DSS(US:DSS)2023-03-30 16:00Business Segments and Operations - DSS operates nine distinct business lines, currently reporting on five segments: Product Packaging, Biotechnology, Direct Marketing, Commercial Lending, and Securities and Investment Management[21]. - The company has a diverse portfolio of financial services, including commercial business lines of credit and investment banking through its subsidiaries[75]. - The company operates approximately 40 subsidiaries across nine market business lines, with five generating significant revenue[92]. - The company has expanded its Board of Directors with the appointment of two independent directors to enhance governance and oversight[31]. Financial Performance - Total revenue for the year ended December 31, 2022, increased by 133% to approximately $47.3 million compared to $20.3 million in 2021[161]. - Direct marketing revenues surged by 575% in 2022, primarily due to the inclusion of Sharing Services Global Corporation (SHRG) financial results starting January 1, 2022[161]. - Rental income rose significantly by 423% to $6,287,000 in 2022 from $1,203,000 in 2021[161]. - Total costs and expenses increased by 108% to $90,994,000 in 2022, driven by the inclusion of SHRG financial results and rising costs of labor and materials[163]. - Interest expense skyrocketed by 1385% in 2022, attributed to increased debt balances, particularly within the REIT business line[171]. - The company recorded a loss on investments of $10,697,000 in 2022, a decrease of 11% compared to $12,035,000 in 2021[170]. Strategic Initiatives and Acquisitions - The company has entered into multiple stock purchase agreements, including acquiring shares from Alset EHome International Inc. for a total of 59,979,582 newly issued shares[25]. - The company acquired a 24.9% equity position in Sentinel Brokers Company, Inc. for $300,000, with an option to purchase an additional 50.1%[148]. - The company completed the acquisition of 62,122,908 shares of True Partners Capital Holdings Limited in exchange for 17,570,948 shares of DSS stock[159]. - The company increased its ownership in SHRG to approximately 65% following the exercise of 50,000,000 warrants[156]. Biotechnology and Product Development - The Biotechnology division has made significant advancements, including key patent awards and positive study results, with ongoing global licensing discussions[21]. - Impact Biomedical, a subsidiary of DSS, received a positive report on the international patentability of its proprietary compound Equivir, aimed at treating viral infections[28]. - Impact holds 5 key patents related to its products, including Laetose and 3F, which are crucial for product development and licensing[70]. - The biotechnology sector is focused on specialty biopharmaceuticals and consumer healthcare products, competing with established companies like Ipsen Pharmaceuticals and Mylan Consumer Healthcare[76]. Market and Growth Opportunities - The company is actively pursuing opportunities in clean energy through its Alternative Energy division, focusing on utility-scale solar farms and microgrids[26]. - The company anticipates potential liquidity events in 2023, including two or three IPOs[38][45]. - The company plans to incur significant marketing and development costs for bio-health products acquired through Impact Biomedical, Inc[103]. - The company is preparing USX Holdings to launch a marketplace for trading digital assets, targeting the US secondary market for securities tokens[50][51]. Risks and Challenges - The company anticipates continued price pressure and supply chain issues into 2023, implementing risk mitigation strategies to avoid significant impacts on profit and loss[84]. - The company faces risks related to intellectual property claims that could adversely affect its operations and financial condition[101]. - Future growth may strain the company's management and financial resources, necessitating improved operational controls[109]. - The company has identified weaknesses in its internal control over financial reporting, which may lead to errors in financial statements and affect investor confidence[112]. Corporate Governance and Structure - As of March 13, 2023, directors, executive officers, and principal stockholders beneficially own approximately 59% of the outstanding shares, potentially controlling significant corporate decisions[125]. - The company does not intend to declare or pay cash dividends on its common stock in the foreseeable future, opting to retain earnings for business investment[113]. - The company has outstanding indebtedness totaling significant amounts, including $40.2 million under the LifeCare Agreement, which matures on November 2, 2023[99]. Real Estate and Asset Management - The American Medical REIT formed by DSS Securities aims to fulfill community needs for quality healthcare facilities, providing investment opportunities in managed medical real estate[69]. - The company owns real estate properties with a net book value of approximately $55,029,000[209]. - The assessment of impairment of real estate properties involves a high degree of subjective auditor judgment due to the complexity of valuation models and sensitivity of key assumptions[210]. Cash Flow and Financing - As of December 31, 2022, the company had approximately $19.3 million in cash, sufficient to meet cash requirements for at least the next 12 months[176]. - Net cash used by operating activities increased to approximately $27.0 million for the year ended December 31, 2022, compared to approximately $9.0 million for the year ended December 31, 2021, driven by a net loss increase of approximately $69.7 million[177]. - The company anticipates raising $30 - $50 million through an IPO of its subsidiary Impact BioMedical, expected to close in early Q3 2023[181].