Item 1A. Risk Factors
ITEM
1A – RISK FACTORS
Investing
in our common stock involves risk. Before deciding whether to invest in our common stock, you should carefully consider the risks and
uncertainties described below. There may be other unknown or unpredictable economic, business, competitive, regulatory or other factors
that could have material adverse effects on our future results. If any of these risks actually occur, our business, business prospects,
financial condition or results of operations could be seriously harmed. This could cause the trading price of our common stock to decline,
resulting in a loss of all or part of your investment. Please also read carefully the section contained in Part II, Item 7, below, entitled
“Cautionary Statement Regarding Forward-Looking Statements.”
We
have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or
results of operations in the future. Additional risks not presently known to us or that we currently believe are immaterial may also
significantly impair our business operations. If any of these risks occur, our business, results of operations or financial condition
could suffer, the market price of our common stock could decline, and you could lose all or part of your investment in our common stock.
The
value of our intangible assets and investments may not be equal to their carrying values .
As
of December 31, 2025, we had approximately $17.0 million of net intangible assets. Approximately $17.0 million is associated with Impact
Biomedical, Inc. The Company has completed valuations for certain developed technology assets acquired in the transaction as well as
the non-controlling interest portion of Impact BioMedical, Inc. and its subsidiaries. If licensing efforts are not successful, the values
of these assets could be reduced. We are required to evaluate the carrying value of such intangibles and goodwill and the fair value
of investments whenever events or changes in circumstances indicate that the carrying value of an intangible asset, including goodwill,
and investment may not be recoverable. If any of our intangible assets, goodwill or investments are deemed to be impaired then it will
result in a significant reduction of the operating results in such period.
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We
have secured indebtedness, and a potential risk exists that we may be unable to satisfy our obligations to pay interest and principal
thereon when due or negotiate acceptable extensions or settlements.
We
have outstanding indebtedness (described below), most of which is secured by assets of various DSS subsidiaries and guaranteed by the
Company. Given our history of operating losses and our cash position, there is a risk that we may not be able to repay indebtedness when
due. If we were to default on any of our other indebtedness that require payments of cash to settle such default and we do not receive
an extension or a waiver from the creditor and the creditor were to foreclose on the secured assets, it could have a material adverse
effect on our business, financial condition, and operating results.
As
of December 31, 2025, we had the following significant amounts of outstanding indebtedness:
●
Premier
Packaging entered into master loan and security agreement (“BOA Note”) with Bank of America, N.A. (“BOA”)
to secure financing approximating $3,710,000 to purchase a new Heidelberg XL 106-7+L printing press. The aggregate principal balance
outstanding under the BOA Note shall bear interest at a variable rate on or before the loan closing. As of December 31, 2025, the
outstanding principal on the BOA Note was $1,916,000 and had an interest rate of 4.63%. As of December 31, 2025, $544,000 was included
in the current portion of long-term debt, net, and the remaining balance of approximately $1,372,000 recorded as long-term debt.
The BOA Note contains certain covenants that are analyzed annually. As of December 31, 2025, Premier is in compliance with these
covenants.
●
Premier
Packaging entered into a loan and security agreement with Bank of America for the principal amount of $790,000 and
shall accrued interest at the rate of 7.44%. Principal and interest shall be repaid in the approximate amount of $14,000 through
March 2029. This loan is collateralized by a Bobst Model Novacut and is guaranteed by DSS, Inc. As of December 31, 2025, the outstanding
principal and interest approximates $482,000 of which $132,000 was included in the current portion of long-term debt, net, and the
remaining balance of approximately $350,000 recorded as long-term debt.
●
AMRE
Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE, entered into a loan agreement (“Shelton Agreement”)
with Patriot Bank, N.A. (“Patriot Bank”) in an amount up to $6,155,000, with the amount financed approximating $5,105,000.
The Shelton Agreement contains monthly payments of principal and an initial interest of 4.25%. The interest will be adjusted commencing
on July 1, 2026 and continuing for the next succeeding 5-year period shall be determined one month prior to the change date and shall
be an interest rate equal to two hundred fifty (250) basis points above the Federal Home Loan Bank Boston 5-Year/25-Year amortizing
advance rate, but in no event less than 4.25% for the term of 120 months with a balloon payment approximating $2,829,000 due at term
end. The net book value of these assets as of December 31, 2025 approximated $6,231,000. As of December 31, 2025, the outstanding
principal and interest approximates $4,231,000. As of December 31, 2025, $226,000 was included in the current portion of long-term
debt, net, and the remaining balance of approximately $4,005,000 recorded as long-term debt. on the accompanying consolidated balance
sheet.
●
$3,000,000 loan agreement with BMI Capital Partners International Limited
(“BMIC International”) (“BMIC International Loan”), between LVAM and BMIC International with interest to be charged
at a variable rate to be calculated at the maturity date. The BMIC International Loan matured on October 12, 2022 and both parties agree
based on the language of the loan documents that the loan will keep extending an additional 3 months until either party cancels the extension.
As of December 31, 2025, the outstanding principal and interest approximated $33,000 and is included in current portion of long-term debt,
net on the accompanying balance sheet.
●
$3,000,000
loan agreement with Lee Wilson Tsz Kin (“Wilson Loan”) between LVAM and Wilson with interest to be charged at a variable
rate to be calculated at the maturity date. The Wilson Loan matured on October 12, 2022 and both parties agree based on the language
of the loan documents that the loan will keep extending an additional 3 months until either party cancels the extension. As of December
31, 2025, the outstanding principal and interest approximated $145,000 and is included in current portion of long-term debt, net
on the accompanying balance sheet.
●
AMRE
LifeCare entered into a loan agreement (“LifeCare Agreement”) with Pinnacle Bank, (“Pinnacle Bank”) in the
amount of $40,300,000. The LifeCare Agreement supported the acquisition of three medical facilities located in Fort Worth, Texas,
Plano, Texas, and Pittsburgh, Pennsylvania for a purchase price of $62,000,000. The LifeCare Agreement has a variable interest rate
which equated to 8.12% on December 31, 2025. The net book value of these assets as of December 31, 2025 approximated $12,338,000.
The outstanding principal and interest approximated $37,000,000 and is included in current portion of long-term debt, net on the
accompanying balance sheet. This note is in default and is due as of the date of this filing.
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A
significant amount of our revenue is derived by one customers.
As
of December 31, 2025, one customers accounted for approximately 29% of our consolidated revenue. As of December 31, 2025, five
customers accounted for 19%, 18%, 13%, 12% and 11% of our trade accounts receivable balance. If we were to lose this customer or if
the amount of business we do with this customer declines significantly, our business would be adversely affected. As of December 31,
2024, two customers accounted for approximately 22% and 13% of our consolidated revenue and these two customers accounted for
approximately 29% and 20% of our consolidated trade accounts receivable balance.
We
may face intellectual property infringement or other claims against us, our customers or our intellectual property that could be costly
to defend and result in our loss of significant rights.
Although
we have received patents with respect to certain of our core business technologies, there can be no assurance that these patents will
afford us any meaningful protection. Although we believe that our use of the technology and products we have developed, and other trade
secrets used in our operations do not infringe upon the rights of others, our use of the technology and trade secrets we developed may
infringe upon the patents or intellectual property rights of others. In the event of infringement, we could, under certain circumstances,
be required to obtain a license or modify aspects of the technology and trade secrets we developed or refrain from using the same. We
may not be able to successfully terminate any infringement in a timely manner, upon acceptable terms and conditions or at all. Failure
to do any of the foregoing could have a material adverse effect on our operations and our financial condition. Moreover, if the patents,
technology, or trade secrets we developed or use in our business are deemed to infringe upon the rights of others, we could, under certain
circumstances, become liable for damages, which could have a material adverse effect on our operations and our financial condition. As
we continue to market our products, we could encounter patent barriers that are not known today. A patent search may not disclose all
related applications that are currently pending in the United States Patent Office, and there may be one or more such pending applications
that would take precedence over any or all of our applications.
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.
Certain
of our recently developed products are not yet commercially accepted and there can be no assurance that those products will be accepted,
which would adversely affect our financial results.
We’ve
acquired several patents in the bio-health field through our acquisition if Impact Biomedical, Inc. Our business plan includes plans
to incur significant marketing, intellectual property development and sales costs for the bio-health related products. If we are not
able to develop and sell these new products, our financial results will be adversely affected.
The
results of our research and development efforts are uncertain and there can be no assurance of the commercial success of our products.
We
believe that we will need to continue to incur research and development expenditures to remain competitive. The products we are currently
developing or may develop in the future may not be technologically successful. In addition, the length of our product development cycle
may be greater than we originally expected, and we may experience delays in future product development. If our resulting products are
not technologically successful, they may not achieve market acceptance or compete effectively with our competitors’ products.
The
markets in which we operate are highly competitive, and we may not be able to compete effectively, especially against established industry
competitors with greater market presence and financial resources.
Our
markets are highly competitive and characterized by rapid technological change and product innovations. Our competitors may have advantages
over us because of their longer operating histories, more established products, greater name recognition, larger customer bases, and
greater financial, technical and marketing resources. As a result, they may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements and devote greater resources to the promotion and sale of their products. Competition may also force
us to decrease the price of our products and services. We cannot assure you that we will be successful in developing and introducing
new technology on a timely basis, new products with enhanced features, or that these products, if introduced, will enable us to establish
selling prices and gross margins at profitable levels.
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If
we are unable to respond to regulatory or industry standards effectively, our growth and development could be delayed or limited.
Our
future success will depend in part on our ability to enhance and improve the functionality and features of our products and services
in accordance with regulatory or industry standards. Our ability to compete effectively will depend in part on our ability to influence
and respond to emerging industry governmental standards in a timely and cost-effective manner. If we are unable to influence these or
other standards or respond to these or other standards effectively, our growth and development of various products and services could
be delayed or limited.
Breaches
in security, whether cyber or physical, and other disruptions and/or our inability to prevent or respond to such breaches, could diminish
our ability to generate revenues or contain costs, compromise our assets, and negatively impact our business in other ways.
We
face certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary
or classified information, and threats to physical and cyber security. Our information technology networks and related systems are critical
to the operation of our business and essential to our ability to successfully perform day-to-day operations. The risks of a security
breach, cyber-attack, cyber intrusion, or disruption, particularly through actions taken by computer hackers, foreign governments and
cyber terrorists, have increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world
have increased. Although we have acquired and developed systems and processes designed to protect our proprietary and/or classified information,
they may not be sufficient and the failure to prevent these types of events could disrupt our operations, require significant management
attention and resources, and could negatively impact our reputation among our customers and the public, which could have a negative impact
on our financial condition, and weaken our results of operations and liquidity.
Our
investments in Asia are subject to unique risks and uncertainties, including tariffs and trade restrictions.
Our
investment in Alset International Limited, presents risks including, but not limited to, changes in share price of investments, changes
in local regulatory requirements, changes in labor laws, local wage laws, environmental regulations, taxes and operating licenses, compliance
with U.S. regulatory requirements, including the Foreign Corrupt Practices Act, uncertainties as to application and interpretation of
local laws and enforcement of contract and intellectual property rights, currency restrictions, currency exchange controls, fluctuations
of currency, and currency revaluations, eminent domain claims, civil unrest, power outages, water shortages, labor shortages, labor disputes,
increase in labor costs, rapid changes in government, economic and political policies, political or civil unrest, acts of terrorism,
or the threat of boycotts, other civil disturbances and the possible impact of the imposition of tariffs as a result of the tariff dispute
between the U.S. and China as well as any retaliating trade policies or restrictions. Any such disruptions could depress our earnings
and have other material adverse effects on our business, financial condition and results of operations.
Future
growth in our business could make it difficult to manage our resources.
Future
business expansion could place a significant strain on our management, administrative and financial resources. Significant growth in
our business may require us to implement additional operating, product development and financial controls, improve coordination among
marketing, product development and finance functions, increase capital expenditures and hire additional personnel. There can be no assurance
that we will be able to successfully manage any substantial expansion of our business, including attracting and retaining qualified personnel.
Any failure to properly manage our future growth could negatively impact our business and operating results.
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If
we fail to retain certain of our key personnel and attract and retain additional qualified personnel, we might not be able to remain
competitive, continue to expand our technology or pursue growth.
Our
future success depends upon the continued service of certain of our executive officers and other key 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.
We
have identified weaknesses in our internal control over financial reporting structure; any material weaknesses may cause errors in our
financial statements that could require restatements of our financial statements and investors may lose confidence in our reported financial
information, which could lead to a decline in our stock price.
Section
404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of
the end of each year, and to include a management report assessing the effectiveness of our internal control over financial reporting
in each Annual Report on Form 10-K. We have had previously identified weaknesses in our internal control over financial reporting following
management’s annual assessment of internal controls over financial reporting and, as a result of that assessment, management had
concluded our controls associated may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.
We
do not intend to pay cash dividends.
We
do not intend to declare or pay cash dividends on our common stock in the foreseeable future. We anticipate that we will retain any earnings
and other cash resources for investment in our business. The payment of dividends on our common stock is subject to the discretion of
our board of directors and will depend on our operations, financial position, financial requirements, general business conditions, restrictions
imposed by financing arrangements, if any, legal restrictions on the payment of dividends and other factors that our board of directors
deems relevant.
We
may seek to develop additional new inventions and intellectual property, which would take time and would be costly. Moreover, the failure
to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.
Part
of our business may include the development of new inventions and intellectual property that we would seek to monetize. However, this
aspect of our business would likely require significant capital and would take time to achieve. Such activities could also distract our
management team from our present business initiatives, which could have a material and adverse effect on our business. There is also
the risk that these initiatives would not yield any viable new inventions or technology, which would lead to a loss of our investments
in time and resources in such activities.
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In
addition, even if we are able to develop new inventions, in order for those inventions to be viable and to compete effectively, we would
need to develop and maintain, and we would heavily rely on, a proprietary position with respect to such inventions and intellectual property.
However, there are significant risks associated with any such intellectual property we may develop principally including the following:
●
patent
applications we may file may not result in issued patents or may take longer than we expect to result in issued patents;
●
we
may be subject to interference proceedings;
●
we
may be subject to opposition proceedings in the U.S. or foreign countries;
●
any
patents that are issued to us may not provide meaningful protection;
●
we
may not be able to develop additional proprietary technologies that are patentable;
●
other
companies may challenge patents issued to us;
●
other
companies may design around technologies we have developed; and
●
enforcement
of our patents may be complex, uncertain and very expensive.
We
cannot be certain that patents will be issued as a result of any future applications, or that any of our patents, once issued, will provide
us with adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid
or unenforceable, or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags behind
actual discoveries, we cannot be certain that it will be the first to make our additional new inventions or to file patent applications
covering those inventions. It is also possible that others may have or may obtain issued patents that could prevent us from commercializing
our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct
our business. As to those patents that we may license or otherwise monetize, our rights will depend on maintaining our obligations to
the licensor under the applicable license agreement, and we may be unable to do so. Our failure to obtain or maintain intellectual property
rights for our inventions would lead to the loss of our investments in such activities, which would have a material and adverse effect
on our business.
Moreover,
patent application delays could cause delays in recognizing revenue from our internally generated patents and could cause us to miss
opportunities to license patents before other competing technologies are developed or introduced into the market.
Changes
in the laws and regulations to which we are subject may increase our costs.
We
are subject to numerous laws and regulations, including, but not limited to, environmental and health and welfare benefit regulations,
as well as those associated with being a public company. These rules and regulations may be changed by local, state, provincial, national
or foreign governments or agencies. Such changes may result in significant increases in our compliance costs. Compliance with changes
in rules and regulations could require increases to our workforce, and could result in increased costs for services, compensation and
benefits, and investment in new or upgraded equipment.
Declines
in general economic conditions or acts of war and terrorism may adversely impact our business.
Demand
for printing services is typically correlated with general economic conditions. The prolonged decline in United States economic conditions
associated with the great recession adversely impacted our business and results of operations and may do so again. The overall business
climate of our industry may also be impacted by domestic and foreign wars or acts of terrorism, which events may have sudden and unpredictable
adverse impacts on demand for our products and services.
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If
we fail to comply with the continued listing standards of the NYSE American LLC Exchange, it may result in a delisting of our common
stock from the exchange.
Our
common stock is currently listed for trading on the NYSE American LLC Exchange (“NYSE American”), and the continued listing
of our common stock on the NYSE American is subject to our compliance with a number of listing standards.
If
our common stock were no longer listed on the NYSE American, investors might only be able to trade our shares on the OTC Bulletin Board
® or in the Pink Sheets ® (a quotation medium operated by Pink Sheets LLC). This would impair the liquidity of our common stock
not only in the number of shares that could be bought and sold at a given price, which might be depressed by the relative illiquidity,
but also through delays in the timing of transactions and reduction in media coverage.
If
we are delisted from the NYSE American, your ability to sell your shares of our common stock may be limited by the penny stock restrictions,
which could further limit the marketability of your shares.
If
our common stock is delisted from the NYSE American, it could come within the definition of a “penny stock” as defined in
the Exchange Act and could be covered by Rule 15g-9 of the Exchange Act. That rule imposes additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by
Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written
agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or
willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities
in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
If
our common stock is not listed on a national securities exchange, compliance with applicable state securities laws may be required for
certain offers, transfers and sales of the shares of our common stock.
Because
our common stock is listed on the NYSE American, we are not required to register or qualify in any state the offer, transfer or sale
of the common stock. If our common stock is delisted from the NYSE American and is not eligible to be listed on another national securities
exchange, sales of stock pursuant to the exercise of warrants and transfers of the shares of our common stock sold by us in private placements
to U.S. holders may not be exempt from state securities laws. In such event, it will be the responsibility of us in the case of warrant
exercises or the holder of privately placed shares to register or qualify the shares for any offer, transfer or sale in the United States
or to determine that any such offer, transfer or sale is exempt under applicable state securities laws.
If
securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding
our stock adversely, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about
us or our business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases,
if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts
cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in
turn could cause our stock price or trading volume to decline.
Because
certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions
requiring stockholder approval.
As
of February 15, 2026 our directors, executive officers and principal stockholders (those beneficially owning in excess of 5%), and their
respective affiliates, beneficially own approximately 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.
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Additional
financing or future equity issuances may result in future dilution to our shareholders.
We
expect that we will need to raise additional funds in the future to finance our internal growth, our merger and acquisition plans, investment
activities, continued research and product development, and for other reasons. Any required additional financing may not be available
on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities, you may experience significant dilution
of your ownership interest and the newly issued securities may have rights senior to those of the holders of our common stock. The price
per share at which we sell additional securities in future transactions may be higher or lower than the price per share in this offering.
Alternatively, if we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include
negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to fund
additional interest expense. If adequate additional financing is not available when required or is not available on acceptable terms,
we may be unable to successfully execute our business plan.