DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

13. DISCONTINUED OPERATIONS

Impact BioMedical Inc.

On April 27, 2020, Global BioMedical Pte Ltd (“GBM”), one of our subsidiaries, entered into a share exchange agreement with DSS BioHealth Security, Inc. (“DBHS”), a wholly owned subsidiary of DSS, Inc. (“DSS”), pursuant to which, DBHS will acquire all of the outstanding capital stock of Impact BioMedical Inc., wholly owned subsidiary of GBM, through a share exchange. The aggregate consideration to be issued to GBM for the Impact BioMedical shares will be the following: (i) 483,334 newly issued shares of DSS common stock; and (ii) 46,868 newly issued shares of a new series of DSS perpetual convertible preferred stock with a stated value of $46,868,000, or $1,000 per share. The convertible preferred stock can be convertible into shares of DSS common stock at a conversion price of $6.48 of preferred stock stated value per share of common stock, subject to a 19.9% beneficial ownership conversion limitation (a so-called “blocker”) based on the total issued outstanding shares of common stock of DSS beneficially owned by GBM. Holders of the convertible preferred stock will have no voting rights, except as required by applicable law or regulation, and no dividends will accrue or be payable on the convertible preferred stock. The holders of convertible preferred stock will be entitled to a liquidation preference of $1,000 per share, and DSS will have the right to redeem all or any portion of the then outstanding shares of convertible preferred stock, pro rata among all holders, at a redemption price per share equal to such liquidation value per share.

Under ASU 2014-08, a disposal transaction meets the definition of a discontinued operation if all of the following criteria are met:

1.	The disposal group constitutes a component of an entity or a group of components of an entity
2.	The component of an entity (or group of components of an entity) meets the held-for-sale classification criteria, is disposed of by sale, or is disposed of other than by sale (e.g., “by abandonment, in an exchange measured based on the recorded amount of the nonmonetary asset relinquished, or in a distribution to owners in a spinoff”).
3.	The disposal of a component of an entity (or group of components of an entity) “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results”.

Impact Biomedical Inc. is a group of subsidiaries of AEI and operates independently with its own financial reporting. The transaction is a disposal by sale and has a major effect on AEI’s financial results. Since it meets all above test criteria, we treated this disposal transaction as a discontinued operation in our financial statements.

On August 21, 2020, the transaction closed and Impact BioMedical Inc became a direct wholly owned subsidiary of DBHS. GBM received 483,334 shares of DSS common stock and 46,868 shares of DSS preferred stock, which preferred shares could be converted to 7,232,716 common shares (however, any conversion will be subject to the blocker GBM has agreed to, as described above). After this transaction, we hold 500,001 shares of the common stock of DSS, representing 9.7% of the outstanding common stock of DSS. Our CEO, Chan Heng Fai is the owner of the common stock of DSS (not including any common or preferred shares we hold) and is the executive chairman of the board of directors of DSS. The Company has elected the fair value option for the DSS common stock that would otherwise be accounted for under the equity method of accounting. ASC 820, Fair Value Measurement and Disclosures, defines fair value of the financial assets. We value DSS common stock under level 1 category through quoted prices and preferred stock under level 3 category through an Option-Pricing Method. Under the “blocker” term in the agreement, the Company could convert 4,293 shares Convertible Preferred Stock into 662,500 shares of the common stock of DSS as of September 30, 2020. The quoted price of DSS common stock was $6.95 as of August 21, 2020. The total fair value of DSS common and preferred stocks GBM received as consideration for the disposal of Impact BioMedical was $46,284,171. As of August 21, 2020, the net asset value of Impact BioMedical was $94,011. The difference of $46,190,160 was recorded as additional paid in capital. We did not recognize gain or loss from this transaction as it was a related party transaction.

The composition of assets and liabilities included in discontinued operations is as follows:

	December 31,		December 31,
	2021		2020
Assets
Cash	$	-	$	-
Prepaid Expense		-		-
Total Asset	$	-	$	-
Liabilities
Accounts Payable	$	-	$	-
Total Liabilities	$	-	$	-

The financial results of discontinued operations are as follows:

	Years Ended December 31,
	2021		2020
Revenue	$	-	$	-
Operating Expense
Research & Development		-		246,915
General & Administration		-		170,035
Total Operating Expense		-		416,950
Loss from Security Investment by Equity Method		-		-
Loss from Acquisition		-		-
Other Expense		-		488
Loss from Discontinued Operations	$	-	$	(417,438	)

The cash flows attributable to the discontinued operation are as follows:

	Year Ended December 31, 2021		Year Ended December 31, 2020
Operating	$	-	$	(422,188	)
Investing		-		-
Financing		-		-
Net Change in Cash	$	-	$	(422,188	)