Item 1. Business
ITEM
1 - BUSINESS
Overview
DSS,
Inc. (together with its consolidated subsidiaries (unless the context otherwise requires), referred to herein as “Document Security
Systems,” “DSS,” “we,” “us,” “our” or the “Company”) currently operates
nine distinct business lines operate around the globe with primary operations in North America and Asia. The nine divisions are:
1.
Product
Packaging,
2.
Biotechnology,
3.
Direct
Marketing,
4.
Commercial
Lending,
5.
Securities
and Investment Management,
6.
Alternative
Trading,
7.
Digital
Transformation,
8.
Secure
Living, and
9.
Alternative
Energy
Each
of these business lines are in various stages of development, growth, and income generation. Because of these varying degrees of business
cycle growth, including the size of the revenues and assets acquired, the Company currently financially reports only on five of these
operating segments.
1.
Product
Packaging,
2.
Commercial
Lending,
3.
Biotechnology,
4.
Direct
Marketing, and
5.
Securities
and Investment Management
As
the other divisions grow and start generating material operations and revenue, those operating segments will be added to our financial
segmental reporting .
Our
divisions, their business lines, subsidiaries, and operating territories:
1.
Product
Packaging: The Company’s consumer packaging and security printing business is led by its wholly owned subsidiary, 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.
Biotechnology:
(“Biotech”) Biotechnology, a science-driven industry sector that uses living organisms and molecular biology to produce
healthcare-related products, progressed on multiple fronts in 2021. This 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. We had a productive year including key patent awards, the advancement of key programs, the release of positive study results,
and several projects now in global licensing discussions. Assets of this group are organized under the holding company, DSS BioHealth
Security, Inc. Its subsidiaries are currently operating in Houston, TX and Rochester, NY. The group also has a research facility
in Winter Haven, Florida.
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3.
Direct
Marketing: (“Direct”) Led by the holding corporation, Decentralized Sharing Systems, Inc.
(“Decentralized” provides services to assist companies in the emerging growth “Gig” business model of
peer-to-peer decentralized sharing marketplaces). Direct specializes in marketing and distributing its products and services through
its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing. Direct’s
products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific, Middle
East, and Eastern Europe. Our December 2021 investment in Sharing Services Global Corporation (“SHRG”) (OTCQB: SHRG)
gave us controlling interest with nearly 65 percent ownership of the established direct selling business. The SHRG platform
leverages the capabilities and expertise of various companies that market and sell products direct to the consumer and generated
$22.1 million in revenue in the twelve months ended December 31, 2022. Currently, Direct and SHRG operate offices in USA, Canada,
Hong Kong, Singapore, S. Korea, Australia, New Zealand, Malaysia, and Singapore. Additionally, through its subsidiaries, HWH World,
Inc. (“HWH World”) and HWH Holdings, Inc., Decentralized Sharing Systems, Inc. provides an array of products and
services via various direct to consumer models. We are continuously adding products and services to this business to enhance its
portfolio of offerings and position its distribution team for continued growth and success. Our products and services allow the HWH
World ecosystem to fulfill its corporate position of health, wealth, and happiness and helps its customers become the healthiest,
happiest versions of themselves. Decentralized sharing systems’ mission is to become the leading direct sales platform for
training, development, and empowerment of leaders on a global scale to achieve maximum human and economic potential.
4.
Commercial
Lending: American Pacific Bancorp (“APB”), is organized for the purposes of being a financial network holding company,
focused 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 services,
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.
5.
Securities
and Investment Management: In 2022, DSS continued to invest in Liquid Value Asset Management Limited (“LVAM”), a
DSS Financial Management Inc. subsidiary and fund management company domiciled in Hong Kong. LVAM’s algorithmic trading includes
short- and long-term trades while offering the unique attribute of being able to liquidate the portfolio into cash within minutes
under normal market conditions. LVAM is positioned as a prime vehicle for private and institutional investors seeking a highly liquid
investment fund with extremely attractive risk adjusted returns relative to the volatility and unpredictability of the markets. We
have also continued our strategic investments in three broker dealers; WestPark Capital, BMI Capital Investments, and Sentinel Brokers
Company, Inc. Additionally, we have become the RIA for DSS AmericaFirst Quantitative Funds (DSS AmericaFirst) family. This
group of businesses is led by its holding company, DSS Securities, Inc., (“DSS Securities”) and the group is currently
headquartered in Houston, Texas, with operations in Chicago, Illinois, Sacramento, California, Los Angeles, California, and New York,
NY. Also in this segment is the Company’s real estate investment trusts (“REITs”), 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. This group is headquartered in Houston, Texas.
6.
Alternative
Trading: (“Alt. Trading”) This Division was established to develop and/or acquire assets and investments in the securities
trading and/or funds management arena. Alt. Trading, in partnership with recognized global leaders in alternative trading systems,
intends to obtain a broker-dealer license and launch an Alternative Trading System (“ATS”). The ATS, focusing on financial
market inefficiencies, will utilize a blockchain based financial market infrastructure (‘FMI’) that will trade digital
asset securities exempt from registration, or ‘private securities’. The digital FMI will allow for T+0 settlement, which
USX believes can be used to attract liquidity. Th platform will generate trading liquidity for the ‘middle’ market –
companies that are seeking to raise under $150M USD, can pursue private placements, which have lower compliance costs that public
offerings. USX Holdings Company, Inc. (“USX”), a subsidiary of the DSS Blockchain, Inc., is a collaboration between the
GSX Group, Coinstreet Partners and DSS, Inc. This collaboration is currently in the planning stages. The Alt. Trading division is
currently headquartered in Houston, TX.
7.
Digital
Transformation: (“Digital”) This Division was established to be a Preferred Technology Partner and Application Development
Solution for mid cap brands in various industries including the direct selling and affiliate marketing sector. Digital improves marketing,
communications and operations processes with custom software development and implementation. Digital launched a few mobile applications
for direct sales business integrating back office and social networking functions. Digital Transformation is currently headquartered
in Hong Kong.
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8.
Secure
Living: (“Secure Living”) This Division has developed a plan for fully sustainable, secure, connected, and healthy
living communities with homes incorporating advanced technology, energy efficiency, and quality of life living environments both
for new construction and renovations for single and multi-family residential housing. Secure Living is currently working with several
land development partners throughout the U.S. to develop entire fully sustainable, healthy living single-family subdivisions. Secure
Living is currently headquartered in Houston, Texas.
9.
Alternative
Energy: (“Energy”) This group was established to help lead the Company’s future in the clean energy business
that focuses on environmentally responsible and sustainable measures. Alset Energy, Inc, the holding company for this group, and
its wholly owned subsidiary, Alset Solar, Inc., pursue utility-scale solar farms to serve US regional power grids and to provide
underutilized properties with small microgrids for independent energy. In addition to solar farms, solar battery banks, and residential
energy creation and storage, Alset Energy also identifies alternative energy opportunities for investment and development. Our goal
is to be a powerful force in the mitigation of the negative effects of climate change by reducing air pollution and expanding access
to clean energy for all, while contributing to global economic well-being. Alset Energy is currently headquartered in Houston, Texas
and seeking market opportunities in the US sunbelt areas, but specifically in Texas, Arizona, New Mexico, and Florida.
2022
RECAP
The
following is a summary of the DSS reported transactions and investments since January 2022 that reflect the active advancements
and investments in these business lines:
On
January 10, 2022, DSS announced its USX Holdings Company, Inc. (“USX Holdings”)
subsidiary has engaged a leading blockchain, digital assets, and custody law practice in connection with its broker-dealer and alternative
trading system (“ATS”) as it prepares to launch an innovative marketplace for trading digital assets based on actively traded
U.S. equity securities. In addition to the ATS and broker-dealer registration, USX Holdings, in conjunction with its legal team, will
file regulatory submissions and registration statements for digital assets to be traded on the proprietary trading platform. USX Holdings
is also applying for money transmitter and virtual currency activity licenses in several states to offer trading in cryptocurrencies.
On
January 11, 2022, Impact Biomedical, Inc., a wholly owned subsidiary of DSS, Inc, along with
its scientific research partner Global Research and Discovery Group Sciences, (GRDG) announced today a project that is designed to take
plastics in a whole new direction with the development of what we call Bio-plastics. Bio-plastics under development are designed to make
everyday objects resistant to viruses, and also gentler to the planet.
On
January 19, 2022, DSS announced that it entered into a stock purchase agreement (the “AIL Subscription Agreement”)
on January 18, 2022, with its shareholder Alset EHome International Inc. (“AEI”), which at that time owned 15.24% of the
Company’s outstanding shares of common stock, pursuant to which AEI sold to the Company 877,248,065 ordinary shares, no par
value per share, of Alset International Limited for a purchase price of 59,979,582 newly issued shares of the Company’s common
stock. On January 18, 2022, the Company entered into a stock purchase agreement (the
“True Partners Subscription 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 (“True Partner”), for a purchase price of 11,397,080 newly
issued shares of the Company’s common stock. The closings of these transactions were approved of the NYSE and the
Company’s stockholders. Transaction details will be filed in an 8-K with the U.S. Securities and Exchange
Commission.
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On
January 25, 2022, DSS announced that it entered into a stock purchase agreement with Alset EHome International, Inc. (“AEI”)
pursuant to which the Company agreed to issue to up to 44,619,423 shares of the Company’s common stock (the “Shares”)
for a purchase price of $0.3810 per share. If required by the rules and regulations of the NYSE American, LLC, the issuance of the shares
will be subject to the approval of the Company’s shareholders.
On
March 03, 2022, Impact Biomedical, Inc., a wholly owned subsidiary of DSS, Inc, along with its scientific research partner Global
Research and Discovery Group Sciences, (“GRDG”) announced it had received a positive report regarding the potential international
patentability of its proprietary compound Equivir to treat viral infections which has shown potential to limit the occurrence of, and
reduce, the risk or severity of viral outbreaks.
On
June 07, 2022, DSS announced that Global BioLife, Inc, a division of the Company’s wholly owned subsidiary Impact BioMedical,
was granted a patent from the China National Intellectual Property Administration (“CNIPA”) for 3F™, a Functional Fragrance
Formulation technology that is effective as a mosquito repellant through a fragrant compound derived from botanical oils. This complements
the corresponding U.S. patent granted (U.S. 11,246,310). 3F™ is an extremely effective mosquito repellant. The repellant is believed
to incapacitate two of the three receptors that mosquitoes use to find sources of nutrition. During the past year, Impact BioMedical
has laid the groundwork for a future that is focused on scientifically tested, high-impact solutions to global problems that humans are
facing from food preservation to antibiotics to creating new ways to develop medicines. Impact Biomedical and GRDG announced a U.S. patent
(US 10,966,424) allowance for 3F™DB in June 2021.
On
June 28, 2022, Impact Biomedical, Inc, along with its scientific research partner GRDG, announced that it signed a license agreement
with ProPhase Labs, Inc. (NASDAQ: PRPH) for Equivir, which has shown potential as a treatment to limit the occurrence of or reduce the
risk or severity of viral outbreaks. Since 2019 Equivir as a treatment against viral infections has received two U.S. patents and a positive
patentability report opening the door for international patent possibilities. The composition is believed to work by potentially blocking
the entry of a virus into host cells, which prevents infection and replication in those host cells. Equivir is a blend of FDA Generally
Recognized as Safe (GRAS) eligible polyphenols. The composition is projected to come in capsule form and be taken much like a multivitamin.
On
July 13, 2022, DSS announced the expansion of its Board of Directors with the appointment of two independent directors, Shui Yeung
Frankie Wong, a 20-year veteran of public-company financial reporting, and Hiu Pan Joanne Wong, an investment manager with BMI Funds
Management Ltd., the leading financial advisor in Hong Kong.
On
July 21, 2022, DSS Inc, announced that Global BioLife, Inc, a subsidiary of the Company’s wholly owned subsidiary Impact BioMedical,
Inc, executed a license agreement with ProPhase BioPharma, Inc, a subsidiary of ProPhase Labs, Inc, a rapidly growing and diversified
diagnostics, genomics and biotech company, for Global BioLife’s Linebacker portfolio (LB-1 and LB-2), two patented small molecule
PIM kinase inhibitors with significant potential across multiple therapeutic indications. LineBacker is anticipated to be effective in
crossing the blood-brain barrier and would be delivered orally. Significant pre-clinical testing has been completed in neurology, anti-inflammatory,
oncology, anti-infective, and viral disease states to demonstrate response to LineBacker.
On
July 26, 2022, DSS Inc, announced that less than a year after successfully synthesizing its first Quantum-based compound, Impact
Biomedical, Inc. and its research partner GRDG developed a Quantum antihistamine that could shift how medicine is administered while
moving the pharmaceutical industry away from an impending patent cliff.
On
October 19, 2022, GRDG, a scientific research partner of Impact BioMedical, Inc., a wholly owned subsidiary of DSS, Inc, announced
that it will be the subject of a documentary film highlighting the passion, the search, and the cutting-edge discoveries that push the
company behind a single-minded goal: creating a healthier world quickly and naturally. The documentary project comes on the heels of
GRDG’s completion of Sombrero, a five-year multi-pronged project that yielded multiple patents and potentially billions of dollars
in licensing opportunities.
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STRATEGIC
BUSINESS PLAN AND 2022 PROGRESSION
2022
was forecasted to be a breakout year for DSS. The DSS team delivered on this objective as the Company excelled under the first year of
the rebranded DSS, Inc., driving strong top-line growth across our diverse business lines and fortifying our foundation for accelerated
growth and value creation moving forward. The Company and team of employees around the world have achieved great progress, collectively
and individually. This forward movement is a function of continual investments in our people, systems, and companies, in good and bad
times, to build the Company’s capabilities.
Revenues,
as of December 31, 2022, have more than doubled from the end of 2021, and the total assets, now at nearly $249 million, have grown
more than 1,000%, up from under $20 million, since the start of transforming DSS just over three years ago in late 2019.
Importantly,
the acquisition of new assets, whether entire businesses, new technologies, or other innovations, is an integral part of the unique development
process the Company employs to create value and drive long-term growth.
Three-Stage
Development for Exponential Growth
For
each acquisition completed, subject to market and other restrictions, there is a three-stage development process applied to maximize value creation and provide the engine for
growth through increased bandwidth, horsepower, and scale. The first stage of this process begins with the asset acquisition itself,
where we identify and acquire the right vehicles and asset structures, as well as the organizations and people capable of building revenue
and scaling operations. The second stage of our development process focuses on revenue generation, creating revenue streams, license
streams, and other reoccurring, scalable revenue. We seek to build highly functional businesses during this stage of development, businesses
that we transform into well-oiled machines built for efficiency and operational excellence. As evidenced by the revenue growth mentioned
earlier, the Company has delivered well on this stage in 2022. And as we continue to grow revenue, we enter the third and final stage
of development where the focus turns toward positive EBITDA and profitability driven by scale and efficiencies. While each of our business
lines are in various stages of this development process, ultimately as we reach our internal goals and expectations and these businesses
reach an optimal point for the most effective leverage, we intend to pursue IPOs that enable us to share our success with our shareholders.
As a holder of DSS Common Stock, you will receive a dividend of four Impact BioMedical Shares for every share of DSS Common Stock you
hold. Giving back to our shareholders in this way has been part of our vision since the beginning days of our transformation, and we
could potentially see two or even three such IPOs over the next 12 months. We believe our decentralized sharing model, the culmination
of our three-stage development process, is unique and will drive shareholder value as we distribute dividends from these potential IPOs,
directly benefiting each of our shareholders.
New
Capacity Added to Consumer Packaging Business
Our
Premier Packaging Corporation, Inc. (“Premier”) subsidiary provides a clear example of the second stage of our development
process as it began operations at its new 105,000 sq. ft. facility in Western New York in the first half of 2022. The increased production
capacity at the new facility, which has enabled us to meet growing customer demand, was a key driver behind our nearly 15% year-over-year
revenue growth for this segment in the most recently reported quarter.
For
over 25 years, Premier has been a market leader in providing solutions for paperboard packaging from consumer retail packaging and heavy
mailing envelopes, to sophisticated custom and sustainable folding cartons and complex three-dimensional direct to customer packaging
solutions. Premier’s innovative products and design team delivers packaging that provides functionality, marketability, and sustainability,
with its fiber-based packing solutions, providing an alternative to traditional plastic packaging.
Since
2019, we have accelerated the transformation of Premier’s operations, investing in state-of-the-art manufacturing equipment, people,
and processes to increase its capacity, improve quality and delivery, and to ensure it has the resources to support its growing customer
base and their evolving supply chain demands. Utilizing these investments, we design and manufacture folding cartons that attract the
consumer’s attention when and where it matters most at the point of sale.
We
will continue to add capabilities in key areas that increase operational efficiencies to strengthen Premier’s foundation and offerings
while continuing to provide world-class service to our customers.
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Licensing
Agreements Add Value to Impact BioMedical Ahead of Planned IPO
Impact
BioMedical, the cornerstone of our BioHealth group, continued to progress on multiple fronts in 2022, including promising early testing
results on new bioplastics, strengthened intellectual property protections, and licensing agreements with ProPhase Biopharma, a wholly
owned subsidiary of ProPhase Labs, Inc. (Nasdaq: PRPH), for its proprietary Linebacker and Equivir compounds. ProPhase Labs, a diversified
diagnostic company with over three decades of enhancing wellness and improving health with OTC and prescription products, believes Impact
BioMedical’s Linebacker compounds have multi-billion-dollar potential as cancer co-therapies and expects to commercialize Equivir
as an OTC supplement in late 2023. Additionally, ProPhase BioPharma expects to file an IND with the US FDA for Equivir G as a prescription
antiviral.
With
a strengthened foundation now in place, we expect Impact BioMedical to provide us with the first opportunity to clearly demonstrate a
core tenant of our vision – sharing our success with our shareholders. Although the uniqueness of our planned dividend strategy
has required overcoming numerous regulatory challenges that have delayed the planned spinoff of Impact BioMedical, we anticipate we could
receive the long-awaited approval to move forward with the first tranche of the dividend in early 2023.
Importantly,
Impact BioMedical is just one of multiple assets we believe can have liquidity events in 2023 as we continue to diligently move our growing
portfolio of businesses through our unique and strategic value creation process.
Double-Digit
Portfolio Growth for American Medical REIT’s High-Quality Healthcare Assets
We’ve
expanded our medical real estate operations to more than 380,000 sq. ft. of high-quality healthcare assets across the US,
providing a formidable foundation for our operations as we seek to further accelerate growth and build long-term value for our
shareholders.
This
attractive business line operates as American Medical REIT (AMRE), a subsidiary of our DSS Securities division, and acquired its first
properties in 2021. It’s now generating average yields of approximately eight percent, and we have a massive pipeline of opportunities
to further grow AMRE in the quarters ahead.
While
other areas within commercial real estate have been impacted by the ongoing effects from the pandemic and changing interest rate environments,
medical real estate has demonstrated considerable resiliency and demand. We are in a great position to further pursue opportunities to
expand our medical REIT business line as we continue to execute our strategic growth plans.
High-Quality
Loan Portfolio Generating 10.6% Average Return
The
expansion of our medical real estate holdings is in part supported by our banking and financing business line, primarily through our
majority-owned American Pacific Bancorp, Inc. (“APB”) subsidiary. APB issued more than $40 million in new loans since our third quarter
2021 acquisition, assembling a diversified portfolio of strong credit quality that is generating an average 10.6% return. Looking ahead,
as the Company prepares to file an S-1 for APB’s IPO, we expect to expand our managed loan portfolio, which earns 1.25% annually
in service charges, to more than $63 million. Importantly, the equity portfolio as a bank holding company is anticipated to remain relatively
stable, regardless of stock market fluctuations.
USX
Holdings to Launch Innovative Marketplace for Trading Digital Assets
In
the near-term, the Company anticipates new developments from the 70% ownership of USX Holdings Company Inc. (“USX Holdings”),
a collaboration with GSX Group Limited, a global digital exchange ecosystem for the issuance, trading, and settlement of tokenized securities,
and Coinstreet Partners, a global decentralized digital investment banking group and digital asset financial service firm.
The
Company is taking the necessary steps to prepare USX Holdings to launch an innovative marketplace for trading digital ADRs based on US
equity securities. The transformative potential of digital securities is extremely exciting, and the Company believes USX Holdings can
be a major player in the space as it pursues the massive opportunity in the US for a secondary market in securities tokens.
USX
Holdings is part of our larger securities business line. In addition to the investment made in USX Holdings in 2021, the Company also
completed strategic investments in broker dealers WestPark Capital and Sentinel Brokers and formed Liquid Value Asset Management Limited,
a proprietary algorithmic trading firm majority owned by our wholly owned subsidiary, DSS Financial Management, Inc. As the Company moves
into 2023, the Company plans to add market making to our securities business line and to pursue additional initiatives to drive further
strong growth.
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DSS
PureAir Positioned for Global Rollout
DSS
expects the foundation laid for our DSS PureAir, Inc. (“DSS PureAir”) business, first launched in mid-2021, to gain significant
new traction across the Asia Pacific region in the quarters ahead. The primary assets of DSS PureAir include the investment in the Celios
air purification system, Puradigm air purification product distribution license, and an array of other healthcare-related product licenses.
With a growing portfolio of solutions, this division will continue to generate sales for the innovative proactive air and surface purifications
solutions through the Company’s expanding direct selling business.
Rapidly
Expanding Direct Selling Business Line
The
December 2021 investment in Sharing Services Global gave DSS controlling interest with nearly 59 percent ownership of the established
direct selling business. The SHRG platform leverages the capabilities and expertise of various companies that market and sell products
direct to the consumer and generated nearly $18.9 million in revenue for the twelve months ended December 31, 2022.
Key
Upcoming Milestone for AmericaFirst Quantitative Funds
AmericaFirst
Quantitative Funds, part of our Securities and Investment Management segment, continued to generate net asset inflows in 2022 despite
the negative market environment, thanks to a combination of peer-group outperformance and great marketing by our team.
Looking
Ahead
With
operations around the world, DSS has a unique visibility of global economic conditions, and based on the view of the increasing likelihood
of recession, the Company has shifted our near-term focus toward cost cutting initiatives and preserving cash while maintaining preparations
for potential significant liquidity events in 2023. DSS will take advantage of the strong performing assets, and, alongside these efforts,
will continue to apply the three-stage value creation process across the diversified portfolio of holdings.
Overall,
the Company has tremendous confidence in the future of DSS, and believes the best days are ahead. The Company remains steadfastly committed
to new value creation and has laid the necessary foundation for years of future success.
The
successes the Company has experienced over the past year and the growth opportunities anticipated for 2023 and beyond have been made
possible by the diligent efforts of the team and the support of the shareholders.
Reporting
Operating Segments:
As
we have reported above, we financially report business operating results on only five operating segments, which we believe will certainly
increase and transition as the newer lines of business develop and mature. However, the five business segments that we are reporting
on in 2022 are as follows:
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. Premier is nearing completion of its facility expansion with
operations expected to begin at the new 105,000 sq. ft. facility in early March 2022.
For
over 25 years, Premier has been a market leader in providing solutions for paperboard packaging from consumer retail packaging and heavy
mailing envelopes, to sophisticated custom folding cartons and complex three-dimensional direct mail solutions. Premier’s innovative
products and design team delivers packaging that provides functionality, marketability, and sustainability, with its fiber-based packing
solutions providing an alternative to traditional plastic packaging.
9
Since
2019, we have accelerated the transformation of Premier’s operations, investing in state-of-the-art manufacturing equipment, people,
and processes to increase its capacity, improve quality and delivery, and to ensure it has the resources to support its growing customer
base and their evolving supply chain demands.
We
will continue to add capabilities in key areas that increasing operational efficiencies to strengthen our foundation and offerings to
our customers while continuing to provide world-class customer service to the customers we serve.
Commercial
Lending: (“Commercial Lending”) through its operating company, American Pacific Bancorp, Inc. (“APB”) provides
an integrated suite of financial services for businesses that 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. APB intends
to continue to develop and expand its lending platform to serve the small to mid-size commercial borrower and to continue to acquire
equity positions of commercial banks in the US to develop its lending network and to provide global banking services to clients worldwide,
including servicing markets with limited access to traditional US banking services. APB’s target customers are businesses with
annual revenues of $5 million to $50+ million, including manufacturers, wholesalers, retailers, distributors, importers, and service
companies. APB has expertise in, and services tailored for, specific industries, including beverage, food and agribusiness, technology,
healthcare, government, higher education, clean technology, and environmental services.
Biotechnology:
(“Biotech”) This sector, through its subsidiary Impact BioMedical, Inc. targets unmet, urgent medical needs and expands
the borders of medical and pharmaceutical science. Impact 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, Impact Bio
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.
Biotech
and Impact BioMedical have several important and valuable products, technology or compounds that are in continuing development and/or
licensing stages:
●
LineBacker:
Multi-faceted therapeutic platform for metabolic, neurologic, cancer, and infectious diseases.
●
Equivir:
A polyphenol compound that is believed to be successful in antiviral infection treatments. Equivir/Nemovir technology is a novel
blend of FDA Generally Recognized as Safe (“GRAS”) eligible polyphenols ( e.g., Myricetin, Hesperetin, Piperine)
which have demonstrated antiviral effects with additional potential application as health supplements or medication. Polyphenols
are sourced from fruits, vegetables, and other natural substances. Myricetin is a member of the flavonoid class of polyphenolic compounds
with antioxidant properties. Hesperitin is a flavanone and Piperine is an alkaloid, commonly found in black pepper.
●
Procombin:
Applications as food additive, and natural preservative for beauty and person care products as well as natural food preservative.
●
VanXin:
Food preservative booster made up of polyphenols that extend the shelf life.
●
Bioplastics:
Advanced bio-compatible plastics that mitigate accumulation of plastics in oceans and landfills and provide UVA and UVB protection
for many types of material for including containers, hard surfaces, and fibers for clothing. The technology is presently in development
and testing antimicrobial plastics for consumer products that control the spread of active pathogens such as SARS-CoV-2, Influenza,
E. coli, Staph, and Rhinovirus, by exploiting key strategies found in the biological realm. These new plastics are specifically focused
on solutions for common products such as cups, plates, utensils, plastic bags, and countertops. The first prototypes are currently
undergoing antimicrobial resistance testing.
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●
Laetose:
Laetose technology is derived from a unique combination of sugar and inositol, which demonstrates the ability to inhibit the inflammatory
and metabolic response of sugar alone. A sugar alternative which is believed to lower human glycemic indexes and is believed to be
a breakthrough alternative sugar aimed to combat diabetes. The use of Laetose in a daily diet, compared to sugar, could result in
30% lower sugar consumption and lower glycemic index/load.
●
3F:
A botanical compound believed to serve as an insect repellent and anti-microbial agent. 3F is a unique formulation of specialized
ingredients ( e.g. terpenes) from botanical sources with demonstrated effect as an insect repellent and an antimicrobial.
●
3F
Mosquito Repellent: 3F repellent contains botanical ingredients that mosquitos avoid. These ingredients are scientifically proven1
to affect the mosquito’s receptors, essentially making the insect blind to a human’s presence. This can be utilized as
a stand-alone repellent or as an additive in detergents, lotions, shampoo, and other substances to provide mosquito protection.
●
3F
Antimicrobial: 3F antimicrobial contains botanical ingredients known to kill viruses. These ingredients are scientifically proven
to inhibit viral replication. This can be utilized as a stand-alone antimicrobial or as an additive in detergents, lotions, shampoo,
fabrics, and other substances.
●
Quantum:
The solution to the Patent Cliff accomplished by creating a new class of medicinal chemistry that uses advanced methods to increase
effectiveness and persistence of natural compounds and existing drugs. The safety attributes of the original molecules are maintained.
Typically, drug discovery processes modify functional groups. Quantum’s new techniques alter behavior of molecules at the sub-molecular
level. It is estimated that 65% of the World Health Organization Essential Medicines List can be improved and re-patented using Quantum
and these methods can be used to enhance and patent natural compounds including many substances used in traditional medicines around
the world.
●
CRST
1: Advanced adjuvant for next generation vaccine applications.
●
Keto
Sweet: Sugar that prevents muscular atrophy.
●
Solarin:
Oral capsule able to prevent sun damage to human skin.
●
Therapix
(license): BioHealth has a license for cannabinoid technology for neurological pain, sleep apnea disorders with RX/OTC potential.
●
Bio
Med (license): A probiotic gut health product that helps to regulate many physiological functions, ranging from energy regulation
and cognitive processes to toxin neutralization and immunity against pathogens.
The
business model of BioHealth and Impact BioMedical revolves around two methodologies – Licensing and Sales Distribution.
1)
Impact develops valuable and unique patented technologies which will be licensed to pharmaceutical, large consumer package goods
companies and venture capitalists in exchange for usage licensing and royalties.
2)
Impact utilizes the DSS ecosystem to leverage its sister companies that have in place distribution networks on a global scale. Impact
will engage in branded and private labelling of certain products for sales generation through these channels. This global distribution
model will give direct access to end users of Impact’s nutraceutical and health related products.
11
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. This business sector has already established the following business lines and associated products and services:
●
REIT
Management Fund: In March 2020, DSS Securities formed AMRE (“American Medical REIT”) and its management company AAMI
(“AMRE Asset Management, Inc.) Through AAMI/AMRE, a medical real estate investment trust, fulfills community needs for quality
healthcare facilities while enabling care providers to allocate their capital to growth and investment in their contemporary clinical
and critical care businesses. Urban and suburban communities are in need of modern healthcare facilities that provide a range of
medical outpatient services. The funds ultimate product is an investor opportunity in a managed medical real estate investment trust.
●
Real
Estate Title Services: Alset Title Company, Inc. provides buyers, sellers, and brokers alike confidence during big real estate
transactions, not just in a transaction, but in the property itself. Through bundled services, Alset Title Company, Inc. provides
it all from title searches and insurance to escrow agent assistance.
●
Sentinel:
Sentinel primarily operates as a financial intermediary, facilitating institutional trading of municipal and corporate bonds
as well as preferred stock, and accelerates the trajectory of the DSS digital securities business.
●
WestPark:
WestPark is a full-service investment banking and securities brokerage firm which serves the needs of both private and public
companies worldwide, as well as individual and institutional investors.
●
BMIC:
BMIC is a private investment bank specializing in corporate finance advising, raising equity, and venture services, providing
a global “one-stop” corporate consultancy to listed companies. From corporate finance to professional valuation, corporate
communications to event management, BMIC services companies in the US, Hong Kong, Singapore, Taiwan, Japan, Canada, and Australia.
●
DSS
AmericaFirst: DSS AmericaFirst is a suite of mutual funds managed by DSS Wealth Management. DSS AmericaFirst expects to expand
into numerous investment platforms including additional mutual funds, exchange-traded funds, unit investment trusts, and closed-end
funds. DSS AmericaFirst currently consists of four mutual funds that seek to outperform their respective benchmark indices by applying
a quantitative rules-based approach to security selection.
Direct
Marketing: (“Direct”) Through its holding company, Decentralized Sharing Systems, Inc. and its subsidiaries and partners,
including Sharing Services Global Corporation, this business line provides an array of products and services, through an independent
contractor network.
For
example, Decentralized’s wholly owned subsidiary, HWH World, Inc. promotes products and services that fulfill its corporate position
of health, wealth, and happiness. The HWH Marketplace through its brands desires to help its customers become the healthiest, happiest
versions of themselves. For the health component , the company offers herbal alternatives of nutraceutical, consumables and topicals,
dietary supplements, beauty and skin care products, personal care, gut health products, aloe vera based supplements, and other wellness
products. As to the wealth component , the company is developing educational tools to its users to better manage individual finances
and savings programs to help its consumers find each consumer’s individual financial goal. As to the happiness component ,
the company is working with other partners to either acquire or partner in products and/or services to allow its consumers to enjoy and
healthy living, including a global travel membership network.
Sharing
Services Global Corporation (“Sharing Services”), a company incorporated in the State of Nevada on April 24, 2015, aims
to build shareholder value by developing or acquiring businesses and technologies that increase its product and services portfolio,
business competencies, and geographic reach. Sharing Services’ combined platform currently leverages the capabilities and
expertise of various companies that market and sell products direct to the consumer through independent contractors. Its new shared
service platform is designed to serve the direct selling “gig economy” sector by providing needed services (such as
equity and inventory financing, advisory services, mobile application tools, merchant processing services, commercial insurance, and
event planning) to smaller direct sales companies. Sharing Services, through its subsidiaries, currently markets and distributes its
health and wellness and other products (such as its subscription-based travel services) in the U.S., Canada and Mexico using a
direct selling business model. It intends to continue to grow its business both organically and by making strategic acquisitions
from time to time of businesses and technologies that augment its product portfolio, complement its business competencies, and fit
its growth strategy.
12
Intellectual
Property
Patents
Related
to our Impact BioMedical Division that maintains important key patents and patent applications that we will use as the
foundation for foster product development and licensing. We currently have 5 patents with claims directed to compositions, the
manufacture of, and/or the use of use and for some of our key products including compositions referred to as Linebacker,
Equivir/Nemovir, Laetose, and 3F. Our intellectual property will enable us to be protected as we further these technologies and pave
the road to commercialization.
We
own patents with claims directed to covering semiconductors, light emitting diodes, and wireless peripheral technologies, respectively.
We also have several patent applications in process, including provisional and Patent Cooperation Treaty (“PCT”) patent applications
in various jurisdictions including the United States, Canada, and Europe. Our issued patents have remaining durations ranging from 1
to 16 years.
Trademarks
We
have several trademarks related to our HWH, SHRG, Impact BioMedical, and DSS, Inc. businesses.
Websites:
The
primary corporate website we maintain is www.dssworld.com.
American
Medical REIT, Inc: http://www.americanmedreit.com
DSS AmericaFirst: https://www.afcm-quant.com
American
Pacific Bancorp (“APB”): https://www.ampacbancorp.com
DSS PureAir, Inc.: https://dsspureair.com/
Premier Packaging: https://www.premiercustompkg.com
HWH (Health, Wealth & Happiness) Marketplace: https://www.hwhmarketplace.com
RBC
Life International, Inc.: https://rbclife.com
SHRG:
https://www.shrginc.com
Impact
Biomedical: https://www.impactbiomedinc.com
In
addition to the active websites, the Company is building multiple new sites and owns several other domain names reserved for future use
or for strategic competitive reasons. Information on our websites or any other website does not constitute a part of this annual report.
Markets
and Competition
Product
Packaging: Our packaging division competes with a significant number of national, regional companies, many of which are independent and
privately held. The largest competitors in this market are primarily focused on the long-run consumer package goods and health and beauty
markets. They include large integrated paper companies such as West Rock Company, and Graphic Packaging Holding Company.
Commercial
Lending: Our commercial lending company, American Pacific Bancorp (“APB”) provides an integrated suite of financial services
for businesses that include commercial business lines of credit, land development financing, inventory financing, third party loan, servicing,
and services that address the financial needs of a variety of diversified businesses lines. These efforts compete with a wide variety
of traditional commercial banks and investment banking companies including.
Biotechnology:
Our biotechnology companies including Impact Biomedical Inc., are focused on the discovery, development, and commercialization of products
and technologies to address unmet needs in human healthcare and wellness. Specific areas of focus include specialty biopharmaceuticals,
antivirals, antimicrobials, and consumer healthcare and wellness products, often derived from naturally sourced elements. These efforts
compete with established and start-up companies, university research and development efforts, and individual inventors and scientists.
Examples of competitors include Ipsen Pharmaceuticals, Conagen Inc., Mylan Consumer Healthcare, Klaire Labs, Vertex Pharmaceuticals,
and the National Center of Natural Product Development at the University of Mississippi.
13
Direct
Marketing: The network marketing or direct marketing industry is a very competitive marketplace. While not directly competing with HWH
and SHRG, the following companies are significant players in the global network marketing business and as a result an indirect competitor
of HWH and SHRG: Amway, Avon, Herbalife, Natura, Vorwerk, Mary Kay, Perfect, Forever Living, Nu Skin, Young Living, and New Era, among
others.
Securities
and Investment Management: Was established to develop and/or acquire assets in the securities trading or management arena. These efforts
and established business lines compete with individual money managers, companies or organizations that engage in the business of trading
securities and derivatives for the benefit of their customers. Traditional RIA’s, Brokers Dealers, REIT’s and other personal
investment companies would also be considered competition.
Customers
Product
Packaging: During 2022, one customer accounted for approximately 14% of our consolidated revenue. Customer diversification improvements
have produced several new customers to our overall customer base and will continue to do so in 2023.
Commercial
Lending: During 2022, American Pacific Bancorp, Inc. has issued a little over $3 million in new loans to customers with strong credit
quality across a diverse portfolio of businesses. We anticipate another $10M+ of new commercial loans in the near term.
Direct
Marketing: During 2022 our direct marketing companies HWH World, HWH World Holdings, SHRG, and its subsidiary, The Happy Co.
continued to build their customer bases and brand recognition on a global basis. These businesses utilize person-to-person sales by
independent representatives through direct communication and distribution to individual consumers and their networks. Mail, email,
social media, influencers or affiliates, and texting campaigns are among the delivery systems used to communicate and sell to our
thousands of customers.
Securities
and Investment Management: Our Securities and Investment Management division has a mixture of retail and institutional investors.
Raw
Materials
Product
Packaging: The primary raw materials the Company uses in its businesses are paper, paperboard, corrugated board and ink. The Company
negotiates with leading suppliers to maximize its purchasing efficiencies and uses a wide variety of paper grades, formats, ink formulations
and colors. Paper and paperboard prices continued to increase in 2022, and we believe increases in future years are expected. Except
for certain packaging customers where the Company enters into annual contracts, for which changes in paperboard pricing is absorbed by
the Company, the Company has historically passed substantially all increases and decreases to its customers, although there can be no
assurances that the Company will continue to do so in the future.
Direct
Marketing: Sources its products from 3 rd party suppliers for nutritional, performance, and health and beauty product ingredients.
We rely on our extensive supplier network for availability of an extensive range of vitamins, minerals, botanicals, plant and herb extracts,
as well as nutritional supplements. We are expecting continue price pressure and supply chain issues into 2023 and have put significant
risk mitigation strategies in place to avoid dramatic P&L effects based on this anticipated and continued volatility. The company
passes any substantial increase of its raw materials or finished goods on to its customers to limit any significant margin impact.
Environmental
Compliance
It
is the Company’s policy to conduct its operations in accordance with all applicable laws, regulations, and other requirements.
While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation
and other compliance efforts that the Company may undertake in the future, in the opinion of management, compliance with the present
environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect
on the Company’s consolidated annual results of operations, financial position or cash flows.
14
Government
Regulation
Our
biotechnology business is faced with potential government regulations. If new legislation, regulations, or rules are implemented either
by Congress, the U.S. Patent and Trademark Office (the “USPTO”), or the courts that impact the patent application process,
the patent enforcement process or the rights of patent holders, these changes could negatively affect our patent monetization efforts
and, in turn, our assets, expenses and revenue. United States patent laws have been amended by the Leahy-Smith America Invents Act. The
America Invents Act includes several significant changes to U.S. patent law. In general, the legislation attempts to address issues surrounding
the enforceability of patents and the increase in patent litigation by, among other things, establishing new procedures for patent litigation.
For example, the America Invents Act changes the way that parties may be joined in patent infringement actions, increasing the likelihood
that such actions will need to be brought against individual parties allegedly infringing by their respective individual actions or activities.
In addition, the U.S. Department of Justice (“DOJ”) has conducted reviews of the patent system to evaluate the impact of
patent assertion entities, such as our Company, on industries in which those patents relate. It is possible that the findings and recommendations
of the DOJ could adversely impact our ability to effectively license and enforce standards-essential patents and could increase the uncertainties
and costs surrounding the enforcement of any such patented technologies.
Moreover,
new rules regarding the burden of proof in patent enforcement actions could significantly increase the cost of our enforcement actions,
and new standards or limitations on liability for patent infringement could negatively impact our revenue derived from such enforcement
actions.
Corporate
History
The
Company, incorporated in the state of New York in May 1984 has formally conducted business in the name of Document Security Systems,
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 rebranding from Document Security Systems,
Inc. to DSS, Inc. This change became effective on September 30, 2021. DSS, Inc. maintained the same trading symbol “DSS”
and updated its CUSIP number to 26253C-102. See the “Overview” section above for further details about our acquisitions .
Employees
As
of December 31, 2022, all DSS, Inc. had 119 employees worldwide. We continue to retain and attract qualified management and technical
personnel. Our employees are not covered by any collective bargaining agreement, and we believe that our relations with our employees
are in good standing.
Available
information
Our
website address is www.dssworld.com . Information on our website is not incorporated herein by reference. We make available
free of charge through our website our press releases, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and all amendments to those reports as soon as reasonably practicable after electronically filed with or furnished to the Securities
and Exchange Commission.
LOOKING
AHEAD IN 2023
We
believe 2023 will be a successful year for DSS. Spurred by innovation, industry needs, and timely acquisitions, in 2023 we will focus
on improving top line revenue and top line revenue diversification and profitability. Through our expertly cultivated processes and industry
research, we can ensure the success of our projects across diverse sectors and business environments. The opportunities within our business
lines and high-growth markets have unlimited potential, and our entities within these sectors are contemporary, scalable, and offer recurring
revenue opportunities.
When
we began executing on our current strategy of restructuring and recapitalization, the Company had approximately $16.2 million in assets
and only a handful of struggling or undercapitalized businesses. In just three years, we divested underperforming assets, added eight
distinct business lines, and grew assets to more than $249 million, which includes $19 million in cash as of our December 31, 2022 filing
with the SEC. Today, we have approximately 40 subsidiaries operating across nine attractive market business lines, with five of those
business lines now with significant operations and generating revenue.
We
have been fortunate to have attracted tremendous talent to lead each of our business units. When building out our businesses, we look
for established, industry leaders with long track records and the expertise to add meaningful value to our DSS ecosystem and create a
foundation for success.
Our
diverse book of clients and investments has given us strong competitive advantages globally in many industries; we intend to aggressively
capitalize on these advantages moving forward. We believe the momentum of our success and ongoing evolution will continue to be unabated
in 2023 we will create the catalyst for new value creation in the coming year and beyond.