What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-31 compared with 2020-03-31 · 1630 added, 1005 removed, 611 unchanged (81% of the section changed)

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders

Security Systems, Inc.

the Stockholders and the Board of Directors of Document Security Systems, Inc.

and Subsidiaries

on the Financial Statements

have audited the accompanying consolidated balance sheets of Document Security Systems, Inc.

and Subsidiaries (the Company) as

have audited the accompanying consolidated balance sheets of Document Security Systems, Inc and Subsidiaries (the Company) as

of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’

equity and cash flows for the years then ended, and the related notes to the consolidated financial statement (collectively, the

financial statements).

equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively,

the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position

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the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company

in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

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We believe that our audits provide a reasonable basis for our opinion.

discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the

adoption of ASU 2016-02, Leases (Topic 842) , and the related amendments.

Our opinion is not modified with respect to this

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

for Business Combinations –

Impact BioMedical, Inc.

described in Note 7 to the consolidated financial statements, the Company completed its acquisition of Impact BioMedical, Inc.

from a related party during the year ended December 31, 2020 for consideration of approximately $38 million.

In connection with

this transaction, the Company evaluated whether this transaction qualified as a business combination, evaluated the classification

of the preferred shares as either a liability or equity, determined the fair value of the consideration paid, determined the fair

value of the separately identifiable assets acquired and liabilities assumed and reflected the excess of the consideration paid

over net assets acquired as goodwill.

In connection with this transaction a deferred tax liability was recorded resulting in the

release of a previously recorded valuation allowance.

The operations of this acquisition are considered to be a single reporting

evaluation of the classification of the transaction as a business combination and the preferred shares issued as permanent equity

Further, based on the stage of development of the business and the related party nature of the transaction, the valuation

of the consideration paid, assets acquired, liabilities assumed, and related non-controlling interest is complex and judgmental.

The valuation models used by management when determining their estimated fair value require subjective assumptions.

In particular,

the fair value estimates are sensitive to changes in assumptions for revenue growth, gross margin, and operating expenses as well

as weighted average cost of capital, illiquidity discounts relating to the consideration paid, and lack of control discounts for

the non-controlling interest.

Additionally, the accounting for the transaction and income

tax accounting related to the opening balance sheet was complex.

Due to the complexity of the transactions and subjectivity involved

with the assumptions used, we identified the business combination as a critical audit matter, which required a high degree of

auditor judgement.

the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion

on the financial statements.

The primary procedures we performed included:

(i) Obtaining an understanding and evaluating

of the design of controls over accounting for and reporting of the transaction, (ii) auditing the appropriateness of management’s

conclusions surrounding the classification of this transaction as a business combination and the preferred share consideration

as permanent equity, (iii) auditing management’s assessment of the identification of assets to be acquired and valued, (iv)

auditing management’s development of the assumptions used in the valuation models applied and the reasonableness of those

assumptions, and auditing the disclosures over this transaction, and (v) auditing the calculation of the deferred tax liability

recorded related to the transaction.

Professionals

with specialized skills and knowledge were used to assist in evaluating certain methodologies and assumptions used in determining

of Investments in Related Parties –

Alset International, Inc.

and Sharing Services Global Corp

described in Note 6 to the consolidated financial statements, the Company has an equity investment in Alset International, Inc.

(“Alset”), a related party, of approximately $6.8 million as of December 31, 2020, recorded as a marketable security

with a readily determinable fair value.

This investment was previously recorded at cost, less impairment.

During the year ended

December 31, 2020, the Company recorded unrealized gains associated with this investment of approximately $3.4 million.

also has an equity investment in Sharing Services Global Corp (“SHRG”), a related party, of approximately $12.2 million

as of December 31, 2020, recorded as an equity method investment, as the Company has significant influence of SHRG.

Prior to obtaining

significant influence, the investment was accounted for as a marketable security with a readily determinable fair value.

the year ended December 31, 2020, the Company recorded unrealized gains associated with this investment of approximately $6.8

million, prior to gaining significant influence, and income of approximately $600,000 associated with the Company’s share

of equity in SHRG.

Further, the Company holds a warrant to purchase additional shares of SHRG amounting to approximately $1.1

million, which is accounted for as an investment in an equity instrument and recorded at fair value, resulting in approximately

$350,000 of unrealized gains.

evaluation of the related party relationships and proper accounting treatment is complex and involves a high degree of subjectivity

and effort in performing procedures surrounding the classification and calculations related to the investments.

to the complexity of the transactions and subjectivity involved with the assumptions used, we identified the accounting for these

related party investments as a critical audit matter, which required a high degree of auditor judgement.

the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion

on the financial statements.

The primary procedures we performed included:

(i) Obtaining

an understanding and evaluating of the design of controls over the determination the investments, (ii) evaluating the related

party nature of the investment and whether the investment was classified and recorded utilizing the appropriate accounting guidance,

(iii) recalculating the respective investment values and gains associated with those investments, and (iv) auditing the reasonableness

of the presentation and disclosure of the investments.

Freed Maxick CPAs, P.C.

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of December 31,

Current assets:

Accounts receivable,

net of $41,000 and $50,000 respectively allowance for doubtful accounts

and cash equivalents

receivable, net

held for sale - discontinued operations

expenses and other current assets

Total current

Property, plant and equipment, net

Notes receivable

Right-of-use assets

Other intangible

LIABILITIES AND

STOCKHOLDERS’

current assets

plant and equipment, net

Other investments

equity method

assets held for sale - discontinued operations

intangible assets, net

AND STOCKHOLDERS’

expenses and deferred revenue

current liabilities

Accounts payable

Accrued expenses

and deferred revenue

Other current

Revolving line

Current portion

of lease liability

liabilities held for sale - discontinued operations

line of credit

portion of lease liability

portion of long-term debt, net

Total current

Long-term debt, net

Long term lease liability

Other long-term liabilities

Deferred tax liability, net

Commitments and

contingencies (Note 13)

current liabilities

term lease liability

liabilities held for sale - discontinued operations

long-term liabilities

tax liability, net

and contingencies (Note 15)

Stockholders’

Common stock, $.02 par value;

stock, $.02 par value;

47,000 shares authorized, 43,000 shares issued and outstanding (0 on December 31, 2019);

Additional paid-in

Accumulated other

comprehensive loss

value $1,000 per share, $43,000,000 aggregate.

stock, $.02 par value;

200,000,000 shares authorized, 5,836,000 shares issued and outstanding (1,206,000 on December 31, 2019)

paid-in capital

Non-controlling

interest in subsidiary

(101,382,000 )

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the Years Ended December 31,

Technology sales,

services and licensing

Total revenue

Costs and expenses:

Cost of revenue,

exclusive of depreciation and amortization

Selling, general

and administrative (including stock based compensation)

sales, services and licensing

and expenses:

of revenue, exclusive of depreciation and amortization

general and administrative (including stock based compensation)

and amortization

costs and expenses

Operating loss

Other income (expense):

Interest income

Interest expense

income (expense):

on extinguishment of debt

from equity method investment

of deferred financing costs and debt discount

Impairment of investment

on extinguishment of liabilities, net

Income (loss)

before income taxes

expense (benefit)

income (loss)

$ (2,889,147 )

Other comprehensive

(loss) from continuing operations before income taxes

(loss) from continuing operations

from discontinued operations

income (loss)

Interest rate

swap gain (loss)

Settlement of

Interest rate swap

from continuing operations attributed to noncontrolling interest

income (loss) attributable to common stockholders

comprehensive income (loss):

rate swap loss

of interest rate swap

Comprehensive

income (loss):

$ (2,882,095 )

Income (loss) per common share:

Shares used in

computing income (loss) per common share:

(loss) per common share - continuing operations:

per common share - discontinued operations:

used in computing earnings (loss) per common share:

accompanying notes.

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flows from operating activities:

income (loss)

income (loss) from continuing operations

$ (2,595,000 )

to reconcile net income (loss) to net cash used by operating activities:

to reconcile net income (loss) from continuing operations to net cash used by operating activities:

and amortization

based compensation

in-kind interest

in deferred tax provision

of deferred financing costs and debt discount

on extinguishment of liabilities, net

of investment

from equity investment

(10,609,000 )

on extinguishment of debt

of deferred financing cost and debt discounts

(increase) in assets:

expenses and other assets

expenses and other current assets

(decrease) in liabilities:

revenue and customer deposits

cash used by operating activities

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of property, plant and equipment

of investment

of notes receivable

receivable investment

of intangible assets

cash used by investing activities

(10,690,000 )

flows from financing activities:

of long-term debt

from lines of credit, net

from revolving lines of credit, net

from conversion of note

of revolving lines of credit, net

from convertible of note

of common stock, net of issuance costs

of subscription receivable, net of issuance costs

cash provided by financing activities

decrease in cash

flows from discontinued operations:

(used) provided by operations

provided (used) by investing activities

used by financing activities

cash used by discontinued operations

increase (decrease) in cash and cash equivalents

and cash equivalents at beginning of year

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Other Comprehensive

controlling Interest in

December 31, 2019

(101,856,767 )

of common stock, net

of preferred stock

based payments, net of tax effect

comprehensive gain

of Impact BioMedical, Inc.

December 31, 2020

(100,391,798 )

December 31, 2018

of common stock, net

based payments, net of tax effect

comprehensive gain

comprehensive loss

December 31, 2019

(103,280,945 )

accompanying notes.

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Security Systems, Inc.

(the “Company”), through two of its subsidiaries, Premier Packaging Corporation, which operates

under the assumed name of DSS Packaging Group, and Plastic Printing Professionals, Inc., which operates under the name of DSS

Plastics Group, operates in the security and commercial printing, packaging and plastic ID markets.

The Company develops, markets,

manufactures and sells paper and plastic products designed to protect valuable information from unauthorized scanning, copying,

and digital imaging.

The Company’s subsidiary, DSS Digital Inc., which also operates under the name of DSS Digital Group,

researches, develops, markets and sells worldwide the Company’s digital products, including and primarily our AuthentiGuard®

product, which is a brand authentication application that integrates the Company’s counterfeit deterrent technologies with

proprietary digital data security-based solutions.

The Company’s subsidiary, DSS Technology Management (“DSSTM”),

Inc., manages, licenses and acquires intellectual property (“IP”) 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 2018, the Company commenced operations

in the Asia Pacific market through its subsidiary DSS Asia Limited, which was formed in 2017.

2019, DSS created four new, wholly owned subsidiaries all of which currently have no employees and are in the exploratory stage

and looking for opportunities.

DSS Blockchain Security, Inc., that intends to specialize in the development of blockchain security

technologies for tracking and tracing solutions for supply chain logistics and cyber securities across global markets.

Sharing Systems, Inc., that amongst other things, intends to provide services to assist companies utilizing blockchain technologies

for sharing system solutions in the new economics of the peer-to-peer decentralized sharing marketplaces.

(the “Company of DSS”) operates eight (8) business lines through eight (8) DSS subsidiaries

located around the globe.

the eight subsidiaries, three 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) 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) Decentralize Sharing Systems, Inc.

subsidiary, created a fourth business segment, Direct Marketing/Online

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.

addition to the four subsidiaries listed above, in 2019 and early 2020, DSS has created four new, wholly owned subsidiaries.

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) DSS Securities, Inc., a Nevada

corporation, has been established to develop or to acquire assets in the securities trading or management arena, and to pursue

two parallel streams of digital asset exchanges in multiple jurisdictions:

(i) securitized token exchanges, focusing on digitized

assets from different vertical industries and (ii) utilities token exchanges, focusing on “blue-chip”

utility tokens

from solid businesses.

(7) 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) 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.

in the these newly created subsidiaries have been minimal or in various start-up or organizational phases.

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”) (see Note 7).

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.

investors the opportunity for direct ownership of Class A licensed medical real estate.

As of December 31, 2020, AAMI has yet

to generate any revenue.

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”).

result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly

owned subsidiary (see Note 7).

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.

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.

anticipates establishing or acquiring two parallel streams of digital asset exchanges in multiple jurisdictions:

(i) securitized

token exchanges, focusing on digitized assets from different vertical industries and (ii) utilities token exchanges, focusing

on “blue-chip”

utility tokens from solid businesses.

DSS BioHealth Security, Inc., to invest in companies that include,

but not limited to, holding bio-medical intellectual property and/or which have, or are securing, strategic alliances, partnerships

and distributing rights for biomedical and security products, technologies or enterprises.

This new division will focus on open-air

defense initiatives, which curb transmission of air-borne infectious diseases such as tuberculosis, influenza, among others, in

shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application

and permitting process.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Consolidation - The consolidated financial statements include the accounts of Document Security System and its subsidiaries.

of Consolidation - The consolidated financial statements include the accounts of Document Security System and its wholly

owned and its majority owned or subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

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On an ongoing

basis, the Company evaluates its estimates, including those related to the accounts and notes receivable, inventory, fair

values of investments , recoverability of long-lived assets and goodwill, useful lives of intangible assets and property

and equipment, contingencies fair values of options and warrants to purchase the Company’s common stock, deferred

revenue and income taxes , substantial doubt about ability to continue as a going concern 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.

basis, the Company evaluates its estimates, including those related to the accounts and notes receivable, inventory, fair values

of investments, recoverability of long-lived assets and goodwill, useful lives of intangible assets and property and equipment,

contingencies fair values of options and warrants to purchase the Company’s common stock, deferred revenue and income taxes,

substantial doubt about ability to continue as a going concern 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

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estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions.

At December 31, 2019, the Company established a reserve for doubtful accounts of approximately $41,000 ($50,000 –

As of December 31, 2020, the Company established a reserve for doubtful accounts of approximately $25,000 ($41,000 –

The Company does not accrue interest on past due accounts receivable.

Inventory - Inventories consist primarily of paper, plastic materials and cards, pre-printed security paper, paperboard and fully prepared packaging which and are stated at the lower of cost or net realizable value on the first-in, first-out (“FIFO”) method.

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;

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.

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.

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.

- Inventories consist primarily of paper, pre-printed security paper, paperboard, fully prepared packaging, and health

and beauty products which and are stated at the lower of cost or net realizable value on the first-in, first-out (“FIFO”)

Packaging work-in-process and finished goods included the cost of materials, direct labor and overhead.

At the closing of each reporting period, the Company evaluates its inventory in order to adjust the inventory balance for obsolete and slow moving items.

No reserve was recorded at December 31, 2019 or 2018.

Write-downs and write-offs are charged to cost of goods sold.

At the closing

of each reporting period, the Company evaluates its inventory in order to adjust the inventory balance for obsolete and slow-moving

No reserve was recorded as of December 31, 2020 or 2019.

Write-downs and write-offs are charged to cost of revenue.

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.

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.

for further discussion on investments.

Plant and Equipment - Property, plant and equipment are recorded at cost.

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expense in 2020 was approximately $710,000 ($690,000 - 2019).

In accordance with ASC 325-20, the Company records its investment in common stock of Singapore eDevelopment

Limited at cost, less impairment as the fair market value of the investment is not readily determinable.

The Company evaluates

investment for indications of impairment at least annually.

- Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and

2 unchanged sentences

for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events

or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less

than its carrying amount.

If, after assessing the totality of events or circumstances, an entity determines it is not more

likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step

impairment test is unnecessary.

If the two-step impairment test is necessary, a fair-value-based test is applied at the

reporting unit level, which is generally one level below the operating segment level.

The test compares the fair value of an

entity’s reporting units to the carrying value of those reporting units.

This test requires various judgments and

The Company estimates the fair value of the reporting unit using a market approach in combination with a

discounted operating cash flow approach.

FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine whether

the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting

unit is less than its carrying amount.

If, after completing the assessment, it is determined that it is more likely than not that

the fair value of a reporting unit is less than its carrying value, the Company will proceed to a quantitative test.

may also elect to perform a quantitative test instead of a qualitative test for any or all of our reporting units.

The test compares

the fair value of an entity’s reporting units to the carrying value of those reporting units.

This quantitative test requires

various judgments and estimates.

The Company estimates the fair value of the reporting unit using a market approach in combination

with a discounted operating cash flow approach.

Impairment of goodwill is measured as the excess of the carrying amount of goodwill

over the fair values of recognized and unrecognized assets and liabilities of the reporting unit.

The Company performed its

annual goodwill impairment test as of December 31, 2019, and no impairment was deemed necessary.

At December 31, 2019 and

2018 the Company’s goodwill consisted of approximately $685,000 and $1,768,600 for

Plastic Printing Professionals, and Premier Packaging Corp., respectively.

Intangible Assets and Patent Application Costs - Other intangible assets consist of costs associated with the application

for patents, acquisition of patents and contractual rights to patents and trade secrets associated with the Company’s technologies.

The Company’s patents and trade secrets are generally for document anti-counterfeiting and anti-scanning technologies and

processes that form the basis of the Company’s document security business.

Patent application costs are capitalized and

amortized over the estimated useful life of the patent, which generally approximates its legal life.

In addition, intangible assets

include customer lists and non-compete agreements obtained because of acquisitions.

Intangible asset amortization expense is classified

as an operating expense.

The Company believes that the decision to incur patent costs is discretionary as the associated products

or services can be sold prior to or during the application process.

The Company accounts for other intangible amortization as

an operating expense, unless the underlying asset is directly associated with the production or delivery of a product.

to acquisition of patents and trade secrets, legal and associated costs incurred in prosecuting alleged infringements of the patents

will be recognized as expense when incurred.

Costs incurred to renew or extend the term of recognized intangible assets, including

patent annuities and fees, and patent defense costs are expensed as incurred.

To date, the amount of related amortization expense

for other intangible assets directly attributable to revenue recognized is not material.

of Long-Lived Assets - 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.

Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction between market participants at the measurement date.

The Fair Value Measurement

Topic of the FASB 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:

1, defined as observable inputs such as quoted prices for identical instruments in active markets;

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;

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.

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.

fair value of notes receivable approximates their carrying value as the stated or discounted rates of the notes do not reflect

recent market conditions.

The fair value of revolving credit lines notes payable and long-term debt approximates their carrying

value as the stated or discounted rates of the debt reflect recent market conditions.

Derivative instruments, as discussed below,

are recorded as assets and liabilities at estimated fair value based on available market information.

The fair value of investments

carried at cost less impairment;

however, the fair value is not considered readily determinable based on the lack of liquidity

for the shares owned.

Instruments - The Company maintains an overall interest rate risk management strategy that may incorporate the use of

interest rate swap contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility.

Company had an interest rate swap that changes variable rates into fixed rates on one Citizens Bank term loan relating to the

Company’s subsidiary, Premier Packaging.

This swap qualified as a Level 2 fair value financial instrument.

This swap agreement

was not held for trading purposes and the Company did not intend to sell this derivative swap financial instrument.

recorded the interest swap agreement on the balance sheet at fair value because the agreement qualifies as a cash flow hedge under

accounting principles generally accepted in the United States of America.

Gains and losses on these instruments are recorded in

other comprehensive loss until the underlying transaction is recorded in earnings.

When the hedged item was realized, gains or

losses are reclassified from accumulated other comprehensive loss (“AOCI”) to the consolidated statement of operations.

The valuations of the interest rate swap has been derived from proprietary models of Citizens Bank, N.A (Citizens), based

upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain

other financial factors such as anticipated profit or hedging, transactional, and other costs.

The notional amounts of the swap

decreased over the life of the agreements.

The Company would be exposed to a credit loss in the event of nonperformance by the

counter parties to the interest rate swap agreements.

The Company did not anticipate non-performance by the counter parties.

swap was settled in September 2019 with the effect of the settlement of an approximate loss of $22,000 recorded in other comprehensive

income in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company performed its annual

goodwill impairment test as of December 31, 2020, and no impairment was deemed necessary for the goodwill associated with Premier

Packaging Company of approximately $1,768,600.

Consistent with this accounting impairment analysis, the Company determined that

due to many factors, including the impact of the COVID-19 outbreak and the related closing of the operations of the Plastic Group,

the Company has quantitatively tested the carrying value of its goodwill associated with the DSS Plastics Group and determined

that an impairment of the DSS Plastics’

goodwill had occurred and the Company recorded a full goodwill impairment of $685,000

during the twelve-months ended December 31, 2020.

This impairment has been included in the calculation of the discontinued operations

of DSS Plastics group.

There was no goodwill impairment recorded during the year ended December 31, 2019.

Assets - The estimated fair values of acquired intangibles are generally determined based upon future economic benefits

such as earnings and cash flows.

Acquired identifiable intangible assets are recorded at fair value and are amortized over their

estimated useful lives.

Acquired intangible assets with an indefinite life are not amortized but are reviewed for impairment at

least annually or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets

are below their estimated fair values.

Impairment is tested under ASC 350.

Assets - 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.

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

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.

Party Liabilities - 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,

Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl.

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 International, 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% of amounts collected.

As of December 31, 2020, the Company has collected approximately

$1,100,000 on behalf of HWH Korea.

This amount was remitted to HWH Korea, net of fees and other expenses, in the first quarter

The related party liability is included in “Other current liabilities”

on the accompanying consolidated balance

There were no amounts outstanding to this related party at December 31, 2019.

Stock Split - On May 4, 2020, Document Security Systems, Inc.

held a Special Meeting of Stockholders at which the Company’s

stockholders approved amendment to the Company’s certificate of incorporation to effect a reverse split of common stock

of the Company by a ratio of 1-for-30 with the effectiveness of such amendment to be determined by the Board of Directors of the

Company The form of the certificate of amendment to effect the Reverse Split was subsequently approved by the Board on May 4,

On May 7, 2020, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State

of the State of New York to effect a 1-for-30 reverse stock split of the Company’s outstanding common stock.

The Amendment

was effective at 5:01 p.m.

Eastern Time on May 7, 2020.

The reverse stock split has been retroactively applied to all financial

statements presented.

- 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

The Company also derives revenue from royalties from third parties which are typically based on licensees’

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.

The Company generates revenue from its direct marketing line

of business primarily through internet sales and recognizes revenue as items are shipped.

of December 31, 2020, 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

of revenue - Costs of revenue includes all direct cost of the Company’s packaging, commercial and security

printing sales, primarily, paper, inks, dies, and other consumables, and direct labor, transportation and manufacturing facility

In addition, this category includes all direct costs associated with the manufacturing and procurement of the products

sold in the Company’s Direct Marketing line of business as well as with the Company’s technology sales, services and

licensing including hardware and software that is resold, third-party fees, and fees paid to inventors or others as a result of

technology licenses or settlements, if any.

Amortization of patent costs and acquired technology are included in depreciation

and amortization on the consolidated statement of operations.

Costs of revenue do not include expenses related to product development,

integration, and support.

These costs are included in research and development, which is a component of selling, general and administrative

expenses on the consolidated statement of operations.

Legal costs are included in selling, general and administrative.

and Handling Costs - Costs incurred by the Company related to shipping and handling are included in cost of revenue.

Amounts charged to customers pertaining to these costs are reflected as revenue.

Payments - Compensation cost for stock awards are measured at fair value and the Company recognizes compensation expense

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the term of the consulting agreement.

Recognition - Effective January 1, 2018, the Company adopted Topic 606 using the modified retrospective approach and applied

the guidance to those contracts which were not completed as of January 1, 2018.

Adoption of Topic 606 did not impact the timing

of revenue recognition in the Company’s Consolidated Financial Statements for the current or prior interim or annual periods.

Company sells printed products including packaging printing and fabrication, commercial and security printing and plastic cards

and badges, including cards and badges integrated with technology such as RFID and smart chips.

The Company also provides information

technology services and digital authentication products and services to its customers.

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.

Customers, including distributors, do not

have a general right of return.

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.

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.

of December 31, 2019, 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

commissions are expensed as incurred for contracts with an expected duration of one year or less.

Commissions - Sales commissions are expensed as incurred for contracts with an expected duration of one year or less.

A significant portion of the Company’s sales commissions expense is generated from its direct marketing line of business.

These commissions are based on current month shipments and are paid one month in arrears.

There were no sales commissions

capitalized as of December 31, 2020.

and Handling 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.

of revenue - Costs of revenue includes all direct cost of the Company’s packaging, commercial and security

printing and plastic ID card sales, primarily, paper, plastic, inks, dies, and other consumables, and direct labor, transportation

and manufacturing facility costs.

In addition, this category includes all direct costs associated with the Company’s technology

sales, services and licensing including hardware and software that is resold, third-party fees, and fees paid to inventors or

others as a result of technology licenses or settlements, if any.

Costs of revenue recorded in the DSS Technology Management group

include contingent legal fees, inventor royalties, legal, consulting and other professional fees directly related to the Company’s

patent monetization, litigation and licensing activities.

Amortization of patent costs and acquired technology are included in

depreciation and amortization on the consolidated statement of operations.

Costs of revenue do not include expenses related to

product development, integration, and support.

These costs are included in research and development, which is a component of selling,

general and administrative expenses on the consolidated statement of operations.

Legal costs are included in selling, general

and administrative.

Legal Expenses - Contingent legal fees are expensed in the consolidated statements of operations in the period

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acquisition costs will be expensed in the period a conclusion is reached in an enforcement action that does not yield future royalties

Costs –

Generally consist of online, keyword advertising with Google with additional amounts spent on certain print

media in targeted industry publications .

Advertising costs were approximately $81,000 in 2018 ($67,000 –

and Development - Research and development costs are expensed as incurred.

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of third-party research costs and consulting costs.

The Company recognized a credit in 2019 of approximately $12,000 primarily

due to receipt of the anticipated $33,000 refund on development costs for the development of proprietary blockchain solutions

for the Company’s AuthentiGuard product line.

In comparison, the Company spent approximately $146,000 and on research and

development during 2018 primarily toward the development of the Company’s AuthentiGuard

product line .

The Company recognized costs of approximately $210,000 in 2020, and a credit

in 2019 of approximately $12,000 primarily due to receipt of the anticipated $33,000 refund on development costs for the development

of proprietary blockchain solutions for the Company’s AuthentiGuard product line.

Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for the current year

5 unchanged sentences

income tax expense.

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 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.

of December 31, 2019, and 2018, there were 1,798,221 and 2,212,773, respectively, of common stock share equivalents potentially

issuable under options, warrants, and restricted stock agreements that could potentially dilute basic earnings per share in the

For the twelve-months ended December 31, 2019, equivalents were excluded from the calculation of diluted earnings per

share since their inclusion would have been anti-dilutive.

For the twelve-months ended December 31, 2018, based on the average

market price of the Company’s common stock during that period of $1.27, 206,429 common stock equivalents were added to the

basic shares outstanding to calculate dilutive earnings per share.

Comprehensive

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The change in fair value of interest rate

swaps was the only item impacting accumulated other comprehensive loss for the years ended December 31, 2019 and 2018.

swaps was the only item impacting accumulated other comprehensive loss for the year ended December 31, 2019.

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.

Weighted average

shares outstanding used for diluted earnings per share includes the assumed conversion of the 47,000 preferred shares, convertible

into 7,233,000 common shares, for the period they were outstanding resulting in an additional 2,471,000 shares for the

year ended December 31, 2020.

Concentration

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2020, two customers accounted for 38% of our consolidated revenue.

As of December 31, 2020, these two customers accounted

for 60% of our consolidated trade accounts receivable balance.

As of December 31, 2019, these two customers accounted for 45%

49% of our consolidated trade accounts receivable balance.

As of December 31, 2018, these two customers accounted for 44% of our

consolidated revenue and 38% of our consolidated trade accounts receivable balance.

Operations and Going Concern –

The accompanying consolidated financial statements have been prepared assuming that

we will continue as a going concern.

This basis of accounting contemplates the recovery of our assets and the satisfaction of

liabilities in the normal course of business.

These consolidated financial statements do not include any adjustments to the specific

amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern.

While the Company has approximately $1.1 million in cash and cash equivalents, and a positive working capital position of approximately

$3.2 million as of December 31, 2019, the Company has incurred negative cash flows from operating and investing activities

over the past two years.

To continue as a going concern, on June 5, 2019, the Company entered into an underwriting agreement with

Aegis Capital Corp., acting as representative of the several underwriters, which provided for the issuance and sale by the Company

in an underwritten public offering (the “Offering”) of 11,200,000 shares of the Company’s common stock.

Company also granted the Underwriters a 45-day option to purchase up to 1,680,000 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 Offering (519,186

shares were exercised on July 18, 2019.) The net offering proceeds to the Company was approximately $5.0 million, inclusive of

the July 18, 2019 transaction and after deducting underwriting discounts, commissions and other offering expenses.

Also, on February

25, 2020, Company entered into an underwriting agreement with Aegis Capital Corp., acting as representative of the several underwriters,

which provided for the issuance and sale by the Company in an underwritten public offering (the “Offering”) of 25,555,556

shares (inclusive of 3,333,333 over-allotment that was exercised immediately) of the Company’s common stock.

The net offering

proceeds (inclusive of the over-allotment exercise) to the Company approximated $4.0 million.

expected use of cash for operations in 2020 will be primarily for funding operating losses, working capital, legal expenses associated

with intellectual property related litigation, and the costs associated with the global roll-out of the Company’s AuthentiGuard

product line.

The Company will also use these funds to make capital improvements at its two manufacturing facilities to increase

production capacity and create efficiencies, as well as to diversify its revenue streams and take advantage of profit opportunities.

Company’s management intends to take actions necessary to continue as a going concern.

Management’s plans concerning

these matters includes, among other things, continued growth among our operating segments including international expansion of

our AuthentiGuard product, and tightly controlling operating costs and reducing spending growth rates wherever possible to return

to profitability.

believe that our $1.1 million in aggregate cash and equivalents as of December 31, 2019 as well as the $4.0 million raised on

February 25, 2020 will allow us to fund our four operating segments current and planned operations through March 2021.

Based on this, we have concluded that substantial doubt of our ability to continue as a going concern has been alleviated.

Adopted Accounting Pronouncements –

of our consolidated revenue and 48% of our consolidated trade accounts receivable balance.

Combinations - Business combinations and non-controlling interests are recorded in accordance with FASB ASC 805 Business

Combinations.

Although Impact BioMedical historically, and to date has not generated any revenues, the acquisition of Impact

BioMedical 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.

Under the guidance,

we determine the fair value of consideration paid and 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 7 regarding the acquisitions in 2020.

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 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.

the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 205—Discontinued

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 and Comprehensive Income (Loss) as Loss from Discontinued Operations.

Adopted and 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.

January 2017, the FASB issued ASU 2017-04, “Intangibles –

Goodwill and Other (Topic 350) –

Simplifying the Test

for Goodwill Impairment”, which eliminates the two-step process that required identification of potential impairment and

a separate measure of the actual impairment.

The annual assessment of goodwill impairment will be determined by using the difference

between the carrying amount and the fair value of the reporting unit.

The standards update is effective for goodwill impairment

tests in fiscal years beginning after December 15, 2019 and has been adopted by the Company effective January 1, 2020.

February 2016, the FASB issued ASU No.

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as of January 1, 2019 was a right-of-use asset and a lease liability of approximately $1,443,800.

Accounting Pronouncements

June 2016, the Financial Accounting Standards Board (“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.

January 2017, the FASB issued ASU 2017-04, “Intangibles –

Goodwill and Other (Topic 350) –

Simplifying the Test

for Goodwill Impairment”, which eliminates the two-step process that required identification of potential impairment and

a separate measure of the actual impairment.

The annual assessment of goodwill impairment will be determined by using the difference

between the carrying amount and the fair value of the reporting unit.

The standards update is effective for goodwill impairment

tests in fiscal years beginning after December 15, 2019.

The Company is currently assessing the impact that adopting this new

accounting standard will have on its Consolidated Financial Statements and plans to adopt ASU 2017-04 in the first quarter of

consisted of the following at December 31:

Finished Goods

Work in Process

Raw Materials

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

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.

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.

we believe that physical security cards and individual IDs will be replaced by more digital and optical technologies.

management decided to fully impair its goodwill related to DSS Plastics during the first quarter 2020, and to exit this business

The impact of this decision in our first quarter 2020 earnings and for as of December 31, 2020 was an impairment

of approximately $685,000.

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.

Operations and Going Concern - The accompanying consolidated financial statements have been prepared assuming that the

Company will continue as a going concern.

This basis of accounting contemplates the recovery of our assets and the satisfaction

of liabilities in the normal course of business.

These consolidated financial statements do not include any adjustments to the

specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a

going concern.

While the Company has approximately $5.2 million in cash, and a positive working capital position of approximately

$3.6 million as of December 31, 2020, the Company has incurred operating losses as well as negative cash flows from operating

and investing activities over the past two years.

continue as a going concern, during the twelve months ended December 31, 2020, the Company through multiple underwriting agreements

with Aegis Capital Corp.

(“Aegis”), acting as representative of the several underwriters, provided the issuance and

sale by the Company in an underwritten public offering shares of the Company’s common stock.

The net offering proceeds to

the Company approximated $20.2 million.

Also, through two separate public offerings underwritten by Aegis during the first

quarter of 2021, the Company received net proceeds of approximately $61.0 million.

Company’s management intends to take actions necessary to continue as a going concern.

Management’s plans concerning

these matters includes, among other things, continued growth among our operating segments, and tightly controlling operating costs

and reducing spending growth rates wherever possible to return to profitability.

In addition, the Company has taken steps, and

will continue to take measures, to materially reduce the expenses and cash burn at all corporate and business line levels.

the twelve months ended December 31, 2020, steps were taken to materially reduce or eliminate cash burns in the IP Monetization

program, the DSS Digital Group and the DSS Plastics group.

the Company’s current operating levels and capital usage, we believe that without any further acquisition or investments,

our $5.2 million in aggregate cash, and cash equivalents, as of December 31, 2020, along with the $61.0 million

raised during the first quarter of 2021, would allow us to fund our nine business lines current and planned operations

through March 2022.

Based on this, the Company has concluded that substantial doubt of its ability to continue as a going

concern has been alleviated

consisted of the following as of December 31:

NOTES RECEIVABLE

October 10, 2019, the Company entered into a convertible promissory note (“Note”) with Century TBD Holdings, LLC (“TBD”),

a Florida limited liability company.

The Company loaned the principal sum of $500,000, of which up to $500,000 and all accrued

interest can be paid by an “Optional Conversion”

of such amount up to 19.8% (non-dilutable) of all outstanding membership

interest in TBD.

This Note accrues interest at 6% and matures on October 9, 2021.

As of December 31, 2019, this Note had outstanding

principle and interest of $506,756.

October 9, 2019 and November 11, 2019 the Company entered into two, separate on demand, convertible notes (“Note”

or “Notes”) with RBC Life Sciences, Inc.

October 10, 2019, the Company entered into a convertible promissory note (“TBD Note”) with Century TBD Holdings, LLC

(“TBD”), a Florida limited liability company.

The Company loaned the principal sum of $500,000, of which up to $500,000

and all accrued interest can be paid by an “Optional Conversion”

of such amount up to 19.8% (non-dilutable) of all

outstanding membership interest in TBD.

This TBD Note accrues interest at 6% and matures on October 9, 2021.

As of December 31,

2020, and 2019 this TBD Note had outstanding principal and interest of approximately $537,000 and $507,000, respectively.

30, 2020, the Company signed a binding letter of intent with West Park Capital, Inc (“West Park”).

and TBD where the

parties agreed to prepare a note and stock exchange agreement whereby DSS will assign the TBD Note to West Park and West Park

shall issue to DSS a stock certificate reflecting 7.5% of the issued and outstanding shares of West Park.

This note and stock

exchange agreement is expected to be finalized sometime during the second quarter of 2021.

October 9, 2019 and November 11, 2019, the Company’s subsidiary

Decentralized Sharing Systems, Inc.

entered into two, separate on demand, secured, convertible notes with RBC Life Sciences, Inc.

(RBC), a Nevada corporation.

The first Note, dated October 9 th ,

lent the principal sum of $200,000 and accrues interest at 6% with a maturity date of November 11, 2019.

This Note also contains

an “Optional Conversion”

clause 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 amount, plus accrued interest into a number of newly issued shares

of its common stock equal to 75% of the total shares common stock that will be outstanding upon such conversion at a fully-diluted

At December 31, 2019, this Noted had outstanding principle and interest of $203,988.

The second Note, dated November 11 th ,

allowed for the borrow by RBC up to an aggregate principal sum of $800,000 and accrues interest at 10% with a maturity date of

November 11, 2024.

Interest on any outstanding principal is payable monthly commencing on December 25, 2019.

Any amount of principal

repaid during this time is allowed to be re-borrowed at any time prior to the earlier of the termination of this Note or the maturity

The first Note, dated October 9 th , lent the principal sum of $200,000 which accrued at

a non-default interest rate of 6% with a scheduled maturity date of November 11, 2019 (“Note #1) This Note #1 also

contains an “Optional Conversion”

clause 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 amount, plus accrued interest into a number of newly

issued shares of its common stock equal to 75% of the total shares common stock that will be outstanding upon such conversion

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.

As of December 31, 2019, the Company had advanced

under the terms of Note #1 the sum of $200,000.

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’

wholly owned subsidiary,

HWH World, Inc..

Accrued interest on the outstanding principal balance was scheduled to be paid monthly commencing on December

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”

clause 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 amount, 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 direct and

indirect subsidiaries.

The outstanding principle and interest at December 31, 2019 was $82,451.

See Note 16 for information regarding

foreclosure on these Notes subsequent to December 31, 2019.

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.

As of December 31, 2019, this Note #2 had an

outstanding principal balance of approximately $82,000, and advances of approximately $518,000 were made during 2020.

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.

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.

April 8, 2020, the Company initiated Uniform Commercial Code Article 9 foreclosure proceedings against 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.

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.

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

See Note 15 for further details on related litigation.

FINANCIAL INSTRUMENTS

Cash Equivalents and Marketable Securities

following tables show the Company’s cash and marketable securities by significant investment category as of December 31,

2020 and December 31, 2019:

Cash and cash equivalents

Money Market Funds

Marketable Securities

Cash and cash equivalents

Money Market Funds

Marketable Securities

Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal

The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit

exposure to any one issuer.

Fair values were determined for each individual security in the investment portfolio.

6 - INVESTMENT

of December 31, 2018, the Company owned 21,196,552 ordinary shares and an existing three-year warrant to purchase up to 105,982,759

ordinary shares at an exercise price of SGD$0.040 (US$0.0298) per share of Singapore eDevelopment Limited (“SED”),

a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited.

The restriction on the sale of shares,

and execution of the warrants expired on September 17, 2019.

At the time of the investment, the cost of the investment was determined

to be the fair value of the Company’s common stock issued in the transaction, which was determined to have the most readily

determinable fair value.

In 2018, the Company adopted ASU No.

2016-01, “Recognition and Measurement of Financial Assets

and Financial Liabilities.”

has and carries its investment in SED at costs.

During the 4th quarter of 2018, the Company

determined that its investment in Singapore eDevelopment (“SED”) was impaired due to the decline in the share price

of SED, especially since November of 2018, which the Company believes was influenced by a general decline in equity markets in

Asia caused by the tariff dispute between the United States and China.

As such, in response to the decline in the trading value

of the SED shares in the fourth quarter of 2018, the Company performed an impairment test and determined an impairment of approximately

$160,000 was warranted.

Similar analysis was performed at December 31, 2019 and no further impairment is deemed necessary as the

stock price has rebounded in excess of 15%.

The carrying value of the initial 21,196,552 ordinary shares investment as of December

31, 2019 was $324,930.

December 19, 2019, the Company exercised the warrant, in part, pursuant to which the Company acquired 61,977,577 ordinary shares

The total consideration paid by the Company for these ordinary shares was SGD$2,479,103.08, or approximately $1,833,000

USD, the investment value at December 31, 2019.

After giving effect to the warrant exercise, the Company now owns 83,174,129 ordinary

shares of SED, representing approximately 7.1% of the outstanding shares of SED, and the remaining warrant to purchase 44,005,182

ordinary shares of SED.

International Limited (formally Singapore eDevelopment Limited)

of December 31, 2018, the Company owned 21,196,552 ordinary 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.

and an existing three-year warrant to purchase up to 105,982,759 ordinary

shares at an exercise price of SGD$0.040 (US$0.0298) per share During the year ended December 31, 2019 the Company exercised 61,977,577 of the warrants for

total cost of $1,829,000 and at December 31, 2019 recorded the investment at cost, less impairment under the measurement

alternative in ASC 321 for a total value of $2,154,000.

As of June 25, 2020, the Company exercised the remaining warrants for

total cost of $1,291,000 bringing its total ownership to 127,179,311 shares or approximately 7% of the outstanding shares of

Alset Intl as of December 31, 2020.

Historically and through June 30, 2020, the Company carried its investment in Alset Intl

at cost, less impairments under the measurement alternative in ASC 321 in part due to the restriction on the sale of shares

which expired on September 17, 2019 as well as the lack of historical volume associated with the shares of Alset Intl.

the third quarter 2020, the Company determined fair value

based on the volume of shares traded on the Singapore Exchange which has a breadth and scope comparable to United States

markets, as well as a consistent and observable market price.

Accordingly, this investment is now 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 SED.

Heng Fai Ambrose

Chan, is the Executive Director and Chief Executive Officer of Alset Intl.

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 December 31, 2020 was

approximately $6,830,000 and during the year ended December 31, 2020 the Company recorded unrealized gains on this investment

of approximately $3,384,200.

Services Global Corp.

(“SHRG”)

Company had acquired in a series of open-market transactions, between March 2020 and December 2020 an aggregate of 13,957,378

of additional Class A common shares of Sharing Services Global Corp.

(“SHRG”), a publicly traded company at an average

purchase price of $0.06 per share.

The Company, during this same period, had also purchased 20,250,000 shares of SHRG in private

purchases at an average purchase price of $0.09 per share.

The aggregate cost of these transactions approximated $2,572,000.

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 million.

The warrants have an average

exercise price of $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.

These warrants have been recorded at the fair market value of $1,056,000 on the

Company’s consolidated balance sheet and are included in “other investments”

with the increase representing

an unrealized gain of $356,000 as of 12/31/2020.

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.

of June 30, 2020, the Company, had acquired and owned approximately 17% of the issued and outstanding shares of SHRG, which was

recorded as a marketable security investment.

In the 3 rd quarter of 2020, the Company, through a series of Class

A common shares acquisitions in July 2020, with such acquisition history detailed below, the Company acquired in aggregate,

an ownership interest in SHRG of greater than 20%.

At that time, it was determined that the Company had the ability to exercise

significant influence over SHRG.

Accordingly, on July 22 nd , the Company began prospectively utilizing the equity method

of accounting for its investment into SHRG in accordance with ASC Topic 323 and recognizing our share of SHRG’s earnings

and losses within our consolidated statement of operations and comprehensive income (loss).

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 lag

basis and utilized SHRG’s three-month ended October 31, 2020 reported results in calculating its portion of SHRG’s

gain which approximated $604,000.

As of July 22, 2020, the Company owned 62,417,593 Class A common shares of SHRG with

an adjusted basis of $11.3 million.

As of December 31, 2020, the Company held 64,207,378 class A common shares equating

to a 32.6% ownership interest in SHRG and had recorded unrealized gains on marketable securities of approximately $6.8

million for the twelve-months then ended related to the period prior to the Company achieving significant influence and

recording the investment under the equity method.

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,

which represents primarily intangible assets in the form of customer and distributor lists and goodwill arising from acquisitions.

The Company is still in the process of valuing the intangible assets as of December 31, 2020 and no amortization has been recorded

during the period ended December 31, 2020.

The aggregate fair value of the Company’s investment in SHRG at December 31,

2020 was approximately $14,774,000.

The following table represents SHRG operating results for the six-months ended October

before income taxes

tax provision

Company, via four (4) of the Company’s existing board

members, currently holds four (4) of the five (5) SHRG board of director seats.

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.

Heuszel, the CEO of the Company (joined the SHRG Board effective

September 29, 2020).

Capital International LLC

September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc.

entered into membership interest purchase

agreement with BMI Financial Group, Inc.

a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas

limited liability company (“BMIC”) whereas DSS Securities, Inc.

purchased 14.9% membership interests in BMIC for $100,000.

DSS Securities also had the option to purchase an additional 10% of the outstanding membership interest which it exercised in

January of 2021 and increased its ownership to 24.9%.

This investment is valued at cost as it does not have a readily determined

is a broker-dealer registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority,

(“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.

Title Company

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 no activity for

the twelve-months ended December 31, 2020.

Technologies Asia Pacific Holdings Limited

December 19, 2020, Impact BioMedical, a wholly-owned subsidiary of the Company, entered into a subscription agreement (the

“Subscription Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited

liability company incorporated in the British Virgin Islands, pursuant to which the Company agreed to purchase 525 ordinary shares

or 4.99% of BioMed at a purchase price of approximately $630,000.

The Subscription Agreement provides, among other things, the

Company 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.

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 ®

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.

BUSINESS COMBINATIONS

Medical REIT Inc.

March 3, 2020, the Company entered into a binding term sheet (the “Term Sheet”) with LiquidValue Asset Management

Pte Ltd (“LVAM”), AMRE Asset Management Inc.

(“AAMI”) and American Medical REIT Inc.

(“AMRE”),

regarding a share subscription and loan arrangement.

The Term Sheet set forth the terms of a proposed transaction to establish

a medical real estate investment trust in the United States and AAMI providing certain services related to the financial and capital

structure of AMRE.

Pursuant to the final signed Stockholders’

Agreement, dated March 3, 2020, the Company has subscribed

5,250 ordinary shares of AAMI at a purchase price of $0.01 per share for total consideration of $52.50.

Concurrently, AAMI will

issue 3,500 shares to LVAM, and 1,250 shares to AMRE Tennessee, LLC, AAMI’s executive management’s holding

As a result, the Company now holds 52.5% of the outstanding shares of AAMI, with LVAM and AMRE Tennessee, LLC, holding

35% and 12.5% of the remaining outstanding shares of AAMI, respectively.

At the completion of the share subscription, AAMI has

a 93% equity interest in AMRE.

Also, at the completion of the transaction, AAMI had no assets or liabilities.

LVAM is an 82% owned

subsidiary of Alset Intl.

whose Chief Executive Officer and largest shareholder is Heng Fai Ambrose Chan, the Chairman

of the Board and largest shareholder of the Company.

pursuant to and in connection with the Term Sheet, 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 “Note”).

The Note matures on March 3, 2022 and accrues interest at the rate of 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

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.

AMRE’s failure to pay any amount due on the Note within five days of when payment is due

constitutes an event of default under the Note, pursuant to which the Company can declare the Note due and payable.

The Note also

provides the Company an option to provide AMRE an additional $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 per share,

subject to adjustment as set forth in the Warrants, and expire on March 3, 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 per share, the exercise price of the Warrants shall

be adjusted downward to 50% of the IPO price.

The Warrants also grants piggyback registration rights to the Company as set forth

in the Warrants.

As of December 31, 2020, this Note had outstanding principal and interest of approximately $844,000.

Upon consolidation this Note is eliminated.

AMRE entered into a $200,000 unsecured promissory note with LVAM.

calls for interest to be paid annually on March 2 with interest fixed at 8.0%.

See Note 10 for further details.

GAAP requires that for each business combination, one of 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% equity interest in AAMI provides existence of a controlling financial interest and has concluded

to account for this transaction in accordance with the acquisition method of accounting under FASB ASC Topic 805, “

Combinations”

(“Topic 805”).

As of December 31, 2020, AMRE had incurred $900,000 of cost of which $430,000

is attributable to the non-controlling interest.

AAMI does not qualify for a separate reporting segment and is included

in Corporate (see Note 18).

BioMedical, Inc.

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 (formally Singapore eDevelopment Limited), and Global Biomedical Pte

(“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”), with a stated value of $46,868,000, or $1,000 per share, for a total consideration of

$50 million (Note 12) to acquire 100% of the outstanding shares of Impact BioMedical.

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 to $35,187,000, thus reducing the final consideration

given to approximately $38,319,000.

The Company incurred approximately $295,000 in cost associated with the acquisition of Impact

Biomedical which were recorded as general and administrative expenses.

As a result of the Share Exchange, Impact BioMedical

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 BioMedical, and have an ownership percentage ranging from 63.6% to 100%.

Since acquisition,

approximately $440,000 of cost have been incurred, of which $51,000 of cost incurred is attributable to non-controlling

Although Impact BioMedical historically, and to date has not generated any revenues, the acquisition of Impact BioMedical

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.

following summary, prepared on a proforma basis, combines the consolidated results of operations of the Company with those of

Impact Biomedical as if the acquisition took place on January 1, 2019.

The pro forma consolidated results include the impact

of certain adjustments.

income (loss) attributed to common stockholders

$ (3,343,000 )

Basic earnings

Diluted earnings

Company has completed its valuations of certain developed technology and pending patents assets acquired in the transaction as

well the fair value of the non-controlling interests.

These have been valued at approximately $22,260,000 and $3,910,000 respectively.

Other assets acquired and liabilities assumed were not significant.

The Company has also completed an initial valuation of goodwill

and deferred tax liabilities of Impact BioMedical, which are pending as of December 31, 2020 as several of the 2019 tax returns

have yet to be filed.

For the purposes of these financial statements, the Company has recorded goodwill of approximately $25,093,000,

driven by other intangible assets that do not qualify for separate recognition, and a deferred tax liability of approximately

The goodwill is not deductible for tax purposes, and has been allocated to Impact BioMedical in totality as a single

reporting unit.

Impact BioMedical does not qualify for a separate reporting segment and is included in Corporate (see Note 18).

8 - PROPERTY PLANT AND EQUIPMENT

plant and equipment consisted of the following at December 31:

Machinery and equipment

Building and improvements

Leasehold improvements

Furniture and fixtures

Less accumulated

plant and equipment consisted of the following as of December 31:

and equipment

and improvements

accumulated depreciation

plant and equipment, net

1 unchanged sentence

2020 and 2019, the Company spent approximately $0 and $10,000, respectively, on capitalized patent application costs.

June 26, 2018, the Company entered into an agreement with Fortress Credit Co LLC (“Fortress”), which among other things

transferred to Fortress all of the remaining economic rights to certain of the Company’s semi-conductor related patents

(See Note 8) .

As a result, the Company wrote-off these patents which had an aggregated gross cost of $2,655,000 and a net

unamortized carrying amount of $295,470 on the agreement date.

July 31, 2018, the Company entered into a Non-Compete Letter Agreement (the “Agreement”) with its former President

and Chief Executive Officer of its wholly owned subsidiary, Premier Packaging Corporation.

The Agreement called for payments of

$16,000 per month, for a period of 19 months, as consideration for the two-year non-competition and non-solicitation restrictive

The Company recorded the aggregate cost of the Agreement of $304,000 as an intangible asset to be amortized over the

24-month period commencing August 1, 2018.

October 24, 2018, the Company’s subsidiary, DSS Asia Limited acquired Guangzhou Hotapps Technology Ltd., (“Guangzhou

Hotapps”) a Chinese company, in exchange for a 2-year, $100,000 unsecured promissory note.

In connection with this acquisition,

the Company acquired the license to do business in China to which the Company allocated a value of $85,734 as well as a related

deferred tax liability of $33,333 due to outside basis differences and recorded as an intangible asset that it will amortize over

a five-year period.

March 5, 2019, the Company paid $350,000 and issued 130,435 shares of the Company’s common stock valued at $144,783 in conjunction

6 unchanged sentences

over the expected useful life of 36 months.

January 24, 2020 and April 8, 2020, the Company foreclosed on two separate note receivables with RBC Life Sciences, Inc.

Note 4) during which the Company acquired $637,000 of intangible assets as settlement of the amounts owed.

These assets are being

amortized over their useful lives.

August 21, 2020, the Company completed its acquisition of Impact BioMedical, (see Note 7) during which the Company, based on valuations

performed, acquired $22,260,000 of developed technology assets.

These assets are not yet placed in service and will

be amortized over a 20-year useful life when placed in service, which is expected to be during the year ended December 31,

assets are comprised of the following:

Acquired intangibles customer

lists, licenses and non-compete agreements

Acquired intangibles patents and patent

Patent application

Carrying Amount

technology assets

intangibles customer lists, licenses and non-compete agreements

intangibles patents and patent rights

application costs

application costs are amortized over their expected useful life which is generally the remaining legal life of the patent.

1 unchanged sentence

expense for the year ended December 31, 2020 amounted to approximately $374,000 ($461,000 –2019).

amortization for each of the five succeeding fiscal years is

amortization for each of the five succeeding fiscal years is as follows:

SHORT TERM AND LONG-TERM DEBT

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 that bears interest at 1 Month LIBOR plus 2.0% (4.5%

as of December 31, 2019).

This revolving line of credit was renewed and has a maturity date of May 31, 2020, and is renewed annually.

As of December 31, 2019, and December 31, 2018, the revolving line had a balance of $500,000 and $0 respectively.

Credit Lines - The Company’s subsidiary Premier Packaging has a revolving credit line with Citizens Bank (“Citizens”)

of up to $800,000 that bears interest at 1 Month LIBOR plus 2.0% (2.1% as of December 31, 2020).

This revolving line of credit

was renewed and has a maturity date of May 31, 2021 and is renewable annually.

As of December 31, 2020 and December 31, 2019,

the revolving line had a balance of $0 and $500,000 respectively.

July 26, 2017, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving Line of Credit Agreement

8 unchanged sentences

are based on an estimated 48-month amortization which will be adjusted upon conversion.

As of December 31, 2019, the line had

not yet converted into a credit facility and had a balance of $898,762 ($339,000 at December 31, 2018).

The Company pays a monthly

amount of $12,756 in principal and interest.

As of December 31, 2020 and December

31, 2019, the Term Note had a balance of $771,000 and $899,000 respectively.

The Company pays a monthly amount of $13,000

in principal and interest.

December 1, 2017, the Company’s subsidiary Plastic Printing Professionals 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 $800,000 to enable

Plastic Printing Professionals to purchase equipment from time to time that it may need for use in its business.

be made under this Equipment Acquisition Line of Credit, from time to time, from December 1, 2017 until December 1, 2018.

aggregate principal balance outstanding under the Equipment Acquisition Line of Credit bore interest at 2% above the LIBOR Advantage

Rate (as defined in the agreement) until it was converted.

Commencing March 30, 2019, the line was converted into two term notes

under which the Company will make monthly payments of $13,657 until November 30, 2023.

Interest under the term notes is payable

monthly at 5.37%.

As of December 31, 2019, the combined balance of the term notes was $576,946 ($684,554 at December 31, 2018).

Loan Debt - On April 28, 2015, Premier Packaging entered into a term note with Citizens for $525,000, repayable over a 60-month

The loan bears interest at 3.62% and is payable in equal monthly installments of $9,591 until April 28, 2020.

Packaging used the proceeds of the term note to acquire a HP Indigo 7800 Digital press.

The loan is secured by the printing press.

As of December 31, 2019, the loan had a balance of $39,294 ($149,542 at December 31, 2018).

Notes - On August 30, 2011, Premier Packaging purchased the packaging plant it occupies in Victor, New York, for $1,500,000,

which was partially financed with a $1,200,000 promissory note obtained from Citizens Bank (“Promissory Note”).

Promissory Note called for monthly payments of principal and interest in the amount of $7,658, with interest calculated as 1 Month

LIBOR plus 3.15%.

This note, in conjunction with the Construction to Permanent Loan described below, was refinanced as of June

December 6, 2013, Premier Packaging entered into a Construction to Permanent Loan with Citizens Bank for up to $450,000 that was

converted into a promissory note upon the completion and acceptance of building improvements to the Company’s packaging

plant in Victor, New York.

In May 2014, the Company converted the loan into a $450,000 note payable in monthly installments over

a 5-year period of $2,500 plus interest calculated at a variable rate of 1 Month LIBOR plus 3.15%.

The note was set to mature

in July 2019 at which time a balloon payment of the remaining principal balance of $300,000 was due.

On June 27, 2019 the balloon

payment, in conjunction with the remaining balance on promissory note identified above, was refinanced.

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 $1,156,742 with Citizens Bank.

The new Promissory Note calls for monthly

payments of $7,181, with interest fixed at 4.22%.

The new Promissory Note matures on June 27, 2029, at which time a balloon payment

of $707,689 is due.

As of December 31, 2019, the new, consolidated Promissory Note had a balance of $1,141,487.

31, 2018, the two refinanced notes had outstanding balances of $869,865 and $315,000.

Citizens credit facilities to each of the Company’s subsidiaries, Premier Packaging and Plastic Printing Professionals,

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, 2019, Premier Packaging was in compliance with the annual covenants,

however Plastic Printing Professionals was not.

Plastic Printing Professionals has sought and received a one-time waiver from

compliance from Citizens for this violation.

Term Note Non-Revolving Line of Credit Agreement with Citizens which was converted into two term notes under which the Company

will make monthly payments of $14,000 until November 30, 2023.

Interest under the term notes is payable monthly at 5.37%.

December 31, 2019 this note had a balance of $577,000.

On July 20, 2020 the Company paid off this note.

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 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% 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% above the bank’s Cost of Funds, as determined by Citizens.

As of December

31, 2020, the loan had a balance of $0 and Premier Packaging still has available $900,000 for equipment borrowings.

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 with Citizens Bank.

The new Promissory Note

calls for monthly payments of $7,000, with interest fixed at 4.22%.

The new Promissory Note matures on June 27, 2029, at which

time a balloon payment of $708,000 is due.

As of December 31, 2020 and December 31, 2019, the new Promissory Note had a

balance of $1,100,000 and $1,141,000 respectively.

Citizens credit facilities to the Company’s subsidiary 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.

October 24, 2018, the Company’s subsidiary, DSS Asia Limited entered into a $100,000 unsecured promissory note with HotApps

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International Pte Ltd, by DSS Asia Limited.

The promissory note does not accrue interest and is payable in full on October 24,

on February 18, 2019, Document Security Systems, Inc.

entered into a Convertible Promissory Note (the “Note”) with

LiquidValue Development Pte Ltd (the “Holder”) in the principal sum of $500,000 (the “Principal Amount”),

of which up to $500,000 of the Principal Amount can be paid by the conversion of such amount into the Company’s common stock,

par value $0.02 per share, up to a maximum of 446,428 shares of common stock (the “Common Stock”), at a conversion

price of $1.12 per share.

The Holder is a related party, owned by one of the Company’s directors.

The Note carried

a fixed interest rate of 8% per annum and had a term of 12- months.

Accrued interest was payable in cash in arrears on the last

day of each calendar quarter, with the first interest payment due on June 30, 2019, and remained payable until the Principal Amount

was paid in full.

The Holder is a related party, owned by one of the Company’s directors.

Effective on March 25, 2019, the

Holder exercised its conversion option and converted the Maximum Conversion Amount under the Note.

As a result of Holder’s

election to exercise its full conversion rights under the Note, the Note was cancelled effective on March 25, 2019.

on May 31, 2019, Document Security Systems, Inc.

(the “Company”

or “Borrower”) entered into a Promissory

Note (the “Note”) with LiquidValue Development Pte Ltd (the “Holder”) in the principal sum of $650,000

(the “Principal Amount”).

The Note was not interest bearing with a maturity date of July 31, 2019.

The Holder is a

related party, owned by one of the Company’s directors.

This Note was paid in full on June 12, 2019.

summary of scheduled principal payments of long-term debt, not including revolving lines of credit and other debt which can be

settled with non-monetary assets, subsequent to December 31, 2019 are as follows:

Debt - On February 13, 2014, the Company’s subsidiary, DSS Technology Management, Inc.

(“DSSTM”), entered

into an Investment Agreement (the “Agreement”) dated February 13, 2014 (the “Effective Date”) with Fortress

Credit Co LLC, as collateral agent (the “Collateral Agent”

or “Fortress”), and certain investors (the

“Investors”), pursuant to which DSSTM contracted to receive a series of advances up to $4,500,000 (collectively, the

“Advances”).

On June 26, 2018, the parties agreed that the amounts due under the Agreement having an aggregate remaining

balance of $3,714,129 as of the Maturity Date, are discharged, without the assignment to the Investors of any of the collateral

that secured the repayment under the Agreement.

In addition, the Company confirmed its obligation to pay the Investors $345,000

that remained from an aggregate of $600,000 that had been deposited and restricted to cover expenses related to the IP monetization

Furthermore, the parties agreed that in the event there are any future recoveries by DSSTM with respect to monetization

activities relating to the collateralized patents or applicable proceed rights set forth in the Agreement, the contractual payment

provisions of the original Agreement will apply, and the Investors will be entitled to receive payment of such proceeds.

result of this agreement, the Company paid $345,000 from restricted cash and recorded a gain of extinguishment of liabilities

of $3,372,129 to reflect the discharge of the notes, wrote off contingent equity interests of $459,000 eliminated by the agreement,

and wrote-off the underlying patents which had an aggregated gross cost of $2,655,000 and an net unamortized carrying amount of

$295,470 on the agreement date, all of which resulted in the a net gain on the extinguishment of liabilities of $3,532,659 recorded

As of December 31, 2018, the balance of the term loan was $0.

The promissory note does not accrue interest and had a maturity date of October 24,

This note was paid in full on October 9, 2020.

March 2, 2020, AMRE entered into a $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%.

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.

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 per share (the “Exercise”

The value of the warrants is not considered to

The holder is a related party owned by the Chairman of the Company’s board of directors.

As of December

31, 2020, the new promissory note, inclusive of unpaid interest, had a balance of $214,000.

Q2 2020, the Company received loan proceeds for Premier Packaging, DSS Digital, and AAMI in the amount of approximately $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% loan forgiveness.

During the fourth quarter 2020, both these notes approximating

$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% loan forgiveness in October 2020, and received confirmation of forgiveness in January 2021.

summary of scheduled principal payments of long-term debt, not including revolving lines of credit, subsequent to December 31,

2020 are as follows:

OTHER LIABILITIES

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capital needs.

As of December 31, 2019, an aggregate of $780,988 is recorded as other liabilities by the Company, of which

$390,494 is classified as short-term.

Of this amount, the Company allocated $2,500,000 which it subsequently adjusted to

$1,500,000 for the payment of estimated future Inter Partes Review costs.

The Company will reduce this liability as it pays legal

and other expenses related to the Inter Partes Review matters involving the LED Patent Portfolio as incurred.

For this amount,

Of this amount, the Company allocated $2,500,000 which it subsequently adjusted to $1,500,000 for the payment of

estimated future Inter Partes Review costs.

The Company will reduce this liability as it pays legal and other expenses related

to the Inter Partes Review matters involving the LED Patent Portfolio as incurred.

As of December 31, 2020, an aggregate of

$780,988 is recorded as other liabilities by the Company, of which $390,494 is classified as current.

For the remaining $3,000,000

the Company reduced the liability with an offset to selling, general and administrative costs by $47,500 per month from January

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was recorded as a reduction of the liability allocated to working capital in 2019.

July 8, 2013, the Company’s subsidiary, DSSTM, purchased two patents for $500,000 covering certain methods and processes

related to Bluetooth devices.

In conjunction with the patent purchases, DSSTM entered into a Proceed Right Agreement with certain

investors pursuant to which DSSTM initially received $250,000 of a total of $750,000 which it will ultimately receive thereunder,

subject to certain payment milestones, in exchange for 40% of the proceeds which it receives, if any, from the use, sale or licensing

of the two patents.

As of December 31, 2019 and 2018, the Company had received an aggregate of $750,000 from the investors pursuant

to the agreement of which $0 was in current liabilities in the consolidated balance sheets ($476,000 as of December 31, 2018).

The Company reduced the liability as it paid legal and other expenses related to its litigation involving the Bluetooth patents,

for which the amount is available to be used for 50% of all such expenses.

12 - STOCKHOLDERS’

of Equity –

On July 3, 2018, the Company sold 214,286 shares of its common stock, par value $0.02 per share, to

a related party accredited investor, Heng Fai Holdings Limited.

The purchase price was $1.40 per share, for total proceeds of

December 17, 2018, the Company sold 612,245 shares of its common stock, par value $0.02 per share, to a related party accredited

investor, Heng Fai Holdings Limited.

The purchase price was $0.98 per share, for total proceeds of $600,000.

On February 18, 2020, in accordance with the Chairman of the Company’s Board of Directors compensation

plan as CEO of one of the Company’s subsidiaries,11,664 shares of the Company’s common stock were remitted in lieu

of cash as settlement of his Q3 and Q4 2019 salary of $114,000 that was accrued as of December 31, 2019.

February 18, 2019, the Company had entered into a Convertible Promissory Note with LiquidValue Development Pte Ltd ., a company

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of the Principal Amount could be paid by the conversion of such amount into the Company’s common stock, par value $0.02

$0.02 per share, up to a maximum of 446,428 shares of common stock (the “Maximum Conversion Amount”), at a conversion

price of $1.12 per share.

per share, up to a maximum of 14,881 shares of common stock (the “Maximum Conversion Amount”), at a conversion price

of $33.60 per share.

Effective on March 25, 2019, LiquidValue Development Pte Ltd exercised its conversion option and converted

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Corp., acting as representative of the several underwriters, which provided for the issuance and sale by the Company in an underwritten

public offering (the “Offering”) and the purchase by the Underwriters of 11,200,000 shares of the Company’s

common stock, $0.02 par value per share.

Subject to the terms and conditions contained in the Underwriting Agreement, the shares

were sold to the Underwriters at a public offering price of $0.50 per share, less certain underwriting discounts and commissions.

public offering (the “Offering”) and the purchase by the Underwriters of 373,333 shares of the Company’s common

stock, $0.02 par value per share.

Subject to the terms and conditions contained in the Underwriting Agreement, the shares were

sold to the Underwriters at a public offering price of $15.00 per share, less certain underwriting discounts and commissions.

As part of this transaction, 66,667 shares were purchased by Heng Fai Ambrose Chan, Chairman of the Board of directors.

Company also granted the Underwriters a 45-day option to purchase up to 1,680,000 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 Offering (519,186

shares were exercised on July 18, 2019 at $0.50 per share, less underwriting discounts and expenses).

The net offering proceeds

to the Company was approximately $5.0 million, inclusive of the July 18, 2019 transaction and after deducting underwriting discounts,

also granted the Underwriters a 45-day option to purchase up to 1,680,000 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 Offering (17,306 shares

were exercised on July 18, 2019 at $15.00 per share, less underwriting discounts and expenses).

The net offering proceeds to the

Company was approximately $5.0 million, inclusive of the July 18, 2019 transaction and after deducting underwriting discounts,

commissions and other offering expenses.

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commitment, the

closing stock price was $0.26 per share) for net proceeds to the Company of approximately $1.6 million after deducting

underwriting discounts, commissions and other offering expenses.

Warrants –The following is a summary with respect to warrants outstanding and exercisable at December 31, 2019 and

2018 and activity during the years then ended:

Average Exercise Price

Outstanding at January 1,

closing stock price was $7.80 per share) for net proceeds to the Company of approximately $1.6 million after deducting underwriting

discounts, commissions and other offering expenses.

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.

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.

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.

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.

Offering was closed on June 26, 2020.

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.

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

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

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.

July 2020 Offering #2 was closed on July 31, 2020, and the overallotment was exercised on August 7, 2020.

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.

connection with the Share Exchange for Impact BioMedical described in Note 7, 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, 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 7, this transaction

is a related party transaction.

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 per share aggregating to $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.

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 or 154.32 shares subject to a Beneficial Ownership Limitation of 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.

Warrants –The following is a summary with respect to warrants outstanding and exercisable as of December 31, 2020

and 2019 and activity during the years then ended:

at January 1:

during the year

Lapsed/terminated

Outstanding at December 31,

Exercisable at December 31,

Weighted average of months

at December 31:

average months remaining

Company did not issue any warrants in 2020 or 2019.

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Incentive Plan (the “2013 Plan”).

The 2013 Plan provides for the issuance of up to a total of 1,500,000 shares of

common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors

and consultants.

Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive

stock option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

The 2013 Plan provides for the issuance of up to a total of 50,000 shares of common

stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants.

Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option

treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

As of December 31, 2020, no shares remained available under this plan.

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(“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

following is a summary with respect to options outstanding at December 31, 2019 and 2018 and activity during the years then ended:

following is a summary with respect to options outstanding as of December 31, 2020 and 2019 and activity during the years then

Average Exercise Price

Average life Remaining

Average life Remaining (Years)

Average Exercise Price

Average life Remaining

Outstanding at January 1,

Average life Remaining (Years)

at January 1,

Lapsed/terminated

Outstanding at December 31,

Exercisable at December 31,

Expected to vest

at December 31,

Aggregate intrinsic value of outstanding

options at December 31,

Aggregate intrinsic value of exercisable

options at December 31,

Aggregate intrinsic

value of options expected to vest at December 31,

the year ended December 31, 2018, the Company issued an aggregate of 405,000 options to purchase the Company’s common stock

at between $1.30 and $1.55 per share with a term of five years to employees at its technology, corporate and printed products

divisions, as well as independent board members.

For 265,000 options granted during 2018 the options vest pro-ratably as follows:

1/3 on the grant date, 1/3 on the first anniversary of the grant date and 1/3 on the second anniversary of the grant date.

the remaining 140,000 options granted during 2018 the options vest pro-ratably as follows:

1/3 on the first anniversary of the

grant date, 1/3 on the second anniversary of the grant date and 1/3 on the third anniversary of the grant date.

at December 31,

to vest at December 31,

intrinsic value of outstanding options at December 31,

intrinsic value of exercisable options at December 31,

intrinsic value of options expected to vest at December 31,

fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model.

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of the Company’s common stock over the most recent period equal to the expected stock option term.

following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options

and warrants granted during the year ended December 31, 2018.

There were no options or warrants granted for compensation during

the year ended December 31, 2019.

Expected option term

Risk-free interest rate

Expected forfeiture rate

Expected dividend yield

The aggregate grant date

fair value of options that vested during 2019 and 2018 was approximately $104,000 and $122,000, respectively.

no options exercised during 2019 or 2018.

aggregate grant date fair value of options that vested during 2020 and 2019 was approximately $100,000 and $104,000, respectively.

There were no options exercised during 2020 or 2019.

Stock - Restricted common stock may be issued under the Company’s 2013 or 2020 Plan for services to be rendered

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any restricted stock.

September 6, 2019, the Company issued an aggregate of 224,310 shares of fully vested restricted stock to members of the

Company’s management team of with a two-year lock-up period and had an aggregated grant date fair value of approximately

$94,000 which is included in stock based compensation for the year ended December 31, 2019.

The Company did not grant any

restricted stock in 2018.

September 6, 2019, the Company issued an aggregate of 7,477 shares of fully vested restricted stock to members of the Company’s

management team of with a two-year lock-up period and had an aggregated grant date fair value of approximately $94,000 which is

included in stock based compensation for the year ended December 31, 2019.

April 3, 2020, the Company issued an aggregate of 5,833 shares of fully vested restricted stock to members of the Company’s

management team of with a two-year lock-up period and had an aggregated grant date fair value of approximately $38,000 which is

included in stock based compensation for the year ended December 31, 2020.

Compensation –

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Such awards include option grants, warrant grants, and restricted stock awards.

the twelve months ended December 31, 2019, the Company had stock compensation expense of approximately $422,000 or less than $0.01

basic and diluted earnings per share ($132,000, or less than $0.01 basic and diluted earnings per share for the corresponding

twelve months ended December 31, 2018).

Of the $422,000, $114,500 was accrued for the CEO of a subsidiary of the Company.

the twelve-months ended December 31, 2020, the Company had stock compensation expense of approximately $188,000 or approximately

$0.05 and $0.03 basic and diluted earnings per shares, respectively ($422,000, or $0.50 basic and diluted earnings

per share for the corresponding twelve months ended December 31, 2019).

July 2019, 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 2013 Employee, Director and Consultant Equity Incentive Plan, to

certain officers and directors in the amount of 458,719 shares, at $0.42 per share which were immediately vested and issued

on September 6, 2019.

certain officers and directors in the amount of 15,291 shares, at $12.60 per share which were immediately vested and issued on

September 6, 2019.

7,477 of these shares where were fully vested restricted stock to members of the Company’s management

team of with a two-year lock-up period.

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.

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

The value assigned to the shares is included in other assets on the accompanying consolidated balance sheets and

will be expensed as marketing expense as it is earned.

September 23, 2020, by written consent of the Chief Executive Officer and the Chairman of the board, 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 a consultant of the Company in the amount of 20,000 shares, at $4.48 per share which were immediately vested.

13 - INCOME TAXES

is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31:

Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between

the financial reporting and tax basis of assets and liabilities.

Deferred tax assets are reduced, if deemed necessary, by a valuation

allowance for the amount of tax benefits which are not expected to be realized.

following is a summary of the components giving rise to the

income tax provision (benefit) for the years ended December 31:

provision (benefit) for income taxes consists of the following:

currently payable

Total currently payable

Total deferred

income tax provision

components of deferred taxes are as follows:

(decrease) increase in allowance

income tax benefit

components of deferred tax assets and liabilities are as follows:

operating loss carry forwards

Equity issued for

Goodwill and other

Investment in pass-through

Deferred revenue

Operating Lease

Gross deferred tax

Deferred tax liabilities:

Goodwill and other

Depreciation and

issued for services

and other intangibles

in pass-through entity

Lease Liability

deferred tax assets

tax liabilities:

and other intangibles

-of-use asset

Gross deferred tax

deferred tax liabilities

valuation allowance

(12,618,311 )

(12,134,419 )

deferred tax liabilities

Tax Cuts and Jobs Act repeals the corporate alternative minimum tax (AMT) and permits existing minimum tax credits

carryovers to offset the regular tax liability for any tax year.

Further, the credit is refundable for any tax year beginning

after December 31, 2017 and before December 31, 2020 in an amount equal to 50 percent of the excess of the minimum tax credit

over regular liability.

2017 Tax Cuts and Jobs Act repeals the corporate alternative minimum tax (AMT) and permits existing minimum tax credits carryovers

to offset the regular tax liability for any tax year.

Further, the credit is refundable for any tax year beginning after December

31, 2017 and before December 31, 2020 in an amount equal to 50 percent of the excess of the minimum tax credit over regular liability.

Any remaining credit will be fully refundable for the year ended December 31, 2021.

As of December

31, 2019, the Company had $46,601 of minimum tax credit included

in prepaids and other current assets in the accompanying consolidated balance sheet.

Company has approximately $50.6 million in federal net operating loss carryforwards (“NOLs”) available to reduce future

taxable income, of which $3.8 million will never expire with the remaining expiring at various dates from

2022 through 2039.

Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in the future

and utilize the NOLs before they expire and any other deferred tax assets, the Company has recorded a valuation allowance accordingly.

The Company’s NOLs are subject to annual limitations as a result of a change in its equity ownership as defined under the

Internal Revenue Code Section 382.

These limitations, as applicable, could further limit the use of the NOLs.

The valuation allowance

for deferred tax assets increased by approximately $484,000 in the year ended December 31, 2019.

The increase in the valuation

allowance was primarily due to taxable loss in the current year.

Company has adopted the provisions of ASU 2016-09 as of the beginning of 2018 which requires recognition through opening retained

earnings of any pre-adoption date NOL carryforwards from nonqualified stock options and other employee share-based payments (e.g.,

restricted shares and share appreciation rights), as well as recognition of all income tax effects from share-based payments arising

on or after January 1, 2017 (our adoption date) in income tax expense.

In light of the Company’s valuation allowance on

its deferred tax assets there was no adjustment required to its retained earnings nor was there any windfall tax benefit to recognize

in the Company’s income tax provision.

As of December 31, 2020 and 2019, the

Company had $0 and $46,000 respectively of minimum tax credit included in prepaids and other current assets in the accompanying

consolidated balance sheet.

December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”).

The legislation

significantly changed U.S.

tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax

system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries.

The Act permanently reduced the

corporate income tax rate from a maximum of 35% to a 21% rate, effective January 1, 2018

losses from the Company’s foreign subsidiaries amounted to $.4 million and $1.5 million for 2020 and 2019, respectively.

The balance of pretax earnings or loss for each of those years were domestic.

the Tax Cuts and Jobs Act provides for a territorial tax system, beginning in 2018, it includes the foreign-derived intangible

income (“FDII”) and global intangible low-taxed income (“GILTI”) provisions.

The Company elected to account

for GILTI tax in the period in which it is incurred.

The GILTI provisions require the Company to include in its U.S.

return foreign subsidiary earnings from its Controlled Foreign Corporations (“CFCs”) in excess of an allowable return

on the foreign subsidiary’s tangible assets.

The FDII provisions allow for a deduction equal to a percentage of the foreign-derived

intangible income of a domestic corporation.

As a result of these provisions, the Company did not have any additional tax expense

or benefit from either GILTI or FDII.

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the

economic uncertainty resulting from the COVID-19 pandemic.

The CARES Act includes many measures to assist companies, including

temporary changes to income and non-income based laws, some of which were enacted as part of the Tax Cuts and Jobs Act of 2017

(“TCJA”).

Some of the key changes include eliminating the 80% of taxable income limitation by allowing corporate entities

to fully utilize NOLs to offset taxable income in 2018, 2019 and 2020, allowing NOLs originating in 2018, 2019 and 2020 to be

carried back five years, enhanced interest deductibility, and retroactively clarifying the immediate recovery of qualified improvement

property costs rather than over a 39-year recovery period.

During the year ended December 31, 2020, the Company was not able to

benefit from these provisions.

The Company will continue to monitor additional guidance issued and assess the impact that various

provisions will have on its business.

December 31, 2020 and 2019, the Company has approximately $56.7 million and $50.0 million in federal net operating loss carryforwards

(“NOLs”), respectively, available to reduce future taxable income.

Under the provisions of the Internal Revenue Code,

the net operating losses are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Certain tax attributes are subject to an annual limitation as a result of certain cumulative changes in ownership interest of

significant shareholders which could constitute a change of ownership as defined under Internal Revenue Code Section 382.

Company has completed a full analysis of historical ownership changes and determined that a portion of the net operating losses

have a limitation on future deductibility.

Approximately $43.8 million of net operating losses incurred prior to 2020 will

be unable to offset future taxable income and have been reserved via a valuation allowance to reduce the deferred tax asset to

the expected realizable amount, leaving $2.9M available for use which expire at various dates through 2038 and the residual which

never expire.

Additionally, at December 31, 2020 and 2019, the Company had approximately $6.9 million and $5.5 million,

and $2.2 million and $1.4 million, of California and Illinois NOL carry-forwards, respectively, which expire through 2039.

NOL carry-forwards may be limited in certain circumstances, including ownership change and have been fully reserved via a valuation

valuation allowance for deferred tax assets decreased approximately $1,543,000 (net of $671,000 acquired with Impact BioMedical)

in the year ended December 31, 2020 and increased by approximately $484,000 in the year ended December 31, 2019.

in the current year valuation allowance and subsequent increase in the deferred tax liability is driven by several factors and

is represented in the below table:

at December 31, 2019

of Impact BioMedical

year activity

of valuation allowance

at December 31, 2020

differences between the United States statutory federal income tax rate and the effective income tax rate in the accompanying

consolidated statements of operations are as follows:

Statutory United

States federal rate

Statutory United States federal rate

State income taxes net of federal benefit

Permanent differences

Change in valuation

Non-controlling intere st

Foreign taxes

PPP loan forgiveness

Stock based compensation

Executive compensation

Change in valuation allowance

Effective rate

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federal jurisdiction and various states.

The tax years 2016-2019 generally remain

open to examination by major taxing jurisdictions to which the Company is subject.

The tax years 2017-2020 generally

remain open to examination by major taxing jurisdictions to which the Company is subject.

14 - DEFINED CONTRIBUTION PENSION PLAN

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Company has operating leases predominantly for operating facilities.

As of December 31, 2019, the remaining lease terms on our

operating leases range from less than one year to approximately four years.

Renewal options to extend our leases have not been

exercised due to uncertainty.

As of December 31, 2020, the remaining lease terms

on our operating leases range from seven to sixteen months.

DSS Plastics Group which finalized the sale of its assets on

August 14, 2020 is not included in the lease liability calculation (see Note 16).

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

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 December 31, 2020.

Rent expense for the year ended December

was approximately $474,000.

31, 2020 and December 31, 2019 was approximately $217,000 and $255,000 respectively.

minimum lease payments as of December 31,2020 are as follows:

Total lease payments

Present value

of remaining lease payments

Weighted average remaining lease

Weighted average discount rate

Agreements - The Company has employment or severance agreements with members of its management team with terms no longer

than twelve months.

The employment or severance agreements provide for severance payments in the event of termination for certain

As of December 31, 2019, the minimum severance payments under these employment agreements are, in aggregate, approximately

Proceedings -

lease payments

Imputed Interest

value of remaining lease payments

Weighted-average

remaining lease term (years)

Weighted-average

discount rate

Agreements - The Company has employment or severance agreements with members of its management team.

The employment or

severance agreements provide for severance payments in the event of termination for certain causes.

As of December 31, 2020,

the Company accrued approximately $4,300,000 for Mr.

Heng Fai Ambrose Chan, an executive of the Company’s DSS Cyber Security

Ltd subsidiary in accordance with the terms of his employment contract.

Also, as of December 31, 2020, the minimum severance

payments under these employment agreements are, in aggregate, approximately $182,000.

Proceedings –

Apple Litigation

November 26, 2013, DSSTM filed suit against Apple, Inc.

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6,128,290 as a matter of law.”

DSS intends to appeal the ruling.

February 16, 2015, DSSTM filed suit in the United States District Court, Eastern District of Texas, against defendants Intel Corporation,

Dell, Inc., GameStop Corp., Conn’s Inc., Conn Appliances, Inc., NEC Corporation of America, Wal-Mart Stores, Inc., Wal-Mart

Stores Texas, LLC, and AT&T, Inc.

The complaint alleged patent infringement and sought judgment for infringement of two of

DSSTM’s patents, injunctive relief and money damages.

On December 9, 2015, Intel filed IPR petitions with PTAB for review

of the patents at issue in the case.

Intel’s IPRs were instituted by PTAB on June 8, 2016.

On June 1, 2017, the PTAB ruled

in favor of Intel for all the challenged claims.

On July 28, 2017, DSSTM filed a notice of appeal of the PTAB’s decision

relating to U.S.

Patent 6,784,552 with the Federal Circuit.

On January 8, 2019, DSSTM entered into a confidential settlement agreement

with Intel Corporation, Dell Inc., GameStop Corp, Conn’s Inc., Conn Appliances, Inc., Wal-Mart Stores, Inc., Wal-Mart Stores

Texas, LLC and AT&T Mobility LLC (collectively, the “Defendants”).

The Federal Circuit Appeal involving DSSTM

and Intel was dismissed on January 16, 2019, and the District Court case against the Defendants was dismissed, as to all the Defendants,

on February 5, 2019.

On July 16, 2015, DSSTM filed three separate lawsuits in the United States District Court for the Eastern

District of Texas alleging infringement of certain of its semiconductor patents.

The defendants were SK Hynix et al., Samsung

Electronics et al., and Qualcomm Incorporated.

Each respective complaint alleges patent infringement and seeks judgment for infringement,

injunctive relief and money damages.

On November 12, 2015, SK Hynix filed an IPR petition with PTAB for review of the patent at

issue in their case.

SK Hynix’s IPR was instituted by the PTAB on May 11, 2016.

On August 16, 2016, DSSTM and SK Hynix entered

into a confidential settlement agreement ending the litigation between them.

The pending SK Hynix IPR was then terminated by mutual

agreement of the parties on August 31, 2016.

On March 18, 2016, Samsung also filed an IPR petition, which was instituted by the

On September 20, 2017, PTAB ruled in favor of Samsung for all the challenged claims relating to U.S.

Patent 6,784,552.

then appealed this PTAB ruling to the Federal Circuit on November 17, 2017.

The Federal Circuit joined this appeal with the Intel

appeal effective on December 7, 2017.

Qualcomm filed its IPR proceeding on July 1, 2016, which was then later joined with Intel’s

IPRs in August 2016 by PTAB.

On June 1, 2017, the PTAB ruled in favor of Intel/Qualcomm for all the challenged claims.

28, 2017, DSSTM filed a notice of appeal of the PTAB’s decision relating to U.S.

Patent 6,784,552 with the Federal Circuit.

A confidential patent license agreement was executed by DSSTM on November 14, 2018, covering Samsung and Qualcomm.

12, 2018, DSSTM and Samsung entered into a confidential release.

On December 27, 2018, DSSTM and Qualcomm entered into a confidential

settlement agreement.

The DSSTM - Samsung District Court case was dismissed on December 17, 2018.

The DSSTM - Samsung Federal

Circuit Appeal was dismissed on January 2, 2019.

The Federal Circuit Appeal involving DSSTM and Qualcomm was dismissed on January

The DSSTM - Qualcomm District Court case was dismissed on January 16, 2019.

As a result, all of DSSTM’s litigation

matters originally filed in the District Court for the Eastern District of Texas have been resolved and are now dismissed.

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

Briefing on the appeal has been completed.

The parties are currently waiting for the Court of Appeals to

schedule a date for oral argument.

LED Litigation

April 13, 2017, the Company filed a patent infringement lawsuit against Seoul Semiconductor Co., Ltd.

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pending but stayed pending the outcome of the IPR proceedings.

April 13, 2017, the Company filed a patent infringement lawsuit against Everlight Electronics Co., Ltd.

and Everlight Americas,

(collectively, “Everlight”) in the United States District Court for the Eastern District of Texas, alleging infringement

of certain of the Company’s LED patents.

The Company is seeking a judgment for infringement of the patents along with other

relief including, but not limited to, money damages, costs and disbursements.

On June 8, 2017, the Company refiled its patent

infringement complaint against Everlight in the United States District Court for the Central District of California.

2018, Everlight filed IPR petitions challenging the validity of claims under U.S.

7,256,486 and 7,524,087.

12, 2018, Everlight filed an IPR petition challenging the validity of claims under U.S.

6,949,771, and on June 15,

2018, filed an IPR petition challenging the validity of claims under U.S.

Patent No 7,919,787.

These challenged patents are the

patents that are the subject matter of the infringement lawsuit.

On January 18, 2019, the Company and Everlight entered into a

confidential settlement agreement resolving the litigation.

April 13, 2017, the Company filed a patent infringement lawsuit against Cree, Inc.

50 unchanged sentences

the Federal Circuit.

That appeal is now fully briefed.

The Court of Appeals has not yet set the matter for argument.

September 18, 2019, DSS filed a patent infringement lawsuit against Seoul Semiconductor Co., Ltd.

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The Court has conducted an initial scheduling conference and has set a procedural schedule for

On May 18, 2020, Seoul Semiconductor filed an IPR petition challenging the validity of claims 1-7 of the patent.

District Court has entered a stay of the District Court proceedings pending the outcome of the IPR petition.

The IPR petition

was instituted on November 20, 2020 and remains pending.

September 19, 2019, DSS filed a patent infringement lawsuit against Cree, Inc.

4 unchanged sentences

On February 11,

2020, Dree filed an IPR petition challenging the validity of the patent claims.

The Court has conducted an initial scheduling

conference and has set a procedural schedule for the case.

2020, Cree filed an IPR petition challenging the validity of the patent claims.

On September 1, 2020, the PTAB instituted the

IPR proceeding.

The District Court has conducted an initial scheduling conference and has set a procedural schedule for the case.

The District Court has entered a stay of the District Court proceedings pending the outcome of the IPR petition, which remains

September 20, 2019, DSS filed a patent infringement lawsuit against Nichia Corp.

5 unchanged sentences

The Court has conducted an initial scheduling conference and has set a procedural schedule for the case.

April 2019 DSS commenced an action in New York State Supreme Court, Monroe County against Jeffrey Ronaldi, our former Chief Executive

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.

lawsuit also seeks an injunction against Mr.

Ronaldi from interfering with any of DSS’

IP litigation.

The defendant has

been granted an extension to respond pending settlement negotiations.

Ronaldi subsequently commenced an action against us

in the Superior Court of California, County of San Diego, in November 2019, in which he alleges that we terminated his employment

in April 2019 in order to avoid paying him certain employment-related amounts.

Ronaldi contends that he is owed a $100,000

performance bonus for 2017 under this employment agreement with us as well as $91,000 in documented and unreimbursed expenses,

and that DSS purported to terminate him for cause under the terms of his employment agreement in order to avoid paying such amounts.

Ronaldi also contends that he is entitled to receive additional amounts, either under the terms of the employment agreement,

or under theories of implied-in-fact contract or promissory estoppel, including, but not limited to, (i) additional performance

bonuses of up to 15% of net litigation proceeds received by us from pending patent infringement litigations, of net licensing

proceeds received by us other than from our internally developed IP, or of the net sales proceeds received by us in connection

with the sale of any of our patent assets, (ii) earned but unpaid base salary, (iii) an equity grant of shares of our common stock,

and (iv) payments for unused personal time and sick days.

He seeks actual, compensatory, restitutionary and/or incidental damages

in an amount to be determined at trial;

prejudgment interest in an amount to be determined at trial;

attorneys’

other costs of the suit;

and such other and further relief as the court deems proper.

We have made a motion to have the

case dismissed and consolidated with the Monroe Co., New York, litigation.

A hearing has been set for April 24, 2020, for the

court to consider that request.

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 alleging acts of self-dealing and conflicts of interest while

he served as CEO of both DSS and DSS TM.

That litigation is in the process of being served upon the defendant.

On May 18, 2020, Nichia

filed an IPR petition challenging the validity of claims 1-4, 8, and 11 of the patent.

The District Court has entered a stay of

the District Court proceedings pending the outcome of the IPR petition.

On November 17, 2020, the PTAB instituted the IPR proceeding,

which remains pending.

Intel, Apple Litigation

November 20, 2019, DSS Technology Management was sued in the United States District Court, Northern District of California, by

28 unchanged sentences

with interest.

On December 13, 2019, the court granted the parties’

stipulation to extend the deadline for DSS Technology

Management and other defendants to respond to the complaint to February 4, 2020.

A hearing on any motions filed in response to

the complaint is set for April 23, 2020.

DSS Technology Management responded to the complaint on February 4, 2020 by filing a motion to dismiss and strike

the complaint as well as a motion to stay discovery.

The court granted the motion to stay discovery on March 25, 2020.

on the motion to dismiss and to strike the complaint was reset for July 8, 2020.

On July 8, 2020 the court granted DSS’s

motion to dismiss, and while the order allowed the Plaintiffs leave to amend their complaint, it did dismiss with prejudice claims

against DSS based on the patents asserted by DSS that were part of the complaint.

On August 4, 2020, Apple and Intel filed a first

amended complaint, in which DSS is no longer named as a defendant and upon which we believe the case is closed as to DSS.

Ronaldi Litigation

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

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.

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.

Ronaldi asserted counterclaims in the Monroe County, New York action

similar to those he originally brought in California.

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.

Ronaldi seeks to recover:

(i) $144,657.53 in wages from April 11, 2019 through December 31, 2019;

(ii) $769.23 in alleged unpaid based salary for time worked

before April 11, 2019;

(iii) $15,384.62 in alleged paid time off compensation;

(iv) $3,076.93 in alleged unpaid sick time compensation;

(v) $26,076.93 in waiting-time penalties;

(vi) -$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.

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.

Jeffrey Ronaldi, Index No.:

alleging acts of self-dealing and conflicts of interest while he served as CEO of both DSS and DSS TM.

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

6:20-cv-06265-EAW.

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

On March 26, 2021 Mr.

Ronaldi applied to the court for reimbursement of $160,896.25 in legal fees.

The Company intends

to object 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 are awaiting the court’s scheduling of the status conference for the management of

all pretrial activities and set a tentative date for trial, however, due to discovery disputes the Court has signaled

its intent to extend those deadlines.

Biosciences Litigation

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.

Document Security Stems, Inc.,

et al., Case No.

3:21-cv-00327.

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

(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.

to an agreement with Maiden, the deadline for Defendants DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel to

answer or otherwise respond is March 30, 2021.

The pretrial deadlines and tentative trial date will be set by the Court following

a customary status conference.

addition to the foregoing, we may become subject to other legal proceedings that arise in the ordinary course of business and

19 unchanged sentences

As of December 31, 2020, there are no contingent payments due.

DISCONTINUED OPERATIONS

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.

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

The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated

financial statements.

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 and an additional contingent earn-out payment of an aggregate amount of up to $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 which did not occur during the twelve-months

ended December 31, 2020.

As of December 31, 2020, the Company has recognized $390,000 of this earn out in Loss from Discontinued

The net effect of all assets disposed of is a net loss of $111,000 These amounts are included in Loss from Discontinued

Included in its Right-of-use assets is the lease of the Company’s facility in Brisbane, Ca.

The intent is to

sublease this property for a value equal to or in excess of the current payments and therefore, not impairment of this asset is

deemed necessary at December 31, 2020.

following tables show the major classes of assets and liabilities held for sale and results of operations of the discontinued

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

Balance Sheets–

Assets and Liabilities Held for Sale

current assets

plant and equipment, net

portion of lease liability

current liabilities

term lease liability

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

Statements of Operations - Discontinued Operations

the Year Ended

and expenses:

of revenue, exclusive of depreciation and amortization

general and administrative (including stock based compensation)

and amortization

costs and expenses

income (expense):

on disposition of business

(loss) before income taxes

tax expense (benefit)

(loss) from discontinued operations

17 - SUPPLEMENTAL CASH FLOW INFORMATION

cash flow information for the years ended December 31:

Cash paid for interest

Non-cash investing and financing activities:

Impact of adoption

of lease accounting standards

paid for interest

investing and financing activities:

of adoption of lease accounting standards

from change in fair value of interest rate swap derivatives

Common stock issued

upon conversion of convertible note

Equity issued to

purchase intangible assets

Elimination of contingent

liabilities through agreement

Purchase of intangible

assets to be paid in installments

Purchase of intangible

assets with term note inclusive of tax

stock issued upon conversion of convertible note

issued to purchase intangible assets

A Shares issued for prepaid marketing services

A Shares issued for Impact BioMedical

Non-controlling

interest related to Impact BioMedical

A Preferred Shares issued for Impact BioMedical

receivable settled for assets in lieu of cash

18 - SEGMENT INFORMATION

Company’s businesses are organized, managed and internally reported as four operating segments.

Two of these operating segments,

Packaging and Printing, and Plastics are engaged in the printing and production of paper, cardboard and plastic documents with

a wide range of features, including the Company’s patented technologies and trade secrets designed for the protection of

documents against unauthorized duplication and altering.

A third operating segment, Digital, is comprised of DSS Digital

Group, and DSS International, and is engaged

in research, development, marketing and selling worldwide the Company’s digital products, including and primarily our AuthentiGuard®

product, which is a brand authentication application that integrates the Company’s counterfeit deterrent technologies with

proprietary digital data security-based solutions.

The fourth operating segment, Technology Management, primary mission has been

to monetize its various patent portfolios through commercial litigation and licensing.

Except for investment in its social networking

related patents, we have historically partnered with various third-party funding groups in connection with patent monetization

reported herein, DSS is in the process of establishing several new business lines, and we anticipate each of these new business

division to be future operating segments.

For instance, Direct Marketing is a newly added operating segment in December 2019 and

focuses on direct marketing or network marketing

engaged in the selling of products or services directly to the public, e.g ., by online or telephone selling, rather than

through retailers.

But for the period ending December 31, 2019, these segments have either yet to be materially formed or to have

generated any material revenues.

information concerning the Company’s operations by reportable segment for the years ended December 31, 2019 and 2018 is

The Company relies on intersegment cooperation and management does not represent that these segments, if operated

independently, would report the results contained herein:

Ended December 31, 2019

and amortization

Company’s eight businesses lines are organized, managed and internally reported as four reportable operating

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

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.

Direct Marketing/Online Sales 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.

information concerning the Company’s operations by reportable segment for years ended December 31, 2020 and 2019 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:

Year Ended December 31, 2020

Premier Packaging

Digital Group

IP Technology

Direct Marketing

/ Online Sales

Depreciation and amortization

Interest expense

Debt Discount

Stock based compensation

Income tax benefit

Net income (loss) from continuing operations

Capital expenditures

Ended December 31, 2018

and amortization

Identifiable assets

Year Ended December 31, 2019

Premier Packaging

Digital Group

IP Technology

Direct Marketing

/ Online Sales

Depreciation and amortization

Interest expense

Debt Discount

Stock based compensation

Income tax benefit

Net income (loss) from continuing operations

Capital expenditures

Identifiable assets

International

7 unchanged sentences

Products Revenue Information:

Twelve months

ended December 31, 2019

months ended December 31, 2020

Printing and Fabrication

Commercial and

Security Printing

Technology Integrated

Plastic Cards and Badges

Plastic Cards,

Badges and Accessories

and Security Printing

Printed Products

Twelve months

ended December 31, 2018

Packaging Printing

and Fabrication

Commercial and

Security Printing

Technology Integrated

Plastic Cards and Badges

Plastic Cards,

Badges and Accessories

months ended December 31, 2019

Printing and Fabrication

and Security Printing

Printed Products

Sales, Services and Licensing Revenue Information:

Twelve months ended December 31, 2019

months ended December 31, 2020

Technology Sales and Services

Digital Authentication

Products and Services

Royalties from

Technology Sales, Services and Licensing

Twelve months

ended December 31, 2018

Information Technology

Sales and Services

Digital Authentication

Products and Services

Royalties from

Technology Sales, Services and Licensing

Authentication Products and Services

from Licensees

Printed Products

months ended December 31, 2019

Technology Sales and Services

Authentication Products and Services

from Licensees

Printed Products

months ended December 31, 2020

Marketing Internet Sales

Direct Marketing

months ended December 31, 2019

Marketing Internet Sales

Direct Marketing

SUBSEQUENT EVENTS

March 12, 2020, the Company entered into a binding term sheet (the “Term Sheet”) with DSS BioHealth Security, Inc.,

a Delaware corporation and wholly owned subsidiary of the Company (“DBHS”), Global BioMedical Pte Ltd, a Singapore

corporation (“GBM”), and Impact BioMedical Inc., a Nevada corporation and wholly owned subsidiary of GBM (“Impact”).

Pursuant to the Term Sheet, the Company will acquire Impact, a company engaged in the development and marketing of biohealth security

technologies, in a proposed share exchange transaction with a purchase price capped at $50 million, subject to completion of due

diligence and an independent valuation.

In consideration of 100% of Impact, the Company will issue GBM (i) up to 14,500,000 shares

of its common stock, par value $0.02 (the “Common Stock”), at a price of $0.216 per share (valued at $3,132,00), and

(ii) perpetual convertible preferred stock (“Convertible Preferred Stock”) for the remaining balance of the purchase

price, as adjusted by the independent valuation and subject to a 19.9% blocker based on the total issued outstanding shares of

Common Stock held or to be held by GBM.

Pursuant to the Term Sheet, in consideration for the Convertible Preferred Stock, the

Company will have certain rights, including appointing members of the Board of Directors of Impact, as set forth in the Term Sheet.

GBM is a 100% owned subsidiary of Singapore eDevelopment Limited whose Chief Executive Office and largest shareholder is Mr.

Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the Company.

As such, the above transactions constitute

related party transactions which have been duly approved by the Company’s Board of Directors and Audit Committee.

March 3, 2020, the Company entered into a binding term sheet (the “Term Sheet”) with LiquidValue Asset Management

Pte Ltd (“LVAM”), AMRE Asset Management Inc.

(“AAMI”) and American Medical REIT Inc.

(“AMRE”),

regarding a share subscription and loan arrangement.

The Term Sheet sets out the terms of a proposed joint venture to establish

a medical real estate investment trust in the United States.

Pursuant to the Term Sheet, the Company will subscribe for 5,250

ordinary shares of AAMI at a purchase price of $0.01 per share for total consideration of $52.50.

Concurrently, AAMI will issue

2,500 shares to LVAM, and 1,250 shares to AMRE Tennessee, LLC, AMRE’s executive management’s holding company (collectively,

the “Subscription Shares”).

As a result, the Company will hold 52.5% of the outstanding shares of AAMI, with LVAM

and AMRE Tennessee, LLC, holding 35% and 12.5% of the remaining outstanding shares of AAMI, respectively.

Further, pursuant to

and in connection with the Term Sheet, on March 3, 2020, the Company entered into a Promissory Note with AMRE, pursuant to which

AMRE will issue the Company a promissory note for the principal amount of $800,000.00 (the “Note”).

The Note matures

on March 3, 2022 and accrues interest at the rate of 8.0% per annum, and shall be payable in accordance with the terms set forth

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 per share, subject to adjustment as set

forth in the Warrant, and expire on March 3, 2024.

February 25, 2020, the Company, closed its previously announced underwritten public offering of 25,555,556 shares of its

common stock.

The Offering included 22,222,223 shares of the Company’s common stock, and 3,333,333 additional shares

from the exercise of the underwriter’s purchase option to cover over-allotments at the public offering price of $0.18

The net offering proceeds (inclusive of the over-allotment exercise) to the Company approximated $4.0 million.

Heng Fai Ambrose Chan, the Chairman of the Board, purchased 11,111,112 shares of Common Stock in the Offering, for an

aggregate purchase price of $2,000,000.

January 2020, the Company began foreclosure proceedings on both of its Note receivables with RBC identified in Note 4.

These proceedings

were finalized in February 2020.

The Company chose to forego the optional conversion of the outstanding principal and interest

into 75% ownership and 100% ownership, respectively, as was allowed in the terms of both agreements.

In lieu of common stock,

the Company took ownership of certain assets of RBC.

Management has concluded that the fair value of these assets equal or exceeds

the amounts outstanding under the obligations.

to December 31, 2019, the Company has invested approximately $460,000 for less than 10% ownership of an entity over which one

of the Company’s directors serves as CEO.

Impact of COVID-19 Outbreak

January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International

Concern”

and on March 10, 2020, declared it to be a pandemic.

Actions taken around the world to help mitigate the spread

of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of

public places and businesses.

The coronavirus and actions taken to mitigate it have had and are expected to continue to have an

adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company

While the closures and limitations on movement, domestically and internationally, are expected to be temporary, if the

outbreak continues on its current trajectory the duration of the supply chain disruption could reduce the availability, or result

in delays, of materials or supplies to and from the Company, which in turn could materially interrupt the Company’s business

Given the speed and frequency of the continuously evolving developments with respect to this pandemic, the Company

cannot reasonably estimate the magnitude of the impact to its consolidated results of operations.

The Company’s manufacturing

facilities in both California and New York support businesses have been deemed essential by their respective state governments

and remain operational.

We have taken every precaution possible to ensure the safety of our employees.

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.

to December 31, 2019, the Company has invested approximately $460,000 for less than 10% ownership of an entity over which one

of the Company’s directors serves as CEO.

March 22, 2021 Premier Packaging was awarded an incentive package from New York State and Empire State Development and its Excelsior

Jobs Program valued at up to $700,000 in connection with Premier’s proposed expansion plans within the state.

This incentive

will take the form of tax credits to be utilized beginning in 2022 through 2031.

March 16, 2021, American Medical REIT, Inc.

received loan proceeds in the amount of approximately $110,000 under the Paycheck

Protection Program (“PPP”) with a fixed rate of 1% and a 60-month maturity term.

The PPP, established as part of the

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts

up to 2.5 times of the average monthly payroll expenses of the qualifying business.

These funds were used for payroll, benefits,

rent, mortgage interest, and utilities.

March 15, 2021, the Company, through one of its subsidiaries, 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 a the per share price of $1.00.

This option will terminate upon

one of the following events:

(i) The Seller’s 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 receives more than $1.00 per share of the

Company’s common stock in a private placement with gross proceeds of $500,000.

Under the terms of the Agreement, the Company

will be allocated two seats on the board of Vivacitas.

On March 18, 2021, the Company entered into an agreement to with Alset

EHome International, Inc.

(“Seller”) indirectly the Seller’s wholly owned subsidiary Impact Oncology PTE Ltd.

to purchase 2,480,000 shares of common stock of Vivacitas for a purchase price $2,480,000.

This agreement includes an option to

purchase an additional 250,000 shares of common stock.

As a result of these two transactions, the Company will have an approximate

10.2% 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.

March 12, 2021, the Company entered into a binder letter of intent with Sharing Services Global Corporation (“SHRG”)

whereas the Company will sell specific assets to SHRG.

The purchase price is to be established by a third-party appraiser mutually

Under the terms of this agreement, SHRG at its option, may pay the purchase price via (i) shares of SHRG Common A stock

at a conversion rate calculated at a 30-day VWAP, (if shares are available), (ii) a 1 yr.

convertible note which at the Seller’s

option may be converted into Common A shares at a conversion rate calculated at a 30-day VWAP (if shares are available), or paid

in US$ or (iii) in US dollars at closing.

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 three-year SHRG Note 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.

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

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.

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 par value per share.

Subject to the terms and conditions contained

2021 Underwriting Agreement, the shares were sold at a public offering price of $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.

offering proceeds to the Company from the Feb.

2021 Offering are approximately $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.

February 3 , 2021, DSS Blockchain Security, Inc (“DSSB”).

a wholly-owned subsidiary of the Company entered

into a binding joint venture term sheet with GSX Group Limited (“GSX”) and Coinstreet Holdings Limited (“Coinstreet”)

whereas the parties intend to own and operate a single or multiple vertical digital asset exchanges for securities, tokenized

assets, utility tokens, stable coins and cryptocurrency that will operate a primary and secondary market via a digital asset trading

platform using blockchain technology.

With its initial contribution of $20,000, DSSB will receive a 40% equity position

in the joint venture.

Upon the execution of related loan documents, in which DSSB will loan $800,000 to GSX, DSSB will obtain

a 70% share in the joint venture.

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

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 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 million,

after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

January 6, 2021, the Company Alset International Limited (“Alset Singapore”), a company formed under the laws

of Singapore, Health Wealth Happiness Pte.

(“HWH”), a Singaporean company and wholly-owned subsidiary of Alset

Singapore, and HWH World Inc.

(“HWH World”), a company registered and formed under the laws of South Korea

and wholly-owned subsidiary of HWH, entered into a binding term sheet (the “HWH Term Sheet”), pursuant to which,

subject to the due diligence on HWH World, necessary approvals and consents, and the terms and conditions to be set forth in the

Definitive Agreement (as defined below), the Company will acquire and purchase all of the outstanding equity interest in HWH World

(the “HWH Transaction”) for a consideration of the lesser of $14.8 million or the value of HWH World assessed

by a third-party valuation company (the “Purchase Price”).

The HWH Term Sheet provided that the Company shall

have the option to pay the Purchase Price in i) cash, or ii) shares of the Company’s common stock at the per share price

equivalent to the average closing price of the common stock for a period of five (5) trading days prior to January 6, 2021.

In accordance with the HWH Term Sheet, the parties thereto (the “Parties”) shall enter into a definitive share

exchange agreement (the “Definitive Agreement”) for the Transaction within three (3) months from the date of the HWH

Term Sheet or at a later date as mutually agreed by the Parties in writing and complete the Transaction within six (6) months

therefrom or at a later date as mutually agreed by the Parties in writing.

The HWH Term Sheet is legally binding and shall

terminate upon the earlier of 1) six months from January 6, 2021, 2) mutual agreement by all the Parties on the termination, or

3) the execution of the Definitive Agreement for the Transaction.

9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data