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, 2023

[  ]☐ 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 3, 2023 there were 16,439,327 140,264,250 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, 2023

(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 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.

On May 13, 2021, Sentinel Brokers, LLC. (“Sentinel 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 Co.”), a company registered in the state of New York, and in December 2022, Sentinel LLC exercised this option to increase its equity position to 75%. 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”).

On January 24, 2022, DSS entered into a business consulting agreement with Sharing Services Global Corporation (“SHRG”). As part of this agreement, 50,000,000 warrants were exercised, which increased the Company’s ownership of SHRG to approximately 65%.

On February 28, 2022, DSS entered into an Amendment to Stock Purchase Agreement (the “Amendment”) with its shareholder Alset EHome International Inc. (“AEI”), pursuant to which the Company and AEI have agreed to amend certain terms of the Stock Purchase Agreement dated January 25, 2022 (the “SPA”). Pursuant to the SPA, AEI had agreed to purchase up to 44,619,423 shares of the Company’s common stock for a purchase price of $0.3810 per share, for an aggregate purchase price of $17,000,000. Pursuant to the Amendment, the number of shares of the common stock of the Company that the AEI will purchase has been reduced to 3,986,877 shares for an aggregate purchase price of $1,519,000. This transaction was completed on March 9, 2022. In addition, the Company’s Executive Chairman and a significant stockholder, Heng Fai Ambrose Chan, is the Chairman, Chief Executive Officer and largest shareholder of AEI.

On May 17, 2022, the shareholders of the Company approved the issuance of up to 21,366,177 Shares of our Common Stock to Alset International, a related party, to purchase the Convertible Promissory Note issued by American Medical REIT, Inc. with a principal amount of $8,350,000 and accrued but unpaid interest of $367,000 through May 15, 2022. This transaction was finalized in July 2022.

On May 17, 2022, the shareholders of the Company approved the acquisition of 62,122,908 shares of True Partners Capital Holdings Limited (“True Partners”), a company publicly traded on the Hong Kong stock exchange in exchange for 17,570,948 shares of DSS stock. The True Partner shares were acquired from Alset EHome International, Inc. (“Alset EHome”), a related party. Mr. Heng Fai Ambrose Chan, our director and Executive Chairman, is also Chairman of the Board, Chief Executive Officer, and the largest beneficial owner of the outstanding shares of Alset EHome. This transaction was completed with the transfer of DSS share to Alset EHome on July 1, 2022 with the issuance of DSS shares, which were valued at $0.34 per share, to Alset EHome.

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, 2023 and December 31, 2022, 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, 2016.2022 (“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 potential recognitionmaking judgments about the carrying values of assets and liabilities.

Reclassifications - For the three months ended March 31, 2022, $577,000 of was reclassified from Interest expense, to Cost of revenue on the consolidated income statements to conform to current period presentation.

Cash Equivalents – All highly liquid investments with maturities of three months or disclosure.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.

Restricted CashAccounts Receivable – The Company extends credit to its customers in the normal course of business. The Company performs ongoing credit evaluations and generally do 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. As of September 30, 2017, cashMarch 31, 2023, the Company established a reserve for doubtful accounts of $336,712approximately $29,000 ($177,609 29,000 – December 31, 2016) is restricted for2022). The Company does not accrue interest on past due accounts receivable.

Notes receivable, unearned interest, and related recognition - The Company records all future payments of costsprincipal and expenses associated with oneinterest 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 long-term based on the maturity date of the Company’s IP monetization programs.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. 

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.

For equity method investments, the Company regularly 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 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, air filtration systems, 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 $57,000 and $742,000 associated with the inventory at our SHRG subsidiary was recorded as assetsof March 31, 2023, 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).2022, 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. Factors that could trigger anIf 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 review, include (a) significant underperformance relativehas 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 historical or projected future operating results; (b) significant changesits carrying value.

Business Combinations - 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 period thatassets acquired exceeds the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however,purchase price and the Company may be liable for certain outliabilities assumed, then a gain on acquisition is recorded. The application of pocket legal costs incurred pursuant tobusiness combination accounting requires the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the paymentuse 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.significant estimates and assumptions.

(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 March 31, 2023, potential dilutive instruments included warrants of 5,000 and for the Company’s common stock. No fractional shares of the Company’s common stock were issued as a result of the reverse stock split. Instead, stockholders of record who otherwise would have been entitled to receive fractional 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,three months ended March 31, 2022 potential dilutive instruments included both warrants and restricted stock agreements, that could potentially dilute basic earnings per share in the future. These shares are excluded from the calculationoptions 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.3,556 and 11,930.

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 resultbecause of any non-performance by the financial institutions.

During the nine months ended September 30, 2017,As of December 31, 2022, two customers accounted for 25%approximately 14% and 15%, respectively,6% of the Company’sour consolidated revenue and these two customers accounted for 17%approximately 36% and 11%, respectively,17% of the Company’sour consolidated trade accounts receivable balance asbalance.

As of September 30, 2017. During the nine months ended September 30, 2016,March 31, 2023, one customer accounted for 25%approximately 23% of the Company’sour consolidated revenue and accounted47% of our trade accounts receivable balance.

Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for 7%the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on 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.

Allowance For Loans And Lease Losses - On January 1, 2023, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” which requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that is expected to be collected over the contractual term of the Company’s accounts receivable balanceasset considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In estimating expected losses in the loan and lease portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. Assumptions and judgment are applied to measure amounts and timing of expected future cash flows, collateral values and other factors used to determine the borrowers’ abilities to repay obligations. After the forecast period, the company utilizes longer-term historical loss experience to estimate losses over the remaining contractual life of the loans. Prior to 2023, the allowance for credit losses represented the amount that in management’s judgment reflected incurred credit losses inherent in the loan and lease portfolio as of September 30, 2016.the balance sheet date.

Going Concern - The riskaccompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern. While the Company has approximately $13.7 million in cash, the Company has incurred operating losses as well as negative cash flows from operating and investing activities over the past two years.

Aside from its $13.7 million in cash as of March 31, 2023, the Company believes it can continue as a going concern, due to its ability to generate operating cash through the sale of its $13.4 million of Marketable Securities, and the anticipated receipts of principal and interest on its Notes receivable of approximately $12 million through March 31, 2024. Also, our subsidiary Impact BioMedical is in the process of an IPO in which DSS projects to maintain a minimum of 55% ownership. Initial conversations with underwriters are providing an estimate of $30 - $50 million potential capital raise. This is expected to close early 3rd quarter 2023. SHRG is in the process of up listing to NASDQ and conversations with the underwriter involved illustrate an approximate raise of $15 million dollars. A significant portion of the funds raised from this up listing will be used to repay loans SHRG owes to DSS. Additionally, we are in negotiations with Pinnacle Bank to extend our note payable, approximating $40.2 million through November 2024.

The Company’s management intends to take actions necessary to continue as a going concern. Management’s plans concerning these matters include, among other things, continued growth among our operating segments, and tightly controlling operating costs and reducing spending growth rates wherever possible to return to profitability. In addition, the Company has taken steps, and will continue to take measures, to materially reduce the expenses and cash burn at all corporate and business line levels.

At the Company’s current operating levels and capital usage, we believe that without any further acquisition or investments, our $13.7 million in aggregate cash, as of March 31, 2023, along with the $13.4 million of Marketable Securities, and the anticipated receipts of principal and interest on its Notes receivable of approximately $12 million through March 2024, would allow us to fund our nine business lines current and planned operations through March 2024. Based on this, the Company has concluded that substantial doubt of its ability to continue as a going concern has been alleviated.  

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 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, 2023, 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 accounts receivablesdisclosure 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 mitigated byone 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 performsevaluates 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, 2023, and December 31, 2022, the Company established a reserve for doubtful accounts of approximately $29,000 and $29,000 respectively. The Company does not accrue interest on its customers, the shortpast due accounts receivable.

Sales Commissions

Sales commissions are expensed as incurred for contracts with an expected duration of its payment terms for the significant majorityone year or less. There were no sales commissions capitalized as of its customer contractsMarch 31, 2023.

Shipping and Handling Costs

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

See Note 14 for disaggregated revenue information.

Reclassifications3. Inventory- Certain prior year amounts have been reclassified to conform to the current year presentation. All common share and per share figures are presented on a post one for four reverse stock split basis.

Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-9 “Revenue from Contracts with Customers”. The new guidance requires an entity to recognize the amount 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. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the effect that the revenue standards will have on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. Entities will no longer be able to use the cost 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, and adjusted for subsequent observable price changes. Upon adoption, entities must record a cumulative-effect adjustment to the balance sheet 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.

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 for the Company on January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2016, 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:following as of:

Schedule of Inventory

3. Investment

4. Notes Receivable

Note 1

On September 12, 2017,February 8, 2021, the Company and Hengfai Business Development Pte Ltd. (“HBD”) entered into a Securities Exchange Agreement wherebyconvertible promissory note (“Note 1”) with Borrower 1, 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 the date of issuance. Borrower 2 repaid the principal and interest in full in April 2022.

Note 2

On May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company agreedentered a convertible promissory note (“Note 2”) with Borrower 2, a company registered in the state of Texas. Note 3 has an aggregate principal balance up to issue$5,000,000, to be funded at the request of Borrower 2. Note 2, which incurs interest at a rate of 6.65% due quarterly, has a maturity date of May 1, 2023. Note 2 contains an optional conversion clause that allows the Company to convert all, or a portion of all, into newly issued member units of Borrower 2 with the maximum principal amount equal to 18% of the total equity position of Borrower 2 at conversion. The outstanding principal and sellinterest as of March 31, 2023, and December 31, 2022, approximated $5,503,000 and $5,420,000, respectively, which is included in current notes receivable on the accompanying consolidated balance sheet.

Note 3

On September 23, 2021, APB entered into refunding bond anticipatory note (“Note 3”) with Borrower 3, which operates as a conservation and reclamation district pursuant to HBD 683,000Chapter 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 5.59% per annum. Principal and interest are due in full on September 22, 2022, and later amended to extend the maturity date to September 22, 2023. 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 $3,751,000 and $3,701,000 of Note 3 is included in current portion of notes receivable on the consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively.

Note 4

On October 25, 2021, APB entered into loan agreement (“Note 4”) with Borrower 4, a company registered in the state of Utah. Note 4 has an initial aggregate principal balance up to $1,000,000, to be funded at the request of Borrower 4, with an option to increase the maximum principal borrowing to $3,000,000. Note 4, which incurs interest at a rate of 8.0% with principal and interest due at the maturity date of October 25, 2022. This note contains an optional conversion feature allowing APB to convert the outstanding principal to a 10% membership interest. APB, as holder of Note 5, has the right to elect one member to the Board of Managers. The outstanding principal and interest of approximately $884,000 and $896,000 of the note is included in current portion of notes receivable on the consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively. As of December 31, 2022, this note is in default. The Company has placed a reserve of $896,000 against this note as of December 31, 2022.

Note 5

On May 14, 2021, APB extended the credit (“Note 5”) to an individual (“Borrower 5”) in the form of two promissory notes for $250,000 and $10,000 respectively, bearing interest at 12.5%, with a maturity date of May 15, 2023. 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 $260,000 and $9,300 are included in current portion of Notes receivable on the consolidated balance sheet at March 31, 2023 and $252,000 and $9,000 are included in Note receivable at December 31, 2022.

Note 6

On October 27, 2021, HWH World, Inc., a subsidiary of the Company entered a revolving loan commitment (“Note 6”) with Borrower 8, a company registered in Taiwan. Note 6 has a principal balance of $52,000 and incurred no interest through the maturity date of December 31, 2021. The outstanding principal at March 31, 2023 and December 31, 2022 is $66,000 and $63,000, respectively, and is included in the current portion of notes receivable. This note was amended in April 2022 to borrow up to $102,000 and extend the maturity date through April 2023 bearing interest rate of 18%. The due date of this loan is currently being re-negotiated.

Note 7

On December 28, 2021, APB entered into promissory note (“Note 7”) with Borrower 7, a company registered in the state of California. Note 8 has a principal balance of $700,000. Note 7, which incurs interest at a rate of 12.0% with principal and interest due at the maturity date of December 28, 2022. On December 29, 2022, the maturity date of this note was extended to May 31, 2023. The outstanding principal and interest of $707,000 and $701,000 of Note 7 is included in current portion of notes receivable on the consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively.

Note 8

On January 24, 2022, APB and Borrower 8 entered into a promissory note (“Note 8”) 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, 2023 approximates $107,000 and at December 31, 2022 approximates $106,000, and is included in Notes receivable on the accompanying consolidate balance sheet.

Note 9

On March 2, 2022, APB and Borrower 9, a corporation organized under the laws of the Republic of Korea entered into a promissory note (“Note 9”). Under the terms of Note 9, 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, 2023 is $766,000, net of $23,000 of unamortized origination fees, of which $376,000 is included in current notes receivable on the accompanying consolidated balance sheet. The outstanding principal and interest at December 31, 2022 is $874,000 net of $25,000 of unamortized origination fees.

Note 10

On May 9, 2022, DSS PureAir and Borrower 11 entered into a promissory note (“Note 10”) in the principal sum of $210,000 with interest of 10%, is due in three quarterly installments beginning on August 9, 2022, with the first two payment consisting of interest only. All unpaid principal and interest are due on February 9, 2023. The outstanding principal and interest at March 31, 2023 approximates $221,000 and is included in current portions of notes receivable on the accompanying consolidate balance sheet. The outstanding principal and interest at December 31, 2022 approximates $213,000, and is included in current portions of notes receivable on the accompanying consolidate balance sheet.

Note 11

On August 29, 2022, DSS Financial Management Inc and Borrower 11 entered into a promissory note (“Note 11”) in the principal sum of $100,000 with interest of 8%, is due in three quarterly installments beginning on September 14, 2022. All unpaid principal and interest is due on August 29, 2025. The outstanding principal and interest at March 31, 2023 approximates $101,000 and at December 31, 2022 was $100,000, and is included in Notes receivable on the accompanying consolidate balance sheet.

Note 12

On July 26, 2022, APB and Borrower 12 entered into a promissory note (“Note 12”) in the principal sum of $1,000,000 with interest of 8%. All unpaid principal and interest due on July 26, 2024. The outstanding principal and interest on March 31, 2023, approximates $440,000, net of $80,000 of unamortized origination fees and is included in Notes receivable on the accompanying consolidate balance sheet. The outstanding principal and interest at December 31, 2022 approximates $924,000, net of $66,000 of unamortized origination fees and is included in Notes receivable on the accompanying consolidate balance sheet.

5. 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, 2023, and December 31, 2022:

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.

6. Provision for Credit Losses

Effective December 31, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses.

As of December 31, 2022, and March 31, 2023 we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan.

We analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss reserves.

General Loan Portfolio Reserve - Based upon a relatively young loan portfolio that are relatively new loans to generally credit worthy borrowers, we do not believe that a substantial general loan portfolio reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general contingent portfolio reserve of $145,000 or approximately ¼ of 1% of the loan portfolio loan balance as of December 31, 2022 and March 31, 2023.

Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of December 31, 2022 and March 31, 2023.

Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness in the Borrow 6 loan, which has a current principal and interest balance of $896,000. As of December 31, 2022 and March 31, 2023 we have recorded a specific loan loss reserve for the full balance due the Company.

The following table identifies the loan loss reserve for the period ending March 31, 2023 and December 31, 2022:

Schedule of Loan loss reserve

7. Investments

Alset International Limited, related party

The Company owns 127,179,291 shares or approximately 4% of the outstanding 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 of Singapore eDevelopmentAlset International Limited (“SED”Alset Intl”), 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 marketable security as of March 31, 2023, and December 31, 2022, was approximately $2,289,000 and $3,319,000 respectively. During the three month ended March 31, 2023 and March 31, 2022, the Company recorded unrealized loss on this investment of approximately $1,156,000 and $305,000, respectively.

West Park Capital, Inc.

On October 10, 2019, the Company entered 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 TBD. This TBD Note accrues interest at 6% and matures on October 9, 2021.

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 $500,000and is included in Investments on the consolidated balance sheet on December 31, 2022 and as of March 31, 2023.

BMI Capital International LLC

On September 10, 2020, the Company’s common stock issuedwholly 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 transaction,option to purchase an additional 10% of the outstanding membership interest which was determinedit exercised for $100,000 in January of 2021 and increased its ownership to have24.9%. Upon achieving greater than 20% ownership in BMIC during the most readily determinable fair value. As ofquarter ended September 30, 2017,2021, the Company is currently accounting for this investment under the equity method of accounting per ASC 323. The Company’s portion of net loss in BMIC during the three months ended March 31, 2023, approximated $4,300.

BMIC is carried at costa broker-dealer registered with the Securities and Exchange Commission, is a member of approximately $485,000.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 Assets

Intangible assets are comprised of the following:BioMed Technologies Asia Pacific Holdings Limited

Intangible asset amortization expense for the nine months ended September 30, 2017 amounted 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% as of September 30, 2017) and expires on July 26, 2018. As of September 30, 2017 and December 31, 2016, the revolving line had a balance of $0.

On July 26, 2017, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving Line of Credit Agreement with Citizens Bank pursuant to which Citizens agrees to lend up to $1,200,000 for the purpose of enabling Premier Packaging to purchase equipment from time to time that it may need for use in its business. As of the date of this report, the revolving line had a balance of $0.

Long-Term Debt - On December 30, 2011, the Company issued19, 2020, Impact BioMedical, a $575,000 convertible note that was initially due on December 29, 2013, and carries an interest ratewholly owned subsidiary of 10% per annum. The note is secured by the assets of Company’s wholly-owned subsidiary, Secuprint Inc. Interest is payable quarterly, in arrears. In conjunction with the issuance of the convertible note, the Company determined a beneficial conversion feature existed amounting to approximately $88,000, which was recorded as a debt discount to be amortized over the term of the note. On May 24, 2013, the Company amended the convertible note to extend the maturity date of the note from December 29, 2013 to December 29, 2015. The change in the fair value of the embedded conversion option exceeded 10% of the carrying value of the original debt and, therefore, the Company accounted for this restructuring as an extinguishment in accordance with FASB ASC 470-50 “Debt Modifications and Extinguishments”. The note was written up to its fair value on the date of modification of approximately $650,000 and the premium recorded in excess of its face value was amortized over the remaining life of the note. On February 23, 2015, the Company, entered into Convertible Promissory Note Amendment No. 2 to extend the maturity date to December 30, 2016, eliminate the conversion feature, and to institute principal paymentsa subscription agreement (the “Subscription Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $230,000 due on the extended maturity date. On April 12, 2016,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 Convertible Promissory Note Amendment No. 3an exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to extenddirectly 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.

Under the maturity date to May 31, 2017 and changeterms of the balloon payment to $155,000 due on the extended maturity date. On May 31, 2017,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 Convertible Promissory Note Amendment No. 4a Stock Purchase Agreement (the “Vivacitas Agreement #1”) with Vivacitas Oncology Inc. (“Vivacitas”), to extendpurchase 500,000 shares of its common stock at the maturityper 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, 2022; or (iii) the date to April 30, 2018 aton which point the note is scheduled to be paid in full. In exchange for the extension, the Company also issued the lender as additional consideration 18,000 sharesVivacitas receives more than $1.00 per share of the Company’s common stock which hadin a fair value of $17,640. As of September 30, 2017, the balance of the term loan was $95,000 ($230,000 at December 31, 2016).

On May 24, 2013, the Company entered into a promissory note in the principal sum of $850,000 to purchase three printing presses that were previously leased by the Company’s wholly-owned subsidiary, Secuprint Inc., and carries an interest rate of 9% per annum. The note is secured by the assets of Company’s wholly-owned subsidiary, Secuprint Inc. Interest is payable quarterly, in arrears. The Company also issued the lender as additional consideration a five-year warrant to purchase up to 60,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The warrant was valued at approximately $69,000 using the Black-Scholes-Merton option pricing modelprivate placement with a volatility of 60.0%, a risk free rate of return of 0.89% and zero dividend and forfeiture estimates. In conjunction with the issuance of the warrants, the Company recorded a discount on debt of approximately $69,000 that was amortized over the original term of the note. The note was set to mature on May 24, 2014, but its maturity date was extended on May 2, 2014 to May 24, 2015 by the lender. In exchange for the extension, the Company also issued the lender as additional consideration a five-year warrant to purchase up to 40,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The warrant was valued at approximately $29,000 using the Black-Scholes-Merton option pricing model with a volatility of 70.0%, a risk free rate of return of 1.53% and zero dividend and forfeiture estimates. In conjunction with the issuance of the warrants, the Company recorded expense for modification of debt of approximately $29,000. On February 23, 2015, the Company entered into Promissory Note Amendment No. 2 to extend the maturity date to May 31, 2016 and to institute principal payments in the amount of $15,000 per month plus interest through the extended maturity date, and a balloon payment of $610,000 due on the extended maturity date. On April 12, 2016, the Company entered into Promissory Note Amendment No. 3 to extend the maturity date to May 31, 2017 and change the balloon payment to $430,000 due on the extended maturity date. . On May 31, 2017, the Company entered into Convertible Promissory Note Amendment No. 4 to extend the maturity date to December 31, 2018 at which point the note is scheduled to be paid in full. In exchange for the extension, the Company also issued the lender as additional consideration 18,000 shares of the Company’s common stock which had a fair value of $17,640. As of September 30, 2017, the balance of the term loan was $370,000 ($505,000 at December 31, 2016).

Term Loan Debt - On July 19, 2013, Premier Packaging entered into an equipment loan with People’s Capital and Leasing Corp. (“People’s Capital”) for a printing press. The loan is secured by the printing press. The loan was for $1,303,900, repayable over a 60-month period which commenced when the equipment was placed in service in January 2014. The loan bears interest at 4.84% and is payable in equal monthly installments of $24,511. As of September 30, 2017, the loan had a balance of $356,064 ($559,609 at December 31, 2016).

On April 28, 2015, Premier Packaging entered into a term note with Citizens for $525,000, repayable over a 60-month period. The loan bears interest at 3.61% and is payable in equal monthly installments of $9,591 until April 28, 2020. Premier Packaging used thegross proceeds of the term note to acquire a HP Indigo 7800 Digital press. The loan is secured by the printing press. As of September 30, 2017, the loan had a balance of $283,271 ($360,611 at December 31, 2016).

Promissory Notes - On August 30, 2011, Premier Packaging purchased the packaging plant it occupies in Victor, New York, for $1,500,000, which was partially financed with a $1,200,000 promissory note obtained from Citizens Bank (“Promissory Note”). The Promissory Note calls for monthly payments of principal and interest in the amount of $7,658, with interest calculated as 1 Month LIBOR plus 3.15% (4.38% at September 30, 2017). Concurrently with the transaction, the Company entered into an interest rate swap agreement to lock into a 5.87% effective interest rate for the life of the loan. The Promissory Note matures in August 2021 at which time a balloon payment of the remaining principal balance will be due. As of September 30, 2017, the Promissory Note had a balance of $927,753 ($966,786 at December 31, 2016).

On December 6, 2013, Premier Packaging entered into a Construction to Permanent Loan with Citizens Bank for up to $450,000 that was converted into a promissory note upon the completion and acceptance of building improvements to the Company’s packaging plant in Victor, New York. In May 2014, the Company converted the loan into a $450,000 note payable in monthly installments over a 5 year period of $2,500 plus interest calculated at a variable rate of 1 Month LIBOR plus 3.15% (4.38% at September 30, 2017), which payments commenced on July 1, 2014. The note matures in July 2019 at which time a balloon payment of the remaining principal balance of $300,000 is due. As of September 30, 2017, the note had a balance of $352,500 ($375,000 – December 31, 2016).

Under the Citizens Bank credit facilities, the Company’s subsidiary, Premier Packaging, is subject to various covenants including fixed charge coverage ratio, tangible net worth and current ratio covenants. For the quarters ended March 31, June 30, 2017, and September 30, 2017, Premier Packaging was in compliance with the covenants. The Citizens Bank obligations are secured by all of the assets of Premier Packaging and are also secured through cross guarantees by the Company and its other wholly-owned subsidiaries, Plastic Printing Professionals and Secuprint.

Other Debt - On February 13, 2014, the Company’s subsidiary, DSS Technology Management, Inc. (“DSSTM”), entered into an Investment Agreement (the “Agreement”) dated February 13, 2014 (the “Effective Date”) with Fortress Credit Co LLC, as collateral agent (the “Collateral Agent” or “Fortress”), and certain investors (the “Investors”), pursuant to which DSSTM contracted to receive a series of advances up to $4,500,000 (collectively, the “Advances”)$500,000. Under the terms of the Vivacitas Agreement #1, the Company will be allocated two seats on the Effective Date, DSSTM issuedboard 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. Chan Heng Fai Ambrose, the Chairman of the Company’s board of directors and sold a promissory noteits 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 December 31, 2022. As of December 31, 2022, the Company determined to impair 100% of its investment in Vivacitas, in the amount of $1,791,000, fixed return equity interests$4,100,000.

Stemtech Corporation

In September 2021, the Company’s subsidiary SHRG, Stemtech Corporation (“Stemtech”) and Globe Net Wireless Corp. (“GNTW”) entered into a Securities Purchase Agreement (the “SPA”) pursuant to which SHRG invested $1.4 million in Stemtech in exchange for: (a) a Convertible Promissory Note in the amount of $199,000, and contingent equity interests in the amount of $10,000, to each of the Investors, and in return received $2,000,000 in proceeds. To secure the Advances, DSSTM placed a lien$ 1.4 million in favor of the Investors on ten semi-conductor patentsCompany (the “Patents”“Convertible Note”) and assigned(b) a detachable Warrant to the Investors certain funds recoverable from successful patent litigation involving these Patents, including settlement payments, license fees and royalties on the Patents. DSSTMpurchase shares GNTW common stock (the “GNTW Warrant”). Stemtech is a plaintiff in various ongoing patent infringement lawsuits involving certainsubsidiary of GNTW. As an inducement to enter into the Patents.

On March 27, 2014, DSSTM received an additional $1,000,000 under the Agreement comprised of a promissory note for $900,000 and fixed and contingent equity interests of $100,000. On September 5, 2014, DSSTM received the remaining $1,500,000 under the Agreement comprised of a promissory note for $1,350,000 and fixed and contingent return interests of $150,000. On May 23, 2016, DSSTM remitted $495,000 in proceeds received from the sale of patent assets (Note 5) to Fortress under the terms of the Agreement. On September 20, 2016, DSSTM remitted $125,250 in proceeds received from a settlement to Fortress as repayment of the note principal balance under the terms of the Agreement.

The Agreement defines certain events as Events of Default, one of which is the failure by DSSTM, on or before the second anniversary of the Effective Date, to make payments to the Investors equal to the outstanding Advances. On February 13, 2016, being the second anniversary date of the Effective Date, DSSTM had failed to make these payments and was therefore in default of the Agreement. On December 2, 2016, the parties entered into a First Amendment to Investment Agreement and Certain Other Documents (the “Amendment”). The purpose of the Amendment was to vacate DSSTM’s ongoing non-payment default under the Agreement, and to amend certain provisions of the Agreement.

The Agreement was amended to add expenses in the amount of $150,000 to DSSTM’s payment obligation, payable on the Maturity Date. This amount was recorded as debt issuance costs and is being amortized on a straight line basis through the amended maturity date of February 13, 2018. The Amendment added a provision whereby DSSTM is required to deposit $300,000 on or before March 2, 2017 and (ii) a further sum of $300,000 on or before March 2, 2018, into a deposit account (collectively, the “Deposit”). The March 2, 2017 deposit was made in a timely manner. The Deposit funds will be restricted to pay certain expenses, consisting of out-of-pocket expenses incurred in connection with certain existing patent litigation matters and other patent litigation matters which may occur after the Amendment Effective Date (the “Qualified Expenses”). In the Event of Default, the Investors may apply the then remaining Deposit to the then outstanding Obligations, if any.

Additionally per the Amendment, DSSTM agreesSPA, GNTW agreed to pay to the InvestorsSHRG an amount equalorigination 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-dayperiod ended September 19, 2021. The GNTW Warrant expires on September 13, 2024 and conveys the right to 25%purchase up to 1.4 million shares of any amounts received by DSSTM for any and all typesGNTW’s common stock at a purchase price calculated based on the closing price per share of monetization activities relatedGTNW’s common stock during the 10-day period ended September 13, 2021. In September 2021, GNTW issued to certainthe Company 154,173 shares of its patents covering systemscommon stock, or less than 1% of the shares of GNTW then issued and methodsoutstanding, in payment of using low power wireless peripheral devices (collectively, “BlueTooth Patents”), but only until the Investors have received paymentsorigination fee. In November 2021, Globe Net Wireless Corp. changed its corporate name to Stemtech Corporation. In connection therewith, the investee’s common stock is now traded under the Agreement totalingsymbol “STEK”. The SHRG carries its investment in the sumConvertible Note, the GNTW Warrant and the shares of (i)GNTW common stock at fair value in accordance with GAAP. As of March 31, 2023 and December 31, 2022 the Capitalized Expenses plus (ii) payments of principalinvestment in the the GNTW Warrant and interest on the Notes totaling the sum of (x) $4,500,000 (consisting of the previously made Advances) plus (y) additional amounts, if any, advanced by the InvestorsConvertible Note, were valued at $144,000, and $44,000 and $140,000 and $39,000 respectively.

In September 2021, SHRG entered into a Membership Unit Purchase Agreement pursuant to which the Agreement. In addition to the monetizationSHRG acquired a 30.75% equity interest granted the Investorsin MojiLife, LLC, a limited liability company organized in the BlueTooth Patents, DSSTM also grantedState of Utah, in exchange for $1,537,000. MojiLife is an emerging growth distributor of technology-based consumer products for the Collateral Agenthome and car. MojiLife’s products include esthetically attractive, cordless scent diffusers for the Investorshome or for the car, as well as proprietary home cleaning products and accessories. On a security interestquarterly basis, SHRG evaluates the recoverability of its investments and reviews current economic trends to determine the adequacy of its allowance for impairment losses based on each investee financial performance data and other relevant information. An estimate for impairment losses is recognized when recovery in certainfull of DSSTM’s unencumbered semiconductor patents to further collateralizeSHRG’s investment is no longer probable. Investment balances are written off against the amounts owed underallowance after the Agreement.potential for recovery is considered remote. In March of 2022, SHRG impaired the MojiLife investment as the evaluation at such time determined the investment was not fully recoverable and 100% valuation was reserved.

As8. Acquisitions

Sentinel Brokers Company, Inc.

On May 13, 2021, Sentinel Brokers, LLC. (“Sentinel LLC”), subsidiary of September 30, 2017, DSSTM has made aggregate principal payments of $752,180 on the notes. As of September 30, 2017, $3,611,560 is recorded as a short-term debt under the arrangement, which includes $263,500 of accrued interest, less unamortized debt issuance costs of $77,856. In addition, as of September 30, 2017, $459,000 of fixed and contingent equity interests is recorded in other short-term liabilities. The Company will reduce the liability upon payment to the Investor from available proceeds from litigation, or if none by the maturity date of February 13, 2018, then such amounts will be settled by the Company by the transfer and assignment of certain of the Company’s patent assets.

6. Other Liabilities

On November 14, 2016, the Company entered into a Proceeds Investment Agreement (the “Agreement”stock purchase agreement (“Sentinel Agreement”) with Brickell Key Investments LPto acquire a 24.9% equity position of Sentinel Brokers Company, Inc. (“BKI”Sentinel Co.”). Pursuant to the Agreement, BKI financed an aggregate of $13,500,000 in a patent purchase and monetization program to be implemented and managed by the Company (the “Financing”). Pursuant to Agreement, $3,000,000 of the Financing was used to cover the Company’s purchase of a portfolio of U.S. and foreign LED patents and a license from Intellectual Discovery Co., Ltd., a Korean company (collectively, the “LED Patent Portfolio”), resulting in a basis in these assets of $0. A total of $6,000,000 of the Financing was directed by BKI to attorneys to cover anticipated attorneys’ fees and out-of-pocket expenses for legal proceedings that may transpire relating to enforcement of the LED Patent Portfolio. This amount is not includedregistered in the Company’s financial statements as the Company has no control over these funds, which are segregated and escrowed in the attorneys’ trust account.

In addition, on November 14, 2106, the Company received $4,500,000state of the Financing, which was required to be used by the Company to payNew York, for the defensepurchase price ofInter Partes Review or other similar proceedings that may be filed from time to time by defendants with the U.S. Patent & Trademark Office relating to the LED Patent Portfolio, with excess amounts available for general working capital needs. As of September 30, 2017, an aggregate of approximately $3,687,000 is recorded as other liabilities by the Company, of which approximately $2,062,500 is classified as short-term. Of this amount, the Company allocated $2,500,000 which it subsequently adjusted to $1,500,000 for the payment of estimated futureInter Partes Review costs. The Company will reduce this liability as it pays legal and other expenses related to theInter Partes Review matters involving the LED Patent Portfolio as incurred. The remaining $2,217,000 in other liabilities is allocated to working capital, which the Company is amortizing this amount on a pro-rata basis over the expected remaining life of the monetization period of the LED Patent Portfolio through November 31, 2019. For this amount, the Company reduced the liability with an offset to selling, general and administrative costs by $47,500 per month from January 2017 through July 2017 and $80,000 per month in August and September of 2017. $300,000. During the nine months ended September 30, 2017, there2021, the Company contributed and additional $750,000 capital into Sentinel, increasing its total capital investment to $1,050,000 as of September 30, 2021. Up to and through November 30, 2022, Sentinel LLC accounted for its investment in Sentinel Co. 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. Under the terms of this agreement, the Company had the option to purchase an additional 50.1% of the outstanding Class A Common Shares. In December 2022, Sentinel LLC exercised this option to increase its equity position to 75%. The acquisition of Sentinel Co. 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.

The following summary, prepared on a proforma basis, combines the consolidated results of operations of the Company with those of Sentinel Co as if the acquisition took place on January 1. The pro forma consolidated results include the impact of certain adjustments.

Schedule of Business Acquisition, Pro Forma Information

On May 20, 2021, Premier Packaging entered into master loan and security agreement (“BOA Note”) with Bank of America, N.A. (“BOA”) to working capital.secure financing approximating $3,710,000 to purchase a new Heidelberg XL 106-7+L printing press. The aggregate principal balance outstanding under the BOA Note shall bear interest at a variable rate on or before the loan closing. As of March 31, 2023, and December 31, 2022, the outstanding principal on the BOA Note was $3,290,000 and $3,406,000, respectively and had an interest rate of 4.63%. The outstanding balance at March 31, 2023 is included in Long-term debt, net on the consolidated balance sheet. As of March 31, 2023, $479,000 was included in current portion of long-term debt, net, and the remaining balance of approximately $2,810,000 recorded as long-term debt, The BOA Note contains certain covenants that are analyzed annual. As of March 31, 2023, Premier is in compliance with these covenants.