DSS, Inc.: Form 10-Q for the period ended Sep 30, 2024
Filed with the SEC on Nov 13, 2024 and accepted by EDGAR at Nov 13, 2024, 22:16 ET.
Management's discussion and analysis
As filed, 28,619 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
FORWARD-LOOKING STATEMENTS
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 and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements.
Overview
The Company, incorporated in the state of New York in May 1984 has 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 name change 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.
DSS, Inc. (together with its consolidated subsidiaries, referred to herein as “DSS,” “we,” “us,” “our” or the “Company”), currently operates nine (9) distinct business lines with operations and locations around the globe. These business lines are: (1) Product Packaging, (2) Biotechnology, (3) Direct, (4) Commercial Lending, (5) Securities and Investment Management, (6) Alternative Trading (7) Digital Transformation (discontinued in 2023), (8) Secure Living (discontinued in 2023), and (9) Alternative Energy (discontinued in 2023). Each of these business lines are in different stages of development, growth, and income generation.
Our divisions, their business lines, subsidiaries, and operating territories: (1) Our Product Packaging line is led by 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) The Biotechnology 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. (3) Direct Marketing, 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 Marketing’s products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific, Middle East, and Eastern Europe. (4) Our Commercial Lending business division, driven by American Pacific Financial, Inc. (“APF”, formally American Pacific Bancorp, Inc. “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. (5) Securities and Investment Management was established to develop and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, broker dealers, and mutual funds management. Also in this segment is the Company’s real estate investment trusts (“REIT”), 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. (6) Alternative Trading was established to develop and/or acquire assets and investments in the securities trading and/or funds management arena. Alternative Trading, in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility tokens, and cryptocurrency via an alternative trading platform using blockchain technology. The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency, and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s). (7) Digital Transformation 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 (discontinued in 2023). (8) The Secure Living 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 (discontinued in 2023). (9) The Alternative Energy 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 (discontinued in 2023).
On December 23, 2021, DSS purchased 50,000,000 shares at $0.06 per share of Sharing Services Global Corporation (“SHRG”) via a private placement. With this purchase, DSS increased its ownership of voting shares from approximately 47% of SHRG to approximately 58%. On January 24, 2022, the Company exercised 50,000,000 warrants received as part of a consulting agreement with SHRG at the exercise price of $0.0001, bring its ownership percentage of voting shares to approximately 65%. SHRG aims to build shareholder value by developing or acquiring businesses that increase the Company’s product and services portfolio, business competencies and geographic reach. Currently, the Company, through its subsidiaries, markets and distributes its health and wellness and other products primarily in the United States, Canada, and the Asia Pacific region using a direct selling business model. The Company markets its products and services through its independent sales force, using its proprietary websites, including: www.elevacity.com (http://www.elevacity.com) and www.thehappyco.com (http://www.thehappyco.com). The Company, headquartered in Plano, Texas, was incorporated in the State of Nevada on April 24, 2015, and is an emerging growth company. The Company’s Common Stock is traded, under the symbol “SHRG,” in the OTCQB Market, an over-the-counter trading platforms market operated by OTC Markets Group Inc. On May 4, 2023, the Company distributed approximately 280 million shares of SHRG beneficially held by DSS and Decentralized Sharing Systems in the form of a dividend to the shareholders of DSS common stock. Upon completion of this distribution, DSS will retain an ownership interest in SHRG of approximately 7%. Immediately prior to this distribution, DSS owned approximately 81% of the issued and outstanding common shares of SHRG. As a result, SHRG, whose operations represented a significant portion of our Direct Marketing segment, was deconsolidated from our consolidated financial statements effective as of May 1, 2023 (the “Deconsolidation”). The consolidated statement of operations for the fiscal quarter ended September 30, 2023, therefore includes one month of activity related to SHRG prior to the Deconsolidation. Subsequent to April 30, 2023 the assets and liabilities of SHRG are no longer included within our consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with SHRG refer to the periods prior to the Deconsolidation.
The five reporting segments 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.
***Commercial Lending: (“***Commercial Lending”) through its operating company, American Pacific Bancorp, Inc. (“APB”) is organized for the purposes of being a financial network holding company, focused providing commercial loans and 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, 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.
***Biotechnology: (“***Biotech”) 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 BioMedical provides advances in drug discovery for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases. Other technologies include a breakthrough alternative sugar aimed to combat diabetes and functional fragrance formulations aimed at the industrial and medical industry.
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.
***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.
- Sentinel Brokers Company, Inc.: 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.
- 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, provide an array of products and services which include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern Europe, through licensing agreements.
Results of operations for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023.
This discussion should be read in conjunction with the financial statements and footnotes contained in this Quarterly Report and in our Annual Report on Form 10-K/A for the year ended December 31, 2023.
| Three months ended September 30, 2024 | Three months ended September 30, 2023 | % Change | Nine months ended September 30, 2024 | Nine months ended September 30, 2023 (as restated) | % Change | |
|---|---|---|---|---|---|---|
| Printed products | $4,828,000 | $3,315,000 | 46% | $11,429,000 | $12,976,000 | -12% |
| Rental income | 496,000 | 236,000 | 110% | 1,334,000 | 3,464,000 | -61% |
| Net investment income | 45,000 | 108,000 | -58% | 181,000 | 422,000 | -57% |
| Commission revenue | 230,000 | - | N/A | 737,000 | 295,000 | 150% |
| Direct marketing | - | 523,000 | -100% | - | 1,763,000 | -100% |
| Total Revenue | $5,599,000 | $4,182,000 | 34% | $13,681,000 | $18,920,000 | -28% |
For the three months ended September 30, 2024, total revenue increased 34% as compared to the three months ended September 30, 2023. The increase in Printed Product revenue of approximately 46% is driven by new customer orders. The increases in Rental income of 110% is driven by new tenants at AMRE LifeCare Pittsburg facility being making rental payments in 2024. The decreases in Net investment income approximating 58% is due to a number of loans made going on non-accrual as borrowers have struggled to make expect payments. The Company’s Direct Marketing revenues decreased 100% as the change in business plan from maintaining its own sales force to licensing its products has been slow to generate revenue.
For the nine months ended September 30, 2024, total revenue decreased 28% as compared to the nine months ended September 30, 2023. Revenues from the sale of Printed products decreased 12% due primarily to orders expected to ship during the 4th quarter 2022 being pushed to the 1st quarter 2023 as well as decrease in orders from two existing customers. The decreases in Rental income of 61% is driven by the tenants at AMRE LifeCare being unable to make rental payments in 2024. The decreases in Net investment income approximating 57% is due to a number of loans made going on non-accrual as borrowers have struggled to make expect payments. The Company’s Direct Marketing revenues decreased 100% as the change in business plan from maintaining its own sales force to licensing its products has been slow to generate revenue.
| Cost of revenue | Three months ended September 30, 2024 | Three months ended September 30, 2023 | % Change | Nine months ended September 30, 2024 | Nine months ended September 30, 2023 (as restated) | % Change |
|---|---|---|---|---|---|---|
| Printed products | $4,350,000 | $3,871,000 | 12% | $10,715,000 | $10,952,000 | -2% |
| Securities | 1,993,000 | 1,926,000 | 3% | 5,804,000 | 6,340,000 | -8% |
| Biotechnology | 10,000 | 4,000 | 150% | 30,000 | 67,000 | -55% |
| Commercial lending | 252,000 | - | N/A | 719,000 | - | N/A |
| Direct marketing | (2,000) | 271,000 | -101% | (2,000) | 820,000 | -100% |
| Sales, general and administrative compensation | 1,197,000 | 1,132,000 | 6% | 3,639,000 | 4,452,000 | -18% |
| Professional fees | 647,000 | 1,139,000 | -43% | 2,206,000 | 3,248,000 | -32% |
| Sales and marketing | 907,000 | 483,000 | 88% | 1,849,000 | 1,845,000 | 0% |
| Rent and utilities | 133,000 | 156,000 | -15% | 560,000 | 656,000 | -15% |
| Research and development | - | 239,000 | -100% | 50,000 | 684,000 | -93% |
| Other operating expenses | 783,000 | 64,000 | 1123% | 2,398,000 | 5,423,000 | -56% |
| Total costs and expenses | $10,270,000 | $9,285,000 | 11% | $27,968,000 | $34,487,000 | -19% |
Costs of revenue include 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 Securities operating segments is comprised mainly of our REIT line of business and 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 5% for nine months ended September 30, 2024 as compared to 2023 is primarily related to the decrease in revenue associate with the change in the Direct marketing business plan that has been slow to generate revenue as well as decrease in revenues from our Printed product business line.
Sales, general and administrative compensation costs, excluding stock-based compensation, decreased 18% for nine months ended September 30, 2024 as compared to 2023 is primarily related the decrease in head count as the change in business plan from maintaining our own sales force for the Direct marketing business segment to licensing its products.
Professional fees decreased 32% for nine months ended September 30, 2024 as compared to 2023 due primarily to primarily due to efforts taken to decrease these cost primarily at the Company’s Impact Bio subsidiary in anticipation of its IPO.
Sales and marketing which include internet and trade publication advertising, travel and entertainment costs, sales-broker commissions, and trade show participation expenses. Sales and marketing remained flat during the nine months ended September 30, 2024 as compared to 2023 due as the decrease in such cost associated with our Direct marketing business segment were offset by increases in our Printed Products and Biotechnology business segments.
Rent and utilities decreased 15% during the nine months ended September 30, 2024 as compared to 2023 primarily due to end of the lease in Tennessee for AMRE office space and California for the Company’s DSS Wealth Management subsidiary.
Research and development costs represent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns possesses as well as research on new technologies. These costs decreased 93% the nine months ended September 30, 2024 as compared to September 30, 2023, due primarily to the cessation of the Company’s research and development contract with GRDG at the end of 2023.
Other operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs. These costs decrease approximately 56% during the nine months ended September 30, 2024 as compared to September 30, 2023, due primarily to the write-off of accounts receivable associated with our AMRE LifeCare facilities of approximately $3,023,000 in 2023 as the tenant was unable to pay rent.
Other Income (Expense)
| Three months ended September 30, 2024 | Three months ended September 30, 2023 | %Change | Nine months ended September 30, 2024 | Nine months ended September 30,2023 (as restated) | % Change | |
|---|---|---|---|---|---|---|
| Interest Income | $28,000 | $682,000 | -96% | $331,000 | $1,220,000 | -73% |
| Dividend Income | - | $- | N/A | $- | $12,000 | -100% |
| Other Income (expense) | 2,000 | (43,000) | -105% | $39,000 | $138,000 | -72% |
| Interest Expense | (53,000) | (51,000) | 4% | $(242,000) | $(438,000) | -45% |
| Foreign Currency Translation Adjustment | 8,000 | - | N/A | $(5,000) | $- | N/A |
| (Loss) gain on equity method investment | (4,000) | (6,000) | -33% | $3,000 | $(28,000) | -111% |
| (Loss) gain on investments | (449,000) | 301,000 | -249% | $(1,021,000) | $(2,471,000) | -59% |
| Impairment of assets upon deconsolidation | - | - | N/A | $- | $(6,220,000) | -100% |
| Provision for loan losses | (562,000) | (1,179,000) | -52% | $(908,000) | $(4,936,000) | -82% |
| Gain (loss) on sale | - | (1,281,000) | -100% | $165,000 | $(1,281,000) | -113% |
| Total other income | $(1,030,000) | $(1,577,000) | 35% | $(1,638,000) | $(14,004,000) | 88% |
Interest income is recognized on the Company’s money markets, and a portion of notes receivable, identified in Note 4. The decrease in interest income is driven by several notes being put on non-accrual as the related borrowers have shown an inability to pay timely.
Other income (expense) for the nine months ended September 30, 2024 as compared to 2023 decreased 72% due primarily to income incurred in 2023 regarding the Company’s distribution agreement with BioMed Technologies.
Interest expenses decreased 45% during the nine months ended September 30, 2024, as compared to the same period in 2023, due to decreasing debt balances.
(Loss) gain on equity method investment is the Company’s prorated portion of earnings on its investments treated under the equity method of account for the six months ended September 30, 2024 as compared to 2023.
(Loss) gain 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 decrease in loss on investment for the nine months ended September 30, 2024 as compared to 2023 is driven by better performance of our stock portfolio.
Impairment of assets upon deconsolidation represents the impairment of assets recognized due to the deconsolidation of SHRG approximately $6,220,000 which is recorded as an impairment of assets due to the deconsolidation in our consolidated statements of operations.
Net Loss
| Three months ended September 30, 2024 | Three months ended September 30, 2023 | % Change | Nine months ended September 30, 2024 | Nine months ended September 30, 2023 (as restated) | % Change | |
|---|---|---|---|---|---|---|
| Loss from continuing operations | $(5,701,000) | $(6,680,000) | -15% | $(15,762,000) | $(29,580,000) | -47% |
| Income (loss) from discontinued operations, net of tax | - | - | N/A | - | (3,481,000) | -100% |
| Net loss | $(5,701,000) | $(6,680,000) | 15% | $(15,762,000) | $(33,061,000) | 52% |
For the nine months ended September 30, 2024 the Company recorded net losses of $15,762,000 as compared to net losses of $33,061,000 for the same period in 2023. The decrease in net loss is driven by decreases in the Provision for loan losses, impairment of assets upon deconsolidation, the improved performance of our stock portfolio as well as the deconsolidation of SHRG.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its liquidity and capital requirements primarily through the sale of its equity securities and debt financing. As of September 30, 2024 the Company had cash of approximately $11.6 million. As of September 30, 2024, 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 Quarterly 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. The deconsolidation of SHRG and sale of HWH Holdings, Inc, two companies with historical losses, also is expected to improve future cash flows.
Cash Flow from Continuing Operating Activities
Net cash used by operating activities was $9,181,000 for the nine months ended September 30, 2024 as compared to $21,035,000 for nine months ended September, 2023. This fluctuation is driven by decreases in net loss, after reconciling items, approximating $371,000. Also, the Company paid litigation losses during the 1st quarter of 2023 of approximately $8,750,000.
Cash Flow from Investing Activities
Net cash provided by investing activities was $9,916,000 for the nine months ended September 30, 2024 as compared to net cash provided by investing activities of $11,885,000 for the nine months ended September 30, 2023. This fluctuation is driven by the sale of marketable securities approximating $11,330,000 during 2023 versus a sale of $3,029,000 during 2024. This is offset by receipts on Notes receivable of $4,039,000 in 2024 versus $1,419,000 in 2023.
Cash Flow from Financing Activities
Net cash provided by financing activities was $4,281,000 for the nine months ended September 30, 2024 as compared to net cash used by financing activities of $3,243,000 for the nine months ended September 30, 2023. This variance is driven by payments toward long term debt of $1,492,000 in 2024 versus $4,056,000 in 2023.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues, or expenses.
Critical Accounting Policies and Estimates
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, 2023, 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 September 30, 2024.
Controls and procedures
As filed, 3,288 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures for the quarter ended September 30, 2024, pursuant to Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation and on the material weaknesses disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 which remained as of September 30, 2024, our principal executive officer and principal financial officer concluded that as of September 30, 2024, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is being recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is being accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Because of its inherent limitations, internal control over financial reporting 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.
Plan for Remediation of Material Weaknesses
As discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, the Company has a remediation plan and is committed to maintaining a strong internal control environment and believes that these remediation efforts will represent significant improvements in our controls. The Company has started to implement these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until the remediation steps set forth above are fully implemented and tested, the material weaknesses described above will continue to exist.
Changes in Internal Control over Financial Reporting
While changes in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2024, as the Company began implementation of the remediation steps described above, we believe that there were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
OTHER INFORMATION
Risk factors
As filed, 182 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes to the discussion of risk factors previously disclosed in our most recently filed Annual Report on Form 10-K for the year ended December 31, 2023.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2024-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2024-07-01 to 2024-09-30 | $5.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2024-01-01 to 2024-09-30 | $13.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months2024-07-01 to 2024-09-30 | $3.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months2024-01-01 to 2024-09-30 | $10.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2024-07-01 to 2024-09-30 | −$4.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2024-01-01 to 2024-09-30 | −$14.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2024-07-01 to 2024-09-30 | $53.0k | us-gaap:InterestExpense |
| Interest expense | 9 months2024-01-01 to 2024-09-30 | $242.0k | us-gaap:InterestExpense |
| Income tax | 9 months2024-01-01 to 2024-09-30 | −$163.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2024-07-01 to 2024-09-30 | −$5.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months2024-01-01 to 2024-09-30 | −$14.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2024-07-01 to 2024-09-30 | −$0.75 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2024-01-01 to 2024-09-30 | −$1.99 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2024-07-01 to 2024-09-30 | −$0.75 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2024-01-01 to 2024-09-30 | −$1.99 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2024-07-01 to 2024-09-30 | 7,066,772 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2024-01-01 to 2024-09-30 | 7,066,772 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2024-01-01 to 2024-09-30 | −$9.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2024-01-01 to 2024-09-30 | $29.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2024-09-30 | $11.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2024-09-30 | $68.8m | us-gaap:AssetsCurrent |
| Total assets | At period end2024-09-30 | $142.7m | us-gaap:Assets |
| Current liabilities | At period end2024-09-30 | $59.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2024-09-30 | $73.0m | us-gaap:Liabilities |
| Long-term debt | At period end2024-09-30 | $7.4m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | At period end2024-09-30 | $49.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2024-09-30 | $52.1m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001493152-24-045198. Last ingested by Listed: Oct 24, 2026, 14:56 ET. Listed shows no prices and gives no investment advice.