What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-18 compared with 2021-08-23 · 255 added, 177 removed, 251 unchanged (63% of the section changed)

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in the forward-looking statements.

Security Systems, Inc.

(the “Company of DSS”) operates seven (7) business lines through seven (7) DSS subsidiaries located

around the globe.

the seven subsidiaries, two of those have historically been the core subsidiaries of the Company:

(together with its consolidated subsidiaries, referred to herein as “DSS,” “we,” “us,” “our”

or the “Company”) currently operates nine (9) distinct business lines with operations and locations around the globe.

business lines are:

(1) Premier Packaging, (2) Direct Marketing/Online Sales Group, (3) IP Monetization, (4) BioHealth Group, (5) Securities

and Fintech Group, (6) Energy Group, (7) Secure Living, (8) Blockchain Technology, and (9) Investment Banking.

Each of these business

lines are in different stages of development, growth, and income generation.

the nine business lines, two of the those have historically been the led by core subsidiaries of the Company:

(1) Premier Packaging Corporation

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In 2020, under its (3) Decentralize Sharing Systems, Inc.

subsidiary, created

a fourth business segment, Direct Marketing/Online Sales Group.

This group provides services to assist companies in the emerging growth

gig business model of peer-to-peer decentralized sharing marketplaces.

Direct specializes in marketing and distributing its products

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

addition to the three 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.

(5) DSS Securities, Inc., a Nevada

corporation, was established to develop and/or acquire assets and investments in the securities trading and/or funds management

Further, Securities, in partnership with recognized global leaders in alternative trading systems, intends to own and operate

in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility tokens, stable coins and

cryptocurrency via a digital asset trading platform using blockchain technology.

The scope of services within this section is

planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, STO and UTO listings on a

primary market(s), asset digitization/tokenization (securities, currency and cryptocurrency), and the listing and trading of digital

assets (securities and cryptocurrency) on a secondary market(s).

Also in this segment is the Company’s real estate investment

trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from

leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single

operator under a triple-net lease.

the REIT was formed to originate, acquire, and lease a credit-centric portfolio of licensed

medical real estate.

(6) DSS BioHealth Security, Inc., a Nevada corporation, is our business line which we will intend to invest

in or to acquire companies related to the bio-health and biomedical field, including businesses focused on the research to advance

drug discovery and development for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases.

This new division will place special focus on open-air defense initiatives, which curb transmission of air-borne infectious diseases

such as tuberculosis and influenza, among others.

(7) DSS Secure Living, Inc., a Nevada Corporation, develops top of the line

advanced technology, energy efficiency, quality of life living environments and home security for everyone for new construction and

renovations of residential single and multifamily living facilities.

The activity in DSS Blockchain and DSS Secure Living has

been minimal or in various start-up or organizational phases.

(“Decentralized”)

subsidiary, the Company created a third business segment, Direct Marketing/Online Sales Group (“Direct”).

This group provides

services to assist companies in the growing gig economic business model of peer-to-peer direct marketing.

Direct specializes in marketing

and distributing its products and services through its subsidiaries, partner networks, and online marketplaces.

Products include health

and wellness for personal use, healthy living and lifestyle, and travel.

Direct will also help to support the direct selling industry

by offering services to its piers that streamline operations, enhance financing, and provide back-end business continuity.

addition to the three business lines and subsidiaries listed above DSS has created four new business lines, and wholly owned subsidiaries.

(4) Blockchain Technology, led by DSS Blockchain Security, Inc (“DSS Blockchain”)., a Nevada corporation, specializes in

the development of blockchain security technologies for tracking and tracing solutions for supply chain logistics and cyber securities

across global markets.

(5) Securities and Fintech, led by DSS Securities, Inc.

(“DSS Securities”), a Nevada corporation,

was established to develop and/or acquire assets and investments in the securities trading and/or funds management arena.

Further, Securities,

in partnership with recognized global leaders in alternative trading systems, intends to own and operate in the US a single or multiple

vertical digital asset exchanges for securities, tokenized assets, utility tokens, stable coins and cryptocurrency via a digital asset

trading platform using blockchain technology.

The scope of services within this section is planned to include asset issuance and allocation

(securities and cryptocurrency), FPO, IPO, ITO, PPO, STO and UTO listings on a primary market(s), asset digitization/tokenization (securities,

currency and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s).

Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring

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

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

the REIT was formed to originate, acquire, and lease

a credit-centric portfolio of licensed medical real estate.

(6) BioHealth Group, led by DSS BioHealth Security, Inc.

(“DSS BioHealth”),

a Nevada corporation, is our business line which we will intend to invest in or to acquire companies related to the bio-health and biomedical

field, including businesses focused on the research to advance drug discovery and development for the prevention, inhibition, and treatment

of neurological, oncology and immuno-related diseases.

This new division will place special focus on open-air defense initiatives, which

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

(7) Secure Living, led by DSS Secure

(“DSS Secure Living”), a Nevada Corporation, develops top of the line advanced technology, energy efficiency,

quality of life living environments and home security for everyone for new construction and renovations of residential single and multifamily

living facilities.

The activity in DSS Blockchain and DSS Secure Living has been minimal or in various start-up or organizational phases.

(8) Energy Group, organized under the Company’s subsidiary Alset Energy, Inc., a Texas corporation, has been established to help

lead the Company’s clean energy future with a focus on environmental responsibility and sustainability measures.

(9) Investment

Banking, created in Sept 2021 as part of the Company’s acquisition of American Pacific Bancorp.

Inc., a Texas corporation, is organized

for the purposes of being a financial network holding company, focused on acquiring equity positions in (i) undervalued commercial bank(s),

bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and

South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services,

mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC (special

purpose acquisition company) consulting, and advisory capital raising services.

From this financial platform, the Company shall provide

an integrated suite of financial services for businesses that shall include commercial business lines of credit, land development financing,

inventory financing, third party loan servicing, and services that address the financial needs of the world Gig Economy.

March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with

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

On June 18, 2021, DSS Securities, entered into a stock purchase agreement with AMRE to acquire 264,525 Class A Common

Shares of AMRE at a per share price of $10, for a total consideration of $2,645,250.

The additional 264,525 Class A Common Shares acquired

increases the Company’s total equity interest in AMRE to approximately 93%.

On June 18, 2021, DSS Securities, entered into a stock purchase agreement with AMRE to acquire 264,525 Class A Common Shares

of AMRE at a per share price of $10, for a total consideration of $2,645,250.

The additional 264,525 Class A Common Shares acquired increases

the Company’s total equity interest in AMRE to approximately 93%.

August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc.

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in prepayment of interest for the first year.

As of June 30, 2021, the Company held 91,207,378 class A common shares equating to a 46.7%

ownership interest in SHRG with aggregate fair value of the Company’s investment in SHRG at June 30, 2021 of approximately $12,769,000.

The Company, via three (3) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board of director

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

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

As of September 30, 2021, the Company held 91,460,978 class A common shares equating to

a 46.8% ownership interest in SHRG with aggregate fair value of the Company’s investment in SHRG at September 30, 2021, of approximately

The Company, via three (3) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board

of director seats.

John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG

Board, along with Mr.

Heng Fai Ambrose Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective

May 4, 2020), and Mr.

Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020).

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with Puradigm.

On June 18, 2021, AMRE Shelton,

LLC., (“AMRE Shelton”) a subsidiary of AMRE financed the purchase of a 40,000 square foot, 2.0 story, Class A+ multi-tenant

medical office building located on a 13.62 acre site in Shelton, Connecticut (See Note 7).

In accordance with Topic 805, the acquisition

of the medical acquired has been determined to be an acquisition of assets as s ubstantially all

of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

This property was appraised at approximately $7,150,000, of which $6,027,000 and $815,000 was allocated to the facility and land

respectively.

Also include in the value of the property is $308,000 of intangible assets with an estimated useful life of 11 years.

within the sale-purchase agreement for this facility, is a $1,500,000 earnout due to the seller if certain criteria are met.

30, 2021, no liability has been recorded for this earnout as management determined it is currently remote.

four reporting segments are as follows:

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

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

Premier operates in the paper board folding carton,

smart packaging, and document security printing markets.

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

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

These products are designed to provide functionality and marketability

while also providing counterfeit protection.

June 18, 2021, AMRE Shelton, LLC., (“AMRE Shelton”) a subsidiary of AMRE financed the purchase of a 40,000 square foot, 2.0

story, Class A+ multi-tenant medical office building located on a 13.62-acre site in Shelton, Connecticut (See Note 7).

In accordance

with Topic 805, the acquisition of the medical acquired has been determined to be an acquisition of assets as s ubstantially

all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable

This property was appraised at approximately $7,150,000, of which $6,027,000 and $815,000 was allocated to the facility

and land respectively.

Also include in the value of the property is $308,000 of intangible assets with an estimated useful life of 11

Contained within the sale-purchase agreement for this facility, is a $1,500,000 earnout due to the seller if certain criteria

As of September 30, 2021, no liability has been recorded for this earnout as management determined it is currently remote.

September 9, 2021, the Company finalized a stock purchase agreement (the “SPA”) with American Pacific Bancorp (“APB”),

which provided for an investment of $40,000,200 by the Company into APB for an aggregate of 6,666,700 shares of the APB’s Class

A Common Stock, par value $0.01 per share.

Subject to the terms and conditions contained in the SPA, the shares issued at a purchase

price of $6.00 per share.

As a result of this transaction, DSS became the majority owner of APB.

APB is organized for the purposes of

being a financial network holding company, focused providing commercial loans and on acquiring equity positions in (i) undervalued

commercial bank(s), bank holding companies and nonbanking licensed financial companies operating in the United States, South East Asia,

Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication

services, mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management,

SPAC (special purpose acquisition company) consulting, and advisory capital raising services.

From this financial platform, the Company

shall provide an integrated suite of financial services for businesses that shall include commercial business lines of credit, land development

financing, inventory financing, third party loan servicing, and services that address the financial needs of the world Gig Economy.

September 13, 2021, the Company finalized a shareholder agreement and joint venture between its subsidiary, DSS Financial Management,

(“DFMI”) and HR1 Holdings Limited (“HR1”), a company incorporated in the British Virgin Islands, for the

purpose to operate a vehicle for private and institutional investors seeking a highly liquid investment fund with attractive risk adjusted

returns relative to market unpredictability and volatility.

Under the terms of this agreement, 4000 shares or 40% of the Company’s

subsidiary Liquid Asset Limited Management Limited (“LVAM”), a Hong Kong company was transferred to HR1 whereas at the conclusion

of the transaction DFMI would own 60% of LVAM and HR1 would own 40%.

LVAM executes within reliable platforms and broad market access

and uses proprietary systems and algorithms to trade liquid exchange-traded funds (ETFs), stocks, futures or crypto.

Aimed at providing

consistent returns while offering the unique ability to liquidate the portfolio within 5 to 10 minutes under normal market conditions,

LVAM provides an array of advanced tools and products enabling customers to explore multiple opportunities, strengthen and diversify

their portfolios, and meet their individual investing goals.

April 7th, 2021, the Company entered into a transfer and assignment agreement (“RIA Agreement”) between DSS Securities, Inc.

(“DSSS”) and AmericaFirst Capital Management, LLC (“Advisor”), a California limited liability company and the

registered investment advisor (“RIA”) to all the funds within the AmericaFirst Quantitative Funds Trust (“Trust”).

In September of 2021, with the approval of the Trust’s Board of Trustees and its shareholders, and with the consideration of $600,000

paid, DSSS became the new registered investment advisor to the Trust.

Upon the completion of the transfer, the Trust was renamed to the

DSS AmericaFirst Quantitative Trust.

The DSS AmericaFirst Quantitative Trust is a Delaware business trust established in 2012.

currently consists of 4 mutual funds managed by DSS Wealth Management, Inc.:

The DSS AmericaFirst Income Trends Fund, DSS AmericaFirst

Defensive Growth Fund, DSS AmericaFirst Risk-On Risk-Off Fund, and DSS AmericaFirst Large Cap Buyback Fund.

The funds seek to outperform

their respective benchmark indices by applying a quantitative rules-based approach to security selection.

The DSS AmericaFirst Quantitative

Funds is a suite of mutual funds managed by DSS Wealth Management, Inc.

that will expand into numerous investment platforms including

additional mutual funds, exchange-traded funds, unit investment trusts and closed-end funds.

We see substantial growth opportunities

in each of these platforms as we are committed to building and expanding upon an experienced distribution infrastructure.

For DSSS services

rendered in its role as RIA, the Trust shall pay a fee for each fund calculated as a percentage of the average daily net assets.

$600,000 consideration given is recorded as an Other intangible asset, net on the Consolidated Balance Sheet at September 30, 2021.

the RIA Agreement has no defined period, this asset has been deemed an infinite life asset and no amortization has been taken.

five reporting segments are as follows:

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

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

Premier operates in the paper board folding carton, smart packaging,

and document security printing markets.

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

and complex 3-dimensional direct mail solutions.

These products are designed to provide functionality and marketability while also providing

counterfeit protection.

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

(“Investment Bank”) This segment is organized for the purposes of being a financial network holding

company, focused providing commercial loans and on acquiring equity positions in (i) undervalued commercial bank(s), bank holding

companies and nonbanking licensed financial companies operating in the United States, South East Asia, Taiwan, Japan and South

Korea, and (ii) companies engaged in—nonbanking activities closely related to banking, including loan syndication services,

mortgage banking, trust and escrow services, banking technology, loan servicing, equipment leasing, problem asset management, SPAC

(special purpose acquisition company) consulting, and advisory capital raising services.

From this financial platform, the Company

shall provide an integrated suite of financial services for businesses that shall include commercial business lines of credit, land

development financing, inventory financing, third party loan servicing, and services that address the financial needs of the world

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

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

Securities and Fintech

(“Securities”) Securities was established to develop and/or acquire assets and investments in the securities

trading and/or funds management arena.

Further, Securities, in partnership with recognized global leaders in alternative trading systems,

intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized assets, utility

tokens, stable coins and cryptocurrency via a digital asset trading platform using blockchain technology.

The scope of services within

this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, STO and UTO listings

on a primary market(s), asset digitization/tokenization (securities, currency and cryptocurrency), and the listing and trading of digital

assets (securities and cryptocurrency) on a secondary market(s).

Also in this segment is the Company’s real estate investment trust

(“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical

operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net

and Fintech Group:

(“Securities”) Securities was established to develop and/or acquire assets and investments in

the securities trading and/or funds management arena.

Further, Securities, in partnership with recognized global leaders in alternative

trading systems, intends to own and operate in the US a single or multiple vertical digital asset exchanges for securities, tokenized

assets, utility tokens, stable coins and cryptocurrency via a digital asset trading platform using blockchain technology.

services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO,

STO and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency and cryptocurrency), and the listing

and trading of digital assets (securities and cryptocurrency) on a secondary market(s).

Also in this segment is the Company’s real

estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers

from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator

under a triple-net lease.

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

This group is

headquartered in Huston, Texas.

This group is headquartered in Huston, Texas.

Marketing/Online Sales Group:

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SHRG) (“Sharing Services” or “SHRG”),

which as of June 30, 2021, Decentralized owned approximately 47% of the outstanding shares of Sharing Services.

Currently, Direct and

SHRG operate offices in USA, Canada, Hong Kong, Singapore, S.

which as of September 30, 2021, Decentralized owned approximately 47% of the outstanding shares of Sharing Services.

Currently, Direct

and SHRG operate offices in USA, Canada, Hong Kong, Singapore, S.

Korea, Australia, New Zealand, Malaysia, and Singapore, with additional

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training, developing and empowering leaders on a global scale to achieve maximum human and economic potential.

of operations for the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020.

of operations for the three- and nine-months ended September 30, 2021, as compared to the three- and nine-months ended September 30,

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.

Three months ended June 30, 2021

Three months ended June 30, 2020

Six months ended June 30, 2021

months ended June 30, 2020

Printed products

Direct marketing

Total Revenue

the three and six months ended June 30, 2021, total revenue increased 51% and 33% respectively, as compared to the three and six

months ended June 30, 2020.

Revenues from the sale of Printed products increased 49%, and 33% during the three and six months ended June

30, 2021, respectively, as compared to the same period in 2020, primarily due to an increase in packaging sales due to the addition

of new customers and existing customers return to pre-Covid 19 operations.

Direct marketing revenue increase illustrates the Company’s

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

Three months ended

June 30, 2021

Three months ended

June 30, 2020

Six months ended

June 30, 2021

Six months ended

months ended September 30,

the three- and nine-months ended September 30, 2021, total revenue increased 24% and 30% respectively, as compared to the

three- and nine-months ended September 30, 2020.

Revenues from the sale of Printed products increased 15%, and 27% during

the three- and nine-months ended September 30, 2021, respectively, as compared to the same period in 2020, primarily due to an increase

in packaging sales due to the addition of new customers and existing customers return to pre-Covid 19 operations.

Direct marketing revenue

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

income is derived from the Company’s Investment in real estate, net.

Three months ended September 30,

Nine months ended September 30,

ended September 30,

Costs and expenses

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Total costs and expenses

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

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

of revenue, exclusive of depreciation and amortization includes all direct costs of direct marketing and printed products revenues,

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

Costs of goods sold increased 24% and 38%

for the three and six months ended June 30, 2021, respectively as compared to the same periods in 2020.

for the three- and nine-months ended September 30, 2021, respectively as compared to the same periods in 2020.

This increase is driven

primarily by an increase in manufacturing costs associated with the products sold as part of our Direct Marketing, and Packaging and

Printing segments, in particular, increases in freight and overhead costs.

Printing segments, in particular, increases in freight, paper, and overhead costs.

general and administrative compensation costs, excluding stock-based compensation, increased 379% and 451% during the

three and six months ended June 30, 2020, respectively, as compared to the same periods in 2020, primarily due to changes in headcount

three- and nine-months ended September 30, 2021, respectively, as compared to the same periods in 2020, primarily due to changes in headcount

year over year associated with addition of our Direct Marketing and BioHealth business segments, and performance bonus accruals approximating

$6.2 million.

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

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

For the three and six months ended June 30, 2021, depreciation

and amortization expense increased 201% and 133% respectively as compared to the same periods in 2020 due to sale and disposal

of assets and amortization on newly acquired intangibles assets.

fees increased 78% and 73% respectively during the three and six months ended June 30, 2021, as compared to the same periods

For the three- and nine-months ended September 30, 2021,

depreciation and amortization expense increased 203% and 156% respectively as compared to the same periods in 2020 due primarily to the

amortization on newly acquired intangibles assets.

fees increased 33% and 56% respectively during the three- and nine-months ended September 30, 2021, as compared to the same periods

in 2020, mostly due to increases in legal services related to the Direct Marketing business segment, and yearly audit fees.

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option grants, warrant grants, and restricted stock awards.

Stock based compensation decreased 164% and 128% respectively

during the three and six ended June 30, 2021 as compared to the same periods in 2020, driven by the expiration of options awarded

to employees no longer with the company

Stock based compensation decreased 90% and 77% respectively during the three-

and nine-months ended September 30, 2021, as compared to the same periods in 2020, driven by the expiration of options awarded to employees

no longer with the Company.

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

and trade show participation expenses increased 164% and 136% respectively during the three and six months ended June 30,

2021, as compared to the same periods in 2020, resulting from an increase in commissions paid to brokers associated with the Company’s

and trade show participation expenses.

The decreased of 13% and increase of 17% respectively during the three- and nine- months ended

September 30, 2021, as compared to the same periods in 2020, is a result of the commissions paid to brokers associated with the Company’s

Direct Marketing segment.

and utilities decreased by 4% and of 39% respectively during the three and six months ended June 30, 2021, as compared

to the same period in 2020, primarily due to a decrease in facilities maintenance costs and utilities for the Company.

This was offset

by a new facility lease in Houston, Texas started during the first quarter of 2021.

and development costs increased $211,000 and $455,000 during the three and six months ended June 30, 2021 respectively as compared

to the same period in 2020 due to the acquisition of Impact Biomedical, Inc.

in 2020 and the related costs for continued research and

development of the acquired product formulations.

and utilities decreased by 30% and of 26% respectively during the three- and nine-months ended September 30, 2021, as compared to

the same period in 2020, primarily due to a decrease in facilities maintenance costs and utilities for the Company.

This was offset by

a new facility lease in Houston, Texas started during the first quarter of 2021.

and development costs increases during the three- and nine-months ended September 30, 2021, as compared to the same period in 2020

are due to the acquisition of Impact Biomedical, Inc.

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

product formulations as well as development of new technologies.

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

the three and six months ended June 30, 2021, other operating expenses increased 191% and 186% respectively as compared

the three- and nine-months ended September 30, 2021, other operating expenses decreased 1% and increased 60% respectively as compared

to the same period in 2020 due to increased software costs associated with enhancements to the Company’s ERP system as well as

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Income (Expense)

Three months ended June 30, 2021

Three months ended June 30, 2020

Six months ended June 30, 2021

Six months ended June 30,2020

Three months ended September 30, 2021

Three months ended September 30, 2020

Nine months ended September 30, 2021

ended September 30,

Other Income (Expense)

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(Loss) gain on investments

(10,894,000 )

Gain/(Loss) on extinguishment of debt

Amortization of deferred financing costs and debt discount

Total other income

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$ (9,786,000 )

income is recognized on the Company’s money markets as well as the accretion of the discount on convertible notes receivable

identified in Note 3.

Other income represents

recognition of amortization of note origination fees.

expense increased 152% and 73% during the three and six months ended June 30, 2021 respectively, as compared to the

same period in 2020, due to increasing debt balances.

loss on equity investment Loss from equity method investment is driven by the Company’s prorated portion of Sharing

Services Global Corp’s earnings for the three and six months ended June 30, 2021.

income is recognized on the Company’s money markets, notes receivable, and the accretion of the discount on convertible notes

receivable identified in Note 3.

income represents recognition of amortization of note origination fees.

expense increased 7% and 54% during the three- and nine-months ended September 30, 2021, respectively,

as compared to the same period in 2020, due to increasing debt balances.

loss on equity investment Loss from equity method investment is driven by the Company’s prorated portion of Sharing Services

Global Corp’s earnings for the three- and nine-months ended September 30, 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 and six months ended June 30, 2021, $509,000 and $519,000 respectively,

For the three- and nine-months ended September 30, 2021, $0 and $519,000 respectively,

realized loss was recorded.

Also unrealized losses on marketable securities which are recognized on the change in fair market value on

our common stock investment driven by unrealized losses on Alset International Limited of approximately $967,000 for six months

ended June 30, 2021.

Also included are the loss of approximately $6,589,000 on warrants which are recognized as the change in

option value of warrants held at June 30, 2021 (See Note 6).

our common stock investment driven by unrealized losses on Alset International Limited of approximately $839,000 for the nine-months

ended September 30, 2021.

Also included are the loss of approximately $9,477,000 on warrants which are recognized as the change in option

value of warrants held at September 30, 2021 (See Note 6).

on extinguishment of debt in April 2020, AAMI received funds from the SBA Paycheck Protection Program of $116,000.

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8, 2021, this note was forgiven in full.

Three months ended June 30, 2021

Three months ended June 29, 2020

Six months ended June 30, 2021

Six months ended June 30,2020

Loss from continuing operations

$ (10,725,000 )

$ (14,787,000 )

$ (1,676,000 )

Income (loss) from discontinued operations

$ (8,646,000 )

$ (12,658,000 )

$ (2,873,000 )

For the three and six months

ended June 30, 2021, the Company recorded net loss from continuing operations of $10,725,000 and $14,787,000 respectively,

as compared to a net loss of $698,000 and $1,676,000 during the same periods in 2020.

The increase in net loss during the

three and six months ended June 30, 2021 as compared to the same periods in 2020 primarily reflect the company’s unrealized losses

on its marketable securities, and warrants, increased costs associated with new business lines, as well as increases in

performance based compensation.

The gain from continuing operations for the three and six months ended June 30, 2021 is inclusive

of a $2,079,000 and 2,129,000 respectively, income tax benefit as compared to the losses of $208,000 and $1,197,000

for the three and six months ended June 30, 2020.

Our effective tax rate for the six month periods ended June 30, 2021 is 17.3%.

There was no tax provision for June 30, 2020 due to the expected tax benefit from net operating losses (NOLs) being fully offset

by an increase in the valuation allowance.

Three months ended September 30,

Nine months ended September 30,

ended September 30,

(Loss) income from continuing operations

Income (loss) from discontinued

operations, net of tax

Net (loss) income

For the three- and nine-months

ended September 30, 2021, the Company recorded net loss from continuing operations of $6,675,000 and $21,462,000 respectively,

as compared to a net gain of $5,182,000 and $3,511,000 during the same periods in 2020.

The increase in net loss during

the three- and nine-months ended September 30, 2021, as compared to the same periods in 2020 primarily reflect the company’s unrealized

losses on its marketable securities, and warrants, increased costs associated with new business lines, as well as increases in performance-based

compensation.

The loss from continuing operations for the three- and nine-months ended September 30, 2021, is inclusive of a $1,624,000

and $4,315,000 respectively, income tax benefit.

Our effective tax rate for the nine-month periods ended September 30, 2021,

There was no tax provision for September 30, 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

Company has historically met its liquidity and capital requirements primarily through the sale of its equity securities and debt financings.

As of June 30, 2021, the Company had cash of approximately $65.6 million.

As of June 30, 2021, the Company believes that it has

sufficient cash to meet its cash requirements for at least the next 12 months from the filing date of this Annual Report.

the Company believes that it will have access to sources of capital from the sale of its equity securities and debt financings.

As of September 30, 2021, the Company had cash of approximately $69.1 million.

As of September 30, 2021, the Company believes

that it has sufficient cash to meet its cash requirements for at least the next 12 months from the filing date of this Annual Report.

In addition, the Company believes that it will have access to sources of capital from the sale of its equity securities and debt financings.

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 June 30, 2021.

no material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter ended September 30,

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 2. Management’s Discussion and Analysis