Impact Biomedical Inc(IBO) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1 - Condensed Consolidated Financial Statements This section presents Impact BioMedical, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets As of March 31, 2025, total assets and stockholders' equity decreased, primarily due to reduced cash and increased related party note payable | Metric | March 31, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------- | :------------------ | | Cash and cash equivalents | $1,318,000 | $1,999,000 | | Total current assets | $2,183,000 | $2,448,000 | | Total assets | $20,051,000 | $20,290,000 | | Total current liabilities | $9,973,000 | $9,785,000 | | Total liabilities | $13,241,000 | $13,053,000 | | Total stockholders' equity | $6,810,000 | $7,237,000 | Condensed Consolidated Statements of Operations The company reported an increased net loss for the three months ended March 31, 2025, driven by higher operating expenses | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Sales, general and administrative compensation | $248,000 | $148,000 | | Sales and marketing | $19,000 | $8,000 | | Professional Fees | $223,000 | $145,000 | | Research and development | $103,000 | $183,000 | | Total costs and expenses | $1,010,000 | $771,000 | | Operating loss | $(1,010,000) | $(771,000) | | Net loss | $(1,278,000) | $(998,000) | | Basic Loss per common share | $(0.11) | $(0.10) | Condensed Consolidated Statement of Changes in Stockholders' Equity Stockholders' equity decreased due to a net loss, partially offset by asset acquisition via stock issuance and stock-based compensation | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Common Stock Shares Outstanding | 12,085,412 | 11,503,955 | | Common Stock Amount | $12,000 | $11,000 | | Additional Paid-in Capital | $42,707,000 | $41,857,000 | | Accumulated Deficit | $(38,936,000) | $(37,669,000) | | Total Stockholders' Equity | $6,810,000 | $7,237,000 | - The company issued 545,024 shares of common stock for the acquisition of DSS PureAir, Inc. assets, valued at $820,000, and 36,433 shares for professional services, valued at $29,000, during the three months ended March 31, 2025[10] Condensed Consolidated Statements of Cash Flows Net cash decreased by $681,000 for the three months ended March 31, 2025, primarily due to cash used in operating activities | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used by operating activities | $(682,000) | $(482,000) | | Net cash provided by investing activities | $1,000 | $0 | | Net cash provided by financing activities | $0 | $483,000 | | Net increase (decrease) in cash | $(681,000) | $1,000 | | Cash and cash equivalents at end of period | $1,318,000 | $2,000 | Notes to Interim Condensed Consolidated Financial Statements These notes detail the company's business, significant accounting policies, and specific financial statement line items, covering operations, assets, liabilities, equity, and transactions Note 1. Nature of Operations and Basis of Presentation Impact BioMedical, Inc. (IBO) discovers and patents healthcare and wellness technologies, commercializing them via licensing, co-development, and direct sales, with a portfolio including Linebacker, Laetose, 3F, and Equivir - Impact BioMedical, Inc. (IBO) focuses on discovering, confirming, and patenting unique science and technologies for human healthcare and wellness, leveraging strategic partnerships for commercialization through licensing, co-development, joint ventures, and potential direct sales[14][15] - The company's portfolio includes: - Linebacker™: Platform of small molecule electrophilically enhanced polyphenol compounds with potential applications in oncology (solid tumors), inflammatory disorders, and neurology. Licensed to ProPhase Laboratories for worldwide development and commercialization - Laetose™: Technology with potential to reduce caloric intake and glycemic index in foods, and inhibit TNF-α, a cytokine associated with inflammatory chronic diseases. Patented formulation with potential applications in therapeutic administration for metabolic diseases like diabetes - Functional Fragrance Formulation ("3F"): Suite of "functional fragrances" with specialized botanical ingredients (e.g., terpenes) for antimicrobial applications or as additives in insect repellents, detergents, lotions, shampoo, and fabrics. Global BioLife is seeking to commercialize this product in partnership with Chemia - Equivir™/Equivir G: Novel blend of FDA GRAS-eligible polyphenols (e.g., Myricetin, Hesperetin, Piperine) demonstrating antiviral effects, with potential as health supplements or medication. Licensed to ProPhase Laboratories for worldwide development and commercialization, initially for upper respiratory wellness[16][17][18][19][20][21][22] - The company continually evaluates additional emerging technologies in various phases of development, including biopharmaceuticals, indoor air quality products, bioplastics, personalized medicine, nanotechnology, and cannabis products[23] Note 2. Summary of Significant Accounting and Reporting Policies This note outlines the company's significant accounting policies, including basis of presentation, consolidation, estimates, loss per share, fair value, and recent accounting standards, also addressing going concern status - The company's consolidated financial statements are prepared in accordance with U.S. GAAP, consolidating entities where it owns over 50% of voting common stock and controls operations. Non-controlling interest is separately disclosed[25][26] - The company has incurred operating losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern within one year. Management plans to monetize intellectual properties and tightly control operating costs to address this[45][46] - The company adopted ASU 2023-07 (Segment Reporting) for the year ended December 31, 2024, and ASU 2023-09 (Improvements to Income Tax Disclosures) as of December 31, 2024. ASU 2024-03 (Disaggregation of Income Statement Expenses) is expected to be adopted for fiscal years beginning after December 15, 2026, with no material effect on consolidated financial statements[48][50][51] Note 3. Inventory As of March 31, 2025, the company reported $489,000 in finished goods inventory, with no allowance for obsolescence deemed necessary | Inventory Category | March 31, 2025 | December 31, 2024 | | :----------------- | :------------- | :---------------- | | Finished Goods | $489,000 | $0 | | Total Inventory | $489,000 | $0 | Note 4. Notes Receivable The company holds a promissory note with an individual, with an outstanding balance of approximately $200,000 as of March 31, 2025 | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Outstanding Principal and Interest | $200,000 | $201,000 | | Current portion of notes receivable | $200,000 | $184,000 | | Notes receivable (long-term) | $0 | $17,000 | Note 5. Property, Plant and Equipment, Net Net property, plant and equipment decreased slightly to $16,000 as of March 31, 2025, with $1,000 in depreciation expense | Asset Category | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Machinery and equipment | $30,000 | $30,000 | | Less accumulated depreciation | $14,000 | $13,000 | | Property, plant and equipment, net | $16,000 | $17,000 | - Depreciation expense for the three months ended March 31, 2025, was approximately $1,000, a decrease from $2,000 in the prior year period[55] Note 6. Goodwill The company fully impaired its goodwill balance of $25,093,000 as of December 31, 2024, following an annual impairment test | Goodwill Balance | Amount | | :----------------------- | :------- | | Balance at December 31, 2023 | $25,093,000 | | Goodwill adjustment | $(25,093,000) | | Balance at December 31, 2024 | $0 | - Management performed annual goodwill impairment testing as of December 31, 2024, utilizing Market and Income Approaches, which resulted in a full impairment of goodwill[56] Note 7. Intangible Assets Net definite-lived intangible assets increased to $17,852,000 as of March 31, 2025, including a $655,000 acquisition from DSS Pure Air, Inc., with $282,000 in amortization expense | Intangible Asset Category | March 31, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :------------------------ | :----------------------------------- | :------------------------------------ | | Developed technology assets | $17,530,000 | $17,808,000 | | Acquired assets | $652,000 | $0 | | Total Intangible Assets | $17,852,000 | $17,808,000 | - On February 25, 2025, the company acquired intellectual property of the Celios air purification system, valued at approximately $655,000, from DSS Pure Air, Inc. for $1,150,000 paid in common stock[59][74] - Amortization expense for the three months ended March 31, 2025, was approximately $282,000, consistent with $278,000 for the same period in 2024[60] Note 8. Note payable, related party The revolving promissory note with DSS, a related party, increased to $9,141,000 as of March 31, 2025, accruing interest at WSJ Prime Rate plus 0.50% and accounted for at fair value | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Outstanding balance (inclusive of interest, net of change in fair value) | $9,141,000 | $8,878,000 | - The Revolving Promissory Note with DSS was amended on July 24, 2024, to allow for equity payments, adjust interest due dates, modify the 'On Demand' feature, and set a fixed monthly repayment of $126,381 starting from the 37th month[62] - The note is accounted for as a liability under ASC 480 and remeasured at fair value each reporting period, with changes recognized in earnings, using a discounted cash flow method (Monte Carlo simulation)[63][64] Note 9. Financial Instruments The company's financial instruments, including cash (Level 1) and the related party note payable (Level 2), are valued using a three-tier fair value hierarchy with observable inputs | Financial Instrument | Fair Value (March 31, 2025) | Fair Value (December 31, 2024) | | :-------------------------- | :-------------------------- | :----------------------------- | | Cash (Level 1) | $1,318,000 | $1,999,000 | | Note payable, related party (Level 2) | $9,141,000 | $8,878,000 | | Total | $10,459,000 | $10,877,000 | Note 10. Stockholders' Equity The company completed an IPO on September 16, 2024, raising $3,726,000 net, and issued common stock for asset acquisition and services, recognizing $2,000 in stock-based compensation - On September 16, 2024, Impact BioMedical Inc. completed an initial public offering, selling 1,500,000 shares of common stock at $3.00 per share, generating net proceeds of approximately $3,726,000[66] - The company issued 545,024 shares of common stock for the acquisition of DSS Pure Air, Inc. assets on February 25, 2025, and 36,433 shares for legal fees on February 26, 2025[68][69] - Stock-based compensation expense for the three months ended March 31, 2025, was approximately $2,000, related to 880,000 option grants awarded on October 1, 2024[67] Note 11. Related Party Transactions The company incurred $78,000 in general and administrative costs from DSS, a related party, with an outstanding promissory note balance of $9,141,000 as of March 31, 2025 | Related Party Transaction | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | General and Administrative Costs | $78,000 | $93,000 | | Note payable, related party (outstanding balance) | $9,141,000 | $8,878,000 (as of Dec 31, 2024) | Note 12. Commitments and Contingencies The company has a 20-year royalty agreement with Chemia Corporation for 3F technology (50/50 profit split, 5% royalty) and a license agreement for Equivir technology (5.5% royalty, 50% development cost reimbursement up to $1,250,000) - The Royalty Agreement with Chemia Corporation for 3F technology has a 20-year term, with 50% profit split after expense reimbursement and a 5% royalty on Chemia's net sales. No reimbursements or royalties were paid for the three months ended March 31, 2025 and 2024[72] - The Equivir License Agreement grants a third-party rights to develop, commercialize, and sell Equivir technology, with the company receiving a 5.5% royalty on net sales and reimbursing 50% of development costs up to $1,250,000. No liability was recorded as of March 31, 2025, or December 31, 2024[73] Note 13. Acquisition On February 25, 2025, the company acquired assets from DSS Pure Air, Inc. for $1,150,000 in common stock, including $325,000 in intellectual property and a $330,000 premium recorded to equity - The company acquired assets from DSS Pure Air, Inc. for $1,150,000, paid in 545,024 shares of common stock on February 25, 2025[74] | Acquired Asset | Value | | :-------------------------------- | :-------- | | Accounts receivable | $4,000 | | Prepaid assets | $2,000 | | Inventory | $489,000 | | Intellectual property (Celios air purification system) | $325,000 | | Premium paid for assets acquired | $330,000 | | Total consideration | $1,150,000 | - A $330,000 premium paid for the assets acquired from a common control entity was recorded directly to equity, in accordance with ASC 805-50[74][75] Note 14. Supplemental Cash Flow Information This note details noncash investing and financing activities, including share issuance for legal services and DSS PureAir asset acquisition | Noncash Activity | 2025 | 2024 | | :--------------------------------------- | :--------- | :--- | | Shares issued in lieu of cash for legal services | $29,000 | $0 | | Shares issued for acquisition of DSS PureAir assets | $1,150,000 | $0 | Note 15. Subsequent Events No subsequent events requiring financial statement recognition or disclosure were identified through May 14, 2025 - No subsequent events requiring financial statement recognition or disclosure were identified through May 14, 2025[77] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition and results of operations for the three months ended March 31, 2025, covering business overview, expenses, income, net loss, liquidity, and cash flows Overview Impact BioMedical Inc. (IBO) is a biotechnology company focused on discovering and patenting healthcare and wellness technologies, commercializing them through licensing and partnerships, with a diverse technology portfolio - Impact BioMedical Inc. (IBO) discovers, confirms, and patents unique science and technologies for human healthcare and wellness, aiming to develop new offerings through licensing, co-development, joint ventures, and direct sales[79][80][81] - The company's structure and key technologies include: - Principal Subsidiaries: Impact BioLife Science, Inc., Global Biomedical, Inc., Global BioLife, Inc., and Sweet Sense, Inc. - Key Technologies: Linebacker (oncology, inflammatory, neurology), Laetose (caloric/glycemic reduction, anti-inflammatory), Functional Fragrance Formulation (3F) (antimicrobial, insect repellents), Equivir (antiviral effects, health supplements)[82][83][84][85][86][87][88][89][90][91][92][93][94][95][96][97][98] - The company continually evaluates additional proprietary technologies in various development phases, including biopharmaceuticals, indoor air quality products, bioplastics, personalized medicine, nanotechnology, and cannabis products[99][100] Costs and expenses Total costs and expenses increased by 31% to $1,010,000 for the three months ended March 31, 2025, driven by higher compensation, marketing, professional fees, and other operating expenses, partially offset by reduced R&D | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Sales, general and administrative compensation | $246,000 | $148,000 | 66% | | Stock-based compensation | $2,000 | $0 | N/A | | Sales and marketing | $19,000 | $8,000 | 138% | | Professional Fees | $223,000 | $145,000 | 54% | | Research and development | $103,000 | $183,000 | -44% | | Depreciation and Amortization | $283,000 | $280,000 | 1% | | Rent and utilities | $19,000 | $4,000 | 375% | | Other operating expenses | $115,000 | $3,000 | 3,733% | | Total costs and expenses | $1,010,000 | $771,000 | 31% | - Sales, general and administrative compensation increased 66% due to additional headcount[101] - Sales and marketing costs increased 138% due to trade show attendance and post-IPO marketing efforts[104] - Professional fees increased 54% as the company began enacting its business plan post-IPO[105] - Research and development costs decreased 44% due to reduced efforts on certain patents in 2025 compared to 2024[106] - Other operating expenses increased 3,733% primarily due to increases in directors and officers insurance post-IPO[109] Other Income (Expense) Total other expense increased by 18% to $(268,000) for the three months ended March 31, 2025, primarily due to an 18% increase in interest expense on debt to DSS | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :--------------- | :-------------------------------- | :-------------------------------- | :------- | | Interest income | $3,000 | $3,000 | 0% | | Interest expense | $(271,000) | $(230,000) | 18% | | Total other expense | $(268,000) | $(227,000) | -18% | - Interest expense increased 18% due to the increased outstanding balance of debt owed to DSS[111] Net loss The net loss for the three months ended March 31, 2025, increased by 28% to $(1,278,000), primarily due to higher costs from additional headcount, D&O insurance post-IPO, and increased professional fees | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :------- | :-------------------------------- | :-------------------------------- | :------- | | Net loss | $(1,278,000) | $(998,000) | -28% | - The increase in net loss is attributed to higher costs from additional headcount, the purchase of directors' and officers' insurance post-IPO, and increased professional fees related to the execution of the company's business plan[112] LIQUIDITY AND CAPITAL RESOURCES The company completed an IPO on September 16, 2024, raising $3,726,000, but operating losses and negative cash flows raise going concern doubts, prompting plans to monetize IP and control costs - The company completed an initial public offering on September 16, 2024, raising $3,726,000 net of issuance costs, and is listed on the NYSE American under the ticker symbol IBO[113] - Operating losses and negative cash flows raise substantial doubt about the company's ability to continue as a going concern. Management plans to monetize intellectual properties and tightly control operating costs[113] Cash Flow from Continuing Operating Activities Net cash used by operating activities increased to $682,000 for the three months ended March 31, 2025, primarily due to increased accounts payable payments and a higher net loss | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used by operating activities | $(682,000) | $(482,000) | - The increase in cash used by operating activities was driven by approximately $289,000 more in accounts payable payments and a $213,000 increase in net loss after reconciling items[114] Cash Flow from Investing Activities Net cash provided by investing activities was $1,000 for the three months ended March 31, 2025, due to payments received on notes receivable | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by investing activities | $1,000 | $0 | Cash Flow from Financing Activities Net cash provided by financing activities was $0 for the three months ended March 31, 2025, a decrease from $483,000 in the prior year due to borrowings from DSS | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by financing activities | $0 | $483,000 | Off-Balance Sheet Arrangements The company has no material off-balance sheet arrangements that would significantly affect its financial condition, statements, revenues, or expenses - The company has no material off-balance sheet arrangements[116] Critical Accounting Policies and Estimates No additional material changes to the company's critical accounting policies were reported as of March 31, 2025, compared to December 31, 2024 - No additional material changes to critical accounting policies as of March 31, 2025[117] Item 4 - Controls and Procedures This section addresses the effectiveness of disclosure controls and procedures, concluding they were not effective as of March 31, 2025, due to material weaknesses, but no material changes to internal control over financial reporting occurred Disclosure Controls and Procedures As of March 31, 2025, the company's disclosure controls and procedures were deemed not effective due to material weaknesses identified in the Annual Report on Form 10-K for the year ended December 31, 2023 - As of March 31, 2025, the company's disclosure controls and procedures were not effective due to material weaknesses disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[118] - Internal control over financial reporting has inherent limitations and may not prevent or detect misstatements, and projections of effectiveness are subject to risks of controls becoming inadequate or compliance deteriorating[119][120] Changes in Internal Control over Financial Reporting Despite remediation steps, no material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025 - No material changes in the company's internal control over financial reporting occurred during the quarter ended March 31, 2025, despite ongoing implementation of remediation steps[121] PART II - OTHER INFORMATION Item 1 - Legal Proceedings The company is not currently a party to any material legal proceedings, though ordinary course litigation could have an adverse impact - The company is not currently a party to any material legal proceedings[123] Item 1A - Risk Factors As a smaller reporting company, Impact BioMedical, Inc. is not required to provide the information typically required by this item - Smaller reporting companies are not required to provide risk factor information[124] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities and use of proceeds to report[125] Item 3 - Defaults upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities to report[126] Item 4 - Mine Safety Disclosures This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[127] Item 5 - Other Information No other information is disclosed under this item - No other information to disclose[128] Item 6 - Exhibits This section lists all exhibits filed as part of the Form 10-Q, including underwriting agreements, corporate documents, warrants, various agreements, and certifications - The report includes a comprehensive list of exhibits, such as the Underwriting Agreement, Amended and Restated Articles of Incorporation, Bylaws, Certificate of Designation of Series A Convertible Preferred Stock, Form of Underwriter Warrant, and various Share Exchange, Subscription, Promissory Note, Royalty, Distribution, and License Agreements[129][130][131]