PALI-2108 demonstrated favorable safety, with no serious adverse events, lab abnormalities, or EKG concerns Phase 1b data demonstrated 100% clinical response and promising signals regarding the efficacy of PALI-2108 in ulcerative colitis (UC) using FDA-defined endpoints Biomarker analyses showed normalization of 186 genes linked to fibrosis and Crohn’s disease strictures, supporting translational potential in fibrostenotic Crohn’s disease (FSCD) Patient dosing in the Phase 1b FSCD study is expected to begin ...

Core Insights - Palisade Bio is developing PALI-2108, a first-in-class dual-acting anti-inflammatory and anti-fibrotic therapy for fibrostenotic Crohn's disease (FSCD), which currently has no approved treatments [1][3] - The company received a No Objection Letter from Health Canada for its Clinical Trial Application, allowing it to proceed with a Phase 1b clinical study [1][3] - Patient dosing is expected to begin in the second half of 2025, with topline data anticipated in the first quarter of 2026 [1][2] Company Overview - Palisade Bio is a clinical-stage biopharmaceutical company focused on precision therapies for autoimmune, inflammatory, and fibrotic diseases [5] - The company aims to transform the treatment landscape by developing targeted therapeutics [5] Product Details - PALI-2108 is an orally administered prodrug designed for gut-restricted delivery, targeting the terminal ileum and colon [4] - The drug is activated by bacterial enzymes in the lower intestine, achieving high local tissue concentrations while minimizing systemic exposure [4] - This design aims to enhance anti-inflammatory and anti-fibrotic effects while reducing common side effects associated with systemic PDE4 inhibitors [4] Clinical Study Information - The Phase 1b study will enroll approximately 6-12 patients to evaluate safety, pharmacokinetics (PK), and pharmacodynamics (PD) [2][7] - The study will include monitoring of adverse events, laboratory tests, EKGs, and paired ileal biopsies analyzed by RNA sequencing [7] - Data from this study, along with results from previous trials in ulcerative colitis, will support the planned Phase 2 IND submission to the FDA in the first half of 2026 [3]

Core Insights - Palisade Bio is focusing on developing PALI-2108 as a potential leader in treating Fibrostenotic Crohn's Disease (FSCD) and Inflammatory Bowel Diseases (IBD) due to the significant unmet need for more effective treatment options [1][3] Company Overview - Palisade Bio, Inc. is a clinical-stage biopharmaceutical company dedicated to advancing novel therapeutics for autoimmune, inflammatory, and fibrotic diseases [2][5] - The company aims to transform the treatment landscape through a targeted approach with its innovative therapeutics [5] Expert Insight - Dr. Brian Feagan, a leading expert in IBD and FSCD, discussed the challenges of current therapies and emphasized the need for treatments that effectively address both inflammation and fibrosis [3] - He highlighted PALI-2108's localized approach, which aims to minimize class-associated side effects while maintaining anti-inflammatory and anti-fibrotic efficacy [3]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of Palisade Bio, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $5,417 | $9,821 | $(4,404) | (44.8%) | | Total current assets | $6,447 | $10,494 | $(4,047) | (38.6%) | | Total assets | $6,667 | $10,880 | $(4,213) | (38.7%) | | Total current liabilities | $3,970 | $3,236 | $734 | 22.7% | | Total liabilities | $4,047 | $3,388 | $659 | 19.5% | | Total stockholders' equity | $2,620 | $7,492 | $(4,872) | (65.0%) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, presenting revenues, expenses, and net loss for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (in thousands) | Metric (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Research and development | $1,675 | $2,628 | $(953) | (36)% | | General and administrative | $1,168 | $1,583 | $(415) | (26)% | | Total operating expenses | $2,843 | $4,211 | $(1,368) | (32)% | | Net loss | $(2,784) | $(4,080) | $1,296 | (32)% | | Basic and diluted net loss per common share | $(0.58) | $(3.32) | $2.74 | (82.5)% | | Metric (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Research and development | $2,625 | $4,842 | $(2,217) | (46)% | | General and administrative | $2,528 | $3,042 | $(514) | (17)% | | Total operating expenses | $5,153 | $7,884 | $(2,731) | (35)% | | Net loss | $(5,014) | $(7,607) | $2,593 | (34)% | | Basic and diluted net loss per common share | $(1.05) | $(7.60) | $6.55 | (86.2)% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity, including net loss, stock-based compensation, and stock issuances for the six months ended June 30, 2025 Changes in Stockholders' Equity (in thousands, except share amounts) | Metric (Six Months Ended June 30, 2025) | Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | | :-------------------------------------- | :--------------------- | :--------------------- | :------------------ | :------------------ | :------------------------- | :------------------ | :------------------------- | | Balance, December 31, 2024 | 200,000 | $2 | 2,768,646 | $27 | $143,407 | $(135,944) | $7,492 | | Net loss | — | — | — | — | — | $(5,014) | $(5,014) | | Stock-based compensation expense | — | — | — | — | $138 | — | $138 | | Issuance of common stock (ESPP) | — | — | 4,601 | — | $3 | — | $3 | | Issuance of common stock (warrant exercise) | — | — | 2,027,000 | $21 | $(20) | — | $1 | | Balance, June 30, 2025 | 200,000 | $2 | 4,800,247 | $48 | $143,528 | $(140,958) | $2,620 | - The company's common stock shares outstanding increased from **2,768,646** at December 31, 2024, to **4,800,247** at June 30, 2025, primarily due to the exercise of warrants[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | Change ($) | | :-------------------------------------------- | :-------- | :-------- | :--------- | | Net cash used in operating activities | $(4,150) | $(6,679) | $2,529 | | Net cash (used in) provided by financing activities | $(254) | $5,600 | $(5,854) | | Net decrease in cash, cash equivalents and restricted cash | $(4,404) | $(1,079) | $(3,325) | | Cash, cash equivalents and restricted cash, end of period | $5,443 | $11,379 | $(5,936) | - Cash used in operating activities decreased by **$2.5 million**, while financing activities shifted from providing **$5.6 million** in cash in 2024 to using **$0.25 million** in 2025[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, specific financial items, and significant events [1. Organization, Business and Financial Condition](index=9&type=section&id=1.%20Organization,%20Business%20and%20Financial%20Condition) This note describes Palisade Bio's business, its focus on developing novel therapeutics, and its financial condition, including accumulated deficit and going concern considerations - Palisade Bio is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for autoimmune, inflammatory, and fibrotic diseases, with PALI-2108 as its lead product candidate for IBD[25](index=25&type=chunk) - As of June 30, 2025, the Company had an accumulated deficit of **$141.0 million** and cash and cash equivalents of approximately **$5.4 million**[26](index=26&type=chunk) - Management has identified substantial doubt about the Company's ability to continue as a going concern for a period of one year following the issuance date of these financial statements[27](index=27&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis for preparing the unaudited consolidated financial statements, including consolidation principles, significant accounting policies, and the impact of recent accounting pronouncements - The condensed consolidated financial statements are unaudited, include normal recurring adjustments, and consolidate the Company's wholly-owned subsidiaries, LBS and Suzhou Neuralstem Biopharmaceutical Co., Ltd[29](index=29&type=chunk)[31](index=31&type=chunk) - A **1-for-15 reverse stock split** was effected on April 5, 2024, retrospectively adjusting all common stock shares and per share data for all periods presented[32](index=32&type=chunk) - The recently enacted One Big Beautiful Bill Act (OBBBA) is not anticipated to have a material impact on the Company's income tax provision in the near term due to a full valuation allowance against its U.S. federal and state deferred tax assets[37](index=37&type=chunk)[38](index=38&type=chunk) [3. Balance Sheet Details](index=12&type=section&id=3.%20Balance%20Sheet%20Details) This note provides a detailed breakdown of specific balance sheet accounts, including prepaid expenses, other current assets, and accrued liabilities Prepaid expenses and other current assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Prepaid insurance | $531 | $384 | | Prepaid subscriptions and fees | $174 | $116 | | Deferred equity issuance costs | $288 | $75 | | Total | $1,030 | $673 | Accrued liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------------------------------- | :------------ | :---------------- | | Accrued accounts payable | $411 | $109 | | Accrued clinical trial expenses | $1,077 | — | | Accrued chemistry, manufacturing and controls ("CMC") expenses | $90 | $606 | | Accrued joint development expenses (Note 7) | $103 | $223 | | Current portion of contingent consideration obligation (Note 4) | $66 | — | | Total | $2,066 | $1,240 | [4. Fair Value Measurements](index=12&type=section&id=4.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurements for financial assets and liabilities, including cash and cash equivalents and the contingent consideration obligation - Cash and cash equivalents, classified as Level 1, had a fair value of **$5.4 million** as of June 30, 2025, down from **$9.8 million** at December 31, 2024[42](index=42&type=chunk) - The contingent consideration obligation, a Level 3 measurement, decreased from **$150 thousand** at December 31, 2024, to **$141 thousand** at June 30, 2025, with **$66 thousand** now classified as a current liability[46](index=46&type=chunk) [5. Stockholders' Equity](index=14&type=section&id=5.%20Stockholders'%20Equity) This note details changes in stockholders' equity, including the impact of a reverse stock split, recent equity offerings, warrant exercises, and outstanding common stock warrants - A **1-for-15 reverse stock split** was effected on April 5, 2024, reducing outstanding common stock from **12,771,015** to **851,302** shares[48](index=48&type=chunk)[49](index=49&type=chunk) - Recent equity offerings include the December 2024 Offering (**$4.1 million** net cash proceeds) and the May 2024 Offering (**$3.5 million** net cash proceeds)[51](index=51&type=chunk)[52](index=52&type=chunk) - A February 2024 warrant inducement generated approximately **$2.2 million** in net cash proceeds from the exercise of **228,162** existing warrants[55](index=55&type=chunk) Common Stock Warrants Outstanding (June 30, 2025) | Common Stock Warrants | Classification | Number of Warrants Outstanding | Weighted Average Exercise Price | | :------------------------------------ | :---------------- | :----------------------------- | :------------------------------ | | December 2024 Offering Common Stock Warrants | Equity-classified | 3,278,688 | $1.40 | | May 2024 Offering Common Stock Warrants | Equity-classified | 922,863 | $1.40 | | February 2024 Warrant Inducement Replacement Common Stock Warrants | Equity-classified | 228,158 | $6.17 | | Total Warrants Outstanding | | 4,717,538 | $5.64 | [6. Equity Incentive Plans](index=16&type=section&id=6.%20Equity%20Incentive%20Plans) This note provides details on the company's equity incentive plans, including stock option and RSU grants, and the associated share-based compensation expense - During the six months ended June 30, 2025, the Company granted **108,600** stock options (weighted-average fair value **$1.02**) and **89,400** RSUs (weighted-average fair value **$1.13**)[65](index=65&type=chunk) Share-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development expense | $25 | $162 | $48 | $209 | | General and administrative expense | $35 | $196 | $69 | $262 | | Total | $60 | $358 | $117 | $471 | - Total share-based compensation expense decreased by **$354 thousand (75%)** for the six months ended June 30, 2025, compared to 2024, partly due to accelerated vesting of RSUs in Q2 2024 that did not repeat[67](index=67&type=chunk) [7. Collaborations and License Agreements](index=17&type=section&id=7.%20Collaborations%20and%20License%20Agreements) This note outlines key terms and financial impacts of the company's collaboration and license agreements, including those for PALI-2108, LB1148, and NSI-189 - Under the Giiant License Agreement for PALI-2108, the Company assumed all development, manufacturing, regulatory, and commercialization costs after Proof of Concept in October 2024[69](index=69&type=chunk)[71](index=71&type=chunk) - Joint development expenses related to Giiant decreased significantly to **$41 thousand** for the six months ended June 30, 2025, from **$3.5 million** in 2024, with a **$0.7 million** reduction in net R&D expenses from funds received from Giiant in 2025[73](index=73&type=chunk)[74](index=74&type=chunk) - Newsoara Co-Development Agreement for LB1148 includes a **$1.0 million** upfront fee and up to **$6.75 million** in milestones, with no license revenue recognized in 2025 or 2024[79](index=79&type=chunk)[80](index=80&type=chunk) - Alto Neuroscience is developing NSI-189 (ALTO-100), with potential milestone payments up to **$4.5 million**, including **$1.5 million** upon Phase 3 enrollment, despite a Phase 2b MDD study not meeting its primary endpoint[86](index=86&type=chunk)[87](index=87&type=chunk) [8. Net Loss Per Share](index=20&type=section&id=8.%20Net%20Loss%20Per%20Share) This note details the calculation of basic and diluted net loss per common share, including the impact of potentially dilutive securities for the periods presented Basic and Diluted Net Loss Per Common Share | Metric (3 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :---------- | :---------- | | Net loss available to common stockholders | $(2,784) | $(4,080) | | Weighted average shares | 4,797,196 | 1,228,453 | | Basic and diluted net loss per common share | $(0.58) | $(3.32) | | Metric (6 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :---------- | :---------- | | Net loss available to common stockholders | $(5,014) | $(7,607) | | Weighted average shares | 4,796,434 | 1,000,367 | | Basic and diluted net loss per common share | $(1.05) | $(7.60) | - For all periods presented, basic and diluted net loss per common share were the same because the Company was in a net loss position, making most common stock equivalents anti-dilutive[93](index=93&type=chunk) - As of June 30, 2025, **4,969,159** potentially dilutive securities (stock options, RSUs, warrants, Series A Convertible Preferred Stock) were excluded from the diluted EPS calculation as their effects would be anti-dilutive[94](index=94&type=chunk) [9. Commitments and Contingencies](index=21&type=section&id=9.%20Commitments%20and%20Contingencies) This note discloses the company's contractual obligations, including lease agreements, insurance financing, and the completion of a prior reduction-in-workforce - The Corporate Office Lease expires on August 31, 2025, and the Company will not exercise its renewal option, with approximately **$24 thousand** in remaining payments due in 2025[95](index=95&type=chunk)[97](index=97&type=chunk) - A new insurance financing arrangement was entered in June 2025, with an aggregate remaining balance of approximately **$0.3 million** as of June 30, 2025, payable over 9 months at **7.82%** interest[99](index=99&type=chunk) - The 2023 reduction-in-workforce (RIF), which involved a **25%** reduction in employees, was completed in Q2 2024, with all related restructuring expenses recognized in 2023[100](index=100&type=chunk)[101](index=101&type=chunk) [10. Segment Information](index=22&type=section&id=10.%20Segment%20Information) This note clarifies that the company operates as a single reportable segment focused on research and development, providing a breakdown of operating expenses by program - The Company operates as one operating and reportable segment, focused on the research and development of novel therapeutics, with its Chief Executive Officer serving as the chief operating decision maker (CODM)[103](index=103&type=chunk) Operating Expenses by Program (in thousands) | Expense Category (Six Months Ended June 30) | 2025 | 2024 | Change ($) | | :------------------------------------------ | :-------- | :-------- | :--------- | | PALI-2108 program expenses | $1,823 | $3,720 | $(1,897) | | Legacy program (expense reimbursements) expenses | $(58) | $99 | $(157) | | Other research and development expenses | $897 | $1,211 | $(314) | | Other general and administrative expenses | $2,491 | $2,854 | $(363) | | Total operating expenses | $5,153 | $7,884 | $(2,731) | [11. Subsequent Events](index=23&type=section&id=11.%20Subsequent%20Events) This note discloses significant events occurring after the balance sheet date, specifically a warrant inducement agreement that generated additional cash proceeds - On July 23, 2025, the Company entered into a warrant inducement agreement, which closed on July 25, 2025, resulting in the exercise of **4,318,905** existing common stock warrants[109](index=109&type=chunk) - The transaction generated approximately **$3.9 million** in gross cash proceeds and led to the issuance of **8,637,810** new unregistered replacement warrants[109](index=109&type=chunk)[110](index=110&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, results of operations, and cash flows. It covers the executive overview of the business, a detailed comparison of operating results for the three and six months ended June 30, 2025 and 2024, an analysis of liquidity and capital resources, and a discussion of critical accounting policies and recent accounting pronouncements [Executive Overview](index=25&type=section&id=Executive%20Overview) This section provides a high-level summary of Palisade Bio's business, its lead product candidate PALI-2108, recent clinical trial results, future development plans, and key financing activities - Palisade Bio is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for autoimmune, inflammatory, and fibrotic diseases, with PALI-2108 as its lead product candidate for IBD[114](index=114&type=chunk) - The company is developing a biomarker-based patient selection approach for PALI-2108 to improve clinical response by identifying PDE4-related biomarkers[115](index=115&type=chunk) - Positive results from the Phase 1 clinical study of PALI-2108 in healthy volunteers (May 27, 2025) and UC patients (August 7, 2025) met primary endpoints of safety, tolerability, and PK[121](index=121&type=chunk) - Plans include initiating a Phase 1b cohort in FSCD and subsequent Phase 2 clinical programs for FSCD and moderate to severe UC, with an IND submission to the FDA anticipated for U.S. trials in H1 2026[121](index=121&type=chunk)[122](index=122&type=chunk) - A warrant inducement transaction closed on July 25, 2025, generating approximately **$3.9 million** in gross cash proceeds for working capital and PALI-2108 development[123](index=123&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes the company's operating expenses and net loss for the three and six months ended June 30, 2025 and 2024, highlighting key drivers of change Operating Expenses and Net Loss (in thousands) | Metric (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Research and Development | $1,675 | $2,628 | $(953) | (36)% | | General and Administrative | $1,168 | $1,583 | $(415) | (26)% | | Net Loss | $(2,784) | $(4,080) | $1,296 | (32)% | | Metric (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Research and Development | $2,625 | $4,842 | $(2,217) | (46)% | | General and Administrative | $2,528 | $3,042 | $(514) | (17)% | | Net Loss | $(5,014) | $(7,607) | $2,593 | (34)% | - The decrease in R&D expenses for both periods was primarily due to a significant reduction in preclinical joint development expenses for PALI-2108 (approx. **$1.9 million** for 3 months, **$4.1 million** for 6 months), partially offset by increased clinical trial and CMC expenses[131](index=131&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - G&A expenses decreased mainly due to a non-cash share-based compensation expense (accelerated RSU vesting) in 2024 that did not recur in 2025, and lower consultant/contract labor costs[135](index=135&type=chunk)[142](index=142&type=chunk) - Other income, net, decreased due to a reduction in the cash balance invested in money market funds[136](index=136&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its financial obligations, its historical funding sources, current cash position, and future capital needs, including going concern considerations - The Company has historically funded operations through equity financings and expects to incur substantial operating losses, requiring additional capital through various financing methods[145](index=145&type=chunk)[146](index=146&type=chunk) - As of June 30, 2025, cash, cash equivalents, and restricted cash totaled **$5.4 million**[149](index=149&type=chunk) - A warrant inducement transaction closed on July 25, 2025, generating approximately **$3.9 million** in gross cash proceeds, which, combined with existing cash, is expected to fund operations into Q1 2026[147](index=147&type=chunk)[148](index=148&type=chunk)[158](index=158&type=chunk) - Management has expressed substantial doubt about the Company's ability to continue as a going concern for one year from the report's issuance date[128](index=128&type=chunk)[145](index=145&type=chunk)[236](index=236&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(4,150) | $(6,679) | | Net cash (used in) provided by financing activities | $(254) | $5,600 | [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section identifies the company's critical accounting estimates that require significant judgment, primarily related to accrued research and development expenses and contingent consideration - The Company's critical accounting estimates, which require significant judgment, primarily relate to accrued research and development expenses and its contingent consideration obligation[160](index=160&type=chunk) - There have been no significant changes in critical accounting policies or estimates since the most recently filed Annual Report on Form 10-K[160](index=160&type=chunk) [Recently Issued or Adopted Accounting Pronouncements](index=32&type=section&id=Recently%20Issued%20or%20Adopted%20Accounting%20Pronouncements) This section confirms that no new accounting pronouncements materially impacted the company's financial statements during the reporting period - No new accounting pronouncements issued or adopted during the three and six months ended June 30, 2025, had or are expected to have a material impact on the Company's condensed consolidated financial statements or disclosures[36](index=36&type=chunk)[161](index=161&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=32&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Palisade Bio, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is considered a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk[162](index=162&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=32&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section addresses the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective due to a material weakness, but the financial statements fairly present the company's position. Remediation efforts for the material weakness are ongoing, with no material changes to internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section details management's conclusion on the effectiveness of disclosure controls and procedures, noting a material weakness but affirming the fair presentation of financial statements - Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[164](index=164&type=chunk) - Despite the material weakness, management believes the condensed consolidated financial statements in this report fairly present the Company's financial position, results of operations, and cash flows in all material respects, in conformity with U.S. GAAP[165](index=165&type=chunk) [Material Weakness in Internal Control over Financial Reporting](index=33&type=section&id=Material%20Weakness%20in%20Internal%20Control%20over%20Financial%20Reporting) This section describes the persistent material weakness in internal control over financial reporting, specifically regarding the financial closing and reporting process - A material weakness, identified in Q2 2021, persists as of June 30, 2025, stemming from a lack of controls in the financial closing and reporting process, including segregation of duties and formalized procedures for journal entries and account reconciliations[167](index=167&type=chunk)[168](index=168&type=chunk) [Remediation Efforts related to the Material Weakness](index=33&type=section&id=Remediation%20Efforts%20related%20to%20the%20Material%20Weakness) This section outlines the ongoing actions management is taking to address the identified material weakness, including personnel additions, software implementation, and policy updates - Management is actively engaged in remediation efforts, including hiring additional finance/accounting personnel, implementing new accounting software, updating policies and procedures, addressing segregation of duties, and implementing additional key internal controls[169](index=169&type=chunk)[172](index=172&type=chunk) - Remediation efforts are ongoing and require additional time to complete design, implementation, and demonstrate operating effectiveness[170](index=170&type=chunk) [Changes in Internal Control Over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section confirms that no material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[171](index=171&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=34&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reports no material legal proceedings or claims pending against it as of June 30, 2025 - Management believes there are no claims or actions pending against the Company through June 30, 2025, which will have a material adverse effect on its business, liquidity, financial position, or results of operations[102](index=102&type=chunk)[174](index=174&type=chunk) [ITEM 1A. RISK FACTORS](index=34&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines the significant risks and uncertainties that could materially affect the company's business, financial condition, and results of operations. These risks are categorized into development, commercialization, and regulatory approval of product candidates, general business operations, dependence on third parties, financial operations, intellectual property, and risks related to the company's securities and broader economic conditions [RISK FACTOR SUMMARY](index=34&type=section&id=RISK%20FACTOR%20SUMMARY) This section provides a concise overview of the primary risks facing the company, including those related to product development, financial stability, third-party reliance, and intellectual property - Key risks include dependence on successful clinical development and regulatory approval of PALI-2108, substantial risks in drug development, and reliance on the Giiant license agreement[176](index=176&type=chunk) - Financial risks include substantial doubt about the ability to continue as a going concern, a history of net operating losses, and failure to remediate a material weakness in internal controls[180](index=180&type=chunk) - Other significant risks involve dependence on third-party CROs and suppliers, challenges in obtaining and enforcing intellectual property rights, and potential delisting from Nasdaq[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [Risks Related to Our Development, Commercialization and Regulatory Approval of Our Product Candidates](index=36&type=section&id=Risks%20Related%20to%20Our%20Development,%20Commercialization%20and%20Regulatory%20Approval%20of%20Our%20Product%20Candidates) This section details risks associated with the clinical development, regulatory approval, and market commercialization of the company's product candidates, particularly PALI-2108 - The business depends on the successful clinical development, regulatory approval, and commercialization of PALI-2108, which is subject to risks like timely completion of trials, funding, and regulatory acceptance of foreign data[182](index=182&type=chunk)[187](index=187&type=chunk) - Drug development is expensive, time-consuming, and uncertain, with no guarantee that PALI-2108 will reach commercialization or obtain regulatory approval[184](index=184&type=chunk)[197](index=197&type=chunk) - Challenges include difficulty enrolling patients in clinical trials, the need for substantially more capital, potential for undesirable side effects, and dependence on adequate reimbursement and market adoption for commercial success[189](index=189&type=chunk)[191](index=191&type=chunk)[194](index=194&type=chunk)[203](index=203&type=chunk)[209](index=209&type=chunk) [Risks Related to Our Business](index=42&type=section&id=Risks%20Related%20to%20Our%20Business) This section covers general business risks, including limited operating history, dependence on key personnel, challenges in acquiring new product candidates, and potential disruptions from government agencies - The Company has a limited operating history and has never generated revenues from product sales, making its business model and prospects difficult to evaluate[213](index=213&type=chunk)[214](index=214&type=chunk) - Success depends on attracting and retaining senior management and scientists with relevant expertise, as competition for qualified employees in the pharmaceutical industry is high[216](index=216&type=chunk) - The Company may choose to discontinue development of product candidates or may be unable to successfully in-license or acquire additional product candidates, impairing business growth[218](index=218&type=chunk)[219](index=219&type=chunk) - Changes in funding or disruptions at government agencies like the FDA could hinder their ability to review and approve new products, negatively impacting the Company's business[222](index=222&type=chunk)[223](index=223&type=chunk) [Risks Related to Our Dependence on Third Parties](index=44&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) This section addresses risks arising from the company's reliance on third-party contract research organizations, suppliers, manufacturers, and collaborators for development and commercialization activities - The Company relies on third-party Contract Research Organizations (CROs) to conduct clinical trials; failure to meet requirements or comply with regulations could delay or prevent regulatory approval[224](index=224&type=chunk) - Dependence on two qualified suppliers for PALI-2108's active pharmaceutical ingredient (API) and third-party manufacturers for drug supplies exposes the Company to risks of supply shortages, quality concerns, and manufacturing disruptions[225](index=225&type=chunk)[226](index=226&type=chunk)[231](index=231&type=chunk) - Reliance on collaborations with third parties for development and commercialization carries risks such as partners' inability to execute responsibilities, price increases, and quality incidents[229](index=229&type=chunk) - Relationships with foreign third-party manufacturers are subject to risks from U.S. legislation, tariffs, sanctions, and trade restrictions, potentially impacting supply and costs[233](index=233&type=chunk)[235](index=235&type=chunk) [Risks Related to Our Financial Operations](index=46&type=section&id=Risks%20Related%20to%20Our%20Financial%20Operations) This section highlights financial risks, including going concern doubts, a history of operating losses, and the potential impact of failing to remediate material weaknesses in internal controls - Management has expressed substantial doubt about the Company's ability to continue as a going concern for one year due to insufficient cash to fund anticipated operations[236](index=236&type=chunk) - The Company has a history of net operating losses and expects them to continue, with no assurance of achieving profitability[238](index=238&type=chunk) - Failure to remediate a material weakness in internal controls over financial reporting could result in material misstatements in consolidated financial statements and a failure to meet reporting obligations[239](index=239&type=chunk)[240](index=240&type=chunk) [Risks Related to Our Intellectual Property](index=46&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) This section addresses risks concerning the company's ability to obtain, maintain, and enforce patent rights globally, protect trade secrets, and defend against infringement claims - The Company may not be able to obtain, maintain, or enforce global patent rights of sufficient breadth to prevent third parties from competing, as the patent application process is expensive, time-consuming, and uncertain[241](index=241&type=chunk)[242](index=242&type=chunk) - Patents may be challenged, narrowed, invalidated, or held unenforceable, and foreign jurisdictions may not provide the same extent of intellectual property protection as the U.S.[245](index=245&type=chunk)[246](index=246&type=chunk)[248](index=248&type=chunk) - Proprietary trade secrets and unpatented know-how are vulnerable to breach of confidentiality agreements, inadvertent disclosure, or independent discovery by competitors[247](index=247&type=chunk) - The Company may be subject to patent infringement claims, resulting in substantial costs and liabilities, and claims that employees or consultants wrongfully used or disclosed trade secrets of former employers[252](index=252&type=chunk)[254](index=254&type=chunk) [Other Risks Related to Our Securities](index=49&type=section&id=Other%20Risks%20Related%20to%20Our%20Securities) This section covers risks related to the company's common stock, including the need for additional financing, stock price volatility, potential delisting from Nasdaq, and future stock sales - The Company will need additional financing, which may not be available on favorable terms and could result in significant dilution for existing stockholders[255](index=255&type=chunk)[271](index=271&type=chunk) - The common stock price is highly volatile and subject to fluctuations based on clinical trial results, regulatory approvals, financing announcements, and other factors[256](index=256&type=chunk)[258](index=258&type=chunk) - There is a risk of delisting from the Nasdaq Stock Market if the Company fails to maintain compliance with the minimum bid price requirement[260](index=260&type=chunk)[261](index=261&type=chunk) - The Company does not anticipate paying any dividends in the foreseeable future, and future sales of substantial amounts of common stock could adversely affect the market price[263](index=263&type=chunk)[266](index=266&type=chunk) [General Risk Factors](index=52&type=section&id=General%20Risk%20Factors) This section addresses broad risks such as health pandemics, global economic conditions, government agency disruptions, and cybersecurity threats that could impact the company's operations - Health pandemics or epidemics, such as COVID-19, could cause significant disruptions in operations, R&D programs, supply chains, and clinical trials[273](index=273&type=chunk) - Global economic conditions, including inflation, rising interest rates, trade restrictions, and geopolitical conflicts, may adversely affect operating costs, liquidity, and access to capital[274](index=274&type=chunk)[275](index=275&type=chunk) - Inadequate funding or disruptions at government agencies (e.g., FDA, SEC) could hinder regulatory processes and impact the ability to access public markets[276](index=276&type=chunk)[278](index=278&type=chunk) - The Company faces risks from system failures, cyber-attacks, and data compromises, which could lead to business disruptions, reputational harm, and legal liabilities, especially concerning patient data in clinical trials[279](index=279&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=55&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company reports no unregistered sales of equity securities or use of proceeds for the period - None[289](index=289&type=chunk) [ITEM 3. DEFAULT UPON SENIOR SECURITIES](index=55&type=section&id=ITEM%203.%20DEFAULT%20UPON%20SENIOR%20SECURITIES) The company reports no defaults upon senior securities for the period - None[290](index=290&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURE](index=55&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURE) This item is not applicable to the company - Not Applicable[291](index=291&type=chunk) [ITEM 5. OTHER INFORMATION](index=55&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reports no other information for the period - None[292](index=292&type=chunk) [ITEM 6. EXHIBITS](index=55&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the Form 10-Q, including various certifications and XBRL documents - Exhibits include Certification of Principal Executive Officer (31.1), Certification of Principal Financial Officer (31.2), Certification of Principal Executive Officer and Principal Financial Officer (32.1), Inline XBRL Instance Document (101.INS), and Cover Page Interactive Data File (104)[293](index=293&type=chunk) [SIGNATURES](index=56&type=section&id=SIGNATURES) This section confirms the official signing of the report by the company's Chief Executive Officer and Chief Financial Officer - The report was signed by J.D. Finley, Chief Executive Officer and Chief Financial Officer, on August 11, 2025[298](index=298&type=chunk)

Core Insights - PALI-2108 has shown safety and tolerability with no serious adverse events, supporting its potential as a once-daily oral therapy for ulcerative colitis and fibrostenotic Crohn's disease [1][2][3] Clinical Data Summary - Phase 1b study demonstrated a 100% clinical response rate in patients with moderate-to-severe ulcerative colitis, with significant histological and biomarker improvements [2][4] - Key findings from the Phase 1b study include a mean reduction of 62.8% in the modified Mayo score and a decrease in fecal calprotectin in 4 out of 5 patients [4] - Phase 1a study confirmed extended drug exposure with colon tissue drug concentrations remaining above target levels for over 36 hours post-dose, supporting a once-daily dosing regimen [5][10] Mechanism of Action - PALI-2108 is designed to selectively inhibit PDE4 in the distal ileum and colon, utilizing a microbiome-activated mechanism to enhance local bioactivation and minimize systemic exposure [7] - The drug demonstrated significant immunomodulatory effects, including a 40% average reduction in tissue lymphocytes and a 51% decrease in PDE4B expression [4][10] Future Development Plans - The company plans to submit an Investigational New Drug (IND) application for a Phase 2 study in the first half of 2026, following the completion of ongoing studies [1][5]

Core Insights - PALI-2108 is the first and only PDE4 inhibitor specifically designed to target the terminal ileum and colon for treating fibrostenotic Crohn's disease (FSCD) and ulcerative colitis (UC), addressing significant unmet medical needs in these conditions [1] - The inflammatory bowel disease market in China is projected to approach $1 billion in total revenues by 2030, indicating a large and growing market opportunity [1] Company Developments - The China National Intellectual Property Administration has issued a Notice of Allowance for a patent covering PALI-2108, with a base patent term extending into 2045, subject to regulatory approval extensions [2] - The CEO of Palisade Bio emphasized the importance of strengthening the global intellectual property portfolio for PALI-2108, which supports the company's clinical and strategic objectives in one of the fastest-growing pharmaceutical markets [3] - Palisade Bio is currently conducting a Phase 1b/2a clinical trial for PALI-2108 aimed at treating FSCD and UC, with multiple near-term clinical milestones expected in the next 12-18 months [3] Company Overview - Palisade Bio is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for patients with autoimmune, inflammatory, and fibrotic diseases, aiming to transform the treatment landscape through targeted approaches [4]

Core Viewpoint - Palisade Bio, Inc. has entered into an agreement with accredited investors to exercise existing warrants for the purchase of up to 4,318,905 shares of common stock at a reduced exercise price, generating approximately $3.9 million in gross proceeds for the company [1][2]. Group 1: Existing Warrants and Financial Details - The existing warrants were issued at adjusted exercise prices of $1.40 and will be exercised at a reduced price of $0.9047 per share [1]. - The gross proceeds from the exercise of the existing warrants are expected to be approximately $3.9 million before deducting fees and expenses [2]. - The company intends to use the net proceeds from the offering for working capital and general corporate purposes [4]. Group 2: Replacement Warrants - In exchange for the immediate exercise of existing warrants, holders will receive new unregistered replacement warrants to purchase up to 8,637,810 shares of common stock at an exercise price of $0.9047 per share, with a term of five years from shareholder approval [3]. - The replacement warrants are offered in a private placement and have not been registered under the Securities Act [5]. Group 3: Company Overview - Palisade Bio is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for patients with autoimmune, inflammatory, and fibrotic diseases [7].

Core Insights - Palisade Bio, Inc. is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for autoimmune, inflammatory, and fibrotic diseases [3] Group 1: Company Overview - The company aims to transform the treatment landscape through a targeted approach with its novel therapeutics [3] - JD Finley, the CEO, participated in the Virtual Investor "What's Your Story" Summer Spotlight On-Demand Conference, sharing his dedication and insights about the company's programs [1][2] Group 2: Event Participation - The on-demand video webcast of the conference is available on virtualinvestorco.com and the company's website [2]

Core Insights - Palisade Bio, Inc. has appointed Emil Chuang, MB BS FRACP to its Board of Directors, enhancing its clinical strategy in treating Fibrostenotic Crohn's Disease and Ulcerative Colitis [1][9] Company Overview - Palisade Bio is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for patients with autoimmune, inflammatory, and fibrotic diseases [10] Leadership Experience - Dr. Chuang brings nearly 25 years of pharmaceutical and clinical experience, including contributions to drug development programs that led to two successful regulatory approvals: infliximab for pediatric Crohn's disease and lorcaserin for morbid obesity [3][4] - His previous roles include Chief Medical Officer at Intrinsic Medicine and leadership positions at Nestlé Health Science, Takeda, and Progenity, with over 80 peer-reviewed publications to his name [6][7] Strategic Importance - The addition of Dr. Chuang is expected to provide valuable insights into the company's clinical programs, particularly in inflammatory bowel diseases [5][6] - The company aims to leverage Dr. Chuang's expertise to advance its pipeline and address unmet medical needs in the therapeutic landscape [6]

Core Insights - Palisade Bio announced positive topline results from Phase 1 studies of PALI-2108, a PDE4 B/D inhibitor for fibrostenotic Crohn's disease and ulcerative colitis [1][2] - The study met primary endpoints of safety, tolerability, and pharmacokinetics, supporting progression to Phase 2 development [2][3] Safety & Tolerability - No serious adverse events (SAEs) or treatment-emergent adverse events (TEAEs) related to laboratory values or EKGs were observed across SAD, MAD, and food effect cohorts [7] - In the SAD study (15–450 mg), only mild and reversible TEAEs occurred, limited to the highest dose [7] - The MAD cohorts showed mostly minor TEAEs, with the 15 mg BID dose free of any TEAEs [7] Pharmacokinetics - PALI-2108 achieved therapeutically relevant concentrations in colon tissue up to 24 hours post-dose, confirming its targeted profile [7] - Plasma-to-tissue ratios indicated localized drug activation in the distal gut with low systemic exposure [7] - Population PK modeling supports a therapeutic window aligned with observed safety and tolerability [7] Future Development Plans - Based on the results, Palisade Bio plans to initiate a Phase 1b cohort to further explore safety, tolerability, and pharmacokinetics while completing chronic safety studies [8] - Phase 2 clinical programs will assess PALI-2108's efficacy, safety, and tolerability in patients with fibrostenotic Crohn's disease and moderate to severe ulcerative colitis [8]