Executive Summary / Key Takeaways

• Impact BioMedical (IBO) stands at a pivotal juncture, transitioning from an early-stage biopharmaceutical and wellness technology developer with limited historical revenue to a potentially transformed entity through an impending reverse merger with Dr Ashleys Limited.
• The company possesses a diverse portfolio of proprietary technologies, including Linebacker for oncology, Laetose for metabolic health, 3F for functional fragrances, and Equivir for antiviral applications, which represent its core value proposition and potential for future milestone and royalty payments.
• Despite recent revenue generation from its acquired Celios air purification system, IBO has faced significant operating losses and negative cash flows, leading to a "going concern" warning and a substantial goodwill impairment in 2024.
• A critical financial restructuring occurred in October 2025, converting a $22.88 million related-party debt into equity, which, alongside the Dr Ashleys merger anticipated in Q1 2026, aims to stabilize its financial foundation and unlock new strategic avenues.
• Investors should recognize the high-risk, high-reward profile, where the success hinges on the effective integration and commercialization strategies post-merger, the monetization of its intellectual property, and the ability to scale operations in a highly competitive and capital-intensive industry.

Setting the Stage: Innovation in Healthcare and Wellness

Impact BioMedical, Inc. (IBO) operates in the dynamic and innovation-driven sectors of human healthcare and wellness, focusing on the discovery, confirmation, and patenting of unique scientific and technological advancements. Incorporated in Nevada in 2018, IBO's business model centers on leveraging strategic partnerships, including licensing, co-development, and joint ventures, to bring its biopharmaceutical and direct-to-consumer wellness offerings to market. The company's overarching strategy is to generate revenue through milestone and royalty payments from these collaborations, alongside direct sales of its proprietary products.

The biopharmaceutical industry is characterized by high research and development costs, stringent regulatory pathways, and intense competition from established global players. Within this landscape, IBO positions itself as a niche innovator, seeking to carve out market share with its specialized technology platforms. The broader industry is also witnessing a growing influence of technological advancements, such as artificial intelligence, which, while not directly detailed in IBO's current operations, underscores the increasing demand for sophisticated R&D capabilities and efficient drug discovery processes.

A Portfolio of Proprietary Technologies and Their Promise

IBO's foundational strength lies in its diverse and patented technology portfolio, each targeting distinct areas within healthcare and wellness. These technologies represent the core of its intellectual property and the primary drivers of its long-term growth strategy.

The Linebacker platform, comprising small molecule electrophilically enhanced polyphenol compounds, holds potential applications in oncology, inflammatory disorders, and neurology. Derived from modified Myricetin, a plant-based flavonoid known for its strong antioxidant and anti-inflammatory properties, Linebacker compounds are designed to down-regulate PIM kinase, an oncogene implicated in various cancers, including colon, lung, prostate, and breast. Linebacker-1 and Linebacker-2 have been licensed to ProPhase Laboratories for global development and commercialization, offering IBO future milestone and royalty payment potential.

Laetose technology presents a compelling opportunity in metabolic health and inflammation. This patented formulation, derived from a unique combination of sugar and inositol, demonstrates the ability to reduce caloric intake and glycemic index in foods, while also inhibiting tumor necrosis factor alpha (TNF-α), a cytokine associated with chronic inflammatory diseases. IBO's data suggests that daily use of Laetose, compared to sugar, could result in a 30% lower sugar consumption and a reduced caloric and glycemic index load. This offers a tangible benefit for managing inflammatory and metabolic diseases like diabetes. A unique composition patent for Laetose is allowed in the United States, with international patents pending, and IBO is actively seeking partners for its global commercialization.

The Functional Fragrance Formulation (3F) is a suite of functional fragrances incorporating specialized botanical ingredients, such as terpenes. This technology is being developed for applications as an antimicrobial or as an additive in various consumer products, including insect repellents, detergents, lotions, shampoos, and fabrics, to enhance their effectiveness. IBO has partnered with Chemia Corporation for the development and licensing of 3F, with potential profits to be split equally. Composition patents for 3F have been issued in the U.S. and are pending in other countries.

Equivir/Equivir G technology is a novel blend of FDA Generally Recognized as Safe (GRAS) eligible polyphenols, including Myricetin, Hesperetin, and Piperine, which have demonstrated antiviral effects. This technology has potential applications as health supplements or medication and is licensed to ProPhase Laboratories (PRPH) for global development and commercialization, with an initial focus on over-the-counter offerings for upper respiratory wellness. Method and composition patents are issued in the U.S. and other countries for Equivir/Equivir G.

Beyond these established platforms, IBO continuously evaluates Emerging Technology, including biopharmaceuticals, indoor air quality products, preservatives, bioplastics, personalized medicine, and pain management solutions. These ongoing search and discovery efforts underscore the company's commitment to expanding its intellectual property portfolio.

In February 2025, IBO expanded its operational scope by acquiring certain assets from DSS Pure Air, Inc., a related party. This acquisition, valued at $1.15 million and paid in common stock, included the intellectual property of the Celios air purification system (approximately $325,000) and related inventory (approximately $489,000). The Celios system now represents IBO's nascent "Biotech retail sales" segment, marking its entry into direct product commercialization.

Competitive Landscape and Strategic Positioning

Impact BioMedical operates in a highly competitive environment, facing off against established pharmaceutical giants and agile biotech firms. Its direct competitors include global biopharmaceutical leaders such as Pfizer Inc. , Johnson & Johnson , Merck & Co., Inc. (MRK), and AbbVie Inc. (ABBV), all of whom possess extensive R&D capabilities, diversified product portfolios, and formidable global distribution networks. IBO, as a relatively newer and smaller entity, positions itself as a niche challenger, aiming to leverage its proprietary technologies to address specific unmet needs.

IBO's competitive advantages, or "moats," are primarily rooted in its innovative intellectual property. The Linebacker and Equivir platforms, with their focus on electrophilically enhanced polyphenol compounds, offer the potential for superior targeting of diseases, which could translate into stronger customer loyalty in specialty markets and potentially faster innovation cycles for new treatments. This technological differentiation could enable IBO to command improved pricing power and generate robust growth through recurring revenue from its licensing partnerships. For instance, Equivir's demonstrated antiviral effects might offer a qualitative edge in health supplements, allowing IBO to differentiate itself from competitors by exploiting their dependence on broader portfolios.

Similarly, IBO's Laetose and Functional Fragrance Formulation (3F) technologies provide unique value propositions in consumer healthcare. Laetose's integrated anti-inflammatory and metabolic benefits, and 3F's antimicrobial properties, could lead to superior customer retention and cost efficiencies in production. These unique formulations allow IBO to offer versatile products that address specific consumer demands, potentially boosting its revenue opportunities and capital efficiency compared to the more traditional pharmaceutical approaches of larger players.

However, IBO also faces significant competitive disadvantages. Its limited scale and resources compared to industry behemoths like Pfizer (PFE) and J&J (JNJ) can lead to higher operational costs and slower market expansion, making it challenging to compete in global markets. This resource disparity could also impact IBO's cash flow and ability to sustain large-scale R&D. Furthermore, its dependence on niche innovation means that longer R&D cycles or a failure to achieve market acceptance for its specialized products could hinder strategic execution and expose it to the faster product launches of more agile competitors. The high barriers to entry in biopharmaceuticals, including substantial R&D costs and stringent regulations, while protecting IBO's IP, also favor established players who can more easily navigate these complexities.

Financial Performance: A Transitional Period Marked by Challenges

Impact BioMedical's financial performance reflects its early-stage development and the capital-intensive nature of its industry. As of the report date, the company has not generated significant revenues from its core operations. For the nine months ended September 30, 2025, IBO reported total revenue of $25,000, entirely derived from the biotech retail sales of its newly acquired Celios air purification technology. This contrasts with no revenue in the corresponding period of 2024, highlighting the nascent stage of its commercialization efforts.

The company has consistently incurred operating losses and negative cash flows. For the nine months ended September 30, 2025, IBO recorded an operating loss of $3.11 million, an increase from $2.52 million in the prior year. The net loss for the same period was a substantial $17.11 million, a stark contrast to the net income of $2.36 million reported for the nine months ended September 30, 2024. This prior-year net income was primarily driven by a significant fair value adjustment to the company's related-party debt.

Several factors contributed to the increased losses in 2025. Selling, general, and administrative compensation costs surged by 77% for the nine months ended September 30, 2025, primarily due to additional headcount and bonus accruals post-IPO. Professional fees also saw a significant increase of 177%, as the company began to implement its business plan and conduct due diligence for potential mergers and acquisitions. Other operating expenses rose by a dramatic 495%, mainly due to increased directors and officers insurance costs post-IPO and third-party warehousing expenses for the Celios technology. Conversely, sales and marketing costs decreased by 95%, reflecting management's efforts to reduce discretionary spending, and research and development costs declined by 40%, attributed to a temporary pause in spending on new and in-development technologies.

Liquidity remains a critical concern for IBO. As of September 30, 2025, cash and cash equivalents stood at a mere $12,000, a significant drop from $2.00 million at December 31, 2024. Net cash used in operating activities for the nine months ended September 30, 2025, was $1.99 million. The company's financial statements explicitly include a "going concern" warning, indicating substantial doubt about its ability to continue operations within one year, given its history of operating losses and negative cash flows.

A notable financial event in 2024 was the recording of a $25.09 million goodwill impairment as of December 31, 2024. This impairment was triggered by projected cash flows indicating an equity fair value far below the carrying amount, driven by limited historical revenues and sustained operating losses, further compounded by working capital and related-party debt considerations.

Strategic Pivot: The Dr Ashleys Merger and Debt Restructuring

In response to its financial challenges and to propel its strategic objectives, Impact BioMedical has undertaken significant initiatives. Management's plans to address the going concern doubt include the monetization of its intellectual properties and tightly controlling operating costs.

A crucial development occurred on October 16, 2025, subsequent to the reporting period. The company converted its $22.88 million related-party note payable to DSS (DSS), a key lender, into 31.94 million shares of common stock. This debt-to-equity conversion, which followed an amendment in July 2024 allowing for equity settlement, significantly alters IBO's capital structure and reduces its debt burden. Additionally, DSS BioHealth Security, Inc. converted its 60.50 million shares of Series A Convertible Preferred Stock into an equal number of common shares on the same date.

The most transformative event on the horizon is the anticipated merger with Dr Ashleys Limited, a Hong Kong-based global pharmaceutical company. A merger and share exchange agreement was executed on June 21, 2025, which will result in Dr. Ashleys acquiring Impact BioMedical through a reverse merger. The combined entity, to be named "Dr Ashleys Limited," is slated to trade on the NYSE American, with the deal projected to close during the first quarter of 2026. This strategic transaction is poised to fundamentally reshape IBO's corporate structure, potentially providing access to greater resources, broader market reach, and a more diversified operational base.

Risks and Investment Considerations

Investing in Impact BioMedical carries a high degree of risk, primarily due to its early-stage nature, limited revenue generation, and historical operating losses. The explicit "going concern" warning underscores the significant financial uncertainties facing the company. While the recent debt-to-equity conversion and the impending merger with Dr Ashleys Limited offer potential pathways to stability and growth, their successful execution and integration are paramount.

The company's business model heavily relies on the successful monetization of its intellectual properties through licensing and partnerships. Delays in research, testing, or marketing efforts, or a failure to secure lucrative commercialization agreements for its technologies like Linebacker, Laetose, 3F, and Equivir, could severely impact its financial viability. The uncertainty of forecasts inherent with new products means that a failure to generate anticipated revenue could lead to future non-cash impairment charges.

Operational risks also include the effectiveness of its disclosure controls and procedures, which management deemed "not effective" as of September 30, 2025. While remediation steps are underway, this highlights potential internal control weaknesses. Furthermore, the highly competitive nature of the biopharmaceutical and wellness industries means IBO must continually innovate and execute flawlessly to differentiate itself from larger, more established players. The success of the reverse merger with Dr Ashleys Limited is not guaranteed, and any unforeseen challenges during the integration process could negatively impact the combined entity.

Conclusion

Impact BioMedical, Inc. is a company in the midst of a profound transformation, seeking to leverage its innovative intellectual property portfolio to establish a foothold in the competitive healthcare and wellness sectors. Its array of proprietary technologies, from oncology and metabolic health to functional fragrances and antivirals, represents significant long-term potential. However, IBO's journey has been marked by substantial financial challenges, including persistent operating losses, negative cash flows, and a "going concern" warning, which necessitated a significant debt restructuring.

The impending reverse merger with Dr Ashleys Limited is a critical strategic pivot, offering a potential lifeline and a new chapter for the company. This merger, coupled with the recent conversion of related-party debt to equity, aims to provide the necessary financial stability and strategic direction to advance its IP monetization efforts. For discerning investors, IBO represents a high-risk, high-reward proposition. The investment thesis hinges on the successful integration of the merger, the effective commercialization of its differentiated technologies, and the ability of the new combined entity to navigate the intense competitive landscape and realize the inherent value of its innovative pipeline. The coming quarters will be crucial in demonstrating the tangible benefits of these strategic maneuvers and validating the long-term potential of this evolving enterprise.