What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-11 compared with 2025-03-28 · 564 added, 504 removed, 406 unchanged (72% of the section changed)

3 unchanged sentences

Financial Statements:

Balance Sheets

Statements of Operations

Statements of Cash Flows

Statements of Changes in Stockholders’ Equity

to the Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Stockholders’ Equity

Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Biomedical, Inc.

Impact Biomedical,

on the Financial Statements

have audited the accompanying consolidated balance sheets of Impact Biomedical, Inc., and its subsidiaries (the “Company”)

as of December 31, 2024 and 2023, and the related consolidated statements of operations, changes in stockholders’ equity, and cash

flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the year then ended, in conformity

with accounting principles generally accepted in the United States of America.

We have audited the accompanying

consolidated balance sheets of Impact Biomedical, Inc., and its subsidiaries (the “Company”) as of December 31, 2025 and 2024,

and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the two years

in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,

2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

Doubt Regarding the Company’s Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As described in Note

2 to the 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.

The accompanying financial statements

have been prepared assuming that the Company will continue as a going concern.

As described in Note 2 to the 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.

Management’s plans in regard to these matters are described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our opinion is not

modified with respect to this matter.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

The financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

Our opinion is not modified with respect to this matter.

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)

(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an

understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

& CO., CPAs, P.C.

Our audits included performing

procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for

/S/ GRASSI & CO., CPAs,

have served as the Company’s auditor since 2022.

March 11 , 2026

BioMedical, Inc.

3 unchanged sentences

Current assets:

Cash and cash

Current portion of notes

expenses and other current assets

Cash and cash equivalents

Accounts receivable

Current portion of notes receivable

Prepaid expenses and other current assets

Total current assets

1 unchanged sentence

Notes receivable

Other intangible assets,

LIABILITIES AND STOCKHOLDERS’

Other intangible assets, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

payable, related party

Accrued expenses

Due to related party

Note payable, related party

Total current liabilities

Deferred tax liability,

Deferred tax liability, net

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 12)

Stockholders’ equity

Preferred stock, $ 0.001 par value;

shares authorized, 60,496,041 shares issued and outstanding ( 60,496,041 on December 31, 2023);

Liquidation value $ 0.001 per share,

$ 60,000 aggregate.

100,000,000 shares authorized, zero shares issued and outstanding ( 60,496,041 on December 31, 2024);

Liquidation value $ 0.001 per share, zero aggregate.

$ 60,496,041,000 on December 31, 2024).

Common stock, $ 0.001 par value;

4,000,000,000

4,000,000,000 shares authorized, 104,621,231 shares issued and outstanding ( 11,503,955 on December 31, 2024)

Additional paid-in capital

Accumulated deficit

( 49,507,000 )

( 37,669,000 )

stockholders’ equity of the Company

Non-controlling

interest in subsidiaries

Total stockholders’

liabilities and stockholders’ equity

Total stockholders’ equity of the Company

Non-controlling interest in subsidiaries

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes.

3 unchanged sentences

the Years Ended December 31,

For the Year Ended

Biotech retail sales

Total revenue

Costs and expenses:

general and administrative compensation (inclusive of stock based compensation)

Cost of revenue

Sales, general and administrative compensation (inclusive of stock-based compensation)

Sales and marketing

3 unchanged sentences

Rent and utilities

Impairment of fixed assets

Impairment of goodwill

operating expenses

Impairment of fixed assets

Loss on disposal of fixed assets

Other operating expenses

Total costs and expenses

2 unchanged sentences

( 28,753,000 )

income (expense):

Other income (expense):

Interest income

Change in fair value of

note payable, related party

Change in fair value of note payable, related party

( 9,388,000 )

operations before income taxes

Interest expense

( 1,065,000 )

Loss from operations before income taxes

( 14,450,000 )

Income tax expense

( 24,737,000 )

Income tax benefit (expense)

$ ( 11,870,000 )

from operations attributed to noncontrolling interest

income (loss) attributable to common stockholders

$ ( 24,770,000 )

Loss from operations attributed to noncontrolling interest

Net loss attributable to common stockholders

$ ( 11,838,000 )

Earnings (loss) per common

Shares used earnings (loss) per common share:

$ ( 24,708,000 )

Earnings per common share:

Shares used in computing loss per common share:

accompanying notes.

3 unchanged sentences

the Years Ended December 31,

Cash flows from operating

Cash flows from operating activities:

Loss from continuing operations

$ ( 11,870,000 )

$ ( 24,770,000 )

to reconcile net loss to net cash used by operating activities:

Adjustments to reconcile loss from operations to net cash used by operating activities:

Depreciation and amortization

Stock based compensation

Change in fair value of

note payable, related party

( 5,068,000 )

Issuance of shares for professional services rendered

Accrued interest on notes payable

Change in deferred tax liability

of fixed assets

( 2,580,000 )

Change in fair value of note payable, related party

( 5,068,000 )

Impairment of inventory

Loss on disposal of fixed assets

Impairment of fixed assets

Impairment of goodwill

Decrease (increase) in

Other receivable

Prepaid expenses and other

current assets

Increase (decrease) in

Decrease (increase) in assets:

Accounts receivable

Prepaid expenses and other current assets

Increase (decrease) in liabilities:

Accounts payable

Net cash used by operating

Accrued expenses

Net cash used operating activities

( 1,890,000 )

( 2,854,000 )

Cash flows from investing

Purchase of property, plant

and equipment

received on notes receivable

cash provided (used) by investing activities

Cash flows from financing

Borrowings from revolving

lines of credit, net

of common stock, net of issuance costs

Net cash provided by

financing activities

Net increase (decrease)

and cash equivalents at beginning of year

and cash equivalents at end of year

Cash flows from investing activities:

Payments received on notes receivable

Net cash provided by investing activities

Cash flows from financing activities:

Borrowings from related party

Payments to related party

Borrowings of note payable, related party

Issuances of common stock, net of issuance costs

Net cash (used) provided by financing activities

Net increase (decrease) in cash

( 1,996,000 )

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

accompanying notes.

3 unchanged sentences

the Years Ended December 31,

controlling Interest in

Preferred Stock

Additional Paid-in

Non- controlling Interest in

Balance, December 31, 2023

$ ( 12,961,000 )

Conversion of common stock to preferred stock

( 60,496,041 )

Issuance of common stock, net of expenses

Stock based payments

Fractional shares as a result of reverse stock split

( 24,708,000 )

6 unchanged sentences

$ ( 37,669,000 )

Issuance of common stock, net of expenses

Fractional shares as a result of reverse stock

Stock based payments

Net (loss) income

Conversion of note payable, related party to equity

Conversion of preferred shares into common shares

( 60,496,041 )

Acquisition of DSS PureAir assets

Stock based compensation

Stock based payments for professional services rendered

( 11,838,000 )

( 11,870,000 )

Balance, December 31, 2025

5 unchanged sentences

DESCRIPTION OF BUSINESS

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

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

of Operations

BioMedical, Inc., incorporated in the State of Nevada on October 16, 2018 (the “Company”, “Impact BioMedical”,

“We”, “IBO”), 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.

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.

business model includes partnering and potentially direct sales for commercialization and distribution.

9 unchanged sentences

(“Sweet Sense”), which was incorporated on April 30,

has several unique and proprietary technologies that are in continuing development:

is a platform of small molecule electrophilically enhanced polyphenol compounds with potential application in oncology (solid tumors),

4 unchanged sentences

Myricetin exhibits a wide range of activities that include strong antioxidant

and anti-inflammatory activities (source:

and anti-inflammatory activities.

can potentially be developed as monotherapy or co-therapy to down-regulate PIM (proviral integration site for Moloney murine leukemia

20 unchanged sentences

Equivir™/Equivir

Equivir/Equivir

G technology is a novel blend of FDA Generally Recognized as Safe (GRAS) eligible polyphenols (e.g.

7 unchanged sentences

Laboratories for development and commercialization worldwide

continually evaluates additional technologies that are in various phases of development which can be advanced to patent filings and allowances.

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 inventors, scientists, universities, research foundations, and other parties, which, subject to completion of diligence,

and approval of the respective management, could potentially expand the offerings of IBO.

of the date of this report, we have not generated significant revenues from operations.

We cannot guarantee we will be successful in

our business operations.

Our business is subject to risks inherent in the establishment of a new business enterprise, including possible

delays in our research, testing and marketing efforts or wider economic downturns.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

11 unchanged sentences

periods as follows:

OF CONSOLIDATED FINANCIAL STATEMENTS INCLUDE ENTITIES REPORTING PERIOD AND ATTRIBUTABLE INTEREST

Name of consolidated

OF CONSOLIDATED FINANCIAL STATEMENTS

State or other

jurisdiction of

17 unchanged sentences

November 7, 2019

Impact Biolife Science, Inc.

April 13, 2021

DSS Biomedical International, Inc.

April 9, 2021

DSS Biolife International, Inc.

April 9, 2021

of December 31, 2025, and December 31, 2024, the aggregate noncontrolling interest was equity of $ 2,946,000 and $ 2,978,000 , respectively,

7 unchanged sentences

Reclassifications

- Costs associated with Professional fees for the years ended December 31, 2024, and 2023 have been reclassified to Research

and development to conform with current period presentation.

For the year ended December 31, 2023, Sales and marketing costs have been reclassified from Other operating costs

to Sales and marketing to conform with current period presentation.

(Loss) per Share - Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common

stockholders by weighted average number of shares of common stock outstanding during the period.

Fully diluted earnings (loss) per share

is computed like basic income (loss) per share except that the denominator is increased to include the number of additional common shares

that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

financial instruments issued or outstanding for the years ended December 31, 2024 include 60,496,041 shares of Series A Convertible Preferred

Shares which are not eligible for conversion until April 10, 2027, 880,000 options priced at $ 3.00 per share expiring on October 31,

2031 and 75,000 warrants priced at $ 3.75 per share expiring on June 13, 2025 .

- Costs in the amount of $ 397,000 associated with research and development have been reclassed from Professional fees

to Research and development expenses for year ended December 31, 2024 on the accompanying Consolidated statements of operations to conform

with current period presentation.

Accrued interest on notes payable, related party year ended December 31, 2024 in the amount of

$ 1,065,000 was reclassed from Borrowings on notes payable, related party on the accompanying Statement of cash flows to conform with

current period presentation.

Also, $ 399,000 was reclassed from Accounts payable to Due to related party for year ended December 31, 2024 on the

accompanying Consolidated balance sheet to conform with current period presentation.

(Loss) per Share - Basic earnings (loss) per share is computed by dividing the net income (loss) attributable

to the common stockholders by weighted average number of shares of common stock outstanding during the period.

Fully diluted

earnings (loss) per share is computed like basic income (loss) per share except that the denominator is increased to include the

number of additional common shares that would have been outstanding if the potential common shares had been issued and if the

additional common shares were dilutive.

Dilutive financial instruments issued or outstanding for the years ended December 31, 2024

include 60,496,041

shares of Series A Convertible Preferred Shares, 880,000

options priced at $ 3.00

per share expiring on October

31, 2031 and 75,000

warrants priced at $ 3.75

per share which expired on June

The of Series A Convertible Preferred Shares, were converted into common shares in October of 2025 and the 880,000

options priced at $ 3.00 per share were forfeited in November 2025 in exchange for stock grants which where distributed in January 2026.

were no dilutive financial instruments issued or outstanding for the year ended December 31, 2025.

13 unchanged sentences

such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

carrying amounts reported in the balance sheet of cash, other receivables, accounts payable and accrued expenses approximate fair value because

of the immediate or short-term maturity of these financial instruments.

The fair value of notes receivable approximates their carrying

value as the stated or discounted rates of the notes do reflect recent market conditions.

Notes payable, related party are recorded at fair value based on several factors (see Note 9).

carrying amounts reported in the balance sheet of cash, other receivables, accounts payable and accrued expenses approximate fair value

because of the immediate or short-term maturity of these financial instruments.

The fair value of notes receivable approximates their

carrying value as the stated or discounted rates of the notes do reflect recent market conditions.

Notes payable, related party are recorded

at fair value based on several factors (see Note 9).

receivable, unearned interest, and related recognition – The Company records all future payments of principal and interest

1 unchanged sentence

For financial statement purposes,

the Company reports the net investment in the notes receivable on the consolidated balance sheet as current or long-term based on the

maturity date of the underlying notes.

Such net investment is comprised of the amount advanced on the loans, adjusting for net deferred

loan fees or costs incurred at origination, amounts allocated to warrants received upon origination, and any payments received in advance,

if applicable.

The unearned interest is recognized over the term of the notes and the income portion of each note payment is calculated

so as to generate a constant rate of return on the net balance outstanding.

Net deferred loan fees or costs, together with discounts

recognized in connection with warrants acquired at origination, are accreted as an adjustment to yield over the term of the loan.

Accounting Standards - The Financial Accounting Standards Board (FASB) issues various Accounting Standards Updates relating to

the treatment and recording of certain accounting transactions.

There are several new accounting pronouncements issued by FASB which

are not yet effective.

Each of these pronouncements, as applicable, has been or will be adopted by the Company.

As of December 31, 2024,

none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of

November 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”)

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure

through enhanced disclosures about significant segment expenses.

The amendment is effective for fiscal years beginning after December

15, 2023 and for interim periods within fiscal years beginning after December 15, 2024 and early adoption is permitted.

The amendments

should be applied retrospectively to all prior periods presented in the financial statements.

The Company has adopted the enhanced segment

disclosures of the year ended December 31, 2024.

The Company reports its segment information to reflect the manner in which the Company’s

chief operating decision maker (“CODM”) reviews and assesses performance.

The Company’s Chief Executive Officer and

Chief Operating Officer have joint responsibilities as the CODM and review and assess the performance of the Company as a whole.

primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income

The CODM uses net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations

and as part of the Company’s internal planning and forecasting processes.

Information on Net income (loss) and Operating income

(loss) is disclosed in the Consolidated Statements of Operations.

Segment expenses and other segment items are provided to the CODM on

the same basis as disclosed in the Consolidated Statements of Operations.

CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in

the notes to the financial statements

December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” which is intended to simplify various

aspects related to accounting for income taxes.

ASU 2023-09 removes certain exceptions to the general principles in Topic 740

and also clarifies and amends existing guidance to improve consistent application.

The amendments in ASU 2023-09 are effective

for public business entities for fiscal years beginning after December 15, 2024, including interim periods therein.

Early adoption of

the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued.

The Company is currently evaluating this ASU, but does not expect it to have material impact to its financial statements.

November 2024, the FASB issued ASU No.

2024-03 (“ASU 2024-03”), Disaggregation of Income Statement Expenses (“DISE”) .

2024-03 requires disaggregated disclosure of income statement expenses for public business entities.

ASU 2024-03 does

not change the expense captions an entity presents on the face of the income statement;

rather, it requires disaggregation of certain

expense captions into specified categories in disclosures within the footnotes to the financial statements.

As revised by ASU No.

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, the provisions of ASU 2024-03 are

effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027,

with early adoption permitted.

With the exception of expanding disclosures to include more granular income statement expense categories,

we do not expect the adoption of ASU 2024-03 to have a material effect on our consolidated financial statements taken as a

the Company reports the net investment in the notes receivable on the consolidated balance sheet as current or long-term based

on the maturity date of the underlying notes.

Such net investment is comprised of the amount advanced on the loans, adjusting for net

deferred loan fees or costs incurred at origination, amounts allocated to warrants received upon origination, and any payments received

in advance, if applicable.

The unearned interest is recognized over the term of the notes and the income portion of each note payment

is calculated so as to generate a constant rate of return on the net balance outstanding.

If applicable, any net deferred loan fees or

costs, together with discounts recognized in connection with warrants acquired at origination, are accreted as an adjustment to yield

over the term of the loan.

Plant and Equipment – Property, plant and equipment are recorded at cost.

11 unchanged sentences

assumed in a business combination.

Goodwill is subject to impairment testing at least annually and will be tested for impairment

between annual tests, which takes place during the fourth quarter, if an event occurs or circumstances change that would indicate

the carrying amount may be impaired.

FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to

determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair

value of a reporting unit is less than its carrying amount.

Some of the qualitative factors considered in applying this test include

consideration of macroeconomic conditions, industry and market conditions, cost factors affecting the business, and overall

financial performance of the business.

If, after completing the assessment, it is determined that it is more likely than not that

the fair value of a reporting unit is less than its carrying value, the Company will proceed to a quantitative test.

If qualitative

factors are not deemed sufficient to conclude that the fair value of the reporting unit more likely than not exceeds its carrying

value, then a one-step approach is applied in making an evaluation.

The evaluation utilizes an income approach (discounted cash flow

The computations require management to make significant estimates and assumptions, including, among other things,

selection of comparable publicly traded companies, the discount rate applied to future earnings reflecting a weighted average cost

of capital, and earnings growth assumptions.

The Company believes the estimates and assumptions used in our impairment assessments

are reasonable and based on available market information, but variations in any of the assumptions could result in materially

different calculations of fair value and determinations of whether or not an impairment is indicated.

A discounted cash flow

analysis requires management to make various assumptions about future sales, operating margins, capital expenditures, working

capital, and growth rates.

Cash flow projections are derived from one-year budgeted amounts plus an estimate of later period cash

flows, all of which are determined by management.

Subsequent period cash flows are developed for each reporting unit using growth

rates that management believes are reasonably likely to occur.

FASB ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine

whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting

unit is less than its carrying amount.

Some of the qualitative factors considered in applying this test include consideration of macroeconomic

conditions, industry and market conditions, cost factors affecting the business, and overall financial performance of the business.

after completing the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than

its carrying value, the Company will proceed to a quantitative test.

If qualitative factors are not deemed sufficient to conclude that

the fair value of the reporting unit more likely than not exceeds its carrying value, then a one-step approach is applied in making an

The evaluation utilizes an income approach (discounted cash flow analysis).

The computations require management to make significant

estimates and assumptions, including, among other things, selection of comparable publicly traded companies, the discount rate applied

to future earnings reflecting a weighted average cost of capital, and earnings growth assumptions.

The Company believes the estimates

and assumptions used in our impairment assessments are reasonable and based on available market information, but variations in any of

the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is

A discounted cash flow analysis requires management to make various assumptions about future sales, operating margins, capital

expenditures, working capital, and growth rates.

Cash flow projections are derived from one-year budgeted amounts plus an estimate of

later period cash flows, all of which are determined by management.

Subsequent period cash flows are developed for each reporting unit

using growth rates that management believes are reasonably likely to occur.

Impairment of goodwill is measured as the excess of the carrying

amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit.

As of December

31, 2024, the Company fully impaired goodwill.

impairment was recognized during the year ended December 31, 2023.

Projected cash flows,

evaluated using a 26.3% discount rate and 3.0% terminal growth, indicated equity fair value far below the carrying amount, driven by

limited historical revenues and sustained operating losses.

Additional working-capital and related-party debt balance considerations

further reduced equity value in the analysis.

Taken together, these factors constituted triggering events and supported recording a goodwill impairment in the

amount of $ 25,093,000 as of December 31, 202 representing the full goodwill balance.

Goodwill is $ 0 as of December 31, 2025.

Assets - The estimated fair values of acquired intangibles are generally determined based upon future economic benefits such

7 unchanged sentences

No impairment was recognized as of year ended

December 31, 2024 or the year ended December 31, 2023.

December 31, 2025 or the year ended December 31, 2024 (Note 7).

Recoverability

24 unchanged sentences

a non-cash impairment in future periods.

to related party - The Company has amounts due to DSS, a related party,

resulting from funding advances and shared expenses in the ordinary course of business.

As of December 31, 2025, and December 31, 2024,

amounts due to the related party totaled $ 621,000 and $ 399,000 , respectively.

The amounts are non-interest bearing.

and are due upon

- The Company has adopted ASC Topic 606 , Revenue from Contracts with Customers (“Topic 606”).

23 unchanged sentences

amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied

for Credit Losses - The Company adopted amended accounting guidance ASC Topic 326 which requires an allowance for

credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that

is expected to be collected over the contractual term of the asset considering relevant information about past events, current

conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

In estimating expected

losses in the loan and lease portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project

losses over a reasonable and supportable forecast period.

Assumptions and judgment are applied to measure amounts and timing of

expected future cash flows, collateral values and other factors used to determine the borrowers’ abilities to repay

After the forecast period, the Company utilizes longer-term historical loss experience to estimate losses over the

remaining contractual life of the loans.

As of December 31, 2024 and 2023 the Company has deemed that no reserve on credit losses

were necessary.

at a specific point in time.

Company recognizes its revenue on the sale of its Celios technology based on when the product is shipped to the customer.

measured as the amount of consideration the Company expects to receive in exchange for shipped product.

Sales and other taxes billed

and collected from customers are excluded from revenue.

for Credit Losses - The Company adopted amended accounting guidance ASC Topic 326 which requires an allowance for credit losses

to be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that is expected to

be collected over the contractual term of the asset considering relevant information about past events, current conditions, and reasonable

and supportable forecasts that affect the collectability of the reported amount.

In estimating expected losses in the loan and lease

portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable

forecast period.

Assumptions and judgment are applied to measure amounts and timing of expected future cash flows, collateral values

and other factors used to determine the borrowers’ abilities to repay obligations.

After the forecast period, the Company utilizes

longer-term historical loss experience to estimate losses over the remaining contractual life of the loans.

As of December 31, 2025 and

2024 the Company has deemed that no reserve on credit losses were necessary.

- Acquisition of assets are recorded at their relative fair value based on total accumulated costs of the acquisition.

Direct acquisition-related costs are expensed as incurred.

This includes all costs related to finding, analyzing and negotiating a

The allocation of the purchase price is an area that requires judgment and significant estimates.

intangible assets include land, building and improvements, furniture, fixtures and equipment, acquired above market and below market

leases, in-place lease value (if applicable).

Acquisition-date fair values of assets and assumed liabilities are determined based on

replacement costs, appraised values, and estimated fair values using methods like those used by independent appraisers and that use

appropriate discount and/or capitalization rates and available market information.

On February 25, 2025, the Company completed the acquisition of certain assets owned by DSS Pure Air, Inc.

(DSS PureAir”),

a related party, for $ 1,150,000 to be paid by 545,024 shares of the Company’s common stock calculated on a 10-day VWAP.

Assets acquired

included accounts receivable, inventory and intellectual property of the Celios air purification system.

Assets acquired included accounts

receivable valued at approximately $ 4,000 , prepaid assets of approximately $ 2,000 , inventory valued at approximately $ 489,000 , and intellectual

property of the Celios air purification system of approximately $ 325,000 , inclusive of a $ 330,000 premium paid for the assets acquired.

This premium of $ 330,000 is accounted for in accordance with ASC 805-50, when assets are transferred between entities under common control,

the premium should not be recorded as an asset or as part of the transaction price.

Operations and Going Concern - The accompanying consolidated financial statements have been prepared assuming that the Company

4 unchanged sentences

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.

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.

continue as a going concern, the Company completed an initial public offering on September 16, 2024 raising $ 3,726,000

net of issuance costs and is currently listed

on the NYSE American under the ticker symbol IBO.

Although there is no certainty that management plans will be able to satisfy the requirements

to continue operating as a going concern, management intends to take additional actions necessary to continue as a going concern.

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.

To continue as a going concern the Company is exploring

several options to raise capital including but not limited to, capital raises via its listing on the NYSE American under the ticker symbol

IBO as well as debt financing.

Although there is no certainty that management plans will be able to satisfy the requirements to continue

operating as a going concern, management intends to take additional actions necessary to continue as a going concern.

plans concerning these matters include, among other things, monetization of its intellectual properties, and tightly controlling operating

Reporting - In November 2023, the FASB issued ASC 2023-07, Segment Reporting (Topic 280):

to Reportable Segment Disclosures , which requires enhanced segment disclosures, including expanded information about significant

segment expenses, other segment items, and the chief operating decision maker’s use of reported segment information.

The amendments

also apply to public entities with a single reportable segment and do not change how the Company identifies its operating segments, aggregates

operating segments, or determines its reportable segments.

The amendments are effective for annual periods beginning after December 15,

2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted ASU

2023-07 effective January 1, 2024.

Adoption of the standard did not affect the Company’s consolidated financial position, results

of operations, or cash flows, but did require expanded disclosures in the notes to the consolidated financial statements related to its

1 single reportable segment.

Income Taxes - In

December 2023, the FASB issued ASC 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires enhanced

annual income tax disclosures, including additional disaggregation of rate reconciliation information and income taxes paid.

adopted ASU 2023-09 effective January 1, 2025.

Adoption of the standard did not impact the Company’s consolidated financial position,

results of operations, or cash flows, but did require expanded income tax disclosures in the notes to the consolidated financial statements

Accounting Standards - The Financial Accounting Standards Board (FASB) issues various Accounting Standards Updates relating to

the treatment and recording of certain accounting transactions.

There are several new accounting pronouncements issued by FASB which

are not yet effective.

Each of these pronouncements, as applicable, has been or will be adopted by the Company.

As of December 31, 2025,

none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of

November 2024, the FASB issued ASU No.

2024-03 (“ASU 2024-03”), Disaggregation of Income Statement Expenses (“DISE”) .

ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities.

ASU 2024-03 does not change

the expense captions an entity presents on the face of the income statement;

rather, it requires disaggregation of certain expense captions

into specified categories in disclosures within the footnotes to the financial statements.

As revised by ASU No.

2025-01, Income Statement—Reporting

Comprehensive Income—Expense Disaggregation Disclosures, the provisions of ASU 2024-03 are effective for fiscal years beginning

after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

the exception of expanding disclosures to include more granular income statement expense categories, we do not expect the adoption of

ASU 2024-03 to have a material effect on our consolidated financial statements taken as a whole.

In July 2025, the FASB issued ASU 2025-05,

Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets ,

which amends the guidance related to the measurement of credit losses for accounts receivable and contract assets.

The amendments are

effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting

Early adoption is permitted.

The Company is currently reviewing the provisions of this guidance, has not yet adopted the standard,

and does not currently expect adoption of ASU 2025-05 to have a material effect on its consolidated financial statements.

FINANCIAL INSTRUMENTS

Cash, Note payable, related party

The following tables show the Company’s cash,

cash equivalents, and note payable, related party by significant investment category as of:

Note payable, related party

following tables show the Company’s cash, cash equivalents, and note payable, related party by significant investment category

SCHEDULE OF CASH,

CASH EQUIVALENTS, RESTRICTED CASH, AND NOTE PAYABLE RELATED PARTY BY SIGNIFICANT INVESTMENT CATEGORY

December 31, 2025

Note Payable, Related Party

December 31, 2024

Note Payable, Related Party

Note payable, related party

( 5,068,000 )

9 unchanged sentences

The outstanding principal and interest as of December 31, 2025 is approximately $ 198,000

with $ 184,000 classified in Current portion of notes receivable and $ 17,000 classified as Notes receivable on the accompanying consolidated

balance sheet.

The outstanding principal and interest as of December 31, 2023, approximately $ 203,000 and is classified in current notes

receivable on the accompanying consolidated balance sheet.

and is classified in Current portion of notes receivable on the accompanying consolidated balance sheet.

The outstanding principal and

interest as of December 31, 2024, approximately $ 201,000 with $ 184,000 classified in Current portion of notes receivable and $ 17,000

classified as Notes receivable on the accompanying consolidated balance sheet.

The maturity date of this note is currently being renegotiated.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses at December 31, 2025 of $ 142,000 driven by $ 140,000 of prepaid insurance.

There were no prepaid expenses for year ended December

Prepaid expenses at December 31, 2024 of $ 265,000

driven by $ 263,000 of prepaid insurance.

PROPERTY, PLANT AND EQUIPMENT, NET

2 unchanged sentences

Machinery and equipment

Construction in progress

Less accumulated depreciation

Property, plant and

equipment, net

expense for the years ended December 31, 2024 and 2023 were approximately $ 7,000

and $ 6,000 ,

respectively.

balances and activity for the year ended December 31, 2024 and year ended December 31, 2023 consisted of the following:

Balance at December 31, 2023

( 25,093,000 )

Balance at December 31, 2024

of December 31, 2024, management performed annual goodwill impairment testing., A quantitative analysis was prepared utilizing the Market Approach and Income Approach

valuing the Company and an impairment of goodwill was identified as result of these tests.

the year ended December 31, 2023, management performed annual goodwill impairment testing and no impairment was deemed necessary.

The guideline public company Market Approach produced a mean business enterprise value indication using estimated 2026 results of

The Income Approach was based upon the use of a discounted pro forma cash flow model and produced a business enterprise

value indication of $ 44.9

A weighting of 30 %

to the weighted value indicated was applied under the Market Approach, and a weighting of 70 %

to the value indicated under the Income Approach.

A lower weighting was applied to the Market Approach due to the fact of using

forecasted earnings of the Company.

Based upon the above weightings, an initial value of $ 46.4

million for Impact was calculated.

Adding cash of $ 201,000

to the initial business enterprise value produced a concluded business enterprise value of $ 46.6

million (rounded) for Impact.

Subtracting interest-bearing debt of $ 11.9

million, results in a Fair Value for the common equity of Impact of $ 34.7

As of September 30, 2023, the indicated equity value exceeded the carrying amount by approximately $ 5.1

million or 14.7 %.

Property, plant and equipment, net

expense for the years ended December 31, 2025 and 2024 were approximately $ 6,000 and $ 7,000 , respectively.

As of December 31, 2025 the

company disposed of its machinery and equipment and recorded a loss of $ 12,000 .

INTANGIBLE ASSETS

definite-lived intangible assets, to be amortized over 20 years, balances, and activity for the year ended December 31, 2024 and year ended

December 31, 2023 consisted of the following:

definite-lived intangible assets, to be amortized over 20 years, balances, and activity for the year ended December 31, 2025 and year

ended December 31, 2024 consisted of the following:

OF INTANGIBLE ASSETS

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Developed technology assets

Acquired assets

following table represents future amortization of developed technologies for the years ending December 31:

OF FUTURE AMORTIZATION OF DEVELOPED TECHNOLOGIES

consisted of the following as of December 31:

Finished Goods

Inventory, gross

Less allowance for obsolescence

Inventory, net

NOTE PAYABLE, RELATED PARTY

2 unchanged sentences

and is due in full at the maturity date of September

The Note was further amended on

July 24, 2024 with an effective date of September 16, 2024 to i) allow the Company to pay certain principal and/or interest payments

owing under the repayment terms in an exchange for potential of equity in the Company, ii) change the quarterly interest due dates

to the last day of each calendar quarter (i.e.

December 31, March 31, June 30 and September 30), iii) to adjust the On Demand

feature so that it starts after the 24th month, iv) continue the planned repayment program commencing on the 37th month and on the

last day of each month thereafter through August 31, 2030 to pay a fixed monthly payment of $ 126,381 ,

The Note was further amended on July 24, 2024 with an effective date of September 16, 2024 to i) allow the Company

to pay certain principal and/or interest payments owing under the repayment terms in an exchange for potential of equity in the

Company, ii) change the quarterly interest due dates to the last day of each calendar quarter (i.e.

December 31, March 31, June 30

and September 30), iii) to adjust the On Demand feature so that it starts after the 24th month, iv) continue the planned repayment

program commencing on the 37th month and on the last day of each month thereafter through August 31, 2030 to pay a fixed monthly

payment of $ 126,381 ,

v) to continue the scheduled maturity date of September 30, 2030, and vi) adjusts the interest rate to be the WSJ Prime Rate plus 0.50 %.

This Note is secured by the assets of the Company.

As of December 31, 2024 and December 31, 2023 the outstanding balance, inclusive

of interest was $ 8,878,000 (net

of change in fair value of the Note of $ 5,068,000 )

and $ 12,074,000 ,

respectively.

The $ 8,878,000 is

recorded in Note payable, related party at December 31, 2024.

The $ 12,074,000 at

December 31, 2023 is included in Current portion of note payable, related party.

The Company accounts for this Note as a liability

under ASC 480, Distinguishing Liabilities form Equity (“ASC 480”).

In accordance with ASC 825-10, the carrying value

of the Note will be recorded at fair value and will be remeasured at each reporting period with the changes in fair value recognized in

We considered various valuation methodologies

in our analysis of the embedded derivative.

Valuation methodologies can generally be aggregated into the following three approaches:

the Market Approach, the Income Approach, and the Cost Approach.

Based on our analysis of the facts and circumstances, in estimating

the fair value of the Note payable, related party, we utilized a discounted cash flow method (income approach), in the form of a Monte

Carlo simulation of the Company’s stock price and volume weighted average price (“VWAP”) throughout 36-month period

from the Effective Date relative to its closing stock price and VWAP as of the Valuation Date, or $2.00 and $2.38, respectively.

simulated analysis estimates the expected note cash flow from the date the first payment is due and until the equity conversion rights

expire under the terms of the Note payable, related party based on the following steps:

the Note Payable repayment schedule

the following inputs underlying the simulation analysis

(i) and (ii), were assigned a normal probability distribution, which has a mean of 0 and a standard deviation of 1, and a correlation

of .9885 based on analysis of the guideline public companies

a simulation with 25,000 trials for purposes of capturing the key inputs discussed above (i.e., forecasting the stock price and VWAP).

the period from the 37th payment to maturity date, the DCF Method includes the remaining payments required to be made in cash.

the results of the simulation and concluded based on the simulation results

As of December 31, 2024 the outstanding balance, inclusive of interest was $ 8,878,000

(net of change in fair value of the Note of $ 5,068,000 )

The $ 8,878,000

is recorded in Note payable, related party at December 31, 2024.

On October 16, 2025, the Company converted its Note payable,

related party to 31,939,778

shares common stock as agreed upon by the Company and DSS (lender) which represents a calculation of the outstanding principal and

interest approximating $ 15 million and a stock price utilizing a 10-day Vwap as of June 18, 2025.

There are no restrictions placed

on the disposition of these shares.

As a result of the conversion, the Company recorded a Change in fair value of the note payable,

related party of $ 9,388,000

which is included on the accompanying statement of consolidated operations.

Company accounts for this Note as a liability under ASC 480, Distinguishing Liabilities form Equity (“ASC 480”).

accordance with ASC 825-10, the carrying value of the Note will be recorded at fair value and will be remeasured at each reporting period

with the changes in fair value recognized in earnings.

STOCKHOLDERS’ EQUITY

On May 10, 2023, the Company’s Board of Directors approved an amendment to the Articles of Incorporation of

the Company to increase the total number of shares of Common Stock to 4,000,000,000 shares with a par value of $ 0.001 .

Each share of Common

Stock when issued, shall have one (1) vote on all matters presented to the stockholders.

Our Amended and Restated Articles of Incorporation

also authorized 100,000,000 shares of preferred stock, par value $ 0.001 per share.

On May 11, 2023, the Company effected a forward split.

As a result, there were 3,877,282,251 shares of our Common Stock and no shares of preferred stock issued and outstanding.

split, there were 125,073,621 shares of our Common Stock and no shares of preferred stock issued and outstanding.

On October 31, 2023,

the Company effected a reverse stock split of 1 for 55 .

Also on October 31, 2023, DSS BioHealth Securities, Inc., the Company’s

largest shareholder converted 60,496,041 shares of Common Stock into 60,496,041 shares of Series A Convertible Preferred Shares, reducing its ownership of the Company’s Common Stock from approximately 88% to approximately 12%.

As of December 31, 2023, there were 10,000,000

shares of our Common Stock and 60,496,041 shares of preferred stock issued and outstanding.

August 8, 2023 DSS, the Company’s largest shareholder, distributed to its shareholders of record on July 10, 2023 4 shares of Impact

Bio’s stock for 1 share they owned.

Each share of Impact BioMedical distributed as part of the distribution will not be eligible

for resale until 180 days from the date Impact BioMedical’s initial public offering becomes effective under the Securities Act,

subject to the discretion of the Company to lift the restriction sooner.

October 31, 2023, the Company effected a reverse stock split of 1 for 55 .

As of December 31, 2023 there were 3,877,282,251

shares of our Common Stock issued and outstanding

which was converted to 70,496,041

Also on October 31, 2023, DSS BioHealth

Securities, Inc., the Company’s largest shareholder converted 60,496,041

shares of Common Stock into 60,496,041

shares of Series A Convertible Preferred Shares, reducing its ownership of the Company’s Common Stock from approximately 88% to approximately 12%.

The Series A Convertible Preferred Shares are

not eligible for conversion until April 10, 2027.

On September 16, 2024, Impact Biomedical

Inc., entered into an underwriting agreement (the “Underwriting Agreement”) with Revere Securities, LLC., as representative

(the “Representative”) of the underwriters named therein (the “Underwriters”), pursuant to which the Company

agreed to sell to the Underwriters in a firm commitment initial public offering (the “Offering”) an aggregate of 1,500,000

As of December 31, 2024 there were 3,877,282,251 shares of

our Common Stock issued and outstanding which was converted to 70,496,041 shares.

Also on October 31, 2023, DSS BioHealth Securities,

Inc., the Company’s largest shareholder converted 60,496,041 shares of Common Stock into 60,496,041 shares of Series A Convertible

Preferred Shares, reducing its ownership of the Company’s Common Stock from approximately 88% to approximately 12%.

16, 2025, DSS BioHealth Security, Inc., elected to convert its 60,496,041 shares of Series A Convertible Preferred Stock into 60,496,041

shares of Impact’s Common Stock.

This conversion was approved by Impact’s Board of Directors and Audit Committee.

September 16, 2024, Impact Biomedical Inc., entered into an underwriting agreement (the “Underwriting Agreement”) with

Revere Securities, LLC., as representative (the “Representative”) of the underwriters named therein (the

“Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment initial public

offering (the “Offering”) an aggregate of 1,500,000

of the Company’s shares of common stock, par value $ 0.001

4 unchanged sentences

A final prospectus relating to this Offering was filed with the Commission on September 16, 2024.

The shares of Common Stock were approved

to list on the NYSE American under the symbol “IBO” and began trading there on September 16, 2024.

The Company also issued

warrants to the Representative and its affiliates (the “Representative’s Warrants”) warrants to purchase the number

of shares of Common Stock in the aggregate equal to 5 %

of the Common Stock to be issued and sold in this offering (including any Shares of Common Stock sold upon exercise of the over-allotment

option, if applicable).

The shares of Common Stock were

approved to list on the NYSE American under the symbol “IBO” and began trading there on September 16, 2024.

also issued warrants to the Representative and its affiliates (the “Representative’s Warrants”) warrants to

purchase the number of shares of Common Stock in the aggregate equal to 5 %

of the Common Stock to be issued and sold in this offering (including any Shares of Common Stock sold upon exercise of the

over-allotment option, if applicable).

The Representative’s Warrants are exercisable for a price per share equal to 125 %

of the public offering price.

The warrants are exercisable at any time, in whole or in part, commencing nine (9) months from the date

of commencement of sales of the offering and ending on the third anniversary thereof.

As of September 30, 2024, the Representative had

not exercised any of these warrants.

As of September 30, 2024, only the 1,500,000

The warrants are exercisable at any time, in whole or in part, commencing nine (9) months from the

date of commencement of sales of the offering and ending on the third anniversary thereof.

As of December 31, 2024 only the 1,500,000

shares included in the Offering are freely tradable on the NYSE.

1 unchanged sentence

are restricted from trading for 180 days from the Offering date.

Incentive Plan – During 2023, the Company’s shareholders adopted the 2023 Employee, Director and Consultant Equity

Incentive Plan (the “2023 Plan”).

The 2023 Plan provides for the issuance of an initial 18,762,000 shares of common stock

authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants.

addition, on the first day of each calendar year, for a period of not more than ten (10) years, commencing January 1, 2025, or the first

business day of the calendar year if the first day of the calendar year falls on a Saturday or Sunday, the shares available under this

plan will automatically increase in an amount equal to the lesser of (i) two percent (2%) of the total number of shares of Common Stock

outstanding as of December 31 of the preceding fiscal year or (ii) such number of shares of Common Stock as determined by the Board of

Under the terms of the 2023 Plan, options granted thereunder may be designated as options which qualify for incentive stock

option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

As December 31, 2025, all shares are free from restriction for trading.

February 25, 2025, the Company completed the acquisition of certain assets owned by DSS Pure Air, Inc.

(DSS PureAir”), a related

party, for $ 1,150,000

to be paid by 545,024

shares of the Company’s common stock calculated on a

February 26, 2025, the Company issued 36,433 shares of the Company’s common stock as payment of legal fees incurred associated

with the Company’s initial public offering (“IPO”), registration of shares associated with its equity incentive plan

as well as other related services.

September 23, 2025, the Company issued 100,000 shares of the Company’s common stock as payment of legal fees incurred associated

with the Company’s merger and share exchange agreement with Dr.

Ashleys Limited.

October 16, 2025, the Company converted its Note payable, related party (Note 9) to 31,939,778 shares common stock as agreed upon by

the Company and DSS (lender).

Incentive Plan – During 2023, the Company’s shareholders adopted the 2023 Employee, Director and Consultant

Equity Incentive Plan (the “2023 Plan”).

The 2023 Plan provides for the issuance of an initial 18,762,000

shares of common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees,

directors and consultants.

In addition, on the first day of each calendar year, for a period of not more than ten (10) years,

commencing January 1, 2025, or the first business day of the calendar year if the first day of the calendar year falls on a Saturday

or Sunday, the shares available under this plan will automatically increase in an amount equal to the lesser of (i) two percent (2%)

of the total number of shares of Common Stock outstanding as of December 31 of the preceding fiscal year or (ii) such number of

shares of Common Stock as determined by the Board of Directors.

Under the terms of the 2023 Plan, options granted thereunder may be

designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422A of the Internal

Revenue Code, or options which do not qualify (“NQSOs”).

As of December 31, 2025, there are 18,037,079

shares available under this plan.

As of December 31, 2024, there are 18,037,079 shares available under this plan.

6 unchanged sentences

option grants with a purchase price of $ 3.00

per share were awarded to certain officers, directors

and consultants of the Company.

per share were awarded to certain officers, directors and consultants

of the Company.

These options have various vesting periods, and all expire on October 31, 2031.

Potential proceeds of

these grants is $ 2,640,000

and are fair valued using a Black-Scholes model

at approximately $ 50,000 .

The Company record stock based compensation expense of approximately $ 19,000

for the year ended December 31, 2024 and is included

in Sales, general and administrative compensation (inclusive of stock based compensation) on the accompanying Statement of Operations.

There were no stock-based

payments made during the twelve months ended December 31, 2023.

These options were forfeited in December

The Company recorded stock-based compensation expense of approximately $ 13,000

and $ 19,000 for the year ended December 31, 2025

and 2024, respectively, and is included in Sales, general and administrative compensation (inclusive of stock based compensation) on

the accompanying Statement of Operations.

The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic

740, Income Taxes , using the asset and liability method.

Deferred tax assets and liabilities are recognized for the expected future

tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax bases, and for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured

using enacted tax rates expected to apply in the years in which those temporary differences are expected to reverse or such carryforwards

are expected to be utilized.

Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the

4 unchanged sentences

SCHEDULE OF COMPONENTS OF INCOME TAX BENEFIT

Expense (Benefit)

Income Tax Expense (Benefit)

Current tax payable

1 unchanged sentence

( 1,998,000 )

Less increase in valuation

Total income tax expense

Total deferred tax

( 2,262,000 )

Less increase in valuation allowance

Total income tax (benefit) expense

$ ( 2,580,000 )

components of deferred tax assets and liabilities are approximately as follows:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

Assets & Liabilities:

Deferred Tax Assets & Liabilities:

Deferred Tax assets:

Impairment of investment

Research & development

Operating loss

Research & development cost

Net Operating loss

Gross deferred tax assets

2 unchanged sentences

( 1,148,000 )

Intangible assets

( 3,744,000 )

10 unchanged sentences

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

Statutory United States federal

Statutory United States federal rate

State income taxes effective rate change

State income taxes net of federal benefit

Permanent differences

Change in valuation allowance

Effective rate

of December 31, 2024, and 2023, the Company has net operating loss carry forwards of approximately $ 13,020,000 and $ 9,209,000

of December 31, 2025, and 2024, the Company has net operating loss carry forwards of approximately $ 18,702,000

and $ 13,020,000

respectively.

The Company does not have other

temporary differences associated with the amortization of intangible assets.

As of December 31, 2024, and 2023, the total deferred tax

assets carry-forward were $ 4,416,000 and

$ 3,554,000 ,

The Company does not have other temporary differences associated with the amortization of intangible assets.

December 31, 2025, and 2024, the total deferred tax assets carry-forward were $ 5,430,000

and $ 4,416,000 ,

respectively.

The deferred tax assets could be carried forward indefinitely.

The full utilization of the deferred tax assets in the future

is dependent upon the Company’s ability to generate taxable income.

Considering the development stage of the Company, management

believed that it was probable that the Company would not use tax assets in the near future.

Accordingly, a valuation allowance of an

equal amount has been established.

The full utilization of the deferred tax assets in the

future is dependent upon the Company’s ability to generate taxable income.

Considering the development stage of the Company,

management believed that it was probable that the Company would not use the entirety of its tax assets in the near future.

Accordingly, a valuation allowance of approximately $ 2,374,000 has been established.

Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense.

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES

August 15, 2018, the Company entered into Royalty Agreement with Chemia Corporation (“Chemia”) pursuant to which Chemia

transferred to the Company all of its right to 3F (Functional Fragrance Formulation).

This agreement has a 20-year term and auto

renews for a period of 1 year unless mutually agreed upon by both parties.

3F consists of 3F Mosquito Repellant and 3F Anti-Viral

formulations.

Based on the Royalty Agreement, the Company should cover all the costs to prepare and finalize necessary patent

application and other intellectual property related to 3F.

Chemia agreed to support the Company in efforts leading to development of

3F intellectual property and it is licensing.

Based on Royalty Agreement any payments received from development, sales, licensing or

transfer of 3F technology will be paid 50 %

to the Company and 50 %

On November 27, 2018, Company and Chemia signed an Addendum to Royalty Agreement (“Addendum”), according to

which the Company granted Chemia a royalty-based limited license for purposes of making and selling fragrances embodying the 3F

Based on the Addendum, Chemia should pay the Company 5 %

of net sales in royalty.

On November 8, 2019, both companies entered into Amendment no.1 to Royalty Agreement, based on which

certain expenses borne by the Company towards patent application and licensing should be reimbursed to the Company before any

royalty payments are made.

For the years ended December 31, 2024 and 2023, there were no

reimbursements or royalties paid to the Company and the Company cannot be assured that Chemia’s efforts will end up in any

future sales of the technology.

February 15, 2022, the Company and its subsidiaries, Global BioLife, Inc.

(“Global”), and Impact BioLife Sciences, Inc.

(“BioLife Sciences”), and GRDG entered into a Licensing Proceeds Distribution Agreement (“GRDG Agreement”),

whereas GRDG would transfer its 20 %

equity position in both Global and BioLife Sciences to the Company in exchange for 20 %

interest in Global and/or BioLife Science revenue received from the exclusive or non-exclusive licensing of and/or the sale of

Global Intellectual Property to a Third Party, net of specific costs.

This Licensing Agreement ended in September 2023 as core

technologies achieved significant development milestones.

August 15, 2018, the Company entered into Royalty Agreement with Chemia Corporation (“Chemia”) pursuant to which Chemia transferred

to the Company all of its right to 3F (Functional Fragrance Formulation).

This agreement has a 20-year term and auto renews for a period

of 1 year unless mutually agreed upon by both parties.

3F consists of 3F Mosquito Repellant and 3F Anti-Viral formulations.

the Royalty Agreement, the Company should cover all the costs to prepare and finalize necessary patent application and other intellectual

property related to 3F.

Chemia agreed to support the Company in efforts leading to development of 3F intellectual property and it is

Based on Royalty Agreement any payments received from development, sales, licensing or transfer of 3F technology will be paid

50 % to the Company and 50 % to Chemia.

On November 27, 2018, Company and Chemia signed an Addendum to Royalty Agreement (“Addendum”),

according to which the Company granted Chemia a royalty-based limited license for purposes of making and selling fragrances embodying

the 3F technology.

Based on the Addendum, Chemia should pay the Company 5 % of net sales in royalty.

On November 8, 2019, both companies

entered into Amendment no.1 to Royalty Agreement, based on which certain expenses borne by the Company towards patent application and

licensing should be reimbursed to the Company before any royalty payments are made.

For the years ended December 31, 2025 and 2024, there

were no reimbursements or royalties paid to the Company and the Company cannot be assured that Chemia’s efforts will end up in

any future sales of the technology.

March 19, 2022, Impact BioMedical entered into a License Agreement (“Equivir License”) with a third-party (“Licensee”)

3 unchanged sentences

shall reimburse the Licensee for 50 % of the development costs provided that the development costs shall not exceed $ 1,250,000 .

December 31, 2024 and December 31, 2023, $ 200,000 , and $ 200,000 , respectively, have been recorded in relation to the Equivir License as development

of the Equivir technology.

Employment Agreements – Impact

BioMedical has an employment agreement with it CEO Frank Heuszel in which Mr.

Heuszel’s agreement contains a mandatory bonus clause

of $ 150,000 for the first year of the employment term, $ 100,000 for the second year of the employment term, and $ 100,000 for the third

year of the employment term.

December 31, 2025 and December 31, 2024, a liability of $ 0 has been recorded in relation to the Equivir License.

Agreements – Impact BioMedical has an employment agreement with it CEO Frank Heuszel in which Mr.

agreement contains a mandatory bonus clause of $ 150,000

for the first year of the employment term, $ 100,000

for the second year of the employment term, and $ 100,000

for the third year of the employment term.

As of December 31, 2024, approximately $ 38,000 is accrued for year one of Mr.

Heuszel’s bonus.

As of December 31, 2025, approximately $ 96,000

is accrued for year one of Mr.

Heuszel’s bonus and $ 25,000

for the second year of Mr.

Heuszel’s bonus.

Litigation Payments – The Company retains the services of professional service providers, including law firms that specialize

6 unchanged sentences

and the fees can be reasonably estimated.

As of December 31, 2024, the Company had no t accrued any contingent legal fees pursuant to

As of December 31, 2025, the Company had not accrued any contingent legal fees pursuant to

these arrangements.

2 unchanged sentences

RELATED PARTY TRANSACTIONS

and Development Activities

on Shareholders Agreement entered into on April 26, 2017, the Company would fund the scientific operations of GRDG, a company involved

in research and development of biomedical products which is a minority stockholder of two of the Company’s subsidiaries and is

owned by Daryl Thompson, a director of many subsidiaries of the Company, to do the development and research works on the biomedical products

for the Company.

On February 15, 2022, the Company and its subsidiaries, Global BioLife, Inc.

(“Global”), and Impact BioLife

Sciences, Inc.

(“BioLife Sciences”), and GRDG entered into a Licensing Proceeds Distribution Agreement (“GRDG Agreement”),

whereas GRDG would transfer its 20 %

equity position in both Global and BioLife Sciences to the Company in exchange for 20 %

interest in Global and/or BioLife Science revenue received from the exclusive or non-exclusive licensing of and/or the sale of Global

Intellectual Property to a Third Party, net of specific costs.

As of the date of this report, no contingent liability has been recognized

under the GRDG Agreement.

As of December 31, 2024 and 2023, the Company incurred approximately $ 25,000

and $ 447,000 ,

respectively, in expenses.

and Administrative Costs

are certain general and administrative costs incurred by DSS, a related party, on behalf of the Company which are passed through to

the Company on a monthly basis.

These costs consist of primarily payroll costs for certain DSS employees and are allocated based on

estimated time spent on behalf of the Company.

Beginning in January 2024 and through September 2024, these costs are approximately

are certain general and administrative costs incurred by DSS, a related party, on behalf of the Company which are passed through to the

Company on a monthly basis.

These costs consist of primarily payroll costs for certain DSS employees and are allocated based on estimated

time spent on behalf of the Company.

Beginning in January 2024 and through September 2024, these costs are approximately $ 31,000 per

Beginning October 2024, these costs are approximately $ 26,000 per month.

As of December 31, 2024, the Company incurred

in related expenses.

As of December 31, 2025, the Company incurred approximately

$ 312,000 in related expenses.

Note payable, related party

On December 31, 2020, and later

amended, the Company executed a Revolving Promissory Note (“Note”) with DSS, a related party, which accrues interest at

a rate of 4.25 %

As of December 31, 2024, the Company incurred approximately $ 357,000 in related expenses.

payable, related party

December 31, 2020, and later amended, the Company executed a Revolving Promissory Note (“Note”) with DSS, a related

party, which accrues interest at a rate of 4.25 %

and is due in full at the maturity date of September

The Note was further amended on July 24, 2024 with an effective date of September 16, 2024 to i) allow the Company

to pay certain principal and/or interest payments owing under the repayment terms in an exchange for potential of equity in the

Company, ii) change the quarterly interest due dates to the last day of each calendar quarter (i.e.

December 31, March 31, June 30

and September 30), iii) to adjust the On Demand feature so that it starts after the 24th month, iv) continue the planned repayment

program commencing on the 37th month and on the last day of each month thereafter through August 31, 2030 to pay a fixed monthly

payment of $ 126,381 , v) to

continue the scheduled maturity date of September 30, 2030, and vi) adjusts the interest rate to be the WSJ Prime Rate plus 0.50 %.

As of December 31, 2024 and December 31, 2023 the outstanding balance, inclusive of interest was $ 8,878,000 (net

The Note was further amended on

July 24, 2024 with an effective date of September 16, 2024 to i) allow the Company to pay certain principal and/or interest payments

owing under the repayment terms in an exchange for potential of equity in the Company, ii) change the quarterly interest due dates

to the last day of each calendar quarter (i.e.

December 31, March 31, June 30 and September 30), iii) to adjust the On Demand

feature so that it starts after the 24th month, iv) continue the planned repayment program commencing on the 37th month and on the

last day of each month thereafter through August 31, 2030 to pay a fixed monthly payment of $ 126,381 ,

v) to continue the scheduled maturity date of September 30, 2030, and vi) adjusts the interest rate to be the WSJ Prime Rate plus 0.50 %.

This Note is secured by the assets of the Company.

As of December 31, 2024 the outstanding balance, inclusive of interest was $ 8,878,000 (net

of change in fair value of the Note of $ 5,068,000 )

and $ 12,074,000 , respectively.

The $ 8,878,000 is

recorded in Note payable, related party at December 31, 2024.

The $ 12,074,000 at

December 31, 2023 is included in Current portion of note payable, related party.

SUBSEQUENT EVENTS

Company has evaluated all subsequent events and transactions through March 24, 2025, the date that the consolidated financial statements

were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure other than what was

identified below:

recorded in Note payable, related party at December 31, 2024 (Note 9).

On October 16, 2025, the Company converted its Note payable,

related party to 31,939,778 shares

common stock as agreed upon by the Company and DSS (lender), which represents a calculation of the outstanding principal and

interest approximating $ 15 million and a stock price utilizing a 10-day Vwap as of June 18, 2025.

There are no restrictions placed

on the disposition of these shares.

As a result of the conversion, the Company recorded a Change in fair value of the note payable,

related party of $ 9,388,000 which is included on the accompanying statement of consolidated operations.

February 25, 2025, the Company completed the acquisition of certain assets owned by DSS Pure Air, Inc.

(“DSS PureAir”),

a related party, for $ 1,150,000

to be paid by 545,024

shares of the Company’s common stock calculated on a 10 day VWAP.

Assets acquired included inventory and intellectual

property of the Celios air purification system.

On February 26, 2025, the Company issued 36,433 shares of the Company’s common stock as payment of legal fees incurred associated

with the Company’s IPO, registration of shares associated with its equity incentive plan as well as other related services.

The Company and DSS have agreed

to settle a portion of the outstanding indebtedness that Impact BioMedical owes to DSS under the Promissory Note in the amount of $ 8,697,142.80

through the issuance of 2,415,873 shares of the Company’s common stock, at a conversion ratio of $ 3.60 per share, which was equal

to the closing market price of the Company’s common stock on March 24, 2025.

(DSS PureAir”), a related

party, for $ 1,150,000 to be paid by 545,024 shares of the Company’s common stock calculated on a 10-day VWAP.

Assets acquired included

accounts receivable, inventory and intellectual property of the Celios air purification system.

Due to related party

Impact BioMedical Inc.

from time to time receives

funding from DSS to cover its capital needs.

DSS, Inc., beneficially owns approximately 86 % of the Company’s voting shares.

December 31, 2025 and 2024, amounts due to DSS approximate $ 621,000 and $ 399,000 , respectively.

These balances relate to noninterest-bearing

funding provided by DSS, and are unsecured,

SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the years

ended December 31:

OF SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest

Non-cash investing and financing activities:

Shares issued for the acquisition of DSS PureAir, Inc.

Shares issued for the professional services received

Stock based compensation

Conversion of debt to equity note payable, related party

Conversion of preferred shares to common stock

SUBSEQUENT EVENTS

Company has evaluated all subsequent events and transactions through March 11, 2026, the date that the condensed consolidated financial

statements were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure other than

January 2026, the Company granted and issued 3,200,000 shares of Common Stock to various individuals including executives, board

members, audit committee members, etc.

Agreement included the individuals rescinding and cancelling any and all unexercised

stock options previously granted.

9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data