What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-09-14 compared with 2022-05-16 · 151 added, 150 removed, 348 unchanged (46% of the section changed)

11 unchanged sentences

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

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

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

This change became effective on September 30, 2021.

maintained the same trading symbol “DSS” and

updated its CUSIP number to 26253C 102.

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

(a New York corporation,

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

change became effective on September 30, 2021.

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

to 26253C 102.

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

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business lines are:

(1) Product Packaging, (2) Biotechnology, (3) Direct Marketing, (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.

(1) Product Packaging, (2) Biotechnology, (3) Direct Marketing, (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.

divisions, their business lines, subsidiaries, and operating territories:

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(3) Direct Marketing, 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 Marketing’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

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

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

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

the REIT was formed to originate, acquire,

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

(6) Alternative Trading was established to develop and/or acquire

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

Trading, in partnership with recognized global leaders

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

tokenized assets, utility tokens, and cryptocurrency via an alternative trading platform using blockchain 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.

(“Decentralized”) provides services

to assist companies in the emerging growth “Gig” business model of peer-to-peer decentralized sharing marketplaces.

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’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.

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

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

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

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

portfolio of licensed medical real estate.

(6) Alternative Trading was established to develop and/or acquire assets and investments in

the securities trading and/or funds management arena.

Trading, in partnership with recognized global leaders in alternative trading

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

utility tokens, and cryptocurrency via an alternative trading platform using blockchain 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

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.

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.

February 8, 2021, DSS Securities announced that it entered into a joint venture (“JV”) with Coinstreet Partners (“Coinstreet”),

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On July 22, 2021, the Company exercised 1,000,000 of the available options under the Vivacitas Agreement #1.

Company’s current equity position in Vivacitas approximates 16%.

The Company’s

current equity position in Vivacitas approximates 16%.

April 21, 2021, the Company announced its wholly owned subsidiary, Premier Packaging Corporation’s intentions to relocate from

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

As of June 30,

2022, no liability has been recorded for this earnout as management determined it is currently remote.

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

$600,000 consideration given is recorded as an Other intangible asset, net on the Consolidated Balance Sheet at March 31, 2022.

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

$600,000 consideration given is recorded as an Other intangible asset, net on the Consolidated Balance Sheet at June 30, 2022.

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

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

14 unchanged sentences

by OTC Markets Group Inc.

On May 17, 2022, the shareholders

of the Company approved the acquisition of 62,122,908 shares of True Partners Capital Holdings Limited (“True Partners”),

a company publicly traded on the Hong Kong stock exchange in exchange for 17,570,948 shares of DSS stock.

The True Partner shares were

acquired from Alset EHome International, Inc.

(“Alset EHome”), a related party.

Heng Fai Ambrose Chan, our director and

Executive Chairman, is also Chairman of the Board, Chief Executive Officer, and the largest beneficial owner of the outstanding shares

of Alset EHome.

five reporting segments are as follows:

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as well as preferred stock, and accelerates the trajectory of the DSS digital securities business.

WestPark, a company we hold a minority interest in, is a full-service investment banking and securities brokerage firm

which serves the needs of both private and public companies worldwide, as well as individual and institutional investors.

WestPark, a company we hold a minority interest in, is a full-service investment banking and securities brokerage firm which

serves the needs of both private and public companies worldwide, as well as individual and institutional investors.

BMI is a private investment bank specializing in corporate finance advising, raising equity, and venture services, providing

35 unchanged sentences

beauty and skin care products, and other wellness products.

of operations for the three months ended March 31, 2022, as compared to the three months ended March31, 2021.

of operations for the six and three months ended June 30, 2022, as compared to the six and three months ended June 30, 2021.

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

Report on Form 10-K for the year ended December 31, 2021.

Three months ended

March 31, 2022

Three months ended

March 31, 2021

Printed products

Rental income

Management fee income

Net investment income

Direct marketing

Total Revenue

the three months ended March 31, 2022, total revenue increased 175% as compared to the three months ended March 31, 2021.

Revenues from the sale of Printed products decreased 8% during the three months ended March 31, 2022, as compared to the same

period in 2021, primarily due to manufacturing down time related to relocating Premier’s manufacturing plant during Q1 2022.

Net investment income, Rental income and Management fee income, $129,000, $1,663,000 and $11,000 respectively, represent

new revenue streams for the Company and are associated with our Securities and Commercial Lending business segments.

The Company’s

Direct Marketing revenues increased 1040% in 2022 as compared to 2021 due primarily to the increase sales in our Asian

markets, and the inclusion of SHRG revenue for the period January 1, 2022, to March 31, 2022.

Three months ended

March 31, 2022

Months ended March 31, 2021

Costs and expenses

Cost of revenue, exclusive of depreciation and amortization

investment income

For the three and six months ended

June 30, 2022, total revenue increased 181% and 178% respectively, as compared to the three and six months ended June 30, 2021.

from the sale of Printed products decreased 20% and 5% during the three and six months ended June 30, 2022, as compared to the same period

in 2021, primarily due efforts to meet customer demands after manufacturing down time that occurred during Q1 2022 related to relocating

Premier’s manufacturing plant during Q1 2022.

Rental income, and Net investment income of $1,508,000, and $166,000 respectively, for the three months ended June 30, 2022 and $3,171,000, and $295,000, respectively for the six months

ended June 30, 2022, represent new revenue streams for the Company and are associated with our Securities and Commercial Lending business

The Company’s Direct Marketing revenues increased 650% and 818% for the three and six months ended June 30, 2022 as compared

to 2021 due primarily to the increase sales in our Asian markets, and the inclusion of SHRG revenue for the period January 1, 2022, to

June 30, 2022.

Three months ended June 30, 2022

Three months ended June 30, 2021

Six months ended June 30, 2022

Six months ended June 30, 2021

Cost of revenue, inclusive of depreciation and amortization

Sales, general and administrative compensation

Depreciation and amortization

Professional fees

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Total costs and expenses

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

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

Costs of goods sold increased 66% for the

three months ended March 31, 2022, respectively as compared to the same periods in 2021.

This increase is driven primarily by

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

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

general and administrative compensation costs, excluding stock-based compensation, increased 152% during the three months

ended March 31, 2022, as compared to the same periods in 2021, primarily due to additional head count associated with the inclusion

of SHRG compensation costs for the three months ended March 31, 2022.

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

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

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

Also included is the depreciation of the buildings acquired

and amortization of intangible assets included in real estate acquisitions made by our REIT business line for the three months

ended March 31, 2022, depreciation and amortization expense increased 535% as compared to the same periods in 2021 due primarily

to the amortization on newly acquired intangibles assets, as well as the acquisition of several properties made by our REIT business

fees increased 25% during the three months ended March 31, 2022, as compared to the same periods in 2021, primarily

due to an increase in legal fees associated with the direct marketing segment, and due diligence fees related to potential

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

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

Costs of goods sold

increased 137% and 145% for the three and six months ended June 30, 2022, respectively as compared to the same periods in 2021.

increase is driven primarily by an increase in depreciation and amortization associated with assets acquired by our REIT line of

business as well as increases in manufacturing costs associated with the products sold as part of our Direct Marketing, and

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

Sales, general and administrative

compensation costs, excluding stock-based compensation, increased 72% and 81% for the three and six months ended June 30, 2022 as

compared to the same periods in 2021 primarily due to additional head count associated with the inclusion of SHRG compensation costs for

the beginning on January 1, 2022.

Professional fees increased

84% and 59%, during the three and six months ended June 30, 2022, as compared to the same periods in 2021 respectively, primarily due

to an increase in legal fees associated with the direct marketing segment, accounting fees, and due diligence fees related to potential

acquisitions.

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.

Stock based compensation decreased 93% during the three months ended March

31, 2022, as compared to the same periods in 2021, driven by the expiration of options awarded to employees no longer with the Company.

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

and trade show participation expenses.

The increased 513% during the three months ended March 31, 2022 as compared to the same

periods in 2021, is a result of the commissions paid to brokers associated with the Company’s Direct Marketing segment, and

in particular, the inclusion of SHRG financial results for the three months ended March 31, 2022.

and utilities increased 161% during the three months ended March 31, 2022, as compared to the same period in 2021,

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

and development costs decreased 31% during the three months ended March 31, 2022, as compared to the same period in 2021 are

due to a decrease in such activities at our Impact Biomedical, Inc.

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

the three months ended March 31, 2022, other operating expenses increased 61% as compared to the same period in 2021 due to increased

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

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.

Stock based compensation decreased 100% and 127% during the three and six months ended June 30, 2022,

as compared to the same periods in 2021 respectively, driven by the expiration of options awarded to employees no longer with the Company.

Sales and marketing which

include internet and trade publication advertising, travel and entertainment costs, sales-broker commissions, and trade show participation

Sales and marketing increased 233% and 336% during the three and six months ended June 30, 2022 as compared to the same periods

in 2021 respectively, is a result of the commissions paid to brokers associated with the Company’s Direct Marketing segment, and

in particular, the inclusion of SHRG financial results for the three and six months ended June 30, 2022.

Rent and utilities increased

151% and 212% during the three and six months ended June 30, 2022, as compared to the same period in 2021 respectively, primarily due

to a new facility lease in Houston, Texas started during the first quarter of 2021 as well as Premier Packaging’s leased facility

beginning in March 2022.

Research and development

costs decreased 2% and 18% during the three and six months ended June 30, 2022, as compared to the same period in 2021 respectively, due

to a decrease in such activities at our Impact Biomedical, Inc.

Other operating expenses consist

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

During the three and six months ended

June 30, 2022, other operating expenses increased 67% and 60% as compared to the same period in 2021 respectively, due to increased software

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

Direct Marketing segment and increased D&O insurance premiums.

Income (Expense)

Three months ended

March 31, 2022

Three months ended

March 31,2021

Other Income (Expense)

Interest Income

Interest Expense

Other Expense

Loss on investments

Other Income (expense)

Gain (loss) on investments

Loss on equity method investment

Gain on extinguishment of debt

Gain on sale of assets

Gain/(Loss) on extinguishment of debt

Gain on disposal of operations, net of taxes

Total other income

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$ (7,032,000 )

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

expense represents cost associated with the impairment of investments and notes receivables for SHRG approximating $1,637,000.

expense increased 6790% during the three months ended March 31, 2022, as compared to the same period in 2021, due to increasing

debt balances.

income is recognized on the Company’s money markets, and a portion of notes receivable, identified in Note 4.

expense for the six months ended June 30, 2022 is driven by the impairment of investments

and notes receivables for SHRG approximating $1,745,000.

Interest expense increased

14% and 1090% during the three and six months ended June 30, 2022, as compared to the same period in 2021, due to

increasing debt balances, in particular within our REIT business line.

on investments consists of net realized losses on marketable securities which are recognized as the difference between the purchase

2 unchanged sentences

on the change in fair market value on our common stock investment.

Loss on equity method investment

is the Company’s prorated portion of earnings on its investments treated under the equity method of account for the three months

ended March 31, 2022.

Gain on extinguishment

of debt consists of funds received by AAMI in April 2020, by the SBA Paycheck Protection Program of $112,000.

As of January 8, 2021, this note was forgiven in full.

Gain on sale of assets

is driven by the Company’s gain on the sale of Premier’s manufacturing facility in Victor, NY, as well as other capital assets.

Three months ended

March 31, 2022

Three months ended

March 31,2021

on equity method investment is the Company’s prorated portion of earnings on its investments treated under the equity method

of account for the three and six months ended June 30, 2022.

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

of January 8, 2021, this note was forgiven in full.

Also, during the three months ended June 30, 2022, SHRG’s $110,000 SBA Paycheck

Protection Program was forgiven in full.

on sale of assets is driven by the Company’s gain on the sale of Premier’s manufacturing facility in Victor, NY, as well

as other capital assets.

Loss from continuing operations

1 unchanged sentence

$ (14,361,000 )

Income from discontinued operations, net of tax

$ (14,787,000 )

from discontinued operations, net of tax

$ (8,646,000 )

the three months ended March 31, 2022, and March 31, 2021, the Company recorded net loss from continuing operations of $8,950,000

and $4,012,000 respectively.

The increase in net loss during the three months ended March 31, 2022, as compared

to the same periods in 2021 primarily reflect the inclusion of the Company’s SHRG subsidiary in the first quarter 2022.

$ (14,361,000 )

$ (12,658,000 )

For the three and six months ended

June 30, 2022, the Company recorded net losses of $5,410,000 and $14,361,000, respectively as compared to net losses of $8,646,000 and

$12,658,000, respectively for June 30, 2021.

The decrease in net loss during the three and six months ended June 30, 2022, as compared

to the same periods in 2021 primarily reflect the performance of Company investments.

AND CAPITAL RESOURCES

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

As of March 31, 2022 the Company had cash of approximately $53.8 million.

As of March 31, 2022, the Company believes

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

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

As of June 30, 2022 the Company had cash of approximately $42.4 million.

As of June 30, 2022, the Company believes that it has sufficient

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

In addition, the Company

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

Sheet Arrangements

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There have been

no material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

no material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis