 2023-10-31 | IBO effected a reverse stock split of 1 for 55. |
| 2023-12-22 | Demand for final payment on LifeCare Agreement with Pinnacle Bank was made, which is past due as of September 30, 2025. |
| 2024-01-04 | Company effected a reverse stock split of 1 for 20. |
| 2024-08-15 | Pinnacle Loan was assumed by SMS Financial. |
| 2024-08-29 | APF entered into a promissory note (Note 12) with WestPark for $459,000. |
| 2024-09-16 | Impact Biomedical Inc. entered into an underwriting agreement with Revere Securities, LLC for an initial public offering. |
| 2024-09-17 | Impact Biomedical Inc. closed its initial public offering, and as of September 30, 2024, 11,497,703 shares of common stock were issued and outstanding. |
| 2024-10-01 | 880,000 option grants with a purchase price of $3.00 per share were awarded to certain officers, directors and consultants of IBO. |
| 2024-11-01 | Monthly payments of approximately $28,000 began for the promissory note with WestPark. |
| 2024-12-10 | DSS entered into a securities purchase agreement with Alset Inc. to sell 820,597 shares of common stock for $803,000. |
| 2024-12-10 | DSS entered into a securities purchase agreement with Heng Fai Ambrose Chan to sell 205,149 shares of common stock for $197,000. |
| 2025-02-06 | 1,000,000 shares of common stock, approximating $870,000, were awarded to Heng Fai Holdings Limited (beneficially owned by Mr. Heng Fai Ambrose Chan) as a bonus for strategic planning and M&A services. |
| 2025-02-20 | Company acquired an additional 19,500,000 shares of True Partners Capital Holding Limited. |
| 2025-02-26 | IBO issued 36,433 shares of common stock as payment of legal fees incurred associated with IBO's IPO and other services. |
| 2025-03-21 | DSS completed the sale of 499,800 shares of Impact Biomedical common stock for $1,500,000. |
| 2025-03-27 | Company finalized the sale of its Plano, Tx. Facility for a gross sales price of $9,500,000. |
| 2025-04-04 | DSS completed the sale of 890,800 shares of Impact Biomedical common stock for approximately $845,000. |
| 2025-05-22 | DSS completed the sale of 115,600 shares of Impact Biomedical common stock for approximately $63,000. |
| 2025-05-23 | DSS completed the sale of 45,400 shares of Impact Biomedical common stock for approximately $24,000. |
| 2025-06-21 | Impact BioMedical Inc. entered into a Merger and Share Exchange Agreement with Dr Ashleys Limited. |
| 2025-06-23 | IBO issued 100,000 shares of common stock as payment of legal fees incurred associated with IBO's merger and share exchange agreement with Dr. Ashleys Limited. |
| 2025-06-30 | Company determined to resign its position as the registered investment advisor (RIA) of the American First Mutual Funds. |
| 2025-08-29 | Pinnacle Loan refinanced with American Savings Life Insurance Company (American Savings Note) in the amount of $3,250,000. |
| 2025-08-31 | DSS issued a $500,000 convertible promissory note to Alset, Inc. |
| 2025-09-30 | End of the reporting period for this 10-Q filing. |
| 2025-10-01 | Monthly installments of principal and interest of approximately $22,000 began for the American Savings Note. |
| 2025-10-31 | Expiration date for 880,000 option grants awarded to IBO officers, directors, and consultants. |
| 2025-11-04 | Date for shares outstanding count (9,092,518 shares). |
| 2025-11-14 | Date the condensed consolidated financial statements were available to be issued and the filing date of this 10-Q. |
| 2025-12-31 | Management will continue evaluating the status of the Impact BioMedical Inc. merger with Dr Ashleys Limited at year-end. |
| 2026-09-01 | Maturity date for the American Savings Note. |
| 2028-07-31 | Maturity date for the convertible promissory note to Alset, Inc. if not demanded earlier. |
| 2029-04-30 | Maturity date for the BOA Note. |
| 2031-07-31 | Maturity date for the Shelton Agreement. |
Recommendation
strong sellThe filing presents a highly concerning financial picture, warranting a 'strong sell' recommendation. The explicit 'going concern' warning, coupled with persistent operating losses and negative cash flows from operations, indicates severe financial distress. The company's reliance on future equity and debt financing, alongside a significant portion of its loan portfolio being in default or fully reserved, highlights substantial credit risk and an unsustainable business model. Furthermore, the material weaknesses in internal controls raise serious questions about the reliability of financial reporting and corporate governance. While some revenue segments show growth, the overall financial instability, increasing accumulated deficit, and the shift to net cash used in financing activities far outweigh any positive operational developments. Investors face significant risk of capital loss.
Keywords
DSS, 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue Growth, Going Concern, Liquidity, SEC Filing, Biotechnology, Product Packaging, Commercial Lending, Securities and Investment Management, Direct Marketing, Related Party Transactions, Internal Controls, Debt Default, Asset Impairment, Shareholder Equity
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