Palisade Bio(US:PALI)2025-05-12 20:10PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of financial condition Condensed Consolidated Financial Statements (Unaudited) Unaudited financial statements for Q1 2025 show decreased assets and a reduced net loss, with notes highlighting going concern uncertainty Condensed Consolidated Balance Sheets Total assets decreased to $8.19 million by March 31, 2025, primarily due to reduced cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,230 | $9,821 | | Total current assets | $7,887 | $10,494 | | Total assets | $8,190 | $10,880 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $2,777 | $3,236 | | Total liabilities | $2,859 | $3,388 | | Total stockholders' equity | $5,331 | $7,492 | | Total liabilities and stockholders' equity | $8,190 | $10,880 | Condensed Consolidated Statements of Operations Net loss for Q1 2025 decreased to $2.23 million, driven by a significant reduction in operating expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Research and development | $950 | $2,214 | | General and administrative | $1,360 | $1,459 | | Total operating expenses | $2,310 | $3,673 | | Loss from operations | $(2,310) | $(3,673) | | Net loss | $(2,230) | $(3,527) | | Basic and diluted net loss per common share | $(0.47) | $(4.59) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity declined to $5.33 million due to net loss, while common shares increased from warrant exercises - Total stockholders' equity decreased by $2.16 million during the first quarter of 2025, primarily driven by a net loss of $2.23 million15 - The company issued 1,628,000 shares of common stock in connection with the exercise of warrants during the three months ended March 31, 202515 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $2.33 million, resulting in a $2.59 million net decrease in cash Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,333) | $(3,180) | | Net cash (used in) provided by financing activities | $(258) | $2,024 | | Net decrease in cash, cash equivalents and restricted cash | $(2,591) | $(1,156) | | Cash, cash equivalents and restricted cash, end of period | $7,256 | $11,302 | Notes to Condensed Consolidated Financial Statements Notes detail the company's going concern uncertainty, reverse stock split, collaborations, and financial instrument fair values - The company is a clinical-stage biopharmaceutical company focused on developing PALI-2108 for inflammatory bowel disease (IBD), including Crohn's disease and ulcerative colitis21 - There is substantial doubt about the Company's ability to continue as a going concern for one year, given its history of net losses, negative cash flows, and an accumulated deficit of $138.2 million as of March 31, 20252223 - On April 5, 2024, the company effected a 1-for-15 reverse stock split of its common stock, with all share and per-share data retrospectively adjusted28 - In February 2024, a warrant inducement transaction generated net proceeds of approximately $2.2 million from the exercise of 228,162 existing warrants51 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses PALI-2108 development, Q1 2025 financial results, and ongoing liquidity challenges with going concern warning Executive Overview The company is advancing PALI-2108 for IBD, with Phase 1 data expected in Q2 2025 and planned U.S. trials in 2026 - The lead product candidate, PALI-2108, is a prodrug inhibitor of phosphodiesterase-4 (PDE4) being developed to treat ulcerative colitis (UC) and fibrostenotic Crohn's disease (FSCD)110113 - A Phase 1 clinical study of PALI-2108 is ongoing in Canada, with all Single Ascending Dose (SAD) and Multiple Ascending Dose (MAD) cohorts completed, and topline data anticipated in the second quarter of 2025115116 - The company plans to submit an Investigational New Drug Application (IND) to the FDA during 2025 and, if approved, commence U.S. clinical trials in the first quarter of 2026117 Results of Operations Total operating expenses decreased by 37% in Q1 2025 due to lower R&D costs for PALI-2108 Comparison of Results of Operations (in thousands) | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $950 | $2,214 | $(1,264) | (57)% | | General and administrative | $1,360 | $1,459 | $(99) | (7)% | | Total operating expenses | $2,310 | $3,673 | $(1,363) | (37)% | | Net loss | $(2,230) | $(3,527) | $1,297 | (37)% | - The $1.3 million decrease in R&D expenses was primarily due to a $2.2 million reduction in preclinical joint development costs with Giiant, partially offset by a $1.1 million increase in costs for the Phase 1 clinical trial of PALI-2108, which commenced in November 2024126127128 - General and administrative expenses decreased by $0.1 million due to lower costs for shareholder services (no special meeting in Q1 2025), employee bonuses, and insurance130 Liquidity and Capital Resources The company's $7.3 million cash balance is sufficient only through Q4 2025, necessitating additional financing - Management has concluded there is substantial doubt about the company's ability to continue as a going concern, as available cash is insufficient to fund operations for the next 12 months123133 - The company believes its cash balance of $7.2 million as of March 31, 2025, is sufficient to fund planned operations through the fourth quarter of 2025, after which it will require additional financing144 Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,333) | $(3,180) | | Net cash (used in) provided by financing activities | $(258) | $2,024 | Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Palisade Bio is exempt from providing market risk disclosures - As a smaller reporting company, Palisade Bio is not required to provide quantitative and qualitative disclosures about market risk148 Controls and Procedures Management concluded disclosure controls were ineffective due to a persistent material weakness in financial reporting - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective at a reasonable assurance level150 - A material weakness in internal control over financial reporting persists, stemming from a lack of controls in the financial closing and reporting process, including insufficient segregation of duties and formalized procedures153 - Remediation efforts are underway, including hiring additional finance staff, implementing new accounting software, and updating formal policies, but are not yet complete155159 PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures Legal Proceedings The company reported no legal proceedings for the current period - The company reported no legal proceedings161 Risk Factors This section details significant risks including development, financial, operational, intellectual property, and securities-related challenges Risks Related to Development, Commercialization, and Regulatory Approval Success hinges on PALI-2108's development, regulatory approval, and commercialization, facing clinical trial and third-party reliance risks - The company's business depends entirely on the successful clinical development, regulatory approval, and commercialization of its lead asset, PALI-2108163169 - The company depends on its license agreement with Giiant Pharma Inc. for the rights to PALI-2108; termination of this agreement would materially harm the business172 - There is a risk that the FDA or other foreign regulators may not accept data from the Phase 1 clinical trial being conducted in Canada, which could require additional, costly trials174 Risks Related to Our Business The company faces risks from limited operating history, unproven business model, and dependence on key personnel - The company has a limited operating history, has never generated revenue from product sales, and adopted a new business plan in September 2023, making it difficult to evaluate its future viability200 - Future growth may depend on the ability to in-license or acquire additional product candidates, a process that is lengthy, complex, and competitive206 Risks Related to Dependence on Third Parties Heavy reliance on CROs and third-party manufacturers for PALI-2108 creates significant operational and supply chain risks - The company relies on third-party CROs to conduct clinical trials; if these CROs fail to meet regulatory requirements (like GCP), the clinical data may be deemed unreliable211 - The company depends on two qualified suppliers for the API used in PALI-2108 and does not have internal manufacturing capabilities, creating risks related to supply shortages, quality control, and cost212 - Reliance on foreign third parties in China and other countries for API supply creates risks related to potential U.S. legislation, tariffs, sanctions, or other trade restrictions221222 Risks Related to Financial Operations Significant financial risks include going concern doubt, history of losses, and an un-remediated material weakness in internal controls - Management has expressed substantial doubt about the company's ability to continue as a going concern for the next year, as available cash is not sufficient to fund operations for that period223 - The company has a history of net losses and expects them to continue, with no guarantee of ever achieving profitability225 - A material weakness in internal control over financial reporting, related to the financial closing process and segregation of duties, has not been fully remediated226 Risks Related to Intellectual Property Success depends on securing and enforcing patent protection for product candidates and complying with license agreements - The company's success depends on its ability to obtain and maintain patent protection for its product candidates, which is an uncertain, expensive, and time-consuming process228229 - Failure to comply with obligations under the Giiant License Agreement could lead to termination of the license, which would materially harm the business as it covers the lead product candidate, PALI-2108238 Risks Related to Our Securities Risks include stock price volatility, potential Nasdaq delisting, future dilution from financing, and no anticipated dividends - The company's common stock is at risk of being delisted from the Nasdaq Stock Market for failing to maintain the minimum $1.00 bid price requirement, having received a non-compliance notice on April 30, 2025247 - The company will require substantial additional capital, and future equity offerings will likely cause significant dilution to existing stockholders242 - The company does not anticipate paying any dividends in the foreseeable future, so capital appreciation is the likely sole source of gain for stockholders249 General Risk Factors General risks include health pandemics, adverse global economic conditions, and cybersecurity threats impacting operations - Health pandemics could disrupt business operations, delay research and development programs, and negatively impact the supply chain and clinical trial execution258 - Global economic conditions, including inflation, tariffs, and rising interest rates, could increase operating costs and make it more difficult to obtain necessary financing259 - The company is vulnerable to cyber-attacks, which could compromise sensitive data (including patient data), disrupt clinical trials, and lead to regulatory actions, litigation, and reputational harm263272 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported274 Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None reported275 Mine Safety Disclosure This disclosure item is not applicable to the company's operations - Not Applicable276 Other Information The company reported no other information requiring disclosure for the period - None reported277 Exhibits This section lists all exhibits filed with the report, including corporate and contractual documents - Lists all exhibits filed with the report, including certificates of designation, warrants, license agreements, and officer certifications278279281