IMPACT BIOMEDICAL INC.

Previous wording

Selling, general and administrative compensation costs decreased 32% and 30%, respectively for the three and six months ended June 30, 2026 and 2025, due to reductions in pay for a certain employee of the Company as well as a reduction in bonus accruals year over year.

Current wording

Selling, general and administrative compensation costs decreased 40% and 33%, respectively for the three and nine months ended September 30, 2026 and as compared to the three and nine months ended September 30, 2025, due to reductions in pay for a certain employee of the Company as well as a reduction in bonus accruals year over year.

Previous wording

Stock based compensation includes expense charges for all stock-based awards to employees, directors, and consultants. Such awards can include option grants, warrant grants, and restricted and unrestricted stock awards. In 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. The agreement included the individuals rescinding and cancelling any and all unexercised stock options previously granted. The Company recorded stock-based compensation expense of approximately $1,440,000.

Current wording

Stock based compensation includes expense charges for all stock-based awards to employees, directors, and consultants. Such awards can include option grants, warrant grants, and restricted and unrestricted stock awards. In January 2026, the Company granted and issued 253,577 shares of Common Stock to various individuals including executives, board members, audit committee members, etc. The agreement included the individuals rescinding and cancelling any and all unexercised stock options previously granted. The Company recorded stock-based compensation expense of approximately $1,440,000.

Previous wording

Sales and marketing costs, which includes internet and trade publication advertising, press releases, travel and entertainment costs. These decreased 100% and 95% for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. The decrease in cost for the three and six months ended June 30, 2025 is due to efforts to reduce cost.

Current wording

Sales and marketing costs, which includes internet and trade publication advertising, press releases, travel and entertainment costs. These decreased 100% and 95% for the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025. The decrease in cost for the three and nine months ended September 30, 2026 is due to efforts to reduce cost.

Previous wording

Professional fees decreased 78% and 45% for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. These costs consist primarily of consulting and legal services associated with developing and implementing Impact BioMedical’s business plan as well as cost associates with the due diligence in connection with potential merger and/or acquisitions and have decreased as all other engagements of professional services have been eliminated or significantly reduced as the Company explores potential mergers and/or acquisitions.

Current wording

Professional fees decreased 59% and 49% for the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025. These costs consist primarily of consulting and legal services associated with developing and implementing Impact BioMedical’s business plan as well as cost associates with the due diligence in connection with potential merger and/or acquisitions and have decreased as all other engagements of professional services have been eliminated or significantly reduced as the Company explores mergers and/or acquisitions.

Previous wording

Research and development costs represent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns, research on new technologies as well as cost to patent newly developed technologies and other related fees for the development of new technologies. Research and development increased 1% and decreased 31% for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025 due primarily to a decrease in spending on identifying new technologies as well as pausing the spend on several in-development technologies.

Current wording

Research and development costs represent costs consisting primarily of independent, third-party testing of the various properties of each technology the Company owns, research on new technologies as well as cost to patent newly developed technologies and other related fees for the development of new technologies. Research and development decreased 33% and 31%, respectively, for the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025 due primarily to a decrease in spending on identifying new technologies as well as pausing the spend on several in-development technologies.

Previous wording

Depreciation and amortization expense decreased 1% remained flat for the three and six months ended June 30, 2026 as compared to the same periods for June 30, 2025 and represents the amortization of the associated with the developed technology and patents acquired as part of the acquisition of Impact BioMedical by DSS as well as the amortization of the Celios patents acquired during the first quarter of 2025.

Current wording

Depreciation and amortization expense decreased 1% for the three and nine months ended September 30, 2026 as compared to the same periods for September 30, 2025 and represents the amortization of the associated with the developed technology and patents acquired as part of the acquisition of Impact BioMedical by DSS as well as the amortization of the Celios patents acquired during the first quarter of 2025.

Previous wording

Rent and utilities represents costs associated with office space located at 1400 Broadfield Blvd, Suite 100 Houston TX which the Company began subletting from DSS during the first quarter of 2024. These costs remained flat for the three and six months ended June 30, 2026 as compared to the same periods for June 30, 2025 as there were no rent increases.

Current wording

Rent and utilities represents costs associated with office space located at 1400 Broadfield Blvd, Suite 100 Houston TX which the Company began subletting from DSS during the first quarter of 2024. These costs remained flat for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 and decreased 2% for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 as there were no rent increases.

Previous wording

Other operating expenses consist primarily of office supplies, IT support, travel, third party warehousing cost, and insurance costs. These costs decreased 43% and 42% for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025 due primarily to efforts by management of the Company to control such costs.

Current wording

Other operating expenses consist primarily of office supplies, IT support, travel, third party warehousing cost, and insurance costs. These costs decreased 33% and 40% for the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025 due primarily to efforts by management of the Company to control such costs.

Previous wording

Interest income is recognized on the Company’s notes receivable. Interest income was relatively flat for three and six months ended June 30, 2026 as compared to the same periods for June 30, 2025 as the outstanding principal balance remained flat.

Current wording

Interest income is recognized on the Company’s notes receivable. Interest income was relatively increased 33% and remained flat for three and nine months ended September 30, 2026 as compared to the same periods for September 30, 2025, respectively, as the outstanding principal balance remained flat.

Previous wording

Change in fair value of note payable, related party is related to the promissory note with DSS (“DSS Note”). During the fiscal year ended 2024, the Company amended the terms of its outstanding principal balance of the DSS Note. Previously, the Note required repayment solely in cash; however, pursuant to the second amendment executed which went into effect on September 16, 2024, the Company now has the option to settle the Note in either cash or shares of the Company’s common stock, subject to certain conditions. In accordance with ASC 480, Distinguishing Liabilities and Equity, and ASC 825, Financial Instruments, the Company remeasured the fair value of the DSS Note as of the modification date and again as of June 30, 2025. As a result, the Company recognized a fair value adjustment of $12,942,000 for the three and six months ended June 30, 2025. This note was settled and paid off in October 2025.

Current wording

Change in fair value of note payable, related party is related to the promissory note with DSS (“DSS Note”). During the fiscal year ended 2024, the Company amended the terms of its outstanding principal balance of the DSS Note. Previously, the Note required repayment solely in cash; however, pursuant to the second amendment executed which went into effect on September 16, 2024, the Company now has the option to settle the Note in either cash or shares of the Company’s common stock, subject to certain conditions. In accordance with ASC 480, Distinguishing Liabilities and Equity, and ASC 825, Financial Instruments, the Company remeasured the fair value of the DSS Note as of the modification date and again as of September 30, 2025. As a result, the Company recognized a fair value adjustment of $268,000 and $13,210,000 for the three and nine months ended September 30, 2025. This note was settled and paid off in October 2025.

Previous wording

Interest expense is recognized on the Company’s debt to DSS. Interest expense increased 33% and 0% for the three and six months ended June 30, 2026 as compared to June 30, 2025, due to the settlement and payoff of the outstanding debt in October 2025.

Current wording

Interest expense is recognized on the Company’s debt to DSS. Interest expense decreased 100% for the three and nine months ended September 30, 2026 as compared to the three and nine months ended September 30, 2025, due to the settlement and payoff of the outstanding debt in October 2025.

Previous wording

For the three and six months ended June 30, 2026 and 2025, the Company recorded decreases in net loss of 95% and 81%. The decrease in net loss is attributable to the Company’s cost is driven by the fair value adjustment to the Company’s debt with DSS recorded during 2025 offset by increases in stock based compensation approximating $1,440,000 recorded in Q1 2026..

Current wording

For the three and nine months ended September 30, 2026 and 2025, the Company recorded decreases in net loss of 56% and 79%. The decrease in net loss is attributable to the Company’s cost is driven by the fair value adjustment to the Company’s debt with DSS recorded during 2025 offset by increases in stock based compensation approximating $1,440,000 recorded in Q1 2026.

Previous wording

Net cash provided by operating activities was $6,000 for the six months ended June 30, 2026 as compared to cash used by operating activities of $1,376,000 for the six months ended June 30, 2025. This fluctuation is driven by less payments of the Company’s accounts payable by approximately $279,000, amounts due to related party of approximately $709,000, as well as decrease in net loss after reconciling items of approximately $419,000

Current wording

Net cash provided by operating activities was $19,000 for the nine months ended September 30, 2026 as compared to cash used by operating activities of $1,989,000 for the nine months ended September 30, 2025. This fluctuation is driven by less payments of the Company’s accounts payable by approximately $240,000, amounts due to related party of approximately $1,002,000, as well as decrease in net loss after reconciling items of approximately $712,000

Previous wording

Net cash provided by investing activities was $1,000 and $1,000 for the six months ended June 30, 2026 and June 30, 2025, respectively. This activity is due to payments received on notes receivable during 2026 and 2025.

Current wording

Net cash used and provided by investing activities was $1,000 and $2,000 for the nine months ended September 30, 2026 and September 30, 2025, respectively. This activity is due to net activity on notes receivable during 2026 and 2025.