Impact BioMedical, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 14, 2023. Impact BioMedical develops and seeks to license or commercialize biomedical and biohealth technologies, including Linebacker, Laetose, 3F and Equivir/Nemovir. The company reported no significant operating revenue to date.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $50,000 |
| Total costs and expenses | $1.078 million | $889,000 | $2.889 million | $2.422 million |
| Operating loss | $1.078 million | $889,000 | $2.889 million | $2.372 million |
| Net loss | $1.177 million | $2.236 million | $3.146 million | $3.889 million |
| Net loss attributable to common stockholders | $1.162 million | $2.169 million | $3.101 million | $3.689 million |
No meaningful revenue margin was reported because revenue was zero in the quarter and year-to-date period. For nine months, professional services rose 101% to $1.121 million, R&D declined 3% to $684,000, and SG&A compensation declined 36% to $182,000. Management attributed the lower comparative-period net losses primarily to a deferred-tax valuation charge in 2022. The filing also discloses a revision to 2022 results: interest income and operating expenses were understated, with the correction decreasing net loss by approximately $58,000.
- Cash flow, nine months: Operating cash used was $2.418 million, versus $1.879 million in 2022; investing cash used was $16,000, versus $74,000; financing cash provided was $2.633 million, all from related-party borrowings, versus $2.008 million.
- September 30 balance sheet: Cash was $201,000; current assets were $501,000; total assets were $45.082 million. Current liabilities were $12.266 million, including $11.784 million owed under a related-party note. Total liabilities were $15.501 million. Current assets were substantially below current liabilities.
- Debt and liquidity: The DSS revolving note bears 4.25% interest, was extended to September 30, 2024, and had a $11.784 million balance including interest. DSS has not set a maximum borrowing amount and intends to fund operations for a year from the financial statements’ issuance-availability date.
- Asset composition: Goodwill was $25.093 million and net developed-technology intangibles were $19.199 million. No goodwill or intangible impairment was recorded for the periods disclosed.
Material changes, outlook and risks
- Year-to-date net loss improved to $3.146 million from $3.889 million, while operating expenses increased 19% to $2.889 million and operating cash use increased. Interest income fell 90% to $10,000, which management attributed to assigning a note receivable to a related party during 2023.
- The company says recurring operating losses and negative operating cash flows raise substantial doubt about its ability to continue as a going concern within one year of issuance. Management says this doubt is alleviated by the extended DSS revolving note and DSS’s intended support, alongside plans to monetize intellectual property, control costs and seek additional funds through an IPO. These plans and funding intentions are not assurances of future financing or commercialization.
- No numerical financial guidance was provided. Commercialization depends on development and licensing progress; the filing says the company has not generated significant revenue and cannot guarantee successful operations.
- Potential obligations include reimbursement of 50% of Equivir development costs, subject to a $1.25 million cap; development had not begun and no liability was recorded. The 3F arrangement allocates certain proceeds equally with Chemia, but no royalties or reimbursements were received in the first nine months of 2023.
- Disclosure controls and procedures were deemed ineffective as of September 30, 2023, with previously reported material weaknesses still present. Management had begun remediation steps. The company reported no material legal proceedings and no material off-balance-sheet arrangements.
- After quarter-end, the company effected a 1-for-55 reverse split on October 31, 2023, and DSS BioHealth Securities converted 60,496,041 common shares into Series A convertible preferred shares. The cover reports 10,000,000 common shares outstanding as of November 1, while the statements and equity note show 70,496,041 shares after the split; the filing text does not clearly reconcile these share figures.
Important facts for investors to verify
- Reconcile the post-split and post-conversion share counts, including the 10 million figure on the cover, the 70.496 million figure in the statements, and the preferred-share conversion.
- Confirm the availability, terms and duration of DSS funding, including the related-party note’s maturity and the company’s dependence on that support.
- Monitor cash burn, near-term liabilities and the company’s ability to raise capital or meet obligations as they fall due.
- Assess evidence of product development, licensing, sales and revenue generation for the company’s principal technologies, as well as any potential Equivir development reimbursement.
- Track remediation of the disclosed material weaknesses and review future filings for changes in control effectiveness and any further financial-statement revisions.