Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Statements in this Annual Report on Form 10-K that are not strictly historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. You can identify these forward-looking statements because they involve our expectations, intentions, beliefs, plans, projections, anticipations, or other characterizations of future events or circumstances. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements as a result of any number of factors. Some of these factors are more fully discussed in the section of this Annual Report on Form 10-K entitled “Risk Factors” and elsewhere herein. We do not undertake to update any of these forward-looking statements or announce the results of any revisions to these forward-looking statements except as required by law.

We recommend investors read this entire Annual Report on Form 10-K, including the “Risk Factors” section, the consolidated financial statements, and related notes thereto. As used in this Annual Report on Form 10-K, unless the context indicates or otherwise requires, “Palisade,” “Palisade Bio,” the "Company,” “we,” “us,” and “our” or similar designations in this report refer to Palisade Bio, Inc., a Delaware Corporation, and its subsidiaries. Any reference to “common shares” or “common stock,” refers to our $0.01 par value common stock. Any reference to “Leading Biosciences, Inc.” or “LBS” refers to our operations prior to the completion of our merger with Seneca Biopharma, Inc. ("Seneca") on April 27, 2021 (the "Seneca Merger"). Any technology that we currently own or may acquire the rights to in the future is referred to by us as either a “product candidate” or "product candidates." Additionally, any reference herein that refers to preclinical studies also refers to nonclinical studies.

OVERVIEW

We are a clinical-stage biopharmaceutical company developing next-generation, once-daily, oral phosphodiesterase-4 (“PDE4”) inhibitor prodrugs designed for targeted delivery to the terminal ileum and colon. Our lead clinical product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD").

During 2025, we announced positive results from our Phase 1 human clinical trial of PALI-2108 for the treatment of UC conducted in Canada. The Phase 1 clinical study of PALI-2108 was a single-center, randomized, double-blinded, placebo-controlled clinical study focused on safety, tolerability, and pharmacokinetics (“PK”) in both healthy volunteers and UC patients. The clinical study included an open-label UC patient cohort with multiple dosing arms in which we evaluated the pharmacodynamics ("PD") of PALI-2108. On October 16, 2025, we dosed our first patients in an exploratory Phase 1b cohort in Fibrostenotic Crohn's disease ("FSCD") while we complete longer-term chronic safety and toxicology studies. The exploratory Phase 1b cohort in FSCD is expected to be followed by the initiation of Phase 2 clinical programs to assess PALI-2108’s efficacy, safety, and tolerability in patients with moderate to severe UC, as well as those with CD.

In addition to conducting clinical studies in Canada, we anticipate data from the exploratory Phase 1b cohort in FSCD together with results from the Phase 1/1b UC program will support Investigational New Drug Application (“IND”) submissions to the United States Food and Drug Administration ("FDA") for a Phase 2 UC study in the second quarter of 2026 and a Phase 2 CD study in the second half of 2026.

Crohn's and Colitis Foundation Research Funding Agreement

On December 17, 2025, we entered into a Research Program Funding Agreement (the “CCF Funding Agreement”) with the Crohn’s & Colitis Foundation (the “CCF”), in which the CCF agreed to provide up to a $0.5 million investment to support our Phase 1b research program related to PALI-2108 in exchange for shares of our common stock.

October 2025 Offering

On October 2, 2025, we closed on an underwritten public offering to issue and sell 197,154,844 shares of common stock and common stock equivalents for net proceeds, including the full exercise of the underwriter's over-allotment option, of approximately $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million (the "October 2025 Offering").

July 2025 Warrant Inducement Transaction

On July 23, 2025, we entered into a warrant inducement agreement with an existing holder of certain of our common stock warrants to exercise their existing common stock warrants to purchase an aggregate of 4,318,905 shares of our common stock. The transaction closed on July 25, 2025 for net cash proceeds of approximately $3.4 million consisting of gross cash proceeds of $3.9 million, less cash equity issuance costs of approximately $0.5 million.

Financial Results

Our operating loss for the year ended December 31, 2025 was approximately $18.1 million, which consisted of research and development expenses and general and administrative expenses of approximately $10.2 million and $7.9 million, respectively. Net cash used in operating activities was approximately $10.8 million for the year ended December 31, 2025, which includes a $16.8 million net loss adjusted for $1.6 million of net cash inflows related to changes in operating assets and liabilities and certain non-cash items impacting the net loss. Net cash provided by financing activities was approximately $134.4 million for the year ended December 31, 2025. As of December 31, 2025, we have $133.4 million in cash, cash equivalents and restricted cash.

FINANCIAL OVERVIEW

Research and Development Expenses

Our research and development expenses include:

•

salaries and employee-related costs, including stock-based compensation;

•

laboratory and vendor expenses related to the execution of preclinical and clinical trials;

•

expenses under agreements with third-party contract research organizations ("CROs"), investigative clinical trial sites that conduct research and development activities on our behalf, and consultants;

•

costs related to develop and manufacture preclinical study and clinical trial material; and

•

regulatory expenses.

Through the majority of 2024, the nature of our research and development expenses incurred related primarily to the preclinical activities associated with our joint development of PALI-2108 with our collaboration partner, Giiant Pharma Inc. ("Giiant"). With the approval to commence the Phase 1 clinical trial of PALI-2108, which we received from Health Canada on October 9, 2024, pursuant to terms of the research and collaboration agreement that we have with Giiant ("Giiant License Agreement"), we have assumed all development, manufacturing, regulatory and commercialization activities and costs of PALI-2108. Therefore, our clinical research and development costs directly attributable to the clinical trials of PALI-2108 were higher in 2025 as compared to 2024, offset by a decrease in joint development costs associated with the Giiant License Agreement. We expect our clinical research and development costs will continue to increase in 2026 as we advance PALI-2108 through clinical studies in UC and CD.

Our direct research and development expenses are tracked by product candidate and consist primarily of external costs, such as fees paid under third-party license agreements and to outside consultants, CROs, clinical sites, contract manufacturing organizations (“CMOs”) and research laboratories in connection with our preclinical development, process development, manufacturing, clinical development, and regulatory activities. We do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. As needed, we manage third parties that are engaged to conduct our (i) research activities, (ii)

preclinical, clinical and translational science development activities, (iii) drug manufacturing activities, and (iv) process development. When we perform any research and development or manufacturing activities under a co-development agreement, we record the expense reimbursement from the co-development partner as a reduction to research and development expense once the reimbursement amount is approved for payment by the co-development partner. Pursuant to agreements where we perform research and development activities under a joint development plan, such as our research and collaboration with Giiant, qualifying development costs are expensed as research and development costs as incurred. We recognize expense payments from Giiant, if any, as a reduction to research and development expense once the expense payments are realized or realizable, which is when we receive the cash or we have an undisputed claim to the cash that is probable of collection.

General and Administrative Expenses

Our general and administrative expenses consist primarily of (i) salary and employee-related costs and benefits, including stock-based compensation, (ii) professional fees for legal, intellectual property, investor and public relations, accounting and audit services, insurance costs, director and committee fees, and (iii) general corporate expenses.

Reverse Stock Split

On April 5, 2024, we effected a 1-for-15 reverse stock split of our issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each our stockholders received one share of our common stock for every 15 shares such stockholder held immediately prior to the effective time of the Reverse Stock Split. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock-based awards and common stock warrants included in this Annual Report on Form 10-K, including the exercise or conversion price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the Reverse Stock Split.

Results of Operations

The following table summarizes our results of operations for the year ended December 31, 2025 and 2024 (in thousands):

Year Ended December 31, Change

Operating expenses:

Other (expense) income:

Interest expense (10 ) (12 ) 2 (17 )%

Research and Development Expenses

Our research and development expenses increased by approximately $1.1 million, or 12%, from approximately $9.1 million for the year ended December 31, 2024 to approximately $10.2 million for the year ended December 31, 2025. The increase is primarily attributable to (i) an approximately $2.8 million increase in research and development employee-related expenses, (ii) an approximately $2.5 million net increase in clinical trial-related expenses associated with the Phase 1 clinical trial of PALI-2108, (iii) an approximately $0.9 million increase in chemistry, manufacturing and controls ("CMC") expenses, and (iv) and an approximately $0.4 million net non-cash loss associated with an increase in the fair value of the contingent consideration obligation pursuant to the Giiant License Agreement. These increases were partially offset by an approximately $5.4 million decrease in expenses that were directly related to the preclinical joint development of PALI-2108.

Research and development employee-related expenses increased approximately $2.8 million for the year ended

December 31, 2025, compared to the year ended December 31, 2024, primarily due to an approximately $1.9 million increase in non-cash share-based compensation expense and an approximately $0.9 million increase in research and development salaries and benefits expense as a result of a 133% increase in research and development headcount necessary to support our PALI-2108 development strategy subsequent to the October 2025 Offering, and to a lesser extent, an increase in employee annual bonuses.

We recognized clinical trial-related expenses of approximately $4.0 million for the year ended December 31, 2025, compared to clinical trial-related expenses of $1.5 million for the year ended December 31, 2024, an increase of approximately $2.5 million due to the commencement of our Phase 1 clinical trial of PALI-2108 in November of 2024. CMC expenses increased from approximately $1.0 million for the year ended December 31, 2024 to approximately $1.9 million for the year ended December 31, 2025, primarily due to increased activity related to our upcoming clinical trials.

Preclinical joint development expenses were approximately $4.3 million for the year ended December 31, 2024. We recognized no preclinical joint development costs for the year ended December 31, 2025. In addition, during the year ended December 31, 2025, we recognized a reduction in joint development costs of $1.1 million that was related to funds received by us from Giiant pursuant to the joint development plan, resulting in a net decrease in preclinical joint development expenses of approximately $5.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

We recognized an approximate $0.4 million non-cash loss on the fair value remeasurement of the contingent consideration obligation for the year ended December 31, 2025, compared to an approximate $0.1 million non-cash gain on the fair value remeasurement of the contingent consideration obligation for the year ended December 31, 2024, resulting in a net non-cash year-over-year loss of approximately $0.4 million. On October 16, 2025, the first of the milestones pursuant to the Giiant License Agreement was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a FSCD cohort. Accordingly, the Company settled this a milestone payment to Giiant in cash in the amount of approximately $0.2 million.

General and Administrative Expenses

Our general and administrative expenses increased by approximately $2.1 million, or 36%, from approximately $5.8 million for the year ended December 31, 2024 to approximately $7.9 million for the year ended December 31, 2025, primarily as a result of (i) an approximately $1.7 million increase in general and administrative employee-related expenses due to an approximately $1.4 million increase in non-cash share-based compensation expense and an approximately $0.3 million increase in salaries and benefits and annual bonuses, (ii) an approximately $0.4 million increase in professional fees and legal expenses, (iii) an approximately $0.1 million increase in shareholder services due to the special meetings of stockholders held in 2025, and (iv) an approximately $0.1 million increase in general operating expenses. These increases were partially offset by an approximately $0.2 million decrease in consultant and contract labor expenses.

Other income (expense)

Other income, net, increased by approximately $0.9 million, or 197%, from approximately $0.4 million for the year ended December 31, 2024 to approximately $1.3 million for the year ended December 31, 2025, primarily as a result of an approximately $0.9 million increase in dividend income, due to the increased investment of excess cash in money market accounts after the October 2025 Offering, and other non-cash losses of less than $0.1 million associated primarily with the write-off of certain other receivable balances for the year ended December 31, 2024 that did not repeat in 2025, partially offset by a non-cash loss of approximately $0.1 million recognized for the year ended December 31, 2025 that related to the fair value of the milestone liabilities recognized upon our entering into the CCF Funding Agreement (Note 5, Stockholders' Equity in Part II Item 8 of this Annual Report on Form 10-K for further details).

Liquidity and Capital Resources

We expect to incur substantial losses for the foreseeable future. Since our inception, we have financed our operations through the sales of our securities, issuance of debt, the exercise of common stock warrants, and to a lesser degree, grants and research contracts as well as the licensing of our intellectual property to third parties.

Management believes the October 2025 Offering for net proceeds of $127.6 million will provide sufficient capital to

fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108 for UC that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108 for CD that is expected in 2028.

Sources of Liquidity

Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of our products, if approved for commercial sale. We will require additional funding to conduct future clinical activities. We may seek additional funding through public and private financings, debt financings, collaboration agreements, strategic alliances and licensing agreements. Although we have been successful in raising capital in the past, there is no assurance of success in obtaining such additional financing on terms acceptable to us, if at all, and there is no assurance that we will be able to enter into collaborations or other arrangements. If we are unable to obtain funding, it could force delays, reduce or eliminate research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect our future business prospects, and the ability to continue operations.

Pursuant to the October 2025 Offering, we issued and sold (a) 113,240,564 shares of our common stock, par value $0.01 per share, at a public offering price of $0.70 per share, and (b) 83,914,280 pre-funded warrants to purchase one share of the our common stock, par value $0.01 per share, at a public offering price of $0.6999 per share. Net proceeds from the offering, including the full exercise of the underwriter's over-allotment option, were approximately $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million. We intend to use the net proceeds from the offering for working capital and general corporate purposes, including the development of PALI-2108 for the treatment of UC and CD.

Refer to Note 5, Stockholders' Equity in Part II Item 8 of this Annual Report on Form 10-K for further details of our recent equity transactions.

Warrant Exercises

During the years ended December 31, 2025 and December 31, 2024, total gross cash proceeds from the exercise of outstanding common stock warrants was approximately $7.6 million and $2.5 million, respectively, primarily as a result of the transactions described below.

On July 23, 2025, we entered into an agreement with an accredited and institutional holder (the “July 2025 Warrant Holder”) of certain of our existing common stock warrants (the “July 2025 Existing Warrant(s)”) to exercise the July 2025 Existing Warrants to purchase up to an aggregate of 4,318,905 shares of our common stock (the "July 2025 Warrant Inducement Agreement"). Pursuant to the July 2025 Warrant Inducement Agreement, the exercise price of each July 2025 Existing Warrant exercised was reduced from $1.40 per share to $0.9047 per share. In consideration for the immediate exercise of the July 2025 Existing Warrants, the July 2025 Warrant Holder received new warrants (the “July 2025 Replacement Warrants”) to purchase shares of common stock in a private placement. Pursuant to the July 2025 Warrant Inducement Agreement, the July 2025 Warrant Holder received two July 2025 Replacement Warrants for each July 2025 Existing Warrant exercised (in its entirety, the "July 2025 Warrant Inducement Transaction"). The transaction closed on July 25, 2025 with the Company receiving net cash proceeds of approximately $3.4 million, which consisted of gross cash proceeds of $3.9 million from the exercise of the July 2025 Existing Warrants, less cash equity issuance costs of approximately $0.5 million. We intend to use the net proceeds from the July 2025 Warrant Inducement Transaction for working capital and general corporate purposes, including the development of PALI-2108 for the treatment of UC and CD.

Also during the year ended December 31, 2025, we received gross proceeds of approximately $3.7 million from the exercise of 3,224,209 common stock warrants that were issued to representatives of the sole underwriter in the October 2025 Offering.

On January 30, 2024, we entered into warrant inducement agreements (the “February 2024 Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “February 2024 Warrant Holders”) of certain of existing common stock warrants (the “February 2024 Existing Warrants”) to exercise the February 2024 Existing Warrants to purchase up to an aggregate of 228,162 shares of our common stock. Pursuant to the February 2024 Warrant Inducement Agreements, the exercise price of each February 2024 Existing Warrant was reduced to $10.97 per share. In consideration for the immediate exercise of the February 2024 Existing Warrants, each of the

February 2024 Warrant Holders received one replacement warrant for each February 2024 Existing Warrant exercised. The transaction closed on February 1, 2024 for net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of approximately $2.5 million, less cash equity issuance costs of approximately $0.3 million.

Cash Flows

As of December 31, 2025, we had $133.4 million in cash, cash equivalents and restricted cash. The following table shows a summary of our cash flows for the years ended December 31, 2025 and 2024 (in thousands):

Year Ended December 31,

Net cash used in operating activities $ (10,847 ) $ (12,193 )

Net cash provided by financing activities 134,440 9,582

Net Cash Used in Operating Activities

Cash used in operations decreased by approximately $1.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a decrease in net loss after adjusting for non-cash items impacting the net loss, primarily stock-based compensation and related charges, and favorable changes in operating assets and liabilities.

Cash used in operating activities was approximately $10.8 million for the year ended December 31, 2025, which reflects an approximately $16.8 million net loss adjusted for (i) approximately $1.6 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) an approximately $4.0 million non-cash expense recognized for stock-based compensation and related charges, (b) an approximately $0.3 million non-cash expense recognized for the fair value remeasurement of certain financial instrument liabilities, primarily our contingent consideration obligation, partially offset by an approximately $0.2 million payment of our contingent consideration obligation, (c) an approximately $0.1 million non-cash expense recognized for the discount on the common shares to be issued pursuant to the CCF Funding Agreement, (d) an approximately $0.1 million non-cash expense related to the amortization of our operating lease right of use asset, and (e) an approximately $0.1 million non-cash expense related to the write-off of certain deferred equity issuance costs associated with our shelf registration statement that expired in April of 2025. The net cash inflow from operating assets and liabilities was primarily attributable to (i) a net cash inflow of approximately $0.5 million from prepaids and other current assets and other noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of our prepaid insurance policies, (ii) an approximately $0.6 million increase in accounts payable and accrued liabilities, primarily due to higher clinical trial-related expenses and translational science expenses as a result of increased clinical trial activity, partially offset by lower accrued joint development expenses associated with the Giiant License Agreement, and (iii) an approximately $0.6 million increase in accrued compensation and benefits due to an increase in the employee bonus accrual, which will be paid in 2026. The operating asset and liabilities inflows were partially offset by an approximately $0.1 million cash outflow related to payments of our operating lease.

Cash used in operating activities was approximately $12.2 million for the year ended December 31, 2024, which reflects an approximately $14.4 million net loss adjusted for (i) approximately $1.4 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) an approximately $0.7 million non-cash expense recognized for stock-based compensation and related charges, (b) an approximately $0.1 million non-cash expense associated with the issuance of our common stock as payment for vendor services provided, and (c) an approximately $0.1 million non-cash expense related to the amortization of our operating lease right of use asset. The net cash inflow from operating assets and liabilities was primarily attributable to an approximately $0.1 million cash outflow related to payments of our operating lease that was more than offset by approximately $1.6 million cash inflow from (i) an approximately $0.8 million decrease in prepaids and other current assets and other noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of our prepaid insurance policies, and (ii) an approximately $0.8 million increase in accounts payable and accrued liabilities, which was primarily due to additional drug manufacturing accruals associated with the clinical trials of PALI-2108 and an increase in accrued joint development expenses associated with the Giiant License Agreement. These increases in accounts payable and accrued liabilities were partially offset by a decrease in accrued severance payments and lower accrued fees to our board of directors ("Board") and Board committee fees.

Net Cash Provided by Financing Activities

For the year ended December 31, 2025, cash provided by financing activities of approximately $134.4 million was attributable to cash proceeds net of underwriting discounts and commissions and cash equity issuance costs of approximately $127.6 million from the October 2025 Offering and net cash proceeds of approximately $7.1 million from the exercise of common stock warrants, including those exercised in conjunction with the July 2025 Warrant Inducement Transaction, partially offset by payments made on our insurance financing arrangements of approximately $0.3 million.

For the year ended December 31, 2024, cash provided by financing activities of approximately $9.6 million was attributable to net cash proceeds of approximately $2.2 million from the exercise of common stock warrants in conjunction with our warrant inducement transaction in February 2024, net cash proceeds of approximately $3.5 million from our private placement financing completed in May of 2024, and cash proceeds net of underwriting discounts and commissions and cash equity issuance costs of approximately $4.4 million from our underwritten public offering of stock completed in December of 2024, partially offset by payments made on our insurance financing arrangements of approximately $0.4 million.

Contractual Obligations

Insurance Financing Arrangement

In June of 2025, we entered into an agreement to finance an insurance policy that renewed in May of 2025. The insurance financing arrangement is secured by the associated insurance policy and is payable over a 9-month period commencing with the first payment that was payable on June 30, 2025. As of December 31, 2025, the aggregate remaining balance under our insurance financing arrangement of approximately $0.1 million will be paid in the first quarter of 2026.

Other than the remaining insurance financing arrangement payments due in 2026, as of December 31, 2025 we have no other minimum debt payments required in 2026 or thereafter.

Future Liquidity Needs

We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $133.4 million as of December 31, 2025, we believe we have sufficient capital to fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108 for UC that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108 for CD that is expected in 2028. Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than anticipated. Further, beyond the readout expected in 2028, we will require additional financing to continue at our expected level of operations, including a Phase 3 clinical trial and possible commercialization of PALI-2108 for the treatment of UC and CD.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period. Our estimates are based on historical experience, known trends, events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies.

Our significant accounting policies used in the preparation of the consolidated financial statements are described in more detail in Note 2 in Part II, "Item 8. Financial Statement and Supplemental Data" of this Annual Report on Form 10-K. We believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations:

Accrued research and development expenses

We expense research and development costs as incurred pursuant to Accounting Standards Codification ("ASC") 730, Research and Development Costs. We are required to make estimates of our accrued expenses resulting from our obligations under contracts or agreements with, as applicable, research and development collaboration partners, CROs, clinical sites, manufacturers, vendors, and consultants in connection with conducting research and development activities, including those related to our ongoing clinical operations. The financial terms of these contract arrangements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows that do not match the periods over which services are provided or milestones are met under the associated research and development contract. Payments under some of these contracts depend on factors such as the successful enrollment of patients, site initiation and the completion of clinical milestones. We make estimates of our accrued research and development expenses as of each balance sheet date based on facts and circumstances known at that time. We accrue for research and development expenses for which the estimated services have been provided but we have not yet been invoiced as of the balance sheet date. There may be instances in which payments made to our service providers will temporarily exceed the level of services provided and result in a prepayment of the research and development expenses. If the actual timing of the performance of services or the level of effort varies from its estimate, we adjust the accrual or prepaid expense balance accordingly.

Our process around estimating accrued research and development expenses involves reviewing open contracts and purchase requisitions, communicating with our personnel, consultants, and research and development collaboration partners to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

Expense payments made to Giiant pursuant to the terms of the Giiant License Agreement for qualifying development costs are expensed only as the associated research and development costs are incurred or other aspects of the drug development or related activities are achieved. In instances where the expense determined to be recognized exceeds the payments made to the Giiant, we recognize an accrual of joint development expenses. In addition, there may be instances in which payments made to Giiant will temporarily exceed the level of services provided, which results in a prepayment of the joint development expenses. We record expense payments from Giiant, if any, as a reduction to research and development expense once the expense payments are realized or realizable, which is when Company receives the cash or has an undisputed claim to the cash that is probable of collection, pursuant to the terms of the Giiant License Agreement and the principles of ASC 450, Gain Contingencies. The Company has determined that Giiant is not considered a customer under ASC 606.

Although we do not expect our estimates of research and development expenses to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Contingent Consideration Obligation

Pursuant to the Giiant License Agreement, we incurred a contingent consideration obligation consisting of milestone payments. Because the contingent consideration associated with the milestone payments may be settled in shares of our common stock solely at the election of the Company, we have determined it should be accounted for under ASC 480, Distinguishing Liabilities from Equity and accordingly we have recognized it as a liability measured at its estimated fair value. As of September 1, 2023, the date the contingent consideration obligation was incurred, the initial fair value of the liability was determined to be approximately $0.2 million.

At the end of each reporting period, we remeasure the contingent consideration obligation to its estimated fair value and any resulting change is recognized in research and development expenses in the consolidated statements of operations. The fair value of the contingent consideration obligation is determined using a probability-based model that estimates the likelihood of success in achieving each of the defined milestones, which is then discounted to present value using our incremental borrowing rate. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820, Fair Value Measurements and Disclosures. The significant assumptions used in the calculation of the fair value as of December 31, 2025 included a discount rate of 15.26% and management's updated projections of the likelihood of success in achieving the one remaining defined milestone based on empirical, published industry data.

As of December 31, 2025 and December 31, 2024, the entire amount of contingent consideration obligation of approximately $0.3 million and $0.2 million, respectively, was classified as a noncurrent liability in the consolidated balance sheets.

The change in the fair value of the contingent consideration obligation for the year ended December 31, 2025 was a loss of approximately $0.4 million, primarily due to an increase in the liability concurrent with the expected dosing our first patients in an exploratory Phase 1b cohort in FSCD, which with an amendment in the trial protocol we determined met the milestone definition pursuant to the Giiant License Agreement. The milestone was achieved on October 16, 2025 and we settled this a milestone payment to Giiant in cash in the amount of approximately $0.2 million in the fourth quarter of 2025.

The change in the fair value of the contingent consideration obligation for the year ended December 31, 2024 was a gain of approximately $0.1 million and was primarily due to the reduction in the milestone payments that would be due to Giiant upon the achievement of certain development milestones pursuant to an amendment to the Giiant License Agreement, partially offset by an increase in management's projected likelihood of success in achieving each of the defined milestones as a result of our commencement of a Phase 1 trial in November of 2024. The change in the revaluation of the liability in the years ended December 31, 2025 and December 31, 2024 is recognized in research and development expenses in the consolidated statements of operations.

Recently Issued and Adopted Accounting Pronouncements

See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 2025 and 2024 71

Notes to Consolidated Financial Statements 77

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and board of directors of Palisade Bio, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Palisade Bio, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated 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.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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 consolidated 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Baker Tilly US, LLP

New York, NY

March 20, 2026

We have served as the Company's auditor since 2022.

Palisade Bio, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31,

ASSETS

Current assets:

Prepaid expenses and other current assets 836 673

Restricted cash 55 26

Property and equipment, net — 3

Operating lease right-of-use asset — 84

Other noncurrent assets 68 273

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accrued compensation and benefits 1,298 722

Current portion of operating lease liability — 90

Share liability 313 —

Insurance financing debt 71 79

Warrant liability — 2

Derivative liability 62 —

Contingent consideration obligation 266 150

Commitments and contingencies (Note 8)

Stockholders' equity:

Total liabilities and stockholders' equity $ 134,344 $ 10,880

The accompanying notes are an integral part of these consolidated financial statements.

Palisade Bio, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

Year Ended December 31,

Operating expenses:

Other (expense) income:

Interest expense (10 ) (12 )

Basic and diluted net loss per common share $ (0.30 ) $ (10.19 )

The accompanying notes are an integral part of these consolidated financial statements.

Palisade Bio, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

Shares Amount Shares Amount

Stock-based compensation expense and related charges — — — — 3,955 — 3,955

Issuance of common stock to vendors — — 5,000 — — — —

Issuance of common stock under Employee Stock Purchase Plan — — 26,531 1 18 — 19

The accompanying notes are an integral part of these consolidated financial statements.

Palisade Bio, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

Shares Amount Shares* Amount*

Stock-based compensation expense and related charges — — — — 652 — 652

Issuance of common stock to vendors — — 32,632 — 135 — 135

Issuance of common stock under Employee Stock Purchase Plan — — 2,256 — 11 — 11

Reverse stock split fractional share settlement — — (102 ) — — — —

(*) Adjusted to reflect the 1-for-15 reverse stock split effected on April 5, 2024.

The accompanying notes are an integral part of these consolidated financial statements.

Palisade Bio, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 3 3

Non-cash operating lease expense 84 114

Non-cash expense for the issuance of common stock (Note 5) 125 —

Recurring fair value measurements of liabilities 349 (54 )

Payment of contingent consideration obligation (235 ) —

Issuance of common stock to vendors — 135

Write-off of deferred equity issuance costs 75 —

Loss on disposal of property and equipment — 4

Stock-based compensation and related charges 3,955 652

Other (61 ) —

Changes in operating assets and liabilities:

Prepaid and other current assets and other noncurrent assets 529 750

Accounts payable and accrued liabilities 624 818

Accrued compensation and benefits 576 (56 )

Operating lease liabilities (90 ) (121 )

Net cash used in operating activities (10,847 ) (12,193 )

Cash flows from financing activities:

Payments on insurance financing debt (320 ) (426 )

Proceeds from the exercise of warrants 7,635 2,506

Payment of warrant inducement issuance costs (495 ) (343 )

Payment of equity issuance costs (618 ) (576 )

Proceeds from issuance of common stock under Employee Stock Purchase Plan 19 11

Shares withheld for payment of employee withholding tax liability — (25 )

Net cash provided by financing activities 134,440 9,582

Cash, cash equivalents and restricted cash, beginning of year 9,847 12,458

Cash, cash equivalents and restricted cash, end of year $ 133,440 $ 9,847

Restricted cash 55 26

Total cash, cash equivalents and restricted cash $ 133,440 $ 9,847

The accompanying notes are an integral part of these consolidated financial statements.

Palisade Bio, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Supplemental disclosures of cash flow information:

Interest paid $ 10 $ 14

Supplemental disclosures of non-cash investing and financing activities:

Fair value of warrants issued to placement agents (Note 5) 10,870 527

Incremental fair value of modified or exchanged warrants (Note 5) 8,602 2,237

The accompanying notes are an integral part of these consolidated financial statements.

Palisade Bio, Inc.

Notes To Consolidated Financial Statements

1. Organization and Business

Unless the context indicates or otherwise requires, “Palisade,” “Palisade Bio,” “the Company,” “we,” “us,” and “our” or similar designations in this Annual Report on Form 10-K ("Form 10-K") refer to Palisade Bio, Inc., a Delaware Corporation, and its subsidiaries. Any reference to “common shares” or “common stock,” refers to the Company's $0.01 par value common stock. Any reference to “Leading Biosciences, Inc.” or “LBS” refers to the Company’s operations prior to the completion of its merger with Seneca Biopharma, Inc. ("Seneca") on April 27, 2021 (the "Seneca Merger"). Any reference to “Series A Preferred Stock” refers to the Company's Series A 4.5% Convertible Preferred Stock. Any reference herein that refers to preclinical studies also refers to nonclinical studies.

Description of Business

The Company is a clinical-stage biopharmaceutical company developing next-generation, once-daily, oral phosphodiesterase-4 (“PDE4”) inhibitor prodrugs designed for targeted delivery to the terminal ileum and colon. The Company's lead clinical product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease, or IBD, including ulcerative colitis and Crohn’s disease (“CD”).

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net operating losses and negative cash flows from operations since its inception. The Company expects to continue to incur net operating losses in the foreseeable future. The successful transition to achieving profitability is dependent upon achieving a level of revenues adequate to support the Company’s costs. There can be no assurances that such profitability will ever be achieved. To fund its operations, the Company has historically relied on primarily equity financings.

On October 2, 2025, the Company closed on an equity offering for net proceeds to the Company of $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million (see Note 5, Stockholders' Equity), which as of the date that these consolidated financial statements are issued has significantly increased the Company's available working capital and its ability to fund its operations into the foreseeable future. Although the Company still anticipates incurring net operating losses and negative cash flows from operations into the foreseeable future, considered in the aggregate, management has concluded that because of the net proceeds raised from the recent equity offering in the amount of $127.6 million there is no longer a substantial doubt about the Company's ability to continue as a going concern for a period of one year following the date that these consolidated financial statements are issued.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Dollar amounts contained in these consolidated financial statements are in whole numbers, unless otherwise indicated.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, LBS and Suzhou Neuralstem Biopharmaceutical Co., Ltd. All the entities are consolidated in the Company's consolidated financial statements and all intercompany activity and transactions, if any, have been eliminated.

Reverse Stock Split

On April 5, 2024, the Company effected a 1-for-15 reverse stock split of its issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each of the Company’s stockholders received one share of common stock for every 15 shares such stockholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all the Company’s issued and outstanding shares of common stock equally. The par value and authorized shares of the Company's common stock were not adjusted as a result of the Reverse Stock Split. The Reverse Stock Split also affected the Company’s outstanding stock-based awards, common stock warrants, and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price or conversion price being increased proportionately. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock-based awards and common stock warrants included in these consolidated financial statements, including the exercise price or conversion price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the Reverse Stock Split for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relate to accrued research and development expenses and its contingent consideration obligation. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.

Cash and Cash Equivalents

Cash and cash equivalents represent cash in readily available checking and money market accounts. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Restricted Cash

As of December 31, 2025 and December 31, 2024, the Company held restricted cash of approximately $55,000 and $26,000, respectively, in a separate restricted bank account as collateral for the Company’s corporate credit card program. The Company has classified these deposits as long-term restricted cash on its consolidated balance sheets.

Deferred Equity Issuance Costs

Deferred equity issuance costs consist of the legal, accounting and other direct and incremental costs incurred by the Company related to its equity offerings, if not yet finalized as of the balance sheet date, or shelf registration statement. These costs will be charged against additional paid-in capital as a cost of the future equity issuances to which they relate. During the year ended December 31, 2025, the Company expensed approximately $75,000 of deferred equity issuance costs recognized as of December 31, 2024 that were associated with its shelf registration statement that expired in April of 2025 in general and administrative expenses in the consolidated statements of operations. During the year ended December 31, 2024, the Company charged deferred equity issuance costs of approximately $37,000 recognized as of December 31, 2023 against the additional paid-in capital recognized in conjunction with the February 2024 Warrant Inducement (see Note 5, Stockholders' Equity).

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions and in money market accounts, and at times balances may exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held and historically the Company has not experienced any losses in such accounts.

Fair Value of Financial Instruments

The Company follows Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.

Further information on the fair value of the Company's financial assets and liabilities can be found at Note 4, Fair Value Measurements.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company values its derivatives using the Black-Scholes option pricing model or other acceptable valuation models. Derivative instruments, if any, are valued at inception, upon events such as an exercise of the underlying financial instrument, and at subsequent reporting periods. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is reassessed at the end of each reporting period.

The Company reviews the terms of debt instruments, equity instruments, and other financing arrangements to determine whether there are embedded derivative features, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Additionally, in connection with the issuance of financing instruments, the Company may issue freestanding options and common stock warrants.

The Company accounts for its common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging (“ASC 815”). Based upon the provisions of ASC 480 and ASC 815, the Company accounts for common stock warrants as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement, or if it fails the equity classification criteria. The Company accounts for common stock warrants as equity if the contract requires physical settlement or net physical settlement or if the Company has the option of physical settlement or net physical settlement and the warrants meet the requirements to be classified as equity. Common stock warrants classified as liabilities, if any, are initially recorded at fair value on the grant date and remeasured at fair value at each balance sheet date with the offsetting adjustments recorded in change in fair value of warrant liability within the consolidated statements of operations. If the terms of a common stock warrant previously classified as a liability are amended and pursuant to such amendment meet the requirements to be classified as equity, the common stock warrants are reclassified to equity at the fair value on the date of the amendment and are not subsequently remeasured. Common stock warrants classified as equity are recorded on a relative fair value basis when they are issued with other equity-classified financial instruments.

Leases

In accordance with ASC 842, Leases, the Company assesses contracts for lease arrangements at inception. Operating right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date equal to the present value of future lease payments using the implicit, if readily available, or incremental borrowing rate based on the information readily available at the commencement date. ROU assets include any lease payments as of commencement and initial

direct costs but exclude any lease incentives. Lease and non-lease components are generally accounted for separately and the Company recognizes operating lease expense straight-line over the term of the lease.

License Revenue

The Company uses the revenue recognition guidance established by ASC 606, Revenue From Contracts With Customers (“ASC 606”). When an agreement falls under the scope of other standards, such as ASC 808, Collaborative Arrangements, the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. As of December 31, 2025 and 2024, the Company does not have any collaborative arrangements with counterparties that are also considered customers. For arrangements that include amounts to be paid to the Company upon the achievement of certain development milestones of technology licensed by the Company, the Company recognizes such license revenue using the most likely method. At the end of each reporting period, the Company re-evaluates the probability or achievement of any potential milestones and any related constraints, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment.

Contingent Consideration Obligation

On September 1, 2023, the Company and Giiant Pharma, Inc. ("Giiant") entered into a research collaboration and license agreement (the “Giiant License Agreement”)(see Note 7, Collaborations and License Agreements). Pursuant to the Giiant License Agreement, the Company incurred a contingent consideration obligation related to future milestone payments, which is recognized as a liability measured at fair value, and ongoing royalty payments of a mid-single-digit percentage of the adjusted gross proceeds, as defined in the Giiant License Agreement, upon the sales or sublicenses third parties of any products developed from the assets licensed under the Giiant License Agreement. Because the contingent consideration associated with the milestone payments may be settled in shares of the Company's common stock solely at the election of the Company, the Company has determined it should be accounted for under ASC 480 and accordingly the Company has recognized it as a liability measured at its estimated fair value. At the end of each reporting period, the Company re-measures the contingent consideration obligation to its estimated fair value and any resulting change is recognized in research and development expenses in the consolidated statements of operations. The Company has determined that the contingent consideration associated with the royalty payments should be recognized as a liability when they are probable and estimable, in accordance with ASC 450, Contingencies ("ASC 450").

Research and Development Expenses

Research and development expenses consist of salaries and employee-related expenses including stock-based compensation costs, and, to the extent applicable, preclinical and translational science costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, regulatory expenses and contract services. All research and development costs are expensed as incurred pursuant to ASC 730, Research and Development Costs.

Research and development expenses related to clinical studies, chemistry, manufacturing and controls ("CMC") and translational science are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these contract arrangements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients, site initiation and the completion of clinical milestones. The Company makes estimates of its accrued expenses as of each balance sheet date in its consolidated financial statements based on facts and circumstances known at that time. The Company accrues for research and development expenses for which the estimated services have been provided but the Company has not yet been invoiced as of the balance sheet date. There may be instances in which payments made to the Company’s service providers will temporarily exceed the level of services provided and result in a prepayment of the research and development expenses. If the actual timing of the performance of services or the level of effort varies from its estimate, the Company adjusts the accrual or prepaid expense balance accordingly.

Pursuant to situations whereby the Company performs any research and development or manufacturing activities under a co-development agreement, and the co-development partner is not considered a customer under ASC 606, the Company records the expense reimbursements from the co-development partner as a reduction to research and development expense once the reimbursement amount is approved for payment by the co-development partner.

Expense payments made to Giiant pursuant to the terms of the Giiant License Agreement for qualifying development costs are expensed only as the associated research and development costs are incurred or other aspects of the drug development or related activities are achieved. In instances where the expense determined to be recognized exceeds the payments made to the Giiant, the Company recognizes an accrual of joint development expenses. In addition, there may be instances in which payments made to Giiant will temporarily exceed the level of services provided, which results in a prepayment of the joint development expenses. The Company records expense payments from Giiant, if any, as a reduction to research and development expense once the expense payments are realized or realizable, which is when Company receives the cash or has an undisputed claim to the cash that is probable of collection, pursuant to the terms of the Giiant License Agreement and the principles of ASC 450. The Company has determined that Giiant is not considered a customer under ASC 606.

Loss Contingencies

From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. In accordance with ASC 450, the Company recognizes a loss contingency provision in its financial statements when it concludes that a contingent liability is probable, and the amount thereof is estimable. For matters where a loss is not probable, or a probable loss cannot be reasonably estimated, no liability is recorded. Costs associated with the Company’s involvement in legal proceedings are expensed as incurred and any insurance proceeds are recognized as a reduction in expense when they are realized or realizable, which is when Company receives the cash or has an undisputed claim to the cash that is probable of collection. Provisions for loss contingencies are recorded in Selling, general and administrative expense in the Company’s consolidated statements of operations and the related accruals are recorded in Accrued liabilities in the Company’s consolidated balance sheets.

Income Taxes

The Company follows ASC 740, Income Taxes (“ASC 740”) in reporting deferred income taxes. ASC 740 requires a company to recognize deferred tax assets and liabilities for expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in the years in which the temporary differences are expected to reverse. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some of or all the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions pursuant to ASC 740, which prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, the benefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxing authority. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in the provision for income taxes.

Stock-Based Compensation

The Company’s stock-based compensation generally includes service-based restricted stock units (“RSUs”), stock options, and from time to time also includes market-based performance restricted stock units (“PSUs”). The Company accounts for forfeitures as they occur for each type of award as a reduction of expense. Stock-based compensation expense related to service-based RSUs is based on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period, which is usually the vesting period. RSU awards generally vest over three or four years and RSU awards to directors of the Company's board of directors (the "Board") cliff vest after a period of one year. Vesting of RSUs could be accelerated in the event of retirement, disability, or death of a participant, or change in control of the Company, as defined in the individual RSU agreements or employment agreements. Pursuant to ASC 718, Compensation - Stock Compensation ("ASC 718"), the Company assesses for liability-classification at grant date and each subsequent balance sheet date any RSU awards that include cash settlement features whereby the award may be settled, at the Company's sole election, in shares of the Company's common stock or in cash based on the fair market value of the Company's common stock on the applicable vesting date. Pursuant to situations in which the Company concludes it has both the intent and ability to settle RSU awards that include cash settlement features in shares of the Company's common stock, based both on the RSU awards vesting schedule and perfunctory increases in the number of shares of common stock available for issuance under the evergreen provisions of the underlying equity incentive plan, the Company classifies the RSU award as equity.

Stock option awards are generally granted with an exercise price equal to the market price of Company’s stock at the date the grants are awarded and a term as determined by the Company's Board but, generally not to exceed ten-years. Stock option awards to employees vest in equal proportions each quarter over three years and stock option awards to directors of the Company's Board cliff vest after a period of one year. Vesting of stock options could be accelerated in the event of retirement, disability, or death of a participant, or change in control of the Company, as defined in the individual stock option agreements or employment agreements. Stock-based awards are valued as of the measurement date, which is the grant date, and are generally amortized on a straight-line basis over the requisite vesting period for all awards. The Company's equity incentive plans allow for the issuance of both incentive stock options and non-statutory stock options. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model is affected by the Company's stock price as well as assumptions, which include the expected term of the award, the expected stock price volatility, risk-free interest rate, and expected dividends over the expected term of the award. Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized ratably over the requisite service period of the awards, which is usually the vesting period. For PSUs with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo simulation model, and expense is recognized ratably over the derived service period regardless of whether the market condition is satisfied. The Monte Carlo simulation model considers a variety of potential future scenarios under the market condition vesting criteria, including but not limited to share prices for the Company and its peer companies in a selected market index.

The Company does not recognize any share-based compensation expense related to conditional RSUs, stock options, or PSUs that are subject to shareholder approval. When and if approval is obtained, the Company recognizes share-based compensation expense related to the conditional equity grants ratably to the vesting of shares over the remaining requisite service period.

The Company offers its employees an opportunity to participate in its shareholder approved Palisade Bio, Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The Company estimates the fair value of 2021 ESPP awards on the first day of the offering period using the Black-Scholes option pricing model. The estimated fair value of 2021 ESPP awards is amortized on a straight-line basis over the requisite service period of the award. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. The Company utilizes its estimated volatility in the Black-Scholes option pricing model to determine the fair value of 2021 ESPP awards.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss was the same as its reported net loss for all years presented.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which prescribes standard categories for the components of the effective tax rate reconciliation and requires disclosure of additional information for reconciling items meeting certain quantitative thresholds, requires disclosure of disaggregated income taxes paid, and modifies certain other income tax-related disclosures. The Company retrospectively adopted ASU 2023-09 in the fourth quarter of 2025. The adoption of ASU 2023-09 resulted in additional financial statement disclosures and had no impact on the Company’s results of operations or financial condition. See Note 11, Income Taxes, which includes the disclosures resulting from the adoption of ASU 2023-09.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which is intended to improve disclosures about a public business entity’s expenses by requiring disaggregated disclosure, in the notes to the financial statements, of certain categories of expenses included in the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. ASU 2024-03 may be applied either on a prospective or retrospective

basis, and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of ASU 2024-03 on its consolidated financial statement disclosures.

Recently Enacted Tax Legislation

The One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States ("U.S") on July 4, 2025. The OBBBA legislation provides for the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, revisions to the international tax framework and the reinstatement of favorable tax treatment for certain business provisions. Additionally, the OBBBA restores the current deduction for domestic research and experimentation ("R&E") expenses under Section 174 for businesses that have previously capitalized domestic R&E expenses for taxable years.

3. Balance Sheet Details

Prepaid expenses and other current assets consisted of the following (in thousands):

December 31,

Other current receivables 264 24

Prepaid subscriptions and fees 145 116

Prepaid software licenses 60 57

Deferred equity issuance costs — 75

Accrued liabilities consisted of the following (in thousands):

December 31,

Accrued accounts payable $ 163 $ 109

Accrued clinical trial expenses 801 —

Accrued translational science expenses 188 —

Accrued director stipends 59 59

Accrued joint development expenses (Note 7) — 223

4. Fair Value Measurements

The following tables reflect the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and December 31, 2024 (in thousands):

Assets:

Money Market Funds Cash and cash equivalents $ 132,399 $ — $ — $ 132,399

Liabilities:

Share Liability Share Liability $ 313 $ — $ — $ 313

Derivative Liability Derivative Liability 62 — — 62

Assets:

Money Market Funds Cash and cash equivalents $ 9,763 $ — $ — $ 9,763

Liabilities:

Warrant Liability Warrant Liability $ — $ — $ 2 $ 2

Cash and Cash Equivalents

The Company invests its excess cash in money market funds that are classified as level 1 in the fair value hierarchy due to their short-term maturity of three months or less and are measured at fair value based on quoted prices in active markets for identical assets.

Share Liability and Derivative Liability

The Company's share liability and derivative liability (refer to Note 5, Stockholders' Equity) are each remeasured and carried at fair value at each balance sheet date based on the market value of the Company's common stock, which is a level 1 input.

Contingent Consideration Obligation

Pursuant to the Giiant License Agreement, the Company incurred a contingent consideration obligation related to future milestone payments. The Company has an obligation to make contingent consideration payments to Giiant, in either cash or shares of the Company’s common stock solely at the Company’s election, upon the achievement of development milestones. On August 2, 2024, the Company and Giiant entered into an amendment to the Giiant License Agreement, which among other things, reduced the milestone payments due to Giiant upon the achievement of certain development milestones (see Note 7, Collaborations and License Agreements, for further details).

The Company’s contingent consideration obligation is carried at fair value based on level 3 inputs. The fair value of the contingent consideration obligation is determined using a probability-based model that estimates the likelihood of success in achieving each of the defined milestones that is then discounted to present value using the Company's incremental borrowing rate. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The significant

assumptions used in the calculation of the fair value as of December 31, 2025 included a discount rate of 15.26% and management's updated projections of the likelihood of success in achieving the one remaining defined milestone based on empirical, published industry data.

The following table summarizes the activity of the Company’s Level 3 contingent consideration obligation, which is measured at fair value on a recurring basis (in thousands):

Year Ended December 31,

Contingent Consideration Obligation 2025 2024

Fair value at beginning of year $ 150 $ 204

Change in fair value during the year 351 (54 )

Cash payments during the year (235 ) —

Fair value at end of year $ 266 $ 150

On October 16, 2025, the first of the Giiant Milestone Payments (see Note 7, Collaborations and License Agreements, for further details) was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a Fibrostenotic Crohn's Disease ("FSCD") cohort. Pursuant to the terms of the Giiant License Agreement, the Company settled this Giiant Milestone Payment in cash in the amount of $235,000 within 30 days of the date the milestone was met. The remaining amount of the contingent consideration liability of approximately $266,000 was recognized as a noncurrent liability in Contingent consideration obligation in the consolidated balance sheet as of December 31, 2025 since it is not expected to be settled within one-year of the balance sheet date. As of December 31, 2024, the entire amount of the contingent consideration obligation of approximately $150,000 was classified as a noncurrent liability in Contingent consideration obligation in the consolidated balance sheet.

Financial Instruments Not Required to be Remeasured at Fair Value

The Company's other financial assets and liabilities, including restricted cash, other current receivables, accounts payable, and accrued liabilities are not remeasured to fair value, as the carrying amount of each approximates its fair value due to the short-term nature of these instruments. The carrying value of the Company’s insurance financing debt also approximates its fair value as of December 31, 2025 and December 31, 2024 due to the short-term nature of the instrument and the market rate of interest, which is based on level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

None of the Company’s non-financial assets or liabilities are recognized at fair value on a nonrecurring basis.

5. Stockholders’ Equity

Classes of Stock

Common Stock

On December 3, 2025, the Company held a special meeting at which time the Company's stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of the Company's $0.01 par value common stock from 280,000,000 shares to 300,000,000 shares. The Company subsequently amended its Amended and Restated Certificate of Incorporation to reflect the increase. As of December 31, 2025, the Company was authorized to issue300,000,000 shares of $0.01 par value common stock. Each share of common stock entitles the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders.

On April 5, 2024, the Company effected the Reverse Stock Split. Accordingly, each of the Company’s stockholders received one share of the Company's common stock for every 15 shares of the Company's common stock that such stockholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all of the Company’s issued and outstanding shares of the Company's common stock equally. The Reverse Stock Split also affected the Company’s outstanding stock-based awards, warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price or conversion price being increased proportionately by the Reverse Stock Split ratio. No fractional shares were issued as a result of the Reverse

Stock Split with any fractional shares that would have otherwise resulted from the Reverse Stock Split paid in cash, at an amount equal to the resulting fractional interest in one share of the Company's common stock that the stockholder would otherwise be entitled, multiplied by the closing trading price of the Company's common stock on April 5, 2024. The amount of cash paid for fractional shares was immaterial to the Company's financial statements.

As a result of the Reverse Stock Split, on April 5, 2024 the number of issued and outstanding shares of the Company's common stock was adjusted from 12,771,015 shares to approximately 851,302 shares.

Preferred Stock

As of December 31, 2025, the Company was authorized to issue7,000,000 shares of $0.01 par value preferred stock of which 1,000,000 shares have been designated as Series A 4.5% Convertible Preferred Stock ("Series A Convertible Preferred Stock"), of which 200,000 shares are issued and outstanding and are convertible into an aggregate of 8 shares of the Company's common stock.

Recent Equity Offerings

Crohn's and Colitis Foundation Research Program Funding Agreement

On December 17, 2025 (the “Execution Date”), the Company entered into a Research Program Funding Agreement (the “CCF Funding Agreement”) with the Crohn’s & Colitis Foundation (the “CCF”), in which the CCF agreed to provide up to a $0.5 million investment to support the Company’s Phase 1b research program related to PALI-2108.

The funding is payable in three tranches (“CCF Milestone Amount”) subject to the achievement of specified milestones. The first milestone (“CCF Milestone 1”) is in the amount of $250,000 and is due within approximately 45 days of the Execution Date. The second milestone (“CCF Milestone 2”) is in the amount of $200,000 and is due based on achievement of certain research deliverables. The third milestone (“CCF Milestone 3”) is in the amount of $50,000 and is due upon the final Phase 1b study report. CCF Milestone 1, CCF Milestone 2, and CCF Milestone 3, are collectively referred to as the “Milestone(s)”. The payments from the CCF are due within approximately 45 days of each Milestone achievement.

For each CCF Milestone payment received, within 30 days the Company must issue shares of its common stock (the “CCF Shares”) equal to the CCF Milestone Amount divided by 80% of the closing price of the Company’s common stock on the date of the respective Milestone cash receipt date.

For six years from the Execution Date, the CCF has a put option (the "CCF Put Option") on the CCF Shares whereby if the Company chooses to terminate active development of the Phase 1b research program related to PALI-2108, as defined in the CCF Funding Agreement, for reasons other than scientific failure, the CCF may require the Company to repurchase the CCF Shares at their original issue price. Pursuant to the CCF Funding Agreement, the CCF Put Option expires once the underlying CCF Shares exceed three times the closing price at which they were issued. The Company determined that although the CCF Put Option meets the definition of a derivative financial instrument pursuant to ASC 815, it also meets the equity scope exception for derivative accounting and therefore is not required to be bifurcated from the underlying CCF Shares and recognized separately.

Pursuant to ASC 480, the Company has recognized CCF Milestone 1 as a financial instrument that requires liability classification and to be initially recorded at fair value. The CCF Milestone 1 liability is expected to be settled within 75 days of the Execution Date, and therefore the subsequent change in fair value for the year ended December 31, 2025 is immaterial. On the Execution Date, the Company recognized a $250,000 other current receivable for the amount due from CCF in Prepaid and other current assets in the consolidated balance sheets. The Company recognized a $250,000 non-cash financing activity for Proceeds from the issuance of common stock included in other current receivables in the consolidated statement of cash flows for the year ended December 31, 2025. Also on the Execution Date, the Company recognized the fair value of CCF Milestone 1 of $312,500 in Share liability in the consolidated balance sheets. The Company recognized a $250,000 non-cash financing activity for the Fair Value of common shares to be issued included in share liability in the consolidated statement of cash flows for the year ended December 31, 2025. There was no change in the fair value of the Share liability between the Execution Date and December 31, 2025.

Pursuant to ASC 815, CCF Milestone 2 and CCF Milestone 3 were determined to be derivative liabilities initially recognized at fair value, with subsequent changes in fair value measured at each reporting period. On the Execution Date, the fair value of CCF Milestone 2 was determined to be $50,000 and the fair value of CCF Milestone 3 at the Execution Date was determined to be $12,500. Both amounts are recognized in Derivative liability in the consolidated

balance sheets. There was no change in the fair value of the Derivative liability between the Execution Date and December 31, 2025.

The difference between the initial fair value of the $312,500 Share liability and the $250,000 current receivable for the amount due from CCF associated with CCF Milestone 1 of $62,500, as well as the initial fair value of the derivative liabilities associated with CCF Milestone 2 and CCF Milestone 3 of $62,500, has been recognized in Other income, net, at the consolidated statement of operations for the year ended December 31, 2025 and as a Non-cash expense for the issuance of common stock in adjustments to reconcile net loss to net cash used in operating activities at the consolidated statement of cash flows for the year ended December 31, 2025.

October 2025 Offering

On October 1, 2025, the Company entered into an underwriting agreement (the “October 2025 Underwriting Agreement”) pursuant to which the Company agreed to issue and sell, in an underwritten public offering by the Company (the “October 2025 Offering”), (a) 87,526,279 shares of common stock, par value $0.01 per share, at a public offering price of $0.70 per share, and (b) 83,914,280 pre-funded warrants to purchase one share of the Company's common stock, par value $0.01 per share, at a public offering price of $0.6999 per share (“October 2025 Offering Pre-funded Common Stock Warrant(s)”). The October 2025 Offering Pre-funded Common Stock Warrants were issued in lieu of shares of common stock to certain purchasers whose purchase of shares of common stock in the October 2025 Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company’s outstanding common stock immediately following the closing of the offering. The October 2025 Offering Pre-funded Common Stock Warrants are exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full. Each October 2025 Offering Pre-funded Common Stock Warrant has an exercise price of $0.0001 per share, and has a perpetual term. In addition, pursuant to the October 2025 Underwriting Agreement, the Company granted the sole underwriter a 45-day over-allotment option to purchase up to 25,714,285 additional shares of the Company's common stock at the public offering price, less underwriting discounts and commissions.

The Company issued common stock warrants to representatives of the sole underwriter in the October 2025 Offering to purchase an aggregate 7,878,927 shares of common stock (the “October 2025 Representative Warrants”). The October 2025 Representative Warrants have an exercise price of $1.155 per share and a term of five years from the date of issuance. The grant date fair value of the October 2025 Representative Warrants of approximately $10.9 million was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the October 2025 Offering.

The October 2025 Offering closed on October 2, 2025 for net proceeds to the Company of $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million, which excludes the grant date fair value of the October 2025 Representative Warrants. At closing, the Company issued (a) 113,240,564 shares of common stock, par value $0.01 per share, which included the full exercise of the underwriter’s over-allotment option to purchase 25,714,285 additional shares of common stock, at a public offering price of $0.70 per share, and (b) 83,914,280 October 2025 Offering Pre-funded Common Stock Warrants.

December 2024 Offering

On December 12, 2024, the Company entered into an underwriting agreement (the “December 2024 Underwriting Agreement”) pursuant to which the Company agreed to issue and sell, in an underwritten public offering by the Company (the “December 2024 Offering”), (a) 158,000 Class A Units at a public offering price of $1.525 per Class A Unit (the “Class A Units”), with each Class A Unit consisting of (i) one share of the Company’s common stock, par value $0.01 per share, and (ii) one warrant to purchase one share of the Company's common stock at an exercise price per share of $1.40and a term of five years from the date of issuance (“December 2024 Offering Common Stock Warrants”) and (b) 3,120,688 Class B Units at a public offering price of $1.5249 per Class B Unit (the “Class B Units”, and collectively with the Class A Units, the “Units”), with each Class B Unit consisting of (i) one pre-funded warrant to purchase one share of the Company's common stock being immediately exercisable, having an exercise price of $0.0001 per share, and a perpetual term (“December 2024 Offering Pre-funded Common Stock Warrant(s)”) and (ii) one December 2024 Offering Common Stock Warrant. In addition, pursuant to the Underwriting Agreement, the Company granted the sole underwriter a 45-day over-allotment option to purchase up to 491,803 additional shares of

the Company's common stock and/or December 2024 Offering Common Stock Warrants. The over-allotment option expired and was not exercised by the underwriter.

The Company issued warrants to representatives of the sole underwriter in the December 2024 Offering to purchase an aggregate 196,721 shares of common stock (the “December 2024 Representative Warrants”). The December 2024 Representative Warrants have substantially the same terms as the December 2024 Offering Common Stock Warrants, except that the exercise price of each of the December 2024 Representative Warrants is $2.51625 per share. The grant date fair value of the December 2024 Representative Warrants of approximately $0.3 million was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the December 2024 Offering.

The December 2024 Offering closed on December 13, 2024 for net cash proceeds to the Company of approximately $4.1 million, consisting of gross cash proceeds of $5.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $0.9 million, which excludes the grant date fair value of the December 2024 Representative Warrants and the incremental fair value of the Repriced Warrants of approximately $0.3 million, described below.

On December 12, 2024, the Company entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) whereby the Company, contemporaneously with and contingent with the closing of the December 2024 Offering, reduced the exercise price of 1,040,217 outstanding common stock warrants (the “Repriced Warrants”) held by an investor that participated in the December 2024 Offering that expire between July 31, 2027 and May 6, 2031. The Repriced Warrants had their exercise price reduced to $1.40 per share. Other than the reduction in exercise price, the terms of the Repriced Warrants remain the same and unchanged.

The Warrant Amendment Agreement is considered a modification of the Repriced Warrants under the guidance of ASC 815-40, Derivatives and Hedging—Contracts in Entity's Own Equity ("ASC 815-40"). The modification is consistent with the equity issuance classification under that guidance as the reason for the Company's repricing of the warrants was to meet a condition of the holder's participation in the December 2024 Offering, which raised equity capital and generated gross cash proceeds for the Company of approximately $5.0 million. As pursuant to the guidance of ASC 480 and ASC 815 the Repriced Warrants were classified as equity instruments before and after the modification, and as the modification is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $0.3 million as an equity issuance cost charged against the additional paid-in capital recognized in the December 2024 Offering. The amount of the equity issuance cost recognized for the modification of the Repriced Warrants was determined using the Black-Scholes option pricing model as the incremental fair value of the Repriced Warrants as compared to the fair value of the warrants immediately prior to their modification.

May 2024 Offering

On May 1, 2024, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company sold in a private placement, (i) 85,100 shares of common stock at a purchase price per share of $6.5015, (ii) 530,142 pre-funded warrants to purchase shares common stock at a purchase price of $6.5014 per pre-funded warrant, with such pre-funded warrants being immediately exercisable, having an exercise price of $0.0001 per share, and a perpetual term, and (iii) common stock warrants to purchase 922,863 shares of the common stock at an exercise price of $6.314 per share and a term of seven years from the date of issuance (the "May 2024 Common Stock Warrants") (collectively, the “May 2024 Offering”).

The Company issued warrants to the placement agent in the May 2024 Offering to purchase an aggregate 36,914 shares of common stock (the “May 2024 Placement Agent Warrants”). The May 2024 Placement Agent Warrants have substantially the same terms as the May 2024 Common Stock Warrants, except that the exercise price of each of the May 2024 Placement Agent Warrants is $10.727 per share and the term is five years from issuance. The fair value of the May 2024 Placement Agent Warrants was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the May 2024 Offering.

The May 2024 Offering closed on May 6, 2024 for net cash proceeds to the Company of approximately $3.5 million, consisting of gross cash proceeds of $4.0 million less cash equity issuance costs of approximately $0.5 million, which excludes the grant date fair value of the May 2024 Placement Agent Warrants of approximately $0.2 million.

Common Stock Warrants and Warrant Exercises

July 2025 Warrant Inducement

On July 23, 2025, the Company entered into a warrant inducement agreement (the “July 2025 Warrant Inducement Agreement”) with an accredited and institutional holder (the “July 2025 Warrant Holder”) of certain of the Company’s outstanding common stock warrants, including: (i) common stock warrants issued on May 10, 2022, which were transferred to the July 2025 Warrant Holder in January 2022 (the “January 2022 Warrants”), (ii) common stock warrants issued on February 1, 2024 (the “February 2024 Warrants”), (iii) common stock warrants issued on May 6, 2024 (the “May 2024 Warrants”), and (iv) the December 2024 Offering Common Stock Warrants, (collectively, the “July 2025 Existing Warrant(s)”) to exercise the July 2025 Existing Warrants to purchase up to an aggregate of 4,318,905 shares of the Company's common stock. Pursuant to the July 2025 Warrant Inducement Agreement, the exercise price of each July 2025 Existing Warrant exercised was reduced from $1.40 per share to $0.9047 per share. In consideration for the immediate exercise of the July 2025 Existing Warrants, the July 2025 Warrant Holder received new unregistered warrants (the “July 2025 Replacement Warrants”) to purchase shares of common stock in a private placement. Pursuant to the July 2025 Warrant Inducement Agreement, the July 2025 Warrant Holder received two July 2025 Replacement Warrants for each July 2025 Existing Warrant exercised. The July 2025 Replacement Warrants are exercisable into an aggregate of up to 8,637,810 shares of common stock beginning on the effective date of stockholder approval of the issuance of common stock shares underlying the July 2025 Replacement Warrants (the “Warrant Stockholder Approval”), at an exercise price of $0.9047 per share, and a term of exercise equal to five years from the date of Warrant Stockholder Approval (the transaction in its entirety, the "July 2025 Warrant Inducement Transaction"). The shares of common stock issuable upon the exercise of the July 2025 Replacement Warrants have subsequently been registered by the Company. On December 3, 2025, the Company convened a special meeting of stockholders at which time it received Warrant Stockholder Approval and the July 2025 Replacement Warrants became immediately exercisable.

The July 2025 Warrant Holder exercised an aggregate of 4,318,905 July 2025 Existing Warrants consisting of: (i) 3,000 January 2022 Warrants, (ii) 114,354 February 2024 Warrants, (iii) 922,863 May 2024 Warrants, and (iv) 3,278,688 December 2024 Warrants. As a result of the exercises of the July 2025 Existing Warrants, the Company issued an aggregate of 4,318,905 shares of its common stock and 8,637,810 July 2025 Replacement Warrants. The July 2025 Warrant Inducement Transaction closed on July 25, 2025 with the Company receiving net cash proceeds of approximately $3.4 million consisting of gross cash proceeds of $3.9 million, less cash equity issuance costs of approximately $0.5 million.

The July 2025 Warrant Inducement Transaction, which resulted in the lowering of the exercise price of the July 2025 Existing Warrants and the issuance of the July 2025 Replacement Warrants, is considered a modification of the July 2025 Existing Warrants under the guidance of ASC 815-40. The modification is consistent with the Equity Issuance classification under that guidance as the reason for the modification was to induce the holders of the July 2025 Existing Warrants to cash exercise their July 2025 Existing Warrants, resulting in the imminent exercise of the July 2025 Existing Warrants, which raised equity capital and generated gross cash proceeds for the Company of approximately $3.9 million. As pursuant to the guidance of ASC 480 and ASC 815-40 the July 2025 Existing Warrants and were classified as equity instruments before and after the modification, and as the modification is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $8.6 million as an equity issuance cost charged against the additional paid-in capital recognized from the associated warrant exercises. The amount of the equity issuance cost recognized for the warrant modification was determined using the Black-Scholes option pricing model as the incremental fair value of the modified July 2025 Existing Warrants and additional July 2025 Replacement Warrants issued as compared to the fair value of the original July 2025 Existing Warrants immediately prior to their modification.

The solicitation agent fees associated with the July 2025 Warrant Inducement Transaction consisted of: (i) a cash fee equal to 9% of the gross proceeds received by the Company, (ii) a common stock warrant to purchase such number of shares of common stock equal to 6% of the aggregate number of shares issued pursuant to the exercise of the July 2025 Existing Warrants, or a total of 259,134 common stock warrants, with an exercise price of $1.49 per share, and a term of five years from issuance (the "July 2025 Solicitation Agent Warrants"), and (iii) $75,000 of out-of-pocket expenses. The fair value of the July 2025 Solicitation Agent Warrants was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the issuance of common stock in connection with the exercise of the July 2025 Existing Warrants.

Total equity issuance costs recognized in the July 2025 Warrant Inducement Transaction of $9.3 million include cash

equity issuance costs of $0.5 million, non-cash warrant modification costs of approximately $8.6 million, and non-cash issuance costs associated with the July 2025 Solicitation Agent Warrants of $0.2 million.

February 2024 Warrant Inducement

On January 30, 2024, the Company entered into warrant inducement agreements (the “February 2024 Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “February 2024 Warrant Holders”) of certain of the Company’s remaining outstanding common stock warrants, including: (i) common stock warrants issued on May 10, 2022 (the "May 2022 Warrants"), (ii) common stock warrants issued on January 4, 2023 (the “January 2023 Warrants”), and (iii) common stock warrants issued on April 5, 2023 (the “April 2023 Warrants”), as well as certain outstanding Series 2 warrants issued on August 16, 2022 (the "Series 2 Warrants") (collectively, the “February 2024 Existing Warrant(s)”). Pursuant to the February 2024 Warrant Inducement Agreements, the exercise price of each of the February 2024 Existing Warrants exercised was reduced to $10.97 per share. Each of the February 2024 Warrant Holders that exercised its February 2024 Existing Warrants pursuant to the February 2024 Warrant Inducement Agreements, received one replacement warrant to purchase one share of the Company's common stock (the “February 2024 Replacement Warrants”) for each February 2024 Existing Warrant exercised (in its entirety, the "February 2024 Warrant Inducement").

The February 2024 Replacement Warrants were exercisable immediately, have an original exercise price per share of $10.97, and expire five years from the date of issuance, which was February 1, 2024.

The February 2024 Warrant Holders collectively exercised an aggregate of 228,162 February 2024 Existing Warrants consisting of: (i) 4,865 May 2022 Warrants, (ii) 4,267 Series 2 Warrants, (iii) 67,511 January 2023 Warrants, and (iv) 151,519 April 2023 Warrants. As a result of the exercises of the February 2024 Existing Warrants, the Company issued an aggregate of 228,162 shares of its common stock and 228,162 February 2024 Replacement Warrants. The February 2024 Warrant Inducement closed on February 1, 2024 with the Company receiving net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of $2.5 million, less cash equity issuance costs of approximately $0.3 million.

The February 2024 Warrant Inducement, which resulted in the lowering of the exercise price of the Existing Warrants and the issuance of the February 2024 Replacement Warrants, is considered a modification of the February 2024 Existing Warrants under the guidance of ASC 815-40. The modification is consistent with the Equity Issuance classification under that guidance as the reason for the modification was to induce the holders of the February 2024 Existing Warrants to cash exercise their February 2024 Existing Warrants, resulting in the imminent exercise of the February 2024 Existing Warrants, which raised equity capital and generated gross cash proceeds for the Company of approximately $2.5 million. As pursuant to the guidance of ASC 480 and ASC 815-40 the February 2024 Existing Warrants and February 2024 Replacement Warrants were classified as equity instruments before and after the modification, and as the modification is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $2.0 million as an equity issuance cost charged against the additional paid-in capital recognized from the associated warrant exercises. The amount of the equity issuance cost recognized for the warrant modification was determined using the Black-Scholes option pricing model as the incremental fair value of the modified February 2024 Existing Warrants and additional February 2024 Replacement Warrants issued as compared to the fair value of the original February 2024 Existing Warrants immediately prior to their modification.

The solicitation agent fees associated with the February 2024 Warrant Inducement consisted of: (i) a cash fee equal to 7.75% of the gross proceeds received by the Company, (ii) a common stock warrant to purchase such number of shares of common stock equal to 6% of the aggregate number shares issued pursuant to the exercise of the February 2024 Existing Warrants, or a total of 13,690 common stock warrants, with an exercise price of $10.97 per share, and a term of five years from issuance (the "February 2024 Solicitation Agent Warrants"), and (iii) $35,000 of out-of-pocket expenses. The fair value of the February 2024 Solicitation Agent Warrants was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the issuance of common stock in connection with the exercise of the February 2024 Existing Warrants.

Total equity issuance costs recognized in the February 2024 Warrant Inducement of $2.4 million include cash equity issuance costs of $0.3 million, non-cash warrant modification costs of approximately $2.0 million, and non-cash issuance costs associated with the February 2024 Solicitation Agent Warrants of $0.1 million.

Common Stock Warrants Outstanding and Warrant Activity

The Company accounts for the majority of its warrants as equity-classified in accordance with ASC 480 and ASC 815-40. The Company’s outstanding common stock warrants that are equity-classified are included as a component of stockholders' equity based on their relative fair value on their date of issuance. Common stock warrants accounted for as liabilities in accordance with the authoritative accounting guidance are included as noncurrent liabilities in the consolidated balance sheets.

The following table summarizes the Company's outstanding and exercisable common stock warrants as of December 31, 2025:

Series 2 Common Stock Warrants Equity-classified 6,748 0.70 1.61

All Other Common Stock Warrants Equity-classified 776 11,614.97 1.45

(1) The pre-funded common stock warrants outstanding as of December 31, 2025 have a perpetual term and are therefore excluded from the calculation of the weighted average remaining contractual life.

Of the outstanding common stock warrants, only the Series 2 Warrants include a down round feature whereby they are subject to price reset provisions in the event future sales of the Company's securities are sold at a price per share less than the exercise price of such warrants.

The following table summarizes all common stock warrant activity for the year ended December 31, 2025:

Forfeited, expired or cancelled (675 ) 5,863.33

(1) The pre-funded common stock warrants that are outstanding as of December 31, 2025 and December 31, 2024 have a perpetual term and are therefore excluded from the calculation of the weighted average remaining contractual life.

6. Equity Incentive Plans

In 2013, LBS adopted the 2013 Employee, Director, and Consultant Equity Incentive Plan, (as amended and restated, the “2013 Plan”). No further awards will be made under the 2013 Plan.

In April 2021, the Company’s shareholders approved the Palisade Bio, Inc. 2021 Equity Incentive Plan (the “2021 EIP”). As of December 31, 2025, there were no shares of the Company's common stock available for future issuance as equity-based awards under the 2021 EIP, which excludes the subsequent evergreen share increase in the number of shares of common stock available for issuance under the 2021 EIP that occurred on January 1, 2026.

Also in April 2021, the Company's shareholders approved the 2021 ESPP. All employees are eligible to participate in the 2021 ESPP while employed by the Company. The 2021 ESPP permits eligible employees to purchase common stock through payroll deductions, which may not exceed $25,000 in a calendar year or 5,000 shares of the Company's shares of common stock each offering period, as defined in the 2021 ESPP, at a price equal to 85% of the fair value of the Company's common stock at the beginning or end of the offering period, whichever is lower. The 2021 ESPP is intended to qualify under Section 423 of the Internal Revenue Code. As of December 31, 2025, there have been 31,032 shares of the Company's common stock issued under the 2021 ESPP. As of December 31, 2025, there were 21,464 shares of the Company's common stock available for future issuance under the 2021 ESPP, which excludes the subsequent evergreen share increase in the number of shares of common stock available for future issuance under the 2021 ESPP that occurred on January 1, 2026.

Compensation expense associated with the 2021 ESPP for the year ended December 31, 2025 and December 31, 2024 was approximately $31,000 and $19,000, respectively.

In November 2021, the Company's compensation committee of the Board adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant equity-based awards to individuals not previously employed by the Company, as an inducement to join the Company. As of December 31, 2025, there were 50,341 shares of the Company's common stock available for future issuance as equity-based awards under the 2021 Inducement Plan.

Stock Options

The fair value of options granted during the years ended December 31, 2025 and December 31, 2024 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

Year Ended December 31,

Weighted-average exercise price per share $ 1.12 $ 4.54

Weighted-average expected term (years) 5.81 5.65

Weighted-average risk-free interest rate 4.38 % 4.03 %

Weighted-average expected dividend yield — —

Risk-free interest rate. The Company bases the risk-free interest rate assumption on observed interest rates appropriate for the expected term of the stock option grants.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Expected volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption is based on historical volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biopharmaceutical industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

The following table summarizes stock option activity and related information under the 2013 Plan, the 2021 EIP and the 2021 Inducement Plan for the year ended December 31, 2025:

Exercised — —

Forfeited, expired or cancelled (14 ) 3,093.75

The weighted-average grant date fair value of options granted during the years ended December 31, 2025 and December 31, 2024 was $1.00 per share and $3.80 per share, respectively. The grant date fair value of the options vested during each the years ended December 31, 2025 and December 31, 2024 was approximately $0.2 million and $0.4 million, respectively.

Restricted Stock Units

The following table summarizes service-based RSU activity and related information under the 2021 EIP for the year ended December 31, 2025:

Non-vested at December 31, 2024 — $ —

Forfeited — —

The grant date fair value of the RSUs vested during the year ended December 31, 2025 and December 31, 2024 was approximately $10,000 and $0.1 million, respectively.

In 2025, the Company issued certain RSUs with a cash settlement feature whereby until such time that there are sufficient shares of its common stock available under the 2021 EIP to settle all outstanding equity-based grants under the 2021 EIP, any RSUs issued with the cash settlement feature that vest prior to such time may be settled, at the Company's sole election, in shares of the Company's common stock or in cash based on the fair market value of the Company's common stock on the applicable vesting date. Upon the first occurrence of sufficient shares being available under the 2021 EIP, the settlement of the RSUs will be made exclusively in shares of the Company's common stock. As of December 31, 2025, including any shares which will become available upon future evergreens, the Company has the intent and ability to settle all of the RSU awards with a cash settlement feature in shares of the Company's common stock as of the underlying vesting dates and has therefore recognized the awards as equity-classified in accordance with ASC 718.

Performance Based Stock Units

As of December 31, 2024, a total of 2,952 PSUs remained unvested and outstanding. None of the PSUs vested during the year ended December 31, 2025 and none were forfeited during the year. As of December 31, 2025, a total of 2,952 PSUs remain unvested and outstanding with a weighted-average grant price of $22.28 per share.

Share-Based Compensation Expense

The allocation of stock-based compensation for all stock option, RSU and PSU awards is as follows (in thousands):

Year Ended December 31,

Research and development expense $ 2,133 $ 263

General and administrative expense 1,791 370

To reduce the ongoing administrative burden and expense associated with the quarterly vesting of the Company's service-based RSUs, on May 28, 2024, the Company's Board approved the immediate accelerated vesting of all unvested service-based RSUs issued to employees that were outstanding as of that date. The accelerated vesting was accounted for as a Type I modification under ASC 718 and accordingly, in the second quarter of 2024 the Company recognized share-based compensation expense associated with the service-based RSUs subject to immediate vesting of approximately $129,000 in general and administrative expenses and approximately $125,000 in research and development expenses.

As of December 31, 2025, the unrecognized compensation expense related to outstanding options was $0.1 million, which is expected to be recognized over a weighted-average period of approximately 1.52 years. As of December 31, 2025, unrecognized compensation expense related to outstanding service-based RSUs was $43.5 million, which is expected to be recognized over a weighted-average period of approximately 2.78 years. As of December 31, 2025, there is no unrecognized compensation expense related to outstanding PSUs.

7. Collaborations and License Agreements

Research Collaboration and License Agreement with Giiant

On September 1, 2023, the Company entered into the Giiant License Agreement whereby the Company received an exclusive, worldwide license (with the right to sublicense in multiple tiers) to develop, manufacture, and commercialize substantially all of the assets of Giiant, including: (i) the PALI-2108 compound, and (ii) the PALI-1908 compound, and the associated intellectual property around each of the foregoing (the “Giiant Licensed Assets”). The Giiant License Agreement has a perpetual term.

Pursuant to the Giiant License Agreement, the Company and Giiant established a joint development committee (“JDC”), consisting of one Giiant appointee and two Company appointees. The JDC will be responsible for: (i) overseeing the day-to-day development of the Giiant Licensed Assets through Proof of Concept (as defined below), and (ii) creation and implementation of the development plan and development budget for such development (the “Giiant Development Plan”) and any amendments or updates thereto.

Prior to receiving regulatory approval to commence a Phase 1 clinical trial (as such term is defined in the Giiant License Agreement) (the “Proof of Concept”), each of the Company and Giiant was solely responsible for all costs and expenses incurred by such party for the joint development of the Giiant Licensed Assets, except as set forth in the Giiant Development Plan. Upon reaching the Proof of Concept, which occurred in October of 2024, the Company became solely responsible for all costs and expenses incurred for the development, manufacturing, regulatory and commercialization of the Giiant Licensed Assets.

For the year ended December 31, 2025, the Company recognized a net credit related to the joint development plan of approximately $1.1 million, which consisted primarily of funds received by the Company from Giiant pursuant to the joint development plan. For the year ended December 31, 2024, the Company recognized expenses of approximately $4.3 million related to the joint development plan. The Company recognized no credits to its joint development expenses for payments from Giiant for the year ended December 31, 2024. Both the expenses related to the joint development plan and any credits for funds received by the Company from Giiant are included in research and development expenses in the consolidated statements of operations.

In instances where the expense determined to be recognized exceeds the payments made to Giiant, the Company recognizes an accrual of joint development expenses. As of December 31, 2025, the Company had no joint

development expenses accrued. As of December 31, 2024, the Company accrued joint development expenses of approximately $0.2 million in Accrued liabilities in the consolidated balance sheets.

Pursuant to the Giiant License Agreement, the Company is (i) required make certain payments upon the achievement of the development milestones (as set forth in the Giiant License Agreement), in either cash or shares of the Company’s common stock, at the Company’s election (“Giiant Milestone Payments”), and (ii) pay ongoing royalty payments of a mid-single-digit percentage of the adjusted gross proceeds, as defined in the Giiant License Agreement, upon the sales or sublicenses of any products developed from the Giiant Licensed Assets to third parties (“Giiant Royalty Payments”) (collectively, the Giiant Milestone Payments and the Giiant Royalty Payments are referred to as the “Giiant License Payments”). The Giiant License Payments are subject to a maximum payment cap in the very low eight-digit range, which will be increased or decreased on a dollar-for-dollar basis based on a formula related to the aggregate of development costs incurred by the parties (“Payment Cap”). On October 16, 2025, the Company determined that the first of the development milestones pursuant to the Giiant License Agreement, was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a FSCD cohort. The Company settled this Giiant Milestone Payment in cash in the amount of $235,000 in the fourth quarter of 2025. As of December 31, 2025, one of the Giiant Milestone Payments remains, which could require the Company to make a payment in the low seven-digit range upon the achievement of the one remaining development milestone. There have been no other Giiant Milestone Payments made pursuant to the Giiant License Agreement.

In the event that Giiant desires to sell or assign any rights to receive the Giiant License Payments, they will be required to notify the Company of such offer or proposal (“Offer Notice”). The Company will then have a right of first refusal for thirty days from the receipt of such Offer Notice, to acquire the rights and obligations contained in such Offer Notice on the same terms.

The Company may unilaterally terminate the Giiant License Agreement for: (i) convenience, or (ii) a material breach by Giiant, that is not cured within the applicable notice period.

Giiant may unilaterally terminate the Giiant License Agreement only for a material breach by Company that is not cured within the applicable notice period provided however that upon the Payment Cap being achieved, that right will terminate and the Giiant License Agreement will become perpetual.

Co-Development and Distribution Agreement with Newsoara

Prior to the completion of the Seneca Merger, LBS entered into a co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”). Pursuant to the Newsoara Co-Development Agreement (and subsequent assignment agreement), LBS granted or licensed Newsoara an exclusive right under certain patents to develop, use, sell, offer to sell, import, and otherwise commercialize licensed products (the “Newsoara Licensed Products”) for any and all indications in the People’s Republic of China, including the regions of Hong Kong and Macao, but excluding Taiwan (the “Territory”). The Newsoara Licensed Products only include the drug asset LB1148, which the Company ceased developing in August of 2023. The right includes the right to grant sublicenses to third parties, subject to LBS’ written consent, provided that both parties agreed that Newsoara would be permitted to use a certain partner for development purposes. The Newsoara Co-Development Agreement obligates Newsoara to initially use LBS as the exclusive supplier for all Newsoara’s requirements for Newsoara Licensed Products in the Territory. During the term of the Newsoara Co-Development Agreement, Newsoara may request to manufacture the Newsoara Licensed Products in the Territory, subject to satisfying certain conditions to LBS' reasonable satisfaction. LBS is obligated to approve Newsoara manufacturing rights without undue refusal or delay. The Company records the expense reimbursements from Newsoara for any research and development or manufacturing activities it performs under the Newsoara Co-Development Agreement as a reduction to research and development expenses once the reimbursement amount is approved for payment by Newsoara.

In consideration of the rights granted to Newsoara under the Newsoara Co-Development Agreement, Newsoara paid LBS a one-time upfront fee of $1.0 million. In addition, Newsoara is obligated to make (i) payments of up to $6.75 million in the aggregate upon achievement of certain regulatory and commercial milestones, (ii) payments in the low six-digit range per licensed product upon achievement of a regulatory milestone, and (iii) tiered royalty payments ranging from the mid-single-digit to low-double-digit percentage range on annual net sales of Licensed Products, subject to adjustment to the royalty percentage in certain events, including a change of control, the expiration of certain patents rights, and royalties paid by Newsoara third parties. To date, Newsoara has met all of its payment obligations under the Newsoara Co-Development Agreement.

During the years ended December 31, 2025 and December 31, 2024, the Company recognized no license revenue from Newsoara under the Newsoara Co-Development Agreement.

The Newsoara Co-Development Agreement will expire upon the expiration date of the last valid claim of any licensed patent covering the Newsoara Licensed Products in the Territory. In addition, the Newsoara Co-Development Agreement can be terminated (i) by either party for the other party’s material breach that remains uncured for a specified time period after written notice or for events related to the other party’s insolvency, (ii) by LBS if Newsoara challenges or attempts to interfere with any licensed patent rights and, (iii) by Newsoara for any reason upon specified prior written notice.

License Agreements with the Regents of the University of California

Prior to the Seneca Merger, the Company has entered into three license agreements, as amended, with the Regents of the University of California (“Regents”) for exclusive commercial rights to certain patents, technology and know-how related to LB1148. Concurrent with the Company's decision to terminate the development of LB1148, on October 20, 2023 the Company terminated two of its license agreements with Regents. As of December 31, 2025, the only license agreement remaining with Regents is that entered into with LBS in August 2015, as amended in December 2019 and September 2022 (the “2015 UC License”). The 2015 UC License was retained for the sole purpose of maintaining the Newsoara Co-Development Agreement under which the Company may receive future milestone or royalty payments through the term of the license. Accordingly, pursuant to the 2015 UC License, the Company is obligated to pay a percentage of non-royalty licensing revenue it receives from Newsoara under the Newsoara Co-Development Agreement to Regents ranging from 30 percent to 35 percent of one-third of the upfront payment and milestone payments received from Newsoara. During the year ended December 31, 2025, the Company recognized no sublicense fees or license maintenance fees due to Regents. During the year ended December 31, 2024, the Company recognized no sublicense fees and license maintenance fees of approximately $16,000 due to Regents. License maintenance fees are recognized in research and development expenses in the consolidated statements of operations.

The 2015 UC License will expire upon the expiration date of the longest-lived patent right licensed under the 2015 UC License. The Regents may terminate the 2015 UC License if: (i) a material breach by the Company is not cured within 60 days, (ii) the Company files a claim asserting the Regents licensed patent rights are invalid or unenforceable, or (iii) the Company files for bankruptcy. The Company also has the right to terminate the 2015 UC License at any time upon at least 90 days’ written notice.

Contingent Value Right

Immediately prior to the closing of the Seneca Merger, Seneca issued each share of its common stock held by Seneca stockholders of record, one contingent value right (“CVR”). The CVR entitled the holder (the “CVR Holder”) to receive, pro rata with the other CVR Holders, 80% of the net proceeds, if any and subject to certain minimum distribution limitations (“CVR Payment Amount”), received from the sale or licensing of the intellectual property owned, licensed or controlled by Seneca immediately prior to the closing of the Seneca Merger (the “Legacy Technology”); provided however that the CVR Holders are only entitled to receive such CVR Payment Amount if the sale or licensing of such Legacy Technology occurred on or before October 27, 2022 (“Legacy Monetization”). Pursuant to the terms of the CVR agreement (“CVR Agreement”), CVR Holders entitlement to receive CVR Payment Amounts expired on April 27, 2025. There were no CVR Payments made to any of the CVR Holders pursuant to the CVR Agreement.

NSI-189 – Exclusive License and Subsequent Exercise of Purchase Option

Prior to the Seneca Merger, Seneca exclusively licensed certain patents and technologies, including a sublicense covering a synthetic intermediate, of the Company's NSI-189 assets (“189 License”), along with a purchase option through December 16, 2023 (“Purchase Option”). On October 22, 2021, Alto Neuroscience ("Alto") agreed to terms of an early exercise of the Purchase Option under the 189 License and entered into an asset transfer agreement ("ATA"). Alto is a U.S. based public, clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options.

Pursuant to the ATA, Alto will be required to pay the Company up to an aggregate of $4.5 million upon the achievement of certain development and regulatory approval milestones for NSI-189 (or a product containing or otherwise derived from NSI-189), which is now known as ALTO-100. If Alto sells or grants to a third party a license to the patents and other rights specific to ALTO-100 prior to the achievement of a specified clinical development

milestone, Alto will be required to pay to the Company a low-double digit percentage of any consideration received by Alto from such license or sale, provided that the maximum aggregate consideration Alto will be required to pay to the Company under the ATA, including the upfront payment and all potential milestones and transaction-related payments, will not exceed $5.0 million.

On October 22, 2024, Alto announced that its Phase 2b study of ALTO-100 in patients with major depressive disorder (MDD) did not meet its primary endpoint. Notwithstanding, ALTO-100 is being evaluated as an adjunctive treatment in a Phase 2b study in bipolar depression with topline data expected in the second half of 2026. Upon the enrollment of a patient in a Phase 3 clinical trial of ALTO-100, if it occurs, a milestone payment of $1.5 million will be due to the Company from Alto under the ATA.

NSI-532.IGF-1

On October 27, 2022, the Company entered an agreement to license NSI-532.IGF-1 to the Regents of the University of Michigan ("University of Michigan") for maintaining NSI-532.IGF-1 cell lines, continued development, maintaining patent protection, and seeking licensees. The Company received no upfront fees for the license. NSI-532.IGF-1 is a preclinical cell therapy being investigated as a potential therapy for prevention and treatment of Alzheimer’s disease. The University of Michigan shall bear 100% of the costs for patent filing, prosecution, maintenance, and enforcement of the patent rights. The Company will receive 50% of net revenues received by the University of Michigan from the licensing of patent rights through the last-to-expire patent in patent rights, unless otherwise earlier terminated, less all reasonable and actual out-of-pocket costs incurred in the litigation of patent rights.

8. Commitments and Contingencies

Corporate Office Lease

The Company was party to a non-cancelable facility operating lease (the "Corporate Office Lease") of office space for its corporate headquarters in Carlsbad, California. The initial contractual term was for 39-months commencing on June 1, 2022 and the lease expired on August 31, 2025. The Company has determined it will not enter into a new lease for its corporate office space.

The Company recognized operating lease expense associated with its Corporate Office Lease of approximately $87,000 and $130,000 for the years ended December 31, 2025 and December 31, 2024, respectively.

Insurance Financing Arrangement

In June of 2025, the Company entered an agreement to finance an insurance policy that renewed in May of 2025. The financing arrangement entered in June of 2025 has a stated annual interest rate of 7.82% and is payable over a 9-month period with the first payment payable on June 30, 2025. The insurance financing arrangement is secured by the associated insurance policy. As of both December 31, 2025 and December 31, 2024, the aggregate remaining balance under the Company's insurance financing arrangements in place at each time was approximately $0.1 million and is included in Insurance financing debt in the consolidated balance sheets.

Other than the remaining insurance financing arrangement payments due in 2026, as of December 31, 2025 the Company has no other minimum debt payments required in 2026 or thereafter.

Legal Proceedings

From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. Management believes there are no claims or actions pending against the Company through December 31, 2025, which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, legal proceedings or claims, however, are subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.

9. Net Loss Per Share

Basic and Diluted Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing the net loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period, plus any potentially dilutive common shares, consisting of stock-based awards and equivalents, and common stock warrants. For purposes of this calculation, stock-based awards and equivalents and common stock warrants are considered to be potential common shares and are only included in the calculation of diluted net loss per common share when their effect is dilutive.

The Company's Series A Convertible Preferred Stock and certain of the Company's outstanding common stock warrants contain non-forfeitable rights to dividends with the common stockholders, and therefore are considered to be participating securities. The Series A Convertible Preferred Stock and the common stock warrants do not have a contractual obligation to fund the losses of the Company; therefore, the application of the two-class method is not required when the Company is in a net loss position but is required if the Company is in a net income position. When in a net income position, diluted net earnings per common share is computed using the more dilutive of the two-class method or the if-converted and treasury stock methods.

Pursuant to the October 2025 Offering, on October 2, 2025, the Company issued the October 2025 Offering Pre-Funded Common Stock Warrants. Pursuant to the December 2024 Offering, on December 13, 2024, the Company issued the December 2024 Offering Pre-funded Common Stock Warrants. See Note 5, Stockholders' Equity, for further discussion of each of these financing transactions. Both the October 2025 Offering Pre-funded Common Stock Warrants and the December 2024 Offering Pre-funded Common Stock Warrants were determined to be equity-classified in accordance with ASC 480 and ASC 815. As of December 31, 2025 and December 31, 2024, 50,080,853 of the October 2025 Offering Pre-funded Common Stock Warrants and 2,027,000 of the December 2024 Offering Pre-funded Common Stock Warrants, respectively, remained unexercised. Pursuant to the guidance of ASC 260-10, the Company concluded that because the equity-classified pre-funded warrants were immediately exercisable for little or no cash consideration due to the non-substantive stated exercise price, all the necessary conditions for issuance of the underlying common shares had been met when the pre-funded warrants were issued. Therefore, the underlying common shares for the unexercised portion of the October 2025 Offering Pre-funded Common Stock Warrants have been included in the denominator for the calculation of basic and dilutive net loss per common share for the year ended December 31, 2025, and the underlying common shares for the unexercised portion of the December 2024 Offering Pre-funded Common Stock Warrants have been included in the denominator for the calculation of basic and dilutive net loss per common share for the year ended December 31, 2024.

As the Company was in a net loss position for all periods presented, basic and diluted net loss per common share for both the years ended December 31, 2025 and December 31, 2024 was calculated under the if-converted and treasury stock methods. For both the years ended December 31, 2025 and December 31, 2024, basic and diluted net loss per common share were the same as all common stock equivalents other than the pre-funded warrants discussed above were anti-dilutive for both years.

The following table presents the calculation of weighted average shares used to calculate basic and diluted net loss per common share (in thousands, except share and per share amounts):

Year Ended December 31,

Basic and diluted net loss per common share:

Basic and diluted net loss per common share $ (0.30 ) $ (10.19 )

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share because their effects would be anti-dilutive:

December 31,

Service-based and performance-based restricted stock units 24,849,552 2,952

Series A Convertible Preferred Stock 8 8

10. Employee Benefits

The Company participates in a defined contribution 401(k) plan adopted by LBS effective June 20, 2016 (the "LBS 401(k) Plan"). All employees are eligible to participate in the plan beginning on the first day of employment. Under the terms of the plan, employees may make voluntary contributions as a percent of compensation. No matching contributions were made by the Company the years ended December 31, 2025 and December 31, 2024.

Effective as of January 1, 2026, the Company's compensation committee of its Board amended the LBS 401(k) Plan to provide for the Company to make matching contributions in an amount equal to 100% of employees voluntary deferral contributions that are not over 6% of eligible compensation.

The Company's common stock is not an investment option available to participants in the 401(k) Plan.

11. Income Taxes

The Company has no current or deferred income taxes as of December 31, 2025 and December 31, 2024.

Income taxes vary from the statutory federal income tax rate applied to loss before income taxes as follows (in thousands):

Year Ended December 31,

Amount Percent Amount Percent

Nontaxable or nondeductible items:

Stock-based compensation 45 (0.3 )% 371 (2.6 )%

Other permanent differences 32 (0.2 )% 1 (0.0 )%

Expiration of tax attributes 583 (3.5 )% 184 (1.3 )%

Adjustment to deferred tax balances 4,397 (26.2 )% — 0.0 %

$ — 0 % $ — 0 %

Deferred income tax assets and liabilities arising from differences between accounting for financial statement purposes and tax purposes, less valuation reserves at year end are as follows (in thousands):

Year Ended December 31,

Deferred tax assets:

Lease liability — 25

Capitalized research and development costs 4,454 3,771

Deferred tax liabilities:

Operating right-of-use asset — 23

Total deferred tax liabilities 99 131

Net deferred taxes $ — $ —

Deferred tax assets and liabilities are recognized for temporary differences and unused tax losses to the extent that realization of the related tax benefits is more-likely-than-not. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods when the deferred tax assets become deductible. After considering the history of operating losses and uncertainty regarding its ability to generate positive pre-tax income in 2026 and beyond, the Company has concluded that it is not-more-likely-than-not that its deferred tax assets will be realized, and therefore maintains a full valuation allowance on all deferred tax assets.

The valuation allowance decreased $5.2 million during the year ended December 31, 2025 and increased $3.5 million during the year ended December 31, 2024.

As of December 31, 2025, the Company had federal net operating loss ("NOL") carryforwards of approximately $93.8 million and state NOL carryforwards of approximately $14.9 million. Of the total amount of federal NOL carryforwards, approximately $85.8 million arose in tax years beginning after December 31, 2017 and will carry forward indefinitely. The federal NOL carryforwards arising in tax years beginning before January 1, 2018 of approximately $8.0 million will begin to expire in 2026 unless previously utilized. The Company’s state NOL carryforwards as of December 31, 2025 may be carried forward for 20 years, and will begin to expire in 2027.

Pursuant to the provisions of the Internal Revenue Code ("IRC"), the Company’s NOL and tax credit carryforwards and certain other attributes are subject to review and possible adjustment by the Internal Revenue Service ("IRS") and state tax authorities. NOL and tax credit carryforwards may be subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the IRC, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. Further, when there are multiple ownership changes, all resulting limitations must be applied to the attributes that existed prior to the ownership change. Since its inception, the Company has completed the Seneca Merger and several equity offerings, including the October 2025 Offering, which may have resulted in a change in control as defined by Sections 382 and 383 of the IRC, or could result in a change in control in the future. The Company has not performed a complete IRC Section 382 and 383 analysis for all relevant tax years regarding the limitation of net operating losses. Although the NOL deferred tax asset does reflect the limitation resulting from both the Seneca Merger and the October 2025 Offering, there could be further limitations due to prior changes in control. Due to the existence of a full valuation allowance, however, changes in the NOLs included as deferred tax assets on the Company’s consolidated balance sheets would have no impact on the Company's effective tax rate.

100

The Company files income tax returns in the U.S. federal jurisdiction and California. Because of the NOLs, the Company is subject to U.S. federal examinations for tax years 2007 and forward, and for examinations from state taxing authorities for tax years 2008 and forward.

The Company accounts for taxation under ASC 740, which clarifies the accounting for uncertain tax positions. ASC 740 requires that the Company recognize the impact of a tax position in its consolidated financial statements if the position is more-likely-than-not to be sustained upon examination based on the technical merits of the position. The Company did not have any uncertain income tax positions as of December 31, 2025 and 2024.

ASC 740 requires the Company to accrue interest and penalties where there is an underpayment of taxes based on the Company's best estimate of the amount to ultimately be paid. The Company identified no unrecorded material uncertain tax positions as of December 31, 2025 and 2024, consequently no interest or penalties have been accrued by the Company in either period. The Company does not anticipate a significant change to its unrecognized tax benefits within the next 12 months.

12. Segment Information

The Company operates as one operating and reportable segment, focused on the research and development of novel therapeutics for patients, including the advancement of PALI-2108 through clinical trials. The Company did not aggregate multiple operating segments into its one operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer.

The Company's CODM uses Net loss that is reported on the consolidated statements of operations for the purposes of assessing performance, allocating resources and planning, monitoring budget versus actual results, and forecasting future periods. The Company’s CODM views specific program spend within research and development expenses, research and development spend that is not allocated to specific programs, as well as general and administrative expenses as significant segment expenses. As a pre-product revenue company, the CODM considers budget versus actual results for expenses that are deemed significant and cash forecast models for assessing performance and to decide the level of investment in the Company’s operating and capital allocation activities.

In addition to significant expense categories included in Net loss, the Company regularly provides disaggregated significant expense amounts that comprise operating expenses to the CODM to assist when managing the Company's single reporting segment.A reconciliation to consolidated operating expenses for the years ended December 31, 2025 and 2024 is included in the table below (in thousands):

Year Ended December 31,

Legacy program expenses — 155

Other research and development expenses 4,960 2,156

Other general and administrative expenses 7,580 5,478

PALI-2108 program expenses are those expenses directly related with the development of the Company's only asset currently under development, PALI-2108. Legacy program expenses are those expenses directly related to its legacy assets, primarily LB1148, which the Company ceased developing in August of 2023. Other research and development expenses includes primarily salary and employee-related costs and benefits and research and development facility expenses, which are not allocated to specific programs, and non-cash loss or gain associated with changes in the fair value of the Company's contingent consideration obligation. Other general and administrative expenses consist primarily of salary and employee-related costs and benefits, legal professional fees expenses, investor and public relations expenses, accounting and audit services, insurance costs, director and committee fees, and general corporate expenses. Excluded from other general and administrative expenses are intellectual property expenses and business development expenses that are allocated to program expenses.

For the years ended December 31, 2025 and 2024, the other segment items that the Company used to aggregate Total operating expenses to arrive at Net Loss as shown on the consolidated statement of operations include Interest expense and Other income, net.

101

The Company does not provide separate segment asset information to the CODM because the CODM does not review segment assets at a different asset level or category than those shown on the consolidated balance sheets. All of the Company’s assets are located in the U.S.

102

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

PALI US Equity

PALI · 10-K · period ended 2025-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

PALI US Equity☆

PALI · 10-K · period ended 2025-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

PALI US Equity