Impact BioMedical, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited consolidated results. The company develops and seeks to license biomedical and biohealth technologies, including Linebacker, Laetose, 3F and Equivir/Nemovir. It reported no significant operating revenues.
Financial performance and position
| Metric | Q1 2024 / March 31, 2024 | Comparable period / December 31, 2023 |
|---|---|---|
| Revenue | No revenue amount reported in the statements; company says it has not generated significant revenue | — |
| Operating expenses | $771,000 | $803,000 in Q1 2023 |
| Operating loss | $771,000 | $803,000 in Q1 2023 |
| Net loss | $998,000 | $849,000 in Q1 2023 |
| Net loss attributable to common stockholders | $962,000; basic and diluted loss per share $0.10 | $657,000; basic and diluted loss per share $0.01 |
| Operating cash flow | $(712,000) | $(1,014,000) in Q1 2023 |
| Cash | $2,000 | $1,000 at December 31, 2023 |
| Related-party note payable | $12,787,000 | $12,074,000 at December 31, 2023 |
| Total current assets / current liabilities | $335,000 / $13,857,000 | $332,000 / $13,136,000 at December 31, 2023 |
| Total assets / stockholders’ equity | $44,356,000 / $27,264,000 | $44,633,000 / $28,262,000 at December 31, 2023 |
Margins are not meaningfully assessable because the filing reports no revenue. Amortization expense was $278,000 and total depreciation and amortization was $280,000. Goodwill was $25.1 million and net intangible assets were $18.6 million; no impairment was recorded in the quarter.
Changes versus Q1 2023
- Net loss increased by $149,000, or about 18%, despite operating expenses declining 4%. Management attributes the higher loss to costs associated with the planned IPO.
- Interest expense rose 128% to $230,000, which the company attributes to increased DSS debt. Other income of $52,000 in Q1 2023 did not recur.
- Research and development expense declined 72% to $50,000, primarily following termination of the GRDG research contract at the end of 2023. SG&A compensation rose 270% to $148,000, which management links to SEC registration and NYSE American listing costs.
- Operating cash use improved by $302,000; the filing says the change was driven by lower payments of accounts payable. Financing provided $713,000, all from DSS, versus $1.017 million in Q1 2023.
- Common shares outstanding were 10 million at March 31, 2024 versus 70.5 million in the prior-year quarter, following the 2023 reverse split and conversion of shares to preferred stock. This makes per-share comparisons less straightforward.
Liquidity, outlook and risks
- The filing states that recurring losses and negative operating and investing cash flows raise substantial doubt about the company’s ability to continue as a going concern within one year of issuance.
- Management says DSS intends to fund operations for at least one year and that the amended revolving note is available to meet cash needs. The note is secured by all company assets, is payable on demand, and has a stated maturity of September 30, 2030. The filing describes the amended interest rate as Wall Street Journal prime plus 0.50%.
- The company is pursuing an IPO, has engaged an underwriter and says it has NYSE American listing approval. Completion and availability of acceptable financing are not assured. Management also cites monetizing intellectual property and tight cost controls as plans.
- A $203,000 secured note receivable matured in February 2024 and its maturity is being renegotiated. The filing reports no credit-loss reserve.
- The Equivir license provides for reimbursement of 50% of development costs, capped at $1.25 million; a related liability of $152,000 was recorded at March 31, 2024. No 3F royalties or reimbursements were received in either comparative quarter.
- Disclosure controls and procedures were deemed ineffective at March 31, 2024; management said remediation steps had begun. No material legal proceedings or material off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Whether the IPO proceeds and DSS funding commitment become available, and whether the company can meet obligations despite only $2,000 in reported cash and a substantial going-concern doubt.
- The demand and repayment terms, current interest rate, and future payment schedule of the $12.8 million secured DSS note, including its balance growth and current-liability classification.
- Whether the matured $203,000 note receivable will be renewed or collected.
- Commercialization, licensing and revenue progress for the company’s technologies, and the assumptions supporting the carrying values of goodwill and intangible assets.
- Remediation of ineffective disclosure controls and the effect of the share-count changes on comparisons of per-share results.