Document Security System Inc.

DSS Details

Document Security Systems, Inc. (AMEX: DSS) is a developer and marketer of secure technologies. It is focused on blockchain security, brand protection technology, direct marketing, real estate, healthcare, and securitized digital assets. As of 17^th March 2021, the company’s market capitalization stood at ~USD 105.6 million.

Increasing Stakes in Fast-Growing Businesses: On 1^st March 2021, DSS announced an additional investment in Sharing Services Global Corporation (OTCQB: SHRG) via USD 30 million convertible promissory notes. SHRG is a diversified holding company specializing in the direct selling industry. Before this investment, DSS held a 37% stake in SHRG. The transaction is anticipated to strengthen DSS as a major player in the direct selling industry and catalyze growth in 2021 and beyond.

On 25^th February 2021, the company reported the acquisition of 7.50% equity interest in WestPark Capital and 24.90% ownership in BMI. The investments are geared towards developing a digital securities exchange business in the US. WestPark Capital is a full-service investment banking and securities brokerage firm servicing companies individual and institutional investors worldwide. BMI is a private investment bank specializing in corporate finance, raising equity, and venture services to its client worldwide.

Capital raise to fuel growth: On 9^th February 2021, the company closed its underwritten public offering of 14.2 million shares at the price of USD 2.80, leading to gross proceeds of ~USD 39.7 million. This was after a similar issue of 6.7 million shares completed on 28^th January 2021 at USD 3.60 per share, resulting in ~USD 27.6 million in gross proceeds. The funds will be utilized to support the growth of new business lines and capture acquisition opportunities, among other purposes. The company also intends to spin out its subsidiary Impact Biomedical into an IPO (Initial Public Offering) and provide a special share dividend to the parent company’s shareholders.

Q3FY20 Results: The company reported a 59% YoY jump in revenues to USD 4.2 million in Q3FY20 up from USD 2.6 million in Q3FY19, driven by a 40% YoY uptick in sales from the Printed Products segment to USD 3.0 million, partially offset by 3% YoY decline in Technology Sales, Services, and Licensing segment revenue to USD 0.5 million. Net income from continuing operations was reported at USD 5.4 million in Q3FY20 as compared to a loss of USD 1.2 million in Q3FY19. The increase was largely attributable to the company's unrealized gains on its marketable securities of USD 7.8 million.

Key Risks: DSS is involved in litigations with various companies (including majors such as Intel and Apple) over several matters. Any verdict against the company can affect the results of operations and the financial condition of the company.

Stock Recommendation: DSS currently trades in the lower band of its 52-week range of USD 2.75-13.50. On the technical analysis front, the stock has a support level of ~USD 2.73 and a resistance level of ~USD 4.77. Considering the growth-focused approach of management and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of USD 3.84, up 4.1% as of March 17, 2021.

DSS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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