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 ~~March 31,~~ June 30, 2021

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

For the transition period from ______to_______ .

	001-32146
	Commission file number

DOCUMENT SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

New York

16-1229730

(State or other Jurisdiction of

incorporation- or Organization)

(IRS Employer

Identification No.)

	6 Framark Drive
	Victor, NY14564
	(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 every Interactive Date File required to be submitted 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 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 ~~[X]~~ ☒	Smaller reporting company ~~[X]~~☒
Emerging growth company ~~[ ]~~☐

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:

Title of each class		Ticker symbol(s)		Name of each exchange on which registered
Common Stock, $0.02 par value per share		DSS		The NYSE American LLC

As of ~~May 7,~~August 4, 2021, there were ~~27,670,125~~67,590,295 shares of the registrant’s common stock, $0.02 par value, outstanding.

DOCUMENT SECURITY SYSTEMS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3
Item 1	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021and December 31, 2020	3
	Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	4
	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020	5
	Consolidated Statement of Changes in Stockholders’ Equity for the three and six months ended ~~March~~June 31, 2021 and 2020	6
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2726
Item 4	Controls and Procedures	3231

PART II	OTHER INFORMATION	3332
Item 1	Legal Proceedings	3332
Item 1A	Risk Factors	3332
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3332
Item 3	Defaults upon Senior Securities	3332
Item 4	Mine Safety Disclosures	3332
Item 5	Other Information	3332

PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(unaudited)

	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	52,061,000		$	5,226,000		$	65,645,000		$	5,183,000
Accounts receivable, net		3,806,000			3,910,000			3,223,000			3,589,000
Inventory		2,556,000			1,955,000			3,220,000			1,955,000
Assets held for sale - discontinued operations								-			531,000
Current portion of notes receivable, net								14,511,000			-
Prepaid expenses and other current assets		1,451,000			1,359,000			1,751,000			1,192,000
Total current assets		59,874,000			12,450,000			88,350,000			12,450,000

Property, plant and equipment, net		4,079,000			4,146,000			4,970,000			4,100,000
Investment, real estate								6,565,000			-
Other investments		5,134,000			1,788,000			13,329,000			1,788,000
Investment, equity method		11,655,000			12,234,000			17,033,000			12,234,000
Marketable securities		10,085,000			9,136,000			7,319,000			9,136,000
Notes receivable		1,543,000			537,000			3,023,000			537,000
Non-current assets held for sale - discontinued operations		-			744,000			-			790,000
Other assets		338,000			384,000			308,000			384,000
Right-of-use assets		156,000			182,000			118,000			182,000
Goodwill		26,862,000			26,862,000			26,862,000			26,862,000
Other intangible assets, net		23,077,000			23,456,000			23,284,000			23,456,000
Total assets	$	142,803,000		$	91,919,000		$	191,161,000		$	91,919,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,248,000		$	1,482,000		$	1,591,000		$	1,457,000
Accrued expenses and deferred revenue		1,798,000			5,270,000			8,026,000			5,260,000
Other current liabilities		658,000			1,435,000			736,000			1,435,000
Current Liabilities held for sale - discontinued operations		-			240,000			-			275,000
Current portion of lease liability		138,000			167,000			101,000			167,000
Current portion of long-term debt, net		498,000			278,000			687,000			278,000
Total current liabilities		4,340,000			8,872,000			11,141,000			8,872,000

Long-term debt, net		1,661,000			1,976,000			7,467,000			1,976,000
Long term lease liability		18,000			15,000			17,000			15,000
Non-current liabilities held for sale - discontinued operations		-			505,000			-			505,000
Other long-term liabilities		507,000			507,000			507,000			507,000
Deferred tax liability, net		2,661,000			3,499,000			1,341,000			3,499,000

Commitments and contingencies (Note 9)

Stockholders’ equity
Preferred stock, $.02 par value; 47,000 shares authorized, 43,000 shares issued and outstanding (43,000 on December 31, 2020); Liquidation value $1,000 per share, $43,000,000 aggregate.		1,000			1,000
Common stock, $.02 par value; 200,000,000 shares authorized, 27,670,000 shares issued and outstanding (5,836,000 on December 31, 2020)		552,000			116,000
Preferred stock, $.02 par value; 47,000 shares authorized, shares issued and outstanding (43,000 on December 31, 2020); Liquidation value $1,000 per share, $ - aggregate ($43,000,000 on December 31, 2020).								-			1,000
Common stock, $.02 par value; 200,000,000 shares authorized, 67,590,000 shares issued and outstanding (5,836,000 on December 31, 2020)								1,351,000			116,000
Additional paid-in capital		235,027,000			174,380,000			279,947,000			174,380,000
Non-controlling interest in subsidiary		3,399,000			3,430,000			3,171,000			3,430,000
Accumulated deficit		(105,363,000	)		(101,382,000	)		(113,781,000	)		(101,382,000	)
Total stockholders’ equity		133,616,000			76,545,000			170,688,000			76,545,000

Total liabilities and stockholders’ equity	$	142,803,000		$	91,919,000		$	191,161,000		$	91,919,000

See accompanying notes to the condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

							2021			2020			2021			2020
	For the Three Months Ended March 31, 2021						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Revenue:
Printed products	$	3,846,000		$	3,169,000		$	3,376,000		$	2,272,000		$	7,237,000		$	5,438,000
Technology sales, services and licensing		489,000			479,000
Direct marketing		608,000			573,000			809,000			506,000			1,416,000			1,078,000
Total revenue		4,943,000			4,221,000			4,185,000			2,778,000			8,653,000			6,516,000

Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization		3,353,000			2,641,000			3,042,000			1,729,000			6,330,000			4,302,000
Selling, general and administrative (including stock based compensation)		4,301,000			2,194,000			7,377,000			2,039,000			11,434,000			3,878,000
Depreciation and amortization		518,000			303,000			821,000			273,000			1,335,000			573,000
Total costs and expenses		8,172,000			5,138,000			11,240,000			4,041,000			19,099,000			8,753,000

Operating loss		(3,229,000	)		(917,000	)		(7,055,000	)		(1,263,000	)		(10,446,000	)		(2,237,000	)

Other income (expense):
Interest income		52,000			24,000			1,485,000			27,000			1,537,000			50,000
Other income								250,000			-			250,000			-
Interest expense		(20,000	)		(31,000	)		(106,000	)		(42,000	)		(126,000	)		(73,000	)
Gain on extinguishment of debt		116,000			-			-			-			116,000			-
(Loss) gain on investments		(1,076,000	)		4,000			(6,821,000	)		580,000			(7,898,000	)		584,000
Loss on equity method investment		(579,000	)		-			(332,000	)		-			(911,000	)		-
Loss from continuing operations before income taxes		(4,736,000	)		(920,000	)		(12,579,000	)		(698,000	)		(17,478,000	)		(1,676,000	)

Income tax benefit		838,000			-			1,854,000			-			2,691,000			-
Loss from continuing operations		(3,898,000	)		(920,000	)		(10,725,000	)		(698,000	)		(14,787,000	)		(1,676,000	)
Loss from discontinued operations		(114,000	)		(1,046,000	)
Income (loss) from discontinued operations, net of tax								2,079,000			(208,000	)		2,129,000			(1,197,000	)
Net loss		(4,012,000	)		(1,966,000	)		(8,646,000	)		(906,000	)		(12,658,000	)		(2,873,000	)

Loss from continuing operations attributed to noncontrolling interest		31,000			67,000			228,000			114,000			259,000			181,000

Net loss attributable to common stockholders		(3,981,000	)		(1,899,000	)		(8,418,000	)		(792,000	)		(12,399,000	)		(2,692,000	)

Loss per common share - continuing operations:
Basic	$	(0.20	)	$	(1.28	)	$	(0.30	)	$	(0.28	)	$	(0.53	)	$	(0.80	)
Diluted	$	(0.20	)	$	(1.28	)	$	(0.30	)	$	(0.28	)	$	(0.53	)	$	(0.80	)

Loss per common share - discontinued operations:
Earnings/ (loss) per common share - discontinued operations:
Basic	$	(0.01	)	$	(0.68	)	$	0.06		$	(0.10	)	$	0.08		$	(0.64	)
Diluted	$	(0.01	)	$	(0.68	)	$	0.06		$	(0.10	)	$	0.08		$	(0.64	)

Shares used in computing loss per common share:
Shares used in computing earnings (loss) per common share:
Basic		19,432,831			1,539,052			34,888,054			2,103,199			27,203,137			1,870,439
Diluted		19,432,831			1,539,052			34,888,054			2,103,199			27,203,137			1,870,439

See accompanying notes to the condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the ~~Three~~Six Months Ended ~~March 31,~~June 30,

(unaudited)

	2021			2020			2021			2020
Cash flows from operating activities:
Net loss from continuing operations	$	(3,898,000	)	$	(920,000	)	$	(14,787,000	)	$	(1,676,000	)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation and amortization		518,000			303,000			1,335,000			573,000
Stock based compensation		15,000			90,000			(15,000	)		54,000
Loss on equity method investment		579,000			-			911,000			-
Loss (gain) on investments		1,076,000			(4,000	)		7,898,000			(584,000	)
Gain on extinguishment of debt		(116,000	)		-			(116,000	)		-
Deferred tax benefit		(838,000	)		-			(2,693,000	)		-
Accretion of debt discount, origination fee, and prepaid interest								(1,698,000	)		-
Decrease (increase) in assets:
Accounts receivable, net		90,000			284,000			366,000			1,399,000
Inventory		(601,000	)		(29,000	)		(1,265,000	)		(266,000	)
Prepaid expenses and other current assets		(92,000	)		(30,000	)		(559,000	)		(86,000	)
Other assets		(382,000	)		(129,000	)		(112,000	)		(94,000	)
Increase (decrease) in liabilities:
Accounts payable		106,000			11,000			159,000			(766,000	)
Accrued expenses		(3,472,000	)		(157,000	)
Accrued expenses and deferred revenue								802,000			(162,000	)
Other liabilities		(778,000	)		-			(698,000	)		133,000
Net cash used by operating activities		(7,793,000	)		(581,000	)		(10,248,000	)		(1,475,000	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(72,000	)		(68,000	)		(1,263,000	)		(80,000	)
Purchase of investment		(3,230,000	)		-
Purchase of real estate								(6,565,000	)		-
Purchase of investments								(18,114,000	)		(1,291,000	)
Purchase of marketable securities		(4,329,000	)		(566,000	)		(8,789,000	)		(1,392,000	)
Purchase of equity investment								(400,000	)		-
Sale of marketable securities		2,188,000			-			9,185,000			-
Purchase of intangible assets								(585,000	)		-
Note receivable investment		(1,006,000	)		(462,000	)		(18,799,000	)		(566,000	)
Net cash used by investing activities		(6,449,000	)		(1,096,000	)		(45,330,000	)		(3,329,000	)

Cash flows from financing activities:
Payments of long-term debt		(89,000	)		(88,000	)		(81,000	)		(142,000	)
Borrowings of long-term debt		110,000			200,000			6,328,000			1,272,000
Borrowings from lines of credit, net		-			300,000
Borrowings from revolving lines of credit, net								-			(500,000	)
Deferred financing fees								(186,000	)		-
Issuances of common stock, net of issuance costs		61,068,000			3,929,000			106,772,000			10,220,000
Net cash provided by financing activities		61,089,000			4,341,000			112,833,000			10,850,000

Cash flows from discontinued operations:
Cash (used) provide by operations		(12,000	)		112,000
Cash used by investing activities		-			(37,000	)
Cash provided by financing activities		-			(33,000	)
Net cash (used) provided by discontinued operations		(12,000	)		42,000
Cash provided by discontinued operations								161,000			167,000
Cash provided (used) by investing activities								3,046,000			(66,000	)
Cash used by financing activities								-			(67,000	)
Net cash provided by discontinued operations								3,207,000			34,000

Net increase in cash		46,835,000			2,706,000			60,462,000			6,080,000
Cash and cash equivalents at beginning of period		5,226,000			1,096,000			5,183,000			1,096,000

Cash and cash equivalents at end of period	$	52,061,000		$	3,802,000		$	65,645,000		$	7,176,000

See accompanying notes to the condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

									Additional		Non- controlling									Shares		Amount		Shares			Amount			Capital			Subsidiary			Deficit			Total
	Common Stock				Preferred Stock				Paid-in		Interest in			Accumulated						Common Stock				Preferred Stock						Additional Paid-in			Non- controlling Interest in			Accumulated
	Shares		Amount		Shares		Amount		Capital		Subsidiary			Deficit			Total			Shares		Amount		Shares			Amount			Capital			Subsidiary			Deficit			Total

Balance, December 31, 2020		5,836,000	$	116,000		43,000	$	1,000	$	174,380,000	$	3,430,000		$	(101,382,000	)	$	76,545,000			5,836,000	$	116,000		43,000		$	1,000		$	174,380,000		$	3,430,000		$	(101,382,000	)	$	76,545,000

Issuance of common stock, net		21,834,000		436,000		-		-		60,632,000		-			-			61,068,000			21,834,000		436,000		-			-			60,632,000			-			-			61,068,000
Stock based payments, net of tax effect		-		-		-		-		15,000		-			-			15,000			-		-		-			-			15,000			-			-			15,000
Stock based payments, net of tax effect, shares
Conversion of preferred stock
Conversion of preferred stock, shares
Net loss		-		-		-		-		-		(31,000	)		(3,981,000	)		(4,012,000	)		-		-		-			-			-			(31,000	)		(3,981,000	)		(4,012,000	)
Balance, March 31, 2021		27,670,000	$	552,000		43,000	$	1,000	$	235,027,000	$	3,399,000		$	(105,363,000	)	$	133,616,000			27,670,000	$	552,000		43,000		$	1,000		$	235,027,000		$	3,399,000		$	(105,363,000	)	$	133,616,000

Issuance of common stock, net																					33,350,000	$	668,000		-		$	-		$	45,080,000		$	-		$	-		$	45,748,000
Stock based payments, net of tax effect																					-		-		-			-			(30,000	)		-			-			(30,000	)
Conversion of preferred stock																					6,570,000		131,000		(43,000	)		(1,000	)		(130,000	)		-			-			-
Net loss																					-		-		-			-			-			(228,000	)		(8,418,000	)		(8,646,000	)
Balance, June 30, 2021																					67,590,000	$	1,351,000		-		$	-		$	279,947,000		$	3,171,000		$	(113,781,000	)	$	170,688,000

Balance, December 31, 2019		1,206,000	$	24,000		-		-	$	115,560,000		-		$	(103,281,000	)	$	12,303,000			1,206,000	$	24,000		-		$	-		$	115,560,000			-		$	(103,281,000	)	$	12,303,000

Issuance of common stock, net		863,000		18,000		-		-		4,036,000		-			-			4,054,000			863,000		18,000		-			-			4,036,000			-			-			4,054,000
Stock based payments, net of tax effect		-		-		-		-		28,000		-			-			28,000			-		-		-			-			28,000			-			-			28,000
Net loss		-		-		-		-		-		(67,000	)		(1,900,000	)		(1,967,000	)		-		-		-			-			-			(67,000	)		(1,900,000	)		(1,967,000	)
Balance, March 31, 2020		2,069,000	$	42,000		-	$	-	$	119,624,000	$	(67,000)		$	(105,181,000	)	$	14,418,000			2,069,000	$	42,000		-		$	-		$	119,624,000		$	(67,000	)	$	(105,181,000	)	$	14,418,000

Issuance of common stock, net																					896,000	$	17,000		-		$	-		$	6,168,000		$	-		$	-		$	6,185,000
Stock based payments, net of tax effect																					30,000		1,000		-			-			266,000			-			-			267,000
Net loss																					-		-		-			-			-			(114,000	)		(792,000	)		(906,000	)
Balance, June 30, 2020																					2,995,000	$	60,000		-		$	-		$	126,058,000		$	(181,000	)	$	(105,973,000	)	$	19,964,000

See accompanying notes to the condensed consolidated financial statements.

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~March 31,~~June 30, 2021

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Document Security Systems, Inc. (the “Company of DSS”) operates ~~eight (8)~~seven (7) business lines through ~~eight (8)~~seven (7) DSS subsidiaries located around the globe.

Of the ~~eight~~seven subsidiaries, ~~three~~two of those have historically been the core subsidiaries of the Company: (1) Premier Packaging Corporation (“Premier Packaging”), ~~(2) DSS Digital Inc.,~~ and ~~its subsidiaries (“Digital Group”), and (3)~~(2) DSS Technology Management, Inc. (“IP Technology”). Premier Packaging operates in the paper board folding carton, smart packaging, and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct mail solutions designed to provide functionality, marketability, and sustainability to product packaging while providing counterfeit protection and consumer engagement platform. Digital Group researches, develops, markets, and sells the Company’s digital products worldwide. As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features and cutting-edge technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s primary product is AuthentiGuard®, which is a brand authentication application that integrates the Company’s counterfeit deterrent technologies with proprietary digital data security-based solutions. IP Technology Management Inc., manages, licenses, and acquires intellectual property assets for the purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments in the development and commercialization of patented technologies, licensing, strategic partnerships, and commercial litigation. In 2020, under its ~~(4)~~(3) Decentralize Sharing Systems, Inc. (“Decentralized”) subsidiary, created a ~~fourth~~third business segment, Direct Marketing/Online Sales Group (“Direct”). This group provides services to assist companies in the ~~emerging growth~~growing gig economic business model of peer-to-peer ~~decentralized sharing marketplaces.~~direct marketing. Direct specializes in marketing and distributing its products and services through its ~~subsidiary~~subsidiaries, partner networks, and ~~partner network, using~~online marketplaces. Products include health and wellness for personal use, healthy living and lifestyle, and travel. Direct will also help to support the ~~popular gig economic marketing strategy as a form of~~ direct ~~marketing.~~selling industry by offering services to its piers that streamline operations, enhance financing, and provide back-end business continuity.

In addition to the ~~four~~three subsidiaries listed above DSS has created four new, wholly owned subsidiaries. ~~(5)~~(4) DSS Blockchain Security, ~~Inc.~~Inc (“DSS Blockchain”)., a Nevada corporation, specializes in the development of blockchain security technologies for tracking and tracing solutions for supply chain logistics and cyber securities across global markets. ~~(6)~~(5) DSS Securities, Inc. (“DSS Securities”), a Nevada corporation, ~~has been~~was established to develop and/or to acquire assets and investments in the securities trading and/or funds management ~~arena,~~arena. Further, Securities, in partnership with recognized global leaders in alternative trading systems, intends to own and ~~to pursue two parallel streams of~~operate in the US a single or multiple vertical digital asset exchanges ~~in multiple jurisdictions: (i) securitized token exchanges, focusing on digitized~~for securities, tokenized assets, ~~from different vertical industries and (ii) utilities token exchanges, focusing on “blue-chip”~~ utility tokens, stable coins and cryptocurrency via a digital asset 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, STO 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). Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from ~~solid businesses. (7)~~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) DSS BioHealth Security, Inc. (“DSS BioHealth”), a Nevada corporation, is our business line which we will intend to invest in or to acquire companies related to the bio-health and biomedical field, including businesses focused on the research to advance drug discovery and development for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases. This new division will place special focus on open-air defense initiatives, which curb transmission of air-borne infectious diseases such as tuberculosis and influenza, among others. ~~(8)~~(7) DSS Secure Living, Inc. (“DSS Secure Living”), a Nevada Corporation, develops top of the line advanced technology, energy efficiency, quality of life living environments and home security for everyone for new construction and renovations of residential single and multifamily living facilities. ~~Aside from Decentralized Sharing Systems, Inc. the~~The activity in ~~the these newly created subsidiaries have~~DSS Blockchain and DSS Secure Living has been minimal or in various start-up or organizational phases.

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

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

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 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 cash flows include all adjustments considered necessary for their fair presentation in accordance with U.S. GAAP. All significant intercompany transactions have been eliminated in consolidation.

Interim results are not necessarily indicative of results expected for the full year. For further information regarding the Company’s accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2020.

Principles of Consolidation - The consolidated financial statements include the accounts of Document Security Systems, 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 accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable, convertible notes receivable, inventory, fair values of investments, intangible assets and goodwill, 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 making judgments about the carrying values of assets and liabilities.

Reclassifications - Certain amounts on the accompanying consolidated balance sheets for the ~~quarter~~year ended ~~March~~December 31, ~~2021~~2020 have been reclassified to conform to current ~~year~~period presentation.

Investments – Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at fair value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded 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. The Company considers debt instruments as available-for-sale securities, and accordingly, all unrealized gains and losses incurred on the short-term investment securities (the adjustment to fair value) are recorded in other comprehensive income or loss on the Company’s Consolidated Statements of Operations.

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 Financial 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 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. The fair value of investments where the fair value is not considered readily determinable, are carried at cost.

Impairment of Long-Lived Assets and Goodwill- The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

Related Party Liabilities ~~- The~~– On April 1, 2020 the Company’s HWH World, Inc subsidiary has a service agreement with HWH Korea, a subsidiary of Alset International Limited (“Alset Intl.”) (formally Singapore eDevelopment Limited). The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The Company also owns approximately 127,179,000 shares of Alset Intl, a company publicly listed on the Singapore Exchange Limited. This service agreement will allow HWH Korea to utilize the Company’s merchant account in connection with their direct marketing network with periodic remittance of the cash collected to them for a fee of ~~2.5%~~2.5% of amounts collected. As of ~~March 31,~~June 30, 2021, the Company has collected approximately ~~$246,000~~ $286,000 as compared to ~~$1,100,000~~ $1,100,000 as of December 31, 2020 on behalf of HWH Korea. The amount of ~~$912,000~~ $253,000 was remitted to HWH Korea, net of fees and other expenses, in ~~the first quarter~~August of 2021. The related party liability of approximately ~~$246,000~~ $315,000 is included in “Other current liabilities” on the accompanying consolidated balance sheets. There were no amounts outstanding to this related party at ~~March 31,~~June 30, 2020.

Acquisitions - In ~~connection with~~

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

Business combinations and non-controlling interests are recorded in accordance with FASB ASC 805 Business Combinations. Under the guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition and all acquisition costs are expensed as incurred. The excess of the purchase price over the estimated fair values is recorded as goodwill. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded. The application of business combination accounting requires the use of significant estimates and assumptions. ~~See Note 5 regarding the acquisitions in 2020.~~

Acquisition of assets are recorded at their relative fair value based on total accumulated costs of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. This includes all costs related to finding, analyzing and negotiating a transaction. The allocation of the purchase price is an area that requires judgment and significant estimates. Tangible and intangible assets include land, building and improvements, furniture, fixtures and equipment, acquired above market and below market leases, in-place lease value (if applicable). Acquisition-date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates and available market information.

Discontinued Operations – On April 20, 2020, the Company executed a nonbinding letter of intent with a perspective buyer for the sale of certain assets of its plastic printing business line, which it operated under Plastic Printing Professionals, Inc. (“DSS Plastics”), a ~~wholly-owned~~wholly owned subsidiary of the Company. That sale was consummated and closed on August 14, 2020. The remaining assets of DSS Plastics were either sold, separately disposed, or retained by other existing DSS businesses lines. Accordingly, the operations of DSS Plastics have been discontinued. Based on the magnitude of DSS Plastics’ historical revenue to the Company and because the Company has exited the production of laminated and surface printed cards, this sale represented a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 210-05—Discontinued Operations. The major classes of assets and liabilities of DSS Plastics are classified as Held For Sale – Discontinued Operations on the Consolidated Balance Sheets and the operating results of the discontinued operations is reflected on the Consolidated Statements of Operations as Loss from Discontinued Operations. See Note 11.

On May 7, 2021, the Company completed the sale of 100% of the capital stock of DSS Digital Inc. (“DSS Digital”), the Company’s wholly owned subsidiary, which researched, developed, marketed, and sold the Company’s digital products worldwide. Based on the magnitude of DSS Digital’s historical revenue to the Company and because the Company has exited the brand authentication services, functional anti-counterfeiting technology and technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing, this sale represented a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 210-05—Discontinued Operations. See Note 11.

Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted 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 and is calculated utilizing the treasury stock method. In a loss period, the calculation for basic and diluted earnings per share is the same, as the impact of potential common shares is anti-dilutive.

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

During the six months ended June 30, 2021, two customers accounted for ~~40%~~45% of our consolidated revenue. As of ~~March 31,~~June 30, 2021, these two customers accounted for ~~65%~~75% of our consolidated trade accounts receivable balance. As of ~~March 31,~~June 30, 2020, these two customers accounted for ~~39%~~45% of our consolidated revenue and ~~59%~~53% 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.

Recent Accounting Pronouncements - In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326)”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently assessing the impact that adopting this new accounting standard will have on our consolidated financial statements.

Impact of COVID-19 Outbreak- The COVID-19 pandemic has created global economic turmoil and has potentially permanently impacted how many businesses operate and how individuals will socialize and shop in the future. We continue to feel the effect of the COVID-19 business shutdowns and consumer stay-at-home protections. But the effect of the economic shutdown has impacted our business lines differently, some more severely than others. In most cases, we believe the negative economic trends and reduced sales will recover over time. However, management determined that one of its business lines, DSS Plastics, had been, and would continue to be, more severely impacted by the pandemic than our other divisions, and we did not believe this was a short-term phenomenon. We expected that this business would be permanently impacted because we believe that both consumer and corporate future travel habits will be negatively impacted and, as a result, use of hotel access cards will be diminished. We believe that conventions and sporting events will be fewer and smaller in attendance, and therefore demand for our card identification products would be reduced. Further, we believe that physical security cards and individual IDs will be replaced by more digital and optical technologies. As a result, management decided to fully impair its goodwill related to DSS Plastics during the first quarter 2020, and to exit this business line. The impact of this decision in our first quarter 2020 earnings was an impairment of approximately $685,000 included in loss from discontinued operations. Additionally, it is reasonably possible that estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, including losses on inventory; impairment losses related to goodwill and other long-lived assets and current obligations.

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 also derives revenue from royalties from third parties which are typically based on licensees’ net sales of products that utilize the Company’s technology, or on a per item usage of the technology on the customers’ printed products. The Company recognizes license revenue at the time it is reported by the licensee. From time to time, the Company generates license revenues through litigation settlements. For these, the Company recognizes revenue upon the execution of the agreement, when collectability is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been ~~met .~~met. 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,~~June 30, 2021, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, the Company has applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations. The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.

Accounts Receivable

The Company extends credit to its customers in the normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are generally 30 days but up to net 105 for certain customers. The Company carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. At ~~March 31,~~June 30, 2021, the Company established a reserve for doubtful accounts of approximately ~~$42,000~~$84,000 ($25,000 – December 31, 2020). The Company does not accrue interest on past due accounts receivable.

Sales Commissions

Sales commissions are expensed as incurred for contracts with an expected duration of one year or less. There were no sales commissions capitalized as of ~~March 31,~~June 30, 2021.

Shipping and Handling Costs

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

See Note 14 for disaggregated revenue information.

3. Notes Receivable

Century TBD Holdings, LLC

On October 10, 2019, the Company entered into a convertible promissory note (“TBD Note”) with Century TBD Holdings, LLC (“TBD”), a Florida limited liability company. The Company loaned the principal sum of ~~$500,000,~~$500,000, of which up to ~~$500,000~~ $500,000 and all accrued interest can be paid by an “Optional Conversion” of such amount up to ~~19.8%~~19.8% (non-dilutable) of all outstanding membership interest in TBD. This TBD Note accrues interest at 6%6% and matures on October 9, ~~2021.~~2021. As of ~~March 31,~~June 30, 2021 and December 31, 2020, this TBD Note had outstanding principal and interest of approximately ~~$537,000.~~ $537,000, and is classified as a Current Asset on the Consolidated Balance Sheets at June 30, 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%~~7.5% of the issued and outstanding shares of West Park. This note and stock exchange agreement is expected to be finalized sometime during the ~~second~~third quarter of 2021.

GSX Group Limited

On February 8, 2021, the Company entered into a convertible promissory note (“GSX Note”) with GSX Group Limited (“GSX”), a company registered in Gibraltar. The Company loaned the principal sum of ~~$800,000,~~$800,000, with principal and interest at a rate of 4%4%, due in one year from date of issuance. The outstanding principal and interest as of June 30, 2021, approximated $813,000, and is classified as a Current Asset on the Consolidated Balance Sheets at June 30, 2021.The GSX Note shall be converted, at the Company’s option, into shares of GSX at the conversion price of ~~$1.05~~ $1.05 per share.

~~RBC Life Sciences,~~On February 3, 2021, USX Holdings Company, Inc., a subsidiary of the Company entered into a binding joint venture term sheet (“GSX JV”) for the creation of a USA based joint venture alternative trading system or exchange (“JV Exchange”). If definitive terms of a joint venture agreement cannot be reached within 12 months from the date of the GSX JV, if mutually agreed upon, the parties shall continue to form JV Exchange based on terms of the GSX JV, or agree to terminate the GSX JV.

Dustin Crum

On ~~October 9, 2019~~February 21, 2021, Impact BioMedical, Inc. a subsidiary of the Company, entered into a promissory note (“Crum Note”) with Dustin Crum (“Crum”). The Company loaned the principal sum of $206,000, with interest at a rate of 6.5%, and ~~November 11, 2019,~~maturity date of August 19, 2022. Monthly payments are due on the ~~Company’s subsidiary~~twenty-first day of each month and continuing each month thereafter until August 19, 2022, at which time all accrued interest and the entire remaining principal shall be due and payable in full. This note is secured by certain real property situated in Collier County, Florida. The outstanding principal and interest as of June 30, 2021, approximated $201,000 and is classified in long-term notes receivable on the accompanying consolidated balance sheets.

Sharing Services Global Corporation

On April 5, 2021, Decentralized Sharing Systems, Inc., a subsidiary of the Company entered into ~~two, separate on demand, secured,~~a convertible ~~notes~~promissory note (“SHRG Note”) with ~~RBC Life Sciences, Inc. (RBC)~~Sharing Services Global Corporation (“SHRG”), a ~~Nevada corporation.~~company registered in the state of Nevada. The ~~first Note, dated October 9~~^th~~, lent~~Company loaned the principal sum of ~~$200,000 which accrued~~$30,000,000, with interest at a ~~non-default interest~~ rate of 6%8%, and shall be due and payable in full on demand by the Company, or if the demand is not sooner made, April 5, 2024. The interest shall be prepaid annually in cash or Class A Common Shares. At any time during the term of the SHRG Note, at the sole discretion of the Company, the outstanding principal can be converted in whole or in part into whole shares of SHRG Class A Common Stock at a conversion rate of $0.20. The Company received a $3,000,000 loan origination fee associated with this note which has been recorded as an offset to the SHRG Note and will be amortized monthly in the amount of approximately $83,000 through the term of the SHRG Note. Accordingly, in April 2021, the SHRG issued to the Company 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of the loan origination fee and 12,000,000 shares in prepayment of interest for the first year In addition, the Company received 150,000,000 warrants both issued and vested on April 5, 2021. These warrants have an exercise price of $0.22 and expire April 5, 2026. Under ASC 815 (“Topic 815”), the warrants received with the SHRG Note do not meet the definition of a ~~scheduled~~derivative but do require treatment as an equity investment (See Note 6). Accordingly, the value of the note was allocated between current portion of notes receivable and other investments on the consolidated balance sheet. The SHRG Note was valued at $15,043,000 as of April 5, 2021, net of discount. As of June 30, 2021, the amortized value of the note approximates $15,911,000 and approximates fair value.

The Company, via three (3) of the Company’s existing board members, currently holds three (3) of the five (5) SHRG board of director seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along with Mr. Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020), and Mr. Frank D. Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020).

Sentinel Brokers Company, Inc.

On May 13, 2021, a subsidiary of the Company entered a revolving credit promissory note (“Sentinel Note”) with Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York. The Sentinel Note has an aggregate principal balance up to $600,000, to be funded at request of Sentinel. The Sentinel Note, which incurs interest at a rate of 6.65% is payable in areas until the principal is paid in full at the maturity date of ~~November 11, 2019~~May 13, 2023. As of June 30, 2021, there is $0 outstanding on the Sentinel Note. On the same date, the Company entered into a stock purchase agreement (“Sentinel Agreement”) to acquire a 24.9% equity position of Sentinel for the purchase price of $300,000. See Note ~~#1) This~~6.

Puradigm, LLC

On May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company entered into a convertible promissory note (“Puradigm Note”) with Puradigm, LLC (“Puradigm”), a company registered in the state of Texas. The Puradigm Note ~~#1 also~~has an aggregate principal balance up to $5,000,000, to be funded at request of Puradigm. The Puradigm Note, which incurs interest at a rate of 6.5% due quarterly, has a maturity date of May 14, 2023. The Puradigm Note contains an ~~“Optional Conversion”~~options conversion clause that allows the Company ~~at any time, before or after the occurrence of an event of default, at its option,~~ to convert all, or a portion of all, into new issued member units of Puradigm with the ~~outstanding~~maximum principal amount ~~plus accrued interest into a number of newly issued shares of its common stock~~ equal to ~~75%~~18% of the total ~~shares common stock that will be outstanding upon such conversion~~equity position of Puradigm at a fully-diluted basis. Note #1 was also secured by and among other things a first lien on all of the assets of RBC and its subsidiaries, and was guaranteed by its subsidiary, RBC Life Sciences USA, Inc.

conversion. The second note (Note #2) dated November 11, 2019, established a secured, convertible, revolving line of credit to RBC up to an aggregate principal sum of $800,000, funded at the sole discretion of lender, and accruing at annual non-default interest rate of 10% with a scheduled maturity date of November 11, 2024, payable to Decentralized Sharing Systems, Inc.’s wholly owned subsidiary, HWH World, Inc. Accrued interest on the outstanding principal balance was scheduled to be paid monthly commencing on December 25, 2019. Further, any amount of principal repaid during the term of the note was allowed to be re-advanced at any time prior to the earlier of the acceleration of note to maturity or its maturity date. This note also contains an “Optional Conversion” feature that allows the Company, at any time, before or after the occurrence of an event of default, at its option, to convert the outstanding principal balance, plus accrued interest into a number of newly issued shares of its common stock equal to 100% of the outstanding shares of common stock of RBC’s direct and indirect subsidiaries. This Note #2 was also secured by a second lien on all of the assets of RBC, behind the first lien securing Note #1, and a first lien on all of the assets of RBC’s multiple subsidiaries and the full guarantee of these subsidiaries. Advances of approximately $518,000 were made during 2020 under this note.

On January 24, 2020, as a result of the borrower’s default on Note #1, Decentralized Sharing Systems, Inc. made demand for repayment of the outstanding balance of the Note #1. In partial resolution, Decentralized Sharing Systems, Inc and RBC agreed to accept and tender, respectively, pursuant to the Uniform Commercial Code Article 9, collateral in partial satisfaction of debt under the terms of Note #1. The Company chose to not exercise its option convert the outstanding principal and interest ~~into equity, but instead elected to accept this specific collateral.~~as of June 30, 2021, approximated $2,772,000. On ~~February 7, 2020, RBC agreed to the deed-in-lieu of specific assets in satisfaction of part of the amount owing under Note #1.~~

~~On April 8, 2020,~~August 2, 2021, the Company ~~initiated Uniform Commercial Code Article 9 foreclosure proceedings against~~advanced an additional $750,000 toward the remaining assets of RBC and its subsidiaries which culminated with an Article 9 public sale on April 23, 2020. Again, the Company chose to forego the optional conversion of the outstanding principal and interest into 100% ownership, as was allowed in the terms of the note. Instead it elected to pursue through a public foreclosure sale collateral that secured Note #2. At that April Article 9 public sale, HWH World, Inc a wholly-owned subsidiary of the Company was the high bidder, and the Company received a Bill of Sale for all of the remaining assets of RBC. As a result of this foreclosure sale and the Note #1, collateral accepted in lieu of partial debt, the Company now owns and controls most of the former assets of RBC and its subsidiaries.Puradigm Note.

During the second quarter of 2020, the Company completed its evaluation of the assets acquired through foreclosure of Note #1 and #2 above and determined the value received supported the recoverability of the carrying value of the two notes. In accordance with ASC 310 Receivables Goodwill and Other, the assets value will be recorded at the carrying value of the debt, allocated based on the value identified. The carrying values of Note #1 and Note #2 were reclassed as property, plant, and equipment and other intangible assets in the amounts of $201,000 and $637,000 respectively within the accompanying financial statements. These amounts are being depreciated and amortized over their useful lives. The Company is currently a defendant in a lawsuit brought against it for unjust enrichment and fraudulent transfer under Texas Uniform Fraudulent Transfer Act. See Note 9 for further details on related litigation.

4. Financial Instruments

Cash, Cash Equivalents and Marketable Securities

The following tables show the Company’s cash and cash equivalents and marketable securities and investments by significant investment category as of ~~March 31,~~June 30, 2021, and December 31, 2020:

2021

Adjusted
Cost

Unrealized
Gain/(Loss)

Fair
Value

Cash and
Cash
Equivalents

Current
Marketable
Securities
Investments
Cash and cash equivalents $ 20,140,000 $ - $ 20,140,000 $ 20,140,000 $ - $ -
Level 1 -
Money Market Funds 31,921,000 - 31,921,000 31,921,000 - -
Marketable Securities 7,769,000 2,316,000 10,085,000 - 10,085,000 -
Level 2
Warrants 700,000 471,000 1,171,000 - - 1,171,000
Total $ 60,530,000 $ 2,787,000 $ 63,317,000 $ 52,061,000 $ 10,085,000 $ 1,171,000
2020

Adjusted
Cost

Unrealized
Gain/(Loss)

Fair
Value

Cash and
Cash
Equivalents

Current
Marketable
Securities
Investment
Cash and cash equivalents $ 1,733,000 $ - $ 1,733,000 $ 1,733,000 $ - $ -
Level 1
Money Market Funds 3,493,000 - 3,493,000 3,493,000 - -
Marketable Securities 5,641,000 3,495,000 9,136,000 - 9,136,000 -
Level 2
Warrants 700,000 356,000 1,056,000 - - 1,056,000
Total $ 11,567,000 $ 3,851,000 $ 15,418,000 $ 5,226,000 $ 9,136,000 $ 1,056,000
Schedule of Cash and Marketable Securities by Significant Investment Category
2021

Adjusted
Cost

Unrealized
Gain/(Loss)

Fair
Value

Cash and
Cash
Equivalents

Marketable
Securities
Investments
Cash and cash equivalents $ 6,497,000 $ - $ 6,497,000 $ 6,497,000 $ - $ -
Level 1 -
Money Market Funds 59,148,000 - 59,148,000 59,148,000 - -
Marketable Securities 4,727,000 2,592,000 7,319,000 - 7,319,000 -
Level 2
Warrants 15,657,000 (6,117,000 ) 9,540,000 - - 9,540,000
Total $ 86,029,000 $ (3,525,000 ) $ 82,504,000 $ 65,645,000 $ 7,319,000 $ 9,540,000
13
2020

Adjusted
Cost

Unrealized
Gain/(Loss)

Fair
Value

Cash and
Cash
Equivalents

Marketable
Securities
Investment
Cash and cash equivalents $ 1,690,000 $ - $ 1,690,000 $ 1,690,000 $ - $ -
Level 1
Money Market Funds 3,493,000 - 3,493,000 3,493,000 - -
Marketable Securities 5,641,000 3,495,000 9,136,000 - 9,136,000 -
Level 2
Warrants 700,000 356,000 1,056,000 - - 1,056,000
Total $ 11,524,000 $ 3,851,000 $ 15,375,000 $ 5,183,000 $ 9,136,000 $ 1,056,000
The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio.
5. ~~Business Combination~~Acquisitions
American Medical REIT Inc.
On March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc. and American Medical REIT Inc. under which it acquired a ~~52.5%~~52.5% controlling ownership interest in AMRE Asset Management Inc. (“AAMI”) which currently has a ~~93%~~93% equity interest in American Medical REIT Inc. (“AMRE”). AAMI is a real estate investment trust (“REIT”) management company that sets the strategic vision and formulate investment strategy for AMRE. It manages the REIT’s assets and liabilities and provides recommendations to AMRE on acquisition and divestments in accordance with the investment strategies. AMRE is a Maryland corporation, organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. AMRE was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE is planned to qualify as a Real Estate Investment Trust for federal income tax purposes, which will provide. AMRE’s investors the opportunity for direct ownership of Class A licensed medical real estate. ~~As of March 31, 2021, AAMI has yet to generate any revenue.~~
~~Further, pursuant to and in connection with the Term Sheet, effective~~
Effective on March 3, 2020, the Company entered into a Promissory Note with AMRE, pursuant to which AMRE has issued the Company a promissory note for the principal amount of ~~$800,000 (the~~$800,000 (the “Note”). The Note matures on March 3, 2022and accrues interest at the rate of ~~8.0%~~8.0% per annum and shall be payable in accordance with the terms set forth in the Note. Under the Note, AMRE may prepay or repay all or any portion of the Note at any time, without a premium or penalty. If not sooner prepaid, the entire unpaid principal balance of the Note including accrued interest will be due and payable in full on March 3, 2022. The Note also provides the Company an option to provide AMRE an additional ~~$800,000~~ $800,000 on the same terms and conditions as the Note, including the issuance of warrants as described below. As further incentive to enter into the Note, AMRE issued the Company warrants to purchase 160,000 shares of AMRE common stock (the “Warrants”). The Warrants have an exercise price of ~~$5.00~~ $5.00 per share, subject to adjustment as set forth in the Warrants, and expire on March 3, ~~2024.~~2024. Pursuant to the Warrants, if AMRE files a registration statement with the Securities and Exchange Commission for an initial public offering (“IPO”) of AMRE’s common stock and the IPO price per share offered to the public is less than ~~$10.00~~ $10.00 per share, the exercise price of the Warrants shall be adjusted downward to ~~50%~~50% of the IPO price. The Warrants also grants piggyback registration rights to the Company as set forth in the Warrants. As of March 31, 2021, this Note had outstanding principal and interest of approximately ~~$844,000.~~$844,000. Upon consolidation this Note is eliminated. AMRE entered into a ~~$200,000~~ $200,000 unsecured promissory note with LVAM. The Note calls for interest to be paid annually on March 2 with interest fixed at ~~8.0%~~8.0%. See Note 7 for further details.
~~U.S. GAAP requires that~~
On June 18, 2021, DSS Securities, entered into a stock purchase agreement with AMRE to acquire 264,525 Class A Common Shares of AMRE at a per share price of $10, for ~~each business combination, one~~a total consideration of $2,645,250. The additional 264,525 Class A Common Shares acquired increases the combining entities shall be identified as the acquirer, and the existence of a controlling financial interest shall be used to identify the acquirer in a business combination. The Company has determined that its aforementioned 52.5%Company’s total equity interest in ~~AAMI provides existence~~AMRE to approximately 93%.
On June 18, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE financed the purchase of a ~~controlling financial interest~~40,000 square foot, 2.0 story, Class A+ multi-tenant medical office building located on a 13.62 acre site in Shelton, Connecticut (See Note 7). In accordance with Topic 805, the acquisition of the medical facility has been determined to be an acquisition of assets as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.The purchase price of the acquisition was $7,150,000. Included in investments, real estate on the consolidated balance sheet is $4,640,000, $1,600,000, and $325,000 for the facility, land and tenant improvements respectively. Also include in the value of the property is $585,000 of intangible assets with an estimated useful life approximating 3 years. All assets were allocated on a relative fair value basis. As of June 30, 2021, no depreciation or amortization has ~~concluded to account~~been recognized for these assets. Contained within the sale-purchase agreement for this ~~transaction in accordance with~~facility, is a $1,500,000 earnout due to the ~~acquisition method~~seller if certain criteria are met. As of ~~accounting under FASB ASC Topic 805, “~~~~Business Combinations”~~ ~~(“Topic 805”).~~ June 30, 2021, no liability has been recorded for this earnout.
During the three and six months ended ~~March 31,~~June 30, 2021, AMRE had net losses of ~~$58,000~~$191,000 and $249,000, respectively, of which ~~$22,000~~$70,000 and $93,000, respectively is attributable to the non-controlling interest. ~~AAMI does not qualify for a separate reporting segment and is included in Corporate (see Note 14).~~
14
Impact BioMedical, Inc.
On August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact”), pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth, and related parties Alset Intl (formally Singapore eDevelopment Limited), and Global Biomedical Pte Ltd. (“GBM”) which was previously approved by the Company’s shareholders (the “Share Exchange”).Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value ~~$0.02~~ $0.02 per share, nominally valued at ~~$6.48~~ $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”), with a stated value of ~~$46,868,000,~~$46,868,000, or ~~$1,000~~ $1,000 per share, for a total consideration of ~~$50~~ $50 million to acquire ~~100%~~100% of the outstanding shares of Impact. The acquisition was done to add assets and a foundation of products with international market opportunities and demand, and which can be structured into long- term scalable, reoccurring license revenue within the DSS BioHealth line of business. Due to several factors, including a discount for illiquidity, the value of the Series A Preferred Stock was discounted from ~~$46,868,000~~ $46,868,000 to ~~$35,187,000,~~$35,187,000, thus reducing the final consideration given to approximately ~~$38,319,000.~~$38,319,000. The Company incurred approximately ~~$295,000~~ $295,000 in cost associated with the acquisition of Impact which were recorded as general and administrative expenses. As a result of the Share Exchange, Impact is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly owned subsidiary and operating results of the acquisition will be included in the Company’s financial statements beginning August 21, 2020. Impact BioMedical has several subsidiaries that are not wholly owned by Impact and have an ownership percentage ranging from ~~63.6%~~63.6% to ~~100%~~100%. During the three and six months ended ~~March 31,~~June 30, 2021, Impact has incurred approximately ~~$420,000~~$563,000 and $1,262,000 respectively of cost, ~~have been incurred,~~ of which ~~$9,000~~$158,000 and $166,000 respectively of cost incurred is attributable to non-controlling interest. Although Impact historically, and to date has not generated any revenues, the acquisition of Impact 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.
6. Investments
Alset International Limited (formally Singapore eDevelopment Limited)
The Company owns 127,179,311 shares or approximately 7%7% of the outstanding shares of Alset International Limited (“Alset Intl”), formerly named Singapore eDevelopment Limited (“SED”), a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited as of ~~March 31,~~June 30, 2021 and December 31, 2020. 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 Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The fair value of the marketable security as of ~~March 31,~~June 30, 2021 and December 31, 2020 was approximately ~~$5,863,000~~ $5,863,000 and ~~$6,830,000~~ $6,830,000 respectively, and during the ~~three~~six months ended ~~March 31,~~June 30, 2021 the Company recorded unrealized loss on this investment of approximately ~~$967,000.~~$967,000.
Sharing Services Global Corp. (“SHRG”)
As of and through June 30, 2020, the Company classified its investment in Sharing Services Global Corp. (“SHRG”), a publicly traded company, as marketable equity security and measured it at fair value with gains and losses recognized in other income. In July 2020, through continued acquisition of common stock, as detailed below, the Company obtained greater than ~~20%~~20% ownership of SHRG, and thus has the ability to exercise significant influence over it. The Company currently accounts for its investment in SHRG using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures recognizing our share of SHRG’s earnings and losses within our consolidated statement of operations.
15
On July 22, 2020, Chan Heng Fai Ambrose, the Chairman of the Company’s board of directors, assigned a Stock Purchase and Share Subscription Agreement by and between Mr. Chan and SHRG, pursuant to which the Company purchased 30,000,000 shares of Class A common stock and 10,000,000 warrants to purchase Class A common stock for $3 $3 million, causing the Company’s ownership in SHRG to exceed ~~20%~~20%. The warrants have an average exercise price of ~~$0.20,~~$0.20, immediately vested and may be exercised at any time commencing on the date of issuance and ending three year from such date. ~~As of the date of issuance the warrants the consideration paid allocated to the warrants amounted to approximately $700,000.~~ The warrants are considered an equity investment that is recorded at fair value with gains and losses recorded through ~~net income.~~earnings. These warrants have been recorded at the fair ~~market~~ value of ~~$1,171,000~~ $548,000 as of ~~March 31,~~June 30, 2021 as compared to ~~$1,056,000~~ $1,056,000 at December 31, 2020 on the Company’s consolidated balance sheet and are included in “other investments” with the ~~increase~~decrease representing an unrealized ~~gain~~loss of ~~$116,000~~$623,000 and $507,000 respectively during the three and six months ended ~~March 31,~~June 30, 2021. These shares and warrants are also subject to a one-year trading restriction pursuant to the terms of a Lock-Up Agreement entered into between Mr. Chan and the Company and assigned to the Company.
As of July 22, 2020, the carrying value of the Company’s equity method investment exceeded our share of the book value of the investee’s underlying net assets by approximately ~~$9.2 million,~~ $9,192,000 which represents primarily intangible assets in the form of ~~customer and~~a distributor lists and goodwill arising from acquisitions. These intangible assets have been valued at approximately $1,148,000and $8,044,000, respectively. The intangible asset arising from the distributor list has a five-year useful life. The Company has recorded amortization of $230,000for the three and six months ended June 30, 2021 on the consolidated statement of operations. On April 5, 2021, a subsidiary of the Company entered into a convertible promissory note (“SHRG Note”) with SHRG (Note 3). The Company loaned the principal sum of $30,000,000. Accordingly, in April 2021, the SHRG issued to the Company 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of the loan origination fee and 12,000,000 shares in prepayment of interest for the first year. In addition, the Company received 150,000,000 warrants both issued and vested on April 5, 2021. These warrants have an exercise price of $0.22 and expire April 5, 2026. As of the date of issuance the warrants the consideration paid allocated to the warrants amounted to approximately $14,957,000. The warrants are considered an equity investment that is ~~still in~~recorded at fair value with gains and losses recorded through earnings. These warrants have been recorded at the ~~process~~fair value of ~~valuing the intangible assets and goodwill~~ $8,992,000 as of ~~March 31,~~June 30, 2021 on the Company’s consolidated balance sheet and ~~no amortization has been recorded~~ are included in “other investments” with the decrease representing an unrealized loss of $5,966,000 during the ~~period~~three and six months ended ~~March 31,~~June 30, 2021. As of ~~March 31,~~June 30, 2021, the Company held ~~64,207,378~~ 91,207,378 class A common shares equating to a ~~40.2%~~46.7% ownership interest in SHRG. Due to the difference in fiscal year ends between the two companies, DSS has elected to recognize its portion of SHRG’s earnings and losses on a ~~quarter~~two month lag basis and utilized SHRG’s three-month ended ~~January 31,~~April 30, 2021 reported results to recognize a loss on the equity method investment of approximately ~~$579,000.~~$317,000. The aggregate fair value of the Company’s investment in SHRG at ~~March 31,~~June 30, 2021 was approximately ~~$16,052,000.~~ $12,769,000.
The following table represents SHRG operating results for the ~~nine-months~~eleven-months ended ~~January~~March 31, 2021:
Net sales $ 55,642,560
Gross profit $ 39,948,960
Operating loss $ (93,872 )
Loss before income taxes $ (290,965 )
Income tax provision $ 391,749
Net loss $ (682,714 )
Schedule of Operating Result

Net sales $ 64,811,151
Gross profit $ 46,546,657
Operating loss $ (2,177,526 )
Loss before income taxes $ (1,829,530 )
Income tax provision $ 594,509
Net loss $ (1,235,021 )
The Company, via four (4) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board of director seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along with Mr. Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020), Mr. Sassuan “Sam” Lee, DSS Independent Director (joined the SHRG Board effective September 29, 2020) and Mr. Frank D. Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020).
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%~~14.9% membership interests in BMIC for ~~$100,000.~~$100,000. DSS Securities also had the option to purchase an additional ~~10%~~10% of the outstanding membership interest which it exercised in January of 2021 and increased its ownership to ~~24.9%~~24.9%. Upon achieving greater than ~~20%~~20% ownership in BMIC during the quarter ended March 31, 2021, and June 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 income in BMIC during the three and six months ended ~~March 31,~~June 30, 2021 was not significant.
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 this joint venture.
16

Alset Title Company
On or about August 28, 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities, Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting process. ATC have initiated or have pending applications to do business in a number of states, including Texas, Tennessee, Connecticut, Florida, and Illinois. For the purpose of organization and the state application process, the Company’s CEO, who is a licensed attorney, has a stated non-compensated 15% ownership interest in the venture. There was minimal activity for the three and six months ended ~~March 31,~~June 30, 2021.
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%~~4.99% of BioMed at a purchase price of approximately ~~$630,000.~~$630,000. 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 entered into an exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to directly market, advertise, promote, distribute, and sell certain BioMed products, which focus on manufacturing natural probiotics, to resellers. This investment is valued at cost as it does not have a readily determined fair value.
BioMed focuses on manufacturing natural probiotics, pursuant to which the Company will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed by the Company include BioMed’s PGut Premium Probiotics^®, PGut Allergy Probiotics^®, PGut SupremeSlim Probiotics^®, PGut Kids Probiotics^®, and PGut Baby Probiotics^®.
Under the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries. In exchange, the Company agreed to certain obligations, including mutual marketing obligations to promote sales of the products. This agreement is for ten years with an 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 ~~“Agreement”~~“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,~~$1.00, with an option to purchase 1,500,000 additional shares at the per share price of ~~$1.00.~~$1.00. This option will terminate upon one of the following events: (i) ~~The Seller’s~~Vivacitas’ board of directors cancels this option because it is no longer in the best interest of the Company; (ii) December 31, 2021; or (iii) the date on which ~~the Seller~~Vivacitas receives more than ~~$1.00~~ $1.00 per share of the Company’s common stock in a private placement with gross proceeds of ~~$500,000.~~$500,000. Under the terms of the Vivacitas Agreement #1, the Company will be allocated two seats on the board of Vivacitas. On March 18, 2021, the Company entered into an agreement with Alset EHome International, Inc. (“Seller”) to purchase from the Seller’s its wholly owned subsidiary Impact Oncology PTE Ltd. (“IOPL”) for a purchase price ~~$2,480,000.~~$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. ~~As a result of these two transactions, the Company will have an approximate 15.7% equity position in Vivacitas.~~ 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 employee 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. As of June 30, 2021, the Company has received 30 Common A Shares of Vivacitas. As of June 30, 2021, the Company will have an approximate 16% equity position in Vivacitas.
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 19.3%.
Sentinel Brokers Company, Inc.
On May 13, 2021, a Sentinel Brokers, LLC., subsidiary of the Company entered into a stock purchase agreement (“Sentinel Agreement”) to acquire a 24.9% equity position of Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York, for the purchase price of $300,000. Under the terms of this agreement, the Company as the option to purchase an additional 50.1% of the outstanding Class A Common Shares. Upon the exercising of this option, but no earlier than one year following the effective date the Sentinel Agreement, Sentinel has the option to sell the remaining 25% to the Company. In consideration of purchase price investment in Sentinel, the Company is entitled to an additional 50.1% of the net profits of Sentinel. The Company currently accounts for its investment in Sentinel using the equity method in accordance with ASC Topic 323, as it currently owns 24.9% of Sentinel. The Company currently accounts for its investment in Sentinel using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures recognizing our share of Sentinel’s earnings and losses within our consolidated statement of operations. The Company recognized a loss on the equity method investment of approximately $18,000 for the period ending June 30, 2021.
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”).
17

7. 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 (“Citizens”) of up to ~~$800,000~~$800,000 that bears interest at 1 Month LIBOR plus ~~2.0% (2.1% as of March 31, 2021). This~~2.0%.This revolving line of credit was renewed and has a maturity date of May 31, 2021 and is renewable annually. This renewal was not exercised by Premier Packaging. As ~~of March 31, 2021 and~~ December 31, 2020 the revolving line had a balance of ~~$0.~~$0.
On July 26, 2017, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving Line of Credit Agreement with Citizens pursuant to which Citizens agreed to lend up to ~~$1,200,000~~ $1,200,000 to permit Premier Packaging to purchase equipment from time to time that it may need for use in its business. The aggregate principal balance outstanding under the Equipment Acquisition Line of Credit shall bear interest thereon at a per annum rate of 2%2% above the LIBOR Advantage Rate until the Conversion Date (as defined in the Term Note Non-Revolving Line of Credit). Effective on the Conversion Date, the interest shall be adjusted to a fixed rate equal to 2%2% above the bank’s Cost of Funds, as determined by Citizens. Current maturities of long-term debt are based on an estimated 48-month amortization which will be adjusted upon conversion. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Term Note had a balance of ~~$741,000~~ $710,000 and ~~$771,000~~ $771,000 respectively. The Company pays a monthly amount of ~~$13,000~~ $13,000 in principal and interest. The Term Note was paid in full in July 2021.
Equipment Line of Credit - On July 31, 2020, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving Line of Credit Agreement with Citizens pursuant to which Citizens agreed to lend up to ~~$900,000~~$900,000 to permit Premier Packaging to purchase equipment from time to time that it may need for use in its business. The aggregate principal balance outstanding under the Equipment Acquisition Line of Credit shall bear interest thereon at a per annum rate of 2%2% above the LIBOR Advantage Rate until the Conversion Date (as defined in the Term Note Non-Revolving Line of Credit). Effective on the Conversion Date, the interest shall be adjusted to a fixed rate equal to 2%2% above the bank’s Cost of Funds, as determined by Citizens. With a maturity date of July 28, 2021, this equipment line is renewable annually. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the loan had a balance of $0$0 and Premier Packaging still has available ~~$900,000~~$900,000 for equipment borrowings. Premier did not exercise its right to renew this line of credit.
Promissory Notes - On June 27, 2019 Premier Packaging refinanced and consolidated the outstanding principal associated with the two promissory notes for its packaging plant located in Victor, New York, for ~~$1,200,000~~ $1,200,000 with Citizens Bank. The new Promissory Note calls for monthly payments of ~~$7,000,~~$7,000, with interest fixed at ~~4.22%~~4.22%. The new Promissory Note matures on June 27, 2029, at which time a balloon payment of ~~$708,000~~ $708,000 is due. In July of 2021, Premier Packaging repaid this note in full. As of ~~March 31,~~June 30, 2021, and December 31, 2020, the new, consolidated Promissory Note had a balance of ~~$1,090,000~~$1,080,000 and ~~$1,100,000 respectively.~~$1,100,000, respectively.
The Citizens credit facilities to each of the Company’s subsidiaries, Premier Packaging, contain various covenants including fixed charge coverage ratio, tangible net worth and current ratio covenants which are tested annually at December 31. For the year ended December 31, 2020, Premier Packaging was in compliance with the annual covenants.
On March 2, 2020, AMRE entered into a ~~$200,000~~$200,000 unsecured promissory note with LVAM. The Note calls for interest to be paid annually on March 2 with interest fixed at ~~8.0%~~8.0%. As of December 31, 2020, accrued interest is included in the outstanding balance. If not paid sooner, the entire unpaid principal balance is due in full on March 2, ~~2022.~~2022. As further incentive to enter into this Note, AMRE granted LVAM 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~~$5.00 per share (the “Exercise” Price). The value of the warrants is not considered to be material. The holder is a related party owned by the Chairman of the Company’s board of directors. As of ~~March 31,~~June 30, 2021, the new promissory note, inclusive of unpaid interest, had a balance of ~~$218,000.~~$222,000.
18
During Q2 2020, the Company received loan proceeds for Premier Packaging, DSS Digital, and AAMI in the amount of approximately ~~$1,078,000~~$1,078,000 under the Paycheck Protection Program (“PPP”). 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 August 4, 2020, pursuant to the terms of the SBA PPP program, the Company submitted applications for Premier Packaging and DSS Digital for a requested ~~100%~~100% loan forgiveness. During the fourth quarter 2020, both these notes approximating ~~$969,000~~$969,000 were forgiven in full and recognized as a gain on the extinguishment of debt on the accompanying consolidated financial statements as of December 31, 2020. AAMI, pursuant to the terms of the SBA PPP program, submitted its application for ~~100%~~100% loan forgiveness in October 2020, and received confirmation of forgiveness in January 2021.
On March 16, 2021, American Medical REIT, Inc. received loan proceeds in the amount of approximately ~~$110,000~~$110,000 under the Paycheck Protection Program (“PPP”) with a fixed rate of 1%1% and a ~~60-month~~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.
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 in an amount not to exceed $3,200,000 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. At closing, the interest rate shall be fixed for the duration of the Loan. As of June 30, 2021, the outstanding principal on the BOA Note was $1,113,000 and had an interest rate of 2.42%. On July 16, 2021, Premier Packaging drew an additional $742,000 against the BOA Note.
On June 18, 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 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-Y ear 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. This agreement contains certain covenants that are analyzed on an annual basis, starting December 31, 2021. 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 (See Note 5). Of the total financed, approximately $189,000 is classified as current portion of long-term debt, net, and the remaining balance of approximately $4,916,000 recorded as long-term debt, net of $186,000 in deferred financing costs.
8. Lease Liability
The Company has operating leases predominantly for operating facilities. As of ~~March 31,~~June 30, 2021, the remaining lease terms on our operating leases range from less than one to ~~two~~five years. ~~DSS Plastics Group which finalized the sale of its assets on August 14, 2020 is not included in the lease liability calculation (see Note 11).~~ Renewal options to extend our leases have not been exercised due to uncertainty. Termination options are not reasonably certain of exercise by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants. There are no significant finance leases as of ~~March 31,~~June 30, 2021.
Future minimum lease payments as of ~~March 31,~~June 30, 2021 are as follows:
Maturity of Lease Liability
Totals
2021 132,000
2022 18,000
2023 4,000
2024 4,000
2025 4,000
2026 2,000
Total lease payments 164,000
Less: Imputed Interest (8,000 )
Present value of remaining lease payments $ 156,000

Current $ 138,000
Noncurrent $ 18,000

Weighted-average remaining lease term (years) 0.9

Weighted-average discount rate 4.04 %
Schedule of Future Minimum Lease Payments
Maturity of Lease Liability
Totals
2021 91,000
2022 19,000
2023 4,000
2024 4,000
2025 4,000
2026 2,000
Total lease payments 124,000
Less: Imputed Interest (6,000 )
Present value of remaining lease payments $ 118,000

Current $ 101,000
Noncurrent $ 17,000

Weighted-average remaining lease term (years) 1.0

Weighted-average discount rate 5.4 %
19
9. Commitments and Contingencies
The Apple Litigation
On November 26, 2013, ~~DSSTM~~DSS Technology Management, Inc. (“DSSTM”) filed suit against Apple, Inc. (“Apple”) in the United States District Court for the Eastern District of Texas, for patent infringement (the “Apple Litigation”). The complaint alleges infringement by Apple of DSSTM’s patents that relate to systems and methods of using low power wireless peripheral devices. DSSTM is seeking a judgment for infringement, injunctive relief, and compensatory damages from Apple. On October 28, 2014, the case was stayed by the District Court pending a determination of Apple’s motion to transfer the case to the Northern District of California. On November 7, 2014, Apple’s motion to transfer the case to the Northern District of California was granted. On December 30, 2014, Apple filed two Inter Partes Review (“IPR”) petitions with the Patent Trial and Appeal Board (“PTAB”) for review of the patents at issue in the case. The PTAB instituted the IPRs on June 25, 2015. The California District Court then stayed the case pending the outcome of those IPR proceedings. Oral arguments of the IPRs took place on March 15, 2016, and on June 17, 2016, PTAB ruled in favor of Apple on both IPR petitions. DSSTM then filed an appeal with the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) seeking reversal of the PTAB decisions. Oral arguments for the appeal were held on August 9, 2017. On March 23, 2018, the Federal Circuit reversed the PTAB, finding that the PTAB erred when it found the claims of U.S. Patent No. 6,128,290 to be unpatentable. The Federal Circuit affirmed its decision on July 12, 2018, when it denied Apple’s petition for panel rehearing of the Federal Circuit’s Opinion and Judgment issued on March 23, 2018. On July 27, 2018, the District Court judge lifted the Stay resuming the litigation, which had a trial date set for the week of February 24, 2020. On January 14, 2020, the Court in the case DSS Technology Management, Inc. v. Apple, Inc., 4:14-cv-05330-HSG pending in the Northern District of California issued an order that denied DSS’ motion to amend its infringement contentions. In the same Order, the Court granted Apple’s motion to strike DSS’ infringement expert report. DSS filed a motion for leave to file a motion for reconsideration of the Court’s order denying DSS the right to amend its infringement contentions and motion to strike DSS infringement expert report. On February 18, 2020, the Court denied DSS’s motion for leave to file a motion for reconsideration. On February 24, 2020, the Court signed a Final Judgment stipulating that Apple was “entitled to a judgment of non-infringement of U.S. Patent No. 6,128,290 as a matter of law.” On March 10, 2020, DSS filed an appeal of this Final Judgment to the United States Court of Appeals for the Federal Circuit under DSS Technology Management v. Apple, Federal Circuit Docket no. 2020-1570. On April 27, 2021, the Court of Appeals heard oral argument, and on April 30, 2021, the Court affirmed the District Court’s judgment. The Company is currently evaluating its options for further proceedings on appeal.
On March 10, 2020 DSS filed an appeal of this Final Judgment to the United States Court of Appeals for the Federal Circuit under DSS Technology Management v. Apple, Federal Circuit Docket no. 2020-1570. On April 27, 2021, the Court of Appeals heard oral argument, and on April 30, 2021, the Court affirmed the District Court’s judgment. ~~The~~After considering all factors the Company has elected to not pursue any further appeals on this matter. Case is ~~currently evaluating its options for further proceedings on appeal.~~deemed closed.
The Ronaldi Litigation
In April 2019 DSS commenced an action in New York State Supreme Court, Monroe County, Index No. E2019003542, against Jeffrey Ronaldi, our former Chief Executive Officer. This New York action seeks a declaratory judgment that, contrary to informal claims made by him, Mr. Ronaldi’s employment agreement with us expired by its terms and that he is not entitled to any cash bonuses or other unpaid amounts. The lawsuit also seeks an injunction against Mr. Ronaldi from interfering with any of DSS’ IP litigation. Mr. Ronaldi subsequently commenced an action against DSS in the Superior Court of California, County of San Diego, on November 8, 2019, under case number 37-2019-00059664-CU-CO-CTL, in which he alleged that DSS terminated his employment in April 2019 in order to avoid paying him certain employment-related amounts. DSS was successful in dismissing the California case and consolidating it with the action pending in Monroe County, New York. Mr. Ronaldi asserted counterclaims in the Monroe County, New York action similar to those he originally brought in California. Mr. Ronaldi claims that his termination violated an alleged employment agreement or implied-in-fact employment agreement and that he should have remained employed through 2019. Mr. Ronaldi seeks to recover: (i) ~~$144,657.53~~$144,658 in wages from April 11, 2019 through December 31, 2019; (ii) ~~$769.23~~$769 in alleged unpaid based salary for time worked before April 11, 2019; (iii) ~~$15,384.62~~$15,385 in alleged paid time off compensation; (iv) ~~$3,076.93~~$3,077 in alleged unpaid sick time compensation; (v) ~~$26,076.93~~$26,077 in waiting-time penalties; (vi) ~~-$91,000~~$91,000 in unspecified expense reimbursement; (vii) $300,000 in alleged cash bonuses ($100,000 per year) based on DSS’s performance in 2017, 2018 and 2019; and (viii) a $450,000 performance bonus based on the result of certain alleged net proceeds from patent infringement litigation. He further claims an interest in any recovery in DSS Technology Management v. Apple, Inc., Case No. 4:14-cf05330-HSG. The parties are now engaged in discovery.
20
Additionally, on March 2, 2020 DSS and DSSTM filed a second litigation action against Jeffrey Ronaldi in the State of New York, Supreme Court, County of Monroe, Document Security Systems, Inc. and DSS Technology Management, Inc. vs. Jeffrey Ronaldi, Index No.: 2020002300, alleging acts of self-dealing and conflicts of interest while he served as CEO of both DSS and DSS TM. Mr. Ronaldi filed a Notice of Removal of this civil litigation to the United States District Court for the Western District of New York where it was assigned Case No. 6:20-cv-06265-EAW. Mr. Ronaldi filed a motion seeking to compel DSS to advance his legal fees to defend the action, which motion was fully briefed as of June 30, 2020 and remains pending and undecided. On March 16, 2021 the Western District of New York granted Mr. Ronaldi’s motion to have his defense costs advanced to him during the pendency of the action as they are incurred. On March 26, 2021 Mr. Ronaldi applied to the court for reimbursement of ~~$160,896.25~~ $160,896 in legal fees. The Company has objected to the size of that bill as it was based on out-of-town billing rates and the result of an excessive number of hours spent on litigation. The parties now engaged in discovery, awaiting a decision on the Company’s objection to Mr. Ronaldi’s fee ~~application and will engage~~application. The parties engaged in court-ordered mediation ~~no later than~~on June ~~30, 2021.~~17, 2021 but the matter did not resolve. Following mediation the Company moved to stay the federal court action pending the outcome of the state court action to avoid inconsistent rulings on common issues of law and fact. The motion to stay is pending. The Company intends to vigorously defend its position.
Maiden Biosciences Litigation
On February 15, 2021, Maiden Biosciences, Inc. (“Maiden”) commenced an action against Document Security Stems, Inc. (“DSS”), Decentralized Sharing Systems, Inc. (“Decentralized”), HWH World, Inc. (“HWH”), RBC Life International, Inc., RBC Life Sciences, Inc (“RBC”)., Frank D. Heuszel (“Heuszel”), Steven E. Brown, Clinton Howard, and Andrew Howard (collectively, “Defendants”). The lawsuit is currently pending in the United States District Court Northern District of Texas, Dallas Division, and is styled and numbered Maiden Biosciences, Inc. v. Document Security Stems, Inc., et al., Case No. 3:21-cv-00327.
This lawsuit relates to two promissory notes executed by RBC in the 4^th quarter of 2019 in favor of Decentralized and HWH, totaling approximately $800,000. Maiden, a 2020 default judgment creditor of RBC, in the principal amount of $4,329,000, now complains about those notes, the funding of those notes, the subsequent default of those notes by RBC, and HWH and Decentralize’s subsequent Article 9 foreclosure or deed-in-lieu debt conveyances. In the instant lawsuit, Maiden asserts claims against Defendants for unjust enrichment, fraudulent transfer under the Texas Uniform Fraudulent Transfer Act, and violation of the Racketeer Influenced and Corrupt Organizations Act. Maiden also seeks a judgment from the court declaring: “(1) Defendants lacked a valid security interest in RBC and RBC Subsidiaries’ assets and therefore lacked the authority to sell the assets during the public foreclosure sale; (2) Defendant Heuszel’s low bid at the public foreclosure sale was invalid and void; (3) the public foreclosure sale was conducted in a commercially unreasonable manner; and (4) Defendants do not have the legal authority to transfer RBC and RBC’s Subsidiaries assets to Heuszel and HWH.” Maiden seeks to recover from Defendants: (1) treble damages or, alternatively, damages in the amount of their underlying judgment plus the other creditors’ claims or the value of the assets transferred, whichever is less, plus punitive or exemplary damages; (2) pre and post-judgment interest; and (3) attorneys’ fees and cost.
On March 30, 2021, Defendants DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel filed ~~their Motion~~a motion to ~~Dismiss the RICO,~~dismiss seeking to dismiss Maiden’s unjust enrichment, ~~and~~ exemplary damages, and RICO claims against ~~them,~~DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel, as well as Maiden’s fraudulent transfer claims against DSS and RBC International, Inc. On August 9, 2021, the Court the entered an order granting in part the motion to dismiss filed on behalf of DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel. Among other things, the Court held that Maiden failed to plausibly plead certain causes of action, including (1) the civil RICO claim against DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel, (2) the TUFTA claim against DSS, and (3) the unjust enrichment claim against DSS and RBC Life International, Inc. ~~On May 4, 2021,~~Notably, the Court declined the request to dismiss the TUFTA claim against RBC Life International, Inc. The Court granted Maiden ~~filed its Response and Supporting Brief in Opposition~~leave to ~~the Motion~~file an amended complaint. Maiden’s deadline to ~~Dismiss. A Reply Brief must be filed by May 18,~~do so is Monday, September 6, 2021. The ~~pretrial deadlines and tentative trial date will be set by the Court after a ruling on the Motion~~Company intends to ~~Dismiss and following a customary status conference.~~vigorously defend its position.
In addition to the foregoing, we may become subject to other legal proceedings that arise in the ordinary course of business and have not been finally adjudicated. Adverse decisions in any of the foregoing may have a material adverse effect on our results of operations, cash flows or our financial condition. The Company accrues for potential litigation losses when a loss is probable and estimable.
21

10. Stockholders’ Equity
Sales of Equity – On February 20, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #1”) with Aegis Capital Corp. (the “Underwriter”), which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “Feb. 2020 Offering”), of 740,741 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #1, the shares were sold to the Underwriter at a public offering price of $5.40 ($0.18 per shares pre-reverse stock split) per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 111,111 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Feb. 2020 Offering which were exercised. The net offering proceeds to the Company from the Feb. 2020 Offering were approximately $4 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses. The offering was closed on February 25, 2020. Heng Fai Ambrose Chan, the Chairman of the Company’s Board of Directors, purchased $2 million of shares in the Feb. 2020 Offering.
On May 15, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #2”) with the Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “May 2020 Offering”), of 769,230 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #2, the shares were sold to the Underwriter at a public offering price of $7.80 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 115,384 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the May 2020 Offering which was exercised. The net offering proceeds to the Company from the May 2020 Offering were approximately $6.2 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses. The May 2020 Offering was closed on June 26, 2020.
On July 7, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #3”) with the Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “July 2020 Offering”), of 1,028,800 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #3, the shares were sold to the Underwriter at a public offering price of $6.25 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 154,320 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the July 2020 Offering which was exercised. The net offering proceeds to the Company from the July 2020 Offering were approximately $6.7 million. The July 2020 Offering was closed on July 10, 2020.
On July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #4”) with the “Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “July 2020 Offering #2”), of 453,333 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #4, the shares were sold to the Underwriter at a public offering price of $7.50 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 38,533 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the July 2020 Offering #2. The net offering proceeds to the Company from the July 2020 Offering #2 were approximately $3.3 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses. The initial July 2020 Offering #2 was closed on July 31, 2020, and the overallotment was exercised on August 7, 2020.
On August 21, 2020, the Company, completed its acquisition of Impact BioMedical, pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth, and related parties Alset Intl, and GBM which was previously approved by the Company’s shareholders (the “Share Exchange”). Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value $0.02 per share, nominally valued at $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred Stock.
In connection with the Share Exchange for Impact BioMedical described in Note 5, on August 18, 2020, the Company filed a Certificate of Amendment of its Certificate of Incorporation (the “Certificate of Amendment”) to increase the number of authorized shares of the Company, including 47,000 shares of Preferred Stock, with a par value of ~~$0.02,~~$0.02, of which 47,000 shares were designated Series A Preferred Stock. The Certificate of Amendment, the form of which was previously disclosed in a Schedule 14A Definitive Proxy Statement filed with the Securities and Exchange Commission on July 14, 2020. As described in Note 5, this transaction is a related party transaction.
Holders of the Series A Preferred Stock have no voting rights, except as required by applicable law or regulation, and no dividends accrue or are payable on the Series A Preferred Stock. The holders of Series A Preferred Stock are entitled to a liquidation preference at a liquidation value of ~~$1,000~~$1,000 per share aggregating to ~~$46,868,000,~~$46,868,000, and the Company has the right to redeem all or any portion of the then outstanding shares of Series A Preferred Stock, pro rata among all holders, at a redemption price per share equal to such liquidation value per share. The Series A Preferred Stock ranks senior to Common Stock and any other class of securities that is specifically designated as junior to the Series A Preferred Stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, in respect of a liquidation preference equal to its par value of ~~$1,000.~~$1,000. A holder of Series A Preferred Stock has the option to convert each share of Series A Preferred Stock into a number of common shares in the Company equal to the $1,000 liquidation preference divided by a conversion price of ~~$6.48~~$6.48 or 154.32 shares subject to a Beneficial Ownership Limitation of ~~19.99%~~19.99%, as defined in the Share Exchange Agreement. Additionally, the Company has the option to require conversion of all outstanding Series A Preferred Stock into common stock at any time, subject to the Beneficial Ownership Limitation discussed. In aggregate the Series A Preferred Shares are convertible into 7,232,670 shares of the Company’s common stock at the date of issuance. The Company evaluated the classification of the Series A Preferred Shares under the guidance enumerated in ASC 470, 480, and 815 and determined that based on the features noted above the instruments are accounted for as permanent equity. On October 16, 2020, GBM converted 4,293 shares of the Series A Convertible Preferred Stock into 662,500 shares of the Company’s common A ~~shares.~~Shares. On May 28, 2021, GBM converted 35,316 shares of the Series A Convertible Preferred Stock into 5,450,000 shares of the Company’s common A Shares. On June 21, 2021, GBM converted 7,259 shares of the Series A Convertible Preferred Stock into 1,120,170 shares of the Company’s common A Shares.
On January 19, 2021, the Company entered into an underwriting agreement, as amended by Amendment No. 1 effective as of January 19, 2021 (the “Jan. 2021 Underwriting Agreement”), with Aegis Capital Corp., as representative of the underwriters, which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “Jan. 2021 Offering”), of 6,666,666 shares of the Company’s common stock, ~~$0.02~~$0.02 par value per share. Subject to the terms and conditions contained in the Jan. 2021 Underwriting Agreement, the shares were offered in a public offering at a price of ~~$3.60~~$3.60 per share, less certain underwriting discounts and commissions. The Company also granted the underwriters a 45-day option to purchase up to 1,000,000 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Jan. 2021 Offering. This overallotment was exercised in full. The net offering proceeds to the Company from the Jan. 2021 Offering are approximately ~~$24.9~~$24.9 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses
On February 4, 2021, the Company entered into an underwriting agreement (the “Feb. 2021 Underwriting Agreement”) with Aegis Capital Corp., as representative of the underwriters named therein, which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “Feb. 2021 Offering”), of 12,319,346 shares of the Company’s common stock, ~~$0.02~~$0.02 par value per share. Subject to the terms and conditions contained in the Feb. 2021 Underwriting Agreement, the shares were sold at a public offering price of ~~$2.80~~$2.80 per share, less certain underwriting discounts and commissions. The Company also granted the underwriters a 45-day option to purchase up to 1,847,901 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Feb. 2021 Offering, which over-allotment option was exercised in full on February 9, 2021. The net offering proceeds to the Company from the Feb. 2021 Offering are approximately ~~$36.14~~$36.14 million, including the exercise of the underwriter’s over-allotment option, and after deducting estimated underwriting discounts and commissions and other estimated offering expenses.
On May 26, 2021, the Company entered into an underwriting agreement (the “May 2021 Underwriting Agreement”) with Aegis Capital Corp., as representative of the underwriters named therein, which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “May 2021 Offering”), of 29,000,000 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the May 2021 Underwriting Agreement, the shares were sold at a public offering price of $1.50 per share, less certain underwriting discounts and commissions. The Company also granted the underwriters a 45-day option to purchase up to 4,350,000 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the May 2021 Offering, which over-allotment option was exercised in full on June 16, 2021. The net offering proceeds to the Company from the May 2021 Offering are approximately $45.75 million, including the exercise of the underwriter’s over-allotment option, and after deducting estimated underwriting discounts and commissions and other estimated offering expenses.
Stock-Based Compensation - The Company records stock-based payment expense related to options and warrants based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During the three months ended ~~March 31,~~June 30, 2021, the ~~Company had~~Company’s stock compensation ~~expense~~was a credit of approximately ~~$15,000~~ $30,000 or less than ~~$.01~~ ($.01) basic and diluted loss per share for the three months ended ~~March 31,~~June 30, 2021($~~90,000~~ 54,000 or less than ~~$.06~~ $.04 basic and diluted loss per share ~~- March 31,~~– June 30, 2020).
On April 3, 2020, by unanimous written consent, the Board of Directors authorized the Company to issue individual stock grants of the Company’s common stock, pursuant to the Company’s 2020 Employee, Director and Consultant Equity Incentive Plan, to certain managers and directors in the amount of 8,900 shares, at $6.60 per share which were immediately vested and issued. 5,800 of these shares where were fully vested restricted stock to members of the Company’s management team with a two-year lock-up period.
22
On June 4, 2020, the Company entered into an agreement with an investor relations firm to provide services over a 14-month period in exchange for 21,000 shares of common stock. The shares were issued on the date of the agreement and were valued by the Company at ~~$210,000.~~$210,000. The value assigned to the shares is included in other assets on the accompanying consolidated balance sheets and will be expensed into marketing expense as it is earned.
~~On September 23, 2020, by written consent of~~ For the ~~Chief Executive Officer~~three and ~~the Chairman of the board,~~six month period ending June 30, 2021, the Company ~~issued individual stock grants of the Company’s common stock, pursuant to the Company’s 2020 Employee, Director~~recognized $45,000 and ~~Consultant Equity Incentive Plan, to a consultant of the Company in the amount of 20,000 shares, at $4.48 per share which were immediately vested.~~$90,000 respectively.
11. Discontinued Operations
As a result of the insufficient cash flows from the operations of Plastic Printing Professionals, Inc. as well as the disruption of our business from the COVID-19 pandemic, on April 20, 2020, the Company executed a nonbinding letter of intent with a buyer for substantially all the assets of this business line. with an intent to exit this business line. As a result, management has decided to fully impair its goodwill related to DSS Plastics. The impact to DSS’s first quarter earnings of this impairment was approximately ~~$685,000.~~$685,000. On August 14, 2020, the Company entered into a final Asset Purchase Agreement and the Company terminated its production and office personnel and maintained only a few employees to assist in and facilitate the sale of its assets. The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial statements.
The consideration paid to the Company under the Asset Purchase Agreement for the sale of the assets included a one-time cash payment of ~~$683,000~~ $683,000 and an additional contingent earn-out payment of an aggregate amount of up to ~~$517,000~~ $517,000 based on future quarterly gross revenue of the business to be conducted by the buyer with the sold assets. Consistent with the Company’s policy for accounting for gain contingencies, the earn out will be recorded when determined ~~realizable~~realizable. As of June 30, 2021, the Company has recognized $390,000 of this earn out, all of which ~~did not occur~~was recognized during the ~~twelve-months~~year ended December 31, 2020. ~~As of December 31, 2020, the Company has recognized $390,000 of this earn out in Loss from Discontinued Operations.~~ The net effect of all assets disposed of isresulted in a net loss of ~~$111,000~~ $111,000 to the third quarter 2020.These amounts are included in Loss from Discontinued Operations. Included in its Right-of-use assets is the lease of the Company’s facility in Brisbane, Ca. In April 2021, the Company terminated this lease with the landlord effective March 31, 2021 and therefore, wrote off the asset and corresponding liability associated with the lease at March 31, 2021. As of December 31, 2020 $744,000 was record as non-current asset held for sale – discontinued operations on the consolidated balance sheet. Also recorded was $240,000 of current liabilities held for sale – discontinued operations and $505,000 of non-current liabilities held for sale – discontinued operations.
Schedule of Discontinued Operations
The following table shows the results of operations of the discontinued operation.

Plastic Printing Professionals, Inc.
Consolidated Statements of Operations and Comprehensive Loss - Discontinued Operations
(unaudited)
For the Three Months Ended
For the Six
Months Ended

June 30, 2020 June 30, 2020

Revenue:
Printed products $ 603,000 $ 1,383,000
Total revenue 603,000 1,383,000

Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization 484,000 1,113,000
Selling, general and administrative (including stock based compensation) 286,000 733,000
Depreciation and amortization 58,000 115,000
Impairment of goodwill - 685,000
Total costs and expenses 828,000 2,646,000
Operating loss (225,000 ) (1,263,000 )

Other income (expense):
Interest expense (7,000 ) (15,000 )
Income (loss) before income taxes (232,000 ) (1,278,000 )

Income tax expense (benefit) - -
Income (loss) from discontinued operations $ (232,000 ) $ (1,278,000 )
On May 7, 2021, the Company completed the sale of 100% of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Digital Purchase Agreement”). Pursuant to the terms of the Digital Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash; $1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary of the closing and ending the day before the six-year of the closing; and $0.5 million in trade credit or license fee rebates. Consistent with the Company’s policy for accounting for gain contingencies, the earn out will be recorded when determined realizable which did not occur during the three-months ended June 30, 2021. Also, the Company has not utilized the $0.5 million trade credit as of June 30, 2021. The net effect of sale of DSS Digital, inclusive of income tax, is a net gain of $2,226,000. This amount is included in Income (loss) from Discontinued Operations on the accompanying consolidated statement of operations.
The following tables show the major classes of assets and liabilities held for sale and results of operations of the discontinued operation.
Schedule of Assets and Liabilities Held for Sale
DSS Digital, Inc.
Consolidated Balance Sheets - Assets and Liabilities Held for Sale
June 30, 2021 December 31, 2020
unaudited unaudited

ASSETS
Current assets:
Cash $           - $ 43,000
Accounts receivable, net - 321,000
Prepaid expenses and other current assets - 167,000
Total current assets - 531,000

Property, plant and equipment, net - 46,000
Total assets - 577,000
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ - $ 25,000
Accrued expenses and deferred revenue - 10,000
Total current liabilities - 35,000
DSS Digital, Inc.
Consolidated Statements of Operations - Discontinued Operations
(unaudited)
2021 2020 2021 2020
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenue:
Technology sales, services and licensing $ 60,000 $ 351,000 $ 535,000 $ 832,000
Total revenue 60,000 351,000 535,000 832,000

Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization 22,000 67,000 87,000 135,000
Selling, general and administrative (including stock based compensation) 94,000 256,000 338,000 609,000
Depreciation and amortization 1,000 4,000 5,000 8,000
Total costs and expenses 117,000 327,000 430,000 752,000
Operating (loss) income (57,000 ) 24,000 105,000 80,000

Income (loss) before income taxes (57,000 ) 24,000 105,000 80,000

Income tax expense (benefit) - - - -
Income (loss) from discontinued operations
$
(57,000 )
$
24,000
$
105,000
$
80,000
12. Income Taxes
Our effective tax rate for the ~~three-month periods~~six-month ended ~~March 31,~~June 30, 2021 was ~~18.8%~~17.3%. There was no tax provision for ~~March 31,~~June 30, 2020 due to the expected tax benefit from net operating losses (NOLs) being fully offset by an increase in the valuation allowance. The Company recorded a discrete tax expense in the six-month period ended June 30, 2021, of $83,000 reducing the tax benefit from our forecasted annual effective tax rate. This discrete item relates to the tax effect of the GAAP over tax basis of a subsidiary that was sold in the six-month period ended June 30, 2021.
As of December 31, 2020, the Company has domestic net operating loss (“NOL”) carryforwards of approximately ~~$56.7~~ $56.7million. The utilization of these NOLs is limited under Sec. 382 of the Internal Revenue Code. A valuation allowance has been recorded to reduce the deferred tax asset to the expected realizable amount, leaving ~~$2.9~~$2.1 million available for use.
As of ~~March 31,~~June 30, 2021, no benefit for losses incurred by our foreign subsidiaries have been recorded as those losses are not anticipated to provide any tax benefits in future periods.
There were no0 unrecognized tax benefits related to uncertain tax positions at ~~March 31,~~June 30, 2021 and December 31, 2020.
As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. At ~~March 31,~~June 30, 2021, there are no ongoing income tax audits.
13. Supplemental Cash Flow Information
The following table summarizes supplemental cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:
Schedule of Supplemental Cash Flow Information
2021 2020 2021 2020

Cash paid for interest $ 20,000 $ 31,000 $ 126,000 $ 73,000

Non-cash investing and financing activities:
Termination of right of use lease asset $ (744,000 ) $ — $ (744,000 ) $ —
Termination of right of use lease liability $ 744,000 $ — $ 744,000 $ —
Satisfaction of accrued expenses with issuance of common stock $ — $ 114,000
Shares received for loan origination fee $
(3,000,000
)
Shares received for prepaid loan interest $
(2,440,000
)
Long-lived assets acquired through settlement of notes receivable $ - $ 838,000
Shares issued for marketing services $ - $ 210,000
2423

14. Segment Information
The Company’s eight businesses lines are organized, managed and internally reported as four operating ~~segments.~~segments. One of these operating segments, Premier Packaging, is the Company’s packaging and ~~security~~ printing group. Premier Packaging operates in the paper board folding carton, smart packaging, and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct mail solutions. These products are designed to provide functionality and marketability while also providing counterfeit protection. A second, BioHealth Group, invests in, or acquires 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 developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza. The BioHealth Group is also targeting unmet, urgent medical needs. A third operating segment, ~~Digital~~Securities and Fintech Group ~~researches, develops, markets,~~(“Securities”) was established to develop and/or acquire assets and ~~sells~~investments in the ~~Company’s~~securities trading and/or funds management arena. Further, Securities, in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple vertical digital ~~products worldwide. As an industry leader in brand authentication~~asset exchanges for securities, tokenized assets, utility tokens, stable coins and cryptocurrency via a digital asset trading platform using blockchain technology. The scope of services ~~our solutions leverage functional anti-counterfeiting features~~within this section is planned to include asset issuance and ~~cutting-edge technologies to satisfy commercial~~allocation (securities and ~~consumer product needs for branding, intelligent packaging,~~cryptocurrency), FPO, IPO, ITO, PPO, STO and ~~marketing. Digital’s~~UTO listings on a primary ~~product is AuthentiGuard®~~market(s), ~~which is~~asset digitization/tokenization (securities, currency and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a brand authentication application that integrates the Company’s counterfeit deterrent technologies with proprietary digital data security-based solutions (subsequent to March 31, 2021, this segment will be discontinued as the Company’s subsidiary DSS Digital, which constitutes the majority of the activitysecondary market(s). Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. the REIT was ~~disposed~~formed to originate, acquire, and lease a credit-centric portfolio of ~~See Note 15).~~licensed medical real estate. The fourth segment, Direct Marketing/Online Sales Group, provides services to assist companies in the emerging growth gig business model of peer-to-peer decentralized sharing marketplaces. It specializes in marketing and distributing its products and services through its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing. Direct marketing products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern Europe.
Our segment structure presented below represents a change from the prior year for the inclusion of our BioHealth Group and REITs segments and the removal of our Plastics segment, Digital Group and IP Technology Management segment as the Plastics segment was discontinued in 2020, DSS Digital was sold and discontinued in May 2021 and activities surrounding our IP Technology Management segment have significantly decreased. The amounts for these segments have been included in the Corporate reporting segment for the three months ended ~~March 31,~~June 30, 2021 and 2020 ~~below. Also, the investment in SHRG, recorded in the Corporate segment at December 31, 2020 is accounted~~below for ~~in the Direct Marketing segment for the three months ended March 31, 2021. Each of our segments employs consistent accounting policies.~~reconciliation purposes.
Approximate information concerning the Company’s operations by reportable segment for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 is as follows. The Company relies on intersegment cooperation and management does not represent that these segments, if operated independently, would report the results contained herein:
Three Months Ended March 31, 2021 Packaging and Printing Digital Direct Marketing Biohealth Group Corporate Total
Revenue $ 3,846,000 $ 489,000 $ 608,000 $ - $
-
$ 4,943,000
Depreciation and amortization 116,000 10,000 44,000 278,000 70,000 518,000
Interest expense 19,000 - - - 1,000 20,000
Stock based compensation 1,000 8,000 - - 6,000 15,000
Net income (loss) from continuing operations 218,000 54,000 (1,799,000 ) (698,000 ) (1,673,000 ) (3,898,000 )
Capital expenditures 66,000 - 6,000 - - 72,000
Identifiable assets 22,567,000 980,000 18,892,000 51,158,000 49,206,000 142,803,000
Schedule of Operations by Reportable Segment
Three Months Ended June 30, 2021 Packaging and Printing Direct Marketing Biohealth Group Securities Corporate Total
Revenue $ 3,376,000 $ 809,000 $ - $
-
$ - $ 4,185,000
Depreciation and amortization 191,000 274,000 278,000 - 78,000 821,000
Interest expense 19,000 2,000 1,000 67,000 17,000 106,000
Stock based compensation 1,000 - - - (31,000 ) (30,000 )
Net income (loss) from continuing operations 65,000 (5,985,000 ) (610,000 ) (173,000 ) (4,022,000 ) (10,725,000 )
Capital expenditures 1,202,000 - - 6,565,000 (57,000 ) 7,710,000
Identifiable assets 29,463,000 44,772,000 53,717,000 10,939,000 52,270,000 191,161,000
Three Months Ended June 30, 2020 Packaging and Printing Direct Marketing Biohealth Group Securities Corporate Total
Revenue $ 2,272,000 $ 506,000 $ -        $ - $ 2,778,000
Depreciation and amortization 195,000 -      - 78,000 273,000
Interest expense 28,000 - - 14,000 42,000
Stock based compensation 4,000 - - (21,000 ) (17,000 )
Net income (loss) from continuing operations 64,000 (25,000 ) - (735,000 ) (696,000 )
Capital expenditures 31,000 - - 2,000 33,000
Identifiable assets 9,715,000 1,411,000 - 13,022,000 24,148,000
Six Months Ended June 30, 2021 Packaging and Printing Direct Marketing Biohealth Group Securities Corporate Total
Revenue $ 7,237,000 $ 1,416,000 $ - $ - $ - $ 8,653,000
Depreciation and amortization 307,000 319,000 556,000 - 153,000 1,335,000
Interest expense 39,000 2,000 1,000 67,000 (17,000 ) 126,000
Stock based compensation 1,000 - - - (16,000 ) (15,000 )
Net income (loss) from continuing operations 283,000 (7,785,000 ) (1,308,000 ) (231,000 ) (5,746,000 ) (14,787,000 )
Capital expenditures 1,202,000 6,000 - 6,565,000 55,000 7,828,000
Identifiable assets 29,463,000 44,772,000 53,717,000 10,939,000 52,270,000 191,161,000
Six Months Ended June 30, 2020 Packaging and Printing Direct Marketing Biohealth Group Securities Corporate Total
Revenue $ 5,438,000 $ 1,078,000 $      - $       - $ - $ 6,516,000
Depreciation and amortization 418,000 - - - 155,000 573,000
Interest expense 55,000 - - - 18,000 73,000
Stock based compensation 8,000 - - - 46,000 54,000
Net income (loss) from continuing operations 86,000 179,000 - - (1,941,000 ) (1,676,000 )
Capital expenditures 76,000 - - - 4,000 80,000
Identifiable assets 9,715,000 1,411,000 - - 13,022,000 24,148,000
24
Three Months Ended March 31,2020 Packaging and Printing Digital Direct Marketing Biohealth Group Corporate Total
Revenue $ 3,158,000 $ 490,000 $ 573,000 $       - $ - $ 4,221,000
Depreciation and amortization 223,000 9,000 - - 71,000 303,000
Interest expense 27,000 4,000 - - - 31,000
Stock based compensation 4,000 20,000 - - 66,000 90,000
Net income (loss) from continuing operations 22,000 (46,000 ) 204,000 - (1,101,000 ) (921,000 )
Capital expenditures 63,000 4,000 - - 1,000 68,000
Identifiable assets 10,626,000 757,000 865,000 - 7,093,000 19,341,000
The following tables disaggregate our business segment revenues by major source:
Schedule of Disaggregation of Revenue
Printed Products Revenue Information:

Three months ended March 31, 2021
Three months ended June 30, 2021
Packaging Printing and Fabrication $ 3,688,000 $ 3,336,000
Commercial and Security Printing 158,000 40,000
Total Printed Products $ 3,846,000 $ 3,376,000
Three months ended March 30, 2020
Three months ended June 30, 2020
Packaging Printing and Fabrication $ 2,966,000 $ 2,103,000
Commercial and Security Printing 203,000 169,000
Total Printed Products $ 3,169,000 $ 2,272,000
Six months ended June 30, 2021
Packaging Printing and Fabrication $ 7,056,000
Commercial and Security Printing 181,000
Total Printed Products $ 7,237,000
Six months ended June 30, 2020
Packaging Printing and Fabrication $ 5,067,000
Commercial and Security Printing 371,000
Total Printed Products $ 5,438,000

~~Technology Sales, Services and Licensing Revenue Information:~~Direct Marketing

Three months ended March 31, 2021
Information Technology Sales and Services $ 38,000
Digital Authentication Products and Services 367,000
Royalties from Licensees 84,000
Total Technology Sales, Services and Licensing $ 489,000
Three months ended June 30, 2021
Direct Marketing Internet Sales $ 809,000
Total Direct Marketing $ 809,000
Three months ended March 30, 2020
Information Technology Sales and Services $ 11,000
Digital Authentication Products and Services 331,000
Royalties from Licensees 137,000
Total Technology Sales, Services and Licensing $ 479,000
Three months ended June 30, 2020
Direct Marketing Internet Sales $ 506,000
Total Direct Marketing $ 506,000
Six months ended June 30, 2021
Direct Marketing Internet Sales $ 1,416,000
Total Direct Marketing $ 1,416,000
Six months ended June 30, 2020
Direct Marketing Internet Sales $ 1,078,000
Total Direct Marketing $ 1,078,000
~~Direct Marketing~~
Three months ended March 31, 2021
Direct Marketing Internet Sales $ 608,000
Total Direct Marketing $ 608,000
Three months ended March 30, 2020
Direct Marketing Internet Sales $ 573,000
Total Direct Marketing $ 573,000
~~15.~~ ~~SUBSEQUENT EVENTS~~
On February 25, 2021, the Company entered into a binding letter of intent with Sharing Service Global Corporation (“SHRG), where the Company is to loan $30 million to SHRG in the form of a Convertible Promissory Note (the “SHRG Note”). This note is due on demand no later than 3 years from the date of issuance and accrues interest annual at 8% and contains a 10% origination fee. Both the first year’s interest and the origination fee are payable at closing in the form of SHRG shares at a conversion rate of $0.20 per share. All or a part of the outstanding SHRG Note balance can be converted at the sole discretion of DSS at a conversion rate of $0.20 per share. This Note also contains detachable warrants, exercisable at DSS’s option, of 150,000,000 shares of SHRG’s Class A common stock with an exercise price of $0.22. The SHRG Note was executed and funded in April 2021.
On April 7, 2021, and affective March 31, 2021, the Company finalized an agreement to terminate its lease of its Plastics facility on Park Lane in Brisbane, California. Under the terms of the termination, the Company remitted $5,000 to the landlord and surrendered possession of the premises. In conjunction with this termination, the Company wrote of the remaining operating lease asset and liability associated with this facility. See Note 11 for further details on the discontinuation of this operation.
On April 5, 2021, Premier Packaging entered into an agreement to lease an approximate 101,250 square foot facility located at 275 Wiregrass Parkway, Henrietta, New York with at target commencement date of December 1, 2021. This lease expires twelve years and 3 months later. Base rents escalate from $61,000 in year one to $76,000 in year twelve. The lease contains two, five year renewal options as well as an option to purchase after year four.
On April 14, 2021, Premier Packaging entered into an agreement to sell its manufacturing facility at 6 Framark Dr, Victor, NY, for the purchase price of $2.1 million with an anticipated closing date of January 31, 2022.
On April 26, 2021, the Company’s wholly owned subsidiary Impact BioMedical, Inc., entered into term sheet with Puradigm LLC, a Nevada limited liability corporation, to advance $5 million in the form of a convertible promissory note (“Puradigm Note”). The Puradigm Note has a two year term with interest at 6.65% payable quarterly. All, or part of the Puradigm Note principal balance can be converted at the sole discretion of Impact BioMedical for up to 18% membership of Puradigm LLC.
On May 7, 2021, Document Security Systems, Inc. (the “Company”) completed the sale of 100% of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash; $1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary of the closing and ending the day before the six-year of the closing; and $0.5 million in trade credit or license fee rebates. Included in the Consolidated Balance Sheet as of March 31, 2021 is approximately $790,000 of assets and $48,000 of liabilities for DSS Digital. Also, included in the Consolidated Statement of Operations for the three months ended March 31, 2021 for DSS Digital is net income of approximately $162,000.
On May 12, 2021, Premier Packaging entered into an agreement with Heidelberg USA, Inc. to purchase a new Heidelberg seven color offset press to support its expanding printing and packaging business. The net purchase price of the press approximates $3.2 million and has an anticipated delivery date of December 2021.
25
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). Except for the historical information contained herein, this report contains forward-looking statements (identified by words such as “estimate”, “project”, “anticipate”, “plan”, “expect”, “intend”, “believe”, “hope”, “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors, that could cause actual results to differ materially from the results anticipated in the forward-looking statements.
Overview
Document Security Systems, Inc. (the “Company of DSS”) operates ~~eight (8)~~seven (7) business lines through ~~eight (8)~~seven (7) DSS subsidiaries located around the globe.
Of the ~~eight~~seven subsidiaries, ~~three~~two of those have historically been the core subsidiaries of the Company: (1) Premier Packaging Corporation (“Premier Packaging”), ~~(2) DSS Digital Inc.,~~ and ~~its subsidiaries (“Digital Group”), and (3)~~(2) DSS Technology Management, Inc. (“IP Technology”). Premier Packaging operates in the paper board folding carton, smart packaging, and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct mail solutions designed to provide functionality, marketability, and sustainability to product packaging while providing counterfeit protection and consumer engagement platform. Digital Group researches, develops, markets, and sells the Company’s digital products worldwide. As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features and cutting-edge technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s primary product is AuthentiGuard®, which is a brand authentication application that integrates the Company’s counterfeit deterrent technologies with proprietary digital data security-based solutions. IP Technology Management Inc., manages, licenses, and acquires intellectual property assets for the purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments in the development and commercialization of patented technologies, licensing, strategic partnerships, and commercial litigation. In 2020, under its ~~(4)~~(3) Decentralize Sharing Systems, Inc. subsidiary, created a fourth business segment, Direct Marketing/Online Sales Group. This group 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 and services through its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing.
In addition to the ~~four~~three subsidiaries listed above, in 2019 and early 2020, DSS has created four new, wholly owned subsidiaries. ~~(5)~~(4) DSS Blockchain Security, Inc., a Nevada corporation, specializes in the development of blockchain security technologies for tracking and tracing solutions for supply chain logistics and cyber securities across global markets. ~~(6)~~(5) DSS Securities, Inc., a Nevada corporation, ~~has been~~was established to develop and/or to acquire assets and investments in the securities trading and/or funds management ~~arena,~~arena. Further, Securities, in partnership with recognized global leaders in alternative trading systems, intends to own and ~~to pursue two parallel streams of~~operate in the US a single or multiple vertical digital asset exchanges ~~in multiple jurisdictions: (i) securitized token exchanges, focusing on digitized~~for securities, tokenized assets, ~~from different vertical industries and (ii) utilities token exchanges, focusing on “blue-chip”~~ utility tokens, stable coins and cryptocurrency via a digital asset 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, STO 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). Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from ~~solid businesses. (7)~~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) DSS BioHealth Security, Inc., a Nevada corporation, is our business line which we will intend to invest in or to acquire companies related to the bio-health and biomedical field, including businesses focused on the research to advance drug discovery and development for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases. This new division will place special focus on open-air defense initiatives, which curb transmission of air-borne infectious diseases such as tuberculosis and influenza, among others. ~~(8)~~(7) DSS Secure Living, Inc., a Nevada Corporation, develops top of the line advanced technology, energy efficiency, quality of life living environments and home security for everyone for new construction and renovations of residential single and multifamily living facilities. ~~Aside from Decentralized Sharing Systems, Inc. the~~The activity in ~~the these newly created subsidiaries have~~DSS Blockchain and DSS Secure Living has been minimal or in various start-up or organizational phases.
26
On March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc. and American Medical REIT Inc. under which it acquired a 52.5% controlling ownership interest in AMRE Asset Management Inc. (“AAMI”) which currently has a 93% equity interest in American Medical REIT Inc. (“AMRE”). AAMI is a real estate investment trust (“REIT”) management company that sets the strategic vision and formulate investment strategy for AMRE. It manages the REIT’s assets and liabilities and provides recommendations to AMRE on acquisition and divestments in accordance with the investment strategies. AMRE is a Maryland corporation, organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. AMRE was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE is planned to qualify as a Real Estate Investment Trust for federal income tax purposes, which will provide. AMRE’s investors the opportunity for direct ownership of Class A licensed medical real estate. AsOn June 18, 2021, DSS Securities, entered into a stock purchase agreement with AMRE to acquire 264,525 Class A Common Shares of ~~December 31, 2020, AAMI has yet~~AMRE at a per share price of $10, for a total consideration of $2,645,250. The additional 264,525 Class A Common Shares acquired increases the Company’s total equity interest in AMRE to ~~generate any revenue.~~approximately 93%.
On August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact BioMedical”), pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth Security, Inc. (“DSS BioHealth”), Alset International Limited (formally Singapore eDevelopment Ltd.), and Global Biomedical Pte Ltd. (“GBM”), which was previously approved by the Company’s shareholders (the “Share Exchange”). Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value $0.02 per share, nominally valued at $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). As a result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly owned subsidiary.
Impact BioMedical strives to leverage its scientific know-how and intellectual property rights to provide solutions that have been plaguing the biomedical field for decades. By tapping into the scientific expertise of its partners, Impact BioMedical has undertook a concerted effort in the research and development (R&D), drug discovery and development for the prevention, inhibition, and treatment of neurological, oncological and immune related diseases.
In August 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities, Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting process.
On October 7, 2020, DSS Securities took part in an initial public offering of Presidio Property Trust, Inc. (“Presidio”), a Maryland corporation, that invests primarily in commercial properties, such as office, industrial and retail properties, as well as in residential across the United States. As part of this offering, we purchased 200,000 shares of Presidio’s Series A Common Stock at $5.00 per share for a total purchase price of $1,000,000.
Effective December 9, 2020, Impact BioMedical entered into an exclusive distribution agreement with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), which is focused on manufacturing natural probiotics. Under the terms of this distribution agreement, Impact BioMedical will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed by Impact BioMedical include BioMed’s PGut Premium ProbioticsTM, PGut Allergy ProbioticsTM, PGut SupremeSlim ProbioticsTM, PGut Kids ProbioticsTM, and PGut Baby ProbioticsTM. Under the terms of the ten-year distribution agreement, Impact BioMedical 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.
On February 8, 2021, DSS Securities announced that it entered into a joint venture (“JV”) with Coinstreet Partners (“Coinstreet”), a global decentralized digital investment banking group and digital asset financial service firm, and GSX Group (“GSX”), a global digital exchange ecosystem for the issuance, trading, and settlement of tokenized securities, using its proprietary blockchain solution. The JV leverages the operational strengths and assets of three key leaders in their field, combining traditional capital market experience, Fintech innovations, and business networks from three continents, North America, Europe, and Asia, to capitalize on unique digital asset opportunities. The JV reported that it intended to first pursue a digital securities exchange license in the US. Moving forward, this JV will be the key operational company building and operating a digital securities exchange that utilizes the GSX STACS blockchain technology, serving corporate issuers and investors in the sector.
On February 25, 2021, DSS Securities announced its acquisition of an equity interest in WestPark Capital, Inc.(“WestPark”) and an investment in BMI Capital International LLC (“BMICI”). DSS Securities executed two separate transactions that were designed to grow the securities division by signing a binding note and stock exchange letter of intent to own 7.5% of the issued and outstanding shares of WestPark and acquiring 24.9% of BMICI through a purchase agreement. WestPark is a full-service investment banking and securities brokerage firm which serves the needs of both private and public companies worldwide, as well as individual and institutional investors. BMI is a private investment bank specializing in corporate finance advising, raising equity, and venture services, providing a global “one-stop” corporate consultancy to listed companies. From corporate finance to professional valuation, corporate communications to event management, BMICI services companies in the US, Hong Kong, Singapore, Taiwan, Japan, Canada, and Australia.
On March 1, 2021, Decentralized Sharing Systems, Inc. (“Decentralized”) announced that it increased its investment in Sharing Services Global Corporation (“Sharing Services” or “SHRG”), a publicly traded company dedicated to maximizing shareholder value through the acquisition and development of innovative companies, products, and technologies in the direct selling industry, through a $30 million convertible promissory note dated April 5, 2021. Decentralized’s financing was made as an investment that would help accelerate Sharing Services sales and growth, as well as international expansion, with the expectation that such capital reserves would help make Sharing Services a dominant player in the global marketplace over the next two years. It was reported that the new $30 million investment would have the potential to exponentially increase Sharing Services sales channels and substantially expand its product portfolio, and to position Sharing Services to capitalize on consolidation and roll up opportunities of other direct selling companies. In the joint announcement, Sharing Services reported that the additional funding would now allow it to accelerate its global expansion with a direct focus on the Asian markets, and specifically in countries such as South Korea, Japan, Hong Kong, China, Singapore, Taiwan, Thailand, Malaysia, and the Philippines. In accordance with the April 5, 2021 convertible promissory note, SHRG issued to the Company 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of the loan origination fee and 12,000,000 shares in prepayment of interest for the first year. As of June 30, 2021, the Company held 91,207,378 class A common shares equating to a 46.7% ownership interest in SHRG with aggregate fair value of the Company’s investment in SHRG at June 30, 2021 of approximately $12,769,000. The Company, via three (3) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board of director seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along with Mr. Heng Fai Ambrose Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020), and Mr. Frank D. Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020).
On March 15, 2021, the Company, through one of its subsidiaries, DSS BioMedical International, Inc. entered into a Stock Purchase Agreement (the “Agreement”) 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. In addition, under the terms of the Agreement, 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 acquire the Seller’s wholly owned subsidiary Impact Oncology PTE Ltd for the purchase price of $2,480,000 to effectively purchase ownership of 2,480,000 shares of common stock of Vivacitas.. This agreement includes an option to purchase an additional 250,000 shares of common stock. As a result of these two transactions, which were closed on March 21, 2021 and March 29, 2021, respectively, the Company owns an approximate 15.7% equity position in Vivacitas. The Seller’s largest shareholder is Mr. Heng Fai Ambrose Chan, the Chairman of the Company’s board of directors and its largest shareholder. On July 22, 2021, the Company exercised 1,000,000 of the available options under the Vivacitas Agreement #1, increasing the Company’s equity position in Vivacitas to 19.3%.
On April 21, 2021, the Company announced its wholly owned subsidiary, Premier Packaging Corporation’s intentions to relocate from its current 48,000 square-foot manufacturing facility from Victor, NY to a new 105,000 square-foot facility in the Town of Henrietta, NY approximately 15 miles from its Victor location by the end of 2021. In connection with this relocation, Premier Packaging has entered into an agreement to sell its current Victor location with the anticipated closing date of January 31, 2022.
On May 13, 2021, Sentinel Brokers, LLC., a subsidiary of the Company entered into a stock purchase agreement (“Sentinel Agreement”) to acquire a 24.9% equity position of Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York, for the purchase price of $300,000. Under the terms of this agreement, the Company as the option to purchase an additional 50.1% of the outstanding Class A Common Shares. Upon the exercising of this option, but no earlier than one year following the effective date the Sentinel Agreement, Sentinel has the option to sell the remaining 25% to the Company. In consideration of purchase price investment in Sentinel, the Company is entitled to an additional 50.1% of the net profits of Sentinel
On May 19, 2021, the Company announced that its wholly owned subsidiary, DSS PureAir, Inc., a Texas corporation (“DSS PureAir”), closed on a Securities Purchase Agreement with Puradigm LLC, a Nevada limited liability corporation (“Puradigm”). Pursuant to the terms of the Securities Purchase Agreement, DSS PureAir agreed to provide Puradigm a secured convertible promissory note in the maximum principal amount of $5,000,000.00 (the “Puradigm Note”). The Puradigm Note has a two year term with interest at 6.65% payable quarterly. All, or part of the Puradigm Note principal balance can be converted at the sole discretion of DSS PureAir for up to an 18% membership interest in Puradigm LLC. The Puradigm Note is secured by all the assets of Puradigm under a security agreement with Puradigm.

On June 18, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE financed the purchase of a 40,000 square foot, 2.0 story, Class A+ multi-tenant medical office building located on a 13.62 acre site in Shelton, Connecticut (See Note 7). In accordance with Topic 805, the acquisition of the medical acquired has been determined to be an acquisition of assets as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. This property was appraised at approximately $7,150,000, of which $6,027,000 and $815,000 was allocated to the facility and land respectively. Also include in the value of the property is $308,000 of intangible assets with an estimated useful life of 11 years. Contained within the sale-purchase agreement for this facility, is a $1,500,000 earnout due to the seller if certain criteria are met. As of June 30, 2021, no liability has been recorded for this earnout as management determined it is currently remote.
The four reporting segments are as follows:
Premier Packaging: (“Premier”) The Company’s consumer packaging and security printing group is coordinated by the wholly owned subsidiary, Premier Packaging Corporation, a New York corporation. Premier operates in the paper board folding carton, smart packaging, and document security printing markets. It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct mail solutions. These products are designed to provide functionality and marketability while also providing counterfeit protection. Premier is currently located in Victor, NY and serves the US market.
BioHealth Group: (“BioHealth”) The BioHealth Group is our business line 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 developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza. The BioHealth Group is also targeting unmet, urgent medical needs. Assets of this group are organized under the holding company, DSS BioHealth Security, Inc. Its subsidiaries are currently headquartered in Rochester, NY. The group also has a research facility in Winter Haven, Florida.
2827

Securities and Fintech Group:
~~Digital Group~~: (“~~Digital”~~Securities”) ~~Digital researches, develops,~~Securities was established to develop and/or acquire assets and investments in the securities trading and/or funds management arena. Further, Securities, 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, stable coins and cryptocurrency via a digital asset 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, STO 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). Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and ~~sells~~leasing each property to a single operator under a triple-net lease. the ~~Company’s digital products worldwide. As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting features~~REIT was formed to originate, acquire, and ~~cutting-edge technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing. Digital’s primary product is AuthentiGuard®, which is~~lease a ~~brand authentication application that integrates the Company’s counterfeit deterrent technologies with proprietary digital data security-based solutions. Digital Group~~credit-centric portfolio of licensed medical real estate. This group is headquartered in Rochester, NY, but it also has offices and staff in Hong Kong. On May 7, 2021, Document Security Systems, Inc. (the “Company”) completed the sale of 100% of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash; $1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary of the closing and ending the day before the six-year of the closing; and $0.5 million in trade credit or license fee rebates. Included in the Consolidate Balance Sheet as of March 31, 2021 is approximately $790,000 of assets and $48,000 of liabilities for DSS Digital. Also, included in the Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2021 for DSS Digital is net income of approximately $162,000.Huston, Texas.
Direct Marketing/Online Sales Group: (“Direct” or “DM”) Led by the holding corporation, Decentralize Sharing Systems, Inc. (“Decentralized”, this group provides services to assist companies in the emerging growth gig business model of peer-to-peer ~~decentralized sharing marketplaces.~~direct marketing. Direct specializes in marketing and distributing its products and services through its ~~subsidiary~~subsidiaries, partner networks, and ~~partner network, using the popular gig economic marketing strategy as a form of direct marketing.~~online marketplaces. Direct marketing products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern Europe. Over the past 1218 months, Direct has made substantial investments in acquiring marketing software, product opportunities, and operational capabilities in this marketplace. Additionally, it has acquired and developed an independent contractor sales force. It has also made substantial investments into other direct marketing companies, including its investment and partnership with Sharing Services Global Corporation (OTCQB: SHRG) (“Sharing Services” or “SHRG”), which as of ~~March 31,~~June 30, 2021, Decentralized owned approximately ~~40%~~47% of the outstanding shares of Sharing Services. Currently, Direct and SHRG operate offices in USA, Canada, Hong Kong, Singapore, S. Korea, Australia, New Zealand, Malaysia, and Singapore, with additional offices or presence being added monthly. Decentralized sharing systems’ mission is to become the leading direct sales platform, training, developing and empowering leaders on a global scale to achieve maximum human and economic potential.
Results of operations for the three and six months ended ~~March 31,~~June 30, 2021 as compared to the three and six months ended ~~March 31,~~June 30, 2020.
This discussion should be read in conjunction with the financial statements and footnotes contained in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2020.
Revenue
Three months ended March 31, 2021 Three months ended March 31, 2020 % Change Three months ended June 30, 2021 Three months ended June 30, 2020 % Change Six months ended June 30, 2021 Six months ended June 30, 2020 % Change
Revenue
Printed products $ 3,846,000 $ 3,169,000 21 % $ 3,376,000 $ 2,272,000 49 % $ 7,237,000 $ 5,438,000 33 %
Technology sales, services and licensing 489,000 479,000 2 %
Direct marketing 608,000 573,000 6 % 809,000 506,000 60 % 1,416,000 1,078,000 31 %

Total Revenue $ 4,943,000 $ 4,221,000 17 % $ 4,185,000 $ 2,778,000 51 % $ 8,653,000 $ 6,516,000 33 %
For the three and six months ended ~~March 31,~~June 30, 2021, total revenue increased ~~17%~~51% and 33% respectively, as compared to the three and six months ended ~~March 31,~~June 30, 2020. Revenues from the sale of Printed products increased ~~21%~~49%, and 33% during the three and six months ended ~~March 31,~~June 30, 2021, respectively, as compared to the same period in 2020, primarily due to an increase in packaging sales due to ~~increased customer sales and~~ the addition of new ~~customers. Technology sales, services~~customers and ~~licensing revenue increased 2% during the three months ended March 31, 2021 as compared~~existing customers return to ~~the same period in 2020. For the three months ended March 31, 2021, direct marketing revenue increased 6%.~~pre-Covid 19 operations. Direct marketing revenue increase illustrates the Company’s continued expansion into the direct marketing industry and its associated opportunities.
Costs and expenses
Three months ended June 30, 2021 Three months ended June 30, 2020 % Change Six months ended June 30, 2021 Six months ended June 30,2020 % Change
Costs and expenses
Cost of revenue, exclusive of depreciation and amortization $ 3,042,000 $ 1,729,000 76 % $ 6,330,000 $ 4,302,000 47 %
Sales, general and administrative compensation 4,609,000 749,000 515 % 6,337,000 1,393,000 355 %
Depreciation and amortization 821,000 273,000 201 % 1,335,000 573,000 133 %
Professional fees 1,235,000 692,000 78 % 2,205,000 1,272,000 73 %
Stock based compensation (30,000 ) 47,000 -164 % (15,000 ) 54,000 -128 %
Sales and marketing 896,000 340,000 164 % 1,570,000 664,000 136 %
Rent and utilities 75,000 78,000 -4 % 108,000 178,000 -39 %
Research and development 211,000 - N/A 455,000 - N/A
Other operating expenses 381,000 133,000 186 % 774,000 317,000 144 %

Total costs and expenses $ 11,240,000 $ 4,041,000 178 % $ 19,099,000 $ 8,753,000 118 %

Three months ended March 31, 2021 Three months ended March 31, 2020 % Change
Costs and expenses
Cost of revenue, exclusive of depreciation and amortization $ 3,353,000 $ 2,641,000 27 %
Sales, general and administrative compensation 1,905,000 737,000 158 %
Depreciation and amortization 518,000 303,000 71 %
Professional fees 977,000 582,000 68 %
Stock based compensation 15,000 90,000 -83 %
Sales and marketing 710,000 560,000 27 %
Rent and utilities 73,000 115,000 -37 %
Research and development 244,000 - N/A
Other operating expenses 377,000 110,000 243 %

Total costs and expenses $ 8,172,000 $ 5,138,000 59 %
28
Costs of ~~goods sold,~~revenue, exclusive of depreciation and amortization includes all direct costs of direct marketing and printed products revenues, including materials, direct labor, transportation and manufacturing facility costs. In addition, this category includes all direct costs associated with technology sales, services and licensing including hardware and software that are resold, and fees paid to inventors or others as a result of technology licenses or settlements, if any. Costs of goods sold increased ~~27%~~76% and 47% for the three and six months ended ~~March 31,~~June 30, 2021, respectively as compared to the same periods in 2020. This increase is driven primarily by an increase in manufacturing costs associated with the products sold as part of our Direct ~~Marking segment.~~Marketing, and Packaging and Printing segments, in particular, increases in freight and overhead costs.
Sales, general and administrative compensation costs, excluding stock-based compensation, increased ~~158%~~515% and 355% during the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to the same ~~period~~periods in 2020, primarily due to changes in headcount year over year associated with addition of our Direct Marketing and BioHealth business segments, and performance bonus ~~accruals.~~accruals approximating $4,574,000.
Depreciation and amortization include the depreciation of machinery and equipment used for production, depreciation of office equipment and building and leasehold improvements, amortization of software, and amortization of acquired intangible assets such as customer lists, trademarks, non-compete agreements and patents, and internally developed patent assets. For the three and six months ended ~~March 31,~~June 30, 2021, depreciation and amortization expense increased ~~71%~~201% and 133% respectively as compared to the same ~~period~~periods in 2020 due to sale and disposal of assets and amortization on newly acquired intangibles assets.
Professional fees increased ~~68%~~78% and 73% respectively during the three and six months ended ~~March 31,~~June 30, 2021, as compared to the same ~~period~~periods in 2020, mostly due to increases in legal services related to the Direct Marketing business segment, and yearly audit fees.
Stock based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. Stock based compensation decreased ~~83%~~164% and 128% respectively during the three and six ended ~~March 31,~~June 30, 2021 as compared to the same ~~period~~periods in ~~2020. This was due to~~2020, driven by the expiration of ~~previously~~options awarded ~~options.~~to employees no longer with the company
Sales and marketing which include internet and trade publication advertising, travel and entertainment costs, sales-broker commissions, and trade show participation expenses increased ~~27%~~164% and 136% respectively during the three and six months ended ~~March 31,~~June 30, 2021, as compared to the same ~~period~~periods in 2020, resulting from an increase in commissions paid to brokers associated with the Company’s Direct Marketing ~~segment and quarterly bonuses to management.~~segment.
Rent and utilities decreased by ~~37%~~4% and of 39% respectively during the three and six months ended ~~March 31,~~June 30, 2021, as compared to the same period in 2020, primarily due to a decrease in facilities maintenance costs and utilities for the ~~Company’s discontinued operations.~~Company. This was offset by a new facility lease in Houston, Texas started during the first quarter of 2021.
Research and development costs increased ~~$244,000~~$211,000 and $455,000 during the three and six months ended ~~March 31,~~June 30, 2021 respectively as compared to the same period in 2020 due to the acquisition of Impact Biomedical, Inc. in 2020 and the related costs for continued research and development of the acquired product formulations.
Other operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs. During the three and six months ended ~~March 31,~~June 30, 2021, other operating expenses increased ~~243%~~191% and 186% respectively as compared to the same period in 2020 due to increased software costs associated with enhancements to the Company’s ERP system as well as new software implement as part of the Company’s Direct Marketing segment and increased D&O insurance.
3029

Other Income (Expense)
Three months ended March 31, 2021 Three months ended March 31,2020 % Change Three months ended June 30, 2021 Three months ended June 30, 2020 % Change Six months ended June 30, 2021 Six months ended June 30,2020 % Change
Other Income (Expense)
Interest Income $ 52,000 $ 24,000 117 % $ 1,485,000 $ 27,000 5400 % $ 1,537,000 $ 50,000 2974 %
Other Income 250,000 - N/A 250,000 - N/A
Interest Expense (20,000 ) (31,000 ) -35 % (106,000 ) (42,000 ) 152 % (126,000 ) (73,000 ) 73 %
Unrealized loss on equity investment (579,000 ) -
N/A
Loss on equity method investment (332,000 ) - N/A (911,000 ) - N/A
(Loss) gain on investments (1,076,000 )
(4,000
) 27000 % (6,821,000 ) 580,000 -1276 % (7,898,000 ) 584,000 -1452 %
Gain on extinguishment of debt 116,000 - N/A
Gain/(Loss) on extinguishment of debt - - N/A 116,000 - N/A

Total other income $ (1,507,000 ) $ (11,000 ) -50133 % $ (5,524,000 ) $ 565,000 1078 % $ (7,032,000 ) $ 561,000 1353 %
Interest income is recognized on the Company’s money markets as well as the accretion of the discount on convertible notes receivable identified in Note 3.

Other income represents recognition of amortization of note origination fees.
Interest expense ~~decreased 35%~~ increased 152% and 73% during the three and six months ended ~~March 31,~~June 30, 2021 respectively, as compared to the same period in 2020, due to ~~decreasing~~increasing debt balances.
Unrealized loss on equity investment Loss from equity method investment ~~represents~~is driven by the Company’s prorated portion of Sharing Services Global Corp’s earnings for the ~~three-months~~three and six months ended ~~March 31,~~June 30, 2021.
(Loss) gain on investments consists of realized losses on marketable securities which are recognized as the difference between the purchase price and sale price of the common stock investment. For the three and six months ended ~~March 31,~~June 30, 2021, ~~a $13,000~~$509,000 and $519,000 respectively, realized loss was recorded. Also unrealized losses on marketable securities which are recognized on the change in fair market value on our common stock investment ofdriven by unrealized losses on Alset International Limited of approximately $967,000 ~~and other investments of $212,000~~ for ~~the three~~six months ended ~~March 31,~~June 30, 2021. Also included are the ~~gains~~loss of approximately $6,589,000 on warrants which are recognized as the change in option value of warrants held at ~~March 31, 2021.~~June 30, 2021 (See Note 6).
Gain on extinguishment of debt in April 2020, AAMI received funds from the SBA Paycheck Protection Program of $116,000. As of January 8, 2021, this note was forgiven in full.
Net Loss
Three months ended March 31, 2021 Three months ended March 31,2020 % Change Three months ended June 30, 2021 Three months ended June 29, 2020 % Change Six months ended June 30, 2021 Six months ended June 30,2020 % Change

Loss from continuing operations $ (3,898,000 ) $ (920,000 ) -324 % $ (10,725,000 ) $ (698,000 ) -1437 % $ (14,787,000 ) $ (1,676,000 ) -782 %

Loss from discontinued operations (114,000 ) (1,046,000 ) 89 %
Income (loss) from discontinued operations 2,079,000 (208,000 ) 1100 % 2,129,000 (1,197,000 ) 278 %
Net loss $ (34,012,000 ) $ (1,966,000 ) -104 % $ (8,646,000 ) $ (906,000 ) -854 % $ (12,658,000 ) $ (2,873,000 ) -341 %
For the three and six months ended ~~March 31,~~June 30, 2021, the Company recorded net loss from continuing operations of ~~$3,898,000,~~$10,725,000 and $14,787,000 respectively, as compared to a net loss of ~~$920,000~~$698,000 and $1,676,000 during the same ~~period~~periods in 2020. The increase in net loss during the three and six months ended ~~March 31,~~June 30, 2021 as compared to the same ~~period~~periods in 2020 primarily reflect the company’s unrealized ~~gains~~losses on its marketable securities, ~~as well as~~and warrants, increased costs associated with new business ~~lines.~~lines, as well as increases in performance based compensation. The ~~loss~~gain from continuing operations for the three and six months ended ~~March 31,~~June 30, 2021 is inclusive of a ~~$838,000~~$2,079,000 and 2,129,000 respectively, income tax benefit as compared to $0the losses of $208,000 and $1,197,000 for the three and six months ended ~~March 31,~~June 30, 2020. Our effective tax rate for the ~~three-month~~six month periods ended ~~March 31,~~June 30, 2021 ~~was 18.8%~~is 17.3%. There was no tax provision for ~~March 31,~~June 30, 2020 due to the expected tax benefit from net operating losses (NOLs) being fully offset by an increase in the valuation allowance.
3130

LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its liquidity and capital requirements primarily through the sale of its equity securities and debt financings. As of ~~March 31,~~June 30, 2021, the Company had cash of approximately ~~$52.1~~$65.6 million. As of ~~March 31,~~June 30, 2021, the Company believes that it has sufficient cash to meet its cash requirements for at least the next 12 months from the filing date of this Annual Report. In addition, the Company believes that it will have access to sources of capital from the sale of its equity securities and debt financings.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues or expenses.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. The financial statements as of December 31, 2020 describe the significant accounting policies and methods used in the preparation of the financial statements. There have been no material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2021.
ITEM 4 - CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our principal executive officer who is also our principal financial officer, we conducted an evaluation of our disclosure controls and procedures for the quarter ended ~~March 31,~~June 30, 2021, pursuant to Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation and on the material weaknesses disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 which remained as of ~~March 31,~~June 30, 2021, our principal executive officer and principal financial officer concluded that as of ~~March 31,~~June 30, 2021, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is being recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is being accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Plan for Remediation of Material Weaknesses
As discussed in our Annual Report on Form 10-K for the year ended December 31, 2020, the Company has a remediation plan and is committed to maintaining a strong internal control environment and believes that these remediation efforts will represent significant improvements in our controls. The Company has started to implement these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until the remediation steps set forth above are fully implemented and tested, the material weaknesses described above will continue to exist.
Changes in Internal Control over Financial Reporting
While changes in the Company’s internal control over financial reporting occurred during the quarter ended ~~March 31,~~June 30, 2021 as the Company began implementation of the remediation steps described above, we believe that there were no changes in the Company’s internal control over financial reporting during the quarter ended ~~March 31,2021,~~June 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
3231

PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
See commentary in Note 9 Commitments and Contingencies.
ITEM 1A - RISK FACTORS
There have been no material changes to the discussion of risk factors previously disclosed in our most recently filed Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS
Exhibit Number Exhibit Description
~~31.1~~10.1 Securities Purchase Agreement, by and among, Sharing Services Global Corporation, and Decentralized Sharing Systems, Inc., dated April 5, 2021 (incorporated by reference to exhibit 1.1 to Form 8-K, filed with the Commission on April 9, 2021
10.2 Convertible Promissory Note, dated April 5, 2021 (incorporated by reference to exhibit 10.2 to Form 8-K filed with Commission on April 9, 2021)
10.3 Stock Purchase Agreement between Proof Authentication Corporation and Document Security Systems, Inc. dated May 7, 2021 Relating to the Purchase and Sale of 100% of the Shares of DSS Digital Inc. (incorporated by reference to Exhibit 1.1 to Form 8-K filed with the Commission on May 11, 2021)
10.4 Underwriting Agreement between Document Security Systems, Inc. and Aegis Capital Corp. (incorporated by reference to Form 8-K filed with the Commission on June 17, 2021)
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*
31.2
Rule 13a-14(a)/15d-14(a) Certification of ~~Prinicpal~~Principal Financial Officer. *
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Taxonomy Extension Label Linkbase Document*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*
*Filed herewith.
~~SIGNATURES~~
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DOCUMENT SECURITY SYSTEMS, INC.
August 23, 2021 By: /s/ Frank D. Heuszel
Frank D. Heuszel
Chief Executive Officer
(Principal Executive Officer)

~~May 14,~~August 23, 2021 By: ~~/s/ Frank D. Heuszel~~
~~Frank D. Heuszel~~
~~Chief Executive Officer~~
~~(Principal Executive Officer)~~
~~May 14, 2021~~ ~~By:~~ /s/ Todd D. Macko
Todd D. Macko
Interim Chief Financial Officer
3433

	2021
	Adjusted Cost		Unrealized Gain/(Loss)		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Investments
Cash and cash equivalents	$	20,140,000	$	-	$	20,140,000	$	20,140,000	$	-	$	-
Level 1				-
Money Market Funds		31,921,000		-		31,921,000		31,921,000		-		-
Marketable Securities		7,769,000		2,316,000		10,085,000		-		10,085,000		-
Level 2
Warrants		700,000		471,000		1,171,000		-		-		1,171,000
Total	$	60,530,000	$	2,787,000	$	63,317,000	$	52,061,000	$	10,085,000	$	1,171,000

	2021
	Adjusted Cost		Unrealized Gain/(Loss)			Fair Value		Cash and Cash Equivalents		Marketable Securities		Investments
Cash and cash equivalents	$	6,497,000	$	-		$	6,497,000	$	6,497,000	$	-	$	-
Level 1				-
Money Market Funds		59,148,000		-			59,148,000		59,148,000		-		-
Marketable Securities		4,727,000		2,592,000			7,319,000		-		7,319,000		-
Level 2
Warrants		15,657,000		(6,117,000	)		9,540,000		-		-		9,540,000
Total	$	86,029,000	$	(3,525,000	)	$	82,504,000	$	65,645,000	$	7,319,000	$	9,540,000

	2020
	Adjusted Cost		Unrealized Gain/(Loss)		Fair Value		Cash and Cash Equivalents		Marketable Securities		Investment
Cash and cash equivalents	$	1,690,000	$	-	$	1,690,000	$	1,690,000	$	-	$	-
Level 1
Money Market Funds		3,493,000		-		3,493,000		3,493,000		-		-
Marketable Securities		5,641,000		3,495,000		9,136,000		-		9,136,000		-
Level 2
Warrants		700,000		356,000		1,056,000		-		-		1,056,000
Total	$	11,524,000	$	3,851,000	$	15,375,000	$	5,183,000	$	9,136,000	$	1,056,000

Net sales	$	55,642,560
Gross profit	$	39,948,960
Operating loss	$	(93,872	)
Loss before income taxes	$	(290,965	)
Income tax provision	$	391,749
Net loss	$	(682,714	)


Net sales	$	64,811,151
Gross profit	$	46,546,657
Operating loss	$	(2,177,526	)
Loss before income taxes	$	(1,829,530	)
Income tax provision	$	594,509
Net loss	$	(1,235,021	)

Maturity of Lease Liability
			Totals
	2021		132,000
	2022		18,000
	2023		4,000
	2024		4,000
	2025		4,000
	2026		2,000
	Total lease payments		164,000
	Less: Imputed Interest		(8,000	)
	Present value of remaining lease payments	$	156,000

	Current	$	138,000
	Noncurrent	$	18,000

	Weighted-average remaining lease term (years)		0.9

	Weighted-average discount rate		4.04	%

	Totals
2021		91,000
2022		19,000
2023		4,000
2024		4,000
2025		4,000
2026		2,000
Total lease payments		124,000
Less: Imputed Interest		(6,000	)
Present value of remaining lease payments	$	118,000

Current	$	101,000
Noncurrent	$	17,000

Weighted-average remaining lease term (years)		1.0

Weighted-average discount rate		5.4	%

	For the Three Months Ended			For the Six Months Ended
	June 30, 2020			June 30, 2020

Revenue:
Printed products	$	603,000		$	1,383,000
Total revenue		603,000			1,383,000

Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization		484,000			1,113,000
Selling, general and administrative (including stock based compensation)		286,000			733,000
Depreciation and amortization		58,000			115,000
Impairment of goodwill		-			685,000
Total costs and expenses		828,000			2,646,000
Operating loss		(225,000	)		(1,263,000	)

Other income (expense):
Interest expense		(7,000	)		(15,000	)
Income (loss) before income taxes		(232,000	)		(1,278,000	)

Income tax expense (benefit)		-			-
Income (loss) from discontinued operations	$	(232,000	)	$	(1,278,000	)

	June 30, 2021		December 31, 2020
	unaudited		unaudited

ASSETS
Current assets:
Cash	$	-	$	43,000
Accounts receivable, net		-		321,000
Prepaid expenses and other current assets		-		167,000
Total current assets		-		531,000

Property, plant and equipment, net		-		46,000
Total assets		-		577,000
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	-	$	25,000
Accrued expenses and deferred revenue		-		10,000
Total current liabilities		-		35,000

Three Months Ended March 31, 2021	Packaging and Printing		Digital		Direct Marketing			Biohealth Group			Corporate			Total
Revenue	$	3,846,000	$	489,000	$	608,000		$	-		$	-		$	4,943,000
Depreciation and amortization		116,000		10,000		44,000			278,000			70,000			518,000
Interest expense		19,000		-		-			-			1,000			20,000
Stock based compensation		1,000		8,000		-			-			6,000			15,000
Net income (loss) from continuing operations		218,000		54,000		(1,799,000	)		(698,000	)		(1,673,000	)		(3,898,000	)
Capital expenditures		66,000		-		6,000			-			-			72,000
Identifiable assets		22,567,000		980,000		18,892,000			51,158,000			49,206,000			142,803,000

Three Months Ended June 30, 2021	Packaging and Printing		Direct Marketing			Biohealth Group			Securities			Corporate			Total
Revenue	$	3,376,000	$	809,000		$	-		$	-		$	-		$	4,185,000
Depreciation and amortization		191,000		274,000			278,000			-			78,000			821,000
Interest expense		19,000		2,000			1,000			67,000			17,000			106,000
Stock based compensation		1,000		-			-			-			(31,000	)		(30,000	)
Net income (loss) from continuing operations		65,000		(5,985,000	)		(610,000	)		(173,000	)		(4,022,000	)		(10,725,000	)
Capital expenditures		1,202,000		-			-			6,565,000			(57,000	)		7,710,000
Identifiable assets		29,463,000		44,772,000			53,717,000			10,939,000			52,270,000			191,161,000

Three Months Ended June 30, 2020	Packaging and Printing		Direct Marketing			Biohealth Group		Securities	Corporate			Total
Revenue	$	2,272,000	$	506,000		$	-		$	-		$	2,778,000
Depreciation and amortization		195,000		-			-			78,000			273,000
Interest expense		28,000		-			-			14,000			42,000
Stock based compensation		4,000		-			-			(21,000	)		(17,000	)
Net income (loss) from continuing operations		64,000		(25,000	)		-			(735,000	)		(696,000	)
Capital expenditures		31,000		-			-			2,000			33,000
Identifiable assets		9,715,000		1,411,000			-			13,022,000			24,148,000

Six Months Ended June 30, 2021	Packaging and Printing		Direct Marketing			Biohealth Group			Securities			Corporate			Total
Revenue	$	7,237,000	$	1,416,000		$	-		$	-		$	-		$	8,653,000
Depreciation and amortization		307,000		319,000			556,000			-			153,000			1,335,000
Interest expense		39,000		2,000			1,000			67,000			(17,000	)		126,000
Stock based compensation		1,000		-			-			-			(16,000	)		(15,000	)
Net income (loss) from continuing operations		283,000		(7,785,000	)		(1,308,000	)		(231,000	)		(5,746,000	)		(14,787,000	)
Capital expenditures		1,202,000		6,000			-			6,565,000			55,000			7,828,000
Identifiable assets		29,463,000		44,772,000			53,717,000			10,939,000			52,270,000			191,161,000

Six Months Ended June 30, 2020	Packaging and Printing		Direct Marketing		Biohealth Group		Securities		Corporate			Total
Revenue	$	5,438,000	$	1,078,000	$	-	$	-	$	-		$	6,516,000
Depreciation and amortization		418,000		-		-		-		155,000			573,000
Interest expense		55,000		-		-		-		18,000			73,000
Stock based compensation		8,000		-		-		-		46,000			54,000
Net income (loss) from continuing operations		86,000		179,000		-		-		(1,941,000	)		(1,676,000	)
Capital expenditures		76,000		-		-		-		4,000			80,000
Identifiable assets		9,715,000		1,411,000		-		-		13,022,000			24,148,000

Three Months Ended March 31,2020	Packaging and Printing		Digital			Direct Marketing		Biohealth Group		Corporate			Total
Revenue	$	3,158,000	$	490,000		$	573,000	$	-	$	-		$	4,221,000
Depreciation and amortization		223,000		9,000			-		-		71,000			303,000
Interest expense		27,000		4,000			-		-		-			31,000
Stock based compensation		4,000		20,000			-		-		66,000			90,000
Net income (loss) from continuing operations		22,000		(46,000	)		204,000		-		(1,101,000	)		(921,000	)
Capital expenditures		63,000		4,000			-		-		1,000			68,000
Identifiable assets		10,626,000		757,000			865,000		-		7,093,000			19,341,000

Three months ended March 31, 2021
Three months ended June 30, 2021
Packaging Printing and Fabrication	$	3,688,000	$	3,336,000
Commercial and Security Printing		158,000		40,000
Total Printed Products	$	3,846,000	$	3,376,000

Three months ended March 30, 2020
Three months ended June 30, 2020
Packaging Printing and Fabrication	$	2,966,000	$	2,103,000
Commercial and Security Printing		203,000		169,000
Total Printed Products	$	3,169,000	$	2,272,000

Six months ended June 30, 2021
Packaging Printing and Fabrication	$	7,056,000
Commercial and Security Printing		181,000
Total Printed Products	$	7,237,000

Six months ended June 30, 2020
Packaging Printing and Fabrication	$	5,067,000
Commercial and Security Printing		371,000
Total Printed Products	$	5,438,000

Three months ended March 31, 2021
Information Technology Sales and Services	$	38,000
Digital Authentication Products and Services		367,000
Royalties from Licensees		84,000
Total Technology Sales, Services and Licensing	$	489,000

Three months ended June 30, 2021
Direct Marketing Internet Sales	$	809,000
Total Direct Marketing	$	809,000

	Three months ended March 31, 2021		Three months ended March 31, 2020		% Change			Three months ended June 30, 2021		Three months ended June 30, 2020		% Change			Six months ended June 30, 2021		Six months ended June 30, 2020		% Change
Revenue
Printed products	$	3,846,000	$	3,169,000		21	%	$	3,376,000	$	2,272,000		49	%	$	7,237,000	$	5,438,000		33	%
Technology sales, services and licensing		489,000		479,000		2	%
Direct marketing		608,000		573,000		6	%		809,000		506,000		60	%		1,416,000		1,078,000		31	%

Total Revenue	$	4,943,000	$	4,221,000		17	%	$	4,185,000	$	2,778,000		51	%	$	8,653,000	$	6,516,000		33	%

	Three months ended June 30, 2021			Three months ended June 30, 2020		% Change			Six months ended June 30, 2021			Six months ended June 30,2020		% Change
Costs and expenses
Cost of revenue, exclusive of depreciation and amortization	$	3,042,000		$	1,729,000		76	%	$	6,330,000		$	4,302,000		47	%
Sales, general and administrative compensation		4,609,000			749,000		515	%		6,337,000			1,393,000		355	%
Depreciation and amortization		821,000			273,000		201	%		1,335,000			573,000		133	%
Professional fees		1,235,000			692,000		78	%		2,205,000			1,272,000		73	%
Stock based compensation		(30,000	)		47,000		-164	%		(15,000	)		54,000		-128	%
Sales and marketing		896,000			340,000		164	%		1,570,000			664,000		136	%
Rent and utilities		75,000			78,000		-4	%		108,000			178,000		-39	%
Research and development		211,000			-		N/A			455,000			-		N/A
Other operating expenses		381,000			133,000		186	%		774,000			317,000		144	%

Total costs and expenses	$	11,240,000		$	4,041,000		178	%	$	19,099,000		$	8,753,000		118	%

Exhibit Number		Exhibit Description

~~31.1~~10.1		Securities Purchase Agreement, by and among, Sharing Services Global Corporation, and Decentralized Sharing Systems, Inc., dated April 5, 2021 (incorporated by reference to exhibit 1.1 to Form 8-K, filed with the Commission on April 9, 2021
10.2		Convertible Promissory Note, dated April 5, 2021 (incorporated by reference to exhibit 10.2 to Form 8-K filed with Commission on April 9, 2021)
10.3		Stock Purchase Agreement between Proof Authentication Corporation and Document Security Systems, Inc. dated May 7, 2021 Relating to the Purchase and Sale of 100% of the Shares of DSS Digital Inc. (incorporated by reference to Exhibit 1.1 to Form 8-K filed with the Commission on May 11, 2021)
10.4		Underwriting Agreement between Document Security Systems, Inc. and Aegis Capital Corp. (incorporated by reference to Form 8-K filed with the Commission on June 17, 2021)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*
31.2		Rule 13a-14(a)/15d-14(a) Certification of ~~Prinicpal~~Principal Financial Officer. *
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*

101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

	DOCUMENT SECURITY SYSTEMS, INC.

August 23, 2021	By:	/s/ Frank D. Heuszel
		Frank D. Heuszel
		Chief Executive Officer
		(Principal Executive Officer)

~~May 14,~~August 23, 2021	By:	~~/s/ Frank D. Heuszel~~
		~~Frank D. Heuszel~~
		~~Chief Executive Officer~~
		~~(Principal Executive Officer)~~

~~May 14, 2021~~	~~By:~~	/s/ Todd D. Macko
		Todd D. Macko
		Interim Chief Financial Officer