Executive Summary / Key Takeaways

• Impact BioMedical (IBO) is an early-stage biotechnology and wellness company focused on discovering, patenting, and licensing unique polyphenol-based technologies with potential applications in oncology, inflammatory diseases, antivirals, and consumer products.
• The company recently completed an IPO in September 2024, raising $3.73 million, and acquired assets related to an air purification system in February 2025, expanding its technology portfolio.
• Despite promising technology platforms like Linebacker, Laetose, and Equivir, which have demonstrated specific benefits and secured licensing agreements, IBO has not generated significant revenue and continues to incur operating losses ($1.01M in Q1 2025) and negative cash flows ($682k used in operations in Q1 2025).
• Increased operating expenses in Q1 2025, driven by headcount, marketing, professional fees, and insurance costs post-IPO, contributed to a wider net loss ($1.28M) compared to the prior year period.
• The company's operating losses and negative cash flows raise substantial doubt about its ability to continue as a going concern, necessitating successful monetization of intellectual property and tight cost control as stated management priorities.

The Promise of Polyphenols: Setting the Scene for Impact BioMedical

Impact BioMedical, Inc. (IBO) is carving out a unique position in the healthcare and wellness landscape, not through traditional drug development pipelines, but by focusing on the discovery, confirmation, and patenting of novel science and technologies, particularly centered around electrophilically enhanced polyphenol compounds. Incorporated in 2018, IBO operates through a structure of principal subsidiaries, leveraging strategic partnerships, licensing agreements, and joint ventures to bring its innovations to market. The company's overarching strategy is to identify promising scientific advancements and translate them into potential offerings across biopharmaceuticals, over-the-counter wellness products, and drug discovery, aiming to address neurological, oncologic, and inflammatory diseases, among other areas.

The competitive arena IBO inhabits is dominated by large, established players like Novartis (NVS), Pfizer (PFE), and Johnson & Johnson (JNJ), giants with vast R&D budgets, global distribution networks, and significant market share. IBO, in contrast, positions itself as a nimble innovator, seeking to exploit niche opportunities and technological advantages that can be licensed or co-developed. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, IBO's strategy relies on its intellectual property providing a differentiated edge against the broad portfolios of these industry leaders.

At the heart of IBO's value proposition lies its portfolio of proprietary technologies:

• Linebacker: This platform utilizes small molecule electrophilically enhanced polyphenol compounds, modified Myricetin, targeting oncology (solid tumors), inflammatory disorders, and neurology. The technology demonstrates potential to down-regulate PIM kinase, an oncogene. IBO has licensed Linebacker-1 and Linebacker-2 compounds to ProPhase Laboratories (PRPH) for worldwide development and commercialization, establishing a pathway for potential future milestone and royalty payments.
• Laetose: A patented formulation with compelling potential in food applications to reduce caloric intake and glycemic index, while also inhibiting TNF-α, a cytokine linked to chronic inflammatory diseases. Data on file suggests Laetose could inhibit the inflammatory and metabolic response of sugar alone, with potential use in a daily diet resulting in 30% lower sugar consumption and lower caloric and glycemic index load compared to sugar. A composition patent is allowed in the U.S., with others pending globally. IBO is actively seeking partners for commercialization in consumer-packaged goods or biopharmaceuticals.
• Functional Fragrance Formulation (3F): A suite of functional fragrances incorporating specialized botanical ingredients like terpenes, with potential antimicrobial properties and applications in products ranging from insect repellents to detergents and fabrics. Partnered with Chemia Corporation, IBO aims to license this technology, with potential profits split 5/50 after IBO is reimbursed for patent/licensing costs. Chemia holds a limited license, paying a 5% royalty on net sales. Composition patents are issued in the U.S. and pending elsewhere.
• Equivir / Equivir G: A blend of FDA GRAS eligible polyphenols (Myricetin, Hesperetin, Piperine) demonstrating antiviral effects, with potential as health supplements or medication. This technology is also licensed to ProPhase Laboratories for worldwide development and commercialization, initially focused on over-the-counter upper respiratory wellness. IBO is entitled to a 5.5% royalty on net sales and is obligated to reimburse ProPhase Labs for 50% of development costs, up to $1.25 million. Method and composition patents are issued in the U.S. and other countries.
• Emerging Technology: IBO actively evaluates additional technologies, including indoor air quality products, bioplastics, personalized medicine, and more, reflecting a commitment to expanding its IP portfolio. This search led to the recent acquisition of assets related to the Celios air purification system from related party DSS Pure Air, Inc. (DSS) on February 25, 2025. This acquisition, valued at $1.15 million paid in common stock, included approximately $489,000 in inventory and $325,000 in intellectual property, plus a $330,000 premium recorded directly to equity.

The strategic 'so what' of these technologies for investors is their potential to generate revenue through licensing and royalties, offering a potentially less capital-intensive path to market compared to full-scale drug development. The specific benefits, such as Laetose's quantifiable impact on sugar consumption or the defined royalty structures for Equivir and Linebacker, provide concrete examples of how IBO intends to monetize its innovations. However, the success hinges entirely on partners' ability to develop and commercialize these technologies effectively.

Recent Performance and Operational Realities

While IBO's technology portfolio presents long-term potential, recent financial performance reflects the challenges inherent in an early-stage, IP-focused company. For the three months ended March 31, 2025, IBO reported an operating loss of $1.01 million, a widening from the $771,000 operating loss in the same period of 2024. This led to a net loss attributable to common stockholders of $1.27 million, or $0.11 per share, compared to a net loss of $962,000, or $0.10 per share, in Q1 2024.

The increase in operating expenses was a primary driver of the expanded loss. Selling, general, and administrative compensation costs rose significantly by 66%, attributed to additional headcount year-over-year. Sales and marketing expenses saw a substantial 138% increase, linked to costs associated with attending trade shows and marketing efforts following the company's IPO in September 2024. Professional fees also climbed by 54%, reflecting increased consulting and legal services as the company began to execute its business plan post-IPO. Other operating expenses surged by a dramatic 3733%, primarily due to the cost of directors and officers insurance obtained after becoming a public company. Rent and utilities expense also increased by 375% due to leasing additional office space.

Notably, research and development costs decreased by 44% in Q1 2025 compared to Q1 2024. Management attributed this decrease primarily to efforts focused on several patents in 2024 that have not continued into 2025. While cost control is a stated priority, a significant reduction in R&D spending in an IP-centric business raises questions about the pace of future innovation and portfolio expansion.

Interest expense increased by 18% to $271,000 in Q1 2025, driven by the increased outstanding balance of the revolving promissory note owed to DSS, a related party. As of March 31, 2025, the outstanding balance on this note, inclusive of interest, stood at $9.14 million.

The acquisition of DSS Pure Air assets in February 2025, while strategically expanding the portfolio, also impacted the balance sheet, adding $489,000 in inventory related to the Celios air purification system and increasing intangible assets by $325,000 for the intellectual property, plus a $330,000 premium recorded directly to equity.

Financial Health, Liquidity, and Outlook

IBO's financial health remains precarious, characterized by historical reliance on debt and persistent operating losses. The IPO in September 2024 provided a crucial infusion of capital, raising $3.73 million net of issuance costs. However, this capital is being consumed by ongoing operations and strategic initiatives like the recent acquisition.

As of March 31, 2025, the company held $1.32 million in cash and cash equivalents, a decrease from $2.00 million at December 31, 2024. Cash flow from operating activities shows a net use of $682,000 for the three months ended March 31, 2025, an increase from $482,000 used in the prior year period. This higher cash burn was influenced by increased payments of accounts payable and the larger net loss. Investing activities provided a minimal $1,000, while financing activities provided $0 in Q1 2025, compared to $483,000 in borrowings from DSS in Q1 2024.

The combination of operating losses and negative cash flows has led management to conclude that there is substantial doubt about the company's ability to continue as a going concern within one year of the financial statements' issuance date. This is a critical risk factor for investors.

Management's stated plans to address the going concern issue center on two key initiatives: monetization of its intellectual properties and tightly controlling operating costs. The success of these plans is paramount. Monetization of IP would likely involve securing additional licensing agreements or achieving milestones/royalties from existing ones (like those with ProPhase Labs and Chemia), which have not yet generated significant revenue. Tightly controlling costs will require careful management of the expense categories that saw significant increases in Q1 2025.

The company did not provide specific quantitative financial guidance figures for future periods, beyond these general strategic objectives. This lack of detailed forward-looking metrics adds to the uncertainty surrounding IBO's path to profitability and sustainable operations. Furthermore, the company noted material weaknesses in its internal control over financial reporting as of March 31, 2025, which could impact financial reporting reliability and operational efficiency if not remediated.

Competitive Landscape and Strategic Positioning

IBO operates in markets where scale, established relationships, and robust R&D pipelines are significant competitive advantages, typically held by large pharmaceutical and consumer goods companies. Comparing IBO's financial profile to industry giants like Novartis, Pfizer, and Johnson & Johnson highlights the vast difference in operational maturity and financial strength. While IBO's TTM Gross Profit Margin appears high (100% in 2022, reflecting minimal cost of revenue), this is misleading given its negligible revenue base. Established players like Novartis (75% Gross Margin in 2024), Pfizer (74%), and JNJ (69%) demonstrate consistent, high margins on substantial revenue.

More critically, IBO's TTM Operating Profit Margin (46.43% in 2022, again on minimal revenue) and deeply negative TTM Net Profit Margin (-980.22% in 2022) and EBITDA Margin (-430.27% in 2022) starkly contrast with the profitability of its potential partners and competitors. Novartis, Pfizer, and JNJ all exhibit healthy operating and net margins (e.g., Novartis: 28% Operating, 23% Net; Pfizer: 23% Operating, 13% Net; JNJ: 25% Operating, 16% Net in 2024). This financial disparity means IBO lacks the internal resources for large-scale clinical trials, manufacturing, or global marketing, reinforcing its reliance on partnerships.

IBO's competitive edge lies in its specific, patented technologies. The potential for Laetose to offer a 30% reduction in sugar consumption impact or the demonstrated antiviral effects of Equivir represent tangible benefits that could be attractive to partners seeking differentiated products. These technological advantages form IBO's primary moat, enabling it to potentially command licensing fees and royalties. However, the success of this model is contingent on partners' ability to navigate the complex and costly processes of product development, regulatory approval, and market penetration – areas where large competitors excel due to their scale and experience.

The licensing model, while reducing IBO's direct operational burden and capital requirements compared to full vertical integration, also means IBO's revenue and profitability are largely dependent on the execution and success of its partners. The 5.5% royalty on Equivir net sales or the 50/50 profit split for 3F (after reimbursement) illustrate the revenue streams, but the timing and magnitude are uncertain.

Compared to the robust cash flow generation of its large competitors (e.g., Novartis $8.73/share Operating Cash Flow in 2024, Pfizer $2.25/share, JNJ $10.08/share), IBO's negative operating cash flow ($0.02/share TTM in 2022, $682k used in Q1 2025) highlights its precarious financial position. This limits IBO's ability to invest aggressively in new R&D or pursue strategic acquisitions without external funding or successful IP monetization. The increase in operating expenses in Q1 2025, while partly due to post-IPO scaling, also underscores the challenge of managing costs effectively at this stage.

Supplier dependencies, as noted in the competitive analysis, could also pose a vulnerability for IBO, potentially leading to higher production costs compared to competitors with more diversified or vertically integrated supply chains. This could impact the attractiveness of its technologies to potential partners concerned about cost of goods.

In essence, IBO's strategic positioning is that of an IP generator seeking to leverage its technological innovation through partnerships. Its competitive strength is concentrated in the novelty and potential efficacy of its patented compounds. Its competitive weakness lies in its limited financial resources, lack of operational scale, and dependence on partners for commercial success, making it vulnerable to the efficiency and market power of larger players.

Conclusion

Impact BioMedical stands at a critical juncture, having transitioned to a public company with a portfolio of patented technologies holding promise across diverse healthcare and wellness applications. The core investment thesis rests on the company's ability to successfully monetize these intellectual properties, particularly through licensing agreements for platforms like Linebacker, Laetose, Equivir, and the recently acquired Celios air purification technology. The specific benefits demonstrated by these technologies, such as Laetose's potential impact on sugar consumption or the defined royalty structures in existing licenses, offer tangible pathways to future revenue.

However, the company's financial reality presents significant challenges. Persistent operating losses and negative cash flows have raised substantial doubt about its ability to continue as a going concern, a risk that overshadows its technological potential. The increase in operating expenses following the IPO highlights the costs associated with scaling a public company, further pressuring its limited cash reserves. While management is focused on IP monetization and cost control, the timing and success of these initiatives remain uncertain, and the lack of specific forward-looking financial guidance adds to this uncertainty. Investors must weigh the potential upside from successful technology commercialization against the significant financial risks and the competitive pressures from large, well-funded industry players. The path forward for IBO is dependent on its ability to translate its scientific innovations into sustainable revenue streams and demonstrate a clear trajectory towards financial stability.