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Item 8. Financial Statements and Supplementary Data

2022-03-31 compared with 2021-03-31 · 2420 added, 2006 removed, 235 unchanged (95% of the section changed)

8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Financial Statements:

Balance Sheets

Statements of Operations and Comprehensive Income (Loss)

Statements of Cash Flows

Statements of Changes in Stockholders’

to the Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Stockholders’ Equity

Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

the Stockholders and the Board of Directors of DSS, Inc.

(formerly, Document Security Systems, Inc.

and Subsidiaries)

on the Financial Statements

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

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

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

the financial statements).

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

of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended,

in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public

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

in accordance with U.S.

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

and the PCAOB.

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

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

have audited the accompanying consolidated balance sheet of DSS, Inc.

(formerly Document Security Systems, Inc and Subsidiaries) (the

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

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

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

as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting

principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities

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

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

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide

a reasonable basis for our opinion.

Audit Matters

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

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

(1) relate to accounts or disclosures that are material

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

The communication of

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

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

disclosures to which they relate.

for Business Combinations –

Impact BioMedical, Inc.

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

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

(1) relate to accounts or disclosures that are material to the financial

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

The communication of critical audit matters

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

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

for Business Combinations – Impact BioMedical, Inc.

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

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

In connection with

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

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

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

over net assets acquired as goodwill.

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

release of a previously recorded valuation allowance.

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

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

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

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

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

In particular,

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

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

the non-controlling interest.

Additionally, the accounting for the transaction and income

tax accounting related to the opening balance sheet was complex.

Due to the complexity of the transactions and subjectivity involved

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

auditor judgement.

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

on the financial statements.

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

In connection with this transaction,

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

as either a liability or equity, determined the fair value of the consideration paid, determined the fair value of the separately identifiable

assets acquired and liabilities assumed and reflected the excess of the consideration paid over net assets acquired as goodwill.

In connection

with this transaction a deferred tax liability was recorded resulting in the release of a previously recorded valuation allowance.

operations of this acquisition are considered to be a single reporting unit.

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

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

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

The valuation

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

In particular, the fair value estimates

are sensitive to changes in assumptions for revenue growth, gross margin, and operating expenses as well as weighted average cost of

capital, illiquidity discounts relating to the consideration paid, and lack of control discounts for the non-controlling interest.

Additionally,

the accounting for the transaction and income tax accounting related to the opening balance sheet was complex.

Due to the complexity

of the transactions and subjectivity involved with the assumptions used, we identified the business combination as a critical audit matter,

which required a high degree of auditor judgement.

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

the financial statements.

The primary procedures we performed included:

(i) Obtaining an understanding and evaluating

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

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

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

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

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

recorded related to the transaction.

(i) Obtaining an understanding and evaluating of the design

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

surrounding the classification of this transaction as a business combination and the preferred share consideration as permanent equity,

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

development of the assumptions used in the valuation models applied and the reasonableness of those assumptions, and auditing the disclosures

over this transaction, and (v) auditing the calculation of the deferred tax liability recorded related to the transaction.

Professionals

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

of Investments in Related Parties –

Alset International, Inc.

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

of Investments in Related Parties – Alset International, Inc.

and Sharing Services Global Corp

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

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

with a readily determinable fair value.

a related party, of approximately $6.8 million as of December 31, 2020, recorded as a marketable security with a readily determinable

This investment was previously recorded at cost, less impairment.

During the year ended

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

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

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

Prior to obtaining

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

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

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

of equity in SHRG.

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

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

$350,000 of unrealized gains.

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

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

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

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

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

on the financial statements.

During the year ended December 31, 2020, the Company recorded

unrealized gains associated with this investment of approximately $3.4 million.

The Company also has an equity investment in Sharing

Services Global Corp (“SHRG”), a related party, of approximately $12.2 million as of December 31, 2020, recorded as an equity

method investment, as the Company has significant influence of SHRG.

Prior to obtaining significant influence, the investment was accounted

for as a marketable security with a readily determinable fair value.

During the year ended December 31, 2020, the Company recorded unrealized

gains associated with this investment of approximately $6.8 million, prior to gaining significant influence, and income of approximately

$600,000 associated with the Company’s share of equity in SHRG.

Further, the Company holds a warrant to purchase additional shares

of SHRG amounting to approximately $1.1 million, which is accounted for as an investment in an equity instrument and recorded at fair

value, resulting in approximately $350,000 of unrealized gains.

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

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

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

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

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

the financial statements.

The primary procedures we performed included:

(i) Obtaining

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

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

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

of the presentation and disclosure of the investments.

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

of the investment and whether the investment was classified and recorded utilizing the appropriate accounting guidance, (iii) recalculating

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

and disclosure of the investments.

Freed Maxick CPAs, P.C.

have served as the Company’s auditor since 2004.

SECURITY SYSTEMS, INC.

served as the Company’s auditor from 2004 to 2020.

31, 2021, except for the effect of discontinued operations discussed in Note 16 to the consolidated financial statements and except for

the retrospective application of changes to the Company’s reportable segments discussed in Note 18, as to which the date for each

is March 31, 2022.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of DSS, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheets of DSS, Inc.

and its subsidiaries (the “Company”) as of December

31, 2021 and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity and cash flows

for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion,

the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December

31, 2021, and the results of its consolidated operations and its consolidated cash flows for the year then ended, in conformity with

accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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

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

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Audit Matters

critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial

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

The communication of critical audit matters

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

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

acquisition of American Pacific Bancorp and real estate asset acquisitions

described in Note 7 to the consolidated financial statements, the Company completed the acquisition of American Pacific Bancorp.

the assets acquired and liabilities assumed were required to be recorded at fair value as of the acquisition date.

Also described in

Note 7, the Company completed acquisitions of real estate assets as each transaction was concentrated in a single identifiable asset

or group of assets.

The Company utilized third-party valuation specialists to assist in the preparation of these valuations.

We identified

the fair value determination of the acquired assets, liabilities assumed, and residual value of goodwill as well as the allocation of

the real estate assets’ purchase price to be a critical audit matter.

principal considerations for our determination that estimation of the fair value of the assets acquired in the acquisitions of is a critical

audit matter are that there was a high estimation uncertainty due to significant judgments with respect to assumptions used to estimate

the future revenues and cash flows, including revenue growth rates, operating margins, the discount rate, the valuation methodologies

applied by the third-party valuation specialist for the fair value of the intangible assets.

This in turn led to a high degree of auditor

judgment, subjectivity, and efforts in performing procedures and evaluating audit evidence related to management’s forecasted future

revenues and cash flows and valuation methodologies.

In addition, the audit effort involved the use of specialists to assist in performing

these procedures and evaluating the audit evidence obtained.

audit procedures included the following:

management’s process for developing the fair value estimates.

the market indicators used by management in developing their fair value estimates.

the completeness and accuracy of underlying data used in the fair value estimates.

an internal valuation specialist to evaluate:

methodologies used and whether they were acceptable for the underlying assets or operations and being applied correctly,

appropriateness of the discount rate used by recalculating the weighted average cost of capital, and

qualification of third-party valuation specialists engaged by the Company based on their credentials and experience.

Turner Stone & Company, LLP

have served as the Company’s auditor since 2021.

AND SUBSIDIARIES

1 unchanged sentence

of December 31,

and cash equivalents

receivable, net

held for sale - discontinued operations

expenses and other current assets

Current assets:

plant and equipment, net

Cash and cash

Accounts receivable, net

Assets held for sale -

discontinued operations

Current portion of notes

expenses and other current assets

Total current assets

Property, plant and equipment, net

Investment in real estate, net

Other investments

equity method

assets held for sale - discontinued operations

intangible assets, net

AND STOCKHOLDERS’

expenses and deferred revenue

Investment, equity method

Marketable securities

Notes receivable

Non-current assets held for sale - discontinued

Right-of-use assets

Other intangible assets,

$ 284,826,000

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

liabilities held for sale - discontinued operations

line of credit

portion of lease liability

Accounts payable

Accrued expenses and deferred

Other current liabilities

Current liabilities held

for sale - discontinued operations

Current portion of lease

portion of long-term debt, net

current liabilities

term lease liability

liabilities held for sale - discontinued operations

long-term liabilities

tax liability, net

and contingencies (Note 15)

Stockholders’

stock, $.02 par value;

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

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

stock, $.02 par value;

Total current liabilities

Long-term debt, net

Long term lease liability

Non-current liabilities held for sale - discontinued

Other long-term liabilities

Deferred tax liability, net

Commitments and contingencies

Stockholders’ equity

Preferred stock, $ .02 par value;

47,000 shares

authorized, issued ( 43,000 on December 31, 2020);

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

Common stock, $ .02 par value;

shares authorized, 76,746,000 shares issued and outstanding ( 5,836,000 on December 31, 2020)

paid-in capital

Non-controlling

interest in subsidiary

Additional paid-in capital

Non-controlling interest

in subsidiary

( 132,384,000 )

( 101,382,000 )

stockholders’

liabilities and stockholders’

stockholders’ equity

liabilities and stockholders’ equity

$ 284,826,000

accompanying notes.

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

Statements of Operations and Comprehensive Income (Loss)

Statements of Operations and Comprehensive (Loss) Income

the Years Ended December 31,

sales, services and licensing

and expenses:

of revenue, exclusive of depreciation and amortization

general and administrative (including stock based compensation)

and amortization

Printed products

Rental income

Management fee income

Net investment income

Direct marketing

Total revenue

Costs and expenses:

income (expense):

on extinguishment of debt

from equity method investment

of deferred financing costs and debt discount

(loss) from continuing operations before income taxes

(loss) from continuing operations

from discontinued operations

income (loss)

from continuing operations attributed to noncontrolling interest

income (loss) attributable to common stockholders

comprehensive income (loss):

rate swap loss

of interest rate swap

Comprehensive

income (loss):

(loss) per common share - continuing operations:

per common share - discontinued operations:

used in computing earnings (loss) per common share:

Cost of revenue, exclusive of depreciation

and amortization

Selling, general and administrative (including

stock-based compensation)

Depreciation and amortization

Total costs and expenses

Operating loss

( 21,409,000 )

( 11,428,000 )

Other income (expense):

Interest income

Interest expense

Gain on extinguishment of debt

(Loss) income from equity method investment

( 9,939,000 )

(Loss) gain on investments

( 12,035,000 )

Amortization of deferred

financing costs and debt discount

(Loss) income from continuing

operations before income taxes

( 38,082,000 )

Income tax benefit

(Loss) income from continuing

( 34,050,000 )

Loss from discontinued

operations, net of tax

(loss) income

$ ( 31,921,000 )

Loss from continuing

operations attributed to noncontrolling interest

(loss) income attributable to common stockholders

$ ( 31,000,000 )

(Loss) earnings per common

share - continuing operations:

Loss per common share -

discontinued operations:

Shares used in computing

(loss) earnings per common share:

accompanying notes.

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

1 unchanged sentence

the Years Ended December 31,

flows from operating activities:

income (loss) from continuing operations

$ (2,595,000 )

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

and amortization

based compensation

from equity investment

Cash flows from operating activities:

Net (loss) income from continuing operations

$ ( 34,050,000 )

on extinguishment of debt

of deferred financing cost and debt discounts

(increase) in assets:

expenses and other current assets

(decrease) in liabilities:

revenue and customer deposits

Adjustments to reconcile net (loss) income from continuing operations to net

cash used by operating activities:

flows from investing activities:

of property, plant and equipment

receivable investment

of intangible assets

cash used by investing activities

Depreciation and amortization

Stock based compensation

Loss (income) on equity method investment

Loss (gain) on investments

( 10,609,000 )

flows from financing activities:

of long-term debt

from lines of credit, net

of revolving lines of credit, net

from convertible of note

of common stock, net of issuance costs

cash provided by financing activities

flows from discontinued operations:

(used) provided by operations

provided (used) by investing activities

used by financing activities

cash used by discontinued operations

increase (decrease) in cash and cash equivalents

and cash equivalents at beginning of year

and cash equivalents at end of year

Gain on extinguishment of debt

Deferred tax benefit

( 4,032,000 )

( 1,774,000 )

Decrease (increase) in assets:

Accounts receivable

( 2,084,000 )

( 8,425,000 )

Prepaid expenses and other current assets

( 2,274,000 )

Increase (decrease) in liabilities:

Accounts payable

Accrued expenses

Other liabilities

( 2,004,000 )

Net cash used by operating activities

( 9,012,000 )

( 6,831,000 )

Cash flows from investing activities:

Purchase of property, plant and equipment

( 14,283,000 )

Purchase of real estate

( 56,794,000 )

Purchase of investment

( 4,130,000 )

Purchase of marketable securities

( 8,171,000 )

( 9,791,000 )

Asset acquired with APB acquisition

Conversion of SHRG to consolidation

( 12,225,000 )

Note receivable investment

( 11,651,000 )

Purchase of intangible assets

( 18,110,000 )

Net cash used by investing activities

( 122,008,000 )

( 10,686,000 )

Cash flows from financing activities:

Payments of long-term debt

( 1,950,000 )

Borrowings of long-term debt

Payments of revolving lines of credit, net

Deferred financing fees

( 1,425,000 )

Issuances of common stock, net of issuance costs

Net cash provided by financing activities

Cash flows from discontinued operations:

Cash provided (used) by discontinued operations

Cash provided by investing activities

Cash used by financing activities

Net cash provided (used) by discontinued operations

Net increase in cash

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

accompanying notes.

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

Statements of Changes in Stockholders’

Statements of Changes in Stockholders’ Equity

the Years Ended December 31, 2021 and 2020

Other Comprehensive

controlling Interest in

December 31, 2019

of common stock, net

of preferred stock

based payments, net of tax effect

of Impact BioMedical, Inc.

December 31, 2020

December 31, 2018

of common stock, net

based payments, net of tax effect

comprehensive loss

December 31, 2019

Balance, December 31, 2020

$ 174,380,000

$ ( 101,382,000 )

Issuance of common stock, net

Conversion of preferred stock

Stock based payments, net of tax effect

Acquisition of American Pacific Bancorp

Acquisition of Sharing Services Global Corporation

Acquisition of Impact Biomedical, Inc.

Acquisition of Impact Biomedical, Inc., shares

( 31,001,000 )

( 31,921,000 )

Balance December 31,

$ 294,686,000

$ ( 132,383,000 )

$ 200,304,000

Balance, December 31, 2019

$ 115,560,000

$ ( 103,281,000 )

Issuance of common stock, net

Conversion of preferred stock

Stock based payments, net of tax effect

Acquisition of Impact Biomedical, Inc.

Net (loss) income

Balance December 31,

$ 174,380,000

$ ( 101,382,000 )

accompanying notes.

SECURITY SYSTEMS, INC.

AND SUBSIDIARIES

1 unchanged sentence

1 - DESCRIPTION OF BUSINESS

Security Systems, Inc.

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

located around the globe.

the eight subsidiaries, three of those have historically been the core subsidiaries of the Company:

(1) Premier Packaging Corporation

(“Premier Packaging”), (2) DSS Digital Inc., and its subsidiaries (“Digital Group”), and (3) DSS Technology

Management, Inc.

(“IP Technology”).

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

and document security printing markets.

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

cartons, and complex 3-dimensional direct mail solutions designed to provide functionality, marketability, and sustainability

to product packaging while providing counterfeit protection and consumer engagement platform.

Digital Group researches, develops,

markets, and sells the Company’s digital products worldwide.

As an industry leader in brand authentication services, our

solutions leverage functional anti-counterfeiting features and cutting-edge technologies to satisfy commercial and consumer product

needs for branding, intelligent packaging, and marketing.

Digital’s primary product is AuthentiGuard®, which is a brand

authentication application that integrates the Company’s counterfeit deterrent technologies with proprietary digital data

security-based solutions.

IP Technology Management Inc., manages, licenses, and acquires intellectual property assets for the

purpose of monetizing these assets through a variety of value-enhancing initiatives, including, but not limited to, investments

in the development and commercialization of patented technologies, licensing, strategic partnerships, and commercial litigation.

In 2020, under its (4) Decentralize Sharing Systems, Inc.

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

This group provides services to assist companies in the emerging growth gig business model of peer-to-peer decentralized

sharing marketplaces.

Direct specializes in marketing and distributing its products and services through its subsidiary and partner

network, using the popular gig economic marketing strategy as a form of direct marketing.

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

DSS Blockchain Security, Inc., a Nevada corporation, specializes in the development of blockchain security technologies for tracking

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

(6) DSS Securities, Inc., a Nevada

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

two parallel streams of digital asset exchanges in multiple jurisdictions:

(i) securitized token exchanges, focusing on digitized

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

utility tokens

from solid businesses.

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

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

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

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

such as tuberculosis and influenza, among others.

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

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

and renovations of residential single and multifamily living facilities.

Aside from Decentralized Sharing Systems, Inc.

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

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

with LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc.

and American Medical REIT Inc.

under which it acquired

a 52.5% controlling ownership interest in AMRE Asset Management Inc.

(“AAMI”) which currently has a 93% equity interest

in American Medical REIT Inc.

(“AMRE”) (see Note 7).

AAMI is a real estate investment trust (“REIT”) management

company that sets the strategic vision and formulate investment strategy for AMRE.

It manages the REIT’s assets and liabilities

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

AMRE is a Maryland

corporation, organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical

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

triple-net lease.

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

AMRE is planned to qualify as a Real Estate Investment Trust for federal income tax purposes, which will provide.

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

As of December 31, 2020, AAMI has yet

to generate any revenue.

Company, incorporated in the state of New York in May 1984 has conducted business in the name of Document Security Systems, Inc.

16, 2021, the board of directors approved an agreement and plan of merger with a wholly-owned subsidiary, DSS, Inc.

(a New York corporation,

incorporated in August 2020), for the sole purpose of effecting a name change from Document Security Systems, Inc.

change became effective on September 30, 2021.

maintained the same trading symbol “DSS” and updated its CUSIP number

to 26253C 102.

(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.

These business lines are:

Packaging, (2) Biotechnology, (3) Direct, (4) Commercial Lending, (5) Securities and Investment Management, (6) Alternative Trading (7)

Digital Transformation, (8) Secure Living, and (9) Alternative Energy.

Each of these business lines are in different stages of development,

growth, and income generation.

Our divisions, their business

lines, subsidiaries, and operating territories:

(1) Our Product Packaging line is led by Premier Packaging Corporation, Inc.

a New York corporation.

Premier operates in the paper board and fiber based folding carton, consumer product packaging, and document

security printing markets.

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

3-dimensional direct mail solutions.

Premier is currently located in its new facility in Rochester, NY, and primarily serves the US market.

(2) The Biotechnology business line was created to invest in or acquire companies in the BioHealth and BioMedical fields, including businesses

focused on the advancement of drug discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related

This division is also targeting unmet, urgent medical needs, and is developing open-air defense initiatives, which curb transmission

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

(3) Direct, led by the holding corporation, Decentralized Sharing

Systems, Inc.

(“Decentralized”) provides services to assist companies in the emerging growth “Gig” business model

of peer-to-peer decentralized sharing marketplaces.

Direct specializes in marketing and distributing its products and services through

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

Direct’s products

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

(4) Our Commercial Lending business division, driven by American Pacific Bancorp (“APB”), is organized for the purposes

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

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

and (ii) companies engaged in—nonbanking activities closely related to 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 services, and advisory capital raising services.

(5) Securities and Investment Management was established to develop

and/or acquire assets in the securities trading or management arena, and to pursue, among other product and service lines, broker dealers,

and mutual funds management.

Also in this segment is the Company’s real estate investment 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) Alternative Trading was established

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

Trading, in partnership

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

asset exchanges for securities, tokenized assets, utility tokens, and cryptocurrency via an alternative trading platform using blockchain

The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency),

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

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

(7) Digital Transformation was

established to be a Preferred Technology Partner and Application Development Solution for mid cap brands in various industries including

the direct selling and affiliate marketing sector.

Digital improves marketing, communications and operations processes with custom software

development and implementation.

(8) The Secure Living division has developed a plan for fully sustainable, secure, connected, and healthy

living communities with homes incorporating advanced technology, energy efficiency, and quality of life living environments both for

new construction and renovations for single and multi-family residential housing.

(9) The Alternative Energy group was established to

help lead the Company’s future in the clean energy business that focuses on environmentally responsible and sustainable measures.

Alset Energy, Inc, the holding company for this group, and its wholly owned subsidiary, Alset Solar, Inc., pursue utility-scale solar

farms to serve US regional power grids and to provide underutilized properties with small microgrids for independent energy.

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”).

(“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

483,334 shares of the Company’s common stock, par value $0.02 per share, nominally valued at $6.48 per share, and 46,868

newly issued shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”).

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

owned subsidiary (see Note 7).

shares of the Company’s common stock, par

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 7).

BioMedical strives to leverage its scientific know-how and intellectual property rights to provide solutions that have been plaguing

the biomedical field for decades.

By tapping into the scientific expertise of its partners, Impact BioMedical has undertook a

concerted effort in the research and development (R&D), drug discovery and development for the prevention, inhibition, and

treatment of neurological, oncological and immune related diseases.

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

entered into a corporate venture to form and operate

a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”).

DSS Securities, Inc.

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

and permitting process.

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.

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

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

Subject to the terms and conditions

contained in the SPA, the shares issued at a purchase price of $ 6.00

As a result of this transaction, DSS

became the majority owner of APB.

(see Note 7).

September 13, 2021, the Company finalized a shareholder agreement between its subsidiary, DSS Financial Management, Inc.

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.

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

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

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.

December 23, 2021, DSS purchased 50,000,000 shares at $ 0.06 per share of Sharing Services Global Corporation (“SHRG”) via

a private placement.

With this purchase, DSS increased its ownership of voting shares from approximately 47% of SHRG to approximately

SHRG aims to build shareholder value by developing or acquiring businesses that increase the Company’s product and services

portfolio, business competencies and geographic reach.

Currently, the Company, through its subsidiaries, markets and distributes its

health and wellness and other products primarily in the United States, Canada, and the Asia Pacific region using a direct selling business

The Company markets its products and services through its independent sales force, using its proprietary websites, including:

www.elevacity.com and www.thehappyco.com.

The Company, headquartered in Plano, Texas, was incorporated in the State of Nevada on April

24, 2015, and is an emerging growth company.

The Company’s Common Stock is traded, under the symbol “SHRG,” in the

OTCQB Market, an over-the-counter trading platforms market operated by OTC Markets Group Inc.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

owned and its majority owned or subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

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 Consolidation – The consolidated financial statements include the accounts of DSS and its subsidiaries.

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.

Actual results could differ materially from these estimates.

On an ongoing

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

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

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

substantial doubt about ability to continue as a going concern among others.

The Company bases its estimates on historical experience

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

about the carrying values of assets and liabilities.

On an ongoing basis, the Company

evaluates its estimates, including those related to the accounts and notes receivable, inventory, fair values of investments, recoverability

of long-lived assets and goodwill, useful lives of intangible assets and property and equipment, contingencies fair values of options

and warrants to purchase the Company’s common stock, deferred revenue and income taxes, substantial doubt about ability to continue

as a going concern among others.

The Company bases its estimates on historical experience and on various other assumptions that are believed

to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Reclassifications

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

to conform to current year presentation.

Equivalents - All highly liquid investments with maturities of three months or less at the date of purchase are classified

as cash equivalents.

Amounts included in cash equivalents in the accompanying consolidated balance sheets are money market funds

whose adjusted costs approximate fair value.

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

The Company performs ongoing

credit evaluations and generally do not require collateral.

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

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.

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

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

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

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

The Fair Value Measurement

Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value.

The hierarchy gives

the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)

and the lowest priority to unobservable inputs (Level 3 measurements).

– Certain amounts on the accompanying

consolidated balance sheets and income statements for the year ended December 31, 2020 have been reclassified to conform to current

year presentation.

Equivalents – All highly liquid investments with maturities of three months or less at the date of purchase are classified as

cash equivalents.

Amounts included in cash equivalents in the accompanying consolidated balance sheets are money market funds whose adjusted

costs approximate fair value.

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

The Company performs ongoing credit evaluations and generally

do not require collateral.

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

The Company carries its trade

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

On a periodic basis, the Company evaluates its accounts

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

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

As of December 31, 2021, the Company established

a reserve for doubtful accounts of approximately $ 20,000

The Company does not

accrue interest on past due accounts receivable.

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

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

The Fair Value Measurement Topic

of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a

three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value.

The hierarchy gives the highest priority to

unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable

inputs (Level 3 measurements).

These tiers include:

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

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as

quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that

are not active;

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its

own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value

drivers are unobservable.

carrying amounts reported in the balance sheet of cash and cash equivalents, accounts receivable, prepaids, accounts payable and

accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

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 consolidated balance sheet of cash and cash equivalents, accounts receivable, prepaids, accounts

payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

securities classify as a Level 1 fair value financial instrument.

The fair value of notes receivable approximates their carrying

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

The fair value of revolving credit

lines notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect

recent market conditions.

The fair value of investments where the fair value is not considered readily determinable, are

carried at cost.

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

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

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

At the closing

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

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

The fair value of notes receivable approximates their carrying value

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

The fair value of revolving credit lines notes

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

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

– Inventories consist primarily of paper,

pre-printed security paper, paperboard, fully prepared packaging, and health and beauty products which and are stated at the lower of

cost or net realizable value on the first-in, first-out (“FIFO”) method.

Packaging work-in-process and finished goods included

the cost of materials, direct labor and overhead.

At the closing of each reporting period, the Company evaluates its inventory in order

to adjust the inventory balance for obsolete and slow-moving items.

An allowance for obsolescence of $ 388,000 associated with

the inventory at our SHRG subsidiary was recorded as of December 31, 2021.

No allowance was recorded at December 31, 2020.

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

Investments in equity securities with a readily determinable fair value, not accounted for under the equity method,

are recorded at fair value with unrealized gains and losses included in earnings.

For equity securities without a readily

determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable

transactions for the same or similar securities, with unrealized gains and losses included in earnings.

equity method investments, the Company regularly reviews its investments to determine whether there is a decline in fair value

below book value.

receivable, unearned interest, and related recognition – The Company records all future payments of principal and interest on

notes as notes receivable, which are then offset by the amount of any related unearned interest income.

For financial statement purposes,

the Company reports the net investment in the notes receivable on the consolidated balance sheet as current or long-term based on the

maturity date of the underlying notes.

Such net investment is comprised of the amount advanced on the loans, adjusting for net deferred

loan fees or costs incurred at origination, amounts allocated to warrants received upon origination, and any payments received in advance.

The unearned interest is recognized over the term of the notes and the income portion of each note payment is calculated so as to generate

a constant rate of return on the net balance outstanding.

Net deferred loan fees or costs, together with discounts recognized in connection

with warrants acquired at origination, are accreted as an adjustment to yield over the term of the loan.

– 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.

for further discussion on investments.

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

Depreciation is computed using the straight-line

method over the estimated useful lives or lease period of the assets whichever is shorter.

Expenditures for renewals and betterments

are capitalized.

Expenditures for minor items, repairs and maintenance are charged to operations as incurred.

Any gain or loss

upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

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

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

liabilities assumed in a business combination.

Goodwill is subject to impairment testing at least annually and will be tested

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

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

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

unit is less than its carrying amount.

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

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

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

The test compares

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

This quantitative test requires

various judgments and estimates.

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

with a discounted operating cash flow approach.

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

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

The Company performed its annual

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

Packaging Company of approximately $1,768,600.

Consistent with this accounting impairment analysis, the Company determined that

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

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

that an impairment of the DSS Plastics’

See Note 6 for further

discussion on investments.

Plant and Equipment –

Property, plant and equipment are recorded at cost.

Depreciation is computed using the straight-line method over the estimated useful

lives or lease period of the assets whichever is shorter.

Expenditures for renewals and betterments are capitalized.

Expenditures for

minor items, repairs and maintenance are charged to operations as incurred.

Any gain or loss upon sale or retirement due to obsolescence

is reflected in the operating results in the period the event takes place.

in real estate, net – Acquisition of assets

are recorded at their relative fair value based on total accumulated costs of the acquisition.

Direct acquisition-related costs are capitalized

as a component of the acquired assets.

This includes all costs related to finding, analyzing and negotiating a transaction.

The allocation

of the purchase price is an area that requires judgment and significant estimates.

Tangible and intangible assets include land, building

and improvements, furniture, fixtures and equipment, acquired above market and below market leases, in-place lease value (if applicable).

Acquisition-date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated

fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates

and available market information.

Depreciation and amortization is computed using the straight-line method over the estimated useful

lives of the assets.

- ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease

ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent

the Company’s obligation to make lease payments arising from the leases.

Operating lease ROU assets and operating lease liabilities

are recognized based on the present value and future minimum lease payments over the lease term at commencement date.

As the Company’s

leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available

at commencement date in determining the present value of lease payments.

A number of the lease agreements contain options to renew and

options to terminate the leases early.

The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination

options that are deemed reasonably certain to be exercised.

Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing

operating leases longer than twelve months.

The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances

of accrued and prepaid rent, and unamortized lease incentives provided by lessors.

Operating lease cost is recognized as a single lease

cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses.

Variable lease payments

for common area maintenance, property taxes and other operating expenses are recognized as expense in the period incurred.

The Company has elected to separate lease and non-lease

components for all property leases for the purposes of calculating ROU assets and lease liabilities.

is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business

Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an

event occurs or circumstances change that would indicate the carrying amount may be impaired.

FASB ASC Topic 350 provides an entity with

the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination

that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If, after completing the assessment,

it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company

will proceed to a quantitative test.

The Company may also elect to perform a quantitative test instead of a qualitative test for any

or all of our reporting units.

The test compares the fair value of an entity’s reporting units to the carrying value of those reporting

This quantitative test requires various judgments and estimates.

The Company estimates the fair value of the reporting unit using

a market approach in combination with a discounted operating cash flow approach.

Impairment of goodwill is measured as the excess of

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

Company performed its annual goodwill impairment test as of December 31, 2021, and no impairment was deemed necessary for the goodwill

associated with Premier Packaging Company, APB and Impact BioMedical of approximately $ 1,769,000 ,

$ 29,744,000 ,

and $ 25,093,000 ,

respectively.

Consistent with this accounting impairment analysis, the Company determined that due to many factors, including

the impact of the COVID-19 outbreak and the related closing of the operations of the Plastic Group, the Company has quantitatively tested

the carrying value of its goodwill associated with the DSS Plastics Group and determined that an impairment of the DSS Plastics’

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

during the twelve-months ended December 31, 2020.

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

of DSS Plastics group.

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

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

such as earnings and cash flows.

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

estimated useful lives.

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

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

are below their estimated fair values.

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

goodwill impairment recorded during the year

ended December 31, 2021.

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

as earnings and cash flows.

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

useful lives.

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

or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets are below their estimated

Impairment is tested under ASC 350.

Assets - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability

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

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

to its undiscounted expected future cash flows.

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

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

If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment

by comparing the fair value of the asset or asset group to its carrying value.

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

of Alset International Limited (“Alset Intl.”) (formally Singapore eDevelopment Limited).

The Chairman of the Company,

Assets - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of

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

If a change in circumstance

occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted

expected future cash flows.

If cash flows cannot be separately and independently identified for a single asset, the Company will determine

whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows.

If the carrying

values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the

asset or asset group to its carrying value.

Party Liabilities - On April 1, 2020 the Company’s HWH World, Inc subsidiary has a service agreement with HWH Korea, a

subsidiary of Alset International Limited (“Alset Intl.”) (formally Singapore eDevelopment Limited).

The Chairman of the

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

1 unchanged sentence

shareholder of Alset Intl as well as the largest shareholder of the Company.

The Company also owns approximately 127,179,000 shares

of Alset International, a company publicly listed on the Singapore Exchange Limited.

This service agreement will allow HWH Korea

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

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

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

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

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

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

on the accompanying consolidated balance

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

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

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

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

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

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

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

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

The Amendment

was effective at 5:01 p.m.

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 December 31, 2021, the Company had collected approximately $ 0 as compared to $ 1,100,000 as of December

31, 2020, on behalf of HWH Korea, which is included in Accrued expenses and deferred revenue on the consolidated balance sheet.

were no amounts outstanding to this related party at December 31, 2021.

Stock Split - On May 4, 2020, DSS, Inc.

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

amendment to the Company’s certificate of incorporation to effect a reverse split of common stock of the Company by a ratio of

1-for-30 with the effectiveness of such amendment to be determined by the Board of Directors of the Company The form of the certificate

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

On May 7, 2020, the Company filed a Certificate

of Amendment of Certificate of Incorporation with the Secretary of State of the State of New York to effect a 1-for-30 reverse stock

split of the Company’s outstanding common stock.

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

Eastern Time on May 7, 2020.

The reverse stock split has been retroactively applied to all financial

statements presented.

- The Company recognizes its products and services revenue based on when the title passes to the customer or when the

service is completed and accepted by the customer.

Revenue is measured as the amount of consideration the Company expects to receive

in exchange for shipped product or service provided.

Sales and other taxes billed and collected from customers are excluded from

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

sales of products that utilize the Company’s technology, or on a per item usage of the technology on the customers’

printed products.

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

From time to time, the Company

generates license revenues through litigation settlements.

For these, the Company recognizes revenue upon the execution of the

agreement, when collectability is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals,

and when all other revenue recognition criteria have been met.

The Company generates revenue from its direct marketing line

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

stock split has been retroactively applied to all financial statements presented.

- The Company recognizes its products and services

revenue based on when the title passes to the customer or when the service is completed and accepted by the customer.

Revenue is measured

as the amount of consideration the Company expects to receive in exchange for shipped product or service provided.

Sales and other taxes

billed and collected from customers are excluded from revenue.

The Company recognizes rental income associated with its REIT, net of

amortization of favorable/unfavorable lease terms relative to market and includes rental abatements and contractual fixed increases

attributable to operating leases, where collection has been considered probable, on a straight-line basis over the term of the related

The Company recognizes net investment income from its investment banking line of business as interest owed to the Company

The Company generates revenue from its direct marketing line of business primarily through internet sales and recognizes revenue

as items are shipped.

of December 31, 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

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

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

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

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

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

technology licenses or settlements, if any.

Amortization of patent costs and acquired technology are included in depreciation

and amortization on the consolidated statement of operations.

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

integration, and support.

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

expenses on the consolidated statement of operations.

Legal costs are included in selling, general and administrative.

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.

of revenue - Costs

of revenue includes all direct cost of the Company’s packaging, commercial and security printing sales, primarily, paper, inks,

dies, and other consumables, and direct labor, transportation, and manufacturing facility costs.

In addition, this category includes

all direct costs associated with the manufacturing and procurement of the products sold in the Company’s Direct Marketing line

of business as well as with the Company’s technology sales, services and licensing including hardware and software that is resold,

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

Amortization of intangible

assets, patent costs and acquired technology are included in depreciation and amortization on the consolidated statement of operations.

Costs of revenue do not include expenses related to product development, integration, and support.

These costs are included in research

and development, which is a component of selling, general and administrative expenses on the consolidated statement of operations.

costs are included in selling, general and administrative.

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

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

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

over the service period for which awards are expected to vest.

The Company uses the Black-Scholes-Merton option pricing model

for determining the estimated fair value for stock-based awards.

The Black-Scholes-Merton model requires the use of subjective

assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility

of the underlying stock.

For equity instruments issued to consultants and vendors in exchange for goods and services the Company

determines the measurement date for the fair value of the equity instruments issued at the earlier of (i) the date at which a

commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance

In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over

the term of the consulting agreement.

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

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

the service period for which awards are expected to vest.

The Company uses the Black-Scholes-Merton option pricing model for determining

the estimated fair value for stock-based awards.

The Black-Scholes-Merton model requires the use of subjective assumptions which determine

the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.

equity instruments issued to consultants and vendors in exchange for goods and services the Company determines the measurement date for

the fair value of the equity instruments issued at the earlier of (i) the date at which a commitment for performance by the consultant

or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.

In the case of equity instruments

issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

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

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

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

There were no sales commissions

capitalized as of December 31, 2020.

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

A significant

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

These commissions are

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

There were no sales commissions capitalized as of December 31, 2021.

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 potential.

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

Research and development costs consist primarily

of third-party research costs and consulting costs.

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

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

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

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

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.

Comprehensive

Income (Loss) - Comprehensive income (loss) is defined as the change in equity of the Company during a period from transactions

and other events and circumstances from non-owner sources.

It consists of net income (loss) and other income and losses affecting

stockholders’

equity that, under U.S.

GAAP, are excluded from net income (loss).

The change in fair value of interest rate

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

Per Common Share - The Company presents basic and diluted earnings per share.

Basic earnings per share reflect the actual

weighted average of shares issued and outstanding during the period.

Diluted earnings per share are computed including the number

of additional shares from outstanding warrants, stock options and preferred stock that would have been outstanding if dilutive

potential shares had been issued and is calculated utilizing the treasury stock method.

In a loss period, the calculation for

basic and diluted earnings per share is the same, as the impact of potential common shares is anti-dilutive.

Weighted average

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

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

year ended December 31, 2020.

Research and development costs consist primarily of

third-party research costs and consulting costs.

The Company recognized costs of approximately $ 1,080,000 and $ 210,000 in 2021 and 2020,

respectively.

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.

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

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.

For the year ended December 31, 2021, potential dilutive instruments includes both warrants and options of

3,556 and 11,930 shares respectively.

Weighted average shares outstanding used for diluted earnings per share includes the assumed

conversion of the 47,000

preferred shares, convertible into 7,233,000

common shares, for the period they were outstanding

resulting in an additional 2,471,000

shares for the year ended December 31, 2020.

Concentration

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.

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

As of December 31, 2020, these two customers accounted

for 60% of our consolidated trade accounts receivable balance.

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

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

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

Combinations.

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

BioMedical meets the definition of a business with inputs, processes, and outputs, and therefore, the Company has concluded to

account for this transaction in accordance with the acquisition method of accounting under Topic 805.

Under the guidance,

we determine the fair value of consideration paid and the assets and liabilities of the acquired business are recorded

at their fair values at the date of acquisition and all acquisition costs are expensed as incurred.

The excess of the purchase

price over the estimated fair values is recorded as goodwill.

If the fair value of the assets acquired exceeds the purchase price

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

The application of business combination accounting requires

the use of significant estimates and assumptions.

See Note 7 regarding the acquisitions in 2020.

Operations –

On April 20, 2020, the Company executed a nonbinding letter of intent with a perspective buyer for

the sale of certain assets of its plastic printing business line, which it operated under Plastic Printing Professionals, Inc.

(“DSS Plastics”), a wholly-owned subsidiary of the Company.

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

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

2021, two customers accounted for approximately 27 %

and 14 % of our consolidated revenue.

December 31, 2021, these two customers accounted for approximately 29 %

and 19 % of our consolidated trade accounts

receivable balance.

As of December 31, 2020, these two customers accounted for approximately

20 % and 18% of our consolidated revenue and

and 19 % of our consolidated trade accounts receivable balance.

January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-01,

Business Combinations (“Topic 805”):

Clarifying the Definition of a Business (“ASU 2017-01”).

The guidance is

intended to assist entities with evaluating whether a set of transferred assets and activities is a business.

Under this guidance, an

entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable

asset or a group of similar identifiable assets.

If this threshold is met, the set is not a business.

If the threshold is not met, the

entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process

that together significantly contribute to the ability to create outputs.

See Note 7 regarding the acquisitions.

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.

The application

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

Operations – On April 20, 2020, the Company

executed a nonbinding letter of intent with a perspective buyer for the sale of certain assets of its plastic printing business line,

which it operated under Plastic Printing Professionals, Inc.

(“DSS Plastics”), a wholly-owned subsidiary of the Company.

That sale was consummated and closed on August 14, 2020.

The remaining assets of DSS Plastics were either sold, separately disposed, or retained by other existing DSS businesses lines.

The remaining assets of DSS Plastics were either sold, separately disposed,

or retained by other existing DSS businesses lines.

Accordingly, the operations of DSS Plastics have been discontinued.

Based on the magnitude of DSS Plastics’

historical revenue

to the Company and because the Company has exited the production of laminated and surface printed cards, this sale represented

a significant strategic shift that has a material effect on the Company’s operations and financial results.

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

The major classes of assets and liabilities of DSS Plastics are classified as Held for Sale –

Discontinued Operations

on the Consolidated Balance Sheets and the operating results of the discontinued operations is reflected on the Consolidated Statements

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

Adopted and Recent Accounting Pronouncements - In June 2016, the FASB issued Accounting Standards Update (“ASU”)

2016-13, “Financial Instruments-Credit Losses (Topic 326)”, which requires entities to measure all expected credit

losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and

supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on

financial assets measured at amortized cost.

This guidance is effective for the Company for fiscal years, and interim periods

within those fiscal years, beginning after December 15, 2022.

The Company is currently assessing the impact that adopting this

new accounting standard will have on our consolidated financial statements.

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

Goodwill and Other (Topic 350) –

Simplifying the Test

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

a separate measure of the actual impairment.

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

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

The standards update is effective for goodwill impairment

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

February 2016, the FASB issued ASU No.

2016-02 and its related amendments which introduced Leases (Topic 842, or “ASC 842”),

a new comprehensive lease accounting model that supersedes the current lease guidance under Leases (Topic 840).

The new accounting

standard requires lessees to recognize right-of-use (“ROU”) assets and corresponding lease liabilities for all leases

with lease terms of greater than 12 months.

It also changes the definition of a lease and expands the disclosure requirements

of lease arrangements.

In July 2018, the FASB added a transition option for implementation that allows companies to continue to

use the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the

year of adoption.

The Company adopted the guidance effective January 1, 2019.

The Company elected the transition package of three

practical expedients permitted under the transition guidance and elected the optional transition method that allows for a cumulative-effect

adjustment in the period of adoption, without a restatement of prior periods.

Further, the Company elected a short-term lease

exception policy, permitting the Company to not apply the recognition requirements of this standard to short-term leases (i.e.

leases with terms of 12 months or less).

As a result of the adoption, the Company adjusted its beginning balance as of January

1, 2019 by recording operating lease ROU asset and liabilities through a cumulative-effect adjustment.

The adoption impacted the

accompanying consolidated balance sheet but did not have an impact on the consolidated statements of operations and comprehensive

income (loss).

the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether

there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange

for consideration over a period of time.

If both criteria are met, the Company calculates the associated lease liability and corresponding

ROU assets upon lease commencement using a discount rate based on a credit adjusted secured borrowing rate commensurate with the

term of the lease.

The Company records lease liabilities within current or noncurrent liabilities based upon the length of time

associated with the lease payments.

The operating lease ROU assets includes any lease payments made and excludes lease incentives

and initial direct costs incurred, if any, and are recorded as noncurrent assets.

Lease terms may include options to extend or

terminate the lease when it is reasonably certain that the Company will exercise that option.

Leases with an initial term of 12

months or less are not recorded on the accompanying consolidated balance sheet.

Lease expense for minimum lease payments is recognized

on a straight-line basis over the lease term.

The impact of the adoption of ASC 842 on the accompanying consolidated balance sheet

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

of COVID-19 Outbreak - The COVID-19 pandemic has created global economic turmoil and has potentially permanently impacted

how many businesses operate and how individuals will socialize and shop in the future.

We continue to feel the effect of the COVID-19

business shutdowns and consumer stay-at-home protections.

But the effect of the economic shutdown has impacted our business lines

differently, some more severely than others.

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

However, management determined that one of its business lines, DSS Plastics, had been, and would continue to be, more

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

that this business would be permanently impacted because we believe that both consumer and corporate future travel habits will

be negatively impacted and, as a result, use of hotel access cards will be diminished.

We believe that conventions and sporting

events will be fewer and smaller in attendance, and therefore demand for our card identification products would be reduced.

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

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

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

of approximately $685,000.

Additionally, it is reasonably possible that estimates made in the financial statements have been,

or will be, materially and adversely impacted in the near term as a result of these conditions, including losses on inventory;

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

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

Company will continue as a going concern.

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

of liabilities in the normal course of business.

These consolidated financial statements do not include any adjustments to the

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

going concern.

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

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

and investing activities over the past two years.

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

with Aegis Capital Corp.

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

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

The net offering proceeds to

the Company approximated $20.2 million.

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

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

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

Management’s plans concerning

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

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

In addition, the Company has taken steps, and

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

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

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

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

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

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

through March 2022.

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

concern has been alleviated

magnitude of DSS Plastics’ historical revenue to the Company and because the Company has exited the production of laminated and

surface printed cards, this sale represented a significant strategic shift that has a material effect on the Company’s operations

and financial results.

Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting

Standards Codification 205—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 and Comprehensive Income (Loss) as Loss from Discontinued Operations.

May 7, 2021, the Company completed the sale of 100 %

of the capital stock of DSS Digital Inc.

(“DSS Digital”), the Company’s wholly owned subsidiary, which researched,

developed, marketed, and sold the Company’s digital products worldwide.

Based on the magnitude of DSS Digital’s historical

revenue to the Company and because the Company has exited the brand authentication services, functional anti-counterfeiting technology

and technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing, this sale represented

a significant strategic shift that has a material effect on the Company’s operations and financial results.

Accordingly, the Company

has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 210-05—Discontinued

Adopted and Recent Accounting Pronouncements - In June 2016, the FASB issued Accounting Standards Update (“ASU”)

2016-13, “Financial Instruments-Credit Losses (Topic 326)”, which requires entities to measure all expected credit losses

for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at

amortized cost.

This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning

after December 15, 2022.

The Company is currently assessing the impact that adopting this new accounting standard will have on our consolidated

financial statements.

December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies the

accounting for income taxes.

This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal

years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted.

We will adopt ASU 2019-12 effective March

1, 2021 and do not expect the adoption of this guidance to have a material impact 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 over time.

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.

3 – INVENTORY

consisted of the following as of December 31:

SCHEDULE OF INVENTORY

Finished Goods

Work in Process

Raw Materials

Inventory Gross

Less allowance for obsolescence

Inventory Net

4 – 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.

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

As of December 31,

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

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

and TBD where the

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

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

This note and stock

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

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

Decentralized Sharing Systems, Inc.

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

(RBC), a Nevada corporation.

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

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

contains an “Optional Conversion”

clause that allows the Company at any time, before or after the occurrence of an

event of default, at its option, to convert the outstanding principal amount, plus accrued interest into a number of newly

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

at a fully-diluted basis.

Note #1 was also secured by and among other things a first lien on all of the assets of RBC and its

subsidiaries, and was guaranteed by its subsidiary, RBC Life Sciences USA, Inc.

As of December 31, 2019, the Company had advanced

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

second note (Note #2) dated November 11, 2019, established a secured, convertible, revolving line of credit to RBC up to

an aggregate principal sum of $800,000, funded at the sole discretion of lender, and accruing at annual non-default interest rate

of 10% with a scheduled maturity date of November 11, 2024, payable to Decentralized Sharing Systems’

wholly owned subsidiary,

HWH World, Inc..

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

Further, any amount of principal repaid during the term of the note was allowed to be re-advanced at any time prior

to the earlier of the acceleration of note to maturity or its maturity date.

This note also contains an “Optional Conversion”

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

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

to 100% of the outstanding shares of common stock of RBC’s direct and indirect subsidiaries.

This Note #2 was also secured

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

of RBC’s multiple subsidiaries and the full guarantee of these subsidiaries.

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

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

January 24, 2020, as a result of the borrower’s default on Note #1, Decentralized Sharing Systems, Inc.

made demand for

repayment of the outstanding balance of the Note #1.

In partial resolution, Decentralized Sharing Systems, Inc and RBC agreed

to accept and tender, respectively, pursuant to the Uniform Commercial Code Article 9, collateral in partial satisfaction of debt

under the terms of Note#1.

The Company chose to not exercise its option convert the outstanding principal and interest into equity,

but instead elected to accept this specific collateral.

On February 7, 2020, RBC agreed to the deed-in-lieu of specific assets

in satisfaction of part of the amount owing under Note #1.

April 8, 2020, the Company initiated Uniform Commercial Code Article 9 foreclosure proceedings against the remaining assets of

RBC and its subsidiaries which culminated with an Article 9 public sale on April 23, 2020.

Again, the Company chose to forego

the optional conversion of the outstanding principal and interest into 100% ownership, as was allowed in the terms of the note.

Instead it elected to pursue through a public foreclosure sale collateral that secured Note #2.

At that April Article 9 public

sale, HWH World, Inc a wholly-owned subsidiary of the Company was the high bidder, and the company received a Bill of Sale

for all of the remaining assets of RBC.

As a result of this foreclosure sale and the Note #1, collateral accepted in lieu of partial

debt, the Company now owns and controls most of the former assets of RBC and its subsidiaries.

the second quarter of 2020, the Company completed its evaluation of the assets acquired through foreclosure of Note #1

and #2 above and determined the value received supported the recoverability of the carrying value of the two notes.

accordance with ASC 310 Receivables Goodwill and Other, the assets value will be recorded at the carrying value of the

debt, allocated based on the value identified.

The carrying values of Note #1 and Note #2 were reclassed as property,

plant, and equipment and other intangible assets in the amounts of $201,000 and $637,000 respectively within the accompanying

financial statements.

These amounts are being depreciated and amortized over their useful lives.

The Company is currently a

defendant in a lawsuit brought against it for unjust enrichment and fraudulent transfer under Texas Uniform Fraudulent Transfer

See Note 15 for further details on related litigation.

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 in TBD.

This TBD Note accrues interest at 6 %

and matures on October

As of December 31, 2021, and December

31, 2020, this TBD Note had outstanding principal and interest of approximately $ 537,000 .

This asset was classified as long-term portion of Notes receivable on the consolidated balance sheet as December 31, 2021,

and as Notes receivable on the consolidated balance sheet as of December 31, 2020.

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 first quarter of 2022.

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 outstanding principal and interest as of December 31, 2021, approximated $ 829,000 ,

and is classified as a Current portion of notes receivable on the Consolidated Balance Sheets at December 31, 2021.

The GSX Note shall be converted, at the

Company’s option, into shares of GSX at the conversion price of $ 1.05

As of the date of filing, this

note is in default.

The Company and GSX are currently re-negotiating the terms of the GSX Note.

February 3, 2021, USX Holdings Company, Inc., a subsidiary of the Company entered into a binding joint venture term sheet (“GSX

JV”), along with Coinstreet, whose CEO is also a member of the Company’s

board of directors, for the creation of a USA based joint venture alternative trading system or exchange (“JV Exchange”).

nine-months ended September 30, 2021, the Company and GSX finalized the terms of the JV Exchange.

This JV is currently in the planning

February 21, 2021, Impact BioMedical, Inc.

a subsidiary of the Company, entered into a promissory note (“Crum Note”) with

Dustin Crum (“Mr.

The Company loaned the principal sum of $ 206,000 , with interest at a rate of 6.5 %, and maturity

date of August 19, 2022.

Monthly payments are due on the twenty-first day of each month and continuing each month thereafter until August

19, 2022, at which time all accrued interest and the entire remaining principal shall be due and payable in full.

This note is secured

by certain real property situated in Collier County, Florida.

The outstanding principal and interest as of December 31, 2021, approximated

$ 197,000 and is classified in current notes receivable on the accompanying consolidated balance sheets.

Brokers Company, Inc.

May 13, 2021, a subsidiary of the Company entered a revolving credit promissory note (“Sentinel Note”) with Sentinel Brokers

Company, Inc.

(“Sentinel”), a company registered in the state of New York.

The Sentinel Note has an aggregate principal balance

up to $ 600,000 ,

to be funded at request of Sentinel.

The Sentinel Note, which incurs interest at a rate of 6.65 %

is payable in arears until the principal is paid in full at the maturity date of May

As of December 31, 2021, there is $ 0

outstanding on the Sentinel Note.

May 14, 2021, DSS Pure Air, Inc.

a subsidiary of the Company entered into a convertible promissory note (“Puradigm Note”)

with Puradigm, LLC (“Puradigm”), a company registered in the state of Texas.

The Puradigm Note has an aggregate principal

balance up to $ 5,000,000 ,

to be funded at request of Puradigm.

The Puradigm Note, which incurs interest at a rate of 6.65 %

due quarterly, has a maturity date of May

The Puradigm Note contains an options

conversion clause that allows the Company to convert all, or a portion of all, into new issued member units of Puradigm with the maximum

principal amount equal to 18 %

of the total equity position of Puradigm at conversion.

The outstanding principal and interest as of December 31, 2021, approximated

which is classified as Notes receivable on the consolidated balance sheet.

Harris-Montgomery

Counties Management District

September 23, 2021, APB entered into refunding bond anticipatory note (“District Note”) with Harris-Montgomery Counties Management

District (the “District”), which operates as a conservation and reclamation district pursuant to Chapter 3891, Texas Special

District Local Laws Code;

Chapter 375, Texas Local Government Code;

and Chapter 49, Texas Water Code.

The District Note was in the sum

of $ 3,500,000

and incurs interest at a rate of 4.15 %

Principal and interest are due in full on September

note may be redeemed prior to maturity with 10 days written notice to APB at a price equal to principal plus interest accrued on the

redemption date.

The outstanding principal and

interest of $ 3,540,000

of the District Note is included in current portion

of notes receivable on the consolidated balance sheet at December 31, 2021.

October 25, 2021, APB entered into loan agreements (“Asili Agreement”) with Asili, LLC.

(“Asili”) a company registered

in the state of Utah.

The Asili Agreement has an initial aggregate principal balance up to $ 1,000,000 , to be funded at request of Asili,

with an option to increase the maximum principal borrowing to $ 3,000,000 .

The Asili Agreement, which incurs interest at a rate of 8.0 %

with principal and interest due at the maturity date of October 25, 2022 .

The Asili Agreement contains an optional conversion feature

allowing APB to convert the outstanding principal to a 10% membership interest in Asili, at a ratio of $1,000,000 to 10%.

APB, as holder

of the Asili Agreement, has the right to elect one member to the Asili Board of Managers.

The outstanding principal and interest of $ 784,000

of the Asili Agreement is included in current portion of notes receivable on the consolidated balance sheet at December 31, 2021.

Park Capital Group, LLC.

December 28, 2021, APB entered into promissory note (“West Park Note”) with West Park Capital Group, LLC.

(“West Park”),

a company registered in the state of California.

The West Park Note has an principal balance of $ 700,000 .

The West Park Note, which incurs

interest at a rate of 12.0 % with principal and interest due at the maturity date of December 28, 2022 .

The outstanding principal and

interest of $ 700,000 of the West Park Note is included in current portion of notes receivable on the consolidated balance sheet at December

June 13, 2019, the Company extended the credit to Leopoldo Bustamate (“Bustamate Note”) in the form of a promissory note

for $ 249,540 , bearing interest at 15 % , with a maturity date of May 15, 2020 .

On June 5, 2020, the Company further extended the same credit

in the form of a promissory note for $ 249,540 , bearing interest at 15 % , with a maturity date of May 14, 2021 .

On August 30, 2021, the

Company further extended the same credit in the form of a promissory note for $ 249,540 , bearing interest at 12.5 % , with a maturity date

of May 15, 2023 .

The modification agreement is effective May 14, 2021.

This promissory note is secured by a deed of trust on a tract

of land, which is approximately 315 acres, and located in Coke County, Texas.

The outstanding principal and interest of $ 260,000 of the

Bustamate Note is included in long term portion of Notes receivable on the consolidated balance sheet at December 31, 2021.

October 7, 2021, HWH entered into a revolving loan commitment (“HWH Ltd Note”) with HWH World Ltd.

a company registered in Taiwan.

Note has an principal balance of $ 52,000 and incurred no interest through the maturity date

of December 31,2021 .

The outstanding principal at December 31, 2021 is $ 52,000 and is included in the current portion of notes receivable.

This note is currently in default and the Company is currently in the process of extending the terms.

In accordance with the terms of

Note, the Company began charging interest at the default rate of 18 % on January 1, 2022 .

January 2021, the SHRG and 1044PRO, LLC (“1044 PRO”) entered into a Funding Agreement pursuant to which the Company

agreed to provide to 1044 PRO a $ 250,000

revolving credit line and loaned $ 204,879

to 1044 PRO under the credit line.

Borrowings under the credit line are payable in monthly installments in amounts determined by the

amount of each cash advance.

At December 31, 2021, loans of $ 193,000

are outstanding, net of an allowance for the impairment losses of $ 115,000 ,

and is included in Current portion of notes receivable on the consolidated balance sheet as of December 31, 2021.

In connection with the loan, the Company acquired a 10 %

equity interest in 1044 PRO and a security interest in 1044 PRO’s cash receipts and in substantially all 1044 PRO’s

the fiscal year 2019, SHRG received a promissory note for $ 106,404 from a prior merchant payment processor in connection with amounts

owed to the Company.

At December 31, 2021, $ 15,000 is outstanding and included in Current portion of notes receivable on the consolidated

balance sheet.

5 – FINANCIAL INSTRUMENTS

Cash Equivalents and Marketable Securities

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

2020 and December 31, 2019:

Cash and cash equivalents

following tables show the Company’s cash and marketable securities by significant investment category as of December 31, 2021 and

December 31, 2020:

SCHEDULE OF CASH AND MARKETABLE SECURITIES BY SIGNIFICANT INVESTMENT CATEGORY

and Cash Equivalents

Restricted Cash

Money Market Funds

Marketable Securities

Convertible securities

Cash and cash equivalents

1 unchanged sentence

Marketable Securities

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

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

exposure to any one issuer.

Company typically invests with the primary objective of minimizing the potential risk of principal loss.

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

any one issuer.

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

6 - INVESTMENT

6 - INVESTMENTS

International Limited (formally Singapore eDevelopment Limited)

of December 31, 2018, the Company owned 21,196,552 ordinary shares of Alset International Limited (“Alset

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

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

ordinary shares of Alset International Limited

(“Alset Intl”), formerly named Singapore eDevelopment Limited (“SED”), a company incorporated in Singapore and

publicly listed on the Singapore Exchange Limited.

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

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

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

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

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

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

Alset Intl as of December 31, 2020.

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

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

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

ordinary shares at an exercise price of SGD$ 0.040

(US$ 0.0298 )

per share During the year ended December 31, 2019 the Company exercised 61,977,577

of the warrants for total cost of $ 1,829,000

and at December 31, 2019 recorded the investment

at cost, less impairment under the measurement alternative in ASC 321 for a total value of $ 2,154,000 .

As of June 26, 2020, the Company exercised the remaining warrants for total cost of $ 1,291,000

bringing its total ownership to 127,179,291

shares or approximately 7 %

of the outstanding shares of Alset Intl as of December 31, 2020.

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

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

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

the third quarter 2020, the Company determined fair value

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

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

Accordingly, this investment is now classified as a

marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent

and ability to hold the investments for a period of at least one year.

During the third

quarter 2020, the Company determined fair value based on the volume of shares traded on the Singapore Exchange which has a breadth and

scope comparable to United States markets, as well as a consistent and observable market price.

Accordingly, this investment is now classified

as a marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability

to hold the investments for a period of at least one year.

The Chairman of the Company, Mr.

Heng Fai Ambrose

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

Chan is also the majority shareholder of Alset

Intl as well as the largest shareholder of the Company.

The fair value of the marketable security as of December 31, 2020 was

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

of approximately $3,384,200.

Services Global Corp.

(“SHRG”)

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

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

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

purchase price of $0.06 per share.

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

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

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

July 22, 2020, Chan Heng Fai Ambrose, the Chairman of the Company’s board of directors, assigned a Stock Purchase and

Share Subscription Agreement by and between Mr.

Chan and SHRG, pursuant to which the Company purchased 30,000,000 shares of

Class A common stock and 10,000,000 warrants to purchase Class A common stock for $3 million.

The warrants have an average

exercise price of $0.20, immediately vested and may be exercised at any time commencing on the date of issuance and ending

three year from such date.

As of the date of issuance the warrants the consideration paid allocated to the warrants amounted

to approximately $700,000.

The warrants are considered an equity investment that is recorded at fair value with

gains and losses recorded through net income.

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

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

with the increase representing

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

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

the terms of a Lock-Up Agreement entered into between Mr.

Chan and the Company and assigned to the Company.

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

recorded as a marketable security investment.

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

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

an ownership interest in SHRG of greater than 20%.

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

significant influence over SHRG.

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

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

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

Due to the difference in fiscal year

ends between the two companies, DSS has elected to recognize its portion of SHRG’s earnings and losses on a quarter lag

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

gain which approximated $604,000.

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

an adjusted basis of $11.3 million.

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

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

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

recording the investment under the equity method.

As of July 22, 2020, the carrying value of the Company’s equity method

investment exceeded our share of the book value of the investee’s underlying net assets by approximately $9.2 million,

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

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

during the period ended December 31, 2020.

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

2020 was approximately $14,774,000.

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

before income taxes

tax provision

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

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

John “JT”

Thatch, DSS’s

Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along with Mr.

Chan, DSS’s Executive Chairman

of the board of directors (joined the SHRG Board effective May 4, 2020), Mr.

Sassuan “Sam”

Lee, DSS Independent Director

(joined the SHRG Board effective September 29, 2020) and Mr.

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

September 29, 2020).

Heng Fai Ambrose Chan, is the Executive Director

and Chief Executive Officer of Alset Intl.

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

of the Company.

The fair value of the marketable security as of December 31, 2021 and 2020, respectively, was approximately $ 4,909,000

and $ 6,830,000 .

During the years ended December 31, 2021 and 2020, the Company recorded an unrealized losses and gains on this investment of approximately

and $ 3,384,200 ,

respectively.

Capital International LLC

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

entered into membership interest purchase

agreement with BMI Financial Group, Inc.

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

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

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

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

January of 2021 and increased its ownership to 24.9%.

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

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

entered into membership interest purchase agreement

with BMI Financial Group, Inc.

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

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

purchased 14.9 %

membership interests in BMIC for $ 100,000 .

DSS Securities also had the option to purchase an additional 10 %

of the outstanding membership interest which it exercised in January of 2021 and increased its ownership to 24.9 %.

Upon achieving greater than 20 %

ownership in BMIC, the Company began accounting for this investment under the equity method of accounting per ASC 323.

The Company’s

portion of net loss in BMIC for the year ended December 31, 2021, was $ 19,000 , and is included in Investments, equity method

on the Consolidated Balance Sheet.

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

(“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”).

The Company’s

chairman of the board and another independent board member of the Company also have ownership interest in this joint venture.

(“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”).

The Company’s

chairman of the board and another independent board member of the Company also have ownership interest in BMIC.

Title Company

or about August 28, 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc.

entered into a corporate venture to

form and operate a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”).

or about August 28, 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc.

entered into a corporate venture to form

and operate a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”).

DSS Securities, Inc.

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 twelve-months ended December 31, 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 year ended

December 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 the right to appoint a new director to the board of BioMed.

With respect to an issuance of shares to a third party by

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

In connection

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

with BioMed, to directly market, advertise, promote, distribute, and sell certain BioMed products, which focus on manufacturing

natural probiotics, to resellers.

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

focuses on manufacturing natural probiotics, pursuant to which the Company will directly market, advertise, promote, distribute

and sell certain BioMed products to resellers.

The products to be distributed by the Company include BioMed’s PGut Premium

Probiotics ®

, PGut Allergy Probiotics ®

, PGut SupremeSlim Probiotics ®

, PGut Kids Probiotics ®

and PGut Baby Probiotics ®

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

Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated

in the British Virgin Islands, pursuant to which the Company agreed to purchase 525 ordinary shares or 4.99 % of BioMed at a purchase

price of approximately $ 630,000 .

The Subscription Agreement provides, among other things, the Company the right to appoint a new director

to the board of BioMed.

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

to purchase such shares, as well as customary tag-along rights.

In connection with the Subscription Agreement, Impact entered into an

exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to directly market, advertise, promote, distribute,

and sell certain BioMed products, which focus on manufacturing natural probiotics, to resellers.

This investment is valued at cost as

it does not have a readily determined fair value.

focuses on manufacturing natural probiotics, pursuant to which the Company will directly market, advertise, promote, distribute and sell

certain BioMed products to resellers.

The products to be distributed by the Company include BioMed’s PGut Premium Probiotics ® ,

PGut Allergy Probiotics ® , PGut SupremeSlim Probiotics ® , PGut Kids Probiotics ® , and PGut

Baby Probiotics ® .

the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States,

Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries.

In exchange, the Company

agreed to certain obligations, including mutual marketing obligations to promote sales of the products.

This agreement is for

ten years with an one year auto-renewal feature.

BUSINESS COMBINATIONS

In exchange, the Company agreed

to certain obligations, including mutual marketing obligations to promote sales of the products.

This agreement is for ten years with

a one year auto-renewal feature.

Oncology, Inc.

March 15, 2021, the Company, through one of its subsidiaries, entered into a Stock Purchase Agreement (the “Vivacitas Agreement

#1”) with Vivacitas Oncology Inc.

(“Vivacitas”), to purchase 500,000 shares of its common stock at the per share price

of $ 1.00 , with an option to purchase 1,500,000 additional shares at the per share price of $ 1.00 .

This option will terminate upon one

of the following events:

(i) Vivacitas’ board of directors cancels this option because it is no longer in the best interest of

(ii) December 31, 2021;

or (iii) the date on which Vivacitas 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 Vivacitas Agreement #1, the Company will be allocated

two seats on the board of Vivacitas.

On March 18, 2021, the Company entered into an agreement with Alset EHome International, Inc.

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

IOPL owns 2,480,000 shares of common stock of Vivacitas along with the option to purchase an additional 250,000 shares of common

The Sellers largest shareholder is Mr.

Chan Heng Fai Ambrose, the Chairman of the Company’s board of directors and its largest

April 1, 2021, the Company entered into an additional stock purchase agreement with Vivacitas (“Vivacitas Agreement #2”),

whereas Vivacities wished to employ the service of the Chief Business Officer of Impact Biomedical, and in return for the services of

this individual, Vivacitas shall issue to the Company, the aggregate purchase price for the Class A Common Shares of Vivacitas at the

value of $ 1.00

per share shall be $ 120,000

to be paid in twelve (12) equal monthly installments

for the period between April 1, 2021 and March 31, 2022.

As of December 31, 2021, the Company has received 90,000 Common A Shares

of Vivacitas.

July 22, 2021, the Company exercised 1,000,000

of the available options under the Vivacitas

Agreement #1 for $ 1,000,000 .

This, along with the shares received as part Vivacitas Agreement #2 increased the Company’s equity position in Vivacitas to approximately

as of December 31, 2021.

Brokers Company, Inc.

May 13, 2021, a Sentinel Brokers, LLC., subsidiary of the Company entered into a stock purchase agreement (“Sentinel

Agreement”) to acquire a 24.9 %

equity position of Sentinel Brokers Company, Inc.

(“Sentinel”), a company registered in the state of New York, for the

purchase price of $ 300,000 .

During the three months ended September 30, 2021, the Company contributed an additional $ 750,000 capital

into Sentinel, increasing its total capital investment to $1,050,000.

Under the terms of this agreement, the Company as the option

to purchase an additional 50.1 %

of the outstanding Class A Common Shares.

Upon the exercising of this option, but no earlier than one year following the effective

date the Sentinel Agreement, Sentinel has the option to sell the remaining 25 %

to the Company.

In consideration of purchase price investment in Sentinel, the Company is entitled to an additional 50.1% of the net

profits of Sentinel.

The Company currently accounts for its investment in Sentinel using the equity method in accordance with ASC

Topic 323, Investments—Equity Method and Joint Ventures recognizing our share of Sentinel’s earnings and losses

within our consolidated statement of operations.

The Company’s portion of net income in Sentinel for the year ended

December 31, 2021, was not significant.

is a broker-dealer operating primarily as a fiduciary intermediary, facilitating intuitional trading of municipal and corporate bonds

as well as preferred stock, and is registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory

Authority, Inc.

(“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”).

September 2021, the SHRG, Stemtech Corporation (“Stemtech”) and Globe Net Wireless Corp.

(“GNTW”) entered into

a Securities Purchase Agreement (the “SPA”) pursuant to which the SHRG invested $ 1.4 million in Stemtech in exchange for:

(a) a Convertible Promissory Note in the amount of $ 1.4 million in favor of the SHRG (the “Convertible Note”) and (b) a detachable

Warrant to purchase shares of GNTW common stock (the “GNTW Warrant”).

Stemtech is a subsidiary of GNTW.

As an inducement

to enter into the SPA, GNTW agreed to pay to the SHRG an origination fee of $ 500,000 , payable in shares of GNTW’s common stock.

The Convertible Note matures on September 9, 2024 , bears interest at the annual rate of 10 % , and is convertible, at the option of the

holder, into shares of GNTW’s common stock at a conversion rate calculated based on the closing price per share of GNTW’s

common stock during the 30-day period ended September 19, 2021.

The GNTW Warrant expires on September 13, 2024 and conveys the right

to purchase up to 1.4 million shares of GNTW’s common stock at a purchase price calculated based on the closing price per share

of GTNW’s common stock during the 10-day period ended September 13, 2021.

In September 2021, GNTW issued to the SHRG 154,173 shares

of its common stock, or less than 1% of the shares of GNTW then issued and outstanding, in payment of the origination fee.

SHRG carries its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock at fair value in accordance

During the three and nine months ended December 31, 2021, the SHRG recognized unrealized gains, before income tax, of

$ 1.2 million and $ 3.3 million, respectively, in connection with its investment in the Convertible Note, the GNTW Warrant and the shares

of GNTW common stock.

September 2021, the SHRG entered into a Membership Unit Purchase Agreement pursuant to which the SHRG acquired a 30.75 % equity interest

in MojiLife, LLC, a limited liability SHRG organized in the State of Utah, in exchange for $ 1,537,000 .

MojiLife is an emerging growth

distributor of technology-based consumer products, such as cordless scent diffusers, for the home and the car, as well as proprietary

home cleaning products and accessories.

During the nine months ended December 31, 2021, the SHRG recognized equity in losses of $ 59,629 ,

before income tax, in connection with its investment in MojiLife.

7 – Acquisitions

Medical REIT Inc.

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

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

(“AAMI”) and American Medical REIT Inc.

(“AMRE”),

regarding a share subscription and loan arrangement.

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

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

structure of AMRE.

Pursuant to the final signed Stockholders’

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

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

Concurrently, AAMI will

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

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

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

At the completion of the share subscription, AAMI has

a 93% equity interest in AMRE.

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

LVAM is an 82% owned

subsidiary of Alset Intl.

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

of the Board and largest shareholder of the Company.

pursuant to and in connection with the Term Sheet, effective on March 3, 2020, the Company entered into a Promissory Note with

AMRE, pursuant to which AMRE has issued the Company a promissory note for the principal amount of $800,000 (the “Note”).

The Note matures on March 3, 2022 and accrues interest at the rate of 8.0% per annum and shall be payable in accordance with the

terms set forth in the Note.

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

If not sooner prepaid, the entire unpaid principal balance of the Note including accrued interest will be due and

payable in full on March 3, 2022.

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

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

The Note also

provides the Company an option to provide AMRE an additional $800,000 on the same terms and conditions as the Note, including

the issuance of warrants as described below.

As further incentive to enter into the Note, AMRE issued the Company warrants to

purchase 160,000 shares of AMRE common stock (the “Warrants”).

The Warrants have an exercise price of $5.00 per share,

subject to adjustment as set forth in the Warrants, and expire on March 3, 2024.

Pursuant to the Warrants, if AMRE files a registration

statement with the Securities and Exchange Commission for an initial public offering (“IPO”) of AMRE’s common

stock and the IPO price per share offered to the public is less than $10.00 per share, the exercise price of the Warrants shall

be adjusted downward to 50% of the IPO price.

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

in the Warrants.

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

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

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

on March 3, 2020, the Company entered into a Promissory Note with AMRE, pursuant to which AMRE has issued the Company a promissory note

for the principal amount of $ 800,000

(the “Note”).

The Note matures on

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 or penalty.

If not sooner prepaid, the entire unpaid principal balance of the Note

including accrued interest will be due and payable in full on March 3, 2022.

The Note also provides the Company an option to provide

AMRE an additional $ 800,000

on the same terms and conditions as the Note,

including the issuance of warrants as described below.

As further incentive to enter into the Note, AMRE issued the Company warrants

to purchase 160,000

shares of AMRE common stock (the “Warrants”).

The Warrants have an exercise price of $ 5.00

per share, subject to adjustment as set forth

in the Warrants, and expire on March

Pursuant to the Warrants, if AMRE files

a registration statement with the Securities and Exchange Commission for an initial public offering (“IPO”) of AMRE’s

common stock and the IPO price per share offered to the public is less than $ 10.00

per share, the exercise price of the Warrants

shall be adjusted downward to 50 %

of the IPO price.

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

As of December

31, 2021, this Note had outstanding principal and interest of approximately $ 914,000 .

Upon consolidation this Note is eliminated.

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

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

entered into a $ 200,000

unsecured promissory note with LiquidValue Asset

Management Pte Ltd (“LVAMPTE”).

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

See Note 11 for further details.

GAAP requires that for each business combination, one of the combining entities shall be identified as the acquirer, and the existence

of a controlling financial interest shall be used to identify the acquirer in a business combination.

The Company has determined

that its aforementioned 52.5% equity interest in AAMI provides existence of a controlling financial interest and has concluded

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

Combinations”

(“Topic 805”).

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

is attributable to the non-controlling interest.

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

in Corporate (see Note 18).

LVAMPTE is majority owned subsidiary of Alset International Limited whose Chief Executive Office

and largest shareholder is Heng Fai Ambrose Chan, the Chairman of the Board and largest shareholder of the Company.

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 %.

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 11) for the purchase

price of $ 7,150,000 .

In accordance with Topic 805, the acquisition of the medical facility 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.

These assets are classified as investments, real estate on

the consolidated balance sheet.

The purchase price has been allocated as $ 4,640,000 , $ 1,600,000 , and $ 325,000 for the facility, land

and tenant improvements respectively.

Also include in the value of the property is $ 585,000 of intangible assets with an estimated useful

life approximating 3 years.

All assets were allocated on a relative fair value basis.

Contained within the sale-purchase agreement for

this facility, is a $ 1,500,000 earnout due to the seller if certain criteria are met.

As of December 31, 2021, no liability has been

recorded for this earnout.

November 4, 2021, AMRE LifeCare Portfolio, LLC.

(“AMRE LifeCare”), a subsidiary of AMRE, acquired three medical facilities

located in Fort Worth, Texas, Plano, Texas, and Pittsburgh, Pennsylvania for a purchase price of $ 62,000,000 .

In accordance with Topic 805, the acquisition of the medical facility 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

These assets are classified as investments, real estate on the consolidated balance sheet.

The purchase price has been

allocated as $ 32,100,000 ,

$ 12,100,000 ,

and $ 1,500,000

for the facility, land and site improvements

respectively.

Also include in the value of the property is $ 15,901,000

of intangible assets with estimated useful

lives ranging from 1

All assets were allocated on a relative

fair value basis.

December 21, 2021, AMRE Winter Haven, LLC.

(“AMRE Winter Haven”), a subsidiary of AMRE, acquired a medical facility located

in Winter Haven, Florida for a purchase price of $ 4,500,000 .

In accordance with Topic 805, the acquisition of the medical facility 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.

These assets are classified

as investments, real estate on the consolidated balance sheet.

The purchase price has been allocated as $ 3,200,000 , $ 1,000,000 , and $ 222,000

for the facility, land and site and tenant improvements respectively.

Also include in the value of the property is $ 29,000 of intangible

assets with an estimated useful life of approximating 5 years.

All assets were allocated on a relative fair value basis.

the year ended December 31, 2021, AMRE had net losses of $ 2,835,000

of which $ 138,000 and is attributable to the non-controlling

BioMedical, Inc.

August 21, 2020, the Company, completed its acquisition of Impact BioMedical,, pursuant to a Share Exchange Agreement by and among

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

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

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

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

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

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

The acquisition was done to add assets

and a foundation of products with international market opportunities and demand, and which can be structured into long- term scalable,

reoccurring license revenue within the DSS BioHealth line of business.

Due to several factors, including a discount for illiquidity,

the value of the Series A Preferred Stock was discounted from $46,868,000 to $35,187,000, thus reducing the final consideration

given to approximately $38,319,000.

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

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

(“Impact”), pursuant to a Share Exchange

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

Biomedical Pte Ltd.

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

the terms of the Share Exchange, the Company issued 483,334

shares of the Company’s common stock, par

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 $3 5,187,000 ,

thus reducing the final consideration given to approximately $ 38,319,000 .

The Company incurred approximately $ 295,000

in cost associated with the acquisition of Impact

Biomedical which were recorded as general and administrative expenses.

As a result of the Share Exchange, Impact Biomedical

is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly owned subsidiary and operating results of the acquisition

will be included in the Company’s financial statements beginning August 21, 2020.

Impact BioMedical has several subsidiaries

that are not wholly owned by Impact BioMedical, and have an ownership percentage ranging from 63.6% to 100%.

Since acquisition,

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

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

meets the definition of a business with inputs, processes and outputs, and therefore, the Company has concluded to account for

this transaction in accordance with the acquisition method of accounting under Topic 805.

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

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

The pro forma consolidated results include the impact

of certain adjustments.

income (loss) attributed to common stockholders

is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly owned subsidiary and operating results of the acquisition

are included in the Company’s financial statements beginning August 21, 2020.

Impact BioMedical has several subsidiaries that are

not wholly owned by Impact Biomedical and have an ownership percentage ranging from 63.6 %

During the year ended December 31, 2021, Impact has incurred approximately $ 2,535,000

of net losses, of which $ 407,000

of loss incurred is attributable to non-controlling

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

Pacific Bancorp.

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

which provided for an investment of $ 40,000,000

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

Subject to the terms and conditions

contained in the SPA, the shares issued at a purchase price of $ 6.00

As a result of this transaction, DSS

owns approximately 53 %

of APB, and as a result its operating results have been included in the Company’s financial statements beginning September

The Company incurred approximately $ 36,000

in cost associated with the acquisition of APB

which were recorded as general and administrative expenses.

The acquisition of APB 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.

Since acquisition, APB has incurred approximately $ 194,000 of net losses, of which approximately $ 96,000 of loss

incurred is attributable to non-controlling interest.

The next largest shareholder of APB is Alset EHome International, Inc.

AEI’s Chairman and CEO, Heng Fai Chan, and a member of the AEI’s Board of Directors, Wu Wai Leung William, each serve on

both the AEI Board and the Board of the Company.

The CEO of the Company, Mr.

Heuszel, also has an approximate 2 %

equity position of APB.

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

if the acquisition took place on January 1.

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

SCHEDULE OF BUSINESS ACQUISITION, PRO FORMA INFORMATION

Net (loss)/income

$ ( 32,217,000 )

Basic earnings

Diluted earnings

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

well the fair value of the non-controlling interests.

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

Other assets acquired and liabilities assumed were not significant.

The Company has also completed an initial valuation of goodwill

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

have yet to be filed.

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

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

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

reporting unit.

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

Basic (loss)/earnings per share

Diluted (loss)/earnings per share

The Company has completed

the valuation of good will and non-controlling interest, which approximate $ 29,744,000 and $ 33,099,000 , respectively.

Goodwill is driven

by other intangible assets that do not qualify for separate recognition and is not deductible for tax purposes.

Net assets acquired

were approximately $ 3,400,000

and included approximately $ 1,250,000

in cash, $ 1,900,000

in marketable securities, $ 330,000

in notes receivable and $ 101,000

of accounts payable and accrued liabilities.

APB and the company in which APB owns marketable securities share a common director.

Services Global Corp.

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 to DSS 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 years from such date.

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

warrants have been recorded at the fair value of $ 324,000 as

of September 30, 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

decrease representing an unrealized loss of $ 224,000 and

$ 732,000 respectively

during the three and nine months ended September 30, 2021.

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 $ 9,192,000

which represents primarily intangible

assets in the form of a distributor lists and goodwill arising from acquisitions.

These intangible assets have been valued at approximately

and $ 8,044,000 ,

respectively.

The intangible asset arising from the distributor list has a five -year

The Company has recorded amortization of $ 57,000

and $ 287,000

for the three- and nine-months ended September

30, 2021, respectively, on the consolidated statement of operations.

On April 5, 2021, a subsidiary of the Company entered into a convertible

promissory note (“SHRG Note”) with SHRG (see Note 3).

The Company loaned the principal sum of $ 30,000,000 .

Accordingly, in April 2021, the SHRG issued to the Company 27,000,000

shares of its Class A Common Stock, including

shares in payment of the loan origination

fee and 12,000,000

shares in prepayment of interest for the

In addition, the Company received 150,000,000

warrants both issued and vested on April

These warrants have an exercise price of $ 0.22

and expire April

As of the date of issuance the

warrants the consideration paid allocated to the warrants amounted to approximately $ 14,957,000 .

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

September 30, 2021, the Company held 91,460,978

class A common shares equating to a 46.8 %

ownership interest in SHRG.

On December 23, 2021, DSS purchased 50,000,000 shares at $ 0.06 per share via a private placement.

With this purchase,

DSS increased its ownership of voting shares from approximately 47 % of SHRG to approximately 58%.

The acquisition of SHRG meets the definition

of a business with inputs, processes, and outputs, and therefore, the Company has concluded to account for this transaction in accordance

with the acquisition method of accounting under Topic 805.

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

if the acquisition took place on January 1.

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

OF BUSINESS ACQUISITION, PRO FORMA INFORMATION

2021 (unaudited)

2020 (unaudited)

$ 102,308,000

Net (loss)/income

$ ( 37,236,000

Basic (loss)/earnings per share

Diluted (loss)/earnings per share

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

The Company is in the process of completing valuations and useful lives for certain assets acquired in the transaction.

We expect the

preliminary purchase price accounting to be completed during the year ending December 31, 2022.

Company, via three (3) of the Company’s existing board members, currently holds three (3) of the seven (7) 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

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).

8 - PROPERTY PLANT AND EQUIPMENT

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

and equipment

and improvements

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

Machinery and

Building and improvements

Furniture and fixtures

Software and websites

accumulated depreciation

plant and equipment, net

Depreciation expense for the

years ended December 31, 2021 and 2020 was $ 1,129,000 and $ 710,000 respectively.

9 - INTANGIBLE ASSETS

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

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

with the signing of a Master Distributor Agreement with Advanced Cyber Security Corp.

(“ACS”) for the Company to distribute

ACS’s EndpointLockV™

cyber security software exclusively in thirteen countries in Asia and Australia, and non-exclusively,

and Middle East.

The aggregate cost of $494,783 of the agreement was recorded as an intangible asset to be amortized

over the expected useful life of 36 months.

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

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

These assets are being

amortized over their useful lives.

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

These assets are being amortized over

their useful lives.

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

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

These assets are not yet placed in service and will

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

performed, acquired $ 22,260,000

of developed technology assets.

were placed in service on January 1, 2021 and will be amortized over a 20 -year

useful life when placed in service.

June 18, 2021, AMRE Shelton 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.

Include in the value of the property is $ 585,000 of intangible assets with an estimated

useful life of 3 years.

November 4, 2021, AMRE LifeCare acquired three medical facilities located in Fort Worth, Texas, Plano, Texas, and Pittsburgh, Pennsylvania.

Include in the value of the property is $ 15,901,000 of intangible assets with estimated useful lives ranging from 1 to 11 years.

December 21, 2021, AMRE Winter Haven, LLC.

(“AMRE Winter Haven”), a subsidiary of AMRE, acquired a medical facility located

in Winter Haven, Florida.

Include in the value of the property is $ 29,000 of intangible assets with an estimated useful life of approximating

assets are comprised of the following:

SCHEDULE OF INTANGIBLE ASSETS

Carrying Amount

2 unchanged sentences

Carrying Amount

technology assets

intangibles customer lists, licenses and non-compete agreements

intangibles patents and patent rights

application costs

Developed technology assets

Acquired intangibles customer lists, licenses,

site/tenant improvements, in-place and favorable or unfavorable leases

Acquired intangibles patents and patent rights

Patent application costs

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

As of December 31, 2020, the weighted average remaining useful life of these assets in service was approximately 8.2 years.

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

December 31, 2021, the weighted average remaining useful life of these assets in service was approximately 3.6 years.

amortized for the year ended December 31, 2021 and 2020 was approximately $ 3,279,000

and $ 374,000 ,

respectively.

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

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION OF INTANGIBLE ASSETS

NOTE 10 – ACCRUED EXPENSES AND DEFERRED

Accrued expenses and deferred revenue consist

of the following for the years ended December 31,

OF ACCRUED EXPENSES AND DEFERRED REVENUE

Customer deposits

Deferred revenue

Accrued wages

Employee stock warrants liabilities

Settlement liability

Uncertain tax positions

Accrued expenses

Sales tax payable

Accrued expenses and deferred revenue

11 – SHORT TERM AND LONG-TERM DEBT

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

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

This revolving line of credit

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

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

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

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

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.

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

of up to $ 800,000

that bears interest at 1 Month LIBOR plus 2.0 %

as of December 31, 2020) and had a maturity date of May

31, 2022 and was renewable annually.

This renewal was not exercised by Premier Packaging.

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

The Term Note was paid in full

in July 2021.

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.

Current maturities of long-term debt

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

As of December 31, 2020 and December

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

The Company pays a monthly amount of $13,000

in principal and interest.

December 1, 2017, the Company’s subsidiary Plastic Printing Professionals entered into a Loan Agreement and accompanying

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

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

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

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

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

Line of Credit - On July 31, 2020, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving

Line of Credit Agreement with Citizens pursuant to which Citizens agreed to lend up to $900,000 to permit Premier Packaging to

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

The aggregate principal balance outstanding under

the Equipment Acquisition Line of Credit shall bear interest thereon at a per annum rate of 2% above the LIBOR Advantage Rate

until the Conversion Date (as defined in the Term Note Non-Revolving Line of Credit).

Effective on the Conversion Date, the interest

shall be adjusted to a fixed rate equal to 2% above the bank’s Cost of Funds, as determined by Citizens.

As of December

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

Line of Credit shall bear interest thereon at a per annum rate of 2 % above the LIBOR Advantage Rate until the Conversion Date (as defined

in the Term Note Non-Revolving Line of Credit).

Effective on the Conversion Date, the interest shall be adjusted to a fixed rate equal

to 2 % above the bank’s Cost of Funds, as determined by Citizens.

As of December 31, 2020, the loan had a balance of $ 0 .

Packaging did not exercise its right to renew this line of credit.

Notes - On June 27, 2019, Premier Packaging refinanced and consolidated the outstanding principal associated with the two

promissory notes for its packaging plant located in Victor, New York, for $1,200,000 with Citizens Bank.

The new Promissory Note

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

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

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

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

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

Citizens credit facilities to the Company’s subsidiary Premier Packaging, contain various covenants including fixed charge

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

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

As of December 31, 2020, the new,

consolidated Promissory Note had a balance of $ 1,100,000 .

In July of 2021, Premier Packaging repaid this note in full.

Citizens credit facilities to the Company’s subsidiary Premier Packaging, contain various covenants including fixed charge coverage

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

For the year ended December 31, 2020,

Premier Packaging was in compliance with the annual covenants.

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

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.

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%.

March 2, 2020, AMRE entered into a $ 200,000

unsecured promissory note with LVAMPTE.

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

As of December 31, 2020, accrued interest is included in the outstanding balance.

If not paid sooner, the entire unpaid principal balance is due in full on March 2, 2022.

As further incentive to enter into this

Note, AMRE granted LVAM warrants to purchase shares of common stock of AMRE (the “Warrants”).

The amount of the

warrants granted is the equivalent of the Note Principal divided by the Exercise Price.

The Warrants are exercisable for four

years and are exercisable at $5.00 per share (the “Exercise”

The value of the warrants is not considered to

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

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 LVAMPTE warrants to purchase shares of common

stock of AMRE (the “Warrants”).

The amount of the warrants granted is the equivalent of the Note Principal divided by the

Exercise Price.

The Warrants are exercisable for four years and are exercisable at $ 5.00

per share (the “Exercise” Price).

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 December 31, 2021, the new promissory note, inclusive of unpaid interest, had a balance of $ 230,000

and is included in current portion of long-term debt, net on the consolidated balance sheet.

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.

As of December 31,

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

Q2 2020, the Company received loan proceeds for Premier Packaging, DSS Digital, and AAMI in the amount of approximately $1,078,000

under the Paycheck Protection Program (“PPP”).

The PPP, established as part of the Coronavirus Aid, Relief and

Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the

average monthly payroll expenses of the qualifying business.

These funds were used for payroll, benefits, rent, mortgage interest,

and utilities.

As of August 4, 2020, pursuant to the terms of the SBA PPP program, the Company submitted applications for Premier

Packaging and DSS Digital for a requested 100% loan forgiveness.

During the fourth quarter 2020, both these notes approximating

$969,000 were forgiven in full and recognized as a gain on the extinguishment of debt on the accompanying consolidated

financial statements as of December 31, 2020.

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

for 100% loan forgiveness in October 2020, and received confirmation of forgiveness in January 2021.

2021, the outstanding principal and interest approximated $ 111,000

is included in long-term debt, net on the consolidated balance sheet.

May 20, 2021, Premier Packaging entered into master loan and security agreement (“BOA Note”) with Bank of America, N.A.

(“BOA”) to secure financing approximating $ 3,700,000

to purchase a new Heidelberg XL 106-7+L printing press.

The aggregate principal balance outstanding under the BOA Note shall bear

interest at a variable rate on or before the loan closing.

At closing, the interest rate shall be fixed for the duration of the

As of December 31, 2021, the outstanding principal on the BOA Note was $ 3,339,000

and had an interest rate of 3.35 %,

and is included in Long-term debt, net on the consolidated balance sheet.

June 18, 2021, AMRE

Shelton entered into a loan agreement (“Shelton Agreement”) with Patriot Bank, N.A.

(“Patriot Bank”) in an amount

up to $ 6,155,000 , with the amount financed approximating $ 5,105,000 .

The Shelton Agreement contains monthly payments of principal and

an initial interest 4.25 %.

The interest will be adjusted commencing on July 1, 2026 and continuing for the next succeeding 5 year period

shall be determined one month prior to the change date and shall be an interest rate equal to two hundred fifty (250) basis points above

the Federal Home Loan Bank Boston 5-Year/25-Year amortizing advance rate, but in no event less than 4.25 % for the term of 120 months

with a balloon payment approximating $ 2,829,000

due at term end.

This agreement contains certain

covenants that are analyzed on an annual basis, starting December 31, 2021.

The funds borrowed were used to purchase a 40,000 square

foot, 2.0 story, Class A+ multi-tenant medical office building located on a 13.62 acre site.

Of the total financed, approximately

is classified as current portion of long-term

debt, net, and the remaining balance of approximately $ 4,673,000

recorded as long-term debt, net of $ 180,000

in deferred financing costs.

On October 13, 2021, LVAM

entered into loan agreement with BMIC (“BMIC Loan”), whereas LVAM borrowed the principal amount of $ 3,000,000 , with interest

to be charged at a variable rate to be calculated at the maturity date .

The BMIC Loan matures on October 12, 2022 and contains an auto

renewal period of three months.

As of December 31, 2021, $ 3,000,000 is included in current portion of long-term debt, net on the consolidated

balance sheet.

November 2, 2021, AMRE LifeCare entered into a loan agreement (“LifeCare Agreement”) with Pinnacle Bank, (“Pinnacle

Bank”) in the amount of $ 40,300,000 .

The LifeCare Agreement calls for the principal amount of the in equal, consecutive monthly installments based upon a twenty-five ( 25 )

year amortization of the original principal amount of the LifeCare Agreement at an initial rate of interest equal to the interest rate

determined in accordance as of July 29, 2022 provided, however, such rate of interest shall not be less than 4.28 %,

with the first such installment being payable on August 29, 2022 and subsequent installments being payable on the first day of each succeeding

month thereafter until the maturity date, at which time any outstanding principal and interest is due in full.

The maturity date of November

2, 2023 may be extended to November 2, 2024.

As of December 31, 2021, the outstanding principal and interest of the LifeCare agreement

approximates $ 39,448,000 ,

net of deferred financing costs of $ 1,002,000 .

Of this, $ 381,000 is included in current portion of long-term debt, net and $ 39,067,000 is included in long-term debt, net

on the consolidated balance sheet.

October 2017, SHRG issued a Convertible Promissory Note in the principal amount of $ 50,000

(the “Note”) to HWH International,

Inc (“HWH International” or the”Holder”).

HWH International is affiliated with Heng Fai Ambrose

Chan, who became a Director of SHRG April 2020.

The Note is convertible into 333,333

shares of SHRG Common Stock.

Concurrent with

issuance of the Note, SHRG issued to HWH International a detachable warrant to purchase up to an additional 333,333

shares of SHRG Common Stock, at an exercise price

of $ 0.15 per

Under the terms of the Note and the detachable stock warrant, the Holder is entitled to certain financing rights.

If SHRG enters

into more favorable transactions with a third-party investor, it must notify the Holder and may have to amend and restate the Note and

the detachable stock warrant to be identical.

December 2019, SHRG and the holder of the SHRG $ 100,000

convertible note dated April 13, 2018 (the “April

2018Note”) entered into an amendment to the underlying promissory note.

Pursuant to the amendment, the parties extended the maturity

date of the note to April 2021.

In addition, after giving effect to the amendment, the April 2018 Note is non-interest bearing.

terms of the April 2018 Note remain unchanged.

As of the date of this report, this note is currently in default..

holder of the note are discussing options, which may include the conversion in full or in part of the note, and the repayment of any

remainder of the note.

SHRG intends to conclude these discussions and to settle the April 2018 Note in the foreseeable future.

summary of scheduled principal payments of long-term debt, not including revolving lines of credit, subsequent to December 31, 2021

are as follows:

OTHER LIABILITIES

November 14, 2016, the Company entered into a Proceeds Investment Agreement (the “Agreement”) with Brickell Key Investments

LP (“BKI”).

Pursuant to the Agreement, BKI financed an aggregate of $13,500,000 in a patent purchase and monetization

program to be implemented and managed by the Company (the “Financing”).

Pursuant to the Agreement.

$3,000,000 of the

Financing was used to cover the Company’s purchase of a portfolio of U.S.

and foreign LED patents and a license from Intellectual

Discovery Co., Ltd., a Korean company (collectively, the “LED Patent Portfolio”), resulting in a basis in these assets

A total of $6,000,000 of the Financing was directed by BKI to attorneys to cover anticipated attorneys’

out-of-pocket expenses for legal proceedings that may transpire relating to enforcement of the LED Patent Portfolio.

is not included in the Company’s financial statements as the Company has no control over these funds, which are segregated

and escrowed in the attorneys’

trust account.

addition, on November 14, 2016, the Company received $4,500,000 of the Financing, which was required to be used by the Company

to pay for the defense of Inter Partes Review or other similar proceedings that may be filed from time to time by defendants with

Patent & Trademark Office relating to the LED Patent Portfolio, with excess amounts available for general working

capital needs.

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

estimated future Inter Partes Review costs.

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

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

As of December 31, 2020, an aggregate of

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

For the remaining $3,000,000

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

2017 through July 2017, $80,000 per month for the remainder of 2017 through March 2018, $86,500 per month for the remainder of

2018, and through November of 2019.

As of December 31, 2019, the liability has been fully amortized.

An aggregate of $955,000

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

12 - 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 18, 2019, the Company had entered into a Convertible Promissory Note with LiquidValue Development Pte Ltd ., a company

owned and controlled by Mr.

Heng Fai Ambrose Chan, DSS’s Chairman, in the principal sum of $500,000, of which up to $500,000

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

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

of $33.60 per share.

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

the Maximum Conversion Amount under the Note.

March 5, 2019, the Company issued 4,348 shares of its common stock at $34.50 per share as partial consideration for a licensing

and distribution agreement entered into with Advanced Cyber Security Corp.

June 5, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital

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

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

stock, $0.02 par value per share.

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

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

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

also granted the Underwriters a 45-day option to purchase up to 1,680,000 additional shares of the Company’s common stock

on the same terms and conditions for the purpose of covering any over-allotments in connection with the Offering (17,306 shares

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

The net offering proceeds to the

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

commissions and other offering expenses.

November 1, 2019, pursuant to a Subscription Agreement, LiquidValue Development Pte LTD, a company owned and controlled by Mr.

Heng Fai Ambrose Chan, DSS’s Chairman, purchased from the Company, in a private placement, and aggregate of 200,000 shares

of common stock, for an above market purchase price equal to $9.00 per share (at the time of LiquidValues’

commitment, the

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

discounts, commissions and other offering expenses.

February 20, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #1”) with

Aegis Capital Corp.

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

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

2020 Offering”), of 740,741

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

Subject to the terms and conditions contained in the Underwriting

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

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

The Company also granted the Underwriters a 45-day

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

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

SCHEDULE OF NOTES PAYABLE AND LONG-TERM DEBT

12 - STOCKHOLDERS’ EQUITY

of Equity – On February 20, 2020, the Company entered into an underwriting agreement (the “Underwriting

Agreement #1”) with Aegis Capital Corp.

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

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

Offering”), of 740,741 shares

of the Company’s common stock, $ 0.02 par

value per share.

Subject to the terms and conditions contained in the Underwriting Agreement #1, the shares were sold to the

Underwriter at a public offering price of $ 5.40 ($ 0.18 per

shares pre-reverse stock split) per share, less certain underwriting discounts and commissions.

The Company also granted the

Underwriters a 45-day option to purchase up to 111,111 additional

shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in

connection with the Feb.

2020 Offering which were exercised.

offering proceeds to the Company from the Feb.

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

discounts and commissions and other estimated offering expenses.

The offering was closed on February 25, 2020.

Heng Fai Ambrose

Chan, the Chairman of the Company’s Board of Directors, purchased $2 million of shares in the Feb.

The net offering proceeds to the Company from the Feb.

2020 Offering

May 15, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #2”) with the Underwriter,

which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten

public offering (the “May 2020 Offering”), of 769,230 shares of the Company’s common stock, $0.02 par

value per share.

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

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

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

on the same terms and conditions for the purpose of covering any over-allotments in connection with the May 2020 Offering

which was exercised.

The net offering proceeds to the Company from the May 2020 Offering were approximately $6.2

million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

Offering was closed on June 26, 2020.

July 7, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #3”) with the

Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment

underwritten public offering (the “July 2020 Offering”), of 1,028,800 shares of the Company’s common

stock, $0.02 par value per share.

Subject to the terms and conditions contained in the Underwriting Agreement #3, the shares

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

The Company also granted the Underwriters a 45-day option to purchase up to 154,320 additional shares of the Company’s common

stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the July 2020

Offering which was exercised.

The net offering proceeds to the Company from the July 2020 Offering were approximately

$6.7 million.

were approximately $ 4 million,

after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

The offering was closed on

February 25, 2020.

Heng Fai Ambrose Chan, the Chairman of the Company’s Board of Directors, purchased $ 2 million

of shares in the Feb.

2020 Offering.

May 15, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #2”) with the Underwriter,

which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public

offering (the “May 2020 Offering”), of 769,230 shares of the Company’s common stock, $0.02 par value per share.

to the terms and conditions contained in the Underwriting Agreement #2, the shares were sold to the Underwriter at a public offering

price of $ 7.80 per share, less certain underwriting discounts and commissions.

The Company also granted the Underwriters a 45-day option

to purchase up to 115,384 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering

any over-allotments in connection with the May 2020 Offering which was exercised.

The net offering proceeds to the Company from the May

2020 Offering were approximately $ 6.2 million, after deducting estimated underwriting discounts and commissions and other estimated offering

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 per share.

Subject to the terms and conditions contained in the Underwriting Agreement #3, the shares were sold to the Underwriter at a public offering

price of $ 6.25 per share, less certain underwriting discounts and commissions.

The Company also granted the Underwriters a 45-day option

to purchase up to 154,320 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering

any over-allotments in connection with the July 2020 Offering which was exercised.

The net offering proceeds to the Company from the

July 2020 Offering were approximately $ 6.7 million.

The July 2020 Offering was closed on July 10, 2020.

July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #4”) with the

“Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm

commitment underwritten public offering (the “July 2020 Offering #2”), of 453,333 shares of the Company’s

common stock, $0.02 par value per share.

Subject to the terms and conditions contained in the Underwriting Agreement #4,

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

The Company also granted the Underwriters a 45-day option to purchase up to 38,533 additional shares of the Company’s

common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the July 2020

The net offering proceeds to the Company from the July 2020 Offering #2 were approximately

$3.3 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

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

August 21, 2020, the Company, completed its acquisition of Impact BioMedical, pursuant to a Share Exchange Agreement by and among

the Company, DSS BioHealth, and related parties Alset Intl, and GBM which was previously approved by the Company’s shareholders

(the “Share Exchange”).

Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s

common stock, par value $0.02 per share, nominally valued at $6.48 per share, and 46,868 newly issued shares of the Company’s

Series A Convertible Preferred Stock.

July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #4”) with the “Underwriter,

which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public

offering (the “July 2020 Offering #2”), of 453,333 shares of the Company’s common stock, $ 0.02 par value per share.

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

price of $ 7.50 per share, less certain underwriting discounts and commissions.

The Company also granted the Underwriters a 45-day option

to purchase up to 38,533 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering

any over-allotments in connection with the July 2020 Offering #2.

The net offering proceeds to the Company from the July 2020 Offering

#2 were approximately $3.3 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

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

connection with the Share Exchange for Impact BioMedical described in Note 7, on August 18, 2020, the Company filed a Certificate

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

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

Series A Preferred Stock.

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

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

As described in Note 7, this transaction

is a related party transaction.

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

or are payable on the Series A Preferred Stock.

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

at a liquidation value of $1,000 per share aggregating to $46,868,000, and the Company has the right to redeem all or any portion

of the then outstanding shares of Series A Preferred Stock, pro rata among all holders, at a redemption price per share equal

to such liquidation value per share.

The Series A Preferred Stock ranks senior to Common Stock and any other class of securities

that is specifically designated as junior to the Series A Preferred Stock with respect to rights on the distribution of assets

on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, in respect of a liquidation

preference equal to its par value of $1,000.

A holder of Series A Preferred Stock has the option to convert each share of Series

A Preferred Stock into a number of common shares in the Company equal to the $1,000 liquidation preference divided by a conversion

price of $6.48 or 154.32 shares subject to a Beneficial Ownership Limitation of 19.99%, as defined in the Share Exchange Agreement.

Additionally, the Company has the option to require conversion of all outstanding Series A Preferred Stock into common stock at

any time, subject to the Beneficial Ownership Limitation discussed.

In aggregate the Series A Preferred Shares are convertible

into 7,232,670 shares of the Company’s common stock at the date of issuance.

The Company evaluated the classification

of the Series A Preferred Shares under the guidance enumerated in ASC 470, 480, and 815 and determined that based on the features

noted above the instruments are accounted for as permanent equity.

On October 16, 2020, GBM converted 4,293 shares of the Series

A Convertible Preferred Stock into 662,500 shares of the Company’s common A shares.

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

and 2019 and activity during the years then ended:

at January 1:

during the year

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

of which 47,000

shares were designated Series A Preferred Stock.

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

Securities and Exchange Commission on July 14, 2020.

As described in Note 7, this transaction is a related party transaction.

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

are payable on the Series A Preferred Stock.

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

value of $ 1,000 per share aggregating to $ 46,868,000 , and the Company has the right to redeem all or any portion of the then outstanding

shares of Series A Preferred Stock, pro rata among all holders, at a redemption price per share equal to such liquidation value per share.

The Series A Preferred Stock ranks senior to Common Stock and any other class of securities that is specifically designated as junior

to the Series A Preferred Stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution

or winding up of the affairs of the Company, in respect of a liquidation preference equal to its par value of $ 1,000 .

A holder of Series

A Preferred Stock has the option to convert each share of Series A Preferred Stock into a number of common shares in the Company equal

to the $1,000 liquidation preference divided by a conversion price of $6.48 or 154.32 shares subject to a Beneficial Ownership Limitation

of 19.99%, as defined in the Share Exchange Agreement.

Additionally, the Company has the option to require conversion of all outstanding

Series A Preferred Stock into common stock at any time, subject to the Beneficial Ownership Limitation discussed.

In aggregate the Series

A Preferred Shares are convertible into 7,232,670 shares of the Company’s common stock at the date of issuance.

The Company evaluated

the classification of the Series A Preferred Shares under the guidance enumerated in ASC 470, 480, and 815 and determined that based

on the features noted above the instruments are accounted for as permanent equity.

On October 16, 2020, GBM converted 4,293 shares of

the Series A Convertible Preferred Stock into 662,500 shares of the Company’s common A Shares.

On May 28, 2021, GBM converted 35,316

shares of the Series A Convertible Preferred Stock into 5,450,000 shares of the Company’s common A Shares.

On June 21, 2021, GBM

converted 7,259 shares of the Series A Convertible Preferred Stock into 1,120,170 shares of the Company’s common A Shares.

January 19, 2021, the Company entered into an underwriting agreement, as amended by Amendment No.

1 effective as of January 19, 2021

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

2021 Offering”), of 6,666,666

shares of the Company’s common stock, $ 0.02

par value per share.

Subject to the terms and

conditions contained in the Jan.

2021 Underwriting Agreement, the shares were offered in a public offering at a price of $ 3.60

per share, less certain underwriting discounts

and commissions.

The Company also granted the underwriters a 45-day option to purchase up to 1,000,000

additional shares of the Company’s common

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

2021 Offering.

overallotment was exercised in full.

The net offering proceeds to the Company from the Jan.

2021 Offering are approximately $ 24.0

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 in the Feb.

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 $ 39.7

million, including the exercise of the underwriter’s

over-allotment option, and after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

May 26, 2021, the Company entered into an underwriting agreement (the “May 2021 Underwriting Agreement”) with Aegis Capital

Corp., as representative of the underwriters named therein, which provided for the issuance and sale by the Company and the purchase

by the underwriters, in a firm commitment underwritten public offering (the “May 2021 Offering”), of 29,000,000 shares of

the Company’s common stock, $ 0.02 par value per share.

Subject to the terms and conditions contained in the May 2021 Underwriting

Agreement, the shares were sold at a public offering price of $ 1.50 per share, less certain underwriting discounts and commissions.

Company also granted the underwriters a 45-day option to purchase up to 4,350,000 additional shares of the Company’s common stock

on the same terms and conditions for the purpose of covering any over-allotments in connection with the May 2021 Offering, which over-allotment

option was exercised in full on June 16, 2021.

The net offering proceeds to the Company from the May 2021 Offering are approximately

$ 45.75 million, including the exercise of the underwriter’s over-allotment option, and after deducting estimated underwriting discounts

and commissions and other estimated offering expenses.

September 3, 2021, DSS entered into a subscription agreement (the “AEI Subscription Agreement”) with AEI, which provided

for an investment of up to $ 15,000,000 by AEI into the Company in exchange of an aggregate of 12,156,000 shares of the Company’s

common stock, $ 0.02 par value per share.

Subject to the terms and conditions contained in the AEI Subscription Agreement, the shares

were issued at a purchase price of $ 1.234 per share.

Prior to this transaction, AEI indirectly held a significant investment in the Company

through majority-owned subsidiaries.

AEI’s Chairman and CEO, Heng Fai Chan, and a member of the AEI’s Board of Directors,

Wu Wai Leung William, each serve on both the AEI Board and the Board of the Company.

Warrants – The following is a summary with respect to warrants outstanding and exercisable as of December 31, 2021 and

2020 and activity during the years then ended:

SCHEDULE OF WARRANT ACTIVITY

Outstanding at January 1:

Granted during the year

Lapsed/terminated

at December 31:

average months remaining

Outstanding at December

Exercisable at December

Weighted average months remaining

Company did not issue any warrants in 2021 or 2020.

Options - On June 20, 2013, the Company’s shareholders adopted the 2013 Employee, Director and Consultant Equity

Incentive Plan (the “2013 Plan”).

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

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

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

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

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

December 9, 2019, the Company’s shareholders adopted the 2020 Employee, Director and Consultant Equity Incentive Plan (the

“2020 Plan”).

Options - On June 20, 2013, the Company’s shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive

Plan (the “2013 Plan”).

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

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

the terms of the 2020 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment

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

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

Under the terms

of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”)

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

As of December 31, 2021, no shares

remained available under this plan.

December 9, 2019, the Company’s shareholders adopted the 2020 Employee, Director and Consultant Equity Incentive Plan (the “2020

The 2020 Plan provides for the issuance of an initial 241,204 shares of common stock authorized to be issued for grants

of options, restricted stock and other forms of equity to employees, directors and consultants.

In addition, on the first day of each

calendar year, for a period of not more than ten (10) years, commencing January 1, 2021, or the first business day of the calendar year

if the first day of the calendar year falls on a Saturday or Sunday, the shares available under this plan will automatically increase

in an amount equal to the lesser of (i) five percent (5%) of the total number of shares of Common Stock outstanding as of December 31

of the preceding fiscal year or (ii) such number of shares of Common Stock as determined by the Board of Directors.

Under the terms of

the 2020 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”)

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

As of December 31, 2021, there

are 483,125 shares available under this plan.

following is a summary with respect to options outstanding as of December 31, 2021 and 2020 and activity during the years then ended:

SUMMARY OF STOCK OPTION ACTIVITY UNDER STOCK OPTION AND INCENTIVE PLANS

Average Exercise Price

2 unchanged sentences

Average life Remaining (Years)

at January 1,

Outstanding at January 1,

Lapsed/terminated

at December 31,

to vest at December 31,

intrinsic value of outstanding options at December 31,

intrinsic value of exercisable options at December 31,

intrinsic value of options expected to vest at December 31,

Outstanding at December 31,

Exercisable at December 31,

Expected to vest at

Aggregate intrinsic value of outstanding

options at December 31,

Aggregate intrinsic value of exercisable

options at December 31,

Aggregate intrinsic

value of options expected to vest at December 31,

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

Company estimates the expected volatility of the Company’s common stock at the grant date using the historical volatility

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

estimates the expected volatility of the Company’s common stock at the grant date using the historical volatility of the Company’s

common stock over the most recent period equal to the expected stock option term.

aggregate grant date fair value of options that vested during 2021 and 2020 was approximately $ 2,000 and $ 100,000 , respectively.

There were no options exercised during 2020 or 2019.

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

which may not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources.

Restricted stock compensation cost is measured as the stock’s fair value based on the quoted market price at the date of

The restricted shares issued reduce the amount available under the employee stock option plans.

Compensation cost is recognized

only on restricted shares that will ultimately vest.

The Company estimates the number of shares that will ultimately vest at each

grant date based on historical experience and adjust compensation cost and the carrying amount of unearned compensation based

on changes in those estimates over time.

Restricted stock compensation cost is recognized ratably over the requisite service period

which approximates the vesting period.

An employee may not sell or otherwise transfer unvested shares and, if employment is terminated

prior to the end of the vesting period, any unvested shares are surrendered to us.

The Company has no obligation to repurchase

any restricted stock.

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

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

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

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

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

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

Compensation –

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.

were no options exercised during 2021 or 2020.

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

not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources.

stock compensation cost is measured as the stock’s fair value based on the quoted market price at the date of grant.

The restricted

shares issued reduce the amount available under the employee stock option plans.

Compensation cost is recognized only on restricted shares

that will ultimately vest.

The Company estimates the number of shares that will ultimately vest at each grant date based on historical

experience and adjust compensation cost and the carrying amount of unearned compensation based on changes in those estimates over time.

Restricted stock compensation cost is recognized ratably over the requisite service period which approximates the vesting period.

employee may not sell or otherwise transfer unvested shares and, if employment is terminated prior to the end of the vesting period,

any unvested shares are surrendered to us.

The Company has no obligation to repurchase any restricted stock.

April 3, 2020, the Company issued an aggregate of 5,833

shares of fully vested restricted stock to members

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

which is included in stock-based compensation

for the year ended December 31, 2020.

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.

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

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

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

July 2019, by unanimous written consent, the Board of Directors authorized the Company to issue individual stock grants of the

Company’s common stock, pursuant to the Company’s 2013 Employee, Director and Consultant Equity Incentive Plan, to

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

September 6, 2019.

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

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

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

the Company’s common stock, pursuant to the Company’s 2020 Employee, Director and Consultant Equity Incentive Plan,

to certain managers and directors in the amount of 8,900 shares, at $6.60 per share which were immediately vested and issued.

5,800 of these shares where were fully vested restricted stock to members of the Company’s management team with a two-year

lock-up period.

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

in exchange for 21,000 shares of common stock.

The shares were issued on the date of the agreement and were valued by the Company

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

will be expensed as marketing expense as it is earned.

During the year ended December

31, 2021, the Company had stock compensation expense of approximately $ 46,000

or less than $ 0.01

basic and diluted earnings per shares ($ 188,000 ,

basic and $ 0.03

diluted earnings per share for the corresponding

year ended December 31, 2020, respectively).

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

common stock, pursuant to the Company’s 2020 Employee, Director and Consultant Equity Incentive Plan, to certain managers and directors

in the amount of 8,900 shares, at $ 6.60 per share which were immediately vested and issued.

5,800 of these shares where were fully vested

restricted stock to members of the Company’s management team with a two-year lock-up period.

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

for 21,000 shares of common stock.

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

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

expense as it is earned.

The Company recognized $ 105,000 for the year ended December 31, 2021.

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.

stock grants of the Company’s common stock, pursuant to the Company’s 2020 Employee, Director and Consultant Equity Incentive

Plan, to a consultant of the Company in the amount of 20,000 shares, at $ 4.48 per share which were immediately vested.

13 - INCOME TAXES

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

the financial reporting and tax basis of assets and liabilities.

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

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

following is a summary of the components giving rise to the

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

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

financial reporting and tax basis of assets and liabilities.

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

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

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

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

SCHEDULE OF INCOME TAX PROVISION

Currently payable:

(decrease) increase in allowance

income tax benefit

Total currently payable

Total deferred

(decrease) increase

( 1,774,000 )

tax effect of discontinued operations

Total income tax benefit

$ ( 4,032,000

$ ( 1,774,000 )

components of deferred tax assets and liabilities are as follows:

operating loss carry forwards

issued for services

and other intangibles

in pass-through entity

Lease Liability

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets:

tax liabilities:

and other intangibles

-of-use asset

operating loss carry forwards

Unrealized loss on securities

Equity issued for services

Goodwill and other intangibles

Investment in pass-through

Deferred revenue

Operating Lease Liability

Gross deferred tax assets

Deferred tax liabilities:

Goodwill and other intangibles

Unrealized gains

-of-use asset

Gross deferred tax liabilities

valuation allowance

( 11,076,000 )

deferred tax liabilities

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

to offset the regular tax liability for any tax year.

$ ( 3,499,000 )

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

offset the regular tax liability for any tax year.

Further, the credit is refundable for any tax year beginning after December 31, 2017

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

and before December 31, 2020 in an amount equal to 50

percent of the excess of the minimum tax credit

over regular liability.

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

As of December 31, 2020 and 2019, the

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

consolidated balance sheet.

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

As of December 31, 2021

and 2020, the Company had $ 0

of minimum tax credit included in prepaids and

other current assets in the accompanying consolidated balance sheet.

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

The legislation

significantly changed U.S.

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

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

The Act permanently reduced the

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

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

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

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

The Act permanently reduced the U.S.

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

losses from the Company’s foreign subsidiaries amounted to $ 0.7

million and $ 0.4

million for 2021 and 2020,

respectively.

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

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

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

The Company elected to account

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

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

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

The Company elected to account for GILTI

tax in the period in which it is incurred.

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

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

on the foreign subsidiary’s tangible assets.

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

intangible income of a domestic corporation.

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

or benefit from either GILTI or FDII.

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

economic uncertainty resulting from the COVID-19 pandemic.

The CARES Act includes many measures to assist companies, including

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

(“TCJA”).

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

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

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

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

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

benefit from these provisions.

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

provisions will have on its business.

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

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

Under the provisions of the Internal Revenue Code,

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

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

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

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

have a limitation on future deductibility.

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

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

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

never expire.

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

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

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

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

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

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

is represented in the below table:

at December 31, 2019

of Impact BioMedical

year activity

of valuation allowance

at December 31, 2020

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

consolidated statements of operations are as follows:

Statutory United States federal rate

income tax return foreign

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

tangible assets.

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

As a result of these provisions, the Company did not have any additional tax expense or benefit from either GILTI or FDII.

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

uncertainty resulting from the COVID-19 pandemic.

The CARES Act includes many measures to assist companies, including temporary changes

to income and non-income based laws, some of which were enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”).

of the key changes include eliminating the 80% of taxable income limitation by allowing corporate entities to fully utilize NOLs to offset

taxable income in 2019, 2020 and 2021, allowing NOLs originating in 2019, 2020 and 2021 to be carried back

five years, enhanced interest deductibility, and retroactively clarifying the immediate recovery of qualified improvement property costs

rather than over a 39-year recovery period.

the year ended December 31, 2021, the Company was not able to benefit from these provisions.

The Company will continue to monitor

additional guidance issued and assess the impact that various provisions will have on its business.

December 31, 2021 and 2020, the Company has approximately $ 58.5

million and $ 56.7

million in federal net operating loss carryforwards

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

Under the provisions of the Internal Revenue Code, the

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

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

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

The Company has completed a full analysis

of historical ownership changes and determined that a portion of the net operating losses have a limitation on future deductibility.

Approximately $ 43.8 million of net operating losses incurred prior to 2020 will be unable to offset future taxable income and have been

reserved via a valuation allowance to reduce the deferred tax asset to the expected realizable amount, leaving $2.9M available for use

which expire at various dates through 2038 and the residual which never expire.

Additionally, at December 31, 2021 and 2020,

the Company had approximately $ 6.4

million and $ 6.9

million, and $ 2.1

million and $ 2.2

million, of California and Illinois NOL carry-forwards,

respectively, which expire

through 2041 .

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

valuation allowance for deferred tax assets increased approximately $ 2,739,000

in the year ended December 31, 2021

and decreased by $ 1,543,000 (net of $ 671,000 acquired with Impact BioMedical) in the year ended December 31, 2020.

The valuation allowance for deferred tax liability increased approximately $ 2,853,000 in the year ended December 31,2021 and

increased approximately $ 3,455,000 for the year ended December 31, 2020.

SCHEDULE OF CHANGES IN DEFERRED TAX LIABILITIES

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

statements of operations are as follows:

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

Statutory United States federal

State income taxes net of federal benefit

Permanent differences

Non-controlling intere st

Non-controlling interest

Foreign taxes

2 unchanged sentences

Executive compensation

Change in valuation allowance

Change in valuation

Effective rate

Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense.

During the years ended

December 31, 2020 and 2019, the Company recognized no interest and penalties.

During the years ended December

31, 2021 and 2020 the Company recognized no

interest and penalties.

Company files income tax returns in the U.S.

federal jurisdiction and various states.

The tax years 2017-2020 generally

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

The tax years 2017-2020 generally remain open to

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

14 - DEFINED CONTRIBUTION PENSION PLAN

Company maintains a qualified employee savings plans (the “401(k) Plan”) that qualifies as a deferred salary arrangement

under Section 401(k) of the Internal Revenue Code and which covers all eligible employees.

Employees generally become eligible

to participate in the 401(k) Plan two months following the employee’s hire date.

Employees may contribute a percentage of

their earnings, subject to the limitations of the Internal Revenue Code.

Commencing on January 1, 2018, the Company matched 100%

of the first 1% of employee contributions, then 50% of additional contributions up to an aggregate maximum match of 3.5%.

total matching contributions for 2020 and 2019 were approximately $117,000 and $123,000, respectively.

Employees generally become eligible to participate

in the 401(k) Plan two months following the employee’s hire date.

Employees may contribute a percentage of their earnings, subject

to the limitations of the Internal Revenue Code.

Commencing on January 1, 2018, the Company matched 100 % of the first 1 % of employee

contributions, then 50 % of additional contributions up to an aggregate maximum match of 3.5 %.

The total matching contributions for 2021

and 2020 were approximately $ 99,000 and $ 117,000 , respectively.

15 – COMMITMENTS AND CONTINGENCIES

Company has operating leases predominantly for operating facilities.

As of December 31, 2020, the remaining lease terms

on our operating leases range from seven to sixteen months.

DSS Plastics Group which finalized the sale of its assets on

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

Renewal options to extend our leases

have not been exercised due to uncertainty.

Termination options are not reasonably certain of exercise by the Company.

no transfer of title or option to purchase the leased assets upon expiration.

There are no residual value guarantees or material

restrictive covenants.

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

leases range from one

to sixty-three

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.

no residual value guarantees or material restrictive covenants.

There are no significant finance leases as of December 31, 2021.

Rent expense for the year ended December

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

expense for the year ended December 31, 2021 and December 31, 2020 was approximately $ 190,000

and $ 217,000

respectively.

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

lease payments

SCHEDULE OF FUTURE MINIMUM PAYMENTS UNDER OPERATING LEASES

Total lease payments

Imputed Interest

value of remaining lease payments

Weighted-average

remaining lease term (years)

Weighted-average

discount rate

Weighted-average remaining

lease term (years)

Weighted-average discount

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

The employment or

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

As of December 31, 2020,

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

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

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

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

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

Proceedings –

The employment or severance

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

As of December 31, 2021 and 2020, the Company

accrued approximately $ 7,276,000

and $ 4,300,000 ,

respectively, for Mr.

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

Ltd subsidiary in accordance

with the terms of his employment contract.

Also, as of December 31, 2021, the minimum severance payments under these employment agreements

are, in aggregate, approximately $ 220,000.

Proceedings –

Apple Litigation

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

(“Apple”) in the United States District Court for the Eastern

District of Texas, for patent infringement (the “Apple Litigation”).

The complaint alleges infringement by Apple of

DSSTM’s patents that relate to systems and methods of using low power wireless peripheral devices.

DSSTM is seeking a judgment

for infringement, injunctive relief, and compensatory damages from Apple.

On October 28, 2014, the case was stayed by the District

Court pending a determination of Apple’s motion to transfer the case to the Northern District of California.

7, 2014, Apple’s motion to transfer the case to the Northern District of California was granted.

On December 30, 2014, Apple

filed two Inter Partes Review (“IPR”) petitions with the Patent Trial and Appeal Board (“PTAB”) for review

November 26, 2013, DSS Technology Management, Inc.

(“DSSTM”) filed suit against Apple, Inc.

(“Apple”) in the

United States District Court for the Eastern District of Texas, for patent infringement (the “Apple Litigation”).

The complaint

alleges infringement by Apple of DSSTM’s patents that relate to systems and methods of using low power wireless peripheral devices.

DSSTM is seeking a judgment for infringement, injunctive relief, and compensatory damages from Apple.

On October 28, 2014, the case was

stayed by the District Court pending a determination of Apple’s motion to transfer the case to the Northern District of California.

On November 7, 2014, Apple’s motion to transfer the case to the Northern District of California was granted.

On December 30, 2014,

Apple filed two Inter Partes Review (“IPR”) petitions with the Patent Trial and Appeal Board (“PTAB”) for review

of the patents at issue in the case.

The PTAB instituted the IPRs on June 25, 2015.

The California District Court then stayed

the case pending the outcome of those IPR proceedings.

Oral arguments of the IPRs took place on March 15, 2016, and on June 17,

2016, PTAB ruled in favor of Apple on both IPR petitions.

The California District Court then stayed the case

pending the outcome of those IPR proceedings.

Oral arguments of the IPRs took place on March 15, 2016, and on June 17, 2016, PTAB ruled

in favor of Apple on both IPR petitions.

DSSTM then filed an appeal with the U.S.

Court of Appeals for the Federal

Circuit (the “Federal Circuit”) seeking reversal of the PTAB decisions.

Oral arguments for the appeal were held on

August 9, 2017.

On March 23, 2018, the Federal Circuit reversed the PTAB, finding that the PTAB erred when it found the claims

Court of Appeals for the Federal Circuit (the “Federal

Circuit”) seeking reversal of the PTAB decisions.

Oral arguments for the appeal were held on August 9, 2017.

On March 23, 2018,

the Federal Circuit reversed the PTAB, finding that the PTAB erred when it found the claims of U.S.

6,128,290 to be unpatentable.

The Federal Circuit affirmed its decision on July 12, 2018, when it denied Apple’s

petition for panel rehearing of the Federal Circuit’s Opinion and Judgment issued on March 23, 2018.

On July 27, 2018, the

District Court judge lifted the Stay resuming the litigation, which had a trial date set for the week of February 24, 2020.

January 14, 2020, the Court in the case DSS Technology Management, Inc.

Apple, Inc., 4:14-cv-05330-HSG pending in the Northern

District of California issued an order that denied DSS’

motion to amend its infringement contentions.

In the same Order,

the Court granted Apple’s motion to strike DSS’

infringement expert report.

DSS filed a motion for leave to file a

motion for reconsideration of the Court’s order denying DSS the right to amend its infringement contentions and motion to

strike DSS infringement expert report.

On February 18, 2020, the Court denied DSS’s motion for leave to file a motion for

reconsideration.

On February 24, 2020, the Court signed a Final Judgment stipulating that Apple was “entitled to a judgment

of non-infringement of U.S.

6,128,290 as a matter of law.”

On March 10, 2020 DSS filed an appeal of this Final

Judgment to the United States Court of Appeals for the Federal Circuit under DSS Technology Management v.

Apple, Federal Circuit

Briefing on the appeal has been completed.

The parties are currently waiting for the Court of Appeals to

schedule a date for oral argument.

LED Litigation

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

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.

That appeal is now fully briefed.

The Court of Appeals has not yet set the matter for argument.

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

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.

The IPR petition

was instituted on November 20, 2020 and remains pending.

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.

On September 1, 2020, the PTAB instituted the

IPR proceeding.

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

The District Court has entered a stay of the District Court proceedings pending the outcome of the IPR petition, which remains

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

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 patent.

The District Court has entered a stay of

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

On November 17, 2020, the PTAB instituted the IPR proceeding,

which remains pending.

Intel, Apple Litigation

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

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.

The Federal Circuit affirmed its decision on July 12, 2018, when it denied Apple’s petition for panel rehearing of the Federal

Circuit’s Opinion and Judgment issued on March 23, 2018.

On July 27, 2018, the District Court judge lifted the Stay resuming the

litigation, which had a trial date set for the week of February 24, 2020.

On January 14, 2020, the Court in the case DSS Technology Management,

Apple, Inc., 4:14-cv-05330-HSG pending in the Northern District of California issued an order that denied DSS’ motion to

amend its infringement contentions.

In the same order, the Court granted Apple’s motion to strike DSS’ infringement

expert report.

DSS filed a motion for leave to file a motion for reconsideration of the Court’s order denying DSS the right to

amend its infringement contentions and motion to strike DSS infringement expert report.

On February 18, 2020, the Court denied DSS’s

motion for leave to file a motion for reconsideration.

On February 24, 2020, the Court signed a Final Judgment stipulating that Apple

was “entitled to a judgment of non-infringement of U.S.

6,128,290 as a matter of law.” On March 10, 2020, DSS

filed an appeal of this Final Judgment to the United States Court of Appeals for the Federal Circuit under DSS Technology Management

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.

After considering all factors the Company has elected to not pursue any further appeals

on this matter.

Case is deemed closed.

Ronaldi Litigation

April 2019 DSS commenced an action in New York State Supreme Court, Monroe County, Index No.

E2019003542, against Jeffrey Ronaldi,

our former Chief Executive Officer.

This New York action seeks a declaratory judgment that, contrary to informal claims made by

Ronaldi’s employment agreement with us expired by its terms and that he is not entitled to any cash bonuses or

other unpaid amounts.

E2019003542, against Jeffrey Ronaldi, our

former Chief Executive Officer.

This New York action seeks a declaratory judgment that, contrary to informal claims made by him, Mr.

Ronaldi’s employment agreement with us expired by its terms and that he is not entitled to any cash bonuses or other unpaid amounts.

The lawsuit also seeks an injunction against Mr.

Ronaldi from interfering with any of DSS’

IP litigation.

Ronaldi subsequently commenced an action against DSS in the Superior Court of California, County of San Diego, on November

8, 2019, under case number 37-2019-00059664-CU-CO-CTL, in which he alleged that DSS terminated his employment in April 2019 in

order to avoid paying him certain employment-related amounts.

DSS was successful in dismissing the California case and consolidating

it with the action pending in Monroe County, New York.

Ronaldi asserted counterclaims in the Monroe County, New York action

similar to those he originally brought in California.

Ronaldi claims that his termination violated an alleged employment agreement

or implied-in-fact employment agreement and that he should have remained employed through 2019.

Ronaldi from interfering with any of DSS’ IP litigation.

Ronaldi subsequently

commenced an action against DSS in the Superior Court of California, County of San Diego, on November 8, 2019, under case number 37-2019-00059664-CU-CO-CTL,

in which he alleged that DSS terminated his employment in April 2019 in order to avoid paying him certain employment-related amounts.

DSS was successful in dismissing the California case and consolidating it with the action pending in Monroe County, New York.

asserted counterclaims in the Monroe County, New York action similar to those he originally brought in California.

Ronaldi claims

that his termination violated an alleged employment agreement or implied-in-fact employment agreement and that he should have remained

employed through 2019.

Ronaldi seeks to recover:

(i) $144,658 in wages from April 11, 2019 through December 31, 2019;

(ii) $769.23 in alleged unpaid based salary for time worked

before April 11, 2019;

alleged unpaid based salary for time worked before April 11, 2019;

(iii) $15,385 in alleged paid time off compensation;

(iv) $3,076.93 in alleged unpaid sick time compensation;

(iv) $3,077 in

alleged unpaid sick time compensation;

(v) $26,077 in waiting-time penalties;

(vi) $91,000 in unspecified expense reimbursement;

(vii) $300,000 in alleged cash bonuses

($100,000 per year) based on DSS’s performance in 2017, 2018 and 2019;

and (viii) a $450,000 performance bonus based on

the result of certain alleged net proceeds from patent infringement litigation.

$300,000 in alleged cash bonuses ($100,000 per year) based on DSS’s performance in 2017, 2018 and 2019;

and (viii) a $450,000 performance

bonus based on the result of certain alleged net proceeds from patent infringement litigation.

He further claims an interest in any recovery

2 unchanged sentences

4:14-cf05330-HSG.

The parties are now engaged in discovery.

The court recently ordered Mr.

Ronaldi to produce several categories

of documents that he sought to withhold.

Discovery is ongoing.

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.

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.

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

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

June 30, 2020 and remains pending and undecided.

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

Ronaldi’s motion

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

On March 26, 2021 Mr.

Ronaldi applied to the court for reimbursement of $160,896.25 in legal fees.

The Company intends

to object to the size of that bill as it was based on out-of-town billing rates and the result of an excessive number of hours

spent on litigation.

The parties are awaiting the court’s scheduling of the status conference for the management of

all pretrial activities and set a tentative date for trial, however, due to discovery disputes the Court has signaled

its intent to extend those deadlines.

Ronaldi applied

to the court for reimbursement of $ 160,896.25 in legal fees which was subsequently reduced to $ 159,771.25 .

A second application

was filed on November 12, 2021 seeking $ 121,672.51 in fees for a total demand of $ 281,443.76 .

The Company has objected to the size

of those bills as they were based on out-of-town billing rates and the result of an excessive number of hours spent on litigation.

parties now engaged in discovery, awaiting a decision on the Company’s objection to Mr.

Ronaldi’s fee applications.

engaged in court-ordered mediation on June 17, 2021, but the matter did not resolve.

Following mediation the Company moved to stay the

federal court action pending the outcome of the state court action to avoid inconsistent rulings on common issues of law and fact.

motion to stay was denied.

The Company intends to vigorously prosecute this action.

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.

(“Maiden”) commenced an action against DSS, 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.

DSS, 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.

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 Decentralized’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

Maiden also seeks a judgment from the court declaring:

“(1) Defendants lacked a valid security

interest in RBC and RBC Subsidiaries’

assets and therefore lacked the authority to sell the assets during the public foreclosure

(2) Defendant Heuszel’s low bid at the public foreclosure sale was invalid and void;

(3) the public foreclosure sale

was conducted in a commercially unreasonable manner;

and (4) Defendants do not have the legal authority to transfer RBC and RBC’s

Subsidiaries assets to Heuszel and HWH.”

Maiden seeks to recover from Defendants:

(1) treble damages or, alternatively,

damages in the amount of their underlying judgment plus the other creditors’

claims or the value of the assets transferred,

whichever is less, plus punitive or exemplary damages;

(2) pre and post-judgment interest;

and (3) attorneys’

fees and cost.

to an agreement with Maiden, the deadline for Defendants DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel to

answer or otherwise respond is March 30, 2021.

The pretrial deadlines and tentative trial date will be set by the Court following

a customary status conference.

addition to the foregoing, we may become subject to other legal proceedings that arise in the ordinary course of business and

have not been finally adjudicated.

Adverse decisions in any of the foregoing may have a material adverse effect on our results

of operations, cash flows or our financial condition.

The Company accrues for potential litigation losses when a loss is probable

and estimable.

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 December 31, 2020, 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

“(1) Defendants lacked a valid security interest in RBC and RBC Subsidiaries’

assets and therefore lacked the authority to sell the assets during the public foreclosure sale;

(2) Defendant Heuszel’s low bid

at the public foreclosure sale was invalid and void;

(3) the public foreclosure sale was conducted in a commercially unreasonable manner;

and (4) Defendants do not have the legal authority to transfer RBC and RBC’s Subsidiaries assets to Heuszel and HWH.” Maiden

seeks to recover from Defendants:

(1) treble damages or, alternatively, damages in the amount of their underlying judgment plus the other

creditors’ claims or the value of the assets transferred, whichever is less, plus punitive or exemplary damages;

(2) pre and post-judgment

and (3) attorneys’ fees and cost.

March 30, 2021, Defendants DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel filed a motion to dismiss seeking to dismiss

Maiden’s unjust enrichment, exemplary damages, and RICO claims against DSS, Decentralized, HWH, RBC Life International, Inc., and

Heuszel, as well as Maiden’s fraudulent transfer claims against DSS and RBC International, Inc.

On August 9, 2021, the Court then

entered an order granting in part the motion to dismiss filed on behalf of DSS, Decentralized, HWH, RBC Life International, Inc., and

Among other things, the Court held that Maiden failed to plausibly plead certain causes of action, including (1) the civil RICO

claim against DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel, (2) the TUFTA claim against DSS, and (3) the unjust

enrichment claim against DSS and RBC Life International, Inc.

Notably, the Court declined the request to dismiss the TUFTA claim against

RBC Life International, Inc.

The Court granted Maiden leave to file an amended complaint.

Maiden’s deadline to do so is Monday,

September 6, 2021.

The Company intends to vigorously defend its position.

On September 3, 2021, Maiden filed its amended complaint, asserting

a single cause of action against the DSS Defendants and RBC for an alleged TUFTA violation.

Generally, Maiden is seeking the same relief

requested in its original complaint.

Maiden, however, has abandoned its request for treble damages.

On September 17, 2021, the DSS Defendants

filed a motion to dismiss the amended complaint seeking to dismiss Maiden’s TUFTA claim to the extent it seeks to avoid a transfer

of assets owned by any of RBC’s subsidiaries, including but not limited to RBC Life Sciences USA, Inc.

Further, the motion to dismiss

also seeks the dismissal of Maiden’s TUFTA claim against Heuszel.

The DSS Defendants’ motion to dismiss the amended complaint

will be ripe for determination on or after October 22, 2021.

Trial is currently set for December 5, 2022 on the Court’s two-week

addition to the foregoing, we may become subject to other legal proceedings that arise in the ordinary course of business and have not

been finally adjudicated.

Adverse decisions in any of the foregoing may have a material adverse effect on our results of operations,

cash flows or our financial condition.

The Company accrues for potential litigation losses when a loss is probable and estimable.

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 December 31, 2021, 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.

1 unchanged sentence

16 – DISCONTINUED OPERATIONS

a result of the insufficient cash flows from the operations of Plastic Printing Professionals, Inc.

as well as the disruption

of our business from the COVID-19 pandemic, on April 20, 2020, the Company executed a nonbinding letter of intent with a buyer

for substantially all the assets of this business line.

with an intent to exit this business line.

As a result, management

has decided to fully impair its goodwill related to DSS Plastics.

The impact to DSS’s first quarter earnings of this impairment

was approximately $685,000.

On August 14, 2020, the Company entered into a final Asset Purchase Agreement and the Company

terminated its production and office personnel and maintained only a few employees to assist in and facilitate the sale of its

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

financial statements.

consideration paid to the Company under the Asset Purchase Agreement for the sale of the assets included a one-time cash payment

of $683,000 and an additional contingent earn-out payment of an aggregate amount of up to $517,000 based on future quarterly gross

revenue of the business to be conducted by the buyer with the sold assets.

Consistent with the Company’s policy for accounting

for gain contingencies, the earn out will be recorded when determined realizable which did not occur during the twelve-months

ended December 31, 2020.

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

The net effect of all assets disposed of is a net loss of $111,000 These amounts are included in Loss from Discontinued

Included in its Right-of-use assets is the lease of the Company’s facility in Brisbane, Ca.

The intent is to

sublease this property for a value equal to or in excess of the current payments and therefore, not impairment of this asset is

deemed necessary at December 31, 2020.

following tables show the major classes of assets and liabilities held for sale and results of operations of the discontinued

SECURITY SYSTEMS, INC.

August 14, 2020, the Company entered into a final Asset Purchase Agreement to sell substantially all of the assets of Plastic

Printing Professionals, Inc.

and the Company terminated its production and office personnel and maintained only a few employees to

assist in and facilitate the sale of its assets.

The financial results for these subsidiaries have been presented as discontinued

operations in the accompanying consolidated financial statements.

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.

December 31, 2020, the Company had recognized $ 390,000 of

this earn out.

earnout was recognized during the year ended December 31, 2021.

The net effect of all assets disposed of resulted in a

net loss of $ 111,000

000 during the year ended December 31, 2020.

These amounts are included in Loss from Discontinued Operations.

Included in its

Right-of-use assets is the lease of the Company’s facility in Brisbane, Ca.

In April 2021, the Company terminated this lease

with the landlord effective March 31, 2021, and therefore, wrote off the asset and corresponding liability associated with the lease

at March 31, 2021.

As of December 31, 2020, $ 744,000 was

record as non-current asset held for sale – discontinued operations on the consolidated balance sheet.

Also recorded was

current liabilities held for sale – discontinued operations and $ 505,000 of

non-current liabilities held for sale – discontinued operations.

The Company has incurred $ 204,000 of

cost associated with wind-down activities for the year ended December 31, 2021.

May 7, 2021, the Company completed the sale of 100 %

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

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

to the terms of the Digital Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $ 5,000,000 ,

consisting of $ 3

million in cash;

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.

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, 2021.

Also, the Company has not utilized the $ 0.5

million trade credit as of December 31, 2021.

The net effect of sale of DSS Digital, inclusive of income tax, is a net gain of $ 2,333,000 .

This amount is included in Income (loss) from Discontinued

Operations on the accompanying consolidated statement of operations.

following tables show the major classes of assets and liabilities held for sale and results of operations of the discontinued operation.

AND SUBSIDIARIES

Balance Sheets–

Assets and Liabilities Held for Sale

Balance Sheets– Assets and Liabilities Held for Sale

OF AND DISCONTINUED OPERATIONS

Current assets:

plant and equipment, net

portion of lease liability

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Right-of-use assets

Current liabilities:

term lease liability

SECURITY SYSTEMS, INC.

Accounts payable

Accrued expense

Current portion of lease liability

Total current liabilities

Long term lease liability

AND SUBSIDIARIES

Statements of Operations - Discontinued Operations

the Year Ended

and expenses:

of revenue, exclusive of depreciation and amortization

general and administrative (including stock based compensation)

and amortization

For the Year Ended

Technology sales, services and licensing

Printed products

Total revenue

Costs and expenses:

income (expense):

on disposition of business

(loss) before income taxes

tax expense (benefit)

(loss) from discontinued operations

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

( 1,243,000 )

Other income (expense):

Interest expense

Gain on extinguishment of debt

Gain on disposition of business

Income (loss) before income taxes

Income tax expense

Income (loss) from discontinued operations

$ ( 641,000 )

17 - SUPPLEMENTAL CASH FLOW INFORMATION

cash flow information for the years ended December 31:

paid for interest

investing and financing activities:

of adoption of lease accounting standards

from change in fair value of interest rate swap derivatives

stock issued upon conversion of convertible note

issued to purchase intangible assets

A Shares issued for prepaid marketing services

A Shares issued for Impact BioMedical

Non-controlling

interest related to Impact BioMedical

A Preferred Shares issued for Impact BioMedical

receivable settled for assets in lieu of cash

SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest

Non-cash investing and financing activities:

Termination of right of use lease asset

Termination of right of use lease liability

Shares received for loan origination fee

$ ( 3,000,000

Shares received for prepaid loan interest

$ ( 2,440,000

of APB net assets

Common A Shares issued for prepaid marketing services

Common A Shares issued for Impact BioMedical

Non-controlling interest related to Impact BioMedical

Series A Preferred Shares issued for Impact BioMedical

Notes receivable settled for assets in lieu of cash

18 - SEGMENT INFORMATION

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

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

It markets, manufactures, and sells mailers, photo sleeves, sophisticated custom folding cartons, and complex 3-dimensional direct

mail solutions designed to provide functionality, marketability, and sustainability to product packaging while providing counterfeit

protection and consumer engagement platform.

Digital Group researches, develops, markets, and sells the Company’s digital

products worldwide.

As an industry leader in brand authentication services, our solutions leverage functional anti-counterfeiting

features and cutting-edge technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and

Digital’s primary product is AuthentiGuard®, which is a brand authentication application that integrates

the Company’s counterfeit deterrent technologies with proprietary digital data security-based solutions.

IP Technology Management

Inc., manages, licenses, and acquires intellectual property assets for the purpose of monetizing these assets through a variety

of value-enhancing initiatives, including, but not limited to, investments in the development and commercialization of patented

technologies, licensing, strategic partnerships, and commercial litigation.

Direct Marketing/Online Sales Group provides services

to assist companies in the emerging growth gig business model of peer-to-peer decentralized sharing marketplaces.

Direct specializes

in marketing and distributing its products and services through its subsidiary and partner network, using the popular gig economic

marketing strategy as a form of direct marketing.

information concerning the Company’s operations by reportable segment for years ended December 31, 2020 and 2019 is as follows.

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

would report the results contained herein:

Company’s nine businesses lines are organized, managed and internally reported as five

operating segments.

One of these operating segments,

Product Packaging, is the Company’s packaging and printing group.

Product 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, Biotechnology, invests in, or acquires companies in the biohealth and biomedical

fields, including businesses focused on the advancement of drug discovery and prevention, inhibition, and treatment of neurological,

oncological, and immune related diseases.

This division is also developing open-air defense initiatives, which curb transmission of air-borne

infectious diseases, such as tuberculosis and influenza.

Biotechnology is also targeting unmet, urgent medical needs.

operating segment, Securities and Investment Management (“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.

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.

The fourth segment, Direct, provides services to assist companies in the emerging growth gig business model

of peer-to-peer decentralized sharing marketplaces.

It specializes in marketing and distributing its products and services through its

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

Direct marketing products

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

fifth business line, Commercial Banking, 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.

segment structure presented below represents a change from the prior year for the inclusion of our Biotechnology, Securities, and Commercial Lending segments and the removal of our Plastics segment, Digital Group and IP Technology Management segment as the Plastics segment

was discontinued in 2020, DSS Digital was sold and discontinued in May 2021 and activities surrounding our IP Technology Management segment

have significantly decreased.

The amounts for these segments have been included in the Corporate reporting segment for the year ended

December 31, 2021 and 2020, as necessary, below for reconciliation purposes.

information concerning the Company’s operations by reportable segment for the years ended December 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:

SCHEDULE OF OPERATIONS BY REPORTABLE SEGMENT

Year Ended December 31, 2021

Premier Packaging

Digital Group

IP Technology

Direct Marketing

/ Online Sales

Biotechnology

Depreciation and amortization

3 unchanged sentences

Net income (loss) from continuing operations

( 17,709000 )

( 2,536,000 )

( 4,582,000 )

( 11,749,000 )

( 34,050,000 )

Capital expenditures

1 unchanged sentence

Year Ended December 31,2020

Premier Packaging

Digital Group

IP Technology

Direct Marketing

/ Online Sales

Biotechnology

Depreciation and amortization

6 unchanged sentences

International

revenue, which consists of sales to customers with operations in Canada, Western Europe, Latin America, Africa, the Middle East

and Asia comprised 9.0% of total revenue for 2020 (2.0% - 2019).

Revenue is allocated to individual countries by customer

based on where the product is shipped.

The Company had no long-lived assets in any country other than the United States for any

period presented.

revenue, which consists of sales to customers with operations in Canada, Western Europe, Latin America, Africa, the Middle East and Asia

comprised 11.0 % of total revenue for 2021 ( 9.0 % - 2020).

Revenue is allocated to individual countries by customer based on where

the product is shipped.

The Company had no long-lived assets in any country other than the United States for any period presented.

following tables disaggregate our business segment revenues by major source:

Products Revenue Information:

months ended December 31, 2020

Printing and Fabrication

and Security Printing

Printed Products

months ended December 31, 2019

Printing and Fabrication

and Security Printing

Printed Products

Sales, Services and Licensing Revenue Information:

months ended December 31, 2020

Technology Sales and Services

Authentication Products and Services

from Licensees

Printed Products

months ended December 31, 2019

Technology Sales and Services

Authentication Products and Services

from Licensees

Printed Products

months ended December 31, 2020

Marketing Internet Sales

Direct Marketing

months ended December 31, 2019

Marketing Internet Sales

Direct Marketing

SCHEDULE OF DISAGGREGATION OF REVENUE

Twelve months ended December 31, 2021

Packaging Printing and Fabrication

Commercial and Security Printing

Total Printed Products

Twelve months ended December 31, 2020

Packaging Printing and Fabrication

Commercial and Security Printing

Total Printed Products

Twelve months ended December 31, 2021

Direct Marketing Internet Sales

Total Direct Marketing

Twelve months ended December 31, 2020

Direct Marketing Internet Sales

Total Direct Marketing

Twelve months ended December 31, 2021

Rental income

Total Rental Income

Twelve months ended December 31, 2020

Rental income

Total Rental Income

Twelve months ended December 31, 2021

Management fee income

Total Management fee income

Twelve months ended December 31, 2020

Management fee income

Total Management fee income

Net Investment Income

Twelve months ended December 31,

Net investment income

Total Net Investment Income

Twelve months ended December 31,

Net investment income

Total Net Investment Income

19 – SUBSEQUENT EVENTS

March 22, 2021 Premier Packaging was awarded an incentive package from New York State and Empire State Development and its Excelsior

Jobs Program valued at up to $700,000 in connection with Premier’s proposed expansion plans within the state.

This incentive

will take the form of tax credits to be utilized beginning in 2022 through 2031.

March 16, 2021, American Medical REIT, Inc.

received loan proceeds in the amount of approximately $110,000 under the Paycheck

Protection Program (“PPP”) with a fixed rate of 1% and a 60-month maturity term.

The PPP, established as part of the

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts

up to 2.5 times of the average monthly payroll expenses of the qualifying business.

These funds were used for payroll, benefits,

rent, mortgage interest, and utilities.

March 15, 2021, the Company, through one of its subsidiaries, entered into a Stock Purchase Agreement (the “Agreement”)

with Vivacitas Oncology Inc.

(“Vivacitas”), to purchase 500,000 shares of its common stock at the per share price

of $1.00, with an option to purchase 1,500,000 additional shares a the per share price of $1.00.

This option will terminate upon

one of the following events:

(i) The Seller’s board of directors cancels this option because it is no longer in the best

interest of the Company;

(ii) December 31, 2021;

or (iii) the date on which the Seller receives more than $1.00 per share of the

Company’s common stock in a private placement with gross proceeds of $500,000.

Under the terms of the Agreement, the Company

will be allocated two seats on the board of Vivacitas.

On March 18, 2021, the Company entered into an agreement to with Alset

EHome International, Inc.

(“Seller”) indirectly the Seller’s wholly owned subsidiary Impact Oncology PTE Ltd.

to purchase 2,480,000 shares of common stock of Vivacitas for a purchase price $2,480,000.

This agreement includes an option to

purchase an additional 250,000 shares of common stock.

As a result of these two transactions, the Company will have an approximate

10.2% equity position in Vivacitas.

The Sellers largest shareholder is Mr.

Chan Heng Fai Ambrose, the Chairman of the Company’s

board of directors and its largest shareholder.

March 12, 2021, the Company entered into a binder letter of intent with Sharing Services Global Corporation (“SHRG”)

whereas the Company will sell specific assets to SHRG.

The purchase price is to be established by a third-party appraiser mutually

Under the terms of this agreement, SHRG at its option, may pay the purchase price via (i) shares of SHRG Common A stock

at a conversion rate calculated at a 30-day VWAP, (if shares are available), (ii) a 1 yr.

convertible note which at the Seller’s

option may be converted into Common A shares at a conversion rate calculated at a 30-day VWAP (if shares are available), or paid

in US$ or (iii) in US dollars at closing.

February 25, 2021, the Company entered into a binding letter of intent with Sharing Service Global Corporation (“SHRG),

where the Company is to loan $30 million to SHRG in the form of a Convertible Promissory Note (the “SHRG Note”).

This three-year SHRG Note accrues interest annual at 8% and contains a 10% origination fee.

Both the first year’s

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

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

This Note also contains detachable warrants, exercisable at DSS’s option, of 150,000,000 shares of SHRG’s

Class A common stock with an exercise price of $0.22.

February 4, 2021, the Company entered into an underwriting agreement (the “Feb.

2021 Underwriting Agreement”)

with Aegis Capital Corp., as representative of the underwriters named therein, which provided for the issuance and sale by the

Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “Feb.

2021 Offering”),

of 12,319,346 shares of the Company’s common stock, $0.02 par value per share.

Subject to the terms and conditions contained

2021 Underwriting Agreement, the shares were sold at a public offering price of $2.80 per share, less certain

underwriting discounts and commissions.

The Company also granted the underwriters a 45-day option to purchase up to 1,847,901

additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments

in connection with the Feb.

2021 Offering, which over-allotment option was exercised in full on February 9, 2021.

offering proceeds to the Company from the Feb.

2021 Offering are approximately $36.14 million, including the exercise of

the underwriter’s over-allotment option, and after deducting estimated underwriting discounts and commissions and other

estimated offering expenses.

February 3 , 2021, DSS Blockchain Security, Inc (“DSSB”).

a wholly-owned subsidiary of the Company entered

into a binding joint venture term sheet with GSX Group Limited (“GSX”) and Coinstreet Holdings Limited (“Coinstreet”)

whereas the parties intend to own and operate a single or multiple vertical digital asset exchanges for securities, tokenized

assets, utility tokens, stable coins and cryptocurrency that will operate a primary and secondary market via a digital asset trading

platform using blockchain technology.

With its initial contribution of $20,000, DSSB will receive a 40% equity position

in the joint venture.

Upon the execution of related loan documents, in which DSSB will loan $800,000 to GSX, DSSB will obtain

a 70% share in the joint venture.

January 19, 2021, the Company entered into an underwriting agreement, as amended by Amendment No.

1 effective as of January

19, 2021 (the “Jan.

2021 Underwriting Agreement”), with Aegis Capital Corp., as representative of the underwriters,

which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten

public offering (the “Jan.

2021 Offering”), of 6,666,666 shares of the Company’s common stock, $0.02

par value per share.

Subject to the terms and conditions contained in the Jan.

2021 Underwriting Agreement, the shares were offered

in a public offering at a price of $3.60 per share, less certain underwriting discounts and commissions.

The Company also granted

the underwriters a 45-day option to purchase up to 1,000,000 additional shares of the Company’s common stock on the same

terms and conditions for the purpose of covering any over-allotments in connection with the Jan.

2021 Offering.

This overallotment

was exercised in full.

The net offering proceeds to the Company from the Jan.

2021 Offering are approximately $24.9 million,

after deducting estimated underwriting discounts and commissions and other estimated offering expenses.

January 6, 2021, the Company Alset International Limited (“Alset Singapore”), a company formed under the laws

of Singapore, Health Wealth Happiness Pte.

(“HWH”), a Singaporean company and wholly-owned subsidiary of Alset

Singapore, and HWH World Inc.

(“HWH World”), a company registered and formed under the laws of South Korea

and wholly-owned subsidiary of HWH, entered into a binding term sheet (the “HWH Term Sheet”), pursuant to which,

subject to the due diligence on HWH World, necessary approvals and consents, and the terms and conditions to be set forth in the

Definitive Agreement (as defined below), the Company will acquire and purchase all of the outstanding equity interest in HWH World

(the “HWH Transaction”) for a consideration of the lesser of $14.8 million or the value of HWH World assessed

by a third-party valuation company (the “Purchase Price”).

The HWH Term Sheet provided that the Company shall

have the option to pay the Purchase Price in i) cash, or ii) shares of the Company’s common stock at the per share price

equivalent to the average closing price of the common stock for a period of five (5) trading days prior to January 6, 2021.

In accordance with the HWH Term Sheet, the parties thereto (the “Parties”) shall enter into a definitive share

exchange agreement (the “Definitive Agreement”) for the Transaction within three (3) months from the date of the HWH

Term Sheet or at a later date as mutually agreed by the Parties in writing and complete the Transaction within six (6) months

therefrom or at a later date as mutually agreed by the Parties in writing.

The HWH Term Sheet is legally binding and shall

terminate upon the earlier of 1) six months from January 6, 2021, 2) mutual agreement by all the Parties on the termination, or

3) the execution of the Definitive Agreement for the Transaction.

February 25, 2022, DSS, Inc.

(the “Company”) entered into an assignment and assumption agreement (the “Assumption Agreement”)

with Alset International Limited a Republic of Singapore limited company (“AIL”), pursuant to which DSS has agreed to

purchase a convertible promissory note from AIL (the “ Note ”).

The Note has a principal amount of $ 8,350,000 and accrued

but unpaid interest of $ 415,000 through May 15, 2022 .

The Note was issued to American Medical REIT, Inc., a Maryland corporation, pursuant

to a subscription agreement, dated as of October 29, 2021 between AIL and American Medical REIT, Inc.

The consideration to be paid for

the Note will be 21,366,177 shares of DSS’s common stock.

The number of DSS shares to be issued as consideration was calculated

by dividing $ 8,765,000 , the aggregate of the principal amount and the accrued but unpaid interest under the Note, by $ 0.408 per

The number of shares of DSS common stock to be issued as consideration may be adjusted based on the accrued interest if the parties

should agree to close this transaction on a date other than the anticipated date of May 15, 2022.

The closing of the Assumption Agreement

and the issuance of the DSS shares described above will be subject to the approval of the NYSE American and DSS’s shareholders.

28, 2022, DSS entered into an Amendment to Stock Purchase Agreement (the “Amendment”) with its shareholder Alset EHome International

(“AEI”), pursuant to which the Company and AEI have agreed to amend certain terms of the Stock Purchase Agreement dated

January 25, 2022 (the “SPA”).

Pursuant to the SPA, AEI had agreed to purchase 44,619,423 shares of the Company’s common

stock for a purchase price of $ 0.3810 per share, for an aggregate purchase price of $ 17,000,000 .

Pursuant to the Amendment, the number

of shares of the common stock of the Company that the AEI will purchase has been reduced to 3,986,877 shares for an aggregate purchase

price of $ 1,519,000 .

In addition, the Company’s Executive Chairman and a largest stockholder, Heng

Fai Ambrose Chan , is the Chairman, Chief Executive Officer and largest shareholder of AEI.

February 28, 2022, the Company entered into a Stock Purchase Agreement with Alset EHome International Inc.

(the “True Partner Revised

Stock Purchase Agreement”), pursuant to which AEI has agreed to sell a subsidiary holding 62,122,908 shares of stock of True Partner

Capital Holding Limited exchange for 17,570,948 shares of common stock of the Company (the “DSS Shares”).

the Company and AEI were parties to an agreement dated as of January 18, 2022 for the sale of 62,122,908 shares of stock of True Partner

International Limited;

such agreement has been terminated.

AEI and its various subsidiaries are collectively the largest stockholder

of the Company.

The Company’s Executive Chairman and a significant stockholder, Heng

Fai Ambrose Chan , is the Chairman, Chief Executive Officer and largest shareholder of AEI.

issuance of the DSS Shares will be subject to the approval of the NYSE American and the Company’s s hareholders .

9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

December 2, 2021, Freed Maxick CPAs, P.C.

(the “Former Accountant”) resigned as our independent registered public accounting

firm, and on December 3, 2021, we engaged Turner, Stone & Company, L.L.P.

(the “New Accountant”) as our independent registered

public accounting firm, subject to completion of Turner Stone’s standard client acceptance

process and execution of an engagement letter .

The engagement of the New Accountant was recommended and approved by the Audit

Committee of our Board of Directors.

Former Accountant’s audit report on our financial statements for the years ended December 31, 2020 and 2019 contained no adverse

opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

the years ended December 31, 2020 and 2019, and through the interim period ended December 2, 2021, there were no “disagreements”

(as such term is defined in Item 304 of Regulation S-K) with the Former Accountant on any matter of accounting principles or practices,

financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of the Former

Accountant, would have caused them to make reference thereto in their reports on the financial statements for such periods.

the years ended December 31, 2020 and 2019, and through the interim period ended December 2, 2021, there was the following “reportable

events” (as such term is defined in Item 304 of Regulation S-K).

As disclosed in Part II, Item 9A of the Company’s Form 10-K

for the year ended December 31, 2020, the Company’s management determined that the Company’s internal controls over financial

reporting were not effective as of the end of such period.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data