DSS 10-K & 10-Q changes, risk factors and insider trading

A significant amount of our revenue is derived by twoone customers.

Furthermore, third parties may assert that our intellectual property rights are invalid, which could result in significant expenditures by us to refute such assertions. If we become involved in litigation, we could lose our proprietary rights, be subject to damages and incur substantial unexpected operating expenses. Intellectual property litigation is expensive and time-consuming, even if the claims are subsequently proven unfounded, and could divert management’s attention from our business. If there is a successful claim of infringement, we may not be able to develop non-infringing technology or enter into royalty or license agreements on acceptable terms, if at all. If we are unsuccessful in defending claims that our intellectual property rights are invalid, we may not be able to enter into royalty or license agreements on acceptable terms, if at all. Moreover, if we are unsuccessful in our pending patent infringement litigation, we could lose certain patents that have been collateralized by third party funding partners. This could prohibit us from providing our products and services to customers, which could have a material adverse effect on our operations and our financial condition.

Our future success depends upon the continued service of certain of our executive officers and other key sales and research personnel who possess longstanding industry relationships and technical knowledge of our products and operations. Although we believe that our relationship with these individuals is positive, there can be no assurance that the services of these individuals will continue to be available to us in the future. There can be no assurance that these persons will agree to continue to be employed by us after the expiration dates of their current contracts.

As of MarchFebruary 24,15, 20252026 our directors, executive officers and principal stockholders (those beneficially owning in excess of 5%), and their respective affiliates, beneficially own approximately 57%68% of our outstanding shares of common stock. As a result, these stockholders, acting together, could have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. As such, these stockholders, acting together, could have the ability to exert influence over the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by: delaying, deferring or preventing a change in corporate control; impeding a merger, consolidation, takeover or other business combination involving us; or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

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 fivefour 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:

Under the banner of DSS, Inc., we have diversified our operations into fivefour distinct business lines, each with its own unique scope and geographical footprint. These business lines include:

Commercial Lending: American Pacific Financial, Inc. (“APF”) represents our banking and 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, which earns 1.25% annually in service charges, 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-dealersbroker-dealers. and mutual funds management. It also oversees a real estate investment trust (REIT) that acquires hospitals and care centers.

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 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 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 decreased 7%3% in 20242025 as compared to 2023,2024. primarilyCost dueof revenue at our Printed products business line increased driven by an increase in revenue. Cost of revenue at our Securities business segment decreased year over year driven by the disposal of the Company’s AMRE Plano, Tx., Ft Worth, Tx., and Winter Haven, Fl. Facilities during 2025 and the elimination of related cost to theoperate decreaseand inmaintain revenuethose associatelocations. withIn addition, This our Pittsburgh, PA facility housed a new tenant for part of 2025 paying related cost previously paid for by the change in the Direct marketing business plan that has been slow to generate revenueCompany as well as decreasedecreases in revenues from our PrintedCommercial product lending business line.unit driven by decreases on loans reserved for year over year.

Sales, general and administrative compensation costs, decreasedincreased 19%12% in 20242025 as compared to 2023,2024, primarily relateddue to stock 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. The issuance was approved by the decreaseboard inof head countdirectors ason theJanuary change31, in business plan from maintaining our own sales force for the Direct marketing business segment to licensing its products.2025.

Professional fees decreased 16%3% in 20242025 as compared to 2023,2024, due primarily dueto efforts taken to acontrol decreasethese costs as the Company continues to drive savings in legalnon-essential fees associated with the direct marketing segment, accounting fees, and due diligence fees related to potential acquisitions.areas.

Sales and marketing costs, which includes internet and trade publication advertising, travel and entertainment costs, sales-broker commissions, and trade show participation expenses, increaseddecreased 3%20% during 20242025 as compared to 2023,2024, primarily due to increasesdecreases in marketing efforts at our Printed Products and Biotechnology business segments offset by theincreased decreasesales inpersons such cost associated withwithin our DirectPrinted marketingProducts business segment, Rent and utilities decreased 14% during the year ended December 31, 2024, as compared to the same period in 2023 respectively, primarily due to end of the lease in Tennessee for AMRE office space and California for the Company’s DSS Wealth Management subsidiary.segment.

Research and development costs consistrepresent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns possesses as well as research costson andnew consulting costs.technologies. During the year ended December 31, 2024, 2025, Research and development costs decreasedincreased 84%22% as compared to the same period in 2023 primarily2024 due to decreasecost inincurred suchto activitiesfile, atperfect ouror update existing and potential patents on technologies owned by Impact Biomedical, Inc. subsidiary.BioMedical.

Impairment of goodwill during the 4th quarter of 2023,2024, the Company performed qualitative and quantitative assessments of the goodwill value associated with its Impact APFBioMedical and Sentinel subsidiariessubsidiary and determined that as of December 31, 20232024 boththe assets required impairment. At December 31, 2023, the Company fully impaired the value of APF and Sentinel goodwill of approximately $29,744,000 and $1,234,000, respectively. Similarly, the Company performed a similar evaluation during the year ended December 31, 2024 andthe Company deemed ana full impairment of the Impact BioMedical goodwill was necessary in the amount of $25,093,000.

Other operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs. During the year ended December 31, 2024,2025, other operating expenses decreased 68%19% compared to the same period in 2023,2024, due primarily to the reserves putCompany againstreleased rentcertain receivableslegal atfee our AMRE subsidiaryaccruals approximating $3.0$897,000 milliondeemed no longer necessary, offset by increases in 2023Impact asBioMedical’s thedirectors tenantand wasofficers unableinsurance toobtained paypost rent.IPO.

Other Income and (Expense)

Dividend income for the year ended December 31, 20232025 represent dividends received on certain marketable securitiesinvestments owned by the Company. No such dividends were received in 2024.

Other income decreased 59%95% during the year 20242025 as compared to 20232024 due primarily to incomeReleases incurredof inaccruals 2023no regardinglonger thedeemed Company’snecessary associated distribution agreement with BioMednormal Technologies.business operations.

Interest expense decreased 49%6% year-over-year primarily due to the increase indecreasing debt atbalances Premierdriven Packagingby andthe LVAMsale duringof 2024.the Company’s Plano, Texas facility.

Gain /(loss) from equity method investment represents the Company’s prorated portion of earnings for its investments accounted for under under the equity method for the year ended December 31, 2024,2025, and 2023.2024. The transition from a loss of $34,000 in 2023 to a gain of $1,000 in 2024 to a loss of $16,000 in 2025 is indicative of the related companies financial performance improving year over year.

Gain/(loss) on investments consists of net realized and unrealized losses on marketable securities which are recognized as the difference between between the purchase price and sale price of the common stock investment, and net unrealized losses on marketable securities which are recognized recognized on the change in fair market value on our common stock investment. The improvement2025 loss in our marketable securities yearas overcompared yearto 2024 is driven by an improvedthe performance in our True Partners Capital Holdings Limited investment which incurred an approximate loss in fair value of $3,224,000 $609,000 in 20232025 as compared to gain in fair value of approximately $591,000 in 2024.

Impairment of investments in real estate represents a write-down of real estate assets associated with our AMRE LifeCare properties during 20232025 and 2024 based on a fair value analysis performed as of December 31, 2023.2025 and 2024. At December 31, 2025, the Company performed an assessment of the fair value of its AMRE LifeCare properties and determined an impairment of its Pittsburg, Pa. facility in the amount of $2,420,000 was necessary, not such impairment was identified for the Company’s AMRE Shelton property. A fair value analysis was performed during 2024 which resulted in a $2,973,000 impairment of the AMRE LifeCare Pittsburgh and Fort Worth locations. Further, the Company executed a purchase agreement for its AMRE LifeCare Plano location with a sale price at approximately $4,250,000 below its 2023 fair value. This transaction closed on March 26, 2025.

Impairment of investments the Company determined an impairment of its investments in Nano9 and BioMed Technologies was necessary and were fully impaired in the amounts of $150,000 and $632,000, respectively, at December 31, 2024. No such impairments were deemed 2024.necessary in 2025.

Gain/(loss) on sale of assets the gain in 2024 is driven by the sale of its Linden, Ut facility while, the loss in 20232025 is driven by the Company’s Company’s loss on the sale of equityits AMRE LifeCare Forth Worth, Tx facility of HWHapproximately Holdings Inc$9,318,000 and lossAMRE onWinterhaven salefacility of assets of HWH World as identified in Note 8.approximately $292,000.

The Company has historically met its liquidity and capital requirements primarily through the sale of its equity securities and debt financing. financing. As of December 31, 2024,2025, the Company had cash of approximately $11.4$6.2 million. AsIn of December 31, 2024,addition, the Company believes that it has sufficient cash to meet its cash requirements for at least the next 12 months from the filing date of this Annual Report. In addition, the Company believes that it will have access to sources of capital from the sale of its equity securities and debt financing. As of December 31, 2025, the Company believes that it has sufficient cash or access to cash to meet its cash requirements for at least the next 12 months from the filing date of this Annual Report.

Net cash used by operating activities was approximately $9.1 million for the year ended December 31, 20242025 as compared to approximately $8.8 $19.2 million for the year ended December 31, 2023.2024. This decrease is driven by a$3.1 million decrease in net loss adjusted to reconcile net loss to net cash used by operating activities, less payments of accrued expenses of approximately $15.8 million, accounts payable of $1.4$0.7 million year over year as well as anin increasecollections otherof liabilitiesaccounts incurred, not paidreceivable of approximately $3.2$0.5 million.million year over year.

Net cash used by financing activities was approximately $14.1 million for the year ended December 31, 2025 driven by payments toward long-term debt of $17.8 million offset by borrowings of long-term debt of $3.3 million. Net cash provided by financing activities for the year ended December 31, 2024 was $5.1$1.4 million due to $4.5$0.9 million of additional borrowings borrowings on long-term debt as well as $3.2 million of proceeds received from Impact BioMedical’s IPO offset by $2.6 million of payments toward long-term debt. Net cash used by financing activities was approximately $2.4 million for the year ended December 31, 2023 driven by payments toward long-term debt of $4.2 million offset by borrowings of long-term debt of $1.8 million.

Aside from its $11.4$6.2 million in cash as of December 31, 2024,2025, the Company believes it canto continue as a going concern, duethe toCompany itscan ability to generate operating cash through the sale of its $9.2$6.5 million of Marketablemarketable Securities.securities. BetweenTo Marchcontinue 24, 2025 and March 27, 2025, the Company soldas a sharesgoing ofconcern, ImpactAlso, BioMedical, a subsidiary, for approximately $1,969,000. Further,historically, the Company has been approximatelyable 1,052,000 to obtain equity via issuance of authorized shares of Impactits BioMedicalcommon sharesstock availablecurrently not issued and/or debt-based financing to meet sell.its working capital needs. In addition, the Company has taken steps, and will continue to take measures, to materially reduce the expenses and cash burn at all corporate and business line levels. Although there are no assurances, we believe the above would allow us to fund our nine business lines current and planned operations for the twelve months from the filing date of this Annual Report. Based on this, the Company has concluded that substantial doubt of its ability to continue as a going concern has been alleviated.

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, 2024,2025, 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 Annual Report on Form 10-K/A for the year ended December 31, 2023.2025.

Allowance For Loans and Lease Losses

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,uncertainties and factors,factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements.

Results of operations for the three and threesix months ended MarchJune 31,30, 2026, as compared to the three and six months ended MarchJune 31, 30, 2025.

For the three and six months ended MarchJune 31,30 2026, total revenue decreased 13%32% and 22%, as compared to the three and six months ended MarchJune 31,30, 2025.2025, respectively. The decrease in Printed Product revenue increasedof approximately 4%24% and 10% for the three and six months ended June 30, 2026 is driven by newcustomer orders customerfrom ordersexisting customers falling short of their forecasts as well as existingthe customeranticipated orderssecond exceedingquarter theironboarding forecasts.of several new customers being pushed out to the third and fourth quarters of 2026. The decreases in Securities revenue of approximately 83%66% and 75% for the three and six months ended June 30, 2026 is driven by decreasesan decrease in rental income asat a tenant atour AMRE LifeCare Pittsburgh facility vacated the location during the second half of 2025.facility. Additionally, the Company sold its AMRE Winterhaven and Ft Worth facilities during 2025, significantly reducing rental revenues in 2026. Also, the Company received approximately 90%67% and 77% less in commission revenues associated with its Sentinel Brokers subsidiary duringfor the three and six months ended MarchJune 31,30, 20262026. asThe comparedCompany to March 31, 2025.The decreases in Commercial lending incomerevenue of approximating 71%63% for the three and six months ended June 30, 2026 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 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 increaseddecreased for the three and six months ended March 31,June 30, 2026 as compared to MarchJune 31,30, 2025 by approximately 7%.18% Costand of6%, revenuerespectively, increaseddue atprimarily ourto Printedthe productsdecrease in revenues for each business line drivenduring by anthese increaseperiods. inAdditionally, revenue year over year which was offset by decreasedecreased 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, 2026.2025.

RentProfessional and utilitiesfees increased 5% duringfor the three and six months ended MarchJune 31,30, 2026 as compared to June 30, 2025 primarilyby approximately 27% and 8%, respectively. These increases are driven by increasescosts inassociated utilities with recruitment of technical personnel at our Premier Packaging facility.and professional staff at DSS.

Research and development costs represent costs consisting primarily of independent, third-party testing of the various properties of each technology technology the Company owns,owns possesses as well as research on new technologiestechnologies. as well asTheses costs toremained patentrelatively newly developed technologies and other related fees for the development of new technologies. Research and development decreased 81%flat for the three months ended MarchJune 31,30, 2026,2026 as compared to June 30, 2025 and decreased for the three six months ended MarchJune 31,30, 20252026 as compared to June 30, 2025. The six month decrease is driven due primarily to a decrease in spending on identifying new technologies as well as pausing the spend spend on several in-development technologies at our Impact BioMedical subsidiary.technologies.

Other operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs. These These costs increaseddecreased approximately 289% duringfor the three months ended MarchJune 31,30, 2026 as compared to MarchJune 31,30, 2025 by approximately 34% and increased by approximately 16% for the six months ended June 30, 2026 as compared to June 30, 2025. The decrease or the three months ended June 30, 2026 as compared to June 30, 2025 is due to efforts by management to control such costs. The increase for the six months ended June 30, 2026 as compared to June 30, 2025, primarily due to collections of previously written-off of accounts receivable associated with our AMRE LifeCare facilities of approximately $600,000.$600,000 during the first quarter of 2025.

Dividend income for the three and six months ended MarchJune 31,30, 2026 represent dividends received on certain investments owned by the Company. No such dividends dividends were received the three and six months ended MarchJune 31,30, 2025.

Interest expenses increased 18% duringdecreased for the three and six months ended MarchJune 31,30, 2026,2026 as compared to theJune same30, period2025 by approximately 28% and 18%, respectively, due primarily to decrease in 202, due to additionaloverall debt taken on during the fourth quarter of 2025.balances.

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 threesix months ended MarchJune 31,30, 2026 as compared to 2025.

Loss Gain (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 decreasefluctuation in loss on investmentdecreased for the three and six months ended MarchJune 31,30, 2026 as compared to June 30, 2025 isby driven by the performance of our stock portfolio.

For the threesix months ended March 31,June 30, 2026 the Company recorded net losses of $6,354,000$11,262,000 as compared to net losses of $5,296,000$7,902,000 for the same period in 2025. The increase in net loss is driven by a decrease in total revenue of approximately 13%22% as well as stock-based compensation of approximately $1,440,000 paid at our Impact BioMedical subsidiary during the first quarter of 2026.

Cash Flow from Continuing Operating Activities

Net cash used by operating activities was $133,000$1,985,000 for the threesix months ended MarchJune 31,30, 2026 as compared to cash provided by $1,168,000operating activities of $454,000 for for threesix months ended MarchJune 31,30, 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.$2,932,000.

Net cash used by investing activities was $2,639,000$2,707,000 for the threesix months ended MarchJune 31,30, 2026 as compared to net cash provided by investing investing activities of $10,070,000$11,019,000 for the threesix months ended MarchJune 31,30, 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 approximating $9,500,000, and the sale of related party investments of approximately $1,500,000,$1,500,000 during the six months ended June 30, 2025, offset by the purchase of marketablea securitiesconvertible bond of approximately$2,450,000 $1,000,000.during 2026.

Net cash provided by financing activities was $1,394,000$2,446,000 for the threesix months ended MarchJune 31,30, 2026 as compared to net cash used by financing activities of $11,694,000$12,512,000 for the threesix months ended MarchJune 31,30, 2025. This variance is driven by payments toward long term debt of $628,000 $284,000,in 2026 versus $9,443,000 in 2025. Also, payments on margin loans of $1,548,000$1,152,000 offsetwere bymade borrowingsin of2026 convertible noteas payablecompared – related party of $2,450,000 during the first quarter of 2025 versusto payments toward long term debt of $8,997,000 and payments on margin loans of $2,806,000$3,178,000 duringin 2025. Additionally, the firstCompany quarterhad borrowings of $3,450,000 from related parties in 2026 and had no such borrowings in 2025.

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 MarchJune 31,30, 2026.