DSS, INC. 10-K

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements DSS, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 76 ) 37 Consolidated Financial Statements: Consolidated Balance Sheets 39 Consolidated Statements of Operations and Comprehensive Income (Loss) 40 Consolidated Statements of Cash Flows 41 Consolidated Statements of Changes in Stockholders’ Equity 42 Notes to the Consolidated Financial Statements 43 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of DSS, Inc. (formerly, Document Security Systems, Inc. and Subsidiaries) Opinion on the Financial Statements We 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 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 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. Basis for Opinion These 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. We 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. The Company 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. Our 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. Critical Audit Matters The 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. Accounting for Business Combinations – Impact BioMedical, Inc. As 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 unit. The evaluation of the classification of the transaction as a business combination and the preferred shares issued as permanent equity is complex. 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. Addressing the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. The primary procedures we performed included: (i) Obtaining an understanding and evaluating of the design of controls over accounting for and reporting of the transaction, (ii) auditing the appropriateness of management’s conclusions surrounding the classification of this transaction as a business combination and the preferred share consideration as permanent equity, (iii) auditing management’s assessment of the identification of assets to be acquired and valued, (iv) auditing management’s development of the assumptions used in the valuation models applied and the reasonableness of those assumptions, and auditing the disclosures over this transaction, and (v) auditing the calculation of the deferred tax liability recorded related to the transaction. Professionals with specialized skills and knowledge were used to assist in evaluating certain methodologies and assumptions used in determining fair values. Valuation of Investments in Related Parties – Alset International, Inc. and Sharing Services Global Corp As described in Note 6 to the consolidated financial statements, the Company has an equity investment in Alset International, Inc. (“Alset”), a related party, of approximately $6.8 million as of December 31, 2020, recorded as a marketable security with a readily determinable fair value. This investment was previously recorded at cost, less impairment. During the year ended December 31, 2020, the Company recorded unrealized gains associated with this investment of approximately $3.4 million. 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. The 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. Due 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. Addressing 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. /s/ Freed Maxick CPAs, P.C. We served as the Company’s auditor from 2004 to 2020. Rochester, NY March 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. 37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of DSS, Inc. Opinion on the Financial Statements We 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. Basis for Opinion These 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We 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. The Company 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. Our 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. Critical Audit Matters The 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. Business acquisition of American Pacific Bancorp and real estate asset acquisitions As described in Note 7 to the consolidated financial statements, the Company completed the acquisition of American Pacific Bancorp. and 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. The 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. Our audit procedures included the following: - Review management’s process for developing the fair value estimates. - Evaluating the market indicators used by management in developing their fair value estimates. - Review the completeness and accuracy of underlying data used in the fair value estimates. - Utilized an internal valuation specialist to evaluate: - The methodologies used and whether they were acceptable for the underlying assets or operations and being applied correctly, - The appropriateness of the discount rate used by recalculating the weighted average cost of capital, and - The qualification of third-party valuation specialists engaged by the Company based on their credentials and experience. /s/ Turner Stone & Company, LLP We have served as the Company’s auditor since 2021. Dallas, Texas March 31, 2022 38 DSS, INC. AND SUBSIDIARIES Consolidated Balance Sheets As of December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 56,595,000 $ 5,183,000 Accounts receivable, net 5,673,000 3,589,000 Inventory 10,380,000 1,955,000 Assets held for sale - discontinued operations - 531,000 Current portion of notes receivable 6,310,000 - Prepaid expenses and other current assets 3,466,000 1,192,000 Total current assets 82,424,000 12,450,000 Property, plant and equipment, net 17,674,000 4,100,000 Investment in real estate, net 56,374,000 - Other investments 11,001,000 1,788,000 Investment, equity method 1,080,000 12,234,000 Marketable securities 14,172,000 9,136,000 Notes receivable 5,878,000 537,000 Non-current assets held for sale - discontinued operations - 790,000 Other assets 489,000 384,000 Right-of-use assets 498,000 182,000 Goodwill 56,606,000 26,862,000 Other intangible assets, net 38,630,000 23,456,000 Total assets $ 284,826,000 $ 91,919,000 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,920,000 $ 1,457,000 Accrued expenses and deferred revenue 21,180,000 5,260,000 Other current liabilities 402,000 1,435,000 Current liabilities held for sale - discontinued operations - 275,000 Current portion of lease liability 393,000 167,000 Current portion of long-term debt, net 3,916,000 278,000 Total current liabilities 27,811,000 8,872,000 Long-term debt, net 55,711,000 1,976,000 Long term lease liability 120,000 15,000 Non-current liabilities held for sale - discontinued operations - 505,000 Other long-term liabilities 880,000 507,000 Deferred tax liability, net - 3,499,000 Commitments and contingencies (Note 15) - 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. - 1,000 Common stock, $ .02 par value; 200,000,000 shares authorized, 76,746,000 shares issued and outstanding ( 5,836,000 on December 31, 2020) 1,594,000 116,000 Additional paid-in capital 294,685,000 174,380,000 Non-controlling interest in subsidiary 36,409,000 3,430,000 Accumulated deficit ( 132,384,000 ) ( 101,382,000 ) Total stockholders’ equity 200,304,000 76,545,000 Total liabilities and stockholders’ equity $ 284,826,000 $ 91,919,000 See accompanying notes. 39 DSS, INC. AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive (Loss) Income For the Years Ended December 31, 2021 2020 Revenue: Printed products $ 15,539,000 $ 13,040,000 Rental income 1,203,000 - Management fee income 24,000 - Net investment income 250,000 - Direct marketing 3,259,000 2,326,000 Total revenue 20,275,000 15,366,000 Costs and expenses: Cost of revenue, exclusive of depreciation and amortization 12,271,000 11,009,000 Selling, general and administrative (including stock-based compensation) 25,091,000 14,717,000 Depreciation and amortization 4,322,000 1,068,000 Total costs and expenses 41,684,000 26,794,000 Operating loss ( 21,409,000 ) ( 11,428,000 ) Other income (expense): Interest income 4,556,000 69,000 Other income 825,000 1,000 Interest expense ( 196,000 ) ( 183,000 ) Gain on extinguishment of debt 116,000 622,000 (Loss) income from equity method investment ( 9,939,000 ) 604,000 (Loss) gain on investments ( 12,035,000 ) 10,609,000 Amortization of deferred financing costs and debt discount - ( 8,000 ) (Loss) income from continuing operations before income taxes ( 38,082,000 ) 286,000 Income tax benefit 4,032,000 1,774,000 (Loss) income from continuing operations ( 34,050,000 ) 2,060,000 Loss from discontinued operations, net of tax 2,129,000 ( 641,000 ) Net (loss) income $ ( 31,921,000 ) $ 1,419,000 Loss from continuing operations attributed to noncontrolling interest 921,000 480,000 Net (loss) income attributable to common stockholders $ ( 31,000,000 ) $ 1,899,000 (Loss) earnings per common share - continuing operations: Basic $ ( 0.64 ) $ 0.72 Diluted $ ( 0.64 ) $ 0.42 Loss per common share - discontinued operations: Basic $ 0.04 $ ( 0.18 ) Diluted $ 0.04 $ ( 0.11 ) Shares used in computing (loss) earnings per common share: Basic 51,525,746 3,548,421 Diluted 51,525,746 6,019,207 See accompanying notes. 40 DSS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Years Ended December 31, 2021 2020 Cash flows from operating activities: Net (loss) income from continuing operations $ ( 34,050,000 ) $ 2,060,000 Adjustments to reconcile net (loss) income from continuing operations to net cash used by operating activities: Depreciation and amortization 4,322,000 1,068,000 Stock based compensation 78,000 149,000 Loss (income) on equity method investment 9,939,000 ( 604,000 ) Loss (gain) on investments 12,035,000 ( 10,609,000 ) Gain on extinguishment of debt ( 116,000 ) ( 622,000 ) Deferred tax benefit ( 4,032,000 ) ( 1,774,000 ) Decrease (increase) in assets: Accounts receivable ( 2,084,000 ) ( 665,000 ) Inventory ( 8,425,000 ) ( 705,000 ) Prepaid expenses and other current assets ( 2,274,000 ) ( 509,000 ) Other assets 1,216,000 264,000 Increase (decrease) in liabilities: Accounts payable 463,000 ( 183,000 ) Accrued expenses 15,920,000 4,291,000 Other liabilities ( 2,004,000 ) 1,001,000 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 ) ( 321,000 ) 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 3,356,000 - Conversion of SHRG to consolidation ( 12,225,000 ) - Note receivable investment ( 11,651,000 ) ( 574,000 ) 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 ) ( 304,000 ) Borrowings of long-term debt 60,864,000 1,278,000 Payments of revolving lines of credit, net - ( 500,000 ) Deferred financing fees ( 1,425,000 ) - Issuances of common stock, net of issuance costs 121,736,000 20,195,000 Net cash provided by financing activities 179,225,000 20,669,000 Cash flows from discontinued operations: Cash provided (used) by discontinued operations 207,000 636,000 Cash provided by investing activities 3,000,000 876,000 Cash used by financing activities - ( 577,000 ) Net cash provided (used) by discontinued operations 3,207,000 935,000 Net increase in cash 51,412,000 4,087,000 Cash and cash equivalents at beginning of year 5,183,000 1,096,000 Cash and cash equivalents at end of year $ 56,595,000 $ 5,183,000 See accompanying notes. 41 DSS, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2021 and 2020 Shares Amount Shares Amount Capital Subsidiary Deficit Total Common Stock Preferred Stock Additional Paid-in Non- controlling Interest in Accumulated Shares Amount Shares Amount Capital Subsidiary Deficit Total Balance, December 31, 2020 5,836,000 $ 116,000 43,000 $ 1,000 $ 174,380,000 $ 3,430,000 $ ( 101,382,000 ) $ 76,545,000 Issuance of common stock, net 67,340,000 1,347,000 - - 120,434,000 - - 121,781,000 Conversion of preferred stock 6,570,000 131,000 ( 43,000 ) ( 1,000 ) ( 130,000 ) - - - Stock based payments, net of tax effect - - - - 2,000 - - 2,000 Acquisition of American Pacific Bancorp - - - - - 33,097,000 - 33,098,000 Acquisition of Sharing Services Global Corporation - - - - - 800,000 - 800,000 Acquisition of Impact Biomedical, Inc. Acquisition of Impact Biomedical, Inc., shares Net loss - - - - - ( 920,000 ) ( 31,001,000 ) ( 31,921,000 ) Balance December 31, 2021 79,746,000 $ 1,594,000 - $ - $ 294,686,000 $ 36,407,000 $ ( 132,383,000 ) $ 200,304,000 Balance, December 31, 2019 1,206,000 $ 24,000 - - $ 115,560,000 - $ ( 103,281,000 ) $ 12,303,000 Issuance of common stock, net 3,434,000 68,000 - - 20,127,000 - - 20,195,000 Conversion of preferred stock 663,000 13,000 ( 4,000 ) - ( 13,000 ) - - - Stock based payments, net of tax effect 50,000 1,000 - - 397,000 - 398,000 Acquisition of Impact Biomedical, Inc. 483,000 10,000 47,000 1,000 38,309,000 3,910,000 - 42,231,000 Net (loss) income - - - - - ( 480,000 ) 1,899,000 1,419,000 Balance December 31, 2020 5,836,000 $ 116,000 43,000 $ 1,000 $ 174,380,000 $ 3,430,000 $ ( 101,382,000 ) $ 76,545,000 See accompanying notes. 42 DSS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS The Company, incorporated in the state of New York in May 1984 has conducted business in the name of Document Security Systems, Inc. On September 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. to DSS, Inc. This change became effective on September 30, 2021. DSS, Inc. maintained the same trading symbol “DSS” and updated its CUSIP number to 26253C 102. DSS, Inc. (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: (1) Product 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. (“Premier”), 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 diseases. 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 Europe. (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. Alt. 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 technology. 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. 43 On August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact BioMedical”), pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth Security, Inc. (“DSS BioHealth”), Alset International Limited (formally Singapore eDevelopment Ltd.), and Global Biomedical Pte Ltd. (“GBM”), which was previously approved by the Company’s shareholders (the “Share Exchange”). Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value $ 0.02 per share, nominally valued at $ 6.48 per share, and 46,868 newly issued shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). As a result of the Share Exchange, Impact BioMedical is now a wholly owned subsidiary of DSS BioHealth, the Company’s wholly owned subsidiary (see Note 7). Impact BioMedical strives to leverage its scientific know-how and intellectual property rights to provide solutions that have been plaguing the biomedical field for decades. By tapping into the scientific expertise of its partners, Impact BioMedical has undertook a concerted effort in the research and development (“R&D”), drug discovery and development for the prevention, inhibition, and treatment of neurological, oncological, and immune related diseases. On September 9, 2021, the Company finalized a stock purchase agreement (the “SPA”) with American Pacific Bancorp, Inc. (“APB”), which provided for an investment of $ 40,000,200 by the Company into APB for an aggregate of 6,666,700 shares of the APB’s Class A Common Stock, par value $ 0.01 per share. Subject to the terms and conditions contained in the SPA, the shares issued at a purchase price of $ 6.00 per share. As a result of this transaction, DSS became the majority owner of APB. (see Note 7). On September 13, 2021, the Company finalized a shareholder agreement between its subsidiary, DSS Financial Management, Inc. (“DFMI”) and HR1 Holdings Limited (“HR1”), a company incorporated in the British Virgin Islands, for the purpose to operate a vehicle for private and institutional investors seeking a highly liquid investment fund with attractive risk adjusted returns relative to market unpredictability and volatility. Under the terms of this agreement, 4000 shares or 40% of the Company’s subsidiary Liquid Asset Limited Management Limited (“LVAM”), a Hong Kong company was transferred to HR1 whereas at the conclusion of the transaction DFMI would own 60% of LVAM and HR1 would own 40% . LVAM executes within reliable platforms and broad market access and uses proprietary systems and algorithms to trade liquid exchange-traded funds (ETFs), stocks, futures or crypto. Aimed at providing consistent returns while offering the unique ability to liquidate the portfolio within 5 to 10 minutes under normal market conditions, LVAM provides an array of advanced tools and products enabling customers to explore multiple opportunities, strengthen and diversify their portfolios, and meet their individual investing goals. On 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 58 % . 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 model. 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. 44 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation – The consolidated financial statements include the accounts of DSS and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts 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 and income statements for the year ended December 31, 2020 have been reclassified to conform to current year presentation. Cash 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. Accounts 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 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 ($ 25,000 – 2020). The Company does not accrue interest on past due accounts receivable. 45 Fair Value of Financial Instruments – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: ● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets. ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The carrying amounts reported in the 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. Marketable securities classify as a Level 1 fair value financial instrument. The fair value of notes receivable approximates their carrying value as the stated or discounted rates of the notes do not reflect recent market conditions. The fair value of revolving credit lines notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. The fair value of investments where the fair value is not considered readily determinable, are carried at cost. Inventory – 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. Notes 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 – 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. For equity method investments, the Company regularly reviews its investments to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value. See Note 6 for further discussion on investments. Property, 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. Investments 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. 46 Leases - ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. 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. The 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. Goodwill – 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 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 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, 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, 2021. Intangible Assets - The estimated fair values of acquired intangibles are generally determined based upon future economic benefits such as earnings and cash flows. Acquired identifiable intangible assets are recorded at fair value and are amortized over their estimated useful lives. Acquired intangible assets with an indefinite life are not amortized but are reviewed for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets are below their estimated fair values. Impairment is tested under ASC 350. Long-Lived Assets - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. Related 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 Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The Company also owns approximately 127,179,000 shares of Alset Intl, a company publicly listed on the Singapore Exchange Limited. This service agreement will allow HWH Korea to utilize the Company’s merchant account in connection with their direct marketing network with periodic remittance of the cash collected to them for a fee of 2.5 % 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. There were no amounts outstanding to this related party at December 31, 2021. Reverse 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. 47 Revenue - The Company recognizes its products and services revenue based on when the title passes to the customer or when the service is completed and accepted by the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for shipped product or service provided. Sales and other taxes billed and collected from customers are excluded from revenue. The Company 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 lease. The Company recognizes net investment income from its investment banking line of business as interest owed to the Company occurs. The Company generates revenue from its direct marketing line of business primarily through internet sales and recognizes revenue as items are shipped. As 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 or less. Costs 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. Legal costs are included in selling, general and administrative. Shipping 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. Share-Based 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 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. Sales 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, 2021. Contingent 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. 48 Research 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 $ 1,080,000 and $ 210,000 in 2021 and 2020, respectively. Income Taxes - The Company recognizes estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. We recognize penalties and accrued interest related to unrecognized tax benefits in income tax expense. Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares from outstanding warrants, stock options and preferred stock that would have been outstanding if dilutive potential shares had been issued and is calculated utilizing the treasury stock method. In a loss period, the calculation for basic and diluted earnings per share is the same, as the impact of potential common shares is anti-dilutive. 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 limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions. During 2021, two customers accounted for approximately 27 % and 14 % of our consolidated revenue. As of 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 41 % and 19 % of our consolidated trade accounts receivable balance. Acquisitions - In 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. Business 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. Discontinued Operations – On April 20, 2020, the Company executed a nonbinding letter of intent with a perspective buyer for the sale of certain assets of its plastic printing business line, which it operated under Plastic Printing Professionals, Inc. (“DSS Plastics”), a wholly-owned subsidiary of the Company. That sale was consummated and closed on August 14, 2020. The remaining assets of DSS Plastics were either sold, separately disposed, or retained by other existing DSS businesses lines. Accordingly, the operations of DSS Plastics have been discontinued. Based on the magnitude of DSS Plastics’ historical revenue to the Company and because the Company has exited the production of laminated and surface printed cards, this sale represented a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 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. See Note 16. 49 On May 7, 2021, the Company completed the sale of 100 % of the capital stock of DSS Digital Inc. (“DSS Digital”), the Company’s wholly owned subsidiary, which researched, developed, marketed, and sold the Company’s digital products worldwide. Based on the magnitude of DSS Digital’s historical revenue to the Company and because the Company has exited the brand authentication services, functional anti-counterfeiting technology and technologies to satisfy commercial and consumer product needs for branding, intelligent packaging, and marketing, this sale represented a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 210-05—Discontinued Operations. See Note 16. Newly 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. In 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 Impact of COVID-19 Outbreak - The COVID-19 pandemic has created global economic turmoil and has potentially permanently impacted how many businesses operate and how individuals will socialize and shop in the future. We continue to feel the effect of the COVID-19 business shutdowns and consumer stay-at-home protections. But the effect of the economic shutdown has impacted our business lines differently, some more severely than others. In most cases, we believe the negative economic trends and reduced sales will recover over time. 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. NOTE 3 – INVENTORY Inventory consisted of the following as of December 31: SCHEDULE OF INVENTORY 2021 2020 Finished Goods $ 7,705,000 $ 1,544,000 Work in Process 512,000 280,000 Raw Materials 2,551,000 131,000 Inventory Gross $ 10,768,000 $ 1,955,000 Less allowance for obsolescence ( 388,000 ) - Inventory Net $ 10,380,000 $ 1,955,000 50 NOTE 4 – NOTES RECEIVABLE Century TBD Holdings, LLC. On October 10, 2019, the Company entered into a convertible promissory note (“TBD Note”) with Century TBD Holdings, LLC (“TBD”), a Florida limited liability company. The Company loaned the principal sum of $ 500,000 , 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, 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. GSX Group Limited On February 8, 2021, the Company entered into a convertible promissory note (“GSX Note”) with GSX Group Limited (“GSX”), a company registered in Gibraltar. The Company loaned the principal sum of $ 800,000 , 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 per share. 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. On 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”). During the nine-months ended September 30, 2021, the Company and GSX finalized the terms of the JV Exchange. This JV is currently in the planning stages. Dustin Crum On February 21, 2021, Impact BioMedical, Inc. a subsidiary of the Company, entered into a promissory note (“Crum Note”) with Dustin Crum (“Mr. Crum”). 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. Sentinel Brokers Company, Inc. On May 13, 2021, a subsidiary of the Company entered a revolving credit promissory note (“Sentinel Note”) with Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York. The Sentinel Note has an aggregate principal balance up to $ 600,000 , to be funded at request of Sentinel. The Sentinel Note, which incurs interest at a rate of 6.65 % is payable in arears until the principal is paid in full at the maturity date of May 13, 2023 . As of December 31, 2021, there is $ 0 outstanding on the Sentinel Note. Puradigm, LLC. On May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company entered into a convertible promissory note (“Puradigm Note”) with Puradigm, LLC (“Puradigm”), a company registered in the state of Texas. The Puradigm Note 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 14, 2023 . 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 $ 5,081,000, which is classified as Notes receivable on the consolidated balance sheet. Harris-Montgomery Counties Management District On 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 % per annum. Principal and interest are due in full on September 22, 2022 . This 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. Asili, LLC. On 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. West Park Capital Group, LLC. On 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 31, 2021. Leopoldo Bustamate. On 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. HWH World Ltd. On October 7, 2021, HWH entered into a revolving loan commitment (“HWH Ltd Note”) with HWH World Ltd. (“HWH Ltd.”) a company registered in Taiwan. The HWH Ltd. 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 the HWH Ltd. Note, the Company began charging interest at the default rate of 18 % on January 1, 2022 . 1044PRO, LLC. In 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 assets. XIP Optimal In 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. 51 NOTE 5 – FINANCIAL INSTRUMENTS Cash, Cash Equivalents and Marketable Securities The 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 2021 Adjusted Cost Unrealized Gain Fair Value Cash and Cash Equivalents Restricted Cash Marketable Securities Notes Receivable Investments Cash $ 50,286,000 $ - $ 50,286,000 $ 50,286,000 $ - $ - $ - $ - Restricted Cash - - - - - - - - Level 1 Money Market Funds 6,309,000 - 6,309,000 6,309,000 - - - - Marketable Securities 12,993,000 1,544,000 14,537,000 - - 14,537,000 - - Level 2 Warrants 3,318,000 - 3,318,000 - - - 3,318,000 Convertible securities 1,023,000 - 1,023,000 - - - - 1,023,000 Total $ 73,929,000 $ 1,544,000 $ 75,473,000 $ 56,595,000 $ - $ 14,537,000 $ - 0 $ 4,341,000 2020 Adjusted Cost Unrealized Gain/(Loss) Fair Value Cash and Cash Equivalents Current Marketable Securities Investment Cash and cash equivalents $ 1,690,000 $ - $ 1,690,000 $ 1,690,000 $ - $ - Level 1 Money Market Funds 3,493,000 - 3,493,000 3,493,000 - - Marketable Securities 5,641,000 3,495,000 9,136,000 - 9,136,000 - Level 2 Warrants 700,000 356,000 1,056,000 - - 1,056,000 Total $ 11,524,000 $ 3,851,000 $ 15,375,000 $ 5,183,000 $ 9,136,000 $ 1,056,000 The Company typically invests 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. 52 NOTE 6 - INVESTMENTS Alset International Limited (formally Singapore eDevelopment Limited) As 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 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. 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. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The fair value of the marketable security as of 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 $ 1,920,000 and $ 3,384,200 , respectively. BMI Capital International LLC On September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability company (“BMIC”) whereas DSS Securities, Inc. purchased 14.9 % 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. BMIC is a broker-dealer registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”). The Company’s chairman of the board and another independent board member of the Company also have ownership interest in BMIC. Alset Title Company On or about August 28, 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities, Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting process. ATC have initiated or have pending applications to do business in a number of states, including Texas, Tennessee, Connecticut, Florida, and Illinois. For the purpose of organization and the state application process, the Company’s CEO, who is a licensed attorney, has a stated non-compensated 15% ownership interest in the venture. There was minimal activity for the year ended December 31, 2021. 53 BioMed Technologies Asia Pacific Holdings Limited On December 19, 2020, Impact BioMedical, a wholly-owned subsidiary of the Company, entered into a subscription agreement (the “Subscription Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated in the British Virgin Islands, pursuant to which the Company agreed to purchase 525 ordinary shares or 4.99 % 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. BioMed focuses on manufacturing natural probiotics, pursuant to which the Company will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed by the Company include BioMed’s PGut Premium Probiotics ® , PGut Allergy Probiotics ® , PGut SupremeSlim Probiotics ® , PGut Kids Probiotics ® , and PGut Baby Probiotics ® . Under the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries. In exchange, the Company agreed to certain obligations, including mutual marketing obligations to promote sales of the products. This agreement is for ten years with a one year auto-renewal feature. Vivacitas Oncology, Inc. On March 15, 2021, the Company, through one of its subsidiaries, entered into a Stock Purchase Agreement (the “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 the Company; (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. (“Seller”) to purchase from the Seller’s its wholly owned subsidiary Impact Oncology PTE Ltd. (“IOPL”) for a purchase price $ 2,480,000 . The acquisition of IOPL has been treated as an asset acquisition as IOPL does not meet the definition of a business as defined in Topic 805. IOPL owns 2,480,000 shares of common stock of Vivacitas along with the option to purchase an additional 250,000 shares of common stock. The Sellers largest shareholder is Mr. Chan Heng Fai Ambrose, the Chairman of the Company’s board of directors and its largest shareholder. On April 1, 2021, the Company entered into an additional stock purchase agreement with Vivacitas (“Vivacitas Agreement #2”), whereas Vivacities wished to 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. On July 22, 2021, the Company exercised 1,000,000 of the available options under the Vivacitas Agreement #1 for $ 1,000,000 . This, along with the shares received as part Vivacitas Agreement #2 increased the Company’s equity position in Vivacitas to approximately 16 % as of December 31, 2021. Sentinel Brokers Company, Inc. On May 13, 2021, a Sentinel Brokers, LLC., subsidiary of the Company entered into a stock purchase agreement (“Sentinel Agreement”) to acquire a 24.9 % equity position of Sentinel Brokers Company, Inc. (“Sentinel”), a company registered in the state of New York, for the purchase price of $ 300,000 . 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. Sentinel is a broker-dealer operating primarily as a fiduciary intermediary, facilitating intuitional trading of municipal and corporate bonds as well as preferred stock, and is registered with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”). 54 In 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. The SHRG carries its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock at fair value in accordance with U.S. GAAP. 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. In 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. NOTE 7 – Acquisitions American Medical REIT Inc. On March 3, 2020, the Company, via its subsidiary DSS Securities, entered into a share subscription agreement and loan arrangement with LiquidValue Asset Management Pte Ltd., AMRE Asset Management, Inc. and American Medical REIT Inc. under which it acquired a 52.5 % controlling ownership interest in AMRE Asset Management Inc. (“AAMI”) which currently has a 93 % equity interest in American Medical REIT Inc. (“AMRE”). AAMI is a real estate investment trust (“REIT”) management company that sets the strategic vision and formulate investment strategy for AMRE. It manages the REIT’s assets and liabilities and provides recommendations to AMRE on acquisition and divestments in accordance with the investment strategies. AMRE is a Maryland corporation, organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. AMRE was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. AMRE is planned to qualify as a Real Estate Investment Trust for federal income tax purposes, which will provide. AMRE’s investors the opportunity for direct ownership of Class A licensed medical real estate. 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 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 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, 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 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. 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. On June 18, 2021, DSS Securities, entered into a stock purchase agreement with AMRE to acquire 264,525 Class A Common Shares of AMRE at a per share price of $ 10 , for a total consideration of $ 2,645,250 . The additional 264,525 Class A Common Shares acquired increases the Company’s total equity interest in AMRE to approximately 93 %. On June 18, 2021, 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. 55 On 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 assets. 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 to 11 years. All assets were allocated on a relative fair value basis. On 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. During 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 interest. Impact BioMedical, Inc. On August 21, 2020, the Company, completed its acquisition of Impact BioMedical, Inc. (“Impact”), pursuant to a Share Exchange Agreement by and among the Company, DSS BioHealth, and related parties Alset Intl (formally Singapore eDevelopment Limited), and Global Biomedical Pte Ltd. (“GBM”) which was previously approved by the Company’s shareholders (the “Share Exchange”).Under the terms of the Share Exchange, the Company issued 483,334 shares of the Company’s common stock, par value $ 0.02 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 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 % to 100 %. 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 interest. Although Impact historically, and to date has not generated any revenues, the acquisition of Impact meets the definition of a business with inputs, processes and outputs, and therefore, the Company has concluded to account for this transaction in accordance with the acquisition method of accounting under Topic 805 American Pacific Bancorp. On 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 per share. Subject to the terms and conditions contained in the SPA, the shares issued at a purchase price of $ 6.00 per share. As a result of this transaction, DSS owns approximately 53 % of APB, and as a result its operating results have been included in the Company’s financial statements beginning September 9, 2021. 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”). 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. Frank D. Heuszel, also has an approximate 2 % equity position of APB. The 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 2021 (unaudited) 2020 (unaudited) Revenue $ 20,337,000 $ 10,233,000 Net (loss)/income $ ( 32,217,000 ) $ 1,778,000 Basic (loss)/earnings per share $ ( 0.63 ) $ 0.63 Diluted (loss)/earnings per share $ ( 0.63 ) $ 0.46 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. 56 Sharing Services Global Corp. (“SHRG”) As of and through June 30, 2020, the Company classified its investment in Sharing Services Global Corp. (“SHRG”), a publicly traded company, as marketable equity security and measured it at fair value with gains and losses recognized in other income. In July 2020, through continued acquisition of common stock, as detailed below, the Company obtained greater than 20 % 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. On 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. The warrants are considered an equity investment that is recorded at fair value with gains and losses recorded through earnings. These 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. 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 $ 9,192,000 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 $ 1,148,000 and $ 8,044,000 , respectively. The intangible asset arising from the distributor list has a five -year useful life. 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 15,000,000 shares in payment of the loan origination fee and 12,000,000 shares in prepayment of interest for the first year. In addition, the Company received 150,000,000 warrants both issued and vested on April 5, 2021. These warrants have an exercise price of $ 0.22 and expire April 5, 2026 . As of the date of issuance the warrants the consideration paid allocated to the warrants amounted to approximately $ 14,957,000 . The warrants are considered an equity investment that is recorded at fair value with gains and losses recorded through earnings.. As of 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. The 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. SCHEDULE OF BUSINESS ACQUISITION, PRO FORMA INFORMATION 2021 (unaudited) 2020 (unaudited) Revenue $ 61,784,000 $ 102,308,000 Net (loss)/income $ ( 37,236,000 ) $ 4,675,000 Basic (loss)/earnings per share $ ( 0.72 ) $ 1.32 Diluted (loss)/earnings per share $ ( 0.72 ) $ 0.78 We 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. The Company, via three (3) of the Company’s existing board members, currently holds three (3) of the seven (7) SHRG board of director seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along with Mr. Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020), and Mr. Frank D. Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020). NOTE 8 - PROPERTY PLANT AND EQUIPMENT Property, plant and equipment consisted of the following as of December 31: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT Estimated Useful Life 2021 2020 Machinery and equipment 5 - 10 years $ 7,005,000 $ 6,866,000 Building and improvements 39 years 11,234,000 1,976,000 Land 185,000 185,000 Furniture and fixtures 7 years 397,000 130,000 Software and websites 3 years 1,099,000 298,000 Construction in progress 4,208,000 33,000 Total Cost 24,128,000 9,472,000 Less accumulated depreciation 6,454,000 5,372,000 Property, plant and equipment, net $ 17,674,000 $ 4,100,000 Depreciation expense for the years ended December 31, 2021 and 2020 was $ 1,129,000 and $ 710,000 respectively. 57 NOTE 9 - INTANGIBLE ASSETS On January 24, 2020 and April 8, 2020, the Company foreclosed on two separate note receivables with RBC Life Sciences, Inc. 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. On 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 were placed in service on January 1, 2021 and will be amortized over a 20 -year useful life when placed in service. On 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. On 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. On 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 5 years. Intangible assets are comprised of the following: SCHEDULE OF INTANGIBLE ASSETS 2021 2020 Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology assets 20 years $ 22,260,000 $ 1,113,000 $ 21,147,000 $ 22,260,000 $ - $ 22,260,000 Acquired intangibles customer lists, licenses, site/tenant improvements, in-place and favorable or unfavorable leases 1 - 11 years 19,529,000 2,162,000 17,367,000 1,259,000 330,000 929,000 Acquired intangibles patents and patent rights 500,000 500,000 - 500,000 500,000 - Patent application costs Varied (1) 1,052,000 936,000 116,000 1,178,000 911,000 267,000 $ 43,341,000 $ 4,711,000 $ 38,630,000 $ 25,197,000 $ 1,741,000 $ 23,456,000 (1) Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2021, the weighted average remaining useful life of these assets in service was approximately 3.6 years. Amounts amortized for the year ended December 31, 2021 and 2020 was approximately $ 3,279,000 and $ 374,000 , respectively. Expected amortization for each of the five succeeding fiscal years is as follows: SCHEDULE OF ESTIMATED FUTURE AMORTIZATION OF INTANGIBLE ASSETS Year Amount 2022 8,237,000 2023 2,686,000 2024 2,142,000 2025 2,471,000 2026 2,021,000 NOTE 10 – ACCRUED EXPENSES AND DEFERRED REVENUE Accrued expenses and deferred revenue consist of the following for the years ended December 31, SUMMARY OF ACCRUED EXPENSES AND DEFERRED REVENUE 2021 2020 Customer deposits $ 160,000 $ 25,000 Deferred revenue 1,348,000 - Accrued wages 11,992,000 4,665,000 Employee stock warrants liabilities 1,070,000 - Settlement liability 342,000 - Uncertain tax positions 922,000 - Accrued expenses 4,024,000 565,000 Sales tax payable 1,322,000 5,000 Accrued expenses and deferred revenue $ 21,180,000 $ 5,260,000 NOTE 11 – SHORT TERM AND LONG-TERM DEBT Revolving 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) 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 . On July 26, 2017, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving Line of Credit Agreement with Citizens pursuant to which Citizens agreed to lend up to $ 1,200,000 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. 58 Equipment Line of Credit - On July 31, 2020, Premier Packaging entered into a Loan Agreement and accompanying Term Note Non-Revolving Line of Credit Agreement with Citizens pursuant to which Citizens agreed to lend up to $ 900,000 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 . Premier Packaging did not exercise its right to renew this line of credit. Promissory Notes - On June 27, 2019, Premier Packaging refinanced and consolidated the outstanding principal associated with the two promissory notes for its packaging plant located in Victor, New York, for $ 1,200,000 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, the new, consolidated Promissory Note had a balance of $ 1,100,000 . In July of 2021, Premier Packaging repaid this note in full. The 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. On March 2, 2020, AMRE entered into a $ 200,000 unsecured promissory note with LVAMPTE. The Note calls for interest to be paid annually on March 2 with interest fixed at 8.0 %. As of December 31, 2020, accrued interest is included in the outstanding balance. If not paid sooner, the entire unpaid principal balance is due in full on March 2, 2022. As further incentive to enter into this Note, AMRE granted 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. During 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. On 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, 2021, the outstanding principal and interest approximated $ 111,000 is included in long-term debt, net on the consolidated balance sheet. On May 20, 2021, Premier Packaging entered into master loan and security agreement (“BOA Note”) with Bank of America, N.A. (“BOA”) to secure financing 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 Loan. 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. On 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 $ 192,000 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. 59 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. On 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. In 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 share. 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. In 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. All other terms of the April 2018 Note remain unchanged. As of the date of this report, this note is currently in default.. SHRG and the 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. A summary of scheduled principal payments of long-term debt, not including revolving lines of credit, subsequent to December 31, 2021 are as follows: SCHEDULE OF NOTES PAYABLE AND LONG-TERM DEBT Year Amount 2022 $ 3,916,000 2023 48,471,000 2024 410,000 2025 219,000 2026 338,000 Thereafter 7,315,000 NOTE 12 - STOCKHOLDERS’ EQUITY Sales of Equity – On February 20, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #1”) with Aegis Capital Corp. (the “Underwriter”), which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “Feb. 2020 Offering”), of 740,741 shares of the Company’s common stock, $ 0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #1, the shares were sold to the Underwriter at a public offering price of $ 5.40 ($ 0.18 per shares pre-reverse stock split) per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 111,111 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the Feb. 2020 Offering which were exercised. The net offering proceeds to the Company from the Feb. 2020 Offering were approximately $ 4 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses. The offering was closed on February 25, 2020. Heng Fai Ambrose Chan, the Chairman of the Company’s Board of Directors, purchased $ 2 million of shares in the Feb. 2020 Offering. On May 15, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #2”) with the Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “May 2020 Offering”), of 769,230 shares of the Company’s common stock, $0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #2, the shares were sold to the Underwriter at a public offering price of $ 7.80 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 115,384 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the May 2020 Offering which was exercised. The net offering proceeds to the Company from the May 2020 Offering were approximately $ 6.2 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses. The May 2020 Offering was closed on June 26, 2020. On July 7, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #3”) with the Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “July 2020 Offering”), of 1,028,800 shares of the Company’s common stock, $ 0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #3, the shares were sold to the Underwriter at a public offering price of $ 6.25 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 154,320 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the July 2020 Offering which was exercised. The net offering proceeds to the Company from the July 2020 Offering were approximately $ 6.7 million. The July 2020 Offering was closed on July 10, 2020. 60 On July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement #4”) with the “Underwriter, which provided for the issuance and sale by the Company and the purchase by the Underwriter, in a firm commitment underwritten public offering (the “July 2020 Offering #2”), of 453,333 shares of the Company’s common stock, $ 0.02 par value per share. Subject to the terms and conditions contained in the Underwriting Agreement #4, the shares were sold to the Underwriter at a public offering price of $ 7.50 per share, less certain underwriting discounts and commissions. The Company also granted the Underwriters a 45-day option to purchase up to 38,533 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the July 2020 Offering #2. The net offering proceeds to the Company from the July 2020 Offering #2 were approximately $3.3 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses. The initial July 2020 Offering #2 was closed on July 31, 2020, and the overallotment was exercised on August 7, 2020. In 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. Holders of the Series A Preferred Stock have no voting rights, except as required by applicable law or regulation, and no dividends accrue or are payable on the Series A Preferred Stock. The holders of Series A Preferred Stock are entitled to a liquidation preference at a liquidation value of $ 1,000 per share aggregating to $ 46,868,000 , and the Company has the right to redeem all or any portion of the then outstanding shares of Series A Preferred Stock, pro rata among all holders, at a redemption price per share equal to such liquidation value per share. The Series A Preferred Stock ranks senior to Common Stock and any other class of securities that is specifically designated as junior to the Series A Preferred Stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, in respect of a liquidation preference equal to its par value of $ 1,000 . A holder of Series A Preferred Stock has the option to convert each share of Series A Preferred Stock into a number of common shares in the Company equal to the $1,000 liquidation preference divided by a conversion price of $6.48 or 154.32 shares subject to a Beneficial Ownership Limitation of 19.99%, as defined in the Share Exchange Agreement. Additionally, 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. On January 19, 2021, the Company entered into an underwriting agreement, as amended by Amendment No. 1 effective as of January 19, 2021 (the “Jan. 2021 Underwriting Agreement”), with Aegis Capital Corp., as representative of the underwriters, which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “Jan. 2021 Offering”), of 6,666,666 shares of the Company’s common stock, $ 0.02 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 $ 24.0 million, after deducting estimated underwriting discounts and commissions and other estimated offering expenses On February 4, 2021, the Company entered into an underwriting agreement (the “Feb. 2021 Underwriting Agreement”) with Aegis Capital Corp., as representative of the underwriters named therein, which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “Feb. 2021 Offering”), of 12,319,346 shares of the Company’s common stock, $ 0.02 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. On May 26, 2021, the Company entered into an underwriting agreement (the “May 2021 Underwriting Agreement”) with Aegis Capital Corp., as representative of the underwriters named therein, which provided for the issuance and sale by the Company and the purchase by the underwriters, in a firm commitment underwritten public offering (the “May 2021 Offering”), of 29,000,000 shares of the Company’s common stock, $ 0.02 par value per share. Subject to the terms and conditions contained in the May 2021 Underwriting Agreement, the shares were sold at a public offering price of $ 1.50 per share, less certain underwriting discounts and commissions. The Company also granted the underwriters a 45-day option to purchase up to 4,350,000 additional shares of the Company’s common stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the May 2021 Offering, which over-allotment option was exercised in full on June 16, 2021. The net offering proceeds to the Company from the May 2021 Offering are approximately $ 45.75 million, including the exercise of the underwriter’s over-allotment option, and after deducting estimated underwriting discounts and commissions and other estimated offering expenses. On 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. 61 Stock 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 2021 2020 Weighted Weighted Average Average Exercise Exercise Warrants Price Warrants Price Outstanding at January 1: 36,514 $ 33.92 40,677 $ 33.52 Granted during the year - - - - Lapsed/terminated ( 32,958 ) 34.35 ( 4,163 ) 30.00 Outstanding at December 31: 3,556 $ 30.00 36,514 $ 33.92 Exercisable at December 31: 3,556 $ 30.00 36,514 $ 33.92 Weighted average months remaining 8.4 9.9 The Company did not issue any warrants in 2021 or 2020. Stock 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, 2021, no shares remained available under this plan. On December 9, 2019, the Company’s shareholders adopted the 2020 Employee, Director and Consultant Equity Incentive Plan (the “2020 Plan”). 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. The 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 2021 2020 Number of Options Weighted Average Exercise Price Weighted Average life Remaining (Years) Number of Options Weighted Average Exercise Price Weighted Average life Remaining (Years) Outstanding at January 1, 19,264 $ 150.30 19,264 $ 150.30 Granted - - - - Lapsed/terminated ( 7,334 ) 39.85 - - Outstanding at December 31, 11,930 $ 218.39 1.18 19,264 $ 150.30 2.2 Exercisable at December 31, 11,930 $ 218.39 1.18 19,264 $ 150.30 2.2 Expected to vest at December 31, 6,597 $ 199.07 - $ 150.30 2.2 Aggregate intrinsic value of outstanding options at December 31, $ - $ - Aggregate intrinsic value of exercisable options at December 31, $ - $ - Aggregate intrinsic value of options expected to vest at December 31, $ - $ - The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The 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. The 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 2021 or 2020. 62 Restricted 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 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. 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. On 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. Stock-Based Compensation – The Company records stock-based payment expense related to options and warrants based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During the 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 , or $ 0.05 basic and $ 0.03 diluted earnings per share for the corresponding year ended December 31, 2020, respectively). On April 3, 2020, by unanimous written consent, the Board of Directors authorized the Company to issue individual stock grants of the Company’s common stock, pursuant to the Company’s 2020 Employee, Director and Consultant Equity Incentive Plan, to certain managers and directors in the amount of 8,900 shares, at $ 6.60 per share which were immediately vested and issued. 5,800 of these shares where were fully vested restricted stock to members of the Company’s management team with a two-year lock-up period. On June 4, 2020, the Company entered into an agreement with an investor relations firm to provide services over a 14-month period in exchange for 21,000 shares of common stock. The shares were issued on the date of the agreement and were valued by the Company at $ 210,000 . 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. The Company recognized $ 105,000 for the year ended December 31, 2021. On 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. 63 NOTE 13 - INCOME TAXES The 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. The following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31: The provision (benefit) for income taxes consists of the following: SCHEDULE OF INCOME TAX PROVISION 2021 2020 Currently payable: Federal $ - $ - State - 5,000 Total currently payable - 5,000 Deferred: Federal ( 5,336,000 ) 582,000 State ( 779,000 ) ( 22,000 ) Foreign ( 123,000 ) ( 125,000 ) Total deferred ( 6,238,000 ) 435,000 Less: (decrease) increase in allowance 2,739,000 ( 2,215,000 Net deferred ( 3,499,000 ) ( 1,774,000 ) Less: tax effect of discontinued operations ( 533,000 ) - Total income tax benefit $ ( 4,032,000 ) $ ( 1,774,000 ) Individual components of deferred tax assets and liabilities are as follows: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2021 2020 Deferred tax assets: Net operating loss carry forwards $ 14,452,000 $ 13,852,000 Unrealized loss on securities 2,598,000 - Equity issued for services 189,000 192,000 Goodwill and other intangibles 21,000 0 Investment in pass-through entity 11,000 12,000 Deferred revenue 176,000 183,000 Operating Lease Liability 47,000 47,000 Other 620,000 605,000 Gross deferred tax assets 18,119,000 14,891,000 Deferred tax liabilities: Goodwill and other intangibles 4,143,000 4,668,000 Unrealized gains - 2,599,000 Right -of-use asset 47.000 47,000 Gross deferred tax liabilities 4.190.000 7,314,000 Less: valuation allowance ( 13,929,000 ) ( 11,076,000 ) Net deferred tax liabilities $ - $ ( 3,499,000 ) The 2017 Tax Cuts and Jobs Act repeals the corporate alternative minimum tax (AMT) and permits existing minimum tax credits carryovers to offset the regular tax liability for any tax year. Further, the credit is refundable for any tax year beginning after December 31, 2017 and before December 31, 2020 in an amount equal to 50 percent of the excess of the minimum tax credit over regular liability. Any remaining credit will be fully refundable for the year ended December 31, 2021. As of December 31, 2021 and 2020, the Company had $ 0 of minimum tax credit included in prepaids and other current assets in the accompanying consolidated balance sheet. On 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 U.S. corporate income tax rate from a maximum of 35% to a 21 % rate, effective January 1, 2018 Pretax 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. While 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. 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 corporation. As a result of these provisions, the Company did not have any additional tax expense or benefit from either GILTI or FDII. 64 On 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 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. During 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. At 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. 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. 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 allowance. The 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 The 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 2021 2020 Statutory United States federal rate 21.0 % 21.0 % State income taxes net of federal benefit 1.3 % ( 9.3 )% Permanent differences - % 2.0 % Other ( 1.1 )% ( 8.3 )% Non-controlling interest - % ( 70.5 )% Foreign taxes - % ( 7.3 ) % PPP loan forgiveness - % ( 142.2 )% Stock based compensation - % 22.4 % Executive compensation ( 3.7 ) % 485.2 % Change in valuation allowance ( 7.7 ) % ( 1547.5 )% Effective rate 9.8 % ( 1,239.9 )% The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2021 and 2020 the Company recognized no interest and penalties. The 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. NOTE 14 - DEFINED CONTRIBUTION PENSION PLAN The 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 %. The total matching contributions for 2021 and 2020 were approximately $ 99,000 and $ 117,000 , respectively. 65 NOTE 15 – COMMITMENTS AND CONTINGENCIES The Company has operating leases predominantly for operating facilities. As of December 31, 2021, the remaining lease terms on our operating leases range from one to sixty-three months. Termination options are not reasonably certain of exercise by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants. There are no significant finance leases as of December 31, 2021. Rent expense for the year ended December 31, 2021 and December 31, 2020 was approximately $ 190,000 and $ 217,000 respectively. Future minimum lease payments as of December 31,2021 are as follows: SCHEDULE OF FUTURE MINIMUM PAYMENTS UNDER OPERATING LEASES Totals 2022 $ 393,000 2023 88,000 2024 37,000 2025 4,000 2026 2,000 Total lease payments 524,000 Less: Imputed Interest ( 11,000 ) Present value of remaining lease payments $ 513,000 Current $ 393,000 Noncurrent $ 120,000 Weighted-average remaining lease term (years) 1.6 Weighted-average discount rate 4.2 % Employment 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, 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. Legal Proceedings – The Apple Litigation On 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. DSSTM then filed an appeal with the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) seeking reversal of the PTAB decisions. Oral arguments for the appeal were held on August 9, 2017. On March 23, 2018, the Federal Circuit reversed the PTAB, finding that the PTAB erred when it found the claims of U.S. Patent No. 6,128,290 to be unpatentable. The Federal Circuit affirmed its decision on July 12, 2018, when it denied Apple’s petition for panel rehearing of the Federal Circuit’s Opinion and Judgment issued on March 23, 2018. On July 27, 2018, the District Court judge lifted the Stay resuming the litigation, which had a trial date set for the week of February 24, 2020. On January 14, 2020, the Court in the case DSS Technology Management, Inc. v. Apple, Inc., 4:14-cv-05330-HSG pending in the Northern District of California issued an order that denied DSS’ motion to amend its infringement contentions. In the same order, the Court granted Apple’s motion to strike DSS’ infringement expert report. DSS filed a motion for leave to file a motion for reconsideration of the Court’s order denying DSS the right to amend its infringement contentions and motion to strike DSS infringement expert report. On February 18, 2020, the Court denied DSS’s motion for leave to file a motion for reconsideration. On February 24, 2020, the Court signed a Final Judgment stipulating that Apple was “entitled to a judgment of non-infringement of U.S. Patent No. 6,128,290 as a matter of law.” On March 10, 2020, DSS filed an appeal of this Final Judgment to the United States Court of Appeals for the Federal Circuit under DSS Technology Management v. Apple, Federal Circuit Docket no. 2020-1570. On April 27, 2021, the Court of Appeals heard oral argument, and on April 30, 2021, the Court affirmed the District Court’s judgment. After considering all factors the Company has elected to not pursue any further appeals on this matter. Case is deemed closed. 66 The Ronaldi Litigation In April 2019 DSS commenced an action in New York State Supreme Court, Monroe County, Index No. E2019003542, against Jeffrey Ronaldi, our former Chief Executive Officer. This New York action seeks a declaratory judgment that, contrary to informal claims made by him, Mr. Ronaldi’s employment agreement with us expired by its terms and that he is not entitled to any cash bonuses or other unpaid amounts. The lawsuit also seeks an injunction against Mr. Ronaldi from interfering with any of DSS’ IP litigation. Mr. Ronaldi subsequently commenced an action against DSS in the Superior Court of California, County of San Diego, on November 8, 2019, under case number 37-2019-00059664-CU-CO-CTL, in which he alleged that DSS terminated his employment in April 2019 in order to avoid paying him certain employment-related amounts. DSS was successful in dismissing the California case and consolidating it with the action pending in Monroe County, New York. Mr. Ronaldi asserted counterclaims in the Monroe County, New York action similar to those he originally brought in California. Mr. Ronaldi claims that his termination violated an alleged employment agreement or implied-in-fact employment agreement and that he should have remained employed through 2019. Mr. Ronaldi seeks to recover: (i) $144,658 in wages from April 11, 2019 through December 31, 2019; (ii) $769 in alleged unpaid based salary for time worked before April 11, 2019; (iii) $15,385 in alleged paid time off 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. He further claims an interest in any recovery in DSS Technology Management v. Apple, Inc., Case No. 4:14-cf05330-HSG. 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. and DSS Technology Management, Inc. vs. Jeffrey Ronaldi, Index No.: 2020002300, alleging acts of self-dealing and conflicts of interest while he served as CEO of both DSS and DSS TM. Mr. Ronaldi filed a Notice of Removal of this civil litigation to the United States District Court for the Western District of New York where it was assigned Case No. 6:20-cv-06265-EAW. Mr. Ronaldi filed a motion seeking to compel DSS to advance his legal fees to defend the action, which motion was fully briefed as of June 30, 2020 and remains pending and undecided. On March 16, 2021 the Western District of New York granted Mr. Ronaldi’s motion to have his defense costs advanced to him during the pendency of the action as they are incurred. On March 26, 2021 Mr. Ronaldi applied to the court for reimbursement of $ 160,896.25 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. The parties now engaged in discovery, awaiting a decision on the Company’s objection to Mr. Ronaldi’s fee applications. The parties 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. The motion to stay was denied. The Company intends to vigorously prosecute this action. Maiden Biosciences Litigation On February 15, 2021, Maiden Biosciences, Inc. (“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. v. DSS, Inc., et al., Case No. 3:21-cv-00327. This lawsuit relates to two promissory notes executed by RBC in the 4 th quarter of 2019 in favor of Decentralized and HWH, totaling approximately $800,000. Maiden, a 2020 default judgment creditor of RBC, in the principal amount of $4,329,000, now complains about those notes, the funding of those notes, the subsequent default of those notes by RBC, and HWH and 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 Act. Maiden also seeks a judgment from the court declaring: “(1) Defendants lacked a valid security interest in RBC and RBC Subsidiaries’ assets and therefore lacked the authority to sell the assets during the public foreclosure sale; (2) Defendant Heuszel’s low bid at the public foreclosure sale was invalid and void; (3) the public foreclosure sale was conducted in a commercially unreasonable manner; and (4) Defendants do not have the legal authority to transfer RBC and RBC’s Subsidiaries assets to Heuszel and HWH.” Maiden seeks to recover from Defendants: (1) treble damages or, alternatively, damages in the amount of their underlying judgment plus the other creditors’ claims or the value of the assets transferred, whichever is less, plus punitive or exemplary damages; (2) pre and post-judgment interest; and (3) attorneys’ fees and cost. 67 On 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 Heuszel. Among other things, the Court held that Maiden failed to plausibly plead certain causes of action, including (1) the civil RICO claim against DSS, Decentralized, HWH, RBC Life International, Inc., and Heuszel, (2) the TUFTA claim against DSS, and (3) the unjust enrichment claim against DSS and RBC Life International, Inc. 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 docket. In addition to the foregoing, we may become subject to other legal proceedings that arise in the ordinary course of business and have not been finally adjudicated. Adverse decisions in any of the foregoing may have a material adverse effect on our results of operations, cash flows or our financial condition. The Company accrues for potential litigation losses when a loss is probable and estimable. Contingent 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. Contingent Payments – The Company is party to certain agreements with funding partners who have rights to portions of intellectual property monetization proceeds that the Company receives. As of December 31, 2021, there are no contingent payments due. NOTE 16 – DISCONTINUED OPERATIONS On 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. The consideration paid to the Company under the Asset Purchase Agreement for the sale of the assets included a one-time cash payment of $ 683,000 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. As of December 31, 2020, the Company had recognized $ 390,000 of this earn out. No 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 $ 240,000 of 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. On May 7, 2021, the Company completed the sale of 100 % of the capital stock of DSS Digital Inc., the Company’s wholly-owned subsidiary (“DSS Digital”), to Proof Authentication Corporation (the “Buyer”) pursuant to a stock purchase agreement (the “Digital Purchase Agreement”). Pursuant to the terms of the Digital Purchase Agreement, the Buyer purchased DSS Digital for a purchase price of $ 5,000,000 , consisting of $ 3 million in cash; $ 1.5 million in potential earn-out if certain performance targets are met during an earn-out period commencing on the one-year anniversary of the closing and ending the day before the six-year of the closing; and $ 0.5 million in trade credit or license fee rebates. Consistent with the Company’s policy for accounting for gain contingencies, the earn out will be recorded when determined realizable which did not occur during the 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. The following tables show the major classes of assets and liabilities held for sale and results of operations of the discontinued operation. 68 DSS, INC. AND SUBSIDIARIES Consolidated Balance Sheets– Assets and Liabilities Held for Sale SCHEDULE OF AND DISCONTINUED OPERATIONS December 31, December 31, 2021 2020 ASSETS Current assets: Cash $ - $ 43,000 Accounts receivable, net - 321,000 Prepaid expenses and other current assets - 167,000 Total current assets - 531,000 Property, plant and equipment, net - 46,000 Right-of-use assets - 744,000 LIABILITIES Current liabilities: Accounts payable - 25,000 Accrued expense - 8,000 Current portion of lease liability - 240,000 Total current liabilities - 273,000 Long term lease liability - 505,000 DSS, INC. AND SUBSIDIARIES Consolidated Statements of Operations - Discontinued Operations For the Year Ended December 31, 2021 2020 Revenue: Technology sales, services and licensing $ - $ 2,045,000 Printed products - 1,602,000 Total revenue - 3,647,000 Costs and expenses: Cost of revenue, exclusive of depreciation and amortization 28,000 1,919,000 Selling, general and administrative (including stock based compensation) 176,000 2,118,000 Depreciation and amortization - 168,000 Impairment of goodwill - 685,000 Total costs and expenses 204,000 4,890,000 Operating loss ( 204,000 ) ( 1,243,000 ) Other income (expense): Interest expense - ( 24,000 ) Gain on extinguishment of debt - 347,000 Gain on disposition of business 2,868,000 279,000 Income (loss) before income taxes 2,664,000 ( 641,000 ) Income tax expense ( 535,000 ) - Income (loss) from discontinued operations $ 2,129,000 $ ( 641,000 ) 69 NOTE 17 - SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow information for the years ended December 31: SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION 2021 2020 Cash paid for interest $ - $ 185,000 Non-cash investing and financing activities: Termination of right of use lease asset $ ( 744,000 ) $ - Termination of right of use lease liability $ 744,000 $ - Shares received for loan origination fee $ ( 3,000,000 ) $ - Shares received for prepaid loan interest $ ( 2,440,000 ) $ - Acquisition of APB net assets $ 38,765,000 - Common A Shares issued for prepaid marketing services $ - $ 210,000 Common A Shares issued for Impact BioMedical $ - $ 3,132,000 Non-controlling interest related to Impact BioMedical $ - $ 3,910,000 Series A Preferred Shares issued for Impact BioMedical $ - $ 35,187,000 Notes receivable settled for assets in lieu of cash $ - $ 838,000 NOTE 18 - SEGMENT INFORMATION The 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. A third 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. The scope of services within this section is planned to include asset issuance and allocation (securities and cryptocurrency), FPO, IPO, ITO, PPO, STO and UTO listings on a primary market(s), asset digitization/tokenization (securities, currency and cryptocurrency), and the listing and trading of digital assets (securities and cryptocurrency) on a secondary market(s). Also in this segment is the Company’s real estate investment trust (“REIT”), organized for the purposes of acquiring hospitals and other acute or post-acute care centers from leading clinical operators with dominant market share in secondary and tertiary markets, and leasing each property to a single operator under a triple-net lease. the REIT was formed to originate, acquire, and lease a credit-centric portfolio of licensed medical real estate. 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. The 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. 70 Our 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. Approximate 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 Product Packaging Commercial Lending Direct Biotechnology Securities Corporate Total Revenue 15,315,000 250,000 3,379,000 83,000 1,196,000 52,000 $ 20,275,000 Depreciation and amortization 612,000 - 461,000 1,113,000 1,833,000 303,000 4,322,000 Interest expense 62,000 - 2,000 1,000 114,000 17,000 196,000 Stock based compensation 3,000 - - - - 43,000 46,000 Income tax benefit 4,032,000 Net income (loss) from continuing operations 2,829,000 ( 303,000 ) ( 17,709000 ) ( 2,536,000 ) ( 4,582,000 ) ( 11,749,000 ) ( 34,050,000 ) Capital expenditures 4,296,000 - 9,798,000 - 56,794,000 189,000 71,077,000 Identifiable assets 25,694,000 32,964,000 50,659,000 56,425,000 64,701,000 54,383,000 284,826,000 Year Ended December 31,2020 Product Packaging Commercial Lending Direct Biotechnology p Securities Corporate Total Revenue $ 13,040,000 $ - $ 2,326,000 $ - $ - $ - $ 15,366,000 Depreciation and amortization 736,000 - 28,000 - - 304,000 1,068,000 Interest expense 102,000 - - - 101,000 ( 20,000 ) 183,000 Stock based compensation 12,000 - - - - 138,000 150,000 Income tax benefit - - - - - 1,774,000 1,774,000 Net income (loss) from continuing operations 1,329,000 - 5,223,000 ( 440,000 ) ( 1,066,000 ) ( 2,986,000 ) 2,060,000 Capital expenditures 260,000 - 49,000 - - 12,000 321,000 Identifiable assets 10,715,000 - 15,009,000 48,118,000 2,820,000 15,257,000 91,919,000 International 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. 71 The following tables disaggregate our business segment revenues by major source: Printed Products Revenue Information: SCHEDULE OF DISAGGREGATION OF REVENUE Twelve months ended December 31, 2021 Packaging Printing and Fabrication $ 15,187,000 Commercial and Security Printing 352,000 Total Printed Products $ 15,539,000 Twelve months ended December 31, 2020 Packaging Printing and Fabrication $ 11,822,000 Commercial and Security Printing 1,218,000 Total Printed Products $ 13,040,000 Direct Marketing Twelve months ended December 31, 2021 Direct Marketing Internet Sales $ 3,259,000 Total Direct Marketing $ 3,259,000 Twelve months ended December 31, 2020 Direct Marketing Internet Sales $ 2,326,000 Total Direct Marketing $ 2,326,000 Rental Income Twelve months ended December 31, 2021 Rental income $ 1,203,000 Total Rental Income $ 1,203,000 Twelve months ended December 31, 2020 Rental income $ - Total Rental Income $ - Management Fee Income Twelve months ended December 31, 2021 Management fee income $ 24,000 Total Management fee income $ 24,000 Twelve months ended December 31, 2020 Management fee income $ - Total Management fee income $ - Net Investment Income Twelve months ended December 31, 2021 Net investment income $ 250,000 Total Net Investment Income $ 250,000 Twelve months ended December 31, 2020 Net investment income $ - Total Net Investment Income $ - NOTE 19 – SUBSEQUENT EVENTS On 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 share. 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. February 28, 2022, DSS entered into an Amendment to Stock Purchase Agreement (the “Amendment”) with its shareholder Alset EHome International Inc. (“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. On 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”). Previously, 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. The issuance of the DSS Shares will be subject to the approval of the NYSE American and the Company’s s hareholders . 72 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On 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. The 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. For 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. For 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.