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DSS: Plans to Invest in Two New Ventures: Impact Biomedical and a Medical REIT

By Lisa Thompson

NYSE:DSS

READ THE FULL DSS RESEARCH REPORT

Impact Biomedical

On Friday, Document Security Systems, Inc.’s (NYSE:DSS) stock popped when it announced that it has entered into a binding term sheet to acquire Impact Biomedical, Inc. Impact has a number of healthcare products in development. The stock rose because in the company’s press release it highlighted Impact’s product called Equivir, which has been shown in studies to be effective as an antiviral against a broad range of viruses including in vitro efficacy against multiple strains of Influenza (H1N1, H3N2, H5N1, H7N9, Influenza B, Parainfluenza 3), Human Rhinovirus-14, Human Coronavirus-A, and Ebola. Equivir’s abilities to inhibit viruses via multiple targets have prompted further studies to test Equivir as a potential treatment of COVID-19, the disease caused by the pandemic novel coronavirus SARS-CoV2.

Impact Biomedical is a wholly owned subsidiary of Global Biomedical Pte Ltd and Singapore eDevelopment Limited, a public company listed in Singapore (SGX-ST)(StockCode: 40V). Singapore eDevelopment is an investment holding company, engaged in the property development, information technology (IT), biomedical, and investment businesses in Singapore, Australia, the United States, and the People's Republic of China. It was incorporated in 2009, based in Singapore, and is a subsidiary of Hengfai Business Development Pte. Ltd. Its chairman is executive chairman and CEO is Heng Fai Chan who is also Chairman of DSS and its major shareholder.

DSS plans a share exchange transaction with a purchase price capped at $50 million, subject to completion of due diligence and independent valuation. Impact is expected to be valued far in excess of that $50 million purchase price but will need significant funds to reach marketability of any of its potential products. DSS management believes that it can fund development costs through partnerships and an IPO of Impact. To acquire Impact, DSS will issue up to 14.5 M shares of stock and a perpetual convertible preferred. The preferred stock will be convertible at $0.216 per share and have a 19.9% blocker. The proposed bonus being, for every one DSS share held, the shareholder will be entitled to a bonus of two Impact shares. After acquisition, DSS will be the majority shareholder and management plans to pursue an IPO of Impact, at which point part of the company will be spun off to DSS shareholders.

Medical REIT

On March 3, 2020, DSS entered into a binding term sheet with LiquidValue Asset Management, AMRE Asset Management, and American Medical REIT, for a share subscription and loan arrangement to fund a medical real estate investment trust (REIT) in the US in a joint venture. This venture will be run by the original team that started Global Medical REIT (NYSE: GMRE) the $476 million REIT based in Bethesda, Maryland. Heng Fai Chan, DSS’ current Chairman, and largest shareholder also founded global Medical.

DSS will subscribe for 5,250 shares of AAMI at $0.01 per share for total consideration of $52.50. Concurrently, AAMI will issue 2,500 shares to LVAM, and 1,250 shares to AMRE Tennessee, LLC, AMRE’s executive management’s holding company. As a result, DSS will hold 52.5% of the outstanding shares of AAMI, with LVAM and AMRE Tennessee, LLC, holding 35% and 12.5% of the remaining outstanding shares of AAMI, respectively. LVAM is an 82% owned subsidiary of Singapore eDevelopment whose CEO and largest shareholder is Heng Fai Ambrose Chan, the Chairman of the Board and largest shareholder of DSS. Also DSS lent AMRE $800,000 via a promissory note which matures on March 3, 2022 and accrues interest at the rate of 8.0% with an option to provide AMRE an additional $800,000 on the same terms. AMRE also issued DSS warrants to purchase 160,000 shares of AMRE common stock at $5.00 per share expiring on March 3, 2024. AMRE was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE intends to acquire purpose-built healthcare facilities and lease them to leading clinical operators with strong market share under secure triple net leases. AMRE targets hospitals (both Critical Access and Specialty Surgical), Physician Group Practices, Ambulatory Surgical Centers, and other licensed medical treatment facilities.

We expect DSS to report Q4 numbers on or about March 26th at which point we will do another update on the rest of the business.

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