UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017March 31, 2022

[  ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________.______to_______ .

001-32146

Commission file number

DOCUMENT SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]      Accelerated filer [  ]      Non-accelerated filer (Do not check if a smaller reporting company) [  ] Smaller reporting company [X]If an emerging growth company, [  ]indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes [  ] ☐ No [X] ☒

Securities registered pursuant to Section 12(b) of the Act:

As of November 14, 2017,May 2, 2022 there were 16,439,32784,626,847 shares of the registrant’s common stock, $0.02 par value, outstanding.

DOCUMENT SECURITY SYSTEMS,

DSS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

DOCUMENT SECURITY SYSTEMS,DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

As of

See accompanying notes to the condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS,

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)(unaudited)

See accompanying notes to condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30:

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

(unaudited)

See accompanying notes to the condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS,DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

March 31, 2022

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

The Company, incorporated in the state of New York in May 1984 has conducted business in the name of Document Security Systems, Inc. (theOn 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”), through two 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 Marketing, (4) Commercial Lending, (5) Securities and Investment Management, (6) Alternative Trading (7) Digital Transformation, (8) Secure Living, and (9) Alternative Energy. Each of itsthese 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, and Plastic Printing Professionals, Inc. (“Premier”), which operates under the assumed name of DSS Plastics Group,a New York corporation. Premier operates in the securitypaper board and commercial printing,fiber based folding carton, consumer product packaging, and plastic IDdocument security printing markets. The Company develops,It markets, manufactures, and sells papersophisticated custom folding cartons, mailers, photo sleeves and plasticcomplex 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 specializes in marketing and distributing its products designedand services through its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing. 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 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 protect valuable informationbanking, 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 unauthorized scanning, copying,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 imaging.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. (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. (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.

On August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact BioMedical”), pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth Security, Inc. (“DSS BioHealth”), Alset International Limited (formally Singapore eDevelopment Ltd.), and Global Biomedical Pte Ltd. (“GBM”), which was previously approved by the Company’s shareholders (the “Share Exchange”). Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value $0.02 per share, valued at $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). As a result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly owned subsidiary (see Note 5).

Impact BioMedical strives to leverage its scientific know-how and intellectual property rights to provide solutions that have been plaguing the biomedical field for decades. By tapping into the scientific expertise of its partners, Impact BioMedical has undertaken a concerted effort in the research and development (“R&D”), drug discovery and development for the prevention, inhibition, and treatment of neurological, oncological, and immune related diseases.

On September 9, 2021, the Company finalized a stock purchase agreement (the “SPA”) with American Pacific Bancorp, Inc. (“APB”), which provided for an investment of $40,000,200 by the Company into APB for an aggregate of 6,666,700 shares of the APB’s Class A Common Stock, par value $0.01 per share. Subject to the terms and conditions contained in the SPA, the shares issued at a purchase price of $6.00 per share. As a result of this transaction, DSS became the majority owner of APB. (see Note 5).

On September 13, 2021, the Company finalized a shareholder agreement between its subsidiary, DSS Digital Inc., which operates under the assumed name of DSS Digital Group, develops, markets and sells digital information services, including data hosting, disaster recovery and data back-up and security services. The Company’s subsidiary, DSS TechnologyFinancial Management, Inc. (“DFMI”) and HR1 Holdings Limited (“HR1”), acquires intellectual property (“IP”) assets and interestsa company incorporated in companies owning intellectual property assets, or assists others in managing their intellectual property monetization efforts,the British Virgin Islands, for the purpose of monetizing these assetsoperating a vehicle for private and institutional investors seeking a highly liquid investment fund with attractive risk adjusted returns relative to market unpredictability and volatility. Under the terms of this agreement, 4000 shares or 40% of the Company’s subsidiary Liquid Asset Limited Management Limited (“LVAM”), a Hong Kong company was transferred to HR1 whereas at the conclusion of the transaction DFMI would own 60% of LVAM and HR1 would own 40%. LVAM executes within reliable platforms and broad market access and uses proprietary systems and algorithms to trade liquid exchange-traded funds (ETFs), stocks, futures or crypto. Aimed at providing consistent returns while offering the unique ability to liquidate the portfolio within 5 to 10 minutes under normal market conditions, LVAM provides an array of advanced tools and products enabling customers to explore multiple opportunities, strengthen and diversify their portfolios, and meet their individual investing goals.

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%. 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 a variety of value-enhancing initiatives, including, but not limited to, investmentsits subsidiaries, markets and distributes its health and wellness and other products primarily in the developmentUnited States, Canada, and commercializationthe Asia Pacific region using a direct selling business model. SHRG markets its products and services through its independent sales force, using its proprietary websites, including: www.elevacity.com and www.thehappyco.com. SHRG, headquartered in Plano, Texas, was incorporated in the State of patented technologies, licensing, strategic partnershipsNevada on April 24, 2015, and commercial litigation.is an emerging growth company. SHRG 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.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X for smaller reporting companies. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying balance sheets and related interim statements of operations and comprehensive loss and cash flows includecontain all adjustments considered(consisting of normal recurring adjustments) necessary for their fair presentation in accordance with U.S. GAAP. All significant intercompany transactions have been eliminated in consolidation.

Interimto present fairly our consolidated financial position as of March 31, 2022 and December 31, 2021, and the results are not necessarily indicative of results expectedour consolidated operations for the full year. For further information regardinginterim periods presented. We follow the Company’ssame accounting policies refer towhen preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the audited consolidated financial statements and footnotes theretothe notes included in the Company’sour latest annual report on Form 10-K for the fiscal year ended December 31, 2016.2021 (“Form 10-K”), and our other reports on file with the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation- The consolidated financial statements include the accounts of Document Security SystemsDSS, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates -The preparation of consolidated financial statements in conformity with U.S. GAAPaccounting principles generally accepted in the United States requires managementthe Company to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofdisclosed in the financial statements and the reported amounts of revenues and expenses during the reporting period.accompanying notes. Actual results could differ materially from those estimates and assumptions. In preparing these financial statements,estimates. On an ongoing basis, the Company has evaluated eventsevaluates its estimates, including those related to the accounts receivable, convertible notes receivable, inventory, fair values of investments, intangible assets and transactionsgoodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company’s common stock, preferred stock, deferred revenue and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for potentialmaking judgments about the carrying values of assets and liabilities.

Reclassifications- Certain amounts on the accompanying consolidated balance sheets for the year ended December 31, 2021, have been reclassified to conform to current period presentation.

Cash Equivalents – All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. Amounts included in cash equivalents in the accompanying consolidated balance sheets are money market funds whose adjusted costs approximate fair value.

Notes receivable, unearned interest, and related recognition - The Company records all future payments of principal and interest on notes as notes receivable, which are then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports the net investment in the notes receivable on the consolidated balance sheet as current or disclosure.long-term based on the maturity date of the underlying notes. Such net investment is comprised of the amount advanced on the loans, adjusting for net deferred loan fees or costs incurred at origination, amounts allocated to warrants received upon origination, and any payments received in advance. The unearned interest is recognized over the term of the notes and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Net deferred loan fees or costs, together with discounts recognized in connection with warrants acquired at origination, are accreted as an adjustment to yield over the term of the loan.

Restricted Cash – As of September 30, 2017, cash of $336,712 ($177,609 – December 31, 2016) is restricted for payments of costs and expenses associated with one of the Company’s IP monetization programs.

InvestmentInvestments– In accordanceInvestments in equity securities with ASC 325-20,a readily determinable fair value, not accounted for under the Company records its investmentequity method, are recorded at fair value with unrealized gains and losses included in common stock of Singapore eDevelopment Limited at cost as theearnings. For equity securities without a readily determinable fair market value, of the investment is not readily determinable. Therecorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings.

For equity method investments, the Company evaluatesregularly reviews its investments to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value. See Note 6 for indications of impairment at least annually.further discussion on investments.

Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the FASB ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets.

● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The carrying amounts reported in the consolidated balance sheet of cash and cash equivalents, accounts receivable, prepaids, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. Marketable securities classify as a Level 1 fair value financial instrument. The fair value of notes receivable approximates their carrying value as the stated or discounted rates of the notes do not reflect recent market conditions. The fair value of revolving credit lines notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. Derivative instruments, as discussed below,The fair value of investments where the fair value is not considered readily determinable, are carried at cost.

Inventory – Inventories consist primarily of paper, pre-printed security paper, paperboard, fully prepared packaging, and health and beauty products which and are stated at the lower of cost or net realizable value on the first-in, first-out (“FIFO”) method. Packaging work-in-process and finished goods included the cost of materials, direct labor and overhead. At the closing of each reporting period, the Company evaluates its inventory in order to adjust the inventory balance for obsolete and slow-moving items. An allowance for obsolescence of approximately $22,000 and $388,000associated with the inventory at our SHRG subsidiary was recorded as assetsof March 31, 2022, and liabilities at estimated fair value based on available market information.

Derivative Instruments -The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility. The Company has two interest rate swaps that change variable rates into fixed rates on two term loans. These swaps qualify as Level 2 fair value financial instruments. These swap agreements are not held for trading purposes and the Company does not intend to sell the derivative swap financial instruments. The Company records the interest swap agreements on the balance sheet at fair value because the agreements qualify as a cash flow hedges under accounting principles generally accepted in the United States of America. Gains and losses on these instruments are recorded in other comprehensive loss until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss (“AOCI”) to the consolidated statement of operations on the same line item as the underlying transaction. The valuations of the interest rate swaps have been derived from proprietary models of Citizens Bank, N.A. based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swaps decrease over the life of the agreements. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreements. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to this cash flow hedge recorded in accumulated other comprehensive loss and other liabilities as of September 30, 2017 was approximately $36,000 ($45,000 - December 31, 2016).2021, respectively. Write-downs and write-offs are charged to cost of revenue.

As of September 30, 2017 the Company has an interest rate swap agreement for its debt with RBS Citizens, N.A. (“Citizens Bank”) (see Note 4) which changes a variable rate into a fixed rate on a term loan as follows:

Impairment of Long LivedLong-Lived Assets and Goodwill- Long-lived and intangibleThe Company monitors the carrying value of long-lived assets and goodwill are assessed for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that full recoverability of net asset balances through future cash flows is in question. Goodwill and indefinite-lived intangible assets are assessed at least annually, but also whenever events or changes in circumstances indicate the carrying valuesamounts may not be recoverable. FactorsIf a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

Acquisitions - In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-01, Business Combinations (“Topic 805”): Clarifying the Definition of a Business (“ASU 2017-01”). The guidance is intended to assist entities with evaluating whether a set of transferred assets and activities is a business. Under this guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If the threshold is not met, the entity then evaluates whether the set meets the requirement that could triggera business include, at a minimum, an impairment review, include (a) significant underperformance relativeinput and a substantive process that together significantly contribute to historical or projected future operating results; (b) significant changesthe ability to create outputs. See Note 5 regarding the acquisitions.

Business combinations and non-controlling interests are recorded in accordance with FASB ASC 805 Business Combinations. Under the manner of or useguidance, the assets and liabilities of the acquired assets orbusiness are recorded at their fair values at the strategy for the Company’s overall business; (c) significant negative industry or economic trends; (d) significant decline in the Company’s stock price for a sustained period;date of acquisition and (e) a decline in the Company’s market capitalization below net book value.

Contingent Legal Expenses -Contingent legal fees associated with our commercial litigation involving our IPall acquisition costs are expensed inas incurred. The excess of the consolidated statementspurchase price over the estimated fair values is recorded as goodwill. If the fair value of operations in the periodassets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded. The application of business combination accounting requires the use of significant estimates and assumptions.

Acquisition of assets are recorded at their relative fair value based on total accumulated costs of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. This includes all costs related to finding, analyzing and negotiating a transaction. The allocation of the purchase price is an area that the related revenuesrequires judgment and significant estimates. Tangible and intangible assets include land, building and improvements, furniture, fixtures and equipment, acquired above market and below market leases, in-place lease value (if applicable). Acquisition-date fair values of assets and assumed liabilities are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legaldetermined based on replacement costs, incurred pursuantappraised values, and estimated fair values using methods similar to the underlying legal services agreementthose used by independent appraisers and that will be paid out from the proceeds from settlements use appropriate discount and/or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period in which a conclusion is reached in an enforcement action that does not yield future royalties potential.capitalization rates and available market information.

(Loss) Earnings Per Common Share- The Company presents basic and diluted (loss) earnings per share. Basic (loss) earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted (loss) earnings per share are computed including the number of additional shares from outstanding warrants, stock options and preferred stock that would have been outstanding if dilutive potential shares had been issued.issued and is calculated utilizing the treasury stock method. In a loss period, the calculation for basic and diluted (loss) earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

On August 26, 2016, For the Company affected a one-for-four reverse stock splitthree months ended 31, 2022, potential dilutive instruments includes both warrants and options of 3,556 and 11,930 shares respectively. For the Company’s common stock. No fractionalthree months ended 31, 2021, potential dilutive instruments includes both warrants and options of 29,314 and 13,596 shares respectively. Additionally for March 31, 2021, there were 43,000 shares of the Company’s commonpreferred a stock were issued as a result of the reverse stock split. Instead, stockholders of record who otherwise would have been entitled to receive fractionalconvertible into 6,570,000 shares were entitled to a rounding up of their fractional share to the nearest whole share, except in the case of any stockholder that owned less than four shares of the Company’s common stock immediately preceding the reverse stock split. In such case, such stockholder received cash for such fractional share in an amount equal to the product obtained by multiplying: (x) the closing sale price of the common stock on August 25, 2016 as reported on the NYSE MKT, by (y) the amount of the fractional share. As a result, the Company issued 1,166 common shares for shares due as a result of the rounding up feature and paid $92 to buy-out the fractional shares of holders with less than four shares immediately preceding the reverse stock split.

As of September 30, 2017 and 2016, there were 3,297,759 and 2,498,128 respectively, of common stock share equivalents potentially issuable options, warrants, and restricted stock agreements, that could potentially dilute basic earnings per share in the future. These shares are excluded from the calculation of diluted earnings per share in periods in which the Company had a net loss because their inclusion would be anti-dilutive to the Company’s losses in the respective periods.

Concentration of Credit Risk- The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

During the ninethree months ended September 30, 2017,March 31, 2022, two customers accounted for 25%10% and 15%3%, respectively, %of our consolidated revenue. As of March 31, 2022, these two customers accounted for 29% and 6%of our consolidated trade accounts receivable balance. During the Company’sthree months ended March 31, 2021, these two customers accounted for 31% and 8% of our consolidated revenue and accounted for 17%57% and 11%, respectively, 8% of the Company’sour consolidated trade accounts receivable balance as of September 30, 2017. During the nine months ended September 30, 2016, one customer accountedbalance.

Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for 25% of the Company’s consolidated revenue and accounted for 7% of the Company’s accounts receivable balance as of September 30, 2016. The risk with respect to accounts receivables is mitigated by credit evaluations the Company performs on its customers, the short duration of its payment terms for the significant majority of its customer contracts and by the diversification of its customer base.

Reclassifications- Certain prior year amounts have been reclassified to conform to the current year presentation. All common share and per share figures are presentedfor the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on a post one for four reverse stock split basis.enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense.

Recent Accounting Pronouncements – - In May 2014,June 2016, the FinancialFASB issued Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-9 “Revenue from Contracts with Customers”. The new guidance(“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326)”, which requires an entityentities to recognizemeasure all expected credit losses for financial assets held at the amountreporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”); ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”); and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”). The revenue standards will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method.credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.2022. The Company has not yet selected a transition method and is currently evaluatingassessing the effectimpact that the revenue standardsadopting this new accounting standard will have on itsour consolidated financial statementsstatements.

2. Revenue

The Company recognizes its products and services revenue based on when the title passes to the customer or when the service is completed and accepted by the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for shipped product or service provided. Sales and other taxes billed and collected from customers are excluded from revenue. The Company recognizes rental income associated with its REIT, net of amortization of favorable/unfavorable lease terms relative to market and includes rental abatements and contractual fixed increases attributable to operating leases, where collection has been considered probable, on a straight-line basis over the term of the related disclosures.lease. The Company recognizes net investment income from its investment banking line of business as interest owed to the Company occurs. The Company generates revenue from its direct marketing line of business primarily through internet sales and recognizes revenue as items are shipped.

As of March 31, 2022, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, the Company has applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations. The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.

Accounts Receivable

The Company extends credit to its customers in the normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are generally 30 days but up to net 105 for certain customers. The Company carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. At March 31, 2022, and December 31, 2021, the Company established a reserve for doubtful accounts of approximately $70,000 and $20,000 respectively. The Company does not accrue interest on past due accounts receivable.

Sales Commissions

Sales commissions are expensed as incurred for contracts with an expected duration of one year or less. There were no sales commissions capitalized as of March 31, 2022.

Shipping and Handling Costs

Costs incurred by the Company related to shipping and handling are included in cost of products sold. Amounts charged to customers pertaining to these costs are reflected as revenue.

See Note 13 for disaggregated revenue information.

3. Notes Receivable

American Premium Water Corporation

On October 15, 2020, APB entered into a loan agreement with (“APW Note”) with American Premium Water Corporation,(“APW”), a Nevada corporation. The loan, not to exceed the principal sum of $200,000, has an interest rate of 12%, and matures on October 15, 2022. The outstanding principal and interest as of March 31, 2022 and December 31, 2021, approximated $39,000 and is classified as a Current portion of notes receivable on the Consolidated Balance Sheets at March 31, 2022 and December 31, 2021. GSX repaid the principal and interest in full in April 2022.

GSX Group Limited

On February 8, 2021, the Company entered into a convertible promissory note (“GSX Note”) with GSX Group Limited (“GSX”), a company registered in Gibraltar. The Company loaned the principal sum of $800,000, with principal and interest at a rate of 4%, due in one year from date of issuance. The outstanding principal and interest as of March 31, 2022 and December 31, 2021, approximated $837,000 and $829,000, respectively, and is classified as a Current portion of notes receivable on the Consolidated Balance Sheets at December 31, 2021. GSX repaid the principal and interest in full in April 2022.

On February 3, 2021, USX Holdings Company, Inc., a subsidiary of the Company entered into a binding joint venture term sheet (“GSX JV”), along with Coinstreet, whose CEO is also a member of the Company’s board of directors, for the creation of a USA based joint venture alternative trading system or exchange (“JV Exchange”). During the nine-months ended September 30, 2021, the Company and GSX finalized the terms of the JV Exchange. This JV is currently in the planning stages.

Dustin Crum

On February 21, 2021, Impact BioMedical, Inc. a subsidiary of the Company, entered into a promissory note (“Crum Note”) with Dustin Crum (“Mr. Crum”). The Company loaned the principal sum of $206,000, with interest at a rate of 6.5%, and maturity date of August 19, 2022. Monthly payments are due on the twenty-first day of each month and continuing each month thereafter until August 19, 2022, at which time all accrued interest and the entire remaining principal shall be due and payable in full. This note is secured by certain real property situated in Collier County, Florida. The outstanding principal and interest as of March 31, 2022, approximated $207,000 and is classified in current notes receivable on the accompanying consolidated balance sheets.

Sentinel Brokers Company, Inc.

On May 13, 2021, Sentinel Brokers, LLC, a subsidiary of the Company entered a revolving credit promissory note (“Sentinel Note”) with Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York. The Sentinel Note has an aggregate principal balance up to $600,000, to be funded at request of Sentinel. The Sentinel Note, which incurs interest at a rate of 6.65% is payable in areas until the principal is paid in full at the maturity date of May 13, 2023. As of March 31, 2022 and December 31, 2021, there was $151,000 and $0, respectively, outstanding on the Sentinel Note, and is included in current notes receivable on the accompanying consolidated balance sheet. Also on May 13, 2021, the Company entered into a stock purchase agreement (“Sentinel Agreement”) to acquire a 24.9% equity position of Sentinel for the purchase price of $300,000. During April 2022, the Sentinel Note was amended to increase the available revolving credit principal to $3,000,000. See Note 6.

Puradigm, LLC

On May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company entered into a convertible promissory note (“Puradigm Note”) with Puradigm, LLC (“Puradigm”), a company registered in the state of Texas. The Puradigm Note has an aggregate principal balance up to $5,000,000, to be funded at request of Puradigm. The Puradigm Note, which incurs interest at a rate of 6.5% due quarterly, has a maturity date of May 14, 2023. The Puradigm Note contains an options conversion clause that allows the Company to convert all, or a portion of all, into new issued member units of Puradigm with the maximum principal amount equal to 18% of the total equity position of Puradigm at conversion. The outstanding principal and interest as of March 31, 2022 and December 31, 2021, approximated $5,164,000 and $5,081,000, respectively, which is classified as Notes receivable on the consolidated balance sheet.

South Regional Management District (formally Harris-Montgomery Counties Management District)

On September 23, 2021, APB entered into refunding bond anticipatory note (“District Note”) with South Regional Management District (the “District”), which operates as a conservation and reclamation district pursuant to Chapter 3891, Texas Special District Local Laws Code; Chapter 375, Texas Local Government Code; and Chapter 49, Texas Water Code. The District Note was in the sum of $3,500,000 and incurs interest at a rate of 4.15% per annum. Principal and interest are due in full on September 22, 2022. This note may be redeemed prior to maturity with 10 days written notice to APB at a price equal to principal plus interest accrued on the redemption date. The outstanding principal and interest of $3,576,000 and $3,540,000 of the District Note is included in current portion of notes receivable on the consolidated balance sheet at March 31, 2022 and December 31, 2021, respectively.

Asili, LLC.

On October 25, 2021, APB entered into loan agreements (“Asili Agreement”) with Asili, LLC. (“Asili”) a company registered in the state of Utah. The Asili Agreement has an initial aggregate principal balance up to $1,000,000, to be funded at request of Asili, with an option to increase the maximum principal borrowing to $3,000,000. The Asili Agreement, which incurs interest at a rate of 8.0% with principal and interest due at the maturity date of October 25, 2022. The Asili Agreement contains an optional conversion feature allowing APB to convert the outstanding principal to a 10% membership interest. APB, as holder of the Asili Agreement, has the right to elect one member to the Asili Board of Managers. The outstanding principal and interest of approximately $803,000 and $784,000 of the Asili Agreement is included in current portion of notes receivable on the consolidated balance sheet at March 31, 2022 and December 31, 2021, respectively.

Leopoldo Bustamate.

On June 13, 2019, APB extended the credit to Leopoldo Bustamate (“Bustamate Note”) in the form of a promissory note for $249,540, bearing interest at 15%, with a maturity date of May 15, 2020. On June 5, 2020, the Company further extended the same credit in the form of a promissory note for $249,540, bearing interest at 15%, with a maturity date of May 14, 2021. On August 30, 2021, the Company further extended the same credit in the form of a promissory note for $249,540, bearing interest at 12.5%, with a maturity date of May 15, 2023. The modification agreement is effective May 14, 2021. This promissory note is secured by a deed of trust on a tract of land, which is approximately 315 acres, and located in Coke County, Texas. The outstanding principal and interest of approximately $289,000 of the Bustamate Note is included in long term portion of Notes receivable on the consolidated balance sheet at March 31, 2022 and December 31, 2021.

HWH World Ltd.

On October 7, 2021, HWH World, Inc., a subsidiary of the Company entered into a revolving loan commitment (“HWH Ltd Note”) with HWH World Ltd. (“HWH Ltd.”) a company registered in Taiwan. The HWH Ltd. Note has an principal balance of $52,000 and incurred no interest through the maturity date of December 31,2021. The outstanding principal at March 31, 2022 and December 31, 2021 is $56,000 and $52,000, respectively, and is included in the current portion of notes receivable. This note is currently in default and the Company is currently in the process of extending the terms. In accordance with the terms of the HWH Ltd. Note, the Company began charging interest at the default rate of 18% on January 1, 2022.

West Park Capital Group, LLC.

On December 28, 2021, APB entered into promissory note (“West Park Note”) with West Park Capital Group, LLC. (“West Park”), a company registered in the state of California. The West Park Note has an principal balance of $700,000. The West Park Note, which incurs interest at a rate of 12.0% with principal and interest due at the maturity date of December 28, 2022. The outstanding principal and interest of $680,000 and $700,000 of the West Park Note is included in current portion of notes receivable on the consolidated balance sheet at Mach 31, 2022.

1044PRO, LLC.

In January 2016,2021, SHRG and 1044PRO, LLC (“1044 PRO”) entered into a Funding Agreement pursuant to which the FASBCompany agreed to provide to 1044 PRO a $250,000 revolving credit line and loaned $204,879 to 1044 PRO under the credit line. Borrowings under the credit line are payable in monthly installments in amounts determined by the amount of each cash advance. At December 31, 2021, loans of $193,000 are outstanding, net of an allowance for the impairment losses of $115,000, and is included in Current portion of notes receivable on the consolidated balance sheet as of December 31, 2021. At March 31, 2022, this loan was fully reserved for. In connection with the loan, the Company acquired a 10% equity interest in 1044 PRO and a security interest in 1044 PRO’s cash receipts and in substantially all 1044 PRO’s assets.

XIP Optimal

In the fiscal year 2019, SHRG received a promissory note for $106,404 from a prior merchant payment processor in connection with amounts owed to the Company. This note is fully reserved for at March 31, 2022, and December 31, 2021.

WUURII Commerce Inc.,

On March 2, 2022, APB and WUURII Commerce, Inc. (“WUURRII”), a corporation organized under the laws of the Republic of Korea entered into a promissory note (“WUURRII Note”). Under the terms of the WURRII Note, APB at its discretion, may lend up to the principal sum of $892,500 with an interest rate of 8%, and matures in March 2024, with interest payable quarterly. The outstanding principal and interest at March 31, 2022 is $895,000, of which $446,000 is included in current notes receivable on the accompanying consolidated balance sheet.

Farah S. Khan

On January 24, 2022, APB and Farah S. Khan (“Khan”) entered into a promissory note (“Khan Note”) in the principal sum of $100,000 with interest of 6%, due annually, and maturing in January 2024. The outstanding principal and interest at March 31, 2022 approximates $101,000, and is included in notes receivable on the accompanying consolidate balance sheet.

4. Financial Instruments

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

The following tables show the Company’s cash, cash equivalents, restricted cash, and marketable securities by significant investment category as of March 31, 2022, and December 31, 2021:

Schedule of Cash and Marketable Securities by Significant Investment Category

The Company typically invests with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio.

5. Acquisitions

American Medical REIT Inc.

On March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc. and American Medical REIT Inc. under which it acquired a 52.5% controlling ownership interest in AMRE Asset Management Inc. (“AAMI”) which currently has a 93% equity interest in American Medical REIT Inc. (“AMRE”). AAMI is a real estate investment trust (“REIT”) management company that sets the strategic vision and formulate investment strategy for AMRE. It manages the REIT’s assets and liabilities and provides recommendations to AMRE on acquisition and divestments in accordance with the investment strategies. AMRE is a Maryland corporation, 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. AMRE was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE is planned to qualify as a Real Estate Investment Trust for federal income tax purposes, which will provide. AMRE’s investors the opportunity for direct ownership of Class A licensed medical real estate.

AMRE entered into a $200,000 unsecured promissory note with LiquidValue Asset Management Pte Ltd (“LVAMPTE”). The Note calls for interest to be paid annually on March 2 with interest fixed at 8.0%. See Note 7 for further details. LVAMPTE is majority owned subsidiary of Alset International Limited whose Chief Executive Office and largest shareholder is Heng Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the Company.

On June 18, 2021, DSS Securities, entered into a stock purchase agreement with AMRE to acquire 264,525 Class A Common Shares of AMRE at a per share price of $10, for a total consideration of $2,645,250. The additional 264,525 Class A Common Shares acquired increases the Company’s total equity interest in AMRE to approximately 93%.

On June 18, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE financed the purchase of a 40,000 square foot, 2.0 story, Class A+ multi-tenant medical office building located on a 13.62-acre site in Shelton, Connecticut (See Note 7) for the purchase price of $7,150,000. In accordance with Topic 805, the acquisition of the medical facility has been determined to be an acquisition of assets as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. These assets are classified as investments, real estate on the consolidated balance sheet. The purchase price has been allocated as $4,640,000, $1,600,000, and $325,000 for the facility, land and tenant improvements respectively. Also include in the value of the property is $585,000 of intangible assets with an estimated useful life approximating 3 years. All assets were allocated on a relative fair value basis. Contained within the sale-purchase agreement for this facility, is a $1,500,000 earnout due to the seller if certain criteria are met. As of March 31, 2022, no liability has been recorded for this earnout as it isn’t probable the earnout will be achieved as of the quarter-end

On November 4, 2021, AMRE LifeCare Portfolio, LLC. (“AMRE LifeCare”), a subsidiary of AMRE, acquired three medical facilities located in Fort Worth, Texas, Plano, Texas, and Pittsburgh, Pennsylvania for a purchase price of $62,000,000. In accordance with Topic 805, the acquisition of the medical facility has been determined to be an acquisition of assets as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. These assets are classified as investments, real estate on the consolidated balance sheet. The purchase price has been allocated as $32,100,000, $12,100,000, and $1,500,000 for the facility, land and site improvements respectively. Also include in the value of the property is $15,901,000 of intangible assets with estimated useful lives ranging from 1 to 11 years. All assets were allocated on a relative fair value basis.

On December 21, 2021, AMRE Winter Haven, LLC. (“AMRE Winter Haven”), a subsidiary of AMRE, acquired a medical facility located in Winter Haven, Florida for a purchase price of $4,500,000. In accordance with Topic 805, the acquisition of the medical facility has been determined to be an acquisition of assets as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. These assets are classified as investments, real estate on the consolidated balance sheet. The purchase price has been allocated as $3,200,000, $1,000,000, and $222,000 for the facility, land and site and tenant improvements respectively. Also include in the value of the property is $29,000 of intangible assets with an estimated useful life of approximating 5 years. All assets were allocated on a relative fair value basis.

During the three-months ended March 31, 2022, and 2021, AMRE had net losses of $1,613,000 and $58,000, respectively, of which $161,000 and $22,000, respectively is attributable to non-controlling interest.

Impact BioMedical, Inc.

Impact BioMedical, a wholly owned subsidiary of the Company, has several subsidiaries that are not wholly owned by Impact Biomedical and have an ownership percentage ranging from 63.6% to 100%. During the three months ended March 31, 2022, and 2021, Impact Biomedical has incurred approximately $614,000 and $420,000 respectively of net losses, of which $67,000 and $9,000 respectively of loss incurred is attributable to non-controlling interest.

American Pacific Bancorp.

On September 9, 2021, the Company finalized a stock purchase agreement (the “SPA”) with American Pacific Bancorp (“APB”), which provided for an investment of $40,000,000 by the Company into APB for an aggregate of 6,666,700 shares of the APB’s Class A Common Stock, par value $0.01 per share. Subject to the terms and conditions contained in the SPA, the shares issued ASU No. 2016-01, “Recognitionat a purchase price of $6.00 per share. As a result of this transaction, DSS owns approximately 53% of APB, and Measurementas a result its operating results will be included in the Company’s financial statements beginning September 9, 2021. The Company incurred approximately $36,000 in cost associated with the acquisition of Financial AssetsAPB which were recorded as general and Financial Liabilities.” ASU 2016-01 requires that mostadministrative expenses. The acquisition of APB meets the definition of a business with inputs, processes and outputs, and therefore, the Company has concluded to account for this transaction in accordance with the acquisition method of accounting under Topic 805. During the three months ended March 31, 2022, APB had net income of $547,000, of which, $257,000 is attributable to non-controlling interest. The next largest shareholder of APB is Alset EHome International, Inc. (“AEI”). AEI’s Chairman and CEO, Heng Fai Ambrose Chan, and a member of the AEI’s Board of Directors, Wu Wai Leung William, each serve on both the AEI Board and the Board of the Company. The CEO of the Company, Mr. Frank D. Heuszel, also has an approximate 2% equity investments beposition of APB. APB and the company in which APB owns marketable securities share a common director.

Sharing Services Global Corp. (“SHRG”)

As of and through June 30, 2020, the Company classified its investment in Sharing Services Global Corp. (“SHRG”), a publicly traded company, as marketable equity security and measured it at fair value with subsequent changes in fair valuegains and losses recognized in netother income. Entities will no longer be ableIn July 2020, through continued acquisition of common stock, as detailed below, the Company obtained greater than 20% ownership of SHRG, and thus has the ability to useexercise significant influence over it. During the costquarter ended September 30, 2020, the Company began to account for its investment in SHRG using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures recognizing our share of SHRG’s earnings and losses within our consolidated statement of operations. Through a series of transactions, DSS increased its ownership of voting shares in SHRG to approximately 58% on December 23, 2021. The 58% ownership of SHRG meets the definition of a business with inputs, processes, and outputs, and therefore, the Company has concluded to account for this transaction in accordance with the acquisition method of accounting for equity securities. However, for equity investments without readily determinable fair values, entities may elect a measurement alternative that will allow those investments to be recorded at cost, less impairment,under Topic 805 and adjusted for subsequent observable price changes. Upon adoption, entities must record a cumulative-effect adjustment tobegan consolidating the balance sheetfinancial results of SHRG as of the beginning of the first reporting period in which the standard is adopted. The guidance on equity securities without readily determinable fair values will be applied prospectively to all equity investments that exist as of the date of the adoption of the standand. The pronouncement also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. The Company has not yet evaluated nor has it determined the effect the standard will have on its consolidated financial statements and related disclosures.31, 2021.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires that lease arrangements longer than 12 months result in an entity recognizing an asset and liability. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The Company has not yet evaluated nor has it determined the effect the standard will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting.” The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective forOn January 24, 2022, the Company on January 1, 2017. The adoptionexercised 50,000,000 warrants received as part of this standard did not have a material impact on our consolidated financial statements.

In August 2016,consulting agreement with SHRG at the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”, which clarifies the treatment of several types of cash receipts and payments for which there was diversity in practice. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, including adoption in an interim period. We anticipate that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows”, regarding the presentation of restricted cash on the statement of cash flows. The standards update requires that the reconciliation of the beginning and end of period cash amounts shown in the statement of cash flows include restricted cash. When restricted cash is presented separately from cash and cash equivalents on the balance sheet, a reconciliation is required between the amounts presented on the statement of cash flows and the balance sheet. Also, the new guidance requires the disclosure of information about the nature of the restrictions. The standards update is effective retrospectively for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. We anticipate that the adoption of this guidance will not have a material impact on our consolidated financial statements.

2. Inventory

Inventory consisted of the following:

3. Investment

On September 12, 2017, the Company and Hengfai Business Development Pte Ltd. (“HBD”) entered into a Securities Exchange Agreement whereby the Company agreed to issue and sell to HBD 683,000 shares of its common stock, which had a market value on that date of $484,930, in exchange for 21,196,552 ordinary shares and an existing three-year warrant to purchase up to 105,982,759 of common shares at an exercise price of SGD$0.040 per share$0.0001, bring its ownership percentage of voting shares to approximately 65%. The acquisition of SHRG meets the definition of a business with inputs, processes, and outputs, and therefore, the Company has concluded to account for this transaction in accordance with the acquisition method of accounting under Topic 805. During the three months ended March 31, 2022, SHRG incurred $7,364,000 of losses of which, $2,579,000 is attributed to non-controlling interest.

We are currently in the process of completing the purchase price accounting and related allocations associated with the acquisition of SHRG. The Company is in the process of completing valuations and useful lives for certain assets acquired in the transaction. We expect the preliminary purchase price accounting to be completed during the year ending December 31, 2022.

6. Investments

Alset International Limited (formally Singapore eDevelopment Limited), related party

The Company owns 127,179,311 shares or approximately 7% of the outstanding shares of Alset International Limited (“Alset Intl”), formerly named Singapore eDevelopment Limited (“SED”), a company incorporated in Singapore and publicly-listedpublicly listed on the Singapore Exchange Limited. This investment is classified as a marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the investments for a period of at least one year. The SED shares and warrants were owned by HBD. One of the directorsChairman of the Company, Mr. Heng Fai Ambrose Chan, is a related party to eachthe Executive Director and Chief Executive Officer of HBD and SED. The costAlset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the investment was determined to be theCompany. The fair value of the Company’s common stock issuedmarketable security as of March 31, 2022, and December 31, 2021, was approximately $4,604,000 and $4,909,000 respectively. During the three months ended March 31, 2022 and March 31, 2021, the Company recorded unrealized loss on this investment of approximately $305,000, and $967,000, respectively.

Century TBD Holdings, LLC

On October 10, 2019, the Company entered into a convertible promissory note (“TBD Note”) with Century TBD Holdings, LLC (“TBD”), a Florida limited liability company. The Company loaned the principal sum of $500,000, of which up to $500,000 and all accrued interest can be paid by an “Optional Conversion” of such amount up to 19.8% (non-dilutable) of all outstanding membership interest in the transaction, which was determined to have the most readily determinable fair value.TBD. This TBD Note accrues interest at 6% and matures on October 9, 2021. As of September 30, 2017, the investment is carried at costDecember 31, 2021, this TBD Note had outstanding principal and interest of approximately $485,000.$537,000 and was classified as Current portion of notes receivable on the consolidated balance sheet. On December 30, 2020, the Company signed a binding letter of intent with West Park Capital, Inc (“West Park”) and TBD where the parties agreed to prepare a note and stock exchange agreement whereby DSS will assign the TBD Note to West Park and West Park shall issue to DSS a stock certificate reflecting 7.5% of the issued and outstanding shares of West Park. This note and stock exchange agreement was finalized during the first quarter 2022 and valued at approximately $500,000 and is included in Investments on the consolidated balance sheet on March 31, 2022. The remaining $37,000 is included in gain (loss) on investments on the consolidated statement of operations at March 31, 2022.

BMI Capital International LLC

On September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability company (“BMIC”) whereas DSS Securities, Inc. purchased 14.9% membership interests in BMIC for $100,000. DSS Securities also had the option to purchase an additional 10% of the outstanding membership interest which it exercised in January of 2021 and increased its ownership to 24.9%. Upon achieving greater than 20% ownership in BMIC during the quarter ended March 31, 2021, the Company is currently accounting for this investment under the equity method of accounting per ASC 323. The Company’s portion of net income in BMIC during the three months ended March 31, 2022, approximated $49,000.

BMIC is a broker-dealer registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”). The Company’s chairman of the board and another independent board member of the Company also have ownership interest in BMIC.

4. Intangible AssetsAlset Title Company

Intangible assets are comprisedOn or about August 28, 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a real estate title agency, under the name of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities, Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting process. ATC have initiated or have pending applications to do business in a number of states, including Texas, Tennessee, Connecticut, Florida, and Illinois. For the purpose of organization and the state application process, the Company’s CEO, who is a licensed attorney, has a stated non-compensated 15% ownership interest in the venture. There was minimal activity for the three months ended March 31, 2022.

BioMed Technologies Asia Pacific Holdings Limited

On December 19, 2020, Impact BioMedical, a wholly owned subsidiary of the following:Company, entered into a subscription agreement (the “Subscription Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated in the British Virgin Islands, pursuant to which the Company agreed to purchase 525 ordinary shares or 4.99% of BioMed at a purchase price of approximately $632,000. The Subscription Agreement provides, among other things, the Company has the right to appoint a new director to the board of BioMed. With respect to an issuance of shares to a third party by BioMed, the Company will have the right of first refusal to purchase such shares, as well as customary tag-along rights. In connection with the Subscription Agreement, Impact Biomedical entered into an exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to directly market, advertise, promote, distribute, and sell certain BioMed products, which focus on manufacturing natural probiotics, to resellers. This investment is valued at cost as it does not have a readily determined fair value.

BioMed focuses on manufacturing natural probiotics, pursuant to which the Company will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed by the Company include BioMed’s PGut Premium Probiotics^®, PGut Allergy Probiotics^®, PGut SupremeSlim Probiotics^®, PGut Kids Probiotics^®, and PGut Baby Probiotics^®.

Under the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries. In exchange, the Company agreed to certain obligations, including mutual marketing obligations to promote sales of the products. This agreement is for ten years with a one year auto-renewal feature.

Vivacitas Oncology, Inc.

On March 15, 2021, the Company, through one of its subsidiaries, entered into a Stock Purchase Agreement (the “Vivacitas Agreement #1”) with Vivacitas Oncology Inc. (“Vivacitas”), to purchase 500,000 shares of its common stock at the per share price of $1.00, with an option to purchase 1,500,000 additional shares at the per share price of $1.00. This option will terminate upon one of the following events: (i) Vivacitas’ board of directors cancels this option because it is no longer in the best interest of the Company; (ii) December 31, 2021; or (iii) the date on which Vivacitas receives more than $1.00 per share of the Company’s common stock in a private placement with gross proceeds of $500,000. Under the terms of the Vivacitas Agreement #1, the Company will be allocated two seats on the board of Vivacitas. On March 18, 2021, the Company entered into an agreement with Alset EHome International, Inc. (“Seller”) to purchase from the Seller’s its wholly owned subsidiary Impact Oncology PTE Ltd. (“IOPL”) for a purchase price $2,480,000. The acquisition of IOPL has been treated as an asset acquisition as IOPL does not meet the definition of a business as defined in Topic 805. IOPL owns 2,480,000 shares of common stock of Vivacitas along with the option to purchase an additional 250,000 shares of common stock. The Sellers largest shareholder is Mr. Heng Fai Ambrose Chan, the Chairman of the Company’s board of directors and its largest shareholder.

On April 1, 2021, the Company entered into an additional stock purchase agreement with Vivacitas (“Vivacitas Agreement #2”), whereas Vivacities wished to employ the service of the Chief Business Officer of Impact Biomedical, and in return for the services of this individual, Vivacitas shall issue to the Company, the aggregate purchase price for the Class A Common Shares of Vivacitas at the value of $1.00 per share shall be $120,000 to be paid in twelve (12) equal monthly installments for the period between April 1, 2021 and March 31, 2022.

On July 22, 2021, the Company exercised 1,000,000 of the available options under the Vivacitas Agreement #1 for $1,000,000. This, along with the shares received as part Vivacitas Agreement #2 increased the Company’s equity position in Vivacitas to approximately 16% as of March 31, 2022.

Intangible asset amortization expenseSentinel Brokers Company, Inc.

On May 13, 2021, a Sentinel Brokers, LLC., subsidiary of the Company entered into a stock purchase agreement (“Sentinel Agreement”) to acquire a 24.9% equity position of Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York, for the ninepurchase price of $300,000. During the three months ended September 30, 2017 amounted2021, the Company contributed and additional $750,000 capital into Sentinel, increasing its total capital investment to $513,881 ($530,015 - September 30, 2016).

5. Short-Term and Long-Term Debt

Revolving Credit Lines - The Company’s subsidiary Premier Packaging Corporation (“Premier Packaging”) has a revolving credit line with Citizens Bank of up to $800,000 that bears interest at 1 Month LIBOR plus 3.75% (4.98%$1,050,000 as of September 30, 2017)2021. Under the terms of this agreement, the Company as the option to purchase an additional 50.1% of the outstanding Class A Common Shares. Upon the exercising of this option, but no earlier than one year following the effective date the Sentinel Agreement, Sentinel has the option to sell the remaining 25% to the Company. In consideration of purchase price investment in Sentinel, the Company is entitled to an additional 50.1% of the net profits of Sentinel. The Company currently accounts for its investment in Sentinel using the equity method in accordance with ASC Topic 323, as it currently owns 24.9% of Sentinel. The Company currently accounts for its investment in Sentinel using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures recognizing our share of Sentinel’s earnings and losses within our consolidated statement of operations. The Company’s portion of net income in Sentinel for the three months ended March 31, 2022, was not significant.

Sentinel is a broker-dealer operating primarily as a fiduciary intermediary, facilitating intuitional trading of municipal and corporate bonds as well as preferred stock, and is registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”).

Stemtech Corporation

In September 2021, SHRG, Stemtech Corporation (“Stemtech”) and Globe Net Wireless Corp. (“GNTW”) entered into a Securities Purchase Agreement (the “SPA”) pursuant to which the SHRG invested $1.4 million in Stemtech in exchange for: (a) a Convertible Promissory Note in the amount of $1.4 million in favor of the SHRG (the “Convertible Note”) and (b) a detachable Warrant to purchase shares of GNTW common stock (the “GNTW Warrant”). Stemtech is a subsidiary of GNTW. As an inducement to enter into the SPA, GNTW agreed to pay to the SHRG an origination fee of $500,000, payable in shares of GNTW’s common stock. The Convertible Note matures on September 9, 2024, bears interest at the annual rate of 10%, and is convertible, at the option of the holder, into shares of GNTW’s common stock at a conversion rate calculated based on the closing price per share of GNTW’s common stock during the 30-day period ended September 19, 2021. The GNTW Warrant expires on July 26, 2018.September 13, 2024, and conveys the right to purchase up to 1.4 million shares of GNTW’s common stock at a purchase price calculated based on the closing price per share of GTNW’s common stock during the 10-day period ended September 13, 2021. In September 2021, GNTW issued to the SHRG 154,173 shares of its common stock, or less than 1% of the shares of GNTW then issued and outstanding, in payment of the origination fee.

SHRG carries its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock at fair value in accordance with U.S. GAAP. During the three month ended March 31, 2022 and twelve months ended December 31, 2021, the SHRG recognized unrealized gains, before income tax, of $357,000 and $3,700,000, respectively, in connection with its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock.

MojiLife, LLC

In September 2021, SHRG entered into a Membership Unit Purchase Agreement pursuant to which the SHRG acquired a 30.75% equity interest in MojiLife, LLC, a limited liability company, organized in the State of Utah, in exchange for $1,537,000. MojiLife is an emerging growth distributor of technology-based consumer products, such as cordless scent diffusers, for the home and the car, as well as proprietary home cleaning products and accessories. During the three months ended March 31, 2022, SHRG recognized an impairment of this investment approximating $1,500,000.

7. Short-Term and Long-Term Debt

DSS, Inc.

Promissory Notes - On March 2, 2020, AMRE entered into a $200,000 unsecured promissory note with LVAMPTE. The Note calls for interest to be paid annually on March 2 with interest fixed at 8.0%. As further incentive to enter into this Note, AMRE granted LVAMPTE warrants to purchase shares of common stock of AMRE (the “Warrants”). The amount of the warrants granted is the equivalent of the Note Principal divided by the Exercise Price. The Warrants are exercisable for four years and are exercisable at $5.00 per share (the “Exercise” Price). In March 2022, this debt was converted into equity in AMRE, and LVAMPTE exercised the warrants for $200,000 (see the consolidated statement of changes in stockholders’ equity)The holder is a related party owned by the Chairman of the Company’s board of directors.

On March 16, 2021, American Medical REIT, Inc. received loan proceeds in the amount of approximately $110,000 under the Paycheck Protection Program (“PPP”) with a fixed rate of 1% and a 60-month maturity term. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. These funds were used for payroll, benefits, rent, mortgage interest, and utilities. As of September 30, 2017March 31, 2022, and December 31, 2016,2021, the revolving line had aoutstanding principal and interest approximated $111,000 is included in long-term debt, net on the consolidated balance of $0.sheet.

On July 26, 2017,May 20, 2021, Premier Packaging entered into master loan and security agreement (“BOA Note”) with Bank of America, N.A. (“BOA”) to secure financing approximating $3,700,000 to purchase a Loan Agreement and accompanying Termnew Heidelberg XL 106-7+L printing press. The aggregate principal balance outstanding under the BOA Note Non-Revolving Line of Credit Agreement with Citizens Bank pursuant to which Citizens agrees to lend up to $1,200,000shall bear interest at a variable rate on or before the loan closing. At closing, the interest rate shall be fixed for the purposeduration of enabling Premier Packaging to purchase equipment from time to time that it may need for use in its business.the Loan. As of March 31, 2022, and December 31, 2021, the date of this report,outstanding principal on the revolving lineBOA Note was $3,710,000 and $3,339,000, respectively and had a balance of $0.