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, 20172023

[  ]☐ 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

001-32146

Commission file number

DOCUMENT SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

275 Wiregrass Pkwy,

West Henrietta, NY14586

(Address of principal executive offices)

(585)325-3610

(Registrant’s telephone number, including area code)

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, 2017,6, 2023 there were 16,439,327140,264,250 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

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 Nine Months Ended September 30,

(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)

September 30, 2017
(Unaudited)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 digital imaging. The Company’s subsidiary, DSS Digital Inc., which operates under the assumed name of DSS Digital Group, develops,tertiary markets, and sells digital information services, including data hosting, disaster recoveryleasing each property to a single operator under a triple-net lease. the REIT was formed to originate, acquire, and data back-up and security services. The Company’s subsidiary, DSS Technology Management, Inc., acquires intellectual property (“IP”)lease a credit-centric portfolio of licensed medical real estate. (6) Alternative Trading was established to develop and/or acquire assets and interests in companies owning intellectual property assets, or assists others in managing their intellectual property monetization efforts, for the purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments in the securities trading and/or funds management arena. Alternative Trading, in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility tokens, and cryptocurrency via an alternative trading platform using blockchain technology. The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency, and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s). (7) Digital Transformation was established to be a Preferred Technology Partner and Application Development Solution for mid cap brands in various industries including the direct selling and affiliate marketing sector. Digital improves marketing, communications and operations processes with custom software development and commercializationimplementation. (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 patented technologies, licensing, strategic partnershipslife living environments both for new construction and commercial litigation.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 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%. In May of 2023, Sentinel LLC acquired an additional 5% increasing its equity position to 80.1%. 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”).

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, unless otherwise indicated) 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 September 30, 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, and 10-K/A for the fiscal year ended December 31, 2016.2022 (“Form 10-K”, “Form 10-K/A”), 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.

Deconsolidation of Sharing Services Global Corporation - On May 4, 2023, the Company distributed approximately 280 million shares of SHRG beneficially held by DSS and Decentralized Sharing Systems in the form of a dividend to the shareholders of DSS common stock. Upon completion of this distribution, DSS will retain an ownership interest in SHRG of approximately 7%. Immediately prior to this distribution, DSS owned approximately 81% of the issued and outstanding common shares of SHRG. As a result, SHRG, whose operations represented a significant portion of our Direct Marketing segment, was deconsolidated from our consolidated financial statements effective as of May 1, 2023 (the “Deconsolidation”). The consolidated statement of operations for the fiscal quarter ended September 30, 2023, therefore includes one month of activity related to SHRG prior to the Deconsolidation. Subsequent to April 30, 2023 the assets and liabilities of SHRG are no longer included within our consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with SHRG refer to the periods prior to the Deconsolidation.

Upon Deconsolidation, we recognized a loss before income taxes of approximately $29,196,000 which is recorded within gain/loss investments in our consolidated statements of operations for the three and nine months ended September 30, 2023. Subsequent to the Deconsolidation, we accounted for our equity ownership interest in SHRG as a marketable security and at the quoted price stock price of SHRG, valued at approximately $148,000 at September 30, 2023.

Reclassifications - Certain amounts on the accompanying condensed consolidated cash flows and condensed consolidated statements of operations have been reclassified to conform to current period presentation.

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.

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/Rents Receivable – As- 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 amounts and its rent receivables at contract amounts, 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. In estimating expected losses in the accounts receivable portfolio, customer-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 customers’ abilities to pay.

At September 30, 2017, cash of $336,712 ($177,609 –2023, and December 31, 2016) is restricted2022, the Company established a reserve for doubtful accounts of approximately $2,706,000 and $29,000, respectively. 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 8 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, are recorded as assets and liabilities at estimatedThe fair value based on available market information.

Derivative Instruments -The Company maintains an overall interest rate risk management strategy that incorporatesof investments where 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 agreementsis not considered readily determinable, are not held for trading purposescarried 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 does not intendevaluates its inventory in order to selladjust the derivative swap financial instruments. The Company recordsinventory balance for obsolete and slow-moving items. An allowance for obsolescence of approximately $57,000 and $742,000 associated with the interest swap agreements on the balance sheetinventory at fair value because the agreements qualify as a cash flow hedges under accounting principles generally accepted in the United States of America. Gainsour Premier subsidiary for September 30, 2023 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 liabilitiesour former SHRG subsidiary as of September 30, 2017 was approximately $36,000 ($45,000 - December 31, 2016).2022. 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 split of 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 featurethree and paid $92 to buy-out the fractional shares of holders with less than four shares immediately preceding the reverse stock split.

As ofnine months ended September 30, 2017 and 2016, there were 3,297,759 and 2,498,128 respectively, of common stock share equivalents potentially issuable options,2023, potential dilutive instruments include both warrants and restricted stock agreements, that could potentially dilute basic earnings per share inoptions of 0 and 0 shares, respectively. For the future. Thesethree and nine months ended September 30, 2022, potential dilutive instruments include both warrants and options of 0 and 11,597 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.respectively.

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.

As of September 30, 2023, two customers accounted for approximately 21% and 7% of our consolidated revenue and these two customers approximately 32% and 15% of our consolidated trade accounts receivable balance. As of December 31, 2022, two customers accounted for approximately 14% and 6% of our consolidated revenue and these two customers approximately 36% and 17% of our consolidated trade accounts receivable balance.

Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for 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 asset 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 the balance sheet date. See Note 6.

Going Concern - The accompanying 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 $6.9 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.

DuringAside from its $6.9 million in cash as of September 30, 2023, the Company believes it can continue as a going concern, due to its ability to generate operating cash through the sale of its $11.1 million of Marketable Securities, and the anticipated receipts of principal and interest on its Notes receivable of approximately $6.3 million through September 30, 2024. Also, our subsidiary Impact BioMedical is in the process of an IPO in which DSS projects to maintain a minimum of 55% ownership. Proceeds of which are expected to pay in part, amounts utilized by DSS for Impact BioMedical expenses. This is expected to close in the fourth quarter 2023. Additionally, we are in negotiations with Pinnacle Bank to extend our note payable, approximating $40.2 million through November 2024. This related note payable is currently in default; however the Company is in the process of renegotiating the terms of this note with Pinnacle, which is expected to be completed during the fourth quarter.

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 $6.9 million in aggregate cash, as of September 30, 2023, along with the $11.1 million of Marketable Securities, and the anticipated receipts of principal and interest on its Notes receivable of approximately $6.3 million through September 30, 2024, would allow us to fund our nine business lines current and planned operations through September 30, 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 September 30, 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 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.

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 September 30, 2023.

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 relating to these costs are reflected as revenue.

See Note 15 for disaggregated revenue information.

3. Inventory

Inventory consisted of the following as of:

Schedule of Inventory

4. Notes Receivable

Note 1

On February 8, 2021, the Company entered into a convertible 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 1 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 entered 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 $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 interest as of September 30, 2023, and December 31, 2022, approximated $5,544,000 and $5,420,000, respectively, which is included in current notes receivable on the accompanying consolidated balance sheet. As of September 30, 2023, the Company has a reserve of $2,884,000 against the principal and interest outstanding. This note is currently in default and its terms are currently being re-negotiated.

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 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 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 19, 2024. 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 $3,854,000 and $3,701,000 is included in the current portion of notes receivable on the consolidated balance sheet at September 30, 2023 and December 31, 2022, respectively.

Note 4

On October 25, 2021, APB entered into a 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 4, has the right to elect one member to the Board of Managers. This note is in default and the outstanding principal and interest of approximately $884,000 was reserved for fully 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 was 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 for both notes were paid in full during the third quarter of 2023. $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. The outstanding principal and interest at September 30, 2023 and December 31, 2022 is $0 and $63,000, respectively, and was included in Notes receivable current portion. This note has been written-off during the third quarter 2023.

Note 7

On December 28, 2021, APB entered into a promissory note (“Note 7”) with Borrower 7, a company registered in the state of California. Note 7 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 $404,000 and $701,000 is included in the Current portion of notes receivable on the consolidated balance sheet at September 30, 2023 and December 31, 2022, respectively. This note has been extended to November 30, 2023.

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 September 30, 2023 and December 31, 2022 approximates $100,000 and $106,000, respectively, 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 $893,000 with an interest rate of 8%, and matures in March 2024, with interest payable quarterly. The outstanding principal and interest at September 30, 2023 is $440,000, net of $9,00 of unamortized origination fees. 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 2 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 September 30, 2023 approximates $224,000 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. The due date of this loan is currently being re-negotiated.

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 September 30, 2023 and December 31, 2022 approximates $99,000, and $100,000, respectively, and is included in Notes receivable on the accompanying consolidate balance sheet, of which $68,000 is included in the Current portion of notes receivable and $31,000 is included in the Notes receivable at September 30, 2023.

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 September 30, 2023, approximates $929,000, net of $30,000 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.

Note 13

On June 15, 2022, Decentralized and Borrower 13 entered into a convertible promissory note (“Note 13”) in the principal sum of $27,000,000 with interest of 8%, with an optional conversion into shares of Borrower 13 at a conversion price of $0.03, maturing on June 14, 2024, with interest due quarterly. In December 2022, this note was fully reserved for. On August 31, 2023, the full value of the outstanding principal and interest of this note was exchanged for 26,000 shares of Series D Preferred Stock with a par value of $0.0001 per share. Beginning on September 1, 2028, these Series D Preferred Shares may be redeemed in the amount of $1,000 per share. Due to the lack of liquidity of these shares, the Company has placed no value on these shares.

Note 14

On February 19, 2021, Impact BioMedical, Inc, a subsidiary of the Company, entered into a promissory note (Note 14) with Borrower 14. The Company loaned the principal sum of $206,000, with interest at a rate of 6.5%, and maturity date of August 19, 2022 later amended to February 19, 2024. Monthly payments are due on the twenty-first day of each month and continuing each month thereafter until February 19, 2024. This note is secured by certain real property situated in Collier County, Florida. The outstanding principal and interest as of September 30, 2023, approximated $204,000 and is classified in current notes receivable on the accompanying consolidated balance sheets. The outstanding principal and interest as of December 31, 2022 approximated $206,000 with $16,000 classified in Current portion of notes receivable and $190,000 classified as Notes receivable on the accompanying consolidated balance sheets.

Note 15

On May 8, 2023, DSS Financial Management Inc and Borrower 15 entered into a promissory note (“Note 15 “) in the principal sum of $102,000 with interest at the prime rate plus 2% (10.5% at September 30, 2023) with a maturity date of May 7, 2026. The outstanding principal and interest at September 30, 2023 approximates $104,000 with approximately $44,000 of principal and accrued interest classified as Current portion notes receivable, and the remaining balance of approximately $60,000 is recorded as notes receivable, on the accompanying consolidated balance sheet.

Note 16

On June 27, 2023, Decentralized and Borrower 16 entered into a convertible promissory note (“Note 16”) in the principal sum of $1,400,000 with a discount of $300,000 and interest rate of 10% and maturity date of September, 1, 2024. The outstanding principal, interest, and associated discount was fully reserved for as of September 30, 2023.

Note 17

On March 31,2023, DSS Biohealth Security, Inc and Borrower 17 entered into a promissory note (“Note 17”) in the principal sum of $140,000 and interest rate floating daily to Wall Street Journal Prime rate per annum (8.5% at September 31, 2023) with the total outstanding principal and interest due at the maturity date of March 31, 2025. The outstanding principal and interest at September 30, 2023 approximates $130,000. Of the total financed, approximately $83,000 of principal and accrued interest is classified as Current portion of notes receivable and the remaining balance of approximately $46,500 is recorded as Notes receivable on the accompanying consolidated balance sheet.

Note 18

On September 28, 2023, APB and Borrower 18 entered into a promissory note (“Note 18”) in the principal sum of $400,000 with interest of 5%. All unpaid principal and interest due on November 12, 2023. The outstanding principal and interest on September 30, 2023, approximates $401,000 and is included in Notes receivable on the accompanying consolidate balance sheet.

Note 19

On August 11, 2022, APB and Borrower 19 entered into a promissory note (“Note 19”) in the principal sum of $1,430,000 with interest of 8%. All unpaid principal and interest due on August 12, 2024. The outstanding principal and interest on September 30, 2023, approximates $1,102,000, net of $375,000 of unamortized origination fees and is included in Notes receivable on the accompanying consolidate balance sheet. The outstanding principal, interest, and associated fees were fully reserved for as of September 30, 2023.

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 September 30, 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 September 30, 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. For the three and nine months ended September 30, 2017, two customers accounted for 25%2023, the Company recorded a Loan loss reserve of approximately $1,179,000 and 15%$4,936,000, respectively,respectively.

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 and $199,000 or approximately ¼ of 1% of the Company’s consolidated revenue and accounted for 17% and 11%, respectively, of the Company’s accounts receivableloan portfolio loan balance as of December 31, 2022 and September 30, 2017. During2023, respectively.

Industry Portfolio Reserves - Given the nine months endedrelatively 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 September 30, 2016, one customer accounted2023.

Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness in the Borrow 4 loan, which has a current principal and interest balance of $884,000. As of December 31, 2022 and September 30, 2023 we have recorded a specific loan loss reserve for 25%the full balance due the Company. As of December  31, 2022 and September 30, 2023, the Company’s consolidated revenueCompany reserved for principal and accountedinterest of $27,831,000 for 7% of the Company’s accounts receivable balance asBorrower 13. As of September 30, 2016. The risk with respect to accounts receivables is mitigated by credit evaluations2023, the Company performs onidentified credit weakness in borrower 2 and has placed a reserve approximating $2,884,000 against the outstanding principal and interest. As of September 30, 2023, the Company identified credit weakness in borrower 16 and placed a reserve of $1,291,000 against the outstanding principal and interest. The Company identified credit weakness in Borrower 19 and has placed a reserve of $1,477,000 against the outstanding principal and interest.

7. Disposal of assets

On July 1^st, 2023, The Company intended to sell its customers,subsidiary, HWH World, Inc. to SHRG. The proposed transaction had the short durationCompany sell 1,000 shares of its payment termscommon stock, representing all the issued and outstanding common stock shares of HWH World for the significant majoritysum $706,000 representing the gross proceeds of its customer contractsthe sale of HWH inventory less cost of goods sold. The parties involved amended the terms of this agreement during the third quarter of 2023 from that of equity transaction to the purchase of inventory and assumption of certain liabilities by SHRG. The amended agreement identified the purchase price approximating $758,000 to be paid from amongst other things, the gross proceeds generated by the diversificationsale of the inventory acquired. The value of the inventory sold approximates $698,000 and the value of the liabilities assumed by SHRG as part of this transaction is approximately $59,000. Further, the agreement includes payment of 1% royalty, starting November 1, 2023, being defined as 1% of the gross sale price of all Seller’s new products made and sold outside of existing inventory on the schedule, for a period ending October 31, 2033. There is substantial doubt regarding SHRG’s ability to sell and pay for the inventory acquired, and therefore, the Company has determined not to record a receivable for the purchase price. A net loss approximating $639,000 associated with this transaction has been recorded during the third quarter of 2023 and is included in Loss/Gain on sale of assets on the consolidated statement of operations.

On July 1^st, 2023, The Company sold 100% of the equity in its customer base.

Reclassifications- Certain prior year amounts have been reclassifiedsubsidiary HWH Holdings, Inc, a Texas corporation (HWHH) to conform to the current year presentation. All common share and per share figures are presented onSHRG for 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”purchase price approximating $259,000. The new guidance requires an entity to recognize theThis amount of revenue to which it expectsis to be entitledpaid from gross proceeds generated by the sale of the inventory acquired as part of the transaction. This transaction was later amended during the third quarter of 2023 to assign the purchase of HWHH from SHRG to Ascend Management Pte., Ltd. (“Ascend”), a Singaporean limited company. There is substantial doubt regarding Ascend’s ability to sell and pay for the transferinventory acquired, and therefore, the Company has determined not to record a receivable for the purchase price. A net loss approximating $617,000 associated with this transaction has been recorded during the third quarter of promised goods or services to customers. Subsequently,2023 and is included in Loss/Gain on sale of assets on the FASB has issued the following standards consolidated statement of operations.

8. Investments

Alset International Limited, 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”). party

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 retrospectiveowns 127,179,291 shares 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 asapproximately 4% 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:

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 683,000outstanding 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 September 30, 2023, and December 31, 2022, was approximately $3,726,000 and $3,319,000, respectively. During the nine-month ended September 30, 2023 and September 30, 2022, the Company recorded unrealized gain of approximately $407,000 and loss on this investment of $1,539,000, respectively.

West Park Capital, Inc.

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 December 31, 2022 and as of September 30, 2023.

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 for $100,000 in January of 2021 and increased its ownership to 24.9%. Upon achieving greater than 20% ownership in BMIC during the quarter ended September 30, 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 and nine months ended September 30, 2023, approximated $6,000 and $28,000, respectively

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.

BioMed Technologies Asia Pacific Holdings Limited

On December 19, 2020, Impact BioMedical, a wholly owned subsidiary of the 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.

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, 2022; or (iii) the date on which Vivacitas receives more than $1.00 per share of the Company’s common stock issuedin 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 of $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 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 December 31, 2022. As of December 31, 2022, the Company determined to impair 100% of its investment in Vivacitas, in the transaction,amount of $4,100,000.

Stemtech Corporation (Sharing Services Global Corp)

In September 2021, the Company’s former subsidiary SHRG, Stemtech Corporation (“Stemtech”) and Globe Net Wireless Corp. (“GNTW”) entered into a Securities Purchase Agreement (the “SPA”) pursuant to which was determinedSHRG 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 Company (the “Convertible Note”) and (b) a detachable Warrant to havepurchase shares GNTW common stock (the “GNTW Warrant”). Stemtech is a subsidiary of GNTW. As an inducement to enter into the most readily determinableSPA, 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-dayperiod ended September 19, 2021. The GNTW Warrant expires on 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 Company 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. 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 symbol “STEK”. The SHRG carries its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock at fair value.value in accordance with GAAP. As of September 30, 2017,2023 and December 31, 2022 the investment in the GNTW Warrant and Convertible Note, were valued at $0, and $44,000 and $0 and $39,000, respectively.

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 carriedan emerging growth distributor of technology-based consumer products for the home and car. MojiLife’s products include esthetically attractive, cordless scent diffusers for the home or for the car, as well as proprietary home cleaning products and accessories. On a quarterly 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 full of SHRG’s investment is no longer probable. Investment balances are written off against the allowance after the potential for recovery is considered remote. In March of 2022, SHRG impaired the MojiLife investment as the evaluation at costsuch time determined the investment was not fully recoverable and 100% valuation was reserved.

9. Acquisitions

Sentinel Brokers Company, 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, for the purchase price of $300,000. During the nine months ended September 30, 2021, the Company contributed an 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%. In May 2023, the Company acquired an additional 5% equity position of Sentinel Co. to increase its ownership percentage to 80%. 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

We are currently in the process of completing the purchase price accounting and related allocations associated with the acquisition of Sentinel Co. Assets included in this acquisition are cash of $3,977,000, receivables of $344,000 and fixed assets of $1,000. Goodwill of approximately $485,000.$1,274,000 was also recorded. The Company is in the process of completing valuations and useful lives for certain assets acquired in the transaction. We expect the purchase price accounting to be completed during the year ending December 31, 2023.

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”).

10. 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, a related party. 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 December 31, 2021, the outstanding principal and interest of approximately $111,000 is included in long-term debt, net on the consolidated balance sheet. During the year ended December 31, 2022, the PPP loan was forgiven in full and recorded as a gain on extinguishment of debt on the accompanying consolidated statement of operations.

On 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 $3,710,000 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 September 30, 2023, and December 31, 2022, the outstanding principal on the BOA Note was $3,053,000 and $3,406,000, respectively and had an interest rate of 4.63%. As of September 30, 2023, $491,000 was included in the current portion of long-term debt, net, and the remaining balance of approximately $2,562,000 recorded as long-term debt, The BOA Note contains certain covenants that are analyzed annually. As of September 30, 2023, Premier is in compliance with these covenants.

4. Intangible AssetsOn August 1, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE, entered into a loan agreement (“Shelton Agreement”) with Patriot Bank, N.A. (“Patriot Bank”) in an amount up to $6,155,000, with the amount financed approximating $5,105,000. The Shelton Agreement contains monthly payments of principal and an initial interest of 4.25%. The interest will be adjusted commencing on July 1, 2026 and continuing for the next succeeding 5-year period shall be determined one month prior to the change date and shall be an interest rate equal to two hundred fifty (250) basis points above the Federal Home Loan Bank Boston 5-Year/25-Year amortizing advance rate, but in no event less than 4.25% for the term of 120 months with a balloon payment approximating $2,829,000 due at term end. The affective interest rate at December 31, 2022 was 4.25%. The funds borrowed were used to purchase a 40,000 square foot, 2.0 story, Class A+ multi-tenant medical office building located on a 13.62-acre site. 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 included in the value of the property is $585,000 of intangible assets with an estimated useful life of approximating 3 years. The net book value of these assets as of September 30, 2023 approximated $4,652,000. Of the total financed, approximately $102,000 of principal and accrued interest is classified as current portion of long-term debt, net, and the remaining balance of approximately $4,590,000 recorded as long-term debt, net of $56,000 in deferred financing costs.

IntangibleOn October 13, 2021, LVAM entered into loan agreement with BMIC (“BMIC Loan”), a related party, whereas LVAM borrowed the principal amount of $3,000,000, with interest to be charged at a variable rate to be adjusted at the maturity date. The BMIC Loan matures on October 12, 2022, and contains an auto renewal period of three months. As of September 30, 2023 and December 31, 2022, $512,000 and $3,000,000, respectively, are included in Current portion of long-term debt, net on the consolidated balance sheet.

On October 13, 2021, LVAM entered into a loan agreement with Lee Wilson Tsz Kin (“Wilson Loan”), a related party, whereas LVAM borrowed the principal amount of $3,000,000, with interest to be charged at a variable rate to be calculated at the maturity date. The Wilson Loan matures on October 12, 2022, and contains an auto renewal period of nine months. This loan was funded during March 2022. As of September 30, 2023 $1,997,000 is included in the Current portion of long-term debt, net on the consolidated balance sheet. As of December 31, 2022 $3,000,000 is included in the Current portion of long-term debt, net on the consolidated balance sheet.

On November 2, 2021, AMRE LifeCare entered into a loan agreement (“LifeCare Agreement”) with Pinnacle Bank, (“Pinnacle Bank”) in the amount of $40,300,000. The LifeCare Agreement supported the acquisition of three medical facilities located in Fort Worth, Texas, Plano, Texas, and Pittsburgh, Pennsylvania for a purchase price of $62,000,000. These assets are comprisedclassified 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 included in the value of the following:

Intangible assetproperty is $15,901,000 of intangible assets with estimated useful lives ranging from 1 to 11 years. The net book value of the assets acquired as of December 31, 2022 is approximately $52,407,000. The LifeCare Agreement calls for the principal amount of the in equal, consecutive monthly installments based upon a twenty-five (25) year amortization of the original principal amount of the LifeCare Agreement at an initial rate of interest equal to the interest rate determined in accordance as of July 29, 2022 provided, however, such rate of interest shall not be less than 4.28%, with the first such installment being payable on August 29, 2022 and subsequent installments being payable on the first day of each succeeding month thereafter until the maturity date, at which time any outstanding principal and interest is due in full. The affective interest rate at December 31, 2022 was 8.46%. The maturity date of November 2, 2023, may be extended to November 2, 2024. As of December 31, 2022, the outstanding principal and interest of the LifeCare agreement approximates $40,193,000, net of deferred financing costs of $270,000. As of September 30, 2023, the outstanding principal and interested approximates $40,462,000, net of deferred financing costs of $24,000 is included in current portion of long-term debt, on the consolidated balance sheet. Interest expense for the nine months ended September 30, 2017 amounted2023 and 2022 approximated $2,672,000 and $952,000, respectively. The LifeCare agreement is currently in default. The Company is in the process of remediating the related issues and continues to $513,881 ($530,015 - September 30, 2016).negotiate the extension of the loan.