• Filing Date: 2021-03-31
  • Form Type: 10-K
  • Description: Annual report
v3.21.1
Investments
12 Months Ended
Dec. 31, 2020
Investments, All Other Investments [Abstract]  
Investments

NOTE 6 - INVESTMENT

 

Alset International Limited (formally Singapore eDevelopment Limited)

 

As of December 31, 2018, the Company owned 21,196,552 ordinary shares of Alset International Limited (“Alset Intl”), formerly named Singapore eDevelopment Limited (“SED”), a company incorporated in Singapore and publicly listed on the Singapore Exchange Limited. and an existing three-year warrant to purchase up to 105,982,759 ordinary shares at an exercise price of SGD$0.040 (US$0.0298) per share During the year ended December 31, 2019 the Company exercised 61,977,577 of the warrants for total cost of $1,829,000 and at December 31, 2019 recorded the investment at cost, less impairment under the measurement alternative in ASC 321 for a total value of $2,154,000. As of June 25, 2020, the Company exercised the remaining warrants for total cost of $1,291,000 bringing its total ownership to 127,179,311 shares or approximately 7% of the outstanding shares of Alset Intl as of December 31, 2020. Historically and through June 30, 2020, the Company carried its investment in Alset Intl at cost, less impairments under the measurement alternative in ASC 321 in part due to the restriction on the sale of shares which expired on September 17, 2019 as well as the lack of historical volume associated with the shares of Alset Intl. During the third quarter 2020, the Company determined fair value based on the volume of shares traded on the Singapore Exchange which has a breadth and scope comparable to United States markets, as well as a consistent and observable market price. Accordingly, this investment is now classified as a marketable security and is classified as long-term assets on the consolidated balance sheets as the Company has the intent and ability to hold the investments for a period of at least one year. The Chairman of the Company, Mr. Heng Fai Ambrose Chan, is the Executive Director and Chief Executive Officer of Alset Intl. Mr. Chan is also the majority shareholder of Alset Intl as well as the largest shareholder of the Company. The fair value of the marketable security as of December 31, 2020 was approximately $6,830,000 and during the year ended December 31, 2020 the Company recorded unrealized gains on this investment of approximately $3,384,200.

 

Sharing Services Global Corp. (“SHRG”)

 

The Company had acquired in a series of open-market transactions, between March 2020 and December 2020 an aggregate of 13,957,378 of additional Class A common shares of Sharing Services Global Corp. (“SHRG”), a publicly traded company at an average purchase price of $0.06 per share. The Company, during this same period, had also purchased 20,250,000 shares of SHRG in private purchases at an average purchase price of $0.09 per share. The aggregate cost of these transactions approximated $2,572,000.

 

On July 22, 2020, Chan Heng Fai Ambrose, the Chairman of the Company’s board of directors, assigned a Stock Purchase and Share Subscription Agreement by and between Mr. Chan and SHRG, pursuant to which the Company purchased 30,000,000 shares of Class A common stock and 10,000,000 warrants to purchase Class A common stock for $3 million. The warrants have an average exercise price of $0.20, immediately vested and may be exercised at any time commencing on the date of issuance and ending three year from such date. As of the date of issuance the warrants the consideration paid allocated to the warrants amounted to approximately $700,000.  The warrants are considered an equity investment that is recorded at fair value with gains and losses recorded through net income. These warrants have been recorded at the fair market value of $1,056,000 on the Company’s consolidated balance sheet and are included in “other investments” with the increase representing an unrealized gain of $356,000 as of 12/31/2020. These shares and warrants are also subject to a one-year trading restriction pursuant to the terms of a Lock-Up Agreement entered into between Mr. Chan and the Company and assigned to the Company.

 

As of June 30, 2020, the Company, had acquired and owned approximately 17% of the issued and outstanding shares of SHRG, which was recorded as a marketable security investment. In the 3rd quarter of 2020, the Company, through a series of Class A common shares acquisitions in July 2020, with such acquisition history detailed below, the Company acquired in aggregate, an ownership interest in SHRG of greater than 20%. At that time, it was determined that the Company had the ability to exercise significant influence over SHRG. Accordingly, on July 22nd, the Company began prospectively utilizing the equity method of accounting for its investment into SHRG in accordance with ASC Topic 323 and recognizing our share of SHRG’s earnings and losses within our consolidated statement of operations and comprehensive income (loss). Due to the difference in fiscal year ends between the two companies, DSS has elected to recognize its portion of SHRG’s earnings and losses on a quarter lag basis and utilized SHRG’s three-month ended October 31, 2020 reported results in calculating its portion of SHRG’s gain which approximated $604,000. As of July 22, 2020, the Company owned 62,417,593 Class A common shares of SHRG with an adjusted basis of $11.3 million. As of December 31, 2020, the Company held 64,207,378 class A common shares equating to a 32.6% ownership interest in SHRG and had recorded unrealized gains on marketable securities of approximately $6.8 million for the twelve-months then ended related to the period prior to the Company achieving significant influence and recording the investment under the equity method. As of July 22, 2020, the carrying value of the Company’s equity method investment exceeded our share of the book value of the investee’s underlying net assets by approximately $9.2 million, which represents primarily intangible assets in the form of customer and distributor lists and goodwill arising from acquisitions. The Company is still in the process of valuing the intangible assets as of December 31, 2020 and no amortization has been recorded during the period ended December 31, 2020. The aggregate fair value of the Company’s investment in SHRG at December 31, 2020 was approximately $14,774,000. The following table represents SHRG operating results for the six-months ended October 31, 2020:

 

Net sales   $ 41,339,507  
Gross profit   $ 30,390,874  
Operating earnings   $ 1,265,192  
Earnings before income taxes   $ 1,113,971  
Income tax provision   $ (355,991 )
Net earnings   $ 757,980  

 

The Company, via four (4) of the Company’s existing board members, currently holds four (4) of the five (5) SHRG board of director seats. Mr. John “JT” Thatch, DSS’s Lead Independent Director and as well the CEO of SHRG is on the SHRG Board, along with Mr. Chan, DSS’s Executive Chairman of the board of directors (joined the SHRG Board effective May 4, 2020), Mr. Sassuan “Sam” Lee, DSS Independent Director (joined the SHRG Board effective September 29, 2020) and Mr. Frank D. Heuszel, the CEO of the Company (joined the SHRG Board effective September 29, 2020).

 

BMI Capital International LLC

 

On September 10, 2020, the Company’s wholly owned subsidiary DSS Securities, Inc. entered into membership interest purchase agreement with BMI Financial Group, Inc. a Delaware corporation (“BMIF”) and BMI Capital International LLC, a Texas limited liability company (“BMIC”) whereas DSS Securities, Inc. purchased 14.9% membership interests in BMIC for $100,000. DSS Securities also had the option to purchase an additional 10% of the outstanding membership interest which it exercised in January of 2021 and increased its ownership to 24.9%. This investment is valued at cost as it does not have a readily determined fair value.

 

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 this joint venture.

 

Alset Title Company

 

On or about August 28, 2020, the Company’s wholly owned subsidiary, DSS Securities, Inc. entered into a corporate venture to form and operate a real estate title agency, under the name and flagging of Alset Title Company, Inc, a Texas corporation (“ATC”). DSS Securities, Inc. shall own 70% of this venture with the other two shareholders being attorneys necessary to the state application and permitting process. ATC have initiated or have pending applications to do business in a number of states, including Texas, Tennessee, Connecticut, Florida, and Illinois. For the purpose of organization and the state application process, the Company’s CEO, who is a licensed attorney, has a stated non-compensated 15% ownership interest in the venture. There was no activity for the twelve-months ended December 31, 2020.

 

BioMed Technologies Asia Pacific Holdings Limited

 

On December 19, 2020, Impact BioMedical, a wholly-owned subsidiary of the Company, entered into a subscription agreement (the “Subscription Agreement”) with BioMed Technologies Asia Pacific Holdings Limited (“BioMed”), a limited liability company incorporated in the British Virgin Islands, pursuant to which the Company agreed to purchase 525 ordinary shares or 4.99% of BioMed at a purchase price of approximately $630,000. The Subscription Agreement provides, among other things, the Company the right to appoint a new director to the board of BioMed. With respect to an issuance of shares to a third party by BioMed, the Company will have the right of first refusal to purchase such shares, as well as customary tag-along rights. In connection with the Subscription Agreement, Impact entered into an exclusive distribution agreement (the “Distribution Agreement”) with BioMed, to directly market, advertise, promote, distribute, and sell certain BioMed products, which focus on manufacturing natural probiotics, to resellers. This investment is valued at cost as it does not have a readily determined fair value.

 

BioMed focuses on manufacturing natural probiotics, pursuant to which the Company will directly market, advertise, promote, distribute and sell certain BioMed products to resellers. The products to be distributed by the Company include BioMed’s PGut Premium Probiotics®, PGut Allergy Probiotics®, PGut SupremeSlim Probiotics®, PGut Kids Probiotics®, and PGut Baby Probiotics®.

 

Under the terms of the Distribution Agreement, the Company will have exclusive rights to distribute the products within the United States, Canada, Singapore, Malaysia, and South Korea and non-exclusive distribution rights in all other countries. In exchange, the Company agreed to certain obligations, including mutual marketing obligations to promote sales of the products. This agreement is for ten years with an one year auto-renewal feature.