DSS, INC. [DSS] Filings

10-Q 1 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from ______to_______ .

001-32146

Commission file number

DSS, INC.

(Exact name of registrant as specified in its charter)

New York

16-1229730

(State or other Jurisdiction of

incorporation- or Organization)

(IRS Employer

Identification No.)

275 Wiregrass Pkwy,

West Henrietta, NY 14586

(Address of principal executive offices)

(585) 325-3610

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Ticker symbol(s)		Name of each exchange on which registered
Common Stock, $0.02 par value per share		DSS		The NYSE American LLC

As of November 09, 2022 there were 139,017,172 shares of the registrant’s common stock, $0.02 par value, outstanding.

DSS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3
Item 1	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2022 and 2021	6
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 4	Controls and Procedures	36

PART II	OTHER INFORMATION	37
Item 1	Legal Proceedings	37
Item 1A	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3	Defaults upon Senior Securities	37
Item 4	Mine Safety Disclosures	37
Item 5	Other Information	37
Item 6	Exhibits	37

PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

	September 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	22,845,000		$	56,595,000
Accounts receivable, net		8,989,000			5,673,000
Inventory		8,663,000			8,261,000
Current portion of notes receivable		12,273,000			6,310,000
Prepaid expenses and other current assets		2,898,000			3,466,000
Total current assets		55,668,000			80,305,000

Property, plant and equipment, net		16,065,000			17,674,000
Investment in real estate, net		55,493,000			56,374,000
Other investments		8,190,000			11,001,000
Investment, equity method		1,326,000			1,080,000
Marketable securities		28,083,000			14,172,000
Notes receivable		1,704,000			5,878,000
Other assets		1,393,000			489,000
Right-of-use assets		8,459,000			498,000
Goodwill		56,606,000			56,606,000
Other intangible assets, net		31,893,000			38,630,000
Total assets	$	264,880,000		$	282,707,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	4,048,000		$	1,920,000
Accrued expenses and deferred revenue		11,627,000			21,180,000
Other current liabilities		396,000			402,000
Current portion of lease liability		819,000			393,000
Current portion of long-term debt, net		6,680,000			3,916,000
Total current liabilities		23,570,000			27,811,000

Long-term debt, net		50,163,000			55,711,000
Long term lease liability		7,991,000			120,000
Other long-term liabilities		507,000			880,000

Commitments and contingencies (Note 9)		-			-

Stockholders’ equity
Preferred stock, $.02 par value; 47,000 shares authorized, zero shares issued and outstanding (zero on December 31, 2021); Liquidation value $1,000 per share, zero aggregate. zero on December 31, 2021).		-			-
Common stock, $.02 par value; 200,000,000 shares authorized, 139,017,172 shares issued and outstanding (79,745,886 on December 31, 2021)		2,779,000			1,594,000
Additional paid-in capital		317,125,000			294,685,000
Accumulated deficit		(167,417,000	)		(134,503,000	)
Total stockholders’ equity		152,487,000			161,776,000
Non-controlling interest in subsidiaries		30,162,000			36,409,000
Total stockholders’ equity		182,649,000			198,185,000

Total liabilities and stockholders’ equity	$	264,880,000		$	282,707,000

See accompanying notes to the condensed consolidated financial statements.

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

	2022			2021			2022			2021
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue:
Printed products	$	5,032,000		$	3,416,000		$	12,650,000		$	10,652,000
Rental income		1,485,000			184,000			4,656,000			184,000
Management fee income		38,000			-			38,000			-
Net investment income		370,000			-			644,000			-
Direct marketing		4,937,000			966,000			17,939,000			2,382,000
Total revenue		11,862,000			4,566,000			35,927,000			13,218,000

Costs and expenses:
Cost of revenue		11,368,000			3,406,000			27,653,000			10,045,000
Selling, general and administrative (including stock based compensation)		14,677,000			6,705,000			40,316,000			19,164,000
Total costs and expenses		26,045,000			10,111,000			67,969,000			29,209,000
Operating loss		(14,183,000	)		(5,545,000	)		(32,042,000	)		(15,991,000	)

Other income (expense):
Interest income		319,000			1,593,000			613,000			3,130,000
Other income (expense)		3,627,000			325,000			4,203,000			575,000
Interest expense		(606,000	)		(31,000	)		(2,105,000	)		(157,000	)
Gain on extinguishment of debt		-			-			110,000			116,000
Gain/(loss) on equity method investment		344,000			(1,645,000	)		134,000			(2,556,000	)
Loss on investments		(14,302,000	)		(2,996,000	)		(10,479,000	)		(10,894,000	)
Gain on sale of assets		-			-			405,000			-
Loss from continuing operations before income taxes		(24,801,000	)		(8,299,000	)		(39,161,000	)		(25,777,000	)

Income tax benefit		-			1,624,000			-			4,315,000
Loss from continuing operations		(24,801,000	)		(6,675,000	)		(39,161,000	)		(21,462,000	)
Income from discontinued operations, net of tax		-			-			-			2,129,000
Net loss		(24,801,000	)		(6,675,000	)		(39,161,000	)		(19,333,000	)

Loss from continuing operations attributed to noncontrolling interest		4,587,000			77,000			6,247,000			336,000

Net loss attributable to common stockholders		(20,214,000	)		(6,598,000	)		(32,914,000	)		(18,997,000	)

Loss per common share:
Basic	$	(0.15	)	$	(0.19	)	$	(0.32	)	$	(0.78	)
Diluted	$	(0.15	)	$	(0.19	)	$	(0.32	)	$	(0.78	)

Earnings per common share - discontinued operations:
Basic	$	-		$	-		$	-		$	0.08
Diluted	$	-		$	-		$	-		$	0.08

Shares used in computing loss per common share:
Basic		134,893,360			34,888,054			102,390,079			27,203,137
Diluted		134,893,360			34,888,054			102,390,079			27,203,137

See accompanying notes to the condensed consolidated financial statements.

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30,

(unaudited)


	2022			2021
Cash flows from operating activities:
Net loss from continuing operations	$	(39,161,000	)	$	(21,462,000	)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation and amortization		9,351,000			2,075,000
Stock based compensation		4,000			74,000
Gain/(loss) on equity method investment		(134,000	)		2,556,000
Loss (gain) on investments		10,479,000			10,894,000
Loss on allowance for obsolescence of inventory		326,000			-
Change in ROU assets and lease liabilities, net		336,000			-
Gain on extinguishment of debt		(110,000	)		(116,000	)
Deferred tax benefit		-			(4,315,000	)
Accretion of debt discount, origination fee and prepaid interest		-			(2,287,000	)
Gain on sale of assets		(405,000	)
Impairment of notes receivable and other investments		1,899,000			-
Decrease (increase) in assets:
Accounts receivable		(3,316,000	)		829,000
Inventory		(728,000	)		(1,580,000	)
Prepaid expenses and other current assets		568,000			(277,000	)
Other assets		(904,000	)		(25,000	)
Increase (decrease) in liabilities:
Accounts payable		2,128,000			432,000
Accrued expenses		(3,205,000	)		1,808,000
Other liabilities		(379,000	)		(1,054,000	)
Net cash used by operating activities		(23,251,000	)		(12,448,000	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,349,000	)		(2,816,000	)
Purchase of real estate		(689,000	)		(6,565,000	)
Purchase of investment		-			(19,026,000	)
Purchase of marketable securities		(14,254,000	)		(8,789,000	)
Disposal of property, plant and equipment		2,557,000			-
Asset acquired with APB acquisition		-			1,235,000
Purchase of equity investment		-			(1,276,000	)
Sale of marketable securities		-			9,185,000
Issuance of new notes receivable, net origination fees		(4,687,000	)		(24,048,000	)
Payments received on notes receivable		786,000			-
Purchase of intangible assets		(180,000	)		(1,115,000	)
Net cash used by investing activities		(17,816,000	)		(53,215,000	)

Cash flows from financing activities:
Payments of long-term debt		(561,000	)		(1,893,000	)
Borrowings of long-term debt		6,360,000			7,102,000
Deferred financing fees		-			(186,000	)
Issuances of common stock, net of issuance costs		1,518,000			121,737,000
Net cash provided by financing activities		7,317,000			126,760,000

Cash flows from discontinued operations:
Cash provided by discontinued operations		-			207,000
Cash provided by investing activities		-			3,000,000
Net cash used by discontinued operations		-			3,207,000

Net increase (decrease) in cash		(33,750,000	)		64,304,000
Cash and cash equivalents at beginning of period		56,595,000			5,183,000

Cash and cash equivalents at end of period	$	22,845,000		$	69,487,000

See accompanying notes to the condensed consolidated financial statements.

DSS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

	Shares		Amount		Shares			Amount			Capital			Deficit			Equity			Subsidiary			Total
	Common Stock				Preferred Stock						Additional Paid-in			Accumulated			Total DSS			Non- controlling Interest in
	Shares		Amount		Shares			Amount			Capital			Deficit			Equity			Subsidiary			Total

Balance, December 31, 2021		79,746,000	$	1,594,000		-		$	-		$	294,685,000		$	(134,503,000	)	$	161,776,000		$	36,409,000		$	198,185,000

Issuance of common stock, net of expenses		42,924,000		858,000		-			-			16,547,000			-			17,405,000			-			17,405,000
Stock based payments		16,347,000		327,000		-			-			5,893,000			-			6,220,000			-			6,220,000
Net loss		-		-		-			-			-			(32,914,000	)		(32,914,000	)		(6,247,000	)		(39,161,000	)
Balance, September 30, 2022		139,017,000	$	2,779,000		-		$	-		$	317,125,000		$	(167,417,000	)	$	152,487,000		$	30,162,000		$	182,649,000

Balance, December 31, 2020		5,836,000	$	116,000		43,000		$	1,000		$	174,380,000		$	(101,382,000	)	$	73,115,000			3,430,000		$	76,545,000
Beginning balance		5,836,000	$	116,000		43,000		$	1,000		$	174,380,000		$	(101,382,000	)	$	73,115,000			3,430,000		$	76,545,000

Issuance of common stock, net of expenses		67,340,000		1,347,000		-			-			120,434,000			-			121,781,000			-			121,781,000
Stock based payments		-		-		-			-			(2,000	)		-			(2,000	)		-			(2,000	)
Conversion of preferred stock		6,570,000		131,000		(43,000	)		(1,000	)		(130,000	)		-			-			-			-
Acquisition of American Pacific Bancorp		-		-		-			-			-			-			-			20,301,000			20,301,000
Net loss		-		-		-			-			-			(18,997,000	)		(18,997,000	)		(336,000	)		(19,333,000	)
Balance, September 30, 2021		79,746,000	$	1,594,000		-		$	-		$	294,682,000		$	(120,379,000	)	$	175,897,000		$	23,395,000		$	199,292,000
Ending balance		79,746,000	$	1,594,000		-		$	-		$	294,682,000		$	(120,379,000	)	$	175,897,000		$	23,395,000		$	199,292,000

See accompanying notes to the condensed consolidated financial statements.

DSS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

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 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.

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 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 management. Also in this segment is the Company’s real estate investment trusts (“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. Alternative 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.

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 5).

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 of operating 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. SHRG markets its products and services through its independent sales force, using its proprietary websites, including: www.elevacity.com and www.thehappyco.com. SHRG, headquartered in Plano, Texas, was incorporated in the State of Nevada on April 24, 2015, and is an emerging growth company. SHRG 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.

The accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments, unless otherwise indicated) necessary to present fairly our consolidated financial position as of September 30, 2022 and December 31, 2021, and the results of our consolidated operations for the interim periods presented. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K, and 10-K/A for the fiscal year ended December 31, 2021 (“Form 10-K”, “Form 10-K/A”), and our other reports on file with the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation - The consolidated financial statements include the accounts of DSS, Inc. 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 receivable, convertible notes receivable, inventory, fair values of investments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options and warrants to purchase the Company’s common stock, preferred stock, deferred revenue and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Reclassifications - Certain amounts on the accompanying consolidated balance sheets for the year ended December 31, 2021, have been reclassified to conform to current period presentation, as have certain amounts for the three and nine months ended September 30, 2021.

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.

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.

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, air filtration systems, 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 approximately $434,000 and $388,000 associated with the inventory at our SHRG subsidiary was recorded as of September 30, 2022, and December 31, 2021, respectively. Write-downs and write-offs are charged to cost of revenue.

Impairment of Long-Lived Assets and Goodwill - The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value.

Acquisitions - 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. See Note 5 regarding the acquisitions.

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.

(Loss) Earnings Per Common Share - The Company presents basic and diluted (loss) earnings per share. Basic (loss) earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted (loss) 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 (loss) earnings per share is the same, as the impact of potential common shares is anti-dilutive. For the three and nine months ended September 30, 2022, potential dilutive instruments include both warrants and options of 0 and 11,597 shares respectively. For the three and nine months ended September 30, 2021, potential dilutive instruments include both warrants and options of 29,314 and 13,596 shares respectively.

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 the nine months ended September 30, 2022, one customer accounted for 13% of our consolidated revenue. As of September 30, 2022, this same customer accounted for 35% of our consolidated trade accounts receivable balance. During the nine months ended September 30, 2021, this customer accounted for 31% of our consolidated revenue and 57% of our consolidated trade accounts receivable balance.

During the nine months ended September 30, 2022, vendor 1 accounted for 43% and vendor 2 accounted for 21% of our consolidated inventory purchases. As of September 30, 2021, vendor 1 accounted for 76% of our consolidated inventory purchases.

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.

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.

2. 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 September 30, 2022, 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.

Accounts Receivable

The Company extends credit to its customers in the normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are generally 30 days but up to net 105 for certain customers. The Company carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. At September 30, 2022, and December 31, 2021, the Company established a reserve for doubtful accounts of approximately $42,000 and $20,000 respectively. The Company does not accrue interest on past due accounts receivable.

Sales Commissions

Sales commissions are expensed as incurred for contracts with an expected duration of one year or less. There were no sales commissions capitalized as of September 30, 2022.

Shipping and Handling Costs

Costs incurred by the Company related to shipping and handling are included in cost of products sold. Amounts charged to customers pertaining to these costs are reflected as revenue.

See Note 12 for disaggregated revenue information.

3. Notes Receivable

Note 1

On October 15, 2020, APB entered into a loan agreement with (“Note 1”) with Borrower 1. Note 1, not to exceed the principal sum of $200,000, has an interest rate of 12%, and matures on October 15, 2022. The outstanding principal and interest as of September 30, 2022 and December 31, 2021, approximated $0 and $39,000, respectively and is classified as a Current portion of notes receivable on the Consolidated Balance Sheets at December 31, 2021. The outstanding balance of $39,000 was converted to equity in Borrower 1.

Note 2

On February 8, 2021, the Company entered into a convertible promissory note (“Note 2”) with Borrower 2, 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 September 30, 2022 and December 31, 2021, approximated $0 and $829,000, respectively, and is classified as a Current portion of notes receivable on the Consolidated Balance Sheets at December 31, 2021. Borrower 2 repaid the principal and interest in full in April 2022.

Note 3

On February 21, 2021, Impact BioMedical, Inc. a subsidiary of the Company, entered into a promissory note (“Note 3”) with an individual. The Company loaned the principal sum of $206,000, with interest at a rate of 6.5%, and maturity date of August 19, 2022. This note was amended to extend the maturity date to February 19, 2024.Monthly payments are due on the twenty-first day of each month and continuing each month thereafter until February 19, 2024, 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 September 30, 2022, and December 31, 2021 approximated $206,000 and $197,000 respectively, with $16,000 classified in Current portion of notes receivable and $190,000 classified as Notes receivable on the accompanying consolidated balance sheets.

Note 4, related party

On May 13, 2021, and later amended in April 2022, Sentinel Brokers, LLC, a subsidiary of the Company entered a revolving credit promissory note (“Note 4”) with Borrower 4, a company registered in the state of New York, of which Sentinel Brokers, LLC., owns 24.9% of the company’s outstanding common stock. The Note 4 has an aggregate principal balance up to $3,000,000, to be funded at request of Borrower 4. Note 4, which incurs interest at a rate of 6.65% is payable in areas until the principal is paid in full at the maturity date of May 13, 2023. As of September 30, 2022 and December 31, 2021, there was $309,000 and $0, respectively, and is included in Current portion of notes receivable on the accompanying consolidated balance sheet.

Note 5

On May 14, 2021, DSS Pure Air, Inc. a subsidiary of the Company entered into a convertible promissory note (“Note 5”) with Borrower 5, a company registered in the state of Texas. Note 5 has an aggregate principal balance up to $5,000,000, to be funded at request of Borrower 5. Note 5interest accrues at a rate of 6.5% due quarterly, and has a maturity date of May 14, 2023. Note 5 contains an optional conversion clause that allows the Company to convert all, or a portion of all, into new issued member units of Borrower 5 with the maximum principal amount equal to 18% of the total equity position of Borrower 5 at conversion. The outstanding principal and interest as of September 30, 2022 and December 31, 2021, approximated $5,333,000 and $5,081,000, respectively, which is included in Current portion of notes receivable on the accompanying consolidated balance sheet.

Note 6

On September 23, 2021, APB entered into refunding bond anticipatory note (“Note 6”) with Borrower 6, 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. At maturity, the outstanding principal and interest of $3,645,000 of Note 6 was converted into a new note with interest accruing at approximately 5.6% per year with a maturity date of September 21, 2023. The outstanding principal and interest of $3,650,000 and $3,540,000 of the Note 6 is included in Current portion of notes receivable on the consolidated balance sheet at September 30, 2022 and December 31, 2021, respectively.

Note 7

On October 25, 2021, APB entered into loan agreement (“Note 7”) with Borrower 7, a company registered in the state of Utah. Note 7 has an initial aggregate principal balance up to $1,000,000, to be funded at request of Borrower 7, with an option to increase the maximum principal borrowing to $3,000,000. Note 7, which incurs interest at a rate of 8.0% with principal and interest due at the maturity date of October 25, 2022. This note contains an optional conversion feature allowing APB to convert the outstanding principal to a 10% membership interest. APB, as holder of Note 7, has the right to elect one member to the Board of Managers. The outstanding principal and interest of approximately $937,000 and $784,000 of the note is included in Current portion of notes receivable on the consolidated balance sheet at September 30, 2022 and December 31, 2021, respectively. The maturity date of Note 7 is in the process of being extended.

Note 8

On June 13, 2019, APB extended the credit (“Note 8”) to an individual (“Borrower 8”) in the form of a promissory note for $250,000, 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 $250,000, 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 $250,000, 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 approximately $256,000 is included in Current portion of notes receivable on the consolidated balance sheet at September 30, 2022 and $260,000 is in included in Notes receivable at December 31, 2021.

Note 9, related party

On October 7, 2021, HWH World, Inc., a subsidiary of the Company entered into a revolving loan commitment (“Note 9”) with Borrower 9, a company registered in Taiwan. Note 9 has an principal balance of $52,000 and incurred no interest through the maturity date of December 31,2021. The outstanding principal at September 30, 2022 and December 31, 2021 is $61,000 and $52,000, respectively, and is included in the Current portion of notes receivable. This note was amended in April 2022 to extend the maturity date through April 2023. The Chief Operating Officer of DSS is the sole shareholder of Borrower 9.

Note 10

On December 28, 2021, APB entered into promissory note (“Note 10”) with Borrower 10, a company registered in the state of California. Note 10 has an principal balance of $700,000. Note 10, 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 $759,000 and $700,000 of Note 10 is included in Current portion of notes receivable on the consolidated balance sheet at September 30, 2022 and December 31, 2021.

Note 11

On January 24, 2022, APB and Borrower 11 entered into a promissory note (“Note 11”) in the principal sum of $100,000 with interest of 6%, due annually, and maturing in January 2024. The outstanding principal and interest at September 30, 2022 approximates $104,000, and is included in Notes receivable on the accompanying consolidate balance sheet.

Note 12

On March 2, 2022, APB and Borrower 12, a corporation organized under the laws of the Republic of Korea entered into a promissory note (“Note 12”). Under the terms of Note 12, APB at its discretion, may lend up to the principal sum of $893,000 with an interest rate of 8%, and matures in March 2024, with interest payable quarterly. The outstanding principal and interest at September 30, 2022 is $887,000, of which $446,000 is included in Current notes receivable on the accompanying consolidated balance sheet.

Note 13

On May 9, 2022, DSS PureAir and Borrower 5 entered into a promissory note (“Note 13”) in the principal sum of $210,000 with interest of 10%, is due in three quarterly installments beginning on August 9, 2022 with the first two payment consisting of interest only. All unpaid principal and interest is due on February 9, 2023. The outstanding principal and interest at September 30, 2022 approximates $218,000, and is included in Current portions of notes receivable on the accompanying consolidate balance sheet.

Note 14, related party

On August 29, 2022, DSS Financial Management, Inc. (“DSSFM”) entered into subordinated loan agreement (“Note 14”) with Borrower 14, a broker/dealer, of which DSSFM owns 24.9% of the company’s outstanding common stock, in the principal sum of $100,000 with interest of 8%, due at maturity date of August 29, 2025. The outstanding principal and interest at September 30, 2022 approximates $101,000, and is included in Notes receivable on the accompanying consolidate balance sheet.

Note 15

On July 26, 2022, APB entered into a revolving credit promissory note (Note 15) with Borrower 15 for the principal sum up to $1,000,000 which accrues interest at 8% per year and maturing on July 26, 2024. Interest payments are due quarterly beginning on September 30, 2022. Principal and any unpaid interest is due upon maturity. The outstanding principal and interest at September 30, 2022 approximates $917,000, and is included in Notes receivable on the accompanying consolidate balance sheet.

4. Financial Instruments

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

The following tables show the Company’s cash, cash equivalents, restricted cash, and marketable securities by significant investment category as of September 30, 2022, and December 31, 2021:

	2022
	Adjusted Cost		Unrealized Gain/(Loss)			Fair Value		Cash and Cash Equivalents		Marketable Securities		Investments
Cash	$	21,151,000	$	-		$	21,151,000	$	21,151,000	$	-	$	-
Level 1
Money Market Funds		1,694,000		-			1,694,000		1,694,000		-		-
Marketable Securities		32,498,000		(4,415,000	)		28,083,000		-		28,083,000		-
Investment in unconsolidated subsidiaries		-		-			-		-		-		-
Level 2
Warrants		3,318,000		(2,246,000	)		1,072,000		-		-		1,072,000
Convertible securities		1,023,000		(725,000)			298,000		-		-		298,000

Total	$	59,684,000	$	(7,386,000	)	$	52,298,000	$	22,845,000	$	28,083,000	$	1,370,000

	2021
		Adjusted Cost		Unrealized Gain/(Loss)		Fair Value		Cash and Cash Equivalents		Marketable Securities		Investments
Cash		$	50,286,000	$	-	$	50,286,000	$	50,286,000	$	-	$	-
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	$	4,341,000

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.

5. Acquisitions

Sharing Services Global Corp. (“SHRG”)

As of and through September 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. During the quarter ended September 30, 2020, the Company began to account 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. Through a series of transactions, DSS increased its ownership of voting shares in SHRG to approximately 58% on December 23, 2021. The 58% ownership 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 and began consolidating the financial results of SHRG as of December 31, 2021. As of December 31, 2021, SHRG had total current assets of $28,494,000 and total assets of $45,660,000. Also as of December 31, 2021 SHRG had total current liabilities of $10,418,000 and total liabilities of $22,463,000.

On January 24, 2022, the Company exercised 50,000,000 warrants received as part of a consulting agreement with SHRG at the exercise price of $0.0001, bring its ownership percentage of voting shares to approximately 65%. 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. During the nine months ended September 30, 2022, SHRG incurred $1,632,000 of losses of which, $702,000 is attributed to non-controlling interest.

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.

6. Investments

Alset International Limited, related party

The Company owns 127,179,311 shares or approximately 4% of the outstanding shares of Alset International Limited (“Alset Intl”), a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited. This investment is classified as a marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the investments for a period of at least one year. The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. 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 September 30, 2022, and December 31, 2021, was approximately $3,370,000 and $4,909,000 respectively. During the nine months ended September 30, 2022 and September 30, 2021, the Company recorded unrealized loss on this investment of approximately $1,539,000 and $967,000, respectively.

West Park Capital, Inc.

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, this TBD Note had outstanding principal and interest of approximately $537,000 and was classified as Current portion of notes receivable on the consolidated balance sheet. 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 was finalized during the first quarter 2022 and valued at approximately $500,000 and is included in Investments on the consolidated balance sheet on September 30, 2022. The remaining $37,000 is included in gain (loss) on investments on the consolidated statement of operations at September 30, 2022.

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 for $100,000 in January of 2021 and increased its ownership to 24.9%. Upon achieving greater than 20% ownership in BMIC during the quarter ended September 30, 2021, the Company is currently accounting for this investment under the equity method of accounting per ASC 323. The Company’s portion of net loss in BMIC during the nine months ended September 30, 2022, approximated $10,000.

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.

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 $632,000. The Subscription Agreement provides, among other things, the Company has the right to appoint a new director to the board of BioMed. With respect to an issuance of shares to a third party by BioMed, the Company will have the right of first refusal to purchase such shares, as well as customary tag-along rights. In connection with the Subscription Agreement, Impact Biomedical 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”), a related party, 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. Heng Fai Ambrose Chan, 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.

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 120,000 shares or 16% as of September 30, 2022. As of September 30, 2022, and December 31, 2021, the fair value of the Company’s investment in Vivacitas is not readily available, and therefore is recorded at cost in the amount of $4,100,000 and $4,035,000, respectively.

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 nine months ended September 30, 2021, the Company contributed and additional $750,000 capital into Sentinel, increasing its total capital investment to $1,050,000 as of September 30, 2021. 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., as it currently owns 24.9% of Sentinel. The Company’s portion of net gain in Sentinel for the nine months ended September 30, 2022 approximated $143,000

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”).

Stemtech Corporation

In September 2021, the Company, Stemtech Corporation (“Stemtech”) and Globe Net Wireless Corp. (“GNTW”) entered into a Securities Purchase Agreement (the “SPA”) pursuant to which the Company 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 Company (the “Convertible Note”) and (b) a detachable Warrant to purchase shares 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 Company 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 Company

DSS, INC. [DSS] Filings
10-Q	[2022-11-14]
10-Q	[2022-09-14]
10-Q	[2022-05-16]
10-K	[2022-03-31]
10-Q	[2021-11-18]
10-Q	[2021-08-23]
10-Q	[2021-05-14]
10-K	[2021-03-31]
S-1	[2020-11-04]
10-Q	[2020-10-23]
10-Q	[2020-08-14]
S-1	[2020-05-21]
10-Q	[2020-05-14]
10-K	[2020-03-31]
S-1	[2020-01-24]
10-Q	[2019-11-13]
10-Q	[2019-08-13]
10-Q	[2019-05-14]
10-K	[2019-03-15]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-Q	[2018-05-15]
10-K	[2018-03-06]
10-Q	[2017-11-14]
10-Q	[2017-08-14]
10-Q	[2017-05-15]
10-K	[2017-03-28]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-Q	[2016-05-16]
10-K	[2016-03-30]
10-Q	[2015-11-13]
10-Q	[2015-08-13]
10-Q	[2015-05-15]
10-K	[2015-03-30]
10-Q	[2014-11-13]
10-Q	[2014-08-12]
10-Q	[2014-05-13]
10-K	[2014-03-26]
10-Q	[2013-11-13]
10-Q	[2013-08-13]
10-Q	[2013-05-15]
10-K	[2013-03-06]
10-Q	[2012-11-13]
10-Q	[2012-08-14]
10-Q	[2012-05-15]
10-K	[2012-03-19]