What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-10-23 · 1316 added, 1403 removed, 375 unchanged (88% of the section changed)

3 unchanged sentences

Balance Sheets

September 30, 2020

March 31, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

Accounts receivable, net

Assets held for sale - discontinued operations

Prepaid expenses and other current assets

1 unchanged sentence

Property, plant and equipment, net

Other investments

Investment, equity method

Marketable securities

3 unchanged sentences

Other intangible assets, net

$ 142,803,000

LIABILITIES AND STOCKHOLDERS’

4 unchanged sentences

Current Liabilities held for sale - discontinued operations

Revolving line of credit

Current portion of lease liability

9 unchanged sentences

Preferred stock, $.02 par value;

200,000,000 shares authorized, 47,000 shares issued and

outstanding (0 on December 31, 2019);

47,000 shares authorized, 43,000 shares issued and outstanding (43,000 on December 31, 2020);

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

Common stock, $.02 par value;

200,000,000 shares authorized, 5,174,000 shares issued and

outstanding (1,206,000 on December 31, 2019)

200,000,000 shares authorized, 27,670,000 shares issued

and outstanding (5,836,000 on December 31, 2020)

Additional paid-in capital

2 unchanged sentences

(101,382,000 )

(103,281,000 )

Total stockholders’

Total liabilities and stockholders’

accompanying notes to the condensed consolidated financial statements.

$ 142,803,000

See accompanying notes to the condensed consolidated

financial statements.

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

Statements of Operations and Comprehensive Income (loss)

Statements of Operations

For the Three Months Ended

For the Nine Months Ended

September 30,

March 31, 2021

Printed products

11 unchanged sentences

Interest expense

Unrealized gain on marketable securities

Amortization of deferred financing costs and debt

Income (loss) before income taxes

Income tax expense (benefit)

Income (loss) from continuing operations

Gain on extinguishment of debt

(Loss) gain on investments

Loss on equity method investment

Loss from continuing operations before income taxes

Income tax benefit

Loss from continuing operations

Loss from discontinued operations

Net income (loss)

Loss attributed to noncontrolling interest

Net income (loss) from continuing operations attributable

to common stockholders

Other comprehensive income (loss):

Interest rate swap loss

Settlement of interest rate swap

Comprehensive income (loss):

Earnings (loss) per common share - continuing operations:

Loss from continuing operations attributed to noncontrolling interest

Net loss attributable to common stockholders

Loss per common share - continuing operations:

Loss per common share - discontinued operations:

Shares used in computing earnings (loss) per common share:

accompanying notes to the condensed consolidated financial statements.

Shares used in computing loss per common share:

See accompanying notes to the condensed consolidated

financial statements.

SECURITY SYSTEMS, INC.

1 unchanged sentence

Statements of Cash Flows

the Nine Months Ended September 30,

the Three Months Ended March 31,

Cash flows from operating activities:

Net loss from continuing operations

$ (3,898,000 )

Adjustments to reconcile net income (loss) to net cash used by operating

Adjustments to reconcile net loss from continuing operations

to net cash used by operating activities:

Depreciation and amortization

Stock based compensation

Unrealized gain on marketable securities

Loss on equity method investment

Loss (gain) on investments

Gain on extinguishment of debt

Deferred tax benefit

Decrease (increase) in assets:

Accounts receivable

Accounts receivable, net

Prepaid expenses and other current assets

6 unchanged sentences

Purchase of property, plant and equipment

Purchase of marketable securities

Purchase of investment

Purchase of marketable securities

Sale of marketable securities

Note receivable investment

Purchase of intangible assets

Net cash used by investing activities

2 unchanged sentences

Borrowings of long-term debt

Payments of revolving lines of credit, net

Borrowings from convertible of note

Issuances of common stock, net of issuance costs

Borrowings from lines of credit, net

Issuances of common stock, net

of issuance costs

Net cash provided by financing activities

Cash flows from discontinued operations:

by operations - discontinued operations

Cash provided

(used) by investing activities

used by financing activities

Net cash used by discontinued operations

Cash (used) provide by operations

Cash used by investing activities

Cash provided by financing activities

Net cash (used) provided by discontinued operations

Net increase in cash

Cash at beginning of period

Cash at end of period

accompanying notes to the condensed consolidated financial statements.

Cash and cash equivalents at beginning

Cash and cash equivalents at end

See accompanying notes to the condensed consolidated

financial statements.

SECURITY SYSTEMS, INC.

1 unchanged sentence

Statements of Changes in Stockholders’

controlling Interest in

Non- controlling

Preferred Stock

Balance, December 31, 2020

2 unchanged sentences

Issuance of common stock, net

Issuance of preferred stock, net

Stock based payments, net of tax effect

2 unchanged sentences

$ (105,363,000

Issuance of common stock, net

Issuance of preferred stock, net

Stock based payments, net of tax effect

Balance, June 30, 2020

$ 133,616,000

Balance, December 31, 2019

$ 115,560,000

$ (103,281,000 )

Issuance of common stock, net

Issuance of preferred stock, net

Stock based payments, net of tax effect

Net income (loss)

Balance, September 30, 2020

$ 174,423,000

$ (100,905,000 )

Other Comprehensive

controlling Interest in

December 31, 2018

$ 107,962,000

$ (100,392,000 )

of common stock, net

based payments, net of tax effect

comprehensive loss

March 31, 2019

$ 108,631,000

$ (100,843,000 )

of common stock, net

based payments, net of tax effect

comprehensive loss

June 30, 2019

$ 113,539,000

$ (101,874,000 )

of common stock, net

based payments, net of tax effect

comprehensive income

September 30, 2019

Balance, March 31, 2020

$ 119,624,000

$ (105,181,000 )

accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated

financial statements.

SECURITY SYSTEMS, INC.

3 unchanged sentences

Security Systems, Inc.

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

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

around the globe.

1 unchanged sentence

(1) Premier Packaging Corporation

(DSS Packaging and Printing Group), (2) DSS Digital Inc., and its subsidiaries (DSS Digital Group), and (3) DSS Technology Management,

(DSS Technology Management).

Premier Packaging Corporation operates in the paper board folding carton, smart packaging and

document security printing markets.

It markets, manufactures and sells paper products designed to protect valuable information

from unauthorized scanning, copying, and digital imaging.

DSS Digital Inc., researches, develops, markets and sells the Company’s

digital products worldwide.

The 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.

DSS Technology

Management 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 2020, under its (4)

Decentralize Sharing Systems, Inc.

subsidiary, created a fourth business segment, Direct Marketing.

Direct marketing or network

marketing is designed to sell products or services directly to the public through independent distributors, rather than selling

through the traditional retail market.

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

DSS Blockchain Security, Inc., a Nevada corporation, 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.

(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”

(“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

Sales Group (“Direct”).

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 DSS has created four new, wholly owned subsidiaries.

(5) 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 biohealth 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,

intends to develop top of the line advanced technology, energy efficiency, quality of life living environments and home security

for everyone for new construction and renovations of residential single and multifamily living facilities.

Aside from Decentralized

Sharing Systems, Inc.

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

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 4).

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.

American Medical REIT, Inc is a Maryland corporation, organized for

the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market

share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease.

AMRE was formed

to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate.

AMRE is planned to qualify as a Real

Estate Investment Trust for federal income tax purposes, which will provide.

AMRE’s investors the opportunity for direct

ownership of Class A licensed medical real estate.

As of September 30, 2020 has not yet closed on any acquisition.

August 21, 2020, Document Security Systems, Inc.

(the “Company”), completed its acquisition of Impact BioMedical,

(“Impact BioMedical”), pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth Security,

(“DSS BioHealth”), Alset International Limited (formally Singapore eDevelopment Ltd.), and Global Biomedical

(“GBM”), which was previously approved by the Company’s shareholders (the “Share Exchange”).

Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value $0.02

per share, nominally valued at $6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred

Stock (“Series A Preferred Stock”).

As a result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary

of DSS BioHealth, the Company’s wholly owned subsidiary (see Note 4).

(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.

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

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 5).

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.

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

and permitting process.

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally

accepted accounting principles (“U.S.

GAAP”) for interim financial information and with the instructions to Form 10-Q

and Rule 8.03 of Regulation S-X for smaller reporting companies.

Accordingly, these statements do not include all the information

and footnotes required by U.S.

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.

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted

accounting principles (“U.S.

GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8.03

of Regulation S-X for smaller reporting companies.

Accordingly, these statements do not include all the information and footnotes required

GAAP for complete financial statements.

In the opinion of management, the accompanying balance

sheets and related interim statements of operations and comprehensive loss and cash flows include all adjustments considered necessary

for their fair presentation in accordance with U.S.

All significant intercompany transactions have been eliminated in consolidation.

In the opinion of management, the accompanying balance sheets and related interim statements

of operations and cash flows include all adjustments considered necessary for their fair presentation in accordance with U.S.

significant intercompany transactions have been eliminated in consolidation.

results are not necessarily indicative of results expected for the full year.

For further information regarding the Company’s

accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s

Form 10-K for the fiscal year ended December 31, 2019.

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

For further information regarding the Company’s accounting

policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for

the fiscal year ended December 31, 2020.

of Consolidation - The consolidated financial statements include the accounts of Document Security Systems, Inc.

and its subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally

accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed

in the financial statements and the accompanying notes.

of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted

in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial

statements and the accompanying notes.

Actual results could differ materially from these estimates.

On an ongoing

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

intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants

to purchase the Company’s common stock, preferred stock, deferred revenue and income taxes, among others.

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.

On an ongoing basis, the Company

evaluates its estimates, including those related to the accounts receivable, inventory, fair values of investments, intangible assets

and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company’s

common stock, preferred stock, deferred revenue and income taxes, among others.

The Company bases its estimates on historical experience

and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the

carrying values of assets and liabilities.

Reclassifications

- Certain amounts on the accompanying consolidated balance sheets for the year ended December 31, 2019 have been reclassified

- Certain amounts on the accompanying consolidated balance sheets for the quarter ended March 31, 2021 have been reclassified

to conform to current year presentation.

and Equity Method Investments –

In accordance with ASC 325-20, Cost Method Investments, the Company records

its investment in common stock of BMI Capital International LLC, a Texas limited liability company, at cost as the fair market

value of the investment is not readily determinable.

As of June 30, 2020, the Company classified its approximate 17% investment

in Sharing Services Global Corp.

(“SHRG”), a publicly traded company, as marketable equity security and measured it

at fair value with gains and losses recognized in other income.

In July 2020, through continued acquisition of common stock, the

Company obtain greater than 20% ownership of SHRG, and thus has the ability to exercise significant influence over it.

accounts for investments in which the Company owns more than 20% or has the ability to exercise significant influence of the investee,

using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures .

evaluates investment for indications of impairment at least annually.

See Note 5 for further details on investments.

Securities –

The Company’s investments in marketable equity securities are classified based on the nature

of the securities.

Marketable securities are 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 Company’s marketable equity securities

are measured at fair value with gains and losses recognized in other income (expense).

See Note 5 for further details on investments

and marketable securities.

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

If there is a decline that is other-than-temporary, the investment is written down to fair value.

See Note 6 for further

discussion on investments.

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).

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:

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.

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 carried at cost less impairment;

however, the fair value is not considered

readily determinable based on the lack of liquidity for the shares owned.

of Long-Lived Assets and Goodwill - The Company monitors the carrying value of long-lived assets for potential impairment

and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may

not be recoverable.

If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying

value of the asset or asset group to its undiscounted expected future cash flows.

If cash flows cannot be separately and independently

identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the

Company can identify the projected cash flows.

If the carrying values are in excess of undiscounted expected future cash flows,

the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

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’

occurred and the Company recorded a full goodwill impairment of $685,000 during the nine months ended September 30, 2020.

impairment has been included in the calculation of the discontinued operations of DSS Plastics group.

Party Liabilities - The Company’s HWH World, Inc subsidiary has a service agreement pending with HWH

Korea, a subsidiary of Alset International Limited (formally Singapore eDevelopment Limited), and thus a related party.

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.

As of September 30, 2020, the Company has collected approximately

$774,000 on behalf of HWH Korea and will remit amounts during the fourth quarter.

The related party liability

is included in “Other current liabilities”

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.

Marketable securities

classify as a Level 1 fair value financial instrument.

The fair value of notes receivable approximates their carrying value as the stated

or discounted rates of the notes do not reflect recent market conditions.

The fair value of revolving credit lines notes payable and

long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions.

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

of Long-Lived Assets and Goodwill - The Company monitors the carrying value of long-lived assets for potential impairment and

tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset

group to its undiscounted expected future cash flows.

If cash flows cannot be separately and independently identified for a single asset,

the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash

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 Intl, a company publicly listed on the Singapore Exchange Limited.

This service agreement will allow HWH Korea

to utilize the Company’s merchant account in connection with their direct marketing network with periodic remittance of

the cash collected to them for a fee of 2.5% of amounts collected.

As of March 31, 2021, the Company has collected approximately

$246,000 as compared to $1,100,000 as of December 31, 2020 on behalf of HWH Korea.

The amount of $912,000 was remitted to HWH

Korea, net of fees and other expenses, in the first quarter of 2021.

The related party liability of approximately $246,000 is

included in “Other current liabilities”

on the accompanying consolidated balance sheets.

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

that the related revenues are recognized.

In instances where there are no recoveries from potential infringers, no contingent

legal fees are paid;

however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying

legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement

action, which will be expensed as legal fees in the period in which the payment of such fees is probable.

Any unamortized patent

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

There were no amounts outstanding

to this related party at March 31, 2020.

In connection with

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

Under the guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition

and all acquisition costs are expensed as incurred.

The excess of the purchase price over the estimated fair values is recorded as goodwill.

If the fair value of the assets acquired

exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded.

Under the guidance, all acquisition

costs are expensed as incurred and in-process research and development costs are recorded at fair value as an indefinite-lived

intangible asset.

If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded.

The application of business combination accounting requires the use of significant estimates and assumptions.

See Note 5 regarding the

acquisitions in 2020.

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.

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

Accordingly, the operations of DSS Plastics have been discontinued.

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’

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 210-05—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.

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

(the “Company”) held a Special Meeting of Stockholders

(the “Special Meeting”) 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 (the “Reverse Split”)

with the effectiveness of such amendment to be determined by the Board of Directors of the Company (the “Board”).

The form of the certificate of amendment to effect the Reverse Split was subsequently approved by the Board on May 4, 2020.

May 7, 2020, the Company filed a Certificate of Amendment of Certificate of Incorporation (the “Amendment”) 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

The Amendment was effective at 5:01 p.m.

Eastern Time on May 7, 2020 (the “Effective Time”).

The reverse stock

split has been retroactively applied to all financial statements presented.

historical revenue to the Company and because the Company has exited

the production of laminated and surface printed cards, this sale represented a significant strategic shift that has a material effect

on the Company’s operations and financial results.

Accordingly, the Company has applied discontinued operations treatment for this

sale as required by Accounting Standards Codification 210-05—Discontinued Operations.

The major classes of assets and liabilities

of DSS Plastics are classified as Held For Sale –

Discontinued Operations on the Consolidated Balance Sheets and the operating

results of the discontinued operations is reflected on the Consolidated Statements of Operations as Loss from Discontinued Operations.

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 3,223,000 and 1,082,000 shares for the three and nine month periods

ended September 30, 2020, respectively.

Basic earnings per share reflect the actual weighted

average of shares issued and outstanding during the period.

Diluted earnings per share are computed including the number of additional

shares from outstanding warrants, stock options and preferred stock that would have been outstanding if dilutive potential shares had

been issued and is calculated utilizing the treasury stock method.

In a loss period, the calculation for basic and diluted earnings per

share is the same, as the impact of potential common shares is anti-dilutive.

Concentration

of Credit Risk - The Company maintains its cash in bank and brokerage deposit accounts, which at times may exceed

federally insured limits.

To address this potential risk, the Company (i) periodically evaluates the financial soundness of the

banks and brokerage agencies with which it holds deposit and (ii) has spread its cash holdings over multiple banks and brokerage

companies to diversify the risk.

As a result, management does not believe that it is materially exposed to any significant credit

risk as a result of any potential insolvency of any financial institution(s).

the nine months ended September 30, 2020, two customers accounted for approximately 21% and 16%, respectively, of

the Company’s consolidated revenue and accounted for 36% and 12%, respectively, of the Company’s accounts

receivable balance as of September 30, 2020.

The risk with respect to accounts receivables is mitigated by credit evaluations

the Company performs on its customers, the short duration of its payment terms for most of its customer contracts and by the diversification

of its customer base.

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

and for the estimated future tax effect attributable to temporary differences and carry-forwards.

Measurement of deferred income

items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available

tax benefits not expected to be realized.

We recognize penalties and accrued interest related to unrecognized tax benefits in

income tax expense.

Accounting Pronouncements - In 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 and has been adopted by the Company effective January 1, 2020.

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

of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured

The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

2021, two customers accounted for 40% of our consolidated revenue.

As of March 31, 2021, these two customers accounted for 65% of our

consolidated trade accounts receivable balance.

As of March 31, 2020, these two customers accounted for 39% of our consolidated revenue

and 59% of our consolidated trade accounts receivable balance.

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

the estimated future tax effect attributable to temporary differences and carry-forwards.

Measurement of deferred income items is based

on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not

expected to be realized.

We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense.

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.

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.

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 year-to-date earnings for the 9 months ended September

30, 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 $11.6 million in cash, and a positive working capital position of approximately

$13.3 million as of September 30, 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 nine months ended September 30, 2020, the Company through multiple underwriting agreements

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

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

The net offering proceeds

to the Company approximated $20.1 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 nine months ended September 30, 2020, material 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 $11.6 million in aggregate cash and equivalents as of September 30, 2020, would allow us to fund our eight business lines

current and planned operations through October 2021.

Based on this, the Company has concluded that substantial doubt of its ability

to continue as a going concern has been alleviated.

In most cases, we believe the negative economic trends and reduced sales will recover over time.

management determined that one of its business lines, DSS Plastics, had been, and would continue to be, more severely impacted by the

pandemic than our other divisions, and we did not believe this was a short-term phenomenon.

We expected that this business would be permanently

impacted because we believe that both consumer and corporate future travel habits will be negatively impacted and, as a result, use of

hotel access cards will be diminished.

We believe that conventions and sporting events will be fewer and smaller in attendance, and therefore

demand for our card identification products would be reduced.

Further, we believe that physical security cards and individual IDs will

be replaced by more digital and optical technologies.

As a result, management decided to fully impair its goodwill related to DSS Plastics

during the first quarter 2020, and to exit this business line.

The impact of this decision in our first quarter 2020 earnings was an

impairment of approximately $685,000 included in loss from discontinued operations.

Additionally, it is reasonably possible that estimates

made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions,

including losses on inventory;

impairment losses related to goodwill and other long-lived assets and current obligations.

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.

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.

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’

The Company also derives

revenue from royalties from third parties which are typically based on licensees’

net sales of products that utilize the Company’s

technology, or on a per item usage of the technology on the customers’

printed products.

The Company recognizes license revenue at the time it is reported by the licensee.

From time to time, the Company generates license

revenues through litigation settlements.

For these, the Company recognizes revenue upon the execution of the agreement, when collectability

is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition

criteria have been met.

of September 30, 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

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 .

generates revenue from its direct marketing line of business primarily through internet sales and recognizes revenue as items are shipped.

of March 31, 2021, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater

than one year.

Pursuant to Topic 606, the Company has applied the practical expedient with respect to disclosure of the deferral and

future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

The Company elected

the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products

as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization

period of the asset that the Company would have otherwise recognized is one year or less.

Company extends credit to its customers in the normal course of business.

The Company performs ongoing credit evaluations and

generally does not require collateral.

The Company performs ongoing credit evaluations and generally

does not require collateral.

Payment terms are generally 30 days but up to net 105 for certain customers.

carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts.

On a periodic basis, the Company

evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management’s estimates that

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

30, 2020, the Company established a reserve for doubtful accounts of approximately $23,000 ($41,000 –

The Company carries its trade

accounts receivable at invoice amount less an allowance for doubtful accounts.

On a periodic basis, the Company evaluates its accounts

receivable and establishes an allowance for doubtful accounts based upon management’s estimates that include a review of the history

of past write-offs and collections and an analysis of current credit conditions.

At March 31, 2021, the Company established a reserve

for doubtful accounts of approximately $42,000 ($25,000 –

December 31, 2020).

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

The Company does not accrue interest on past due

accounts receivable.

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

There were no sales commissions

capitalized as of September 30, 2020.

There were no sales commissions capitalized

as of March 31, 2021.

and Handling Costs

4 unchanged sentences

Notes Receivable

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.

TBD Holdings, LLC

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

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

As of September 30,

2020 and December 31, 2019 this TBD Note had outstanding principal and interest of approximately $529,000 and $507,000, respectively.

As of March 31, 2021 and December 31, 2020, this

TBD Note had outstanding principal and interest of approximately $537,000.

On December 30, 2020, the Company

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

and TBD where the parties agreed to prepare

a note and stock exchange agreement whereby DSS will assign the TBD Note to West Park and West Park shall issue to DSS a stock certificate

reflecting 7.5% of the issued and outstanding shares of West Park.

This note and stock exchange agreement is expected to be finalized

sometime during the second quarter of 2021.

Group Limited

February 8, 2021, the Company entered into a convertible promissory note (“GSX Note”) with GSX Group Limited (“GSX”),

a company registered in Gibraltar.

The Company loaned the principal sum of $800,000, with principal and interest at a rate of 4%, due

in one year from date of issuance.

The GSX Note shall be converted, at the Company’s option, into shares of GSX at the conversion

price of $1.05 per share.

Life Sciences, Inc.

October 9, 2019 and November 11, 2019, the Company’s subsidiary Decentralized Sharing Systems, Inc.

2 unchanged sentences

(RBC), a Nevada corporation.

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 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 the note the sum of $200,000.

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.

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,

a scheduled maturity date of November 11, 2024, payable to Decentralized Sharing Systems, Inc.’s wholly owned subsidiary,

HWH World, Inc.

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

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.

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”

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 2nd 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 advanced and outstanding principal

balance of $81,575.

feature that allows the Company, at any time, before or after the occurrence of an event of default, at its option, to convert

the outstanding principal balance, plus accrued interest into a number of newly issued shares of its common stock equal to 100%

of the outstanding shares of common stock of RBC’s direct and indirect subsidiaries.

This Note #2 was also secured by a

second lien on all of the assets of RBC, behind the first lien securing Note #1, and a first lien on all of the assets of RBC’s

multiple subsidiaries and the full guarantee of these subsidiaries.

Advances of approximately $518,000 were made during 2020 under

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.

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

4 unchanged sentences

At that April Article 9 public

sale, HWH World, Inc was the high bidder, and the company received a Bill of Sale for all of the remaining assets of RBC.

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.

In accordance with Financial

Accounting Standards Board Codification 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.

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.

In accordance with ASC 310 Receivables

Goodwill and Other, the assets value will be recorded at the carrying value of the debt, allocated based on the value identified.

carrying values of Note #1 and Note #2 were reclassed as property, plant, and equipment and other intangible assets in the amounts of

$201,000 and $637,000 respectively within the accompanying financial statements.

These amounts are being depreciated and amortized over

their useful lives.

The Company is currently a defendant in a lawsuit brought against it for unjust enrichment and fraudulent transfer

under Texas Uniform Fraudulent Transfer Act.

See Note 9 for further details on related litigation.

Financial Instruments

Cash Equivalents and Marketable Securities

following tables show the Company’s cash and cash equivalents and marketable securities by significant investment

category as of March 31, 2021 and December 31, 2020:

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 loss.

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

any one issuer.

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

Business Combination

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.

Medical REIT Inc.

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

(“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 Term Sheet, 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 2,500 shares to LVAM, and 1,250 shares to AMRE

Tennessee, LLC, AAMI’s executive management’s holding company (collectively, the “Subscription Shares”).

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 Singapore eDevelopment Limited whose Chief Executive Office 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 $800,000.00 (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 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”).

AAMI is a real estate investment trust (“REIT”) management company that sets the strategic

vision and formulate investment strategy for AMRE.

It manages the REIT’s assets and liabilities and provides recommendations to

AMRE on acquisition and divestments in accordance with the investment strategies.

AMRE is a Maryland corporation, organized for the purposes

of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary

and tertiary markets, and leasing each property to a single operator under a triple-net lease.

AMRE was formed to originate, acquire,

and lease a credit-centric portfolio of licensed medical real estate.

AMRE is planned to qualify as a Real Estate Investment Trust for

federal income tax purposes, which will provide.

AMRE’s investors the opportunity for direct ownership of Class A licensed medical

As of March 31, 2021, AAMI has yet to generate any revenue.

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”).

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

Under the Note, AMRE may prepay or repay all or any portion of the Note at any time, without a premium or penalty.

sooner prepaid, the entire unpaid principal balance of the Note including accrued interest will be due and payable in full on March 3,

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,

1 unchanged sentence

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 September 30, 2020, this Note had outstanding principal and interest of approximately $834,000.

Upon consolidation

this Note is eliminated.

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 September 30, 2020, AMRE had incurred $595,000 of cost of which $307,000

is attributable to the non-controlling interest.

On August 21, 2020,

Document Security Systems, Inc.

(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.

BioHealth”), and related parties Alset International Limited (“Alset Intl”, formally Singapore eDevelopment

Limited), and Global Biomedical Pte Ltd.

(“GBM”) (See Note 5), 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 valued at $50 million.

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.

The Company has concluded to account for

this transaction in accordance with the acquisition method of accounting under FASB ASC Topic 805, “Business Combinations”

(“Topic 805”).

Activity from August 21, 2020 to September 30, 2020 was not significant.

The 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.

The pro forma consolidated results include the impact of certain adjustments.

$ (3,223,000 )

Basic earnings per share

Diluted earnings per share

are currently in the process of completing the purchase price accounting and related allocations associated with the acquisition

of Impact BioMedical.

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 is in the process of completing valuations and useful lives for certain Technology and In Process Research &

Development assets acquired in the transaction and the purchase price allocation will be completed with finalization of those

We expect the preliminary purchase price accounting to be completed during the three months ending December 31, 2020.

For the purposes of these financial statements, the consideration given is classified as Other Intangible Assets, Net.

No amortization was recorded during the three months ended September 30, 2020.

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 March 31, 2021, 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.

The Note calls for interest to be paid annually on March 2 with interest

fixed at 8.0%.

See Note 7 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, “

Business Combinations”

(“Topic

During the three months ended March 31, 2021, AMRE had net losses of $58,000 of which $22,000 is attributable

to the non-controlling interest.

AAMI does not qualify for a separate reporting segment and is included in Corporate (see Note

BioMedical, Inc.

On August 21, 2020, the

Company, completed its acquisition of Impact BioMedical, Inc.

(“Impact”), pursuant to a Share Exchange Agreement by

and among the Company, DSS BioHealth, and related parties Alset Intl (formally Singapore eDevelopment Limited), and Global Biomedical

(“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 to acquire 100% of the outstanding shares of Impact.

The acquisition was done to add assets and a foundation of products

with international market opportunities and demand, and which can be structured into long- term scalable, reoccurring license revenue

within the DSS BioHealth line of business.

Due to several factors, including a discount for illiquidity, the value of the Series

A Preferred Stock was discounted from $46,868,000 to $35,187,000, thus reducing the final consideration given to approximately

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

as general and administrative expenses.

As a result of the Share Exchange, Impact is now a wholly owned subsidiary of DSS BioHealth,

the Company’s wholly owned subsidiary and operating results of the acquisition will be included in the Company’s financial

statements beginning August 21, 2020.

Impact BioMedical has several subsidiaries that are not wholly owned by Impact, and have

an ownership percentage ranging from 63.6% to 100%.

During the three months ended March 31, 2021, Impact has incurred approximately

$420,000 of cost have been incurred, of which $9,000 of cost incurred is attributable to non-controlling interest.

Although Impact

historically, and to date has not generated any revenues, the acquisition of Impact meets the definition of a business with inputs,

processes and outputs, and therefore, the Company has concluded to account for this transaction in accordance with the acquisition

method of accounting under Topic 805.

International Limited (formally Singapore eDevelopment Limited)

of March 31, 2020, the Company owned 83,174,129 ordinary shares of Alset International Limited (“Alset Intl”,

formally Singapore eDevelopment Limited) a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited,

at an exercise price of SGD$0.04 (US$0.029) per share and warrants to purchase an additional 44,005,182 ordinary shares at an

exercise price of SGD$0.04 (US$0.029) per share.

On June 25, 2020, the Company exercised those warrants bringing its total ownership

to 127,179,311 shares or approximately 10% of the outstanding shares of Alset Intl at September 30, 2020.

As of June 30, 2020

the Company carried its investment in Alset Intl at cost, less impairments under ASU No.

2016-01, “Recognition and Measurement

of Financial Assets and Financial Liabilities”.

During the third quarter 2020, the Company determined that the investments

has a readily determinable fair value based on the volume of shares traded on the Singapore Exchange which evidences a ready market

for shares, 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 Company’s marketable equity securities are measured at fair

value with gains and losses recognized in other income (expense).

At the time of change the Company recorded an unrealized

gain of approximately $2.1 million.

Company owns 127,179,311 shares or approximately 7% of the outstanding shares of Alset International Limited (“Alset Intl”),

formerly named Singapore eDevelopment Limited (“SED”), a company incorporated in Singapore and publicly listed on

the Singapore Exchange Limited as of March 31, 2021 and December 31, 2020.

This investment is classified as a marketable security

and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the

investments for a period of at least one year.

The Chairman of the Company, Mr.

Heng Fai Ambrose Chan, is the Executive Director and

Chief Executive Officer of Alset Intl.

Chan is also the majority share of Alset Intl as well as the largest shareholder

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 September 30, 2020 was approximately $5,583,000.

The fair value of the marketable security as of March 31, 2021 and December 31, 2020 was approximately

$5,863,000 and $6,830,000 respectively, and during the three months ended March 31, 2021 the Company recorded unrealized

loss on this investment of approximately $967,000.

Services Global Corp.

(“SHRG”)

As of June 30, 2020,

the Company, had acquired and owned approximately 17% of the issued and outstanding shares of Sharing Services Global Corp.

(“SHRG”),

a publicly traded company, as marketable equity 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 will recognize our share of their

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

Due to a lag in financial

reporting of SHRG, the Company has not recorded any share of earnings or losses during the period ended September 30, 2020.

a go forward basis, earnings or losses from SHRG will be recorded on a two-month lag.

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 September 30, 2020, the Company held 62,457,378

class A common shares equating to a 32.2% ownership interest in SHRG and had recorded unrealized gains on marketable securities

of approximately $6.1 million for the nine months then ended.

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 $9.5

million, which represents primarily intangible assets and goodwill arising from acquisitions.

The Company is still in the process

of valuing the intangible assets at September 30, 2020 and no amortization has been recorded during the period ended September

The following table represents SHRG operating results for the three months ended July 31, 2020:

of and through June 30, 2020, the Company classified its investment in Sharing Services Global Corp.

(“SHRG”), a publicly

traded company, as marketable equity security and measured it at fair value with gains and losses recognized in other income.

2020, through continued acquisition of common stock, as detailed below, the Company obtained greater than 20% ownership of SHRG, and

thus has the ability to exercise significant influence over it.

The Company currently accounts for its investment in SHRG using the equity

method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures recognizing our share of SHRG’s

earnings and losses within our consolidated statement of operations.

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, causing the Company’s ownership in SHRG to exceed 20%.

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

The warrants are considered an equity investment that is recorded at fair value with gains and losses recorded through net

These warrants have been recorded at the fair market value of $1,171,000 as of March 31, 2021 as compared to $1,056,000 at December

31, 2020 on the Company’s consolidated balance sheet and are included in “other investments”

with the increase representing

an unrealized gain of $116,000 during the three months ended March 31, 2021.

These shares and warrants are also subject to a one-year

trading restriction pursuant to the terms of a Lock-Up Agreement entered into between Mr.

Chan and the Company and assigned to the Company.

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 and goodwill as of March 31, 2021 and no amortization has been recorded during the period ended March 31, 2021.

31, 2021, the Company held 64,207,378 class A common shares equating to a 40.2% ownership interest in SHRG.

Due to the difference

in fiscal year ends between the two companies, DSS has elected to recognize its portion of SHRG’s earnings and losses on

a quarter lag basis and utilized SHRG’s three-month ended January 31, 2021 reported results to recognize a loss on the equity

method investment of approximately $579,000.

The aggregate fair value of the Company’s investment in SHRG at March 31, 2021

was approximately $16,052,000.

The following table represents SHRG operating results for the nine-months ended January

Operating loss

$ (1,146,919 )

Loss before income taxes

$ (1,234,868 )

$ (1,093,377 )

July 21 st and 22 nd , 2020, the Company purchased an aggregate of 11,000,000 shares of Class A common Stock

of Sharing Services Global Corp.

(SHRG) in two private purchases from third parties at a purchase price of for $0.08 per share

At that time the Chief Executive Officer of SHRG, Mr.

Income 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

John “JT”

Thatch, served as a director on the Company’s

board of directors and the Chairman of the board of directors of the Company, Mr.

Fai Heng Chan, served on the board of directors

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

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.

The Company had acquired

in a series of open-market transactions, between March 2020 and September 2020 an aggregate of 13,957,378 of additional common

shares, at an average purchase price of $0.06 per share.

The Company, during this same period, had also purchased 18,500,000

shares of SHRG in private purchases at an average purchase price of $0.08 per share.

noted above, DSS, via four (4) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board

of director seats.

JT Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along

Fai Heng Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020),

Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along

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).

Heuszel, the CEO of the Company (joined

the SHRG Board effective September 29, 2020).

Capital International LLC

5 unchanged sentences

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

DSS Securities also has the option to purchase an additional 10% of the outstanding membership interest.

This option expires on

September 10, 2022.

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

January of 2021 and increased its ownership to 24.9%.

Upon achieving greater than 20% ownership in BMIC during the quarter

ended March 31, 2021, the Company is currently accounting for this investment under the equity method of accounting per ASC 323.

The Company’s portion of net income in BMIC during the three months ended March 31, 2021 was not significant.

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

4 unchanged sentences

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”).

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.

1 unchanged sentence

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 nine months ended September 30, 2020.

ATC have initiated or have pending applications to do business in a number of states, including Texas, Tennessee,

Connecticut, Florida, and Illinois.

For the purpose of organization and the state application process, the Company’s CEO, who is

a licensed attorney, has a stated non-compensated 15% ownership interest in the venture.

There was minimal activity for the three months

ended March 31, 2021.

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 has the right to

appoint a new director to the board of BioMed.

With respect to an issuance of shares to a third party by BioMed, the Company will

have the right of first refusal to purchase such shares, as well as customary tag-along rights.

In connection with the Subscription

Agreement, Impact entered into an exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to

directly market, advertise, promote, distribute, and sell certain BioMed products, which focus on manufacturing natural probiotics,

to resellers.

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

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 ®

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.

Oncology, Inc.

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 at 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 with

Alset EHome International, Inc.

(“Seller”) to purchase from the Seller’s its wholly owned subsidiary Impact

Oncology PTE Ltd.

(“IOPL”) for a purchase price $2,480,000.

The acquisition of IOPL has been treated as an asset acquisition

as IOPL does not meet the definition of a business as defined in Topic 805.

IOPL owns 2,480,000 shares of common stock of

Vivacitas along with the option to purchase an additional 250,000 shares of common stock.

As a result of these two transactions,

the Company will have an approximate 15.7% equity position in Vivacitas.

The Sellers largest shareholder is Mr.

Fai Ambrose, the Chairman of the Company’s board of directors and its largest shareholder.

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% (2.1%

as of September 30, 2020).

This revolving line of credit was renewed and has a maturity date of May 31, 2021 and is renewable

As of September 30, 2020 the revolving line had a balance of $0.

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

with Citizens pursuant to which Citizens agreed to lend up to $1,200,000 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.

Current maturities of long-term debt

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

As of September 30, 2020, the Term Note

had a balance of $801,000.

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

March 31, 2021).

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

As of March 31, 2021 and December 31, 2020 the revolving line had a balance of $0.

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

Citizens pursuant to which Citizens agreed to lend up to $1,200,000 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.

Current maturities of long-term debt are based on an estimated 48-month amortization

which will be adjusted upon conversion.

As of March 31, 2021 and December 31, 2020, the Term Note had a balance of $741,000 and $771,000

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 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%.

20, 2020 the Company paid of 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 September

30, 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 September 30, 2020, the new, consolidated Promissory Note had a balance of $1,110,000.

Citizens credit facilities to each of the Company’s subsidiaries, Premier Packaging, contain various covenants including

fixed charge coverage ratio, tangible net worth and current ratio covenants which are tested annually at December 31.

year ended December 31, 2019, 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

International Pte Ltd in conjunction with the acquisition of Guangzhou HotApps Technology Ltd., a Chinese subsidiary of HotApps

International Pte Ltd, by DSS Asia Limited.

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.

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 March 31, 2021 and 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 March 31, 2021 and December 31, 2020, the new, consolidated Promissory Note had a balance of $1,090,000

and $1,100,000 respectively.

Citizens credit facilities to each of the Company’s subsidiaries, Premier Packaging, contain various covenants including fixed

charge coverage ratio, tangible net worth and current ratio covenants which are tested annually at December 31.

For the year ended December

31, 2020, Premier Packaging was in compliance with the annual covenants.

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%.

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 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 be material.

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

Q2 2020, the Company received loan proceeds for Premier Packaging, DSS Digital, and AAMI in the amount of approximately $1,072,000

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

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.

AAMI, pursuant to the terms of the SBA PPP program, submitted its application

for 100% loan forgiveness in October 2020.

Those applications are currently pending.

Based on the uncertainty surrounding the

forgiveness, the amounts are recorded as long-term debt on the accompanying consolidated balance sheets at September 30, 2020.

If not forgiven, these loans calculate interest at 1% and have a two-year repayment period.

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 be material.

The holder is a related party owned by

the Chairman of the Company’s board of directors.

As of March 31, 2021, the new promissory note, inclusive of unpaid interest,

had a balance of $218,000.

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.

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.

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.

Lease Liability

Company has operating leases predominantly for operating facilities.

As of September 30, 2020, the remaining lease terms on our

operating leases range from less than one to two years.

DSS Plastics Group which finalized the sale of its assets on August 14,

2020 is not included in the lease liability calculation (see Note 10).

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.

As of March 31, 2021, the remaining lease terms on our operating

leases range from less than one to two years.

DSS Plastics Group which finalized the sale of its assets on August 14, 2020 is not included

in the lease liability calculation (see Note 11).

Renewal options to extend our leases have not been exercised due to uncertainty.

options are not reasonably certain of exercise by the Company.

There is no transfer of title or option to purchase the leased assets

upon expiration.

There are no residual value guarantees or material restrictive covenants.

There are no significant finance leases as of September 30, 2020.

minimum lease payments as of September 30, 2020 are as follows:

There are no significant finance leases as

of March 31, 2021.

minimum lease payments as of March 31, 2021 are as follows:

Maturity of Lease Liability

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Imputed Interest

Total lease liability

Present value of remaining lease payments

Weighted-average remaining lease term (years)

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Apple, Federal Circuit

DSSTM has filed its Plaintiff-Appellate brief and Apple has filed its responsive brief.

DSSTM’s reply

brief is due by November 16, 2020.

LED Litigation

April 13, 2017, the Company filed a patent infringement lawsuit against Seoul Semiconductor Co., Ltd.

and Seoul Semiconductor,

(collectively, “Seoul Semiconductor”) in the United States District Court for the Eastern District of Texas,

alleging infringement of certain of the Company’s Light-Emitting Diode (“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 7, 2017, the Company refiled its patent infringement complaint against Seoul Semiconductor in the United States District

Court for the Central District of California, Southern Division.

On December 3, 2017, Seoul Semiconductor filed an IPR challenging

the validity of certain claims of U.S.

This IPR was instituted by the PTAB on June 7, 2018.

2019, the PTAB issued a written decision determining claims 1-9 of the ‘771 patent unpatentable.

The Company did not appeal

that determination.

On December 21, 2017, Seoul Semiconductor filed an IPR challenging the validity of certain claims of U.S.

This IPR was instituted by the PTAB on June 21, 2018.

On June 10, 2019, the PTAB issued a written decision

determining claims 1-3 of the ‘486 patent unpatentable.

On August 12, 2019, the Company filed a Notice of Appeal with the

Federal Circuit Court of Appeals challenging the PTAB’s decisions.

The Company subsequently filed a motion to vacate and

remand the PTAB’s decision in light of intervening precedent under the Appointments Clause.

That motion was granted on January

On January 25, 2018, Seoul Semiconductor filed an IPR challenging the validity of certain claims of U.S.

This IPR was instituted by the PTAB on July 27, 2018.

On July 22, 2019, the PTAB issued a written decision determining

claims 1, 6-8, 15, and 17 of the ‘087 patent unpatentable.

On September 23, 2019, the Company filed a Notice of Appeal with

the Federal Circuit Court of Appeals challenging the PTAB’s decisions.

The Company subsequently filed a motion to vacate

and remand the PTAB’s decision in light of intervening precedent under the Appointments Clause.

That motion was granted

on February 3, 2020.

These challenged patents are the patents that are the subject matter of the infringement lawsuit, which is

pending but stayed pending the outcome of the IPR proceedings.

April 13, 2017, the Company filed a patent infringement lawsuit against Cree, Inc.

(“Cree”) 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 Cree in the United States District Court for the

Central District of California, and thereafter filed a first amended complaint for patent infringement against Cree in that same

court on July 14, 2017.

The case is currently pending as of the date of this Report.

On June 6, 2018, Cree filed an IPR petition

challenging the validity of claims under U.S.

This IPR was instituted and joined with the Seoul Semiconductor

On June 7, 2018, Cree filed IPR petitions challenging the validity of certain claims U.S.

7,524,087 and 6,949,771.

Both IPRs were denied by the PTAB on November 14, 2018 as time barred.

The challenged patent is the patent that is the subject

matter of the infringement lawsuit, which is pending but stayed pending the outcome of the IPR.

August 15, 2017, the Company filed a patent infringement lawsuit against Lite-On, Inc., and Lite-On Technology Corporation (collectively,

“Lite-On”) in the United States District Court for the Central District of California, 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.

The case is currently pending but is stayed pending the

outcome of IPR proceedings filed by other parties.

December 7, 2017, DSS filed a patent infringement lawsuit against Nichia Corporation and Nichia America Corporation in the United

States District Court for the Central District of California, alleging infringement of certain of DSS’s LED patents.

Company is seeking a judgment for infringement of the patents along with other relief including, but not limited to, money damages,

costs and disbursements.

The case is currently pending as of the date of this Report.

On May 10, 2018, Nichia filed an IPR petition

challenging the validity of claims under U.S.

On May 11, 2018, Nichia filed an IPR petition challenging

the validity of claims under U.S.

On May 25, 2018, Nichia filed an IPR petition challenging the validity

of claims under U.S.

On May 29, 2018, Nichia filed an IPR petition challenging the validity of claims under

On May 30, 2018, Nichia filed an IPR petition challenging the validity of claims under U.S.

The 6,949,771 IPR was denied institution, but the remaining IPRs were instituted by the PTAB.

On December 10, 2018,

Nichia refiled IPRs relating to 6,949,771, which was denied by the PTAB on April 15, 2019.

These challenged patents are the patents

that are the subject matter of the infringement lawsuit, which is pending but stayed pending the outcome of the IPR proceedings.

On September 17, 2019, the PTAB issued a written decision determining claims 1-14 of the ‘787 patent unpatentable.

did not appeal that determination.

On October 30, 2019, the PTAB issued a written decision determining claims 1-17 of the ‘297

patent unpatentable.

The Company did not appeal that determination.

On November 19, 2019, the PTAB issued a written decision determining

claims 1-5 of the ‘486 patent unpatentable.

The Company has appealed that determination to the U.S.

Court of Appeals for

the Federal Circuit.

The Company’s opening brief on this appeal is currently due September 10, 2020.

September 18, 2019, DSS filed a patent infringement lawsuit against Seoul Semiconductor Co., Ltd.

and Seoul Semiconductor Inc.

in the United States District Court for the Central District of California alleging infringement of U.S.

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.

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.

September 19, 2019, DSS filed a patent infringement lawsuit against Cree, Inc.

in the United States District Court for the Central

District of California alleging infringement of U.S.

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 February 11,

2020, Cree 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.

The District Court has entered a stay of the District Court proceedings

pending the outcome of the IPR petition.

September 20, 2019, DSS filed a patent infringement lawsuit against Nichia Corp.

and Nichia America Corp.

in the United States

District Court for the Central District of California alleging infringement of U.S.

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.

The Court has conducted an initial scheduling conference and has set a procedural schedule for the case.

On May 18, 2020, Nichia

filed an IPR petition challenging the validity of claims 1-4, 8, and 11 of the patents.

The District Court has entered a stay

of the District Court proceedings pending the outcome of the IPR petition.

Intel, Apple Litigation

November 20, 2019, DSS Technology Management was sued in the United States District Court, Northern District of California, by

Intel Corporation (“Intel”) and Apple Inc.

(“Apple”).

The other defendants in the litigation are Fortress

Investment Group LLC, Fortress Credit Co.

LLC, Uniloc 2017 LLC, Uniloc USA, INC., Uniloc Luxembourg S.A.R.L., VLSI Technology

LLC, INVT SPE LLC, Inventergy Global, INC., IXI IP, LLC, and Seven Networks, LLC.

The complaint includes allegations regarding

a February 13, 2014 Investment Agreement between DSS Technology Management and Fortress Credit Co.

LLC as well as two subsequent

The complaint also contains allegations regarding DSS Technology Management’s lawsuit against Intel that was

filed in February 2015 in the United States District Court, Eastern District of Texas (referred to below).

In the complaint, Intel

and Apple allege violations of Section 1 of the Sherman Act and unfair competition under Cal.

against DSS Technology Management.

Additional claims are alleged against other defendants.

Intel and Apple seek relief from the

court including that defendants’

conduct be declared a violation of Section 1 of the Sherman Act, Section 7 of the Clayton

Act, and Cal.

17200, et seq.;

that Intel and Apple recover damages against defendants in an amount

to be determined and multiplied to the extent provided by law, including under Section 4 of the Clayton Act;

that all contracts

or agreements defendants entered into in violation of the Sherman Act, Clayton Act, or Cal.

be declared void and the patents covered by those transfer agreements be transferred back to the transferors;

patents transferred to defendants in violation of the Sherman Act, Clayton Act, or Cal.

be declared unenforceable;

and that Intel and Apple recover their costs and expenses associated with this case, together

with interest.

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.

On April 27, 2021, the Court of Appeals heard oral argument, and on April 30, 2021, the Court affirmed the

District Court’s judgment.

The Company is currently evaluating its options for further proceedings on appeal.

March 10, 2020 DSS filed an appeal of this Final Judgment to the United States Court of Appeals for the Federal Circuit under

DSS Technology Management v.

Apple, Federal Circuit Docket no.

On April 27, 2021, the Court of Appeals heard oral argument,

and on April 30, 2021, the Court affirmed the District Court’s judgment.

The Company is currently evaluating its options

for further proceedings on appeal.

Ronaldi Litigation

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The parties are now engaged in discovery.

deadline for completion of fact discovery is March 12, 2021, and a Note of Issue signaling readiness for trial is due May 28,

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.

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

2020002300, 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 Case No.

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.

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.

filed a motion seeking to compel DSS to advance his legal fees to defend the action, which motion was fully briefed as of June 30, 2020

and remains pending and undecided.

On March 16, 2021 the Western District of New York granted Mr.

Ronaldi’s motion to have his

defense costs advanced to him during the pendency of the action as they are incurred.

On March 26, 2021 Mr.

Ronaldi applied to the court

for reimbursement of $160,896.25 in legal fees.

The Company has objected to the size of that bill as it was based on out-of-town

billing rates and the result of an excessive number of hours spent on litigation.

The parties now engaged in discovery, awaiting a

decision on the Company’s objection to Mr.

Ronaldi’s fee application and will engage in court-ordered mediation no later

than June 30, 2021.

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.

On March 30, 2021, Defendants

DSS, Decentralized, HWH, RBC Life International Inc., and Heuszel filed their Motion to Dismiss the RICO, unjust enrichment, and exemplary

damages claims against them, and the TUFTA claim against DSS and RBC Life International, Inc.

On May 4, 2021, Maiden filed its Response

and Supporting Brief in Opposition to the Motion to Dismiss.

A Reply Brief must be filed by May 18, 2021.

The pretrial deadlines and

tentative trial date will be set by the Court after a ruling on the Motion to Dismiss and 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

4 unchanged sentences

and estimable.

Litigation Payments - The Company retains the services of professional service providers, including law firms that specialize

in intellectual property licensing, enforcement and patent law.

These service providers are often retained on an hourly, monthly,

project, contingent or a blended fee basis.

In contingency fee arrangements, a portion of the legal fee is based on predetermined

milestones or the Company’s actual collection of funds.

The Company accrues contingent fees when it is probable that the

milestones will be achieved, and the fees can be reasonably estimated.

As of September 30, 2020, and December 31, 2019, the Company

had not accrued any contingent legal fees pursuant to these arrangements.

Payments - The Company is party to certain agreements with funding partners who have rights to portions of intellectual

property monetization proceeds that the Company receives.

As of September 30, 2020, there are no contingent payments due.

Stockholders’

of Equity –

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 20, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital

(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 “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, 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 Offering.

The net offering proceeds to the Company from the Offering were approximately $4 million, after

deducting estimated underwriting discounts and commissions and other estimated offering expenses, and assuming no exercise of

the Underwriter’s over-allotment option.

On February 20, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement

#1”) with Aegis Capital Corp.

(the “Underwriter”), which provided for the issuance and sale by the Company and

the purchase by the Underwriter, in a firm commitment underwritten public offering (the “Feb.

2020 Offering”), of

740,741 shares of the Company’s common stock, $0.02 par value per share.

Subject to the terms and conditions contained in

the Underwriting Agreement #1, the shares were sold to the Underwriter at a public offering price of $5.40 ($0.18 per shares pre-reverse

stock split) per share, less certain underwriting discounts and commissions.

The Company also granted the Underwriters a 45-day

option to purchase up to 111,111 additional shares of the Company’s common stock on the same terms and conditions for the

purpose of covering any over-allotments in connection with the Feb.

2020 Offering which were exercised.

The net offering proceeds

to the Company from the Feb.

2020 Offering were approximately $4 million, after deducting estimated underwriting discounts and

commissions and other estimated offering expenses.

The offering was closed on February 25, 2020.

Heng Fai Ambrose Chan, the Chairman

of the Company’s Board of Directors, purchased $2 million of shares in the Offering.

May 15, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital

(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 “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, the shares were

sold to the Underwriter at a public offering price of $7.80 per share, less certain underwriting discounts and commissions.

Company also granted the Underwriters a 45-day option to purchase up to 115,384 additional shares of the Company’s common

stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Offering.

offering proceeds to the Company from the Offering were approximately $6.2 million, after deducting estimated underwriting discounts

and commissions and other estimated offering expenses, and assuming no exercise of the Underwriter’s over-allotment option.

The offering was closed on June 26, 2020.

July 7, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital

(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 “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, the shares were

sold to the Underwriter at a public offering price of $6.25 per share, less certain underwriting discounts and commissions.

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 Offering.

offering proceeds to the Company from the Offering were approximately $6.7 million.

The offering was closed on July 10, 2020.

July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital

(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 “Offering”), 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, the shares were

sold to the Underwriter at a public offering price of $7.50 per share, less certain underwriting discounts and commissions.

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 Offering.

offering proceeds to the Company from the Offering were approximately $3.3 million, after deducting estimated underwriting discounts

and commissions and other estimated offering expenses.

The initial offering was closed on July 31, 2020, and the overallotment

was exercised on August 7, 2020.

connection with the Share Exchange for Impact BioMedical described in Note 5 above, 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 200,000,000 shares of Preferred Stock, with a par value of $0.02, of which 46,868 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 4 and 5,

this transaction is a related party transaction.

Holders of the Series

A Preferred Stock have no voting rights, except as required by applicable law or regulation, and no dividends accrue or are

payable on the Series A Preferred Stock.

The holders of Series A Preferred Stock are entitled to a liquidation preference at

a liquidation value of $1,000 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, 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.

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.

Compensation - The Company records stock-based payment expense related to options and warrants based on the grant date

fair value in accordance with FASB ASC 718.

Stock-based compensation includes expense charges for all stock-based awards to employees,

directors and consultants.

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

Subject to the terms and conditions contained in the Underwriting Agreement #2, the shares were sold to the Underwriter

at a public offering price of $7.80 per share, less certain underwriting discounts and commissions.

The Company also granted the

Underwriters a 45-day option to purchase up to 115,384 additional shares of the Company’s common stock on the same terms

and conditions for the purpose of covering any over-allotments in connection with the May 2020 Offering which was exercised.

net offering proceeds to the Company from the May 2020 Offering were approximately $6.2 million, after deducting estimated underwriting

discounts and commissions and other estimated offering expenses.

The May 2020 Offering was closed on June 26, 2020.

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

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

Subject to the terms and conditions contained in the Underwriting Agreement #4, the shares were sold to the Underwriter

at a public offering price of $7.50 per share, less certain underwriting discounts and commissions.

The Company also granted the

Underwriters a 45-day option to purchase up to 38,533 additional shares of the Company’s common stock on the same terms

and conditions for the purpose of covering any over-allotments in connection with the July 2020 Offering #2.

The net offering

proceeds to the Company from the July 2020 Offering #2 were approximately $3.3 million, after deducting estimated underwriting

discounts and commissions and other estimated offering expenses.

The initial July 2020 Offering #2 was closed on July 31, 2020,

and the overallotment was exercised on August 7, 2020.

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 5, on August 18, 2020, the Company filed a Certificate

of Amendment of its Certificate of Incorporation (the “Certificate of Amendment”) to increase the number of authorized shares

of the Company, including 47,000 shares of Preferred Stock, with a par value of $0.02, of which 47,000 shares were designated Series

A Preferred Stock.

The Certificate of Amendment, the form of which was previously disclosed in a Schedule 14A Definitive Proxy Statement

filed with the Securities and Exchange Commission on July 14, 2020.

As described in Note 5, this transaction is a related party

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.

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

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

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

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.

The net 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.

Compensation - The Company records stock-based payment expense related to options and warrants based on the grant

date fair value in accordance with FASB ASC 718.

Stock-based compensation includes expense charges for all stock-based awards

to employees, directors and consultants.

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

During the nine months

ended September 30, 2020, the Company had stock compensation expense of approximately $216,000 or $0.08 basic and diluted gain

per share ($203,000, or $0.25 basic and diluted loss per share for the corresponding nine months ended September 30, 2019).

During the three months ended March 31, 2021, the Company had stock compensation expense of approximately $15,000 or

less than $.01 basic and diluted loss per share for the three months ended March 31, 2021($90,000 or less than $.06 basic and

diluted loss per share - March 31, 2020).

April 3, 2020, by unanimous written consent, the Board of Directors authorized the Company to issue individual stock grants of

3 unchanged sentences

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 into stock-based compensation 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.

June 4, 2020, the Company entered into an agreement with an investor relations firm to provide services over a 14-month period in exchange

for 21,000 shares of common stock.

The shares were issued on the date of the agreement and were valued by the Company at $210,000.

value assigned to the shares is included in other assets on the accompanying consolidated balance sheets and will be expensed into marketing

expense as it is earned.

September 23, 2020, by written consent of the Chief Executive Officer and the Chairman of the board, the Company issued

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

Discontinued Operations

1 unchanged sentence

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 perspective

buyer for substantially all the assets of this business line.

As a result of insufficient cash flows, the disruption of our business

from the Covid-19 pandemic, and with the intent to exit this business line, the Company terminated its production and office personnel

and maintained only a few employees to assist in and facilitate the sale of its assets.

The financial results for these subsidiaries

have been presented as discontinued operations in the accompanying consolidated financial statements.

The consideration

paid to the Company for the sale of the assets included a one-time cash payment of $683,000 and a potential additional 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 nine months ended September 30, 2020.

The net effect of

all assets disposed of with this transaction is a net loss $111,000 and is included in Loss from Discontinued Operations.

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

September 30,

Current assets:

Total current assets

Property, plant and equipment, net

Right-of-use assets

Current liabilities:

Current portion of lease liability

Total current liabilities

Long term lease liability

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

Statements of Operations - Discontinued Operations

For the Three Months Ended

For the Nine Months Ended

September 30,

Printed products

Total revenue

Costs and expenses:

Cost of revenue, exclusive of depreciation and amortization

Selling, general and administrative (including stock based compensation)

Depreciation and amortization

Impairment of goodwill

Total costs and expenses

Operating loss

Other income (expense):

Interest expense

Loss on sale of assets held for sale

Income (loss) before income taxes

Income tax expense (benefit)

Income (loss) from discontinued operations

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 assets.

financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial

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.

December 31, 2020, the Company has recognized $390,000 of this earn out in Loss from Discontinued Operations.

The net effect of all assets

disposed of is a net loss of $111,000 These amounts are included in Loss from Discontinued Operations.

Included in its Right-of-use assets

is the lease of the Company’s facility in Brisbane, Ca.

In April 2021, the Company terminated this lease with the landlord effective

March 31, 2021 and therefore, wrote off the asset and corresponding liability associated with the lease at March 31, 2021.

effective tax rate for the three-month periods ended March 31, 2021 was 18.8%.

There was no tax provision for March

31, 2020 due to the expected tax benefit from net operating losses (NOLs) being fully offset by an increase in the valuation allowance.

of December 31, 2020, the Company has domestic net operating loss (“NOL”) carryforwards of approximately

$56.7 million.

The utilization of these NOLs is limited under Sec.

382 of the Internal Revenue Code.

A valuation allowance has

been recorded to reduce the deferred tax asset to the expected realizable amount, leaving $2.9 million available for use.

of March 31, 2021, no benefit for losses incurred by our foreign subsidiaries have been recorded as those losses are

not anticipated to provide any tax benefits in future periods.

were no unrecognized tax benefits related to uncertain tax positions at March 31, 2021 and December 31,

a result of our operations, we file income tax returns in various jurisdictions including U.S.

federal, U.S.

state and foreign

jurisdictions.

We are routinely subject to examination by taxing authorities in these various jurisdictions.

31, 2021, there are no ongoing income tax audits.

Supplemental Cash Flow Information

following table summarizes supplemental cash flows for the six months ended September 30, 2020 and 2019:

following table summarizes supplemental cash flows for the three months ended March 31, 2021 and 2020:

Cash paid for interest

Non-cash investing and financing activities:

Impact of adoption of lease accounting standards

Gain from change in fair value of interest rate swap derivatives

Common stock issued upon conversion of convertible note

Equity issued to purchase intangible assets

Common Shares issued for marketing services

Common Shares issued for Impact BioMedical

Series A Preferred Shares issued for Impact BioMedical

Long-lived assets acquired through settlement of notes receivable

Termination of right of use lease asset

Termination of right of use lease liability

Satisfaction of accrued expenses with issuance of common stock

Segment Information

Company’s eight businesses lines are organized,

managed and internally reported as four operating segments.

Packaging and Printing is engaged in the printing and production of

paper, and cardboard 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 second 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

The third 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 programs.

The fourth segment, Direct

Marketing, direct marketing or network marketing is the business of selling products or services directly to the public, e.g .,

by online or telephone selling, rather than through retailers.

We believe this business has significant growth potential in the

blossoming “gig economy”

with comparisons to the growth that is being realized in parallel businesses such as ride

information concerning the Company’s operations by reportable segment for the three and Nine months ended September 30,

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:

Three Months Ended September

Direct Marketing

Depreciation and amortization

Interest expense

Stock based compensation

Net Income (loss) from continuing operations

Capital expenditures

Identifiable assets

Three Months Ended September

Direct Marketing

Depreciation and amortization

Interest expense

Stock based compensation

Net loss from continuing operations

Capital expenditures

Identifiable assets

Nine Months Ended September 30, 2020

Company’s eight businesses lines are organized, managed and internally reported as four operating segments.

these operating segments, Premier Packaging, is the Company’s packaging and security printing group.

Premier Packaging operates

in the paper board folding carton, smart packaging, and document security printing markets.

It markets, manufactures, and sells

mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct mail solutions.

These products

are designed to provide functionality and marketability while also providing counterfeit protection.

A second, BioHealth Group,

invests in, or acquires companies in the biohealth and biomedical fields, including businesses focused on the advancement of drug

discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related diseases.

This division is

also developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and

The BioHealth Group is also targeting unmet, urgent medical needs.

A third operating segment, 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 (subsequent to March 31, 2021, this segment will be discontinued as the Company’s subsidiary DSS Digital, which constitutes the majority of the activity in this segment

was disposed of See Note 15).

fourth segment, Direct Marketing/Online Sales Group, provides services to assist companies in the emerging growth gig business

model of peer-to-peer decentralized sharing marketplaces.

It specializes in marketing and distributing its products and services

through its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing.

marketing products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific

and Eastern Europe.

segment structure presented below represents a change from the prior year for the inclusion of our BioHealth Group and the removal

of our Plastics segment and IP Technology Management segment as the Plastics segment was discontinued in 2020 and activities surrounding

our IP Technology Management segment have significantly decreased.

The amounts for these segments have been included in the Corporate

reporting segment for the three months ended March 31, 2021 and 2020 below.

Also, the investment in SHRG, recorded in

the Corporate segment at December 31, 2020 is accounted for in the Direct Marketing segment for the three months ended March 31,

Each of our segments employs consistent accounting policies.

information concerning the Company’s operations by reportable segment for the three months ended March 31, 2021 and 2020

is as follows.

The Company relies on intersegment cooperation and management does not represent that these segments, if operated

independently, would report the results contained herein:

Three Months Ended March 31, 2021

Packaging and Printing

Technology Management

Direct Marketing

Biohealth Group

Depreciation and amortization

4 unchanged sentences

Identifiable assets

Nine Months Ended September

Direct Marketing

Depreciation and amortization

Months Ended March 31,2020

and amortization

Interest expense

Stock based compensation

Net loss from continuing operations

Net income (loss)

from continuing operations

Capital expenditures

Identifiable assets

following tables disaggregate our business segment revenues by major source:

Printed Products Revenue Information:

Three months ended September 30, 2020

Packaging Printing and Fabrication

Commercial and Security Printing

Total Printed Products

Three months ended September 30, 2019

Packaging Printing and Fabrication

Commercial and Security Printing

Total Printed Products

Nine months ended September 30, 2020

Products Revenue Information:

months ended March 31, 2021

Packaging Printing and Fabrication

Commercial and Security Printing

Total Printed Products

Nine months ended September 30, 2019

Commercial and

Security Printing

Printed Products

months ended March 30, 2020

Packaging Printing and Fabrication

Commercial and Security Printing

Total Printed Products

Sales, Services and Licensing Revenue Information:

Three months ended September 30, 2020

Information Technology Sales and Services

Digital Authentication Products and Services

Royalties from Licensees

Total Printed Products

Three months ended September 30, 2019

Information Technology Sales and Services

Digital Authentication Products and Services

Royalties from Licensees

Total Printed Products

Nine months ended September 30, 2020

Information Technology Sales and Services

Digital Authentication Products and Services

Royalties from Licensees

Total Printed Products

Nine months ended September 30, 2019

Information Technology Sales and Services

Digital Authentication Products and Services

Royalties from Licensees

Total Printed Products

Three months ended September 30, 2020

Direct Marketing Internet Sales

Total Direct Marketing

Three months ended September 30, 2019

Direct Marketing Internet Sales

Total Direct Marketing

Nine months ended September 30, 2020

Direct Marketing Internet Sales

Total Direct Marketing

months ended September 30, 2019

Commercial and

Security Printing

Printed Products

Technology Sales, Services and

Licensing Revenue Information:

months ended March 31, 2021

Information Technology Sales

Digital Authentication Products and

Royalties from

Technology Sales, Services and Licensing

months ended March 30, 2020

Information Technology Sales

Digital Authentication Products and

Royalties from

Total Technology

Sales, Services and Licensing

Direct Marketing

months ended March 31, 2021

Marketing Internet Sales

Direct Marketing

months ended March 30, 2020

Marketing Internet Sales

Direct Marketing

SUBSEQUENT EVENTS

October 7, 2020, DSS Securities took part in an IPO of Presidio Property Trust, Inc., a Maryland corporation that invests primarily

in commercial properties, such as office, industrial and retail properties, as well as in residential model home properties, in

regionally dominant markets across the United States.

We purchased 200,000 shares at $5.00 per share for a total of $1,000,000.

October 16, 2020, Global BioMedical Pte Ltd.

converted 4,293 shares of its Series A Preferred Stock of DSS having a par

value of $0.02 per share in exchange for 662,500 restricted shares of the Common Stock of the Company having a par value

of $.02 per share based upon a liquidation value of $1,000 and a conversion price of $6.48 per share pursuant to Section 8.2(a)

of the Certificate of Designation of Series A Convertible Preferred Stock.

October 20, 2020, the Company filed its preliminary Form 14A proxy materials for the 2020 Annual Meeting of Stockholders.

purpose of the meeting is to (1.) To elect eight director nominees to the Company’s Board of Directors to hold office until

the next Annual Meeting of Stockholders;

(2.) To ratify Freed Maxick CPAs, P.C.

as the Company’s independent registered

public accounting firm for the fiscal year ending December 31, 2020;

(3.) To provide an advisory vote on executive compensation;

(4.) To approve, pursuant to Rule 713 of the NYSE American, the potential issuance of shares of the Corporation’s common

stock, par value $0.02 per share representing equal to or greater than 20% but not more than 50.99% of presently outstanding

stock, issuable upon conversion of our Series A Convertible Preferred Stock, issued by the Company to Global BioMedical Pte.

on August 21, 2020 in accordance with the Share Exchange Agreement dated April 27, 2020, by increasing the beneficial ownership

limitation of the Series A Convertible Preferred Stock;

and (5.) To approve the reincorporation of the Company from New York to

Texas, pursuant to a merger of the Company with and into a newly-formed Texas corporation that will initially be a wholly-owned

subsidiary of the Company, resulting in a change in name of the Company from “Document Security Systems, Inc.”

“Alset, Inc.”

On February 25, 2021, the Company

entered into a binding letter of intent with Sharing Service Global Corporation (“SHRG), where the Company is to loan $30 million

to SHRG in the form of a Convertible Promissory Note (the “SHRG Note”).

This note is due on demand no later than 3 years

from the date of issuance and accrues interest annual at 8% and contains a 10% origination fee.

Both the first year’s

interest and the origination fee are payable at closing in the form of SHRG shares at a conversion rate of $0.20 per share.

part of the outstanding SHRG Note balance can be converted at the sole discretion of DSS at a conversion rate of $0.20 per share.

Note also contains detachable warrants, exercisable at DSS’s option, of 150,000,000 shares of SHRG’s Class A common stock

with an exercise price of $0.22.

The SHRG Note was executed and funded in April 2021.

April 7, 2021, and affective March 31, 2021, the Company finalized an agreement to terminate its lease of its Plastics

facility on Park Lane in Brisbane, California.

Under the terms of the termination, the Company remitted $5,000 to the landlord

and surrendered possession of the premises.

In conjunction with this termination, the Company wrote of the remaining operating

lease asset and liability associated with this facility.

See Note 11 for further details on the discontinuation of this operation.

April 5, 2021, Premier Packaging entered into an agreement to lease an approximate 101,250 square foot facility located at 275

Wiregrass Parkway, Henrietta, New York with at target commencement date of December 1, 2021.

This lease expires twelve years and

3 months later.

Base rents escalate from $61,000 in year one to $76,000 in year twelve.

The lease contains two, five year renewal

options as well as an option to purchase after year four.

On April 14, 2021,

Premier Packaging entered into an agreement to sell its manufacturing facility at 6 Framark Dr, Victor, NY, for the purchase price

of $2.1 million with an anticipated closing date of January 31, 2022.

April 26, 2021, the Company’s wholly owned subsidiary Impact BioMedical, Inc., entered into term sheet with Puradigm LLC,

a Nevada limited liability corporation, to advance $5 million in the form of a convertible promissory note (“Puradigm Note”).

The Puradigm Note has a two year term with interest at 6.65% payable quarterly.

All, or part of the Puradigm Note principal balance

can be converted at the sole discretion of Impact BioMedical for up to 18% membership of Puradigm LLC.

On May 7, 2021, Document Security

Systems, Inc.

(the “Company”) completed the sale of 100% of the capital stock of DSS Digital Inc., the Company’s wholly-owned

subsidiary (“DSS Digital”), to Proof Authentication Corporation (the “Buyer”) pursuant to a stock purchase agreement

(the “Purchase Agreement”).

Pursuant to the terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase

price of $5,000,000, consisting of $3 million in cash;

$1.5 million in potential earn-out if certain performance targets are met during

an earn-out period commencing on the one-year anniversary of the closing and ending the day before the six-year of the closing;

million in trade credit or license fee rebates.

Included in the Consolidated Balance Sheet as of March 31, 2021 is approximately $790,000

of assets and $48,000 of liabilities for DSS Digital.

Also, included in the Consolidated Statement of Operations for the three months ended March 31, 2021 for DSS Digital is net income of approximately $162,000.

On May 12, 2021, Premier

Packaging entered into an agreement with Heidelberg USA, Inc.

to purchase a new Heidelberg seven color offset press to support

its expanding printing and packaging business.

The net purchase price of the press approximates $3.2 million and has an anticipated

delivery date of December 2021.

2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING

statements contained herein constitute “forward-looking statements”

Certain statements contained

herein this report constitute “forward-looking statements”

within the meaning of the Private Securities Litigation

Reform Act of 1995 (the “1995 Reform Act”).

Document Security Systems, Inc.

desires to avail itself of certain “safe

harbor”

provisions of the 1995 Reform Act and is therefore including this special note to enable us to do so.

the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate”,

“project”, “anticipate”, “plan”, “expect”, “intend”, “believe”,

“hope”, “strategy”

and similar expressions), which are based on our current expectations and speak only

as of the date made.

These forward-looking statements are subject to various risks, uncertainties and factors, that could cause

actual results to differ materially from the results anticipated in the forward-looking statements.

Except for the historical information contained herein, this report contains

forward-looking statements (identified by words such as “estimate”, “project”, “anticipate”,

“plan”, “expect”, “intend”, “believe”, “hope”, “strategy”

and similar expressions), which are based on our current expectations and speak only as of the date made.

These forward-looking

statements are subject to various risks, uncertainties and factors, that could cause actual results to differ materially from

the results anticipated in the forward-looking statements.

Security Systems, Inc.

(the “Company”) currently operates in eight (8) business lines segments through eight (8) DSS

subsidiaries located around the globe.

(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

(DSS Packaging and Printing Group), (2) DSS Digital Inc., and its subsidiaries (DSS Digital Group), and (3) DSS Technology Management,

(DSS Technology Management).

Premier Packaging Corporation operates in the paper board folding carton, smart packaging and

document security printing markets.

It markets, manufactures and sells paper products designed to protect valuable information

from unauthorized scanning, copying, and digital imaging.

DSS Digital Inc., researches, develops, markets and sells the Company’s

digital products worldwide.

The 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.

DSS Technology

Management 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 2020, under its Decentralize

Sharing Systems, Inc.

subsidiary, created a fourth business segment, Direct Marketing.

Direct marketing or network marketing is

designed to sell products or services directly to the public through independent distributors, rather than selling through the

traditional retail market.

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

DSS Blockchain Security, Inc., a Nevada corporation, 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.

(5) Decentralize Sharing

Systems, Inc., a Nevada corporation, seeks to provide services to assist companies in the new business model of the peer-to-peer

decentralized sharing marketplaces.

(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 biohealth 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.

Secure Living, Inc., a Nevada Corporation, intends to develop 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.

(“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.

and DSS BioHealth Security, Inc.

the activity in the these newly

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

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”).

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.

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.

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

and permitting process.

four reporting segments are as follows:

Packaging and Printing Group - Operating under the name Premier Packaging Corporation (a New York corporation), the DSS

Packaging and Printing Group produces custom packaging serving clients in the pharmaceutical, nutraceutical, beverage, specialty

foods, photo packaging and direct marketing industries, among others.

The group also provides active and intelligent packaging

and document security printing services for end-user customers along with technical support for our technology licensees.

division produces a wide array of printed materials, such as folding cartons and paperboard packaging, security paper, vital records,

prescription paper, birth certificates, secure coupons and parts tracking forms.

The division also provides resources and production

equipment for our ongoing research and development of security printing, authentication and related technologies.

Digital Group - This division 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 AuthentiGuard®

product allows

our customers to implement a security mark utilizing conventional printing methods that is copy and counterfeit-resistant and

that can be read and recorded utilizing smartphones and other digital image capture devices, which can be utilized by that customer’s

suppliers, field personnel and end users throughout its global product supply and distribution chains.

Technology Management - Since its acquisition in 2013, DSS Technology Management’s 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 programs.

It is our intent to de-emphasize and ultimately wind down this business line.

While Management will continue to assert and defend

the existing patents and purse potential infringements as they are identified, we do not intend to seek out new patent portfolios.

Marketing - Direct marketing or network marketing is designed to sell products or services directly to the public through

independent distributors, rather than selling through the traditional retail market.

We believe this business has significant

growth potential in the now popular “gig economy”.

Consistent with the Company’s strategic business plan and

vision, we plan to enter the direct marketing or network marketing industry and take advantage of the opportunities that exist.

We have entered into partnerships with existing direct marketing companies to access U.S., Canadian, Asian and Pacific Rim markets.

In addition, we have acquired various domestic and international operating licenses from those companies.

Through the acquisitions

we have secured product licenses, formulas, existing sales networks, patents, web sites, and other resources to initiate sales

and revenue generation for this line and launched our HWHGIG and HWH Marketplace direct selling platforms.

of Operations for the Three and Nine Months Ended September 30, 2020 as compared to the Three and Nine Months Ended September

(“Premier”) The Company’s packaging and security printing group is coordinated by the wholly

owned subsidiary, Premier Packaging Corporation, a New York corporation.

Premier operates in the paper board folding carton, smart

packaging, and document security printing markets.

It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom

folding cartons, and complex 3-dimensional direct mail solutions.

These products are designed to provide functionality and marketability

while also providing counterfeit protection.

Premier is currently located in Victor, NY and serves the US market.

(“BioHealth”) The BioHealth Group is our business line created to invest in, or acquire companies in

the biohealth and biomedical fields, including businesses focused on the advancement of drug discovery and prevention, inhibition,

and treatment of neurological, oncological, and immune related diseases.

This division is also developing open-air defense initiatives,

which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza.

The BioHealth Group is also targeting

unmet, urgent medical needs.

Assets of this group are organized under the holding company, DSS BioHealth Security, Inc.

Its subsidiaries

are currently headquartered in Rochester, NY.

The group also has a research facility in Winter Haven, Florida.

(“Digital”) Digital 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.

Digital Group is headquartered in Rochester, NY, but it also has

offices and staff in Hong Kong.

On May 7, 2021, Document Security Systems, Inc.

(the “Company”) completed the sale of

100% of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication

Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Purchase Agreement”).

Pursuant to the

terms of the Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $5,000,000, consisting of $3 million in cash;

$1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary

of the closing and ending the day before the six-year of the closing;

and $0.5 million in trade credit or license fee rebates.

in the Consolidate Balance Sheet as of March 31, 2021 is approximately $790,000 of assets and $48,000 of liabilities for DSS Digital.

Also, included in the Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2021 for DSS Digital

is net income of approximately $162,000.

Marketing/Online Sales Group:

(“Direct”

or “DM”) Led by the holding corporation, Decentralize Sharing

Systems, Inc.

(“Decentralized”, this group provides services to assist companies in the emerging growth gig business model

of peer-to-peer decentralized sharing marketplaces.

Direct specializes in marketing and distributing its products and services through

its subsidiary and partner network, using the popular gig economic marketing strategy as a form of direct marketing.

Direct marketing

products include, among other things, nutritional and personal care products sold throughout North America, Asia Pacific and Eastern

Over the past 12 months, Direct has made substantial investments in acquiring marketing software, product opportunities, and

operational capabilities in this marketplace.

Additionally, it has acquired and developed an independent contractor sales force.

also made substantial investments into other direct marketing companies, including its investment and partnership with Sharing Services

Global Corporation (OTCQB:

SHRG) (“Sharing Services”

or “SHRG”), which as of March 31, 2021, Decentralized

owned approximately 40% of the outstanding shares of Sharing Services.

Currently, Direct and SHRG operate offices in USA, Canada,

Hong Kong, Singapore, S.

Korea, Australia, New Zealand, Malaysia, and Singapore, with additional offices or presence being added monthly.

Decentralized sharing systems’

mission is to become the leading direct sales platform, training, developing and empowering leaders

on a global scale to achieve maximum human and economic potential.

of operations for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

discussion should be read in conjunction with the financial statements and footnotes contained in this Quarterly Report and in

our Annual Report on Form 10-K for the year ended December 31, 2020.

sales, services and licensing

the three months ended September 30, 2020, total revenue increased 59% as compared to the three months ended September 30,

Revenues from the sale of Printed products increased 40% during the three months ended September 30, 2020, as compared

to the same period in 2019, primarily due to an increase in packaging sales due to customer sales returning after reopening

from COVID-19 and the addition of new customers.

Technology sales, services and licensing revenue decreased 3% during

the three months ended September 30, 2020 as compared to the same period in 2019.

For the nine months ended September 30,

2020, total revenue increased 17% due to the revenue associated with our Direct Marketing line of business.

Direct marketing

revenue increase illustrates the Company’s entrance into the direct marketing industry and its associated

opportunities.

Nine months ended

September 30, 2020

Nine months ended

September 30, 2019

months ended March 31, 2021

months ended March 31, 2020

Technology sales,

services and licensing

the three months ended March 31, 2021, total revenue increased 17% as compared to the three months ended March 31, 2020.

from the sale of Printed products increased 21% during the three months ended March 31, 2021, as compared to the same period in

2020, primarily due to an increase in packaging sales due to increased customer sales and the addition of new customers.

sales, services and licensing revenue increased 2% during the three months ended March 31, 2021 as compared to the same period

For the three months ended March 31, 2021, direct marketing revenue increased 6%.

Direct marketing revenue increase illustrates

the Company’s continued expansion into the direct marketing industry and its associated opportunities.

Three months ended March 31, 2021

Three months ended March 31, 2020

Costs and expenses

Costs of goods sold, exclusive

of depreciation and amortization

Cost of revenue, exclusive of depreciation and amortization

Sales, general and administrative compensation

7 unchanged sentences

Total costs and expenses

of goods sold, exclusive of depreciation and amortization includes all direct costs of direct marketing and printed products

revenues, including materials, direct labor, transportation and manufacturing facility costs.

In addition, this category includes

all direct costs associated with technology sales, services and licensing including hardware and software that are resold, and

fees paid to inventors or others as a result of technology licenses or settlements, if any.

Costs of goods sold increased 48%

and 6% respectively during the three and nine months ended September 30, 2020 as compared to the same periods in 2019.

This increase

is driven primarily by an increase in material costs related with our Direct Marketing division.

general and administrative compensation costs, excluding stock-based compensation, increased 91% and 54% respectively during

the three and nine months ended September 30, 2020, as compared to the same periods in 2019, primarily due to changes in

headcount year over year associated with expanding our sales team as well as the addition of our Direct Marketing business segment,

and an increase in cost of the Company’s health and welfare programs.

and amortization include the depreciation of machinery and equipment used for production, depreciation of office equipment

and building and leasehold improvements, amortization of software, and amortization of acquired intangible assets such as customer

lists, trademarks, non-compete agreements and patents, and internally developed patent assets.

For the three and nine months ended

September 30, 2020, depreciation and amortization expense decreased 17% and decreased 2% respectively as compared to the same

periods in 2019 due to sale and disposal of assets of the DSS Plastics Group.

fees increased 74% and 75% respectively during the three and nine months ended September 30, 2020, as compared to the same

periods in 2019, mostly due to increases in legal services for the outsourcing of corporate legal services, legal fees associated

with the defense of a suit brought by Intel Corporation and Apple, Inc.

against the Company (see Note 8), costs for discontinued

operations and consulting fees incurred by the Direct Marketing segment and acquisition activities.

Costs of goods sold, exclusive

of depreciation and amortization includes all direct costs of direct marketing and printed products revenues, including materials,

direct labor, transportation and manufacturing facility costs.

In addition, this category includes all direct costs associated with technology

sales, services and licensing including hardware and software that are resold, and fees paid to inventors or others as a result of technology

licenses or settlements, if any.

Costs of goods sold increased 27% three months ended March 31, 2021 as compared to the same periods

This increase is driven primarily by an increase in manufacturing costs associated with the products sold as part

of our Direct Marking segment.

general and administrative compensation costs, excluding stock-based compensation, increased 158% during the three

months ended March 31, 2020, as compared to the same period in 2020, primarily due to changes in headcount year over year associated

with addition of our Direct Marketing and BioHealth business segments, and performance bonus accruals.

and amortization include the depreciation of machinery and equipment used for production, depreciation of office equipment and building

and leasehold improvements, amortization of software, and amortization of acquired intangible assets such as customer lists, trademarks,

non-compete agreements and patents, and internally developed patent assets.

For the three months ended March 31, 2021, depreciation and

amortization expense increased 71% as compared to the same period in 2020 due to sale and disposal of assets and amortization

on newly acquired intangibles assets.

fees increased 68% during the three months ended March 31, 2021, as compared to the same period in 2020, mostly due to increases

in legal services related to the Direct Marketing business segment, and yearly audit fees.

based compensation includes expense charges for all stock-based awards to employees, directors and consultants.

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

Stock based compensation decreased 51% and 35% respectively

during the three and nine months ended September 30, 2020 as compared to the same periods in 2019.

This was driven by a larger

number of shares issued in 2019 to managers, directors and consultants.

Stock based compensation decreased 83% during the three ended

March 31, 2021 as compared to the same period in 2020.

This was due to the expiration of previously awarded options.

and marketing which include internet and trade publication advertising, travel and entertainment costs, sales-broker commissions,

and trade show participation expenses increased 885% and 387% respectively, during the three and nine months ended September 30,

2020 as compared to the same periods in 2019, resulting from an increase in commissions paid to brokers associated with the Company’s

Direct Marketing segment.

and utilities decreased by 23% and 1% respectively during the three and nine months ended September 30, 2020, as compared

to the same periods in 2019, primarily due to a decrease in facilities maintenance costs and utilities for the Company’s

discontinued operations.

and development increased 181% and 300% respectively during the three and nine months ended September 30, 2020 as compared

to the same periods in 2019 due to refunds of grant money and rebates in 2019 that did not recur in 2020 and the acquisition

of Impact Biomedical, Inc.

operating expenses consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs.

During the three and nine months ended September 30, 2020, other operating expenses increased 145% and increased 53% respectively

as compared to the same periods in 2019 due to startup software costs for the Direct Marketing segment.

and trade show participation expenses increased 27% during the three months ended March 31, 2021 as compared to the same period

in 2020, resulting from an increase in commissions paid to brokers associated with the Company’s Direct Marketing segment

and quarterly bonuses to management.

Rent and utilities

decreased by 37% during the three months ended March 31, 2021, as compared to the same period in 2020, primarily due to a

decrease in facilities maintenance costs and utilities for the Company’s discontinued operations.

and development costs increased $244,000 during the three months ended March 31, 2021 as compared to the same period in 2020 due

to the acquisition of Impact Biomedical, Inc.

in 2020 and the related costs for continued research and development of the acquired

product formulations.

Other operating expenses

consist primarily of equipment maintenance and repairs, office supplies, IT support, and insurance costs.

During the three

months ended March 31, 2021, other operating expenses increased 243% as compared to the same period in 2020 due to increased

software costs associated with enhancements to the Company’s ERP system as well as new software implement as part

of the Company’s Direct Marketing segment and increased D&O insurance.

Income (Expense)

Three months ended

September 30, 2020

Three months ended

September 30, 2019

Nine months ended

September 30, 2020

Nine months ended

September 30, 2019

months ended March 31, 2021

months ended March 31,2020

Other Income (Expense)

Interest Income

Interest Expense

Unrealized gain on marketable securities

Amortization of deferred financing costs and debt discount

Total costs and expenses

Unrealized loss

on equity investment

(Loss) gain on investments

Gain on extinguishment

$ (1,507,000 )

income is recognized on the Company’s money markets as well as the notes receivable identified in Note 3.

expense decreased 41% and 3% respectively during the three and nine months ended September 30, 2020, as compared to the same

periods in 2019, due to the payoff of DSS Plastic debt during the quarter (see Note 6).

Unrealized g ain

on marketable securities

is recognized on the change in fair market value on our common stock investment is Sharing Services Global Corp.

approximately

$6.1 million and Alset International Limited approximately $2.1 million for the nine months ended September 30, 2020.

Income (Loss)

September 30, 2020

Nine months ended

September 30, 2019

Income (loss)

expense decreased 35% during the three ended March 31, 2021, as compared to the same period in 2020, due to decreasing debt balances.

Unrealized loss on equity

investment Loss from equity method investment represents the Company’s prorated portion of Sharing Services Global Corp’s

earnings for the three-months ended March 31, 2021.

gain on investments consists of realized losses on marketable securities which are recognized as the difference between the purchase

price and sale price of the common stock investment.

For the three months ended March 31, 2021, a $13,000 realized loss was recorded.

Also unrealized losses on marketable securities which are recognized on the change in fair market value on our common stock investment

of Alset International Limited approximately $967,000 and other investments of $212,000 for the three months ended March 31, 2021.

included are the gains on warrants which are recognized as the change in option value of warrants held at March 31, 2021.

on extinguishment of debt in April 2020, AAMI received funds from the SBA Paycheck Protection Program of $116,000.

As of January

8, 2021, this note was forgiven in full.

months ended March 31, 2021

months ended March 31,2020

from continuing operations

$ (3,898,000 )

$ (2,386,000 )

Loss from discontinued operations

Net Income (loss)

Loss from discontinued

$ (34,012,000 )

$ (1,966,000 )

the three and nine months ended September 30, 2020, the Company recorded net income from continuing operations of $5,366,000

and $3,771,000, respectively, as compared to a net loss of $1,222,000 and $2,386,000, respectively during the same periods in

The increase in net income during the three and nine months ended September 30, 2020 as compared to the same periods

in 2019 primarily reflect the company’s unrealized gains on its marketable securities of $7,782,000 and $8,365,000, respectively.

For the three and nine months ended September 30, 2020, the Company recorded net loss from discontinued operations of $424,000

and $1,702,000 respectively, as compared to a net loss of $29,000 and $346,000, respectively during the same periods in 2019.

The change in net losses incurred during the three and nine months ended September 30, 2020 as compared to the same periods

in 2019 primarily reflect the combined impact of a decline in revenues in the Plastics Products Group driven by the impact of

the Covid-19 pandemic as well as the Q1 2020 impairment of goodwill totaling $685,000.

For the three months ended

March 31, 2021, the Company recorded net loss from continuing operations of $3,898,000, as compared to a net loss of $920,000

during the same period in 2020.

The increase in net loss during the three months ended March 31, 2021 as compared to the same

period in 2020 primarily reflect the company’s unrealized gains on its marketable securities, as well as increased costs

associated with new business lines.

The loss from continuing operations for the three months ended March 31, 2021 is inclusive

of a $838,000 income tax benefit as compared to $0 for the three months ended March 31, 2020.

Our effective tax rate for the three-month

periods ended March 31, 2021 was 18.8%.

There was no tax provision for March 31, 2020 due to the expected tax benefit

from net operating losses (NOLs) being fully offset by an increase in the valuation allowance.

AND CAPITAL RESOURCES

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 $11.6 million in cash, and a positive working capital position of approximately

$13.3 million as of September 30, 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 nine months ended September 30, 2020, the Company through multiple underwriting agreements

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

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

The net offering proceeds

to the Company approximated $20.1 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 nine months ended September 30, 2020, material 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 $11.6 million in aggregate cash as of September 30, 2020, would allow us to fund our eight business lines

current and planned operations through October 2021.

Based on this, the Company has concluded that substantial doubt of its ability

to continue as a going concern has been alleviated.

Company has historically met its liquidity and capital requirements primarily through the sale of its equity securities and debt

As of March 31, 2021, the Company had cash of approximately $52.1 million.

As of March 31, 2021, the Company believes

that it has sufficient cash to meet its cash requirements for at least the next 12 months from the filing date of this Annual

In addition, the Company believes that it will have access to sources of capital from the sale of its equity securities

and debt financings.

Sheet Arrangements

8 unchanged sentences

There have been no material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter

ended September 30, 2020.

ended March 31, 2021.

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-Q

Item 1. Financial Statements