SEC Form 10-Q filed by Impact BioMedical Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Commission file number
| (Exact name of registrant as specified in its charter) |
| (State or other Jurisdiction of | (IRS Employer | |
| incorporation- or Organization) | Identification No.) |
(Address of principal executive offices)
(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.
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)
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 ☐ | 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, $0.001 par value per share | N/A | N/A |
As of October 25, 2024 there were shares of the registrant’s common stock, $ par value, outstanding.
IMPACT BIOMEDICAL, INC.
FORM 10-Q
TABLE OF CONTENTS
| 1 |
Impact BioMedical Inc and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 2024 (unaudited) | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Current portion of notes receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Notes receivable | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and deferred revenue | ||||||||
| Current portion note payable, related party | ||||||||
| Total current liabilities | ||||||||
| Long-term portion note payable, related party | ||||||||
| Deferred tax liability, net | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued and outstanding ( on December 31, 2023); Liquidation value $ | ||||||||
| Common stock, $ par value; shares authorized, shares issued and outstanding ( on December 31, 2023) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity of the Company | ||||||||
| Non-controlling interest in subsidiaries | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| 2 |
Impact BioMedical Inc and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Costs and expenses: | ||||||||||||||||
| Sales, general and administrative compensation | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Professional Fees | ||||||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Rent and utilities | ||||||||||||||||
| Other operating expenses | ||||||||||||||||
| Total costs and expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Change in fair value of embedded derivative | ||||||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from operations before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax benefit | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Loss from operations attributed to noncontrolling interest | ||||||||||||||||
| Income (loss) attributable to common stockholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Income (loss) per common share: | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Shares used in computing loss per common share: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to the consolidated financial statements.
| 3 |
Impact BioMedical Inc and Subsidiaries
Condensed Consolidated Statements of Stockholder’s Equity
(unaudited)
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | Total Impact | Non- controlling Interest in | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | Subsidiary | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Issuance of common stock, net of expenses | - | |||||||||||||||||||||||||||||||||||
| Fractional shares as a result of reverse stock split | - | |||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| 4 |
Impact BioMedical Inc and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
(unaudited)
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Income (loss) from operations | $ | $ | ( | ) | ||||
| Adjustments to reconcile loss from continuing operations to net cash used by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Change in fair value of embedded derivative | ( | ) | ||||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ||||||
| Payments received on notes receivable | ||||||||
| Net cash provided (used) by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Borrowings from revolving lines of credit, net | ||||||||
| Issuances of common stock, net of issuance costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| 5 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Nature of Operations and Basis of Presentation
Nature of Operations
Impact
BioMedical, Inc., incorporated in the State of
Impact has several unique and proprietary technologies that are in continuing development:
Linebacker™
Linebacker is a platform of small molecule electrophilically enhanced polyphenol compounds with potential application in oncology (solid tumors), inflammatory disorders, and neurology. Polyphenols are substances found in many nuts, vegetables, and berries. Linebacker compounds are modified Myricetin, which is a common plant-derived flavonoid. Myricetin exhibits a wide range of activities that include strong antioxidants and anti-inflammatory activities (source: NIH). Linebacker can potentially be developed as monotherapy or co-therapy to down-regulate PIM (proviral integration site for Moloney murine leukemia virus) kinase which plays a key role as an oncogene in various cancers (e.g., colon, lung, prostate, breast). Additional potential applications include inflammatory disorders and neurology. Linebacker-1 and Linebacker-2 compounds have been licensed to ProPhase Laboratories (NASDAQ: PRPH) for development and potential commercialization worldwide, from which Impact Biomedical could receive future milestone and royalty payments. Composition and method patents are issued to the company for Linebacker in the U.S. and other countries.
Laetose™
Laetose technology is derived from a unique combination of multiple sugars independently with myo-inositol, which demonstrates compelling potential in 1) reducing glycemic index and caloric intake in foods, 2) application as a therapeutic which inhibits tumor necrosis factor alpha (TNF-α), a cytokine associated with inflammatory chronic diseases, and 3) a method of reducing or limiting the occurrence of diabetes. The sugar can be one or a combination of sugars: sucrose, fructose, isoglucose, and galactose. Laetose has a unique composition patent allowed in the United States and patents are pending in other countries worldwide. IBO is actively seeking potential partners for further development and commercialization of Laetose as a consumer packaged or biopharmaceutical offering worldwide.
Functional Fragrance Formulation (“3F”)
3F is a suite of organic “functional fragrances” containing specialized botanical ingredients (e.g., terpenes) with potential application as an antimicrobial, or as an additive in insect repellents, detergents, lotions, shampoo, fabrics, and other substances to increase effectiveness. IBO has partnered with the Chemia Corporation (St. Louis, MO) to pursue development of the 3F technology. Chemia is a leading developer and manufacturer of fragrances and flavors. Composition patents have issued in the U.S. and are pending in other countries. In addition to Chemia, IBO is actively seeking potential partners for the further development and commercialization of 3F worldwide, given the broad application of this technology.
Equivir™/Equivir G
Equivir technology is a novel blend of FDA Generally Recognized as Safe (GRAS) eligible polyphenols (e.g., Myricetin, Hesperetin, Piperine) which have demonstrated antiviral effects with additional potential applications such as health supplements or medication. Polyphenols are substances found in many nuts, vegetables, and berries. Myricetin is a member of the flavonoid class of polyphenolic compounds with antioxidant properties. Hesperitin is a flavanone and Piperine is an alkaloid, commonly found in black pepper. Equivir/Equivir G is licensed to ProPhase Laboratories for development and commercialization worldwide. ProPhase Lab’s initial focus is for potential use as an over-the-counter health supplement offering for upper respiratory wellness. Additional applications could be pursued in the future. Method and composition patents are issued in the U.S. and other countries.
Emerging Technology
IBO continually evaluates additional technologies that are in various phases of development which can be advanced to patent filings and allowances. These include, and are not limited to biopharmaceuticals, indoor air quality products, preservatives, bioplastics, personalized medicine (e.g., genomics, diagnostics), nanotechnology, cannabis products and technology, pain management, and others. These activities include discussions with inventors, scientists, universities, research foundations, and other parties, which, subject to completion of diligence, and approval of the respective management, could potentially expand the offerings of IBO.
As of the date of this report, we have not generated significant revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including possible delays in our research, testing and marketing efforts or wider economic downturns.
Note 2. Summary of Significant Accounting and Reporting Policies
Basis of Presentation and Principles of Consolidation
The
Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). The consolidated financial statements include all accounts of the Company and its
majority owned and controlled subsidiaries. The Company consolidates entities in which it owns more than
| 6 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
Name of consolidated subsidiary | State or other jurisdiction of incorporation or organization | Date of incorporation or formation | Attributable interest as of September 30, 2024 | Attributable interest as of December 31, 2023 | ||||||||
| Global BioMedical, Inc. | % | % | ||||||||||
| Global BioLife, Inc. | % | % | ||||||||||
| BioLife Sugar, Inc | % | % | ||||||||||
| Happy Sugar Inc | % | % | ||||||||||
| Sweet Sense Inc. | % | % | ||||||||||
| Global Sugar Solutions Inc. | % | % | ||||||||||
As
of September 30, 2024, and December 31, 2023, the aggregate noncontrolling interest was equity of $
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the balance sheets and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.
Reclassifications
Costs associate with Sales and marketing have been reclassed from Other operating expenses for the three and nine months ended September 30, 2023 to conform with current period presentation. Also, cost associated with Professional fees for the three and nine months ended September 30, 2023 and the nine months September 30, 2024 have been reclassified to Research and development to conform with current period presentation.
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed like basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the three and nine months ended September 30, 2023. For the three and nine months ending September 30, 2024, there are shares of Series A Convertible Preferred Shares which are not eligible for conversion until April 10, 2027.
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 balance sheet of cash and cash equivalents, prepaids, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes receivable approximates their carrying value as the stated or discounted rates of the notes do reflect recent market conditions. The Company’s investments are recorded at cost as the fair value of these investment in is not readily available. The fair value of notes payable approximates its carrying value as the stated interest rate reflects recent market conditions.
| 7 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Cash and cash equivalents
The
Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents.
There were
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, if applicable. 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. If applicable, any 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. (Note 3)
Goodwill
Goodwill
is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business
combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests, which
will take place during the fourth quarter in 2024, if an event occurs or circumstances change that would indicate the carrying amount
may be impaired. FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence
of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than
its carrying amount. Some of the qualitative factors considered in applying this test include consideration of macroeconomic conditions,
industry and market conditions, cost factors affecting the business, and overall financial performance of the business. If, after completing
the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value,
the Company will proceed to a quantitative test. If qualitative factors are not deemed sufficient to conclude that the fair value of
the reporting unit more likely than not exceeds its carrying value, then a one-step approach is applied in making an evaluation. The
evaluation utilizes an income approach (discounted cash flow analysis). The computations require management to make significant estimates
and assumptions, including, among other things, selection of comparable publicly traded companies, the discount rate applied to future
earnings reflecting a weighted average cost of capital, and earnings growth assumptions. The Company believes the estimates and assumptions
used in our impairment assessments are reasonable and based on available market information, but variations in any of the assumptions
could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. A discounted
cash flow analysis requires management to make various assumptions about future sales, operating margins, capital expenditures, working
capital, and growth rates. Cash flow projections are derived from one-year budgeted amounts plus an estimate of later period cash flows,
all of which are determined by management. Subsequent period cash flows are developed for each reporting unit using growth rates that
management believes are reasonably likely to occur. Impairment of goodwill is measured as the excess of the carrying amount of goodwill
over the fair values of recognized and unrecognized assets and liabilities of the reporting unit.
Intangible Assets
The
estimated fair values of acquired intangibles are generally determined based upon future economic benefits such as earnings and cash
flows. Acquired identifiable intangible assets are recorded at fair value and are amortized over their estimated useful lives. Acquired
intangible assets with an indefinite life are not amortized but are reviewed for impairment at least annually as of December 31st,
or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets are below their estimated
fair values. Impairment is tested under ASC 350.
| 8 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Recoverability of Long-Lived Assets
We evaluate long-lived assets such as property, equipment and definite lived intangible assets, such as patents, for impairment whenever events or circumstances indicate that the carrying value of the assets recognized in our financial statements may not be recoverable. Factors that we consider include whether there has been a significant decrease in the market value of an asset, a significant change in the way an asset is being utilized, or a significant change, delay or departure in our strategy for that asset, or a significant change in the macroeconomic environment. Our assessment of the recoverability of long-lived assets involves significant judgment and estimation. These assessments reflect our assumptions, which, we believe, are consistent with the assumptions hypothetical marketplace participants use. Factors that we must estimate when performing recoverability and impairment tests include, among others, forecasted revenue, margin costs and the economic life of the asset. If impairment is indicated, we determine if the total estimated future cash flows on an undiscounted basis are less than the carrying amounts of the asset or assets. If so, an impairment loss is measured and recognized.
Our impairment loss calculations require that we apply judgment in identifying asset groups, estimating future cash flows, determining asset fair values, and estimating asset’s useful lives. The Company reviews identifiable amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. Based on the uncertainty of forecasts inherent with a new product, events such as the failure to generate forecasted revenue from new products could result in a non-cash impairment in future periods.
Derivative Accounting
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. Also, the fair value of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes simulation model. The Company has determined that Note payable, related party contains an embedded derivative in the form of payment via equity and has accounted for it in accordance with ASC 815. (see Note 7).
Revenue Recognition
The Company has adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). The Company enters into licensing and development agreements with collaborators for the development of its technologies. The terms of these agreements contain multiple performance obligations which may include (i) licenses, or options to obtain licenses, to the Company’s technology, (ii) rights to future technological improvements, and/or (iii) research activities to be performed on behalf of the collaborative partner. Payments to the Company under these agreements may include upfront fees, option fees, exercise fees, payments based upon the achievement of certain milestones, and royalties on product sales. Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under the agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when or as the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied.
Research and Development
Research
and development costs are expensed as incurred. Total research and development costs were $
| 9 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Provision for Credit Losses
On January 1, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” which requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that is expected to be collected over the contractual term of the asset considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In estimating expected losses in the loan and lease portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. Assumptions and judgment are applied to measure amounts and timing of expected future cash flows, collateral values and other factors used to determine the borrowers’ abilities to repay obligations. After the forecast period, the Company utilizes longer-term historical loss experience to estimate losses over the remaining contractual life of the loans. Prior to 2022, the allowance for credit losses represented the amount that in management’s judgment reflected incurred credit losses inherent in the loan and lease portfolio as of the balance sheet date. As of September 30, 2024 and December 31, 2023 the Company has deemed that no reserve on credit losses were necessary.
Continuing Operations and Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. As reflected in the accompanying financial statements the Company has incurred operating losses as well as negative cash flows from operating and investing activities over the past two years. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. These consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern.
To
continue as a going concern, the Company completed an initial public offering on September 16, 2024 raising $
Recent Accounting Standards
The Financial Accounting Standards Board (FASB) issues various Accounting Standards Updates relating to the treatment and recording of certain accounting transactions. There are several new accounting pronouncements issued by FASB which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of September 30, 2024, none of these pronouncements are expected to have a material effect on the financial position, results of operations or cash flows of the Company.
| 10 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 3. Notes Receivable
On
February 19, 2021, Impact BioMedical, Inc, entered into a promissory note with an individual. The Company loaned the principal sum of
$
Note 4. Property, Plant and Equipment, Net
Property, plant and equipment consisted of the following as of:
| Estimated | September 30, | December 31, | ||||||||
| Useful Life | 2024 | 2023 | ||||||||
| Machinery and equipment | $ | $ | ||||||||
| Construction in progress | ||||||||||
| Total Cost | ||||||||||
| Less accumulated depreciation | ||||||||||
| Property, plant and equipment, net | $ | $ | ||||||||
Depreciation
expense for the nine months ended September 30, 2024 and 2023 was approximately $
Note 5. Goodwill
Goodwill balances and activity for the nine months ended September 30, 2024 and year ended December 31, 2023 consisted of the following:
| Balance at December 31, 2023 | $ | |||
| Goodwill adjustment | ||||
| Balance at September 30, 2024 | $ |
As
of September 30, 2023, management performed annual goodwill impairment testing. No goodwill impairment was identified as a result of
these tests. As of September 30, 2023, a quantitative analysis was prepared utilizing the Market Approach and Income Approach valuing
the Company. The guideline public company Market Approach produced a mean business enterprise value indication using estimated 2026 results
of $
Note 6. Intangible Assets
The definite-lived intangible assets, to be amortized over 20 years, balances, and activity for the nine months ended September 30, 2024 and year ended December 31, 2023 consisted of the following:
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| Definitive-lived: | ||||||||||||||||||||||||
| Developed technology | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Amortization
expense for the nine months ended September 30, 2024 and 2023 was approximately $
The following table represents future amortization of developed technologies for the years ending December 31:
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| Thereafter | $ |
| 11 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 7. Note payable, related party
On
December 31, 2020, and later amended, the Company executed a Revolving Promissory Note (“Note”) with DSS, a related
party, which accrues interest at a rate of
A
summary of scheduled principal payments of long-term debt (exclusive of the embedded derivative of $
| Year | Amount | |||||
| 2024 | $ | |||||
| 2025 | ||||||
| 2026 | ||||||
The movement in the liability and derivative components of the Note payable, related party as of December 31,2023 and September 30, 2024 are set out below:
| Liability Component | Derivative Component | Total | ||||||||||
| December 31, 2023 | $ | $ | $ | |||||||||
| Change in fair value of embedded derivative | ( | ) | ( | ) | ||||||||
| Advances on note | ||||||||||||
| Interest expense | ||||||||||||
| September 30, 2024 | $ | $ | $ | |||||||||
We considered various valuation methodologies in our analysis of the embedded derivative. Valuation methodologies can generally be aggregated into the following three approaches: the Market Approach, the Income Approach, and the Cost Approach. Based on our analysis of the facts and circumstances, in estimating the fair value of the Note payable, related party, we utilized a discounted cash flow method (income approach), in the form of a Monte Carlo simulation of the Company’s stock price and volume weighted average price (“VWAP”) throughout 36-month period from the Effective Date relative to its closing stock price and VWAP as of the Valuation Date, or $ and $, respectively. The simulated analysis estimates the expected note cash flow from the date the first payment is due and until the equity conversion rights expire under the terms of the Note payable, related party based on the following steps:
| 1) | Developed the Note Payable repayment schedule |
| 2) | Developed the following inputs underlying the simulation analysis |
| i) | Stock price | |
| ii) | VWAP |
| 3) | Inputs (i) and (ii), were assigned a normal probability distribution, which has a mean of 0 and a standard deviation of 1, and a correlation of .9885 based on analysis of the guideline public companies |
| 4) | Ran a simulation with 25,000 trials for purposes of capturing the key inputs discussed above (i.e., forecasting the stock price and VWAP). |
| 5) | For the period from the 37th payment to maturity date, the DCF Method includes the remaining payments required to be made in cash. |
| 6) | Captured the results of the simulation and concluded based on the simulation results |
Note 8. Financial Instruments
Cash, Note payable, related party
The following tables show the Company’s cash, cash equivalents, restricted cash, and note payable, related party by significant investment category as of:
| September 30, 2024 | ||||||||||||||||||||
| Adjusted cost | Unrealized Gain/(Loss) | Fair Value | Cash and Cash Equivalents | Note Payable, Related Party |
||||||||||||||||
| Cash | $ | $ | - | $ | $ | $ | - | |||||||||||||
| Level 2 | ||||||||||||||||||||
| Note payble, related party | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| September 30, 2023 | ||||||||||||||||
| Adjusted Cost | Unrealized Gain/(Loss) | Fair Value | Cash and Cash Equivalents | |||||||||||||
| Cash | $ | $ | - | $ | $ | | ||||||||||
| Total | $ | $ | - | $ | $ | |||||||||||
Note 9. Stockholders’ Equity
On
May 10, 2023, the Company’s Board of Directors approved an amendment to the Articles of Incorporation of the Company to increase
the total number of shares of Common Stock to shares with a par value of $.
On August 8, 2023 DSS, the Company’s largest shareholder, distributed to its shareholders of record on July 10, 2023 4 shares of Impact Bio’s stock for 1 share they owned. Each share of Impact BioMedical distributed as part of the distribution will not be eligible for resale until 180 days from the date Impact BioMedical’s initial public offering becomes effective under the Securities Act, subject to the discretion of the Company to lift the restriction sooner.
On
October 31, 2023, the Company effected a reverse stock split of
On
September 16, 2024, Impact Biomedical Inc., entered into an underwriting agreement (the “Underwriting Agreement”) with
Revere Securities, LLC., as representative (the “Representative”) of the underwriters named therein (the
“Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment initial public
offering (the “Offering”) an aggregate of
of the Company’s shares of common stock, par value $
per share at a public offering price of $
per share. On September 17, 2024, the Company closed the Offering, and as of September 30, 2024 there were
shares of common stock issued and outstanding. The total net proceeds to the Company from the Offering, after deducting discounts,
expenses allowance and expenses, was approximately $
Note 10. Related Party Transactions
Research and Development Activities
Based
on a shareholders agreement entered into on April 26, 2017, the Company would fund the scientific operations of GRDG, a company involved
in research and development of biomedical products which is a minority stockholder of two of the Company’s subsidiaries and is
owned by Daryl Thompson, a former director of many subsidiaries of the Company, to do the development and research works on the biomedical
products for the Company. On February 15, 2022, the Company and its subsidiaries, Global BioLife, Inc. (“Global”), and Impact
BioLife Sciences, Inc. (“BioLife Sciences”), and GRDG entered into a Licensing Proceeds Distribution Agreement (“GRDG
Agreement”), whereas GRDG would transfer its
General and Administrative Costs
There
are certain general and administrative costs incurred by DSS, a related party, on behalf of the Company which are passed through to the
Company on a monthly basis. These costs consist of primarily payroll costs for certain DSS employees and are allocated based on estimated
time spent on behalf of the Company. Beginning in January 2024, these costs are approximately $
Note payable, related party
On December 31, 2020, and later amended, the Company
executed a Revolving Promissory Note (“Note”) with DSS, a related party, which accrues interest at a rate of 4.25% and is
due in full at the maturity date of September 30, 2030. The Note was further amended on July 24, 2024 with an effective date of September
16, 2024 to i) allow the Company to pay certain principal and/or interest payments owing under the repayment terms in an exchange of equity
in the Company, ii) change the quarterly interest due dates to the last day of each calendar quarter (i.e. December 31, March 31, June
30 and September 30), iii) to partially eliminate the “On Demand, if No Demand” feature so that the “On Demand, if
no Demand” feature only starts after the 24th month, iv) continue the planned repayment program commencing on the 37th month and
on the last day of each month thereafter through August 31, 2030 to pay a fixed monthly payment of $
| 12 |
IMPACT Biomedical, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 11. Commitments and Contingencies
On
August 15, 2018, the Company entered into Royalty Agreement with Chemia Corporation (“Chemia”) pursuant to which Chemia transferred
to the Company all of its right to 3F (Functional Fragrance Formulation). This agreement has a 20-year term and auto renews for a period
of 1 year unless mutually agreed upon by both parties. 3F consists of 3F Mosquito Repellant and 3F Anti-Viral formulations. Based on
the Royalty Agreement, the Company should cover all the costs to prepare and finalize necessary patent application and other intellectual
property related to 3F. Chemia agreed to support the Company in efforts leading to development of 3F intellectual property and it is
licensing. Based on Royalty Agreement any payments received from development, sales, licensing or transfer of 3F technology will be paid
On
February 15, 2022, the Company and its subsidiaries, Global BioLife, Inc. (“Global”), and Impact BioLife Sciences, Inc. (“BioLife
Sciences”), and GRDG entered into a Licensing Proceeds Distribution Agreement (“GRDG Agreement”), whereas GRDG would
transfer its
On
March 19, 2022, Impact BioMedical entered into a License Agreement (“Equivir License”) with a third-party (“Licensee”)
where the Licensor is granted the right, amongst other things, to develop, commercialize, and sell the Company’s Equivir technology.
In exchange, the Licensee shall pay the Company a royalty of
Note 12. Subsequent Events
The Company has evaluated all other subsequent events and transactions through November 12, 2024, the date that the consolidated financial statements were available to be issued and noted no other subsequent events requiring financial statement recognition or disclosure.
| 13 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). Except for the historical information contained herein, this report contains forward-looking statements (identified by words such as “estimate,” “project”, “anticipate”, “plan”, “expect”, “intend”, “believe”, “hope”, “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements.
Overview
Impact BioMedical, Inc. (the “Company”, “Impact BioMedical”, “We”) through the utilization of its intellectual property rights, or through investment in, or through acquisition of companies in the biohealth and biomedical fields, focuses on the advancement of drug discovery and prevention, inhibition, and treatment of neurological, oncological, and immune related diseases. The Company is also developing open-air defense initiatives, which curb transmission of air-borne infectious diseases, such as tuberculosis and influenza.
Global BioLife, Inc. (“Global BioLife”), one of the Company’s subsidiaries and the main operating company of the group, focuses on research in four main areas: (i) the “Linebacker” project, which aims to develop a universal therapeutic drug platform; (ii) a new sugar substitute called “Laetose,”; (iii) a multi-use fragrance called “3F” (Functional Fragrance Formulation); and (iv) Equivir/Nemovir, a blend of natural polyphenols designed as an antimicrobial medication.
Linebacker
Unlike the traditional approach to treat individual diseases with specific drugs, the Linebacker platform seeks to offer a breakthrough therapeutic option for multiple diseases. Linebacker is designed to work by inhibiting a cascade of inflammatory responses responsible for many diseases. Its design is in direct contrast to the traditional approach of targeting individual diseases with specific drugs.
Laetose
We have also developed a low-calorie, low glycemic level, natural modified sugar through Global BioLife. The product, “Laetose,” is designed to possess low glycemic properties and mitigate inflammation. The Company is presently seeking to license Laetose. Global BioLife established a joint venture, Sweet Sense, Inc. (“Sweet Sense”), with Quality Ingredients, LLC for the development, manufacture, and global distribution of the new sugar substitute. On November 8, 2019, the Company purchased 50% of Sweet Sense Inc. from Quality Ingredients, LLC for $91,000. Sweet Sense is now an 81.8% owned subsidiary of Impact BioMedical.
Functional Fragrance Formulation (“3F”)
Global BioLife has entered into a royalty agreement with U.S.-based Chemia Corporation (“Chemia”), a leading developer and manufacturer of fragrances, to manufacture the 3F technology. This arrangement, under the terms of the agreement, allows Chemia to create fragrances based on Global BioLife’s patents. The 3F product is made from specialized oils sourced from botanicals that insects avoid. Global BioLife aims to commercialize this product, with any potential profits from the 3F project being split between Global BioLife and Chemia pursuant to the terms of the 20-year Royalty Agreement. (Note 10)
| 14 |
Equivir
Equivir, is a polyphenol compound that is believed to be successful in antiviral infection treatments. Equivir is a patented medication, which has broad antiviral efficacy against multiple types of infectious disease.
The Company was incorporated in the State of Nevada as a for-profit company on October 16, 2018 and established a fiscal year end of December 31st. The Company issued 9,000 shares to its sole shareholder Global BioMedical Pte. Ltd., which was wholly owned by Alset International Limited (formally Singapore eDevelopment Limited), a multinational public company, listed on the Singapore Exchange Securities Trading Limited (“SGXST”). On March 31, 2020, the Company issued 125,064,621 shares of common stock to its sole shareholder Global BioMedical Pte. Ltd. On July 24, 2020, the Board approved the Stock Split, pursuant to which each share of the Company’s common stock issued and outstanding was split into nine shares of the Company’s common stock. The numbers of authorized common stock and issued and outstanding common stock in the reporting periods were retrospectively adjusted for the stock split.
Impact BioMedical, Inc. targets unmet, urgent medical needs and expands the borders of medical and pharmaceutical science. Impact drives mission-oriented research, development, and commercialization of solutions for medical advances in human wellness and healthcare. By leveraging technology and new science with strategic partnerships, Impact Bio provides advances in drug discovery for the prevention, inhibition, and treatment of neurological, oncology and immuno-related diseases. Other exciting technologies include a breakthrough alternative sugar aimed to combat diabetes and functional fragrance formulations aimed at the industrial and medical industry.
The business model of Impact BioMedical revolves around two methodologies – Licensing and Sales Distribution:
1) Impact develops valuable and unique patented technologies which will be licensed to pharmaceutical, large consumer package goods companies and venture capitalists in exchange for usage licensing and royalties.
2) Impact utilizes the DSS ecosystem to leverage its sister companies that have in place distribution networks on a global scale. Impact will engage in branded and private labelling of certain products for sales generation through these channels. This global distribution model will give direct access to end users of Impact’s nutraceutical and health related products.
| 15 |
Costs and expenses
| Three months ended September 30, 2024 | Three months ended September 30, 2023 | % Change | Nine months ended September 30, 2024 | Nine months ended September 30,2023 | % Change | |||||||||||||||||||
| Sales, general and administrative compensation | 132,000 | 101,000 | 31 | % | 424,000 | 182,000 | 133 | % | ||||||||||||||||
| Sales and marketing | 461,000 | 17,000 | 2612 | % | 487,000 | 44,000 | 1007 | % | ||||||||||||||||
| Professional Fees | 122,000 | 317,000 | -62 | % | 313,000 | 750,000 | -58 | % | ||||||||||||||||
| Research and development | 82,000 | 357,000 | -77 | % | 386,000 | 1,055,000 | -63 | % | ||||||||||||||||
| Depreciation and Amortization | 281,000 | 280,000 | 0 | % | 840,000 | 840,000 | 0 | % | ||||||||||||||||
| Rent and utilities | 4,000 | - | N/A | 14,000 | - | N/A | ||||||||||||||||||
| Other operating expenses | 45,000 | 6,000 | 650 | % | 58,000 | 18,000 | 222 | % | ||||||||||||||||
| Total costs and expenses | $ | 1,127,000 | $ | 1,078,000 | 5 | % | $ | 2,522,000 | $ | 2,889,000 | -13 | % | ||||||||||||
Selling, general and administrative compensation costs increased 31% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 and increased 133% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023 due to increased cost incurred associated with the Company’s registration with the SEC and the NYSE American, and efforts toward the Company’s IPO.
Sales and marketing costs, which includes internet and trade publication advertising, press releases, travel and entertainment costs. These increased 2,612% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 and decreased 1,007% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The increase in cost for the three and nine months ended September 30, 2024 are associated with cost to attend trade shows and marketing efforts pre and post IPO.
Professional fees decreased 62% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 and decreased 58% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. These cost consist primarily of consulting and legal services associated with developing and implementing Impact BioMedical’s business plan, These costs decreased in 2024 in anticipation of the Company’s IPO.
Research and development costs represent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns possesses, research on new technologies as well as cost to patent newly developed technologies and other related fees for the development of new technologies. Research and development decreased 100% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 and decreased 93% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, due primarily to the cessation of the Company’s research and development contract with GRDG at the end of 2023.
Depreciation and amortization expense is flat for the three and nine months ended September 30, 2024 as compared to September 30, 2023 and represents the amortization of the associated with the developed technology and patents acquired as part of the acquisition of Impact BioMedical by DSS.
Rent and utilities represents cost associated with office space located at 1400 Broadfield Blvd, Suite 100 Houston TX which the Company began subletting from DSS during the first quarter of 2024.
Other operating expenses consist primarily of office supplies, IT support, sales and marketing costs, travel and insurance costs. These costs increased 650% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 and increased 222% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Other Income (Expense)
| Three months ended September 30, 2024 | Three months ended September 30, 2023 | % Change | Nine months ended September 30, 2024 | Nine months ended September 30,2023 | % Change | |||||||||||||||||||
| Interest income | $ | 3,000 | $ | 3,000 | 0 | % | $ | 10,000 | $ | 10,000 | 0 | % | ||||||||||||
| Other income | - | - | N/A | - | 52,000 | -100 | % | |||||||||||||||||
| Change in fair value of embedded derivative | 5,670,000 | - | N/A | 5,670,000 | - | N/A | ||||||||||||||||||
| Interest expense | (305,000 | ) | (102,000 | ) | 199 | % | (795,000 | ) | (319,000 | ) | 149 | % | ||||||||||||
| Total other income(expense) | $ | 5,368,000 | $ | (99,000 | ) | 5522 | % | $ | 4,885,000 | $ | (257,000 | ) | 2001 | % | ||||||||||
Interest income is recognized on the Company’s notes receivable. Interest income was flat for three and nine months ended September 30, 2024 as compared to September 30, 2023 as the outstanding principal balance remained flat.
Other income represents income generated from the Company’s distribution agreement with BioMed Technologies (“BioMed”). during the first quarter of 2023. BioMed’s products focus on natural probiotics.
Change in fair value of embedded derivative is related to the promissory note with DSS which allows the Company to repay both principal and interest with common stock of the Company.
Interest expense is recognized on the Company’s debt to DSS. Interest expense increased 199% and 149% for three and nine months ended September 30, 2024 as compared to September 30, 2023, respectively, due to the increased outstanding balance of debt due.
| 16 |
Net Income (Loss)
| Three months ended September 30, 2024 | Three months ended September 30, 2023 | % Change | Nine months ended September 30, 2024 | Six months ended September 30, 2023 | % Change | |||||||||||||||||||
| Net income (loss) | $ | 4,450,000 | $ | (1,177,000 | ) | 478 | % | $ | 2,572,000 | $ | (3,146,000 | ) | 182 | % | ||||||||||
For the three and nine months ended September 30, 2024 and 2023, the Company recorded increases in net income (loss) of 478% and 182%, respectively. The increase in net income (loss) is attributable to the Company’s cost cutting measures in taken with both its professional and research and development costs as the Company shifts efforts to taking to market its existing technologies as well as the change in fair value of embedded derivatives associated with the amended Note payable, related party.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its liquidity and capital requirements primarily through debt financing. On September 16, 2024, the Company completed an initial public offering raising $3,726,000 net of issuance costs and is currently listed on the NYSE American under the ticker symbol IBIO. The Company’s management intends to take additional actions necessary to continue as a going concern. Management’s plans concerning these matters include, among other things, monetization of its intellectual properties, and tightly controlling operating costs.
Cash Flow from Continuing Operating Activities
Net cash used by operating activities was $2,663,000 for the nine months ended September 30, 2024 as compared to cash used by operating activities of $2,418,000 for the nine months ended September 30, 2023. This fluctuation is driven by less payments of the Company’s accounts payable by approximately $232,000, as well as decrease in net loss after reconciling items of approximately $161,000
Cash Flow from Investing Activities
Net cash provided by investing activities was $2,000 for the nine months ended September 30, 2024 as compared to cash used by investing activities of $16,000 for the nine months ended September 30, 2023. This fluctuation is driven by the purchase of capital assets approximating $18,000 during the nine months ended September 30, 2023 without similar activities during 2024.
Cash Flow from Financing Activities
Net cash provided by financing activities was $5,328,000 for the nine months ended September 30, 2024 and represents $1,602,000 in borrowings from DSS as well as $3,726,000 in issuance of common stock, net of issuance costs. During the nine months ended September 30, 2023, net cash provided by financing activities was driven by borrowings from DSS of $2,633,000.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues, or expenses.
| 17 |
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. The financial statements as of December 31, 2023, describe the significant accounting policies and methods used in the preparation of the financial statements. Accounting for derivatives has been added to Footnote 2 of the accompanying financial statements. There are no additional material changes to such critical accounting policies as of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
ITEM 4 - CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures for the quarter ended September 30, 2024, pursuant to Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation and on the material weaknesses disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 which remained as of September 30, 2024, our principal executive officer and principal financial officer concluded that as of September 30, 2024, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is being recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is being accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Changes in Internal Control over Financial Reporting
While changes in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2024, as the Company began implementation of the remediation steps described in our annual report dated December 31, 2023, we believe that there were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 18 |
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
ITEM 1A - RISK FACTORS
Smaller reporting companies are not required to provide the information required by this item.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 - OTHER INFORMATION
None.
| 19 |
ITEM 6 - EXHIBITS
| 20 |
| 21 |
| 22 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| IMPACT BIOMEDICAL, INC. | ||
| November 12, 2024 | By: | /s/ Frank D. Heuszel |
| Frank D. Heuszel | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| November 12, 2024 | By: | /s/ Todd D. Macko |
| Todd D. Macko | ||
| Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
| 23 |