Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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. ("IBO". "Impact", "Impact BioMedical", "we", "us", "our" or the "Company") discovers, confirms, and patents unique science and technologies which can be developed into new offerings in human healthcare and wellness in collaboration with external partners through licensing, co-development, joint ventures, and other relationships, and currently trades on the NYSE American under ticker symbol IBO.

By leveraging technology and new science with strategic partnerships, we provide advances in biopharmaceuticals, over the counter direct to consumer wellness offerings, and drug discovery for the prevention, inhibition, and treatment of neurological, oncologic, and inflammatory diseases. In addition to our existing efforts, we continually search for, and evaluate, other potential new offerings to add to our portfolio.

Our business model includes partnering and potentially direct sales for commercialization and distribution. Potential licensors and development partners include pharmaceutical, consumer packaged goods companies and others, who would commercialize IBO technologies in exchange for milestone, and royalty payments. Currently, our operations are conducted, and our assets are owned through our principal subsidiaries: (i) Global BioLife, Inc. ("Global BioLife"), which was incorporated on April 14, 2017, (ii) Impact BioLife Science, Inc. ("Impact BioLife"), which was incorporated on August 28, 2020, (iii) Global BioMedical, Inc. ("Global BioMedical"), which was incorporated on April 18, 2017, and (iv) Sweet Sense, Inc. ("Sweet Sense"), which was incorporated on April 30, 2018.

In addition to our existing efforts, we continually search and evaluate other potential new offerings to add to our portfolio.

Below is a list of our principal subsidiaries:

Impact BioLife Science, Inc. We are the sole owner of the issued and outstanding common stock of Impact BioLife Science, Inc.

Global Biomedical, Inc. We own 90.9% of Global Biomedical, Inc. issued and outstanding common stock.

Global BioLife, Inc. Through our majority owned subsidiary Global Biomedical, Inc., we own 81.8% of the issued and outstanding common stock of Global BioLife, Inc.

Sweet Sense, Inc. We own approximately 95.5% of the issued and outstanding common stock of Sweet Sense.

Impact BioMedical 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 antioxidant 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 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 demonstrates compelling potential in reducing caloric intake and glycemic index in foods, while also inhibiting tumor necrosis factor alpha (TNF-α), a cytokine associated with inflammatory chronic diseases (data on file with IBO).

The patented formulation has potential to inhibit the inflammatory and metabolic response of sugar alone and has potential applications in therapeutic administration to reduce or limit inflammatory or metabolic diseases (e.g., diabetes). Use of Laetose in a daily diet, compared to sugar, could result in 30% lower sugar consumption and lower caloric and glycemic index/load.

Laetose has a unique composition patent allowed in the United States and 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 "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.

In addition to Chemia, IBO is actively seeking potential partners for further development and commercialization of 3F worldwide, given the broad application of this technology.

Composition patents have been issued in the U.S. and are pending in other countries.

Equivir

Equivir/Equivir G 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 application 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 use as an over-the-counter 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

Impact BioMedical continually evaluates additional proprietary technologies that are in various phases of development. 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 potential companies/technologies which, subject to completion of diligence, and approval of the respective management boards, could potentially expand the offerings of Impact Biomedical Inc. There is no assurance that anyone, or all, of these will result in a material transaction and this is exemplary of consistent and ongoing search and discovery efforts within Impact Biomedical Inc.

These activities include discussions with potential companies/technologies which, subject to completion of diligence, and approval of the respective management boards, could potentially expand the offerings of Impact Biomedical Inc. There is no assurance that anyone, or all, of these will result in a material transaction and this is exemplary of consistent and ongoing search and discovery efforts within Impact Biomedical Inc.

Revenue

		Three months ended March 31, 2026				Three months ended March 31, 2025				% Change
Biotech retail sales		$	7,000			$	-				N/A
Total revenue		$	7,000			$	-				N/A

Revenue consists of sales of the Company's retail sales of its Celios air purification technology. It includes online and third-party distributor sales. This is a new product line acquired in February of 2025 via the Company's transaction with DSS PureAir.

Costs and expenses

		Three months ended March 31, 2026				Three months ended March 31, 2025				% Change
Sales, general and administrative compensation		$	180,000			$	246,000				(27	)%
Stock-based compensation			1,440,000				2,000				71900	%
Sales and marketing			1,000				19,000				(95	)%
Professional Fees			258,000				223,000				16	%
Research and development			46,000				103,000				(55	)%
Depreciation and Amortization			285,000				283,000				1	%
Rent and utilities			19,000				19,000				0	%
Other operating expenses			67,000				115,000				(42	)%
Total costs and expenses		$	2,296,000			$	1,010,000				127	%

Selling, general and administrative compensation costs decreased 27% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 due to reductions in pay for a certain employee of the Company as well as a reduction in bonus accruals year over year.

Stock-based compensation includes expense charges for all stock-based awards to employees, directors, and consultants. Such awards can include option grants, warrant grants, and restricted and unrestricted stock awards

Sales and marketing costs, which includes internet and trade publication advertising, press releases, travel and entertainment costs. These decreased 95% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease in costs for the three months ended March 31, 2026 is due to Company efforts to reduce travel, marketing and entertainment costs.

Professional fees increased 16% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. These costs consist primarily of consulting and legal services associated with developing and implementing Impact BioMedical's business plan. These costs increased in 2026 as a result of due diligence in connection with potential mergers and/or acquisitions.

Research and development represent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns, research on new technologies as well as costs to patent newly developed technologies and other related fees for the development of new technologies. Research and development decreased 55% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 due primarily to a decrease in spending on identifying new technologies as well as pausing the spend on several in-development technologies.

Depreciation and amortization expense increased 1% for the three months ended March 31, 2026 as compared to March 31, 2025 and represents the amortization of the associated with the developed technology and patents as well as the amortization of the Celios patents acquired during the first quarter of 2025.

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. These costs remained flat year over year as there were no scheduled rent increases scheduled.

Other operating expenses consist primarily of office supplies, IT support, travel, third party warehousing cost, and insurance costs. These costs decreased 42% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 due primarily to efforts by management of the Company to control such costs.

Other Income (Expense)

		Three months ended March 31, 2026				Three months ended March 31,2025				% Change
Interest income		$	5,000			$	3,000				67	%
Interest expense			-				(271,000	)			(100	)%
Total other income		$	5,000			$	(268,000	)			102	%

Interest income is recognized on the Company's notes receivable. Although payments are being received in accordance with the note receivable terms, interest income increased for three months ended March 31, 2026 as compared to March 31, 2025 as the outstanding principal balance increased slightly.

Interest expense is recognized on the Company's debt to DSS. Interest expense decreased 100% for the three ended March 31, 2026 as compared to March 31, 2025, due to the settlement and payoff of the outstanding debt in October 2025.

Net loss

		Three months ended March 31, 2026				Three months ended March 31, 2025				% Change
Net loss		$	(2,284,000	)		$	(1,278,000	)			79	%

For the three months ended March 31, 2026 and 2025, the Company incurred a net loss of $2,284,000 and $1,278,000 respectively. The increase in net loss is attributable to the stock-based compensation awarded to certain officers, directors and other employees of the Company during the first quarter of 2026 with an approximate value of $1,440,000.

LIQUIDITY AND CAPITAL RESOURCES

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 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.

The Company has historically met its liquidity and capital requirements primarily through debt financing. 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 Operating Activities

Net cash used by operating activities was $464,000 for the three months ended March 31, 2026 as compared to cash used by operating activities of $682,000 for the three months ended March 31, 2025. This fluctuation is driven by less payments of accounts payable by approximately $125,000 as well as an improvement of adjustments to reconcile loss from operations to net cash used by operating activities of approximately $134,000.

Cash Flow from Investing Activities

Net cash used by investing activities was $1,000 for the three months ended March 31, 2026, as compared to net cash provided by investing activities was $1,000 for the three months ended March 31, 2025, and represents activity on the Company's notes receivable.

Cash Flow from Financing Activities

Net cash provided by financing activities was $482,000 for the three months ended March 31, 2026 and represents borrowings from a DSS, a related party. During the three months ended March 31, 2025 net cash provided by financing activities was $0 as no such activities took place.

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.

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, 2025, describe the significant accounting policies and methods used in the preparation of the 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 March 31, 2026.