EX-99.3 6 ex99-3.htm

Exhibit 99.3

DOCUMENT SECURITY SYSTEMS.INC

Unaudited Pro Forma Condensed Consolidated Balance Sheet

March 31, 2020

	Pre-Acquisition DSS (Purchaser)			Record Purchase		Post-acquisition DSS (Purchaser)			ImpactBio (Target)			Proforma Adjustment (Note 1)			Proforma Adjustment (Note 2)			Consolidated Financials
ASSETS
Current Assets:
Cash	$	3,802,000				$	3,802,000		$	130,000								$	3,932,000
Accounts Receivable		3,582,000					3,582,000			-									3,582,000
Inventory		1,743,000					1,743,000			-									1,743,000
Prepaid Expense and other current assets		514,000					514,000			23,000									537,000
Total Current Assets		9,641,000			-		9,641,000			153,000			-			-			9,794,000
Property plant and equipment, net		4,925,000					4,925,000			-									4,925,000
Investment		2,154,000					2,154,000			-									2,154,000
Marketable Securities		570,000					570,000			-									570,000
Investment in Target		-			50,000,000		50,000,000			-			(127,000	)		(49,873,000	)		-
Notes Receivable		1,255,000					1,255,000			-									1,255,000
Other assets		54,000					54,000			-									54,000
Right-of -use assets		1,119,000					1,119,000			-									1,119,000
Goodwill		1,769,000					1,769,000			-						78,440,000			80,209,000
Other intangible assets, net		816,000					816,000			-									816,000
Total Assets	$	22,303,000		$	50,000,000	$	72,303,000		$	153,000		$	(127,000	)	$	28,567,000		$	100,896,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts Payable	$	1,489,000				$	1,489,000		$	27,000								$	1,516,000
Accrued expenses and deferred revenue		706,000					706,000												706,000
Other current liabilities		390,000					390,000												390,000
Revolving line of credit		800,000					800,000												800,000
Current portion of lease liabilities		369,000					369,000												369,000
Current portion of long-term debt, net		403,000					403,000												403,000
Total Current Liabilities	$	4,157,000		$	-	$	4,157,000		$	26,000		$	-		$	-		$	4,183,000
Long-term debt, net		2,427,000					2,427,000												2,427,000
Long term lease liability		750,000					750,000												750,000
Other long-term liabilities		507,000					507,000												507,000
Deferred tax liability, net		44,000					44,000												44,000
Total Liabilities	$	7,885,000		$	-	$	7,885,000		$	26,000		$	-		$	-		$	7,911,000
																			-
Stockholders’ Equity																			-
Common Stock	$	42,000		$	10,000	$	52,000		$	14,000		$	(14,000	)				$	52,000
Convertible Preferred Stock		-			46,868,000		46,868,000			-									46,868,000
Additional Paid in Capital		119,624,000			3,122,000		122,746,000			1,802,000			(1,802,000	)					122,746,000
Accumulated Deficit		(105,181,000	)				(105,181,000	)		(1,730,000	)		1,730,000						(105,181,000	)
Total Stockholders’ Equity (Deficit)		14,485,000			50,000,000		64,485,000			86,000			(86,000	)		-			64,485,000
Non-Controlling Interests		(67,000	)				(67,000	)		41,000			(41,000	)		28,567,000			28,500,000
Total Stockholders’ Equity (Deficit)	$	14,418,000		$	50,000,000	$	64,418,000		$	127,000		$	(127,000	)	$	28,567,000		$	92,985,000
																			-
Total Liabilities & Stockholders’ Equity	$	22,303,000		$	50,000,000	$	72,303,000		$	153,000		$	(127,000	)	$	28,567,000		$	100,896,000

DOCUMENT SECURITY SYSTEMS.INC

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2020

	DSS (Purchaser)			Impact BioMedical (Target)			Proforma Adjustment (Note 1)		Proforma Adjustment (Note 2)		Consolidated Proforma

Revenue:
Printed products	$	3,949,000		$	-		$	-	$	-	$	3,949,000
Technology sales, services and licensing		479,000			-			-		-		479,000
Direct selling		573,000			-			-		-		573,000
Total revenue	$	5,001,000		$	-		$	-	$	-	$	5,001,000
Costs and expense
Costs of revenue, exclusive of deprecation and amortization	$	3,271,000		$	-		$	-	$	-	$	3,271,000
Selling, general and administrative (including stock based compensation)		2,641,000			125,000			-		-		2,766,000
Deprecation and amortization		360,000			-			-		-		360,000
Impairment of Goodwill		685,000			-			-		-		685,000
Total Operating Expense		6,957,000			125,000			-		-		7,082,000
Operating Loss		(1,956,000	)		(125,000	)		-		-		(2,081,000	)
Other Income (expense)
Interest Income		24,000			-			-		-		24,000
Interest Expense		(39,000	)		-			-		-		(39,000	)
Gain on Marketable Securities		4,000			-			-		-		4,000
Amortization of deferred financing costs a debt discount		-			-			-		-		-
Financial Services		-						-		-		-
Loss from Security Investment by Equity Method		-			-			-		-		-
Loss from Acquisition		-			-			-		-		-
Total Other Expense		(11,000	)		-			-		-		(11,000	)
Income (loss) before income tax		(1,967,000	)		(125,000	)		-		-		(2,092,000	)

Income tax benefit		-			-			-		-		-

Net Loss	$	(1,967,000	)	$	(125,000	)	$	-	$	-	$	(2,092,000	)

Add: loss attributed to noncontrolling interest		67,000			41,000			-		-		108,000

Net Loss Attributable to Common Stockholders	$	(1,900,000	)	$	(84,000	)	$	-	$	-	$	(1,984,000	)

Note 1:	Elimination of impactbio equity	Investment in subsidiary	126,000
		Accumulated Deficit	1,730,000
		Common Stock		14,000
		Additional Paid in Capital		1,802,000
		Non-Controlling Interests		40,000


Note 2:	Record goodwill	Goodwill	78,441,000
		Investment in subsidiary		49,874,000
		Non-Controlling Interests		28,567,000

Note 3:	Document Security Systems, Inc. has engaged an independent valuation firm to value the assets of Impact BioMedical, Inc. and its subsidiaries. For purposes of this proforma, and until the valuation is complete, the purchase price of $50 million is included in goodwill.

Note 4:	Document Security Systems, Inc. is analyzing the accounting treatment of the perpetual convertible preferred shares offered and for the purposes of this proforma has assumed that the transaction will be recorded as an equity transaction. Also, DSS is evaluating the valuation of those shares and the quoted price of the common shares and face value of the perpetual convertible preferred shares have been assumed to be $50 million.

DOCUMENT SECURITY SYSTEMS.INC

Unaudited Pro Forma Condensed Consolidated Balance Sheet

December 31, 2019

Ended December 31, 2019
	Pre-Acquisition DSS (Purchaser)			Record Purchase		Post-acquisition DSS (Purchaser)			ImpactBio Medical, Inc. (Target)			Proforma Adjustment (Note 1)			Proforma Adjustment (Note 2)			Consolidated Financials
ASSETS
Current Assets:
Cash	$	1,096,000				$	1,096,000		$	109,000								$	1,205,000
Accounts Receivable		4,212,000					4,212,000			-									4,212,000
Inventory		1,708,000					1,708,000			-									1,708,000
Prepaid Expense and other current assets		460,000					460,000			30,000									490,000
Total Current Assets		7,476,000			-		7,476,000			139,000			-			-			7,615,000
Property plant and equipment, net		5,061,000					5,061,000			-									5,061,000
Investment		2,154,000					2,154,000			-									2,154,000
Investment in Target		-			50,000,000		50,000,000			-			(132,000	)		(49,868,000	)		-
Notes Receivable		793,000					793,000			-									793,000
Other assets		50,000					50,000			-									50,000
Right-of -use assets		1,223,000					1,223,000			-									1,223,000
Goodwill		2,454,000					2,454,000			-						78,435,000			80,889,000
Other intangible assets, net		935,000					935,000			-									935,000
Total Assets	$	20,146,000		$	50,000,000	$	70,146,000		$	139,000		$	(132,000	)	$	28,567,000		$	98,720,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts Payable	$	1,492,000				$	1,492,000		$	7,000								$	1,499,000
Accrued expenses and deferred revenue		936,000					936,000												936,000
Other current liabilities		390,000					390,000												390,000
Revolving line of credit		500,000					500,000												500,000
Current portion of lease liabilities		397,000					397,000												397,000
Current portion of long-term debt, net		441,000					441,000												441,000
Total Current Liabilities	$	4,156,000		$	-	$	4,156,000		$	7,000		$	-		$	-		$	4,163,000
Long-term debt, net		2,310,000					2,310,000												2,310,000
Long term lease liability		826,000					826,000												826,000
Other long-term liabilities		507,000					507,000												507,000
Deferred tax liability, net		44,000					44,000												44,000
Total Liabilities	$	7,843,000		$	-	$	7,843,000		$	7,000		$	-		$	-		$	7,850,000
																			-
Stockholders’ Equity																			-
Common Stock	$	24,000		$	10,000	$	34,000		$	-		$	-					$	34,000
Convertible Preferred Stock		-			46,868,000		46,868,000			-									46,868,000
Additional Paid in Capital		115,560,000			3,122,000		118,682,000			1,732,000			(1,732,000	)					118,682,000
Accumulated Deficit		(103,281,000	)				(103,281,000	)		(1,646,000	)		1,646,000						(103,281,000	)
Total Stockholders’ Equity (Deficit)		12,303,000			50,000,000		62,303,000			86,000			(86,000	)		-			62,303,000
Non-Controlling Interests		-								46,000			(46,000	)		28,567,000			28,567,000
Total Stockholders’ Equity (Deficit)	$	12,303,000		$	50,000,000	$	62,303,000		$	132,000		$	(132,000	)	$	28,567,000		$	90,870,000
																			-
Total Liabilities & Stockholders’ Equity	$	20,146,000		$	50,000,000	$	70,146,000		$	139,000		$	(132,000	)	$	28,567,000		$	98,720,000

DOCUMENT SECURITY SYSTEMS.INC

Unaudited Pro Forma Condensed Consolidated Statement of Operations

Year Ended December 31, 2019

	DSS (Purchaser)			Impact BioMedical (Target)			Proforma Adjustment (Note 1)		Proforma Adjustment (Note 2)		Consolidated Proforma
Revenue:
Printed products	$	17,090,000		$	-		$	-	$	-	$	17,090,000
Technology sales, services and licensing		2,148,000			-							2,148,000
Direct selling		172,000			-							172,000
Total revenue	$	19,410,000		$	-		$	-	$	-	$	19,410,000
Costs and expense
Costs of revenue, exclusive of deprecation and amortization	$	12,602,000		$	-						$	12,602,000
Selling, general and administrative (including stock based compensation)		8,284,000			523,000							8,807,000
Deprecation and amortization		1,404,000			-							1,404,000
Total Operating Expense		22,290,000			523,000			-		-		22,813,000
Operating Loss		(2,880,000	)		(523,000	)		-		-		(3,403,000	)
Other Income (expense)
Interest Income		25,000			-							25,000
Interest Expense		(157,000	)		-							(157,000	)
Amortization of deferred financing costs a debt discount		(2,000	)		-							(2,000	)
Financial Services		-			(1,000	)						(1,000	)
Loss from Security Investment by Equity Method		-			(40,000	)						(40,000	)
Loss from Acquisition		-			(90,000	)						(90,000	)
Total Other Expense		(134,000	)		(131,000	)		-		-		(265,000	)
Income (loss) before income tax		(3,014,000	)		(654,000	)		-		-		(3,668,000	)

Income tax benefit		(125,000	)		-							(125,000	)

Net Loss	$	(2,889,000	)	$	(654,000	)	$	-	$	-	$	(3,543,000	)

Add: loss attributed to noncontrolling interest		-			200,000							200,000

Net Loss Attributable to Common Stockholders	$	(2,889,000	)	$	(454,000	)	$	-	$	-	$	(3,343,000	)

Other comprehensive income (loss)
Interest rate swap loss		(15,000	)		-							(15,000	)
Settlement of Interest rate swap		22,000			-							22,000

Comprehensive income (loss)	$	(2,882,000	)	$	(654,000	)	$	-	$	-	$	(3,536,000	)

Note 1:	Elimination of ImpactBio equity	Investment in subsidiary	132,000
		Accumulated Deficit	1,646,000
		Common Stock		-
		Additional Paid in Capital		1,732,000
		Non-Controlling Interests		46,000

Note 2:	Record goodwill	Goodwill	78,435,000
		Investment in subsidiary		49,868,000
		Non-Controlling Interests		28,567,000

Note 3:	Document Security Systems, Inc. has engaged an independent valuation firm to value the assets of Impact BioMedical, Inc. and its subsidiaries. For purposes of this proforma, and until the valuation is complete, the purchase price of $50 million is included in goodwill.

Note 4:	Document Security Systems, Inc. is analyzing the accounting treatment of the perpetual convertible preferred shares offered and for the purposes of this proforma has assumed that the transaction will be recorded as an equity transaction. Also, DSS is evaluating the valuation of those shares and the quoted price of the common shares and face value of the perpetual convertible preferred shares have been assumed to be $50 million.